Here in Doowopolis, we talk a lot about building. There's always been a big, bright future ahead - but someone has to build it, right? Back in the 1950s & 60s, the original developers of Doowopolis built hundreds of motels that echoed the hopes, dreams, and visions of working & middle class leisure-seekers from places like Philadelphia and New York City - i.e. trips to exotic, far-away lands like the Caribbean and Tahiti; travel via the latest "land rocketships" like the Chevy Bel-Air and Ford Galaxie; hopes of striking "Bonanza" on the great western Frontier (or in the final frontier of outer space, via Satellite or Telstar, of course); and the opportunity to sip just a taste of the "luxury life" (La Vita!) while they were at it - Pink Champagne and Blue Diamonds, anyone? Doowopolis had it all. And all the while, you worked hard to keep up with the Tempo of the rock 'n roll beats all around you - because we were all in on the dance, right?
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The difference between then & now? It took a lot of hard work to build all those dreams. Hard-working people with big dreams took big risks to fulfill the fantasies of not only their own success, but of the upwardly-mobile dreams of all the hard-working, would-be vacationers who would fill all the rooms. It was an entire ecosystem build on the basic idea of "big dreams and hard work". What could be more American than that? (or really, what could be more human?)
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Fast forward to the 21st century? Risk turned into "risk" (in quotes for a reason). Hard work turned into hardly working. And the magic money machine that started running way back in the early 2000s, accelerating after the 2008 financial crisis, and then accelerating further into the COVID-19 pandemic, changed the very essence of what it meant to have a dream, work hard for it, and earn success on the basis of risk/reward. The result? Well, it's perhaps best personified by the rows and rows of grey-and-beige, dull-and-drab, speculative "zombie" condos built in the Wildwoods of New Jersey during this period - in many cases, replacing the colorful, neon-lit, future-forward "Doo Wop Motels" that represented a much more optimistic view of the future in an earlier generation. Coincidence? We think not. Whose "hard work and big dreams" did these debt-fueled condos represent? Not mine or yours. Whose version of a "better tomorrow" was all this new "building" meant to fulfill? We're still not sure.
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Take a broader view than just this big little shore town at the southern tip of the Jersey Shore, and you'll see similar things were happening all across corporate America. "Zombie" companies that no longer (or never did) produce any real revenue or value, were being propped up by endless "money printing" and cheap debt (that you & I, as savers & taxpayers, ultimately have to pay for). Stocks and real estate prices were artificially inflated to prevent people from losing money on bad bets or poorly-conceived "investments". Legitimate entrepreneurs with legitimate ideas, legitimate hard-earned capital, and legitimate business plans in hand were forced to the sidelines, crowded out by the "zombies" (and their over-inflated asset prices), essentially rewarding the worst ideas, while punishing the best ones (or preventing them from ever coming to fruition in the first place). Does that sound like a "better future" to you?
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Perhaps no one has said it better recently than billionaire investor, venture capitalist, SPAC guru, and one-time Facebook executive Chamath Palihapitiya. And we laud him for his honesty:
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“We are learning what went wrong, which is that we had a decade-plus of zero interest rates,” Palihapitiya said of the market. “That is what fundamentally was wrong. It perverted the market. It distorted reality. It allowed manias and asset bubbles to build in every single part of the economy.”
"Palihapitiya said the “free money” given by the central bank resulted in a “misallocation of risk,” which led many people to misprice the risk of their investments."
Chamath Palihapitiya
(Article by Lauren Feiner for CNBC.com)
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And as for those who thought they were "building a better future" by using all that "free money" to demolish the hopes & dreams of an entire generation (not to mention the dreams of the generation that followed, with their hopes of rekindling the spirit of Doo Wop in the 1990s) and instead replacing it with their debt-fueled, dark-and-dreary "let's take the money and run, hoping tomorrow never gets here" version that came to define the 2000s & beyond? Many patted themselves on the back initially (at least those who benefitted), but after it all came crashing down? (for like, the third or fourth time in 20 years?) Some like Chamath have finally started to see the light. If it wasn't really your success, whose success was it anyway? Hint: No one's. In the big picture, it was probably failure. Hence, the perfect time to admit - I didn't really build that after all.
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“The biggest thing that I learned was how much of my early success was probably not attributable to myself. So on the same way that I sort of blame Jay Powell for zero interest rates, I think I massively benefited from Powell, and Bernanke and Janet Yellen before,” he said, referencing past Fed chairs.
Chamath Palihapitiya
(Article by Lauren Feiner for CNBC.com)
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While Democrats and Republicans argued back in 2012 over "who built that" (in reference to then-President Obama's infamous "If you've got a business, you didn't build that" speech) - both sides were missing the point.
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If you built a legitimate business - then yeah, you built that, and the world needs more of you.
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If good public infrastructure got built, then yeah, the government probably helped to build that, and the world needs more of that too.
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But "zombie" companies with absurdly high valuations? Meme stocks with no fundamental businesses underlying them? Artificially-inflated real estate assets (like speculative "investment condos" replacing Doo Wop Motels?) propped up by nothing but artificially-suppressed interest rates and fake printed money? The total distortion of natural market forces preventing legitimate income-producing and job-creating businesses from being able to operate or plan for the future? All for the sake of funneling "fake" paper profits to those first in line for the magic money machine without actually having to create any real value? Who would even want to take credit for building that? (and who asked for it to be built in the first place?)
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“And what it allowed us to do was crowd into companies. Many of those companies had unbelievable valuations. Eventually these unprofitable businesses went public and only now are we starting to sort out what are good and what are not so good businesses.”
Chamath Palihapitiya
(Article by Lauren Feiner for CNBC.com)
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What good is a party that only lasts until the music stops? Hint: the music never stopped at the Tempo Motel - at least not until the "central" monetary authorities decided it was up to them (and not you) to control the dial. And the music has definitely never stopped playing in the minds of hard-working dreamers & doers all across America - in fact, it's still playing louder than ever today. What's missing? The right stage to perform on - the one that gives everyone an opportunity to become a star, if they work hard enough for it, dream big enough for it, save responsibly enough for it, plan wisely enough for it, think civically enough for it, and invest accordingly.
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If we can build it (again), not only will they come, but we bet they'll raise the Tempo to new heights and get us all dancing again.
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The Tempo Motel, originally built in the late 1950s in Wildwood Crest, New Jersey - and part of the proposed "Doo Wop Historic District" in the late 1990s - was demolished in 2002 by developers of speculative condominiums sold at inflated prices during the "low interest rate / no money down" real estate bubble that would eventually collapse and get bailed out with taxpayer money after the 2008 financial crisis.
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Who do you want building your future? The beneficiaries of "free money" who don't have to take any real risk or do any real work in building their vision of a future which serves only to deliver risk-free profits to themselves? Or the ones who have to work hard - and take real risk - building the kind of future we all dream of? Whose future is it anyway? Hint: it's always brighter when you are invited to help build it.
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As Willy Wonka once said (ironically enough, back in 1971) - "We are the music makers, and we are the dreamers of the dreams." Could it be that he was foretelling the era of unsound fiat money that might threaten to put all those songs and dreams in jeopardy, while tasking us with the opportunity (and obligation) to fix it someday? Here in Doowopolis, we still say - building big dreams takes lots of hard work. Remember who the music makers are. Remember the Tempo. Keep the zombies out (unless it's Halloween).
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Read full article on CNBC.com:
Chamath Palihapitiya blames the Fed for ‘perverted’ market conditions that benefited him
https://www.cnbc.com/2022/10/26/palihapitiya-blames-the-fed-for-perverted-market-that-benefitted-him.html