The Pomp Podcast - #1132 Tim Draper On Elon Musk, Tesla, Bitcoin & The Future Of The U.S.

Starting point is 00:00:00 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. Tim Draper is a venture capitalist at Draper Associates. He's the creator of Viral Marketing, and he is a Bitcoin believer. Tim has seed funded Tesla, SpaceX, Twitch, Coinbase, Hotmail, Skype, Baidu, and many, many others. In this conversation, we talk about innovative technology, Bitcoin's rise, and the future promise of the technology, and why Tim believes so much in governments trusting their citizens and installing the idea of freedom.

Starting point is 00:00:36 I really enjoyed this conversation with Tim, and I hope you guys enjoy it as well. After you get done listening to this episode, jump on Twitter and let us know what you agreed with, what you disagree with, what you liked, and what you didn't like. We both appreciate the feedback, and it helps us get a good laugh

Starting point is 00:00:49 as to what you thought about this episode. All right, here's my conversation with Tim Draper. This episode is brought to you by LMAX Digital, the number one institutional crypto exchange. They offer clients the deepest pool of liquidity and they have 100% uptime track record through all the volatility spikes. LMAX Group's liquidity relationships and ultra low latency technology means that LMAX Digital is the market leading solution for institutions across crypto trading and custodial services. LMAX Digital, secure, liquid and trusted. Go learn more at lmaxdigital.com slash POMP.

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Starting point is 00:03:00 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. All right, guys. Bang, bang.

Starting point is 00:03:15 I've got Tim here with me. I thought a great place to start would be innovation is something that you've hung your hat on. You have an investment style that benefits when people figure out innovation, when they're able to build companies and startups. How do you actually know when something is innovative versus it looks shiny or it looks sexy, but it isn't truly something that's going to break through and end up creating economic value?

Starting point is 00:03:35 So what's cool about what I do is I can fail a lot. so think of me swimming really hard and hoping a wave comes. And so when I meet an entrepreneur where I say, oh, wow, that's really interesting. The market size is big enough. They're using technology in a new, unique way. And they're talking about the customer a lot. And if they're successful, I like the way that world looks, then I'm ready to jump in. And about half the time, it doesn't work. But every once in a while, it does. And when it does, it usually works bigger than any of us ever imagined. And so that's why I'm always making an investment based on what could the world look like and how, is that a world I want to live in? And that turns out to

Starting point is 00:04:34 be a great way to invest. Yeah. When you're meeting founders early on and you're asking them questions, obviously you're not asking them only questions about themselves, but you're trying to understand how they think, how they make decisions. Are there things that you explicitly look for where you're like, yep, that is, you know, a good sign or even things that they may say or do where you're like, that's a red flag. I've seen that pattern before and I don't want to kind of repeat it. Yeah. So, um, now all the entrepreneurs who are listening are going to game the system, but let me, uh, I'll give you the hint because it's you, because it's pop. This is, you know, very special. And I'm just going to say, I asked the question, why are you doing this?

Starting point is 00:05:15 And I do it in just that way because the great entrepreneurs will rise to the occasion and the wannabes, they'll sort of say, well, you know, my friend thought it was a good idea or I wanted to start a business or whatever, want to make money or whatever. We're backing missionaries and it turns out the mercenaries don't make money. The missionaries do.

Starting point is 00:05:42 And so the ones who have it in their head that this is the way the world's going to look and this is what I'm going to do and this is how I'm going to get there and here's how I'm going to delight my customer and this is how customers are going to become our sales force, all those things, then we say, okay, that's worth jumping into. Yeah. When you meet some of these founders, what's always fascinating to me is like Airbnb goes on to be a massive business. Facebook goes

Starting point is 00:06:06 on to be these massive businesses. And you hear the origin stories. Now, there's always the hindsight bias of like, oh, we always knew it was going to be a big business. But a lot of times, it's somebody trying to solve a problem for themselves or for a friend or whatever. And it starts off small. How many of the founders do you think actually have like world domination as a kind of vision early on versus they almost gain confidence as the thing begins to work more and more and they realize they can go bigger and bigger? I actually think it is the latter. At first, it's I want to solve this problem for this customer. And I've got this new technology that is like 10 years better than the technology that these competitors are operating under. And now

Starting point is 00:06:47 I can do something really interesting for the customer that they weren't able to do before. Well, then they jump in and they start and things start going well. And going well means you've got three customers who are delighted. Until you have three customers that are delighted, it's not going well okay okay before that it's like still failing um we call that fail and fail again until you succeed you're still failing until until you've got three customers who are delighted and then figure out how you can make those customers into your sales force get them so happy that all they have to do all they want to do is talk about you and have them spread it and then you start getting that machine going. And then the entrepreneur can really realize their

Starting point is 00:07:44 full potential, their full dream, their full vision. And that really does make a difference. And then they do start getting big and broad and thinking bigger and broader. and they are also capable of doing much more. Once your company is profitable, all of a sudden the world opens up to you. Until then, you're at the mercy of venture capitalists. And like going into a bear market like this, your venture capital should not be your source of money.

Starting point is 00:08:19 You need to cut your team back and make it as efficient as possible so that you can make it through and get the money from your customers. When you think of a consumer product, it's very easy to understand what the problem is. Delight three customers, they turn into your sales force. You don't just invest in consumer products. You also invest in all sorts of innovative technologies.

Starting point is 00:08:40 And so maybe we can use two examples, rockets and Bitcoin, which a lot of times people like to say Bitcoin is on the rocket and right, it's going to the moon, but we're going to separate them for right now. It's taking a very circuitous route. Yes, it's going up and down, up and down, but eventually we'll go up, right? And maybe let's start with rockets. Right. When you think about some of the companies that you guys have invested there, how do you think about which customers are you delighting? How do you think about which is the problem? A rocket can do a lot of different things.

Starting point is 00:09:07 Like walk me through maybe just like underwriting some of these companies and use an example or just talk generally. So it is true that Elon, when when he talks about when he talked about Tesla, he was talking about how he could delight his customers. So he did have that in mind. Now, backing a rocket company, that's where the market part comes in to our thinking. The market is nothing's happened in this industry for years. The existing parties are not providing the customer experience we all want. So it had been 50 years since there had been a successful car company when we funded Tesla from the very beginning. And everyone in the world really thought that rockets were only a business for governments. And when you have an industry like that, that hasn't changed forever, and you have

Starting point is 00:10:12 an entrepreneur that says, huh, there's a new technology here, and I can do something with it, And I can jump into this market with something that, in the case of the rocket, was 1,200th of the cost of what it would take to get a rocket from NASA. So NASA would shoot a rocket up with a certain payload. And SpaceX was able to do that for 1,200th of the cost. Pretty good. And so once you see something like that, where an industry has gotten sort of fat and lazy, and not to say that the individuals within NASA are fat and lazy or the individuals within the car companies are fat and lazy. Yeah, in the car company example, they were so caught up in their own success. They lobbied government.

Starting point is 00:11:08 Government sort of wrote rules to limit what they could do. And then all of a sudden, there's this electric car that comes along that doesn't run like a golf cart, but it runs extraordinarily fast. It's a breakthrough. And those breakthroughs happen occasionally, and they are the hardest to invest in. Why? Uh, because, well, in the case of both of those, uh, eight out of the 10 partners at Draper, Fisher, Jurvetson, uh, were saying no. Really? Eight out of 10 thought it was a bad idea.

Starting point is 00:11:45 And the rest were kind of, I mean, and the two of us were pushing, pushing, pushing, and eventually they sort of, well, okay, do it, but less or whatever. And, uh, a little less so with SpaceX because SpaceX, we already knew Elon was capable of extraordinary things. Why did you think that? So you guys invested in Tesla early, right? And in some ways it's an insane idea to just go build an American car company in general, right? At that time. Now there's still people who think it's an insane idea, but at least there's some traction. Why did you think Elon Musk was so different than other entrepreneurs that you all had met? Well, we backed, before we backed Elon, we backed Martin Eberhard in the electric car business.

Starting point is 00:12:27 We, because Tesla was started by Martin Eberhard. He, it actually started before that. I got this ride with Ian Wright, who took me on his Wright mobile. Okay. And, and he said, and I said, oh, great. It's an electric car. this will be like riding in a golf cart. And he, he strapped me in with five, with five point straps. And I said, what, wait, wait, what? And he, and he, and I, I was thinking, you know,

Starting point is 00:13:00 you gotta be a tree hugger or a, or a golfer to want an electric car. And he said, no, no, stay strapped in. And he took me out on 280 and we went zero to 60 so fast. And the car was sort of held together with PVC tubing and stuff. And, um, and we're on the freeway and, and I'm just going, Oh my God, this is amazing. You, you know, this is a big breakthrough. And then he took me around and then he said, now watch this. And we were maybe 40 feet from a stop sign going about 60 miles an hour. And he stopped before the stop sign. And I went, Oh boy, this is a whole different level in automotive. And then there were all these restrictions and the lithium ion batteries blow up and all that stuff. And then I just studied the electric car industry. I went out

Starting point is 00:13:55 and looked at all the different hobbyists who are building electric cars, and they all mentioned Tesla. And the reason they mentioned Tesla was that he had worked out something where he could have multiple lithium batteries, and one could blow up and the car would still go. And you get more torque if you run all the batteries at the same time. So then we met with him, and it was a push to get it through our partnership. But then we got it done. And so I really do believe that the hardest investments to make are the ones that pay off the best. Yeah. And so if it feels like, yeah, it's hard to put money, like, it's easy to put money in when Bitcoin's at $67,000. And it's hard to put money in when Bitcoin's at $15,000 or $16,000.

Starting point is 00:14:55 And, and that kind of, you know, people call it contrarianism, but I don't think it's exactly contrarianism, because we're actually trying to catch a wave that's really important long term. So the one thing that I do do is I filter out entrepreneurs where they're not doing something that I believe is fundamental or will change society or will transform humanity or will do something extraordinary for the world. And if they're not doing something like that, I figure there are other venture capitalists who can back that. They can just do it for the money, whatever. Yeah. We we end up making more money than they do. But it's just because we just seem we make more mistakes. We are willing to fail. And and when we succeed, we succeed really big in the world changes. Yeah. I'm not an expert on this. So you kind of tell me what I should know. There's a bunch of controversy. Elon says he started Tesla. Martin says they started Tesla, whatever. How do you kind of just think about like, when you have something that gets really big, there's a lot of people who are like, I was early, right? You even see this with employees, the whole thing. I've met people who are like, I was an early employee at X company. I'm like, oh, really? Like, when'd you join? You're like, that's four years after the company started. And you're the 1000th employee. And sometimes it's relative of like, if they have 50,000 being 1000 is early. if they have 1500, maybe it's not so early. How do you think through that? And like, does it even matter? Like, I think it's maybe a lot of friends and a lot of, a lot of founders

Starting point is 00:16:37 and, uh, and then failure, everybody runs away from, yes, of course. And that is a natural thing. And I think I'm a little weird that way in that, um, I'm willing to take unpopular stances. I'm willing to be unpopular for a while so that then down the road the world will improve if and often people see that maybe what they're talking about isn't actually right but they go ahead and talk about it anyway and I I think that that's human nature they don't want to be sort of left out and, and perceived as a failure. Uh, they want to be perceived as a success. So they sort of say, I'm, I attach myself to this, not this. The movie business is very much that way. In what way? Everybody's a part of, you know, Star Wars from the beginning and nobody's a part

Starting point is 00:17:37 of Len Yendel or whatever, you know, nobody's a part of the ones that were bombed. The failures. And that's definitely true in the venture business. So that does happen. It's a thing. And Elon was a part of the founding of Tesla. But Martin Eberhard was the original CEO. And that's when we backed. And then they ran out of money.

Starting point is 00:18:01 And Elon said, I'll put in $10 million. But I don't like the way this is going. I've got a better way to go. We were very welcoming to Elon. He did an incredible. And he did an incredible job. I mean, he got this huge government loan, $400 million. He bought the Numi plant from Ford, I guess, for about $0.05 on the dollar.

Starting point is 00:18:29 Wow. He basically set up for greatness, and he was willing to sort of lay it all on the line. And there were times when he had to lend money from his own pocket to keep the thing going. He had to do so much to make it all work. And he did the same for SpaceX. And really, there were times at SpaceX when things were very tough. You know, three rockets in a row blew up. And he still had that faith and that determination.

Starting point is 00:19:03 And I think he's probably going to be able to do that with Twitter, too. I tend to think he's going to be okay with Twitter. If you can land rockets and create an electric vehicle, I think Twitter is a walk in the park to some degree. Well, I mean, he bought at the top, but there will be another top. I think he will be very successful with that. Yeah. And I love how he thinks.

Starting point is 00:19:26 It's like, first, I want to save the planet. That's Tesla. Well, first, he wants to create PayPal, which is like anybody can buy things very easily digitally. Then he wants to save the planet with Tesla. Then he wants a hedge against this planet with SpaceX. And then he's thinking, we need free speech. We seem to be losing free speech.

Starting point is 00:19:51 And I think the pandemic gave weak government officials the ability to try to control people. And that was not a healthy thing. In fact, I've noticed that in the world, that the weak leaders are the ones who try to control people, and the strong, great leaders are the ones who trust people and set them free. And that is much rarer, but the weak ones are like President Xi. He's decided that he's going to control 1.4 billion people and tell them all what to do, lock them up. I mean, God, and he's locked up people, their houses were on fire, and they had to get out. And, and he's his military guys say no, you cannot leave because of this no zero tolerance thing for COVID. I mean, a great leader sets people free, tells them everything that he knows, and let lets them figure it out for themselves. And that is a much better way for leaders to operate. George Washington, he said, no, it's going to be a free country. I'm not going to be the king of America.

Starting point is 00:21:04 I'm going to be the president of America. And after two terms, it's enough. Bring on another person. And think of what that did. My gosh. It set people free for 200 plus years. And now you're seeing weak politicians and weak leaders and weak government employees trying to bring more controls into the system.

Starting point is 00:21:28 And I think that's unhealthy. I mean, the way I look at it, people say, why do you like decentralized? And I say, okay, well, what is centralized? Let's start there. Centralized is Putin. One guy has decided that he's going to ruin the lives of 200 million people just because he decided he didn't like the idea that he didn't own ukraine and all of a sudden he's just ruined 200 million lives that's centralization decentralization it would be putin with you know maybe one or two other people working on and if they all decide to go to war then put put them into a fighting cage. It doesn't ruin 200 million lives, which is why I love Bitcoin, because it's decentralized and doesn't have a single point of failure, whereas the Fed is

Starting point is 00:22:30 centralized and the Fed has a point of failure. And when a centralized government decides they're going to print $10 trillion. That creates inflation. That means your dollar that used to be worth $1 is now worth $0.82. And then the Fed has to make up for it by saying, OK, now we've got to raise rates. And then you go through this cycle. And people say, well, why do we keep going through these booms and busts? Well, it's because the Fed has to react to what the politicians are doing. That's all centralized. If it's all run on Bitcoin, it's decentralized.

Starting point is 00:23:16 There are 21 million of them. That's all there will ever be. And all those will be run off various nodes. And no one person can print a whole bunch more Bitcoin, create a crisis in the economy, force interest rates to go arbitrarily high, force us into a recession so that people get laid off, and then we have to kind of reinvent ourselves. So I like decentralization. And centralization is President Xi. One guy is

Starting point is 00:23:51 deciding to shut down all of Shanghai and the entire world supply chain. One guy. What's that about? When you think of Bitcoin, I always see the Fed as human-led decision-making that has a variable policy and is reactive to the world, right? So things happen and they react. They raise rates, they drop rates, they whatever. Bitcoin is software. So it's programmatic monetary policy. It is not variable. It's set in stone. And it doesn't react. When you think of those two systems, they're obviously at odds. And going back to this idea of venture capital, it's almost like the perfect venture capital bet, right? It's like, it's definitely different.

Starting point is 00:24:33 And if it's right, it's super asymmetric. And so obviously you were very early to recognizing that and wagering quite a bit of money on it. But the counter argument or the critic would say, oh no, we need to be reactive because the Fed is able to cool off the economy if it gets too hot, or it's able to actually ignite growth

Starting point is 00:24:51 when we get into these bad periods. I'm assuming we see similarly kind of why that is wrong, but just talk a little bit as to like, how would you tell a critic of Bitcoin, no, the programmatic monetary policy is actually better for the economy, not just for Bitcoin holders, but for the economy to run on this programmatic monetary policy? How do you think about that? I think there are a lot of people who resist change and they are the equivalent of the weak leader, the one who just wants it to go the way they want it to go. And they have a job and everything's kind of going along and

Starting point is 00:25:29 they don't want to mess with it. I think the strong people are accepting of change or even embrace it. And they even drive change. And when you have a big change like this, this is an anthropological leap. This is the equivalent leap of going from shells to gold or gold to the promise of gold or from the promise of gold to the full faith and credit of the U.S. government, those leaps brought, built incredible, each one brought incredible wealth to the world. And each one had people saying, no, we still should do shells

Starting point is 00:26:15 because that's the way we do everything and we don't really want to change anything. uh but then everybody realized that gold was better and then they moved to the promise of gold and that was even better than that and then the credit policy all of a sudden with credit we were able to do even more now we have we are making this this leap um bitcoin is is much more liquid it can move anywhere it it is uh decentralized transparent it's which means anybody can see what has happened on the blockchain. Everyone can see what's happened on the blockchain. It keeps perfect records. It can be taken anywhere in the world. It's not tied

Starting point is 00:27:01 to some political force that decides that they want... I don't imagine that the Russians are taking Ukrainian zlotys or whatever. I guess Polish zlotys. Anyway, you can't buy things with fiat currencies that aren't in the country that you're in unless they've got a really good relationship with the other country. Bitcoin's accepted everywhere. And that's a real benefit. Long term, that's a fantastic benefit. The other part of Bitcoin is if I need to send money to somebody in africa without a bank account uh i'm not even sure how i could do it i call my bank they turn the dollars into something they move it over it has to be transferred to naira the naira has to show up and turn into cash and then they hand it to somebody that doesn't make for a very

Starting point is 00:28:04 liquid environment but if i have if i want to send a bitcoin it's just i'm done and i've done that actually i bought a bunch of books from this guy who said i'm going away for six months to africa and i won't have a bank account i said but i gotta buy the books from you so i think he made about a million dollars on those books wow now uh i have two questions one so there's always that like Like, you know, Bitcoin is going to be worth more in the future. Yes. And so you say, well, do I really want to spend it? But you do want usage to improve.

Starting point is 00:28:41 So it's always a trade-off. How do you decide when you spend Bitcoin versus when you don't? Is it just this thing is so valuable that it's worth it? Or is there some other framework? Well, my goal is never to sell my Bitcoin, but to eventually spend or invest. Really, I want to invest it. Um, and, uh, but I'm, I'm going to wait for a time when I, I feel that, uh, that the world understands it and that the world is, um, is, has finally embraced it.

Starting point is 00:29:15 And I think that's probably five years from now, um, because, uh, this is kind of an interesting statistic, women control 80% of retail spending. And until recently, about 1 in 16 Bitcoin wallets was owned by a woman. Now it's more like 1 in 8. When at retail, when the retailer can easily accept Bitcoin, which they kind of can now with OpenNode, they're going to realize that they can bring another two percent right to their bottom line and they're going to encourage their customers to buy with bitcoin and the moment i can buy my food my clothing and my shelter all in bitcoin why do i need a political currency Why would I want a fiat currency?

Starting point is 00:30:18 I would just hold on to Bitcoin. I would sell all my fiat currency. And I think there will be a moment where there's kind of a run on fiat currency where it's like, we got to get out of this. This episode is brought to you by Masari. Your days of spending hours scouring the internet for quality crypto insights are over.

Starting point is 00:30:39 Masari is your one-stop shop for all your crypto data and research needs. With Masari Pro, you can gain access to exclusive, industry-leading, long-form daily research reports, daily crypto news, advanced asset screeners, and curated sets of charts and protocol metrics. If you try Masari Pro today, listeners of the Pomp Podcast can get up to 25% off their Masari Pro membership by visiting www.masari.io backslash Pomp or enter promo code Pomp at checkout. That's www.masari.io backslash Pomp and use promo code Pomp. We'll be right back. deeper sleep. About two years ago, I started sleep on the eight sleep and I sleep on it every single night. It quite literally changed my life. I get deeper and better sleep, but don't just listen to

Starting point is 00:32:17 me. Clinical data shows that eight sleep users experience up to 34% more deep sleep. It is not a holiday miracle, even though it sounds like one. If better sleep is on your wishlist, look no further than the new pod three. You can go to eight sleep.com slash pump for exclusive holiday savings and ring in the most wonderful time of the year. Eight sleep currently ships with the U.S., Canada, the U.K., and select countries in the E.U. and Australia. Go check them out, 8sleep.com slash POM today. Is that what you think basically is like the end result here? There's a lot of people who hold Bitcoin.

Starting point is 00:32:50 Some of them have very extreme views and kind of ultra bullish. Some of them are like, yeah, it's 1% of my portfolio. And, you know, I look at it just like anything else. Your belief is that Bitcoin will replace fiat currencies in our lifetime? Yeah, yeah. At some point, you're not going to want a government-controlled currency because it does what this happens. You get a boom, and then you get a bust, and then the Fed has to adjust. And the boom and bust is all determined by some political candidate who happened to win.

Starting point is 00:33:23 And then they just say, OK, we're going to spend a bunch of money. and then you get a boom. And then all of a sudden you get a huge bust because the Fed has to say, wait, we're going into inflationary times. We got to raise interest rates. And so all of a sudden you've got a bust. There's something healthy about a boom and a bust. But I think you'll get that anyway. People will be excited about something and then less excited and then excited again. I'll give you a kind of interesting example. Almost every technology goes through what I call the IS curve. I even branded it the Draper IS curve. Every industry kind of comes up and then gets hyped to the max. And then that's sort of the dot on the I. It's an accursive I.

Starting point is 00:34:17 And then it comes, drops down and they say, oh God, well this, you know, I can't buy anything with my credit card and I can't do it. All these things that the internet has promised, I can't do anything with it. And so for years, it sits there languishing. But while it's languishing, all these great engineers are working really hard and they're coming up with a great way for us to experience this internet thing. And then it starts slowly creeping up like an S and then it explodes for years. And then it flattens out as new technologies come along and go through their same IS curve. So it's almost like a false start in the beginning. Like there's hype because people see what it could be, but the work hasn't been done yet. So you got to do the work and then

Starting point is 00:35:04 it takes off. That's exactly right. So I think the same things happen with Bitcoin. You've had the big hype I. And by the way, the S is much higher than the I. I mean, you think about the top of the I had Amazon valued at maybe, I don't know, $100 million. And now it's worth a couple trillion. Yeah, $2 trillion, something like that. Yeah. So that's 1,000 times higher than the I was the S. And so people don't even realize how creative other people are. And they don't realize how big something like this can become. So the internet transformed communications, information, gaming, entertainment, media, taxis, hotels. And those are all pretty big industries.

Starting point is 00:36:01 They're big. They have a big influence and all that. But Bitcoin has the potential. So Bitcoin with the blockchain, the smart contracts, the eventually DAOs, have the potential to transform the biggest industries in the world. That's all of commerce, finance. It doesn't just stop with currency. going to see major changes in real estate as companies like propy all of a sudden

Starting point is 00:36:40 are the place you go for your title so you probably wouldn't need title insurance anymore insurance is going to go through major changes and what is government but a lot of insurance policies and so i think government's going to go through major transformation in fact i'd say 80 percent of government is probably insurance. It's your health care insurance, your workman's comp, your welfare, your unemployment, unemployment insurance, the pension, security, social security, all that stuff. That probably does make up about 80 percent. And so all of that with a Bitcoin economy could be virtual and various governments could compete for your service to provide better service for you. Uh, and so I've seen a few governments that are being built up in space

Starting point is 00:37:37 or 11 miles offshore or in free trade zones or whatever. And, uh, I'm a, I'm a, uh, citizen of one of them which one um oh god i wish i remembered um he's gonna be mad the guy who created aragon has also now created a new government luis um uh quende he uh and and anyway he made me the 187th uh member of the of the government you were one of the first uh e-residents of, uh, I think, uh, yeah, I was supposed to be number one, but I ended up being number three because, uh, they, some New York times editor got a chance to be first in exchange for a story. Yeah. And then Jurvetson was second. Cause I felt like, okay, Steve, you were in a, your grandfather was the Estonian president. I'll give you number two. And then I was number three.

Starting point is 00:38:37 OK. And and I really love that. By the way, that government is so far ahead of our government in in digitizing the government. What are they doing? Digitize voting, digitize the whole economy's digitized. Your parking is digitized. Your taxes are digitized. Everything is everything is online and it's very efficient. And that has allowed that government to swing above its weight class. It looks like it's, I think they're maybe number three as a per capita unicorn creator. Wow. And a lot of that is based on a government that encourages, sets its people free, and trusts them and sets them free. Yeah.

Starting point is 00:39:28 When we switch from, let's call it a fiat-based world to a Bitcoin-based world, however that happens or whenever that happens, is it a peaceful transfer or do you worry that there's like conflict? And as we've seen over the centuries and even thousands of years, whenever global reserve currencies change hands and things like that, it usually hasn't been very peaceful. How do you kind of think through that? And obviously there's an investment case for an asset, but then there's also like you have a family, you're a human, right? Like there's things that like you don't want to see suffering in the world, bad things. So how do you think this plays out? It is playing out. And I would argue that we were all pretty much at peace while the Internet was booming because that was all about communications and being better, you know, doing business with each other and building a supply chain throughout the world.

Starting point is 00:40:22 And everybody was benefiting from that. And that was unprecedented at how much more productive people were during that time and how many people got brought out of poverty during that time. And then Bitcoin came along. And the great countries, the great leaders are the ones who have embraced Bitcoin. The weak leaders are the ones who are saying, no, we've got to control things. And all of a sudden, they use that as an excuse or whatever to show their true colors, which is, I need to control everybody. When you have a control-based government, they go to war because it's a single person. It's a weak person. It's somebody who gets everybody to do exactly

Starting point is 00:41:11 what they want them to do. And those people also want the rest of the world to do what they want to do and they um and so they'll attack if they're not doing what they want to do so i'd argue it's already happening um i wouldn't be surprised if there were more wars happening and then when all the wars are done um hopefully we'll all serve most of us will survive or you know vast majority will survive. That'll be the time when we all kind of hold hands. The borders start to drop. The businesses start doing work across borders again. The supply chain reopens up around the world. We don't have to say us against them. And we're all better off. It feels like most people, I think in the Bitcoin community think that is the end state and there's questions in terms of

Starting point is 00:42:11 how we get there. But also there's questions about the US government and are they going to fully embrace it? Are they going to tax it? Are they going to maybe in the most extreme case, ban ownership or whatever? It also feels like maybe we've kind of de-risked some of the most extreme reactions, right? We have politicians who hold the asset. We have many businesses that are publicly traded that use the asset. Many Wall Street firms now are playing in it. What do you think is kind of the play, if you will, for the U.S. government? Is it something where they just say, hey, it's a fast growing sector, we're going to put some taxes here and that'll be good enough? Or do you think that there's other regulations that you worry about or people should be paying

Starting point is 00:42:50 attention to? Now, again, I say that the good leaders are pushing, they're trusting people and setting them free. And the bad leaders are trying to control things and regulate and tax and whatever else. Now, I understand taxing because it aligns interests. And I think that the U.S. government should understand that they've just wasted a ton of money on 80,000 IRS agents, where if they became a Bitcoin economy, everybody would be paying their taxes automatically. And they probably could charge far less taxes because they don't have to have all these guys going around wasting people's time, looking for frauds, looking for whatever, because there would be no frauds. It would all be on the blockchain. Everybody'd see it. Everybody knows how much

Starting point is 00:43:57 everybody's making. I mean, the government will know how much you're making and that tax will happen. Now, I actually think you could experiment with something like a transfer tax and just put that like 0.0025% or something on all transactions, all digital transactions. And you would start to see that taxing Bitcoin as an asset makes no sense. It should be taxed as a, it should be taxed on transactions. And then that would pay for probably a lot more than what the government is using it for now and much more efficiently. And I think there's only one or two countries in the world who have started to do that. And they are probably going to be, they're going to go from the poorest to probably some of the wealthiest countries in the world over the next 40 years

Starting point is 00:45:02 because they've done it. Which ones? El Salvador and Central African Republic. And then Malta, of course, is going to benefit big. Switzerland is benefiting big because they're making Bitcoin a part of their economy. You think El Salvador will be one of the richest countries in the world in the future? Yeah, they're starting as the poorest. Singapore was one of the poorest countries in the world 60 years ago. And Lee Kuan Yew trusted his people and he didn't set them free completely. He laid down very clear laws, and then he set them free, and he had a completely free market. And over that 70-year period, he went from poorest to richest. Have I talked about Korea? No. Oh. So this is why I've come to the conclusion about freedom and trust. It's all

Starting point is 00:46:01 about freedom and trust so they drew this line the arbitrary line but they split korea in half and the northerners took on oh and they drew this line the the demilitarized zone and that nobody crossed that line almost zero people crossed that line over 70 years so the the north koreans took on government control socialism communism marxism leninism they took on all those isms, and everybody did what the government told them to do. And the government told them to do basically everything, their job, their everything. It was like government is watching you and making sure you're doing exactly what you have to do, and that's the deal. South Korea was free market, capitalistic system, democracy, open borders,

Starting point is 00:46:58 freedom freedom of speech freedom of whatever trusted their people okay 70 years have gone by the average South Korean now makes 460 times what the average North Korean makes and that's when adjusted for purchasing power it's even better uh 460 460 times and and the average south korean is now four inches taller than the average north korean that's crazy and that has been three generations four generations and suddenly you have entirely different i mean they're almost different races yeah of people and um and now if even if north Korea started to create freedom now, it would take generations for them to understand the markets and build their base. Eastern Europe has had that problem too. Like when Gorbachev brought down the

Starting point is 00:48:06 wall, suddenly the Eastern Europeans said, okay, I want to be a part of this capitalistic system. This thing looks good. This thing looks good, but we're not sure how to do it. And they didn't really understand the customer and they didn't there were certain things they didn't understand on the other hand some of the best entrepreneurs in the world have come out of the eastern block and that's because the technology education was so good and they came up with different ideas they had different ways of thinking and that kind of thing so some of that was very healthy yeah but that just tells you that get you want you want more countries you want more opportunities you want more choices as a consumer but not just for all your consumer goods you want more choices

Starting point is 00:49:00 of what government that you want to work with yeah and those governments are going to have variety of, I mean, through the, oh, and okay, through the Bitcoin and the blockchain and smart contracts and DAOs, you're going to see new governments jump up that are completely virtual, and you are going to be able to be a part of them. It's like Balashi's network state idea. Yeah. And I think ultimately the other land-based governments are going to become much more efficient and some of them will fall under their own weight. What would you do if you were the president of the United States? You understand technology. You understand a lot of the innovations that are happening. You understand Bitcoin and kind of the potential that it has.

Starting point is 00:49:50 You become president tomorrow. You get a year runway. you can do whatever you want. There's nobody in Congress or Senate who stops. They just say, Tim, save us. What would you do? I think I'd send that message of we are going to, and to all the government employees, to everybody, we're going to trust the people and we're going to set them free. And those messages will, that will tweak government in so many different ways, different things will happen. Like, I would suspect that that would get government employees' payments to be not tied, the improvements in their salary, not to be tied to CPI, which is what they are now, which is ridiculous. It's tied to inflation,

Starting point is 00:50:41 but be tied to GDP growth. All of a sudden, they're on your side, and it's our government again. It's not that government that's in our way. It's our government. I mean, we were supposed to be, we the people, right? Now it feels, it used to be that the government worked for the people and now it feels like the people are working for the government. Um, and so I think that, that I would try to get the bureaucracy fired up to trust the people, set them free, and I would deregulate massively. There are so many regulations that are overlapping. And it's a little like China. They have overlapping regulations so that they can get you if you do and get you if they don't and and uh so they they just it's their way of being

Starting point is 00:51:37 able to target people and i think that's very unhealthy i think the healthy way to operate is to say people have to figure out how to make their living people have to figure out the way they want to live how they want to operate in a free market that is the best system that we've ever had to do that. And it's worked everywhere. It's been tried. I think that would be the approach I would take. Yeah. I've got two more questions for you. The first is, are you still buying Bitcoin? Like you, you, you bought so much Bitcoin on the, on the auction and people know that story. But how do you think about like, you have a dollar, do you buy Bitcoin? Do you save a dollar? Do you invest in a startup? Like, how do you just go through like a capital allocation

Starting point is 00:52:20 decision. It's a great thing, great to talk to you about. I have a big bunch of startups that are in my portfolio and they need capital. And they, if we pay them in Bitcoin, if we invest in Bitcoin, the accountants get three times as much money. So, uh, until that is all fixed, I will continue to invest in fiat with fiat. So, um, uh, and I have like, I have a fund where I allow other investors in, but it's mostly, well, it's not mostly my money. It's a quarter of my money. And so I have large capital calls I have to make. So as long as I feel that all the capital calls are covered by fiat, as long as I feel that I know that I'm going to have enough fiat to cover those capital calls over this long period of time, then the rest I can put into, I can put into

Starting point is 00:53:31 Bitcoin. That's what you did. It's like pretty much you've got responsibilities. And once you know that the fiat that you have covers the responsibilities everything else pretty much goes in bitcoin yeah and i have a foundation that actually has a now a disproportionate amount of bitcoin because it i mean we we bought at a relatively low price and now it's more and so you you look and say well wait that isn't a well-managed foundation well actually it's really well managed. Track record says otherwise. My last question for you is, right now there's investors, there's founders that are all going through this like recessionary period. And I know that now somehow we're debating what is a recession, what's not a recession, whatever.

Starting point is 00:54:19 It's worse times than it was a year ago, right? And there are people who are debating whether it will get worse than it is now, or maybe it'll get better. But how do you over the years kind of think about these periods? What do you do? What do you give advice to founders to do? Like, just how do you navigate a recession if you're a tech investor, a founder, or somebody who's into Bitcoin? So I was lucky because I've already been through this with the dot-com boom and bust. And during the boom, people were losing their minds and their pets.com and whatever else. And it was like, this guy, I knew it was the top of the market, although I didn't know. the guy came to me and he said, yeah, I'm a rocket scientist and I'm doing hotels.com.

Starting point is 00:55:04 And I thought, what? You are not meant to be doing hotels.com. You're meant to be a rocket scientist. And, uh, and I started to think, oh, I get it. There's, there's something that this sort of, you know, the greed thing has taken over and people aren't doing things for the right reasons. But then I saw it all disappear very quickly. And that was even quicker than what you're seeing here. And, and so then I got to see what happened afterwards. And so since I saw that, I saw it again here with, with a big boom in the tech stock market. And I was telling all my entrepreneurs, because these guys, Tiger Global and all these big, huge venture hedge funds were coming in with huge amounts of money. And I thought, wow, this is

Starting point is 00:56:03 very unusual. And so I told all my entrepreneurs two years ago, just raise as much as you can, don't spend it. Raise as much as you can, don't spend it. Now, some of them listened, and some of them didn't. Ones who didn't are now in a tough spot. We now tell them, you've got to cut your business down. You've got to cut your team down. Keep growing your business, but cut your team down. And I remember with a dot-com bust, I went to a company and I said, OK, so how many people do you have? And they said, 400. And I said, OK, you've got to cut that to three and they said 300 and I said no three people wow and I looked and I said you have to start getting your money from customers you the venture money's been too easy and it's

Starting point is 00:56:58 not going to be there anymore and so you got to get your money from customers and they went out of business yeah um because they didn't do any of that they thought I was just out of my mind which you know is arguable you know go ahead think about it listen to me long enough and you'll go yes he is completely out but i think what i think is interesting there though is like it's almost um uh the propensity for action or like a violence of action of from 400 to 3 i'll be okay 400 to 300 400 to 200 400 100 even crazy let's do 450 but 400 to 3 there's like a sticker shock to that. But really what I'm taking away from that is like, sometimes that is what is necessary. It depends on the situation, but like that could be what is necessary. Yeah. I think

Starting point is 00:57:47 sometimes you have to do, you're running a business. You've got, let's say you've got $10 million in the bank and you're burning a million a month. Okay. 10 million in the bank, you're burning a million a month you're done in 10 months okay a bear market can be i mean the the dot com bear market that was eight years seven six or six eight years more than a long time and if you aren't figuring out how to getting get money from customers before that you're going to be out of business. And, uh, in fact, there's a, uh, group correlation ventures who, who, uh, said, uh, to me that there is almost, it's almost bifurcated that if a company is, and this is before the big bull market, if a company is spending more than $300,000 in a month,

Starting point is 00:58:48 the odds of their success go down like like a waterfall wow and the the odds of success of somebody who's burning less than 300,000 are much better and it's almost that's the number just keep it down below 300,000 a month and you have a pretty good shot at making it because even in a bear market, the venture guys can dig deep and maybe put some money in to keep you alive if that's the burn rate. But if the burn rate's a million a month, 10 million a month in some cases. What's the worst you've ever seen? What's the worst burn rate? It's probably in the 10 million a month. $10 million a month somebody was burning.

Starting point is 00:59:36 Yeah. Is it a publicly known company or is it a no-name company? Oh, I mean, I've seen that kind of thing recently a lot. But I think now you're not going to see it. So I think you've got to run your business conservatively in that way. Just don't run out of money. It's over. It's done.

Starting point is 01:00:03 Your whole dream, your vision is done. And if you do run out of money, if you don't run out of money, there's still a good shot you can make it. So just manage it tightly. Don't run out. Don't run out of money and check out Bitcoin. I think that's a great summary of our conversation. Where can we send people? You've got book.

Starting point is 01:00:27 You're online. Where do you want us to send people? So you can follow me on Twitter. um uh the uh you can uh pitch us draper.vc um you can uh you can watch our show we have a show called meet the drapers where we have fantastic guest judges and it was started as just a whim between me and my dad and my sister and we just started this thing and my my kids and we started this thing, we wanted to interview entrepreneurs on online. And we have we have 11 million viewers now. And our next season, season six, looks like it's going to be 30 million viewers. I can't

Starting point is 01:01:16 believe it. We I can't believe that many people want to watch. But it is sort of fascinating to watch these entrepreneurs going through what they're going through. We interview and we ask them very different questions. It's very, it's a different show than like a shark tank or whatever. And we're, we're really excited about that. And then if you are like somewhere around 25 years old and you're thinking, I want to go do something with my life and I have great passion and I kind of have an idea, then think about going to Draper University, applying to Draper University. That's another of our things. And you can read my book, which is, it's fun.

Starting point is 01:01:59 Just Google your name and they'll find it. They'll find all sorts of things. They're going to find things they don't even want to see. Things you can't unsee. All right, Tim. Well, listen, thank you so much for doing this. And we'll definitely do it again in the future. Thanks for having me on the show.

Starting point is 01:02:17 Thanks so much for listening to today's episode. I really hope you enjoyed this one. Make sure you're subscribed on Apple, Spotify, or your favorite podcast player. And if you're looking to transition into a brand new job in the Bitcoin or crypto industry, we've got you covered. Head over to thecryptoacademy.io. My team and I have been working with the top HR teams in the industry to develop an intensive three-week training program with over 50 live events.

Starting point is 01:02:39 We teach you exactly what you need to know to break into the industry, including live interview prep and resume review. Our students have been hired at over 75 of the world's best Bitcoin and crypto companies. go to thecryptoacademy.io to learn more again that's thecryptoacademy.io if you enjoyed today's episode make sure you share it with your friends and i'll see you all for the next episode

The Pomp Podcast - #1132 Tim Draper On Elon Musk, Tesla, Bitcoin & The Future Of The U.S.

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