Wednesday, November 16, 2022

"The Potemkin Economy"

"The Potemkin Economy"
by John Wilder

"Grigory Aleksandrovich Potemkin-Tauricheski is famous mostly for what he didn’t do, but more about that in a minute. What Potemkin did do, starting in 1774, was conquer most of what is southern Ukraine, the Crimea, Moldova, and Catherine the Great a bunch of times. The land he mostly took from the Ottoman Empire, but Catherine seems to have invited the conquest. And apparently, Grigory didn’t do it right, because she made him do it again. And again. I mean a bunch of times. Catherine had a succession of lovers that would put Kamala’s body count in 1992 to shame. Okay, the summer of 1992. Okay. August of 1992. Okay, August 11, 1992. By noon

But when Potemkin wasn’t kicking Ottoman butt or... well, the other thing, what he did do was found city after city along the Black Sea coast. You just might have heard of Kherson? Yup. Potemkin founded and named that city. He was even buried there until Putin dug him up and took him back to Russia recently. It’s certain he wasn’t the last Russian to retreat. But mostly, we remember Potemkin for the phrase Potemkin Village. Where did that phrase come from?

Catherine the Great, somewhere between lovers, decided to have a Lord of the Rings-type trip to go see what Potemkin was up to down south, and maybe have Potemkin put something in Mount Doom, if you know what I mean. That was based on the idea that Potemkin had a lot of the Novorossiyan (approximately the southern area that Putin held before the Russians began advancing to the rear last month) villages built and rebuilt so that he could fool Catherine about how prosperous the area was.

Well, not really. First of all, Potemkin didn’t have to impress Catherine, they’d known each other forever by this point, and she really liked him even though whenever they weren’t together they were boffing enough other people to make Paris Hilton blush. What everyone does agree on is that Potemkin had folks paint some of the village buildings, and they did build a few fake ones, but those were mainly to show Catherine what the area would look like.

So, despite personal bravery, solid administration, building an entire fleet, and being a diplomat worthy of any of today’s age, we remember Potemkin for something he really didn’t do. To be fair Potemkin was the guy that conquered most of the area that Russia and Ukraine are fighting for right now, so there’s a good argument that they should just give it all back to Turkey and be done with it.

But it came to my mind when I started thinking about the economy we find ourselves in today – in many ways, it’s a Potemkin economy. FTX®, that wonderful stealer of money and funder of Democrats? It was a financial Potemkin Village. There was nothing really there, ever. A smelly-looking Millenial with his autistic girlfriend who is so homely that she makes Greta Thunberg look like an 8.5 and the rest of the crew literally printed their own virtual currency, and then grifted their way through piles of cash from nations and celebrities and even their own employees. A Potemkin Village? Sure.

And now Elon Musk is finding that his $44 billion toy, Twitter™ is filled with fraud. First, there are fraudulent users. We don’t have the full number of bots that Tweeted™, but it wasn’t a small number.

Second, there was an algorithm that was built to push the Leftist agenda by artificially drawing people’s attention to things they weren’t organically interested in. As soon as Musk stopped the algorithm in Japan, for instance, politics stopped trending and anime and Godzilla© and sushi topped the list of things that Japanese people were actually interested in.

Third, the advertisers weren’t all they were cracked up to be. Rather than being advertisers that were interested in, oh, say, advertising to customers, they’re fleeing the platform. Why? Because they weren’t interested in selling products, they were really interested in social posturing. They’re leaving in droves – the economic engine of Twitter® appears to have been built on corporate virtue signaling.

Fourth, the employees themselves seemed to be, at a ratio of at least 75%, useless people with a huge sense of entitlement. How bad are these people? They’re upset that they won’t have free food from in-house chefs. They’ll have to pay for lunch. Maybe they’ll have burgers?

As Potemkin himself might have said, “North Crimean Canal”. Oh, sorry. Potemkin might have told those disappointed Twitterites©, “Crimea River.”

There are more examples out there. By definition, these Potemkin Companies look fine to casual observation until something breaks down. Facebook© started as the darling of the Internet. Then Zuckerberg decided that he’d spend the rest of his life staring out of the world through virtual reality, and spent $36 billion dollars on “the Internet, but with stupid goggles”.

Sure it makes sense to Mark who took the movie The Matrix as a how-to manual, but pretty much everyone else thinks it is stupid. But the scary thing for Mark is it’s making people look at what he really owns. Some folks think it’s just the next version of MySpace©, because the teens have abandoned it and it now consists of businesses trying to sell stuff, mothers trading recipes for what to do with their children’s Adderall© for a quick buzz, and the NSA desperately trying to track everyone. I guess Facebook© has a lot of servers and stuff, but is their model a Potemkin Company?

And how many other Potemkin Companies are sitting out there, in plain sight, but just not yet recognized? My bet is that there are a lot, especially in the financial sector and tech sectors. One principle that I’ve seen apply again and again is Wilder’s Rule #32: what can be built really quickly can collapse a lot quicker. If Zuck can make $100 billion in four years, he can lose it in four weeks.

The valuation of almost everything in our economy is subjective – it has value because we give it value. Amazon™ was worth $180 last year at this time. It was worth $99 yesterday. It has gone down by half. Amazon© has also announced that they’re going to lay off 10,000 employees in the next month.

Oops. And what else might be a sign of a Potemkin Economy? Valuations are built on emotion, and emotion is defined on how pretty something is. Well, at least if we lose the Potemkin Companies and the Potemkin Dollar, we still have our relationship with Catherine the Great Kamala.

Oh, crap. We’re in even worse condition than I thought."

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