Foundation + Steel Framing, Dot Com Domains + Bitcoin – Match Made in Heaven?
As an investor in digital assets, be they domain names or cryptocurrencies such as Bitcoin, it’s vital to understand what exactly it is you’re investing in and why you’re doing it. Far too frequently, the only explanation(s) provided by those who invest/trade tend to be something along the lines of “because they go up in value” and it’s an attitude which can be described as shortsighted… to put it mildly.
Instead of seeing everything as just one large gamble, why not understand that your career as a digital asset investor is measured not in months but years or even decades… something in the realm of impossibility for most investors to comprehend, it seems. One of the takeaways from Michael Saylor’s DomainSherpa interview was, without a doubt, represented by the fact that he has an extremely low time preference. To put it differently, he for example doesn’t consider $30,000,000 for Voice.com an excellent price for him despite it being an outlier in terms of domain sales headlines, for the simple reason that he understands one crucial “selling point” of such assets: the fact that they are poised to stand the test of time.
Michael Saylor is the type of investor who doesn’t mind talking about domain names by utilizing multi-decade timeframes or even timeframes which go beyond one century. On the surface, the first reaction of the average viewer when hearing such statements tend to be either in the realm of shock (“Is this guy actually talking about Voice.com and its potential 100 years from now?”) or dismissal (with some most likely assuming these statements are merely in the realm of hyperbole) but neither paint an accurate picture of reality. To truly “get” the Michael Saylor interview and internalize the principles which helped him amass the fortune and reputation he now has, it makes sense to understand that this is a man who knows what he’s investing in.
Dot Horse as a Foundation and DentaCoin as Steel Framing?
An extremely interesting tidbit associated with the Michael Saylor interview is represented by the fact that when referring to domain names, he focused exclusively on dot com and when mentioning cryptocurrencies, Bitcoin was his only focus. Why hasn’t he referred to one of the many new gTLDs that have popped up over the years and why isn’t he also analyzing the thousands upon thousands of altcoins that exist?
Primarily for one simple reason: the fact that when building a house for you and your family to live in long-term, you cannot afford to cut corners. This is why the “foundation + steel framing” concept Andrew Rosener and Michael Saylor have referred to is so powerful, because it essentially forces you to embrace a long-term viewpoint.
Drawing a parallel between the foundation of a house and a new gTLD (granted, with dot horse being a bit extreme as an example) or between steel framing and an altcoin (with DentaCoin once again being an extreme example due to representing a bizarre cryptocurrency dedicated to serving the needs of… well, dentists) seem severely sub-optimal, for the simple reason that nothing out there can compete with the gold standard when it comes to both domains and cryptocurrencies. As true as it may be that new gTLDs which have far more going for them than dot horse exist and the same way, while it is also true that some altcoins have a fair bit more potential than DentaCoin, nothing has the strength of legitimately challenging the gold standard.
What’s Wrong with Short-Term Opportunities?
This article will, without a doubt, be read by a fair number of people who have embraced shorter-term business models in the domain industry, perhaps also in crypto. They might be wondering why this article is being so harsh to alternative domain names and cryptocurrencies, especially in light of the fact that fortunes have been made in both cases.
Is there anything wrong with short-term opportunities?
To keep the answer short and simple: nothing.
If you know what you are doing and if you are genuinely talented when it comes to whichever game it is you are playing as an investor, there is absolutely nothing wrong with embracing shorter-term business models… whatever works. Perhaps you do it with the intention of building a long-term portfolio along the lines of what Michael Saylor is envisioning or maybe you have another modus operandi in mind. No matter what the situation may be, the answer is that no, there is absolutely nothing wrong with short-term opportunities. However, in the opinion of this author at least, you would be shooting yourself in the foot by not trying to also analyze Michael Saylor’s vision and time preference.
An Economist’s Take
As an economist, it makes sense to approach readers with an analogy that is literally screaming at us: trading on the one hand and long-term investing (accumulation) on the other. Needless to say, trading sounds ridiculously exciting because impressive gains (or losses!) can be experienced on a day-to-day basis, with the main principle being valid when it comes to the elephant in the room in terms of comparisons: gambling. While this comparison might irritate those who trade for a living, it is nothing if not science-backed.
To illustrate why, I would like to propose an experiment: actively seek out ads of trading companies and analyze them. You will notice that, due to being compelled to do so by the proverbial powers that be rather than wanting to do so, the ads in question contain data with respect to the likelihood of winning on their platform. Upon closer inspection of that fine print, you will come to a shocking realization: the fact that 70%-80% of retail traders ultimately lose money. Why? For the simple reason that just like with other forms of gambling, the overwhelming majority of traders simply do not have an edge. An no, “intelligence” is not something that qualifies, with even geniuses such as Isaac Newton (in)famously losing a lot of money on various forms of speculation.
In stark contrast, it has been proven that accumulation is very likely to work in favor of those who embrace this modus operandi. Even if they don’t time markets perfectly and in fact, even if they get in at the worst possible moment. As long as you gain exposure to assets that are genuinely valuable and embrace a “buy and hold” rather than “spend, spend, spend” mindset, you are automatically light years ahead of the average consumer. For example, let us assume you bought an excellent studio apartment that you rent out at the worst possible time and that three months after your acquisition, the price collapses by 50%. As unfortunate as that may be, you are in no hurry to sell and on the contrary, the studio apartment in question can produce a steady flow of revenue. Compare this to the average consumer who would have preferred to perhaps simply spend that amount on a rapidly depreciating fancy car and you will realize that even the worst investment grade asset accumulation strategy in the world dramatically “out-performs” the modus operandi of the average consumer.
Stress + Uncertainty vs. Slow and Steady Accumulation
Yes, there is undoubtedly money to be made when venturing outside the let’s call it gold standard in terms of domain names (dot com) as well as cryptocurrencies (Bitcoin) but more likely than not, the path in question will bring a fair bit more stress as well as uncertainty in your life… why put yourself through that?
Warren Buffett used to say that some of the best companies out there from a value investing perspective are those that are boring and anything but in the spotlight. He is hardly the only investing legend articulating such a viewpoint and at the end of the day, the bottom line is this: the overwhelming majority of those who are reading this have time. They do. Yes, the domain industry tends to be more mature than the crypto one and as such, many of you most likely aren’t exactly in your twenties but the same “you have time” principle is also valid for the midlife crisis territory readers and if you believe this is nothing more than a feel-good exaggeration, I would strongly recommend browsing through some of Gary Vaynerchuk’s videos to see the perspective of an ultra-successful entrepreneur who was not a “whiz kid” who hit is big when he was very young. On the contrary, he was what one could call a relatively late bloomer and… well, so what? Right from the beginning, he played the long-term game knowing that he has plenty of time left and that put him in a position of strength compared to those who chase the proverbial quick buck.
If you feel the need for excitement, by all means, try gold standard alternatives on for size but I can pretty much assure you that the initial excitement will wear off relatively quickly and be replaced with stress and uncertainty. Before you know it, you end up hating everything there is to hate about your decision and yearn for sustainability rather than rollercoaster rides.
Why Refuse a Generous Value Proposition?
At the end of the day, whether we are talking about domain names or cryptocurrencies, the two gold standard choices provide a more than generous balance between asset appreciation potential and a proven track record. We are most definitely still in the early stages of the internet and arguments which revolve around the two proven players we have discussed through today’s article being too mature to put enough potential on the table are ludicrous at best.
The decision is yours and nobody else’s to make. While it is understandable that high-risk approaches seem tempting for reasons which range from profit potential to the thrill of the chase, it might be wise to look at your life as well as career with the big picture in mind and understand that excessive risk-taking can and will lead to burnout, whereas pacing yourself and embracing a proven “foundation + steel framing” combination for the proverbial house you are building may very well prove to be the wiser as well as empirically validated option in light of the fact that case study after case study involving leaders of various industries proves that embracing sustainability tends to be a common denominator. If you have a model that works right in front of you, why fight it?