The Pomp Podcast - #576: Preston Pysh on Investing Lessons From Billionaires

Episode Date: June 8, 2021

Preston Pysh is a financial investor and the host of the podcast, We Study Billionaires. In this conversation, we discuss investing lessons from billionaires, bitcoin, ethereum, ETH 2.0, Elon Musk, Ray Dalio, Warren Buffett, and whether gold has failed or not.  ======================= Public Rec is on a mission to make comfort look good. Their fan-favorite Flex Short is the ultimate crossover short you’ll need all summer long. From the beach to the gym, this quick-drying short has you covered. Comfort starts with a better fit. Free shipping. Free returns. Visit www.publicrec.com/pomp and use POMP at checkout for 10% off! ======================= Whether you're an experienced crypto trader or just starting out, Kraken has the tools to help you achieve financial freedom. With the new Kraken app, you can easily buy and sell over 60 of the most popular cryptocurrencies in just a few minutes. Featuring a sleek new design and an easy-to-use interface, you can now take your crypto portfolio with you on the go, 24/7. Visit kraken.com/pomp to learn more or search "kraken" in the app store. ======================= Unstoppable Domains makes crypto easier by replacing your address with [AnyName].crypto. They allow you to send and receive over 70 cryptocurrencies, including BTC, ETH, and LINK with a single blockchain domain. Go to unstoppabledomains.com and get [YourName].crypto to make your crypto life easier. =======================

What's up, everyone? This is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Now let's kick this thing off. Preston Pysh is a financial investor and the host of the podcast, We Study Billionaires. In this conversation, we discuss investing lessons from billionaires, Bitcoin, Ethereum, ETH 2.0, Elon Musk, Ray Dalio, Warren Buffett, and whether gold has failed or not. I really enjoyed this conversation with Preston, and I hope you do as well. Before we get into this episode, though, I want to quickly talk about our sponsors. First up is Public Rec.

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All right, let's get into this episode with Preston. I hope you enjoy this one. 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. All right, guys. Bang, bang. I've got Preston here. Thank you so much for doing this. Yeah, absolutely. All right. You've been doing the We Study Billionaires podcast for seven years. Let's just start. Where'd the name come from? Because it's a pretty good name. Well, it actually started off with the name, just The Investor's Podcast. And then we realized it

was just too generic it was great for search engine optimization but it was too generic and we were just like well you know we we were going to do a lot of conversations around warren buffett value investing and it was like hey you know that that might get to be a little bit of an old topic after a while so let's just change it to we study billionaires and then we can you know cover whatever great investors are out there if they had a net worth over a billion dollars we just kind of wanted to pick apart how they did it what books did they read um let's read those books and talk about what we learned and um it was just kind of a you know a name that just materialized as we realized like you just can't talk about value investing every show

yeah we need a little bit more breath in 2014 2015 when you guys started uh it's pretty early for podcasting still like why a podcast and not, uh, an email or a blog or, you know, some other medium. So I was on a, we were at the Berkshire shareholders meeting and I was just leaving Omaha on a flight and I bumped into this guy, his name's Hari Ramachandra and didn't know him, but he had a LinkedIn jacket. And, uh, and so I just started talking to him like oh so you're a shareholder like hey you know what else do you do i see you work for linkedin and so we just started talking and i told him that i had stood up a website that um and the website was just real generic but it had all these videos that basically take somebody from

knowing nothing about investing up to the point where they're doing like a discount cash flow analysis on a on an equity and trying to determine what the valuation of it is through an irr and And so you go from knowing nothing through all of that. And I think there was, I can't even remember, maybe like 35 videos course, completely free. Put it on YouTube, designed a website then that housed all of it and then had additional information underneath the videos.

And so I was telling him about this website that I had made that teaches people about investing. And there was a book that went along with it and all sorts of stuff. And he was like, you should do a podcast. and I was like, I've never listened to one of those. I don't even know what that is. Is that what you LinkedIn people do?

You listen to podcasts? Yeah, he was like, you should start a podcast. And I said, you know, it sounds interesting. Tell me more about it. I've heard of it, but I didn't really know that much about it. And so he's like, there's this guy, his name's Pat Flynn. He has this show that's all about creating passive income, and he has a podcast.

You should listen to it. I said, okay. So I downloaded it before we got on the plane. We, we go on the plane and I'm literally sitting next to him on the plane. No way. Okay. So I need to listen to this guy for some reason. There's too much going on here.

Right. And so I downloaded the podcast and I listened to it and I was like, holy hell, this guy is doing this out of his house. Like, this is like the barrier to entry here is like nothing. and um i just thought it would be kind of fun to just you know and and at the time i was running a forum on that website i was running a forum and i was having conversations about uh stock valuations like we're like hey what do you think of exxon mobile what do you think of this company that company and um one of the people on the forum was stig broderson who i do the show with

And like Stig shows up on the forum and he's writing these, these like five page analysis on one company. And I mean, they're so detailed. He's getting into his opinions on what the valuations are. And so I was like, Hey man, the, would you be interested? Never met Stig in my life, shot him a, you know, an email. Would you be interested in just like doing, you know, a conversation like once a week, once a month, whatever we'll record it. and then with an rss feed we can just pump out whatever we create he's like well he's like you know english is my second language and it's not my first language and see he's like i don't think too many people are gonna really want to listen to me and it's like stig like maybe they'll want to listen to you more because you're coming from maybe just a different vantage point or maybe they can empathize with you know whatever and he's like all right well whatever i guess there's no downside to this and so we we started the show and we started having these conversations we started sending them out primarily to like the the berkshire value investing type uh people and we

we garnered a decent sized audience just pumping out these conversations talking about this company that company this great investor that investor and we eventually you know turned it into we study billionaires where we were just studying anybody who was an investment guru and how they do it how many think you've done this point say that again how many uh billionaires do you think you studied it oh god i don't know uh 150 yeah i would say uh probably more near the 50 mark just because there's a lot that we've covered like everyone knows i'm a big ray dalio fan right so like i've covered him a lot we've covered stan a lot um so do they ever reach out after you do an episode they're like hey i appreciate that not really no no um you know like jesse itzler so like sarah

blakely um we were studying her and then i had a friend that i met at a different meeting and they introduced me to jesse who's sarah's husband and then jesse and i became friends and then he took me on a hiking excursion and so like you it's we have had so the answer question yes some people have like we have interacted with but a lot of the other ones we haven't and it's just yeah it's crazy uh let's say 50 just as an easy number yeah so you study 50 of the world's most successful you know wealthiest people yeah what are the commonalities between them all right they come from different industries they have different viewpoints of the world but like what are the things that they all share so i think this was the thing that that made me want to do this show

was i've always had the opinion like if you want to accomplish whatever it is whether it's investing you want to be a great skier you want to be whatever right look at who the best person in the world is and don't just like study them but like really kind of hone in on the books that those people say influence them or the people that influence them and then kind of studying because then you can kind of more inherently, you know, understand what it is that drove them. So early on, like with like Buffett, like security analysis, the intelligent investor, how to win friends and influence people. Like there's these books that he has said have influenced him in a major way. So we started trying to read those. So the common thread,

the first one that I would tell you is they're just absolute knowledge pigs on whatever it is they're trying to accomplish so if they're if their company is you know creating shampoo right then then that person would study and become just the absolute expert on whatever that one thing is and they're usually well read way beyond that as as well so for us we we were like okay if these people are just knowledge pigs and readers like for example buffett and i know he's not real popular in the bitcoin community but for me he should be popular he's a great investor he's a great investor he's influenced me deeply in in the way i kind of view things optically from how how to invest but um i i learned very early on and this is a great example

at one of his shareholders meetings that a person asked a question to to warren he said how did you pick your your predecessors the people that are going to come and replace you like what is the thing that you were looking at and warren's response was they were the only two people we could find that read more than charlie and myself and so for him like just reading as much as possible is um you know and and you go to the shareholder meeting he has his his book list of 30 to 50 books that he read for that year and then they're available there for people to purchase if they want to you know read some of them he has like little notes on what they're what the books were about but just to kind of show you at his age yeah how many books he's in now i want to get

know a bitcoin book because i kind of suspect he hasn't read one um but yeah that's a enormous part of the success and it's a common thread that you see almost on every one of them is they're just knowledge pigs yeah do you think that they're reading um for the sake of reading or do you think that it's uh like a personal curiosity it's like the latter okay so like they say hey i want to learn about shampoo like you gave the example they then go and find as many books as they possibly can about the topic and go read that it's not just oh a friend told me this book was good so i'm just going to read it without any kind of purpose behind it yeah so the the focusing on who recommended it and then how many books does that person who recommended it like like i have

a lot of people to be like oh i go read this book it's really good and like i don't want to sound like a snob but like in the back of my head i'm thinking to myself how many books does this person read a year because if they read one book in the last like three years like then tell me it's the best book ever then telling me that that's the book that i need to read like i don't put too much credence in in the recommendation but like when somebody who's who's reading like jeff booth's a perfect example like jeff and i become very close through doing the the podcast and just talking when jeff booth tells me to read a book i know the filtering process that he has done is tremendous because he does about 50 books a year um and so i i place a lot of weight in that

so that's something that i think a guy like buffett and and others you know that when they when they are reading they're optimizing how they're reading and what they're reading and it's almost you know well that's not all but a lot of them i find read more of the um non-fiction there's a few that are that are fiction but for the most part a lot of them are non-fiction readers and that's what i am as well yeah same yeah what about from like a mentality standpoint dude most of these people set out to be rich or successful i think so you do yeah like and not all not all but i think most have this um you know at the end of the day and anytime somebody's achieving something at a very high level you have to ask yourself why why are they so driven that

they have to achieve or accomplish that and typically when you pull the thread back there's something that early in their life shaped them in a way that maybe like tony robbins is a great example he was broke poor right like couldn't even pay for a meal and was like that's it i'm done i've had it and like this is not how i'm gonna live my life and and just then he found uh jim rowan and um just set him on a completely different trajectory so like those those events early on in your life have this either a fear or a massive reward that's kind of driving them towards achieving that thing like for warren he just always wanted to have a lot of money from even when he was like 10 years old like there's stories of him when he was like 14 years old like running

pinball machines in barber shops and you know the barbers he's working deals with the barbers so that he can put it in their shop like hey you're going to get a cut of whatever percent if i can put this in your store he's doing this at like 14 15 years old and the barber's like so who do you work for oh there's a there's this gentleman that i work for but no it wasn't it was born like he ran and that's amazing yeah so like early on he had this you know i don't know like for him specifically like what was driving him his dad was a representative in congress um but there was something that that incentivized him to try to make a lot of money through life how much of this is family driven versus like individualistic so you just gave two examples that i think are

pretty different right so warren buffett's dad was literally a congressman uh my understanding of tony robbins and his family was it wasn't such a great situation i think he kind of a broken home and and uh not very well off um i do think that i understand that most of the wealth of billionaires and even millionaires, but really billionaires, it's not inherited wealth, right? This is value creation and capture in their lifetime. But how much of it is driven by a family either, hey, I have really loving parents and they're together. And so they provide this great life for me. And then I'm able to go on. Maybe like a Jeff Bezos seems like that's probably his story versus more like the Tony Robbins. I'm running away from something. I'm trying to improve my

life because it's so bad. I think it's a little bit of both. I wouldn't be able to say one's more prominent than the other um it seems like it's a little bit of both and another important point is with our show if you if it's not self-made we don't study the person oh interesting yeah so like all the walton kids like we've never covered them on the show but sam walton we've read his book we've talked about how he did what he did and so like we really want to focus on the people that actually generated all the product or service that created value to society and how they did it and why they did it and that kind of stuff. But to answer your question, I'd say it's probably a split. Yeah. What's fascinating to me is I think the story or kind

of narrative around wealth specifically in America, but globally is, oh, most of the people just inherit stuff. And I started to look and the data says the exact opposite. It's like 80% plus, you know didn't inherit a single dollar right um most of the billionaires outside of maybe you know the waltons or a couple of like that uh did not inherit anything um and so then you get this world where like actually it's every industry right like it is basically the best person in industry ends up accruing so much value and there's this power law dynamic to it and therefore they end up uh kind of having outsized returns and becoming you know worth hundreds of millions if not billions of dollars is it fair to say that they're all more similar than different though

Um, or do you see, no, these people are drastically different. They just all ended up in the same spot on like a scorecard of wealth. I think when you, when you look at people who have like what I would classify as like mega wealth, which is billion plus, like if you want to grow that and you want to go from a billion to five to 10 and higher, what, what you have to become is an amazing capital allocator so like buffett bezos a lot of these people because you're moving beyond just creating an operational business and now you're having to take the free cash flows that that operational business is kicking off and you have to employ it in a manner that continues to expand and continues to grow so you know i i like bashing on mark cuban so i guess i'll start there

So like when you, when you look at Mark and you look, I like Mark, Mark's a nice guy. Go ahead. So when you look at Mark, has he grown his net worth when, after selling his, his stake? Sure. Is it anything that's aggressive over a 20 year period of time? Not really. Why do you, why do you use that as a measurement? Just because that's a measurement of capital allocation.

Well, I think when you compare it to a guy like Buffett, he's, he's dealing with capital that's way bigger than Mark's and he's still compounding it at a market rate. The last 10 years have been a little hard. I would argue why I think it's been hard for value investors, which might be an interesting kind of topic to get into. And I think it all relates back to the money in Bitcoin and the cost of capital. But when you look at how he's compounded his wealth, he's done it still even though he's managing massive amounts and size um and but when you look at a a person let's say you're dealing with somebody whose net worth is 100 million dollars you're typically still dealing with an with somebody who's very operationally focused

like that product or service that they grew to that and then they kind of hit a roadblock and it's harder for them to go through it because they're running into similar dynamics of like how do i transition from being a great operator to now being a great capital allocator in addition to continuing to be a great operator and that's not necessarily an easy transition or at least it isn't from you know how i've the people that i've studied and looked at the people who are great capital allocators did most of them start out as operators and then eventually transition so it is a true transition i think that stuff that's why it's hard is because most don't do it from like i would argue like with our show we start off on the capital allocator side and not on

the operating side of of things and so it's almost like for for me i feel like i've done things in complete reverse um but um you know you look at some of these these these people that have high net worth and they struggle with that transition because now they really have to to understand it becomes very financial. It becomes very mathematical. You're looking at free cash flows. You're looking at, okay, how's those free cash flows valued versus all the other competitors in that space? Is the discount worth it based on risk-free rates? And so when you start getting into the risk-free rates and you look at why value investors have struggled over the last decade, it's because the cost of capital is being manipulated in my personal opinion.

I think most would agree. It definitely is. when you think about the capital allocation, how much of this is capital allocation within a business that they're the owner of? And so they're trying to basically take capital, create more production, right? Or kind of more value accretion versus just like actual pure investing. So I'm not investing into a business and allocating capital within something that I own. It's more so I'm actually selecting securities, for example, or real estate or whatever the asset is. How much of it, I guess, is almost like an internal versus external capital allocation, kind of wealth generation. So much of this comes down to voting rights.

Okay. Interesting. So think about Michael Saylor is an amazing example of voting rights. So here's a guy who's been able to retain a majority of the voting rights of his company through decades of operational execution. And now he's at a point where he's looking at the retained earnings of his company and saying, I need to do something with this because I'm getting debased so heavily. And so now I need to become an amazing capital allocator. What can I do to front run all this hurdle rate that's double digits? And so because he had control and because he had his voting rights, he's able to make these bold moves in a way that, let's say you started a company. You had to take on venture money. Your voting rights get the base down to a point where

you're really not fully running the company at that point. The board has so much more power and voting control that you have an opinion, but in the grand scheme of things, maybe your idea for how to allocate free cash flows gets completely diminished to the point where you're ineffective. You're still in charge, but strategically, you're really not. And so the ones that are able to retain the voting rights, I found, are the Jeff Bezos. He's been able to control the board really well, even though he doesn't have a majority stake, obviously, for a company of that size. But he has a lot of control and a lot of voting power to basically do what he wants and to move the company in a direction that not too many people are going to argue with him. And it almost feels like, and we've seen study after study of all kinds of group decision

making and stuff, the voting control, you specifically said the bold bets, right? The things that AWS, bold bet, right? Michael said with Bitcoin, bold bet. You really need the ability to kind of have all of the options on the table to choose from. That's right. And the almost evolutionary decision making or the iterative decision making ends up giving you kind of iterative results, right?

So if you, hey, I'm just going to improve this product a little bit. Okay, well, maybe you get another 5% a year. But if you actually want to have the outlier returns, you have to make outlier decisions. And I think that there's a disconnect a lot of times where people want outlier returns, but they don't have the courage, conviction, the stomach for outlier decision-making, right? It's just, well, if we improve the product 5%, then shouldn't we get there? I would even take it a step further than that. So as those voting rights get distributed out and get debased from any one person really kind of being able to make bold calls, what you find is that the employees that have kind of risen to the top within the organization and now they're the CEO, they're now making decisions that are much more ego-based in, hey let's do this acquisition of company xyz let's bolt them onto our existing organization

let's pay a ridiculous premium to do it that way i can say that i added 10 000 more employees to the organization right and maybe it's going to increase the top line and whatever their bonus is based on as far as financial metrics and like you're getting away from what is going to provide the most shareholder value and and it gets much more political within the organization because there's no one entity that's kind of driving the yeah i also wonder how much of it uh paul graham has written a piece uh kind of learn to unlearn right it's the whole idea that uh some people come into the y combinator program they come to paul and they're like all right what's the playbook to raise money yeah he's like go build a great product that's right that's right like

Like there's no like, okay, go to class study, you know, uh, pass the test, then move on to the next grade. And like, it's not school in the traditional sense. It's no, the best way to raise money is to build a great product, build a great product. Everyone's going to want to give you money. Um, and so it feels a little bit like if you're an employee that's risen through the ranks, you've probably risen through the ranks. Cause you're actually good at following directions.

You're good at being somewhat malleable, right? Yeah. You navigated the politics, all this stuff. And so then when you take over a CEO, again, transitioning, can you go from that person who's used to kind of fitting within the system to then thinking in kind of the bold bets, thinking about it in a much better kind of sustainable long-term way. Some people are good at it. Not everybody is though.

It doesn't help that when you get into the monetary policy side of things and you look at the incentive structure of this continual debasement and this continual consolidation of enterprise and now things are too big to fail. So now we need to print more and stuff it into the hands of these capital allocators that are going out there and basically allowing large businesses to become huge businesses. And then when that consolidation happens, you're not able to have these entities with voting rights to go out there and make bold calls in any type of large organizations anymore. That's where I think Michael Saylor's microstrategy is such a unicorn of a company is once you get up into a billion plus market cap, it's kind of hard to find people that still retain a lot of the voting rights to go out there and make bold calls. And so when Michael did what he did, I was shocked that that was what we saw first. I expected to see a big tech company say, oh, yeah, we've allocated a 2% position into Bitcoin instead of it all just being in marketable securities. We're now taking 2% of that budget that we typically put in the marketable securities and we put it into Bitcoin. And then you would really never see that much of a profound impact on the company's performance because it's such a small allocation.

Instead, we got literally the exact opposite where you had a person who's like, I'm going all in. That's it. I'm all in. And you're seeing the stock price follow the price of Bitcoin for good or worse. And you couldn't have gotten a more demonstrative situation for corporate balance sheets. and you know in a few years i'd say within five years you'll you'll get a demonstration on what it does for the income statement which is going to be profound a lot of people aren't seeing that right now explain that so so right now it's a balance sheet thing so as the balance sheet of

micro strategy gets more and more powerful with its retained earnings like the markets valuing the stock but as we get into decentralized finance and now you can you can take those coins you can now employ them through lending right and let's say the lending rate is five percent well if he has let's just keep the numbers generic because we're doing public math if you got a billion dollars worth of bitcoin and you're getting five percent interest well all of a sudden you're making 50 million dollars of of buying power through lending okay and if the company like microstrategy i want to say their their bottom line after tax is anywhere from like 50 to 70 million dollars so now if he can take his bitcoin position which is bigger than

a billion right and it can match the income of of what all the employees are doing you know think about all those employees that are working their tails off creating you know productive labor right and productive service um to society and it's it's netting the same number as these imaginary coins that are just being let out like that's kind of a mind-blowing moment for people to realize like hey the bottom line of this guy's company has literally doubled on the income statement and it's not just going up in value with the assets that he's holding on his balance sheet so it's incredible to think about i think he's got three to five billion dollars depending on where the price is right yeah they coin the balance sheet the company was a billion dollar

business in august of last year yeah right so in less than a year it's now i think valued you know what five seven billion whatever the number is on the market cap side and you start thinking about uh what business 500 to 700 increases the entire market cap of the business at that size at that market cap yeah i mean it's incredible right it's nuts and so it takes a bold bet right it's kind of point um but i love how demonstrative it is because if it was a small bet um you just wouldn't see it in the numbers like you're seeing it it's like hey here's the answer sheet and if you guys want to you know copy it feel free and you don't have to do it the same way i copied it you could do it as a five percent allocate i mean i would argue at today's price you only need probably a

one percent allocation to protect whatever retained earnings you have on a for a company what do you think about tesla and the way they did it like forget eon's tweets and all that yeah just tesla's strategy in terms of uh buying holding i think it was like seven percent maybe somewhere in that range uh selling a little bit right before earnings like just what's your kind of analysis of the whole thing so from the beginning i was really skeptical that tesla would have been a company to put bitcoin on their balance sheet at all like if you would have said here's all the big tech companies tesla would probably been one of the last ones i would have told you simply because they don't have the free cash flows that would warrant such a kind of a

bold strategy and um yeah by the way that's exactly why i thought they would do it was really i've always thought that elon the energy network uh the power wall see i never thought about it from that vantage point yeah i and to be fair uh if i'm trying to be as intellectually honest as possible i don't have it in front of me so i'll have to go back and look at exactly what the tweets were there was a time where uh i think i tweeted something and i was like if you said to me pick the company that is going to be the first to launch their own coin i said tesla or amazon and my thought process was tesla would use it within the energy network right like it's like a credit or something uh or amazon would basically replace like gift cards or something like that

uh and part of it was just like he's crazy enough to do it right like yeah like he has that element of like i'm willing to bet the house i'm willing to whatever now he didn't do that or he's only seven percent but uh the way they did it seemed a little i i think it was exciting when they first put the position on when he sold a piece of it how much of it was like testing the market versus trying to cover you know and i don't even know that i buy that that's why he's like i guess it makes sense that he wants to know how much liquidity if he you know needed to get out of it but yeah but it would do it right around the earnings uh report it's just weird just coming to blow out earnings yeah no it's it was it was but in short like the the reason i just didn't

think that it was gonna be him was you know i i guess i look at my own company like if my company wasn't making money like the last thing i'm gonna do is go buy a bunch of bitcoin and then have to sell it as as i have my expenses the following month to have to pay because at the end of the day either your cash account is growing or it's or it's contracting and when i look at how volatile their their quote-unquote earnings are and now i would say in the last like year they've started demonstrating that they can be profitable but it's still reliant on a lot of credits and um you start taking some of those things away i mean it's a completely different ball game for the company But I was surprised. And so the thing that surprised me even more is his energy comments and stuff that he's come out. And the bigger block size stuff with Dogecoin. And I'm thinking, I was talking with Jeff Booth and Lynn about it and Lynn Alden. And they're both like, hey, he's a huge public figure and he's learning in public.

and you know that's that's pretty much the only thing that i can kind of hang my hat on that makes sense is is that he's learning as he goes just like we did right there's a journey right and everyone goes through it and you kind of i think most people come in through bitcoin or mining or i think i can get rich on this or whatever and then you explore the entire totality of an industry some of it's gonna have value some of it's not yeah some people stop along the journey and kind of get off the bus and they're like all right so i found my home yeah and then for the most part most people go around the whole you know kind of track and they come back like all right bitcoin is real right yeah it's weird when you are the second richest man in the world you're

doing it on twitter but yeah i mean yeah i guess that's a pretty good explanation of just say something right like i mean if you think back how many dumb things did you or i say when we were first starting learning about everything and someone's like ah let me show you this or let me you know go read this or whatever like that's how you learn yeah you know so i read his autobiography we've studied elon on the show and one of the things that sticks out to me with the whole dogecoin thing is so he was he was picked on really bad as a kid and uh like abused there was one story in uh one of the books that we read where uh people literally threw him in high school threw him down the steps at his high school and like he hurt himself and whatnot so like

he was picked on extensively and i think for him when he started you know saying things in the bitcoin space i mean you know you know how painful the memes can get i mean people in the bitcoin space are ruthless on twitter if you say anything that's out of whack right or you're just off on on your comment and so i think for elon maybe and this is me you know psychoanalyzing elon elon musk but um i think for him maybe he viewed that as bullying and the whole dogecoin thing is just a total middle finger to everybody online i think he's funny i think he thinks it's funny And I think it's his way of saying, you know what, you're not going to get the best of me and you might want to pick on me. But how about this doge to the moon send.

Right. And he can see everyone just just making everyone furious. And I think it's kind of his way to it's his way to get back at people that are being rude or maybe, you know, just roughing them up. Yeah. So that doesn't make it right. I'm just I'm just trying to. Yeah, I'm just trying to. He's an interesting one along with some of these people.

Do you think that they're happy? Do you think most of these billionaires are happy or do you think they're just rich and lonely and not happy? You know, so Ray has a quote. He said, you can have anything you want, but you can't have everything. And so when I think about, you know, some of these people that I've studied, it's become very evident to me that you are sacrificing something. And most likely, it's your family. And most likely, it's those things that are probably the most meaningful in your life that maybe are there for you, but you kind of take them for granted. and because i don't care what you say like it's anybody who has a billion dollars of net worth it takes tremendous energy to achieve that and um the focus that's required to take all that

energy and focus it into something in order to to grow it to that um comes at an expense you know as an aero guy like you can't do an equation where you've got lift without drag being part of the equation, right? It's a great way to look at it. And so when you look at it, you have to ask yourself, okay, so what is it that I'm giving up? And so when people, and I think it's important for people to have these accomplishments in their life. I'm not trying to say that people shouldn't try to achieve, but I think when you map out what is it that I'm trying to accomplish and then what is it I'm trying to accomplish from a family standpoint? And then how can those two things coexist? Because if they can't coexist, that's failure. You might knock this one out of the

ballpark, or you might knock this one out of the ballpark, but you never accomplished anything, right? And you're going to have regrets in your life because you didn't. And so I think that the managing and the merging of and optimizing that balance between the two is something that I've personally learn from studying all these people and how you know you you want me to run tesla and spacex and everything else and neural link and all like get the hell out of here no thanks right never yeah i want to do that it's incredible it's amazing what he's done but yeah just at the sacrifice of something else that's right dalio uh you said you're a big fan of him what uh what's his story and what's the fascination there so the thing with ray i would have never found

bitcoin without ray dalio but like period like ever up until a couple of weeks ago that would be a bold statement because he wasn't even in bitcoin so explain yeah so um because as a hardcore warren buffett person almost religious devout warren buffett person um gold is just a non-starter because warren looks at it like this he he if you own equity it's producing cash flows like why would you own a lump of gold that literally produces and generates no free cash flows like this thing over here has the potential to grow and expand and produce more so like like gold was just like a laughable kind of topic like within any type of value investing community. And so then we were reading a book on, um, Ray Daly. In fact, it was

a, it was a, um, Tony Robbins book where he interviewed money master the game. I think it's the name of it where he just Ray Daly was all through this book. And I'm thinking, my God, who the hell is it? Like, why is this guy so important to, to Tony Robbins? And so I started digging into why Ray was recommending that, uh, you should have gold exposure in any portfolio And what it came down to was a currency collapse situation and debasement in general and how gold will protect you. And Ray's thing is he's not trying to predict the ups and downs necessarily. What he's trying to look at is the correlation between asset classes. So typically in the last five to 10 years, it really isn't the best example of this. But historically, if your bond market's

bidding, your equity market's selling off and the money's going into the bond market because it's providing higher yields for the risk being assumed. And then vice versa, if the equity market's booming, most likely the fixed income bond market's kind of going down in relative terms in price action to offset. And so the yields on those two were kind of like almost like a sine, cosine. Inversely related. Exactly. They're inversely related.

And so Ray's thing was, let me take bonds, which is a much larger market cap. And when it's going down, stocks are going up, but it's not proportional. Like if this one goes up one, this one's not going down one. It's like this one's going up one, this one's going down like 0.2, right? Because the bond market was so big. So what Ray's like, if I lever that and I own equities proportional to that, And then a similar thing happens between commodities and currencies. So when a currency is going up, the commodities kind of perform poorly and vice versa.

So the way he would organize his all-weather portfolio was based on this. And then the big movements of where you wanted to be positioned inside of that really kind of came down to inflation and growth within the broader market economy. So this was like, for me, when I started studying this and really trying to dig into it and understand it it was so different than anything i'd ever learned with warren buffett style and i'm looking at ray's performance and i mean his numbers are are that of of buffett and i think if ray would entertain higher leverage he would tell you he could outperform buffett just mathematically he could figure out a way to to design a portfolio to outperform him which all that i found fascinating

and like way different than how i had learned so but they have a commonality in that neither one of them likes leverage well i don't know that you could necessarily say that because because ray had like always levered his his fixed income side of his portfolio so but i think ray understands how uh damaging leverage can be to a portfolio and specifically because ray blew up um you know back in the i think it was the early 1980s he completely blew up his fund and um that was an enormous part of why he became so systematic in the way that he that he treats the market but in general ray's uh opinion on having gold in your portfolio was this moment for me like i have to understand why and when i dug and i really tried to start understanding it

it created, it answered a lot of questions for me that I had about the overall economy and the market that I felt was drastically broke. So like coming out of the 2008, 2009 crisis, I never felt like anything was ever fixed. I felt like they had just kept putting bandage after bandage on it. They kept pushing interest rates down to nothing. And I kept telling myself, like how in the world are they going to solve this right and then you study ray and you're looking at these big long-term debt cycles and it all started to like really kind of come together for me i'm like holy crap like gold actually could be very important especially if they get this debasement to a point where interest rates are they try to go negative with interest rates and

what does that mean for the cost of capital because over here i'm doing all these discount cash flows on equities, and you're using a cost of capital and a premium above that for the risk. And I'm saying, well, if cost of capital is zero, how the hell do I do these equations anymore? And so all that really started really kind of click into place when I started studying Ray and why gold was important. And then it was like, Bitcoin. Well, what the hell is Bitcoin? And has he talked about it or not? No. No, he didn't talk about it, but his opinions on why gold was important for the portfolio because of currency collapse was for me like this, wow. Okay. So that is important and that

could happen. And we are in this 80 year credit cycle and interest rates are at nothing percent. Cost of capital is completely broke. Inflation's a total joke. And so gold for me became something that i really started to study a whole lot more which i was really kind of breaking off from the value investing community at this point where did you buy gold during this period and i never owned physical gold i would always just buy paper gold um but but still that was a break from totally break like you know can can you uh can you still call yourself a value investor if you're buying gold hell yeah yeah i think that i think i think you should be able to but there's all There's a religion aspect to Berkshire Hathaway.

I call myself that, but I tell you, there's some people that would tell you that, you know, I'm the devil of the value investing community. I think labels, and Jeff Booth's really big on this too, I absolutely hate saying I'm a value investor. I absolutely hate saying, to be honest with you, I don't like saying I'm a Bitcoiner. I like to tell people I'm a nothing. like you should like show me all the arguments at hand on like where and like i enjoy investing i love the math of investing um you know as an engineering background like like investing but

anyway like when you tell yourself something you are cognitively programming yourself to identify that you are this thing and when you do that it's very difficult that if the circumstances change or new facts arise you've told yourself that i'm this thing for so long that you feel like you can't make a pivot or or change to something else right so i think it's extremely dangerous to say you're anything um i tend to agree with you um role paul he uh at one point i saw uh he had this thread that uh i thought was very um interesting now you and i both know role i think that he uh probably tweeted it uh similar to the elon musk like little jab at bitcoiners and some of the tribalism and all stuff uh but at the same time there's a lot of truth to what he said he

basically said look i belong to no religion i belong to no group i belong to nothing my job is to take wealth or value and grow it and therefore i'm going to pursue the uh best way to do that yeah right and and i completely agree with him on that yeah so do we see but we see uh and frau was here you know we just see the technical solution for sound money in a digital space differently right now yeah and it doesn't mean we might not be completely aligned in the future if he becomes you know a hardcore bitcoiner and bitcoin becomes a thing like whatever it It doesn't matter to me. I'm just looking at the facts as they exist, looking at all the technical solutions that are out there.

And I'm saying, hey, this is all about decentralization because if it's not decentralized, they're going to shut it down or attempt to do something in the future that could shut it down. And you're no better off than where you are today. You get into the proof of stake stuff. I mean, it's what you already have with an existing monetary policy. Do you think they know that? the performance of i don't know i don't know how they can't see it like i mean think about it if you're staking coins and you're getting paid interest and that gets bigger and bigger but now you're like controlling whether that transaction can happen or not meanwhile on

bitcoin we have proof of stake people don't think of it this way but i look at layer two lightning If you can buy a $250 full node, that's your stake, right? And now I can route transactions. I don't even have to have coins in there. I don't even have to open a channel. But if you pay that one-time fee of $250, you just staked your ability to run transactions, right? No one's talking about that. Instead, they're talking about locking up coins on ETH2 for two and a half years.

All right, hold on. let's just get into it ready so let me put context is this your first time listening to the podcast this is a uh familiar topic uh lately a very popular topic uh bitcoin was created uh it is a decentralized blockchain um there was people who wanted to do things on bitcoin that they felt they couldn't do in terms of smart contracts composability etc about 10 years ago they decided to then go and build a variation of a blockchain uh that they felt like they could build in the composability um and the smart contract functionalities uh the first and most popular one is ethereum uh and the idea was they were going to scale to layer one now i think the

consensus pretty much uh in the bitcoin world is and it has always been or for a long time has been uh bitcoin is not going to scale layer one you're going to need a layer two uh now in the ethereum community i think people are waking up to the idea and accepting it and kind of working towards you're not gonna scale layer one you gotta scale layer two uh i recently said in 2017 bitcoiners learned this because transaction times were a mess and fees were astronomical you know we got to fix that right and so okay let's go focus on layer twos ethereum kind of went through that over the last like 12 months right or really like last six months is really slow uh transaction times and fees exploded it's okay hey we got to go figure out a different scaling solution

in the pursuit of faster transaction times lower fees more efficiency there's all kinds of competition going on in the ethereum uh world some of it is other layer ones so anything from you know nfts the dapper labs guys build flow and kind of a use case specific blockchain to something like matic which is kind of like a side chain or like a layer two that uh the ethereum world likes to say is built on top of ethereum kind of but doesn't actually use ether as like the base asset within the system and then you get things like binance smart chain which is just like i don't want to say copy and paste but pretty damn close of like hey we're just going to take this we're going to make it more centralized we're going to speed up uh block times we're

going to make fees cheaper etc when you get in that whole world ethereum is being worked on by really smart people right incredibly intelligent engineers absolutely strategists etc they are not going to sit around and just let everyone else go try to be faster cheaper etc they're going to do things and so explain your understanding of how this eth2 thing works what is going on and then like what the issues are that you see with uh some of the like structural components of it yeah and while i'm describing this you have all these competitors on the side call it binance or donna whatever that are trying to outpace them with their own more central i would argue more centralized solution set, but they're able to do all these things that they're trying to catch up

with that's in place. And meanwhile, the market cap's exploding, right? So for ETH2, so you have a beacon chain. So you've got ETH1, which is what we know now, right? You got your beacon chain, which the beginning of December of 2020, they launched their beacon chain. And this is now how they're going to do proof of stake. The chain that they've got right now, similar to Bitcoin, is proof of work, which in my opinion, and I assume you agree with me, is a lot better solution for they're actually being worked to produce monetary units, right? Anyway, so they launched this beacon chain. And think of it like a skeleton that then there's going to be even more, eventually 64 block chains that are going to be underneath of this. The reason they're doing all

this is so that they can scale it. Because as it exists right now, the size is going to get too big five, 10 years from now, it can't scale. So that's their solution. They've got this beacon chain. So to get this thing going, they have to have coins that are there that can then validate the blocks Because with proof of stake, you're using people with large position sizes are able to validate the transaction because they have an incentive to do so. Yeah. So it's important to say, like, the argument for proof of stake is I own a lot of this asset that is dependent on this chain. And therefore, I have an economic interest in telling the truth on chain in terms of validating transactions, etc. So that I can get more of the coin just like. Yes.

So you want to understand proof of stake. Just look at the existing monetary system and you'll understand it quite well. so um anyway so they in december they had all these people stake their coins and the exchanges are a huge part of this the exchanges get a cut of the interest that's being paid well the interest is seven percent that they're paying for these so i take my we'll call them eth1 coins and i now i'm staking them on the beacon chain or eth2 yep i'm getting paid seven percent interest and if i am an exchange i'm not using only my own ether i'm using all my deposits that's right to go ahead and go over here and stake it as well well you're you're offering it up to all the customers if

they want to stake it here's here we'll we'll help you stake it and so then once it goes in there it's not coming out until the powers that be release the uh release the tokens the interest that's being paid is coming out of the new beacon chain okay this is the most important part so in lending you earn interest when you lend out your assets in crypto there is the ability to do staking or uh airdrops or some of these other things where you can actually earn yield but it doesn't come from i lent it you pay me interest right yeah what we're talking about here specifically is uh kind of a combination of a couple of things so one is this is not lending where somebody's borrowing and going and doing something within their paying you interest

that's not how the yield is generated it's not really an airdrop right because it's got an element of um it's the same system where you put in a amount let's say 10 eth and you're going to get paid seven percent on that 10 eth uh but where the actual eth is coming from you're saying these are eth1 coins that are being staked in the eth2 system but there's now seven percent being paid out from ETH2 into that remain on, on the ETH2 beacon chain that are coming from that protocol. Okay. But as, so is there, there's basically a disagreement between ETH1 and ETH2 in terms of the supply?

Well, that'll, that'll work itself out when it eventually gets ported out, when ETH1 gets ported over. Okay. Okay. And then all the coins are going to then be materialized. But the reason you're not seeing that inflationary impact kind of being realized into the market is because that interest is being pegged into the staked address and isn't allowed to be withdrawn. So ETH1 is basically getting debased against those ETH2 coins, but it's not being realized in the market because those coins never hit the market. So really what's happening is it's almost like money's being printed at the central bank,

but they're not putting it into the system. And they told people they were doing it, but no one actually understands what's happening. And then at some point in the future- Instead it's going to all the bondholders. Yeah. In the future, they're going to give it out. Yes. Eventually when the pin is released and it's ported, right? Like all those coins now have been released with the additional interest and they'll be all realized at once. Now, what you hear in the ETH community right now

is this 1559 update where the proof of work- EIP-1559. Correct. So, and I think they're trying to do this in the July timeframe. And what they're doing is the miners, people that are mining Ethereum right now, from what I understand,

it's very profitable for miners. and their fees are high and so what they're doing is they're breaking the fee into two portions it's a base fee that you're going to pay and once you pay that if this if this 1559 goes through once you pay that it gets burnt not to come back onto the market ever again and then if you want your transaction to get included faster you have the option to basically put a a kicker or a fee on top of that to get your transaction included into the next block. So what I think they're trying to do, and at least, and I might be mis-selling this and I don't want to misrepresent it, but anything that I see online is talking about, oh, well, ETH's going to do $15.59 and

it's going to jack the price because there's going to be less and less coins after each block's mined. But what's not being said is the 7% debasement over on ETH2 that's going to drop into the market all at once now are they trying to do this to offset the two right to to keep the supply basically if we're going to add seven percent can we take seven percent out do are they doing that in in in an interest to sustain yeah maybe i i don't know um and i want to be fair in the way that i'm representing it they could be um my bigger concern is like why are you porting or why are you staking coins in december of 2020 and yesterday i just saw that uh i think it was vitalik announced that and they're not going to port until the end

of 2022 and from what i understand i might be wrong about this but i think they're not even going to release the stake coins until they have the sharding set up underneath of the port which is 1.5 which is happening not at the end of 2022 it's going to be months after that before they even stand up the 64 blockchains that are underneath of the beacon chain so we're like two years away now which is two and a half years since so why did you stake the coins and pay this it's seven percent the basement so soon yeah because basically you're talking about you know almost 20 i mean i don't know but for me when i'm looking at this okay and i didn't suspect you and I would be having an Ethereum conversation, but hey, well, I didn't either, but let's do it.

But when I look at this from a technical standpoint, right? Can this all happen? Absolutely. Do I see a high probability of success when you're trying to take something that is a proof of work, massive in size? I think the last thing that I saw, it was like 10 terabytes to run a full node. And it's growing at like two terabyte, or I'm sorry, I think it's one terabyte every two months is how fast it's growing right now in size. Think about it. This thing branches off. I mean, it's an area kind of equation, not a linear kind of equation. And so like, where's that going to be by the end of December of 2022 as far as node size how many people can run a 20 tera node and at what cost right um so

i want to be fair to the ethereum yeah i do too what i want to what i want to say is um you and i probably see this as low probability of success if it works and they pull it off it will create value for the ecosystem yeah but the probability of it working as we know the facts today are much lower than maybe the confidence level that some people are labeling this with right so it's it's yeah that's the issue yeah i think it's just like there's a lot of people talking about it as like this is happening it's gonna work you know maybe not there's no risk but just like way more confidence than you or i have that's actually i'm not a hater, to be honest with you. I started out mining Ether, by the way. Really? Yeah. I've never mined

anything. I've always just bought the coins. But I'm not a hater on this. In fact, I actually really enjoy studying the engineering and trying to understand how they're going about it. But at the same time, I'm an investor. I'm looking at what's the reward and what's the risk associated with achieving the reward. And when I'm looking at the technicalities of trying to port this, in an open source environment it's not like one person's there with a integrated master schedule and saying on this date we need to have this achieved and this is a parallel task this is a serial task like these are the milestones we got to hit in order to hit that day like no they're doing there's people that are doing it but there's another person doing the same thing and maybe

their their schedules are different and their tasks are different and like like in an open source environment, trying to do what they're trying to do is extremely hard and very challenging and they might knock it out of the ballpark. They might knock it out of the ballpark. I'm looking at the price action and I'm saying, I think that's because everyone staked their coins and those coins are now off the market and scarcity of the coins. That's what's driving the price action that maybe you've seen the outperformance recently. I'm thinking it's much more attributed to that than any type of uh technical solution and i think the biggest concern for oh there's peter mccormick um but anyway i think the bigger uh i think the bigger concern like long term for for them

is these other chains the binance the qadar cardano um competing with them and maybe offering an even more centralized uh solution set than what ethereum has but because they have that maybe from a technical standpoint they're able to get these things in place now while i'm saying all of this this is really important this is really important in the back of my head the thing i'm concerned about isn't any of that d5 like oh that's the thing i'm concerned about is this hundred trillion plus bond market that's been bid down to zero percent manipulated for decades down to zero percent and as the price of this starts to run i'm thinking to myself if i'm sitting on a fixed income desk on wall street i'm ready to like crap my pants right and i'm saying to myself

What if this becomes the new form of value, right? And you're hearing Stan and Ray talking about the dollar is going to eventually fail. Like, come on, dude. Like, we never heard anything like this years ago. Stanley Druckenmiller went on CNBC and said, in 15 years, I think there's a high probability of the dollar not being the gold reserve currency. So where the hell is all that buying power that's the $100 trillion plus going to get stuffed into?

Is it going to get stuffed into some protocol that's kind of centralized, kind of not? That the monetary policy has kind of been changing and now it's tightening, but then once these coins get dropped because it gets ported, there's more. They're not going there with $100 trillion of low yielding debt because the people that are putting it into that are looking for a return that is really reliable, right? they're going to go to something that just preserves it like on the spot right and so like that's what i'm looking at like people are looking at the price action in a very myopic kind of way they're saying hey this one's doing good oh doge coins up 30 percent right let me chase all over

this place meanwhile their capital gains are exploding that they're going to have to pay the taxes on all their trading and everything else meanwhile i'm just sitting over here and i just keep buying what i feel has tremendous upside it has minuscule technical risk relative to all the other things out there and so from an investing standpoint that's what they call it all the all the people who are operating at the fringes of innovation yeah call it boomer coin which means it's the safest most conservative thing on the market but it's just when when you when you look at people that have created enormous wealth in their life they take giant asymmetrical bets where the risk is actually just like minuscule but the reward is massive and there's you might have

you might have three of them in a lifetime right and so like that's that's the lens that i'm looking at bitcoin through it's not that i'm a hater on these other things i think especially as an engineer i'm telling you i'm looking at i'm just like holy hell that's ambitious right and i hope they're successful i hope they can do whatever but for me it's just real easy to like like bitcoin is just what do you think happens to bitcoin over the next five years i i mean i think the run we're in right now is about to get crazy pretty interesting yeah are you a subscriber to like the super cycle theory i i am uh but i don't know if it's going to be this cycle or maybe the next cycle i'd be really shocked if it could go longer like the central banks could keep the lid on this

insanity for more than five years i'd be really surprised i agree with you um how do you look at the institutions coming into the market uh i think there's some people who would argue oh institutions are here they have strong hands uh there won't be a big you know 80 85 drawdown after a blow off top in the current cycle that we're in other people argue uh no they're the weakest hands around and they're going to dump this stuff they're actually going to accelerate a drawdown once they get any sort of 20 30 percent you know deleveraging and they're actually gonna make it go faster and i think so much of it comes down to what we were talking about earlier which which is the voting rights and the boards like to convince the board that they need to do this um is is as challenging

i mean i look at square as a perfect example jack dorsey's like running that company but he doesn't have the majority the voting rights are a substantial portion of it and so i think he's struggling to, because I suspect, I might be wrong, but I would suspect that he would want to put more of that on their balance sheet than what he's done. But I don't think he can do it just because of the composition of the board and what he's up against. So I think that that's probably the bigger picture. And I think as the price, I think once the price goes through about $100,000, I think it's just going to get such a wire brush scrub of scrutiny as to what the hell is this thing and why are there people trading a hundred thousand dollars for an imaginary token

why there's something i'm missing i think is what happens once you kind of get through that price level and um and it hasn't died i thought it was died 20 times before that too yeah yeah it's basically not only does it not die but it keeps going up higher and higher in price over time what the hell's going on what's going on yeah yeah i think i think we're starting to get there So for me, if I was going to say, you know, I think five years is I don't know how they can keep the lid on this for another five years. You might see it even sooner. And so for me, like trying to time whether like how do I position myself through all this? The thing that I'm really paying much more attention to than Bitcoin is just like the macro backdrop of what's happening in the fixed income market, what's happening in the commodities market.

Oil's at $70 a barrel right now. If it's anything like 2008, by the end of the summer, you're at $150 a barrel. And people hearing that now would be like, that's totally nuts. It's possible. And it's possible. It's way more possible than I think people realize. In March of last year, I wrote a piece and I picked four assets and I said, here's how I think they're going to perform. I said equities, I think it was over a two-year period if I remember correctly.

Equities, 8 out of 10. Oil, 5 out of 10. Gold, 2 out of 10. Bitcoin, 11 out of 10. Yeah. Those were the rankings. yeah directionally correct on almost all of them oil and uh equities should have swapped them right in terms of oils outperform the equities just because it was so uh depressed but i actually

look at it as that's probably the right way to keep looking at it like we're a year after right but like i don't think anything's changed nothing's changed if anything it's only intensified it's bitcoin you know oil slash equities or kind of be you know similar but oil probably outperforms equities and then you have gold yeah and so it's this crazy world of like has gold failed yeah well let's put it this way gold has always failed there's a lot of people that i'm gonna get so much crap for that but uh think about it throughout time currencies have always failed again a gold peg let me rephrase that a gold peg has always failed why because it requires trust okay you've got to have a vault you got to trust somebody to maintain that vault more importantly there's

a multiple of how much currency is in circulation against that gold and you got to trust that somebody's not going to put more into circulation against what's in the vault okay between those two pieces, they both require trust. So go back to when we did Bretton Woods, right up until we came off the gold standard. Why did we come off the gold standard? It wasn't like we just miraculously decided one day we were going to come off it. It's because we kept adjusting that money multiplier, that ratio. We kept adjusting that money multiplier for decades until it got so high that if people came back with that currency and wanted their gold, we couldn't fulfill all the orders so gold has always failed as a as a as a peg but but here's where gold so so i'm talking

about it in a sovereign way okay gold has failed in a sovereign way to protect the buying power of the currencies that ride on top of it every time from an individual standpoint gold has preserved buying power throughout time i will say that so if you had an ounce of gold today and you had it back in the roman empire the buying power that you were able to go out there and achieve for whatever you know the difference the way i look at it is uh gold preserves buying power it's up five percent you know over the last 12 months or so uh bitcoin grows the purchasing power, right? One is being a kind of a repricing of the asset. It's accelerating your purchasing power. Things are getting cheaper around you. Gold simply keeps the prices the same around you,

right? It doesn't have any symmetry to it. That's right. And Bitcoin will, in my opinion, Bitcoin will eventually be that. Correct. Right. It'll serve the same preservation of buying power. And when that day comes, I'll become a hardcore value investor. I'll be doing the discount cash flows on that, but I'll be using Bitcoin as the... I mean, I'm already doing that. That's why I'm pretty much in Bitcoin, right? But as that transition occurs and that comes to become the unit of account, there's tremendous opportunity in front running that event that I would argue a once-in-a-lifetime event i agree for i let you go i have three questions you could ask me one to end it uh you're a very very well-read guy what's your most important book you've ever read

well uh this is a strange book so i'm kind of like i'll say it let's go what is it i recommend this book there's a book called the seed of the soul the seed of the soul okay the seat like you're sitting in a seat of the soul and this is oprah winfrey's favorite book of all time and it's uh it i would argue and i just i actually got uh robert breed love to read this book um and he loved it and he says you know it kind of changed me a bit and i said well yeah welcome to the club it changed me too um but it i felt like it just made me a better person um and the book gets into a lot of um what are your intentions and kind of like karmic

obligation that's associated with your intentions especially when you act upon them um and i'm gonna just warn you like if if you read this book it's a strange book all right but the seat of the soul the seat of the soul yeah oprah winfrey i'm gonna go by that today dude it's it's uh it was it was a profound book for me all right um and the other book um i really like learning about the brain and i like learning about habits so like the power of habit was a really profound book for me um atomic habits is another one um there's a book called the brain by david eagleman i think it's fantastic um Um, there's some, there's some other ones on the brain that I would tell you are really

good. Um, investing wise, I think you can get this on PDF because it's not even in print, but margin of safety is probably one of the best investing books out there. Way better than the intelligent investor and security analysis. Um, all right. Second question, sleep schedule. Our friends at eight sleep. Uh, I've got a thermoregulated bed.

that I sleep on, it's freezing cold. I used to sleep like five, maybe six hours. Wolves don't sleep the whole nine yards, right? Like point of pride. I sleep like eight or nine hours now. I love it. Completely changed my life. Better mood, more energy,

everything you're worried about. What's your sleep schedule? It's pretty predictable. I usually go to bed, I don't know, 10 or 11 o'clock and then up at six. it's like seven eight hours yeah yeah it's not bad it's pretty generic there's nothing special to it but that's another good book um the guy from stanford wrote it um why we sleep or why we sleep yeah really good book was it matthew walker i think it was his name or something i

don't yeah i can't remember his name all right third question aliens believer or non-believer oh yeah why um i just when i look at just how massive everything is and almost where um you know when you look at what life is it's just assembling and organizing things and everything else is entropy and chaos um it just for me seems like it's a natural part of the universe life is somehow part of the natural part of the universe and like if you'd go to even planets within our own solar system it wouldn't surprise me in the least bit to find some type of bacteria or life form that's that has matured or developed itself um based on the organic substance of that planet um wouldn't surprise me in the least bit um and so when you look at all the other solar

systems all the other galaxies like i don't know man it's just from a statistical standpoint it just seems very natural yeah i think it's a no-brainer yeah what question you have for me to finish up oh man i guess uh how you got your start in this because i don't know i don't know your backstory so like you're in the military i know oh in like in uh in the podcasting yeah oh podcast yeah uh i was in the military uh came back um i had two like small startups that i tried to build uh varying levels of success went out to facebook ran some product and growth teams there uh i always say that uh the prompt like the quintessential example of showing up being surrounded by amazing people uh right time right place you get way too much credit when things go

right and if things had gone wrong you'd get all the blame right but like literally uh couldn't better better situation uh started investing full-time in 2016 and a kid that i had met when he was in high school uh was a freshman in college and he came out to me and i'd heard about bitcoin one time before in 2014 at facebook uh david marcus when we hired him he talked about a little bit but 2016 kid didn't even pitch me on cryptocurrency anything he was like hey man like there's basically this thing called mining you like buy a computer you plug it in and like money shows up and i was like you like print like like you mean like what and so he like explained it to me and it was gpu mining uh which is what he had been doing uh and to his credit he

could show me like look i bought this that's how much it cost this is what i earned like i'm making money yeah like all stuff right and uh my dad had been in the data center business for like 40 years oh so when i saw this i was like wait a minute it's like better than data centers like persistent demand for power no sales team you don't need to sock to tier three center you know i mean like all the thing and i was just like okay fine and uh the first big bet that i made was i sold all my facebook stock and i took about 50 of it i put it in cash and put in the bank the other 50 i bought equipment wow and i had no idea you got your start kind of well and to be clear the very first foray was like i bought equipment like went to a other facility somebody else was like hosting it for me

and had like a dashboard so it wasn't like i was like doing much right other than just uh the capital allocation uh but then from there it's like okay like now how do i get started do more and more uh and so jason williams so i think you've probably interacted with him uh jason and i met in 2016 and uh there's this famous car ride that we took from raleigh to charlotte we're going to see a company we'd invested in and uh it's probably beginning of 2017 and i was like telling him about this and he's like this is nuts like what are these like fake like shut up right so you know two and a half hours down two and a half hours back about the time we got back he was like all right like but let's like do like this is interesting and uh we both invested in a power

generation company uh and he had stepped in as a ceo at this point and so uh the power generation company literally took car tires and turned it into i've heard commodities i've heard about oil steel uh syngas carbon etc and you should see the faces on the people when we showed up we were like all right we're gonna build a cryptocurrency mine here on the facility they were like what is a cryptocurrency like what is a mine who are these weirdos yeah just like this is like wild and it was like yeah like we're gonna take the car tires we're gonna do the exact same process but rather than sell that power into the grid we're gonna like mine it here on site and like here's the math like you know we're gonna sell for three cents or we can mine it like 35 cents or whatever

and they were like that sounds like a scam right like what do you mean you could 10x the you know uh revenue totally we're just like yeah it's just a different thing and so to their credit uh i mean we tried a lot of different things people are like oh i built a mine like cool you ever try to figure out air conditioning and like cooling and the cost and i mean you just get into like it's just a nightmare yeah ended up getting it built and then that was like uh while this is going on i've got the mines running in uh ether went from 10 to 30 to 100 between like february and may of 2017 and i was like stop the press it like what is going on uh and i just went down the rabbit hole and here we are wow dude i had no idea yeah it was uh i love how jason's involved

in there i didn't realize that jason and i are very good friends we've known each other now for a while and uh we're very similar and now you know dave portnoy loves him yeah can't get enough of him well because jason understands that you know people who talk shit like to talk shit to somebody you need somebody to go back and forth it's not as fun doing it to a wall every time he is parabolic guy. All right. Where can we send people to find you on the internet or find a podcast? I'm on Twitter, just first and last name, Preston Pish. And the podcast is called We Study Billionaires, the Bitcoin show that I run. It comes out on Wednesdays. And then we still run a traditional show on Saturdays for people that are interested in the traditional investing

stuff. Awesome. Thank you so much for doing this. Hey, thanks for having me over. This is awesome.