The Breakdown - Why 2020 Unlocked a New Generation of Investors, feat. Jill Carlson

Episode Date: December 24, 2020

No one would have expected an economic crisis to bring a new generation of investors to the table, but that's exactly what it did.

It's these seeds that get planted decades prior and this sense of injustice or grievance that I think builds up. And I think that we saw that in 2008 and exactly, you know, the way that all of that got handled, I think, came to bear in the 2016 election and in a lot of what's happened since then. I have similar fears about the handling of this economic crisis. Because despite what the stock market will tell you, it is still an economic crisis. Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world. The breakdown is sponsored by crypto.com and nexo.io and produced and distributed by CoinDesk.

What's going on, guys? It is Wednesday, December 23rd, and today on the breakdown's end-of-year extravaganza, we have Jill Carlson. Jill Carlson is an investor at Slow Ventures and the co-founder of the Open Money Initiative. She's one of the most fluid thinkers around about where Bitcoin and markets intersect, and her interest in the impact of Bitcoin and crypto and new financial technologies is absolutely global. I love this conversation. I know you're going to enjoy all 21 minutes of it as well. Let's dive in. All right, Jill, welcome back to the break. down. How are you doing? Yeah, it's good to be here. Thanks so much for having me. I feel like I'm starting to have a tradition of holiday episodes have to feature

have to feature you now. I think that we did July 4th and I might have even might have even tried last year or something like that. But anyways, I'm super excited for this. It's really fun. We've been having these great conversations just kind of like ripping through the year that was, the year to come. I know you spent a ton of time thinking about this stuff. So I think we're going have a lot of fun. Awesome. Okay, so let's dive in. First question I've been asking everyone, what is or was the most important economic story of 2020? Oh, man. This is pretty obvious to me. Easy monetary policy, money printing. Yeah. I feel like I did this thing where I was like, let's see what happens when I asked that first. And it's just like, well, I mean,

Duh, bro. What else could it possibly be? So, you know, I think, I think instead of pushing you further on that, let's keep going because it's obviously going to flood through everything. I mean, I can talk about money printing all day long. You know that. But I wanted permission before I dove in. You do have permission.

But for funzies, let's keep going because I think it's going to be a part of so much more, too. So let's actually go to the next kind of the, I have a couple variants on the same question. So the next one is, what is the, what is the, the most important economic story that people didn't pay enough attention to? Oh, this one is less obvious, I guess, just by its very nature. I think the mass unemployment and the toll, the very real economic toll that COVID and lockdowns and quarantines have taken, I think that it's been fairly glossed over because it hasn't, you know, necessarily impacted yet a lot of sort of the powers that be in our society.

We haven't felt necessarily a lot of the trickle up from those consequences of COVID. And a lot of that has been masked, obviously, by easy monetary policy, by the sort of helicopter money that we've seen happen not only in the United States, but across a lot of the world. But, you know, if you look at sort of the longer term consequences of, say, 2008 or, you know, really any very very very very very very. real protracted economic downturn. It has ramifications at the political level, how people vote, how people feel within a society, sort of the overall ethos and culture for decades to come. And I think that that's absolutely going to be true in this case. You know what's interesting, just building off this point, this idea of the long run consequences of things. I feel like right now, for the first time, we're actually seeing the full,

full political fallout on the left of the sort of Obama administration's approach to dealing with Wall Street in the context of the great financial crisis or lack of dealing with Wall Street, right? If you look at like all of the folks who are coming into prominence now as voices in the MMT space, right? The Nathan Tankas is, the Rohan Gray's, all these guys who are kind of in that space and, you know, tons more people as well. I feel like, you know, this was so long ago, but it's like that,

is still, it's coloring and shaping the context now, you know, more than a decade later. It's absolutely, it's a butterfly effect, right? It's, it's chaos theory. You know, it's, it's these seeds that get planted years, decades prior, and this sense of sort of injustice or grievance that I think builds up. And again, you know, I think that we saw that in 2008 and exactly, you know, the way that all of that got handled, I think, came to bear in the 2016 election and in a lot of what's happened since then. And I have similar fears about the handling of this economic crisis, because despite what the stock market will tell you, it is still an economic crisis. We're now kind of headed into, let's call it the vaccine era of COVID, right? And there is

obvious, obviously a lot of hopefulness that will see, you know, a big, kind of a rip back to normalcy. Whereas I think a lot of folks, what they're trying to suss out is what, what the actual long-term damage will look like. And I think the question that I have for you is, as you look out across the next year, across vaccines getting rolled out, when it comes to different industries, economics, what do you think is coming back better? What do you think is coming back, but worse or having a heart or kind of some significant demand destruction? And what do you think is just not coming back at all? My fear is that small businesses aren't coming back.

My fear is that small businesses have borne such damage over the course of this past year and that people have also adjusted their behaviors in such a way that intentionally or not avoids small businesses, you know, relying on Amazon, relying on, you know, DoorDash, delivering them from Safeway, relying on Chewy to get their pet food instead of going to the corner dog store that closed down during the COVID months. I really fear that that's not going to come back. I do think that consumer behaviors will shift back to normal quite quickly, but I think that a lot of the places that we formerly relied on as consumers may no longer be there. And I think that that's going to result in a lot of consolidation in those big players that I mentioned in sort of

the big dominant conglomerates, you know, accumulating even more market share than than they already had. And I think that if that's true, that is a tragedy for small town America and really, you know, sort of small town, hometown, homegrown businesses everywhere. Well, it's interesting, too, because it's, I mean, you know, a lot of the character and composition of even urban America is defined by those small businesses. And I mean, I tend to agree. I think one of the challenges to and why partisanship is so not useful in a lot of these discussions is that, you know, these forces are sort of natural reactions. Like the fact that Amazon was able to pick up the slack of a lot of different supply chains was extremely important.

But obviously, they're also the ones. I mean, it's such a message of, you know, the billionaires got bigger, right, and richer. And I don't know that we have the right terms to, like, how do we, this is probably more rhetorical than specific, because if you had these answers, you'd just be in politics. But, like, yeah, how do we address the fact that there is this, you know, significant structural forces changing the nature of how markets are going to work that just, you know, kind of came to the fore in a huge way now,

while also trying to recognize the value that is not just in market efficiency of these businesses being a texture of part, you know, and part of our cities and towns. Well, I really love, actually, that you start off with the questions around, you know, what's the most important economic story and what's the most important economic story that people haven't paid enough attention to? Because I think that so much of this issue comes back to the narratives and the stories that are getting told. And if you look at the stories that have gotten told over the course of this year, maybe not in March, April. And then certainly there was sort of this moment of really deep awareness of, you know, racial inequality and injustice in May and June. But it's been disappointing how those have increasingly, as you look at mainstream media and mainstream consciousness, felt like just mere moments in time. And very quickly, the narratives all were verted back to the narratives that, again, not just the billionaires, but sort of the upper class care about. And so it's been, you know, a lot more focus, again, on sort of, oh, well, the stock market is rallying as opposed to, you know, the story of the inequality that's really playing out across the world. I wonder how much that has to do with the particular dynamics of a U.S.

election year, where everything is reduced into the most battle-tested soundbite that it can be. That's true. That's a great point. I think that that's kind of always the case, though. It's always a U.S. election year, effectively. Yeah, exactly. There's always people talking their book, campaigning for something. And it's not just, it's not just in politics that it happens. I mean, I think of, I think one of the most seminal moments of this year was Bill Ackman getting on CNBC, screaming that the end is coming, that, you know, hell is coming. meanwhile having bought all of those credit default swaps you know credit two hit my guess but um but you know someone is always talking their book is the point yeah no i mean it's it's fascinating like it's also been interesting to see our relationship with those sort of uh the wall street demigods shift and change a little bit too i feel like there's been i don't know it's it's like they've been more in the public eye than ever in some ways but it's like a

a new class finally emerged, the Bill Ackman's, the Chamoths, right? That like, you know, kind of shunted everyone to the side. I think that that's true, but I also think that more than ever, there is, I think that they have been proven to be no longer gods. You know, you and I have talked about this before. A lot of that is due to the gamification and the retailifying of high finance and trading and investing. and the Robin Hood rally and the notion that, you know, you don't have to be a Bill Ackman or a Chimoth or, let alone a Warren Buffett to make money in the markets.

And that's been, I think, actually a very heartening thing to come out of this year. And the narrative that I love, which is just that, again, you know, you don't have to be an old guy in a suit at a Bloomberg terminal to be a traitor. Yeah, I mean, I think that the idea of people using markets to exert economic control over their own lives, like if we can, if we can shift some of the kind of day trader narrative to that, I mean, you and I talked about this all the time, but the sort of this is why there are narrative battles, you know, because the version of that story that I and I think you want is that one, right? Democratized access ability to participate, like fewer barriers, fewer hurdles, lower buy-in, right? Versus the bunch of crazy kids just fucking. off with college money kind of narrative, you know, that we had a little bit at the middle of the year. Yeah. Yeah. No, absolutely. This episode is brought to you by crypto.com, the crypto super app that lets you buy, earn, and spend crypto all in one place and earn up to 8.5% per year on your Bitcoin. Download the crypto.com app now to see the interest rates you could be earning on

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crypto and fiat. Your passive income made simple. Get started at nexo.io. Let's shift over to crypto for a minute. So when all was said and done, what do you think the biggest Bitcoin or crypto stories of the year were? I think that the biggest story of the year is Bitcoin finally being consensus recognized as a hedge, as an inflation hedge, as an alternative to gold. I think that that has, become something that is no longer a radical thing to say. There are certainly still haters out there, but many of the haters of the last five years have actually come around on that point. And you know, you don't need to look to the likes of Paul Tudor Jones to tell you. But certainly the very fact that funds of that magnitude are putting money in in size around that thesis is very heartening to me.

And I think that amidst all of the craziness, all of the defy activity, all of the tokens getting launched and networks going live, all of that's been exciting. But I think if you want to look at where crypto is going and you want to look at whether this is real or not in gaining respect or losing respect, you look to Bitcoin always. And I think that, you know, the very fact that Bitcoin is getting this kind of respect. And in a very reasoned, rational way, finally is the biggest story of the year. It's interesting. I do think that there was maturity on a lot of front, like a maturation on a lot of fronts. I completely agree with your assessment in terms of both the biggest story and why it was relevant. I also do think it's interesting too, and you kind of mentioned this with Defi, like the last time that we had a Bitcoin run up, there was this real, you know, back and forth give and take.

between just radical ICO profits circling back into Bitcoin and then back over into new IC. Like it was completely unhealthy, right? Like it easily so. And it's interesting because I think a lot of folks naturally tried to draw the DEFI is ICO2.0 comparison. But the thing that happened with DFI is that it stayed in its lane, I think in part, because it's just from a technological barrier to entry perspective, it's like you're not going to have Korean pensioners, you know, be pitched AVE, you know, and like figure out how

to use it and get into it. I don't know. I know a lot of savvy Korean pensioners. Yeah, that's true, especially after 2017. God damn. I think actually that's much to the, much to the benefit of the defy space and to the industry as a whole, right? Like, it did have these kind of crazy pops and like really wild things happening, but it was all in the context of people who knew exactly the sort of game that they were playing, right? Yeah. Yeah. No, that's exactly right. And I mean, I think that that's the really interesting thing about this year is this year has been, I maintain that the most important thing that's happened is the takeoff of the Bitcoin gold narrative. But it's really been a sort of tale of two cities this year of that happening in this very sort of sober, institutionalized fashion. You know, everyone keeps talking about ironically how quiet this Bitcoin rally has been.

and that I think is very healthy. And then on the other side, there's been this chaotic, really fun, but frenzied, defy phenomenon is the only way that I can put it, that obviously really took off over the summer and has continued to. And what's fascinating is, as I think you're pointing out, these two things, they've happened in parallel, but they've not happened together. They've been really two distinct and separate phenomena with two very different sets of actors involved, whether you're talking about on the investment side or on the actual sort of user side, very separate. And that is a huge distinction from 2017, where it was all co-mingled.

Completely. Really, really important point. Okay. So here's another question. What is an unheralded advance or underheralded advance in this space? I think that all of the innovation that has gone on around governance, it's not that it's been unheralded or underheralded because goodness knows every project now has a governance token and so on and so forth. But I was looking back just today actually at some notes from a couple of years ago from 2018. And in these notes, I was trying to compile sort of resources that were out there

in the crypto world on various topics, on privacy, on scalability, and on governance. And just two years ago, at the time, the only really live projects that were really focused on governance were Tezos, Decred, and I think Aragon might have been live then. Only barely. Yeah, it was really, not this thing that was a foregone conclusion. And really, if I look at 2020, yes, it's been the year of defy, but it's really been kind of quietly, uh, in a way the year in which governance has really come into its own. And again, I say that that's unheralded because I, I don't think it gets talked about in this, in the same kind of hyped or frenzied or sort of foaming at the mouth way that, that, for example, the defy trends have.

It's just, it went from being this very sort of niche idea to being, again, kind of a foregone conclusion very quickly and quietly. But I think that governance and all of the innovation that's happened around, around governance of these various protocols has been huge. Yeah, governance is definitely the type of thing that happens all the time, but we talk about when we don't have prices to talk about. And for a lot of this year, we've had prices and exogenous factors and forces to talk about, right? So let's talk going forward.

What do you think the most important narrative for 2021 is? And I'm keeping that intentionally vague and take it in any direction you want. Oh, boy. In crypto? Could be. Or it could be on a macro level. All right. Let's start with crypto.

That's because that's a little more straightforward. I think going back to this point about, the Bitcoin gold thesis. I think that one important litmus test will be whether that thesis continues to gain increasing mainstream traction or whether it kind of peters out here where it is. But then I think that the next logical thing in my mind is the other use case that cryptocurrency has been heralded as from the start, which is payments, which is censorship-resistant payments. And so I think that that is going to be the big thing that gets tested in the upcoming year is whether or not we can make crypto work from that perspective. And, you know, I'm thinking of things like the artist formerly known as Libra, you know, coming online.

I'm thinking about things like USDC and other stable coins continuing to grow and not just grow in terms of sort of. of volumes or, you know, assets locked and so forth, but also grow in terms of use cases, you know, grow beyond just being the thing that, you know, people store money in when they're not speculating in coins, you know, whether those takeoff for cross-border payments, for merchant adoption, all of these things that really crypto has struggled with for years and whether or not we can gain traction. And then I should also mention, you know, it's not just about stable coins,

that narrative of payments and of medium of exchange. It's also about things like the Lightning Network, right? It's things that are enabling scalability and those potential use cases in a way that they haven't before. Totally. I think, I mean, this is something that's going to be elevated by virtue if nothing else of, it's going to be forced as a regulatory battle too, you know?

Like we're going to really have this conversation out, at least it seems to me, you know, given what we're seeing at the early part of this month even. Right. Yeah. No, I think that's right. I think that's right. Yeah, the stable act, I assume, is what you're referring to here. The stable act.

I love the casual use of the word tethering as their tea. I was like, all right, someone's paying a little attention. I know. I know. that's a whole other topic of a whole other podcast, I think. Exactly. So last question that I'm super interested in your answer to. What's one prediction that only you have?

I'm not sure that I'm the only one who has this prediction, but one thing that I feel very strong conviction about that I don't see often discussed and that I think many people, people in the circles that I run in would disagree with is that we are going to see politically, economically, you name it, a return over the next at least four years, if not longer, to moderation. I think that over the last eight, ten plus years, we have seen this extreme swinging of the pendulum back and forth. And that pendulum has just been moving, even further to each side as it swung.

You know, so from Obama, who people tend to think of and talk about as kind of a moderate, but you think about him in the context of the time coming in post-Bush era, he was quite progressive. And then the reactionary of not only Trump, but before Trump, sort of the Tea Party and so forth. And I actually really think that with this election and with the way that things are going even economically, from a policy perspective, we're going to see a return of moderation. And I actually think that that's a great thing. That's one of the things that I'm the most optimistic about,

as opposed to this really, you know, swinging between the extremes that we've seen over the last decade plus. And so that's perhaps quite a general answer. I'm sure that there are things that I could dive into more specifically at some point that are perhaps sort of more unique to me and my perspective there. But that's one thing where I think I do differentiate from a lot of folks and is giving me some optimism looking at 2021 and beyond. I agree. This is definitely another podcast that we need to do. I think this was a year in which being like moderate isn't even the like we need a new lexicon even for moderate, you know, like, It's just like fundamentally like unaligned on a on a general basis and in this space that like,

you know, but I agree. I think it's there's a lot there to unpack. And I love that answer. Also as a jumping off point. So Jill, thank you so much for hanging up today. It's really fun. I never feel like these go long enough. But we'll have to do it again.

Thank you so much. This is a pleasure.