The Pomp Podcast - #1032 Zach Weinberg & Logan Bartlett Debating Pomp On Bitcoin’s Utility

Episode Date: July 5, 2022

Zach Weinberg & Logan Bartlett are the hosts of "Cartoon Avatars" In this conversation, we debate the bull and bear case for Bitcoin & Cryptocurrencies. Zach & Logan have recently been critics of this market, so I decided to bring them on the show to go through their thoughts on the digital currency. ======================= LMAX Digital - the market-leading solution for institutional crypto trading & custodial services - offers clients a regulated, transparent and secure trading environment, together with the deepest pool of crypto liquidity. LMAX Digital is also a primary price discovery venue, streaming real-time market data to the industry’s leading analytics platforms. LMAX Digital - secure, liquid, trusted. Learn more at LMAXdigital.com/pomp ======================= The Pod Pro Cover by Eight Sleep is the most advanced solution on the market for thermoregulation. It pairs dynamic cooling and heating with biometric tracking. Go to https://www.eightsleep.com/Pomp to redeem exclusive Fourth of July savings and start sleeping cool this summer through July 10th. Eight Sleep currently ships within the USA, Canada, the UK, select countries in the EU, and Australia. ======================= Valour (formerly DeFi Technologies) represents what’s next in the digital economy -- providing simplified, trusted access to crypto, decentralized finance and Web 3.0 investment opportunities. Institutions and investors can gain diversified, secure, compliant, and easily tradable access to a diversified set of industry-leading equity products and protocols, through a single stock purchase on a regulated exchange. Currently listed on U.S. (OTC: DEFTF) and Canadian (NEO:DEFI) exchanges. For more information or to subscribe to receive company updates and financial information, visit our website at valour.com =======================

What's up, everyone? This is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Now let's kick this thing off. Zach Weinberg and Logan Bartlett are the co-hosts of Cartoon Avatars. They both have had super successful careers in building companies and investing as well. In this episode, we only talk about one thing. What's the bull and bear case for Bitcoin and cryptocurrencies? currencies. Zach and Logan have built a name in recent weeks for being the critics of these assets and these markets. So it was about time they sat down and we discussed it. There's a lot of jokes in here, and there's also some serious conversation as well. I really enjoyed

this conversation with Zach and Logan. I hope you guys enjoy it as well. Before we get into this episode though, I first want to talk about our sponsors. First up is LMAX Digital, the number one institutional crypto exchange. They offer clients the deepest pool of crypto liquidity on the planet underscored by a hundred percent uptime track record through volatility spikes they leverage lmax groups liquidity relationships and ultra low latency technology lmax digital is the market leading solution for institutional crypto trading and custodial services you've never heard of lmax digital is probably because you are not an institution they have no retail only institutions they feature a central limit order book streaming spot bitcoin ether litecoin

and Bitcoin Cash, all paired with US dollars, euro, and yen. LMAX Digital, they're secure, they're liquid, and they're trusted. Learn more at lmaxdigital.com slash Pomp. Again, lmaxdigital.com slash Pomp. This episode is brought to you by 8Sleep. 8Sleep is the single best product that I have purchased over the last three years. It completely changed my life. I'm not joking. Pay attention. The Pod Pro Cover, which goes over your mattress by 8Sleep, is the most advanced solution on the market for thermoregulation. It pairs dynamic cooling and heating with biometric tracking. You can go to 8sleep.com to check out the Pod Pro cover and you save $150 at checkout. They currently ship within the United States, Canada, and the UK.

Now I told you it changed my life. It helps me sleep deeper, helps me sleep longer. I feel much more refreshed and I have better energy. You want to know how I have relentless energy every single day? Because I sleep on an 8sleep. Seriously, go check it out. 8sleep.com slash pomp today. This episode is brought to you by Valor. Valor represents what's next in the digital economy. They provide simplified, trusted access to crypto, decentralized finance, and Web3 investment opportunities. Institutions and investors can gain diversified, secure, compliant, and easily tradable access to a diversified set of industry-leading equity products and protocols through a single stock purchase on a regulated exchange. They're currently listed on the OTC

at D-E-F-T-F, and on the Canadian NEO Exchange at D-E-F-I. For more information or to subscribe to receive company updates and financial information, you can visit their website at valor.com. That's V-A-L-O-U-R.com. Valor.com. Go check them out today. Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy but only as an expression of his personal opinion this podcast is for informational purposes only we've got uh zach and logan coming

on next how are you guys good man awesome uh you guys look super excited very very enthusiastic ready to uh to tackle all of this we're happy to be here were there three of you what just happened Zach uh so uh brothers is a concept where there's like there's five boys in our family and we all look similar you know same mom same dad but uh they're leaving so now you two are here we could be like uh spiritual brothers the three of us now pump I will say uh our only interactions in the past were me uh questioning when your brothers other brothers started to go like viral and stuff I said how many goddamn pumps are there and uh and you responded you were like i forget so i'm like snarky back and forth i'm sure we can dig it up but the the uh the craziest

part is actually that uh we all are about two years apart there's five of us and uh on the internet though that's hard to parse out and so what ends up happening is people will start to confuse us and so i'll be having a conversation with somebody like oh man i loved your uh your tweet about tiger woods i'm like i don't know much other than he's a golfer so you guys all pumps like is that a nickname that shares across the board or are you like do they go by other stuff now before i answer that did you guys have high school nicknames like did like coaches or anything like that give you guys nicknames i had lb from a few people but that that's kind of like not really all right zach did you have a nickname it was always weinberg it's like a jewish thing

you know everyone calls you by your last name because there's like everybody's named like zach or john or something and it's impossible to tease us apart so you go by the last name all right so i had a similar thing where basically i think a lot of like uh athletic coaches and stuff they couldn't say our last name. So like, what do you do? If you can't say Pompliano, you just stop at the first part. And you're just like, all right, pop like that. That's the easy way to yell and scream. All right. Let's get into a lot of this. First of all, I want to start off with, I've got a little joke for you guys, which is if your podcast is named cartoon avatars, we spent all morning trying to figure out what is the best way to kind of set up this conversation. And so I

figured that there's some people who I've seen on the internet who are like Zach and Logan and cartoon avatars they're geniuses this is the most genius thing ever is to bring these people on and ask hard tough questions so we have you guys here as einstein and tesla but then good stuff hold on but then there's other people on the internet who i've seen said these guys are complete morons they don't know what they're talking about so we got a second meme as you guys is dumb and dumber that's good my read on this whole thing is that you guys are neither einstein and tesla or dumb and dumber. Everyone's somewhere in between, which I think is actually an important place to kind of start of like, is it fair to categorize both of you as like, uh, cautiously optimistic about this

stuff? Healthy skepticism. Like how would you describe, uh, your view of Bitcoin crypto web three, like this whole space. Jack, you go first. Well, I'll say it first and foremost, like I'm a technology optimist. I mean, I'm a pretty active, maybe one of the most active early stage angel investors in the US. So I look at and I'm interested in early stage technology, probably on the front end of that curve. So in a macro sense, I love new technology. I've built new technology. It's basically the only thing I've ever done. So I like it from a technical perspective. I would consider myself a skeptic on the utility and not in this religious, is it binary? It works or it doesn't. Nothing ever is that clear, but more the amount of dollars and hype and investment

that we're putting in relative to the output, the productive output that we're going to get out of the broadly crypto ecosystem. And I know that's like a loaded term and we have to break it down. So consider me a skeptic specifically in crypto, but a technology enthusiast more broadly. All right, Logan, what about you? I would say that I agree with Zach on the technical aspects of this. I think it's awesome. I think it's so cool. And as a job, I'm a venture capitalist and nothing would be better for me if all of the existing financial institutions get ripped apart and all the social media companies get ripped apart. I think that would be awesome because that would give me so much opportunity to invest in stuff. I guess I have two criticisms

of it in general. One is Zach's point on the utility. The rhetoric also has bothered me, just like the whole not going to make it and whatever, like all that stuff. I'm just kind of like, it doesn't lead to good discourse if you're going to be that polarizing about how you talk about who's on the in-club versus who's on the out-club. And then the final thing is like, I guess this goes to the use cases, but it's how much money and how many brilliant people are spending their time working on this versus other things that I think have a more clear, direct impact on the world. And so that it's kind of I'm complicated in all of that. But yeah, I I've actually kind of fallen into this and I would consider myself slightly more neutral than Zach. But I had a podcast. Zach was a buddy, started coming on with other friends. And then we sort of fell into like Paki McCormick's a friend. Mike Dudas is a buddy. Sean McGuire, like all these people kept coming on wanting to talk about it. And so now I'm like the facilitator of these conversations to some extent without too strong of a view myself. Before you guys joined, we were talking about how genius it was that like the podcast has become so popular because you bring Zach on and Zach asks the really tough question of like, tell me a use case. And then like all hell breaks loose, it seems like based on the internet clips.

Let's start maybe with this idea of like the people, the amount of people, because that's a really interesting point. It's like, are people wasting their time? Do we have all these really smart people? Is there so much capital going in and not actually getting their productivity? um i've went and looked and tried to figure out how many people work in like the broad crypto ecosystem so bitcoin plus all the web3 whatever and there is no like one answer but if you do some searches on linkedin and like all this stuff it seems like there's probably somewhere between 250 and 500 000 people is my estimate uh if you search you know blockchain

or bitcoin or whatever on these platforms usually you get kind of 50 to 100 000 uh roles and then you can kind of extrapolate it uh out let's say that it was a million people so just kind of like way more than, uh, than what the estimates I think probably are. How do you evaluate whether they're wasting their time? Like a million people, like Amazon employs more than a million people as just one company. Right. And so like, is that a big number? Is it a small number? How do you kind of think through, uh, uh, coming to a conclusion as to like, what is the answer to that question? Well, I don't think the number of people is the right heuristic, right? Like you had eight people build Instagram and clearly that was a, you know, massive theoretical benefit to society in terms of

at least the dollar value it created. So I wouldn't look at the people, I would look at the dollars. I would look at how many venture dollars, which means LP dollars, which at the end of the day means usually like an endowment or a pension fund or someone's 401k in some way, shape or form getting into this ecosystem, whether they know it or not. I would look at the dollars in and then the equity value created out. And what's the multiple here that we're creating based on the in. So I don't know how many people are, I've never looked and it's not something I would, I would check, but I looked at the, I think it was Logan, what 2021 crypto specific venture fundraise was like 31 billion. Yeah. Morgan Stanley says 30 billion or so was invested

in crypto companies. Yeah. So, and that's a single year. So I assume, I mean, I'm going to just like hand wave this for a second, but it's probably over a hundred billion across the life cycle and growing. And so the question is like, how many more uses could we have had for productive uses for that a hundred billion? Cause what comes with the money are people, right? Like the money leads to hiring, the money leads to teams, things like that. So I always think money is like the best way to, to track it. So these aren't, these aren't like running your mill, you know, these are like very talented computer science type people, right? Like Olympic math. I mean, Vitalik, probably one of the smartest, like math people in the world. And so I guess maybe to Zach's point,

the dollars go in and then the people follow because inevitably we sort of have the lizard brain of chasing opportunities to go make money. And so I think that is kind of the leading indicator of this stuff. And it's not comparing it to the average Amazon person or whatever. Like these are, for the most part, pretty talented computer scientists that are spending potentially some part of their life's work on this when I feel like there might be better uses, but I don't know. I don't have the super strong opinion on that. So if we, if we kind of continue on this path, um, let's take a Vitalik or somebody like that, right? There's plenty of people who are like, Hey, these people are really smart. They're

choosing to go work here. They obviously are choosing to go work here, uh, as a stated reason, because they think they can create, you know, quote unquote good in the world. It feels like everyone says good in the world, uh, whatever that means at this point, uh, in kind of public discourse, but how much should, uh, people be able to evaluate like is good being produced in the world externally versus kind of a more traditional venture capital style of like, let's just go find great people. And then they'll tell us where they want to go spend their time and effort. Like, how do you think about, uh, Oh, smart people are working on things that aren't actually productive versus no, the smart people will eventually figure out where the most productive

uses of their time are. And so we should just like trust them. Well, I don't think it's, I don't think those are the two choices. Uh, right. Like I think in general, you can look at the productivity of the dollars you're deploying by seeing ultimately what comes out of them in terms of companies, right? Like what is the output? What's the equity value of the companies that we're creating? And that's a good proxy for like, are we spending our time on interesting things? Because interesting things tend to be worth a lot of money, right?

Like that's just kind of how this, it's like capitalism 101, I guess. So I would look at, you know, what's the amount of money that we're actually seeing come out of this from an equity value standpoint based on the dollars that we've put in. And if you think of like the venture life cycle of what, like a typical venture fund, you'd expect to see like some early indications seven years in, 10 years, something like that. So, you know, I can't believe I'm about to say this, but yeah, we are a little early in the evaluation of the companies. I can't believe I said it's early. That's the clip, by the way. Zach Weinberg said it's early. yeah exactly yeah however uh you'd want to see like long-term real recurring non-speculative

trading revenue right like you have to decouple like what is speculative trading revenue from what isn't uh and my fear right now is like most of the revenue that we're seeing in the ecosystem whether it's in the exchanges which are definitely the best business model out there right whether it's like FTX or Coinbase or any of these other groups, or whether it's in the like NFT trading platforms like OpenSea and whatnot, another good business because marketplaces are underlying good businesses from an economic standpoint, that most of the activity that's happening on those ecosystems is purely speculative in nature and not actually like a long-term recurring business.

That's the, to me, like even the numbers that we show of like revenue, real revenue, not like coin revenue in the system is not actually real long-term revenue. Like it looks like revenue and it kind of like smells like revenue. But when you dig underneath the hood, you're like, Ooh, this is really just speculation that we're taxing. How do you balance? Um, so I've managed funds in the space. I'm an LP and other funds. I know the returns of a bunch of these funds. The best venture funds in history have been in this space over the last five

years, six years, whatever the time period is. Uh, and many of the funds of these vintages have drastically outperformed traditional venture funds. Now there's a whole bunch to unpack there. and we don't need to get into all the details of like how to calculate returns and all this stuff. But like, how do you think about productivity or value of that capital being deployed? Is it a measurement of just like LPs gave me a dollar and then that fund gave back $10? And so like, that's better than if they gave a different VC a dollar and they got $3 back there? Or is there some other way to think about like the return on VC invested capital? Yeah, well, I mean,

I would say two things on that. The first one is that, uh, certainly in the internet bubble, like, uh, similarly, the returns were absolutely astronomical. Like the best funds that, that came out of that were 99, 2000 people that were able to get liquid after a company started. And six months later it went public and they dumped all their shares. Right. And so I don't know necessarily ensure you could say, Oh, Amazon came out of that period as well. And so all it takes is one Amazon to justify everything else. And we can go down that rabbit hole if we want. But then the second thing is, to what end are they making these dollars? And I think if you look at, for the most part, where a lot of these returns have been generated, it's come at the expense of, one, returns that are no longer there, which you could also say is true of software businesses or whatever, right? The market's obviously down across the board, but two, wondering about the sustainability of all of this, right? To Zach's point on the business model, and then also like who's left holding the bag in all of this.

And so if you go and unpack where all these returns came from, a lot of them, I have to imagine, came from tokens, right? And the tokens, inevitably, you got in on this pre-sale and then it got available to everyone else. And then there was retail and then everything sort of traded down and retail has been left holding the bag in large part here. Right. And so I think those are kind of the two points. Yes, the returns have been astronomical. And I think that's why you're seeing Andreessen and Paradigm and all these people able to raise bigger and bigger funds is because the returns have been absolutely amazing. But to what end and how long will that actually persist? And I would say, I don't know, and probably not very long. An important question, though. Pop, I want to give you like two scenarios and like have you tell me the difference between them. All right. This is not poking at you, to be very clear. This is poking at the industry.

First scenario, I start a new company. I ICO my coin to fundraise. So basically what I do is I create a coin. I haven't raised any dollars myself, right? So I have no equity dollars in the business. I issue a coin. I sell it out in like an auction process or whatever it may be to the market, to essentially everybody, right?

To retail, to accredited investors, non-accredited investors. I mean, that's the whole point of the crypto piece of this, right? It's like, it's technically anyone can come in and buy it. And we did those. We did those ICOs for a while. And then we basically said as an industry, and I guess the SEC as well kind of said, nah, that's a security issuance. That's illegal.

Like no mas. And we shut it down. Now what we do, this is like version two, is we say, okay, we're not actually going to sell the token to the public yet. The first thing we're going to do is we're going to raise a bunch of equity capital, good old classic equity capital from a third party set of third parties, typically venture capital, not to pick on VCs, but it could be anybody, right? Like from some third party, that third party is going to give me money. Now what I'm going to do is I'm also going to give them the coins. I'm not going to necessarily charge them for the coins. I'm going to put the

coin at a really low value. I'm going to give it to them. I'm going to give them a first look. And then I'm going to let them sell it to the public markets once this thing launches and gets liquid. So I've kind of put this middleman, funny enough, in the middle of this thing and saying, no, no, no, I'm not raising money directly from the public. I'm raising money from venture. Venture is then taking these coins and selling them to the public. That's not an ICO. And I kind of look at those things and I go, is that not the same thing? Just like twisted around, you know, like is it potato, potato type of situation? I think that those are like very, very similar.

I would actually put a third scenario in there, which I've seen people start trying to do, which is like, we're going to raise money from venture capitalists because at the end of the day, they're trying to build some sort of organization and they need capital to start it. Right. So like, it's got to come from somewhere, whether you sell a coin, you sell equity, you get a loan, you know, whatever it is. So they get capital and then they actually don't even give the coin to the VC.

In some cases, I see people trying to explicitly solve the problem of how do we have a coin and not be a security? And so what they do in that pursuit is then like, how can we put the coins into people's hands as our users, but not have them buy them? So there's like, oh, if you participate in the system, like somehow you earn them or you get them or whatever. And so I actually think that all three of those things are like very similar in their end state which is like the average person ends up holding them and you can argue whether there's

like a reason for doing it or whatever but i do worry and i think where we probably uh all three of us agree in like this web3 world is whenever i see a founder like pitching an idea and i ask them like why are you doing that thing like some aspect of it and their answer is like to avoid being uh caught up in the regulatory scrutiny or something like that what it tells me is that like they're not actually worried about solving the problem for the customer. They're like trying to make business decisions to like address other things that are just a distraction from like solving the problem for the customer. And I think to your point, like there's a ton of mental energy that has been going on. And frankly, lawyers have been making an absolute bag in this industry,

helping to like structure all these like really unique things. Like there are jurisdictions that I know about now that I never would have even known the name of if it hadn't been for people are like running around the world trying to figure out like who's the friendliest to the coins right and i think like that there's a lot of that going on as well to your point but i also think that that's the argument from you know whether it's the bitcoin community or even the critics of just this whole industry on like maybe the ideas are right but the execution is wrong or the like distraction from trying not to be a security like is there a big difference between if you just treated it like a security or if you didn't right and it's case by case you know what

I think is amazing. And this kind of touches on the return aspect of it. Like why is venture a great asset class historically at the top and why it's been able to deliver great returns is, you know, if you look at it, most asset classes have a linear distribution, right? And like to be the 25th is not that different than to be the 23rd, right? But venture has this stair step. And the reason for that is there's compounding advantages that come from having a brand essentially, right? You have a brand, you get access to better companies because you get access to better companies, you invest in better companies, because you're an investor, better people join those companies, right? Because you're an investor, other investors want to follow and invest in it.

But at the end of the day, like if you're making something, then you have to go out and sell it to the customer, right? And if it's an enterprise software company, like you can have all those compounding flywheels that are advantageous. But at the end of the day, there's another customer out there that will determine whether or not the product's a good one, right? The weird thing about crypto. And the reason I think the returns have been so high is all of that happens. And then you get to use your hype in your brand and you get to drop it on the average retail investor. And so there's this whole self-perpetuating compounding loop. And instead of going to a discreet customer and saying, hey, does this bring you value? You go to a speculative investor and

say, hey, I'm involved here. This is going to the moon, diamond hands, hodl, whatever, right? And then the retail investor says, oh, it's amazing. Andreessen Horowitz is involved in this. We have to get involved, right? And so it's actually like the reason the returns I think are so good is because it self-perpetuates itself to actually generate the returns, right? And so it doesn't surprise me. Doesn't that happen in the public markets as well of like, whether it's good or bad, there's a bunch of investors, usually retail, not the kind of professional wall street investors who they look at, like who else has invested? That's like smart money. And then they go and buy some of these stocks. Like, is that like a human, like green? And I think that's what's crazy about GameStop and AMC and, you know, Tesla and all this is because they're, they're disconnected from valuations. Right. And so I agree like fundamental valuation, but for the

most part, we've seen over a long enough period of time, things tend to revert back to cash flows and unit economics and whatever, earnings per share and all of that stuff. And this doesn't have that, right? Sorry, Zach. No, no. I mean, look, I agree with everything you said. I would also say that when we try and do this comparison of a coin drop to a public equity, it's a false comparison, right? Because public companies have tremendous regulatory scrutiny and requirements and like a regulatory body overseeing it and audited financials and liability risk and, you know, all these things.

And by the way, like there's still scams. That's the crazy part. Like with all of those rules and all of the history of like people, you know, with the pink sheets screwing over retail and like brokers calling grandmas and saying, you should buy this.

You know, this is what used to happen, right? We had, there's a movie about it called Boiler Room. Even with all the scrutiny and regulation, we still have scams and here we have none of the scrutiny or now we're getting a little and definitely none of the regulation. And we're seeing, you know, scam central left and right, because we're just like reliving the history of finance over the last 50 years. The thing that's like really fascinating to me about the coin is I think it acts as a false proxy

for product market fit and utility. It dilutes the signal. it's really negative signal or no signal i don't even know what it is because it's not signal right like typically when you are building a software product you're looking for early signal about usage right i want to know like is there a product market fit and if it's an enterprise thing you want like paying customers and long-term contracts and if it's a consumer thing you want users but you want retention on those users you want to look at cohorts it's always like normal little metrics and so what i think has happened here and i said this on another podcast the other day is like most of these companies are built by engineers who don't have a background in like

financialization and speculation and it's not critiquing them it's just not what they do and so you issue this coin and in your head as a technical person you're like it's just a feature of the software just a coin it's just it's like another piece of code i wrote because it is actually just like another piece of code i wrote i made this token it's distributed off you go and then you see like a whole bunch of people buy it and you're like whoa i must have product market fit because there's a lot of people buying my token. Just like you would think classically, like there's a bunch of users using my software. I've got a bunch of customers. And in your head, they're all the same thing. And they are not the same thing because the reason they're buying the

token and it's mostly like not actually customers or users, it's speculators, is because they want to try and quick flip it to the market. They look at it as an asset class. We talk about these things like an asset class. We talk about it as a thing I'm investing in, not a thing I'm a customer of. We use the terms of finance. We don't use the terms of software. And I think that's the giant red flag to me, which is we talk about this stuff as if it's technology, but then when we talk about why people buy it and use it, we talk about it like an asset. And it's not both. It's like, can we pick one of these two things? And that's what I think people are getting confused in here is they look at this stuff, they look at usage metrics as a proxy for product market fit,

and it's not usage, it's speculation. So I've always talked about this as mercenaries and missionaries and yield farming, I think was like the original one where it became very obvious to me of people would basically say, Hey, I created a whole bank full of tokens that I invented. Come here. We'll give you a thousand percent APY or whatever the crazy number was in the beginning. And then as more and more people started to join because they wanted a thousand percent APY that got commoditized down. And then those users immediately jumped ship to the next chain or opportunity where they were offered a thousand percent APY. And so I've always thought about it is like, oh, those are just like mercenary users. And so I didn't so much as like the signal of the

product market fit as much as just like, you are not going to have any retention because you can't keep paying 1000% APY. And that's the type of user that you're attracting. And they're literally just going to leave. And so it ends up being this very weird thing. When it's a reverse network effect, by the way, most of these companies have network effects that more people join, it's actually advantageous to the platform. This one, because it's speculation, the more people join, they miss out on the opportunity and so they're they're like oh shit i need to go somewhere else right it's like a very perverse incentive that is logan you logan and i have talked about this too i think that applies to the the pay to play or whatever they call it pay to earn sorry gaming same thing

right like explain like the axi infinities and all that yeah yeah i mean we've logan i've talked about this as well which is like that same like anti-network effect happens in the pay to earn gaming business model, right? And it's kind of like the gravity of a coin broadly. And I'm not, by the way, I'm not including Bitcoin because I agree and believe that is a totally separate thing from what we're talking about here. And we can have that combo because I'm excited to chat about it. But in the gaming use case, right? And most of these coins, the people who get in early have the most to win, right? Because you see the speculative run up. And at a certain point, what happens is your major holders and the people who have had the most gains, their future gains

start to look significantly smaller than the paper gains they've already got, right? Like I've gone from a dollar to $10 and like now I can get from 10 to 12, just to use a stupid, simple analogy here. And all of a sudden you're like, well, I've made all the money I can in this game. I should hop to the next one. And there will always be a next one, always will be a next one because the friction to start them is relatively low. And now what you've got essentially is like your largest insider holders selling because they should sell because it is actually like economically beneficial for them to get out of the game or the coin or whatever it is and move to the next one. Exactly. Pop to your point, right? Like they're mercenaries, they're not missionaries. And you're

going to see this like rise up. Insiders realize we're at the peak, sell it out, drop back down, move to the next one. There's no retention. Like it's inherently going to do this. It is like almost by design, a highly volatile asset because of the ability to flip to the next game or the next thing. I actually agree wholeheartedly on this. And I think it's why we've seen the ideas are probably right. Like there will be somebody who cracks it. We'll come back to this in a second about kind of play to earn or whatever. And I'll get your guys' thoughts on some of the newer versions that I'm seeing. But let's talk about Bitcoin real quick. Where do both of you stand on Bitcoin specifically? You like it, you hold it, you don't like it, you think there's concerns,

like just kind of lay out where you guys are on it at the moment. So I have a tiny bit of Bitcoin and it's mostly, I would characterize it as schmuck insurance that I just don't, I actually don't totally believe in like the long-term value and the price and all of it, but it seems that it's reached a zeitgeist point that it's common enough in use case on ticker tape, on institutions buying in, that I just don't want to live in a world in which everyone makes so much money and I miss out on all of that. And so I have a tiny bit of exposure to it. I am not a long-term believer. I'm not a zealot in it. I think it's the most probably interesting of all the stuff that we can talk about here because it's the most mainstream, but that's my stance. Zach?

that was code for logan is a dgen uh bitcoin holder who's never selling okay all right got it uh zach what about you i was thinking about how i was going to answer this question before i came on uh i was really struggling with it it's like what like do you believe in god you know it's like oh man this is going to be a tough answer uh in satoshi we trust zach come on yeah this is this might go on for a while here uh i guess let me try and sell bitcoin to you which is kind of a fascinating exercise here right like why is bitcoin cool uh so to me like bitcoin has one property and you could argue the decentralized piece but let's just assume that like all of these things are decentralized for a second because we're talking about you know crypto

broadly uh it is one property that makes it interesting which is that it's a fixed supply right? Like we're not going to make definitionally in the code ever more Bitcoins than whatever is like author. I don't know. What's the actual number? 21 million. 21 million. Okay. So there is a literal fixed supply. It's not some company telling you it's a fixed supply. It's not a government telling you it's a fixed supply. It's not like, ooh, maybe we found some gold in a cave somewhere and the supply increased, right? Like actual fixed supply. And that makes it interesting in the sense that as the world gets richer and as we have more money, period, then that money is chasing a fixed supply. So theoretically, if people want to own it, and that's the giant if,

if it makes sense in people's brains to own this thing, that the price should rise because you've got a fixed supply and an increasing demand. Does that sound right to you? It's kind of like the bull case, if you will, of why you'd hold something with a fixed, like a digital version of a fixed supply type of thing. That to me is the bull case. Yeah, I think there's two arguments. That is definitely one of them is if you're looking at it as like,

will this be more or less valuable in the future? I think that that's a pretty good summary in terms of like the market structure compared to the legacy world. Yeah, so that's the first. And then the question is like, okay, so why would you buy it? And that's the part,

besides like other people are buying it. And I'm not suggesting by the way that because other people buying it is actually a bad reason. That's actually like a pretty good reason. I mean, clearly it's worked over the last seven years to be like, I'm buying it because other people are buying it in the same way that like buying Beanie Babies early in the cycle was like a really damn good idea because other people were buying them. It's true of any sort of like new speculative asset. The question is like in the long run, why do people buy it? And this is where I start to struggle with it

because it feels to me like the story keeps changing. First, we said it was a payment network then we said it was like the new internet then we said they're gonna people are gonna build these giant companies on top of it then we said it's like decentralized no government not exactly sure why that's available because you need fiat in most places the kind of the story kept shifting and then we heard the latest maybe this is like two years ago or so which was well it's an inflation hedge right it's digital gold and gold in itself by the way is a weird asset that people own it's very odd right it makes almost no sense it's kind of like the history of gold is why people are they own gold because they own gold, because they've done it for a really long time, not because it

has any productive... There's no productive use of gold besides jewelry, and that's clearly not why people own it. So the question is like, all right, is it an inflation hedge? And what kind of inflation are we talking about here? And I think we have to tease out this inflation hedge statement because I think people mean two different things. And you've started to tease this out to your credit one is it's a hedge against what i would think of as like cpi inflation like consumer like the actual physical price of products right like detergent uh and toilet paper which is only two things i buy so house full of detergent right and some bananas uh and that one does not seem to be true right like we're watching it live right now it's inversely correlated with cpi now part

of the reason for that, I think, is because it's actually correlated with money supply growth, right? And what we're doing right now is we're seeing inflation peak go up, if you will, CPI inflation, and the Fed is tightening both in terms of rising rates. It's also unwinding its balance sheet, right? So we're actually seeing the money supply out there tighten a bit. And that's why Bitcoin, I believe, and other risk assets are coming down, right? Because the money supply is shrinking, which actually would be the argument that like, this is the exact time to sell Bitcoin. Like you should not own it in this environment. And I think that that's, that is a distinct use case. Sorry, I conflated, I mixed the two, but one is like, it's a CPI hedge, which

I don't think is true. The other one is that it's basically like levered beta, right? Like it's money supply grows. So beta grows and like Bitcoin is kind of like on the front end of the spectrum of beta because it's highly speculative and it basically correlates with like what other things that grow when the money supply grows, which is like risk assets and growth assets like QQQ. And I think that's really what people mean or think when they say it's an inflation hedge. They view it as like, it's just a hedge when the money supply grows, the price of Bitcoin probably goes up because of the fixed supply, right?

We go all the way back to that original like hypothesis, which is like when there's more money in the system and you have a fixed supply of something that theoretically people want to buy, the price will go up. It's not more complicated than that, in my opinion. The question is just like, does that story hold? Because once you lose, and this is what I was going to ask you, once you lose the other stories, the payments, the CPI inflation index, the non-government story, whatever, all the other things we've told ourselves over the last seven years about why this thing is going to change the world, does the one piece of it about it is a fixed supply and it seems like people want to buy it in some way is that enough is that enough to hold its value and

to me that's the question if i'm an investor i'm asking which is like what's the bear case what's the bull case that's where i struggle because to me that's not enough so let's go to what you just said first that we could talk about kind of in the future but i think uh what you're teasing out and this is something that um bitcoin is very unique in that like there's so many different types of people who pay attention to it uh either because they're a bull or a bear uh but you get like the wall street crowd you get the technology crowd you get like human rights crowd you get like that anon on twitter who's like yelling and screaming about whatever uh and all these people come together and they all have like really bad ideas for the most part and then like there's a couple

of people who like say something once in a while and you're like oh wow that was really smart and it makes sense it's like a political party literally we we were just recently talking about the fact that like uh just as republicans and democrats have gotten more extreme like the bulls and bears in bitcoin and in crypto have like gotten more extreme and then there's like as in political parties a lot of people are like i just want to kind of hang out like in the middle like you know like just like be rational and i think that there's going to be a return of like the rational people uh or the centrist um but there's this guy brent donnelly uh who we recently had on and what he talked about was uh bitcoin is not an inflation hedge as zach was talking about

in terms like cpi stuff it's more a hedge against loose monetary policy and i think that's your whole thing about like the expanding money supply and stuff yeah loose monetary policy essentially translates to more money being printed in the system. Correct. And so like, yes, I think that that is the nuance. And of course, like, you know, 240 characters on Twitter, like nobody says that it's way easier to say it's an inflation hedge. Um, so I think that that story will become more popular and kind of, you'll get the fragmentation of like, it's not a CPI hedge, it's loose monetary policy edge. But with that said, um, if you go back to 2020, I think it was Q3 when Paul Tudor Jones and Stanley Druckenmiller and all these guys started to be like, Hey, we're buying Bitcoin

because we think inflation is coming and we want to, you know, be best positioned. And Paul, uh, said, uh, it'll be the fastest horse. Like that was like the famous quote. And what has made me think a lot about is like the markets are forward looking. And so when you think of it from that perspective, like buying Bitcoin before the inflation came was actually really smart. Like waiting until the inflation was here and then going and buying it actually would have been like really bad, right? Cause you would have been buying it and now you're down. And so it does beg the question of like, how do any assets, forget Bitcoin for a second, like any asset relate to inflation? So if you think inflation is coming, you probably move your assets beforehand to

prepare for it. But does it also work on the backend? Like if you think the Fed is going to be successful and they're going to bring inflation down, do you sell certain assets? Or like, do you move in advance to try to go and prepare yourself? I don't know. Like, I don't think we've lived through this. And so like, that's one of my big questions is like on the other side of the inflation, it's very obvious in the beginning, people will move assets to try to benefit from incoming inflation, whether it's a narrative thing or it's actually true. But on the back end, will we see investors move assets because they're trying to prepare for like the fall of inflation? Well, I guess the best way to look at it, and part of why I don't believe that story,

and I think some people do, is look at the asset classes that historically are inflation hedges, or pseudo act like inflation hedges. Let's start with some facts. Nothing is a perfect CPI inflation hedge. Nothing historically has done perfectly well. There are a few asset classes that tend to do better in a high inflation period. Gold is one of those for, honestly, mostly cultural reasons. And gold is not a perfect CPI inflation hedge. If you look at the price of gold, you know, over the last few, it was kind of like flat ish. Now that's a lot better to be clear than like most of the assets that, uh, people owned. And so in a way it's actually like a decent inflation hedge relative to the fact that like literally everything else has gotten

crushed. Uh, the other thing that seems to generally do well during like high classic inflationary periods, like again, CPI inflation type stuff are commodities, right? Like cyclical style business, like commodity prices tend to rise. So as a result, owning like commodity producers is a pretty good idea. And that's done pretty well. Like it's held up pretty well. And you don't see those asset classes, the classic like inflation hedges, you don't see them trading ahead, right? You're not seeing those prices like massively dip because people are expecting inflation to come down. And so if we thought the market was so smart about what was going to happen in the future and it thought inflation was coming down and people are trading

ahead of it, you'd see those historical asset classes start to trade down and they're not. So I just don't buy the story because it's not a different, it's the same investors. It's like, you know, I've got a pie of stuff and like, I'm going to kind of move my money around in that pie. And it's not like there's just the Bitcoin people and there's just the commodity people and there's just the like gold people. It's just not how it works. And so that's why I don't buy the story because none of the other asset classes tell the same story. Like the data doesn't show it. So I actually think what happens is basically people look at their money. It's not just people.

It's like LPs and portfolio managers as a pie. And they look at this pie and they go, I've got $100 and I've got like 40 in equities and I've got like 30 in corporate debt and whatever. I've got like 3% in gold. And someone comes along with a story, like a technology story and says, we've got this new thing that's going to change the world and it's a fixed supply. It's called Bitcoin. And it's pretty cool.

and a lot of smart people are talking about it. A lot of tech luminaries are talking about it as the next big thing. Like, it seems pretty cool. I don't really know anything about it. Price is going up. Yeah, I could trim my gold from three to two and I could go from my Bitcoin ownership from zero to,

like, sure, why not? You know, it's not, and actually like most people I talk to when I ask them like, what percentage of your net worth is in Bitcoin? Not the crazy ones, but like the rational sane people is usually like 1%. It's like the schmuck insurance that Logan mentioned, right?

And it's sitting there in people's portfolio because it's such a tiny percentage of everyone's portfolio. That's basically what's going on. And I don't think anyone is really thinking this through about, is it truly an inflation hedge or not or whatever? And we're about to see this shake out because many of the stories are collapsing. That to me is the most, and I'm not long or short, I don't own any Bitcoin, I don't short it, I don't do any of this stuff.

I think what's really fascinating about what's going on right now is most of the stories are being put to the test, right? Yeah, agreed. The gold, the CPI thing, the like inverse correlation with the money supply, or sorry, correlation with the money supply, you know, this like payment network, which is clearly never going to happen, at least on Bitcoin. It's all of those stories that are collapsing. We'll see what happens.

Is this idea that like, yeah, everybody just owns like half a point or a point of their portfolio in Bitcoin because someone said that's a smart idea? Yeah, maybe. I mean, like people are lemmings. They tend to follow what other people do. I don't think there's like a ton of truly rational thinkers out there. the big guys, you know, the Buffetts and whatnot. Now, most of these people were like anti-gold in the first place too, are saying like, it's not a productive asset. It doesn't make sense to own

yada, yada, yada. And yes, I agree. Like if you didn't buy gold, you're definitely not buying Bitcoin. That's a very fair statement. And I think that that's true. So anyway, it's not an argument for or against. I just think it's like, I don't see the upside case when the money supply is shrinking. When the money supply is growing. That was where I was going to go, Pop, actually, is I read that article that you posted on your blog and the returns are all super interesting. Wouldn't that mean that now is the time with the money supply shrinking to sell Bitcoin? So I think that there's two ways that people look at this, right? And this gets a little bit at what Zach's saying, Logan, which is if you're going to trade assets and you take directional positions,

then like, I think there's a lot of people who probably already sold, right? And they sold it along with they're selling their tech stocks and numbers would indicate as much right yeah and so like if you were going to sell yeah then you basically said hey the fed's in control this is all one trade uh if they're going to tighten a lot of things many things will all go down like just sell go to cash the dollar strength in 20 year high and then we'll wait till they basically pivot and go back to lose monetary policy so i i definitely think there's a a very large portion of people who like that's what they do whether they're institutions or individuals i think now what you have though what's unique about bitcoin uh to some degree is and you can look at like the

non-chain metrics is like a very large portion over 50 percent sometimes as high as 65 66 percent just they don't sell and some of it's like the meme of like you know hodl like all this stuff uh i think it was stanley jerky miller actually was the one who said that like that's how he got convinced to buy bitcoin was that uh during the 2018 crash like 85 of people didn't sell so he was like well these people are fucking crazy so like i'm gonna go buy some too uh which you know what i think is going on there because i actually i think this is like such a good point and i was this is i was like thinking of my pro bitcoin argument and i want to touch on this one because i think it's fascinating of like there is you are right there is a contingent of people we don't

know who they are who don't sell in like any is at least they have it i guess the better way of saying they haven't here's who i think they are i'm gonna make a gross over generalization here and i have absolutely no data to back this up i'm gonna just like start with that this is just like in my head. A good way to make an argument. Let me give you the best justification for this idea I just came up with last week, which is you've got a bunch of countries, China, Russia, Iraq, whatever, a bunch of like autocratic style countries that have wealth, right? China in particular, Russia clearly has a bunch of wealth from oil and gas and, you know, anything to do with like essentially energy. And when you've got five to $10 billion, one to $5 billion in

your local currency, and you're not really subject, like you don't have rights in the classic sense, right? Like people can come and put you in jail or take your money at any point. Now they don't always do that. And in Russia, sometimes they show up and you happen to kill yourself uh but like in general it wouldn't be a bad idea to take like 10 of your money and just stick it in bitcoin i actually think that's like part of this is like they're not holding it because they think it's a good investment it is a true insurance policy because it cannot be grabbed i agree it's the ukraine argument right like a bunch of people pointed to ukraine and like oh my god if you got uprooted from your uh home and you had to leave you can't take your buildings

you can't take your business you can't whatever like you can leave with your bitcoin which like yes technically is true how many people were doing that yeah how do you get it into bitcoin right like all that for sure well and just do the math for a second like what's the current market cap of bitcoin was like 500 billion now or something like that might be 400 but yeah somewhere in that so 400 billion all right so we've got how many billionaires in just china alone there's probably like a few hundred let's just i'm going to make this up let's say there's a thousand billionaires in China. And like on average, they're like median assets or something like three to $5 billion each. Let's use five because I can do the math in my head. Each one

of them puts like 10% of their money in Bitcoin because you're like, I don't know, I might have to run and I need to get something out of here. So you've got on average $500 million, give or take, of any of these people in Bitcoin. You've got a thousand of them, plus you've got like a few other countries. And it's like, okay, there's a few hundred billion dollar Bitcoin market cap right there. There's the math. You can do it bottoms up in terms of basically super rich billionaires in these autocratic nations holding Bitcoin as an insurance policy. To me, that's probably where the price floor sits. It's that. Now, how you figure that out, it's beyond me. But that's actually what I think is going on. I think those are the people who

aren't selling, plus the crazy super religious holders or whatever. What's fascinating about this is if you take this argument and flip it not the billionaires but actually the like uh uh in the bitcoin community they call them the plebs or like that the individual person i think that you're right it's just not the billionaires there are billionaires who hold bitcoin for sure like all that type of stuff but i don't think that many of the billionaires are like putting 10 right i think it's more of like the oh i'm just going to trim some of my gold position and put like a little bit in there and if you're a billionaire in china or elsewhere i think that you're probably sophisticated enough to like, make sure that your assets are out of there,

right? Like if you look at like all the Russian oligarchs that are getting sanctioned, like somehow none of their assets are in Russia, which is like, oh, okay. Like they figured it out. Right. And I think when you look on the on-chain data, which again, does not show all of the exchange data and all that, but at least gives us some directional signal. What we've seen over the last couple of years is all the large holders, their percentage of ownership has been going down. and it's actually the small holders the people with you know three hundred dollars or three thousand dollars uh of bitcoin in their wallet address those have been going up in there and right now hitting all-time highs and so in like some crazy way you have like the large holders

who large isn't that a bear case for you is that a bear case that would be a bear case for me because like there's more money there's more money in the richest people combined than there are in like the bottom 70 percent and that's like everybody else like top one percent's gotten probably what like half the nation's 70 percent of the world's wealth or something so i would argue that's a bear case i mean i don't know the stats by the way of who's selling what but if the big guys are selling that would scare me so so this is and this i think ultimately gets at the crux of uh the debate between like the bitcoin community and many of the critics which is like if you look at this as a pure financial speculation tool you would want every rich person

to go put all of their money in immediately and the price would explode and you'd be, you know, wealthy beyond, uh, uh, your water streams. I think that what ends up happening is that the Bitcoin community, although take away all this stuff on Twitter and Reddit and you know, all the craziness, there's this thought process that like, this is the asset that will change the fiat distribution of 1% or 90% of the assets or 70% of the assets, whatever. And it's this idea that, these individuals are treating it like a reserve asset. So what you end up finding is that like a lot of these smaller wallets, they just never sell. They're not trading. They're not doing anything. Yeah, they're treating it like a piece of their savings.

Savings account, right? And they're just saying, hey, look, rather than saving dollars, I'm going to save in Bitcoin. It can't be debased. And like, whether it goes up, down, sideways, whatever, I'm just going to hold it for a long period of time. The problem with that argument is that, and by the way, I think that's a fair statement of like, all right, I'm going to save in Bitcoin versus my local currency versus dollars, maybe I don't have access to dollars or euros or, you know, one or whatever, like, okay, I'm going to put a little bit of my savings and just hold it and kind of not look at it. It's almost eerily similar to like the, I'll just put like half a percent or something kind

of thesis here. I think that's reasonable, but it doesn't change the income profile of those people one bit. Right. They still don't have a lot of money. They're just, they're poor, right? Like they are just poor and it's not the fault of, you know, any one person here. It's just the fact that it doesn't change this idea that actually most of the wealth is concentrated. I'm not suggesting good or bad, it just is. And that's probably the source of what props this price up. Because if you add up 5%, 4% savings of people in third world countries who probably don't

have a lot of savings, who are generally poor, don't have a ton of income, it's actually not that big of a number. You'd be better off having the 10% of the Chinese billionaires if you want to prop the price up. Now, I have not done that math. I just want to be clear. Yeah, someone probably has. And I would bet if you did the like bottoms up five percent of savings of people not in major countries that have access to dollars and euros, it's not that big of a number. So can we actually find this out by on chains? I mean, well, we know five percent of it's Satoshi. Right. And that doesn't change.

I don't know. Has there been any activity in his or her wallet? Yeah, he is. He is dead. The other, the other, yeah, he's got to be dead at this point, right? Who else? No sane human being would be holding all of their money through this and this and this. I'm sorry. Nobody has diamond hands like that. It is impossible. Like their stuff would have been solved. That person is either dead probably, or likely lost the key. My wife thinks that, uh, it's proof that Satoshi is a woman. Cause she says no man in their right mind could have created Bitcoin and not told somebody. That is one of the smartest things I have ever heard somebody say, because she's exactly right. Right. Yeah. So a hundred percent, you would have told your buddies.

I mean, it's pretty incredible. Like, isn't that Satoshi guy pretty cool? And they'd be like, yeah, I wonder who it is. And like three drinks in, you'd be like, okay, it's me. So let me ask this. I want to throw an idea out there for you guys. And I didn't prepare you for this because I just want to kind of have you guys think through it with me. It's a business that I invested in but the logic behind why i think it's interesting will ultimately get at the difference between bitcoin and crypto in my opinion so in crypto you mentioned uh play to earn and this whole idea of like i'm gonna go play the video game i'm gonna earn something there's now a walk to earn and a bunch of these different things like do an action get paid for it but in each one of

these what they've done is they've basically said i'm gonna create you know uh zach coin right or or whatever it is. And if you go and you do whatever this action is, we're going to pay you in Zach coin. And it sounds amazing to the people who, again, to your point are in there early, they get a bunch of the coins and then the coins go up in value because more and more people want them. And like that ends up having some shelf life. And eventually like somebody along the way is like, wow, I have a lot of money in Zach coin. What is that coin? Uh, I'm going to turn Zach coin into dollars and like move on with my life. That was awesome. But like, I'm over this And then it kind of all falls apart. One of the businesses that I'm fascinated with right now

is a company called Fountain. It's a podcast app player. And if you think of the podcast space, you have iTunes, which wins because they got pre-installed on all the devices. Spotify is going to go sink billions of dollars into like IP and kind of exclusive content. And so like, how can you go and actually win in the podcast space? Their idea is why don't you actually create the ability to listen to earn, but do not create another coin. Instead, just use the payment rails of Bitcoin. So the whole idea is RSS feeds are the podcast feed, right? You guys have one for cartoon avatars. And when somebody goes to listen to cartoon avatars, which they were going to do anyways on Spotify or Apple or wherever, now they will get Satoshi's streamed to them as they

listen. And the first question everyone comes up with is where's the Bitcoin come from, right? Yeah. Yeah. Who's money, who's money's paying them. Yeah. So what, again, as you kind of start thinking through this, they're like, okay, well they raised some capital. They'll put a little bit off their balance sheet to kind of help jumpstart it. But really where the bulk of it, majority of the money today is coming from is either advertisers that say, I would love to advertise against a cartoon avatars, but what ends up happening is I don't actually know if people are listening to the ads or not. These guys can say, if you don't listen to minute two to minute, you know, two 45 in the, uh, podcast episode, you don't get the

money. So they can actually ensure that you listen. Well, are you, you're, you're like what in your thirties, forties, early thirties, early thirties. Okay. Do you remember, this is like right around when the internet was getting create, I wasn't, this is not an age thing. I just want to see if you remember this. Do you remember the pay to earn browser extensions? Pay to earn? No, but pay to search somebody recently. And I went down this whole rabbit hole of like paid to literally like do search queries was the one that I went and looked at. Yeah. So like back in the day, this is like AOL-ish timeframe or whatever. People were like, wait a minute, I get paid X dollars to show people ads and I can pay them X minus something in theory

to watch said ads. And like, there's the ARB, right? Like that's essentially the ARB. And then what happened is basically people built these like little browser extensions and you would run them Yep. On your computer while you browsed. And that's the key here. Like you, you browsed is never you actually browsing. It was like somebody put like a little, like their cat would move the mouse. Like literally people did, right. You would like fake mouse movements and you would fake typing and you'd fake searching. And then people built like the computer program that would pretend that it was browsing the internet and you'd get paid. And basically what happened in this whole thing, which is eerily similar to what you're describing is people scam the system because

people are clever and they're smart. And when someone says, here's money to do something, you're like, how can I get that money without doing that thing? Because that seems like a good idea. And what you will have, I would bet all my money is if somebody was like, I'm going to pay you to listen to a podcast, you know what I'm going to figure out? How to trick you that I'm not actually listening to this podcast. I will figure that out. And then you will pay me. And then eventually what will happen is the advertisers will be like, can you show me actually the data on the people who are listening to this. Do you know who they are?

Did they log in? Who are they? Can I survey them? Can I talk to them? And somebody in the analytics department of the ad agency is going to go, are these real people or are they bots? And they're going to be bots.

And that's how the story will play out. I would bet everything on it because we've watched it happen in the beginning of display ads in the early nineties and early two thousands is the exact same thing. Okay. So fully understand the history of that.

The other component of this is it's not just advertisers. it's also podcasters themselves so let's say that you guys were making a bunch of money on uh advertising on your podcast and then you basically take it and you are sharing it with your audience you're saying hey the bigger the podcast gets the more money that we're going to make we're going to send some percentage of deep rev share with my customers or users or something correct now the thing that becomes super interesting about this is because it's using the bitcoin payment rails which is just the ability across lightning network to send it

instantaneous and for free, right? So it just reduces frictions of payments on a global stage. You as the audience can now send money back to the podcaster. So to your point, the only way that you can really start to see, are these people real or not, is you're earning in the podcast. What they've done is they've basically created the ability for the audience to also almost like tip the podcaster. And so you get the Bitcoin and it stays within the ecosystem. Hey, you listen to earn, but then also you can turn around and you're like, Hey, I really liked this episode and your ability to comment or to engage with the podcaster you have to basically send some sats back and now by the way we're talking about a penny two pennies three pennies like super super small amounts

but what it does is it tries to get at this problem now already there's people trying to scam it right like so like that's gonna happen it's an economic incentive really really you're always you offer somebody free money and then they try to scam the system i'm like so surprised about that that makes no sense in crypto everything was solved right uh yeah so i i think like what i'm trying to get at here though is like there's two components that are interesting to me one is you can do some of these use cases or like ideas without having to create your own coin and i think that's ultimately where a lot of this is going to end up is like people are going to realize like oh we're actually not trying to be like some super decentralized thing that's highly inefficient and

like brings up you know i don't know governance and these things are like hilarious right you've got like a thousand people in a discord channel all trying to make a decision like good luck right? And instead they say, no, we can just do this with whether it's Bitcoin or stable coins or whatever. But the second thing also is, uh, this idea that if you have payment rails where you bring the cost down to zero, I'm not a believer that like you and I are going to go try to read an article and pay a penny. Like that just feels to me like that's probably not where the world is headed. Uh, but it does feel like if you can stream me money as I'm doing actions, you can divert my attention to do different things similar to the mercenary versus missionary thing and if

i'm going to listen to the podcast anyways then maybe i actually will come listen to it on your app versus itunes because i'm going to make two dollars and it feels like you know i'm winning even though it's only two dollars and it's capped so that i can't abuse the system thoughts you're gonna you're gonna abuse the system i also think listen i think podcasting as players is just the whole ecosystem's broken i'm sure you can speak to that so i i'm happy about the people taking bets. And I respect everything that Spotify is doing and Anchor. I think all these incentive things that are out of the course of normal behavior, like you look at Honey, which has been, you know, I think the most successful or at least largest outcome of

something that like incentivized behavior in some way, it was passive, right? Totally passive. And you were able to just do it in your normal course and speed. And I think that, you know, if you look at, I think, you know, the ramp guys a little bit and like what their last business Paribus did in the saving side was they was like totally passive email capture, all of that stuff. Right. I think when you need to change people's behavior to Zach's point and like to port away from an existing aggregator, I just think the incentives of like small micro transactions, you may be able to do it because you have a loyal following, presumably that's going to follow you over there. And maybe a handful of people are going to do the friction to go do that. But the TAM that exists of your

loyal followers and to get the incremental market share, it just doesn't seem worth it from a user standpoint, as well as a podcaster standpoint. Because inherently, you might have your very loyal fans that are going to come with you to this pod. And maybe you get a whole ecosystem to do that. But then you're constrained to, instead of all of Spotify or all of RSS or all of whatever it is, it's some finite number of loyal users. And so I don't know, I like innovation that's happening in this ecosystem because it does suck. But I guess I'm, I would never, I can't imagine, we're not monetizing what we do, but I think it would be really hard to get anyone but your most loyal fans to come with you to a new platform. I mean, you actually prefer as a content producer,

subscription revenue, right? It's predictable. You can price it higher. I mean, this is why most of the large newspaper publications kind of don't like micropayments for content because they think it cannibalizes the subscription revenue because some subset of those micropayments, because they don't add up to the same, the subscription dollar is bigger than the micropayment and consistent. They think they cannibalizes their business, which is why most of them basically refuse to do it. Or they only do it in these like really edge case things. So, but I just think it's like, it's not even the, will people do it or not? And I agree with everything logan said like most won't the bigger issue is just like when you give free money to

people they will abuse the system always human beings will abuse the system when you give them easy ways to make money and by the way they're not even just going to be like listeners they're going to be you know people in other countries with a lot of time on their hands and low incomes going wait a minute like cell phone forms yeah exactly user farm cell phone farms like bot farm i mean you know what they're probably gonna do man they're gonna take all those crypto mining rigs that they can't run anymore in china because they're banned and they're gonna build the world's best fake podcast audience listening system and get paid all the money back for the hardware they spent that's the kind of shit people do because they're clever and like this is why this whole

like, oh, I'm going to give like micro payments and little coins to people. It doesn't work because the incentive is really to like ride the coin up and get out and to abuse the system. If you want people to be aligned from an incentive standpoint, and this is true, not just of users, it's also true of like, you know, your employees and your investors, you give them equity and equity is the chance at future. We have systems to do this, right? It's called invest in the company and give equity grants. And we've done this for like a hundred years and it's regulated and we have rules around it to protect people from taking equity and companies that don't actually exist and paying money for it. Like the whole system actually

kind of already exists and there are problems, but most of those problems are not technology problems. They're like IRS problems and legal problems and like 83B election problems. Like it's that kind of stuff. And so all crypto is trying to do is say like, oh man, this equity stuff is like really annoying because there's a lot of rules. There's a reason there are rules. but there's a lot of rules. So instead of doing this equity thing, which has all these rules and regulations, I'm going to do this coin thing, which has no rules and regulations. And that's how I'm going to get people the money. And we're just reinventing all the stuff people used to do. And we're going to get all the same scams. And then we're going to get all the same rules.

There's this window in time where it's a pretty good business. I was talking to somebody and they're like, well, the reason I own Bitcoin is because other people are buying it and there's momentum. And I'm kind of like, that's the best reason I've ever heard to own Bitcoin. That is the best reason to own it. It's going up because other people are buying it. And I'm like, yeah, that's true. Why don't you own it right now? Will you buy some? Because I'm stupid, man. And I try and think about like, what is the long-term value cashflow of this thing? And I like actually try and reason through it. And what I actually should be is like, yeah, my uncle who barely knows how to use a computer is buying Bitcoin. I should probably buy Bitcoin too.

and then when he tells me he sold it i should probably sell it like that's actually what i should do and i don't because i i can't get out of my head of like why do i own this why do i own this why do i own this and the same thing is true of gold like i don't own gold because i don't like what what am i gonna do with the gold am i gonna like stick it in my apartment somewhere and like show it to my kids like there's no utility so i don't own either of these things it doesn't mean i'm right although i was you called me out on twitter and you were right like i was wrong for a while and now i look a little bit more right but to me it's almost irrelevant it's almost irrelevant which is like i don't it's not about the money i'm making or losing it's a lot more

of like what is going to happen in the future and like is my uncle selling his bitcoin and did he should he have owned it in the first place so that's why i don't own it uh more than you know any sort of like you should just go you should uh uh let me give you a a twitter tip which i've seen a bunch of the bitcoin critics do lately is they go and they literally might buy five dollars a bitcoin a hundred dollars i don't know what it is some small amount maybe even they buy one bitcoin and then every time that somebody like yells at them on twitter for any opinion that they have like i own some and it's the like uh uh like i i'm now in the club so like you can't attack me as a critic because i can be a critic but i own some one of my favorite questions um i

don't know if we have time to do it but one of my favorite questions to ask people is like when would you what would get you to change your mind about bitcoin when would you sell yeah like when would you sell? What would have to happen for you to sell? I'll go first while Pomp thinks. If they stop showing it on the ticker screen that I have up here of CNBC, if they take it down, then I'm out. Until that point, it's still in the zeitgeist enough and it's still being talked about enough and that it's worth holding whatever the 0.5% I have. Then if it goes away from that, I'm out. You know, one of the things that I saw happen recently, which there was an article about, is all the people that own board ape uh yacht club uh have now changed their profile picture

jimmy fallon has paris hilton has you go through all the lists they've all changed their profile picture i am out on all the apes like that is such it's like shit this is a falling knife get out that was always a dumb thing though that was always a dumb thing of course why would you change your like the whole idea of like these people who are like oh i have like an image a marketing thing whatever and like we're all gonna change our profile pictures of the same thing like of course they were at some point, we're going to go back to wanting to have their unique identity that their whole like business was built around. Right. Whoa, wait a minute. I shouldn't buy a digital picture of a monkey for a hundred thousand dollars. You're sure. What about the

future earnings of that digital monkey? Do you think, do you think more people, this is a serious question. Do you think more people made money on whether crypto punks or board apes or some of the tech stocks from 2020 till today? Like, where do you think people made more money i don't know i don't know if we could get the answer probably in the monkey like it's crazy right from a literal more people standpoint like more people made money in tech stocks right maybe a better return might have been the stupid monkeys but can i give you my nft my nft case i just i don't know do we have do we have time yeah go ahead all right all right cool uh because i was talking to somebody in the space of like what is this nft thing and here we are so i might

as well talk about it uh like why is art valuable then we're gonna start philosophically here for a second like what what gives art if we assume now i'm not talking about the like you know i'm nft as a ticket or whatever like just the the the collectible part of this for a second why is art valuable well it's kind of valuable for like two big reasons this is a bit of a hand wavy exercise One is that like the person who made it or the thing it's about is important. It's just culturally important. It's kind of like, why is Picasso important? Because Picasso was an important person, right?

Like why are Monet's important? Cause like he was an important person as well. And like, that's what part of it is like, one, this is like an important thing. Why is the LeBron James sports card worth more than, you know, Derek Rose? Well, like LeBron's better at basketball, unfortunately. So then the question is like, okay, so it's, it has to be an important thing, an important person. And then two, it has to be scarce, right?

There's not a lot of that. And so as a result, I can kind of like show off of like, I got one of these and you don't, right? And that's why art is valuable because there's like scarcity to it. And that's why sports cards are valuable because there's like definitionally scarcity to it because the license is limited and they can only make so many of the cards. And like those two things tend to be true. And then there's a third, which is that they like trade somewhat infrequently, sometimes

to be never, but like the more scarce they are, they tend to be more valuable. And then it's like, whoa, this, this art piece, whatever it may be, is like finally available for sale. It hasn't been available in the past. So the price goes up because it's an auction and it's not really a market, right? It's like market doesn't actually maximize price. Auction maximizes price because it's a one-time only biz. You better get your maximum out there.

Where's the market you can kind of trade. And that's kind of true of like most art. And yes, I'm sure there's exceptions. NFTs like almost definitionally have almost none of those things, right? Like they're not important in culture. Maybe you could make the argument that like the bored ape thing

has like slowly crept into the zeitgeist of culture, kind of, I mean, we're talking about it on this podcast. People put like stupid monkey photos on a bunch. Maybe, maybe, right? Like that kind of makes sense to me. they're not that rare because there's like a lot of people who are doing this and so much. It's just like, it doesn't really solve that one. Most NFTs are inherently not rare, right? Like the friction to create is effectively zero. And then three, they're widely available and traded,

right? It's like anti-scarcity. That's the whole point of the NFT is you can like move it around all the time. So the whole thing makes no sense to me as like holding any long-term value because It doesn't have any of the properties that typically exist in collectibles, in art. And I'm not a collectibles person or an art person, but at least that's kind of the fundamentals of it. And that's why I don't believe in the open seas and whatever as businesses. It's not that I think every NFT is going to go to zero, right? There will be some small, tiny little percentage of the market that exists that does well in

the same way that like there's a tiny little percentage of artists ever that like hold value but all of these platforms open c whatever they all make their money on transaction fees so i i think that um and look i know you got to go here in a second um is that's true the art market too right so like i agree with you of like if you think of all the art everywhere in the world that's created like 99.9 of it like we've never heard of we don't care no it has no value outside of like what the you know material that it's painted on or printed on or whatever Do you know the Sotheby's market cap? If I had to guess, it's sub $100 billion, like $5 billion, $10 billion, $15 billion.

I don't know. Three. I'm on mute. I guess two, yeah. Yeah, three. Yeah, small. So what we're saying is in the most mature market in the world, right, with like super high-priced items and Russians buying them and Chinese buying them and Americans buying them, the like real world open sea which is basically sotheby's which has a real world open sea giant

vig by the way i think like a sotheby's vig on this stuff is like 10 to 20 it's a big number three billion dollar market cap crazy all right doesn't that scare you listen i uh i wish everyone the best we'll see how this all plays out uh last thing thanks for having us on the last thing i want to leave you guys both with is uh if you had to pick one thing that you believe that you're like all right for sure other people definitely disagree when it comes to bitcoin crypto etc positive or negative what's the one thing that you guys feel pretty strongly about that you think other people are uh uh either missing or or don't uh don't pay attention to i have officially stumped the cartoon avatar yeah well i i don't know where like your listener group

uh i mean i think uh almost all the coins are going to zero uh i don't know if people are going to agree with that, but I think there might be, I don't know, one, two, three, four that can exist and persist in some way, shape or form. And, uh, and everything else is going to zero. I think there's 280 that are currently traded on FTX. And so I guess, uh, you know, whatever, 20,000 total, 20,000 total. I think those are all zeros. So get out now would be my advice, but I don't know if that's controversial. Probably is very controversial. Yes. Uh, Zach, what about you? That's what I was going to say. It's all going, like most of the stuff goes to zero. I mean, I think what happens is the returns, I don't know if this is like

controversial, but I think the returns in these next wave of funds are going to get destroyed. I think like the jig is up on like, so, you know, most of the return, you remember you're talking about like all these like funds that did exceptionally well. I think a lot of that was just like flipping the tokens, not the equity value. Cause the only big equity value companies that exist right now are like FTX, which you never raise money for. And then Coinbase, which has been around for very long.

You know, there's like not a lot of like big equity values that aren't just like paper equity values. I think once that like little coin scam gets looked at and people aren't allowed to like flip the coin to retail really quickly, the equity returns are going to get crushed. And I think the funds will get crushed. Then the LPs will be like,

eh, this is not for me. I think that's fair. Where can we send people to listen to Cartoon Avatars? Wherever you get your podcasts. we actually pay you all right all right all right all right guys listen i appreciate you guys coming on this was a lot of fun uh thank you and we'll definitely do it again in the future yeah thanks for having us on see you guys see you man later thanks so much for listening to today's episode i really hope you guys enjoyed this one make sure you're subscribed on apple

spotify or your favorite podcast player and if you're looking to try to transition to get a new job in the Bitcoin or crypto industry, we've got you covered. Head over to palmscryptocourse.com. We've developed a curriculum with the top teams across the industry. It's a three-week intensive training program with over 50 events packed into that three-week time period. Go to palmscryptocourse.com to learn more, and I'll meet you guys for the next episode.