Edition #22: Yearn.Finance, Base Rate, Millennials, VC Compensation, Choose Nerds, Vet Support

Why we ignore probabilities in favor of new information

written by oz chen

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Today’s compliment: you’re a person of high interest

I’ll kick off this edition with a personal note about writing, followed by a money medley covering: base rate fallacy, how millennials are *actually* doing, why not all VCs are rich, and a bullish take on Ethereum.

Personal note

I’ve been spending way too many brain cycles figuring out what I should write. On a weekly basis, it’s me against the niche. Does psychology of money even make sense? Should I talk more about alternative investments? Maybe I should go back to writing personal development stuff…

Picking two arbitrary extremes help me in times of indecision. I figured if I get stuck, I’ll either write one of two things:

  1. Useful: do I have high confidence this will be useful? (Write for someone else)
  2. Fun: Is it personally engaging for me to write? (Write for myself)

This week, I decided to go with #1.

In Edition 20, I brought up Yearn.Finance, a project that helps users automatically find and earn crypto interest. I’m talking high interest from 10% to 60%+ returns on assets like USDC and SNX.

After not finding a true “newbie’s guide” with detailed steps and screenshots of how to use the platform, I turned myself into a financial guinea pig and decided to write it myself:

Using Yearn.Finance: A Detailed Beginner’s Guide

The guide walks through the details of conducting the transaction with Metamask and why I picked the USDC stablecoin as the first experiment (earns ~13.7% as of today). If you’re about to start your DeFi journey, I hope this guide serves you.

Money Medley

✅ Ace of Base

Riddle me this: Ling is shy. Most librarians are shy. Is Ling more likely to be a salesperson or a librarian?

Answer: Salesperson. This is because sales is a much more common job than being a librarian.

Welcome to the base rate fallacy. This is the idea that people tend to overemphasize new, specific information compared to generalized, objective statistics—the “base rate.”

It’s commonly known that most funds can’t beat the S&P 500. Yet, an investor might neglect the base rate and choose a fund because it’s managed by Ivy League graduates.

(Loosely related: 65% of people think they are above average in intelligence, which gets really hilarious the more you think about it.)

Just because there’s a base rate doesn’t mean one shouldn’t try to be just above average, or why it’s not wrong to pick stocks. But it’s a helpful to know which benchmark to beat.

🥑 🍞 Millennials aren’t doing that bad

Depressing charts and stories of living at home with parents give the impression that millennials have been handed a financial ass whoopin’. But are millennials really worse off than previous generations?

This analyst says “no,” arguing that many reports are based on skewed data that doesn’t fairly align age in their generational comparisons. This looks like comparing a 34 boomer to a 27 year old millennial. After making some adjustments, the analyst found that…

  • Millennials accumulate financial assets at about the same rate that GenX and Baby Boomers did
  • Millennials have about the same financial assets per capita as prior generations did around the same age.

While many millennials do hold more non-mortgage debt, it seems unfair to characterize millennials in aggregate as struggling and behind.

So if you’re a millennial sitting there guiltily thinking “hey…I’m living okay…” , this post adds some context. Go head, be proud of yourself.

😱 Not all VCs are filthy rich

The word “venture capitalist” conjures up an image in my mind of a megamillionaire, flush with startup wins and fat bonuses. Once again, I’m wrong. VC compensation depends heavily on fund size and where employees fall in the pecking order.

According to this 2020 survey, analysts make an average of $80K, associates $120K and senior associates $150K. VCs are by no means struggling, but they’re not automatically rolling in dough either.

Case in point: Eric Banh is a VC from the Hustle Fund who makes a $54K salary:

Predictably, climbing the ladder (like at any other organization) leads to higher paychecks. VC partners make $250K+. But this isn’t as astonishing as I expected: many roles at tech companies match or exceed VC salaries.

🤓 Choose what the nerds choose

One way to make bets on the future is to ask: what are the nerds most excited about?

Reports from Electric Capital and Outlier Ventures attempt to answer this question by measuring software developer activity across crypto projects. Takeaways:

  • Ethereum has the most developers and continues to attract the most technical talent
  • Meanwhile, “Ethereum killers” like Tron, EOS, Komodo, and Qtum have seen a decrease in development activity. A lot of this energy is going towards…
  • DeFi projects including top names like Aave, Bancor, Gnosis, Maker, and Uniswap. New DeFi projects launched in 2020 like SushiSwap, Yearn Finance, and Curve Finance have also seen massive growth

Good news: many of these coins are available to buy on exchanges like Coinbase. Bad news: this is a lot of crypto projects to track.

As an investor, I’m thinking “Hmm…Ethereum itself has the most developer activity. And most DeFi projects use Ethereum as the underlying blockchain.”

Result? I continue to buy Ethereum. (Not Investment advice)

💸 Money tip: unsure about a new fintech service? Vet them with a support ticket

Speaking of nerds, Steve Sokolowski is an admirable nerd who spent 100 hours researching the best places to earn crypto interest, and produced this updated report.

He uses a pretty clever way to vet platforms: send a test support ticket and see how fast they respond—if they respond at all.

Hi [company name], 
I have 100 bitcoins and 2000 litecoins that I was considering earning interest with, but I want to submit a support ticket on a Sunday morning to see how long it will take to receive a response before I commit a  large amount of money to your company. 
I apologize for taking up your time when I don't have a real question.  Please respond so I can get an idea of how quick your support is! 
-Steve Sokolowski 

This is a clever hack you can apply to any new fintech service you’re trying out: test their customer support.

Shout out to Christopher Creatura for pointing me to this article.

Just for fun: Japan’s crazy roller coaster bridge. I thought this was fake at first, but the Eshima Ohashi Grand Bridge, built in 1997, is indeed real.

liked this article? tell your mom, tell your kids


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