Max Pain (A Recent History)

Download a special PDF version of this memo here

In early 2020, right before the pandemic, we released a memo titled The Umami Theory of Value. Written as a kind of elegy for the experience economy and the excesses of the preceding decade, we’ve been quite happy how, in retrospect, it managed to identify the end of a specific cultural-economic era.

Two years later, the themes explored in Umami seem relevant once again. Recent events, including a world under variegated lockdown and the current perilous economic situation have caused friends and clients alike to speculate on the role of meaning and value in our culture today.

We thought it would be interesting to gather some of the thoughts and concepts we’ve been discussing and using internally over the past two years into a compact memo, which is what you’re reading right now. Consider it a micro-history of the trials and tribulations of meaning and value under increased cultural and economic volatility, witnessed from the perspective of Nemesis HQ.


In The Umami Theory of Value, we discussed how, in the absence of material improvement, various entities found new ways to manipulate meaning in order to create new forms of illusory value.

At the time of writing in early 2020, we felt we were entering the final stage of a cultural economy built on increasingly obscure remixes of meaning. Our assumption was that a trigger—such as a tightening of financial conditions—could easily pop the bubble.

We predicted a repulsive turn—“[…] take some time to cultivate a taste for the sour, the bitter and the straight up repulsive—the only flavors of today’s reality pill”—during which value and material reality would violently recouple.

However, we did not predict what would happen first: a surreal crescendo of the decoupling of value and base reality where credulity would be stretched to its extreme.

Starting in the summer of 2020 and peaking in late 2021, various factors conspired to create an economy gone wild: direct-check COVID relief, money printer gone brrrrr, a crypto bull market, and a global population stuck in front of their screens. Instead of the Umami Era disintegrating into pure, gritty dystopia, we saw incredible returns on incredibly random things. Taking seemingly ridiculous risks became a smart thing to do. We call this era Clown Town.

Clown Town

In the Umami Era, meaning was endlessly remixed in order to generate novelty for both the experience economy and the attention economy. Yet even when things got extremely random and nonsensical, an illusion of meaning was mostly retained.

In Clown Town, the tether between meaning and value was severed. This time, active anti-meaning behavior gained prominence:

“I don’t care if it’s fake if it works.”
“Everything is a scam.”
“Pigeons are a Ponzi.”
“I’m just looking for God.”

Mainstreaming risk became normal: money-related infotainment peaked across platforms, and regular folks finally gained exposure to gamified, highly-leveraged financial products from the comfort of their homes. Extreme fear and irrational exuberance intermingled. Money became increasingly fake-seeming as it diverged more and more from a hard day’s work and most conventional wisdom.

The growing number of people taking chances that they barely believed in (starting an Onlyfans, going all in on a memecoin, becoming a performative racist for clicks) reflected a rational response to seeing absurd and/or conventionally shitty ideas have outsized success (Bored Apes, Trump, the Babyccino).

The least likely outcome becoming the most likely made people think that counter-trading their intuition was a winning tactic, leading to behavior that was high-risk, low conviction.

If the neon Lambo parked in front of Hype House became the symbol of “making it” in this period, then the actual “making it” in WAGMI, to most participants, was home ownership and not having to work particularly hard, or at all.

To this rather conventional end, bucking conventional wisdom in any direction became the order of the day. Contrarianism became incredibly popular. Taking the diametrically opposed position to consensus as a shortcut to standing out in a crowded and volatile field was a key Clown Town strategy.

The problem, however, was mistaking risk for opportunity. Though it is easy to come up with extremely asymmetric bets (low-cost, high, but unlikely to pay off), in the end it is only probabilities that matter.

As a subset of contrarianism, Hot Sauce Behavior became especially popular.

Hot Sauce involves taking something basic or mid and applying a socially forbidden or mysterious spice to it (in place of, or to function as, the X factor or the je ne sais quoi). This element had to be shocking, bad, atavistic, or otherwise “not normal”—it could be Nazism, grooming, the Occult, Catholicism, outright aggression, the threat of violence, or the attitudes of obscure-to-you political groups—but in smallish amounts. It made peoples’ hearts race and adrenaline pump while they consumed something otherwise bland. (This was the Tension Economy as the new Attention Economy.)

To add an analogy from sound/information theory: The amplification of a dissonant signal creates distortion with artifacts (random sonic material accidentally produced by the editing process). These artifacts can themselves become an aesthetic. This is how we get deep fried memes, quirked up shawties, the weird girl aesthetic, and Balenciaga. The presence of artifacts that would ordinarily be edited out for polish lent Clown Town its Funhouse Mirror quality.

However, one thing is obvious: When too many people try to adopt the contrarian position at once, it’s no longer contrarian. Mavericks become the new consensus-following herd. If everyone tries to outsmart each other by adopting novel or obscure contrarian positions, it leads to player-versus-player environments where the froth and chop of memetic war makes winning even harder. As participants learn and adapt their strategies, the first scenario (maverick consensus quickly deteriorates into PvP) as people try to position themselves in opposition to the emerging contrarian-consensus.

Where Are We Now?

If the 2020 degen was a gambler willing to go all in on a whim…
…the 2023 degen is a sophisticated risk manager

We have found ourselves in a new cultural era in which multiple overlapping crises and rising interest rates have led to an emergent reckoning. It is now widely understood that it was very stupid to play crazy games with tons of excess money instead of actually improving material reality. But certain questions remain: What the fuck is anything worth today? What’s the best way to manage risk while it all comes falling down?

The volatility of the past two years has created a landscape that demands an increasingly sophisticated consumer, one capable of managing to risk in an environment where it is almost impossible to do so. This Mass Sophistication means regular people are smarter and more based than ever.

Perhaps this is why the Internet is now choked with meta-analyses of social and cultural trends, endless Substacks, longform takes, and a general glut of ascended-plebe expertise.

This phenomenon is somewhat mystical. In chess, today’s average player is more skilled than the one from yesteryear because online exposure of advanced theory has led to regular players making the moves of masters. As Virgil once said, “One kid does a new skateboard trick, then hundreds more can do it the next day around the world.” Rupert Sheldrake’s concept of morphic resonance argues the same is true for crystal formation.

In theory, this should be a good thing. Everyone should be able to use their increased intelligence and awareness to better navigate the world.

In reality, the irony is painful: When everyone gets smarter, things get harder. If everyone is reassessing the most-effective-tactics-available all the time, it gets harder and harder to win, even though you’re smarter and “should be in a better position.” The Yale admissions office realizes thousands of applicants have watched the same obscure how-to-get-into-Yale TikTok, and decides to change the meta: Leadership is no longer a valuable quality. A lesson from computing comes in handy here: the one where you can’t emulate a smarter computer, only a dumber one. Yet, as we’ve described, stupidity is maxed out.

When winning gets harder across the board, culture enters Max Pain.

Max Pain is an urban legend-slash-theory from the options market, in which certain people are betting on a price to go up and others are betting on it to go down, yet it somehow finds a way to do neither, instead converging on the place where most people’s bets expire worthless, regardless which side they’re on. In this metaphor, “Pain” means both losing money and not knowing what to do, even though you had a reasonable assessment of the future when you started. Max Pain means, even when you’re right, you’re wrong; it describes a climate in which everyone’s opinion is right at some point, but never at the right time.

To expand the term beyond its original scope, Max Pain punishes people betting on the future, regardless of the direction. Max Pain is the feeling that we’re doomed to fail—that even when you are right (about climate change, for example) you are wrong (you flee New York City and find that even Montana is somehow underwater). You are right, but you can’t win because conditions oscillate dramatically between opposing states, hurting everyone equally. The most painful outcome is the most likely outcome (everyone is wrong long enough to lose conviction, for example).

Ultimately, it is only those who control the flows of information and capital —social media platforms, market makers, exchanges—that are able to profit systematically. Meanwhile, regular people are going to have to figure out what to do with their attention, money, and predictions for the future.

*[needle yanked off vinyl sound effect]

Lol, that’s how the original draft of this memo ended. Post FTX, post Elon Twitter, post $META -70% we’ve witnessed the full IQ bell curve horseshoe pathway from genius to degenerate idiocy in full effect. This makes us cautiously optimistic of any clean slate that appears in our path.

At Nemesis HQ, we are closely tracking emergent strategies in this landscape.

We’ll let you know what we find out.

Martti Kalliala, Lucas Mascatello, Emily Segal
in collaboration with Richard Turley

Download a special PDF version of this memo here

Special thanks to…
Karim Kazemi, Emma Burke, Phoebe Kaufman, Joshua Segal, Echo Wu