Sam Bankman-Fried FTX Collapse Shows Crypto is Tulip Mania – Not Lehman Brothers

by Arthur · November 11, 2022

Good morning.

For all of us struggling to grow our companies day by day and dollar by dollar, it’s a little scary to see someone like Sam Bankman-Fried, age 30, start a company, build it to a $32 billion valuation, and then collapse for a day. We at Fortune went on that trip, put SBF on the cover of our August/September issue and asked if he could be the next Warren Buffett: “He could build an empire like the Oracle of Omaha – or crash and burn.” We now know which one. SBF was himself direct in his Twitter analysis: “I have stepped up, and should have done better.”

In a way, this is an all-too-familiar story, of companies built on excess leverage. It is the story of Lehman Brothers or the dot.com boom. But Lehman’s bonds were backed by overvalued houses, and pets.com actually shipped a lot of dog food. Crypto is more like tulip mania – there isn’t much holding it up except the belief that it will eventually go higher. If that faith disappears, what is left? We may soon find out. Meanwhile, for those not invested in crypto, this is a great spectator sport – rivaling Elon Musk’s Twitter takeover. You can read Fortuneits coverage here.

And since it’s Friday, some feedback. Lots of response to my post on Monday about the last five polls as a way to fix America’s political problem. EG called it:

“Too complex … and complex is seen by a suspicious public as lacking transparency.”

DW was more open to the idea, calling it “very clever”, but ultimately concluded:

“It would take the founding fathers rising from the dead to get this passed. And even they can fail.”

But wait! The Final Five was actually on the ballot in Nevada, and no founders were spotted there, but the initiative appears to be ahead as of this writing. Watch this space.

More news below.

Alan Murray
@alansmurray
[email protected]

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AROUND THE WATER COOLER

’10 cents on the dollar’: What happens if Sam Bankman-Fried’s empire is forced into a fire sale of its investments, by Leo Schwartz and Anne Sraders

Elon Musk warns a Twitter bankruptcy is possible after telling employees ‘tough times’ ahead, by Bloomberg

Investors shake off months of bad news to give the stock market its best day in two years, by Associated Press

These exuberant housing markets look like busts—and they just sank Redfin’s turnaround, by Lance Lambert

The kids are doing well, but they’re worried: Gen Z is working harder and saving more than any other generation, by Megan Leonhardt

This edition of the CEO was edited by David Meyer.

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