The Pomp Podcast - #530: Q and A

Episode Date: April 8, 2021

In this special episode, Pomp answers questions taken from Twitter. He talks about balancing ambition and happiness, whether or not you should time markets, the likelihood of a bitcoin ban, and much more.

What's up, guys? Bang, bang. Today's a special episode. I've taken questions from you, the listeners, on Twitter, and I'm going to do my best to answer as many of them as I can. Polina, my wife, is here to read them out because I can't read very well, and we are going to do our best. So bear with us. But before we get into the episode, I'm really excited to answer these questions. I want to talk about our sponsors. First up is Circle. Circle is a new sponsor, so pay attention here. They're a global financial technology firm that enables businesses of all sizes to harness the power of stablecoins and public blockchains, Jesus, public blockchains for payments, commerce, and financial applications

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to worry about. Go to Crypto.com app today, use the code POMP, and you will get $25. Two, five, go do it. All right, let's get into this episode. We are going to do our absolute best here. No judgment. Polina is going to read the questions. I'm going to do my best to answer them, and let's see how it goes. First question. first question comes from at brent underscore kt do you and paulina find time to unplug or is it full throttle all day every day it's inspirational but i hope you guys find some time away from the screens i find lots of time to unplug uh i actually think a lot about the balance between ambition and happiness right now and the more that i spend being happy i actually get better

and better results. So it's more of a work smarter, not necessarily harder. That doesn't mean that I don't work hard or not a lot of hours, but it just means that I'm much more intentional about the work that I do and also more intentional about getting my eight hours of sleep, shout out eight sleep, or I am much more intentional about spending time with Polina, going on walks, eating dinner together, et cetera, et cetera. So definitely intentional about all of that. But I think the balance between ambition and happiness is the way that i kind of use the mental framework today um this one is related and it comes from at alt coins sorry altcoin beats who really is pom let's erase all of this crypto and financial stuff at your core so where would you be working

and what truly makes you happy in life yes besides the lovely paulina i'm just a dude that's it literally, I'm just a dude. Uh, whether it is, uh, going to a bar, hanging with my brothers, hanging with my wife, I'm just a guy and I enjoy doing what I enjoy doing. And so who you see is pretty much it. Uh, I say and act the same way in person as I do in business meetings, uh, or in private. And I think that that's part of the beauty of it is I'm just me. And I try to be as authentic as I possibly can because that's when I'm happiest. And so I don't think there's really any kind of secret or any curtain necessarily to kind of reveal behind. It's just me having a blast and hopefully other people are along for the ride. At RobJoe66, you often get faced with the

accusation that you are smart. You nearly always deny or claim that the guy next to you is smarter. why why don't you just take it when it's obviously true in your area slash field i think that the idea of being quote-unquote smart is a finite position to end up in uh there's a saying that the more you know about something the more you realize you don't understand and i think that that constant pursuit of uh intellectual curiosity and information ends up teaching you that uh you're not nearly as smart as the next person. You're not nearly as smart as you will be in the future. And so if you're constantly trying to, uh, compare yourself to a past version of yourself, sure, you're smarter today, hopefully than you were yesterday. But I think of smart as a very

static position. Um, and so I constantly just think about if I'm still learning, how could I possibly be smart? If there's still, still more to go. Jose Silva, in the past, you've talked about the Bitcoin market cycles and even said that 2020 will most likely be a down year for the asset. Do you plan on selling some at the top of this year and then reaccumulating in 2022 to 2033? I think that it's nearly impossible to time markets, especially with any level of super granular accuracy. And so I think that what we've seen is if you held Bitcoin over the last 10 years, lots of volatility, hundreds of percent up and 70-80% downside in some years. But what was true along the way was Bitcoin continued to grow

at a 200% compound annual growth rate for a decade. And so just holding ended up doing all right. And I think that that's a really great way for people to kind of look at this. And I don't think I can time markets. I don't think most people can. So if you can't do it, then don't try. Greg asks, what company that you invested in this past year are you most excited about? And what is one company that you shouldn't have passed on? I don't know if there's necessarily just one company. I can talk about maybe two companies that I've written the largest check to in the last 12 months might be a good way to kind of, you know, just talk about one or two of them. Obviously, BlockFi, I'm a huge fan of.

I have invested a lot of money, sit on the board there. I believe that BlockFi's pursuit of deposits and payments over a simple brokerage model will end up proving to be very, very valuable. Obviously, the last round was raised at $3 billion valuation. I think that they'll continue to perform very well through the rest of this year and into the future. And so that business is led by Flory and Zach. They're doing a fantastic job. They've got over 500 employees around the world. And I think that this idea of building actual crypto products for crypto investors or financial products for crypto investors is, you know, just getting started. And it'll be cool to kind of see what else they roll out over the years. The other

company is Strike. I think that this is probably one of the most underrated companies in the space for products. Strike allows you to send any currency across the Lightning Network and have it instantaneously settled for free. And so Jack Mallers is by far, in my opinion, one of the smartest people in the Bitcoin space. He continues to be incredibly principled in his view of the company and product he wants to build and his outlook on Bitcoin. So just super excited to kind of continue to invest in Jack and his vision of the future. So those two companies I think are pretty simple to kind of point out just because they were the two largest checks that I wrote recently. And then when it comes to a company that I should have passed on or I should not have

passed on. I'll go way, way back. I had a chance to write a very small check in DoorDash when I was working at Facebook. A friend of mine, angel investor, invested in the seed round. I met who was, I believe he was the head of growth at the time. And they were kind of closing up around. I had no clue what angel investing was. I had no interest in doing that. Really dumb on my part. Ended up being a multi-billion dollar company. So you kind of just want to go back in hindsight and get the ones that you knew would have worked. But again, you know, it put me in a position that I am today. So you can't really regret it or worry too much about it.

Just keep trucking. Alexander Loris. The COVID-19 pandemic disproportionately hurt small businesses while larger corporations adjusted, thrived, and took more market share. Bezos embraces Biden admin's higher corporate taxes. How will this affect small businesses and large corporations differently? I think that large corporations are very intelligent about ensuring that they show little to no profit because of all of their R&D and kind of their reinvestment into their

own business. And so when you do that, you end up paying near zero taxes. That's not any sort of verdict on bad behavior by the corporations. They're simply operating within the rules. And actually, we should encourage people to pay nothing in taxes if what they're doing is they're taking any free cash flow and they're reinvesting it into kind of progress, innovation, entrepreneurial type activities, and making their business better, employing more people, et cetera. So it's a weird thing because I think a lot of people like to yell and scream about the fact that large corporations aren't paying taxes. But what that means is that they're reinvesting anything that would have been profits, which actually ends up making it a bigger and

bigger company over time, which means that it can employ more people, it can make more progress, serve more customers, all that. At the same time, most small businesses, one, are not as sophisticated. They actually end up booking a profit. So they pay taxes. But also two is it's just smaller numbers. And so it's one of these things where the big companies are going to be absolutely fine. But when you raise taxes, you actually hurt the smaller companies, right? Because they're the ones who are operating on the smallest margins. They're the ones who literally the difference between 21 and 28% corporate tax rate could be the difference between hiring two more people or firing two people. And so when you start to look at kind

of the impact, I think that a lot of these policies, although they're targeted at trying to affect and impact the largest companies in the country, remember, they've got lots of lawyers, lots of accountants, they're very sophisticated, and they find ways to operate within the rules, but continue to build progress and build their companies. The small businesses are the ones that don't have those resources and end up getting hurt. And so I generally think that we should encourage more free markets and worry less about government intervention. Sergio Steffay, do you think that current market cap of crypto is too big to face a threat of being banned in the future? If yes, what do you think that the governments will do in regards to crypto and the

blockchain technology as a whole? Will they see these as a threat or on the contrary? I think that we're past the point where governments are going to be able to ban the entire industry. That seems pretty far-fetched at this point. With that said, they may try to ban individual assets. They may try to attack specific companies or regulate them. With all of that, I think that we're likely to see continued growth regardless. So we've seen in certain countries like Nigeria, Pakistan, China, talk of it in places like India and elsewhere where they actually banned something like Bitcoin or other types of assets and actually adoption has gone up. um and so i think that really what we're starting to kind of look at here is less about like is it

a binary do they ban it do they not instead i think the way that is much more likely for them to kind of attack or or uh kind of be adversarial is just tax it more uh regulate it more uh regulate the companies make it super difficult to operate businesses in the industry right now the outright ban is a pretty aggressive move and hard to to see but i think that uh the continued pressure on the corporations and individuals in the space, that's likely to see where they're gonna get a lot of traction. So hopefully that doesn't happen,

but to me, that's kind of the more likely outcome if there's continued government pressure. Okay, Ariel, how can people who make less than 100K a year make an exit from fiat efficiently and what things should they stockpile before fiat dramatically declines in value? I don't think anyone has to worry about like hyperinflation in the United States.

I think that's kind of a false narrative and one that people should be careful about spreading. I think instead, what we need to understand is that there's a continued devaluation of the dollar. And so it's not like if you have a hundred dollars in the bank, all of a sudden, you're not going to be able to buy a loaf of bread, right? Like that's not kind of what you need to worry about. What you do need to worry about is maybe that rather than your dollar being devalued at a 2% rate, maybe it's four or five or six or 7%. So it's not, again, quite as binary. I think it's more of the kind of the gray area. With that said, I don't worry about, uh, aggregate dollar amounts. So whether you're making $10 million a

year, a hundred K a year, or literally $10,000 a year, uh, a lot of it is on a percentage basis. Now, uh, I say that obviously if you make more dollars, it's easier to, uh, kind of adhere to certain percentages. Uh, because if you, you know, only make 20, $30,000 a year, then you still have bills. And so things like food or gas end up being a much, much higher percentage of your, uh, income than let's say somebody who makes a hundred K or a million or $10 million a year. And so I think that you just got to think of it in percentages, right? If somebody who makes a hundred K a year can put, let's say a thousand dollars into Bitcoin as kind of a saving slash investment, then maybe you can't do a thousand dollars, but what you can do is you can do a hundred dollars

or $10. The percentages I think is what's much, much more important. And what you have to remember is that the key financial kind of principle here is spend less than you make. And so if you can spend less than you make. You can get out of debt. You can get into investable assets and you can be patient. I think you got a shot at building real long-term wealth. At Samstick33, who are the people that when they release some content, you stop everything you're doing to read or listen? Other than my wife, who is the smartest person that I know, nobody. And I think that that's actually a really important thing is I long ago gave up on having any heroes or believing that um, you know, somebody was a hundred percent right all the time, or somebody had, uh, accurate views

all the time, or was even interesting all of the time. I think it's less about who the individual is and it's much more about the content itself. Um, and so that's a little bit of a nuanced way of looking at it, but there's some people who I think are incredibly intelligent who just might write something that's bad, uh, vice versa. I actually think there's some people who I don't think are quite that intelligent, uh, but then they write something that's super interesting and thought provoking. And so I think of it less in terms of like, who is that individual or that group of people? And I think it much more about the quality of the content. Now, how do I determine that? A lot of times it is literally, um, I've got a whole host of people that I follow specifically

for the content that they share. And I almost use that social graph as somewhat of a filtering mechanism. Gotta be careful. It doesn't become an echo chamber. You only read what everybody else is reading. But at the same time, if you see two or three people that you like, and that you converse with on a regular basis, all sharing the same article, it's probably worth the time investment to go ahead and read it. And so I think that's kind of the way that I look at a lot of it. I like this name. Beep, beep. I'm a jeep. I currently have a mechanical engineering background. How would someone like me transition to the cryptocurrency job field? What skills would you recommend to acquire? Where would I even start? So I think there's a couple of different

things you can do. You can use the skills you have, or you can try and fill a role that doesn't need those skills. As a mechanical engineer, I'm sure there's tons of mining companies and people who create hardware that have needs for mechanical engineering or other types of more engineering type degrees. And so I think that you can absolutely go find roles that align with the skill set you have. At the same time, you may say, look, I don't want to do engineering. Maybe I want to do something else. And so I think that what you should do in that situation is just start from first principles and really try to boil down what do you enjoy doing, what do you want to do, and then really go out and look for those types of roles. And so it's kind of a bad answer,

if you will, but I think that there's directly applicable jobs for mechanical engineering. But I also think that a lot of people feel tied to or pot committed to a degree or two experiences. Oh, well, I went and got a degree in mechanical engineering. I've done this for the last five years i feel like that's the only thing that i can uh offer somebody that's not necessarily true but you got to ask yourself what do you want to do i think that's usually the best place to start because it'll lead you uh kind of to the place where you'll be the happiest john arch btc what is the best slash most memorable question you've ever been asked one time polina asked me if i felt fat what i did not do that and i had just eaten about 16 dominoes pizza slices and i looked

at her and i said ph or fat so that was probably the most memorable questions anyone's ever asked me oh my god okay what was i supposed to say one time i asked anthony the first time i met him i asked him if he thought that two ambitious people could be together i don't remember my answer you said yes okay dave what sort of impact is bitcoin gonna have short and long term on the banking system in terms of damage to them overtaking them and changing the way people bank it almost feels like banks are making it hard to put money in crypto and i get the feeling it's out of fear the best companies in any industry navigate every technology shift so the reason why Goldman Sachs has been around for 100 gazillion years is because Goldman Sachs has

navigated literally, it seems like the printing press, which probably is not true, but everything from the internet to mobile phones, to beepers, to SaaS software, cloud computing, and now cryptocurrency. And so I think that you've got to remember that some of these institutions have been around for so long because they understand those technology shifts. They're willing to adapt and change when they feel like the information changes. So we're seeing some of that today. There's plenty of other large institutions or incumbents who are absolutely screwed. They're completely antiquated and archaic and they're thinking and they are going to get smacked, literally could go bankrupt or have to be bought in terms of protecting that shareholder

equity. And so it's hard to predict kind of who's going to end up where, but I think that you can use history as a guide. If you've seen a firm kind of over and over and over again, navigate those technology shifts and be able to kind of incorporate new technology into their business and not only survive, but actually thrive over many decades, they probably have the DNA and the higher probability of being successful. It doesn't guarantee success, but at least it gives them a shot. Ben Wehrman, you frequently voice your conviction that BlockFi will become one of the most important companies in the world. As a new user and instant fan of the platform, this gets me hyped, but could you elaborate on how you see the future unfolding for them as adoption explodes?

Yeah. So the reason why I say that they're going to be one of the most important companies really just stems from they're going after payments and deposits. That to me is the most scalable model when building a financial institution. And so compared to the brokerage businesses, which are the crypto exchanges, I think BlockFi is in a much better position from a scalability and a profitability standpoint. I could be wrong. We'll see. But that's my personal opinion. With that said, I think that BlockFi and also the other infrastructure companies all benefit when adoption goes up, right? When you look at, let's say, Bitcoin going from 10K kind of at Q4 last year to the now $60,000, tons of new users came into the market. And also the existing users started to use the products more often. And so just like Coinbase came out and showed these magnificent growth numbers going from $1.3 billion in revenue in 2020 to $1.8 billion in revenue just in Q1, you're seeing that across

the board. Kraken, BlockFi, all these companies, just metrics are up and to the right. And the reason is because the tailwind of price movement and new user adoption ends up driving revenue, profitability, et cetera. And so I tend to think that it's less a BlockFi story around adoption, and it's more so just the overall industry. But because of BlockFi's specific business strategy, I think that they will have an outsized benefit accrue to them going after that deposits and payments rather than solely going after brokerage. Nick Clement, there is a greater than 0% chance that Bitcoin could go to zero and become worthless. If this would happen, what do you think would be the cause? I think the most likely thing is a self-induced error, meaning that during the

development process, somebody introduces an error. I think it's highly, highly, highly unlikely. and that's why there's such a methodical intentional development process but to me that would be the most likely scenario and I actually don't think that Bitcoin can go to zero I actually could promise you it won't go exactly to zero it may go really close to zero in that situation but I'll buy them all up at the end and so maybe I can keep it at a dollar but I don't know if it'll go actually to zero just because whenever you have kind of bid and asks on a on a marketplace, uh, unlikely that it goes exactly to zero. All right. This is a good question to end on Rahul Zoda advice to young people. What do you wish someone told you at age

20? Make it actionable, go bigger, be more ambitious and have no fucking fear. And the reason why I say that is because what you realize is whether you're 20, 30, 50, or on your deathbed, we're all gonna die and if you know that we all end up in the same place you have a finite amount of time on earth and so you use it to your advantage try to do the most epic shit you possibly can while you're here rather than simply trying to always play it safe go bigger be more ambitious and have no fucking fear that's the way to live your life in my opinion all right guys that is it make sure that you go check out the sponsors click on the link in the description i appreciate all of you thank you so much for sending all the questions

and we will have to do this again in the future