Search Engine - 07 The Drug Trader

Episode Date: May 26, 2022

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Hi, I'm PJ Vote. This is the Crypto Island miniseries. In this episode, we talked to someone with a very illegal job that's after these advertisements for legal businesses. This episode of Surge Engine is brought to you in part by Square. Square, the easy way for business owners to take payments, book appointments, manage staff, and keep everything running in one place. Whether you're selling lattes, cutting hair, detailing cars, or running a design studio, Square helps you run your business without running yourself into the ground. I like seeing Square in action at my local coffee shop. They use Square for payments, and it just makes everything feel effortless. Quick checkout, digital receipts, sometimes even loyalty points. It really enhances the experience and lets the team focus on serving great coffee, not fumbling with the register. Square works wherever your customers are.

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Run your business smarter. The Square gets started today. Can't tell if I should be describing the space I'm in. Maybe not. It has stairs. It has a lot of stairs. So a few days ago, I went to interview this person.

Not going to use their real name. I'm going to change them identifying details for reasons that'll become clear. But I can say I visit him at his home in New York. Come by then. Cool space. Thanks. Just making music.

Let's turn it all off. What were you working on? Like what type of song? Um, this. This is just like a static. It's like a static. It's like a photo or a movie. Yeah, yeah, yeah, yeah.

Cool. Yeah. I don't think you've ever seen this many synthesizers on one lights. And I've seen a lot of synthesizers. Yeah. Yeah. This person, he's in this scene in Brooklyn of people who I really like. They're real artists, people who have not made peace with capitalism.

They spend their lives making absurd, beautiful follies, but they sometimes make their money through activities that are at best grade of black market. This person, he was in that scene. And some of the people in that scene who I knew, sometime in the past couple years, they all got really into crime. crypto, which I just found funny. These Brooklyn hippie hustlers were now also crypto day traders. Also, I just observe when I'm rolling.

You have a giant crypto chart up. So that's monitoring the market? Of course, yeah. How are you doing today? Today I'm doing great. I'm up like 100% in the last like four days. Even with the bear market? Oh, yeah. Bear market is just like, that doesn't mean anything to me because

bear market doesn't mean all these coins are just going down. They're going like this. You're doing like an up and down like cardiogram. Right. It's like a spiral. So as long as there's up and down movement, as long as there's that dynamic movement, then there's opportunity to make money. So you've been riding those waves? Yeah, 100%. This person's strategy is basically what crypto traders called technical analysis, which sounds fancier than it is. You look at the graph of the coin's price and you just try to make educated guesses on the spike and the drop. The bottom, the support, or the top, the resistance. But people on crypto Twitter, they spend all day just scribbling hypothetical lines on these charts, making gnostic predictions about where the price could go next.

When they should buy, when they should sell. Jay was doing the same thing. but just in his apartment. I think you want to just introduce yourself how we'll be referring to you for the purposes of this. Okay. Hi, my name is Jay. Okay. And Jay, what was the first time you heard about crypto at all? I guess the very first time I heard about crypto was like 2012.

I was in San Francisco. A friend was DJing a party. and I was hanging out with him and he was like oh I want you to meet this guy he's from Berkeley he's really smart I think you guys will really get along

you'll have a lot to talk about so I spent most of the show sitting at a table with him while our friend was DJing and he was telling me about this strange thing and he was a very very early minor

he was mining Bitcoin he was mining Bitcoin he was mining Bitcoin and I think other things as well. Maybe some that are defunct now, I'm not sure. But he was obviously, he's one of those bright-eyed manic geniuses that as soon as they start talking, they get very animated. I might be one of them too.

And he was so excited about it. And I mean, he was losing me because it just sounded like, it sounded like he was describing like fantasy and I had no basis in reality. for it. Like, I couldn't ground it to anything that I knew before. Like, money was money and gold was gold and silver coins were silver coins. And I'd, like, amassed silver coins before. But I, I just couldn't really figure what he was talking about. Wait, why had you amassed silver coins before? Well, I used to just travel around a lot with, like, nothing. I'd never, like, I never had, like,

steady income or anything. And one of the things I used to do was I would go to banks when I was, like, hitchhiking across the country and, like, the Midwest. or something, you go to a small town bank with like 100 bucks and you buy all their 50 cent coins. Why? Because all 50 cent pieces in the U.S. before 1964 or 90% silver. And there's no one, there was no one separating them out. So you'd buy $100 worth of 50 cent coins.

You'd get 200 coins. And you'd always find three or four pure silver coins. in there. And so then you can melt down the silver? No, you just keep them. They're worth, I mean, they're worth as much as the price of silver. I look this up, and it's totally true. Although it's 90% silver coins before 1965, not 1964.

Still, pretty crazy. I feel like whatever the thing about you that collects facts like that about the world is probably related to the thing about you that is excited about cryptocurrency. Do you know what I mean? Yeah, I mean, it's exciting because it's... because it's silver there for the taking. It's like a ripe fruit tree or something. And, I mean, at the time, that was exciting to me.

That was like, in my mind, that's like a retirement account. I have a box full of silver coins, you know, some storage you in Vermont. So that was the first time the ghost of crypto visited Jay. But at the time, he didn't see the appeal. It wasn't solid the way silver was. About a year later, I used to run weed, like from more. weed farms on the west coast to New York, which was the best market for it. It's worth twice as much out here. And at the time, it was a really lucrative thing. And I had a guy who was, he had him

a trucking service. And he used to do the actual transport for us. And one time he owed me like 10 grand or something. And he was like, hey, do you want 10 Bitcoin? Because it was about a thousand bucks. And I was like, what is it? And then he explained it to me and he didn't know shit either. He just was using it as like a currency, but he was just like, it's, I don't know, it's like this thing. Like, it's going to be worth a lot more in the future. Like, he wasn't very convincing. But I remembered that, oh, that's what that kid had in Berkeley. So I was like, sure, I'll take 10 Bitcoin. So he transfers 10 Bitcoin into my wallet. I get, like, I, like, I, like, I, open a wallet. I read about the minimum you have to do and I open this wallet. And like the next day,

Bitcoin goes from like a thousand to like nine hundred and fifty or something. And I'm like, yo man, I just I just lost a thousand bucks. And he's like, well, I'll have the cash like next week. I can just buy them back from you if you want. I was like, yeah, but you're going to buy them back for what they cost. They're going to buy them for a thousand bucks each. And he's like, okay, okay, no problem. So I had 10 Bitcoin for like a week in 2012. Which at the height last year would have been like... It's like $750,000. Okay, so it's like the second time crypto visits your life.

It's the second time. Turn it away. And I turn it away. And the third time I married it. Jay finally settled down with crypto, not because an underworld contact visited him with a virtual briefcase full of Bitcoin, although that does happen later in the story. Right now, it's still 2017. And the thing that gets Jay into crypto, it's the same thing that was happening to a lot of people back then. The price of Bitcoin just started spiking. And Jay bought a little bit around Thanksgiving

of that year. During this time, it was unreal. You would wake up every morning and your account had 30% more money in it than it did the night before. And it just kept doing it. that for like two months. And that's when I got hooked. Of course, Jay, like a lot of people, held on too long. He didn't sell the top. But the spikiness and risk of the crypto gamble, it had him now. Most people who I've encountered who day trade crypto, they don't sell Bitcoin or Ethereum.

Those are like in this world where you save your winnings. They're almost like index funds. Instead, day traders make money trading the tinier coins. Although Jay doesn't really say trade. He says play. So what do you play? I play smaller coins that are solid enough that I don't have to worry about total collapse, like Luna excluded, but are small enough that there is room to go to 3X in a couple of months.

There's very good news sources out there. And that's what just saved my ass with Luna. I read an article that specifically detailed why the algorithm was dangerous and gave an example of the biggest coin to date before Luna that had tried to do that stable coin same algorithm and it completely failed. And it made perfect sense. It was a reasonable article. Then I started cross-checking it and I found a couple other ones that said the same thing. And I was like, that's enough information for me to get out of it. What's the best investment you've had so far in crypto?

What's been the most successful play? God, I'm not even sure. But, like, last year I went like 5x twice. You mean? Like, I went, I took a certain amount of money, and I went 5x with it, and then, like, went back down to, like, five, ten grand. That's what, like, crypto people call a round trip. Yeah, I did that. I did that, actually did that three times last year.

How do you handle, how do you not, how does it not, I just, the stomach for it? Well, at this point, it's like, I really am confident that I can do it again, so it's not a problem. Two of those were completely out of my hands. Like, I was in Mexico. I had just gone on margin, a half a million dollars. going on margin. I might need to explain this. So this is something that financial institutions

and professional investors have always done, but that now Robin Hood customers and crypto traders are doing as well. So it goes like this. You've decided you want to buy an enormous amount of a stock or of crypto. You don't have the money to do it. So you put up some of your own money as collateral,

and then you ask the bank or the exchange to lend you a lot more. Sounds great. Unless the price of the things, you bought drops, then you can get margin called. The bank can say, we want to be paid back right now. And if you can't do it, which of course you can't, they take your collateral and they sell the asset you bought with their money.

They liquidate you in order to get their money back. Again, in the old world, this was a risky move that professionals did. Now it's something Jay does on his phone. Like I was in Mexico. I had just gone on margin a half a million dollars. So like the exchange had just given me like 400. I had 50,000 of my own money in there and they gave me like 400,000 on top of it. And I had it all in.

And I was doing obviously then I'm really watching the cycles. But a little tiny movement that it does 10 times a day is going to make me 20 grand. You know? So I was just doing like that, boom, boom. Every day just making a sale and then getting out. But the, uh, I was in Mexico and I lost my phone. And I happened to lose my phone

the very moment that there was a major crash in Bitcoin. So everything just dropped such a significant percentage that when you're on margin like that, if it goes below a certain percentage, they force liquidate sales of all your things. I have notifications set up on my phone. That gives you warning, but I didn't know where my phone was. It was in a cab in Mexico.

So, yeah, so I really couldn't do anything about that. Jay lost $50,000 that day, but he was okay because of his other income stream, which is far more profitable. More about that income stream after the break. This episode of Search Engine is brought to you in part by Vanguard. To all the financial advisors out there whose job is to help your clients keep more of what they earn, Vanguard is here to help you with that. Vanguard is slashing fees again, this time for more than 50 of its funds. That's on top of big fee cuts they gave last year to investors in 87 of their funds.

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This episode of Search Engine is brought to you in part by Instacart. Instacart is more than a grocery technology platform. It's really about giving you back time and making everyday tasks feel a whole lot easier. It connects you to thousands of stores across the country so you can get what you need without having to plan your whole day around it. Lately, I've been using it a ton when I'm trying to just stay on track with meals during the week. I'll sit down, map out a few recipes,

and just build my cart with the things I'll need. Specific ingredients, brands I like, even the little things that I would normally forget. really feels like everything is being chosen thoughtfully, which makes a huge difference if you care about quality. Plus, there's the convenience factor, which is what honestly just keeps me coming back. Whether I'm planning ahead or just realizing last minute that I'm out of basics,

I can order through the app and get what I need on my schedule. Instacart brings convenience, quality, and ease right to your door so you can focus on what matters most. Download the Instacart app now and get groceries just how you like. Welcome back to the show. It's funny because one of the, One of the things I wrote into a lot in crypto is like, it's like a stereotype about cryptocurrency that it's like, oh, it's not useful for anything.

And then people will be like, well, it's useful for like illicit activities. But like you don't hear from people who are using it for illicit activities for like obvious reasons. I mean, I do. I hear from them frequently. Jay sells drugs. He doesn't do it himself. He owns a delivery service. But when his customers order stuff, he tries to use it as an opportunity to free them from

their addiction to the dollar. He tries to get them hooked on crypto instead. I've actually turned a lot of people onto it because I'll give them a discount. So I'll be like, if you pay with crypto, you know, you get like $50 off your order. People are like, wow, how do I sign up? And actually on the menu of the service, there's like very detailed instructions on how to sign up for crypto. And so do you tell them to like get an account with an exchange? Like how do you, what is that? No, well, there's, there's a couple things like, you know, Venmo now you can buy crypto. I actually didn't know that.

You can buy it, but it's a scam because you can't remove it from Venmo. So Jay's not into Venmo because the crypto you buy there doesn't leave the app. But he does like another big corporate payment app that allows crypto purchases. One you may be familiar with if you listen to the Genesis episode in Miami. Cash app is what the instructions are on the menu. Oh, interesting. Cash app is awesome because it's giving people who they hear crypto and they're like, oh, I don't know what that is.

I'm not that kind of person. I'm not going to be able to figure that out. And it is extremely intimidated to get into crypto. Just Coinbase is trying to be like the Walmart of crypto. But just opening a Coinbase account and getting it all verified is very complicated. I don't even know sometimes what to tell someone. They're like, I can't send from my Coinbase account. I'm like, I don't know, man.

It was so funny to me understanding this. Like back in Miami, Abram, the street preacher, had hated. cash app because he saw Bitcoin as the people's money and cash app as a corporate tentacle wrapped around it. But here I saw how cash app created by Twitter founder Jack Dorsey, also now a Bitcoin maxi, how his invention cash app was being used for its most obvious purpose to help people buy drugs. So what is the benefit to you of them paying directly in crypto? It's like, what does that do for you? Well, there's no, like the primary thing is, the IRS. It's electronic money that's not visible to the IRS. It could be. I mean, if they

like really drill down into anyone's situation, they can find anything. But unless they're doing that, it's pretty safe and hidden from view for tax purposes. It's one of my questions as an outsider who can't get that inside is how much of crypto's appeal for people is just tax avoidance. Like what percentage of it is that? I mean, I'm not sure. That's just a small part of it for me. The growth factor is a huge part of it. And also philosophically, it feels like good.

It feels okay, you know. Talk to me more about that. Like, what is the philosophical appeal of crypto for you? It's really like an economy of the people. And like very similar to the way weed was. And probably still is, but less so. It's a way for just any free person to get real wealth. Why did, I'm intrigued by this idea with weed, because it's like something you can grow and sell and if you're willing to take on risk.

Like it's an access point. Yeah, exactly. Like they're, I mean, in say the 90s, I didn't know anyone with real money. unless they inherited it or something. And flashed forward 20 years and like people who were living out of a backpack or people who were, you know, carving little wooden pipes and selling them at festivals, now own land and a house and have started multiple businesses. And it's absolutely distributed wealth to,

a huge part of the population that wasn't willing to suck it up and go, you know, work on Wall Street or do any of the number of things that people do working their day in and day out, working their ass off at a job that maybe they're tired of. And some of those jobs are really important for society. But there's a lot of people that just have other things on their mind. Like, all I want to do is make music all day. And if I had to go work nine to five in some job that like just taxed my soul, I would be a miserable person. And I think there's a lot of people out there like that. And usually they just end up dropping out kind of. But things like crypto and weed gave them an opportunity to actually have real wealth. And I've seen people,

people who had nothing 20 years ago, and now they're doing really cool shit. And do they stay in weed, or did they cash it into other stuff? Most people have been moving out of weed for a while, because as it gets legal and it takes a lot of the income away. And also the competition is so high. And like now there's like farms run by like Chinese mafia in California. And like it's a madhouse and everybody's kind of out. everyone I know is if they haven't moved out already they're moving out and how much overlap so like if one of the started other businesses with the capital they raised you know legal safe business right you just like you do the thing that you would have wanted to do if you inherited a bunch of money and

right like just come up with a cool product and I mean now with Instagram like you can sell anything and if it's a great useful product and it's sustainably made all the better you know So if like like what I hear you saying is like one of the sort of threads between crypto and weed or drugs is like it's like rejecting a very limited horizon that you get from society. And then if you're willing to take on risk, you can kind of like cheat the system and you can have. Yeah, it's not even cheating almost. I mean it's like it's like it's a legitimate system unto itself. It's like an alternative system. Like to the IRS.

Yeah. they're like this sucks but I mean who who who like what God declared that the US dollar is the currency for humanity I mean that fuck you I didn't ask for that you know like like IRS like I okay I appreciate roads things like that but if you're spending half of every dollar on the military like I you just lost the obligation in my mind to get my dollar it's not like a I am emotionally invested in, like, rebelling or something. It's just I think for myself, and I want everyone to be as free as possible and just to do what they feel without harming anyone.

And if, like, we lived in a society where the centralized power was completely benign, I might not even have a problem with the centralized power. But it's not that way. And it's completely out of control. And like we'll have an update to our phones. And like a year later, you can see the behavior change in human beings all over the world from the one little swipe thing. Or it's changing it. And like, no one's planning.

No one's driving this train. You know, no one's driving the train. Yeah. Jay's just answered a question. I actually ask everyone I meet in crypto. What is your problem with centralized authority? And Jay's answer, I thought, it fit my own worldview better than most I've heard. The problem with the world isn't a bad guy in a room somewhere.

It's that the systems we build become more powerful than our ability to change or even comprehend them. Jay has found his way around these systems for now. But he knows that at some point he needs to move into a legit lifestyle. That's what other people I've met who do what Jay does have done. But it's an actually difficult logistical problem. If you, over a lifetime, have made a whole mountain of cash selling drugs and doing whatever else, how do you convert that pile into a new life for yourself? That's the real puzzle, the exit.

After the break, the very surprising way Jay might pull off his exit. This episode is brought to you by Nordstrom. Spring calls for a wardrobe refresh, and Nordstrom has the best styles of the season. From dresses and denim to stand-out tops and accessories, find the trends and essentials that feel right for you. Discover new arrivals from brands you love like Waif, Princess Polly, mango, Adidas, and free people. Plus, free shipping and returns and freestyling appointments make everything so easy.

Shop in stores at Nordstrom.com or download the Nordstrom app. You should tell the people who we are and what our new show is. I'm Robert Smith, and this is Jacob Goldstein, and we used to host a show called Planet Money. And now we're back making this. new podcast about the best ideas and people and businesses in history and some of the worst people, horrible ideas and destructive companies in the history of business. We struggled to come up with a name, decided to call it, business history. You know why? Why? Does this show about the history of business? Available everywhere. You get it. Welcome back to the show. Do you see crypto

potentially as one of the things that like helps you exit? Absolutely. Yeah, definitely. Because because it's an opportunity to move large amounts of money as well, like really large amounts that normally, like, you can't do that, you know? Normally you have, like, a suitcase of cash or something, and it's very hard to move it around. What do you do with, like, the suitcase of cash problem? There's, like, different systems. It depends what you're trying to do.

You, you know, try to invest it in things that will take cash. buy land with cash, you buy cars with cash, and then you sell the car, you get a check, buy crypto. Like now with Bitcoin at ATMs, you can onboard cash onto crypto. Oh, right. That's a way to buy Bitcoin without having to like... Turned into electronic money first or get it into like a bank account or something. Also, even better than that, there's peer-to-peer networks where people are buying and selling Bitcoin to people.

Like right now you could go meet somebody in New York City with 10 grand and buy a third of a Bitcoin. Wait, you mean actual peer to peer? I mean meet them and give them cash. I need to jump in here with an explanation because this is a little bit confusing, but once you understand it, completely amazing. So normally buying Bitcoin means you visit an exchange online that will give you Bitcoin exchange for money, but ask for your government ID, your name. For people who want real anonymity, Jay is saying, You can find a stranger on the internet who owns Bitcoin. You can arrange to meet them in the real world in person.

You hand them your suitcase full of money. And then they transfer Bitcoin to your wallet in front of you. A truly anonymous, physically peer-to-peer transaction. Have you done that? I haven't, but I'm very much looking forward to doing it. I'm so curious who is the guy on the other side of that transaction. It's really interesting because I have a friend who does it all the time, and he's like super involved.

It's like his social network. It's all these strangers that he's one of them he's going to meet and buy or sell Bitcoin with, but he's been really absorbed by it. And what is, why is he, why is he absorbed by it? I don't know. It's like, it's like, you know, that underground network thing, like secret society thing. I wonder where they meet to do the trades. Wherever you want.

And how do you trust the person? You see the transaction go through on the phone and you see the cash in there. I think on the website that they're using, which is on the dark web, there's actually like a, every time you do a transaction with someone and there's no problems, you get like a rating. So everyone has an actual rating for the number of transactions they've done that went off without a hitch. But it's in person. It's not like mailing money through the mail. No, that's sketchy.

I wouldn't mail money through the mail. I mean, I just did throw a bunch of mushroom chocolates. You sent money just like hidden? I usually buy money orders. Have someone buy money orders for me and then send them. We used to all send money orders and stuff. Or we used to like take a speaker and fill it with 50s and hundreds and then mail that in the mail, like through like a freight service or something. Why a speaker?

Because that's a giant magnet. It'll deform any. imagery if there's the try to x-ray it but this is better than that way better because we used to lose like one in every five shipments what would happen to the shipment just like who knows someone would take it or if it went to the authorities they just possess it and then you get a letter saying like we have your speaker yeah we have we have you we have your hundred we have your three hundred thousand dollars if you'd like to if you'd like to come pick it up just just show up at this address with a very clear paperwork document explanation of where this money came from.

They must really enjoy sending those letters. Yeah, I've gotten them before. What happens to that money? Do they get to spend it? You know, I have no fucking idea. But you know who owns the most bitcoins in the world? It's the FBI and the DEA. Oh, from seizure. It's the U.S. government.

So I checked this. It's not quite right. Satoshi Nakamoto is still the largest. told her of Bitcoin, but it is true that the U.S. government routinely seizes oceans of crypto. From there, they auction it off, although they have no policy of timing the market, so they often end up selling when the price is low. Sitting here, though, in Jay's beautiful synth and plant-filled apartment, I just think for a moment about what it would be like to see the world the way the IRS does, to watch the full path of money, I think. It'd be like watching Beriam move through a body. You could see a whole society.

that way. You might watch a dollar travel from a drug dealer to a guy accepting a suitcase full of cash. You could see the dollar change hands for two silver coins or a bag of chocolate mushrooms or a speaker shipment. You might even watch that dollar disappear into shadow, transformed to something strange and digital, but eventually end up as so many things ultimately do, flat under the fist of the most powerful system human beings have built. It's the U.S. government. I don't have a problem with rules. Like, any time where there's human beings together, there's rules.

But the problem is when one authority is setting those rules, it's very susceptible to bullshit. And when those rules are bullshit, I mean, then it's like, forget it. I don't subscribe. I reserve the right to decide what rules I'm going to honor and what rules I don't. Jay, if it all goes, To hell, he's got his silver half dollars in the storage unit in Vermont. What is your view of the future? What do you think will happen?

I have no idea. I have no idea. I just wake up and try to figure out which way the wind's blowing and see what I'm going to do about it. Crypto Island is edited by Shruti Pinnamanei. Sound design and mixing by Stephen Jackson and Phil Demahovsky at the audio non-visual company. Jay's voice was digitally altered. Crypto Island theme music by Christine Andrews. Additional music from Falcons 3. Fact-checking by Garrett Graham.

Thanks for listening. See you next episode.