The Pomp Podcast - #1502 Jack Mallers | Bitcoin Could 400x From Here!

Starting point is 00:00:00 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. Are you looking for a simple way to earn Bitcoin rewards every single day? At Simple Mining, we help people mine Bitcoin, even if you're brand new.

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Starting point is 00:03:34 reliable, scalable, and cutting-edge solution, Polkadot seems to be the top choice for industry players. Go check them out today at polkadot.com. This thing on? What's going on, guys? How are you? I'm the only guy in here without a collar. You'll have to excuse me, man. I thought you got dressed up. I look good. I think I look good. How are you? I'm great. What I want to talk to you about is Strike is probably one of the best well-known Bitcoin brands around the world. We've had a lot of people talk about what's going on in the United States. You were instrumental in helping El Salvador become the first Bitcoin

Starting point is 00:04:11 country to start acquiring Bitcoin, mining Bitcoin. You've spent a lot of time all around the world, talking to many of these world leaders, how do you evaluate where we are with nation-state adoption of Bitcoin? I think El Salvador's situation, as remarkable and impressive of a story it was, I think it was unique. They didn't have their own currency. So I think of money as our time and energy in an abstracted form. Everyone in this room, you wake up, you do something valuable for the world. And in return for that you get money so money in a funny way is your time your energy your effort your labor your work right and el salvador didn't have the ability to print that that's a powerful thing

Starting point is 00:04:59 if you can print time and energy right and so they didn't have their own currency they were destructed after a civil war they're the one of the most violent places in the world and so i would say it was very unique in the type of leader and the type of macroeconomic situation they were in being on the dollar, adopting a new currency wasn't as jaw-dropping as if someone with their own central bank and their own ability to print money. So it doesn't surprise me that there wasn't any fast follows. I think that story being replicated is actually harder than what meets the eye. I think Naive is a tremendous leader and he made it look easier than it actually is. But I would say that being the world reserve currency

Starting point is 00:05:42 is not a sustainable position. Just in like Triffin's dilemma. I'm not speaking biasly as a Bitcoiner. I'm speaking factually. I think a neutral reserve asset is natural. And so I've always said that it wouldn't surprise me after El Salvador was able to prove out that this is practical and feasible, and they're able to ride both a bull and bear market, that the United States as someone who's next to legitimize the asset makes a ton of sense. because it's pro-growth, it's pro-technology, it's pro-industry, it's pro-energy. It's pro a lot of the things that both the new administration has campaigned on, but us as a country, I mean, freedom, open networks, freedom of speech,

Starting point is 00:06:24 freedom of property rights, right? And then on top of that, we have a world reserve currency problem where we import real stuff and we export not real stuff. And that's part of being the world reserve currency. So I don't know if that's the answer you're looking for, but I think it's all kind of playing out pretty rationally. when the united states starts to accumulate bitcoin how do you view what happens after that is it just a mad dash every country in the world says oh my god we are behind the ball we've got

Starting point is 00:06:53 to go and acquire this as well and bitcoin goes to a million dollars or is there some other you know path that you see yeah i think what we're living through right now i would describe as the unwind from World War II, or the world wars generally, right? I would say, just to remind everyone, not that you don't know, but the world was decimated, right? And the US was in a strong position. And the global relationship came about as the US effectively saying, hey, we'll help you guys get off your feet. I'll tell you what, you can produce stuff for us. and we will export you the new world reserve currency to kind of get you back up on your feet. You need a customer. You need someone to import your goods and services. And also,

Starting point is 00:07:38 if we produce stuff locally in the US, we'd have no one to export it to because you guys are decimated, crushed, and poor. And so you've seen all these markets importing real stuff into the US. All the stuff we need. Oil, food, all the stuff that we all consume. And we get two-car garages and we get the big flat screen TVs. And in return, we distributed the new world reserve currency, which was the US dollar. Okay. That worked and was very kind of us in a biased American way. Obviously, we get our advantages from that. But I think where the world is now is like, okay, cool. Thanks for helping us get back on our feet. Now what? Because we don't want to give you guys real stuff to consume and have amazing lives in

Starting point is 00:08:25 exchange for this piece of paper you print. And you see Russia, you see China, they don't want to continue to buy our debt. The amount of treasuries that they are investing in is going down. They're talking about bricks. I don't think that's an actual threat or anything we'll see in practice, but it's a rotation away from the dollar. No world reserve currency has had any staying power because you have to operate in a deficit. You have to export your currency and import real stuff and it's unsustainable. You're importing goods in debt to give out a piece of paper. And so where I think we are is in the very early innings, and Bitcoiners get excited and I'm one of the ones most guilty for that, of a rotation back to neutral reserve asset for the

Starting point is 00:09:15 world. And if the United States acknowledges that Bitcoin carries those properties, even in a minor way, but says, listen, the story of humanity is engineering a better world. And this Bitcoin thing looks like it maps very well to that thesis and story of our species. And it carries the properties that are necessary to transition to a neutral reserve asset, I think that's a huge deal in the grand scheme. I'm talking centuries of evolution of the geopolitical and macroeconomic relationships between the most powerful nations in the world. Talk a little bit about the pain that the average American family is in and how you, who has a business where you're interfacing with retail everyday citizens as your user,

Starting point is 00:10:04 see their lives changing once they begin to start to adopt Bitcoin? Yeah. Listen, again, the US is in a position where they have to debase and weaken the currency. It is implied in the current state of the US dollar. You've seen this iterations like you have 1933, we're going to confiscate your gold. Then you have 1971, screw the gold standard. we're going to give ourselves the ability to debase and weaken the currency as needed. We're not going to be governed by the laws of mother nature. And so it's pretty implied that the purchasing power of the dollar over a long enough timeframe is only going down, no other direction. So what does that mean for... The reason there's such a large wealth gap in

Starting point is 00:10:55 America is because you either own assets or you don't. When they weaken the dollar, that's good for assets. That means real estate's going up. That means your stock portfolio is going up. That means the Miami mansion on the water is going to go from being worth $1 million to $100 million. And that means someone hardworking and lucky enough can acquire it to only Ken Griffin is going to be able to buy it. That's because of a weaker dollar. And so what you have is a very binary divide in the country. You either can afford Manhattan real estate, beachfront real estate, large assets that are expensive and are usually passed down generationally and have some advantage. Or you're more paycheck to paycheck savings account. You

Starting point is 00:11:35 kind of have a Robin Hood stock portfolio when you're punting some stuff based on following Pomp on Twitter. And it's that category of America that's growing because it's very hard to outpace the amount of currency that the US has to issue. And so let's say if real... Listen, inflation, just to be clear, is not 2% to 3%. What they're measuring it in is 2% to 3%. But the government doesn't know what you want. If you want to live in Miami in a nice house, it's not 2% to 3%. It's 20%.

Starting point is 00:12:09 Put another way, if you're not getting a 20% raise every single year, you cannot make progress towards owning a nice house in Miami, period, or Manhattan. And so the ability to outpace that and the ability of folks that are grouped into working as hard as they can, but getting less out of life. So yeah, I mean, it's terrible. And then just to end on a more positive note, not everyone can get Miami Beachfront real estate. Not everyone can get Manhattan real estate. Not everyone can get access in Silicon Valley to the new Facebooks and the new NVIDIAs of the world, but everyone can get Bitcoin. And it's the best performance of all of these anyway. I've outperformed Ken Griffin by doing nothing

Starting point is 00:12:52 but buying Bitcoin. And so that is the most empowering part is that everyone can be an asset holder and owner of property and actually gain benefit from a depreciating currency and protect their ability to have a better life tomorrow than they do today. A lot of people that we've talked to over the last couple of days have talked about the public companies adopting the Bitcoin standard and putting Bitcoin in their treasury. Strike. It's not only a great Bitcoin brand. It's not only a fast-growing user platform. You also have Bitcoin on your balance sheet. And you and I know each other well enough at this point that I'm pretty sure every time you make a decision, it is denominated in Bitcoin,

Starting point is 00:13:32 including like, what do I eat for lunch today? What have been the pros and cons? And what have you learned about operating with that Bitcoin standard as a private company? Yeah. I got my comms team, which is just a beautiful, awesome, hardworking woman named Lavinia back there. And we debate all the time. Strike's a private company. And so people don't know. But I would assume it's one of the most profitable Bitcoin companies in the world. We operate well over 85% gross profit margins. We've got some of the highest EBITDA margins in the world, even in the public markets. So we are a business that is like MicroStrategy. We're just in the private sector, but we sweep all of our cash flows into Bitcoin. We hold

Starting point is 00:14:14 the minimum amount of cash reasonable as a business, as a person, as an individual. I own zero US dollars. And so it changes everything in a really fundamental principled way because as a company... Listen, if the cost of capital is the dollar, it's effectively zero. And you've got excess amounts of venture and people willing to just throw cash at you. And it's very hard to make decisions. Well, what are we supposed to do with all this money? Let's turn on Instagram marketing ads. Let's launch 100 products. Let's open a nice office in New York City. And you're burning capital because the cost of capital is zero. It can't get any worse than holding dollars because that's just bleeding to death. So you might as well just punt on whatever.

Starting point is 00:14:57 This employee has a cool idea. Yeah, go work on it. All of a sudden, if we introduce our treasury asset and the way we measure capital in something that's compound annual growth rate is 60% over the last 10 years. When an employee comes to me and says, I have an idea, I say, how good of an idea? 61% every year. Good. Because if not, get the fuck out of my office. Sorry. And that's built a really good culture. Our growth rate is astounding. Our efficiency. So when I talk about things like EBITDA margins, gross profit margins, we run a tight ship. And I'm a Midwest founder that was raised in the Chicago pits by traders, but also our governance and our culture is imposed by Bitcoin. And that's the real cost of capital that the world didn't have before.

Starting point is 00:15:51 You were racing against growth. Companies were doing stock buybacks. And now all of a sudden, And what Michael's doing at MSTR, what we're doing at Strike is imposing real physical constraints and costs of capital that make humans better and make decisions easier to make. Talk about the cycle. You've got a business where... I'm an investor in Strike. So I've seen the financials. They're very good. But as you build your business, if these 4-year cycles persist, how do you insulate yourself from seeing your balance sheet shrink by 80% because the price that Bitcoin is contracting, and then it's expanding. And there's this cyclicality that I think people say to themselves, it sounds great to be exposed to Bitcoin when the price is going

Starting point is 00:16:32 up. Well, if I'm also got my entire company's balance sheet in Bitcoin on the way down, that doesn't feel as good. And so how do you guys think about that? So at Strike, being profitable is a moral imperative before a financial one. The way we think about it is producing more value for the world than you consume from the world is being a good person or a good company. It's quite literally in the financial sense, making the world a better place. So I have a rule at my business. I will never run strike unprofitably because we're taking advantage of the world or advantage of how easy money is or advantage of overinflated venture markets because of COVID. And so we principally believe that we

Starting point is 00:17:20 are here to do more for the world than we take from the world. And then for that reason and purpose, we're never at risk. We're not levered. There is no counterparty risk to us blowing up. Bitcoin can go down as much as it wants. It doesn't matter. And on Bitcoin's volatility, Satoshi, if I wasn't a founder and CEO of Strike, I would be a Bitcoin historian. I've been in Bitcoin for 12 years. I love being a part of its story and reminiscing on the early forums. Someone was asking Satoshi about the volatility. And he said, if we wanted a more stable value, we can make the currency units dynamic. We can change how much Bitcoin should exist based on trying to achieve a stable value.

Starting point is 00:18:10 If we want dynamic price, meaning it's going to bounce around a lot, we should fix the currency units. And he was being a little humble and joking. But the point is, if you're going to give the world an absolute scarce asset, the only provably fixed asset in the history of our species, and you're going to give it global free market access, it's going to be volatile. And where there's risk, there's reward. If you look at Bitcoin's Sharpe ratio, it's greater than the MAG7, than the S&P 500, than gold. And so as a business too, we accept that. I firmly believe that any attempt to restore harmony in society rests on the renewal of personal responsibility. And so us as a business, we're not reliant on Jerome Powell. We don't care

Starting point is 00:19:00 about what Mark Andreessen is going to start investing in. We take a personal responsibility to be ethically and morally profitable because we want to be good for the world. We want to make progress in the world. We want to be making the world a better place. And we accept the risks of being in this industry because we understand the reward. And we're happy to be here. We're happy to embrace that volatility because if you take it away, then I don't think we can change the world. The upside isn't as high. There's a correlation there. I don't want to run a bakery or a business that's a little bit more mundane. I want to play in the big leagues.

Starting point is 00:19:34 I want to change the world. How do you view the new administration and their support for Bitcoin and what they should do? I hate politics, man. Got them. I mean, what do I think they should do? uh or what i mean listen what did what did i tell if you were president for the day what would you do no i mean we could go back rewind time a bit what did i tell another president to do

Starting point is 00:20:05 i told them listen governments aren't designed to be good at engineering consumer products um so i was very against the chivo wallet for example what do you want you want jack dorsey you want michael saylor you want these guys to come build stuff for your citizens jack dorsey's gonna be way better at building stuff than you are so give favorable regulation favorable tax treatment allow them to invest back into your country right look at what tether is doing tether has probably invested more in el salvador because they've gotten favorable regulation and favorable tax treatment than if they were trying to claw pennies out of them with overtaxation, right? So pro-regulation, pro-growth, or pro-favorable regulation. Pro-growth, be reasonable in...

Starting point is 00:21:01 Trump's talking about tax cuts and ways to inspire growth. And then I think that you want to align incentives with the space. Buy some. Everyone in this room knows that your relationship with Bitcoin is different as soon as you own a little bit. And so I think just making the United States a Bitcoiner, at the very least, aligns with the industry that's arguably the fastest growing and creating the most wealth. I mean, let's be clear. In 15 years, Bitcoin's created $2 trillion worth of new wealth. A lot of that's in this country. And at current growth rates, it's going to be tens of trillions of dollars over the next 10 years. So that was my suggestion to Naeem. You're going to attract the most profitable company in the world per employee and probably

Starting point is 00:21:46 in the history of our species in Tether. You've got Block and Square interested in El Salvador. You've got Michael Saylor meeting with El Salvador, and that's because of their stance. And then own some. Become in line and incentivize with the space. Put some skin in the game. I would say the same thing to Trump. ETFs are now popular. Plenty of people who did not own Bitcoin, their first interaction is through those ETFs. There's a financialization of Bitcoin that's happening. And it feels like there's a little bit of a trade-off. Maybe the ethos and the reasons why you bought Bitcoin may not be present when this new class of Bitcoiners coming in because

Starting point is 00:22:22 of that financialization. But you need those people if you want the ever-elusive mass adoption. How do you think about this trade-off of we want as many people to have exposure to Bitcoin as possible, but you also don't want to have the dilution of the message of the ethos and the values of Bitcoin? Listen, Bitcoin is a permissionless network. I can never understand for the life of me when certain Bitcoiners are like, someone kick BlackRock out. Who elected you the president of Bitcoin, moron? So it's what Bitcoin in the eye of the beholder. And so I welcome Wall Street. They're trying to solve very specific problems. The bond market, not good. The long-term viability right now of those instruments, not good.

Starting point is 00:23:13 It looks like the United States and Trump are going to get their weaker dollar and finance reshoring and do what they need to do at the expense of those buying these long-duration instruments. So what is Wall Street doing? Larry Fink's trying to sell people what they need, which is a way to retain purchasing power and actually be performant in real terms. If you do the math on a 60-40 portfolio versus a 55-45 with a little Bitcoin or a 60-35-5, you can look at the graph. It's just a little exposure to this thing. It goes a long way for the biggest financial market in the world, which is bond market, treasuries. And so that's fine with me. Would I want to broker my access to Bitcoin through Larry Fink? Yeah. No, thanks.

Starting point is 00:24:03 I don't own any ETFs. I also don't own MSTR. As much as I love Saylor, I'm cool, man. I don't know you that well. So I own my own Bitcoin. But that's fine. And the free market will figure these things out in the meantime. So I think it's great. I think it's great. Bitcoin's like universal acid. Somehow, it seeps into areas that you never would have expected and it conquers it. And Wall Street's no exception. I continue to say that Larry Fink is the CMO of Bitcoin now. And one of the things that maybe you and I have experienced over the years, I love you, but it's a different messenger than you. As good looking, as charming as you are sitting in an empty women's closet on television compared to Larry Fink going on TV and saying,

Starting point is 00:24:59 oh, Bitcoin's going up because it's a flight to quality. He just carries a little bit different gravitas with them. Talk a little bit about not just the maturation of the asset, but also the message and the messenger. And so much of Bitcoin now is Larry Fink is actually really, really important to bring in a whole new group of people. Paul Tudor Jones and Stanley Druckenmiller were really, really important to bring in all those portfolio managers in 2020. And just like, it feels like the ground is changing. And you're saying, Hey, I'm welcoming all of them. But where do you see this continuing to evolve? And does that mean that the voice of what I would consider a native or hardcore Bitcoiner is still important?

Starting point is 00:25:37 Let me tell you guys a story. So I dropped out of college in 2012. I didn't even get a credit. Right. Lasted a little under 30 days, I think. That doesn't even count as going. Yeah. I visited. Extended visit. But I got charged tuition for it. The point of the story is when I got home, my dad is the one who got me into Bitcoin. And he was like, I'm really excited about this thing. I really don't want to ship you off to another university and have to handle another bill. You wasted enough money. How about you take a look at this thing with me and it was Bitcoin.

Starting point is 00:26:17 At the time, the only real credible place to buy it was exchanges like Mt. Gox. And he said, I don't trust this exchange. Even the way the price moves, it looks like they might have liquidity issues. I mean, he's a smart guy, obviously. In 2013, Coinbase was founded and became accessible. and it was the investors behind Coinbase were folks like Mark Andreessen. And as soon as my dad saw Mark Andreessen and Silicon Valley back Bitcoin, that was enough credibility to be like, all right, I opened us accounts. Let's start stacking.

Starting point is 00:26:58 Point in the story is there has been over the last 12 years in my experience and 15 years in Bitcoin's experience, there are moments of credibility that matter a lot. Now, Silicon Valley leaning into Bitcoin, as for all of us, especially 10 years ago, Silicon Valley is the best at tech. They're the best at understanding this stuff. If they believe in it, it makes me feel less crazy. All right, let's open an account because we don't have to wire money to Japan. And I think it's the same. I mean, Bitcoin's growth story is similar. Instead of me and my dad, a college dropout and a retired trader. It's the biggest portfolio managers in the world, but it's the same thing. Okay. If Larry did the work to put his reputation on the line,

Starting point is 00:27:43 I'm not going to get fired. Same thing. And so I think it's... Another version of this story is when the CME, Chicago, came out with the first futures product. When the CME listed Bitcoin futures it was equivalent at the time of the etf it was oh wow the cme is you know the most liquid some of the largest volumes in the world in financial markets if they did the work to put their reputation on the line this thing's legit and then bitcoin went from 200 to 20 000 so i think it's another chapter in its story i don't take offense to it i love i love uncle larry uh he can be the chief marketing officer there's no problem and again as a bitcoiner bitcoin you know bitcoin is an ego test um you know you have to sacrifice the idea that more control

Starting point is 00:28:33 and bigger ego is correlated to success um it's when you realize this thing's bigger than me um and i can only play my small part is when you maximize the opportunity i think so you know i think an experienced bitcoiner has no ego and i don't take offense to wall street having an interest at all my last question for you is um bitcoin when the white paper came out the title was a peer-to-peer electronic cash system and there's a lot of people who see bitcoin now being more of a store of value and they think it's hard to see you know kind of a medium of exchange and a global reserve currency and hyper bitcoinization given everything we know today what do you see as the future of bitcoin does it end up just being a

Starting point is 00:29:21 store of value? Does it end up being the global reserve currency? Just paint us that picture 20, 30 years from now, where you see us going. I think at Strike, we take on this attitude of being humble, as I was just alluding to, and saying, we don't know. People that subscribe themselves the responsibility to predict the future are assholes. Sorry for the language. But nobody knows. Part of being human is you can't change the past. You don't know the future. We all share in the moment that we call now. And so we take that approach as a company and we're super customer-focused. What I can tell you guys based on Running Strike is product market fit is in what people are calling store of value.

Starting point is 00:30:09 But it's really... Humans own about $900 trillion worth of stuff right now. That's currency, real estate, art, collectibles, precious metals like gold, $900 trillion worth of stuff, it's estimated that about half of that is monetized. Meaning they own the stuff, they own the house, they own the art, they own the precious metal, not to consume it, not to live in the house, not to look at the art and be like, Oh, I love this art. But because they're trying to store wealth, they're trying to preserve value, they're going to sell it later. So that means the market opportunity to store wealth, store value, persist value you create for the world today and bring it to tomorrow is about

Starting point is 00:30:51 $400 to $500 trillion. And that is where product market fit in extreme demand is from Larry Fink, from the bond market, from the treasury market, from retail consumers, from those living paycheck to paycheck. That's the product market we see in strike. And the payment stuff, I would say less so. I would say less so. So when people say, can Bitcoin go higher than 100K? Well, the way I about it is right now bitcoin's about one and a half trillion dollar in market cap is going after a 400 to 500 trillion dollar opportunity and that's in purchasing power terms so in dollar terms that'll go up as the currency weakens so i think bitcoin still has a 400 to 500 x left in it and we see that as as a company we onboard institutions businesses retail we support all

Starting point is 00:31:35 we support the dollar the pound the euro so we see the same demand globally the same growth prospects globally. And that's where the product market fit is for us. So we're interested. Is it March yet? Products like lending. We'll get into that. And then the currency stuff is just growing at a slower pace. And I don't think there's enough demand in product market fit. And I don't think the size of the opportunity is as big relative, if that makes sense. But we'll see. And I think Bitcoin is going to grow to hundreds of trillions of dollars in market cap. And there's gonna be a lot of opportunity um for all of us to share in that ladies and gentlemen jack mallers thank you guys

The Pomp Podcast - #1502 Jack Mallers | Bitcoin Could 400x From Here!

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