The Pomp Podcast - #1285 Bill Miller IV | Bitcoin Will Dominate Wall Street In 2024

Episode Date: December 18, 2023

Bill Miller IV serves as CIO and Chairman at Miller Value Partners, he also serves as a Portfolio Manager. In this conversation, we talk about the bitcoin market, ETF’s, miners, regulation, halving, stablecoins, artificial intelligence, and a non-bitcoin yield focus fund that Bill also manages.  ======================= Base is making it their mission to bring a billion people onchain. But what exactly is Base? It's an Ethereum L2 offering a seamless experience for both builders and users. With near-zero gas fees and rapid transaction speeds, Base is shaping the future of the onchain world. Base is a canvas for everyone, with hundreds of apps in the Base ecosystem, whether you're an emerging creator, a seasoned developer, or someone exploring the onchain space for the first time, Base is designed to bring your ideas to life. So, if you're looking for a platform where the future of onchain is being built daily, Base is your destination. Join in and make onchain the next online. Learn more at ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠base.org⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ and follow along on Twitter at @BuildOnBase to see cool things to do onchain, everyday. ======================= Trust and Will has simplified the process of creating and managing your will or trust online. They leverage a data-driven, design-first approach and amazing customer support to help you protect your legacy from the comfort of your home starting at just $159. Sign up today for 10% off using ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://trustandwill.com/pomp⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ ======================= Pomp writes a daily letter to over 250,000+ investors about business, technology, and finance. He breaks down complex topics into easy-to-understand language while sharing opinions on various aspects of each industry. You can subscribe at https://pomp.substack.com/

What's up, everyone? This is Anthony Pompliano. Many of you know me as Pomp. You're listening to the Pomp Podcast, which is my effort to find the most interesting people in the world and sit with them for hours while I ask questions in an effort to learn. So it would mean the world to me if you would subscribe to the show on your favorite audio platform, watch episodes on YouTube, and tell your friends and family about the podcast. My goal is to help millions learn from the world's most interesting people. So let's get into today's episode. Bill Miller, the fourth serves as Miller Value Partners, CIO and chairman. And he also serves as a portfolio manager. In this conversation, we talk about the Bitcoin market, spot futures, ETFs and Bitcoin miners. Then we move on to

regulation, the Bitcoin having stable coins, artificial intelligence, and a non Bitcoin yield focused fund that Bill also manages. I really enjoyed this conversation with Bill. and I learn something every single time I talk to him. I really hope that you all enjoy this conversation and here's my episode with Bill Miller, the fourth. 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. Today's episode is brought to you by BASE.

BASE is making it their mission to bring a billion people on-chain. What exactly is BASE? It's a layer two offering a seamless experience for both builders and users. With near zero gas fees and rapid transaction speeds, BASE is shaping the future of the on-chain world. BASE is a canvas for everyone with hundreds of apps in the ecosystem, whether you're an emerging creator, a seasoned developer, or someone exploring the on-chain space for the first time. BASE is designed to bring your ideas to life. So if you're looking for a platform where the

future of on-chain is being built daily, BASE is your destination. Join in and make on-chain the next online. Learn more at BASE.org or follow along on Twitter at BuildOnBASE. Again, that's at BuildOnBASE to see cool things to do on-chain every single day. today's episode is brought to you by trust and will i've gone through a number of different changes in my life over the last few years i got married i had a kid and i had to start thinking about how could i ensure that my wife and my child would be okay if anything ever happened to me that's where trust wills and estate planning come into play now most people what they do is they get introduced to a friend an uncle or someone in their local community it tends to be someone who's

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Pomp, you'll get 10% off. Plus you'll get free shipping of all your estate planning documents. So go to trustandwill.com slash Pomp and make sure you get an estate plan in place. Whether it's for you or one of your loved ones, having a trust and or a will can literally be the difference between someone being taken care of and someone not. Go check them out today at trustandwill.com slash POMP. All right, guys. Bang, bang. I've got Bill here with me.

Bill, you have two jobs. You got two lives. You do public market security selection and then you also are a Bitcoiner. I'll leave it to people to guess which one you enjoy more or which one they oversee with you more. But I thought we could start

talking about Bitcoin first. And it seems like the Bitcoin market, obviously, there's a lot of exuberance. price has risen 150, 160% year to date, but it's still down, you know, 40% or so. You talk with folks in the traditional financial system more so than many of the guests who come on the show. What are you hearing? Are they excited about it? Do they even know the price has gone up? Do they care at all? I think a lot of traditional financial investors actually own Bitcoin personally, and maybe not in their professional products for a variety of

reasons. There's certainly awareness of it. I don't know how many are, I'll tell you, very few are as heavily invested as we are, but there's an awareness. There's still a hesitancy. There's still a fear that there's an ax eventually going to fall. There's all kinds of fears that have been the same roughly since the launch of Bitcoin and it's spot on people's radar. And the interesting thing to me is you could have made any of these arguments that are still the big fears out there about Bitcoin five years ago, 10 years ago, when Bitcoin was at 100, 200, 500, none of them would have made you any money. You're just sitting on the sidelines. So the way we got into it was, it's traditional portfolio risk management, which is we said,

wow, this could be really, really big one day. I mean, still, even from this market cap and level, it still could be absolutely enormous. So how do you invest in that? What's the right way to do that? Well, you put a very small percentage of your portfolio in it and you watch it and see what happens. And that's what we did. And the more work we did on it, we actually have added to it personally along the way. And now it's a very big part of our portfolios personally. Now, when you think about that small percentage and it could become big, I think there's two ways to look at it. I know people who put a little in, as it went up, they sold and they were taking their profits. You guys did the opposite. Why did you put more in as the price

went up versus just taking the profits and going and reallocating it somewhere else? I think Bitcoin becomes less risky as it goes up in price, just because it means that there's increasing ownership of it and adoption. And the broader that adoption is, not only in the U.S., but globally, the less likely it is to go to zero because it's on everyone's radar screens. People care about it. They're paying attention to it. They want to own it. And so the broader the adoption is, the less risky it is. Now, as that asset becomes more and more valuable, an ecosystem gets built around it. There's people who are in and around Bitcoin, which opens up a whole plethora of investment opportunities, right? Things that you could go and you could buy. You

could buy a Bitcoin spot. You could play in the futures. You could go buy public miners. There's asset management firms. You could go into some sort of node management. I mean, there's all kinds of different ways to play this. How have you all thought about maybe the areas that you're excited about and see as a really good investment opportunity? And then maybe areas where you see other people allocating capital and you're like, you know what, we actually have a lot of concerns and have refrained from investing there in the Bitcoin ecosystem. Yeah. So one of our bigger wins, at least for me earlier this year, I took a tax loss on a portion of my Bitcoin and ended up reallocating the proceeds I had bought at a higher level. I needed to offset some things.

So sold it at a tax loss and ended up buying GBTC at a big discount to the underlying value of the Bitcoin it held, just because the thought process was either there's some sort of egregious amount of fraud in here, which I thought was very unlikely, or this is just a supply-demand imbalance that will eventually work itself out. And that seems to be what's happening here. But that's one way to do it. So GBTC owns underlying Bitcoin. It's a closed-end fund. It's not necessarily going to trade in lockstep with the underlying value of its holdings. There's supply-demand issues there, but that's one way to do it. The interesting thing there is you can potentially get margin credit for that depending on where you hold it.

You can own underlying Bitcoin directly, which is how most of mine is held. Now, with that, you can either go through a custodian or you can self-custody it. I currently have it at a variety of custodians, but at the end of the day, for me, i think you need to eventually be looking toward that self-custody if you look at what's going on from a regulatory perspective right now and you look at the theoretical underpinnings of the why you own bitcoin you need to be able to self-custody and get that so i'm working towards that i'm having some discussions now we want to eventually get there i'm intrigued very much by this bit key situation just released by jack dorsey so he's a very trusted voice and party in the ecosystem so

that's super interesting um but so you can own it directly you can own gbtc you can own microstrategy which we do personally as well as in our funds um the thought process on microstrategy is a little uh more broad than just bitcoin in and of itself because if you look at what michael's doing there at the helm he obviously understands math very very well and when the shares trade above the enterprise value of the firm trades above the intrinsic value of the core business plus the underlying value of the bitcoin holdings what i think he's going to keep doing it's been a pattern so far is he's selling shares when it trades above that so when it's trading at a rich price benefits shareholders to sell shares and then buy bitcoin with it right and potentially

if the shares ever get massively undervalued relative to the value of their holdings he could potentially buy back shares so there's a very interesting mathematical opponent there at the helm of that enterprise i think there's also massive optionality longer term for being the largest corporate owner of bitcoin in the world not only from a financial services perspective but all kinds of other things so you can on microstrategy we love that as a way to get exposure um you can own miners i i'd be very careful on my time frame as an owner of a miner I think miners are a critical component to the ecosystem. I think longer term, that is a very challenging business.

And why is that? It's a very challenging business because it's a highly capital intensive business and it's very competitive. So you constantly have to be putting money into your machinery to stay competitive, to mine it at a relatively efficient price relative to your energy you're consuming. So it's capital intensive, super competitive. And also the subsidy goes down every four years. for the business for what you so the price is naturally declining for the business the service

you're providing which makes it a very tough business to operate in longer term now when bitcoin goes up they're going to trade like turbocharged bitcoin so they're going to be bitcoin beta i think longer term again it's a very challenging business and i'm certainly thankful for the services they provide and there always will be a variety of the service too because there's always someone that's looking to uh it's it's able to buy a machine on the cheap and plug in somewhere on their cost advantage energy so you know there's the amount of computing power securing the bitcoin network's never been higher that's going to be a trend that should continue almost indefinitely um so miners i you know that's not something that's something we have made a

mistake in in the past and probably not going to buy anytime soon um what are some other ways you're thinking about getting exposure to it there's private markets um which you know historically i think people from the outside would look at uh kind of your investment philosophy as being much more public oriented but um i don't know if you guys have done anything private in markets yes private markets are i mean they're the effective in my opinion of the wild west of investing i mean the private markets are bigger than public markets but they're also more opaque potentially more dangerous um bitcoin services funds are interesting to me So we did make an investment in one of those.

I almost think if you've made a ton of money in Bitcoin or your value that Bitcoin you hold has run up, you kind of owe it to the system to give a little back, whether it's on a marketing front or it's on the investment front and getting the world up and running. Michael Saylor is obviously doing an amazing job leading the charge on services being built around Bitcoin. But there's also funds that are investing specifically in that. So if you believe in the technology and you believe that one day longer term, it becomes a medium of exchange and accounting system that a lot of assets are priced in, it makes a lot of sense to participate in some of these first mover private Bitcoin funds. When you think about Bitcoin, you mentioned medium of exchange. I think that the promise of the white paper is that it would be a store value and a medium of exchange. There's a lot of people who say, hey, look, maybe it becomes a medium of exchange.

But even if it doesn't, just a store of value will be wildly more valuable than it is today. How do you think about it from an investment thesis in terms of, you know, what is it if it's just a store of value? What is it if it becomes a medium of exchange? And then what do you think in terms of the likelihood that we can cross over into a true medium of exchange? Is there a way to handicap that or think about maybe probability? Well, Pomp, I remember when we were in Miami, one of the things we talked about was how Bitcoin has a description problem, which I think is a really important idea, and you flagged this, which is a lot of times people ask us, hey, what are you investing in? What do you like? We say, oh, we like this stock. We like

that stock. These things are interesting. And we also own a ton of Bitcoin. And the answer, the response generally is, oh, okay, I don't like that. I don't get that. And that's weird or whatever. Or they own a bunch potentially too. But the people that don't understand it, if instead of giving them a name of a stock we liked, we had said instead, I'm investing in the world's fastest growing monetary payments and technology network. Oh, that's pretty interesting. It must be a private company, huh? No, well, you can, it's very liquid, it's very public.

You can see exactly the status of the entire network and technology 24 hours a day, seven days a week, 365 days a year. There has never been a currency or monetary payments system or network in the history of the world where you can say that. And you know, maybe you don't care, maybe everyone in America doesn't care

because the dollar's relatively stable versus other governments, but I care. I'm paying attention to what's going on with the currency supply. People don't understand how the system works are paying attention to the currency supply and what's going on. The Fed lets us know every month what's going on.

But the information around Bitcoin is unprecedented in terms of what you own and what's going on with it. And I think that's immensely valuable. So it's done a lot better than be just a store of value over the past decade. best performing asset class. There's a ton of people working on it on an open source basis, which is amazing too. It's a global phenomenon. The medium of exchange, I think, is replacing actual currencies for people versus having a store of value. And then you have a fiat currency,

whether it's a stable coin or kind of an electronic that you're actually using for payments on a day-to-day basis. How do you think about where we end up maybe or the probability of getting to medium of exchange? Yeah. The way I think about it is assets that have limited supply will eventually be priced in Bitcoin, whether that's waterfront estates, whether that's rare paintings, artifacts, stuff like that. That'll eventually be priced in Bitcoin, capital goods kind of things. Everything else, you can deal with a local government or some sort of other depreciating currency or medium of exchange. And so I think that's eventually how it eventually shakes out that's many many decades away potentially but that's that would make sense

to me from a theoretical perspective it's basically the once you get the pricing then that naturally leads to the medium of exchange because people are actually using it as a unit of account that's a fair way to think about it you know they're from a medium of exchange perspective the lightning network has immense potential when you look at the transaction throughput relative to visa mastercard other alternatives so that i think that could eventually continue to supplant uh your that will eventually hopefully take over from a medium of exchange perspective but what the point i think we're dancing around here which is people don't necessarily think through the right uh they don't necessarily put the right context

around the innovation right so why is bitcoin so important why do you why are you and i obsessed with it why are people out there so interested in it and i think only a handful of people will articulate this but the tri-party ledger system that satoshi invented there's one real implication for it which is you don't need a third party who tells you what the rules and laws are to do things anymore because there is now effectively um that's what fiat means it's because i say so and the reason that fiat things exist or it or existed way back when once upon a time was to protect against big violent threats and clashes between tribes and that sort of thing like we're in a new age and time here and there's been no innovation in monetary technology in

centuries until now and it's a real breakthrough that you can actually store value independent of of what someone else says or does to the yardstick that you own. And so that's the real innovation of Bitcoin. And that's why Senator Warren's so unhappy about it. It's why these lifetime politicians who want to have a big government control perspective around the thing are so upset about it. Because at the end of the day, if their colleagues can't change the yardstick and change the rules all the time, it's an immutable store of value over time. And so So that is the real benefit of it, is that people can't take from you what you have. When you think about some of the threats to Bitcoin, I think of there's technology, right?

You still got to write software, still got to maintain the software. It's got to work, if you will. But probably the one that most people would point to currently is regulation. And really, I think US-based regulation. How are you viewing that both as maybe getting clarity in the market, but also as a potential obstacle or friction for Bitcoin specifically? Well, other than politicians that are nervous about their jobs, potentially longer term, I don't know if there's a huge constituency that wants to shut this thing down. I mean, so that's one way to think about it is who's actually against

this. I don't know. Number one. Number two, the government has sold at current market values, tens of billions of dollars of Bitcoin to its citizens. So can they do that and then turn around and say, nope, sorry, this is illegal? I mean, sure, but that's some crony stuff, right? Like we hope the US doesn't work that way. Also, if you look more broadly around the world, the trend is positive

unless you live in a dictatorship, right? I mean, El Salvador, now in Argentina, you've got a pro-Bitcoin president. Japan is talking about lower regulation, Germany. So everywhere around the world, the trends are very, very positive. You also hope that the U.S. gets it right, right? Like generally speaking, from my perspective, the U.S. is fantastic because they get most things right. The system of governance is better than in other places.

And you hope that the system understands that technological innovation, such as the one, such as the context I brought up earlier, should not be stifled and shut down. I mean, that's just depressing to even think about. So we got to, we all, it's on all of us to comment on this FinCEN proposal, let people know what we think and get our voices out there. So that's next on my list. When we see maybe the threat of companies in the U.S. saying, hey, if the regulation doesn't get clear, if I can't operate my business here, I will go abroad. Have you seen that happening?

Like, I think maybe Coinbase and Block are like the two companies in the public market that have spent a lot of time kind of voicing their opinion. And it seems like Coinbase has tried to keep the business they had, but also start to become more crypto native over time. They're launching wallets and, you know, kind of all these technologies and stuff. But they're still U.S. based and it doesn't seem like they're going to actually leave. Is that your read as well? I think most of these, well, if most of their developers and teams are here

and they're from here and they're citizens of the U.S., there's going to be a hesitancy to do that until it's absolutely necessary. And politicians will keep trying to tighten the screws, but the response has not been all that positive, right? I mean, you have certain loud voices that benefit from centralization speaking out against it, but in reality, people don't want centralized power, you know? So longer term, you know, people say, oh, this is a libertarian fantasy. Well, most people are libertarians. They don't want to be told what to do. Right. I mean, who sits there and says, yes, I want the government to come out and tell everyone what to do. No, every one of our generation says, um, uh, fiscally

conservative, but socially liberal. Right. Okay. We'll take a look at Bitcoin then. So, um, I think people be hesitant to leave until it's absolutely necessary. And there's no signs yet that it is necessary. How do you think the federal reserve and like monetary policy plays into Bitcoin as a market or kind of as an asset that you can buy and sell. You know, if you look at maybe Bitcoin denominated by M2, it seems pretty highly correlated. If you look at, you know, the fact that the Federal Reserve said, hey, we're going to destroy investor demand and Bitcoin's price went down 80 percent and, you know, it seemed like they were winning. They're still tight and Bitcoin's come ripping back, you know, hundreds of percent. Like how important is the Fed maybe

to watch and pay attention to when it comes to bitcoin's price i think central banks that print money that people care about collectively are really important it's not just the fed fed being a central bank of the world they would be the most important but you know when we went back and looked at the history of the fed their balance sheet or their their the you know the outstanding money supply has grown roughly at the rate of nominal gdp for the past 100 years world addicted to debt and deficits and that's going to continue so you know the money machines are going to keep printing that's important to watch one of the things i think that's interesting about bitcoin's recent price dynamics actually is that they've occurred at a time when

fed shrinking money supply so yes money supply it is a correlated thing but it's not necessarily the sole driver it's it's more technologically uh interesting than that the most interesting or surprising data point that i've seen recently is the rise of stable coins um and stable coins now on chain are settling more transactions than bitcoin um at least at the layer one um there are a ton of anecdotes in argentina in lebanon in venezuela areas where the economy basically has fallen apart. Inflation is, you know, at least high double digits, if not triple digits. People want dollar exposure and they're doing it via this, you know, kind of digital dollar phenomenon. Does that serve as a tailwind for Bitcoin? Is that a headwind? And it's kind

of like taking market share or potential capital flows. How do you see, you know, the quote unquote rise of stable coins and what appears to be some product market fit there in relation to Bitcoin and its popularity stable coin is just another fiat idea right it's because some central entity says it's worth this it's worth this also the us government certainly seems to be most focused on not having that they view that currently as the biggest competition bitcoin eventually becomes a stable coin i think in the next 10 to 20 years effectively not not from an underlying technology perspective but the volatility goes way down as adoption broadens out and people understand hopefully the benefits of the underlying system so stablecoin is not something we own it's not

something we've seen any reason to own we're not involved in those when you think about um artificial intelligence another thing that becomes pretty interesting is uh right now uh specifically in the public markets but even in private markets i think that we're seeing like bitcoin and cryptocurrencies are kind of lumped into an industry and then you have artificial intelligence is like this other thing. And if you go and you look, NVIDIA up until recently was the only stock in the stock market that had outperformed Bitcoin.

Bitcoin rightfully took the throne back, if you will. But it's very much like, hey, I'm going to allocate to Bitcoin and crypto or I'm going to allocate to AI. What I think is happening or likely to happen is as systems become more automated, Bitcoin becomes an important part from a payment system standpoint.

It's pretty hard to have machines transact with each other with a one-day settlement time if you want to have automated systems. And so have you guys done any work or thought through at all this concept of like Bitcoin is money for machines or how maybe some of these other technology trends could serve as a tailwind for Bitcoin itself? Bitcoin as money for machines is an interesting idea. You mentioned people buying NVIDIA and other types of things like that or Bitcoin. That seems to me just like a momentum oriented investor perspective a bitcoin at the end of the day is the ultimate financial system collateral right because you know exactly where it is it's completely transparent there is no better

collateral for if you want to actually run a bank you know that's what they should be holding you know maybe not maybe not today given the volatility of it if they don't you know from a acceptance perspective but longer term that's really where the all of the uh the value lies is in that tri-party ledger that's secured by more computing power well ahead of every other coin and no one will ever catch up to it so it is the ultimate collateral longer term people don't necessarily realize that that uses a trading instrument part of the issue with trading stuff is you also then have to pay taxes on it so if you realize a big gain the only thing you know for sure when you realize a big game is that you owe somebody money um so at the end of the day if you look back at

what's happened with bitcoin for the past 10 years i personally sit there and say i'd rather not pay taxes on this right now i'd rather hope that this 10-year incredibly strong trend continues and sell something else instead if i need to raise money but it sounds to me like that's more of a investing style perspective if somebody's choosing between nvidia and bitcoin or something else what about bitcoin etfs obviously uh the rumor is that we'll get the approvals in early january whether that happens or not um when it does occur there is a pretty good reason to suggest that tens of billions of dollars will flow into those products you know in maybe 12 24 months um on one hand tens of billions of dollars coming into a market is material capital on the other hand you know 900

billion dollar asset or so it's not like bitcoin will triple in price overnight and so how do you view etfs potential approval assets flowing in and maybe even impact on bitcoin itself There's a great cartoon in the investment industry that says the punchline is something along the lines of, I don't do something because other people are doing it. I do it because lots of other people are doing it. So the reality is once the ETF is approved and everyone's doing it, then that whole fear of career risk and people losing their heads if somebody doesn't like Bitcoin goes away. I mean, that's institutional. There's no more institutional acceptance. i also think that's why the back and forth continues um the rejection was completely

capricious certain people don't want it out there but it's it's ultimately i feel like it's baked in the cake um i think for me a potentially interesting question is okay you know day one does etf prove me bitcoin goes to the moon or does it mean that the supply demand kind of i mean you could see that supply demand balance potentially going the other way in the short term and bitcoin going down on that right because then people can actually get exposure via etfs they may not understand why they should hold the underlying coins or spots on the ledger they may sell that to buy the etf who knows but at the end of the day long-term etf acceptance is a massive massive tailwind for bitcoin the having is coming uh feels like you know game of thrones or

something um historically that has uh preceded a pretty large run up in price um some people think that it doesn't matter anymore i probably would argue that anytime you have a significant supply uh change and whether it's known in advance or not it likely will have some impact how do you think about it is it as simple as having occurs price goes up or is there more nuance to it it. There's not much more nuance to it. Look, the reality is there's a strong underlying group of people that get the technology and they're not selling it. And then there's a base level of demand. Not only is there this strong base level demand, you have the speculators on top that you have the growing adoption via the wallet numbers, as you pointed out in the past, adoption is

growing. So there's this growing base of demand. And then the marginal supply, all pricing happens at the margin. The marginal supply gets cut in half. What happens when the marginal supply gets cut in half? Only one thing, the price goes up. I mean, unless the demand changes or the bottom falls out. So people always talk about markets are perfectly efficient. They're not perfectly efficient. And there is a catalyst every four years for Bitcoin. And it's not much more complicated in that pump. That's it. When you see all these other coins that are becoming popular, people are talking about them, they're getting capital. Is it all a zero in your mind? Is it just, hey, Bitcoin is one of your maybe 10 to 20 good ideas that you're allocated in your life and

you just stick with the thing that you know? How do you think about the rest of the market? I think other coins, altcoins, are effectively venture capital by another name. That's it. It's just teams of people building new technologies that are untested, unproven, potentially very large if they figure it out and get all the wheels turning in the right way. Again, it goes back to what we were talking about earlier around contextualizing the what's and the whys of what we're doing here in the original invention. You look back at history, there's plenty of examples of technologies that eventually were improved upon, but the improvements ended up going into the dustbin because there's this element of path dependence, right? so as an investor the ecosystem the the computing power going into it it's just so much larger and bigger with bitcoin than anything else that at some point you go okay this is you want to be real the reality is there's path dependence here and bitcoin is the winner and so you can speculate

on some of these other coins and that doesn't mean some of them won't be huge most of them will be zeros you know from an investment perspective coinbase is a really good way if you want a broad-based exposure to do that because they're going to have their hand in all these things are also giving themselves a good number of shares and diluting the shareholders every year but that's fine um but you know that's a good way to get exposure to all these things if you want to do it you don't actually want to dig into the underlying technologies and make bets on them speaking of coinbase um they were uh the equity that got me going down the rabbit hole of comparing what i called crypto equities with bitcoin itself and so far whether it's the miners

whether it's Coinbase, other publicly traded stocks in the Bitcoin or crypto industry, they seem to be outperforming by about 2x Bitcoin itself. Is that just a function of what I'll call the classic buy gold or buy the gold miners debate, or is there something else that may be going on there? Good question. I think it's going to be very relevant too. You said that it's up two times roughly the amount of Bitcoin. All these public market things are massively sensitive to start and end dates and when you pick them and that affects all kinds of relative performance comparisons and so i think that's really important to keep in mind um you know it is i don't want to say it's a natural

monopoly but other things like it will spring up assuming the system continues to develop and i mean what's the market cap on coinbase right now let's see it's it's like 35 billion last time i looked around there yeah right there um and you know one of the things that could be driving that too is what we talked about earlier which is as a professional investor this is one of the only ways to get exposure to a really cool technology so you you're going to pay a premium potentially to actually owning the technology because it can't be owned and directly by institutional investors so that could be part of what's driving it too yeah what's interesting to me and um i'll quickly get out of my depth in the public markets but um it almost feels like whether it's the miners

coinbase etc there are some um similar to microstrategy uh some like indirect exposure to the assets themselves that are held on these balance sheets and things like that and then there is um almost like revenue denominated in an appreciating asset right you know especially with the miners and even coinbase to some degree and so uh that is a concept that is foreign you know in public markets and so i almost wonder are they getting some sort of premium performance simply because people are excited about things that they just never have seen before um where once it is better understood especially a miner who is just going to get it and sell it and really yes it may be denominated in bitcoin but actually you should just be looking

at the fiat amount um does that premium go away i'm not i'm not sure but it's a pretty interesting thing because it seems to be across the board um the other part of the analysis i guess is like just because it went up a lot that actually may signal that it's like the bad thing to allocate to now right it's like the it's the overvalued thing uh to some degree no i totally agree that's a really good insight perspective on um revenue and an appreciating currency that's an interesting idea i hadn't framed it like that that's cool um yeah i agree with with everything you're saying though let's um let's finish up talking about some of the public market work you do outside of bitcoin you and i could talk for hours about

bitcoin people will be like all right guys shut up um what uh what are you excited about in public markets um and maybe you can explain a little bit about the uh the yield fund um and what you guess you're doing there as well yeah well the the two things i'm sort of focused on just at this moment are getting these two etfs out the door so we have registrations out statements out there they're effective we can talk about it's actually the first time i think we talked about it um But one of the big learnings for me from business school, there's a couple of parts of your life and you can pull away the insight statements from those institutions or whatever. So business school, one of my key learnings was, this came from the real estate class,

like always be in a growing market. You don't want to be in a market that's shrinking. Growth solves a lot of problems. Mutual funds are a dying wrapper. less tax efficient than etfs so they're hard to compete in um i'm excited just to get into a growing wrapper in terms of the etfs but if you think about how do you outperform a broad-based index there's two ways to outperform a broad-based index you can manage systematic risk which is just your overall exposure to the market's basket and risk right and then there's the unsystematic you

can manage the unsystematic risk which is what do you own and what weights and how does it differ from the underlying index and so these two etfs effectively one is trying to take on the overall exposure aspect in a systematic way so when do you want to be levered long the market can you can you time your leverage or use market-based indicators to efficiently time your leverage some people say no you can't time the market that's impossible we're not timing the market here we're timing the uh we're timing when we're using leverage so it's a very different framing i think which is which matters and then the other one is we're looking to manage unsystematic risk against the the market um and we're just looking to do it in a very concentrated way trying to own

things that are just kicking off tons of free cash flow with really aligned management teams who are allocating money in the right way so that's what i'm focused on right now i'm also focused on our content strategy i'm excited to do more things like this podcast with you we may be launching our own podcast in the next year doing things once a month on markets generally um my dad has actually expressed interest in being a co-host on that so we're excited about doing that um hopefully next year so content getting these new funds out there um and continuing to hopefully outperform our benchmark and and everything we manage we're the largest investors in every product that we manage and own. And that's what we're focused on. So excited about 2024.

The Miller family, when somebody externally said to me, hey, I know nothing about them. What's their deal? I would basically say disciplined and highly concentrated. Like those are like two of the things I would immediately think of, which are both great advantages, especially when you're right. Talk about concentration, especially in the public markets because i think that that's something that um obviously you know your dad doing it i think has been very well covered and i i get the sense talking with you uh a couple of times that like okay this is in the jeans and uh you're not gonna go buy you know shotgun half a percent across every fund and have a gazillion investments to manage so how do you think about concentration

today i think what's interesting is if you were to look at you know my dad's portfolio his own personal account if you look at my personal account they're just drastically more concentrated even though we are the largest investors in all of our funds and we own them in size they're still our personal accounts are far more concentrated than any of our funds or any financial advisor would say is prudent um so look you no one got rich diversifying their portfolio this is the fact um so at the end of the day i think the ultimate goal is to put yourself in a position where you can concentrate what you own in your investments and actually have it working on your behalf instead of just accepting the status quo and doing what everyone else is doing

and i've been really fortunate because my dad's got us to a point where we can now do that and it's incredibly fun and so that's what we're focused on and if you look out over maybe the next 10 years or so. I would say that you are unique in public markets in that you are young, you have a ton of experience, and you've already got a track record that people can evaluate in terms of what you've been able to deliver from a returns perspective. What is the North Star or what are you building towards in the next decade or so as you continue to launch more products and build out an investment business i'm trying to build a platform of active management that actually achieves its goals i know that sounds like a long shot but the customer experience in active

management has not been good um it's a very challenging business right i mean fees continue to go down as they should markets are incredibly efficient but i think over the past 15 years i've unlearned everything i learned at business school and i actually do believe now i'm in a really good place to achieve our objectives and over the long term deliver for our shareholders uh and us so you know i do think markets are not efficient i'm increasingly optimistic about you know the more learning you do the more likely you are to outperform the markets one of the biggest lessons i've learned from my dad is you know there really are no shortcuts outperforming the market i mean you got to be sitting at the machine all the time and figuring

out what's going on you got to be reading i mean i could spend 24 hours a day just doing research on names generally speaking i spend most of my time closer to the top of the funnel just trying to find collections of attributes across securities or in a security that makes it likely to that i think makes it more likely to outperform um you know that's a combination evaluation thought about properly contextualized properly insider alignment and just supply and demand dynamics like that's ultimately what i think it comes down to and so if you spend all your time doing that you should if you're using the right effort be able to outperform and that's the goal so far doing a great job where uh where can we send people to find you on the internet

personally um and also find uh the business if uh if they want to learn more about that appreciate that um at bill for b-i-l-l-f-o-u-r is my twitter handle at miller value firm's twitter handle um subscribe to our mailing list we put out content on public markets often on sometimes on bitcoin as well subscribe to our mailing list at millervalue.com so thanks for uh thanks for putting that out there you do a great job by the way on the on your own marketing front with your own stuff i could i know we could learn a ton from you and others could too you're you're a rock star on that digital stuff yeah i i have the blessing and the curse if i just say what i think which uh sometimes probably gets me in trouble all right bill thank you

Thank you so much for doing this. We'll do it again in the future. Awesome. Thanks, Pop.