What's up, everyone? This is Anthony Pompano. Most of you know me as pomp. You're listening to the pump podcast. Simply the best podcast out there. Let's kick this thing off.
A video card is co-founder and partner on the investment team at Electric Capital a vehicle's the successful serial entrepreneur with executive experience at Google and Facebook which acquired his previous company in 2012 in this conversation. We discuss a visual scripting thesis decentralized Finance why smart contracts are undervalued crypto infrastructure and why decentralization is The Natural end State? I really enjoyed this conversation with the virtual and I think you will.
Well before we get into this episode though, I want to quickly talk about our sponsors. First up is block 5 block 5 provides Financial products for crypto investors those products and crew include a high yield interest account a u.s. Dollar loan against your crypto collateral and no fee trading on their crypto exchange as an investor and someone who sits on the board. My favorite is the high-yield interest account where you can earn up to eight point six percent apy in an interest-bearing account if you want to get started today, you can go to
Block Phi.com pump again block Phi.com pump and if you've got an account, you can sign up for the wait list for the new credit card that they'll be launching that will pay you rewards in Bitcoin rather than cash or airline miles again. Block five.com pump. Next up is Choice. It's a new self directed Ira product that I'm really excited about. If you're listening to this you are likely part of the 7.1 million bitcoiners. We have retirement accounts with dollars in them, but not Bitcoin. I was in that situation.
Into but now you can actually buy real Bitcoin in your retirement account. I'm talking about owning your private keys and using tax advantage dollars to do it too. It's an absolute Game Changer a self-directed IRA product that allows you to buy Bitcoin hold the private key and use tax advantage dollars to do it head on over to retire with Choice.com pump again retire with Choice.com pump next up and lastly is the Rodman Law Group. They are
dedicated to helping entrepreneurs realize their Vision by helping them operate defensively in sectors where laws and regulations haven't caught up to the realities of the industry. I've been investing a long time now, and I know that having a great lawyer whether you're an investor or an entrepreneur is one of the key things to success the Rodman Law Group has been accepting Bitcoin as payment since 2017. They've also moved part of their treasury into Bitcoin they get
They understand the industry. So if you are looking for help on the legal side go check out the Rodman Law Group. You can go to the Rodman law group.com pump again the Rodman law group.com / pomp. You'll get a discount on the legal services for the first year again, the Rodman law group.com / pump a law group that not only understands Bitcoin cryptocurrencies and blockchain Technology. But also our great lawyers and understand the
the law as well. So head on over to the Rodman log group.com pop. All right, let's get in this episode with the vitro. I hope you guys enjoy this one. Anthony promptly on O is a partner at Morgan Creek digital all opinions expressed by pomp or his guests on this podcast or solely their opinions and do not reflect the opinions of Morgan Creek digital or Morgan Creek Capital Management. You should not treat any opinion expressed by pomp
as a specific inducement to make a
particular investment or follow a particular strategy, but only as a
Expression of his opinion this
podcast is for informational purposes only.
All right guys bang bang. I've got to be sure here. Thank you so much for doing this sir.
Great to see you. Thanks for having me
for sure. Let's just jump into your background. You didn't work on crypto forever. So what did you do before Krypto? Where'd you grow up Facebook? Just tell us the whole story.
Yeah. Well where I grew up I grew up. I was born in India. I grew up mostly in the midwest Kentucky and Ohio and came out west for school and spent most of my career as an entrepreneur. So I started and sold to companies second one to Facebook.
And worked on a bunch of stuff that works on product and and some add stuff and had a good time and with that second company, actually the way I got into crypto with that second company. What we were doing was we were kind of like we're actually kind of like a TiVo in the cloud. So you give us the URL who copy whatever was only the side of it and make a copy of it. But the way that we did that was we built all of this really amazing infrastructure where we could control computers and all sorts of remote data centers and kind of build their own little mini distributed system.
And and were able to cost optimize that and and like by Remnant compute power all over the world. And this wasn't like 2010-2011 and my co-founder Curtis is also my co-founder electric. He'd worked on protein folding at home. He worked on like some distributed systems like 15 years ago and he came across Bitcoin and said, hey, I think this actually might solve the hardest problem we had which was like, how do you get people to donate computational resources to to this network like this Bitcoin thing might solve it.
And so for a hot minute we said maybe we should just become Bitcoin miners. So in like 22 2011 just started like mining a bunch of Bitcoin is like pretty basic error. Right? And so 2010 2011 and we were we were not pressing it. We were not Visionaries we didn't hang on to it. So we like, you know, there's a period ran up to like, you know, a hundred bucks or whatever and we basically just saw him like this and saying we're out and but that was kind of like our original foray into it and Facebook bought all that IP and then we stuck around as obvious and so we did a little bit
bit of like a theorem and Monero meeting and then we left in 2016 and we're thinking about what to do and we're just spending all of our time in crypto personally. We were you know, it was kind of like the first thing that felt as raw as the internet felt to us when we were kids where you just like going to a chat room and nobody knew how old you were when you lived you know, who you were it was just like your handle and he has some ideas and you like throw them out there and if they made sense and let people in
To do and if they didn't make sense you got ignored and you can kind of have this like just amazing experience. I'm sure you remember this 2017 where you would you show up in a chat room or telegram group or a signal or whatever and it would be you know like this Motley Crew of people like like the group of people in crypto even to today. I think it's like, you know Wall Street people you have entrepreneurs you have academics. You have Turing Award winners, you have professors who have dropped out of school.
We have college kids you have like adult film stars, you, you know, obviously have some drug dealers but like that's a really strange group of people to all be in one place and you know you threw a dinner like if your house party and that was who showed up he'd be like what the hell house party is this right like at some porn stars and some drug dealers and like my college professor and like a bunch of college kids and like some Wall Street guys. It's just be like a weird party so fun. It could be a blast right why it is a blast right? I mean, that's what makes crypto really fun. It's just like
All these people on The Fringe kind of like showed up to the same party. And so we looked at in 2017 and we like this is so fun. We just want to do this all day. So we threw we've just threw down some desks at my place and encourages but come over everyday and we would like being these chat rooms would be reading white papers and we're hacking on some code and writing some smart contractors having fun with it and kind of as a last Bitcoin cycle was going up all these VC started reaching out to us because we had done scummy so bunch of folks Davis and so they started reaching out.
Hey, could you come in and talk to the partnership about this crypto stuff? Like I remember you guys tell me about Bitcoin like five years ago six years ago the real this time. Should I like Tripp Eisen Bitcoin? What seethe? What's a what's a nyko? You know, like should I do one? Like how do I you know, should this company do one and so we started doing all this education in 2017 and by the end of 2017 all these people a bunch of the the more traditional VCS who are phenomenal. I mean, these are like the world's best investors really quickly realize that crypto is different and they're not really
really set up to do it. You have like regulatory challenges. You don't want to go register with the SEC, you know back then it's a lot better now, but, you know four years ago, if you if you invest in some token Network, like what all of a sudden one day like a USB stick shows up with five million dollars on it. Like what do you do with that is your associate just hang on to that at their house like that doesn't seem like a good idea, right? So they were like, okay we don't want to do this. Can we just give you guys money? Like if I give you money of each Alan Curtis, I know you're not going to go buy some mineiro and like
The Costa Rica and like live that John McAfee life, right? So here take some money and like do what you do and just like, you know, we trust you guys. And so that's that's actually how electric happened. So Curtis my joke. We're kind of like accidental VCS. We never we're like entrepreneurs that were just kind of doing our thing and a bunch of people said, hey take some money. And I mean anybody who's done a company is like a people show up with money and they're like, hey take our money. He's probably take it like you've been burnt by we lived through 2008 and so like one of the number-one lessons we learned is like if people want to give you money, you should probably take it.
It and so that's how we started electric and now we focus a hundred percent on crypto and crypto networks and have been fortunate to be able to do that for last few years.
So you are my favorite accidental VC, which goes right next to my favorite non VC, which is Jeff Lewis at Bedrock. Whoo-hoo contagious to everyone that so the guy accidental VCS. We have not a VC and I'm sure that somebody will call a something new tough talk through just a little bit about kind of your thesis on crypto in general, right? So there's some major themes that
You guys have but just when you sit down with an LP and you say Hey, you know, here's how we think about this space Here's why we're excited about it. What do you share with them?
Yeah. So we I mean we're engineers and product people and so we came at it from like a really different perspective. I think there's this really valid which we learned just just by doing worldview on the stub just a bit more top-down, right which is like the money supply fix apply Austrian School of Economics, like all that kind of stuff that we sort of, you know, we boots
wrapped up in to understand but we come at it from like a much more Bottoms Up perspective like our our take on it is is through the lens of software. And so what you have here is in our opinion the pendulum swinging away from the internet like the internet as we know it today. Would you like to think about what the internet was designed to do or what has become it really optimizes for like speed and throughput and scalability and we gave up or things like privacy is we've now realized thing.
Ownership of our beta hand over control to these like massive centralized organizations and you know these crypto networks and all of this distributed technology all of a sudden just as what happens. If I do the opposite like instead of optimizing for Speed and scalability and throughput what if I optimize for you owning your own data and what if I optimize for censorship resistance and what if I optimized for privacy, like what can I do and once you change the constraints that like that it's there so it's sort of that like Marshall.
Fluid into the medium is the message kind of a thing right? It's like actually the once you change the constraints people just become really creative and you realize you can do totally different things. And so the question then is okay. Well you have this technology stack that basically does was totally different set of things in the internet's the inverse of the internet. So what is it good for and I think the failing that most people have had is they look at it? And they say, oh it's bad at all of these things instead of saying like what is it good for it. So it reminds me a little bit of like the iPhone launch. Like I was actually really
And I slept outside Moscone to be able to get into that iPhone launch and I watch Steve Jobs like launched the iPhone. It was just a sick just like an unbelievable isn't master class in like how you do a product launch was unbelievable. But the thing that I remember afterwards was like I went back to work and I try to like explain to people this thing that it just happened and I couldn't I just like totally fail to explain it and the criticisms were like Hey, cuz the Blackberry was so dominant at the time the criticisms were like, oh it doesn't have a keyboard and like, you know like
It doesn't let me do this or you know, the screen is really small or the internet connection is slow or there's no apps like they're all these criticisms and what people Totally Miss were like, oh well as a GPS on the device and as a pretty good camera and the touch screen lets you just do totally different things. And so I think we've you look at the sort of blockchain and crypto Universe. The question is what is all this stuff really good for like where does privacy matter where is okay if things don't happen in like 30 milliseconds if it takes a couple of minutes like where's that? Okay, and it turns out anything that deals with money. Those are actually very
Trade-offs to make like you don't need to get a loan in like 30 milliseconds, especially if like you think about how you get a loan today from the bank. It might take you 30 days. It might take you 60 days. So actually like 30 minutes to get a loan or three minutes to get a loan is still way better its orders of magnitude better than 30 days. And so what you have is this like technology that's just good at a totally different set of stuff than the internet and a massive Market which has everything to do with money that the assistive technology.
He's just a perfect fit for and so it's us that's like that's where all this starts. And so that's you know, like our understanding of Bitcoin and our understanding of the theorem really came kind of more like Bottoms Up and then we sort of like learned about the economic side of it more like oh this is kind of like digital gold but to us, it's that the technology that's always been the interesting wedge. Yeah. So let's talk a
little bit just about kind of decentralization in general. I think that this is probably one of the underlying themes across, you know, a lot of what you guys are doing and really just the industry in general.
Roll and so there's kind of a couple schools of thought one is a Bitcoin is the king Bitcoin will remain the king and everything will be built on top of Bitcoin. There's another school of thought that is we're going to take all of the ethos of Bitcoin around decentralization a kind of consensus and we're going to apply it in a million different ways with all sorts of different technology and go touch every other industry and then there's kind of a hybrid which is like well Bitcoins can be really important and that's likely to be the winner in the digital currency space and then like there's a bunch of
Their stuff but they don't necessarily compete with Bitcoin. My guess is that you're in the third bucket, but one I want to make sure that that's true and then just kind of explain like everything else other than Bitcoin as your kind of thinking through decentralisation to the
protocols. Yeah. We're absolutely not third bucket. Like the coin is the biggest and most important protocol today. It will be one of the biggest and most important things in this entire space. It's the gateway drug for a lot of people. It's like how you get into the space is you sort of get your head around Bitcoin. And then once you start getting your head around Bitcoin, you start realizing
that there are certain things that becomes phenomenal for and great for and then actually if you sort of just complete the consideration set a little bit of the constraints a little bit you might be able to do more and so something as simple as like, yes, technically there's Bitcoin script and it's programmable not quite the way that that other platforms are but like wouldn't it be great if it were much easier for developers to come in and write these kinds of smart contracts and and and that very naturally starts to lead you to something like etherium or he wouldn't it be great if actually
You could tweak some of the parameters and and make it much much better for like micro payments by Keith has some challenges around Gatsby's and that might lead you to something like like mobile point just really optimized for payment flows. And so you can start I think Bitcoin is really really important, but we sort of think that there's going to be many many thousands of token certainly many many thousands of protocols and they're going to all sort of interact with each other and we're going to essentially recreate a lot of and in our opinion
What the internet was supposed to be and but it'll take 20 to 30 years. I think we're like in the first verse ending of this so happy to talk about that. I mean, I think that the sort of natural one that we spent. A lot of time on these days is is essentially the smart contract Universe like, you know, I think one of the most fundamental things here that most people even people in the space including ourselves, I think have not really fully internalized is what it means for computers to be able to own money, right?
So I'll give you start from this place of you know, Bitcoin is money. Like it's the bits themselves are the value. That's kind of a crazy concept, right? That's it's a bearer instrument that that means unlike your bank account. When you go to your bank that's a representation of money like you log in and then you gotta go to the bank. It's really an IOU from the bank and we should really it's funny because then that's an IOU from the government but you know Bitcoins different cuz you own the bits and if you own
it's you know you on the money and the way that you assert ownership over the bits is with a private key, which is just another set of bits and so very quickly you realize well doesn't that mean that like a piece of code can create a wallet and and have its own private key and it never tells me what the private key is and then I could send money into the wallet and actually now that piece of code essentially custody the money tones the money and that's a pretty fundamental breakthrough because what that means is that computers can be counterparties to humans and there doesn't need to be a human on the other side or
what he means is that actually computers like machines can pay machines. And so once you start playing that out, you're like wait, so that means like you could do really crazy stuff eventually things like you have a self-driving car driving down the street and enough of them line up and they like all decide to pay the stop light to turn green so you can do like microtransactions and actually now like all the lights in the city would turn green kind of the right, you know the right times and like your traffic will flow more swiftly and actually be gathering taxes exactly for the streets where there's the most usage right like that.
Stuff you're like, oh that could actually now happen and there need to be no humans in the loop. Like you just the way you go to the gas station and they be like plug in your car to charge and like using your mobile app. You like fill up the wallet on your car's wallet, right that kind of crazy stuff can start to happen. But in the short term you start saying, well, you know, what are these things really good for and in our opinion going back to this idea of like money smart contracts are this really interesting thing because what they do is they take like a quadrillion dollars of stuff.
It's happening the world and allow you to express it in code. And so if you think about anything that has to do with money write a will or a trust or an escrow or re or a mortgage or security or derivative like literally a quadrillion dollars of the world is here's a pile of money and here's a bunch of rules around that money. Like, you know, Anthony has access to it of each hole doesn't but like in six months of isil has access to it and Anthony doesn't so I can some future time Horizon like, please execute these instructions and today we just do that with like spreadsheets and legal.
And send email and like that's actually how all that stuff works today. And so Along Comes something like a theorem which is just like well I can own the money and now you can just write those instructions out and code and it's deterministic. I can tell you exactly what the code is going to do and there's no way to change it and that's that's literally the one thing that computers are better than humans at is like deterministically executing instructions. So to us, it's just like, you know, literally a quadrillion dollars of stuff is going to get eaten up by these kinds of tools how it happens in Southie and I think it's going to take a decade to play out. We're still
in a really early days. Anyway, we very well using a Facebook analogy. We very well may be in the like my space era of this where we kind of are starting to see that this is possible but actually like we haven't realized how it's going to go mainstream yet or maybe through his Facebook. We will know in 10 years, but you know, I think I think we haven't yet really figured out how this stuff is going to change everybody's lives and it is I think it's going to change every slept. I think it's going to touch 7 billion people
so I completely agree with you. How do you think about like, let's just take smart contract Platforms in general, right? So I think a theory
Is by far the leader there? There's a bunch of people working on bringing smart contract functionality to bitcoin, but then there's also you know a gazillion other. It seems smart contract platforms that are popping up that really, you know, the theorem Killers competition what however you want to kind of label them. But how do you think about this? Is it a one smart contract platform to rule them all is their coexistence is it literally every protocol will have to have Smart contract compatibility and so it's less about like which one is the Smart contract platform and it's just
Like at what point does a protocol add that functionality just like how do you think about that among the different protocols?
Yeah. I think it's a really good question and it's a tough question and there's a different question. There's like a slightly there are two different questions there. There's the question of like what happens in the world and what do you think is gonna happen in the world and then there's the like investor variant of that question, which was like, okay. Well then how do you construct a portfolio, you know to minimize your downside but maximize your upside and you might do something slightly different like you might be really convinced that if there is going to win but as a
A that might be like a 90% chance. You're like a theist to think of theorems gonna win but as an investor, you might still take a bunch of positions into things, you know to just in case right from a from a return perspective of my soul make sense to do that. So that first question like I think the way it's going to likely play out is it's going to be winter takes most because the network effects are real, you know developer Network effects integration Network effects Fiat on ramps and off ramps regulatory Network effects. Like these are all things that are moats around aleurone protocol and if they're in Varna,
Way has the lead there, but it's still very early days. And then I think you'll get like number 2 number 3 number 4 and depending on how you think about as an investor that could still be a fantastic opportunity. So if you look at like social networking, which is another Network factor of a sort of business Facebook was obviously the big winner but LinkedIn did fantastically Twitter is really important to talk is really important snap is really important like you actually have if the market size is like large enough is you know, it's multiple billions of people then odds. Are you
Have second and third and fourth place winners that are still really really massive. And so I don't think it's I don't think it's, you know, winner-take-all. I think it's winner take most but actually we're in such early days here that actually it from an investor perspective kind of having having a few different bets. You'll probably still do really well if you pick well and then each of those networks will specialize in the same way that media companies are the social media companies or other network effect things do so, you might get one thing that's sort of the money chain which might be like eith you might get
something that's much better for NF t s because like, you know scalability is such a challenge and gas fees are so high it like crowds that crowds out a lot of non fungible Co can use cases. And so maybe that's move somewhere else. And so, you know, I think it's TBD how who wins and how they win but I think that my best guess is That's How we'll be is like winner take most and then specialized change for different use cases that are optimized to meet the needs of that sort of crowd of people.
Yeah. I mean, it makes sense and you know, the beauty of it is the market will ultimately decide
I think that that's a pretty rational view of the world. Let's look around you. We talked a lot about kind of the technology infrastructure and kind of how that plays out and really where investors are thinking about capital and returns. But how does this look for users in terms of how does the crypto infrastructure kind of changed the products and services and goods that we interact with on a daily basis. I think people understand the argument for Bitcoin as money and that not being kind of Fiat or kind of in the traditional technology format, but
What else like how do you think about the actual everyday life of a person somewhere in the world changing because of this crypto infrastructure?
Yeah, I think it's going to be kind of like the phone in a sense which is to say that it's going to change everything but you will stop thinking about it as a separate thing. So like there was a time when people were doing mobile apps. We're like investors would see Pitch decks or Founders would go in and pitch and be like, we're a mobile app company, right? And here's what we do.
And like you did that today, your investors would just be like like a horsey room. Like what else would you be right? Like, of course your mobile company, right? And so I think that will that's kind of how it will happen. So the question is like what are the use cases where people are going to use these things and they won't even realize that it's quick behind-the-scenes, right? And then one day five or ten years from now, like every company will just have this and it'll just makes sense to use these Primitives and then you won't even call them crypto companies. It will just be that's just like an app or that's just a company, right? So a really concrete example would be you know, like Facebook is doing
Doing this what used to be called. Libra is now called DM which is the idea that you could have this this way to move money really really quickly between people all over the world. And of course I make sense inside something like Facebook Messenger or Whatsapp man in a lot of other use cases and so like Shopify as part of that Network and trying to make that happen and they have all sorts of challenges, but you can imagine if they launch that like all of a sudden a billion people would be moving money around the world using crypto infrastructure because that's actually a better way to do. This stuff is actually like the 2020s computer science.
Jen of how do I move money around the world and sort of like 1970s infrastructure, which is kind of how we do it today. And so I think that's how it plays out. We're like another good way. This is I think gonna play out is like through the Creator economy, like creators are musicians and artists and all these people that are just so creative about how they're using media and their you already seen starting to see it happen, right? Like what is it? What does it mean for a musician to like make music but retain the rights that music right? Is there a way for them to essentially have like the
I write speed digital and be guaranteed that they own them but perhaps be able to resell them or what does it mean for a Creator to be able to like raise money? Right? So it creators are real interesting creators are like the new small business like 15 years ago. If you were a SAS business and you went to a bank and you're like, hey, look we have really good are our will you lend us money? The banks were like, no. I don't that's not a that's like not a physical asset. How do I lend against that they didn't understand this concept of recurring Revenue. How do you do that is like a YouTube creator.
Or Tick-Tock creators they can you go to a bank and be like, hey, I have 18 million fans or followers. Like please lend me money so I can like hire staff and make better content and like monetize better like no bank is going to give you money. Right because they don't understand that asset but your fans might right and so maybe we can do is like issue a token and your fans will all by that token. And if you're if they find you when you're when you're just starting out and there's a limited number of tokens and there's those tokens give you benefits like you get to be a part of a an invite.
Only fan club like maybe this talk is appreciate in value over time. And so when that when that creators really popular than those tokens are worth a lot of money and so, you know that you get and creators are playing this kind of stuff today. Right as it becomes for the Creator like a financing mechanism and for the fans away to like support the people that they create you care about but also potentially participate in the only financial upside of identifying people to become like a talent scout that's totally going to happen and a very well what will happen on crypto infrastructure. It's just like people may not realize that that's what they're doing behind the scenes, right? So
That's that's kind of how it plays out is like five over the next five years. There will just be some killer use cases and the average person won't even realize that what they're using is crypto
and so is killer use cases. I think I separated into two buckets right one is like hey Amazon already has gift cards. And so that's a version of a quote token. It's got a different technology form factor, but it unlocks certain types of behaviors certain value for that ecosystem. The other would be something like hey Uber wouldn't have been possible without mobile phones with GPS in it and
Therefore there was a technology leap and then that unlocked, you know a whole bunch of services not just super but many like it that use that GPS functionality. And so it almost sounds like you're basically making the argument like both will happen or it's not a binary world like some of it is just taking existing things in the world and now using tokens and protocols and smart contracts to now put them in this new technology form factor, but also because there's Innovation around the technology that we can unlock brand new use cases and brand new things in the world that we haven't seen before because of that
technology.
Yeah, that's right. And I think you know, they're they're like a couple different ways to look at that. So the historical analog is like if you go back I went back and read a bunch of Articles from like the early 90s when the internet was just getting off the ground and it's their hilarious. Oh, yeah. I totally if anybody is like like a student of History. You should totally go back and read these articles because like you see them trying to explain this new thing the internet and they're just like to now to us. It's just like so obvious but
They're just a struggling. And so you have these like hilarious videos and stuff that people try to explain the internet and and the prevailing wisdom at one point was once people got their head around the idea that the internet was like the information superhighway the natural conclusion was oh well, of course, this is going to be great for CNN and the New York Times like they're going to be just huge businesses and Walmart is totally going to be able to sell stuff online and be like an even bigger company and in retrospect you like. Oh that was totally wrong like the real winners were Facebook and YouTube and and Tick-Tock and
And Amazon, it was not you know, the the incumbents and and the reason is that like adopting this technology natively and using it natively requires you to change the human organization around the technology. Right? So like at Amazon the people who make all the decisions with the engineers not the brand managers. It's not the guy who has the relationship with Proctor and Gamble that gets to make the call. And so the question in crypto land is yeah, like all of this stuff gets baked into
two existing companies chop, fine Facebook and whatever else but like what does a crypto native organization look like and like what use cases does that infrastructure unlock that you just couldn't do before because if you play that forward, I mean I'm has on was sort of an obvious one like in the sense that like you could see e-commerce was going to happen. But a lot of the really biggest businesses that came out of the internet were the things that were really counterintuitive. They like they just didn't make sense at the time like it's hard to imagine now, but like Facebook Facebook and Airbnb
Uber just like made no sense at the time. They actually you know, like they're basically the biggest messes on the internet like basically all of the things you're not supposed to do right like you're not supposed to talk to strangers you like shouldn't get into a stranger's car. You should like shouldn't go to a stranger's house. Like really you're going to take everything about your life like where you live and who you are and who you're married to and like what your kids look like and put it into a public database where anybody can find you like these are all the things you're not supposed to do and they're like the biggest businesses, right? So the question I sort of think through is like what is the wave of
Stuff where it's going to look really obvious in hindsight, but in the moment, you're like that looks bad shit. Like why would anybody do that? And that's really hard but I think those are going to be actually really big thing. So there's like the set of obvious stuff that we just talked about like, you know, mobile payments, but I think there's going to be some really really wild stuff that I don't think we've like fully scratch the surface up that that's going to start to happen in the other thing that is important to realize is like that takes time, you know, like we didn't we didn't start to see the counterintuitive stuff on the internet and some sense really start to hit until like
Teen years later right like the internet really starting to see 1990 ish. Like the really counterintuitive stuff was like 2005 is like people were ready for it or like even with the iPhone right? Like the iPhone happened and the first version of the app select scheme or fake. It was like leather and paper and wood right is Just Cause like it was touch so we're like, oh we're used to like touching wood. So we should make it look like wood or you know have like a GPS and so we could take like the desktop maps and say like, okay I can put a map on a phone now we could like poured it over.
/ but it literally took like I think Uber was 2010. And so that means it took about three years of people playing around on the iPhone for people to figure out that like the killer app was not that I could go somewhere but it was that like other stuff could come to me you had to like turn the idea on its head and that was actually the killer app for GPS. And so like I think we're still like in the very early days of this exploration and it might very well might take like 3 to 10 years for us to stumble into a bunch of like really counterintuitive stuff, which just turns on its head the idea.
Like any of what we think is possible today. And so that's like the really fun stuff. I mean, you know this too is like a venture investor. It's like the stuff that you like you walk away from a meeting and you're just like, okay that was either the stupidest thing I've ever heard or that was brilliant and I don't know what right like, I don't know. It could be either one and I don't know and that's like the really interesting stuff in my opinion.
So one of the things that the Venture Capital Community has figured out is like sometimes the best investment strategy is like I'm gonna go find the smartest people that are going up to the biggest markets. I'm going to give them money and like why do I think I'm smarter than like there.
Figure it out when it comes to crypto and decentralization is the team or the person less important because you're not talking about a decentralized system. They don't have control and kind of there's all these, you know new Frameworks or paradigms or actually, is it still the same thing when you think about allocating Capital like yours Looking for really really smart people going after unique problems or hard problems and that's kind of a big, you know, Milestone or thing that you look for when you actually
investing. Yeah, so I think at a high level at the Great
Because well because I think the real answer is nobody knows yet actually, right and we'll find out in 10 years. That being said, I think we tend to think that that value creation follows great people and so just like give people who give the best people the most money and they'll do they'll do great things with it. That being said, I think the challenge is that the like how do you find great. Like what does it mean to be great in crypto versus what does it mean to be great on the internet and you know on the internet you had people like Jeff Bezos or Travis kalanick or
Mark Zuckerberg create just huge amounts of value and they had a certain archetype. There's a certain profile there. There's a certain set of skills. And I think what's interesting about crypto is that the skill set is very different and so you have brilliant people like the tolik, but he operates totally differently forms up and says, you know, right like and there's this sense of like, what does that set of skills? It's actually going to take to be successful and I like a bunch of people that move over I think from the internet are our probably likely.
Sale, even if they're super successful because goes back to this idea of like, what does it mean to be a crypto native entrepreneur? So it's actually I would say is probably the hardest part of my job. Actually, it's just like you meet these really really brilliant people, but you're not sure if there's like founder market fit your like is this the kind of person that can succeed in this market and that's sort of a process that I think all the investors and all the founders and everybody's kind of trying to figure out is like who are the kinds of people that can really be successful here and why but I mean, I think you can look at something like metallic and you're like, I don't know what he'd been successful like going through y combinator.
Maybe but he's clearly clearly the right type of person to be to be operating crypto Network and be sort of you know, the steward of that.
Yeah talk a little bit about conversations with limited partners or investors and you are fund and how that sentiment has shifted over the years in terms of 2017 2018 people sound like they're just like literally throwing money at you like how you solve my problem. I don't understand this and then kind of how that maybe went through a trough and then has has recovered a
little bit.
Yeah, it has it has and in a funny way, I think for crypto like covid-19 Catalyst like covid coated was Tailwind for Netflix and Amazon, but also covid-19. He'll win for Bitcoin in part because all of these things that Bitcoin people have been saying occur to people have been saying like, hey, look the money printing is just gonna get worse. They're not going to dial it down. Right and like this is gonna be really bad and like, you know, we don't trust our institutions anymore. And like this is their real problems here like censorship is a problem like all of these things that crypto people have been saying,
For years and years and and we all sounded like loonies all of a sudden the LPS that had heard these people talking about these things set up one day and we're like wait, maybe you're right and that basically happened in like March April and I think that was a pretty pivotal moment. But even even before that, I know I think you have to kind of break down like institutional investors into like what kinds of institutional investors and there are like large family offices or ultra high net worths. There are endowments their Pension funds, you know, there are sovereign wealth funds and so there's a spectrum there and you know,
2017 the people who were who were kind of clued into crypto. I would say we're essentially Ultra Ultra high-net-worth like billionaires and some some family offices and kind of where we moved like where the dominoes have moved to now is like the endowments and like a very small number of very forward-thinking Pension funds and corporate treasuries and folks like square or microstrategy and we're not yet at like Sovereign wealth funds. We're not yet at central banks like we're not there yet. And so that's kind of the line is and I think
You know the conversation the big shift basically has been that every time like the best way to in my opinion. So like have LP sit up and take note is if the person to their left just made a bunch of money and so like what annum happening in like 2016-2017 was a bunch of billionaires had some friend or a friend of a friend who was like a you know, a hundred million are and like that guy became a billionaire and then they looked over there like wait that guy's a billionaire. Like how did I become a billionaire and I started looking what he's doing and and
There is crypto in the mix and then so all these people started by it. And then when those people started by in the really large family offices started to look over and then once a really large family offices started to look over endowments and pensions started look over and so you kind of have this like domino effect and we're just sort of like at this point. It's like we're far enough along that I gets the rest of the donors are clearly going to fall. You know, the other thing I'll say is I think one of the big learnings for us to is even inside every sort of group of LPS. There's some people that are just way
Way more rational about it than others. And so I've been really impressed to the degree to which there are these like really smart Ultra rational investors and when you meet them how quickly they get it and like the three things that those guys are all into now that all those people are into these like hyper-rational smart and sushil folks and they get is crypto marijuana in Esports. It's like really interesting like they get those things in a way that like a lot of other institutional investors don't and so, you know,
If if we were if we were talking to help he's like three or four years ago. I think we looked like crazy people and like today you have the same conversation and people like, oh man, like you guys are you have like seeing the future. It's like pretty dramatic how quickly changed to
I always laugh and say you can go talk to like any kid between age like movie and 15 and 25 and be like, hey or electric vehicles going to be a thing to like of course every car could be electric. It's like hey is your digital money going to be a thing. Like of course, I what are you talking about? You know these Force going to be think of course, and so that there's this
element of like when I talked about institutional investors, a lot of them will literally Graphics like my kid is all into this right and like it's driving them. They hear them talking about it. And for whatever reason they have this inclination like my kids probably right like he knows nothing about investing like my kids probably right? It's like do you think that that has a big impact that right?
That's it. That's hilarious. Yeah. I mean that's that's a fantastic investment pieces. You just like do what the young people are doing if you just like bet long on that. He'll probably you're probably do the right thing because all this is going
And it totally right
the other thing that I keep keep going back to as well is I've been fortunate enough as I'm sure you have as well to talk to some of the most successful investors in the world and most of these folks are considered the most successful because not only have they had great returns, but they've been doing it for a very long period of time is just naturally with experience comes age. Right? And so they end up being in their 50s 60s and times even older and in almost every single situation. They have somebody who is younger than them that has gotten
Mm in right? So whether it is their child a friend, you know, whatever it is. And so it's always fascinating to see that in those conversations. They'll say something like oh, you know my kids been like every single time. I see him like he's always just pounded away at me about this stuff. But then all of a sudden they see market prices move and they said wait a second like maybe I should spend more time here, or maybe actually this is the right kind of thesis. And so how do you think that that plays out not only from a Bitcoin stamp because everyone's paying attention of Bitcoin CNBC all the media organizations pay attention of Bitcoin price.
What about everything else right when everything else starts to kind of move up? Does that further unlock even more Capital than just the Bitcoin price or do you think is it tutions yet aren't paying attention to like the things outside of Bitcoin necessarily and so we still got some way to go until they start to really understand the rest of it.
Yeah. It's very early days writing this I'll be going it's you know, when we talk to institutions, I would say the most forward-thinking ones look at aetherium and they think it's going to be a thing kind of the way they thought
Bitcoin was probably going to be a thing in the 2017 move and they have not yet made the decision to move into it where we've had lots of conversations with institutions that are trying to figure out how to own the coin directly, you know, whether or not they've actually pulled the trigger there like at that point now like the investment committees are okay with it. Nobody know very very very few people there with the theorem and that's just a theory that's not even trying to touch on like defy or any other alternative tokens or you know, thinking about things Beyond etherium, so it's still very very early days.
Comes to like institutions coming into space and and to your point you a lot of the times there is usually one person and they almost I would say 90% of the time not always but like 90% of the time they tend to skew younger. It's kind of like that that saying it's like things that are created when you're like 65 don't make sense in our like unnatural things that are created when you're 35 are you know, Innovative and things that are created when you're 5 or just like the natural order thing and you have the world
to your point earlier, right? So like for like a fifteen-year-old today, like all this stuff is just like how the world is going to be. But yeah, I think most institutions are not quite there yet. I mean, I think the other thing that that's worth noting here is like they're not irrational right? Like these are really smart people and part of what happens behind the scenes is like how these decisions get made and so like I think like I didn't know this before I became an investor is like the process by which an institution decides to make an investment decision a
Is a pretty heavy lift the bigger the organization the heavier the lift but also be is really hard to unwind and so you got to get the entire organization there and there's a lot of like principal-agent Risk mixed in which is you know, like our am I going to be the person that puts my neck out to do this and like why am I going to do that inside this organization? And so you have to have people who really really really believe or there has to be some sort of catalyst and this is where I think like covid really changed a lot like everybody sort of realized that if we're going
owing to a zero interest rate World in USD dollars like USD denominator world like your Euros already there then if you have like you'll targets be trying to make 7% a year. Like how are you going to do that? And so all of a sudden people are open to the idea because kind of they have to be and so I think it's inevitable. But yeah, it's still very early days for anything. That's not Bitcoin.
Is there anything that you think maybe he's getting tons of attention and a lot of people are flocking withers individual like intellectual capital.
Our financial Capital then maybe you're not as bullish on or something that you think that you know might not actually be
sustainable. Yeah. Well, I think these things all go through like a hype cycle and I think hype Cycles are actually really important. I think a lot of people think hype Cycles are a bad thing, but I think they're necessary. It's just like you have to get the hype cycle because the over-investment is what allows you to invest in this stuff that needs to like go mainstream across the chasm and if you don't get the over-investment, the thing is never going to accrue enough capital or not intention or enough people to like really make sense.
It's and you see that there's like this whole like if anybody wants to go read Carlota Perez, there's like a whole economic theory around like why you need bubbles basically and it's an important part of like Innovation. And the thing that I think might be in a little bit of a hype cycle right now is essentially decentralized infrastructure and in part. It's I think you know, the people who are poor thinking developers have experience this themselves, like developers have been experiencing this pain of like, oh I used to build on Twitter and then Twitter shut down the API on the are used to build on Facebook and then
Shut down the API me and kill my business or you know, we just saw this last week, right like setting aside the politics of of it all it kind of doesn't matter. You know, what you think of parlor the fact that like Amazon can just shut that thing off and Apple and Google can just kick it out from the App Store all of a sudden. I think the world kind of woke up and said wait a second this like five companies control whether or not you exist and if they decide to take you out from the internet like you don't exist and developers have been feeling that pain for a long time. And so now everybody sort of I think it's starting to understand the
pain is acute. I kind of like kind of liken it to the bear Stearns moment in 2008 or like if you were paying attention bear Stearns was a really big deal, but the Lehman moment was like a year later. And so I think we're now building up to this like bigger and bigger stuff is going to happen and the world is waking up to the idea that literally five to ten companies control whether or not you exist on the internet and the internet is like your life. And so all of that is now problem statement, but I don't think the technology is quite where it needs to be to actually solve the problem yet. It's getting there but not quite.
There yet. So I suspect what's going to happen is those things are maybe were defy was and like 2015 where a lot of really smart people are going to pour a lot of energy into it, which is great, but it's not going to quite work the way that we needed to work yet and then there will be sort of a hype cycle around that and probably Flames out and then on the other side of that is where the stuff really starts to work, but I suspect that's like, you know, three four five years out. I don't think it's like in the next 12 months all of a sudden you can just go truly decent like you can't I think it's very hard to build a truly decentralized Twitter that just works in the next 12 months.
Yeah, and it feels like we're now getting to the point where technologists understand like centralization is a risk, but maybe the users don't yet. And so I keep talking about like the develop its the developer's responsibility to build decentralized systems because the users don't care but at some point in the future users will care right? It's kind of like encryption like now users do care about encryption but maybe 10 years ago like that wasn't as big of a deal. And so if you wanted to protect your users you put encryption in but they weren't necessarily demanding it. It just feels like we're getting pulled.
that direction what's kind of your thought process around with the regulatory response to all this so like, you know you and I sit down and we're super bullish we get really excited and we're like, oh my God Bitcoins going to like, you know have this great Ascent this rebellious decentralized systems, like, you know, the internet is the the king and there's a lot of regulated sure like, okay crazy guys, like chill out that was never gonna happen, right like where we don't want that to happen like who wins essentially router or is it actually there's coexistence like maybe there isn't such a competition
That is literally just coexistence and how do you
think through that? Yeah, it's a really great question. I spend a lot of time thinking about this and and have spent actually a fair amount of time talking to to regulators and policy folks and and and people in the intelligence Community as well and law enforcement and and I think you know, if you have to sort of think through it I think game theoretically which is like who are the actors and whether incentives and was that mean and I think if there were only two actors in The Mix if it was just like the US government and the crypto people it would probably
Play out sort of straightforwardly which is like hey, we don't really like this like, you know, maybe we'll try it down but there's a third actor in the mix here, which is the Chinese government and I think the Chinese government actually is the like hyper-rational like amazing. I mean like they're so impressive and how they managed to use technology, you know again setting aside what you think they do with the technology just their ability to use Technologies. They're the best government in the world at this and so
What are they doing? Well with the Chinese government has done is they basically said, you know what we're going to let the supply chain for Bitcoin exist here again make the Asics. That's great run im here like run your mining pools here. That's awesome. We love that but you know what? We don't really love people buying a lot of this stuff. So we're going to make sure that like thats pretty much under our control. And so they hit this like perfect sweet spot where they like have influence over this stuff. They're building capacity like President XI said, we're gonna invest a bunch of blockchain infrastructure going to subsidize that we have the blockchain network happening. They're investing in there deep.
EP system their digital currency electronic payment system, which is a blockchain based Central Bank digital currency, and then they're going to take that which now lets them have truly digital cash and they're going to push it through the belt and road. So they're investing trillions of dollars to for these strategic initiatives and developing markets from you all the way from Singapore to Sri Lanka to East Africa into the Gulf and into Europe and there's going to push it through there. And so all of a sudden, you know, if you're doing any kind of international trade if you're doing any kind of goods transfers, we don't any Financial
She'll transactions all of a sudden you have this way better system now. It's not like the old school 1970s fedwire system that takes weeks for your cash to show up where you need because it has to go through three Hops and three different people need to settle along the way it's instant. And that's pretty compelling. Right if you're trying to do business, that's pretty compelling. And if your largest trading partner says, hey, why don't we use this this platform? That's even more compelling. And so that's kind of what's Happening. That's the third actor is now the Chinese government could actually become the platform on which
Like international trade is settled and if you're the US government that is actually a much bigger challenge than crypto. Like if I'm if I'm the US government from treasury if I'm fence and if I'm the CIA like anybody in government actually needs to be thinking about how do we operate in a world where today one of the best tools for US National Security is the fact that the u.s. Dollar is the reserve currency of the world and if that gets weakened and there's an entire system that allows
Allows countries to circumvent that what does that mean for us? And that is a pretty existential threat. So you say okay. Well, that's a given that's happening. That's not like crypto paranoia. Like literally you can just go read like that's literally the treatment of Chinese government is very transparent about this. And so if that's what's happening, what do you do? If you're the government if you're the US government and you can't have two options, you can either try to like compete with them head on and you try to do that. I think you fail like healthcare.gov, you know the history of the US government.
Writing technology and like the last 20 years is not good. So they're going to try and they should like you should modernize these modernize these systems, but you're already 7 years behind and you don't have a great track record. So I don't think you win if you do that, but how do you win if you're a startup person like you immediately start thinking about like startup 101 is just like what is the Judo move here? Like what is the thing that you can do that? The other person just can't do structurally, right? So like snap one in large part because they just did the opposite of
Facebook like you open up the phone and it was a camera instead of a feed. There is no permanent identity, you know is all ephemeral and Facebook is entirely about permanent identity. It's just like they did the opposite of Facebook and so many ways and that's why Facebook has such a hard time with it. And so what do you need to do? If you're the US government I would argue you actually need to embrace crypto because crypto is the one thing that the Chinese government will not do like they don't want Capital to leave China and not being their control. They don't want to give away privacy and cryptos about privacy and self Salvage.
Sensor and censorship resistance, like all of the things that make crypto work or all of the things that the Chinese government doesn't want to do any of your the US government you like double down on crypto. Actually you like really embrace it and you say this is actually our offensive tool like we're going to do all the stuff we need to do to upgrade our infrastructure and try to compete but let's like actually embrace u.s. Back stable coins. Like let's get u.s. DC and Sello dollars and and Libra, you know or DM dollars or whatever. Let's just get that everywhere. Let's get that into the developing world because that's that's
reinforcing the network effect of the u.s. Dollar. Let's actually embrace Bitcoin. Let's actually make sure that all the crypto interest, you know Innovation that's happening happens in American companies and happens in American Banks and happens in American, you know happens on Shore basically instead of pushing it out to regions of the world where other governments have more influence. So it's maybe a little counterintuitive on the surface, but I actually think like the game theory optimal move for the u.s. Government is to double down on crypto and really embrace it because that's actually how you can you can have a shot against competing as the Chinese government.
Out which I think I think you're really going to struggle a few US government and I think in at least in my conversations, I think there are enough people in government that actually get that so there's actually a contingent of people inside the US government at across all of these different groups that get that and are trying to make that case right now.
I could not agree more. I think that the whole idea of like the government's going to ban. It is the exact kind of intuitiveness that ends up not coming to fruition and it's the counterintuitive move of no the first countries to have braces.
Us actually win and although the United States is very good at sometimes getting in its way. I do think that this where we're going to end up and you're you know, looting to everything from there's Congressman their Senators. There's people up and down the US government that I think are kind of sort of wake up to this and somebody said to me in a very blunt way. They said look all old people die eventually and they replaced by younger people. And so the odds that a president in the future is a Bitcoin ER or a crypto person is like very
And that's just a maybe 20 years from now but like that happens at some point, right? It's just naturally if you grew up like there's people who now are assuming positions of power and influence in the government that grew up with a cell phone in their hand right there just starting and so 20 years from now like almost everyone will be that way. So it's pretty interesting before we get into rapid fire questions to wrap up. What is kind of your sweet spot from an investment standpoint. So for Founders or people who are building in the crypto ecosystem kind of what are you looking?
For both mathematics standpoint and also from like a stage of the company or the
project. Yeah, we're seeing in Syria say investors will do tokens will be crypto networks will do hybrid will do Equity could so kind of do everything but our sweet spot is like, you know a couple of people in an idea and maybe a prototype because we're Builders and we kind of know how to take we've seen a lot of companies inside crypto and outside go from from nothing to something to, you know, a couple billion dollars to an IPO like we've seen that whole lifecycle and so in the early
Is where we can be the most helpful and that's where we had the most value. So that's where we focus in terms of sectors and stuff. It goes back to kind of what we're talking about before like there's a bunch of stuff that we have conviction on things like defy and decentralized infrastructure. Frankly. We think it will happen but the stuff that gets us really excited is like when you meet with a founder and you walk out of the meeting saying well, I went into the meeting believing X and I walked out of the meeting believing not X like that person actually turned
Upside down like what I think about the world. That's the kind of person that you you just bet on yours. Like okay, like I had some long-held belief about the world and you actually change that you found something you figured out something that's true about the world that most people think is not true and when you find something like that you just like, okay take all my money and that doesn't happen that often. But those are the people that like we love working with is just like you find one of those people on your side cool thing: the money
I love it. That is a fantastic thesis. I already got three questions for you, and then you'll get to ask me one, too.
In a shop. The first is what's the most important book you've ever
read we did this before it's still the Bible.
Second question is a new one. What is your sleep routine our friends over at eight sleep have officially sponsored this question now because they know me well Big Sleep nut and I try to get at least 8, if not nine hours a night. What? Uh, what would you say is your sleep routine?
I would say my sleeper train is terrible. I don't have one. We have we have a little baby and so I don't get it. I don't get
My sleep routine is terrible. I wish I hadn't seen how old is the baby. He's 8 months old now, so he's starting to settle in. Okay. So
here's the three answers that I get one is I work too much to is I'm religious about my sleep and I already have an eight sleep and it's amazing or three is I have a young child and whenever somebody says I have a young child, it's immediately know just like there is no sleep schedule. It's horrible. You're lucky that I showed up here and like shower before I came. Yeah now it's
It's hard, but it's wonderful and all sorts of other ways a-plus-plus like would recommend. Everybody should have children. That's great.
Last question is aliens. Are you still believing are we do we have any change of opinion from a Galactic Federation or whatever other crazy UFO stuff that's starting to come out.
I'm still a Believer. I don't know. Have you been tracking like the David favor stuff and like Tic Tac and Gamble and all that stuff. And then that will Mama which was like the Harvard guys convinced. It was a spaceship. You can track it all this.
Yes, I do. People naturally send me everything and so all the things you just mentioned. Yes. The one that I recently saw that I have not looked at yet is I guess Rogen has some guy on who claims that he might have been abducted by a UFO or something. Oh really and supposedly from what I gleaned again. I didn't listen yet. But what I saw online was he and his friends went into the woods. There's this big white light something happened. He basically blacked out he came to many days later.
His friends ran away. They've all taken polygraph test like multiple times throughout the years and they all have the exact same story. They all passed polygraphs every time and so like I have to listen to kind of all the details but like, you know, if that stuff starts to happen where it's like, you know, same story for 20 years polygraphs are past like, I don't know man, it's you start to wonder, you know, what's really going on
have you? Um, have you heard of you know, the Betty and Barney Hill abduction
Ian from the 1960s as a 1964 something like really missed one. Yeah, so it's it was like the first modern UFO Abduction that kind of like went into the press and so it's like the first modern one, but it turns out that guy's granddaughter is an MMA fighter. And so she's like just a super interesting person. So if you want to guess the like talk about like alien stuff, but also it's just like a super interesting person. She's like a legit MMA fighter to
be like my grandfather got abducted by aliens, and now I beat people up in the roof.
It's super interesting because I thought I started tweeting about it a couple days ago, and she I think she's gonna do like some she's going to talk about our grandparents or something and all the stories that they told her about the stuff
that's croquet. I would definitely go check that out. You get asked me one question of finish up what you got for
me. What do you most looking forward to in
2021?
Getting back to it. I'll put in air quotes normal, like just you know, kind of getting vaccines done masks open up the businesses. Just just get back to the closest symbol as we possibly can of normal, you know, you know, maybe people will debate like I don't know if we ever lived in a normal world. So like are we you know where we going back to but just I think a lot of the additional obstacles and hardships that people are facing like just get over that stuff. Yeah,
and it'll be nice to get back to normal. Whatever that is. Now the new normal
for sure. Where can we send people to find you on the
The internet or find out more about
electric. Yeah, just follow me on Twitter had a beetle electrics pretty easy to find and select your Capital.com.
Awesome and we'll listen. Thank you so much for doing this. I'll do it again the
future. Yeah, but the board
