Thursday links: Time travel, anti-capitalism, ETH, pump.fun

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“Your future is whatever you make it. So make it a good one.”

— Doc Brown

In the latest EconTalk podcast, Russ Roberts and Mike Munger ask some basic questions — What are markets? What is capitalism? Why do they matter? — with some surprising results.

Munger defines markets as “a set of institutions for reducing the transactions cost of impersonal exchange.”

To help us understand why that matters, Munger starts with the most basic possible example: If I have a banana and you have an apple, but I like apples better than bananas and you like bananas better than apples, we trade.

This leaves the amount of apples and bananas unchanged, but makes us both better off.

Every voluntary exchange, therefore, makes the world a better place — and markets enable more voluntary exchanges.

But not just that.

The next step in people becoming better off is the division of labor: Instead of everyone trying to grow the food they want, everyone grows only what they’re best at and then trades for everything else.

This “puts the production process on steroids,” creating more apples, bananas and everything else.

The only limit to that process is how many people are involved, and that is why we need markets. The “impersonal exchange” of markets allows people who don’t know each other to participate in the division and specialization of labor.

This is to everyone’s benefit: “We want to find more and more people to exchange with,” Munger explains, “not because it makes them wealthier, but because it makes us wealthier.”

This first-principles explainer sets up Munger’s unconventional definition of capitalism: “A set of market institutions that allow time travel.”

It’s a surprisingly intuitive thought.

You might, for example, have an idea for a product that you’re sure people will want to buy; but you probably don’t have the money required to build a factory to start making it for them.

“What capitalism does is solve that problem through time travel,” Munger explains. “We’re going to travel forward into the future to a time when this factory is operating and is producing substantial profits. I’m going to take some of those profits and get in my time machine and go back in time and invest it in the resources that create the capital that now allows me to [build the factory].”

Selling equity is the time machine that empowers you to do that.

Buying equity, by that logic, is what enables all new things to come into the world.

To recap, the three functions of markets are exchange (things go where they’re most wanted), specialization (the production of things increases) and time travel (all new things are created).

People tend to think of markets primarily as a place to make money, but that is their real purpose — and their benefits are limited only by their size. “The division of labor,” Adam Smith wrote, “is limited by the extent of the market.”

Crypto did not get a mention in the podcast, but I think it offers a good way to look at it: The highest purpose of permissionless crypto markets, open to everyone, is to make markets better by making them bigger.

Crypto treasury companies are anti-capitalism

The CEO of Metaplanet has an interesting explanation for why it chose to become a bitcoin treasury company: “We’ll get cash that we can use to buy profitable businesses, cash-flowing businesses,” he told the FT.

This is a departure from competitors like MicroStrategy, whose stated purpose is simply to stack crypto as fast as it can.

I think it’s a telling departure, because holding a non-productive asset now so that you can buy productive assets later is the opposite of how capitalism is supposed to work.

Per Mike Munger, capitalism is meant to pull investment out of the future and into the present.

Metaplanet is doing the opposite, hoovering up investment capital now so that it can do something productive with it later.

This is anti-capitalism.

Surprisingly, the capitalist stock market seems happy with this: Metaplanet trades at nearly 11x the value of its bitcoin holdings.

Vitalik says Ethereum is important to the world

Listening to Vitalik is always a welcome reminder that crypto can be more than memecoins and treasury companies — it could help make the future a good one, even.

“The Ethereum ecosystem going well is a very important thing to particular parts of the world going in the right direction,” he told Epicenter this week.

Specifically, the Ethereum co-founder cites finance, identity and governance as areas that can benefit from the “neutral layers” only crypto can create.

For that to happen, though, he thinks the industry needs to be more mission-driven: “The thing we need to shift gears on is from saying something is by default worth building because it uses blockchains.”

Instead, he says, the industry should be “properties first,” not “technology first.”

I’d offer the bluetooth messaging app that Jack Dorsey announced this week as a prime example — it hasn’t gotten a lot of attention because there’s no crypto involved, but it embodies crypto’s original cypherpunk values.

Vitalik noted that the Ethereum Foundation has shifted its focus toward applications in order to better promote crypto’s original intentions: “We think that building is a much healthier way of achieving those goals than just complaining.”

Some of that complaining has been about ether’s underperformance vs. Solana’s and he seems to have heard it: “If Ethereum gets sucked into directly playing the HFT game as an L1, to me, that will just fundamentally destroy Ethereum’s soul.”

Ethereum’s competitors, he implies, are over-optimizing for the wrong things (like speed of execution), and to illustrate the risk that entails, he asked a rhetorical question: “Should we destroy humanity in exchange for a 1% chance of giving really good lives to 500 trillion shrimp?”

Only a correctly optimized Ethereum can prevent it.

The pump.fun token launches on Saturday

This weekend, the memecoin launchpad pump.fun will pull $1.3 billion of its future profits into the present with an initial coin offering.

You might, like me, be thinking that the present has quite enough memecoins as is.

But pump.fun says it’s not just about that: “Anyone can use pump to build whatever they want. It’s more than memes.”

What pump says it is building is “a global network of instant money & attention” that will disrupt the big social media platforms: “Our plan is to Kill Facebook, TikTok, and Twitch.”

That is a worthy goal, I guess, although I shudder to think what pump will replace them with.

Whatever the odds of that happening may be, the ICO at $0.004 per token does not appear to be pricing it in.

In a note for Blockworks Research, Ryan Connor says the token’s $4 billion valuation is “very reasonable,” based strictly on the outlook for memecoins. “With Pump.fun annualizing at $750m revenue for 2025, and 25% going back to the token, this puts the token valuation at ~5x 2025 annualized revenue and ~20x 2025 annualized token buybacks.”

Valuation is a bit less reasonable in pre-market trading on Hyperliquid, where the token was already changing hands 30% above the ICO price this afternoon.

(It’s also traded an incredible $130 million of volume over the last 24 hours, which might go a long way in explaining the giant valuation of Hyperliquid.)

Connor cites several risks to the investment case, including the risk that it’s not a traditional investment: “Buyers should keep in mind that the equity entity ultimately governs this project’s value flows today.”

Translation: Token holders will just have to hope that pump will choose to share its future profits with them.

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