At some point in the past twelve months, we transitioned from irrational exuberance to despair. Many of the winners of the Covid-economy are now trading well below their 2020 lows... Netflix, Peloton, Teledoc -- just to name a few. This happened despite the fact that their revenues remain well above pre-Covid levels
It certainly feels like we traded in our optimism for VUCA (Volatility, Uncertainty, Complexity, and Ambiguity). We've gone from celebrating our business superstars to celebrating their downfall. (Schadenfreude makes for great headlines.)
- Binance makes an early investment in Sam Bankman-Fried's FTX
- FTX wildly successful. Founder becomes multi-billionaire genius poster-child.
- Founder then aggressively lobbies Congress for less active oversight of the crypto industry. Donates $39 million in the 2022 mid-term elections.
- He then gloats to regulators about how much better FTX is than Binance.
- Binance is completely offended and tweets that it might sell all its FTX tokens.
- FTX suffers "run on the bank" and liquidity crisis. Account holders flee.
- Binance tweets that it might buy FTX outright to rescue the company.
- …and rescinds the offer two days later, saying that FTX was too broken to fix. FTX declares bankruptcy by the end of the week.
This is what VUCA looks like.
Putting a value on Uncertainty, Complexity, and Ambiguity is difficult. Volatility... we can work with this.
The most publicized measurement for volatility is the least understood. The VIX index is sometimes known as the Fear Index, because it tends to "spike" during times of panic.
How do you read the VIX?
- Above 40 is panicked
- Above 30 shows anxiety
- Around 20 is normal
- Below 15 is confident