TFTC: A Bitcoin Podcast - Ten31 Timestamp: Fast Takeoffs And Hard Landings

Starting point is 00:00:00 John, World War III is upon us, bombs are going off, most people are unaware, we were just talking about this before we hit record, in the land outside of X and the internet, but yeah, crazy weekend, a lot to talk about, and I think it would make sense to start with the war in Iran, and spreading throughout the Middle East right now, and its implications on the markets that we track, and that touch Bitcoin, so you took some time this weekend, to write about fast takes takeoffs and hard landings for the time stamp what are the last 72 hours what are the implications of what's happening right now in your mind yeah i mean if anyone's familiar with the uh the great movie airplane it increasingly feels over the last year like every week is the wrong week to have stopped sniffing glue like the air traffic controller constantly constantly feeling that way um and i see all the people can see that uh marty has already migrated to uh greener pastures to ride out the the impending doom that we're all facing now so that's probably something i should have done but yeah it's crazy crazy crazy week among

Starting point is 00:01:05 many crazy weeks and i think it was it was just an interesting set of headlines that came across the wire over the course of the week and tried to try to connect them a little bit in the timestamp this week at the risk of sounding or becoming a little too much like a charlie day in front of of the petty Sylvia board. It feels like there are some noteworthy connections we can highlight, but yeah, maybe just starting on what everyone's thinking about and talking about this morning is the U S has not, has not declared, but declared war on Iran. And we are currently in the very early stages of some sort of regime change over there. Um, so not going to comment on, you know, all the, all the fog of war disqualifications and, uh, caveats certainly

Starting point is 00:01:49 hold and you know not going to comment on how any of it's going to go or our reports that we're getting out of there but i think like one thing to pull out maybe as we sit here today that i was trying to highlight in in the time stamp is like you've quickly you quickly saw over the course of this weekend once we got the announcement on saturday morning that this was happening you know a lot of takes on all different parts of the political spectrum um generally i would say pretty universally this has like not been a popular concept of like you know doing this in some, in some way, I think it's been hard for people to see what America's interest could be here. And I think that that's all very legitimate and I'd sympathize with a ton of it. You and I

Starting point is 00:02:29 are both children of the Ron Paul 2012 campaign. So I think we're both very non-interventionist at heart. I think one thing though, just from like a real politic perspective of kind of like trying to figure out like what's going on here and like why this is, why is this happening that i haven't seen in a lot of headlines and like mainstream conversation you see it a little more on twitter over the last 24 hours um and you know certain like uh and on profile pictures talking about this but you know the thing that we've been watching here at 1031 for several months is just like the early even a year is the overall trend toward like decoupling a relative to primarily china right and we've talked about this about on the show before and i think we've tried to ask

Starting point is 00:03:10 ourselves with anything that the admin is doing or any kind of geopolitical headlines that maybe don't make a ton of sense in isolation. Like how does this potentially relate to an overall broader strategy? Um, I think there are a lot of people that are still kind of sitting there convinced that, you know, orange man, stupid, and there's kind of nothing under the hood that could possibly be like justifying what's going on. And I think that's like kind of a, uh, ultimately disastrous way to be thinking if you're trying to allocate capital, if you're trying to be an investor or just, you know, protect your wealth. Um, and I think there are a lot of signs pointing to, you know, everything should kind of be viewed through like an existential lens of trying to

Starting point is 00:03:49 decouple from or undermine the influence of China, whether you think that's like a good thing or a bad thing. I think that's just like pretty clearly the framing that the admin and the Pentagon are taking right now. Um, and so I think the thing that we were pointing out in the timestamp over the last few months and in the last and this past weekend is this looks a lot more than anything else like not not a war for you know freedom and democracy and i mean protecting our values and protecting them abroad but an end around to further pressure you know the chinese who are net energy importers from a variety of different sources one of which is quite famously iran um iran is a sanctioned source so you like won't find them in a lot of different tallies of

Starting point is 00:04:29 Chinese oil imports, but various different estimates point to them, like this one that I found here from Columbia, point to them exporting close to one and a half million barrels per day to China. For context, that is like, I think, roughly in line with the Saudis, maybe a little lower, and then maybe like, you know, a half to two thirds of what Russia does. And I believe Russia is China's biggest oil exporter. So to us, that really is like where the focus should be. And I think it potentially starts to make a lot more sense, you know, when you start thinking through all of these geopolitical games from a perspective of how does it affect our positioning vis-a-vis China, we're sitting here as like two dudes on the

Starting point is 00:05:07 internet who have no actual alpha on what the DOD is or the DOW, excuse me, is thinking you're doing. But I think like this is a helpful framing and set of questions that people should be asking as they look at these headlines and as they look at the next few weeks, like what we do or don't do in Iran or other countries, right? Like certainly, you know, Trump has rattled his Sabre at Cuba and Colombia and various others that have maybe had some like Chinese influence in the past. So to us, that's kind of like the Rosetta Stone for a lot of this to keep in mind going forward. Yeah. And I think having watched what's played out since the national security strategy was set out at the beginning of November last year and looking at sort of the line of

Starting point is 00:05:50 thinking that you just went down, I think it is pretty descriptive if you are thinking strategically from a geopolitical sort of chessboard reordering into this more multipolar world where it's very much the United States versus China being the dominant power players. And if you're thinking of an order of operations, what the Trump administration would need to do to effectuate that national security strategy, it's basically, it's take away the raw input of the Chinese economy which is energy and so i think the order of operations have taken up maduro you know securing that that oil resource and also blocking china russia off from it and then then feeling comfortable to go into iran which is providing china with another significant tranche of oil

Starting point is 00:06:39 there it wouldn't make sense obviously there's a ton of other theories which you alluded to which probably not productive to go down on this show but i think not only is the energy side of things something that, again, if we're looking back, like seems pretty descriptive, just looking at what's happened over the last three months. The other side of the coin is AI run this race. And I think the saber rattling between the Department of War and Anthropic over the last couple of weeks has been indicative of this sort of national security strategy being implemented as well. And so that's another big thing where we have the Department of War basically trying to industrialize this budding AI industry in the United States as well, which will have some pretty profound

Starting point is 00:07:27 implications if they're able to do that effectively. Yeah, for sure. Anyone who's not familiar with Elbridge Colby, we should go look up his work. He's, I think, had a role in the first Trump administration and is now a fairly high ranking official in, I believe, the D.O.W. somewhere in the Pentagon. But he wrote a book in like 2019, maybe called Strategy of Denial, which is basically just kind of going through exactly what Marty's outlining, like a way that the U.S. should approach kind of all foreign policy and geopolitical relationships with an eye toward containing Chinese influence. And so I think that's the kind of guy who's sitting there kind of holding the pin on a lot of this stuff. And you can ask, you know, who has the

Starting point is 00:08:13 ultimate influence who's ultimately making decisions and kind of pulling the levers but i think there's a lot of frankly a lot of officials in the admin have been pretty open about what they want to do and what they're focused on so i do think going forward that's gonna color how the admin operates and i think they see themselves increasingly on like wartime footing because of guys like that you saw this weekend in iran and then marty your point like this this kerfuffle between the pentagon and anthropic over the last couple weeks that ultimately ended up, as this headline shows, with the White House blacklisting Anthropic and saying that the Pentagon can't use their tools and their models anymore. And then Sam Altman

Starting point is 00:08:49 jumped on that immediately and inked a deal for OpenAI to backfill and provide a lot of that stuff to the Pentagon. But I think this is a really interesting headline to have happened at the same time, basically, as the Iran stuff. Because again, it's like, I think all of these things look kind of baffling if, or like way overly aggressive. And again, I'm not even necessarily saying that there are good things, bad things are a lot of like pros and cons to all of these decisions and a lot of different value judgments that can be made. But I think like, it's very easy to, if you're seeing just one headline after another, to think that this all looks very disconnected and, you know, uh, like Trump, Trump and his, his people are just kind of flailing

Starting point is 00:09:27 around. And I think this actually aligns really well with what happened in Iran over the weekend. In so far as I think it tells you, like, the U.S. is very clearly intent on both asserting more control in, but also expanding, for better or worse, I think the definition of what their sphere of influence means, right? So as you would expect to see that, too, again, not just firing one way or the other, but you would expect to see that, too, if you came to the conclusion that the admin effectively believes it's at war, right? If you go back and look at things that have happened in the U.S. in World War I, World War II, with the government effectively like requisitioning private assets and taking over whole industries and redirecting them, redirecting their production to one thing or another that was needed for the quote unquote national interest. You know, we have a long history of the government deciding like when when things hit the fan, when things get really hairy, the rules kind of change. You can you can like that or not. You can say that that's a net good or not for, you know, per capita, kind of everyone's economic well-being. But we've seen enough examples, both in the U.S. and just like general history going back thousands of years, that when push comes to shove, the sovereign kind of reasserts itself. And so, you know, my subtitle for the email this week was sovereign.

Starting point is 00:10:45 Is he who decides the model weights? Because the essence of this fight is can anthropic tell the government our models will do thus and such, but not this and that thing. Like, can the models be flexible enough for the Pentagon to use them as they see fit, right, to deal with national security threats? And so that's, like, it brings up a question of, like, who has sovereignty over these things? Like, this is what the AI maxis are telling you, what Anthropic's telling you, what Sam Allman's telling you is, like, these are basically super weapons or they're kind of moving in the direction of becoming that. So it's, like, who actually gets to decide, like, what they can and can't do in different situations? And I think the Pentagon making this huge stink and this whole like, you know, press release war that went back and forth and ultimately blacklisting anthropic is like, you know, just another kind of data point to put on the pile that the government right now is acting like a World War II type government, right? It's not, you know, post-1989, post-fall Berlin Wall, like, or, you know, 1990s, like, golden era, golden era, the unipolar moment situation. It's moving much more back into kind of a wartime footing, both domestically and abroad.

Starting point is 00:11:54 And, you know, all that is to say, all that points to, like, certain implications for the way that I think you want to handle your personal allocations or if you're an institution, like institutional allocations. I think it says many things about where the world's going financially over the next 10 years that it would be kind of unwise to ignore or write off on the basis that, like, you know, Trump is crazy and two years he'll be out anyway. Yeah, I think it would be completely nuts to do that. And I think you did a really good job of distilling and aligning all these disparate things that, to your point, like you said earlier, many people would see them as random and very extreme. But I think if you take a step back, look at it from a 30,000-foot view, it looks like what we've been talking about for months, not only on the show, but in the newsletter. It seems like we are on wartime footing and have been for some time, again, going back to the National Security Strategy document from last November. I think that document made it abundantly clear how the Trump administration is thinking, and they're moving rather quickly. And again, not a judgment whether this is good or bad, but I think it's undeniably impressive

Starting point is 00:13:03 how quickly they're moving at some of this stuff, to your point. Whether or not they ultimately, the decisions they make end up being for the benefit of the American people and the world at large in the long run has yet to be determined. We're still in the fog of war. But I think one thing is clear, they may have an agenda and they're trying to execute on it at the very least. And I think in going back to something else you said, which is we are both sort of anti-intervention abolitionist acolytes of the Ron Paul 2012 era. And that's, I mean, if we are on wartime footing,

Starting point is 00:13:35 I'm just having pattern recognition going off in my head right now, particularly focusing in on the saber rattling between anthropic and the Department of War. I mean, I could see this being the Patriot Act moment of this era, which somebody lives through that. And I think the ramifications of the Patriot Act are abundantly clear now over 20 years since it was enacted that it was a terrible precedent dissent and has erected this dragnet surveillance system on U.S. citizens in the world at large. And I think if we're going to do an AI Patriot Act this time around, the implications are going to be an order of magnitude worse for individual sovereignty. And to that point. I think that's why we have a hard focus here at 1031 on freedom tech and Bitcoin is a

Starting point is 00:14:27 freedom technology, a freedom protocol. But as it pertains to AI, I think that's one thing that we're pretty passionate about is ensuring that individuals have the ability to interact with these large language models in a way that is private, sovereign, and done in a way where the model provider cannot spy on you, which is expressed via our investment in Maple AI. So yeah, I just wanted to throw that out there. I can see AI Patriot Act becoming a thing in the next nine months if this stuff escalates even further. Yeah.

Starting point is 00:14:59 Unfortunately, I think that's probably on some version of it. So everyone should kind of watch out for that, do the best they can to kind of position against it. But it's definitely, you know, it goes back to the theme of just like, once this stuff starts being treated rightly or wrongly like, you know, nuclear launch codes, the implications radically change for both individuals and, you know, what individuals can do and what companies can do. And, you know, I think in that world, it's also very, it's good to think about having assets as well at your disposal, having a, you know, sovereign AI stack, but also in that world,

Starting point is 00:15:36 having assets at your disposal that have a minimal account rate risk and can be used as permissionlessly as possible, ideally on a globally liquid basis. So I think all of this just kind of comes back to reinforcing as well. I don't think there could be a better time to be investing in the space we're investing in and focusing on what we're focusing on. I don't think you could imagine price action aside, like trends that are fundamentally more favorable to and more in line with the thesis that animated Bitcoin's creation in the first place in 2008 and that animates everyone who's using it today. So, you know, this is a Bitcoin show. This is primarily a Bitcoin oriented fund, Bitcoin, AI, energy, whatever, freedom tech, however you want to kind

Starting point is 00:16:21 of think about that. But there are a lot of upshot that is all these trends that you're seeing that we're throwing out there right now, I think have meaningful implications for kind of everything that we're doing day to day. Yeah. And I think this is a good segue into the Bitcoin price action Saturday into Sunday. I mean, and probably over the last few months, I think, again, if you were taking a 30,000 foot view as an institutional allocator and looking at everything that's been playing out since Trump too started. And again, specifically since the national security strategy doc was published last November, it's been pretty clear that we've been building up towards this type of conflict. Again, it's clear in retrospect now that it's actually happened,

Starting point is 00:17:00 but I think maybe the Bitcoin price action since late October, early November has probably been signaling that again, Bitcoin has this liquidity alarm bell down, fell 50% between early November and early February. And then when bombs started flying on Saturday, the price fell $3,000, I believe, but then quickly, quickly recovered. And so I think the Bitcoin price action over the weekend was actually shockingly strong. And again, still in the midst of the fog war. It's not to say that it will not go lower from here, but I thought the price held up pretty well. All things consider maybe the market recognizing that we're getting into an accelerationist point in the geopolitical realm where having exposure to a neutral sound money protocol for the digital age

Starting point is 00:17:50 makes a lot more sense yeah i mean it's you know again way too early to call and we're sitting here right now i just checked we're above 69 000 so let's see if we can kind of you know break above the 70k you know 60 70k ban that we've been in but it's it's exactly the kind of like price action that you would want to see for kind of hammering on a bottom right like usually the simple rule of thumb is like stuff going up that stops going up even on the basis of good news like is you know finding a local top and probably going to retrace and you know on the converse and stuff that is getting hit with more and more and more bad news and kind of just isn't going anywhere tells you like a lot of the natural sellers have been exhausted and it's you know trying to find a

Starting point is 00:18:30 bottom so you know we don't call tops or bottoms on this show very much learned my lesson on that But certainly, that would, you know, point you in the direction of getting closer to the end. And to your point as well, on Bitcoin as kind of this liquidity alarm bell or this like macro alarm bell, it does thus far kind of remind me of early 25, right? With, you know, we had, if you remember, we basically topped locally at Trump's inauguration. And then it was like down only for three months, kind of on like no obvious news. and eventually the stock market kind of caught up to but then it was finally the stock market really had its big puke on liberation day with the tariff announcement and bitcoin basically went nowhere and then started to outperform everything you know more quickly and recover

Starting point is 00:19:09 more quickly you've seen things like that too and you know 2022 late 22 kind of the ftx blow up like we went down like a little bit after getting killed all year and then quickly started like finding a bottom and moving higher and despite that being like an extinction level event for crypto. So yeah, that's those are the kinds of things that I think you'd be looking for to see if maybe some of the near term natural selling is exhausted. And we'll see. But another interesting data point as it relates to kind of like macro trends and Bitcoin price action is if you throw up that the chart of the 10 year this morning, again, it's like it's way it's way too early to call. But as it relates to, you know, what the market may or may not be processing and thinking

Starting point is 00:19:49 through. This is a really interesting reaction out of the tenure. You know, we went down into the weekend, which is to say, you know, bonds are catching a bit, likely as people were getting more in a position for something to happen in Iran over the weekend. But as of this morning, you know, we've ripped much higher. Granted, we're still, you know, we were at 4.2, 4.3 a few weeks ago. So it's kind of been a steady downtrend up until this morning. But it's interesting that you see kind of this rip this morning on the, you know, the confirmation of bad news and frankly, even like maybe worse news than I think Google might have been positioned for. You know, Trump is out there saying like this could go on for four weeks or longer and there could be some real American

Starting point is 00:20:25 casualties. So I hope that doesn't happen. But then you're also getting, you know, oil price spiked significantly. There's been potential like potential closure of the Strait of Hormuz, you know, attacks on some ships there. So like that could be very meaningful to the oil price. And I think all that flows back into, you know, Treasury's not behaving as a safe haven asset this morning but rather kind of repricing in potential like shock from energy prices which is really not good for fixed income especially fixed income of a very over indebted you know sovereign that now wants to radically escalate its military spending as well right so if if all that is the case and all that's playing out the 10 years moving like this like there's kind of ultimately if this

Starting point is 00:21:03 continues very very early like this could you know retrace so let's not get ahead of ourselves but like if something like this were to continue and you still wanted to go do regime change in Iran and do everything else that Trump's study wants to do, there is ultimately one solution to this, right? And it's, you know, getting a more accommodative Fed chair to do your bidding and do what's necessary to kind of keep this contained. Because this can't go to like four and a half, five plus, right, quickly. Otherwise, things really start to get very hairy across various elements of what Trump's trying to figure out right now. So if that's all the case, again, you know, this is like our 14-step logic, but that gets you back to a world where

Starting point is 00:21:39 you definitely want to own some bitcoin right so again it's it's monday morning way too early to call but those are trends that i think are worth watching over the next week or two how does the tenure react to all this and is bitcoin able to um start finding some outperformance relative to to other assets yeah yeah it's it's i'm sorry i got teared a bit of echo but it was crazy to see the tenure react like this and again i mean don't have to to imbue my my sort of political bias and perspective on war. But I think any, I mean, you had Secretary of the Department of War, Hegseth, come out this morning saying this isn't regime change. Don't worry. This is very different, very calculated. And again, too early to tell, yet to be determined. But I mean, just the pattern

Starting point is 00:22:27 recognition and the cynic in me as somebody who grew up with Middle Eastern wars that the U.S. embarked on. I'm not going to hold my breath for this to be a quick in and out. But other stuff happened as it pertains to the markets that we play in. And I think it will be remiss of us not to bring it up. And I think we should end it with just a little five minute conversation on this. But the news out of block last week, Jack Dorsey basically coming out and announcing that they were they they are laying off 40 percent of their workforce, dropping their headcount from above 10,000 to below 6,000, citing the acceleration of the productivity of AI tools that they've been leveraging internally. And I think this was the first big sort of AI layoff headline that

Starting point is 00:23:18 we've seen from a prominent tech company, Jack Dorsey, one of the most prominent tech founders of our time, basically pulling the bandaid off early and saying, hey, the AI tools are at a point where we can, what we believe is to safely reduce headcount to run more efficiently and increase our profit margins. A lot of commentary on this over the weekend. Basically people saying that Block's headcount became too bloated during COVID, where they tripled their headcount rather quickly. And so this is, they're using AI productivity gains as an excuse to cut back a bloated headcount that was driven by mistakes made during the COVID era from a managerial perspective. I think it's a combination of both. I think they certainly were bloated,

Starting point is 00:24:06 probably did overhire during COVID, but I think it would be idiotic to believe that they aren't leveraging these AI tools to their advantage. And as somebody who knows Jack, knows many people within the Block organization and having talked to them over the last year, it's become pretty clear that they are leveraging these tools internally. And if you just look at the pace with which the Block family companies have been shipping over the last year, it has certainly increased. And so I think there's a case to be made on both sides of the argument. They're probably had a bloated they probably had a bloated headcount

Starting point is 00:24:39 and needed to cut it, but they're also probably experiencing insane productivity gains from these AI tools. Yeah, for sure. I think that's all right. Cosign that. I think it's probably reasonable to say it's a combination of those two things. But even if you know, if even just a material portion of the cut is entirely related to AI tools. That's very meaningful. And I think the most interesting thing is the stock price reaction was up 25% immediately. I don't know what the follow-through

Starting point is 00:25:05 has been like. I haven't checked this morning. But it closed, I believe, well up 15% on the day or more. And I think every company is a unique case and not every situation is going to pour over to the next one one-to-one. But that, you have to think, gives some CEOs with more bloated org structures ideas, right? And, you know, everyone ultimately is incentivized to, yeah, I mean, you've got the, you just pulled up the data center chart here. This is a chart from ZeroHead showing the data center construction spending. I believe this is on like an annualized rolling, like last whole month's basis. But in any case, it's now officially overtaken a new office spending on construction of new offices. And so, I mean, here's another data point kind of in that

Starting point is 00:25:46 same in that same direction that this this trend is only continuing and accelerating and this for better or worse ai tools air productivity is going to eat a greater and greater share of spend on the corporate level and data center construction is eating greater and greater share of total construction spend so things are moving in this one direction ceos are increasingly going to get this i get ideas from case studies like what happened with jack what happened with block and that's going to have implications for for hiring in in the us right it's in worldwide it's going to have implications for potentially unemployment rate at least on a short-term basis um we didn't even get to the the citrini ai apocalypse report we don't have time for that

Starting point is 00:26:27 but you know that was uh before all the iran stuff that was the big headline the big reason the world was gonna end so if you haven't read that i would go uh take a minute to read it but it's all of a piece which you know these things are happening faster than your average you know white collar worker is fully appreciating. And that's going to create some level of disruption, even if not society ending disruption, but some kind of ripples will come out of that, that will likely engender some degree of policy response, which has a lot of, again, implications for all the things we talk about here. Yeah. And just to wrap up here to tie it to Bitcoin too, I think these gross profit per employee numbers, pre and post layoffs are

Starting point is 00:27:09 impressive and i saw a chart i don't think we have it here but they're the the layoffs quickly vaulted blocks first profit per employee up to nvidia levels um so from that perspective they are probably one of the best companies at least publicly traded obviously we know tether is probably the best edit in the world they're still private right now but with these layoffs it seems like gross profit per person within block is going to skyrocket and point to bring this up is i think part of our thesis here at 1031 and part of why we're investing at this intersection of bitcoin ai and energy is because if you're going to have the productivity gains afforded to via this ai sort of renaissance and or this ai revolution that we're seeing it makes sense that if you're

Starting point is 00:27:55 going to be able to be much more profitable with a lower head count you can sit in the the bitcoin treasury thesis becomes stronger because you're going to want to shovel those profit profits into a hard asset like bitcoin a monetary asset like bitcoin and so i think the era of low headcount high productivity high profit margin is upon us and if we are entering that era you are going to want to pair those those productivity gains with a sound digital money bitcoin couldn't decide to bear myself we'll be back next week Thank you.

TFTC: A Bitcoin Podcast - Ten31 Timestamp: Fast Takeoffs And Hard Landings

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