Can crypto re-democratize investing?

The greatest stock market investment of all time got off to a slow start.

Home Depot had hoped to open four stores in its first year of operation, 1979, but raised enough seed money to open only two. 

Even then, they didn’t have nearly enough cash left to stock the shelves. 

To keep the store from looking entirely barren, co-founder Pat Farrah asked suppliers to send them empty boxes. With their labels facing outward, the boxes gave customers the mistaken impression there was plenty of everything on offer.

Not that there were many customers to impress. Another co-founder, Bernie Marcus, spent the first few days after opening in the mall parking lot offering passersby $1 bills just to go in and have a look around.

Two years later, Home Depot listed on Nasdaq.

It typically takes a lot longer these days. SpaceX, for example, remained private for 24 years before offering shares to the public. 

In the June IPO, public investors bought into a company that’s launched 114 rockets so far this year, operates over 11,000 orbiting satellites, has 12 million Starlink subscribers, runs 1.4 gigawatts of data center capacity, and expects to hit $100 billion in annualized revenue by the end of the year.

Investors in the Home Depot IPO bought into a chain of four hardware stores.

It was not an easy sell. 

Home Depot asked investors for the princely sum of $6 million, which valued the entire company at $40 million. Half of the proceeds would go toward opening a few more stores, and the other half to paying back investors who held fixed-income preferreds the company had issued pre-IPO.

A week before the shares were scheduled to list, their bankers at Bear Stearns informed Home Depot’s founders they had drummed up just $3 million of demand for shares.  

The IPO went ahead only because co-founder Ken Langone convinced the investors in the preferreds to take shares instead of cash.

That was a good decision, as it turns out, because Home Depot — now worth $314 billion — has been the greatest stock market investment of all time.

A study of US stock market returns over the 100 years through 2025 found that $1,000 invested in Home Depot’s 1981 IPO would be worth $17 million today. That works out to an annualized return of 24.63% — over 44 years!

In other words, investors who never sold are now sitting on a profit of 1,700,000%.

(Fun fact: Ken Langone has never sold.)

Several major stocks have appreciated even faster than Home Depot. But none have done it for as long.

NVIDIA, for example, has delivered investors an annualized return of 37%, but over “only” 27 years. The shorter time frame means that, cumulatively, the shares are up a comparatively modest 485,000%.

Others have achieved higher cumulative returns than Home Depot — Altria and Vulcan Materials, for example — but only because they’ve been compounding for so much longer (over a century, in those two cases). Annualized, Altria and Vulcan have returned roughly 16.5% and 14%, respectively.

Measured as a mix of these two metrics — the highest return over the longest period — Home Depot is the best investment of all-time.

They might hold that title forever.

SpaceX, for example, could well put data centers into orbit, which would be great for its valuation. But how much upside can there be from its IPO starting point of $1.77 trillion?

To match Home Depot’s 44-year record, SpaceX’s would have to be worth $10 quadrillion by the year 2070. (Even adjusting for inflation.)

Seems unlikely!

This is a problem because investors are expecting stock market returns over the next few decades to be more or less what they were over the last few.

The catch is that historic returns have been driven by a small number of giant winners like Home Depot.

Between 1926 and 2016, another study of stock market returns found that just 89 stocks accounted for half of the stock market’s $43 trillion of net wealth creation.

If those kinds of companies now stay private for longer, public-market investors will have to lower their expectations.

Perhaps the devs can do something?

On a recent episode of the Odd Lots podcast, Jeff Yan said the purpose of Hyperliquid is to make markets “more broadly accessible” and give people “more equal access to financial opportunities.”

His idea is that pre-IPO perpetual futures — permissionlessly deployed on Hyperliquid — give retail investors access to companies like SpaceX at an earlier stage of their development.

It’s an appealing vision, for sure. Imagine having bought SpaceX in 2004 the way public-market investors bought Home Depot in 1981.

But perpetual futures don’t quite get us there. 

Yes, you could buy Anthropic futures on today’s news that its IPO prospectus will report “red-hot growth.” But, if so, you’d be buying in at a $1.9 trillion market cap — a giant premium to the $1.2 trillion it’s reportedly been trading at in private markets.

As Jordi Alexander explains, this is a structural issue with perpetual futures: longs will almost always have to pay a large premium to get a market maker to assume the myriad risks involved in shorting a pre-IPO stock to them.

This makes perps good for trading but terrible for investing. 

There are other ways for crypto to democratize investing — like stablecoins that finance GPUs, for example, and DePINs that fund autonomous taxis. 

But if onchain investors want to get in early on the next Home Depot, they’ll have to look for companies that are created onchain, not just traded there.

And then hold on for the long, long haul.

— Byron Gilliam

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