The Canadian Investor - Paypal Mafia and Crypto Lending Platforms in Trouble

Episode Date: June 27, 2022

In this release of the Canadian Investor Podcast, we cover the following topics: How to save on foreign exchange fees with the Norberts Gambit method Crypto Lending Platforms experiencing liquidity issues The paypal mafia, a list of great entrepreneurs that all came from paypal’s early days LINK TO NORBERTS GAMBIT GUIDE Tickers of stocks discussed: DLR.TO, DLR.U.TO, PYPL Check out our portfolio by going to Jointci.com Our Website Canadian Investor Podcast Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital Sign up to Stratosphere for free 🚀 our platform for self-directed stock investing research. Register for EQ Bank, the seamless digital banking experience with better rates and no nonsense. Check out the Yes We are Open Podcast from sponsor MonerisSee omnystudio.com/listener for privacy information.

Welcome back into the show. This is the Canadian Investor Podcast, made possible by our friends and show sponsor, EQ Bank, which helps Canadians make bank with high interest and no fees on everyday banking. We also love their savings and investment products like GICs, which offer some of the best rates on the market. I personally, and I know Simone as well, is using the GICs, which offer some of the best rates on the market. I personally, and I know Simone as well, is using the GICs on a regular basis to set money aside for personal income taxes in April of every year. Their GICs are perfect because the interest rate is guaranteed, and I know I won't be able to touch that money until I need it for tax time. Whether you're looking to set some money aside for a rainy day or a big purchase is

coming through the pipeline or simply want to lower the risk of your overall investment portfolio, EQ Bank's GICs are a great option. The best thing about EQ Bank is that it is so easy to use. You can open an account and buy a GIC online in minutes. Take advantage of some of the best rates on the market today at eqbank.ca forward slash GIC. Again, eqbank.ca forward slash GIC. Live from the great white north, this is the Canadian investor where you take control of your own portfolio and gain the confidence you need to succeed in the markets. Hosted by Brayden Dennis and Simon Belanger. The Canadian Investor Podcast. The date is June 22nd, 2022.

My name is Brayden Dennis. And as always, joined by the great Simon Belanger. Simon, we have a lot to talk about today. We're going to revisit a very popular topic on the show called Norbert's Gambit, which is the elite way to convert CAD to USD and vice versa. You're going to talk about this meltdown. I mean, you don't have to be into financial markets you may have heard of like the terra luna celsius like crypto winter type things so you're gonna you're

gonna cover that and i'm just gonna be all ears on that and then simone i don't know if you saw the the doc here but i'm gonna talk about the paypal mafia as well which i think is a fun little topic there's actually one of them that I will mention now in my crypto segment about crypto lending platforms. That's part of the PayPal mafia? Yeah. If you had to guess, which one would you think? Is it Peter Thiel? Yeah. Yeah. It's Peter Thiel. So dude, he is like an octopus. He has tentacles in everything. If it is tech related, he's touching it somewhere, somehow via with his capital or as an advisor or literally building it from the ground up. It is insane. Yeah, he's a big Bitcoin bull too. Remember the whole thing?

Is he really? Yeah, yeah. I remember the Bitcoin conference. Oh, yeah, yeah. He made that whole slide about Warren Buffett, about his sociopathic grandpa. Sociopathic grandpa. Yeah, that didn't sit well for me. No, it didn't sit well for me either. You can't be chirping Buffett, man. Okay, but yeah, I mean, he's obviously very integral in Silicon Valley and

the PayPal mafia, but we'll get there. So stay tuned for the show. All right. Let's talk about Norbert's Gambit. I think this is the third time we have discussed it on the show. If I got just a penny for every time I get requests on to revisit it, can you clarify it? Where's the guide that you're talking about? And so it's going to be in the show notes of this episode. I'd be off dirt and ramen. I would no longer be on dirt and ramen if I just had maybe, okay, maybe 10 cents and a dime every time we had a request for it. So here it is. Now, this is one of the most actionable and useful pieces of information for Canadian investors. And that's why I keep bringing it up because you can literally start using this and it'll make a difference in your portfolio right away. You use it regularly when you buy U.S. stocks, right?

Yeah. Yeah. I mean, I use it. I haven't recently because I've mostly been buying like Shopify. That's Canadian listings. Canadian listings. Yeah, exactly. But when you're buying US listings, you're using this.

For the most part, unless I have to convert smaller amounts of money. Small amounts. Yeah, exactly. We'll get into that. Yeah. I always say a rule of thumb. If you're moving over 2K Canadian, I would do this personally. That's my like rule of thumb.

Yeah, that's a good rule. Based on the quick math that you can do versus how much it costs. Okay. Canadian I would do this personally that's my like rule of thumb yeah that's a good rule based on the quick math that you can do versus how much it costs okay so with that out of the way this is a method to convert CAD and USD which is very important for Canadian investors inside of your brokerage okay that is the why that is the what is. And the reason why it's so important to bring up is because, yes, it's important to be a great investor and to know what to invest in. But that takes time, that takes conviction, it takes years to compound. This is something you can start doing tomorrow and boost your overall returns by reducing fees. And reducing fees is one of the easiest ways to do so. So next time

you are buying US stocks or vice versa, converting US to CAD, you can do this. So Simone and I, we both do this for converting CAD to USD when we're buying stocks. And why? Okay. The why is because I don't want to pay the 2% or more conversion fee that your brokerage is going to charge you. Some bank platforms charge over 3%. I've seen as high as three and a half percent fee they take when you buy US stocks in CAD. If your brokerage account is holding Canadian dollars and you go buy Goog on the US exchange in US dollars, they charge a fee for that, for converting your money. And also why it's important is because this can unlock some hesitancy. This can unlock some hesitancy for Canadians investing in US stocks because one,

they don't want to pay those fees, which I get. I don't want to pay them either. And that's why I do this. And so this unlocks the hesitancy or maybe gets you over the hurdle rate is maybe the right way to say this for Canadians investing in US stocks. Because we talk about this so much, right? This hesitancy for Canadians to buy US stocks baffles me, and I think it should be avoided at all costs. So I think that that's an important one to kind of double click on, right? Yeah. No, that's really important. And before you get started, I would just caution people. I know we've had that comment in the past where people will use this method,

and then it takes usually, what, a couple of business days until it's off? Four days. couple business days until it's off four days yeah for it to be done and then they you know the dollar the exchange rate changes within that time period and they could have gotten more u.s dollar with the fee that's being charged two and a half percent exactly with the two and a half percent just because of foreign exchange movements but it can work both ways so that's something you can't control. And what Braden is going to go over is essentially, you know, taking advantage of reducing fees that you can control. That's right. Yes. Because there is a risk over the four days between when the trade settles and

journals over that there is unfavorable currency changes between the CAD and the USD, and there's a chance to lose X percentage based on that. I think it's worth taking a shot on it because this is fees you can control. If currency changes, I mean, that's just something that's- It could go both ways, right? It could go both ways.

I've made money in those four days. And again, we say on $2,000, we're not talking about like hundreds of dollars. We're talking about like 10, 15 bucks, 20 bucks, like in a pretty extreme case. And it can go both ways. I've been like, oh, I just made 20 bucks on this Norbert's Gambit journal,

but that's just house money that I just happened to win. Yeah, I just wanted to mention it because we've had that comment before. It's good. It is one of the things to think about. I still think it's worth doing regardless. Okay. So I'm going to go over this in four steps. I know it's a podcast, so I'm going to try to make it very clear. Four steps. If you want a written guide, it'll be in the notes on the podcast player, go in the show notes. There's going to be a link there. Okay. And so you can get it there, but four steps here on the podcast. Step number one to Norbert's is buying DLR on the TSX.

DLR is the ticker. So DLR.TO on many brokerages for TSX stocks. I know on Questrade, the screenshots on the guide that I have in the link, DLR.TO is what the brokerage will call it. No, this is actually an ETF from Horizons that is designed for this process. It is designed for this process for investors to convert CAD to USD with this ETF. Okay, so that is step one, buy DLR.TO in CAD. Step two, now we need to journal the shares from DLR to DLR.U. So again, in your brokerage, this might be DLR.U.TO, just representing that it's on the Toronto Stock Exchange. That's dlr.u.to. Now, this is the counterpart of the ETF that trades in US dollars. So you're going to journal your shares from dlr to dlr.u. You are going to do this by calling or

emailing your brokerage. So for me, this would be like, you know, if I call them, I'd be like, hello, I'd like to journal over my shares, DLR to DLR.you. And they'll be like, how many? And I'd be like, oh, all of them. And they'll be like, well, I need to know exactly how many you have. And I'd be like, okay, 115. And they're like, okay, thank you very much, Mr. Dennis. Bye-bye. Or you email them, which is my preferred method, because they'll do it the same day, and then you don't have to wait on hold. Because there is a longer-than-normal wait time

on every single thing I ever call. Since March 2020. Since March of 2020. We are experiencing higher than normal delay in volume. Dude, just a word salad of excuses is what it is. And so I just saved myself some brain cells and do the email method. You're going in to have to be specific, the number of shares you want to journal and the account number. So make it as easy as possible so they don't have more questions for you. So now, boom, step three, the easiest one, wait four business days or four

days that the market is open because it takes two days for trades to settle and then two days for them to journal it over. Okay. So you're going to wait four business days. Number four is really easy. You just sell the shares, the DLR.U shares, which are in USD. You sell them and now you have USD. You just moved your money from CAD to USD, didn't pay this two and a half or even 3% conversion fee. In total, you did pay for two trades though. So we got to think about the fee structure holistically. They are ETFs, so maybe you get those trades for free. Like I know for me, the ETF to buy is free and then to sell is five bucks. But if you're on a bank platform, let's play devil's advocate.

You know, you pay 10 bucks a trade on the platform. You're going to do $10 to buy it and $10 to sell it and wait four days. I would be wanting to move probably like three or 4K at that point for it to be really worth it. Because you got to do this work and it takes four days. So if you're in my situation on Questrade, it cost me $4.95 in fees to do this because the ETF to buy was free and selling it cost me $4.95. That is the fee structure for me moving my CAD to USD. That is a beautiful thing. And it's what I do every time I move Canadian dollars into USD in my brokerage account. If I want to buy US stocks, I do this probably every other month if not more

yeah do you know if you can do that with companies that are dual listed you can you can okay so before they made the horizons etf people used to just pick a really really liquid non-volatile large cap with lots of volume and do this process so like people would do it with td people would do with rbc or in bridge or something like that yeah one of those names like the banks were like pretty common like there used to be a lot of guides written on how to do it with td stock but it's irrelevant you could actually do this this is a lot easier now with an actual product that horizons made to do this for you no i mean i've heard it before i was just i forgot about that whether you

could do it with dual listed stocks yeah yeah you can i never have but i know you can do that you can just you can literally get them to journal the shares over to the nyse in the case of like td bank for instance yeah it's a good method i've used it quite a few times. Like I said, it just depends on the amount of money I'm converting. Yeah, fair enough. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade

as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense. And with them, you can buy all North American ETFs, not just a few select ones, all commission-free, so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees. They have an award-winning customer service team with real people that are ready to help if you have questions along the way. As a customer myself, I've been impressed with Questrade's customer service team with real people that are ready to help if you have questions along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call

or email, every support rep is very knowledgeable and they get exactly what I need done quickly. Switch for free today and keep more of your money. Visit questrade.com for details. That is questrade.com. dot com for details. That is questtrade.com. Calling all DIY do-it-yourself investors, Blossom is an essential app for you. It has been blowing up with now more than 50,000 Canadians plus and growing who are using the app. Every time I go on there, I am shocked. The engagement is amazing. This is a really vibrant community that they're building. And people share their portfolios, their trades, their investment ideas in real time. And it's all built on the concept of transparency because

brokerage accounts are linked. And then once you link your brokerage account, you can get in-depth portfolio insights, track your dividends. And there's other stuff like learning Duolingo style education lessons that are completely free. You can search up Blossom Social in the app store and join the community today. I'm on there. I encourage you go on there and follow me, search me up. Some of the YouTubers and influencers and podcasters that you might know, I bet you they're already on there. People are just on there talking, sharing their investment ideas and using the analytics tools. So go ahead, blossom social in the app store and I'll see you there. Now we'll move on to our next segment, which is on cryptocurrencies and it's presented by

our sponsor ShakePay. ShakePay is an easy way to buy and sell Bitcoin and Ethereum. Now there's been a lot of news about crypto lending platforms that are taking massive losses. The one like you referenced that is making the most headlines at least the past couple of weeks has been Celsius. So Celsius is a centralized crypto platform

that allows customers to deposit their cryptocurrency. Is it bad? Sorry to interrupt. Is it bad that before this happened when people talked about celsius the company i thought they were talking about a drink like a energy drink company i have no idea why right now we know yeah i mean i do that sometimes with just names all kind of associated with whatever random thing that comes to mind but yeah you know oh wait

okay no no celsius is a fitness drink okay i just googled it i was thinking of the right thing it's like a fitness drink that looks like the branding of an alcoholic like skinny white clock hand okay okay sorry to really get you off track here okay so circle back on Celsius the centralized crypto platform not the workout drink so it's a centralized crypto platform that allows customers to deposit their cryptocurrency and earn interest on it in the case of Celsius it was high interest and I'm talking here they're still showing on their website at least when i did these notes on the weekend 18 that you can get in terms of interest depending on the type of cryptocurrency so that the larger ones like bitcoin and ethereum typically those have yielded

less than 18 but regardless anytime you see that in opinion, it's a bit of a red flag. There are other players in that space. Some well-known names include BlockFi, Nexo.io, Lendon. Some bigger players, some bigger exchanges like Coinbase, Crypto.com, and Binance also offer some crypto interest products. They all offer some interest-bearing products, but the approach can be very different depending on which platform. So some of them will have a very conservative approach, while others like Celsius will have a much more aggressive approach in trying to generate high yields. And this is what has put them in a lot of trouble. So what these platforms offer is a centralized crypto lending platform. If you want

to get yield on your crypto, there's essentially two options. Either you go decentralized route, which is like a traditional financial institution with a lot less regulation, or you go the decentralized route, also known as decentralized finance protocols or DeFi. When you use DeFi you essentially rely on the protocol and there is no middleman. But as we've seen in the past year a lot of things can go wrong with these protocols including some protocols being hacked and the funds withdrawn. So it's something that people should be very careful when they use. I find DeFi very complicated. I'll be honest. And I was talking during the Blue Jays meetup.

Adrian and I were talking about that. And both of us and Adrian's a smart guy. Adrian, by the way, is one of Braden's employees at Stratosphere that I owe. He does a lot of stock research. He's a weapon. Yeah, he's a very smart guy. And both of us like it's something we have trouble understanding so it can't like just give context in terms of the type of complexity

yeah no and it's become a bit like d5 has become a bit of a buzzword for some stuff that i don't even really know really applies to what it's supposed to apply to it's become a bit of a buzzword yeah and it's definitely a nascent industry. And obviously- It's the wild west, man. Yeah, it is the wild west. And before I continue here on Celsius, what we're seeing right now is there's a lot of these smaller projects. We're seeing the ones that are actually more legitimate versus the ones that were just a cash grab projects where people just wanted to create them, make a quick buck, and then the project kind of fizzles out and dies. So I think

that's important as well. But to get back to the issue with Celsius specifically, is that they had been using DeFi to generate high yields with the funds that were being deposited on their platform by users. So their strategy was essentially to offer higher yields than its competitors in order to attract new customers. But in order for them to offer that, they had to take significantly more risk. And part of what Celsius did was use the funds that were deposited then use it as collateral to generate yield on DeFi protocols. The issue with that is if their collateral dropped in value too much they would need to add more liquidity or phase being liquidated. It's essentially like investing on margin. So that's all nice and dandy when you're in a bull market because liquidations are less likely to

happen but during bear markets like we're seeing right now you can get in the exact situation they have found themselves so they also had negative inflows on their platform since the start of May so clearly you know negative inflows so negative inflows just mean there's less money coming in on the platform than going out. So more people are withdrawing than putting new money in. So when you add that and the fact that they were already having some liquidity issues, this has led to them freezing all withdrawals on the platform. These things work until you get negative momentum.

until you get negative momentum. As soon as negative momentum kicks in, you get more withdrawals than deposits. And these business models spiral out of control. And we're seeing that on a couple of platforms. This was bound to happen though. I think like, dude, the writing's on the wall. You should have complete, your guard should be up. Like you should be completely aware of there are many risks when you are accepting an 18% yield. Like where can you find that and never had issues long term? You know, like go back in time, anyone who promises an 18% yield, it ended terribly for almost everyone, especially if they're guaranteeing it.

Like, you ever heard of Bernie Madoff? Yeah, me too. Yeah, me too. Yeah, and this is what a kind of classic bank run, right? So you have a scandal or something happening with the financial institution and the customers are losing confidence that they can actually refund their deposits. So then people start withdrawing as quickly as they can and then you get into this vicious cycle and at some point they have to freeze all withdrawals. Obviously in the traditional financial market we've seen that in the past but typically governments have stepped in and bailed them out but that's not the case with cryptocurrency now circle back to what i was saying earlier about

other centralized lending platform most of them offer lower interest rates than celsius and use more conservative lending practices but i think what's happening with Celsius and what happened with TerraUSD and Luna that we talked about a couple of weeks ago shows the need for proper regulation in this space. And I think the term proper is important here because you also want to make sure you don't stifle innovation in this space. So it's definitely a delicate balance that regulators will need to try and establish here. that regulators will need to try and establish here. For me, there just needs to be better rules to ensure that what's happening with Celsius doesn't happen again. And there's more transparency

when it comes to the centralized crypto landing platforms and what they do with customer deposit. That was one of the biggest issues with Celsius is people didn't really realize what they were doing with DeFi with customer funds until this all came out a few weeks ago. This is why if you do want to own Bitcoin, you buy it on ShakePay because that is the best platform in Canada. And I've met the CEO personally. They sponsor the show. I know the guys over there. And then you put it in cold

storage, right? Like you buy it on ShakePay, you throw it in cold storage. I know you've been doing that for years now. And I know that's what I'm going to be doing. And so, yeah. Yeah. In cold storage, it's just another way to say self-custody. So essentially, you own your own keys to your Bitcoin and only you can decide to make transactions. You're not dependent on any centralized platform, whether it's an exchange, whether it's, you know, a centralized lending platform like I'm talking about here. You remove a lot of the risk involved with cryptocurrency, in my opinion, by doing that. And definitely, you know, Bitcoin has been extremely volatile, but I've been pretty consistent on that. You know, own Bitcoin if you'd like. You don't have to. Make sure that

it's a percentage of your portfolio you're comfortable with. And I'll even go further, and I've always said this, put it as a percentage of your portfolio that if it went to zero, you're okay. It doesn't ruin your whole financial planning. Obviously, if you have 5% or 2%, you know, no one's likes losing 5% of their portfolio, poof like that. But if you have that mentality, you'll be able to handle these big swings a lot easier. Just a kind of a side note.

And I've been very consistent on that. That's right. Well, Simon, thanks for the roundup there on some of these platforms. There's one last thing. Yeah, just to add here. There's more. Yeah, there's more. Not too long, but there's also been some speculation with BlockFi,

which is another centralized lending platform in the past week, that they could be facing liquidity issues and that's the one that peter teal one of his venture kind of investing block fi i know that yeah exactly and i think the ceo is zach prince if i remember correctly and yesterday news came out that block fi was getting a 250 million dollar revolving line of credit to shore up their accounts from FTX. FTX for those who are not familiar with them it is a pretty large. How are the FTX guys so rich like they have like 40 employees. 250 I think the last I've heard. Okay but this guy became a billionaire with like less than 20 employees at one point. Yeah it's think it's Sam something, I can't remember his name.

But all that to say that those who are not familiar with FTX, it's a crypto trading exchange that is very prominent in the US and has a, I would say, a very good reputation in the crypto space. FTX has been very active recently because they actually agreed to purchase Canadian exchange bid vote last week and the transaction will be completed later this year. So just something I wanted to add a bit more kind of partial news, but also puts a little bit of context what's going on in that overall space. All those platforms are trash when you can go on ShakePay and it is so, so easy. All right, Simone, thanks for the roundup on crypto here.

I mean, a lot of people are wondering what the hell is Celsius? What the hell is going on? Especially for the casual stock investors like me. I don't know this space really. Yeah. But people have questions. Yeah. And I would say too,, don't, you know, just don't listen to me. Do your own research when you're interested, if you're interested in Bitcoin or any other crypto,

make sure you do your research. There's tons of good resources out there that you can very easily learn about it, especially when it comes to Bitcoin and like anything else, like the stocks we own for me, like Bitcoin, it's much easier to own something during a downturn if you understand what you own. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense. And with them, you can buy all North American ETFs, not just a few select ones, all commission-free,

so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees. They have an award-winning customer service team with real people that are ready to help if you have questions along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get exactly what I need done quickly. Switch for free today and keep more of your money. Visit questrade.com for details. That is questrade.com. for details. That is questtrade.com. Calling all DIY do-it-yourself investors. Blossom is an essential app for you. It has been blowing up with now more than 50,000 Canadians plus and growing who are using the app. Every time I go on there, I am shocked. The engagement is amazing. This is a

really vibrant community that they're building. And people share their portfolios, their trades, their investment ideas in real time. And it's all built on the concept of transparency because brokerage accounts are linked. And then once you link your brokerage account, you can get in-depth portfolio insights, track your dividends. And there's other stuff like learning Duolingo style education lessons that are completely free. You can search up Blossom Social in the app store and join the community today. I'm on there. I encourage you go on there and follow me, search me up. Some of the YouTubers and influencers and podcasters that you might know, I bet you they're already on there. People are just on there talking, sharing their investment ideas and using the analytics tools. So go ahead,

blossom social in the app store and I'll see you there. Let's talk about the PayPal mafia. The PayPal mafia. Okay. So I got a long list of folks here in this segment. And these are all the people tied to the early roots of PayPal story, who have gone on to be extremely influential in today's world, in the tech scene, in Silicon Valley, in products that you and I engage with on a very regular basis. And so I've been meaning to do a segment on these guys because it's so, and I say guys, because it's a long list of dudes. I'm trying to see if there's a single woman on this list. It's literally just, it was such a boys club, man. I don't think there is. And the PayPal mafia, to give you an idea of the scale of people involved and how they started to dominate Silicon Valley after this, I will just go one by one of the

people involved and tell you what they have done since. And as I'm doing this, the brain's going to start connecting everything and realizing, wow, these guys literally own so much technology. It is insane. Okay. So you hinted at Peter Thiel. He's known as the mob boss of PayPal mafia. He was one of the early founders. He was one of Max Levchin and the other co-founders, earliest investor and advisor in the idea of PayPal. He was already a pretty well-known Silicon Valley investor, and he served as PayPal CEO for a bit. When the business was taking off, he served as the CEO. He has then gone on to be the first outside investor in Facebook. So that can give you an idea of the wealth he has accumulated from that investment. And he has co-founded Palantir, which is a company that many of you will know.

So he's one of those guys who's like billionaire several times over from so many different ventures. And so many of you will know his name. Max Levchin. Max Levchin was an immigrant with a keen passion for developing products, code, and entrepreneurship. And so when he started PayPal, he co-founded PayPal and he was the chief technology officer. He was very key in this story, especially because the company was on the brinks of collapse because of fraud. There was a lot of fraud going on early in their days and that almost took them out. And so Max was instrumental in that. He then later went on to co-found Affirm, which is the biggest buy now pay later company

as of today. I know Shopify owns a pretty significant stake in Affirm as well. You ever heard of this guy, Elon Musk? He was the founder of x.com, which merged with PayPal. PayPal and x.com were direct competitors. They were competing for the same market, similar product. And they were actually funny enough in the same building when they were starting out. And they didn't know that at first. It was just kind of ironic little story. And both

Max Levchin and Elon Musk would sleep under their desks and work like absolute maniacs to see their vision come alive. They ended up merging and having to work with each other and respect each other very much. But as many people have hinted at, working for Elon is an interesting challenge, as many people know. Yeah. I mean, it's probably something I don't think I would enjoy working for Elon. I'll just put it right there. It'd be an interesting experience. Yeah, yeah. David Sachs, he is the former PayPal chief operating officer who later founded Genie.com and Yammer.

Yammer was a Microsoft acquisition. Many people will be familiar with it if they're on the Microsoft suite at work. It's like social media at work, i think it's stupid yeah i agree we have it at my work i'm like why would i even use spam yeah dude i actually asked our it team i'm like is this legit like is it gonna be like i knew what yammer, but I'm like, it shows external on it. I'm like, should I like even click on this? Yeah, no, I think it's a goofy product, but Hey, you know what? Microsoft buys your company. You're probably going to make some money. Scott Bannister, he was an early advisor and board member in the company. And he actually invented the technology for search advertising. So there was like a keyword auction that he invented that

now is very instrumental to search advertising, what Google and Bing compete on with this keyword auction. So an important technology, Roloff Botha. I don't know if I'm messing up his name, but former CFO of PayPal. He later became one of the top dogs at Sequoia Capital. Sequoia is one of, if not the most infamous, well-known successful venture capital funding startups and tech companies out of Silicon Valley and around the world. Sequoia is a household name in venture capital and definitely has one of the best brand names in the space. Steve Chen, former PayPal engineer who co-founded a little well-known company called YouTube. Jawed Kareem, former PayPal engineer working with Steve. He co-founded YouTube,

the two of them. I think it was actually a third guy, but these two guys, Steve and Jawed, co-founded YouTube. Now, Jawed Kareem actually posted the very first YouTube video ever posted on the platform. Have you ever seen it? No, I haven't. Okay. It's this kind of funny, dorky, low quality, 19 second video selfie cam that he posts at the San Diego Zoo. He's like in front of some animals. I forget. He's like from some tigers or something. He's like, hey guys, I'm at the zoo. And he just looks like a kid because he is. So those two guys, obviously a very prevalent platform today. Reid Hoffman. He was the former EVP at PayPal. He went on to start

a company called LinkedIn. Everyone knows it. You probably have a LinkedIn profile. Ken Howery, former PayPal CFO, became a partner at the Founders Fund, which is a venture capital fund ran by Peter Thiel. Again, you're seeing these connections, right? Chad Hurley. Okay, here he is, the third co-founder of YouTube. There he is. So those three guys. Eric Jackson, he wrote the book called The PayPal Wars, which I really want to read. I got to read that because I'm sure there's lots of juicy stuff here. He became the CEO of a publishing company. I'll try to rifle off here, two thirds of the list. Jared Kopp, he was the assistant to Peter Thiel who co-founded Slide, Home Run, and NextRule. I don't know if I know any of those companies, but

okay. Dave McClure, he's a startup investor in Silicon Valley. The name might not resonate with you, but people who are out there will know him. Andrew McCormick, co-founder of Valor Ventures with a little known guy called Peter Thiel. Luke Nosek, again, founders fund with Peter Thiel. These are like the Silicon Valley mob bosses. Keith Raboy, he then went on to work at LinkedIn, Slide, that company he's talking about, Square, the founders fund, and he's early investor in Zoom, Slide, that company he's talking about, Square, the founder's fund, and he's early investor in Zoom, Slide, LinkedIn, Yelp, YouTube. Do you see a pattern here?

They're doing well. They're doing okay financially. They all backed each other's companies. Yeah. Yeah. They backed each other's companies and they're definitely probably all made a decent penny when PayPal got bought. And there's still definitely a lot

of entrepreneurs. I'll say that. Yeah. Yeah. Tons of entrepreneurship. And so this is interesting, right? Russell Simmons co-founded Yelp. Okay. Wow. Now, Jeremy Stoppelman, who co-founded Yelp with Russell Simmons. Now, I wanted to tie in here, Max Levchin, the founder of PayPal, was the largest shareholder in Yelp up until 2015. Again, connecting the dots. Yishan Wang, former engineering manager at PayPal, you went on to work at Facebook and became the CEO of Reddit. That's the list here. You have a group of people in the right place at the right time with the right network, with the right motivation, the right mission, and most importantly, probably the right skills. It's the perfect storm. And so, like, I'm just thinking about this.

How did they all arrive at the same spot? It's unbelievable. Yeah. I mean, payments needed evolution back then when PayPal got started. So remember, I think it was last episode, you talked about the first job and I talked about how I would go to flea markets and garage sales and buy some eBay, like buy some stuff that I knew would sell on eBay and resell it on eBay. Well, for those are younger, when I started doing that, PayPal was not a thing. So when I would sell something,

there'd be a buyer, they would have to send me a money order, I would receive it money order, essentially, you have cash on a piece of paper, you don't have like, you know, the money has already been taken out of their account. So it's not like a check where it's always like, oh, I hope I won't bounce or anything like that. Money order, it's basically you have cash. Same thing for a cashier check. You have cash on it. The money's been taken out from their account. I had to, once I got that, then I had to ship the item. So you can imagine like people would buy items from me. It's a significant problem. Yeah, exactly. It would probably take around a month until they receive it because you have to factor in the time that they would have to get the money order, mail it. Some of them were from the States. Actually, a lot of them were from the

States. I would have to receive it, mail their item, and then get it. So you can see how much of a problem that it was back in the day and how much of a pain in something like PayPal really solved that. And it was, you know, I think a no brainer for eBay to buy them. Yeah, it was. And they really fumbled the bag on that at some point, because given the market caps today of those two companies. Now, you're right. And it brings up an important thing here for entrepreneurship. And if you want to start your own company is they recognize the significant problem, which was digital payments was a pain. And then they found a traction channel of people who have that deep problem. And there were people like you, eBay. eBay was how they really exploded. It's

how the product grew virally. It's this giant group of people who are looking for the exact solution that they've invented at PayPal. And Max Levchin said that they couldn't even handle the volume. That's how you know you have extreme product market fit. Like he said, like, I think it was every Monday, they would just wait until the entire platform breaks at some point, like during peak day, they would all just be waiting. And then it would just go off and then go like, and he said that one guy on in the office would bring in like his instrument and play some sad, like as soon as the thing went down every day.

And so you can kind of understand the culture of them trying to keep up and the power of them just really finding traction on eBay. So it's a really cool story, man. It really is. Another thing that I found interesting in this story is they did all of these extra efforts to grow the business outside of eBay and diversify, and none of it moved the needle whatsoever. They explode. They have this really successful venture outside of that. And then 98% of the volume is still going through eBay. So it's not moving the needle whatsoever. And so it brings in an important thing, which is concentration risk.

That was the number one risk for the company. Yeah. And online shopping didn't really pick up like eBay was. I remember like eBay was the most prominent platform for years. If you wanted to buy something online, eBay was the place to go. Like companies were just not set up to most of them, like had a, you know, a Berkshire style website, which just had like basic information about the company. And that's about it. And, you know, the vast majority, like weren't anywhere near close of being able to sell products online. So I don't think people, especially younger people, I don't think they realize,

especially if they're maybe in their early 20s, how they grew up in an environment where it's been so easy to transact online. I mean, if you're looking like pre, I would say like what, pre 2007, 2008, around there, like it didn't really pick up until, I think, in the 2010s. Like, really, really pick up. Like, you started having some towards the end of, you know, the 2000s.

But I remember, like, you just, there was not that many options. There was no infrastructure yet. Exactly. The infrastructure wasn't set up both physically and from, like, a platform like Shopify that enables them to build those storefronts easily. So unless you're like raising a bunch of VC money to put up a storefront with a complex backend, that's not going to happen until like these platforms like Shopify come up,

build you a front end and a fulfillment network in the back for you, right? and a fulfillment network in the back for you right or like 3p on amazon where you can leverage their network and their fulfillment centers it just didn't exist no exactly and i think that was the biggest issue as you you know when you started being able to buy some things online it would take oftentimes weeks until you would get it like the next day delivery like that was nowhere near close so there was a lot of building involved and i think obviously amazon invested in that heavily over the years and now they're reaping the benefits of it but that started a long long time ago that network that amazon has done their fulfillment network. It took, I mean, what, decades, I guess, to build. Like it's, yeah.

600 million square footage of warehouse space is their footprint on their 10K. Like, can you imagine? Like, you can't even really like put that into context. It's just like a gigantic amount of space. Even Ottawa, it's not the largest city, but I think, I know for sure we have two massive fulfillment centers. Right. And Ottawa is not the biggest city. So yeah,

just gives you an idea how big. And there's, have you noticed that none of them have Amazon branding on any of them? Have you never noticed that? No, I don't think I think I was driving. So I was trying not to crash the car car but you see these gigantic facilities and there's no amazon uh well i saw the amazon sign on the way in and stuff that's why i didn't but it's not like on the side of the buildings and they do that on purpose because it's like they want it to just be this like magic thing that just shows up you don don't really know how it happens, but you're happy it happens. You know what I mean? That's right. Yeah, everyone was, especially when we had all the lockdowns. And you know, I definitely my Amazon consumption has gone down a little bit

since then. Same. And I think that we're seeing that volume come through in earnings reports. Yeah, right now. Yeah, actually, like, I think the pandemic has showed me that from time to time i actually like going into the store and grabbing the thing it's going full circle baby yeah yeah not always i still buy a lot of stuff online but i think it showed me that you know from time to time it's fun to to just go in and just grab the product you know that you want to buy and socialize with people okay so here's a little. I wonder what you think about this. So I have to renew my parking permit for the city of Toronto. And they started taking requests for you to renew your parking permit via phone because of the pandemic, which was a huge initiative from the city, huge, gigantic,

very innovative move from the city, you know, use a phone. It's crazy. Now they went back and they said, no, it's got to be in person because we're done with the pandemic and you can't do it via phone anymore. So if you're anywhere in Toronto, you have to go to bay street way downtown at like city hall which is not an easy place to get to they don't have more than one location no man you have to even auto is better than that i think we have like three or four client service centers and spread there's one in the east one central one kind of one more west and one more south at least there's options in terms right not you don't have to go downtown specifically so it's not a place any sane person would drive their car to through the city especially depending on the time of day so you

know i'm either gonna bike down there after this and or take the subway because you know it's not a bad place to go it's you know right in the middle of the city. It's fairly convenient. But they have gone backwards now. And they're like, sorry, I can't do it over the phone. You got to come in. We're back to normal. I'm like, what? Back to inefficient?

Well, yeah, at least to me it would be like keep the option. At least. Keep the option, right? I'm like, I'm here with you on the phone right now. Like, what do you mean? He did it for me six months ago. That's probably the biggest takeaway, I think for businesses because of a pandemic

is just being able to offer omni-channel. So different ways for your customer to buy your product. Right, because people have different wants and needs depending on their schedules. Yeah, and preferences. customer to buy your product. Right. Because people have different wants and needs depending on their schedules. Yeah. And preferences. Some people just like to go a bit more often in person. Some people prefer online. Some people may still like curbside pickup. But I mean, I don't see the use in that anymore. But I'm sure some people still like the convenience. I think the businesses that do that the best will probably be the most resilient going forward. Just give your customer the option.

Those kinds of discussions don't happen when the city's having their... How do we make this great for our customers? Those questions don't happen. All right, guys. Thanks so much for listening. We really appreciate you guys. And I hope everyone's having a great summer. Summer's now in full swing. I'm off to Portugal soon. Enjoy some Portuguese beaches. That should be a great time. Simon, you're becoming a dad.

Hey, come on, bring it in. Thank you. Thank you. Yeah. It's coming quickly. Less than, I think due dates is about seven weeks now. Wow. Yeah, I know. Wow, it's coming quick.

Yeah. Oh, yeah. You must be pumped. I'm excited. Yeah, and a little nervous at the same time because you never know until you start living it. But I think we're getting close to fully prepared. I want to be kind of baby ready like a month before. That way she arrives a bit early.

No stress. It's all good. No sweat there. There you go. Do you have a name yet it's a girl it's a girl we won't announce it because you know i may have some family members who listen do you have no but do you have a name picked or is it still hesitating between two between two okay i feel like that's normal at this at this stage no no i'm not asking you to yeah and now it's the name right now in the pod because i have family members and sometimes they have strong opinions so you know you're gonna know when she's born that way if you don't like

the name you can't say it exactly exactly what are you gonna do then you're just then you're just a real asshole if you complain about their name after they're born yeah you can't complain about a baby's name like no thanks so much for listening. If you want to support the show, join tci.com. You get a shout out. You get Simone and I's portfolio updates every single month. In addition, stratosphere.io is the investment research platform that I have built. Simone's an investor and it is a wonderful terminal for researching stocks. We just came out with a new report on Airbnb as well. So I'm going to probably talk about that on the podcast soon. Yeah, we're covering like 20 Canadian names, 50 US names now. So the number is going up and up and up. So check that out

at stratosphere.io. Thanks for listening. Bye-bye.