There have been two manias over the last few years that made me question my understanding of human behavior and the universe in general.
One mania was the NFT and crypto explosion. I had been aware of Bitcoin for awhile and knew of some smart people who thought highly of it but it took me a long time before I waded in. But then all of a sudden there were hundreds of coins and NFTs that were seemingly making people look a lot smarter than me.
Then people were making money by “staking” their coins. Which seemed like pure magic to me. I understand interest but making 100% interest in a month made zero sense.
We’ve learned that most of these coins were pointless and the whole thing was just a big levered casino that was living on borrowed time.
Another mania was the Amazon aggregator business. I’ve sold on Amazon for a while and experienced or knew people who experienced all the bad stuff that can happen. Your listings get hijacked, Amazon suspends your account, you get review bombed, a competitor manages to change your listing, Amazon merges your listings, you get counterfeited, etc.
The brilliance of the Amazon third party seller model has always been that you allow someone with deep expertise to sell to a huge audience. So in exchange for giving a merchant access to a customer base Amazon gets deep level expertise in a highly competitive environment. The problems I mentioned, though, are all prevalent and make selling on Amazon a perilous adventure. It’s actually why I stopped selling on Amazon.
So if you were to tell me that an Amazon business would get a higher multiple of EBIDTA than my direct to consumer based business I would tell you that makes no sense. Yet someone decided they could de-risk Amazon businesses by bundling them. So if 1 business gets suspended but you have 30 more you’ll have time to figure out how to get that one business back and it won’t hurt that much. There is some logic to it. But there was NEVER any logic to thinking someone could run an Amazon business better than the founder who had expertise and was motivated by profit. Now the model has proven to be a complete and utter failure and I’m not surprised at all.
The moral of this story is to stick to your principles. If you have a concept of how the world works and a bunch of people start making noise that what you thought is up is now down beware. Up is still up no matter how many people tell you it’s now down. And be prepared that the up is down guy might actually make a lot of money. The people that make money in these manias are the ones who get out before the leverage crumbles. So if you want to dip your toes don’t get greedy!!