When Elon Musk talks, bitcoiners listen. The price of the most prominent cryptocurrency on earth has been steadily climbing for the last two weeks since Musk added #bitcoin to his Twitter profile and declared himself a “supporter of bitcoin” on Clubhouse social media — which led to a new high of $45,000 per bitcoin after Tesla announced it would be buying $1.5 billion in bitcoin and also explored accepting payments for Tesla cars in bitcoin (in a limited amount).
“I think the bitcoin excitement is in part because it is an exciting ride — it rides up and rides down. Roller coasters are fun, right? People like riding them,” QED Investments Partner Amias Gerety told Karen Webster when he stopped by for the latest edition of The Week In Payments.
And while bitcoin is a perennially wild ride, it wasn’t the only one up for discussion this week, as the fate of physical commerce, the future of ghost kitchens and the innovative potential of payments packed with data were also on the agenda.
Bitcoin Mania Strikes Again
There is a serious and a silly part of the Tesla big bitcoin buy, Gerety said. The serious part is the inescapable reality that bitcoin is becoming more mainstream and is thus becoming a more serious thing for investors to consider across the board. QED, he said, has long held off on throwing money into the crypto segment, but even it has made its first investment in a crypto firm in Mexico of late.
And there are environments, particularly places like LatAm where the value proposition for bitcoin is a lot more obvious due to political instability and hyperinflation in the currency. There it makes sense to seek some bitcoin exposure as a hedge against uncertainty if nothing else.
However, he said, in the context of turning a $1.5 billion balance sheet investment into bitcoin, that falls more distinctly on the less serious side of the ledger. Traditionally chief financial officers have thought the balance sheet was a place to put low-risk investments for cash flow needs. Insofar as they were going to look for a return, he said, the tendency would be to do it in a mission-aligned way with corporate venture capital. What Tesla is doing, he said, isn’t using bitcoin as currency or even remotely typical behavior — its treating bitcoin as a “speculative asset.” And one, he said, that is incredibly poorly aligned with the corporate mission of taking CO2 out of the atmosphere.
“One-and-a-half-billion dollars of bitcoin will probably consume about half a terawatt of energy,” Gerety said. “That is almost 10 percent of the power savings that all of North America Teslas will produce in the next year.”
And more broadly, Webster and Gerety agreed, as much as any wild ride is, hopefully retail investors know that the thing about roller coasters is they almost always end up right back where they started.
The Future Of The Physical World
Consumers have digitized their habits over the last year, mostly forced by circumstances. But consumers have also learned to love their new digital habits in the process, finding them more efficient, easier and more convenient than what the old normal had to offer. But the physical world and the physical consumer experience, Geret said, isn’t going away.
There will always be certain goods and products that the customer wants to see in person ahead of time. Even prototypically online brands like Rent the Runway have opened physical shops, he said, because consumers still want the fitting as part of the experience of buying high-end fashion. No matter how good the virtual experience gets there is always going to be something it can’t replace. This isn’t an either-or question anymore, according to Gerety.
“At a certain point, your strategy is focused on technology for efficiency, technology, for immediacy, and then customer acquisition costs,” Gerety said. “You just analyze what’s the best way to get customers, what’s the best way to keep customers happy. Sometimes that’s physical and sometimes it’s digital.”
In many ways, he said, what is happening in retail is comparable to what is happening in banking as consumers are finding it easier to transact digitally. In both places, he said, the new challenge is building the in-person experience around what they simply can’t get online. And there isn’t going to be a single right answer here. What works for Home Depot and Lowe’s might not work for the neighborhood hardware store and vice versa. The trick is building up a back end that is powerful and efficient so that front end experience can be customized and curated to the needs of the actual consumer.
“I think it’s pretty exciting actually, because what we’re saying is whatever you thought before, rethink it. And when that happens, there’s tons of rooms for creativity — it’s not just stamping out a bunch of Apple Stores for other consumer categories.”
The Unbundled Path To Innovation
Ghost kitchens, though rarely referred to this way, are a terrific exampling of the power inherent in unbundling. It is a case, he said, of unbundling the marketing and the brand from the delivery and the cooking. It’s a move not all that dissimilar to what happens in a supermarket freezer aisle with the branded frozen foods. One can in many ways, he said, consider a ghost kitchen a modern, mobile enabled versions of the same idea.
“This opens up opportunities for payments players — we’ve already seen companies like toast and Square are now building tools that compete with what are called practice management software companies,” Gerety said. “At the same time practice management, software companies are integrating payments to compete with Toast and Square. I think that’s exciting. I think it shows that you know, when you unbundle, you can start to rethink things.”
Gerety said he has no crystal ball, and can’t see the future of payments, retail or food delivery any better than anyone else can. What he does know is that when things get unbundled, innovators get more creative and the experience consumers are offered become more unique across the board.
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