2020 WRAP UP: A Flight of Black Swans is Called A Wedge. Read Why?
2020 Wrap Up: A Flight of Black Swans is Called A Wedge. Read Why?
Are You Ready For a Black Swan Event?
Back in the first few years of this century, we conducted a number of 'Disruptor Strategy' projects for some of the world's largest and most sophisticated companies. These projects focused on helping them prepare for 'Black Swan' events. Events which by definition can not be predicted, are of very low frequency but very high magnitude. Even given this definition, organizations can certainly stress test their ability to cope with Black Swans. Those projects always included global pandemics in their long list of possible Black Swans, but they never got to the top of the list. Read the white paper that Matthew wrote on this topic by clicking here.
2020: Flight of Black Swans Top 10 List
As we wrap up 2020, this year has been remarkable for the Black Swan events that have changed our lives. For most of us the one that has dominated our thinking all of the time is this terrible pandemic and its horrible impact on our families, communities and businesses. But if you look closer, and use your 20:20 rear view vision, this year has actually had many more than 1 global Black Swan at work. In fact, 2020 will go down in history as a year in which we were surprised by a veritable 'wedge' of Black Swans.
Here are the Top 10 Black Swans that have surprised us in 2020:
Black Swan 1: COVID 19 Locked us All Down
We have to start here of course. But you already know all about this one. So we won't amplify the obvious. It is top of the list. One of the collateral impacts of COVID has been that many of us - and our government, financial, business, and media leaders have been blinded to other Black Swans which have also flown in and which we really should be talking about too.
Black Swan 2: BLM Created a Tipping Point
That black lives matter is not a new idea. It has been there in plainview ever since one group of people took advantage of another to further their own interests. That it would become a central theme and top of the agenda in most social, economic and business discussions around the world was unexpected for us, and we think most. We think 2020 was a tipping point year on this topic. It will drive a lot of what we do for the years to come.
Black Swan 3: Governments Changed The Underpinnings of Monetary Policy
Everything in economics, finance and business changes if governments dramatically alter monetary policy for the world's central bank fiat currencies. In 2020 that is what just happened. We are still wrestling with what it means when trillions and trillions of fiat money is printed by governments worldwide. We did not predict it could ever happen. Now we need to cascade the implications down into everything that humans do that has a $, €, ¥, and £ and other symbols before it. Every financial calculation has to change, and scarce assets have to be more valuable than ones that can be created in infinitely large quantities.
Black Swan 4: We All Went Virtual
At Fifth Era and Keiretsu we have been backing digital economy companies for decades including in eCommerce, eMedicine, eLearning, digital entertainment and so on. But we never expected that everyone would be shopping from home, that 100% of students would suddenly be learning electronically, that 100% of doctors and nurses would be interacting with patients remotely and that 100% of people would be finding their entertainment online. Will they ever go back? We doubt it.
Black Swan 5: We All Stayed at Home
Now we are fortunate. Staying at home for us is a privilege. For others it is a challenge. However, 2020 is the year in which the world's largest employers not only went virtual, but found, much to their surprise, that productivity WENT UP!. Who would have predicted that? Even if our leaders, team members, employees multitasked, moonlighted, got distracted at times, overall productivity WENT UP! And it wasn't just productivity. In some surveys we are seeing that customer and employee satisfaction went up too! What does this mean for every business, every central business district, every human activity? We will find out in 2021 and beyond.
Black Swan 6: We Got Ready for the Clean Planet Campaign
We think 2020 will also go down as the year in which the world tipped over to focusing on a clean and healthy planet. This is probably less a Black Swan, and more a catastrophic shift in the human ecosystem. 20 years ago, we argued that while all people are innocent until proven guilty, when it comes to the planet we need to reverse that burden of proof. All human activities are destructive of the planet until they prove themselves innocent. That is how we need to think because while we can afford to make a mistake and let a guilty person free, we can't make a mistake and destroy the only planet we have. We launched Universal Carbon and Bitcoin Zero this month and hope you will click to learn more.
Black Swan 7: The World Embraced Digital Monies and Assets
Yes we talk about this one in every newsletter we write. Because we are the managers of the world's leading blockchain venture fund of funds. But we have been shocked ourselves this year by the speed and breadth of change. In 2019 Bitcoin was still being called a fraud, Central Bank Digital Currencies (CBDC's) were a pipedream, and every SERIOUS banker, asset manager, exchange operator, payment processor and so on was at best watching from the sidelines. In 2020, they all jumped into the game. At least all of the SERIOUS ones.
Black Swan 8: Intrinsic Value Appears to be Being Displaced by Austrian School Economics
In a short newsletter we can't do justice to this one, but it may be the most profound of all for investors and traders. The dominant school of thought in financial valuation has been that of 'Intrinsic value'. However, for more than a century there has been an alternative school of theory called the Austrian School which argues that there is no intrinsic value in any asset. That ALL assets are given value by the perceptions and behaviors of humankind. While the mainstream paradigm calls the exceptions 'bubbles', paradigms shift when the outliers become so numerous that a new theory is needed. Tesla has broken out to a place that intrinsic valuation can't explain. So too have many other assets - and especially those that are available on democratized access platforms like Binance, Coinbase, Robinhood, Uphold, and so on. Bubbles or the Austrian School proving true? We may see in 2021.
Black Swan 9: Crypto Assets Are Now A Sensible Allocation in Every Portfolio
For 30 years we have written and advised that a 60:40% optimum portfolio strategy makes no sense if the data on the highest returning asset classes in the world (early stage technology and small cap real estate) are not in the optimum portfolio dataset. Anyone proposing an 'optimum portfolio allocation plan' to you is actually proposing a 'SUB-optimum portfolio allocation plan' if they don't recommend these private asset classes as a large allocation. And that is before we get to new asset classes like Bitcoin and other cryptocurrencies. However, 2020 is the year in which the world's largest and best investors began to argue the same. When Ray Dalio, Stanley Druckenmiller, Paul Tudor Jones, Bill Miller, Cathie Wood, and so many others say a Bitcoin allocation makes sense, they have just abandoned, finally, the 60:40% narrative. Now in 2021 will they please broaden this beyond Bitcoin to early stage technology.
Black Swan 10: The World Became Better In Most Regards
This one is highly controversial, and it won't be until later in 2021 that we know for sure. However, in the middle of a global pandemic, the world's quality of life metrics seem to have continued to get better. As examples, according to the UN and World Bank, the child death rate continues to fall, the poverty rate is still falling, accidental (and flu related) deaths appear down, and other metrics driven by mammon hit all time highs around the world. The global death rate (which has been falling for decades at the same time as the population has been growing) implies 60 millions deaths annually, while COVID tracked deaths are less than 2 million and may not change the downward trend. Did you see that as a possibility? We agree with Peter Diamandis, that we are living in a world of abundance. But in 2020 we surely lost sight of it for a while.
That's our Top 10 List. What is yours? Let us know if we missed any that are on your list as you reflect on 2020. We want to know.
Why 10 Black Swans Represent a Wedge into the Future
In the title of this posting we said we would answer the question, why is a flight of Black Swans called a wedge? In the context of 2020 and the future we hope it is now obvious. A flight of Black Swans, arriving together, and compounding with each other, creates a powerful wedge which can drive us forward into the future. 2020 was a year that brought the future into today accelerating human change by at least a decade and maybe more.
Lots of flying swans have been called a wedge for hundreds of years. 2020 just made that name clearly appropriate.
Conclusion
So that is our '2020: Flight of Black Swans Top 10 List'. Are these all Black Swans? Technically perhaps not, but we were not able to predict most of these 10 events that shocked us in 2020. And the much more important point is that these Top 10 include some of the most important tailwinds which will drive change in 2021 and beyond. For investors that is what really matters. We need to invest into asset classes that will be driven forward by tailwinds such as these.
We know 2020 has been stressful, depressing, and tragic for many of you. And we don't mean to white wash over that reality. However, the loudly blaring COVID narrative has made many of us blind to just how many Black Swans have flown into our lives in the course of this one exceptional year. And some of those Black Swans are much more positive than they are negative. We really believe that.
So we wish you a happy holiday, and a prosperous new year. We hope you and your families are safe.
And as always, thank you for reading.
Alison and Matthew
Blockchain Coinvestors AngelList Syndicate
The Blockchain Coinvestors AngelList syndicate is now live. The first opportunities are open for investment. We intend to use this channel for investors who prefer to invest in smaller increments. Feel free to reach out if you have any questions.
Click here to go to our Syndicate page on AngelList.
Register Now For Our Upcoming Webinars
There's been a lot to process in 2020. Please join us to dig into the details of the 10 big changes we presented above.
Wrapping Up 2020, Dec 28th at 7:00am PST
Wrapping Up 2020, Dec 28th at 12:00pm PST
Blockchain Coinvestors has a simple goal - provide the broadest coverage of the fastest growing blockchain companies and emerging unicorns. This webinar presents our investment strategy.
Blockchain Coinvestors Investment Thesis, Jan 4th at 7:00am PST
Blockchain Coinvestors Investment Thesis, Jan 4th at 12:00pm PST
Our webinar library can now be found at www.fifthera.com/webinars.
Appearances in 2020
Our latest published interview in Securities.io on our newest project, the Universal Protocol Alliance, can be found here.
We had the honor of presenting at multiple online conferences this year. A selection follows. Click links to listen to any you may have missed:
Inspired Insider: Early-stage investing hack and emerging opportunities
The Executive Connection (TEC): The future of the digital economy
Digital Future: Why Digital Monies Change Everything for Business on VoiceAmerica podcast.
Investor Connect podcast with host Hall Martin: Early-stage investing and "The Intelligent Investor: Silicon Valley"
Reimagine 2020: The new investment frontier, blockchain infrastructure innovation, and how the current environment is setting us up for the next decade.
On The Brink: How to make sense of Digital Monies and Assets
Virtual Investor Conference: Interviewing Greg Kidd (early investor and/or founder at Twitter, Square, Ripple, Coinbase, Robinhood, Uphold, Linqto and many others.
We thank you once again for your support, and we hope that in this challenging time you and your family and loved ones are staying safe and healthy.
Best wishes,
Alison Davis
Matthew C. Le Merle