Tag Archives: Investing

Will the Startup Bubble Burst?

When someone talks negatively about an innovative idea like startups or cryptocurrencies, I get triggered. I know I have to be rational and let those intense emotions go, but sometimes, it’s difficult. In such cases, I use those emotions as fuel for creativity and write a blog post about them.

Who Are the Critics of Startups and Cryptocurrencies?

When someone talks negatively about an innovative idea, there are usually one or two things going on. They either missed the idea or the idea disrupts their business.

You might have heard some famous investors and bankers badmouthing cryptocurrencies. Why do they do that? Most of the time, it’s one of the following.

  • They missed the uptrend entirely.
  • Cryptocurrencies pose a threat to their businesses.

I have yet to come across a reasonable argument against cryptocurrencies from these otherwise brilliant people. To me, their comments don’t sound authentic, but they sound like having a hidden agenda.

Successful investors or bankers are savvy enough to not badmouth the startup idea in general. Startups are generally badmouthed by people who feel like they can’t participate in them, neither as investors nor as founders.

Investing in a Startup

I understand when someone thinks that participating in a startup is not for them. Investing in a startup feels like that’s the last time you have seen your money. The chances of seeing your money back is really low, but if the startup takes off, the returns are unsurpassed.

Investing in a startup isn’t for everyone. Or let’s say it wasn’t for everyone. Cryptocurrencies lowered the barriers to entry to this space. Nowadays, you don’t need to invest a minimum of $100K USD in a startup. You can invest as little as $100 USD in the cryptocurrency of a startup.

I can afford to lose $100 USD, but I can’t afford to lose $100K USD. So, I couldn’t invest in a startup in the past, but now, I can. I bought some Steem Power which is the cryptocurrency of the social platform Steemit.com.

I’m not a big fan of Steemit.com as I have written in a post before. However, you never know how things will evolve in the future. I invested an amount that I can afford to lose entirely. I just marked a date three years later in my calendar. I don’t have any expectations from that investment, at least for the next three years.

This is how investing in startups looks like in general. People invest an amount they can lose entirely and they are ready to wait for three to seven years before they see any returns to their investment.

I get that this type of investing is not for everybody, but why badmouth it just because it’s not for you. There are other people who can benefit from this type of investment. They take the risk and some of them get the rewards.

Is There a Startup Bubble?

Here’s another negative opinion about startups. “The startup space is in a bubble.” The question isn’t whether the startups are in a bubble or not. The question is “is there an investment vehicle that isn’t in a bubble?”

There is excess cash in the market and people are looking for investments that bring in higher returns than the 0% their savings accounts bring.

That excess cash flows into the stock market, cryptocurrencies, and to startups. If you take into account the official 2% inflation policy in fiat currencies, I don’t see anything wrong with that.

Sure, at a certain moment, we could see crashes in the stock market and/or cryptocurrencies. As a result, startups would suffer from that crash as well. However, that doesn’t mean that it’s bad that investments are flowing to the startup space.

If you think that there’s a startup bubble and that’s a bad thing, stop using Facebook, Twitter, Amazon, and every other Internet based product or service. Most of them were built during the Dot-Com Bubble and benefited from those investments. As I have written in a previous post, bubbles are good for technological progress.

Founding a Startup Is Not For Everyone

I get that you can’t found or work in a startup. It’s a lot of hard work. It’s a lot of stress. There’s no job security. Wages are low compared to established corporations. As a result, this career path isn’t for everyone. It favors either the young and single or already well-off people.

Middle class family people need their jobs to have a solid income and to have some downtime to take care of their families. That doesn’t match well with startups. I get that startups aren’t for everyone. And that’s fine. But please don’t badmouth startups. Let the people who can afford to work on them in peace.


Investing in or working on a startup is not for everyone. Neither does it have to be. Startups benefit the society by providing technological progress.

From time to time, there are bubbles in startups, just like the rest of the economy. Startups and as a result the whole society benefit from those bubbles.

Investing in or working on a startup might not be the right move for you, but please be authentic about this fact and don’t badmouth startups.

Disclosure and Disclaimer

At the moment of writing this post, I owned Bitcoin, Steem Power, and S&P 500 Index Funds. This post is for information purposes only and not intended to be business or investment advice.

The Most Suitable Strategy for the Reality that We Are Living In

What’s the purpose of a blog post?

  • Is it to make a conviction?
  • Is it to tell you what to do?
  • Is it to provide you with new options and let you decide?
  • Is it to discuss an idea with its pros and cons?
  • Is it to start a discussion to get more input from the reader?

Sometimes, when I start a blog post, I don’t have a clear conviction about the topic. I want to discuss different sides of it. I want to write down the arguments for and against the opposing sides. I hope to reach a conclusion at the end of the blog post.

Sometimes, it is possible to reach a conclusion at the end of the blog post. Sometimes, it is not. If it isn’t, I ask the readers for their opinion. Sometimes, I keep the question open.

I keep looking for the answer. I set up experiments and make observations about different options to reach a conclusion. I use blogging as a tool to reach mental clarity.

I don’t see myself as an expert who knows it all. I’m here to come up with new ideas, discuss them, and try to come up with some conclusions. If I can’t succeed at that, I start a discussion with my readers and/or experiment with those ideas in my life.

I believe that’s a better way of approaching life than jumping to conclusions and acting on those conclusions.

It’s human nature to jump to conclusions. Uncertainty doesn’t feel good.

Jumping to conclusions and having strong convictions are dangerous.

We live in a chaotic reality.

Who would have known that Bitcoin would hit $20K USD when it started at less than a penny nine years ago? Who would have known Bitcoin would lose 70% of its value, dropping from $20K to $6K within two months?

At the height of the market, I was writing posts about the possibility of an 80% correction and not to be overenthusiastic about it. Not, because I had any convictions it would lose 70% of its value, but because I knew the possibility was there.

If I knew that for sure, I’d sell Bitcoins short. I didn’t do it. Doing that would be certainly dangerous.

Jumping to conclusions and having strong convictions is dangerous. Reality is more intricate than that. It can change in any moment.

Having strong convictions and going all in on them is risky. Taking into account the possibility of different outcomes and acting accordingly is the safer strategy.


It requires great effort to keep an open mind. Jumping to conclusions and having strong convictions is easy but dangerous.

Keeping an open mind and accepting the possibility of opposing options being true is hard. Yet, that strategy is the most suitable one to the reality that we are living in.

The goal isn’t to know it all. That’s an impossible goal. The goal is to come up with a strategy that works in either case.

How to Optimize Your Decision Making Process

Making a decision is one of the most exhausting mental processes. Making a series of decisions drains your brain and as a result, the quality of your decisions plummet. This phenomenon is called decision fatigue.

A successful life requires a lot of quality decision making, but we have a limited capacity for decision making. That is a problem and that problem can be solved by optimizing our decision making process. I will discuss several methods to optimize our decision making process. If you have other methods or ideas, please let me know in the comments.

No decision is (most of the time) the worst decision.

Decisiveness is a personality trait of successful people. Successful people make a decision, act on it, and then deal with the results.

  • Make a decision,
  • Act on it,
  • And deal with the results.

You might think that the opposite of that sequence would be

  • Don’t make a decision,
  • Stay put,
  • And don’t deal with the results.

That second sequence might look more attractive to you, because you don’t need to make the mental effort to make a decision. You don’t need to make the physical effort to take action. And most important, you don’t need to deal with the results. This is an illusion.

While you’re staying put, the world is moving in all kinds of directions. Time is passing. Your time on this earth is limited. That means, not making a decision is a decision itself. It has its results and you have to deal with those results.

In some rare cases, not making a decision can be the better decision. The so called “wait-and-see” approach might be the superior approach in some chaotic situations, but most of the time, it’s the worst decision.

Think about choosing between two job offers for example. If you hesitate between two offers for too long, you’ll end up losing both offers as they might be filled with other candidates. If you hesitate between two vacation options for too long, you will end up spending your vacation at home.

I have hundreds of ideas in my notebooks. I pick one every day and write a blog post about it. If I hesitate too long between different ideas, I might end up with no blog post on that day.

In summary, making no decision is a decision and it is most of the time the worse decision. If you can’t make a decision, write down your options, eliminate the less desirable ones, and choose one of the remaining ones randomly. You can find more about that in my post called From Hesitant to Decision Maker in Four Simple Steps.

Automate Your Decisions

You might have heard about Mark Zuckerberg, Steve Jobs, and Albert Einstein wearing the same clothes every day. The reason they are doing that is to eliminate one more decision from their daily routine. Remember every decision you make takes away from your limited capacity to make decisions in the rest of the day.

You can automate some simple decisions such as what you’re going to wear and what you’re going to eat. I don’t wear the same shirt every day, but my shirt choosing process is fairly simple. Just wear the left most shirt in the wardrobe.

You can automate your day further by establishing a daily routine. I have a daily routine where all the activities such as eating, writing, working out are fixed in time and duration. I don’t a have a strict schedule, but I more or less know when I’m going to start that activity, what I’m going to do during that activity, and how long it’s going to take.

Having a daily routine is especially useful at work. You can allocate different chunks of your time to different activities and repeat the same routine every day. That way you never have to think about what you’re going to do next.

Another area I use automated decision making is saving and investing. I have a fixed amount that I save every month and invest that in an index fund and bitcoin. This automated saving and investing system eliminates all the emotions from the investing process and prevents me from making those costly investment mistakes.

Not having to think about what to do next saves a lot of decision making capacity, which you can use in other, more important decisions throughout the day.

The Downside of Automating Your Decisions

The downside of having a daily routine is creating a comfort zone around it and never improving it. Even though it saves considerable mental energy to have a fixed daily routine, you might want to adjust it according to the changing conditions in your life.

You might want to update your processes from time to time. Being too strict results in guaranteed failure and innovation must be a part of your job, business, and life. Daily evaluations are a part of my daily journaling practice and they help me make the necessary course corrections.

How to Increase Your Decision Making Capacity

Using your decision making capacity efficiently is a critical part of optimizing your decision making. Another critical part of that is to increase your decision making capacity.

Decision making is a muscle. You can increase your decision making capacity by training your decision making muscles. Just make a list of decisions to be made and commit to make at least one of those decisions every day.

Remember, not making a decision is most of the time the worst decision. If you can’t decide between two or more options, they are equally good or bad. It’s more important to deal with the consequences of a decision than to make the decision. Just toss a coin if you have to, which is much better than not deciding at all.


Decision making is a muscle and there can be a lot of thoughts, emotions, and distractions weighing in on that muscle. You can make your best decisions when you have mental clarity. You can achieve mental clarity by letting go of your useless thoughts, emotions, and distractions.

North Star, Values, and Clear Goals

Having a north star, an ideal, a well-defined life goal that you are striving towards can make your decision making process extremely easy. Having clear goals and values can guide your decision making process.

When you have more than one option when making a decision, just evaluate each option for how they serve your north star, your values, and your goals. Once you do this exercise and you’re honest with yourself, the choice will be obvious.

It’s one thing that the right choice is obvious and it’s another thing to actually make that decision and follow up on it with your actions. If you’re struggling with that, you might want to work on your self-discipline and courage.


The quality and quantity of your decisions are a critical factor in your success in your life. You can optimize your decision making process with the following methods.

  • Know that no decision is (most of the time) the worst decision and make a random decision if you can’t make your mind.
  • Automate your decisions by creating daily routines. Don’t forget to update your daily routine as needed to avoid stagnation.
  • Increase your decision making capacity by using and training your decision making muscle.
  • Increasing your mental clarity with mindfulness.
  • Have a north star. Have a clear set of values and goals to guide your decisions.

Disclosure and Disclaimer

I owned some SPY and BTC at the moment of writing this post. This post is for information purposes only and not intended to be investment advice.

Focus or Innovate?

If you read the personal development literature, you might think that the secret to success is to focus on a single project and concentrate 100% of your efforts on it.

You will come across recommendations to focus on essentials, focus on your core skill set, focus on your strengths and delegate the rest.

If you’re a business owner, the same experts suggest that you should focus on your core business and let go of the rest. Some business coaches, like Dan Peña, recommend riding your horse to death, meaning to stick to a business until it dies off, milking your cash cow to death.

There’s a truth to that advice, but what if your project or your business becomes irrelevant in the market place?

Too Much Focus?

You might have heard the story of a professional who has ten years of work experience but can’t find a new job; or the businesses who were success stories for a long time, but suddenly failed, for example Kodak and Blackberry.

Why can’t a professional with ten years of work experience find a job? When you take a closer look at their career, you will see that they don’t have ten years of work experience. They have one year of work experience repeated ten times.

In other words, they were focused too much, too long on a narrow skill set, until it became irrelevant.

If you’re old enough to have used analogue cameras, you would know that for every 36 pictures you took, you needed to buy a roll of film by Kodak or other manufacturers. That was great business for Kodak back in the day. That is until digital cameras made it to the mainstream.

Back in the day, Blackberry smartphones with their full physical keyboards and internet access were the standard for professionals. Then Steve Jobs came up with iPhone and the rest is history.

DRY: Don’t Repeat Yourself

What did the unemployed professional do wrong? They broke the rule of DRY, which is a rule we follow in computer programming. The expansion of DRY is “Don’t Repeat Yourself.”

Focusing on a single project is good, but if you’re continuously repeating yourself, you’re not making any progress, and eventually, the market will catch up with you.

What could Kodak and Blackberry do differently? There’s a single word answer to that question: innovation. Innovation by definition is the opposite of concentration.


As we see from the examples above, too much concentration is dangerous. Concentration needs to be balanced with innovation, or in other words diversification.

A typical application of diversification is investing. We all heard the saying “don’t put all your eggs to a single basket.” That means don’t invest all of your money to a single asset. It’s good advice, which I’m trying to follow as well.

However, it’s a bit difficult to maintain an investment portfolio of twelve and more stocks. You need to follow their prices and news. All of that is quite some work for someone who isn’t a professional investor.

As a result, most people stick to their savings accounts, which bring negative interest nowadays, meaning that the interests don’t cover the inflation rate. My solution to that problem is SPY. It’s an index fund that tracks the S&P500 index, which consist of approximately 500 stocks.

My game plan is to keep 80% of my savings in SPY and invest the rest in diversification assets such as put options to hedge my portfolio risk and some cryptocurrency, mainly Bitcoin.

When Is Diversification Too Much?

You have to be careful with diversification though, because there’s always the risk of spreading yourself too thin between different projects. That approach would result in failure in all of those projects.

Eventually, you might need to choose one of those projects to focus on, which reminds me of the 80/20 Rule of Google.

80/20 Rule of Concentration vs Innovation

Back in the day, Google had an 80/20 rule for their employees. An employee had to work 80% of their time on tasks that were assigned to them. 20% of the time, they could work on a project of their own choice, given that the project would eventually benefit Google.

The 80/20 rule of Google was a good balance between concentration and innovation. As a result, they came up with some successful products, such as Gmail, and some interesting ones, such as Wave.

In my opinion, their mistake in the implementation was to divide a working week using the 80/20 rule. Roughly speaking, the employee had to work four days a week on their assigned tasks and one day a week on their own project. The oscillation between the assigned tasks and own project would inevitably create productivity loss.

Instead of the weekly time allocation, I would give an employee a complete, uninterrupted month to come up with a proof concept implementation of their own project. If the proof of concept was received well, they could go ahead and implement it.

If their proof of concept didn’t deliver the expected results, they would have to wait for another four months before being allowed to start on a project of their own choosing. This would satisfy the 80/20 rule and avoid the loss of productivity.

How to Decide When to Concentrate and When to Diversify?

Concentrating 80% of the time and diversifying 20% of the time seems to be a good balance.

If you concentrate more than 80% of your resources on a single project or investment, you are risking your career, business, or investments, because there is always the risk of that project or investment becoming irrelevant.

If you diversify more than 20% of your resources, you will not be able to make much of a progress in your business or career.

When to Concentrate or Diversify?

There’s a time to concentrate and there’s a time to diversify. There’s a formula to decide when to concentrate and when to diversify. This formula comes from my experience in solving computationally hard optimization problems.

The computationally hard optimization problems are modeled as vast search spaces, consisting of huge numbers of possible solutions. Each solution in the search space has a fitness value, which indicates how good that solution is.

Evaluating all the solutions in the search space is impractical. What we do instead is to find an intelligent way of traversing solutions. We evaluate the fitness of each solution that we come across and we keep the best one in the memory.

I believe this type of problems are a great analogy to real world problems. The balance of concentration and diversification is used in local search algorithms to solve this type of problems.

When we come across a region in the search space with lots of good solutions, we intensify the search. That means we spend more time in that region looking for better solutions. Once, we can’t find any better solutions in that region, we diversify to another region.

When we diversify to another region, the initial solutions we find are considerably worse than the solutions we found so far. This is to be expected. However, as we keep searching that area, better solutions might be found. Then, we can concentrate our efforts in that region.

Innovation Is Scary

Innovation is scary. It means getting out of your comfort zone and making a fool of yourself. You can’t perform well on a project that you just started as well as you perform on a project that you worked on for ten years.

I remember the first full screen smartphone of Blackberry, which meant to compete with iPhone. I had that phone and it was a total disaster. Until then, Blackberry ruled the smartphone market, but with their first full screen phone, they failed. This was to be expected.

When you innovate, when you diversify, when you explore new ideas, it is expected that you fail. The trick here is to fail quickly and fail cheaply.

You’re not trying to perfect the implementation of an idea, when you diversify. You’re just looking for an idea that would work in the market place.

The time to perfect an idea is not the first time you try it. The time to perfect an idea is when you find an idea that works in the market place. Only then, it makes sense to concentrate on that idea and intensify your efforts on it.


The secret to success is to know when to concentrate on a single idea and when to explore other ideas. When an idea proves itself to be promising, then it’s time to concentrate your efforts on it. When the returns of an idea start to fade, then it’s time to diversify and explore other ideas.

The golden ratio seems to be 80% concentration and 20% diversification. This ratio not only applies to time, but also allocation of your resources, such as investing your savings.

Disclosure and Disclaimer

At the time of writing this post, I owned SPY, Bitcoin, put options, and other cryptocurrencies. This post is for information purposes only and not intended to be business or investment advice.

A Billion Dollar Disaster of a Business Model

People will gravitate to the social platforms that pay them. This is the future of social media.

Last week, I have published an analysis of Steemit, a social platform with its own cryptocurrency. The idea behind Steemit is to pay its users to post, comment, and upvote. Wait don’t rush to Steemit.com yet. Let me finish my post first.

The first reaction to a social platform paying its users is that it is probably a scam. I argued in my previous post that it is feasible for a social media platform to pay its users. Users add value to a social platform, by posting, commenting, and liking posts and comments. So, why not compensate them for the value they add to the system?

Facebook has a market cap of $500 Billion USD and turns a healthy profit every year. They have the funds to compensate their users for their contributions. With Steemit, the cat is out of the bag now. Eventually, people will gravitate to the social platforms that pay them.

The question isn’t whether it is feasible or not. It is feasible. The question is how to do that. Unfortunately, Steemit is doing it wrong.

Reward Distribution Scheme of Steemit

Steemit is programmed to distribute 6.5% of their market capitalization to their users in the first year. Their system foresees the reduction of this amount gradually over 20.5 years from 6.5% to 0.65%

At the moment of writing this post, their market capitalization is $1 Billion USD. That means, Steemit will give away $65 Million USD in one year to its users for posting, commenting, and upvoting, if they can maintain their market capitalization of course.

Yes, they do. I’m not joking. If you don’t believe me, read their FAQ, verify their market capitalization, and do the math. If you think I’m wrong, post your calculations in the comments section.

I wonder whether anyone in their team or in their investors realize that they will burn through $65 Million USD in one year for mostly mediocre content.

The giveaway rate will be reduced to 0.65% in 20.5 years, but by then, they will have blown 50% of their market capitalization away, which is a whopping $500 Million USD, if they can maintain the billion USD market cap, which I highly doubt.

System Is Open to Abuse

The amount of funds distributed to users on Steemit is absurd. What is more absurd is the way they distribute it. They distribute these funds according to the votes those posts and comments receive. As you can imagine that is open to all kinds of abuse. Some people simply maximize their return on investment by voting their own posts and comments instead of voting valuable posts and comments.

No company can survive blowing away a significant portion of their market capitalization every year on something that doesn’t add any value at all. If they don’t stop this mistake, Steemit won’t be able to survive. Eventually, they will face a selloff of their tokens. Without any market capitalization to distribute to their users, their whole system is going to implode.

Disclosure and Disclaimer

At the moment of writing this post, I owned some Steem Power tokens. This post is for information purposes only and not intended to be business or investment advice.

This Is How Your Expectations Sabotage Your Success

And this is how to update them.

Linear Growth vs. Quantum Leaps

This is something I’ve learned fairly recently in my life. I have experienced it multiple times in my life, but I didn’t learn my lesson until I read about it in a blog post. It is very counterintuitive and it makes sense when I look at my life experience.

Expectation of Linear Growth

I’m talking about linear growth vs. quantum leaps. Until I learned this concept, I used to expect linear growth of results. That was my logic. If I didn’t see that linear growth, I got discouraged and gave up.


Here’s an example. Suppose that I buy a stock at $100 USD and I expect it to be $120 USD in a year. In the past, I’d expect its price to appreciate $0.40 USD every week and to reach the $120 USD mark at the end of the year. That’s not how it works in the stock market and in life.

The stock fluctuates around $100 USD most of the time. It even declines slightly, which is even more discouraging. Then after a few quarters, some positive unexpected news hit the market, and the price surges to $120 USD within a week or two. This is exactly what happened to the cryptocurrency Ripple, after I sold it.


I observed the same phenomenon with my blog as well. At the beginning, there was little to none interest to my blog for a few months. Then someone reached out to me to include my posts in their Medium publications. I accepted and realized that it was possible to submit my posts to publications.

I started to submit my posts to Medium publications from then on and that was a quantum leap for my blog. I kept publishing in small size publications for a while. Then the Startup reached out to me to include my posts in their publication, which is followed by 200K+ people. I gladly accepted and that was another quantum leap.


This is exactly how it worked with my career as well. I stayed in the same position for a few years. Then suddenly an opportunity showed up and I was in a new job. This happened multiple times in my career.


The quantum leap concept applies to any area of life. If you’re single, you might date a lot of people without being able to connect with any of them for a long time. And one day, you meet someone you click with and you start a relationship.

The Catch

There’s a catch though.

In order to benefit from the quantum leaps, you have to stick to your guns even if you don’t see any results for a long time.

In case of investing, it’s sticking to your investments. In case of your business, it’s sticking to your business, taking steady action every day, even if you don’t see any results in return. In other words, you have to add value every day, but don’t expect any results proportional to your efforts.

Sticking with your investments, business, or any other endeavor without seeing any results for a long time can be very depressing. You might be tempted to give up, but you might be just a few inches from the gold, so keep digging.

What’s even more depressing is to quit and then see someone else succeed with the same investment or a similar business just a few months after you quit.


This post is for information purposes only and not intended to be business or investment advice.

In the Intersection of Social Media and Cryptocurrencies

Is this the future of social media?

UPDATE February 17, 2018: I have published another post titled A Billion Dollar Disaster of a Business Model about Steemit after using and researching it more in depth.

There are countless social media platforms out there. Facebook, Twitter, YouTube, Instagram, Snapchat, and the list goes on. Of course, Medium is the favorite of us writers. They all have their own way of engaging users and making money. Likes, claps, views, reads, comments, fans, followers, and the list goes on.

I came across a new social platform and they have a superior way of engaging their users. Let’s talk about the business model first and then talk about the website, because as you know, ideas are one thing, execution is another.

The idea here is to pay the users for their engagement. You read that right. They are paying money to their users for signing up, posting, commenting, and upvoting posts.

How’s that possible?

A business paying their customers? That must be a fraud, a Ponzi scheme. What is the catch here? Are they just harvesting personal data with the promise of cash and not going to pay at the end?

Wow, that was fast, but I get your concerns with all the online fraud nowadays.

Let’s not talk about a specific website. Let’s talk about the feasibility of this model first.

Is It Feasible?

Yes, it is perfectly feasible.

What is the value in social media?


Yes, your attention is valuable. It is valuable for yourself and it is valuable for the advertisers who advertise on all of those platforms. That’s why companies such as Facebook, Twitter, and Snapchat are valued at $500+, $20+, $20+ billion USD, respectively.

Do you really think that they cannot pay some of that cash directly to the end users who spend their valuable time on contributing their content, comments, and likes to those platforms? I think this is perfectly possible.


Now, before I discuss the case study, let me be clear. I’m not making any investment recommendations, neither positive nor negative. I haven’t made up my mind either. I will explain my game plan at the end, but you’re on your own, as always.

I will discuss the pros and contras of this business to the best of my ability and it is up to you to make your own research, observations, and investment decisions and you have 100% responsibility on those decisions.

Having said that, let’s continue with our case story. The website that I’m talking about is Steemit.

The Business Model of Steemit in Two Sentences

Users purchase influence on Steemit and that income is redistributed to the users and the administrators of the platform.

What does influence mean on Steemit?

If you have a high influence on Steemit, your upvotes have a higher weight compared to others. That means you have more influence on determining which posts and comments will be distributed to the users.

But wait, isn’t that a Ponzi scheme?

“Some users are paying other users after a cut to the administrators. The newcomers are paying the older users. That sounds like a Ponzi scheme to me.” If that’s what you’re thinking, read the next question.

Why would I pay for influence on Steemit?

Well, probably, you wouldn’t. But there are a lot of people and institutions who would be willing to pay big bucks to influence what’s distributed on social media. Think about an election cycle and the supporters of the candidates getting into a bidding war.

Influence is a valuable commodity that has its expiration date. It has to be repurchased with money and/or new content frequently, both of which benefit Steemit. That regular and frequent inflow of money and content to get influence on this system makes Steemit a sustainable business, at least in theory. That invalidates the Ponzi scheme argument.

Isn’t that the same as promoted posts on Twitter and Facebook?

Kind of, but not the same. We can say that the mechanism is different, but the effects are similar. The more influence you have, the more you can promote a post.

Unlike Twitter and Facebook, you can increase your influence by getting your posts upvoted by others. So, there’s a way to receive influence for free by contributing content that receives upvotes by others.

In Twitter and Facebook, you pay to promote a post. In Steemit, you pay to become an influencer. Once, you become an influencer, everything you upvote receives a higher weight.

Your influence fades over time. That means either you have to buy more influence or provide the community with sweat equity in the form of content or curation, i.e. upvoting, to top up your influence.

You make this sound like Unicorns and Rainbows. Doesn’t it have any downsides?

Unfortunately, it does. I wish it was all unicorns and rainbows, but it has its downsides. If it was a perfect product, it would have a huge impact on society by now. It doesn’t. Moreover, if it was already perfect, there wouldn’t be an opportunity to invest in it right now.

It’s a Beta Product

As they openly declare under their title, Steemit is in its beta phase. That means the website is not officially launched yet. It is in its testing phase. Unfortunately, I came across a few bugs using it.

I don’t mind a website having bugs. Even Facebook had bugs and probably still has. But a platform that has its own cryptocurrency having bugs is another thing.

I wouldn’t like my bank to have bugs in their software that would result in irreversible loss of my funds. I don’t know whether Steemit has bugs in their crypto software, but my reasoning goes, “if they have bugs in their website, they might have bugs in their crypto software too.”

“Do I feel comfortable investing my hard earned cash into a cryptocurrency that might have bugs in it?”

That’s a question I’m asking myself and you should too.

Considerable Changes to the Rules of Economics

The rules of creating and distributing new tokens have been changed in December 2016. This is a huge red flag for me. Frankly, this made me think of skipping this cryptocurrency altogether. Even the slightest change to the rules can result in huge impact on the price of the cryptocurrency.

The fact that the administrators can make dramatic changes in the economic rules of a cryptocurrency is a huge red flag. Those changes can result in huge losses or profits.

Cryptocurrencies of Steemit

Before delving into the changes, let’s go over the two tokens offered by the system.


Steem is the base currency. It’s liquid. That means you can convert it to other assets such as Bitcoin anytime you want. It doesn’t grant you any influence on the Steemit platform. Neither does it earn any dividends.

Steem Power

Steem power is the “preferred” token. It is illiquid. You can’t convert it to other assets any time you want. You can only start a conversion schedule, which means it will take you 13 weeks to liquidate it.

Steem power grants you influence on the Steemit platform. It earns dividends in the base currency, i.e. Steem.

December 2016 Rules of Economics Changes

  1. The inflation rate of the base token, i.e. Steem, is reduced from 100% to 9.5%. A new scheme to ever reducing inflation is introduced. This is a positive change for the investors.
  2. The dividend rate for the preferred tokens, i.e. Steem Power, is reduced from 90% of the 100% inflation rate to 15% of the 9.5% inflation rate. This is a net negative change for the investors of the preferred tokens.
  3. 2 year lock up period for the preferred tokens are eliminated. Instead, a new liquidation schedule of the preferred tokens is introduced. Once you start the liquidation of the preferred token, it will be liquidated in 13 instalments over 13 weeks, i.e. 3 months. This is a positive change for the investors of the preferred tokens.

Long Registration Process

The platform requires your email and mobile phone number. We are used to entering our email when registering to websites, but a lot of people will have concerns about entering their phone numbers to register to a website.

Moreover, it takes up to seven days until your registration is confirmed by the administrators. In my case, it took four days. You can’t participate on this platform unless your registration is confirmed. You can’t buy the tokens either. So, you have to wait until your registration is confirmed.

Long registration process is a huge downside of Steemit. A lot of people sign up to a social platform just because they see something interesting and they want to react to it. If they can’t do it immediately, the window of opportunity is lost and that user is lost forever.


Sure, there are some quality posts on Steemit, but the platform is in its infancy. You shouldn’t expect the same quantity and quality that you can find on other platforms such as Medium.


If this business model has some traction and other major platforms such as Facebook feel threatened, they can easily adopt the same business model to prevent their existing users from fleeing to Steemit.

We know how Mark Zuckerberg is eager to copy the features of Facebook competitors. It’s a wise thing to do and it works for Facebook.

Correlation with Bitcoin

The performance of the Steem token is correlated to the crypto market, which is led by Bitcoin. That means, if money flows out of Bitcoin, money will flow out of Steem as well, at least in the short term.

Class Actions Not Allowed

That means investors of the Steem and Steem Power tokens cannot get together, hire a law firm, and sue Steemit, which is kind of different than owning regular stocks in US. This was a clause in their terms of service that you agree to when signing up to the platform.


After all the pro and contra arguments, here is an opportunity coming up for Steemit. 2020 US Presidential election. If Steemit can gather enough steam in 2018 and 2019, 2020 can be a big opportunity for Steemit.

Supporters of both candidates might pour cash into Steemit to buy influence and support their candidates. Not only the big corporations, but also individuals could buy influence on Steemit.

Unlike official campaign donations, individuals and organizations from all over the world could purchase influence on Steemit to influence the presidential election.

Of course all of this is subject to Steemit having sufficient traction, not imploding, or not being eliminated by big competitors by then.

Investment Options

There are three investment options that I can see.

Sweat Equity

You can earn Steem Power by participating on their platform, writing posts, commenting, and upvoting. This is not something I’m enthusiastic about at the moment. My preferred social platform is Medium at the moment.


This is the liquid base currency that you can sell any time you want, that has 9.5% inflation rate at this moment. It doesn’t bring in any dividends or influence. Its only advantage is that it is liquid.

Steem Power

This is the preferred token. It brings in the 15% of the 9.5% inflation rate as dividends in the base currency, i.e. Steem. Its downside is that you can’t liquidate it immediately. It has its own liquidation schedule of 13 weeks. You can liquidate it in 13 instalments over 13 weeks. You can stop the liquidation process anytime you want.

If you do the math, Steem Power receives 1.425% extra in Steem every year. “Is that 1.425% a year extra worth the 13 week lock up?” If your answer is “yes,” your choice should be Steem Power. If your answer is “no,” your choice should be Steem.

My Game Plan

I already have a game plan for Bitcoin in 2018. My game plan is increasing my Bitcoin holdings from 3% of my savings to 5% in 12 instalments over 12 months. Now that Steem enters this picture, I’m not interested in increasing that 5% ceiling.

In other words, if I would invest in Steem, I would only invest by selling Bitcoins and diverting some of those 12 instalments to Steem, at most four of them.

I’m not 100% convinced of Steemit though. A significant increase in traction in user engagement, increased quality and quantity of content, or a significant decrease in the price of Steem could motivate me to invest.

On the other hand, I have skipped Ripple in the past and its price increased tenfold after I sold it. So, I’m kind of in the middle on this one.

If I invest, I’d hold it at least until the peak of the 2020 presidential election campaign to sell.

Your Turn

I have explained all of my observations and conclusions about Steemit, their business model and their tokens. Now, it’s your turn. What do you think about their business model and their tokens? Do you have any comments or questions? Let me know in the comments section.

Disclosure and Disclaimer

At the moment of writing this post 3% of my savings were in Bitcoin. I did not have any Steem or Steem Power tokens. I may or may not purchase Steem or Steem Power tokens in the following days.

This post is for information purposes only and not intended to be business or investment advice.

How the Hodlers Fail the Crypto-Economy

December 2017 was a missed opportunity for hodlers as well as the crypto-market in general.

Hodlers could act responsibly in December 2017 and be rewarded for their actions. Instead they’ve chosen to be greedy. They’ve lost the opportunity to profit and to contribute to the stability of the crypto-market.

By hodlers, I don’t mean the average investor who made a humble investment into Bitcoin and held on to it through the ups and downs of the market. By hodlers, I mean the crypto-geeks who built a significant holding back in the day when Bitcoin was less than $10. By hodlers, I also mean the early investors who invested a significant amount in Bitcoin when Bitcoin was less than $1000.

Lack of Market Making

Hodlers had a responsibility in December 2017. They had the responsibility of market making. They had the responsibility of selling some of their holdings when the markets went out of control in 2017. If they did that in a controlled fashion, we wouldn’t have the crazy ups and downs. We would still have a healthy bull market now. We would be attracting more and more investors to the crypto-space. Mainstream adoption wouldn’t be a joke that it is right now.

Confusing on paper profits with real profits was an illusion.

Instead, hodlers chose to hold on to their portfolios and they became the victims of their greed. Holding on to their portfolio so tightly was an illusion for hodlers. Their illusion was confusing on paper profits with real profits. The markets have punished them for not taking some of their profits, which they could put in use when the markets withdrew later in December 2017 and January 2018.

In a way, Charlie Lee, the creator of the LiteCoin, did what was responsible and sold all of his LiteCoin holdings at the height of the market in December 2017. He did what was responsible for the crypto-market in general and for his portfolio in particular.

It was a no-brainer to sell a portion of one’s portfolio above $10K in December 2017, even a few percentage points of one’s holdings.

I’m 100% aware that one person cannot influence the market by themselves. However, when the markets go crazy and you have sufficient amount of funds, it’s a no-brainer to put some of those funds, for example 10% of your holdings, into the market. It was a no-brainer to sell a portion of one’s portfolio above $10K in December 2017, even a few percentage points of one’s holdings.

Responsibility to Act Rationally

As crypto-investors, we have a responsibility. That responsibility is to act rationally in this market. That is to only invest what we can afford to lose. That is to accept the fact that Bitcoin prices can crash for 80% or more any time. That is to accept that our Bitcoin accounts can be hacked any time. Moreover, our responsibility is to act as market makers, even if we can’t influence the market just by ourselves.

By market making, I mean deploying up to 10% of our holdings when the price swings exceed rational expectations. It is really not that difficult to gauge whether the markets act irrationally or not.

Did gold, silver, oil, or another commodity made a 2000% price move in 2017? No, they didn’t. Did the whole financial system collapse? No, it didn’t. Did we experience hyper-inflation? No, we didn’t. Then why did the price of Bitcoin increase almost 2000% in 2017? It did not have a reason. Serious Bitcoin investors had the responsibility to act against that move, instead of getting excited about profits on paper.

My 2018 Crypto Game Plan

In order to fulfill my responsibility to the market and to my own portfolio, I’ll keep investing in Bitcoin in 2018, because I expect the price to withdraw throughout 2018. At the moment, 3% of my savings are in Bitcoin. My plan is to increase this percentage to 5% throughout 2018 in 12 installments over 12 months. I have already invested three installments in January 2018 at $11K, $10K, and $9.2K

I plan to add passive orders under market prices and wait for them to be fulfilled. If they aren’t, I plan to buy from the market price in the last week of each month.

In the unlikely event of 2018 being a copy of 2017 and the Bitcoin price exceeding $100K without a rational reason such as hyperinflation, I will start to sell up to 10% of my Bitcoin investments. That is my responsibility as an investor. Taking profits in irrational upswings is also sound portfolio management.

Please don’t interpret the paragraph above that I expect Bitcoin to go above $100K in 2018. As I explained in my previous Bitcoin related post, BTC can end up anywhere between $1K and $100K in 2018. Moreover, if it ends up at $1K, it can stay there for several years. Hence, maximum 5% portfolio allocation from my side.


Depending on their long term investment objectives, I believe whales, hodlers, and even regular investors have the responsibility to act against irrational market movements. Unfortunately, 2017 is a missed opportunity for many hodlers and the crypto-markets in general.

I hope, we, the crypto-investors, learn our lessons and use up to 10% of our portfolios to contribute to the stability of the crypto-markets, if prices start to act irrationally. This is not only our responsibility to the crypto-economy at large. This is also our responsibility to our own portfolio.

If we don’t act on our responsibility, the crypto-economy will remain as the Wild West of finance. We won’t see people and businesses using it as a means of exchange, not even store of value. It will be a casino, attracting gamblers that are only after quick bucks. And the mainstream adoption will remain as a dream.


This post is for information purposes only and not intended to be investment advice.

The Dark Side of Bitcoin

No this post isn’t about Criminals, Drug Dealers, or Terrorists.

The most common argument against Bitcoin is that it is used by criminals, drug dealers, and terrorists. Well, guess what? The US Dollar is also used by these groups. Shall we ban all cash?

While we are at it, we should go ahead and ban computers, phones, and the Internet as well, all of which are used by criminals, drug dealers, and terrorists. So, its use by criminals is not an argument against Bitcoin.

Energy Usage

How about its energy usage? Well, this isn’t a sufficient argument against Bitcoin either. Our financial system is mostly online and that uses energy as well. Mining and securing gold requires energy. Until an energy neutral way to store and transfer funds is invented, energy usage is not a sufficient argument against Bitcoin.

Bitcoin is a Ponzi scheme.

In a Ponzi scheme, there is a central operator promising unusual returns. They pay these unusual returns with the deposits from newcomers. The operation goes on until there is no more fresh money entering the operation and it collapses.

There is no central authority in Bitcoin nor promise of unusual returns. Unfortunately, some investors look at the past price movements and they hope for unusual returns. This doesn’t make Bitcoin a Ponzi scheme.

Bitcoin is based on the greater fool theory.

Bitcoin is only valuable if the following two requirements are met.

  1. The Bitcoin network stays operational.
  2. There are other people who also believe that Bitcoin is valuable.

The second requirement could be called a sort of greater fool theory, if the fiat currencies weren’t inflationary. The fiat currencies, currencies issued by central banks such as the US Dollar and Euro, are inflationary by design. It’s the official policy that they lose their value by a few percentage points every year to stimulate the economy.

If the fiat currencies weren’t inflationary, Bitcoin would be worthless except for its use to transfer funds. In that case, the greater fool theory argument would make sense. However, with the inflationary policies and low interest rates, the greater fool theory argument isn’t that strong either.

Only rich people can afford it.

Who can afford to buy a Bitcoin at $11K? Only rich people, right? Wrong. You can buy one hundred millionth of a Bitcoin. That wouldn’t make much sense, but it’s definitely possible to invest in Bitcoins starting with a few dollars.

1800 Freshly Minted Bitcoins per Day

This is where it gets serious. At this moment, 1800 new Bitcoins are minted every day to reward miners who maintain the underlying network of Bitcoin. At the time of writing this post, one Bitcoin costs more than $11K. 1800 new Bitcoins per day means approximately $19.8 million worth of new Bitcoins entering the market every day.

If the miners choose to sell all of their freshly minted coins every day, the rest of the market has to pay them $19.8 million in cash every day, just to keep the Bitcoin price at its current level.

An inflow of $19.8 million a day is not a problem during a bull market like the one we had until mid-December 2017. From then on, we experienced a pullback. As the prices pull back, I don’t see investors pouring $19.8 million every day to Bitcoin.

If the freshly minted coins are not offset with net inflow of cash, we will see the continuation of the pullback until a balance is reached.

My intuition says that the Bitcoin price will slowly pull back for the rest of 2018. I don’t see any reason for new money flowing into the market, because the average person only invests in assets that are already in an upwards trend. We are already past that point in Bitcoin.

Having said that, I’m not pessimistic about Bitcoin in the long term. I don’t think neither me nor anyone else can predict what will happen with the Bitcoin price in 2018. It can end up anywhere between $1K and $100K in 2018. So, take into account all the possible scenarios when investing into Bitcoin.

I believe 2018 will be the year the smart money will be accumulating Bitcoin. My plan is to join them. 3% of my savings are already in Bitcoin. I plan to increase this percentage to 5% in 2018.

My game plan is to divide the 2% of my savings in 12 and buy that amount of Bitcoin every calendar month. This plan matches my assumptions.

  1. Fiat currencies lose 2% of their value every year by design. (Official government policy)
  2. You can’t time the market. You can’t say when the market is at its highest or lowest point.
  3. You can’t predict the market, the lowest or highest prices of an asset.

Therefore, I’ll be using dollar cost averaging strategy over twelve months in 2018. In a given calendar month, I’ll enter a passive buy order below the market price order. If this order doesn’t get filled, I’ll buy from the market price in the last week of the month. I’ll repeat that for each month in 2018. This strategy worked in January and I was able to buy at $11K and $10K in January.


There are a lot of arguments circulating in the media against Bitcoin. Most of these arguments aren’t convincing. While people are busy discussing weak arguments, they are missing an obvious but strong argument against it: the constant cash inflow requirement to keep the Bitcoin price at its current level. Yet, even that might not stop Bitcoin in the long term.

If you have any other arguments against Bitcoin, let me know in the comments and I may discuss the serious ones in future posts.

Disclaimer and Disclosure

This post is for information purposes only and not intended to be investment advice. At the moment of writing this post, 3% of my savings was in Bitcoins.

Taking Debt and Overspending Is Good

If you know what you’re doing.

I heard Dan Peña explaining a business practice that he followed back in the day. Mr. Peña was spending 125% of his revenue every year, which astonished me.

I have written about entrepreneur mindset before and I have mentioned the lack of risk aversion as a part of it. Even then, I couldn’t think about spending 125% of my revenue every year. That was one of the moments when something I learned expanded my consciousness to new possibilities.

Conventional wisdom says “spend less than what you earn, save the difference, and never take debt except for your home.” I follow that advice and it’s kind of useful for the average person. However, entrepreneurs are a different breed.

Mr. Peña’s justification for spending more than what he earns was to give himself no way out but to perform at his best. Talk about motivation.

When Mr. Peña was spending 125% of his revenue every year, he most probably spends this revenue into businesses that would bring more profits down the road. So, he was probably following an aggressive growth strategy.

The way an entrepreneur overspends and the way a regular person overspends are two different things.

An entrepreneur overspends by investing into businesses and assets that would bring profits in the future. A regular person overspends into liabilities, things that would only depreciate and will not bring any money in the future.

Robert Kiyosaki explains the difference between assets and liabilities brilliantly in his book “Rich Dad, Poor Dad.” Mr. Kiyosaki claims that even your home is a liability, because it doesn’t bring any income, but requires you to spend money.

“Your home is a liability.” Robert Kiyosaki

Taking debt to invest in assets, in your business, and in your career is a risky move. It’s a double edged sword, which works out for some people and doesn’t work for others. For example, think about all the people who are stuck with their student loan debt or lost their savings in the real estate crash.


Debt is an instrument entrepreneurs use to pursue growth. It requires doing your due diligence for sure. If you take into account the official 2% inflation target in fiat currencies, the governments are actually encouraging people to take on some debt. On top of the inflation argument, having to pay debt to keep your business aloft can be a huge motivation.


This post is for information purposes only and not intended to be investment or business advice.