Tech geniuses aren't always geniuses
We're at that point in the economic cycle when so-called business heroes who built fortunes on mastery of the technological future suddenly seem as clueless as the rest of us.
Why it matters: It underscores the fact that even the tech celebrities who dominate the world economy today owe some of their success to the remarkable supportive market conditions that prevailed over the last decade.
Driving the news: Sam Bankman-Fried, the casually unkempt crypto billionaire, announced Tuesday that he had sought a hurried investment from a rival after his crypto exchange, FTX, had for hours been failing to allow users to withdraw assets.
- The saga — outlined by our Axios Crypto colleagues — essentially boils down to the fact FTX didn't seem to have the funds it needed to have, amid a massive wave of withdrawals.
- In the non-crypto financial world, this would seem to basically be a kind of bank run followed by a financial rescue, coming less than a day after Bankman-Fried wrote: "A competitor is trying to go after us with false rumors. FTX is fine."
- Bankman-Fried says that FTX.us, the company's U.S.-regulated arm, has not been affected by these issues.
Yes, but: In the less-than-fully-transparent world of crypto, we'll have to just wait and see if any worrisome aftershocks emerge from Bankman-Fried's struggles.
- "It’s neither a public company nor regulated like a bank or broker, we just don’t know what the risks are,” said Tyler Gellasch, president and CEO of the Healthy Markets Association, an investor trade group, in an interview.
The big picture: SBF, as Bankman-Fried is widely known, is not the only lionized tech billionaire to find himself looking like less than a genius lately.
- Facebook (sorry, Meta!) founder Mark Zuckerberg has presided over the immolation of roughly $800 billion in market value over the last year, thanks in part, to his fixation on building a parallel universe of virtual and augmented reality products no one seems to want.
- Then there's Elon Musk, whose persona as a preternaturally gifted technologist has taken a hit after he massively overpaid for Twitter, failed to get out of the deal, laid off half its staff, and all while floundering around for ideas about what to do, and watching advertisers flee. (Tesla's market value has shrunk by roughly $600 billion in 2022.)
💭 Our thought bubble: In our culture — and the business press — it's always fun to tell stories about boyish tech billionaires who break the rules, disrupt industries and rocket to untold riches. But there's something much more boring going on in the background that explains a lot of their financial success in recent years: interest rates.
- As we write about often, low-interest rates tend to make so-called growth companies, typically speculative technology or biotech firms, look especially attractive.
The bottom line: The return of inflation and the rapidly rising interest rates are changing the storyline, exposing the fact that when market conditions change it can make even the savviest tech billionaire look bad.