On The Brink with Castle Island - Marcos Veremis (Evanston Capital) on the Institutional Allocators Perspective on Cryptoassets (EP.75)

Episode Date: May 4, 2020

Marcos Veremis, Managing Director at Evanston Capital Management joins the show. In this episode we discuss: Marcos' time at Cambridge Associates and how he came to lead cryptoasset research at the firm His perspectives on the various investment theses that are gaining traction with institutional allocators Fund structure, strategy and other crypto-fund considerations To learn more about Evanston Capital Management visit their website

Today on the podcast we had Marcos Verrimis, managing director at Evanston Capital Management. Marcos is someone I've been wanting to have on the podcast for quite some time because I think he has a unique perspective on the blockchain and crypto asset industry. This perspective is from the lens of how institutional allocators are thinking about this industry. Prior to Evanston Capital Management, Marcos was a managing director at Cambridge Associates, an investment advisor based in Boston, Massachusetts. At Cambridge, Marcos led crypto asset and blockchain research and him and his team, author, a widely circulated white paper titled Crypto Assets, Venture into the Unknown. In this episode, we discussed a range of topics, including Marcos's view on the industry narratives that resonate the most strongly with institutional allocators. We also talked about his perspective on generalist

funds versus specialized funds in the pros and cons of the hedge fund model versus the venture capital model for this industry. This episode was a lot of fun. So without further ado, here's our conversation with Marcos Verimis. 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 Britain's ailing economy with a new round of Concentive 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. Marcos, thanks so much for joining the podcast. We're taping this probably a few weeks before we release it. And we're right in the middle of the COVID pandemic and the lockdown. So it would be strange to start a podcast, I think, in this day and age, without just asking you, how are things going from your perspective? And what's life like these past few weeks for you?

So far, you know, it's working fine. You know, work is done in the end. You know, you have something to do, you finish it. I must say that it is when we can talk about it further with relation to crypto, but it is an extraordinary set of circumstances where you have supply and demand destruction all of a sudden in the economy on a grand scale and globally. And I don't think we've ever seen such a thing happen before in this scale. I mean, there have been pandemics like the 18 pandemic, but I don't believe the entire world shut down. at the same time the way it did now. And everything is also very interrelated in this globalized world.

So it is one of a kind and hopefully it's going to be short lived. Yeah, from your lips to God's ears. That's absolutely right. Well, there's so much to talk with you today about and definitely want to get into the crypto side of things, want to talk about your experience at Cambridge. But maybe the best thing to do would be to just have you give us a quick introduction and talk a little bit about your career journey to date. and then we can get into the blockchain part of the things.

Yes, of course, Matt. First of all, it's great to be here and thank you for the invite, and especially during these extraordinary times. I can give you my background. I mean, I won't make it too detailed. I don't want to bore you, but my career is for the past 13 and a half years and until March the 31st was with Cambridge Associates. I did many different things at Cambridge Associates.

I joined them straight out of Columbia Business School. And I lived in three different cities, and I took on very different roles, spanning from client relationship work to research, portfolio management, and other. More recently, I joined a firm called Evanson Capital Management, which is a firm I've known for a very long time since the beginning of my career, actually. Evanson's main product is a fund of funds that has been around since 2002. And they are one of the most thoughtful, if not the most thoughtful team in the hedge fund space and in other spaces as well. So I'm really excited to be joining them at this time.

That's super exciting. We first got to know each other over the course of your time at Cambridge. And you were leading the charge with respect to blockchain and crypto assets. So we'd love to get into that a little bit. Some of our listeners might not be familiar with Cambridge Associates and exactly what the firm does. and why kind of crypto matters. So maybe could you set that up a little bit and talk about what your journey was like in terms of leading the charge for an organization like Cambridge?

Yeah, no, absolutely. So for those who don't know Cambridge Associates, it's an investment advisory firm, but also an investment management firm. It's developed over the years. And it started in the early 70s as a project for the Harvard University endowment and then developed into a full consulting firm initially for endowments. and then moved into family offices and pension sovereign wealth funds and so on.

The firm covers every asset class, and it was one of the firms that was very early into alternatives back in the late 70s, 80s and venture capital in particular. So it's developed relationships and expertise, and especially in the alternative space. And I joined, as I mentioned, straight out of business school, and I took on very different roles over the years and in different offices. So one of the roles I took was being, as I mentioned, a hedge fund specialist, but then more recently I started doing much more work in venture capital. And in the 2016-17 time period, I started seeing crypto creep into both the traditional hedge fund

world and the traditional venture capital world. And that piqued my interest. and I was immediately fascinated by the space for multiple different reasons. And I can walk you through some of the reasons. There are plenty, but first the idea of being able to create and transact value outside of intermediaries and on the internet in a native way I thought was a truly novel concept and groundbreaking. The other thing is that, as you know very well as a practitioner, it combined different disciplines into one discipline.

So game theory, cryptography, distributed systems. And that was extremely intellectually fascinating to say the least. But also what was fascinating in my professional setting was the level of disagreement with regards to the technology's potential and in the investment world. So there were smart folks talking about crypto being a fraud or, you know, know, irrelevant. And then you had very smart people, I'd say mostly on the venture side, saying that this is potentially a transformational technology in many ways. So I started reading books like mastering Bitcoin, plenty of medium articles. And over time, I started making some of my

own investments in both funds and a couple of angel investments. Happy to talk about them too later. And so that's how I became aware and interested in this field. And of course, you know, my professional role helped me a lot to get a lot of information flow. It's fascinating to hear you talk about sort of the disagreements that really intelligent people can have about this technology. And I think it's something that we've seen in all sorts of other technologies throughout history where you have people that are very well respected and thought of as industry leaders that have a very strong viewpoint one way or the other and maybe they end up being

wrong. So I'm thinking about Ken Olson, the CEO of Digital Equipment Corporation. Back in 1974, he was asked about the prospect of personal computers and the fact that anyone could have a computer in their home. And he basically dismissed it. He said, I don't know why anyone would ever want a computer in their home. And around the same time period, you had science fiction writer, Arthur C. Clark writing about, you know, everyone will have what ended up being an iPhone.

He didn't call it that. But basically having processing power and the ability to do your job remotely. and everyone will have it. So it's interesting because in the context of blockchain, you see people like Jamie Diamond, who's really opposed to this technology and says that public blockchains and Bitcoin specifically are tulip bubbles. So you must have seen quite a bit of that in your journeys at Cambridge where you had really smart people taking a strong viewpoint, either pro or con, and trying to reconcile that can be challenging sometimes. A hundred percent, 100%. And in fact, I would say that I never saw such a thing in my

career before. I've seen disagreements, obviously, you know, on multiple asset classes and cycles, you know, whether it's a good distress cycle or not a good distress cycle, you know, a lot of disagreements of this sort, but I've never seen a disagreement that is being so extreme in my career. And that is immediately fascinating and an area where you want to look into. because you had as I said, you know, like usually the hedge fund guys, some of the, you know, very well-known hedge fund portfolio managers were dismissing the space as a two-lit bubble. But then you also had some of the venture capital guys mostly again saying that this is a new computing platform, a new way of organizing human activity, you know, really big concepts.

Definitely. I mean, I had that experience when I was at first. Fidelity before we had started the fund. We were in this time period where we're going business unit to business unit and almost doing lunch and learns about the technology and trying to surface ideas around where some products could be deployed. And this was back in 2015, 16, but one of the big challenges for me at the time was just how do you meet people where they are? So do you start with, you know, this is something like a digital commodity or something like a digital gold? Do you start with here's a digital compute system? Do you start with, you start with

security settlement. Do you say, you know, maybe this will change the way that certain life cycle events happen? And I'd imagine that it's a similar type of challenge from your seat throughout the years you've been explaining this to institutional investors. And so do you start with this is a commodity, this is a digital compute system? And furthermore, you have all sorts of ideas around what is the strategy and structure that makes the most sense to access this market if you're an institutional investor. I mean, you could buy it and hold it. You could invest through a hedge fund and you could be actively trading this. You could go early stage startups.

You could put it in a venture wrapper. So, I mean, how do you weigh the pros and cons of these approaches and how did you think about explaining the tradeoffs here? That's a great question. I mean, I have some thoughts on the various ways of investing in crypto, you know, hedge funds versus venture structures and versus investing directly and so on. But let me start by saying that so far in the institutional world, I think those who are looking at the space are taking a venture perspective.

They're looking at it through a venture lens and view it kind of as a subcategory of venture. That's the way it's been perceived in most of these institutions from the teams. And it's usually the venture teams looking at it. In terms of, you know, how do you invest? I've seen, as you said, this is a very broad space. You have digital gold, digital compute. you have all sorts of digital primitives here and digital strategies around crypto. I think, first of all, I've seen, you know, hedge funds that do both tokens and Bitcoin

and equity. And I've seen venture capital firms that do all of the above as well. And, you know, I've also seen on in some occasions, some institutional investors limited at this point, invest directly in Bitcoin and Ethereum and open up like a fidelity or Coinbase account. I think in my view, the venture structure is the most interesting one with an appropriate one, but with some negatives. But I can elaborate on that. So why is it? So first of all, I think with venture, you know, they draw down, they can draw down the capital as you're a venture capital. is you can draw down the capital over a period of time, maybe two, three years or more in some cases. And in a place as volatile as this and as fast moving as this, I think that is a very nice way to kind of average into a space.

You're also protected with a closed-ended structure from redemptions. And I think under a hedge fund structure, you could face a lot of redemptions at the worst possible time. and you can't play offense when you truly have to play offense. And that is a serious problem. There's also more or less business risk with a VC structure. So I've tended without being rigid about it to favor VC structures that do, that play the entire game of crypto and blockchain, meaning from equity all the way to tokens.

I've generally favored that at this point. They're also, you know, the high watermark and the way carries paid is at the very end of it as well. But on the other hand, you know, with hedge funds, if you're investing primarily in things like Bitcoin or Ethereum, you know, you want to have more liquidity, right? I mean, it's it makes a lot of sense to give the investor the option to rebalance and to liquidate whenever they want. Finally, you know, buying directly, I think it makes a ton of sense. You know, if somebody, a lot of these funds have a ton of Bitcoin as an example, right? They have a ton of Bitcoin in their portfolio, maybe 20%, 30%, some cases maybe more than that. And you're paying a 220 to hold Bitcoin while you could be buying it yourself and paying it much less.

But to your question, you know, these are some of the pros and cons, but then in practice, I think most institutions are going the fund investing route, even when Bitcoin is involved. at this stage. And most of them, at least from the institutional world, are going through the venture structure way, mostly. You bring up some really fascinating points that I'd love to tease out a little bit. So one is just this idea around holding direct Bitcoin exposure within a fund. And I'm curious your point of you, you know, having spoken with a number of LPs and worked with tons of LPs over the course of your career, is buying Bitcoin directly something that, you know, these LPs are ready for, whether that be an endowment or a pension fund, is that something

that is being contemplated and considered? I guess one of the interesting things to me has been some of these folks probably don't have direct gold exposure, so it might be harder to make a case to hold Bitcoin just from a classification standpoint. How do those conversations go? So far, there have been very few willing to hold Bitcoin directly. You know, a very small minority of even this small minority that's investing in crypto. There could be numerous reasons for that. The first is that they don't know how to do it or they're not comfortable bringing to their investment committees

and their boards, the idea of opening up a custody account and trying to explain what that is and so on. If you invest through a fund, it's very straightforward. So that could be a reason. The other reason is that they probably want it actively traded by somebody because if they held it and bought it in a passive way, they wouldn't know what to do with it over time. So they'd probably want a manager to do it for them.

So kind of these two considerations maybe make most institutions want to go access it through a fund structure even if they pay much more. I think though that that could change. That's my gut feeling. As people get more familiar with a space, it could change. In my view, you could have more. you know more direct bitcoin holdings rather than through fund structures also you know a lot of

these investors are not just investing here to invest in bitcoin so they they think some of them don't even like bitcoin for the reasons that we can talk about but even the ones who do might say you know let the manager kind of hold the little bit of that but you know i'm investing in the space as a whole and they can decide you know how to spread their bets On the other hand, there have been some funds out there where institutional investors have invested in that hold a lot of Bitcoin. So that argument that I just mentioned isn't relevant in these cases. I think it's more about the previous hurdles that I mentioned, you know, custody, communication to their boards and all of that. Got it.

So you referenced folks that are looking at this industry and maybe are interested in things other than Bitcoin within the crypto sector. What is the common viewpoint with folks like that? Where are they coming at it from? There are three types. In my mind, I've outlined three types of institutional investors, right, and how they approach crypto. There are those who confuse crypto in general with Bitcoin. So in their mind, crypto and Bitcoin is one and the same thing.

They're probably not too far ahead in their research into the space. And hence, crypto is about the non-sovereign money narrative. to them. And within this group, the vast majority, to dismiss it, but there are some that are quite interested about it, and especially during these times. A second group is those who view crypto, I would say broadly speaking, as a new method, a new way, a new technology to cut costs, increase efficiencies. And within this group, a lot of folks within this group are the ones to say blockchain, not crypto, but not necessarily. And finally, there are those I think who are further out into their thinking and have done more

work, and they view crypto as having many sides to it, you know, from sovereign money, all the way to decentralized computing and decentralized applications, to gaming, to the simple fact that creative minds have been entering the space and have freedom to innovate in the space. And so it feels like venture capital in the early 90s. and they're betting on innovation to win no matter how, how it plays out. So I'd say that these are kind of the three types of categories I've been seeing in terms of investors. And obviously, the way you approach conversations with each one is it should be a bit different.

You know, maybe more education in one case, you know, maybe explaining the value of public blockchains in another case. You know, you need to figure out who you're talking to and how they're thinking about it. the space. That's well put. I totally agree with what you just said. It's been interesting to me to watch just the evolution of the fund landscape. And I'm going back even to before this is what I was doing. You know, back in 2014, before Ethereum launched, you didn't really see dedicated managers in this sector. And it was really after Ethereum launched and eventually the ERC 20 token standard, that we started to see the launch of dedicated hedge funds. So the metastables and polychains of the world being sort of the early adopters. Of course, there's Pantara before that with their Bitcoin

fund. But now we have a lot more. So there's dedicated venture funds, there's dedicated crypto hedge funds. What do you make of this specialization? Do you think that this will be the way things endure going forward? Yeah, I believe so. I believe it will be the way things endure. I've gotten a lot of throughout my few years that I've been covering the space formally and speaking with investors. I've gotten a lot of times the question, why should we be looking at these dedicated crypto funds when we have our generalist venture funds who can allocate there and they can allocate, decide the allocations for us and are probably better positioned than we are to time these things as well. And I think what they don't understand is that crypto and blockchain are, they are a very unique space,

very idiosyncratic space, take tokens, which is a big part of it in many cases, you know, with the early liquidity, the token economics, protocols with network participation and mining and staking and all of that stuff, which is completely new territory. And generally, non-traditional business models that require new frameworks and a fresh approach, let's say, to understanding them. I think for these reasons, and it makes a lot of sense to look at crypto-native funds because they are immersed into the space and develop expertise across all these areas. And also in a traditional VC firm structure or in a traditional hedge fund structure,

although I guess you can have successful crypto investments on crypto partners, there are, I think, structural barriers to investing effectively in the space. and such as, you know, the LPs might not want you to do it, you know, first of all, while with crypto-nated funds, you know what you're getting into. The LPA, the limited partnership agreements need to be changed, you know, the investment committee processes in these more traditional firms are quite often are consensus-driven, and then if you combine that with a lack of knowledge of the crypto space from most of the members of a partnership,

you can expect that it's not an optimal environment for crypto and blockchain investing. And then frankly, successful partners in, let's say, traditional venture capital, have both, or at least until recently, well, they still do, I guess, but they have both a ton of money on their hands because, you know, the industry overhang

in traditional ventures isn't it a $250 billion or so. But they also have a lot of opportunities because, you know, as you know, the traditional Web 2 businesses are still flourishing and entering various parts of the economy. So why would they deal with a crypto space? So you need a clean slate, aligned incentives,

and you need people that are going to think in non-traditional ways. And I think that's the way you're going to get the best deals. You're going to be the most value-add to enterprise. entrepreneurs in the space. And that's how you're going to manage a portfolio much better. So I think this is a long answer to your question, but the short answer is that I think they make a lot of sense and I think they will remain the crypto dedicated funds. Well, obviously, I like to hear that answer being a dedicated fund ourselves. But one of the

things that I often think about is just how much is changing so quickly at a protocol level in this industry and how important it is to be very familiar with what's happening. And so I'm speaking a little bit in support of what you just said around there is value in having this dedicated expertise. But I think about the sort of what could go wrong. And so think back to 2013, even 2012 to some extent, when there are a lot of traditional venture funds that were investing in their first blockchain oriented businesses, they were actually Bitcoin payments oriented companies. And a lot of these point of sale Bitcoin payments companies were founded under this premise that the block size would increase at some point and that Bitcoin would create this

competition for credit cards, basically. And so it was really this assumption that didn't really fully take into account what the protocol landscape was going to be. So if you talk to a core developer, you would have known, look, this is just not going to scale at the base layer. Bitcoin is not going to be able to process this type of activity. Maybe we'll have a later. Maybe we'll have a layer two type of thing built at some point eventually, but it's really unlikely that we're going to see the block size increase to the throughput required for these businesses to actually work. And so to me, that's one interesting example, but I think you could point to a ton of others where probably in defy would be a good example right now. If you're investing in operating

businesses that are built on some of these protocols, I mean, you better have a really good understanding of what's going on and what the roadmaps are for these open source communities. I don't know if you'd agree with that or not. Completely agree. And that goes back to the topic of being crypto-native and kind of being in the flow on the understanding of the communities around crypto and what is going on there in order to be able to make good investment decisions, right? If you're not immersed into it and you're not talking to these developers on a daily basis and the community on a daily basis, I think you have probably a clouded view of what is going on and you might make investment mistakes. their result. Definitely. Within that institutional client base that you're interacting with, what is the predominant narrative that right now is most powerful to them? You laid out those three categories, which I think make a ton of sense. I'm curious which one is resonating the most.

And maybe as a follow-up, has this crisis and the amount of money printing that is happening right now, is that impacting any of these narratives or any of the discussions that you're having with allocators? That's a very good question, and I think it varies. I would say that the store of value, like hard money narrative is still the weakest in the institutional world. I think the institutional world is mostly thinking of this space as in terms of decentralization, and that means efficiencies on cost cutting across industries and in different ways. And as I said, you know, some people say blockchain, not crypto, but there are folks that understand that crypto assets could be are an integral part of some of these networks.

So I'd say that's the narrative that is more dominant in the institutional world. But with that said, there are quite a few thinking about this non-sovereign money narrative. And the interesting, it's interesting that you ask me this question, because before a few days ago, you know, I did have a conversation with a large family office about the store of value narrative in light of these developments with a COVID response, meaning incredible money printing and incredible fiscal responses.

And the idea of hard money is probably going to start resonating with people more is my view as a result of the reaction to the COVID pandemic. I think that's totally right. I think that there's a narrative around hard money there's also potentially a narrative just around U.S. dollars on a blockchain, and this being a really compelling use case. We've seen a rapid growth in stable coins over the past year, but actually over the past five weeks, we've seen really an exponential growth in terms of the total value stored in stable coin assets, whether that be tether, USDC, die even. So these are growing. And

it's hard to say the reason why. I think some of it is risk off from other crypto assets, just being held on exchanges in stable coins. So that's one thing. But the other thing that it could potentially be is that the dollar itself is just so strong. And right now, there are people that are in countries that don't have access to U.S. banking. And they have access to stable coins. And so we could actually be seeing U.S. dollars on a blockchain as one of the first quote unquote killer apps happening right in front of us. Absolutely. Absolutely. So interesting what you say. I'm going to don't quote me on this because it was something I heard a while ago. I'm not sure that's the case still, but I think in a place like before COVID, in a place like

Argentina, I think Dai was trading at a premium on the US dollar in terms of, you know, because obviously it has benefits. It can be taken out of the country. There are no frictions. You don't need to hold paper dollars under your mattress. So demand was very high for it. Yeah, I've seen that as well. You know, it kind of reminds me of just the euro dollar system in some ways where you're going

to have this flight into dollar. So I think it could be about time for some of these stable coins to really have their moment to shine. So I obviously see that as sort of a tripwire, so to speak, development that could really accelerate awareness of this. I think just stable coins being made more broadly available. Are there any other things that you're monitoring and saying, look, if these certain things were to start happening, this could just get more serious, more quickly in the institutional context. and I would have more institutional conversations occurring if certain tripwires were to happen.

What are you monitoring? Yeah, in terms of trip wires. You know, there's issues like regulatory environment, custody, quantitative easing, obviously, that we talked about that could be triggers for engaging into these conversations. But I do think, I still really do think that the two big, most important things on getting institutions to enter this space,

are education. It still is the most important thing, and it's been going on for a while, but it's still the most important thing. And then maybe the first breakout app outside of Bitcoin, where you're starting to see signs happening in defy on other areas, stable coins, potentially. But I think as soon as you see a killer app,

like something from within the crypto space exploding in usage, the investors are going to come. and the improved regulatory custody environment, quantitative easing are all going to help for sure. So I think if you add all of these things together, you could see much more, I think, interest in the space. Again, the backdrop seems to be quite good for the space as a whole, in my mind, like the macro backdrop. I think so, right? Because you have the money story. You also have just the privacy narrative around these data monopolies really have been revealed to be quite predatory in the way that they manage customer personally identifiable information and the way that they monetize that.

And potentially some elements of this industry are just driving the truck straight towards that target in terms of what they're doing. They're giving self-sovereignty over data. We could see a re-architecting of the way that some of these systems work. So there's a lot of macro things that are driving in that direction. I'm curious what types of businesses. You mentioned that you're making investments in the space and have made investments. So what type of businesses are you most excited about in the industry right now? And feel free to name names if you'd like. Yeah, no, absolutely. So DFI is certainly a space that is developing in a very interesting way, in my opinion. I mean, you know better than me

how much it has grown since 2018 with multiple very interesting projects happening there. stable coins, as we mentioned, is another area that could be game-changing. I think for the space and for the world as a whole, it could be game-changing for the space because it will allow for non-volatile payments and then other crypto assets are going to play different roles, like securities or work tokens or store of value like Bitcoin. But the whole crypto ecosystem is going to potential is going to be unleashed by the stable coin group, you know, and that's why I think Libra wants to get in and sell, oh, you know, there are numerous things going on there. So very interesting things happening there.

I think Bitcoin has hard money or I would say as a hard asset with a fixed supply in a world of what I would describe the monetary and fiscal mess because we're talking about a situation in which we've been pumping money and we're at zero interest rates for 10 years now. And there's not much room for much more anymore. At some point, the confidence in the monetary system is going to suffer, especially if we start seeing inflation, which I'm not sure we're going to see any time soon, but it could happen at some point. And then I think there are other interesting developments in gaming that I've seen. Personally, I've made two angel investments in the space. I've made a couple of fund investments,

but I made two angel investments in the space. One is Tagomi, whom you probably know, and the other is bison trails. And they're both infrastructure-related plays at this stage and time. And I think that's a big necessity at the moment because you need more, more of this infrastructure in order to enable the use cases. I couldn't agree more with that. And certainly those companies are at the forefront of building some of that infrastructure. One of the fascinating things has been just, you know, a lot of this infrastructure needs to be around brokerage and custody and things that exist in other asset classes.

But with the exception of fidelity and one or two other big financial services firms that are a little bit more below the radar with what they're building, you haven't really seen folks enter. And it's sort of the classic innovators dilemma. It's a small market right now. It's certainly growing quickly. I'm sure they're looking at it and saying, well, we don't necessarily want to take the regulatory risk. It's not immediately obvious how big this market is going to be. Why don't we just wait? But in the meantime, you see really large businesses being built around custody and brokerage and order execution. And by the way, these, are in industry niches where in a traditional world, trading fees have gone to zero, custody fees are

being pushed far down. So there is some really interesting unit economics for some of these businesses. What's your take on just the response of incumbents right now? Do you think that incumbents have a move to be made here? And when are we going to start to see it? Incumbents, you mean the traditional prime brokerages and, you know, first of all, you have fidelity. I would call that an incumbent. Yeah, they're maybe one of the only incumbents that's been an early adopter here. And obviously, I'm biased. That's my former employer. But, you know, Fidelity saw this early and saw, hey, look, we're going to disrupt ourselves before we have someone else disrupt us. But you haven't seen banks take those actions. In the tech side, it's been interesting because, you know, you see

Facebook really moved early and they're trying to do, they're trying to do big things. Who knows if that ends up happening. But maybe the technology incumbents have been a little bit quicker. But you still don't see Amazon or Google with huge crypto teams necessarily? I think it's because the space is very young and it's very young and it's still a very embryonic niche area and the use cases are still limited. Even Bitcoin, which is actually, you know, very large. If it were a startup, we'd be talking about one of the most successful startups ever, at least up until now.

But it's still small for some of these giant firms to dedicate. resources. I think they'll start getting in when they see the growth in the space. I'm pretty sure that will happen. And who knows, behind the scenes, they are working on a few projects. Even with Libra, I mean, we didn't know that Facebook was doing anything until, I can't recall, but a few months before they announced it. We had some insights that they potentially were doing something, but we didn't precisely know how serious it was. That's a good point. And I think that's maybe a dovetail into the next point around just following the talent. And, you know, one of the things that tipped a lot of people off about Libra and Facebook's efforts was

they just started hiring talented people that we knew were in crypto. Christian Catalini from MIT comes to mind as someone who is hired there. And so when I see that happening, I get really excited. You're someone who's carved out a really fascinating career path. And it seems like you're at the intersection of two things that you're really passionate about in terms of your kind of non-crypto part of your job and then the fact that you get to play this critical role in explaining and evangelizing this industry. What type of advice would you give to young people that are looking to get into your line of work right now? I must say that my line of work is not an easy one these days. So I graduated from business school in 2006 when it was still the golden days of finance,

of traditional finance and consulting, and I became an investment consultant. Like I became the what was the career path many people wanted at the time, you know, and that were going from business school. But then for a number of cyclical and structural reasons that I can elaborate on, this industry, it has not been an easy place to be. Why? Because of QE, because of active management not working, because of fintech, because of disintermediation, you know, you've really needed to learn how to adapt. So it is a fascinating line of work, but I would not be content with what I know or I would tell people entering the space, actually, or any space these days. never be content with what you know.

What you think has value today might have much less value tomorrow. So learn, constantly learn, and do it throughout your career in good times because things can change in short notice. And I mean, I give you my personal example. You know, I started with traditional finance. I was actually very deeply involved into value investing. And I loved value investing from Columbia Business School. and I was a big believer in value investing. And this past decade has been a very tough environment for value investing for numerous reasons,

both because of structural changes in the economy with the internet web two, the most important one I think, but also because value stocks that just happened to go out of favor for an extended period of time. So you need to be able to adapt. You need to be able to look at things like crypto, you know, new areas that are emerging. You need to be able to change your frameworks and ways of thinking. So that's my advice. And it would be my advice for anyone actually in any job.

That's really great advice. And that's a great place to leave it. Marcos, where can people follow you, learn more about your work and stay in touch? Yeah. So I'm going to be joining Evanston now. So people can always find me at Evanston. I do have a Twitter account. I don't use it very much, but I might start using it more, and I actually don't even have my

full name on it, because for privacy reasons, but now I've revealed it. Good for you. It's Mark, my gnome is it's M-A-R-C-M-Y-N-O-M-E is my Twitter handle, and sometimes I post articles in there. I retweet things. We also did an audio session for South by Southwest, by the way, a couple of days. days ago with a couple of folks, Joe LaLuze from Bison Trails, a firm I invested in, and then Kyle from Multi-Coyne and Catherine from Notation. That was, I think, another interesting

session for people to listen to. That's great. And we'll also direct people in the show notes to the great Cambridge Associates report that you put together several months ago, venture into the unknown. I think that was called. It's really great resource. That's right. Yeah, yeah, sorry. I should have mentioned that. That's probably the only piece people know me about, you know, know my name for. It was written in February of 2019. It kind of described the space from an allocator's perspective. Yeah, I read that actually last night preparing for this interview again. And it holds up really well. So I'm looking forward to touching base in the months to come and seeing how things are going. And maybe we'll get you on to talk about the allocator's view in a couple months once we see what's going on with the world here. Absolutely. It's evolving all the time. I think that paper will be, I mean, the main framework behind the paper is not going to be stale, but some of the things being said in the paper are probably already stale, and they need to be revisited. Well, Marcos, this has been a lot of fun. I really appreciate making the time to come on the podcast. Matt, thank you so much and thanks everyone. And hang in there. We'll get through it. Thanks for listening to another episode of On the Brink with Castle Island. To find out more about Castle Island, visit castle island. Visit castle island.

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