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Innovation Occurs at the Margins



Welcome back and what a wild week it has been.

  • Last week CPI numbers came in less than expected, and markets rallied.

  • Is this a short-term bounce or the start of something more long-term?

  • Is inflation starting to get under control?

  • What will the Fed do to interest rates at its next meeting?

  • Experts are predicting 2023 going to be a bad year. Will it be?

Nobody knows. With the exception of 2008 and 2020, I have never seen any market like this. Bottom line is hope for the best, prepare for the worst.

Innovating on the margins:

An interesting read I came across last week was the idea of "innovating at the margins".

What does this mean?

It means that if you're on the leading edge of where everything is you're usually:

  1. An outsider, not an insider

  2. Usually un-noticed from mainstream, until your idea hits product-market fit

  3. Usually working at a startup in an apartment, garage, dorm room, or as a digital nomad.

  4. Working on cutting-edge ideas that nobody has thought about or pondered before.

This usually allows innovators to "tinker" and test new ideas.

Ideas can be tested out faster, cheaper, and can usually iterate more quickly than convention.

As entrepreneurs, it's important to identify industries and opportunities that are on the "cusp" of what is currently possible and to begin to innovate from there. It can be at a startup incubator such as Y-combinator or it can be "bootstrapped" startup. Regardless, it's important to consider what legacy industries are ripe for change. What single product, idea, innovation, culture, brand, service can be created at scale that has the potential to change the way existing industries do things.

It can be what Netflix did to streaming, Amazon to retail, etc.

Latest podcast released last week from Financial Freedom for Physicians:

  1. Unleashing Multiple Revenue Streams With Events with Keith Willard (Behind the Veil)- This was a fascinating discussion with event planning, adding additional revenue streams, and the impact that COVID had on in-person events. The YouTube video was quite popular with over 500 views in the first few weeks, which you can watch here.

  2. Nurturing Creativity within the Educational System with Robin Landa. I loved this conversation with Robin Landa, who is currently a university academic, and we discussed how the modern educational system here in the United States can start fostering talent and creativity.

Latest articles that I've been following:

  1. Walgreens attempting to join forces with Summit Health. In another colossal move, a former retail pharmacy giant is joining forces and moving further and further into transforming itself into a modern healthcare company. So far, the biggest players are Amazon, WalMart, CVS, and Walgreens. In the end, we will see former retail giants in specific sectors rebrand into healthcare and tech companies. The best example is Apple transforming from a computer company into a tech company and now transforming itself into a financial and healthcare company for tomorrow. The companies that survive today will be forced to shift into these new paradigms.

  2. Twitter files paperwork to become a payments company. This has the potential to be huge. If it hits product-market fit, with mass users at scale, the entire payments industry could see huge changes. With the number of Twitter users and the utility of the platform for news, media, engagement, influencers, this could be a moment where the payments industry could see huge changes and leaps forwards in terms of democratization, access, ease, affordability, onboarding. Already we've seen user engagement and accounts significantly rise. There are still a number of issues including the number of bots and scammers. Last week, Twitter rolled out the verified user feature only to shut it down due to concerning impersonation issues.

  3. Lastly, FTX one of the world's largest centralized crypto exchanges declared bankruptcy last week. FTX was based in the Bahamas (red flag) and had many large institutional, venture capital, and celebrities as investors. They had the naming rights to the Miami Heat basketball arena. It was a major donor attempting to curry political influence with Washington DC. FTX's parents are prominent professors at Stanford University, where Elizabeth Holmes, Do Kwon went. Is Stanford the new breeding ground for white-collar criminals? Used to be Harvard with Jeff Skilling (Enron) and others. While there are many layers to the story, including its shady meteoric rise, ties to the SEC, the bottom line is that this is a huge black eye for the crypto industry. It has set the industry back several years. I personally can't stand the amount of fraud, excess, waste, and abuse that occurs in this space. I can't stand the bad actors and the scammers. I simply can't stand them. They mess everything up at everyone else's expense for their own personal gain. This example highlights the need for more education, regulation. It also illustrates the shortcoming of centralized finance, and the need for self custody of your own digital assets in cold storage via a hardware wallet such as Ledger or Trezor. You should not be storing your digital assets on a centralized digital exchange as the counterparty risk is extremely high- you can lose everything (Mt. Gox, Quadriga CX, FTX). It also highlights the fact that you should trust no one (not even Coinbase, Gemini, Kraken- some of the major exchanges in the US), despite what CEOs are going on the news and media saying that their companies are "fine"- only to declare bankruptcy 24-hours later. It signifies how fast a "house-of-cards" can fall, if a business is built upon bad practices by taking shortcuts. It also highlights the speed and how efficient true capital markets are wiping out the bad actors overnight. This is true capitalism at work. While the industry will recover, the events of 2022 (Luna, 3AC, Voyager, BlockFi, FTX) have left an extremely "bad taste" in many individuals mouths. The tech and innovation can do good, but bad humans inherently mess things up. We need to have clear guidance, more direction, more regulation, and need to get rid of the bad actors.

Disclaimer: my views. Not advice.

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