CHAT GPT’s Ascent Is Crypto’s Final Death

Death, birth, and recession is how God reminds us to get our priorities straight.?

Anyone who lived in NYC during the tragic terrorist attacks of September 11, 2001 will also remember how immediately trivial all our priorities from September 10th suddenly felt. There was nothing more important than hugging the people you loved, rubbing strangers’ backs when they started crying, and helping out however you could. That was it. Our lives were reduced to three simple, deeply human tasks that we should have never de-prioritized. I hope to never relive that moment. But there was something beautiful about life being reduced to something so elemental.

My wise, old neighbor Peter said it best: “Death is a gift that the deceased give to the living.”

Breakthrough innovation has an analogous effect on the collective human consciousness. Its immediate indisputable value immediately exposes the innovation that preceded it as speculative.?

So it is with OpenAI ’s #chatgpt, and the impact it is having on cryptocurrency. When a truly transformative technology emerges it vacuums out whatever hype lingered in the tech bubble that preceded it. Chat GPT makes #crypto look like the headlines from September 10th.?

The meteoric ascent of Open AI’s CHAT GPT3 is, in part, fueled by a long drought of valuable technological innovation. CHAT GPT is so intuitively better, faster, smarter and cheaper than the bulk of the incumbent solutions in education, copywriting, management consulting, law, and investment banking. That is approximately $560 billion dollars of annualized revenue in the US alone. These industries, at long last, are going to have to fight with technology to keep their customers. (I wrote an article about how these industries were essentially selling “grownup term papers” that you can access here.) CHAT GPT passes the ‘luggage with wheels’ usability test, meaning that using it is immediately intuitive as soon as you see it. And its scalability is limitless. It’s clear that it will be more useful to different people in different industries over time. Useful, usable, and scalable are the three boxes a technology needs to check in order to be disruptive and CHAT GPT checks all three.

Before you tell me to calm down I want to mention three important caveats here:

1. There is a generative AI bubble. There always is when a new technology emerges whose value is so exciting. I intend to participate in that bubble and buy a bunch of AI stocks in companies that are overhyped, overvalued, and poorly understood. You will too.?

2. When inflation and interest rates start to come down the AI bubble will expand in multiples. Lower interest rates will inflate risk appetite, and will make it easy for companies to take on debt to acquire recently IPOd AI stocks (that are overhyped, overvalued, and poorly understood, see point 1.)?

3. Generative AI will make the world better and worse. Many industries have created no real value for society, investors, their customers, or employees for a long time. Many of them will be forced to reinvent themselves, thank God. Equally, AI has no soul or humanity. For example, everything that New York did right on the day after 9/11 would have been wrong if it was entrusted to machines. Even intelligent ones.

End of caveats

Crypto, in contrast, checks none of these boxes.

I first started writing about cryptocurrency in 2012 when I was a director of innovation at Bloomberg. I was included in a meeting with the head of the CFTC, Gary Gensler (now chair of the SEC) who was starting to think about how to regulate crypto. At this early stage Bitcoin had broken out of its early niche community of digital cryptographers and was being used to buy narcotics and other contraband. In that meeting one of my colleagues asked the regulator, “How is bitcoin any different than a duffel bag full of cash? Are you going to ban cash?”

It was a great question, and to this day I’ve never gotten a good, straightforward answer. Many people who I’ve worked with, and respect, who are incredibly intelligent, believed that blockchain and crypto were transformative in ways that I was never able to grasp. I tried my best to lean more toward optimism. And never succeeded.

I have never understood how cryptocurrency was ever valuable for anyone who would otherwise transact with a suitcase full of cash. Its only other value was speculation. I had to tie myself into intellectual knots trying to understand why fiat currency needed a blockchain-derived alternative. Its price seemed totally detached from its value. And its value was tenuous at best.?

Every time a #blockchain use case emerged that showed promise, the company that built it would fold, and its customers would revert back to their old machines.?

Another huge red flag was crypto’s corporate lab status. For those who are reading this and have never innovated inside a huge corporation, a ‘lab’ is always an innovation decoy. It’s the company's way of politely saying “we think this technology is unsafe, stupid, and useless, but we don't want to look antiquated if we completely opt out of the hype cycle. So we’ll pay a bunch of PR people to partner with some engineers and a few vaporware designers to fabricate the appearance of experimentation. And, make sure to join us at the Disruption Tent at SXSW for free popcorn and NFTs!”?

So, I think the immediate usefulness of generative AI and the meteoric ascent of Chat GPT has clarified something that was hazy: this a crypto extinction - not a crypto winter. There will be no rebirth in Spring. It’s the end of crypto and the birth of generative AI.?