Demetri Kofinas on 'Financial Nihilism'

This podcast is brought to you by Wells Fargo Advisors. Looking for a firm your clients can't outgrow? Wells Fargo Advisors offers financial advisors full balance sheet solutions with wealth planning, investment products, banking, and lending that meet the needs of affluent to ultra-high net worth clients. Build your practice your way and on your schedule with independent and employee model options designed to meet your needs today and tomorrow. Learn more at joinwfadvisors.com.

GameStop, AMC, Dogecoin. These meme stocks and altcoins soared to become worth billions of dollars. But what are they really worth? Do they have intrinsic value or is it all subjective? Hi everyone. I'm business coach Steve Sandusky for Barron's Advisor and welcome to Actionable Intelligence. My guest today is Demetri Kofinas. Demetri is a media entrepreneur, financial analyst, and host of a popular podcast called Hidden Forces. In today's conversation, we explore what is value, how do you determine value, and what role is technology, monetary policy, the 2008 economic crisis, financial nihilism, and memetic desire playing in how we decide where to invest our money.. It's a fascinating conversation that takes us well beyond traditional stock and bond investing. So let's get started with Demetri Kofinas. You host a very popular podcast called Hidden Forces. And in your show, you use a financial and a cultural lens to view the world and to try and understand and make sense of what's happening around us. I'd love for you to start by setting some context here about what you think are some of the most important factors or hidden forces that are affecting the financial markets today?

Well, I mean, everyone's been talking about the flood of liquidity that we've been living with. That's become very normal now, but obviously would have been totally beyond even, I think, most people's wildest imaginations 10, 12, whatever years ago. I think also something else that I've been thinking about recently has been not just the decay of institutions or the sclerosis of institutions, which we're seeing everywhere, whether it is the flat-footedness of regulators or the sort of lack of any kind of formative energy on the part of international bodies to create a coherent vision for where we're going internationally, given the fact that so much is changing geopolitically, but also from a regulatory point of view. I think what's driving that though, the institutional sclerosis, is really the moral decay. There has been a prolonged period of moral decay in society. And I think that that has been a driver of the institutional decay. And part of that moral decay is, for example, the selective enforcement of norms and rules and laws. And 2008 was like the classic example of this. And I think that also drives the nihilism, something else I've talked about, which is that people have increasingly lost faith in the models, frameworks, moral codes that they grew up with and that they thought were universal. That has led to this kind of just increasing period of moral and institutional entropy in society. I think we do see that absolutely in markets. The rise of narrative investing, I think, has some origin in this. I think also the ESG net-zero initiatives, are playing a big role, and also a sort of emerging stereotype for China that's different than what it previously was, which was that it was this emerging capitalist country that was going to fold into the international order. I think most people realize now that that's gone. So I think a lot— those are just some of the, I think, powerful forces that are driving markets in society.

Well, we could do whole shows on each one of those. So let's just take the financial crisis going back to 2008, because I think that was such a watershed event in terms of what happened, and then what the policy response was to that. So what do you think in terms of that event, the response to that event, and how we may still be paying the price for what happened back then?

I mentioned one of them, which is that the rules were changed when the game no longer worked for the elites, for the people in power. I read when I was younger, much younger in my life, Noam Chomsky, It might've been in the documentary of Manufacturing Consent that he said this, but it was something along the lines of, "There are people who own the country and they're not going to let the country get out of control." I think that encapsulates in a way what 2008 showed a lot of people, which is that there are people who to some degree or another exert an unusual degree of control over the levers of power. Over the organs of government. If push comes to shove, they're willing and able to change the rules in order to save themselves, and as we saw in 2008, not just save themselves, but profit from it. I think that combined with the 2001 attacks and the subsequent invasion of Iraq and really failed invasion, failed occupation, has really impacted societal trust and political stability in ways that were maybe only beginning now to see, though I think that connection hasn't been made. So another one has just been the expansion of the balance sheet and the change in how monetary policy is conducted and the inequality that's come out of that. So I think those are kind of just the ones that come foremost to mind for me.

Now, there is a whole generation that essentially grew up around the 2008 economic crisis those were some of their formative years. Do you make a connection between folks that were experiencing that, whether these were people in their teens or maybe in their early 20s, and they witnessed their parents losing their jobs and the impact that that may have had on them, and then their inability to get a good job coming out of that and everything that's happening with the Fed and all the money printing and all that stuff? You mentioned this idea of financial nihilism. Can you draw any connection between what is happening with that generation, and then what you call financial nihilism? Because I think this then leads into how do we value anything, which is a conversation that I really want to get into here as well.

I think, for example, the thing that popped up in my head is that maybe it's not a coincidence that younger generations care less about saving, care less about buying things, and are more interested in experiences. Because there is, I think, less faith in people's ability to plan for the future. And that in no small part is driven by interest rate policy. This is something that I've been openly grappling with for a few years on the podcast that I've spoken about in various ways, the point of nihilism in particular.

Let's start with define financial nihilism, just so we're all working off of the same page.

Well, I define financial nihilism or market nihilism "As an investment philosophy that views the objects of speculation as though they were intrinsically worthless." That's different than saying that perception is important or that perception drives value, but that there ultimately is some underlying value that has to align with perception over time. I think George Soros has done the best job of discussing or describing this relationship, which is how he talks about bubbles. Bubbles are really the escape from reality or value of perception and price. I think it's actually more than that. I think it's the full embrace that value is entirely subjective, that there is no objective value, and that so long as we can manipulate the secondary layer, the perceptual layer of reality, so long as we can do that, we can live entirely in that space. I think We see this in certain meme stocks. We see it absolutely in crypto. You may or may not disagree with this, and it'd be interesting to have a discussion about it. Bitcoin, I think, is the perfect example of this, because Bitcoin has no fundamental value in and of itself. Its value is entirely in its network, i.e., in people's willingness to hold it, to own it, and to perceive that it has value. It does not itself create utility in any way. In fact, consumes energy in order to live. It's different than gold in that way. That's how I view financial nihilism. It's that nothing matters in the world. Investing is not about allocating capital towards productive investments. It's really a shell game. So in that way, it's also a manifestation of the financialization of capitalism, which has been going on, I think, since at the very least the early 1980s.

Preston Pysh: I had a conversation recently with Steven Westlake, who wrote a book a few years back called Capitalism Without Capital. One of the things that he was talking about in there was how in the mid-2000s, I'm talking like 2005, '06, '07 or so, there was a crossover in terms of what companies were investing in, and it switched from tangible assets to intangible assets. He was trying to make the argument, and I think he made it pretty persuasively, that intangible assets, whether it's brands, patents, and other things like that, software, that they behave very differently. They have network effects and other things like that. We can value them differently, or they are valued differently because they have scalability and so on. I think we're seeing that with things like Bitcoin, because you mentioned that, that has the network effects. Well, how do you value network effects? If you ask Cathie Wood at ARK Invest, She's going to say, "It's very highly valued." You ask someone else, they may say, "Well, I can't put a number on it because I can't touch it. It has no cash flow. I can't do a discounted cash flow analysis of it." So to me, this whole idea of what is value, you say it's subjective. Well, how do we put a PE on that?

[Speaker:BRYAN LAWRENCE] I spent a lot of time in the early 2000s studying branding, and I found it absolutely fascinating. I had a business at the time that was a skill gaming video game company, so experiences were very important. The kind of stuff I was reading at the time felt very avant-garde. It opened my eyes to realizing that there was so much value in the intangible. Now, I don't know how commonly understood that was at the time. Again, I was very young, so everything was new, but it felt as though it was not very well understood. I think that we had some catching up to do at that time in terms of recognizing the value of experiences, that Coca-Cola wasn't something that Coke owned, something that we all owned, and we all co-created it and co-manifested meaning. Products had totemic significance, and you really had to think in a very meta way about value. I think we've gone to the other extreme now. I think we've surpassed the point at which those theories, as they're applied, reflect a sustainable reality, so to speak. And so that's very interesting that you bring that up. We live in the era of stories and branding and hype and hype for hype's sake. And I think that this also is not coincidental because in a world where money is free Who are the entrepreneurs that excel? They tend to be storytellers. They tend to be people with the best deck. People come to your office and tell you all about how this market is going to be worth $10 trillion. There's a total addressable market. It really becomes about, well, let's dream bigger because we're in the space of dreaming now. We don't need to actually generate profits so long as we can raise capital. That goes back to what you said at the very beginning of your question, which I thought was so spot on. Referencing that author, which is that we're at a post-capital world, and we've confused credit with capital, and you can't have capitalism without capital. But that's what we have today. And so it's a kind of mix of socialism and, and capitalism. And the question for me is, when it finally ends, when this tenuous equilibrium between the two comes to an end, will we flip towards more socialism? Or will we revert back to something that more closely resembles the world that we inhabited pre-2008.

[Speaker:TREY_LOCKERBIE] I definitely want to talk about that, this endgame, or how are we going to continue to evolve along this continuum here? But I want to keep digging into this idea of value, because I think this is something that a lot of financial professionals struggle with today. We look at the financial markets, we look at the PE ratios on the S&P 500, we look at the total market cap of the S&P 500 relative to GDP, and I think we're at or near all-time record highs. And so how do we know whether this is the right value, whether this is overvalued, whether this is undervalued? And then we throw in things like, again, Bitcoin and crypto and non-fungible tokens, and we see these crazy valuations. And so are we making an evolutionary shift in terms of what we value and how we place value on something moving from the physical, tangible to the intangible. I know you've talked about this idea of mimetic desire in some of your recent podcasts. I'd love for you to touch on that, define what mimetic desire is, and then I think we can explore how that may be impacting the prices that we see for some of these different assets.

[Speaker:BRAD_STONE] I think value investors, and I would consider myself someone that operates more comfortably with that type of a framework are at a disadvantage in this environment. I think in this environment, what matters are flows and narratives. It's very difficult to ask that question and get an answer of what is this worth, because there's a fog, right? It's a fog of war at the moment, and you can't really discern value. Crypto's a great example of that. Look, I'm an investor in crypto. It's not something I talk about very much. I've made some early seed investments in the space, but as the years have passed on, I've increasingly felt uncomfortable investing or making any kind of new investments in new projects because I've lost the ability to really discern where the value is. Crypto is so susceptible to this. Because of the tokenization. When I first got into crypto, I was a huge fan of this new business model, this idea of making it possible to invest in the actual software itself, right? So that whereas Microsoft had to invest its capital, its investors invested in Microsoft, Microsoft invested in creating Windows 95, and then everyone else basically used the product and the profits accrued to the company, which accrued back in theory to the shareholders. Of course, this model is also broken with this elimination of dividends over time. With tokenization, the problem is that like everything else, the product becomes an object of speculation. Maybe it is actually, this is what's going on, financialization is eating the world. It wasn't enough that we moved to a place where the game became increasingly zero-sum and it became about extraction. It's gotten to the point now where just everything feels like it's about money. Everything is financialized, and even individual basketball players are looking to sell personal equity in their future, in their income-generating future. That's a general answer to your question about value. I'm happy to get more specific into it. In terms of memetics, memetic desire is wanting something that other people want because they want it. NFTs are an area where you absolutely see this. Most people have absolutely no clue what an NFT is, But they're attracted to it.

Why?

Because everyone else is attracted to it. Everyone else is talking about it. I moved out to the North Fork of Long Island since COVID and I just bought a new car. It hasn't arrived yet. I'm very excited for it. It is a Rubicon Wrangler. Now, I haven't owned a Jeep ever, and I never really wanted one. If you had asked me 10 years ago, I'd be like, I don't want that piece of crap. I don't want a Wrangler. But why did I buy one? Because everyone out here has one. So that's what memetics is, and I would consider myself a nonconformist. So for me to do something like that just shows you how powerful memetics are.

And I think maybe this idea of mimetic desire is one reason why influencer marketing is so powerful, because if someone that we like and that we want to mimic is doing this or promoting that, well, then I want that too, because I want to be just like that person that I really like out there.

100%, totally true. And that's something else that's, uh, man, has the world changed. It goes back to also, see, that's really interesting, memetics and again financialization, right? Because people aren't just influencers, they're monetizing their influence. It's that combination. And I gotta say, like, from a moral standpoint, it feels really awful. I don't think that it's a net good thing. Again, I embraced it early on. I actually thought it was great that you could tokenize things and that you could introduce financial incentives, but as time has gone on, I see the downside of financializing things that were once considered either sacred or at the very least private. I think where this began to occur was with reality TV and probably the Kardashians. I think the Kardashians were the ones who really brought this mainstream. Since then, we've just seen more and more people embrace it. There's just a whole industry of peddling mimetic desire and influence and getting people to do things because you're doing them.

I want to go back to John Maynard Keynes here for a minute, because I think he can tie into this idea of mimetic desire. You may recall he wrote about this beauty contest idea. It was a concept that he talked about, I think, back in the 1930s in one of his books. The idea was, he was saying, okay, let's say we've got a beauty contest. And we have 100 faces, and the contest is that you have to pick what you think are the 6 most beautiful faces. And if you pick the most popular 6 faces, then you're going to win a prize. And so you might think, okay, well, I'm going to pick the 6 that I think are the most beautiful faces. Or you could say, I'm going to pick who I think other people think are the most beautiful faces. Then you could take that another order and say, do I think the average of the 6 most that other people are going to pick and the average of the average and the average? You could keep going and going and going. It's not what I think is most beautiful, it's what I think other people are going to think is most beautiful. That's what investing is.

Exactly.

You apply that to investing, you apply that to crypto, you apply that to NFTs, then there really is no definition of value other than what I think other people are placing value on, and if enough people do, "People are going to buy this, and it's going to go up." I think that gets back to your financial nihilism idea of the price is the thing. The value is just what people think it is, irrespective of any "intrinsic value." [Speaker:BRYAN_LAWRENCE] I agree at extremis that that's true.

If we take it to the extreme, it is obviously true that all value is subjective, because even food, which objectively is valuable because it makes you want to eat it, If you don't think it's valuable, you could think of a thought experiment where someone starves to death because they just have some type of abnormality, and that is all abnormality by the standards of how we think about appetite, and that person would starve to death. It could be a biological abnormality, but it's a subjective abnormality. But I think in practice, there is value in distinguishing between— there's objective value in distinguishing between objective and subjective value. Because I think objective value is a type of value that recurs over time. Whether it is the ability to generate profits has objective value. While you may not value it, over time, it's going to have an influence on whether that business remains viable or not. That's what I would say to that. I think there is, and I think this idea that there isn't has worked, Steve, because we've been in a nonstop bull market. What happens when this party comes to an end? I did a recent episode with Maureen Farrell on WeWork. She and her co-author Elliot Brown at the Wall Street Journal were the leads on covering the rise and fall of WeWork. WeWork is emblematic of the risks that are right under the surface in financial markets because WeWork lost over $10 billion. It took in $10 billion in funding. It lost billions more in revenue due to costs being completely out of control at the company. That company is not bankrupt. It should be bankrupt, and it would have been bankrupt in a bear market, but this happened in a bull market. This company eviscerated over 80% of its market capitalization of its equity value practically overnight, and we're still in a bull market. I think it's easy for these types of narratives around value to persist so long as money is cheap and numbers go up.

[Speaker:BRYAN_LAWRENCE] Well, and I think AMC is another good example here. Here's a company that was either near bankrupt or probably should have gone bankrupt as a result of the pandemic, Yet it became a meme stock, and the price skyrocketed, and then the company takes advantage of that and issues hundreds of millions or a billion or more of new equity, which gives it a new lease on life. The idea of the narrative of the memetic desire of the meme stock created its own reality that enabled the price to go up and the company to issue a lot of new equity, which in the end may actually have saved the company from going bankrupt.

May have saved them from going bankrupt for now. That doesn't answer the question of whether or not the company has a viable path towards prosperity and how raising that money will impact the type of decisions that executives will make going forward and whether or not it will incentivize more competent executives of the company. I don't know. It's still a theater company. I don't know what the economics are for that. It's fascinating, man. That was the same period of time where we had Davey Daytrader, remember? Barstool Sports founder, Sports were shut down. He got bored, turned on his camera and started trading stocks, and it was entertaining for people. Part of that is the entertainment factor. You have to pull that out of the narcissism and appreciate also that people are entertaining themselves in new ways, they're bored, and they're willing to use money as a way to entertain themselves, which is nothing new, and people have gambled as a form of entertainment. I think what is new in this context is, besides the narcissism, is the, again, moral decay. Gambling is not a good thing. In fact, it's never a good thing. It's okay, I've gambled before too. I don't gamble much, to be honest with you. It's not really something I might have bought a lottery ticket here or there. I never really found it appealing, but I know quite a bit about it because my first company was a skill gaming company. You bet on yourself. It wasn't entirely gambling, it was skill gaming. There is a distinction in the law, I studied quite a bit about gambling, so I understand its appeal, but it's not a good thing for society. Society has become more like the economy. Markets have become more like a casino, and savers have become speculators. They've become gamblers. That's not good for the long-term health of any economy or any society. All of these are driven by a select number of forces. When it comes to this particular one, it is 100% or close to 100%. Fed policy, government spending, and the impairment of balance sheets, and how the government has chosen to address that by way of financial repression, making it really impossible for people to save. Nothing moves the needle anymore in society. Not only is it— I mean, these dynamics all feed on each other, but it's not just impossible to save. Even if you were able to save at this point, because of those same dynamics, prices, asset prices, The things that people save to buy are going up to such a degree that it doesn't make any sense to save, because even if you were to save, prices would move so quickly, so much higher that you'd be priced out. You need bigger and bigger returns in order to move the needle on your life. That reinforces that speculative desire.

Preston Pysh: Do you think that we are actually witnessing the birth of a new asset class? I'm talking about digitization here, digital assets. Whether it's, again, crypto, whether it's NFTs, whether it's the ability to buy a token, which represents a claim on the future earnings of a budding NBA star, so people can sell their future earnings stream and monetize their value. Do you think that's happening at this point? And is that a viable asset class that investors should be thinking about and trying to learn more about going forward?

100%. It obviously is. That's a big part of the future. It's going to drive innovation in business models. I think the pandemic has made that more clear for people. I think where I differ from the mainstream narrative that's within crypto is that I think that we are so far removed from any notion of value and opportunity We're way early here. The valuations are way early, and we need a market-clearing event in order to get the clarity that we need in order to really pinpoint better where the opportunities are. As I said, I'm an investor in crypto, but the last big investments I made were when the real questions were around base layers. DApps were obviously particular with consensus over at Ethereum, But I think we haven't even solved that problem. There are still basic scaling issues with Ethereum and a variety of other platforms. Those problems haven't been addressed yet, and everyone's dreaming about secondary, third, fourth layer solutions to all sorts of other problems, but we haven't solved the most basic ones. That's where I get stuck with crypto. It's hard for me to have these broader conversations about crypto's changing the world, when I feel like we still haven't solved some of the most basic technological problems? I think to sum it up, this goes back to my observation around tokenization, which is that the incentives are all messed up. Everyone's incentivized to gamble on the token and is really obsessed with the price and with pushing narratives that aren't necessarily pro-innovation because crypto is just one of these weird industries where the The normal incentives of innovation that exist in technology, which is disrupt, disrupt, disrupt, new, new, new, are flipped on their head. Why? Because new is disruptive. New eats at the value of my investment. It cannibalizes my value. It cannibalizes the older thing. There's a lot of problems there, and I think it's holding the industry back. While, yes, I agree with you, long-term, 100%, that's where we're going. There's going to be tons of innovation that is going to happen in digital space around the ability to— so long as we, by the way, live in a capitalist world. If we're not living in a capitalist world, then this technology doesn't really make sense. Because this technology, what we're talking about here, presumes that people have the ability to own digital things. Prior to public blockchains, it was very difficult to own digital things without having a central counterparty manage the rights for those digital assets.

I want to talk about Damien Hirst here. He's an English artist. He has a new project called The Currency. I think this will be really interesting because it will help us discern, at least in this specific example, what value people placed on digital versus what they place on physical. Basically, what he is doing is he created 10,000 physical pieces of art, just small pieces of art, basically colorful dots, which are designed to somewhat mimic an actual currency. And then he also created 10,000 corresponding NFTs, and people can pay $2,000 and get one of those NFTs. But there's a couple of twists here. So one twist is that within 12 months, so basically sometime next year, you will be able to determine which of those two you actually want. Do you want to keep the NFT or do you want to actually get the physical representation of that NFT? So that's twist one. Twist two is at the end of 12 months, whichever one you don't choose, he's going to publicly destroy. So if you decide you want to keep the NFT, then the corresponding physical art is going to be destroyed. If you want to keep the physical art, then the corresponding NFT is going to be burned. And so I think this will be a fascinating experiment to see the relative value between a tangible asset and a physical asset, and what do people prefer? How many people are going to take one over the other? He also thinks this is an experiment in belief in terms of what do people believe is worth something. And so I don't know if you have any thoughts on what he's doing here.

I do, actually. I do. Yeah. Scarcity comes to mind. So we are living now in a time where scarcity, the concept of scarcity, has become increasingly relevant and prominent at the forefront of people's minds. Bitcoin's the classic example of this, the narrative in Bitcoin being that because it's "scarce," because within the parameters of the code, there will only be so many Bitcoin, this gives Bitcoin value, which I think is a poor understanding of what makes Bitcoin valuable. It isn't that it's scarce. The scarcity is part of that, but again, we can haggle about really whether it's scarce or not and what that really means. Again, Bitcoin is the child of the 2008 financial crisis. Actually, it's the child of the reaction of the authorities to the 2008 financial crisis, and the narrative proposition, the value prop of Bitcoin is intrinsically tied to that. What was 2008's bailout other than the opposite of scarcity? It was, "Okay, you're in trouble. We're going to bail you out. We're going to manifest money." I think what's interesting is hearing what you're saying here, which is that this artist is making a conscious decision at some point to destroy one thing or the other. Now, why destroy one or the other? Can we not derive value from something if there's not less of it? I think that's really interesting. I, I don't see any reason fundamentally that people can't get just as much value out of something if there aren't more of those things. Classic example, actually, in this case, bring it back to the Jeep Wrangler. There are tons of Wranglers everywhere. That probably actually drove me to buy a Wrangler. I guess the one question is just that question, and then the second one is just an observation that to me, it just feels incredibly wasteful to burn a piece of art. That could adorn someone's home.

I think of it as an experiment, and he's trying— Sure.

Yeah, so I think it's a very good thing. I totally get that. I think it's a cool experiment, and I'm not trying to suggest that the guy's doing something I think it's interesting, but I think long-term, it does reveal a problem, which is that the scarcity mindset that has emerged that didn't exist when I was younger, and not to this degree, and it's proliferated in the minds of people, things are so much focused on scarcity. One of the value propositions of EIP-1559 and PoS in particular is it's going to increase scarcity among users of Ethereum, and therefore increase the value of its token. So that's where that fits in. When you bring that up, that's where it fits in, in my head.

Yeah. Well, there are times when scarcity drives value and other times when scarcity has no impact on value. So for example, a Picasso painting, certainly the scarcity of a Picasso painting drives value. But if we look at the PhD dissertation of someone who's writing about something really obscure and there's only one example of that dissertation. The scarcity of it, there's no value in it, okay, except for the, the person who wrote it and, you know, the dissertation committee that has to read it. So scarcity itself doesn't drive value. There has to be other factors related to it.

Actually, such a great point. And to continue on the PhD example, unless it's a profound realization, unless it's something that really has underlying real value. It's predictive, like Einstein's relativity theory.

Yeah, or Da Vinci's Codex. I think he had like a handwritten journal that I think Bill Gates bought and paid many millions of dollars for. So that's a one-of-a-kind journal that he wrote, or maybe the Bitcoin white paper, for example. If Satoshi Nakamoto handwrote that and there was only one copy of it, that would probably be worth a lot of money relatively.

But it also, yeah, that gets a little tricky because that feeds back to, I think, perceptions of value. But my point being that if Einstein, regardless of how or where the theory of relativity came from, its predictive power gave it value. It gave it objective value, irrespective of whether people valued it or not, people who knew what it was, so that even though there was no one else necessarily that was putting something like that forward, people had the capacity to instantly recognize its value. Because of the properties that it brought by virtue of what the theory espoused.

[Speaker:BRIAN_LAWRENCE] Yeah, and I think we also have to distinguish here between what is of value that you're talking about, and also what is of value as simply a collectible. Someone might buy hot ride cars from the 1960s as a collectible, and it has value to the owner because I enjoy the feeling I get from having this I want a car that reminds me of my childhood that I can look at, maybe I'll take it for a spin every once in a while, but it's a collectible.

[Speaker:ASH BENNINGTON] Right. There's an opportunity there to differentiate between two types of scarcities. People that invest in collectibles, or at least who have traditionally invested in collectibles, don't do that primarily because it's a good investment. I guess some people do, and that's become increasingly true, and we can talk about that. But when I bought baseball cards as a kid or basketball cards, I didn't do that because I was like, well, this is going to be worth a lot one day, and I'm going to be able to buy this really cool thing with it. I wanted those cars because there was something inherently attractive about having something that other people didn't have. And that made me special, not made me special, but there was something special about that. And I want to differentiate between that and using scarcity as a metric for value, which is increasingly common today. People look for something to be scarce in order to assign value to it. I think that's very new, or new within my lifetime. I think that that comes back to the bailout, comes back to Fed policy. It comes back to the realization that some things are abundant and can be conjured into thin air and made from whole cloth. I think there has been in the zeitgeist this desire to try and find things that are scarce, because there's a realization that scarcity has value to some degree or another. I just think we've assigned too much value to scarcity today.

I want to just summarize a little bit about what we're talking about here with value, and then there's one other segment that I would like to get into here if we can. So basically what we've been talking about here today is how do we determine what value is? What is valuable? And there's lots of different ways that we can think about it. Whether it's a tangible asset, an intangible asset, whether it spits off cash flows and we can do a discounted cash flow analysis, whether there's some value in the scarcity, whether it's a collectible, whether it's something like Bitcoin or other types of companies that take advantage of network effects. So there's different ways that we can think about value. And what I think is important for listeners to think about is, that there are different ways to think about what is valuable and not to just stay fixed in traditional asset classes. Because I think because of technology, because of digitization, we're witnessing the birth of new asset classes in real time. Some are going to fall by the wayside. Some are just going to be subject to extreme speculation, and a lot of money is ultimately going to be lost when the bubble bursts. We know that's going to happen, but others may be at the very early innings. And so I think it's important for people to keep an open mind about what's happening, to do the research, to do the homework, to possibly invest in some of these things, because once you're invested in it, you have a vested interest in it to learn more about it. So I don't know if you have some additional thoughts on that in terms of how we think about the different types of ways to classify value.

[Speaker:BRYAN_LAWRENCE] To have a view on something, you need to be invested in it, even a small amount, nothing like serious, doesn't have to compromise your integrity. Even as a reporter, buy $100 of Bitcoin, it's going to be on your radar in a different way. I totally agree with that. I also think this is maybe isn't directly related to the first part of your question, but I also own, I say roughly 5% to 10% of my portfolio to things I hate. To things that don't necessarily align with my worldview or that I necessarily wouldn't want to see succeed, but exactly because they might be successful. That brings me to neutral. That's sort of the cost of eliminating the behavioral bias that can mess me up as an investor, so that when the markets don't move in my direction, there's a steam valve, so to speak. That's something that I do, and I frame it that way as opposed to saying hedging my portfolio, because that's a form of a hedge, because of social media, and maybe also because of my unique role in being a public person, so that things that don't necessarily align with the world I want to see, their success has maybe more of a negative impact on my life than it would otherwise. Being invested in a way that allows me to profit from their success alleviates some of the tension there, I guess, some way.

Yeah, and it sounds like that's also a way for you to stay out of the echo chamber and where you're just going to pay attention to things that you agree with and ignore this other stuff out there that you may disagree with.

100%. That is absolutely true. And I work really hard at that. That's really hard to do. I've improved a lot, but I'm sure there are places where I could improve further. But that's— man, is that true? Because we live in a time where everyone is pumping their book. They're selling their particular story and they're so committed to that. I think people want something different. To the extent that you can just come at every conversation just honestly and just be Zen about it and not let yourself get overtaken or overwhelmed by one view or another, you'll be all the better for it, I think. That's certainly true as an investor.

Let's wrap up by switching gears. You have this podcast called Hidden Forces. You've had some amazing guests on it. I'd love for you to share maybe 2, maybe 3 episodes where you had a holy cow moment.

What was that moment? Shoshana Zuboff on surveillance capitalism. I had been struggling with this subject for a long time. What is happening with our devices, with the ad model, with social media. How does this all come together? And she framed it so perfectly in her book, that her framing of surveillance capitalism, and that we are the product, but we're the fuel, we're the oil that runs the machine, we're the input. And so that was really profound. I'd also strongly recommend for anyone who similarly was indoctrinated in the fire of Austrian theories of money, and credit and the business cycle. I mean, I'm a huge beneficiary of Rothbard and Mises and Hayek, of course, and a lot of these other really great thinkers. They helped me to see the 2008 crisis. I doubled down on Austrian economics after the 2008 crisis, and it blinded me to the realities of the world. It blinded me to the way in which monetary policy operates in the post-Bretton Woods world. And so Bill Janeway's episode was really profound for me because he helped me to understand that not all government is bad and that government has played a valuable role in helping to stimulate, guide, and grow the economy in ways that are positive. It's not all a metastasis.

Government spending isn't all cancer. Well, Demetri, I think we will wrap there. So thank you very much for being on the show. Appreciate your time, and congratulations on the great podcast that you have. If folks want to reach out to you, what's the best way for folks to connect with you?

Sure. They can view our entire episode library, which has now reached more than 200 episodes. They can do that at hiddenforces.io. You can follow me on Twitter @Kofinas, K-O-F as in Frank, I-N as in Nancy, A-S as in Sam, And you can follow the podcast at Hidden Forces Pod.

My key takeaway from my conversation with Demetri Kofinas is how the 2008 economic crisis and the response to it was such a seminal moment in shaping our world. The massive expansion of government balance sheets, the lost jobs, the growth in wealth inequality, the introduction of Bitcoin and blockchain technology, the rise of populism, all in some way can be connected to the response to that great crisis. And the better that we can understand history, the better prepared we'll be to shape the future in a positive way. All right, that's all for today. Make sure you like and share this podcast through your favorite social platform. And for more great podcasts, visit us at barons.com/podcast. Take care and And be safe.

This podcast was brought to you by Wells Fargo Advisors. Looking for a firm your clients can't outgrow? Wells Fargo Advisors offers financial advisors full balance sheet solutions with wealth planning, investment products, banking, and lending that meet the needs of affluent to ultra-high net worth clients. Build your practice your way and on your schedule with independent and employee model options designed to meet your needs today and tomorrow. Learn more at joinwfadvisors.com.