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FTX: How to Become a Rice Trillionaire

I filmed this video a bit more than a year ago at the time when everybody was talking about DeFi and NFTs. I wanted to explain how those valuations work and make fun of them. I never released the video because I thought it restated the obvious. But the FTX collapse a few weeks ago resulted from exactly what I describe in this video. Let's watch it and I will see you at the end of the video. I really enjoy the energy of the younger me, by the way. Hello, first of all, disclaimer. The title is a click bait, and there's very little to no interesting financial advice in this video. It's mostly a joke, but still right, right now, I'm a poor person compared to who I'm going to be in the next few minutes. This whole idea started when I listened on the Odd Lots podcast.

There seems to be the sentiment that the crypto market is now worth a couple of trillion dollars. This is getting serious and people will get hurt. I believe that they would be right in the old world when money was real and people were putting their hard earned savings to something that would support their retirement. But pretty much every word in the sentence I just said is now obsolete. Money is not real. Savings don't exist or aren't hard earned, and there will be no retirement whatsoever. So let's become trillionaires as soon as possible before everyone is a trillionaire and the word doesn't mean anything anymore. One of the fastest ways to become a trillionaire is to buy one of these. This is a 10 trillion dollar note from Zimbabwe. But I will show you a much better way since a) it takes time to get this note b) It will cost some real dollars plus shipping and handling, and c) you want to be trillionaire in US instead of Zimbabwe dollars, right? So here we go.

By the way, I bought this note early in 2020 for $7. Right now I can't find any of these for less than $13. If I use that to measure inflation it would be 36% and not 8%. Everything around me seems to have gone up way more than 8%. In here there is lots of rice. About 35,000 grains of rice. I have more in the basement. I have exactly 3000 containers like this. This is a grain of rice. What is the fair price for this? Well, the fact is that this is my rice. It's an NFT rice. Only I can sell you my rice because I'm important, so my rice is important too. Okay, so I will sell you one of those for $5. You're happy. I'm happy. This was a trade.

How much is this container now worth? It's $175,000. Half a Lambo in here. That's good, but not nearly enough. You might not need my entire grain of rice, so you might decide to sell 100 of it back to me. I want my fraction of the rice back, especially since you touched it, and it now has a whole transaction of history. So it's much more legit as a currency. So I will pay $100 for 1/100th of my own rice. So how much is this container worth right now? One grain of rice is now worth $10,000. So my container is now worth $350 million. And what is my net worth as the owner of 3000 such containers? You guessed it right, I'm now a trillionaire in US dollars. Now, you might say that I'm a scam or I'm a joke like dogecoin and you might be right, but you know what I think?

I think that we have a very legit market here. It's just that it's a bit illiquid. So I'm now in need of liquidity. I can create liquidity by hard coding a number in a screen. If I'm a centralized exchange or any other opaque bank or institution, I can do that. If I can't manipulate numbers directly, I can just sell rice to myself. Assuming very small transaction fees, everything will go fine. Okay, liquidity sorted. Now I can invite anyone to audit my trillion. Cryptos expose all this fakeness of money. With cryptos, it's even easier to do exactly what I did. You don't even have to have the containers and the grains of rice are indeed crypto-unique. Who is going to get hurt? My opinion is no one. Nobody put their hard earned money to my rice. Nobody hoped on it for their retirement. It just bubbled.

When we say that this is a trillion dollar market, it likely means that it took a few hundreds of millions to make. But this isn't just for crypto. This is the funny nature of money. The price of every stock you have and the market caps of the companies and all such are based on the last transaction. All the prices are defined by the latest transaction. There's an implicit assumption of greedy people that will try to correct prices. Right now though, we live in funny times that enough people don't care about profit or at least little profit. People have enough to eat and such, and they start caring about what money means. Is it a meme? Is it a "look how hard I troll the Wall Street and the media; Dodge is now on headlines". You can reject all this and even not find it funny.

But then it would be only fair to ask yourself this closing question. How much of the price of the things you truly value is created in exactly the same scam way that just made me a trillionaire? Nice. So FTX did exactly what I described. It didn't use rice, but it issued two coins. FTT and Serum. Most of their 32 billion valuation was on those two coins. Once CZ called their bluff, everything collapsed. Did anyone get hurt? I think this is nothing like the Luna fiasco earlier this year. FTX was a derivatives exchange, so its audience was supposed to be more sophisticated. VCs lost money, but their job is to manage risk so they shouldn't complain and they don't. Sam Bankman-Fried (SBF), exactly like Elizabeth Holmes, said things that made investors, the media and everyone else believe and stop asking questions. As SBF says, you say all the right shibboleths and so everyone likes you. My conclusion in both cases is that you can't be mad at individuals. Of course, they lied and they did criminal things. But their lies got underwritten by so many people, universities, institutions, journalists, brands. If you want to blame someone, I seriously don't know where to start. Our collective desperation for the headline, the profit, the generous billionaire, or whatever miracle we need to fix our world, this, our collective desperation makes us believe in geniuses like SBF and Holmes. Thanks for watching.

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