My First Million - Best of This Week: March 4th

Starting point is 00:00:00 Hello, and welcome to rule the world. I know I could be what I want to. I put my all in it like no days off. On a road, let's travel, never looking back. Hello, and welcome to another episode of My First Million, Best of the Week edition. This is Ben Wilson, also known as producer Ben. And this episode is some of the best clips from our episodes throughout the week.

Starting point is 00:00:22 Nothing new, just a short, rapid fire recap. To start off with, we have David Friedberg, founder of Kana, talking about the power of thinking big. More importantly, how to actually do it, how to think big, and why more people don't do it. Let's give it a listen. You know, your team is only as good as you challenge them to be. And so they'll, you know, if you're not challenging your team and you're asking them, what do you think you can do?

Starting point is 00:00:46 They're only going to achieve a fraction of what's possible. Great coaches and great leaders need to kind of, and technology leaders in particular have this unique ability to, I think, understand the technology and leap several iterations forward to speak to the team about where we're headed and then bring the timelines in and that makes for an incredible sense of urgency and outcome. Why do you think most people don't do that?

Starting point is 00:01:09 So thinking big, that sounds easy enough to understand. Sounds fun to do. You know, I could hear that advice. Why do you think that's hard advice to follow in practice? It's a really important question. So one of our principles at TPB is Dare to Dream. So it's all about creating that audacious perspective.

Starting point is 00:01:25 You know, how big can this be? How big should we be? And what happens when you set a big goal, like let's say I have to go climb to the top of a mountain, and I can't see the path from here to the top of the mountain, there's 100 permutations or 1,000 permutations on how you might get up that mountain. And you don't know which path is going to work. Most people that are smart have been successful. And most people that have been successful are not used to not succeeding.

Starting point is 00:01:51 And so the orientation at that point is that success is all about doing something and getting an action that you expect out of what you just did. And so you are inclined naturally as a smart person, as a successful person, to only do things that you know what you're going to get as an outcome. And guess what that does? That limits your horizon. So then you end up saying,

Starting point is 00:02:12 I'm not going to take the more circuitous, challenging route or path that might get me to the top of the mountain. But I can see that this particular path gets me, you know, a quarter of the way up the mountain. And that may not mess. And you might know, however, that that means you're giving up going to the top of the mountain. but at least you know for sure that if you do X, you're going to get Y.

Starting point is 00:02:31 And I see this all the time. I see this all the time at businesses where the teams end up compromising on their big vision. And they compromise on the moonshot because they're more likely to succeed and they feel more comfortable taking a shorter range, narrower horizon, and minimizing the opportunity set significantly and saying, I'm just going to go do this because I know if I do X, I'm going to get Y. and that feels comfortable and I know it's going to happen. And so they minimize the dare to dream circumstance. And then they always say, well, you know what? We'll come back and dream big later. But guess what happens?

Starting point is 00:03:05 Let's say you're thinking about, I'll give you a very specific example because this relates to the business we're announcing this week, canna.com, which is our molecular beverage printer. But early on, there was a hard push to say, look, we know restaurant owners will buy this device. I don't know if every consumer is going to buy this device. It might be too expensive. It might not taste good enough.

Starting point is 00:03:24 consumers are so, you know, fickle. If we make a device for restaurants, we know that there's an economic advantage. There's an ROI enterprise-based sale. Let's go sell in restaurants. And we'll make a bigger device so it can hold more. And we don't have to worry about shrinking and getting all the technology into a tiny form factor that fits on a kitchen countertop. The problem is if you do that and you start selling to restaurants, you've now significantly minimized the opportunity to go into the consumer channel because you now have a customer and the customer is the restaurant.

Starting point is 00:03:52 And the restaurant's going to say, I want this feature. and I want this feature and I want this feature and I want you to do this for me. And all of a sudden, your whole team is going to be inundated with product and feature requests that focus on that much smaller, much narrower market. You're going to end up going deeper and deeper into that market. And you're going to lose out on the opportunity to go build for the big market, to go build for the 100x market that can actually change the world and improve the problems that we're trying to address with this business.

Starting point is 00:04:17 And so, you know, I've seen this at many different businesses where taking on a lot of technical risk, taking on a moonshot project. is often foregone and you end up, you know, trading into a much smaller pie and a much smaller opportunity. And then you often miss out on that bigger opportunity. And so I think it's really important for entrepreneurs to continue to dream big and find aligned capital and align shareholders to let you dream big and shoot for those bigger, higher risk opportunities. Because if they work, they're 100X bigger. All right, next up, we got a selection from an interview with Raoul Powell, a former hedge fund manager turned entrepreneur. And Raul is someone who's really interesting.

Starting point is 00:04:53 After he had made it kind of big as a hedge fund manager, he put all of his liquid net worth into crypto and managed 10x's money or something like that. And so on this clip, Raoul is talking about how network effects ensure the success of crypto going forward. You know, you notice certain characteristics like crypto tends to be exponential in price. So you put on the logarithmic chart. It starts to make sense. You know, you look at things like copper and lumber. They tend to be mean reverting assets because they get met by. excess supply with high prices lead to excess supply. So right now with oil at $100,

Starting point is 00:05:28 everybody wants to make as much oil as possible. So the price comes down over time. It doesn't happen with crypto because you can't. Right. So you need to understand the structure of markets, where the sentiment is, is it overly bearish? Like a day like today, it got overly bearish. And so suddenly you start to see a reversal. So these kind of things are interesting. But my big discovery and why I really started loading up on Ethereum was another chart, which was a understanding that Metcalf's law was the primary driver of all crypto markets, and in fact, almost all of the tech stocks that we've known today. And once you realize that these are basically networks, and once you realize that crypto are

Starting point is 00:06:11 networks where you actually own the networks, so Facebook is a great network stock, and it works perfectly on a log chart, and it's an exponential, does all the things, as you imagine. You can value it in Metcalf's law terms, but the fundamental difference, is shareholders and network users are not aligned. The shareholders make the money. The network users get the utility. Along comes crypto, you marry the network user with the owner. Okay, now you've got network effects upon network effects.

Starting point is 00:06:40 This is like behavioral economics manner from heaven. Religion meets Matt McAff's law, right? It's like, now I'm tribal about the thing. It's religion meets capitalism. It's basically what it is, right? So that is incredibly powerful. So I start looking at the fact that Bitcoin and Ethereum charts just at different points when they, at the same point in the adoption cycle, were remarkably similar. And then it dawned to me as they're all the bloody same thing.

Starting point is 00:07:08 They're all about adoption. So then, so if you look at it and if you're honest with yourself, Ethereum, if you think about Metcalf's law, it's about the number of users and then the kind of connections between the users and the applications built to create those connections. Well, Bitcoin's kind of a one-sided one, which is a bunch of people own it as a store of value, like gold. Nothing wrong with that. But there's not many applications built in it. When you look at Ethereum, it's like, holy shit. I mean, this is like the internet. Right.

Starting point is 00:07:38 That moment is like, okay, this is far superior of bet. And so that's why I took that bet and then I eventually shifted majority into Ethereum and then took other bets in the space to explain. macro views. Yeah. It's funny. I have one-tenth of the intelligence of you, but I did the exact same pattern. So I heard about it in 2013, bought a little bit dabbled, sold during

Starting point is 00:08:04 when I went to a wedding and my aunt was telling me about how great Bitcoin and Ethereum was. I was like, oh, it's probably a bubble, 2017-2018. Sold for a nice profit. It was patting myself on the back. You know, in retrospect, worst trade I ever made. Should have just held everything. You know, started buying back

Starting point is 00:08:20 in. In 2019 or 2020, I kind of announced that I've, I had moved 25% of all my liquid net worth into the thing, but that was right before, you know, another run-up. And so that became quickly 50-60%. And, you know, peers and some people are telling you you're crazy. I'm sure you had the same. And same thing. You know, why are you betting on this? Are you just kind of speculating? And I said, no, like, basically I spent my whole career studying the power of network effects, right? I'm trying to build marketplaces and social networks in Silicon Valley because I know that a network is the most powerful force imaginable.

Starting point is 00:08:55 And then I see this chart, this adoption chart of this new money network. It's like, well, if the, if the, if the social network was worth X and the information network was worth Y, and then the merchant network, which is like, you know, basically Amazon, it was worth, you know, Z, then this thing is going to be, the money network is going to be worth a lot. I could tell you that. And so I was like, I didn't know much more than that, but I just knew if you can bet early in a network effect that's still going through its kind of like, you know, adoption curve, you know, you'll do pretty well. And so that was kind of my, my, my, my, my, my, coming from a completely,

Starting point is 00:09:30 you know, sort of a different, different take, but ended up at sort of the same conclusion. And I remember being impressed that you were talking about network effects because I didn't really see a lot of people in kind of traditional finance talking about that at all. And I was like, they're missing the point, you know. Really one of the first people to really start saying, unless you understand network effects, you don't understand what this is at all. because everyone was an alterifying weird things. And finally, we got Sam and Sean talking about the Russian oligarchs.

Starting point is 00:09:56 These are a handful of billionaires in Russia who control not only the economy and a bunch of the money in Russia, but also a lot of the power and politics as well. So Sam is going over how it is that these oligarchs got their money and their power. So something that I've always been interested in is the Russian oligarchs. So have you ever studied those folks? Not studied, but, you know, okay, tell me about it. Okay, so this starts, I'm reading a thing, so you're going to see me look off. This starts on November 3rd, 1995, in a remote Siberian town called Surgot. Basically what happened in this small cabin, an auction took place for the right to lend the cash-strapped Russian government tens of millions of dollars. So basically in 95, the Russian government wasn't doing so hot and they needed money. And so they got these banks to come to this meeting. And they said, we need some money. We need to borrow some money. And also as collateral, we're going to put up shares of some of the large state-owned companies. Because at this point, Russia was basically going from being a communist nation to being a private country. And so they still had some like state-owned oil companies, mineral companies. Basically, like, if you think of Exxon Mobil, they like, like, the government like owned that. And at this point, they were trying to figure out how do we make this. So private individuals. can do this. And so at this meeting, basically only two bidders showed up. And if more bidders

Starting point is 00:11:27 wanted to come, it was kind of a pain in the ass because conveniently, there were no more flights. The airport shut down and you couldn't even book a flight to come into this small town. By the way, your camera's, okay, you're there. And so basically what happened at this small cabin is one company made a bid to buy a or to loan money to the government. They loaned something like $500 million. And that was like $100,000 above the opening bid. So people were bidding to loan money. And so this bank loaned money to the government.

Starting point is 00:12:05 And then the government had to pay back the loan at a certain point, something like a year later. And if they didn't, the bank then was given the collateral. So the shares in this company to auction off. And they could keep 30% of the profits. So obviously the government didn't pay back the money. And there's like a lot of like wondering why they didn't pay it back. Basically the idea is that the current president was like, obviously this is all like,

Starting point is 00:12:32 we're all planning this. So don't pay this back and give us a little bit. Whatever. So they don't pay back. You're saying it's collusion. Basically there was a handshake, wink, wink agreement basically of what's going to happen here. Yes. And so the government doesn't pay back the loans. And so now this bank is basically now has a minority ownership and like 12 large state-owned corporations. And they basically holler at

Starting point is 00:13:00 eight to 10 guys, guys who are already relatively successful. And they basically said, you want to make a bid on this company? I'm going to make sure no one else bids on this company. But I'll give it to you. You interested? And that's exactly what happen. And why would they do that? Why would they hook up these individuals in that way? They did it for three different reasons. The first reason, and a lot of this is just like hearsay. The first reason is the person who was president at the time, who was it, Ben? What was his name? It was the fat guy who had a heart attack. Boris Yeltsin. Yes. He was basically said to these eight or 10 businessmen, I'm going to hook you up. You guys hook me up. When I'm when I'm in office,

Starting point is 00:13:39 hook it up. I'm going to hook you up, whatever. So that's one theory. The second theory is that they wanted experienced managers to run these companies. And the third theory basically is even though these eight to ten oligarchs put bids on these companies and basically they bought the equivalent of ExxonMobil. So we're talking about like a company that's worth billions of dollars. They paid a hundred million dollars for this company. And so these managers, these oligarchs, these eight to ten folks, a lot of them were mildly successful, but they were all in on the government. They were all friends and friends. You know, they're all homies. They basically, they did take on risk. So these companies did have debt and like they had to go and like collude with other people and fire the rest of the managers of the company.

Starting point is 00:14:20 So it was basically almost like a PE thing, but it was like pretty dirty. And the government was like, yeah, we need we want like these mercenaries to be in power because if they make these companies better are, you know, our government's going to be better. The Russia is going to be better. And so they basically profits after after this whole deal profits to these companies grow by 50x market caps go up by 100. X. And so here's an example. The reason I got interested in this is there's this guy named Robin Abron. What's his name? Ben, how do you say his last name? I think it's Abramovich. We're going to call him Roman. So Roman even knows what the hell you're talking about right now is impressive. And he's like a part of your brain that's like outside of your body. And you're

Starting point is 00:15:05 like, uh, brain, what's that name? Oh yeah, here is. Roman's famous. Roman owns, we're just going to call Roman. He owns Chelsea, the soccer team. So he's like a famous guy and he owns like this like, you know, 200 foot yacht. He's like a big deal. And basically he paid $100 million, him and his partner Boris, paid $100 million. And they've just, they came up a little bit of money and then they went and hollered at like other rich people. And they said, hey, loan us some money. Let's buy this company.

Starting point is 00:15:31 They paid $100 million for a company that is now like the eighth or tenth largest oil company in the world. So imagine paying in the mid-90s. Imagine paying $100 million for Exxon Mobil. Right. Insane. And so these companies explode. Now, they explode partially because basically what these owners did, these eight to ten oligarchs, what they did was they purposely tanked the company, so it sucked for a long time. And then they bought out the rest of the minority shareholders.

Starting point is 00:15:59 So it was, again, cronyism there. And second, these were government-run companies, so they're a shit. And so these private individuals, they did a pretty good job of making them better, and they became far more profitable. And this created, like, eight to ten guys that were worth, like, up to $40 billion. So at one point, one of them was worth $83 billion. And, you know, things have changed. But it created so much wealth between these few folks. And it also like trickled down. So here's the craziest part is that a bunch of the managers of the company. So basically there was like

Starting point is 00:16:29 the president of oil or something like that as a government official. He becomes, he sets up this, one of these companies. He eventually becomes president of one of the companies. And now is worth $8 billion, even though he was like a government official. official. So I thought it was interesting because I actually wanted to read a book about these folks. I'm like, oh, who's this like rich guy that owns Chelsea football? Let me like go and learn from him. And when I realized it's like I pretty much can't learn from him. I mean, I could maybe learn some step, but like his process is not like replicable. I can't replicate it because he was like 38 and Russia had just fallen and he basically turned zero dollars into he's worth now like 20 billion

Starting point is 00:17:09 all through this cronyism. But I thought it was incredibly interested. Have you not heard about these folks? I've never heard any of that in my life. It's crazy. It's like the big bang for like Russian rich oligarchs. It's like there was just one meeting and it kicked off this series of events that like, you know, seems kind of unfathomable how that would be allowed to happen or just happen. But then they also consolidated power, right?

Starting point is 00:17:37 Like, didn't Putin basically, like, take all their money and consolidate all their power? Here's the second interesting part of the story. And I actually learned this from listening to Ben's podcast. So basically, Putin was considered, like, the anti-corrupt guy for a minute. Like, when he was elected, he was like, you know, I'm not going to stand for that nonsense. And he made an example of one of the guys. One of the billionaires, his last name starts with the K, I'm not going to try to pronounce it. It's a challenge.

Starting point is 00:18:01 He put this guy in jail for 14 years. And he literally put him. And so in Russia, for some reason, put you in these like cages and you could like take pictures of these folks. Have you ever seen that? Like a like a Russian serial killer picture or anything. Like it. So it's like visible from the outside you mean? Yeah. It's like the mugshot, but it's like literally a cage that sits on you and people can come and like take pictures. It's weird. And anyway, this guy was worth at the time like $15 billion and Putin arrested them for not paying taxes, things like that and put him in jail for

Starting point is 00:18:30 14 years. And he goes to the other guys. He goes, you want that to happen to you? No. All right. Let's play. And so a lot of people think that Putin is the richest man in the world. And he owns one of the most expensive homes in Russia and in the world. It's like a billion dollar, two billion dollar house. And people are like, well, how'd you do that? And so a lot of people think, dollar house? Yeah, Ben was telling me all about it. There is a billion dollar house. Wow, I didn't even realize that. It's, it's got like, it's got skyscraper. It's, yeah, it is like this full complex. It's got private beaches. It's got like pools on pools. It's got guests. It's basically got a hotel on it.

Starting point is 00:19:07 It's like a house is maybe not the right way to think of it, but it is a house. It's a private residence for Putin. But basically, like there's no proof of this, but a lot of people, because even when the Panama papers released, they couldn't find Putin's accounts. But basically a lot of people are like, well, so he made an example out of this one guy. And he went to the rest and goes, y'all want to play? Let's play. And now, Roman, by the way.

Starting point is 00:19:32 I was really hoping you'd attempt a Putin accent there. kind of disappointed, not going to lie, the story is good, but it's just missing that a little something. I think Ben could do it for not me. Ben, I think you have a little bit of the Russian twings and you're speaking. Yes, they say me, they tell me I speak good in the Russian accent. I will, is this like racist? Can I do this?

Starting point is 00:19:52 Is this okay? I don't know. It's border. I don't think it's a race. We have the cancellation vaccination. You're allowed to do a funny, funny accent here. As long as it's Russian. If you're listening,

Starting point is 00:20:04 you took that too seriously, just swipe over and delete the podcast and go on with your life. And to wrap this up, basically, the way that these guys all work now is a lot of these oligarchs are part of like the peace keeping, like they're helping Putin like negotiate peace. So like the inner, the way that this shit's intertwined is just bananas. It's crazy. And I was like trying to learn about these folks. And I was like, oh, well, like, there's nothing to learn here. I can't, I can't do this. Like this is just crazy. And these, these. guys are so wealthy. And so it's trickled down. But if you basically, a lot of them when that happened were in their 30s, like 35, 38 years old. And that's why I got interested in this because

Starting point is 00:20:45 I remember years ago reading about these folks. I'm like, how does a 38 year old become worth $3 billion? What the hell? How did a 38 year old become CEO of a diamond mining company? Okay. That's it for this week. Thanks so much for listening. And have a great weekend. I put my all in it like no days off on the road less travel never looking back

My First Million - Best of This Week: March 4th

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