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FAMGAs New Near Term Threat & How Crypto Can Capitalize

I’ve written extensively on “The Coming Epic Battle Between Crypto & FAMGA (aka Facebook, Apple, Microsoft, Google, & Amazon)”.

My simple belief is that crypto is a set of new technologies (blockchain, cryptocurrency, smart contracts, zero knowledge proof), that in combination, are a new computing platform, enabling new business processes (e.g. decentralization) that will cause massive disruption and wealth creation. I take the above as given. What isn’t given, is who’s going to capture that wealth.

If you look at who is capturing the majority of the tech related wealth being created today, the answer is FAMGA, which has captured more than 60% of all the wealth created from the 100 companies over the last five years. FAMGA appears to be on an inexorable march to global domination:

Most people believe that FAMGA will continue to capture the majority of tech wealth creation, because that’s what they’ve done, and they have so many advantages of scale to leverage. Some people believe that the only way to slow FAMGA down is to regulate them. I’m not a fan of tech regulation because we’re so bad at it, generally doing more harm then good.

The biggest reason I believe that crypto has a fighting chance, is crypto can leverage community, which can be a VERY powerful competitive force. That’s why my company, CryptoOracle, focuses so much on building, supporting, and educating the crypto community.

But I’m also a big believer in the fact that “the only thing that is constant is change” (Hercalitus, 500 BC). And I think there’s a change happening that will slow FAMGAs ability to capture the pending wealth creation tsunami.

The Main Reason People Work At FAMGA Is Losing Its Luster

Facebook reportedly pays employees 17% more on average then other tech employees, because if you want the best, you have to pay up. But the bigger pay related reason people go to Facebook is for wealth creation via options. At the time of its IPO, in 2012, it was reported that Facebook created 1,000+ millionaires. And that was at $40 a share when it had 4,000 employees. Today Facebook has over 35,000 employees, all hoping to become Facebook millionaires (if they aren’t one already). But for most Facebook employees, that dream has evaporated over the last four months, as Facebook’s price declined more then 35%. Given the decline, Facebook’s share price today is below where it was at the end of Q1 ’17. As such, per the table below, we estimate that over 51% of Facebook’s employees are underwater on their options (i.e. their options are priced higher then the shares are trading at):

% Of Facebook Employees With 100% of Options Underwater

While Facebook’s problem may be worse then the other FAMGA members because it’s being hiring at a faster clip and it’s shares are down more from their recent highs (35%) then Apple (down 23%), Amazon (17%), Google (14.1%), or Microsoft (down 4.6%), employee unhappiness over share performance is remains a problem for all of FAMGA. In total, FAMGA has lost over $825 billion in total market cap from it’s recent highs:

In billions of $US

And employees don’t have to be underwater to be unhappy about the value of their stock compensation. A Facebook employee that was granted 10,000 options at the end of 2016, is currently tracking to make about $200,000 on those options. But at Facebook’s peak price, that same employee was tracking to make $2.3 million on his options.

The Opportunity For Crypto

Obviously, Crypto, on average, is down far more then the Facebook is down. But for the people who have seen the crypto light, for people who believe that crypto is the future, the price drop may have diminished their wallet, but it has not diminished their long term belief in crypto. However, I believe that almost everyone at Facebook is less certain of the Facebook’s future today then when they joined. So I believe that Facebook, and the rest of FAMGA, will be facing higher employee attrition in the coming months and years. That portends a challenge for FAMGA, and an opportunity for crypto.

The opportunity is simply to imagine and build great projects that can interest the FAMGA employees that now realize that FAMGA is unlikely to bring them the wealth they anticipated. The opportunity is to get more of those FAMGA employees thinking of their own projects. The opportunity is to get all the talented people thinking about going to FAMGA, to appreciate how things have changed. Because things always change.

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