What Taylor Swift Can Teach You About Investing

Don’t miss “FTX: What Happened” with the former president of FTX’s U.S. arm and Anthony Scaramucci.

Angry victims of the FTX swindle are looking for restitution from the celebrity spokespeople who pitched the failed exchange, in a lawsuit that names Larry David, Tom Brady and Shaquille O’Neill, among others. One name not on that list is Taylor Swift, who was offered a reported $100 million sponsorship deal with the offshore crypto exchange – but dodged embarrassment and potential legal fallout by exercising some basic skepticism.

Swift reportedly asked FTX representatives, “Can you tell me that these [listed assets] are not unregistered securities?” in the course of negotiations, which ultimately failed. That’s according to Adam Moskowitz, the plaintiff’s lawyer in the FTX endorsements suit, speaking to The Block’s Frank Chaparro. Moskowitz describes learning about the incident in the discovery phase of the suit, and I haven’t seen confirmation from Taylor Swift’s camp.

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But even if it’s a bit of a just-so story, there’s a wealth of wisdom in this little parable. It wouldn’t be the first time Swift showed herself to be a brilliant and sharp-elbowed businesswoman on top of her musical talent – for instance, having muscled her way free of an onerous publishing deal.

The lesson of her FTX adventure, though, is a bit more abstract than it seems. Swift’s question about unregistered securities was remarkably prescient, given that we’re now seeing aggressive regulatory crackdowns on crypto exchanges. She has, it seems, been paying attention. But selling unregistered securities was not what brought FTX down – old-fashioned fraud was the culprit. Swift did not, it seems, ask FTX representatives “is your management team secretly sending user assets to an affiliated hedge fund?”

How, then, might her securities law question, largely unrelated to the risk that ultimately manifested, have led Swift to shy away from going into business with FTX? I’m speculating here, but one likely scenario is that she or her people weren’t satisfied with the way FTX handled this and other questions. For instance, maybe Bankman-Fried or his representatives were confused or uncoordinated or defensive – all useful signs of an organization that may have deeper problems. (Or maybe the Swift camp didn’t appreciate FTX’s boy wonder playing “League of Legends” during their meeting.)

Despite Moskowitz’s secondhand characterization, we can’t be sure this is how it actually went down. The negotiations between FTX and Swift were first reported back in December by the Financial Times. The deal would have netted Swift $100 million for placing FTX branding at concerts. According to the FT’s sources, though, there was skepticism of the deal within FTX because of its astronomical price tag (for comparison, FTX paid $135 million for naming rights to the Miami Heat stadium).

But taken at face value, the lesson of Moskowitz’s story is that maybe you don’t have to be completely up to speed on every single long-tail risk facing everything you invest in. What Swift did right wasn’t so much asking a specific question about the law or securities – it was asking any challenging and critical questions at all.

A truly canny investor won’t be entirely focused on the content of the answers to hard questions, but also on the way a question is addressed. Whether you’re able to do it face-to-face as Swift reportedly did or by turning a sharp eye to a company’s public communications, that’s a basic and crucial evaluation tool in business and investing at any level.

At least in my mind-palace version of events, Taylor Swift smelled a rat in the responses to her questions about securities law. By running in the other direction, she avoided a catastrophe.

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