The Breakdown - Rebuilding the Resilience Economy feat. Anthony Pompliano

Episode Date: April 9, 2020

As host of the Pomp Podcast, author of the daily Off The Chain newsletter, and founder partner at Morgan Creek Digital Assets, Anthony Pompliano is one of the best known media personalities and investors in the crypto industry.  In this episode, he and @NLW discuss:  The Fed’s just announced $2.3 trillion stimulus package - including the authorization to buy junk bonds Why media and trust have desiccated to their lowest levels ever  The lack of a plan to restart the economy  Why Bitcoin was sold in last months larger market sell off Why smart institutional investors are looking to bitcoin as a hedge when the deflationary environment turns inflationary  Why companies have to be allowed to fail to increase resilience  Why the best way to build a resilience economy is to put money in the hands of entrepreneurs and small businesses 

Welcome back to The Breakdown, an everyday analysis breaking down the most important stories in Bitcoin, crypto, and beyond, with your host, NLW. The Breakdown is distributed by CoinDesk. Welcome back to The Breakdown. It is Thursday, April 9th, and boy, oh boy, did we wake up to it today. Within about a half an hour of each other, two major announcements happened. First, that the jobless claims were, again, at 6.6 million bringing the total. number of Americans who have filed these claims to something like 16.5 million over the last three weeks, which is 10% of the working population. We also got announcement of a $2.3 trillion stimulus from

the Fed, which included not just more money, but new mandates to buy things like junk bonds that were not previously on the table before. So crazy things going on in the markets, as has been the case for a month. And today, to help us get through what they all mean I have on Pomp himself, Anthony Pompliano, the host of the Pomp podcast, formerly off the chain, author of the newsletter of the same name. And I wanted to have Pomp on for a couple of reasons. I think that right now, two of the biggest crises that we're facing are crises of media and trust and information and crises of economics and how we redesign the economy. Pomp's life kind of sits at the intersection of those two things based on the platform that he's built for himself

in independent media and also for his work investing and allocating capital in the crypto markets. What's more, one of the things that is really cool about forcing yourself to do a huge amount of content like Pomp does is that it forces you to be learning constantly. And so I wanted to flip the switch for Pomp and allow him to be the one being interviewed to share just raw and filtered his ideas, not be just trying to get out ideas from his guests. We talk about a huge range of things. I mean, as you would expect, we talk about the stimulus, we talk about the crisis and trust in media and what that means. We talk a lot about what it looks like to rebuild the resilience economy, which I think is going to be one of the major themes for our country and certainly for this podcast for the coming

year. We talk about for those of you who are interested in the institutional take on Bitcoin, what actually happened with the Bitcoin sell-off and what it means for the Bitcoin narrative. So a huge array of topics. It's a great conversation. I think you'll really like to. like it. As always, when we do these long interviews, they're edited very lightly. So with that caveat, let's dive in. All right. We are here with Anthony Pompliano, Pomp, the man who needs no introduction. Thanks for hanging out. Absolutely. Thanks for having me. So right as we were about to record this, the Fed announced $2.3 trillion in new stimulus. It happened to do so almost exactly at the same time as the jobless claims report came out saying another 6.6 million Americans had filed claims.

What do you make of this? I mean, at this point, is anything shocking to you? I mean, there's two specific parts of this, right? One is there's no coincidence that they announced this right as the jobless claims hit. 6.6 million jobless claims two weeks in a row. My guess is actually that those jobless claims are not indicative of the actual reality. one because you obviously don't count, you know, gig workers, freelancers, self-employed, et cetera. Two, we know that the systems are log jammed and people are having trouble filing the claims.

And what I'm starting to think is 6.6 million unemployed claims in a week. That may actually be the upper limit of the capacity of the systems to process. Yeah, right? We've actually hit just that threshold of our ability to track it. Exactly. So you basically just get 6.6. And as long as it's more than 6.6, we're going to keep. seeing 6.6 printed week after week.

I mean, two data points could be a coincidence or that could be what's happening, so I have to keep watching it. But I think that's one takeaway from this morning. And then two is the Fed's doing exactly what they're supposed to do or what they're kind of backed into a corner to do, which is they need to instill confidence in the market. They need to look like they have unlimited money, which they're trying their best. And they've got to try to stabilize markets and prevent job loss, right? But what I continue to say over and over and over again is this is not a problem where you can print your way out of it.

And I don't think that they've realized that yet. What actually ends up happening is they're just throwing money in a black hole and they're making the short term. And in the long term, they're making the problem worse. And the reason is the economy will not recover and we will not get stability in prices until people go back to work. And so the solution here is get Americans back to work. It's not how do we print as much money as possible. And so I think that they have to do that as the short-term band-aid, but I just don't think that that's a viable solution because no matter how much money they print, the situation

gets worse and worse every day as people are sitting at home. I mean, I agree completely. It's been extraordinarily frustrating to not like the second we started to go into lockdowns, our next conversation needed to be, all right, what does it look like to, to, to bring this economy back online because I think there's a misperception that it's just like a flip of a switch, right? Everyone goes back to work and pretends it didn't happen, but that can't possibly be the case in the context of there are real economic implications for every single day that this

goes on. And so dealing with those, figuring out how we're going to live with this, I guess there's another magical thinking around a vaccine that somehow is just going to show up, go through human trials fast enough, or some other, you know, some existing thing that works. And it's just, again, it's kind of magical thinking. There's a one of the thing real quick on this, right? And this is a somewhat controversial opinion, but we have to go back to the base of all of this, which is a virus, right? And the virus, regardless of what anyone says, the virus is not as bad as we originally thought.

And I've been saying it over and over and over again that the reason why the virus is not as bad as we thought is because we've been analyzing bad data. And so what I think is going to end up happening here, when it's all set up, and done. This is going to be literally months, if not years away. We're going to look back at this, and we are going to say that it has the similar death rate as the traditional flow. And the reason why I say that is not because I don't think the virus is bad. I actually think that the virus is incredibly bad in certain demographics of people, old people, sick people, right, people with preexisting conditions, et cetera. We know that it kills those people at a higher rate. But when you actually start to test an entire population, what you find is in every country in the world, those numbers are

coming down and they're coming down drastically to the point where some European countries are even reporting that the death rate is lower than what you see with the traditional flu. And so what I think has happened here is we're using data that we know is bad, right? At one point, I think last Saturday, so this is a week old data at this point. But last Saturday, the United States had only tested about 850,000 people. out of 330 million. So all of our decisions in the United States were based off of testing less than 0.3% of the population, and the 0.3% of the population that gets tested naturally has a selection bias where people who feel sick go and get tested. And so when you start to understand that there's

bad data and we're analyzing bad data, which you end up saying is I actually don't know how bad it is, right? I have opinions, but I don't know. And so we're making decisions on bad data. And if you analyze bad data, it leads to bad decision making. That's just what ends up happening. And so we've decided to be overly cautious, which I actually think is the right decision. And let's go ahead and do the social distancing. Let's do the shelters in place. Let's do all of that. But at some point, it becomes, is the cure worse than the actual virus itself? And in that situation, what we've got to find is not a black and white solution. It's not let's shut down the health care system by overwhelming it with cases. And so let's shut down the economy, right? There's two things,

the health crisis and economic crisis. What we need is we actually need a solution in the gray, right? We need to be able to combat the virus at the same time, make sure that the economy isn't ground to a halt. And that's where kind of the holy grail, and we don't have that answer yet. And I think that's where people should be focusing on finding the solutions, not just on, you know, one side or the other of that equation. Couldn't agree more. I think that all of the time that we debate health outcomes versus economic outcomes as though there's some kind of mutually exclusive and binary thing, is time lost figuring out exactly what you said, which is a very complex, probably set of protocols, procedures, testing, phased economic redeployment. There's going to be

a very complicated solution, but we're wasting time, not talking about that. So one of the things that I really like that you wrote about this is this idea of an economic circle of life. the idea that an economic circle of life had been broken in this. Can you explain that idea just a little bit? Yeah. So the economic circle of life is basically very similar like velocity of money, right? So if you think of a manufacturer actually manufactures hard goods, right, or kind of supplies that then gets set to a supplier.

The supplier and manufacturer, they create the goods. They send it to a business. The business sells it to customers. Those customers then go and pay for things. But that business then pays rent to a landlord. That landlord then has money that they owe for their mortgage to the bank. The bank then finances the suppliers and the manufacturers, et cetera. So you almost get kind of this circular nature of the flow of capital and an economy.

And so when I talk about it being broken, what the government essentially did is they walked in and they literally said to a number of types of businesses, you cannot operate. You have to shut down. You have to go home. And so what you do is you break that. and it has kind of an upstream and a downstream impact. The upstream impact is almost like a dam in a river, right? You literally have stuffed the river, and so you get all this water that backs up upstream.

And what that means is now all of a sudden the supplier is sitting there saying, wait a second, I don't have customers to send the supplies to anymore. So I'm left holding inventory that I was going to sell in the next couple of weeks, but I can no longer sell that. So food for a restaurant, for example. Then what they do is they turn around and they say to the manufacturer. So in the food industry, it would be like the farmers. They say, I can't buy anything from you because I've no one to sell it to.

And so you get this kind of chain reaction back upstream where everyone gets hurt simply by shutting down a restaurant or another type of business. The downstream impact is now all of a sudden that business says, should I pay my rent? We see Staples and a couple of other companies saying, we're not going to pay the rent. And so what that does is now it puts a landlord in a position where they go to the bank and they say, look, my tenants aren't paying my rent. I can't pay you the mortgage. And if everyone does that, all of a sudden, you start to get solvency questions throughout that food chain. And so what I think ends up happening here is this is obviously unprecedented, where you have government mandated

shutdowns, et cetera. And it all goes back to the solution is not, how do we print a bunch of money and just hand it to people to help them kind of get a band-aid solution? Instead, it's we have to come up with a solution on how do we get workers back to work, but do it in a safe and orderly way. And so the thing that I think is missing the most out of all of this is there's a lot of mandating going on. There's a lot of we tell you what to do. And I don't think that that's the best way to handle crisis, right? In times of crisis, you need leaders who can inspire people to do things, right? Because when you inspire people to do things, they'll actually go above and beyond what you expected them to do. And to me, the best way to do this is to actually take the approach of

we are at war with ourselves and from an economic standpoint, and we need people to help us get out of this. And if you kind of issue a call like that to a country that has entrepreneurship as its DNA like the United States, I think you'll be surprised by the response. But instead what we're doing is we're basically just mandating it. Everyone go home and just sit there and it's going to be weeks, if not months until we actually come back. And we're going to print as much money as we can, hand it to people, and hope that we gave you enough money to just survive. I just don't think that that's a good solution.

Yeah. Well, it's, I mean, it's a never-ending black hole. I mean, what you described with this economic circle of life is a cascading set of issues, which takes a health crisis and turns it into an everything crisis across all dimensions, right? It's also interesting, going back to your point about mandating versus inspiring. right? There is already starting to be interesting evidence that shows that to the extent that we're starting to flatten the curve, and there's still questions around that. But to the extent that we are, it's interesting to look at what percentage of that has to do with mandated shutdowns, which is, by the way, a key part of it, but also like voluntary behavior shifts in the lead-up to it. So I can't remember his name, but a professor wrote an essay. I'll link to it, looking at data from New York that suggests that some amount of the curve flattening happened in the reduction in MTA usage in the in the weeks preceding a shutdown, right? And his conclusion was basically that like, you have to just give people the real information,

like the real facts. It's like not sugarcoat things, not pretend that they don't exist, but actually be clear with them. And oh, they will often shift their behaviors in ways that have positive outcomes for the entire system. And I think that's one of the, one of the challenges of this too has been, you know, we had. a huge issue with trust in media and a crisis of trust in institutions and traditional beacons of leadership before this, it feels to me like this might have been the straw that broke the camel's back just across media and institutional dimensions when it comes to just a cataclysm of trust. Yeah, look, I think it's no secret that the virus was an accelerant

for an economic downturn, right? I'm not a perma bear by any means. I'm actually usually a perma bowl when it comes to stuff. But last June, I started to write and say, look, there's too many alarm bells going off, right? There's too many signals that we are reaching atop. And the response from central banks is they're going to have to use the two tools that they have. They're going to cut rates and they're going to print money, right? And they've essentially done exactly that at an even greater scale that I thought possible. But the virus ended up being the accelerant in that situation. And if it wasn't the virus, something else would be blamed for kind of us paying off the debts that we kind of accumulated over time given what we were doing for the last 10, 12 years. Now, what has not yet been talked about

is the virus as an accelerant in other aspects of life. And to be crystal clear, the U.S. government and other organizations that previously were thought of as experts or, you know, these great institutions, they are lying to the people. Right. And what What I mean by that is the CDC, the Surgeon General, WHO, they are outright lying to people. And it's sad, right? I mean, literally, there should be riots in the street of people saying, you're lying to us, you're getting people killed, and you should resign. These institutions should be broken up.

And the reason is because what they're doing is they are looking at it not from how do I protect the individual. what they look at is how do I protect the overall population? And so saying things like masks don't work, it should be a criminal offense, right? It literally should be a criminal offense because if a doctor said something that was wrong when it comes to medical advice, they would be held accountable for it. And then when you go as far as to then go into the economic side of this and look at things that the Federal Reserve is doing and saying, et cetera, it's just crazy to me. And so where I think this all ends up is people already had a difference.

mistrust in media, large-scale organizations, you know, quote-unquote expert opinions, et cetera. Now the virus has simply accelerated the fact that there's not a person that you talk to, right, in kind of a number of circles that I'm in that think they're not being lied to. And unfortunately, what that does now is it forces people to question everything. And when they question everything, I think the sad part is they even question the things that are true. and maybe that's a good thing or maybe it's not, but what it does is it just seeps into every aspect of life and you get into this weird world where, you know,

how do you even trust the video that you see online because you know that it's possible somebody could be faking it? Right. And it's just this really, really weird, slippery slope that we're headed towards. And it's because it's very provable with social media now that we're being lied to by a number of these institutions. I do think that it's, you get at something

which is really important that we don't discuss. which is, you know, I think Bitcoiners in particular are much more comfortable living in a slightly more or perhaps even a lot more chaotic society in which you don't trust, you verify by just by nature, right? That is the kind of key principle of the jungle. However, the point that you're making, which I think is important, is that it's getting increasingly harder to verify as well, right? It's not just it's not just having a clear-eyed sense of skepticism about the official line. In a world where there are really no sources of truth other than the ones you happen to curate for yourself, it just fragments everyone into a million tiny islands in this archipelago

of mistrust. And then to add on top of that what's coming in terms of deep fakes and just actual outright manipulation of what our senses tell us is true creates a really scary dynamic. Yeah, and I think part of this is, the way I kind of operate my life is even if I know somebody is lying to me, right, meaning one of these organizations, et cetera, I always kind of fall back on. I'm responsible for me, right? And that personal responsibility and kind of personal ownership, I think is very rare when it comes on a societal basis if you were to look. And the reason why that's the approach is, just because organizations are misleading or manipulating, et cetera, doesn't mean it's the end of the world. You know, newsflash, it's been happening for decades and decades, right? It's just now we're able to, you know, kind of prove it without a shadow of a doubt.

And so two things end up happening. One is people go and find other information sources that they trust more. Again, it doesn't mean those information sources aren't also misleading them, but just they find ones that they feel are more accurate or more aligned with the way that they think. And then two is you've got to understand that it doesn't really matter what they said. Like they can say all day long, hey, masks don't matter, right? But if you feel like they matter, put a mask on. Right.

It's kind of like there's a separation of the information you receive and the actions you take. You're ultimately responsible for the actions you take. And it's up to you to evaluate the information you receive whether it's accurate or not. So this is a really interesting point. It's something that I've been thinking about a lot in the context of this crisis. I think that you have two very almost. countervailing forces. On the one hand, you have basically the entire business sector and unfortunately a lot of out-of-work employees becoming economic wards of the state, right, which could in some ways

lead to an expectation of dependency, right? A presumption that the government is always just going to be there to backstop it, so who cares, right? That's kind of one possible outcome. On the other hand, you're seeing this massive uptick. And I see it, I mean, right now it's anecdotal because there haven't been times to actually go out and look and study at this. But all around us, these people are taking individual responsibility. You're seeing communities and family units getting stronger. You're seeing networks of resiliency spark up all the time. And it goes from every level from, you know, Ben Hunt helping organize networks of peer-to-peer buying for retail commercially available, you know, PPE in China and having it shipped back and distributing it to hospitals,

you know, 50 at a time as their states wait in these endless cues with bidding wars, or you see it in like the smaller level, right? I live in a tiny little town in the Hudson Valley where obviously it's, you know, it's predominantly older, it's not very wealthy, to say the least. And you have the restaurants who've had to shut down or who are just going to delivery, even despite their economic hardship, are now doing free meals for the community, right? And it's being, as soon as they announce that, the people who are in the community who can afford to help have been coming in to help with that, right?

And so you see these localized networks of resiliency. And sometimes localized means just a type of person, not just geographically local. But I think that it's one potentially interesting thing is that I don't see people sitting back and just saying, like, I guess the government is going to take care of this now. I see actually a lot of people stepping up and taking on a different type of responsibility than they might have before. Yeah, look, I'll bet on the American spirit any day of the week, right? But the key to capturing and empowering that American spirit is the government's got to get out of the way.

And I think that's what's getting lost in a lot of this. And what I mean by that is we have one of the greatest advantages in the world, in that we have a capitalistic society that we've trained people for decades to solve problems. And the best thing that we can do is get resources in the hands of our entrepreneurs and our small business owners and give them the problem set. get out of their way, and they will solve it. And so whether it comes to how do we get PPE, right, to how do we help these restaurants, et cetera. And some of my favorite stories so far are simple things like there's a small business, and I forget the name of it, unfortunately, who is supposed to set up all of the infrastructure

for Coachella. Coachella gets canceled, goes virtual, right? All of a sudden, that same small business owner says, you know what? I'm going to start setting up tents for FEMA, right? And so they're able to pivot their business and quickly go and be resilient, right? And I think that you see that, you know, we've got a number of companies that we know of that previously we're not in the business of making masks or any sort of PPE who quickly transitioned their manufacturing capabilities to start to do that, right?

You see that with the car companies saying, wait a second, I think we can build ventilators, right? And when you go through all of this, what you end up finding is you can have one of two societies. You can have a centrally planned world where literally the guy, government plans everything, or you can have a decentralized resilient system where you empower the entrepreneurs and those with ingenuity to solve problems. And I think right now what ends up happening is the government is trying to actually be the century planned entity. And it doesn't work. That's not how America has been built and it's not going to solve the problem here. And so instead, what we need to do is we need to empower these people, give them the problem set and get out of

their way. And I tend to think that, unfortunately, our small business owners and our entrepreneurs are better positioned to do this than our large corporations. And when you get into things like the corporate bailouts, et cetera, what you see is there's a lot of peacetime CEOs running the large companies and there's a lot of wartime CEOs running small businesses. And we're in a war time. And so let's give them the resources and get out of their way rather than run to these large corporations that frankly aren't doing a very good job right now. You know, it's really interesting, this idea of central planning versus resilience. I think you could almost make the argument, too, that in the wake of the bailouts in 2008, 2009,

it created an incentive for those big corporations to not prioritize resilience because of a presumption, maybe active or even in the back of their mind that there was this new, there was this actor, right, that was going to help from fail. And so the incentives were pushing them to take these crazy risks and buyback stocks instead of having any cash for rainy day and all this sort of thing, right? Whereas to your point, entrepreneurs and small businesses simply don't have those kind of options. So they have to be more resilient to some extent. I guess my question for you, so this was a major theme of your conversation with Chamath last week, this idea of shifting back from an efficiency-based economy to a resilience economy. How optimistic are you that we can do that?

What does it take to actually do that in the wake of this? Once we do get back to work, once we do figure out how to manage a health crisis that I don't think is going to abate, even if it gets a little bit better. I think the way that you build resiliency is you allow failure. And that sounds really, you know, kind of grim, right? But that's what needs to happen. We need to let companies fail. And the companies that fail are the people who didn't do the hard. disciplined things in the good times. And so when I go to, you know, I'll pick on the airline

industry because they seem to be taking the brunt of a lot of this. They've spent, I think it's like over 80% of their free cash flow over the last decade on share buybacks. Now, share buybacks aren't bad, right? You can do them. They're actually a tax efficient way to deliver shareholder value back to shareholders. That's fine. But what happens is if they hadn't spent the free cash flow on that, they would actually have almost exactly the amount of money that they're asking the government for a bailout for. So that's kind of step one. Step two is the first rule of businesses don't run out of money. And if you're running out of money, you've got to figure out how not to do that. And so you have three options. You can either increase your revenue somehow. You can go to the

debt markets or you can go to the equity markets. What corporations are doing right now is they're actually going to the debt and equity markets, but they're not going to find public or private investors, what they're doing is they're running to the government. And the reason is because they think the government is the idiot in the room. And what I mean by that is they believe that the U.S. government will give them a better deal, a more attractive financial deal than they could get from the same public or private investors. And so what happens is they don't need to be resilient, right? To your point about the incentive, the incentive is not to be resilient. The incentive is who can get to the government and get them to give you the money, right? That's how you survive. And so the way that

you solve that problem is you say, we are not going to bail you out, right? And there will be failures of corporations. There will be people who lose their job. All of this short-term pain. But the short-term pain is actually what builds the resiliency, right? Things don't become resilient by accident. You have to test them. You have to build in the resiliency. And so an example I used the other day with somebody is it's like basic training in the military. There's a lot of people who show up to basic training. And they come from all different walks of life. Some of them them are tough. Some of them are weak, right? But everyone shows up. And on day one, what do they do? They shave everyone's head. They put a uniform on you, and now you're all treated the same. I don't care

who you are, how rich or poor you were, what you did in your life, how successful or not successful you were. You're all the same. And for the next six, eight, 12 weeks, whatever it is, depending on the branch of the military, they break you down. They break you down physically and mentally, and then they build you back up. And when you come out of that process, you're incredibly resilient. But what we have right now is we're like in midair with a plane and we're not willing to let the plane crash. But actually what ends up happening is you have to allow things to fail to build the resiliency. And so I just don't think that we have the fortitude to do that right now because what ends up happening is everything gets politicized.

And politicians, the last thing that they want to do is have kind of what David Sachs would call like tough talk. They always want it to seem like they've got your back. But really where the solution lies is for them not to step in. And so I think that's kind of the balance here is how do you do the right thing, the thing that's necessary to be done for the long term, but also when your election in November or in the next two, four years, et cetera. I think that that's just a sad reality of where we are right now.

Yeah, I mean, I worry about this political will question too. I worry that we've crossed this event horizon where it just will never make sense politically again for anyone to let any company fail or any group fail in any sort of way. And that's, I think we were on that course already, but I worry that this may have accelerated it. You know, I think to your point about the failure, one interesting little case study to look at this is just how inefficient letting bad business survive is. So, you know, came out of startup world. I was in San Francisco for a decade on the VC side and on the operating side. And one of the things that is unimaginable, can you imagine a startup financing ecosystem where bad companies just weren't performing still got to their Series A, their Series B, their Series C route, right?

It's ludicrous to even think about, right? Because it's just, why would you do that when there are all these other options? And I'll throw a personal example. There was a company that I had for a while. It was a classic example of something that happens in Silicon Valley where it's just close enough to working that you keep pushing, you know, you keep pushing that string. And it's not quite there. And when I think about the wasted resources of the people who spent, like, it's a company that should have either failed or turned into a consultancy rather than a venture back company after about a year. We held on to it for more like three or four years. That's two to three years for all of the people in that in that group, many of whom were really, really talented, that could have been off doing other things, could do doing more productive things, right? It was a net loss, not just for us because we didn't make it, but for every employee who could have been contributing to some other company doing much better things.

And I think if you scale that up across the economy writ large, the lesson still applies where there will be things. When we think about things failing, we don't think about what happens after, which is people go find and work with and contribute their talents to things that aren't failing, right? And that's better for everyone in the long run. Look, if they let the airlines fail, the airline industry will be stronger, better, and customers will have a better experience in five years. Can you imagine the companies that would spring up to take advantage of that opening?

I mean, it's like, from an investor perspective, you're like so it's like salivating because you know that what would come out of that would be amazing, you know? Of course. And what you end up, what you're seeing right now is, you know, in media, in the corporate world, et cetera, there is an establishment. And that establishment has benefited not by traditional free market forces, but through all sorts of artificial barriers. So in media, it was, hey, we're just not going to give a voice or a platform to people

that we don't approve of, right? And when you do that, no one will hear their voice. Social media breaks that down. Every person has now got a platform, a voice, and an audience. With the corporations, there's all sorts of regulatory monopolies or oligopolis that have been created. And what they do is they use the regulatory arbitrage to prevent others from entering the market. And so these are the opportunities to break down those oligopolis and to allow competition. Again, America was built on competition, on innovation, on ingenuity.

the best thing we can do is to give resources to the people who want to take that risk and see what they do. Because what I have seen, right, I think it was the Boeing CEO who continues to go on television and is like negotiating with the federal government on television. If he takes the bailout, I actually think what should happen is if you take a bailout from the U.S. government as the CEO of a corporation, you are barred from serving as a CEO of a publicly traded company for 10. 10 years. Not because I think that that's actually what the right punishment is, but because that level of deterrence will force the operators to go to the equity and debt markets that do not include the U.S. government and get the money that they need in order to remain solvent. And so what occurs in a lot of these situations is that we simply don't take the hard stance. We want everyone to feel good. We want everyone to walk away saying, wow, I really like.

that person. This isn't a time to be liked. This is a time to do the right thing. And what the right thing ends up being in many cases is not what the CEO of the large corporation wants. It's not what the other individuals in the market want. And so I think we just got to have a real conversation of like, what are we optimizing for? Because right now, what I'm seeing across the market, this isn't a capitalistic society. This is socialism. Right. That is what we are seeing. We are seeing a shift from capitalism to socialism. And we've seen this play out over and over and over again in the world. This is not a path. I think that America wants to go down because 50, 100 years from now, we'll look back and say that was the turning point. I want to switch gears for

just a minute to something that I think you have some unique insight into. So over the last month, we've seen crazy volatility in markets. At one point, actually, the previous the lagging 30 days in the stock market had been more volatile than the lagging 30 days in Bitcoin, which is obviously a hard thing to do. The narrative of Bitcoin has been in this interesting spot where the correlation of it, the fact that it was sold off at the same time as the market sold everything off, for some that changed the narrative or undermine the narrative. You spend a lot of time with those institutional investors who were some of those folks who had to sell off.

how have you seen their perspective, right? So not not the hardcore Bitcoin hodlers, but the institutional investors' perspective on Bitcoin shift, if at all, over the last month during this crisis. Yes, I think first you've got to separate. There's two types of audiences right now, right? There's what I just call the Twitter trolls. And I say trolls in a lovingly way

because they're not all necessarily trying to be negative, but just all of the people on Twitter who may or may not have a lot of experience when it comes to finance, crisis, asset classes, et cetera. And then you get the institutional investors, which in an overgeneralized manner, are experts at this. I think that there is a very big difference in understanding of what's happening in the market between those two groups. There's a lot of people I see on Twitter who keep yelling and screaming, Bitcoin's not a safe haven asset. Bitcoin's not a store of value.

Bitcoin has, is completely correlated to stocks, all the things that everyone sees. what people need to understand is in the institutional world, they understand how liquidity crisis works. They realize that in times of liquidity crisis, asset correlations go towards one. Every asset with the liquid market is going to sell off. And we have historical example after historical example of this happening. You know, gold in 2008 is the best example. I don't think anyone's going to claim that gold is not a store of value. But in 2008, during the liquidity crisis, about six months, it's sold off.

almost 30%. And then it ended the entire crisis up over 300%. And so what ends up happening is it just was a liquidity crisis. But we're two to three weeks into this. And people are yelling and screaming about their kind of, you know, their analysis of Bitcoin has changed when this crisis is going to be months, if not, you know, two years long. And so you can't make an analysis on something in the middle of the crisis. And so what I think is happening is that a lot of people in the institutional world, they have one of two perspectives. If Bitcoin was a very big part of what they did, so take hedge funds that started trading Bitcoin a lot, et cetera, they sold the Bitcoin, right? They just sold it off. We saw 50% drop into the day on Black Thursday down 30%. These people spent every day

trading Bitcoin and cryptocurrencies. They just sold it. They needed the liquidity. They're actually a small part of the institutional world, a very small part. The majority of institutional investors could care less about Bitcoin right now, not because of anything Bitcoin did, but because they have bigger problems. And so if you're sitting there and you manage, let's say, you know, a $5 billion pool of capital, whether you're an endowment, a foundation, a pension, etc., Bitcoin at most was like 25 basis points of your portfolio. If it goes to zero, literally you've lost more money in the stock market, then you lost if Bitcoin went to zero. Right.

And so it's just not that material to their portfolios. Now, the smart ones, I think, are the ones who are thinking two or three steps ahead, what they're starting to realize is, wait a second. We're in a deflationary environment. All assets are selling off, the dollar strengthening. The only way to stabilize markets and reverse those asset prices is to flood the market with dollars through quantitative easing. We're seeing that start to happen.

There's likely to be much more coming. In that scenario, when we switch from a deflationary to an inflationary environment, I need to protect my portfolio. I need to go into real estate gold, Bitcoin, et cetera. And so what some of them are starting to say is, wait a second, I'm not fully on the Bitcoin train where I'm going to go put 5, 10 percent on my portfolio. But I actually want to have the conversation now because in a world where we switch from deflationary to inflationary, I want actually to get exposure.

And so I think it's encouraging that kind of the more sophisticated institutional investors are realizing, wait a second, this is exactly what Bitcoin was built for. And I actually may want to get some exposure to this thing because I don't have very many other places to go to protect my portfolio in the world we're going into. And a lot of people analyze where we are right now and they're saying, oh, Bitcoin didn't work. But that's not true because you have to look at it over the entire lifetime of the crisis. and actually when we switch from deflationary to inflation, that's when Bitcoin should do the best. You also have this interesting narrative moment happening where Bitcoin's narratives are interesting

because in some ways every narrative that we've seen was present at some point early, right? It's just what comes into vogue at any given time. But one that has always been there that is built into the design of the thing is the fact that there's only going to be 21 million ever, right? And also built into that, the mythos of it is chance are on the brink of a second bailout, right? Although I tweeted this morning that that seems so quaint today compared to what we're seeing now. But you have this interesting moment coming up where as the central bank engine just revs up, you have the Bitcoin half-in coming. And that contrast is, I think, a powerful metaphorical moment to prompt people to do that kind of second, third order thinking that you're recommending.

I was on the phone with a couple of institutional investors the other day, and I said to them, I don't want to be telling you this because it means that there's a lot of people who are in a lot of trouble, but I could not be more bullish on Bitcoin right now because just like in 2008, we went from deflationary to inflationary and gold did incredibly well. Imagine if 50% of the gold miners in the world shut down their operations at the exact same moment, right? And that's what's going to happen with Bitcoin. 50% of the incoming supply is going to disappear right as everyone turns and looks for an asset where they can protect themselves from inflation. And so to me, again, go back to last June, I was writing about interest rates,

drop, maybe they get to zero. I actually didn't think that they would get to zero, but they ended up getting there. There's going to be tons of quantitative easing. We've printed way more than I thought we would, and then you're going to have it all coincide around the same time as the habit. Well, when that occurs, it's rocket fuel for Bitcoin, right? Because you're getting the macro environment, pushing people into an asset, and right as you're having the demand shock of that asset, you also get a supply shock. And so both the supply and demand shock are trending in a positive manner for Bitcoin. And so you get like this multiplier effect of what Bitcoin probably would have done already is just now magnified because of that macro backdrop in which it's happening

alongside. Yeah, I think it's a remarkable moment for sure. So this actually reminds me, though, another piece of yours that I really liked that I know you spent a ton of time working to formulate your thesis on was you wrote a what you expect to be winning and losing assets on the other side of this. You know, we kind of talked about a couple of them here, I think, but I'd love to. love to hear the conclusions that you came to on that. Yeah.

So what I basically did was I looked at, you know, a number of assets. And I said over the next, you know, two years, give or take, here's what I think the performance of assets will be. And less about like, here's price targets or anything like that. Just structurally, here's how these assets should work. And, you know, in kind of two minutes. One, when you switch from a deflationary to an inflationary environment, you pretty much can close your eyes and buy anything. and it should increase in U.S. dollar price simply because the dollar is being devalued and the asset is the asset. So that was kind of, you know, at the high level. I then looked at equities and I said there's a

number of equities that if you buy them at the right time and they don't go to zero, because they fall in so much in value, they will rebound. Even if they don't rebound back to their all-time highs, you will have multiple or attractive return profiles. Now, you can also just simply, buy the indexes, and I think that you'll get a great return there as well at some point, right? So I don't try to time markets. I don't participate in the public markets for a whole bunch of reasons, but I rated that as an eight out of ten opportunity. I then looked at oil. Oil at the time was trading around $20. It then got pressed up to $25. It's dropped. It's kind of, you know, floated around the, let's call $10 to $30 range. And my whole thought process is I don't see

oil surviving at incredibly deflated prices that put American shale oil producers underwater, right? So at some point, we've got to have a return back, whether that's in the short term or medium term. I do see that that is going to return to, you know, again, depending on who you ask, let's call it $35 to $50 range, is where they end up breaking even. And so that to me is attractive from a return perspective, but there's a lot of complexities that go away. And so, that's go with that and a lot of geopolitical things that just provide uncertainty. So I think I ranked at like a five out of 10 because of those complexities and uncertainties. I looked at gold and I said, look, gold's going to do well in this move from deflationary to inflationary environment,

just like it did in 2009, 2010 and into 11 when it hit its all-time high. Now, gold is stable. It's been stable for 5,000 years. So when I talk about it doing quote unquote well, I think that it's probably going to go from, call it $1,700 it is today to $2,500 to $2,500. So it's going to do well. It's just not going to, you know, 4 or 5x in value. And so I gave it a 3 out of 10, not because I don't think it'll do well. It's just that the upside potential of the asset is not in its favor because it is so stable, right? Volatility works on both the upside and downside.

So when there's drawdown, cold doesn't draw down as much. When there's upside, gold doesn't go up as much. That then led me to Bitcoin, which I said was, you know, very, similar to gold in all of the sound money principles, but it has much more volatility. So when it drew down, I think gold drew down 12% during this most recent liquidity crisis. Bitcoin at one point was down 50%. So it's much, much more volatile. Well, that volatility works against it in the liquidity crisis, but it works for it or behind it in the move to the inflationary environment.

And so what you're going to see is Bitcoin will appreciate, I believe, hundreds of percent on the upside. And so I ranked it 11 out of 10, mainly just stating that, you know, I could could not be more bullish. I've continued to accumulate more Bitcoin. And when I do that, I actually look at it as I am taking a inflationary asset, which is the dollar that can be devalued at any time. And I am converting it into a deflationary structure with a disinflationary monetary supply that protects my wealth.

So I literally look at it as I am moving dollars into a protected status with Bitcoin. And I think that more and more people are going to start to realize, wait a second, there's an advantage to this. They'll size the risk appropriately in their portfolio. But you will see more people seek out this asset as they see the quantitative easing that's occurring in the macro economy. One of the things that I love about our conversations, whether it's whichever side, who's technically the interviewer, is that you've spent so much time clearly thinking about this. And I think it comes out in part from not just kind of your main job of being an investor. but also the fact that you have to produce, you've set it up for yourself such that you have to produce a huge amount of content,

which forces you to go be constantly in learning mode, right? In the last few months, or I guess the last, I don't know, it feels like years, but a bit weeks, last few weeks, you shifted or kind of like, it feels to me like you expanded the event horizon or just the horizon of the podcast. How has your sense of the importance of kind of independent individual media podcasting newsletters changed in the last year and a half since you've been doing it. And what are the cultural shifts that you want to be able to capture with the newly rebranded Pomp

podcast? Yeah, I think I'm always pretty clear to people. I have no master plan. It just, I kind of a long time ago decided I'm going to do the things that make me happy, right? And what I realized was I got tired of just talking about Bitcoin all the time. and there's a lot of friends that I wanted to talk about other things, whether it was macroeconomy, you know, business technology, et cetera. And I had a platform to do it. And so rather than keep bringing them on to kind of a crypto only podcast, I said, look, I want this to be more than that.

And so I rebranded it in the way that would allow for that to happen. On top of that, I then made a pretty conscious decision to be very intentional about getting non-crypto people on the podcast. And the reason why I wanted to do that was two things. One, that's where my personal interest lied. But two, it's a way to pull more people into Bitcoin and cryptocurrencies by simply having them talk about the other things that they're doing and then asking the simple question, well, what do you think about Bitcoin during the podcast?

And so I think that what it really does is it kind of opened. up the total adjustable market, if you will. And I've seen a really positive impact on, obviously, all the download numbers and that stuff, but also the types of guests that are willing to come on. There's more and more guests who usually would not have been interested in coming just to talk about cryptocurrency for whatever reason. Now they want to come on and they want to discuss all sorts of different things. And I think that, you know, one, it helps educate an audience, but two, my real goal here is that I hope I can kind of pull more people closer to familiarizing or educating themselves around Bitcoin. Yeah, I mean, listen, you know, I've told you before, I completely

support the move. For me, with the breakdown, the goal and the intention is similar in the sense of, I think that Bitcoin is, it really is a lens and a gateway to think about different types of power systems in the world, right, even beyond the economy, the nature of truth and information and all these sort of things, when people go down this rabbit hole, they start thinking about everything. And so why would the media that this community is creating space for be limited to just the asset when it is a red pill for the whole world, right? So I've been loving it personally. The interviews, the different perspectives have been great.

So I'm really happy that you made that shift. And I'm sure it's going to continue to be great. But in honor of the Pomp podcast, why don't we wrap up with, I just have a few rapid-fire for you today. For sure. All right. One, what is your favorite meme right now? Oh, by far, Jerome Powell, sitting there with the money print with the rock music, for

sure. The creativity of the memesters has just gone through the roof, like, or just the quality of execution is off the charts right now. I completely agree. That one and the other one I got to say is not necessarily a meme, but I do find all of the Tiger King content, absolutely hilarious as well. There's a lot of comedy getting us through right now, for sure. All right.

Speaking of Tiger King, best thing you've watched, read, or listened to during quarantine? The best thing I've watched read or listened to. I recently watched a four-part thing on Netflix called Self-made. It's all about Madame C.J. Walker. and she was the first female millionaire in the United States. And it's a cool mix between like informative and entertainment. But that's probably the one that I would choose.

I really enjoyed that. Love it. Guest who doesn't make any sense thematically, but you'd love to have anyway for the podcast. It's kind of hard because you just said you can have anyone. That's kind of the operating principle. Yeah. Someone where people would be like, what? If I had to choose anybody in the world to have on the podcast, I would choose either

Alan Iverson or if I could, Biggie. Probably one of those two would be the two that like, for whatever, I don't even know what I would talk to them about, but I just, hey, you're cool. Like, I'm down. You literally like, you know, shaped so much of my childhood. Like, let's just shoot the shit. Love it. And last one. What's, keeping you optimistic right now. It's just that none of this actually matters, right? Like, at the end of the day, everything in finance is a game. And I think people take it a little too seriously sometimes, but we're all going to die. Like, every person who's in this podcast is going to die. And so you just got to remember that like the professional aspect of a lot of this is

exactly that. But at the end of the day, everything else in your life is probably more important than this. And so, you know, that's a hard message. I think for some people when they're like, look, I just lost my job, you know, all that kind of stuff. But really what ends up happening is you realize that there's a lot more to life than just that. And it sounds cliche, but the reason why a lot of people say this is because it's true. Lamento Mori. Awesome, man. I really appreciate you hanging out. I'm sure everyone love the conversation. Keep up the good work and I'll see you on Twitter. Awesome, man. I appreciate it very much. The idea that I think stands out with me from that conversation is this idea of resilience and rebuilding the resilience economy and what it takes

in terms of allowing failure. I think that there are these huge interesting strands of resilience emerging in terms of individuals and family and community networks. And I think that there is a possibility of extending that into the way that our economy is organized. But it's not going to be hard. It's going to be incredibly painful. And there are major questions of political will involved, as we touched into. But I just can't see any scenario where we just try to do this merry-go-round all over again, even if the Fed can print us out of this one more time. At some point, we are going to hit a crisis that brings us to our knees unless we redesign for resilience. So that's what I'm thinking about going into the weekend, going into the rest of April.

And I appreciate you hanging out and thinking about it with me too. So until next time, guys, stay safe and take care of each other. Peace.