The Repricing of Difficulty

They're not rewarded immediately, but eventually they are.

Theres something satisfying happening in financial markets right now:

1. SaaS/software companies being priced down

2. Altcoins that were ponzis, bad economics and/or scams going to zero

3. Hardware companies repricing upwards

For the past 2 decades we’ve been told that software is this really hard thing that other people cannot do and should be priced accordingly. Based on this, venture investors were happy to pour millions into retarded startups thinking that once they grow to be massive they can charge a fuck ton and get away with it.

A downstream consequence of the above: venture investors were happy to fund trash as long as it could get marked up in the next round and be listed on public markets for what would make them a handsome return. This cancerous mentality was at its peak with crypto venture investing that was willing to fund actual scams and make a return in less than 1-2 years.

At some point you’d wonder, would any of this madness actually make sense? The answer is yes. It is starting to now. As we speak the largest company on the planet is NVIDIA and the following is Google, which you might think is software but is really a data and hardware company. The remaining top 10 spaces will soon be occupied by other hardware companies in the coming years.

I was speaking to my aunt who was in Silicon Valley in the 80s (and is still there today): back in her time, Micron, AMD and Intel were the companies of the time. 40 years later we have come full circle and these are the same companies that the market is talking about! They’re continuing to gain more importance as we’re witnessing the rebirth of semiconductors 2.0.

However before 2025, everyone assumed hardware was an easy problem when in reality it was and is hard to do.

So what’s the point of this?

Companies have to solve hard problems and have to stick it out for decades to see it come to life. The current state of crypto and SV software has a mentality of short term things that are easy to pump. It is ingrained into the culture and will need to do a 180 to see real change in trajectory.

Crypto in partocular is at odds here and needs to add real value to the word to come back into the limelight. BTC, SOL and ETH have underperformed as investments in the past 2 years. The rest of the industry is in a state of down ownly and basically financial ruin. Capital is actively being chased away. Not being able to hold any token because you’re not sure if it will go to zero is challenging for capital to park itself and forget. Very little of this industry is built to last.

Until crypto changes its culture to start rewarding hard problems, be more ethical and less ponzlike -- it’s going to be a long winter ahead. Fortunately the excess is being washed out, investors are getting burned for poor decisions, teams are working on real problems and long term players are sticking around. I am confident that the industry will come back but the signal will be when there is an abundance of value that it is too hard for capital to ignore.

Right now, it is very easy for capital to ignore crypto.

To all of the builders out there, working on hard problems: keep going. Markets eventually measure value, not votes. Crypto is no different on the downside as we’ve seen, and will not be different on the upside either.