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10x Leading Through Uncertainty
Thoughts on crypto, Coinbase Q2, and driving clarity in chaos
Crypto appears to be one of the most exciting plays in the business today!
As of this post, we have more than 18,000 cryptocurrencies with a total market capitalization of $2 trillion. Approximately 8% of the United States population participates in cryptocurrency trading on a monthly basis. There are more than 300 million crypto users in the world. Crypto movement is prominent enough that several countries have banned it outright, while some countries are developing their own version of digital currencies.
Blockchain is the underlying technology that powers all of the world’s cryptocurrencies. It is a persistent, transparent, append-only digital ledger that can be used to track or record almost any type of asset, from goods and services to patents, smart contracts, and more. Blockchain relies on cryptography and a system of peer-to-peer verification to secure transactions and, in the case of cryptocurrency, to mine coins and tokens. The technology and its potential has captured hearts and minds (and wallets) of millions of people across the globe. Facebook is betting on this foundational capability as it embarks on its multiyear, multibillion dollars pivot to Metaverse.
This is to say, Blockchain and hence crypto is as bleeding edge as it gets. There is both massive hype and massive potential deeply intertwined when it comes to crypto. There are cynics who believe there is no inherent value in crypto, it’s all just a speculation game. I partially agree. Then there are folks, who claim to have seen the future, with no fiat currency in it. The truth is somewhere in between. As Gergely Orosz mentions, “so much of the money in the space comes from everyday people who are non-accredited investors (aka not rich)... and money they cannot afford to lose. And then they lose it.”
To put it in a visual perspective, here is the price chart for Bitcoin (courtsey Google Finance)
Certainly not for the faint of the heart - doesn’t matter what your personal beliefs around the underlying technology are!
Enter Coinbase, which is a digital platform for trading and storing cryptocurrencies. It primarily makes money via transaction fees, which is earned based on the price and quantity of the crypto asset bought, sold, or withdrawn. Transaction revenue makes up 87% of the total revenue of Coinbase. Due to the wild swings in crypto assets, Coinbase has been on a wild ride itself, having to rescind offers and laying off as much staff as they hired in all of 2021. While it certainly appears chaotic, I believe we’re dealing with a highly innovative tech, hype cycle that typically accompanies disruption, unprecedented level of quantitative easing by Fed, and lack of regulations around crypto assets - the result, for Coinbase, is a complete chaos as far as financials go.
Naturally the question arises, how should the management respond? How do you lead through uncertainty? I found CEO Brain Armstrong’s comments from the latest (Q2 2022) earnings call (read below), an example of stoic wisdom and management philosophy, I deeply relate to.
“Of course, we don’t control the macroeconomic factors or downturn,” CEO Brian Armstrong said on a conference call with analysts. “We don’t really even control the crypto market more broadly, right? So what do we control? Well, obviously we can focus on building great products for our customers. We can focus on staying on the forefront of crypto technology to make sure that we’re creating compelling use cases and making those available to our customers. We can focus on our expense management in down markets, and, frankly, we can ensure that we just don’t get distracted or disillusioned by short-term thinking.”
Here, Armstrong clearly identifies the externals (see below), vs where he has control and influence. He sets a goal for the company that’s not dependent on any external factors, viz. “staying on the forefront of crypto technology to make sure that we’re creating compelling use cases and making those available to our customers”. And outlines specific measures to sustain that focus, viz. “focus on our expense management in down markets, and, frankly, we can ensure that we just don’t get distracted or disillusioned by short-term thinking.”
“The chief task in life is simply this: to identify and separate matters so that I can say clearly to myself which are externals not under my control, and which have to do with the choices I actually control. Where then do I look for good and evil? Not to uncontrollable externals, but within myself to the choices that are my own…” — Epictetus, Discourses, 2.5.4–5
Clarity of control is such an important notion for a leader, it cannot be understated. It impacts pretty much everything a leader does pretty much on a daily basis. The president of our country is trying to manage inflation, avoid a recession, prevent a war - none of these outcomes are in his control. CEOs of various companies are trying to sustain and grow their businesses in an increasingly uncertain world. Middle managers are trying to deliver against various OKRs - while not fully controlling people, processes or technology. That’s why clarity is of paramount importance. It helps you focus your energy on precisely the matters you can control. This is no guarantee of success, of course. But this is the only practical approach to translate human potential into progress.
Clarity is not end-all, of course. Once you have clarity, you also need to figure out a way to properly channel your efforts into actions. As you go (grow?) through life, you realize there are SO many things you don’t control, there is a temptation to give into a defeatist attitude, “After all, what can I do?”. The answer lies in this beautiful serenity prayer by the American theologian Reinhold Niebuhr.
“God, grant me the serenity to accept the things I cannot change,
courage to change the things I can,
and wisdom to know the difference.” — Reinhold Niebuhr
Those within our control;
Those outside of our control; and
Those we have some control (influence) over.
And Stephen Covey has this fine pictorial to translate the “TOC” into action.