On The Brink with Castle Island - Dan Tapiero (10T Holdings) on Macro, Crypto and Growth Equity (EP.197)

Episode Date: March 24, 2021

Dan Tapiero, the Managing Partner or 10T Holdings joins the show. In this episode we discuss: Dan's pre-crypto career as a macro manager and entrepreneur and the path that led him to founding 10T Holdings The institutional narrative for Bitcoin and cryptoassets and how this thesis interplays with gold Views on layer one smart contract platforms and how to think about value accrual on these networks How Dan is approaching growth stage opportunities in this industry To learn more about 10T visit: 10tfund.com Follow Dan on Twitter @DTAPCAP  

Today on the podcast, I sat down with Dan Tapiero, the managing partner and CEO of 10T Holdings. 10T is a newly formed growth stage venture fund focused on public blockchain infrastructure companies. And Dan is someone that I've been looking forward to having on the show because of his background and perspectives in traditional markets. Before starting 10T, Dan was the managing partner of DTAP capital advisors, a global macro fund. And before that, he co-founded GBI, Gold Bullion international. And before that, he was a portfolio manager and analyst at both Tiger and SAC. I enjoyed chatting with Dan about private blockchains, global macro, and the pace of institutional adoption. I definitely think you'll enjoy this one. So without further ado, here's my conversation

with Dan Tapiero. Brought down by bad mortgage investments, Lehman, which has 25,000 employees, will be liquidated. The federal government loans American International Group, AIG, $85 billion. This is a different kind of market. And the Fed is asleep. The federal government is stepping it to stabilize Fannie Mae and Freddie Mac, the two mortgage giants that have been threatened by the housing crisis. The Bank of England has pumped 75 billion pounds more to the Britain's ailing economy with a new round of quantitative easing. You print a couple trillion dollars and all of a sudden people start to worry. So out of this worry, we have something called a Bitcoin. Bitcoin. So Dan, thanks so much for joining us today on the podcast. Yeah, Matt, my pleasure.

Glad to be here. Excited to have you on. There's a ton to talk about. And maybe before we do, Why don't we just start off with a quick introduction on yourself? A lot of people are going to know you from the crypto side. A lot of people are going to know you from the macro side. But let's just hear it from you, a little bit on your personal background and what brought you to founding 10T holdings. Thanks. Thanks. Well, as we talked about before, and as most people know, I was 25 years in the hedge fund business.

I was a global macro portfolio manager throughout my career, worked for, started my career at Tiger with Julian Robertson and then worked for Michael Steinhart, worked for Steve Cohen at SAC for 10 years, and then Stan Drucken Miller as well at Duquesne. Along the way, I also started two business, so a little different from most global macro hedge fund managers. When I was working with Drac and Miller, we launched a company called Agcoa, which that was in 2006. And by 2013, it was the largest private farmland reaped in the U.S. ended up selling that to CPB. P-I-B, the Canadian Pension Fund System. And in 2008-09, I also started another business, a physical gold sales and storage business called GBI Gold Bullion International. That business is still up and kicking and

thriving and had a record year last year. And that business also has a few different crypto lines. And that was sort of how I got into Bitcoin in 2014. That business integrated with a company called Bit Reserve, which today is the uphold wallet. And if you go on uphold today and you have Bitcoin, you want to buy gold or you've got gold and you want to buy Bitcoin, you can transact on that platform today. And GBI built those pipes and enabled that functionality. So I think we were the first place in the world where you could buy and sell physical metal to buy and sell Bitcoin and Ripple. So that was my introduction. And back then we had their a lot of young people at the firm, and we had a president at the time, very capable guy who was

very much into the crypto world, and he sort of brought us to that. We spent a year integrating with them. So I was very aware of it, but at the time, Bitcoin was still kind of small. And as a macro guy used to dealing in trillion dollar markets, currencies, bonds, et cetera, it was interesting, but it wasn't that interesting. And Barry Silbert, I've known for a long, time. And Barry called, I had a meeting with him down at his offices. I think it was on 18th Street at the time, DCG. And he says, damn, we got this great product, this Bitcoin trust thing. And I'm like, yeah, I like to buy some. It's kind of complicated. And I remember saying to him, how much can I do? You know, I put a few million dollars into it. And he's like, well, we're doing about a million or so a day.

And I thought, well, how am I going to do that? I said, I'm not going to do $100,000. I mean, there's nothing to almost not worth bothering. And I thought, well, to get a position on would take several days of liquidity. And for me at the time, as I said, global macro portfolio manager, I'm thinking, I can't own anything that would take me several days to get out of. So I just kind of like just dismiss the whole thing. And I never did the deep dive.

I was aware of it. The gold business was making little bits of money. That business line wasn't really successful. We were very early. The product was called, I think we also even had a digital gold product back then where we sold fractional bits of gold. That never took off either.

That was very early. But it wasn't until 2018, the end of 18, 19, that I got really focused on it. The gold business in Q418, actually, earlier in 18, integrated with a firm called Equity Trust, which is a self-directed IRA. And we were the second place in the U.S. where you could trade crypto in your IRA. And we used Barry as our back end. But at the time, to be able to trade crypto with no tax consequences was just a phenomenal

sort of concept. There was one other place you could do that. And we gave people the ability to trade eight different cryptocurrencies. And actually, you can set up a self-directed IRA with them now. Our name doesn't appear anywhere. We're sort of the middleware. You know, where GBI in a way often acts as more of a tech and I think ops company. We build the pipes and equity trust is the front end.

And in this case, DCG is the very, very back end. But that sort of pulled me into it more mentally. And then when the price collapsed from 20,000 in January of 18 down to four, as a macro investor, I've seen lots of those opportunities, big bubbles that blow off. And so I thought, all right, it's cheap now. It's either going to zero or it's the bottom. And so I just started buying Bitcoin in my own entity, which is DTAP Capital, which I launched in 03 to be run Perry Pesu with my SAC money at the time. And again, fell down the rabbit hole hard, six months, 10 hours a day. I was in a fortunate position not to really have any external things bothering me.

I was not really focused on a macro investor looking for opportunities. And so, and I'm prone to almost excessive focus. So when I started digging here and went through the white paper and then did that interview in the summer of 19 with Raoul Powell, which got a lot of play on Twitter and in the ecosystem generally, I just got sucked in and I read tons of stuff that you guys put out and Nick's work was, I think, instrumental as well. Of course, Safe and Antonopoulos and Jan Pritzker and all the sort of core guys were able to explain it to an older guy like me. They really sucked me down the rabbit hole. And I got it. And I just kept thinking, God, what an idiot I was, how did I not come to this realization in 2014? And what a waste of time

everything else has been, right? Well, that's how we all feel. But I think the thing is, like, you have to have the scaffolding. And you were a guy that understood global macro and gold. And so I'd say you were almost maybe predisposed to understanding it and we're still early. Yeah. I mean, hard money. And I said this a lot. I've sort of stopped on this theme. for some reason, the Bitcoin guys, you know, they constantly are attacking gold. Now, I understand attacking Peter Schiff because there's a lot of nonsense that comes from his Twitter feed. And I think he might even do it purposely to get these guys riled up. But look, the early advocates, the larger sort of people from the legacy world that

understand Bitcoin intuitively and immediately are the gold people. And I have been advocating, I think alone, basically, maybe there are a handful of others, Ronnie Stoufferlay out there in Liechtenstein, and there are gold and Bitcoin people. And I think they're not really comparable in a way because I think gold is a great hedge for the legacy system for traditional portfolio managers that have, let's say, a 60-40 exposure. they've got 40% of their assets still in bonds yielding 50 basis points. That exposure is not going to hedge their equity as it has since 1981. We know from 81 until basically now, if you've had that 60, 40, 70, 30 exposure,

it's worked out really well. And you've compounded in a great way. And every time the equity market had a wobble or there was a recession, your bonds kicked in and offset. Now, we're not in that kind of world. Bonds really can't be a productive asset below zero. Forget even talking about all the negative yields in Europe and in Japan. And then also on a real basis, if you look at what real yields are globally, government bonds, they're almost all negative. So gold, even though it's had much more of a sell-off than I thought it would, I think it potentially

actually bought them today, which is a very strange thing. I'm not usually a guy who says, okay, today's the bottom, especially on Twitter, I stay away from short-term prognostications. And I'm a long-term investor myself, so that's where I have conviction. But if you have that traditional portfolio, I think you have to move some of those bonds into gold. Because gold in a period where the central banks, again, will continue to inject liquidity if we have a faltering, is like Bitcoin, a scarce asset. And you're looking at a huge increase in money supply. That's continuing. And gold, okay, it's not a finite supply like Bitcoin, but it is an extremely limited supply

where the supply is increasing and arguably is not increasing, but at a very small percent every year. So it's also much more liquid. Again, gold trades $50 trillion a year. Now actually Bitcoin is a trillion dollar asset. it's going to trade between $5 and $10 trillion this year. Liquidity's improving. But I really see Bitcoin is something much, much bigger than just a hedge for your portfolio,

more than just a real asset, more than a hard money thing. I mean, I think it's the basis for this entire new digital asset ecosystem, this whole world, legacy world that's going to have to migrate into this digital world. And again, I know we all know this from being involved in Twitter in the space, but look, Swift is a pre-internet technology. The fact that I just did a wire today through the whole Swift. I mean, it's absurd, right? It's absurd. And so there's an inevitability to me about the growth in this digital asset ecosystem.

And again, as Raul likes to say, the pristine collateral for this system underlying it. is Bitcoin and also I think the Bitcoin network, I think all transactions of very large value will be across the Bitcoin network because of its security. I don't know that every single thing in this new digital asset ecosystem will be Bitcoin. I just don't know. It may be, but I think that once you dig in and you could probably talk a little bit about this being a VC in the space, there are lots of interesting things going on with lots of functions where the security apparatus of Bitcoin isn't necessarily needed. You don't need those 6,000 confirmations for that cup of coffee, right?

Yeah, I think about it. And one of the things I come back to is I think the way that we're looking at crypto assets just from a taxonomy standpoint right now is probably the wrong way to look at it, which is basically just stack ranked them by market cap. I think these things are all trying to do different things. Many of them won't work, but it would be the equivalent of, I think, looking at a share of IBM stock against a bar of gold, against the Chuck E. Cheese arcade token and talking about the value of these things.

They're just competing for different use cases. I mean, Bitcoin is competing for a digital gold sound money. Some of these things are competing to be cash flow generating financial products. Some of them are competing to be application launching platforms. I think the big question in my mind is, how will value accrue to these things at scale? It's pretty easy for me to wrap my mind around Bitcoin being a kind of a digital gold, pristine collateral competitor. I think some of these other ones is just more difficult to see how a token would accrue meaningful value at scale.

I'm wondering kind of how you think about that. Yeah, but you don't think about that, though. You don't have that question mark in your head about Ethereum, I presume. Well, I guess the question with Ethereum is, so Ethereum, I would think most of the Ethereum would argue that Ethereum is competing to be money. And that's something that I can wrap my head around. I think certainly some of the upcoming protocol enhancements around digital scarcity are pushing it further and further in that direction. And I think if that's the way that it goes,

then certainly that's a narrative that I think value will flow into. Now, I think many of these other platforms that don't have like a robust supply policy and have unclear value accrual mechanics, it's just less clear that the token itself ought to be valuable at scale in the trillions compared to companies that are building things on top of them, if that makes sense. Yeah. Let me ask you a question though. I know this is, you're asking me questions, but do you think that the ETH crowd, they moved towards this because they saw the success that Bitcoin has had? Or do you think it was always sort of their plan to have more of a

controlled supply policy? Well, yeah, you're putting me in a situation where we, might get some arrows thrown at us here. But I would... It's just a question, right? We're just chatting. Nothing on the line here. I would say that the John Feffer paper from 2017 has influenced the direction of monetary policy of Ethereum to some extent around the velocity argument and the argument that these

networks can be useful and deliver great things to society. But the token itself will not be valuable unless you can drive down that velocity and really have a kind of an ingrained holding preference there that they're treated like money. And so when I look at the upcoming protocol upgrades to Ethereum, a lot of that is going to be driving down the velocity of the network and kind of introducing velocity sinks of sorts. So I think that there's been a realization that value will accrue to things that have money like properties. Yeah, I would argue that. But you know, it's interesting because you've seen the rise of things like polka dot. And the question is, in a way,

is Ethereum making a mistake, meaning there's, what is Pocodon now, $30 billion in value? If Ethereum didn't move towards a more supply focused, let's say, regime, maybe that 30 billion would have accrued to them. Yeah. I'm just asking, what do you think? Because I don't have the same expertise that you do. Well, I don't claim to have a monopoly on the expertise for that topic. I think that it's interesting, though.

I think a lot of this comes down to scalability. And there's sort of a money side of this and a technology side, which makes it so fascinating and why I think every day in this industry you can go down a different rabbit hole. But I think the question is around the use cases that are being built on these networks and is the fact that Ethereum has not gone through this upgrade cycle to get the Ethereum 2.0, is that going to push development off platform into the likes of DFINITY and Pocod and Cosmos and all of these, Solana, all these other ecosystems? And how does that play out?

How do you think about that from the perspective of an investor? Well, I actually, as I said, I don't really have the deep expertise and do not have a programmer's background. But the way that we are, let's say, playing it or investing in, I think is through 10T holdings. I mean, I have my Bitcoin position and that's sort of been my focus. and I've been very clear about my views on Twitter and a range of interviews and do think we can probably move up to that 3 to 500,000 level at some point might happen more quickly. I've always thought we'd sort of get to a trillion dollar market valuation and then we'd kind of rest a little bit.

Maybe that happens, maybe not, but certainly within the next five years we have that on. I think Bitcoin can head up to that price. but in terms of playing the growth and the overall move to this digital asset ecosystem, which is not just about Bitcoin, we launched 10T, and 10T will invest in 10 to 15 companies that are mid to late stage, companies that are larger than $400 million in market value. And these are companies that are growing up with the adoption of Bitcoin, cryptocurrency, and blockchain technology broadly. And we've sort of broken the whole world

into three categories, digital asset ecosystem gateways, next generation financial services, and blockchain infrastructure. And we're going to have three to five companies in the portfolio. And I think that kind of diversification reduces risk.

I think that the companies, there are a handful of companies in that portfolio that are leveraged to the growth in some of the projects that you mentioned, not primarily, but we will have companies that are leveraged to the winners. And again, we're not investing in anything but in the private equity. So nothing in tokens or protocols or nothing in defy or stable coins.

And I know for most people in this community, that's like, oh, they'll say, oh, Dan, that's kind of boring. Okay, you're making an investment in a company that does $200 million in revenue. Where's the upside in that? Well, as I mentioned you before, I think venture capital is like yourself, you're getting in at $1. You're going to sell the company to me at $100 because we think it's going to $1,000 or to $2,000. And so for guys from the legacy world, traditional investors from the world that I'm from, if I have an investor call and I even say like proof of work algorithm, it's over. I've lost them. These are 60-year-old guys managing tens or hundreds of billions of dollars.

They don't understand that. They know me because I've got long relationships or they've invested in other projects that I've been involved with, other macro ideas. And they say, okay, Dan, we see, you know, you've put together this interesting presentation. We like the idea of a sector bet. We like the idea of owning private equity because we get that. income statement, balance sheet, data room, $50 million in revenue, great leadership team, we get it. And so in a way, I think I'm bringing a whole new investor class to the space that has not been there. And then they say to me, well, you know, can you introduce us to somebody to buy a little Bitcoin through?

And I say, sure, then they buy a little Bitcoin. Then they start focusing on a little more. They know something's going on here, and in a way I'm sort of acting as like a trusted counterparty, and I have a track record. And again, we're the first fund that I'm aware of that is explicitly focused on these mid to late stage DAE companies. As you know, there are growth equity funds that will write one-off checks to companies. Tiger, KOTU, haven't been involved. Bain has been involved. But there's no. fund that explicitly focuses just on this area and the research team we've built up and all our

focus is just on this. It's been a huge gap in the market. I'm glad that you're the one that's filling it. Certainly, as you talk about these infrastructure companies, there have been a lot of early stage investors focused on these. But now these companies are really starting to take off. And I'd be curious to talk a little bit about your view on what's driving the growth in some of these infrastructure companies, the exchanges, the brokerages, the lending firms.

The demand in my mind is obviously driven by Bitcoin, this kind of digital gold thesis that there's a lot of appetite for. Also, stable coins. So that's a kind of a narrative that people can wrap their minds around, the fact that you can move a dollar around the world 24-7, 365. You can have someone in an impoverished country even holding dollars on a smartphone for the first time. These are really powerful narratives, not only because they work in practice, but because

they're easy to explain. Yeah. One thing I'd be curious to get your point of view on is just what's it like to explain the other types of categories to people that might not be in this every day? So explaining what Defi is and explaining smart contracts. Yeah, I mean, there are a few people, you know, LPs that we have who want to get a little more into the weeds. And we do that a little bit. And of course, the team that I've put together, we're now about 10 people and still hiring looking for some. smart research analysts so anyone can reach out to me. We have people on the team who can sort of do the extremely deep dive if someone wants to know an investor, look, what's the difference between polka dot and chain link? And why should I care, right? As opposed to thinking, as an example like we have a position in a certain exchange that has in January had a massive inflow of trade into Dogecoin. And so instead, of me explaining to them why I think Dogecoin is a zero, but maybe I'm missing something. I don't

know, but I'm certainly not going to invest in it. And if someone says to me, what about Dogecoin? I said, look, I don't know, but let me tell you, this business we own has just made X, Y, Z amount of revenue from a 20x increase from one day to the next in their Doge coin volume. And so in that way, I'm constantly trying to put what's happening in this DAE into terms and into like a framework that they understand. So they understand like, okay, I don't need to understand that. I understand that we're going to own a business that's leverage to that. And so that's, you know, I think, and to tell you the truth, look, three years ago, I don't think I could have launched this business. There weren't enough companies that were large enough. There was also not really a broker market for the

secondaries. And now there's some very nascent. There are maybe four or five brokers, but I think that'll change. And that we really have found that there is this hole in the capital stack where there aren't that many funds that are willing to write a $50, $80 million check for a CD round for a company. But look, as you mentioned, things have taken off this year, I think because the narrative that you mentioned, the yield narrative, I think is very easy for people to understand. If I've got a dollar stable coin, I'm getting zero in my bank with my cash, and how is it that I can get a 5, 6, 7, 8% yield on a stable coin at Celsius or blockfi? It just doesn't. And so for people who are a little more adventurous, who don't mind a little,

I would say credit risk, and like the liquidity, they try it. They say, you know what, I'll try that with $1,000 and see how that works. So I think that's been important. Institutional adoption is definitely something real, not just Michael Saylor and some of the, and now we have this Norwegian guy. And I actually think that speaking to American corporates is nice. I think it's great that Saylor, is galvanizing that community a little bit. He had that big call a month ago with, but to be honest, the big money is the institutional money management world. Harder for me to think that some corporate from the Midwest is going to put money into Bitcoin because they're worried about the purchasing power of the dollar. It's just not, it's a little early for that. That's for Elon Musk and

sailor and very cutting-edge Silicon Valley guys maybe. So I think that it's that institutional money manager maybe who's more comfortable because there is a fidelity potentially in the space or who is because Northern Trust now offers custody or Boni has come out and said they're going to offer custody or you have a firm like Nidig, which basically looks like the investment broker or Bank that they're comfortable with. I think that's the, there's hundreds of trillions of dollars of that kind of money. And that to me is more of if we saw the Norwegian oil fund put 5% into Bitcoin, 5% of a trillion, that's 50 billion. That would be 5% of Bitcoin. That's the,

I think that around the edges is so enormous. And the Bitcoin market so, so, small, I think that's what the driver has been from 200 billion and, you know, whatever, six months ago to a trillion dollar market valuation. Things of 5x. That's what gets you to a true global store of value is when you start to see some of those moves. I think we are seeing some of those. But I don't think it's American corporates.

I mean, Americans, I don't think even realize 80% of all the volume in the world is Binance, Hobie, and OKX. Coinbase is tiny on the world stage. It's sort of frightening to think what Binance could be worth. If people really think Coinbase is worth $100 billion, what's Binance worth? Come on. I mean, what's cracking worth? Leaves are big numbers, right?

Yeah, I think people will be shocked when they start to see. Well, I guess it's already out with the Coinbase S-1, but the numbers are really impressive, to your point. And I think a lot of people that might not have been in this every day and realized how big these businesses are, they would be really surprised to see how big some of the ones that you mentioned are. Yeah, but do you really think Coinbase is worth $100 billion? I mean, I'm asking you now. Yeah, I think that it depends on how do you think about value? I think it wouldn't surprise me at all if Coinbase trades up to $200 when it's listed publicly. I think in a lot of ways it will be a proxy for just crypto exposure for a lot of people that can't access Bitcoin.

And yeah, but 200 billion, Matt, I mean, if they do five, six billion in revenue this year, they did a billion in revenue last year, right? That's in the S one. And let's say they do five or six billion. I mean, 200. I mean, I was around in 99, 2000. That's a pretty generous multiple, right? Yeah, and I'm not saying that it's fundamentally worth that.

But I'm saying it would not surprise me at all since they're the blue chip name. that they get out publicly and they're essentially viewed as the proxy for the whole industry. Yeah, look, unless you think maybe they are going to do 10, 15 billion in revenue. I mean, like, I don't know. It would be great for all of us in the space. We're all rooting for them as much as possible. But it just seems like such an astronomical number. It does.

I would say, though, that I think, and this is more of a general perspective on the industry and maybe even into defy, but I think these addressable markets are so much bigger than people actually think. And so if you look at some of the things that are being built in defy around money market funds, basically, is what a lot of these things look like to me. And you look at the global market for money market funds, it's enormous. But I think what we're talking about here with defy potentially is even larger than that because you're giving people ability to participate in these things in a way that they just don't have access to through traditional rails.

And I think the fact that it's permissionless expands that addressable market. I think that we're going to look back on this maybe in the same way that we looked at the early days of Uber when you're comparing it to the size of the taxi market. But it actually was a lot bigger when you unlocked the kind of the ability for anyone with a smartphone to go anywhere they want. I think a lot of ways crypto is similar to that. Yeah, I agree completely. Except I think cryptocurrency is actually much, much bigger than Uber. As we know, there's $190 trillion in cash and cash plus duration equivalent. So that would be bonds globally, government corporate total.

So it's $190 trillion in cash, basically, plus duration. It just seems like even if you took just 10% of that, that's still $20 trillion. And you're probably going to take a lot more than 10%. Again, I think it probably happens over the next 10 years. I know these things define what's going on there. Super interesting. I just think there's still too much of a knowledge barrier to entry. And maybe it's reasonably easy for you and I to be involved there.

And we're one person away from someone who could explain every single aspect to us. But I think there's still quite a high bar. for people to just sort of throw themselves into defy and get involved with uniswap and all the different things. I just think it's the language, just even understanding the language and the mechanics can take months. Oh, yeah. If you're not initiated. I think that's right. And I think there's clearly usability challenges there. I think a lot of these things are just not built with a customer empathy for like real world people that are trying to use these platforms. I also think there's just a ton of regulatory risk. And I think we're going to see what,

But a Gensler, SEC has to say about the way that some of these tokens are launched. I also think we're going to hear from the Treasury Department and the DOJ around some of the anti-money laundering and travel rule compliance issues. So it's early days. I do think in a lot of ways the technology itself is the genie's kind of out of the bottle. It's just math at the end of the day. And I think these things will exist in some capacity. I guess the question is to what extent will they coexist with the U.S.

regulatory regime and are there safe harbors and things like that? I mean, look, I think the U.S., you have people in the regulatory bodies who are sort of crypto friendly. I mean, Gensler is or crypto knowledgeable. I don't think anyone wants people to get ripped off too much or wants fraud out there. So there is some minimum amount of regulation that we probably all can agree on. you know, we don't want it to fund terrorist activity. And it largely does not.

And I think if there's one place you don't want to do illicit stuff, it's on the Bitcoin network because it's all there. And you've got companies like chain analysis that can sort of hunt you down if you're a bad actor now, right? So I think the public's perception that there's still like nefarious activity going on, It's just, that's a narrative from five years ago. Totally. I agree.

It's only the very dumb criminals that are doing things on public blockchains, fully traceable, that it's kind of a worn out narrative. One of the things I'd love to get your perspective on is I did get caught off guard just with the pace of these balance sheet purchases. I would have thought that the endowments would have been way ahead of the game. And I know some are. And I know that you're very close to quite a few people in the endowment world. So how are endowments thinking about this as a category?

and I guess where do you see that going? Yeah, I've mentioned this a few times that I run the investment committee for an endowment of a school. It's about $550 million, $600 million in size. We were very fortunate to put 1% of the endowment into the space broadly, majority in Bitcoin, of course, and then just a few other little things. But that was in Q119. Look, there's a committee.

I had to bring in, I'd been talking about it before, it wasn't enough for the committee to hear me say, these are the 20 reasons why we should do it. I brought in an outside party, very well-respected investor who was also on my side sort of on this. And he made the presentation as well. And from hearing it from a third party, I was able to convince the committee. But it was a lot of work. And our advisors on the endowment, I had to convince them as well. And the way we did it was really, I think the thing that got us over the hump there was just the Wences Casaris theme of just put 1% in here. These are the possibilities. Yeah, maybe we're wrong, but we're only going to lose 1%.

And we think this is a 10x possibility, a 20x possibility. And endowments are uniquely positioned to own Bitcoin in my view because they're very long. term and they don't need the liquidity, most of them. And so we have 20% of our endowment in private equity, and a lot of that's locked up for 10 years. So I just said, look, we're going to have 1%, we're going to hold it for 10 years. We're already used to doing that. And worst case scenario, we lose 1%. And so that obviously has grown and is now getting larger. And people on the committee know, we're not touching it. We don't talk about it. It's going to be there. And we'll come back to it in five to ten years. So I think that being said, endowments are usually super conservative.

And there are advisors out there who suggest very conservative asset allocation models. We're in a very good position. It's the third largest high school endowment in the country or maybe it's the fourth largest. And we're blessed with lots of. fantastic donors and great people on the committee so we can take a little more risk. But you have to think about it in those terms that, hey, we're just going to risk this 1%. And it's sitting in bonds or in cash. We now have a zero bond allocation, of course, and have for a while. But that's the way we sort of think about it.

But you need more people who are translators like myself to. explain it to them in terms they understand, and then to say, look, you don't even have to take a lot of risk. It's just 1%. And there really aren't. Harvard and Yale, I think we were the first high school endowment in the country to own Bitcoin directly. We own it directly. And I don't even think Harvard and Yale do. I think they've invested in some of the VC funds. And you're in Boston, so you probably know what a Harvard endowment is doing. Maybe they own some Bitcoin directly now, I don't know. There are quite a few that have investments, of course, in VC firms, and maybe they're even investors of yours, and they can understand that, right? Because there's a

person they get, you're a VC, they think of it probably as early tech, even though it's a lot more than that. But I think that also insurance companies, mass mutual, what they did with that 100 million allocating the Bitcoin, I think that it's those giant pools of capital. that need to start dipping their toes in where the risk of losing 1% is not a big deal, but then it gets them to a position where they have a billion dollars in it or whatever. I think that's nodding violently, as you're saying it, remembering a conversation that I had back in 2014 at Fidelity and we were talking to a lot of other big financial firms. And I was speaking to a very senior person at one of those banks who was saying,

Look, I get it. I think that this is a really disruptive technology, but the messengers are kind of suboptimal. And it's kind of saying everyone in the industry feels like they're one click away from being a con artist. But that's obviously changed quite a bit. And I think having people like yourself enter and having large capital allocators, hear the message differently might be part of this. Yeah, but let me tell you, it's still the first inning of that. I still have plenty of people who just harp on the same.

things. Oh, the government, a government could ban it. There's lots of fraud. They can increase the supply infinitely. When you start trying to explain hard forks and soft forks and 51% attacks and then get into mining and node operators, forget it. Like you've knocked off, I mean, it takes six months for a traditional guy to get it. And it may be that we just need time and time for some of the younger people to come up. It's their time. The old guys who don't want to adjust, who don't want to adapt, this is nature. So they're going to slowly float away. And that's what normally happens in business. And we'll have younger, smarter people who will be able to articulate, you know, like yourself, be able to articulate the message well. And it's a slower process. It feels to

us like it's happening every day. Bitcoin goes from 10,000 to 50,000. It's like everything's on fire immediately all day 24, 7, 365. But the reality of the matter is that people are still very few people who get it in a sense that we would say get it. Totally, totally. So you seem just incredibly energized about what you're working on now and you're someone who started businesses, started funds in the past. How does starting 10T compare to starting other businesses that you've been involved in? It's really interesting. I mean, question that I haven't been asked before. And I would say, you know, I'm drawn to starting businesses in areas that are empty. I figure, I don't like having competition. I like knowing that if I screw up, there's no one there to eat my lunch. And I sort of

still feel that way in the physical goal business. The ag business was the same. There are only four or five institutional buyers of farmland in America when we launched Agcoa. And we ended up becoming sort of the largest buyer in the country for several years there in 08, 09, 10, 11. So in the sense that we're the first to explicitly focus on this area, it feels sort of normal to me, what is not normal is the speed and velocity. BlockFi is a perfect example. I'm not sure whether you were investors there, but yeah, we are. Yeah, we were. So, I mean, I remember that initial raise and I'm thinking, oh my God, borrowing and lending, I got to own this because I love that concept. I love the business. It was at a $50 million valuation. I couldn't get in. I didn't

have a route to get in. And this was just, it would have been for me personally. And then, And a year later, they come around and they raise it $500 million and I try to get involved there, but I just, I don't have an apparatus. DTAP wouldn't have put in enough money to get on the radar. And now they raise it $2.8 billion. And so, I mean, at $500 billion, it would have been a T-T company. But it's crazy to think that a company could go from $500 to $2.8 that quickly. And it's probably $2.8 going to $10 or $15 potentially.

So I think, look, any person under 35 who's entrepreneurial, who cares about investment, wants to be part of the future, wants to make a nice chunk of money, I mean, this is really the only place that I recommend in terms of their focus. So I wouldn't have said that necessarily about the gold or ag businesses. This is really, I've never seen anything, a macro opportunity like this, the asymmetry, And I think it still is there because it's difficult to understand. Farmland, gold, people from the legacy world can understand that for the most part. It was weird.

It was alternative. They were alternative assets. But this is just more than alternative assets. This is an alternative world. You have got to say, and I find one of the thing that says, if you don't throw yourself 100% into this world, this is not a side hustle situation. This is all in, or you're not going to be able to understand or keep up the pace of what's going on here. I totally agree. I always get a hard time from my friends that I grew up with because I used to be a diehard sports fan. I used to watch like every

Red Sox game, but I haven't watched a game in like five years because there's just no time. You have to be 100% all in on this. Yeah. Look, I don't know. anything that's more interesting. I haven't given up the Yankee games, though. I've been a Yankee fan since the 70s, and I wouldn't say I haven't watched the Yankee game in five years, but I will tell you that it's an all-encompassing thing. You really have to be passionate about it. And so the people that we've hired, I don't normally hire for a resume. I mean, I hire people who are passionate. And you can see in this space the people who, you know, maybe there are VC, in another area or they're in private equity somewhere or they're at a bank.

But they're so passionate about it, they've spent all of their free time, basically, engrossed. And it's easy for me to hire somebody like that because it's more like a hobby in a way, right, a hobby that's a life focus. Totally agree. Well, that's a great place to leave it, Dan. Where can we send people to learn more about 10T holdings? Where can we send entrepreneurs?

And it sounds like you're hiring. Where can we send people? Yeah, we just have a main email box, I are at 10Tfund.com. And we have a landing page, typical 10TFund.com, www. And, you know, they can reach out there. And we are, we're growing quickly and very excited about this business and being involved. Well, I'm really excited that you're here as well. And thanks so much for joining us today on the pod. Thanks, man. My pleasure. Thanks for listening to another episode of On the Brink with Castle Island. To find out more about Castle Island, visit castle island.V.C. To listen to all of our podcast episodes,

please go to On the Brink-Podcast.com or just click on the tab in our website. Thanks for listening.