(This is a five-minute read)
The cryptocurrency industry is unprecedently good at creating value. Like, orders of magnitude better at making money than other industries.
Most crypto investors intrinsically understand that blockchains are one of the most effective examples of leverage. Bitcoin Core (the program on which bitcoin is based) started out at just 3000 lines of code, but was enough to create billions of dollars in value.
Second- and third-generation blockchains are based on the idea that they can be built upon, meaning one cryptocurrency can add layers and layers of value, each layer worth billions, via the applications built onto it.
The technology sector, in general, is so successful because of leverage as well: code can be reproduced infinitely across time and space for very little marginal cost. When pursuing the creation of value, we can use this idea of leverage to inform how we might go about amplifying our work and our wealth.
Large U.S. firms do a pretty good job of it. If you consider that the average household income is just a hair over $50,000 a year, they do a really good job.
|Fortune 500||$22.6 trillion||28.7 million||$787,456|
|Nasdaq 100||$14.97 trillion||5.7 million||$2,659,415|
There’s a practical side to this calculation.
If you can take advantage of an organization that knows how to deploy leverage, you can be more impactful and generate more value (and get paid more) as a result.
I had a tweet go marginally viral (welcome, if you’re coming from there), and decided to elaborate on it here, in my now-daily newsletter.
So what companies, organizations, and jobs can best apply leverage and create value?
Companies, organizations, and jobs in the world of cryptocurrency, it just so turns out.
Remember that the average Fortune 500 company produces about $800,000 in value per employee. Below is a list of crypto unicorns and their average value produced per employee.
|Ripple Labs||$10 billion||548||$18,248,175.18|
I’d like to point out how totally ludicrous the valuation per employee of FTX is. To my research, it makes FTX the company with the largest valuation per employee of ALL TIME. I’m happy to be proven wrong.
For comparison, there are four countries that have a GDP less than $200,000,000. Entire countries are worth less than a single FTX employee.
Some might think that this phenomenon isn’t specific to crypto, it’s specific to tech in general. Let’s take a look at the top five companies (measured by this metric) in the Nasdaq 100.
Impressive, but these top firms barely overlap with the bottom of the spectrum of crypto companies.
But maybe we’ve got to look at smaller companies, tech unicorns that are pre-IPO. I looked, and the only recent unicorn that got produced a valuation over $20,000,000 per employee was Waymo:
To further test the idea that crypto companies are special, let’s do some comparisons.
Series E, Financial crime/fraud analysis
Recent IPO Exchanges/Trading Platforms
Pre-IPO exchanges/Trading Platforms
Obviously, these are not perfect comparisons, but they’re close enough to be valid, especially when the crypto companies are winning in value creation per employee by huge magnitudes nearly every time.
There’s not enough data to write about and compare these valuations for smaller companies, solo-preneurs, media companies, YouTubers, and email newsletter writers, but CPMs and other ad-related metrics certainly seem to hint towards the fact that nearly all crypto businesses are intrinsically valued much higher than other industries.
What Does This Mean for You?
While this whole idea of value creation and leverage can (cost of goods, scalability of business models, industry), needs to be considered if you’re an investor or an entrepreneur, it can be put to even better use for you as a job seeker.
To really drive this point home, let’s take a look at legacy firms:
|Procter and Gamble||$345 billion||101,000||$3,415,000|
|BNY Mellon||$46 billion||48,500||$948,453|
Even the best performing firm of these four, P&G, is producing about 1/70th the value per employee as FTX. These legacy films that are dealing with physical products simply have a disadvantage by operating in the physical universe.
They’re limited by centralization, by deployment challenges, by supply chain issues, by physical space. Each product produced, each customer acquired, requires more capital and labor. While the cryptocurrency industry simply isn’t inhibited by marginal costs to the same extent. In most cases, it’s nearly free for crypto companies to sell one more unit of product. The bottleneck, often, is acquiring customers.
How to Make Money from this Knowledge
While there are well-paid people at pretty much every large company, the average salary, and average value produced per employee varies significantly.
“Create value” is a good mantra no matter where you work and this statistic has proved that ‘work in crypto’ is probably where a smart, motivated worker can best produce value.
A pessimist might say that these crypto firms are overvalued, or that they just can’t deploy capital effectively. That might be true, but as an employee, it means there’s a glut of resources available.
If you can figure out how to take advantage of this leverage, if you can figure out how to deploy a crypto firm’s resources, how to create opportunities for growth, you will have a successful career that grows as the industry expands.
Valuations of companies can sometimes be irrational, but they’re not often completely wrong. Venture capital firms have already figured out that cryptocurrency companies are where value will be created in coming years.
How will you take advantage?
Founder, Crypto Pragmatist
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