With its $1.5 billion investment in Bitcoin, analysts estimate that Tesla is “on a trajectory to make more from its Bitcoin investments than profits from selling its EV (electric vehicle) cars in all of 2020.” However it is ironic that Tesla, whose mission is to accelerate the world’s transition to sustainable energy, is benefiting from a cryptocurrency that has a carbon footprint comparable to that of New Zealand.
But the association worked anyway.
On the surface, a digital currency like Bitcoin seems like a natural progression for the brand that is pioneering the digital transformation of the automobile industry. Matt Levine echoed this perceptual correlation in his newsletter. “My rough sense is that Tesla is pretty correlated to Bitcoin anyway, in that a future where Bitcoin is valuable is also likely a future where Tesla is valuable, though my model for that correlation is vague, some sort of electricity-plus-being-extremely-online connection.”
The marriage between Bitcoin and Tesla seems to create such a plausible narrative that the environmental inconsistency appears like a jarring glitch that also requires expensing some cognitive energy.
When it comes to cognitive energy, we’re in need of some conservation ourselves.
We are Experiencing a Collective Rupture in Meaning-Making
According to David Trickey, a psychologist and representative of the UK Trauma Council, the events surrounding the pandemic have created a rupture in meaning-making. When “the way you see yourself, the way you see the world, and the way you see other people” are shocked and a gap arises between your “orienting systems” and that event — simple stress cascades into trauma, often-mediated through sustained and severe feelings of helplessness.
Our habits and established cycles that had cued our automated behaviors broke, and we became more receptive to new signals in our disturbed state of organized chaos. As we grappled to deal with our world turning upside down, we inevitably opened the window to new narratives around us.
Since the pandemic started, our habitual cycles have been in a constant flux — through polarizing political and social trends, diminishing trust in government and scientific authorities, lockdowns, panic buying, distance learning, remote working, our stance on vaccinations, and a botchy vaccine rollout turning us into vaccine hungry equivalents of sneakerheads.
Of course this chaos has translated into major habit discontinuity. We are experiencing a collective cognitive toll from constantly having to battle out good vs evil, safe vs unsafe, true vs fake, and remote vs in-person.
This cognitive exhaustion is leading us to seek simpler narratives that can help us with meaning-making.
Narratively Exhausted and Physically Bored
“I’m exhausted by the absurd and unrelenting narrative of my own life right now. I don’t have space in my head for deep contemplation on the nature of good and evil. I’m experiencing what you might call narrative fatigue, and all I want to do is bonk cavemen on the head with rocks in Spelunky 2 or reconnect some colorful wires in Among Us.”
Collective ‘trauma’ and ‘pandemic fatigue’ is making us feel exhausted and bored at the same time. The GameStop saga serves as a fitting example of a feat established by a population that was ‘narratively exhausted’ and physically bored at the same time.
When it came to igniting the frenzy, it wasn’t the logical arguments about GameStop being undervalued or the fundamental prospects of the company that caused investors to pile onto shares of the company. It was a simple narrative that rolled the ball into momentum.
The GameStop story had a clearly defined villain(hedge funds), victim (GameStop), and hero(Wall Street Bets investors).
Light on narrative, high on impact.
It’s not just GameStop. Viral growth of games like Animal Crossing and Among Us indicate a preference for active entertainment that is not too heavy on the narrative. According to Jamie Madigan, a psychologist and the author of The Psychology Of Games and The Engagement Game, Among Us is a great connector because it forces players to take sides from within a very structured experience. The GameStop saga was also an episode of taking sides within the playground of the stock exchange.
Complicated Narratives are Losing People
The Congressional hearing of the GameStop saga showed how lawmakers were quick to pounce on Vlad Tenev, Robinhood CEO, for his complicated responses to why Robinhood temporarily prevented investors from trading the meme-stocks during the height of the frenzy.
As James Surowiecki explains, “that Robinhood was left with no choice but to impose a buying ban, isn’t disputed at this point,” however it was his convoluted narrative that “fueled people’s anger instead of defusing it, and instead of dispelling concerns that there was some grand conspiracy to rob ordinary investors, actually increased those concerns.” His narrative was also hurt by the unfortunate corollary that by limiting the trades, Robinhood inevitably helped hedge funds cover their losses.
The market was looking for a simpler explanation.
Unconvoluted reasoning is why investors flock towards Elon Musk, because heaven knows his cognitive capacity respawns at twice the speed of a normal human being.
Elon Musk just makes the narrative easier.
Here is an example of how he compared Bitcoin to fiat currency — three words: ‘almost as bs’.
Musk doesn’t talk about Dogecoin in terms of inflationary vs deflationary currencies. Instead he describes the situation has having ‘too much concentration.’
There is something about digital technology that equates it with ‘clean’ — that’s the narrative we have the hardest time shrugging off.
For example, Clubhouse is being lauded as the inevitable digital audio innovation that triangulates the accessibility of Twitter, content quality of podcasts, and serendipity of drop-in conversations. Although its backend services are provided by the Chinese streaming platform — Agora, the security loophole appears largely as a glitch in the larger narrative about the platform that facilitated a spontaneous dialog between the digital Oracle and the recently discredited Robin Hood of our times.
Clubhouse’s popularity skyrocketed when Elon Musk grilled Robinhood’s co-founder, Vladimir Tenev, about why it limited users to only being able to buy a small number of shares in the meme-stocks. Downloads of the app grew from 3.5 million to 8.1 million during the 2 weeks after the session with Elon Musk.
Similarly, Bitcoin, which is experiencing a resurgence as an inflationary hedge, is also riding high on the meme-wave. Bitcoin also makes for a good story. The genesis block, mined by Satoshi in early January 2009, included the text of a headline from that day: “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.”
Bitcoin was conceived to tackle issues of trust in centralized banking by creating the concept of ‘proof of work’. It tried to address how politically beholden the banking system had become. A digital technology with a large carbon footprint sounds like an oxymoron, but that’s exactly what Bitcoin is. Proof-of-work calculations required by the blockchain result in energy-intensive calculations, which is what drives the climate pollution associated with Bitcoin. Cryptocurrency mining rigs can get so hot they can be used as home heaters. Furthermore, the energy demands of the mining rigs are causing consolidation among mining rigs, ironically resulting in a concentrated and centralized infrastructure for mining Bitcoins.
The ‘unbreakable code’ narrative of Bitcoin also contradicts with a possible, albeit distant, looming threat from quantum computing. Future quantum computers can potentially break the cryptography of today’s blockchains. Blockchain technology is in a constant race to stay ahead of bad actors by having to adopt quantum-resistant blockchains and even distributed ledger technology whose nodes rely on quantum computers.
A Simple Narrative is all that Matters
The Bitcoin and GameStop frenzies show us that as long as there is a virus-like narrative that is able to engage and attract people in it, neither fundamentals nor technical details matter. The population is currently in a haze, not because we don’t care or don’t have the capacity to understand, but because our cognitive capacity is furiously working under torrential waters to keep our sanity afloat.
If a cute narrative catches our fancy, who are we to blame?