The Line Between Sharing and Shilling
Raoul Pal is now enemy #1 in the Bitcoin community. He's being accused of pumping the recently collapsed Terra yield protocol. He denies that. Who is right? Who is wrong? Is it binary?
When you're lucky enough to have an audience that values your opinion, there's a large responsibility that comes with that. I can tell you from experience that it can be difficult at times to be cognizant of one’s own exuberance when ideas that we are possibly too close to on an emotional level seem exciting.
Raoul Pal is the founder and CEO of Real Vision. Real Vision, dubbed “the Netflix of finance,” is an independent financial content company that has seen quite a bit of change in the last 3 years or so. Former contributor and co-founder Grant Williams left in early 2020 and Pal has taken the majority of the content in a completely different direction since.
That content is now very crypto-focused in my view. There’s nothing wrong that. I’m basically doing the exact same thing with BlockChain Reaction - but crypto is not for everyone. And Real Vision’s pivot to that kind of content is actually the biggest reason why I stopped being a paid subscriber. It’s not that I’m not interested crypto; on the contrary. I just didn’t need to keep paying for something that I feel I can adequately do myself.
“Basically Risk Free”
When you decide to focus on an asset class that has a lot of risk and that has a diverse set of products, you’re occasionally going to talk about things that are not good ideas for everyone. It’s the nature of the business. Right or wrong, Raoul Pal has been getting absolutely dragged on Twitter over the last week or so because of what he said about Terra late last year:
Now, obviously with hindsight, Terra was not “basically risk free.” And quite honestly, it was not smart to say that even before Terra blew up. In my view, someone like Raoul who is ex-Goldman, has been in finance for decades, and thinks at a very philosophical level should not have said that. There is no such thing as “basically risk free” ever. Holding any security has risk. Holding any commodity has risk. Holding dollars or other US debt instruments has risk. Getting out of bed in the morning has risk. It was a silly thing to say.
I think the bigger issue that people are now having might be that Raoul doesn’t appear to be owning up to that comment. Saying something is “basically risk free” and then acting as though you didn’t understand it after the rug is pulled out from underneath everyone is a bad look. Novogratz has a Terra “LUNA” tattoo but even he shared something close to a mea culpa after the Terra blow up.
The fundamental question I think is this: was Raoul shilling Terra? That I don’t believe. His word choice was bad. But I don’t think mentioning a protocol in a video is the same thing as pumping it every day on Twitter with rocket emoticons. Raoul wasn’t doing that with LUNA and there are plenty of people who are entirely fixated on one specific cryptocurrency or digital asset who are doing that. Some of them are now taking shots at Raoul.
Who has moral high ground?
As much as I like Zcash as a personal bet and share my thesis for why, you’re not going to see me pumping it endlessly and dumping on competing digital currencies online. I think it’s a solution to some of our problems but I understand that I could be wrong on Zcash. It’s one of my bigger crypto bets but it isn’t the only one. Being exposed to it is the risk that I personally take. And it’s why I constantly disclose that I’m not a financial advisor. Everyone has to do their own research.
Just as we see in so many different walks of life; religion, politics, sports, music, brands - like every other human-engineered construct, crypto is tribal AF. While I’ve always known there has been a religious-like following embedded in the Bitcoin community, even I’m surprised by how badly the Bitcoiners seem to want to take Pal down a peg because his actions are viewed as pumping “shitcoins” or promoting irresponsible behavior. But do the Bitcoin maximalists have moral high ground? I don’t think so. Raoul Pal is “irresponsibly long” in that his entire portfolio is in crypto. But he’s not telling people to buy Bitcoin with debt. Michael Saylor is the one doing that.
If talking about Terra is synonymous with pumping “shitcoins,” then certainly telling people to use their homes as collateral to speculate in his preferred crypto is diabolically irresponsible. Especially since we’re now seeing deflationary pressure and that debt is becoming more difficult to service.
Who do I trust?
For a completely un-biased opinion on Bitcoin I like Brent Johnson’s take very much. Brent is a money manager who runs Santiago Capital. He’s very skeptical of Bitcoin but honors his clients wishes when they want to buy it. Here’s what he said on a recent Pomp Pod episode:
Philosophically, I love Bitcoin. And I don’t have any problem with them investing their own money in Bitcoin. As a fiduciary, I can’t tell somebody ‘go put 100% of your money into Bitcoin.’ Even if I did like that, I would never say that because I don’t think that’s the right thing to do.
Brent Johnson, via Pomp Podcast
Brent is a good egg. And he’s absolutely crushing it with his “dollar milkshake” theory right now. Probably because he’s an honest thinker and isn’t overly exposed to one idea. But with respect to Brent, nobody is ever going to care about your money as much as you do. Not “your guy” (or gal) at Edward Jones. Not Jerome Powell or Janet Yellen. Not Jim Cramer. Not Raoul Pal. Not me. And certainly not any of the “finfluencers” on TikTok. That doesn’t make us all bad people. Individually, we all just need to be careful who we choose to follow and who’s opinions we assign value to.
We also need to be very cognizant of exactly what we are risking in the markets. If I have any real critique of Raoul Pal, it isn’t that he talks about ideas that I personally avoid. It’s that he says things like “irresponsibly long.” It’s that he proudly dropped $400,000 for a monkey picture at the literal top of the NFT market. These are reckless actions for a macro strategist in my mind and I’m surprised he’s so cavalier about sharing what he does personally. His audience is large and a lot of his crypto content ends up on YouTube where people far less sophisticated than him can see it and follow it.
If you take anything away from this post though I hope it is this; every investment decision we make is a personal choice. Every outcome from those decisions is a reflection of our own actions. It is heartbreaking that there are people who lost everything they had in the Terra debacle. But those people should have never put their mortgage payments in a crypto protocol. Crypto is still the wild west. While I personally think there are quite a few fantastic opportunities in the blockchain space, if the whole industry collapsed I will still be able to pay my bills and feed my kid. I don’t know how many times I’ve said that I’m bullish crypto but I still have more in Gold. I still have more in equities. I hate the inflation decay, but I still have more in cash. The point is manage your risk appropriately. Don’t be stupid.
If I shill one thing in this post it’s this video-podcast I did with Grant Williams a little over a year ago. I have three all-time favorite conversations that I had on The Trend is your Friend and this one with Grant is in that Top 3. I hope you all have a wonderful long weekend. Don’t eat too many hot dogs. Another form of risk management ;)
Disclosure: I’m not an investment advisor. I merely share what I do and why I do it. You shouldn’t take anything I say as investment advice and always do your own research when making investment decisions. Cryptocurrencies, tokens, STONKs, and digital trinkets could all go to zero. I’m personally long BTC and ZEC.