Big Technology Podcast - A Debate About NFTs — With Jason Stein

Episode Date: May 11, 2022

Jason Stein is the founder and managing partner at SC Holdings, a private equity and strategic advisory firm based in New York. He joins Big Technology Podcast to discuss the merits of NFTs, of which he is bullish and I am skeptical. This isn't a shouting match debate, but a reasonable back and forth between two people with different views on the issue. Stay tuned for the second half where we discuss how a struggling economy will impact risky assets.

LinkedIn Presents Hello and welcome to the big technology podcast, a show for cool-headed, nuance conversation, of the tech world and beyond. well today we are going to be talking about NFTs they are a subject of endless controversy on the internet and we have with us today someone really poised to talk about it one of I think the most creative entrepreneurs and investors out there and this is going to be a thrill and I've been waiting to get him on the show since we started but finally he's here Jason Stein welcome to the podcast thank you I'm not sure I'm well poised to talk about NFTs but I

come on you're already slagging the show and we're about to get started that makes me as well poised as anyone that's true NFTs it's a great starting it really is a great starting point so I think we should also introduce folks how you and I met because I think it's a good backdrop for what's going to be another experimental area of technology so I actually had the article back here

in 2013 I was writing about potential business models for Twitter. And the Associated Press started having its ads team sell sponsored tweets that it would write and post on its Twitter account. And I called you up, you know, you were, you were working with your own social, you started your own social media agency. And I was like, Jason, what is this all about? And the headline ended up being why the AP selling its own sponsored tweets is good for Twitter. And, you know, I think that like back in the day, we were all trying to figure out like what social media was about whether it was a return on investment there. You were bullish. You're very bullish from the beginning. And I was a little bit, you know, took me a little bit longer to

come on board to that idea. And so here we are now talking about another experimental technology. But you did, you didn't know where the ball was going there. Look, there's a lot of similarities from today in Web 3 and social media, which I guess was peak Web 2. from back in the early 2010s. And one of the biggest common themes is skepticism, of course. But that's the case with any new technological platform advancement, large-scale evolution or shift on the way people use the Internet. And you can go back and find the same skeptical headlines.

from every era, right? Apple, social media.com. And in many cases, the skepticism is warranted because with any new paradigm and technology, there's a lot of failures along the way. And a lot of people lose money, including consumers, more than professional investors who are more diversified in their investments, where they can afford. to lose some. But to be clear, my my investment business doesn't do a lot of Web 3 investing. Yeah. It's a little too early stage and speculative for our strategies. But I personally, an investor

and collector of crypto and NFTs respectively. And I think as the space matures, it's something we will be more and more invested in. Yeah. And the reason why we got started talking about this stuff. I can share the story, is I was giving this talk to a Columbia Business School class, just about tech. I tend to visit them frequently. And I was a little too provocative, I think, you know, in one of these conversations, and I called NFTs business Q&N. And I don't think it's really parallel, but I did think that there, and I still believe that there were people that were diluting themselves in some of these NFT schemes. And so what happened was, let me know if we have to edit this out. But one of the people from the class was in your office, you know,

talking about how this guy came in and, you know, said all these things about NFTs. And then next thing I know, I get a FaceTime from you being like, Alex, you got to think differently about this. He's one of our NBA interns. I was like, let's have this on the on the pod. Sorry, go ahead. Totally. Yeah. So, so he was one of our MBA interns last semester. And that's, that's exactly what happened and look I like I said I think you're right in that there are a lot of schemes and a lot of people will lose money in their NFT investments but I don't think that's different than investing in in startups broadly right like their speculative investments where you're betting on an idea and on entrepreneurs and a roadmap and a vision and but by you know it's very

nature. That's exactly what NFTs are. And buying an NFT just because it looks cool without understanding what is the utility of it, who is the team behind it, what is the roadmap for it, and what is your view on what makes NFT successful more broadly? Without all that, you're throwing darts. And there's a high likelihood you're going to lose money. So I think you're right. But it is hilarious that this MBA intern came in and said, this guy came to our office. We're all, you know, to our school and spoke and we're all, you know, big believers in CryptoWeb 3. And he was just shitting on it the whole time.

Does anyone know this guy, Cantrowitz? Has anyone heard of him? And a couple of us looked up and smile. You're like, oh, God, we got to give this guy. Dose Reality. So, but I'm glad we're doing it. I'm glad we're here. I'm glad we're talking about it. I think it's clear. I'm skeptical that this thing is going to work and that there's going to be real returns to it. However, my mind is open, just like it was with the social media stuff. I have an open mind here. And I want to hear from the people that believe in it because I don't want to miss it if it's true. And I also think that, like, you're right. With any early stage technology, it's pretty easy to be skeptical. And you know, you're going to be right most of the time if you're skeptical. So, but, but, but. You're going to be right if you're skeptical?

If you're skeptical most of the time, you're going to be right. Most startups don't work out. I disagree. Go ahead. I just don't. I think if you're skeptical most of the time, you end up being wrong in the long run. Well, I would say on an absolute. You're skeptical about social media, right?

I think less so than less so than you believe. I think that I was mostly interested in bullish in social media because I actually saw real returns. real like a real communities forming real real momentum social media I saw the power of Facebook that's exactly what's happening in in Web 3 there are real communities forming and it's it's in many ways the evolution of

community from social media and Web 2 which was essentially happening happening in public for everyone to watch to more focused communities that are based very much around specific interests or NFTs or sectors of NFTs, whether that's art or profile pictures, access and membership-based NFTs around restaurants and clubs, or anything in between, you know, gaming and all the technology uses.

So, look, I just think it's a more focused, more private version of Web2 communities where people are a little more aligned with the incentives, right? Everyone in a community around an NFT is usually invested in that NFT, right? So everyone has the same incentive, which is for that NFT to be successful and to help each other. Whereas on social media, there's no alignment of incentives amongst people other than to potentially tear each other apart 24-7 to get more engagement. Right? So I don't know. As someone who was in social media early and saw all the merits of it and now has seen all the pros and cons of it,

I think any attempt at a healthier approach to community and discourse is exciting to me. Okay. But back to your point on being skeptical. I mean, anything technological advancement that people have been skeptical of, I think you might be short-term correct about one specific NFT or one specific app on an iPhone or one specific social media platform, right? There have been many that tried, that failed. But broadly, if you're saying a sector or a space or most importantly,

a technological use case is going to fail, I think you end up being wrong more often than not. Yeah, I think that's a good way to look at it. On a case-by-case basis, you'll be right. On a company by company, you'll be right more often than you're wrong. But on bigger trends, you'll be wrong more often than you're right. No, I'm saying the opposite. No, I'm saying, well, company by company, more often, you're right if you're skeptical.

Trends, you will miss if you're skeptical. Right. I think we're in agreement. Correct. Correct. Correct. Yes. Same thing.

Yep. Can you unpack some of the things that you've been talking about, roadmaps? And, you know, for a lot of folks, NFTs are just like, you know, these monkey images that you pay all your money for. And, you know, you have a URL that points to them. But you've talked a couple of times about roadmaps and communities, which is another side of NFTs that I don't think, you know, people spend a lot of time thinking about at least those outside the space so why are those so important why is that more interesting to you than the art if it is because i don't know it seems like the art's kind of ugly oftentimes so but like let's hear a little bit more about like the stuff

underneath the surface and i think that that's actually what makes you believe in this space more than you know the art itself so i'd love to hear your perspective on that and then also just like the definition of web two versus web three because we oftentimes like get into this discussion and, you know, use those terms, but it's kind of tough to, everyone has their own definition, so I'd like to hear yours. So let's start with the idea that you just brought up, which is everyone thinks NFTs are just these monkey profile pictures, right? And really what you're referring to is Bordiape Yacht Club, mutinate Yacht Club, and the ecosystem

within that, right? Yugo Labs, right? Is that what you're talking about? But yeah, but a lot of a lot of NFT art is sort of like cheap rip-offs of the ape stuff too. Sure. And that or it's like you can get the McDonald's Whopper NFT, which is like an ad for a whopper spinning and some GIF. I don't understand that. But let's start with.

Defend the art, Jason. I'm just kidding. Well, actually, I just want to point out a misunderstanding. So Yuga Labs, which makes Port-Aviot Club and all of the other sort of sister. related NFTs in there, which full disclosure, I own an NFT, a mutiny, and some of the land they just released last week, which is a whole other controversy. But look at the deck for Yugo Labs for the fundraise they just completed, which is a big raise.

I don't remember. I'll look it up. But the entire concept for the company is predicated on building. an interactive video game in which people play as their own NFT. It could be one of the Ugo Labs, and if he's going to be any other NFT they own. And it's effectively a world where 10,000 people can

play in at once. So it's Fortnite, at a much larger scale, Fortnite 100 people play at any given time, right? In any one one game, there's multiple games going on. And at once, course. But in this case, they're saying everyone enters and they have some version of Fortnite meets Roblox where you are your own NFT and enter and play. And so in that case, you're saying these monkey profile pictures, but really what they're trying to build. And we can debate whether it's how plausible it is and what's the probability of success is. But they are

trying to build a modern platform, right? The metaverse as everyone is referring to. And in the they take a lot of shots at Facebook's point of view on the Metaverse, and they say, nobody wants to spend their time in a 3D version of LinkedIn, right? Which is, I think is funny and true, but also, you know, in the business world, you know, there'll be applications. But the point is, A, you have to actually understand what you're investing in, understand what the roadmap is. And in this case, I'd encourage people who are skeptical of 48, mutinate,

and others like it, gutter cats, gutter dogs, et cetera, to actually understand the roadmaps and the vision and then decide if you think that vision is achievable based on the people who work at the company, based on the idea, whether something consumers would like, and if it could be a good business. And in this case, if they're even 50% as successful as the deck suggests they will be,

It's a very, very, very successful gaming company, right? It's the next epic games if they're successful. So you can't just say art, right? If you look at an NFT and it looks cool and the entire economy around it is based on hype and supply and demand of something that looks cool, I'd be very hesitant to buy that nfts not saying that it will be unsuccessful but it's just like buying art from an early unknown artist you might find the next basquiat right but 99 out of 100 you're going to have something that's not worth a lot at the end of the day you're just you're picking art

and you're picking it off the street corner as opposed to going into a high-end gallery right that that's sort of what what open sea is open to everyone but if there's a use case and a utility that goes beyond just owning art and a profile picture, I think it gets very exciting. To me, it's a very interesting way to create a consumer brand today where you're allowing people who believe in the concept, the idea, the point of view, the aesthetics, the values of that brand to effectively buy in at a very early stage by owning an NFT. It's very similar to owning equity in a company. And if that NFT and that platform and that idea are successful, the value of your

NFT is going to go up. So those people become your biggest advocates. They become your community. Spend time in Discord and watch what the community talks about. Look at the suggestions they're making to the founders of that NFT and the operators and whether those operators are receptive and quick to iterate on it. And you learn a lot. it's basically like being in the slack of a company that you've invested in

and seeing it operate in real time. Right. And so this is like one example of the road. Imagine you could invest. Imagine you could invest you were an investor in in Facebook before it IPOed. And you had access to all of its biggest users, all of its biggest advocates and its operating team and its founding team and Mark Zuckerberg. And they were interacting with people giving feedback on where the community should go,

where the product should go. you would learn a lot about whether that would make for a good company for a good investment and what you thought about its future, right? But don't you think that Facebook was able to succeed not because of like listening to feedback? Like let's take the news feed, for example, right? That was hated by all the enthusiasts of Facebook. It was, but it was the company's decision to press forward with the news feed despite the

negative feedback, despite the community that allowed it to be as successful as it is. So I'm curious, like, this goes to the fact that, like, you know, a lot of companies that sell NFTs, you know, will have this community type decision-making apparatus like Dow's decentralized autonomous organizations. It sounds good in principle, but don't you think that, like, some of the best technology companies in the world got that way because of a vision of the founder, at least in the early days? and someone that would make decisions and press forward with a plan no matter, you know, how angry a community you might have been about it. Yes. And I would say that Facebook actually was listening to its community at the largest scale, and that's what made it successful, right?

It had data on how people were using the news feed, right? And it was updating the news feed based on user engagement to give people what Facebook. thought they wanted, right? And what they actually were clicking on. I think in the case of that we're talking about for NFTs, the, first of all, just because the community suggests something doesn't mean that it has to be adhered to, right? But it's a data point.

And those people are free to sell and, you know, make money or lose money at any given time. But of course, I agree with you that some autonomy from a thousand, founder is mission critical. And I also think that hearing the community and its biggest advocates engage and interact is very important. But one thing that's really critical to understand here is all of the community members who own an NFT want the same thing, which is the value of that NFC to increase. Right. And so the alignment amongst them and the founders is the same, right? Whereas the majority of users of social media don't necessarily own stock and have a financial incentive from the beginning of that platform's release to speak in the

best interest of that platform success. But that gets to it is sort of another contradiction that we brought up on the show in the past when Aaron Levy was here, which is that the interests of investors and the interest of users are actually going to be in conflict oftentimes. An investor wants to get the most money out of a product. A user might want to play for free or have experiences that aren't going to try to milk the asset and get them to part with as much money as possible. So how does that balance actually come into play when we have like the NFT holders influencing the decision? Because it's a completely different incentive structure than someone who's just coming and using it without

equity in a product. Well, wouldn't you argue that that's the problem with Web 2.0 or than Web 3.0? I'll say more about that. And I'm still looking for the decision too, the definition. A lot of the challenges that exist today with social media and with Twitter, which is maybe the most relevant current example. For investors, as a public company, Twitter has always said the best thing they can do is increase engagement to increase ad revenue, right? And many decisions that it was making to increase engagement was actually fairly unhealthy for many users of the platform, potentially unhealthy for society, right?

Agreed. And Jack has openly come out and said that, right? Yes, sir. that a lot of those decisions were driven by the wrong things. And I think if they were only making decisions for what was going to be best for the users, they would have acted very differently. And so I think the hope, right, for Web3 is that from the very, very beginning, with everyone aligned, you would make some of these.

decisions together and set forth the plan for the company, right, where it wasn't driven by just one or two investors who sat on a board, right? And this is an interesting topic for me to discuss as someone who does that for a living, right? You know, invest in companies. It can make you obsolete. It could certainly make you obsolete if you didn't embrace these trends or believe in the merits of Web3. I wouldn't go to the extremes and say, you know, it's going to make any investors obsolete. And there's many non-technological sort of sectors where this is fairly irrelevant,

at least today. But in short, I agree with you that there is a conflict, potentially a healthy one, between the founders of Web3 companies. and the community that will have to be hashed out. But this is why it's so important to understand the roadmap at the beginning to actually go and read the contract that you get and you buy an NFT to go in and go on to the website and see how much the founders have disclosed about where they want to take this business.

A lot of it is very, very clear in the NFTs and Web3 companies that I find compelling. Yeah. I also don't think we should enter Web3. sort of dough-eyed, right? I'm thinking this is all going to be great. This is all awesome. It's all going to work out perfectly. This solves all the problems in the world and Web 2.0.

Because as we've seen from social media, as amazing as we thought it was in the early days, there was so much that we could not have even contemplated, right? If social media was as successful as the biggest bull thought it would be in 2012, what will be the implications on the entire world on the political ecosystem in America, on the relationship between people in America on different sides of the political spectrum, right? Instead of being skeptical, I think it's more productive to say, if this works out, what should we be thinking about?

What should we be prepared for, right? Because if it doesn't work, it doesn't work, it's gone, okay, onto the next one, right? But if Web 3 is as successful as people think it could be, what are the implications of that, what needs to change in the world, how do governments need to be prepared, how do financial institutions need to be prepared, how do consumers need to be prepared? That's what's exciting to me about this topic, more so than will this work or not, because I think the probability of cryptocurrencies, NFTs, and Web3-based businesses and technologies going to zero.

I think the probability of that is a low number. It's not non-zero, but there's so much money in it now and so many users. Inactive in Web3 and so many corporations betting on Web3 and putting a lot of money into it, that it's hard to see a scenario where it's not a relevant platform. I'm not saying it replaces Web 2 entirely. I'm not saying it's the only way people use money. I'm not saying it's the only way people interact with brands. I'm saying it is a piece of a consumer and business and technological ecosystem.

And can we just say so? Just to just set the definition. So Web 2 is sort of like technology that's built, you know, and users can participate, but it's owned by central entities. Web 3 is more decentralized built on the blockchain. So that's on right to you? Okay. With more community ownership, right.

All right, sorry. I think the biggest thing, or one of the big things I think about within that is that in Web 3, you can basically sell any asset you have. Whereas in Web 2, you can't really sell anything. You can buy things, right? And let me just give you an example. Fortnite, incredible innovation and very popular game. My son loves it.

He plays it. I play it with him. Last December, he's, you know, for Hanukkah, he told me he wanted V-Bucks, which is the currency in Fortnite.

That allows you to buy a tire for your character to play it. It's the only way that the game makes money. It's a free game. And you wear this attire and it doesn't give you any powers. It's just like wearing clothes, right? It makes you look cool. And so you meet your friends in the game and you have your different outfits

on and it's a vanity component, but no different than where, you know, how you decide what you wear in the real world when you're seeing your friends, except that you can't, when you buy the clothes, you don't own them, you can't resell them. There's not a marketplace for them if you wanted to resell them. And so, you know, one night we said, okay, it's digital products money for Hanukkah and he goes and he he buys the the Christmas Spider-Man outfit and it was cool and he wore it for a few days and then we went away um over December break we came back in in January and I guess he spent like 40 bucks on on the outfit and you know it's it's January 3rd or 4th and he goes dad has

could you get me a new outfit for fortnight some new skins i was like you just spent forty dollars on on your spider-man and he was like yeah but it's christmas theme and christmas is over it's it's it's the new year now like i can't meet my friends wearing christmas clothes and in that moment i realized like well it would be cool if he could sell bad skin right to back into the marketplace or he could hold it and it was limited edition and sell it and wear it again in a year and be have a retro or sell it ahead of Christmas next year I'm not even sure what the license is you know on you know for some of these sort of IP based costumes like Star Wars they have in Fortnite and if it'll be

around even where you're even though you bought it next Christmas and so so the concept would be if this were built on Web3 and if you owned a limited edition number of those skins, you could then go back and sell it at any time to any other Fortnite player, right? And to me, that's just a microcosm of what you would hope

gets addressed in Web3. Isn't that a design choice that Fortnite makes versus like the need to have like a new technology? I can't Fortnite just say, okay, we're going to build a marketplace for these skins versus like with Web3, So you basically have to build a video game as good as Fortnite that, you know, your son would want to hang out with his friends. And, you know, of course, it would have this added commerce capability.

But can't Fortnite simply solve that just by building the marketplace? I think people who are the biggest proponents of Web 3 solve and believe that Web 3 is a better technological solution to that marketplace. Because you understand exactly how many. versions of any specific skin were made, anyhow, how many of them were made, how many have been purchased? What is the value of each of them? What are they trading for? What is the floor? What is the volume? In a marketplace that you're describing, you have no idea how many of those skins were ever created, how many have been sold, what they've been sold for. And there's no open, decentralized place to transact other people in it. Right. And so yes, sure, could they create

some version of eBay within Fortnite to buy and sell them? Absolutely. I think the question for technologists is, is Web3 the best platform to build that on today? Jason Stein is with us. He's the founder and managing partner of SC Holdings. We're talking NFTs. We're going to keep doing it after the break. I've got some more questions. Maybe we can also talk a little bit about the market downturn, given that this is all being impacted. I was about, I was about, I was about a highly volatile, highly speculative asset class on a day where the market is absolutely getting crushed after a week of getting crushed. and the probability of a recession has continued to increase by the minute today. So I think it is worth talking about.

Okay, why don't we do that when we come back from this break? We'll be back with Jason Stein right after this. Hey, everyone. Let me tell you about The Hustle Daily Show, a podcast filled with business, tech news, and original stories to keep you in the loop on what's trending. More than 2 million professionals read The Hustle's daily email for its irreverent and informative takes on business and tech news. they have a daily podcast called The Hustle Daily Show

where their team of writers break down the biggest business headlines in 15 minutes or less and explain why you should care about them. So search for The Hustle Daily Show and your favorite podcast app like the one you're using right now. And we're back here on Big Technology Podcasts with Jason Stein, founder and managing partner at SC Holdings. You can find him on Twitter at Jason W. Stein.

I recommend the follow. Jason's been one of the most important voices that I've listened to as I've gotten to learn about technology, and he always seems to be ahead of the curve with anything new. I wouldn't recommend the follow. I barely tweet anymore. I used to tweet a lot. You're just waiting for Web 3 social media to come in so you can return.

Are you going to go back with when Elon buys Twitter? What made you decide to stay away and when can you go back? I thought about that. Yeah, go ahead. Go ahead. No, or is that? Well, if people, I'm, I guess, like, I'm trying to shut out where people could follow your stuff. Is it just going to be this one show and we'll just, you know, drop it here?

Do you have a place where you like to communicate with the masses? I'm glad if it's this one show, let's put your knowledge into this thing. Oh, they can reach, if someone wants to communicate, speak to me, they can reach out, however they want Twitter, email. Or whatever. You know, I, I, one of the reasons I stopped, there's a few reasons I stop tweeting a lot, right? One is just, it's time consuming. And I work 24-7 and I have three young kids and one of the things to not spend time on for me to make more room for those was tweeting a lot. The other maybe more importantly is if you're going to tweet, you're usually doing it.

because you want to have a following and there's a business use case for it. And if you have a big following, there's obviously a ton of advantages to tweeting a lot and having a big following. Gary Vaynerchuk's a great example of that. But there's many, many, many, right? My issue was in order to be very successful on Twitter is you have to have fairly extreme points of view to get the most engagement, right? It doesn't necessarily matter what that point of view is because,

the internet seems to be 50-50 on every topic, right? And so you take an extreme point of view, you've got a lot of engagement, you get a lot of negativity, you get a lot of support. And I found that, and this is going back a few years now, I found that I was forcing myself to take a strong point of view on topics to get more engagement.

And it was actually, it shapes your view on things, right? You get yourself worked up to think, you believe something, and then you have to support it, and then you have to fight with people, and there's no nuance. And most big business issues are not binary, right? And not as simple as that, and I think it's important to be open-minded and understand both sides and be able to argue both sides and be prepared for both sides. right? When I say is, you know, our NFTs going to zero, I think the probability is low that they go to zero. Is it possible? Yes. And so as someone who thinks in probabilities and thinks in bets for as an investor, it's just, I find Twitter it became, it was incentivizing, incentivizing behavior that was a little too extreme for me to feel, to feel comfortable. yeah this is why i love the podcast you know so like i just i just tweeted uh well well that's

last time i put my life savings into a monkey jpeg and that's my like twitter you know point of you but actually that is pure trolling exactly okay i'm just saying that like no i'm just saying yeah i'm trying to say i much of pre more appreciate this is why i think that like publishing media that is you know subscription um and and and has room for nuances is a platform so for me me, you know, in terms of the type of media I enjoy being in, podcast, A, you know, newsletter B, you know, and then Facebook, Twitter, you know, way distant. After that, I just think that this is a place where you can actually go to make progress versus a place like Twitter, which you're right.

It does incentivize these extreme outcomes. I think social media is relevant for businesses. I think it's for celebrities, for professional athletes, right? who people want to follow and have some sort of deeper relationship with where sure then you need to speak to people at scale right and people who aspire to that so i i think i spend time on it consuming to some regard but i'm not sure it doesn't mean everyone needs to to be a prolific poster on social media i got excited when twitter announced that they last week that they might be they might add a feature where you can pick up to 175 people

to see your tweets and only those people that exist now it's called circles no well is that is that the name of the feature the product but it's not it's not in my account i don't right i don't have access to it um even though i pay for twitter blue to get access to new features on twitter um mostly just so i can change the design of the icon on my home screen yeah Um, which I actually enjoy. I don't know if it's, me too. That's the one thing I enjoyed with Twitter blue before I canceled it.

I did like the icon thing. I like it too. You'll be happy to know that there is no new seasonal icon right now. I don't know if that's Elon, um, cutting unnecessary design time out of the company. No, everybody, I'm sure gave up, you know, inside Twitter. They're not going to do any work from now until that deal closes. I wouldn't, I mean, I can't, you can't generalize. I don't, maybe some people, I'm sure, I hope there's some people who are inspired by, by

Elon getting involved. Well, of course, no, there are going to be people that will work for him. But, like, he's going to change the product in a way that, like, your roadmap, you know, from now until the deal closes is somewhat obsolete. Wouldn't you say? I personally, if I was in that company, would not be doing it. Depends what you work. Depends what you're working on there, right?

Right. Product. No, I'm not doing anything. Ad sales. Yeah, I'm selling those ads. Well, what if you work on Twitter Blue. Well, you don't know what he's, he's, he's, he's already said that he doesn't like the direction of Twitter Blue.

he also said that now he wants to change it so maybe you come up with new ideas um but i would be hesitant to to crush myself to ship in that product totally so we're talking about the markets are crashing market down to yeah yeah so let's let's i'm kind of curious what your perspective is um yeah why don't you tell me your perspective and then i'm going to ask you some questions about nfts and in context of the market crashing i mean it's brutal well well right now. Yes. But this is what was supposed to happen when the government raised interest rates in order to slow down the economic growth. Right. Yes. So let's not pretend that we woke up one day and all of a sudden some unknown force was causing this insane market crash like in the 1920s,

right, 1930s, and instead, you know, at least realize that this is exactly what was intended, right, to slow down the economy. multiples were very high in public and private markets, and that was caused by the government as well, right? Yes. Interest rates were slashed to zero, right? A lot of buying of assets as well by the government. tons of liquidity and they need to slow that down so maybe it's working maybe now's a good time to buy

who knows where the bottom is i'm not going to guess might be here you know it might be 10 15% down is what a lot of sort of the more bearish um market out further 10 to 15% yeah well it's amazing because the smp has already dropped like 15% on the year so down 20% It's possible. Yes. But I mean, where would that be relative to where... Pre-COVID? Yes, and P. Yes.

Yeah, just basically a full correction to like normal 6% growth. Many people believed prior to COVID that the markets were already too high, right? They had run up for 10 years, right, 12 years since the last recession. right from right so maybe that's where things should restart and by the way i i think if you know i don't even think you're actually hitting if the if the s m got down to 3,500 i don't actually think that was the peak prior to covid i think it no February 2020 was 3,300 right so you're not that you're not even all the way there, right? So maybe this is healthy.

But what's interesting to me is that the problem being created was, or the problem that's trying to be solved is too much demand in the economy, right? And so inflation caused by not enough supply to meet demand is too high. Prices are going up to meet demand. And so the government, the Fed, is specifically as trying to slow down demand. I would like to understand what measures can be taken at the same time to increase supply. Because it seems like that would also be a healthy approach to solving this problem in tandem. Supply, like fix the supply chain.

Yeah. What could be done to help lose. up the supply chain. So that prices don't have to be so high and that consumer demand could be met. And what's the solution? This is above my pay grade. It's not, I'm not, I don't, this is not what I do for a living. I invest in, you know, we make private equity, growth equity investments.

And we can talk about what we're seeing on the private side relative to the public markets. But I don't know. I think that, that's the question. That's what I would like to understand. better do does does Biden and and the government reduce tariffs right so that at least for a time being while while prices go up and costs go up to make more product and get more supply into the country there there's lower tariffs being paid so that costs aren't passed on to the consumer so that inflation isn't as high right we also have so much of our economy tied up in China

and China right now is really struggling with COVID. And it seems like that's going to be the case for a while. So we have to anticipate there are going to be serious shutdowns there for a country that really hasn't gone through a wave of COVID yet. 100%. And of course, there's the war in Ukraine. No doubt. But those are not things we can necessarily control as it relates to economic measures

to help fight inflation, right? Right. Those are going to happen. And they are happening. And so the question I have are what are ways to improve supply while reducing demand so that the measures don't have to go so far. And I'm not, again, this is not my day job, but it's an interesting question to think about. Like a lot of demand isn't the worst thing in the world, right? Not enough supplies is the actual route.

Yeah. Well, shout out to anybody listening in the government who might have a solution to that. Come on, we should talk about it. So, Jason, I want to ask you, again, supply and demand, right? Zero interest rate policy also created a demand for much more risky assets. When you just couldn't make money on cash, you were going to move your money into places like equities and, and I think, crypto. And we also had a moment where, I mean, this is from the Wall Street Journal story about NFTs last week where they said that the daily average of NFTs being transacted. acted last week was 19,000 per day. That's a 92% decline from the peak of 22,000 in September last

year. So where do you do you think that like some of the market for NFTs has also been fueled by sort of speculative investing that basically came from zero interest rate policy and a desire for people to find riskier bets. And that's sort of where they landed. Now the Fed has, you know, signal it's going to increase rates, it started to increase rates, and you have a flood away from that. So I'm curious if you think that's related. And what are the implications for NFTs? I have no idea is the answer to those questions. But what I will say is people have been seeking out speculative assets that give you outsized returns forever, right? From the gold rush to the dot com era to web three today to public equities that we're trading at, you know, outrageous

evaluation, right? Peloton, Shopify is, you know, was at 1,500. It's, it's, it's, it's, 500 today. Downs, it's down 70% on the year, Shopify. Coinbase, similar, right? It's now trading at seven, six, I think six and a half times earnings last time I looked. I mean, if you believe in crypto, right, long term, owning Coinbase at six and a half times earnings is pretty fucking compelling, right? But you could also say that about buying crypto and so my point is of course people were looking for speculative assets and of course sitting home during COVID and having a little extra cash may have impacted that and low interest rates may have impacted that not just for NFTs but for the meme stocks and for any other stocks

you know the the private markets where I spend 98% of my time have been less slightly less impacted by that because there's not as many retail investors playing there. I think maybe that NFTs and crypto became that for the equivalent of the private markets for a lot of the retail investors. And those markets have not been hit as much yet by this correction. Early stage venture typically doesn't really get impacted a lot. buy this. It's a 10-year bet, maybe 15-year, depending on what you invest in, when it IPOs or exits. We also don't make early-stage venture investments. We're sort of middle-stage between venture and exit. And those companies haven't really been hit. We also haven't seen

companies that are feeling the pain of the consumer yet, right? Most of the companies are are continuing to grow that we're invested in. And I'm curious if and when that, that starts to slow down. But to date, the demand and spending is pretty high across the board at all of our companies. And so I try to use that as a gauge for, are things going to slow down? Are they going to pick up? Is this sort of a lot of talk and not as much?

data. And my hope is that the markets have had a healthy correction, Facebook trading at 12 times, earnings, Blackstone trading at 11 times, paying a 4% dividend, right? Those are names I own. But then there's also companies that, you know, potentially have a long way down. And I think just like NFTs, just like private companies and just like public companies, it's very hard to generalize about the potential upside or potential downside of an asset class or a sector, right, without talking about the specific companies. Because in a shakeout, many companies will go under, right?

But if you believe in Web 3, there will be some really good companies that come out of that, right? Right. The same thing goes for the private markets and the same thing goes for the public markets. Now, that's the big argument every time we go through this wave of technology is that things will shake out and you end up with the good use cases and it might be one-tenth of the first wave but eventually that becomes the foundation of the next wave of technology so you look at me making the case for NFTs and so my work here my work here is done I think we made progress here guy got you to admit some things you got me to admit some things

you know a hundred percent this is like this is how discourse this is was intended to a to occur right yes sir so um uh you know one of the interesting i want to just maybe we end here one of the interesting things um that happened i think at the beginning of the pandemic as i gave you a call i was like freaking out i'm jason what's going to happen the markets are dead and you told me that you you were ready and you're ready to thrive in the chaos so we're back in chaos now where do you think the opportunities are and do you have the same sunny perspective as you did back in March 2020. Well, let's be clear.

I didn't have a sunny perspective in either case, but, you know, I'm an optimist by nature, and I like to believe things will work out, and I like to bet and invest my time and money for the scenario that things work out, because if they don't, we're all fucked anyway, right? And I think a lot of opportunity comes anytime there are challenges in the market. ways, right? This is not a, I'm not the, I didn't come up with this concept, right? I guess it was Warren Buffett or Charlie Munger are always saying, um, be fearful when others are greedy and be greedy when others are fearful. And for whatever reason, I've always, I've, I've gravitated toward that and tried to, to act on it. And, you know, if, if you bought Apple when, you know, in 2007, 2008,

when it was, you know, pre-split, you know, at $70, $90 a share, you're up, I think, over 1,000 percent, 100 percent by now. If you bought Facebook and when, you know, it's share price after IPO got cut in half and everyone said it was doomed, right? And social media doesn't work and social media advertising doesn't work and teens don't use Facebook and and and all that then you know you've done incredibly incredibly well i think you're you're up 10x um if you bought at uh at the bottom in march of 2020 or or in the round that bottom you're still up you're sitting in pretty you're up a lot a wild amount right

Whether you bought crypto or, you know, real estate holdings, Starwood, like any one of these is, right, S&P, you're in good shape. You've given a lot back, but to me, that's an exciting time. And on the private side, these are times our companies need support from people who've been through this before who've built companies during downturns, right? I started my first business during a recession because I had graduated from school and there couldn't get a job anywhere, right? Demon Brothers had just gone under Baircerns had gone under, Madoff had just happened, right? It's not like you were walking around New York City, like people were trying to hire like they are today.

And so it was an opportunity. And at the same time, that opportunity led to brands saying, hey, maybe we should we should move some ads spent to social media, right? And so some traditional advertising started moving from print to social and more digital because of that. And so, again, it's another opportunity. I would never look at these times and say I'm happy, but you have to be prepared for them. They're part of business and you can't get flustered when they happen. And for me, I like to act on it. I feel best making investments now than I do.

at the peak of the market. Yeah. I mean, I'm with you. Like the idea that in a recession you invest is makes a lot of sense. To me, I started my company in the middle of, you know,

the last in 2020, like right as the coronavirus started to get bad. It just seemed like the right time to do it. So do you have like two more minutes? I feel like I'd love to hear your story. If you could just tell folks the story of how you started the social media company, it's one of my favorite stories. sure sure so i i'd graduate from n yu the world was in a good amount of of chaos and i was

very interested in in the internet and in the advent of social media and there were two things happening that excited excited me one was people were running around the streets of new york city with with digital cameras hd video cameras that you could rent for a hundred fifty bucks a day and they were making these beautiful videos and films in New York City's a backdrop. They looked a little bit like Woody Allen film without the dolly and the fancy camera work but beautiful.

And then they were uploading the footage onto the hard drives onto their Final Cup Pro on their Mac laptops and editing it. And that was a democratization of content creation. And obviously, you know, iPhone cameras became better and better and that only went further and HD cameras, you know,

red cameras and cannons got, DSLR's got better and better and cheaper and cheaper. And at the same time, I'd been working on Wall Street when I was over the summer in college and programmatic trading had started to become more and more popular. And the same thing was, the same concept was beginning to apply to advertising on Google,

right, that anyone could buy, ads or sell ads on their website or or eventually apps. And so the democratization of content distribution was occurring where previously, if you had made a TV spot or a digital video, you had to have a relationship with a big TV network and, you know, buy an ad well in advance and spend hundreds of thousands of not millions of dollars to have that TV ad space or those big billboards.

And so it just dawned on me that, you know, it would be a good idea to start a company. that that made content, high-end content inexpensively, and was able to distribute it, you know, relatively inexpensively versus how it had been done previously. And I didn't know anyone.

I'd never worked in digital media or content or advertising or programming of any kind at networks. And I went on Craigslist and went to the TV film video section and just started applying for jobs. And, you know, there were things like need viral. video need YouTube, like celebrity video and, you know, would apply to 100 jobs a day and off and down the East Coast and get, you know, one out of 100 would respond. And then out of all

those, you know, one out of every 30 or 40 would become a job and ended up getting, uh, some, some real brands hiring that way. Uh, and, and ended up getting to a million dollars of revenue doing that. And, and then, you know, from there, 100 million of revenue and 600 employees and six offices over five years and then sold the business to, you know, big conglomerate. And then, you know, I was excited to get to start an investment business, which had always been my passion from a young age, following the stock market. And loving private investing where it combined my operating experience. with the investing passion. So we've got 15 people here in the financial district now every day

and are invested in companies like the Spring Hill Company, which is a Maverick, Carter and LeBron James Entertainment Studio in Hollywood, who we've been working with closely for, you know, since the beginning of this company in 2019 and Athletic Greens, which is a direct-to-consumer subscription, health and wellness product. I take every day now. And we're investors in Certified Collectibles Group with Blackstone, where we participated in their buyout and they grade memorabilia.

So coins, paper, money, and comic books, huge business. And that's thrived throughout COVID and continues today. You know, and maybe there's some NFT play there in the future. But yeah, we've made about 15 of those investments. We invest between $10 million and $50 million per deal and actively help these growing companies continue to scale in a healthy way. And it's a lot of fun. Amazing. Well, look, Jason.

A fun journey. Yeah, it's great. I love the Craigslist thing. I mean, there's sourcefulness there. That's where the demand is. Can you imagine? I'm not even going to go get into the details, but can you imagine some of the interactions that were going on at the time? Jesus.

I would love to hear those details. One day. Yeah, maybe one day. All right. I'm not going to put a board eight profile picture on my Twitter yet, but, you know, I appreciate the conversation. You have to make me one promise. It depends what it is. Let's hear.

If you're going to be skeptical or even open-minded and analytical, you have a responsibility as a journalist to participate. participate in some of the NFT communities. You have to buy some NFTs, you have to go into Discord, you have to sell, you have to interact, you have to understand

how it works. You have to play some of the NFT-based games. And then tell me what you think. Then I have a right to be. I promise you you have much newer and potentially sharper criticisms when you start experiencing

gas fees. Yes, I was about to say I'll do it, but I don't want to spend $3,000 for a $20 NFT, so. Nor should you. Yes. Okay. It's a deal.

It's a deal. I will report back on the podcast based off of what I find. Jason, thank you so much for joining us. Great to chat with you as always. I appreciate you being here. Thank you. Talk to you soon. Speak to you then.

We will have another episode next week with Pachy McCormick and Austin Reef of Morning Brew, Paki of Not Boring. Just want to say a quick thank you to Nate Watney for doing the edits. LinkedIn for having me as part of your podcast network and all of you the listeners. If this is your first time, please hit subscribe. If you're here from the This Week in Tech podcast, appreciate you joining. Love to hear your feedback. Longtime listeners or first timers, if you want to hit the rating button, that would be terrific. And that will do it for us here this week. We'll see you next time on Big Technology Podcast.