Invest Like the Best with Patrick O'Shaughnessy - Brian Armstrong – The Future of Crypto - [Invest Like the Best, EP.186]

Episode Date: August 11, 2020

My guest this week is Brian Armstrong, the co-founder and CEO of Coinbase. The topic of our conversation is the future of cryptocurrency and decentralized finance. Its been a while since I checked in on the world of crypto and while prices are still below the 2017 highs, there’s been a ton of additional work and infrastructure laid. We discuss the major events of the past decade and what might happen in the 2020s. Perhaps most interesting, we cover the potential benefits of a modernized financial system, which Coinbase hopes to help usher in. As I’m trying to do more in conversation with CEOs, we also discuss the lessons he’s learned building a business. Please enjoy my conversation with Brian Armstrong.   This week’s episode is sponsored by Bottomless. Bottomless is a smart coffee subscription which automatically re-orders coffee for you based on your consumption habits.    Bottomless is offering one month and your second bag of coffee for free at bottomless.com/patrick.   For more episodes go to InvestorFieldGuide.com/podcast. Sign up for the book club and new email newsletter called “Inside the Episode” at InvestorFieldGuide.com/bookclub. Follow Patrick on Twitter at @patrick_oshag   Show Notes (2:23) – (First question) – Most important developments in cryptocurrencies             (3:00) - What happened in crypto over the last decade (3:01) – What will happen to cryptocurrency in the 2020s (4:01) – Long term vision for Coinbase (6:57) – Why should we be aiming towards an open financial system (11:41) – How crypto improves the movement of money (14:22) – Creating sound money and currencies (16:21) – Why economic freedom is an important variable in what he’s trying to do (19:44)  - How economic freedom can happen with various regulators around the world and in different countries (22:49) – How Coinbase attracted its first users (26:33) – The December 2017 madness of cryptocurrencies (29:50) – How he thinks about recruiting teams and motivating them to be productive (33:40) – Mistakes with people he’s learned from (34:56) – Steering a product roadmap and creating a successful business (37:17) – What do the non-Bitcoin currencies offer that Bitcoin doesn’t (41:19) – Innovation in cryptocurrency that excites him: DeFi (43:40) – Interesting geographic locations and their impact on crypto (45:29) – How his thoughts on company building has changed over the years (46:47) – Battling any loss of confidence as a founder (51:01) – Improving decision making as a leader (53:54) – Aspects of the job that he loves the most today (56:25) – Largest impediments to mass adoption of crypto (58:25) – His curiosity for scientific research and bioengineering (59:19) – Advice that helped him that he would offer others (1:01:38) – Kindest thing anyone has done for him   Learn More For more episodes go to InvestorFieldGuide.com/podcast. Sign up for the book club and new email newsletter called “Inside the Episode” at InvestorFieldGuide.com/bookclub. Follow Patrick on Twitter at @patrick_oshag

This episode of Invest Like the Best is brought to you by Paxos. I have personally interviewed Paxos's CEO Chad Kaskarilla on this podcast before and I'm excited about how they're changing the crypto landscape. Whether you're a small fintech or a large financial institution, with Paxos crypto brokerage, you can offer your customers crypto buying, selling, transferring, and more, all with Paxos's easy to integrate APIs. Paxos takes care of everything in the back end from licensing and compliance to custody and exchange. You can start offering crypto to your customers within months. I've gotten a no Paxos over the years and have been personally impressed with their track record. With clients that include PayPal, Venmo, Revolute, and Bank of America, they're the most trusted infrastructure provider for crypto and

blockchain. I'm excited that more fintechs and banks are starting to offer crypto features, and Paxos crypto brokerage is the best way to get to market quickly and safely. To learn more, visit Paxos.com forward slash Patrick. That's Paxos.com. forward slash Patrick. This week's episode is brought to you by Bottomless. Bottomless is a smart coffee subscription which automatically reorders coffee for you based on your consumption habits. You may remember Bottomless from Episode 124 when we had co-founder and CEO Michael Mayer on the show. I'm also a Bottomless customer and like the service and idea so much I became an investor. Here's how Bottomless works. They send you a complimentary Wi-Fi scale with your first coffee order.

Just set up the scale with your Wi-Fi, store your coffee on top, and then from that point forward, bottomless sends you coffee at the perfect time with no additional effort. The coffee itself is always roasted to order and shipped straight to you from a network of roasters across the country. My favorite part about bottomless is how the technology could be used for almost anything I buy regularly. It feels like magic and how everything will work in the future. Bottomless is offering one month and your second bag of coffee free at bottomless.com forward slash Patrick. That's bottomless.com forward slash Patrick. Hello and welcome, everyone. I'm Patrick O'Shaughnessy and this is Investors.

like the best. This show is an open-ended exploration of markets, ideas, methods, stories, and of strategies that will help you better invest both your time and your money. You can learn more and stay up to date at investorfieldguide.com. Patrick O'Shaughnessy is the CEO of O'Shaughnessy Asset Management. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of O'Shaunsi asset management. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of Oshonosi asset management may maintain positions and the securities discussed in this podcast. My guest this week is Brian Armstrong, the co-founder and CEO of Coinbase. The topic of our conversation is the future of cryptocurrency and

decentralized finance. It's been a while since I checked in on the world of crypto and while prices are still below the 2017 highs, there's been a ton of additional work and infrastructure laid. We discussed the major events of the past decade and what might happen in crypto. in the 2020s. Perhaps most interesting, we cover the potential benefits of a modernized financial system, which Coinbase hopes to help usher in. As I'm trying to do more in my conversation with CEOs, we also discuss the lessons he's learned building his business. Please enjoy my conversation with Brian Armstrong. Brian, thanks so much for doing this for me today. I thought a neat place to begin, since I used to spend a lot of time talking to people in the world of cryptocurrency would be

sort of as an update. Many people were intimately familiar with what was going on in crypto in 2017 and 2018, probably less intimately familiar with what has happened most substantially since. So it would be really neat to begin with your take on the most important developments over the last couple of years. Well, there's a lot to catch up on. And actually, I wrote a blog post at the beginning of 2020 that sort of talked about what happened in 2019 and then what I think will happen in 2020. A number of things happened.

Defi started to actually work and get a lot of traction, I should say. We saw central bank digital currencies, which is kind of a fancy name for, certain type of stable coin, that started to get a lot of interest. So we saw China started to digitize the yuan and the U.S. started to get interested in digitizing the dollar after Libra kind of created a big hornet nest, start up a hornet nest over there in D.C. So there was a number of things like that that started happening. And then I would say there's probably five or six really good teams that are working on what I call next generation blockchain. They're trying to improve the scalability, the developer tools, things like that.

in these next generation blockchain, things like Algram, Pocod, Cosmos, too. I don't want to shout at anything in particular better than another one. I'm just sort of watching the whole space broadly, but there's been a bunch of those as well, which is really exciting. And I'm hoping that that kind of is kind of like when the internet moves from dial up to broadband or something. We can get another couple orders of magnitude of transactions, but through the blockchains, I think that will actually unlock a lot of new use cases.

I love thinking about things through the lens of the long-term vision of your business. I think those that know Coinbase will understand its most basic use case, but I thought it would be a neat early conversation around sort of the mission and vision of Coinbase and the various important aspects of that. Could you highlight the long-term vision that you hope to help breathe into existence? So I think most people they think about cryptocurrency as something that people trade kind of speculatively right now or they afford to Bitcoin, but they don't know about any of the others. To me, that's actually missing the long-term potential. For Coinbase, our mission is to create an open financial system for the world. we have this vision about using that open financial system to bring economic freedom to people all over the world. And so it's kind of this pretty big ambitious goal, which is we kind of want to create an entirely new economy.

We're calling it the crypto economy, which is native to the internet. It's much more fair. It's much more global. It's much more efficient in terms of low fees. Yeah, you could imagine it as kind of what if the internet, which is this global decentralized thing, had a native currency that was also global and decentralized. well, then you could have this new freer economy happening. Basically what this means in practice is people start off and buy, all right, I want to buy a little bit of Bitcoin or something to get started and learn more about this. And then, okay, I'm going to learn about some of these other cryptocurrencies.

But that's basically utilizing just the trade action, like by himself. And that's only one small part of an economy is trading. The other things that people do is they earn money. They spend money, whether that's the merchants or paying their friends. They send money remittance cross-border. They also invest money. Cryptocurrency, they do something called staking. There's even other things like cryptoeconomic actions like voting and governance.

So you're starting to see more and more of those features come up in Coinbase. For instance, we launched a Coinbase debit card in the UK last year and it got a lot of distraction. And we launched something called Coinbase Earn where you can actually earn bits of cryptocurrency for going and doing various tasks and learning about things. And we have a merchant payment solution called Coinbase Commerce, which is accepting allowing merchants to accept cryptocurrency payments. We also launched staking and a whole bunch of things. And this is a metric we kind of track internally

is what percentage of our customers are not just trading, but they're doing some kind of non-trading activity with cryptocurrency. That number has just been steadily increasing, which is one of the few graphs at Coinbase that actually steadily increases. Most things are very volatile. They look kind of the price of Bitcoin or something like that. For years, people were asking me this when Coinbase was getting started, it's all right, well, what are people actually doing with crypto

other than trading it? And we can actually see the real data now. And it's not one thing, that's the main thing. It's a bunch of little things. They're earning it. They're spending it with merchants. They're doing remittance. They're using DAFs.

They're using prediction markets. They're using things like Reddit that just came out with these community coins. They're launching startups. But really is like a truly new economy that's happening. And my hope is that that's going to grow to be a significant portion of the global economy at some point. We're really excited about that trend. What got me so excited about this world early on was

this notion that the internet to that point had been about information delivery and protocols, and this was about value delivery and protocols. And you use two concepts that I'd like to dig in on a bit more. One is this concept of an open financial system. And then the second is economic freedom. On the open side, that implies that right now it's closed. I'd love to hear the contrast. What is it about what you hope to usher in that is superior? And what does that allow for relative to the, we'll call it incumbent or closed financial system? It's really important to contrast the traditional financial system and this new open financial system, what's the difference? And then we can talk about economic freedom, too, if you want.

In the traditional financial system, look, I don't want to say every part of it is bad. Obviously, some parts of it work pretty well, especially in countries like the United States. We have functioning credit system, and generally, even though there's some inflation, some of that is good to stimulate the economy, but we get sort of dollars lost in this value. I think the main challenges that I see with the traditional financial system are there's some things like, One, its payments kind of only work more seamlessly when you're in one country, like the United States. A lot of times people who are trying to send money abroad, whatever they counter these issues. You can actually get on a plane and fly to Australia faster than it takes you to send money there, for instance.

Or if you were to send money there, you might lose sometimes 3% or 5%. A lot of people who are doing these kind of Western Union type transactions, they end up paying like over 10% in fees just to get money to someone abroad. So part of it is this kind of global nature. The other issue with it is there's consumer financial privacy issues. We're seeing all these issues with Equifax being hacked, and a lot of people's data is leaked out there. There's things that are just annoying. How many times you see some random charge on your credit card or your credit card gets declined when you try to use it online or you get some kind of unexpected overdraft fee?

So there's a lot of these little things that people just get frustrated about with the financial system. But I think probably the biggest one for me is that this is kind of underappreciated. I think the existing financial system is actually a huge barrier to innovation. What I mean by that is that there, I think there's a lot of people out there who don't realize this because they've never tried to start a company or something like that. But a lot of entrepreneurs have had this experience I have in my past where I started this tutoring company in college and getting customers, I thought was going to be the hard part or maybe making a product for somebody liked.

But actually, one of the hardest parts was just being able to collect payments from my customers and get payments out to all the contractors, tutors. And I remember the banks were asking me all these kind of questions, are you an aggregator of funds and do you have this policy? And I almost felt like I was being treated like a criminal, actually. It was really difficult to get these kind of systems set up. That was just a U.S. company. I mean, now with Coinbase and companies like Airbnb and Uber, it's incredibly difficult to get payments working on a global scale in all these countries, both collecting money in and getting money paid out. You get all these kind of weird things that people do because the global financial system is not well connected, people

on Amazon Turk on Amazon, they'll often get paid in Amazon store credit because they have no way to get payments out to these people in Bangladesh or wherever they are. Then you'll get these kind of weird shadow economies of people trading Amazon credits in these regions or to try to buy food and stuff like that. It kind of just gives you this lens into the global financial system when you realize it's almost like if every country had its own private internet or something like that. If I wanted to read a web page in Brazil or send an email to Spain, I'd have to pay some kind of border tax or something to get my email into Spain. When you think about it from that point of view, it kind of doesn't make sense that every country in the world needs to have its own currency and its own financial system because it creates so much friction when the economy is becoming more and more global. That's kind of the traditional financial system.

In the open financial system, this is also very new. Some of it I think will come in the future. everything is kind of fast, cheap, and global. So sending payments is kind of more like sending an email. It just arrives in a few seconds. It's pretty cheap. It works everywhere in the world. It kind of levels the playing field as well.

If you're somewhat in Venezuela and you can't really get access to a stable currency or bank count, well, if you're in a country where a lot of countries like women are not allowed to have bank accounts, there's kind of an financial conclusion aspect of this, anybody who has a smartphone can get access to cryptocurrency. It has like a more level playing field like that. My hope is that the open financial system will unlock a ton of innovation. It'll be a lot of improve a quality of opportunity. It'll also just make things a lot more efficient, lower fees for transaction fees and exchange rates and prevent people from getting unexpected prices. That's kind of my contrast to that.

And we can talk about economic freedom too if you want. Yeah, before we go there, we'd love to even just break that down one more level to two dimensions. So the first would be the money itself and then the second would be sort of the movement of the money. You sort of talked a bit about both. When I think about the movement of money, I'm curious how you think crypto improves on, say, what stripe will look like in 10 years, continuing to innovate behind an API. They're trying to tackle that problem, maybe for your tutoring business example or something to accept funds more easily. But you're accepting USD. I guess my question is, how could crypto improve both the movement of money or value around the world, but then also in what ways might the money itself be superior to something like the U.S. dollar? There's a lot of really great companies like Stripe and Square and others who are building on top of the existing infrastructure underneath. They can actually take something like the credit card system or ACH or wires or equivalence in Europe and other countries.

And they're kind of trying to do all that hard work to stitch together a lot of these kind of archaic systems and put like a nice wrapper on top of it. I think that's really great. But there's only so much they can do because they're all built on the same underlying system. So you'll notice Stripe and Square and Braintree and all these companies, every single one is the prices are almost exactly the same as 2.9% or whatever. And the number of days before you get your payouts as a merchant is almost the same. They can compete on the margin. Stripe has shown that by making those developer tools easier, you can actually have a huge advantage. But there's all built on the same underlying system.

And cryptocurrency is kind of coming along and saying, hey, look, what if we had a new underlying system that was dramatically more efficient? That could be either in terms of a globalist, a real-time settlement, the fees, And by the way, I don't mean to paint this as a perfectly rosy picture in cryptocurrency. There's a lot of work that needs to be done. Sometimes the fees in certain blockchains are very high. Sometimes the settlement times are too high. It's kind of like the early days of the internet where there's dial-up modems and stuff. It's still a little bit rough around the edges. The potential is there and you're seeing it's getting better and better every couple of years. I think once that happens, you'll get these kind of magical experiences from the consumer point of

view that are closer. The best analogy I've seen is probably something like WeChat payments in China. Now, China, again, it only kind of works within one country. But if you've been to China and you've seen how people use Weechad payments, it is kind of a glimpse into the future. Okay, well, what if that works, but not just in China on a global scale and without all the financial privacy issues that China has, that starts to get into a glimpse of what it might look like. You're on some kind of an e-commerce site. You just pull out your phone, you scan it at a QR and it says, do you want to pay this much to this merchant and send them at your shipping address? You hit accept and boom, the checkout's done.

You never needed to register a create account. You never needed type of credit card into your browser or something like that. There's things like that around the movement of money. And then the underlying currency itself, which is kind of the second part of your question, I think there's some real interesting stuff there just around creating sound money. Right now, the U.S. dollars is generally considered to be the reserve currency of the world. I don't think that's going to change immediately, although China is definitely pushing to try to get the yuan to be a strong contender, if not take that top spot in the next five or ten years.

And I think there's a decent chance they actually might do that because they're being very aggressive around the world in terms of all kinds of investments and technologies and things. But in the crypto economy, the dollar is not the reserve currency. Bitcoin is the reserve currency that people go to. In that sense, it's actually a little more trustworthy because if you read about modern monetary theory and quantitative easing and inflation and government debt and all these kind of things, in the last 10 years or so, there's been a couple kind of worrying things with the U.S. dollar in terms of our debt ratios, and especially with this COVID stuff and all the recent

economic activities, there has been a lot of stimulus bills, paths, and quantitative easing and stuff like that. The short-term effect of that has been still deflationary because I think there's just such limited supply of manufacturing took a hit and people's wealth, income has kind of gone down, but they're going to keep stimulating and printing that much money. The long-term effect could be that there's actually more and more inflation. I think people are, even if they don't fully understand how those mechanisms work underneath, There's a lot of people out there who are starting to kind of get this uneasy feeling,

what is going on with the Treasury and the Federal Reserve? And does this really make sense? It seems too good to be true. You're just going to print all this money and somehow it's all going to be okay. I think they're kind of looking for an alternative system that they can trust. And in cryptocurrency, there's nobody who has their fingers on the dial who can kind of manipulate it for their own benefit. There's only ever going to be 21 million Bitcoin.

Nobody can really go in and change that. and that so far stood the test of time 10 years or so. The U.S. dollar is increasingly, they're not feeling like they have that same level of trust. I think both of those ways to look at it are true. I would love to talk about why economic freedom is an important variable in all of this. I think obviously one positive appeal of you already mentioned fostering innovation and things like that. One appeal of a different financial system, a replacement or a secondary one, would be higher

economic freedom. So talk about your thinking and research there and how, those freedoms relate to the rise of a crypto economy? Economic freedom is a concept that I'm really personally passionate about. Years and years ago, I ended up reading something about it, probably on Wikipedia or the Wall Street Journal published something on it, Heritage Foundation. There's a few different organizations out there that try to kind of rank the countries of the world by economic freedom.

And economic freedom is this measure. It's a composite metric that economists and various people look at that it's kind of saying how easy is it to start a business in this country, how much corruption and bribery is there, does free trade exist, can people work on things they want or join the companies they want? It's this composite metric, and the really kind of surprising thing about it is that people might think, oh, well, that might correlate with high GDP growth and stuff like that, and it does correlate with that. But it also correlates with all these other things in society that people wouldn't probably immediately guess. Countries with the highest economic freedom tend to have the best

treatment of the environment. They have the best income share of the forest, 10% of people in society. They have less war. They have higher self-reported happiness of citizens. They have better literacy rates, lower infant mortality rates, all these positive downstream effects. And by the way, some of the countries you might imagine that are the highest economic freedom countries like New Zealand or Ireland or that's where you, I might want to live in that country someday. And the place is the lowest economic freedom or North Korea or Zimbabweb or things like that where you might be fascinated about the kind of struggles they have. I love seeing these, by the way, there are these visual indications people show.

Like, if you look at Cuba 50 years ago in Cuba today, which is a low economic freedom country, it actually looks relatively same, the same, like skyline. And Singapore transformed in the timeframe from a swamp land into metropolis. So North Korea, South Korea is kind of maybe the most visually distinct one, which is like kind of an AB test that history put in our lap, where it's like same geography, same natural resources, everything. the laws and the economic freedom were different, and they had these dramatically different outcomes to see it from space at night and all that kind of stuff.

Peter Thiel says that every company is founded on a secret. I guess the secret of Coinbase has one is that I had this hunch when I read the Bitcoin white paper a long time ago where I said, I think economic freedom is really cool and maybe it's downstream effects in society, not just correlation, but causation is there. I bet with the rise of smartphones and this new cryptocurrency Bitcoin and all the things that will come from that, I bet we could add. economic freedom into countries all over the world by basically creating some of the basic financial infrastructure that some of these don't have where there's property right enforcement if i have some

money can i actually keep it or will it be taken away from me somehow or inflated away free trade and global trade and just enabling commerce and transactions to happen in a maybe even credit markets people are now getting loans with defy which a lot of these emerging markets you can't get loans to do anything and so that slows their economy that's kind of why i love economic freedom. And I actually think cryptocurrency plus the smartphone is kind of the secret that we can use to inject economic freedom into countries all of the world and hopefully change the economic freedom of the world. It begs the question how that might happen alongside regulators or regulations in different countries, both developed countries like the U.S., but also say Zimbabwe,

that the role of the incumbent governments and institutions and regulations and regulators is really important. How do you see that relationship unfolding, especially if crypto gets much bigger than it is today? It's going to have to be addressed. Eight years ago, Coinbase roughly started. And we decided from the early days we were going to go out, practically work with regulators and try to be an educational resource to them. And a lot of the crypto companies at that time were kind of trying to fly under the radar and hope that regulators didn't notice them.

And I kind of realized, hey, not all regulation I agree with, of course, but that's just a practical matter. That's the world we live in. And then if we're going to build this company for the long term, we need to work with regulators, not try to avoid them. That's exactly what we did in the U.S. and then in the EU and now in 35 or 40 countries. We've successfully been able to interact with regulators and teach them about, okay, here's the AML program that we have in place and get their feedback on it and have them tell us where we can improve it. In the U.S., we started off being still are regulated as a money transmitter. New York then put out something called a bit license. There's a federal FinCEN we work with in the U.S.

We end up working with CFTC and SECC on a whole bunch of matters as well. And then same kind of equivalence in Europe and all the places that we operate. I would generally say it's like this. In kind of developed countries that have existing regulatory frameworks and generally want to have growth in their economy and they believe in technology and things like that, we are finding that we are already a regulated financial service business today in all these countries around the world. And generally, I would say maybe when Coinbase was first starting, we got a lot of skepticism and things like that, but now they're like, hey, Bitcoin is great, Serium is great.

The conversations we're having with them are about the latest thing or some stable coin or some security token where they still need to get educated and learn more about it, so do we. That's all the developed countries of the world. Now, there's going to be just like the Internet. Generally, the Internet is open and it works in most places in the free world, but China has the Great Firewall China, North Korea decided they want to build their own internet.

During the Arab Spring, some countries tried to turn off the Internet. So I think there is definitely going to be a portion of the world that also does that same approach with cryptocurrency. And it wouldn't surprise me if China tries to discourage the use of some global decentralized cryptocurrencies and push their own thing instead. Or if North Korea or some countries try to block cryptocurrency entirely. So I think it's just kind of what side of history do you want to be on? And I would say every year more and more kind of folks have gotten comfortable with cryptocurrency. Whereas now today in the U.S., I mean, even Ben Bernanke, and people like that have come out and said, hey, we think this has promise and this is an

interesting technology. And the internet was so good to the United States in terms of creating all these very valuable companies like Google and Amazon and everything that I think the U.S., it will be a regulated, huge business that is legal and hopefully most places in the free world. With Coinbase as an early leader in this space, I thought it would be neat to talk about its progression from the early days, both to talk a bit about how you think about product and just building a business, almost unrelated to cryptocurrency, but also just to use it as markers for how this has evolved, like how people use this stuff and interact with this stuff.

I would love to begin right at the start, which is how did you get the first batch of users to join the original Coinbase product? So the origin story is pretty at Airbnb. I was kind of working on some code for them to try to help them move payments around the world. And I ended up reading the Bitcoin white paper just when I was at home one time with my parents over the holidays. This was, I think, around December of 2010. And I remember reading that white paper and thinking, wow, this is a really big deal. Something about it just caught my attention. And anyway, I started thinking more about it over the next year or so and started working on a little bit of a

prototype and eventually applied to Y Combinator, which is the startup incubator and went through that program. I have to say, they kind of took a bet on me, which I'm always grateful for because at that time, I was sort of telling some of my friends and stuff about, hey, I think this Bitcoin thing is pretty cool. And I kind of want to try to make a prototype or a product. Most of the people I thought to were like, I don't really get it. It sounds like kind of a scam. What is the thing you're kind of getting into? I probably would have been very hesitant to kind of quit my job and really go try to do this full time. It wasn't for that initial check for 150K or so that Ycombinator wrote me.

I'm very grateful to them for that. I kind of went through that program. Right after that I met Fred Ursum, who ended up being my co-founder. Can't say enough good things about him. I mean, without Fred, I don't think there would have been a coin base with this great match of our skill sets and talents. And he and I just kind of ended up working 12 hour days, six, seven days a week for a couple of years to try to hero the thing into existence and start to build a team. And a lot of the early people came from those days. And the very first version of the product was simple. It was just I knew that there was this protocol out there, Bitcoin. And it was kind of like a protocol on the internet, like TCPIP or SMTP, which powers email. And I figured everybody at

that time was running Bitcoin nodes kind of on their own computer, I figured this might evolve kind of like email. Nobody wants to run their own email server. They just use Gmail or some kind of hosted service. So what if we did that for Bitcoin? What if we make like a hosted Bitcoin wallet? So if you lost your phone or lost your computer, it's not like you lost all your money. It's all the security updates and the backups are in the cloud and we'll just build this great service. So that was the initial idea. And what was funny was I just launched it. This prototype, we put it up on sites like Reddit and Hacker News. And we just got the first couple hundred people to come in and look at it. And I remember at that time,

you couldn't buy Bitcoin or any cryptocurrency on Coinbase. It was just purely a hosted Bitcoin wallet. And I remember a lot of people would come sign up, but they wouldn't really stick around and use the product. And so I emailed five of them. Today, we call this user studies. We do it all the time in product development. But I was doing it very informally. Back then, I just emailed five people who had signed up as, hey, can you get on the phone with me? I'm building this thing. I'd love to talk to you. And I kind of asked them, I was like, hey, I saw you signed up. But you didn't come back, can you give me some feedback on the product? And they were like, it seems pretty cool, but I don't really have any Bitcoin. Maybe if I get some, I'll come back and use it. And I kind of

asked, I remember asked one of the phone. I was like, well, if we made just a simple buy button in the app, if you have used that. And he was like, probably. Fred and I went about sort of getting all the pieces in place to get that to work, where they're getting a bank partner to work with us, which was a huge ordeal, and getting an easy way for people to connect the payment method and getting some kind of simple exchange integration working. And we made it just a very simple buy experience. The minute we launched that feature, it kind of started to take off organically. And we had product market fit at that point. And that was the very beginnings of Coinbase. What did it feel like at the peak of the December madness in 2017? So for people who don't know, I mean, cryptocurrency has gone through a

number of bubbles and corrections. Each time it ends up at a higher plateau. So I think it's kind of directionally in an upward channel, but each of those kind of bubble moments has been kind of crazy at Coinbase. So the last one, big one, was in 2017, and around December, things got crazy there for a while, not only because we were just seeing record traffic come into the site, and we became the number one app in the app store. I remember we had never seen numbers like this where we have 50,000 people sign up in one day or something on the app. And I remember all of us, This was probably, I don't know, 75 of us were in some kind of cramped office at that size, or maybe 150. I don't remember exactly how many people.

And we're all just kind of staring around, hoping the website will stay up. Oh, man, we had 50,000 people sign up. We've only ever had 5,000 people sign up before in a day. And then the next day, 500,000 people signed up in one day. I was like, how is that possible? I was Googling 50,000 people fit into the giant stadium in San Francisco or something. That's what 50,000 people looked like, a lot of people. And then we just had 10 giant stadiums signed.

up in one day. There was a lot of sleepless nights. There was a lot of sleep deprivation. We were just desperately trying to keep the website up and running. There was a lot of capital kind of allocation challenges, like cash flow to challenges. People were trading so much cryptocurrency that we needed to kind of via the ACH system, we were collecting this money out of people's accounts, and there was two to three working days of capital that we needed to confront. We were basically using huge amount of resources just to try to keep the buy and sell flows on. I remember a lot of sort of scammy behavior started to emerge as well. All these people who kind of rushed into cryptocurrency, they're like, oh, this is some get rich quick scheme. And we saw people who were

launching these tokens that were completely scammy and kind of fraudulent. I remember customers would find our office and sort of waiting for us there outside when we come into the office. And so I started sneaking in the back door. I remember one of the people who works in the building that I was living in, they like came and knocked on my door. And they were like, sir, I know the company you work for. and I just want to know, should I buy crypto? And I was like super awkward. People were like coming to my house. In some ways, it was good in hindsight because it got another order of magnitude of people

in the world kind of knowledgeable about cryptocurrency. And a lot of people ended up getting a little bit of it for the first time. In some ways, it was actually very negative because it brought in the wrong type of mentality of people who are like, this is some get rich quick thing. And all the scammy behavior, I think, sort of created a little bit of a reputational stain for a little while. But most of that has passed at this point. And it reminds me of kind of like the dot-com boom bust cycle. This is just how technology, I think, evolves and gets introduced into the world.

People get irrationally exuberance about it. And then they have despair about it. The whole thing's over. It'll never work. Reality, it's never as good as it seems and it's never as bad as it seems. The real adoption was just kind of slowly improving throughout all of that, regardless of what the price is doing. So that's why I always try to tell the team and other people,

don't get caught up in the hype. If you want to try something with this, put 1% of your assets into it and just don't touch it for 10 years. Don't put it in any money you can't afford to lose. This is a new thing. And just think long term. That's what I always try to tell people. You mentioned team there. And I'm so interested with relatively young companies like Coinbase that have nonetheless

added a ton of people to their firm over the last decade. How you think about recruiting, identifying talent, successfully convincing them to join Coinbase and then incentivizing them in the right way for the first. them to be most productive. This seems like probably the highest leverage thing that you as a CEO can do in a hypergrowth stage. I'd love to hear the lessons you've learned on people. There's so many things we could talk about on people and hiring. And I agree with you, by the way. I think basically everything in a company comes back to people because you think, well, okay, we need to be profitable. Well, how do you become profitable? Well, you got to have a good product

people want. Well, okay, how do you have a good product people want? Well, you got to hire great people to build that and build a great team and get them to be aligned towards the same thing. So it kind of all comes back to people. There's a few things that I think we did well, some that we probably didn't do well, but in terms of taking the positive lessons. So at some point, we wrote down the values of the company and we got really clear about, I'd say, so the first 150 or 200 people, Fred and I were able to meet with each of them in person. And we were the final decision maker on these hires, and that created this core nucleus, core culture that had some of these common elements. But after that, we realized to scale the company and today's coinbase is about 1100 people,

we weren't going to be able to meet all of them in person. And so we need to formalize and write down what are the hiring criteria, what are the values that we're looking for, what are the things we want to all have in common here. We wrote those down and we talked about clear communication, positive energy, continuous learning, efficient execution, and learn more about those on our website if you want. And we also introduced this thing we called like a barraiser program. We borrowed this idea from Google, which is you don't want to do. to let hiring managers make unilateral hiring decisions. There needs to be another person who can

veto the hire and their job is to raise the bar with every hire. Fred and I repeated that over and over again, especially in the early days of Coinbase, but even now today, where we tell everybody, if you're not a hell yes on this candidate, you're a no. So if you're ever unsure, you round down to no, your job is to raise the bar with every hire. The barraiser was kind of there to be the stickler or the jerk in the room a little bit to have some backbone. And kind of say, hey, are you a hell yes on this person or do you just try to fill these open head counts that you have because your team has so many priorities you need to go do and you don't have enough headcount. That's the risk a little bit. This is human nature. If you're a hiring manager,

you might want to fill that seat because, gosh, you have so many things you're supposed to get done or you just want to build your empire, whatever the kind of failure modes are. So I'd say the barraiser, don't let hiring managers make you lateral hiring decision, really write down the values. There's a lot more stuff that we're doing now in terms of where we source candidates. I think different people, they join companies for different reasons. Some people want it to be, to growth and learning, saying for others, it's really important mission that they care about. For others, it's compensation. They want to build wealth. I think of it. Those are different levers that you can pull for different people. And for each person is different. They're going to be

motivated by different things. So you've got to be good at all of them. Hopefully you hit the right lever for all those people, but you also need to tailor it to that person's preferences. Just having a really important mission for the world, which I talked about, the open financial system and economic freedom, I'd say that's one of the things that has gotten us a lot of great talent, because the best people they want to work on really ambitious stuff that's going to change the world. And that's me coming out and saying, hey, I actually think we can build a whole new economy for the world that's more free and accelerate the pace of innovation and overthrow dictators in the world or whatever. And people are like, okay, that's crazy, but that's awesome. And I want to come see if I can help with that.

I love the concept of a barraiser. In addition to wanting to work on hard problems, people want to work with great people. And that becomes like a self-fulfilling prophecy that's really, really interesting. What are the mistakes mentioned maybe some things you didn't do as well? What were some of the blunders or errors or just mistakes that you made on the people's side that have helped you learn and change how you do things? Well, one of them is we probably should have written down those hiring values sooner. If I were to do it again, I probably would have written it down at five employees instead of 150. Because I think Fred and I were just killing ourselves being the barraiser effectively or the values interviewer. I kind of got so burned out on interviewing at a certain point. I think I had done 5,000 interviews or something in four years. It got crazy. Maybe not quite that many, but thousands at least. I probably would have done that sooner. The other things that I probably would say, I mean, there was a lot of hiring lessons,

but one of them is that I ended up kind of valuing hiring for humility, I would say, a little bit later in Coinbase's history. And the reason was that there were some people that we hired that were just, They were brilliant. They were geniuses. They were far better at what they did than I could ever be. But they struggled to kind of work well with other people. And some people in Silicon Valley talk about it's a brilliant jerk or whatever. I don't want to call it that because I think it's kind of a mean term. But I do want to look for humility. And that's kind of the willingness for somebody to say, hey, I'm curious. I want to learn from other people. I'm not so committed to being right about this thing.

I've ended up valuing that more over the years, I would say. I'd love to hear a bit about your learning on the product side as well as the people side. Undoubtedly, Coinbase has had product market fit in crypto investing or trading, which is just an incredibly powerful base instinct of people in finance. Seems to be one of those things that no matter what it is we're trading, we're going to want to trade. I'm curious how you think about steering the product roadmap, knowing that people love to do that, but also with this bigger vision in mind, with more primitive functions like lending and spending

and paying that you mentioned at the beginning. beginning, how you balance that in thinking about what makes for a successful product. One thing I'll just say, kind of a product focus CEO. I do love working on product, sometimes so much so that the teams probably didn't wish I was so into product. But I would say, so a lot of times products start off simple, Coinbase, just buy and sell crypto. And then over time, we start to add more and more of the functionality. So there definitely is sort of an art to you don't want to destroy the new user experience. We call it the NUCS NUX, where we have to remember that we're building a product for people,

who are brand new, they've just heard about Bitcoin for the first time in some news article they read or whatever, and they're like, hmm, what is this? I'll come in and try to buy some Bitcoin. For those people, if you put something in front of them, do you want to stake your forked asset of this Ethereum smart contract or whatever, you've just completely lost them? Or if you just say the word private key or something, you've completely lost them. They don't understand cryptography, nor do they want. We have to build a simple new user experience that's just going to handhold them. But we also have these power users who they want to do the advanced stuff and they want to do T-WOP orders for $10 million and kind of all these kind of interesting things. First of all, I should say CoinBase is a multi-product

company. So we have products for institutional customers. We have it for retail. We have it for merchants, all kinds of things. So that's part of the solution. But the other thing I like to think about is sort of this, it's kind of like a Swiss Army knife analogy where on a Swiss Army knife, you can take out just one blade and it's a simple tool. But if you really want to expand out all with the thumbnail catch, you can expand out dozens of different tools and get those when you need them. And so I kind of like to think about that. Those things that are more like secondary or tertiary action, how do we kind of hide those behind a thumbnail catch? So they're there for people who need them, but they don't derail the experience with a new user. That's just one concept, but there's many

things like that that we try to think about. I'd like to go back now to the currencies themselves. Coinbase supports and allows you to trade not just Bitcoin, but early on it was a a few others now, I think, I don't know what the number is today, but it's expanded over the years. How do you think about that through the lens of the mission and vision? What do the non-bitcoin cryptocurrencies bring to the table that Bitcoin does not? So today, Coinbase has about 30 or so assets that people can trade. We'll continue to add more as well. And the way that I thought about this over time was first, really everything we did was focused on Bitcoin. That's what got us off the ground and we saw at a certain point that a lot of our customers were coming to us and saying,

hey, we want to trade some of these other assets. I hoped it would go away for a while because I was like, I love the simplicity of the focus of just being a Bitcoin. But it became clear at a certain point that we could probably fail as a company if we did not start to provide customers what they wanted. They were just going to go elsewhere. At a certain point, we just kind of made this decision. We're like, all right, we're going to add a couple more currencies. Where we got to over time was we said, you know what, our customer base is so distributed and different. They each have their own favorite cryptocurrency or something that they're passionate about. And our job is not to play judge and jury and try to tell them what they should use. Our goal should be, let's just provide everything.

As long as it's not a scam or something outright like that or violating some law that we fall under, let them make their own decision about what they want to trade and we're going to be agnostic. It's a little bit like New York Stock Exchange or something. They have listing standards for who's going to be on there, but it's not like they're telling you to buy Boeing over Google or something like that. They're kind of just providing infrastructure. And by the way, I think over time, you're going to see just like on Amazon, Amazon lists all the products you might want to buy, but some of them have two stars and some of them have five stars. So we want to try to provide things like that over time to help consumers and institutions make more educated choices about what

they're trading. We don't want to have somebody feel like they got duped or something. It's the same thing with like the Google Play Store or the app store. So some kind of ratings, I think, is the solution as opposed to us playing judge and jury. But Anyway, so I think the second part of your question was about kind of why are there so many different cryptocurrencies or maybe what are the use cases out there? Most specifically, what I'm interested in is working backwards from this vision of a differentiated, more open financial system that precipitates more economic freedom. What about Bitcoin isn't good enough?

Or maybe it's the big, chunky core asset, but there's other things needed. We could talk about second layer solutions as well here that allow that dream to come true. What's the missing functionality? Okay, so here's kind of my feature list, I think, of things that we need to get out there that'll help cryptocurrency reach the next order of magnitude of people. So one of them is scalability. Transactions per second today on most blockchains is too low for a mass market application. It's allowed things like defy to take off because borrowing and lending, you don't need to do

super high transaction throughput. But if you wanted to put like Reddit, where every upload is on chain or a game or something like that, you need much higher throughput. So scalability is one. And we can talk about layer two solutions, which I think are really promising for some of these next generation blockchains that are working on higher throughput. Second one is probably around usability. So today, when you send a cryptocurrency transaction, you're sending it to this random address, which is like a random string of characters. And what you want to be sending it to is a human readable address, not a machine readable address. And by the way, the internet went through this same transition too. It went from having IP addresses

to domain names, like through the DNS system. So you need something that translates those human names into the computer name. And the third one, I would say, is around security or privacy. So today in cryptocurrency, it's pseudo-anonymous on most of the chain. You can't tell exactly who somebody is,

but it is a public ledger, so you can trace it through. And there's privacy coins that are coming out. Now, private coins are a little bit controversial, but I think eventually people want more financial privacy. And again, the Internet, did the same thing. It moved from HTTP, which was plain tech to HGPS over time. So the internet is kind of a perfect analogy. It went from dial-up to broadband. It went from IP addresses

to domain names and it went from HTTP to HTTP. And cryptocurrency needs to do the same kind of equivalent. So I think how is that going to translate into the different cryptocurrencies that are out there today? Nobody knows for sure and I certainly don't. Bitcoin has really sort of established itself as the reserve currency in the crypto economy. So I think that'll be the gold standard the gold equivalent for quite a long time. And we may get layer two solutions working on top of Bitcoin, which allow the high throughput as well, or that might end up in one of these newer blockchains like any of the ones that I mentioned earlier. And then, of course, privacy tokens are a piece of the puzzle, some of these decentralized identity solutions, which would give you

that human readable names instead of the machine readable names. Those are all things where there's a lot of research papers being written. We're reading them at Coinbase. We're doing meetings, try to figure out, all right, do we want to put our weight behind one of these standards to sort of help the industry move forward? So those are the things I think we really need to get working. What area of innovation in crypto outside of Coinbase are you most excited about? Well, there's a lot of really cool stuff happening in Defi. I mean, we're participating a little bit in DeFi through Coinbase wallet and things like that, but I think we haven't dipped our toe into it in a big way. Can you define Defy for people out there?

It stands for Decentralized Finance. It's basically a collection of new protocols and tokens that are allowing people to do different financial activity like borrowing and lending or doing decentralized exchanges but these are happening in a totally distributed decentralized way instead of there being like a centralized place where you'd go hey i want to get a loan and they'd match you with a lender or like an exchange where you'd go and you'd say i want to put a buy order and they'll match with a seller in a centralized way these are operating via smart contract and with new protocols so they're totally decentralized, which means they inherently work on a global basis and that can't really be shut down.

There's a lot of regulation that's well-intentioned around lending licenses and things like that. But in decentralized protocol like that, you want to work on a global basis, well, it's kind of impossible to go get a lending license in 190 countries around the world, not to mention individual states and like all these in the United States and everything. Decentralized protocols are basically creating a little bit of that truly open financial system that is global and they get there by being decentralized. Is there a country or region that you visited as part of this coin-based journey

that was especially interesting through the lens of crypto? There has been a few over the years. Yeah. One thing that was kind of formative in my past was I ended up living in Wednesdaysaurus for a year, not while I was building Coinbase, but prior when I was younger. And I think seeing a country that had gone through hyperinflation actually did really influence my thinking. A lot of people who have only grown up in the United States and have never really seen

financial crises. The U.S. has its own now, I suppose, but a lot of people who they grew up outside the U.S., they somehow just get cryptocurrency quicker, I've noticed. That's not the only way to get there, but that's one of the ways people get there. And I've done other trips in my life, too, where, for instance, I took a trip into Ecuador at one point, and I did this Amazon rainforest trip, and that guy was in the villages where people, they had dirt floors, but they all had cell phones. In fact, they were, like, pretty modern Android smartphones. And I realized, Okay, well, the smartphone is the cost of come down. People are going to have these everywhere.

Even the forest people, they all use the Internet. They know how to use it. I gave some of them cryptocurrency and stuff like that just to see, could they even understand it and things like that. And they're very resourceful. They understand how to use things. There's actually a charity that I set up called givecrypto.org, which is sending small amounts of crypto into regions of the world

that are going through financial crisis. We've sent a bunch of payments to people in Venezuela and stuff like that where 90% of the people who receive these payments, they're able to go complete a transaction buying food or medicine, whatever they need with cryptocurrency or going to a local exchanger. That, to me, was pretty excited. We didn't even know if it would work. Would they even want cryptocurrency? Would the internet work well enough in Venezuela? But 90% of them were able to benefit from it. And the transaction fees for us to get money like that into Venezuela was a lot less than transferring fiat currencies.

Back to the idea of company building again, over the journey of building Coinbase to this point, What has changed most in your mind, what opinions of yours have changed most about effective company building? This might take me some time to write up a really good post on this. But just off the cuff, I mean, certainly hiring great people was one of the best things that we started with. It kind of all comes back to that. And then you have to have a company that's going to be economically viable. And Coinbase has been very lucky to have a good business model and be operating capital positive and stuff like that. There's a real risk that I think companies get too big, too fast, and they have to kind of rely a lot on venture financing, and basically the founders end up losing control and bad things can happen there.

This is a topic, maybe I could talk more about publicly at some point, but I think actually having founder-controlled companies is kind of important, just in terms of staying true to the vision of it. And it can all go wrong as well. We've seen some public examples of that too, like founders are kind of crazy people. I think there's some data I've seen that founder-led companies in the public markets actually outperform and that kind of thing. You need to kind of pair these crazy founders with great operators. That's a really tricky thing to get right. There's probably a lot more I could say on that. I'll have to think about it more.

Sure, sure. During that same journey, the founder thing is interesting. Like the psychology of it is very interesting to me. Were there points where you lost confidence, either in yourself or in the business or in the vision? And if so, how did you fight through those things? Starting a company is definitely an emotional roller coaster. And I have a lot of respect for founders, even when they fail, because it is such a tough thing. A lot of people, I think they see someone like Elon Musk or something.

And they're like, oh, this guy's crazy. What's he doing? They don't like him or whatever. I kind of have some respect for it. What he's attempting to do is freaking difficult. And whether he succeeds or not, I feel like we should be rooting for him because it's probably better for humanity in that sense. But yeah, I mean, there were some very dark days building Coinbase where, especially when we were smaller, somebody stole this amount of money and my two best engineers quit.

And we just got this lawsuit from someone. And one of the things nobody told me about starting a company is that a lot of people will just end up hating you for no reason. Which sounds like kind of a weird thing. But I like to think I'm just like a pretty normal, nice guy. I talk to people, whatever. In your normal course of your life, most people will never experience. the idea of having a hundred people mad at you at the same time, much less 10,000 or million. That's been very uncomfortable, and I think it's this kind of human nature thing.

Social media probably doesn't help with this, but people, if they meet you in person or something, they're always nice to me, and they've kind of become more comfortable with what I'm all about and everything. But if they just know me from the Internet or something, there's people who have become very negative or whatever over time. So it's a common experience, by the way. I don't think it's anything specific to point-based. Like probably obvious statement, but I mean, there's people who I know that are just, they decided to run a charity where they're just giving all their money away. And there's people who hate them, too, which is mind-boggling to me. So I think that's just something social media has maybe exacerbated a little bit. But yeah, you've got to power through

all that stuff. And if you want to change the world, you can't let that stop you. Basically, people are going to hate you kind of no matter what you do. So you might as well just do the thing that you actually are passionate about and keep going. Do you think that that has hardened you at all or changed your personality in a permanent way, almost out of necessity? It seems like it must have to, to some degree, to be able to keep enduring. Your growth is going to be correlated with the amount of haters. Yeah.

Oh, totally. I mean, this is actually an essential skill set of founders is you need to make sure you don't burn out, take occasions, like exercise, health, all that stuff. And then you've got to make sure that you cultivate this mental toughness. or resiliency because building a company is basically just moving from one setback to the next with enthusiasm. Sometimes people ask me how I got that. Part of it might be just how I'm wired or something. I'm a pretty even-keeled person, but I think a lot of it can be learned too. It's just, it's like building a muscle. Before starting Coinbase, I had never managed anybody. And so if you

had thrown me into doing what I'm doing now, or companies, 1,100 people and stakes are really high and all this, I mean, I would have crumbled under it. But it didn't happen overnight. It took eight years. I learned how to manage one person and then 10. I had a lot of really good executive coaches along the way. My board was really supportive. I tried to surround myself with people who had either were building companies or had built companies. And I just tried to go hat and hand to them and kind of with total humility and be like,

here's what I was thinking about doing. But I don't know what the hell I'm doing. Can you tell me what to do? And I would just get everybody's opinion. And then just what thought was that you were sort of drinking from the firehood that's trying to grow a company like that. One of the best things I did was I surrounded myself with a really great executive team and deferred a lot to them on things that I just didn't really know that much about. I have nothing to teach my CFO, my CLO, my head of engineering or anything, go on down the list.

They're all much better at what they do than what I do. So a lot of them, they've run bigger organizations than me. They're older than me. They're more experienced. So you have to kind of have this. It's really finding this balance between, okay, I'm going to defer to these people because that's why I hire them. but I also kind of know where I want this company to go. If I feel like there's something a little off about that,

I do need to make sure it's all aligned towards this common strategy and vision that I've articulated. It's a tough balance. In addition to people being so important, it seems like the other hand of this would be more and more effective decision making on your part. How have you gotten better at that skill set over the years? Do you think you've gotten better as a decision maker?

And if so, kind of along what dimensions? decision making is definitely really important. I would say up until about 150 people or so at the company, all of our decision making was pretty ad hoc, and it was Fred and I would just get in the room, and we'd decide. Nine or ten times we would agree. The one of the ten times that we didn't agree, we'd kind of say, all right, how much do you care about this? One to five, and we would kind of go on three, boom, and show the number of fingers. And he was a four, and I was a three. Okay, great, you get this one, let's do it your way. That was like our B-1 decision-making, which got us a long ways. The company grew I remember we went through a big gross bird and we had 250 or 500 people.

We realized that all decision making was just breaking down at a certain point. And people were coming to us and they're like, we were kind of a bottleneck. Nobody knows what the decision is. It's just being delayed for weeks. And we would end up revisiting decisions a lot. People would come in a month later, hey, I want to revisit this or someone would come in at the last minute. Hey, you didn't ask so-and-so what their opinion was. So the decisions no and void.

So we started to run into all these decision-making problems. I credit some of the executives that joined at that time, especially Emily, who's now our C-O, and she introduced a couple really good frameworks. One of them is around this decision-making framework called Rapid. There's a couple of them out there, but it's basically this idea of just choosing who is going to be upfront, who's the decision-maker, who's going to provide input, those people, they can't veto that their input is important, who's going to actually go do the work once the decision's made. You kind of label all the participants, and then you go and you do it in writing.

it captures everybody's input in writing. And then you go in and you have the meeting to discuss and you make everybody do the pre-read. Nobody can say, well, my opinion wasn't heard. You wrote your opinion in the document and you watched everybody read it. And then you discuss and then the decision maker and a big believer in this idea of having single decision makers

in most cases because then it unblocked a lot of things. There's a few exceptions to that, the barraiser we talked about. But in certain committees we have to use and things like that. But generally, I try to just have single decision makers. So we then memorialize it in writing in the document after the decision maker deliberate. And the decision maker doesn't need to be me. Delegate and push down as many of these things as you can. Only the really one-way doors that would be very expensive to go back or are the kinds of things that should be at my level.

And push a lot of that decision making down into the org and formalize the process. What aspects of the job do you most enjoy now? Yeah. So the founder CEO job changes a lot over time. In the early days, I was actually writing the code. to build the first version of the product and getting our first couple users and doing fundraising and stuff. And I'd say over time, what I've realized the things that I actually like and I think I'm good at is a few things. So one is hiring top talent.

So I still think that's probably one of my top priorities is getting really top talent in the org, especially senior people and board members. The second one is around product. So I love product. We have an amazing chief product officer and product team, but I do like to go in. There's probably about five or six areas of product that I really. care about. That changes every few quarters. And I want to go into those meetings and try to influence the direction and make sure it's in line with the overall product strategy that I've set out with our chief product officer. The last one is just about setting a clear strategy and culture for the company.

So articulating those things in writing, repeating them often like at our all-hand meetings. And when kind of edge cases come up, trying to be a guidepost or something like that about, hey, this is the kind of company we want to be long term. So this, is the kind of the reasoning behind how we got to that strategy or that cultural principle. So those are the three things that I try to focus on now. You've mentioned a few times how much you love product. I'd love to dig one step deeper there and just understand what specifically is it, is it trying to remove frictions, trying to identify the jobs to be done, the aesthetics of it?

What really gets you excited in those meetings? So I definitely am very excited about usability. I mean, I just generally think that all tech products are still too difficult to use. You make things easier to use. You just open up not only like a few more people, but like an order of magnitude. It's kind of like a pyramid where at the top you have these computer scientists and the next layer down or really tech-savvy people. You keep going down the pyramid.

You can build something that can get billions of users. I focus a lot on usability. On usability, are there questions that you ask of the team that you find yield interesting answers? Are there ways to poke and prod to get something more usable without having the idea yourself? Yeah. I mean one thing that I like to do in product meetings is I'm not a big fan of slide decks when I go to product meetings and product reviews and people are just showing me slide decks I get really nervous what is the customer going to see just show me the thing the

customer is going to see whether that's a clickable prototype or the actual implemented feature I don't like them to coach the witness too much and they're like okay next you're supposed to click this you're not going to be sitting there over the customer's shoulder when they're using the product show me a brand new user trying this out we do a lot of user studies, user research, or in the early days, especially I would try to simulate being the voice of the user, although I'm not the perfect user. We have lots of different types of customers now. But yeah, I like going to product reviews where you get hands on with, let's see the demo, let's see the actual thing. Don't show me slides. Yeah, there's probably other stuff,

but that's one that comes to mind. Back on crypto and the kind of broad vision that we started with, what do you think the largest or largest impediments are to this vision coming to fruition? Is it regulation? Is it something else? What are you thinking about as barriers that need to be knocked down? I think it's going to be a little bit of a repeat of what I said earlier, which is I think there's challenges just in terms of scalability, usability, usability, and then privacy and security on these blockchain. If we go from dial-up to broadband and all those kind of things, that'll be a huge unlocked. There's definitely some regulatory component to it. Right now, there's a lot of startups that are trying to be created. We've actually invested in a bunch of them through Coinbase Ventures. We've

in probably 60 or 70 crypto startups. By the way, people aren't familiar when I say crypto startup. It's kind of like a new type of startup, like a dot-com startup or something, but a crypto startup is a startup that raises money often using cryptocurrency. They also attract their initial user base with cryptocurrency by building a community, having some kind of collective ownership principles. There's a lot of really talented teams trying to build companies this way now, but a lot of the regulatory environment is still unclear for them about, is this a security,

what kind of securities regulations might you trip up if you do these. And so there's all these kind of different exemptions and stuff that people are trying to jump through hoops to try to make work. So we're trying to think about how we at Coinbase can help that. We're working on a product. We'll probably call it Coinbase launch or something like that. But it's a way for anybody who wants to do a crypto startup to come in and say, all right, I want to issue a token.

Maybe I want to raise money. Maybe I just want to use it to build my community and just handhold people through that process and help them. with the custody of it, help them create the smart contract, help them with the governance issues, vesting of these things if you need to distribute those employees. I think that, kind of like Stripe Atlas meets Angelist or something. I don't know what exactly the analogy would be, but that could be a huge unlock for the crypto economy as well to get a thousand new startups built like that.

Whether in crypto or elsewhere, what do you not understand well today that you wish you did? I mean, I'm interested in all kinds of technology. Generally, I'm a technological progressive, I would say. I believe technology is an incredible force to change the world, and we should invest more in it. Yeah, I'm trying to understand more about how academic and scientific research works and why it seems so inefficient. There's a startup that I've been helping out called Researchhub.com that's trying to,

it's kind of like GitHub for science, it's trying to accelerate the patient's scientific innovation. I'm also just really interested in genetic engineering and different kind of biotherapies and things like NeurLink, and I think the human body. is something that's going to be something that people can edit and program over time. So I'm very interested in those kind of topics well. But I need to go back and brush up on my biology and chemistry. And I really try to understand it. I was always better at computers and that stuff.

I learned as well as I wish I had. So that's something I wish I knew more about. Thinking about advice for young people out there, whether they're going to be founders or just go work at another company, was there any special advice, whether from a board member or a mentor or something you read in a book that was a really helpful guiding light, in the early days that you would offer up for the younger people out there?

First of all, I'd say I don't think everybody, if you want to have an impact on the world, probably in terms of expected value, actually, it might even be making more sense to join a startup that's already found really good fit and it's kind of off to the races or even these big companies that are products with billions of users.

If you're editing a feature in a product that has a billion users, you're having a big impact on the world. Most startups that you go and try and create some scratch, they fail. I've tried lots of startups and Coinbase was probably one of 10 or something. It's the one that works, but most startups fail and I feel like I kind of got lucky, too. There was a big component of luck to it. But for people who do want to start companies, if that's just something you want to do,

I think there's one quote that I really like stuck with me where the greatest risk is not taking one. A lot of people in life, they have ideas. I say like 99% of people talk about ideas all the time. They're like, oh, wouldn't it be cool as this and this works or if that happened or someone's built this, but they don't actually go do anything about it. It's sort of like an intellectually, you can get so caught up and, okay, what if I did that and this? Okay, well, stop trying to see 10 steps ahead. You can only see a few steps ahead. Just go do anything. It doesn't even matter what you do as long as you do something, because that's my other favorite quote is action

produces information. So at a certain point, you've got to stop pontificating about this stuff and just try something, anything. You're going to be embarrassed by the V1 that you go out there and you create. part of the product development process is dramatically scaling back kind of the ambition and the feature set and everything to rapidly iterate and prototype these things. But go do anything. The first thing you try is almost guaranteed not to work. So don't give up. Just go try the next thing and the next thing and the next thing. That's the only way that new products and companies ever get created in the world. You've got to put a lot of shots on goals to get one to eventually work. Action creates information is an amazing quote that I had never heard before. I will not forget

that one. This has been awesome. I mean, I've not explored this space in a while. I love getting caught up. I love hearing all the lessons you've learned, not just about crypto, but about building a business. My closing question for everybody is the same, and it's to ask what the kindest thing that anyone has ever done for you. Well, I mean, the first thing comes to mind is what I said earlier, which is I was just a kid who was tinkering around with some kind of technology, and I thought maybe I was crazy because nobody else seemed to think it was very cool. But I applied to Y Combinator and they wrote me that initial check and I was like, okay, maybe I'm not crazy. It sounds so silly in hindsight, but I was afraid of calling my parents and telling them, hey,

by the way, I quit my job to go do this crazy thing. If I could tell them, well, if somebody actually believed in me because they wrote me this check, it gave me a little bit more confidence to go do it. So I think sometimes just taking a bet on somebody and seeing the potential in them, and I've tried to do that a few times with other people can be like a really, important gift for them. So that was probably one of the kindest things someone's ever done for me. That answer has become probably the most common, some early bet ahead of results or something like this. It's made me kind of reflect on maybe I need to do a lot more of that, make bets on people much earlier on. It's definitely a great source of kindness. Well, Brian, this has been awesome. I really

appreciate your time. It's great to meet you again. Thanks for all that you've taught us. Yeah, thanks for the questions. They were great. And I'm going to try doing more podcasts like this. This was a really great one to kick off with. Thank you so much. If you enjoyed this episode, you can sign up for a new email newsletter sent out each week called Inside the episode. Each week, I condensed that week's episode to my favorite big ideas, quotations, and more. I've been recommending books to members of this email list for years, and we'll keep doing so in this weekly email. You can sign up at investorfieldguide.com forward slash book club.