The Pomp Podcast - Howard Lindzon, GP at Social Leverage: The Science of Seed Investing

Episode Date: December 12, 2018

Howard Lindzon is one of the best FinTech investors in the world. His portfolio speaks for itself. In this conversation, Lindzon and Anthony Pompliano discuss what Lindzon looks for in great founding teams, and the trends he's excited about moving forward. ----- Join the Off the Chain newsletter. Pomp's daily email analyzes the crypto market for institutional investors. Simply, it’s the best crypto newsletter delivered to your inbox every morning. No frills. No bullsh*t. Just everything you need to know in a 3-minute read. https://offthechain.substack.com/ ----- BlockFi BlockFi allows you to keep your crypto, put it up as collateral, and receive a USD loan funded directly to your bank account. They do loans ranging from $2,000 to $10,000,000, and they're perfect for helping you reach your financial goals of all sizes. Visit BlockFi.com/Pomp to learn more about putting your crypto to work without having to sell it. ----- If you enjoyed this conversation, share it with your colleagues & friends, rate, review, and subscribe. This podcast is presented by BlockWorks Group. For exclusive content and events that provide insights into the crypto and blockchain space, visit them at: https://www.blockworksgroup.io

What's up, everyone? This is Anthony Pompliano. Most of you know me as Pomp. You're listening to Off The Chain, simply the best podcast in crypto. Let's kick this thing off. Howard Lindzen is one of the best fintech investors in the world. His portfolio speaks for itself. In this conversation, we talk about some of the things he looks for in great founding teams and the trends that he's excited about moving forward. I really enjoyed this conversation and Howard is as funny as ever. I hope you enjoy it too. Before we get started, I want to talk about one of our sponsors, BlockFi. These guys are doing really interesting work in crypto lending. What they allow you to do is keep your crypto, put it up as collateral,

and receive a US dollar loan funded directly to your bank account. They do loans ranging from $2,000 to $10 million, and they're perfect for helping you reach your financial goals of all sizes. You should visit BlockFi.com slash Pomp. Again, that's BlockFi.com slash Pomp. Again, one more time, type it in, BlockFi.com slash Pomp, if you'd like to learn more about putting your crypto to work without having to sell it. Definitely do it. We all know legendary venture capitalist Tim Draper. He's one of the earliest supporters of Bitcoin and has done a ton of work to drive crypto adoption. Many people don't know about one of his newest endeavors though, Draper University. If you're an entrepreneur looking to launch your idea in crypto,

you can apply to attend their pre-accelerator program and learn how to build successful global companies from Tim. And for all you corporate executives out there, you don't need to feel left out either. Draper University also has a week-long intensive program that will get you educated on all things blockchain and crypto. As we know, knowledge is power, so don't get left behind. You can check out draperuniversity.com. Again, that's draperuniversity.com and let me know what you think. If it's good enough for Tim, it will probably be good enough for you. And as Nike says, just do it. This podcast is presented by BlockWorks Group, the only blockchain event and media production company I trust. If you're an investor, lawyer, accountant,

or entrepreneur and want to attend exclusive events and dinners, visit them at blockworksgroup.io. I promise you won't be disappointed. Anthony Pompliano is a partner at Morgan Creek Digital. All opinions expressed by Pomp or his guests on this podcast are solely their opinions and do not reflect the opinions of Morgan Creek Digital or Morgan Creek Capital Management. You should not treat any opinion expressed by Pomp as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. This podcast is for informational purposes only. All right, guys, we have the very first not in-person recording. I've got Howard on video, so bear with us if there's any noise

issues. But thank you very much for coming on. Thanks. He's waving and drinking water. So let's start with your background. And I actually think most people have no clue about how you got into investing in early stage companies. So maybe just give us a a rundown yeah i'm born in toronto um you guys part of the caravan before caravans were cool i came down to uh go to arizona state we attacked from uh we attacked the border from windsor very very weak you came the other way the the modern caravan is coming south to north you came uh north to south yeah i came with an israeli flag over the bridge from detroit and detroit was burning back in those days so uh the but i did i i am born in toronto i i i was

fascinated with um the desert you know jewish people in florida jewish people in toronto go to florida in the winter my family went to phoenix so um and i you know 11 years old to go into arizona state football games i'm like i'm coming to arizona state why and what was so enticing about arizona state um girl short everybody wore everybody was perfectly tanned and and beautiful and i was tall with the big nose and white and i thought my odds would be much better there to meet my future wife and um cycling golf just everything like you come from Toronto and you were like I just couldn't believe Arizona State in Tempe so anyways I went to school in Arizona and uh you know wife 23 years two dogs two kids um both my kids are uh I like to say own and

operate two millennials they are at uh university of arizona um i kind of invest by looking over their shoulder the last 15 years but i've been investing in startups for over 20 years uh most last 11 quite successfully um you know it took me probably five to ten years to actually even understand this stuff and and and i think the most exciting part about podcasting where we're at today and social media and crypto and everything is how connected people are you know this whole idea of you know six degrees of separation and now we're almost at one degree of separation if you behave and and know how to use the tools and so the leverage that people have been able to create over the last 10 years has been exponential so we'll get around to this

but you know we started a company called social leverage uh in 2008 uh during the financial crisis when my thesis was you know people are going to learn their lesson financial leverage is a great tactic it's not a strategy and now uh so we started the idea of social leverage which is our fund name and our company names which more about the with different problems but the idea of you know one person will leverage themselves into a network and wider and deeper and and uh with with uh with that leverage and how powerful it is from an individual you know breaking down barriers and countries into neighborhoods is a powerful thesis and here we are in 2018 uh we've seen some of the dangers of social leverage um but social leverage

is still just beginning how do you invest not in la san francisco new york how is that possible i think that surprises a lot of people yeah i live on a plane i think it's an advantage uh if if you understand the power of face-to-face i mean this is our first face-to-face like we haven't we know each other we haven't done a call we've probably done a call I'm from a generation that doesn't use FaceTime or Skype. It creeps me out. I feel like it's important to just be face-to-face, right? Like we know each other from our tweets and from the friends of friends

and from doing deals together and hearing feedback about how you work with other entrepreneurs, et cetera, et cetera, et cetera. But the power of face-to-face is key. I grew up in an era of face-to-face. You had to go. I was a stockbroker. you had to go knock on doors and meet people face to face saw the value of that I was never a cold caller although I was good at it so I think what makes it work is Phoenix where you know my

formative business years was a great airport we lived within 20 minutes of the airport you get anywhere I had two babies so it's fun to leave I mean you want to leave when you have two kids if your wife, you know, you're making up stuff. Honey, I got a deal to do in Botswana. I need to leave the kid crying in his crib. But so I think how you do it is face to face. And, you know, the world is shrunk, right? Phoenix, a great airport, Southwest, you got to LA, got to San Francisco, get to New York, you get to Toronto. And, you know, many of the lessons I learned about, you know shitting in your own backyard i don't like to invest where i live um in 2008 in phoenix you realize how small the world is you know every you go to a coffee shop and and everybody that you

lost money with in a real estate deal was still in that coffee shop so you know it's it's to me it's better not to live in and work in the same place so with angel investing and now seed investing i'm happy to go to la for a day or two see all the founders not have to live with them uh not have to run into them if we've lost money together or not getting along type thing um so i think it's i think it's actually a positive to to not live in the place that you're investing that's a very fascinating way of looking at it uh i could be form-fitting i mean anybody could argue that i'm form-fitting the answer but i think our results speak for itself you know social leverage has had you know top tier results for for 10 years well i was just going to say so i i

actually don't remember the exact tweet but i remember you tweeted um i think it is your uh maybe like late 2000s vintage fund that uh 2015 is prequin's number one fund it was a 21 million dollar fund um it has robin hood and wag and customer in it we think there'll be and narvar with we think there could be up to four billion dollar companies on that phone Well, there's two that already basically are. Got it. And you invested the capital in when? 2015?

First checks. Yeah. Seed fund. So, you know, WAG was probably at a four or five million. Robinhood under 10. Narvar was four or five million. And customer was seed round at around eight or nine million with Ed Sims. He's a New York VC.

Great guy. got it and then why the focus on fintech right because i know that you've done a ton in the space obviously robin hood etc like what's the driving force behind your your conviction there yeah so this is the the key thing i think for people to know i mean it's not out of the blue um i have been fascinated with making the idea of markets just just the just the game you know I'm not a gamer I'll never strap on headphones and play games you know it's not in the genetics of our family like my son played fortnight for like maybe three four months with buddies but more for the social part of it so for whatever reason I miss the gaming gene yeah you know I'm

a face-to-facer not a gamer and the markets are a game you know I hate to you know I'm not trivializing by saying it's a game it is the ultimate battle of wits as as one could say against everybody else meaning i i look at the markets as complete battle of wits and behavior not a battle of numbers and um and i think anybody can learn that then you know we're all we all can survive in the streets i think you know if we saw if we if if we understand the poker phenomena that took over the world a while back you know with uh was the idea that any you know if you're playing a certain type of poker game you could have a peasant from the street of the philippines play a ceo of a fortune 500 company on a computer and battle wits uh with bluffing etc and just getting

good cards and i think that's the stock market right the difference being you got to have a table stakes in the stock market and so that was what that's one problem obviously that process is and that's where crypto came in and that's where robin hood comes in is democratizing the playing field onboarding what fascinates me most about the markets is for rich people and we could joke about that and we can complain about that or we can try and solve some of the problems and i felt as someone who participated in markets since i was my teens that i've been fascinated with onboarding and on-ramping and next generation of investors and that led me down this path I'm more proud of the fact that we had a point of view at Social Leverage about how fintech was going to evolve, more about the do-it-yourself versus the robo.

Because I think it's a battle of behavior, I think saving and investing are important concepts, and there's very simple ways to do that. You just spend less than you make, and then you dollar-cost average into a robo-advisor. I have no arguments against any of that stuff. I just don't think they're VC-type investments in that space unless there's a game, if there's some learning at the end. And I think the game mechanics of the stock market and what Robin had brought, the easy onboarding and access. E-Trade did that before this and Schwab and Daytech in 1999, and they were rewarded greatly. And then we had like a 15-year chasm between innovation. and we can talk about that how social networks finally disrupted the walled gardens of brokerage

and we're seeing the early stages where people say it's a bubble i'm saying we're in the early stages of a fintech boom right the next fangs will be fintech companies uh not social media companies and they won't be jp morgan and goldman sachs they'll be the stripes of the world and And there'll be companies out of India and China, the underbanked, that are on board this next generation. So I feel we're just getting started in this. You know, there'll be bear markets like we're in right now, but we're just getting started. So this is a really fascinating perspective around the next things are fintech companies, right? Yeah.

And I've said before that it feels like for the first time in a meaningful way over the last five years, technologists have turned and are attacking Wall Street and really starting to understand how it works, what's broken, and using a lot of what they've learned in building technology to do that. what are some of the areas where you think the biggest companies are going to get built or the areas of opportunity that maybe um you haven't invested in yet but you're looking for it's a good question i don't think we're good enough at social lovers you know there's like the sequoias the fred wilson's the chris dixon's that really you know maybe i'm a polymath in the sense that i have so many interests but unfortunately for me uh brain capacity or just just general lack of of playfulness and understanding of tech i'm at a disadvantage so i got to know my own weaknesses um but i think the biggest opportunities outside of hardcore tech

yeah for me because i'm not an engineer are are how do you arbitrage customer acquisition right um you know what robin hood did they did they did two things again and i don't have any inside information i'm just surmising from valuation growth and from demand of you know people excited about the company and there's obviously detractors too but you know overall the excitement around robin hood and its growth and that is two things they did two things first they arbitrage customer acquisition we we came from a world where each trade and schwab and we're paying three to four td ameritrade playing four hundred dollars a customer and like i said i own an operation millennials if you spend four dollars on my son you've overspent getting that customer

you know they're not loyal uh they're fleety um they are they are going to use hundreds of accounts to do everything right you know you know you've wronged them once there's very low switching costs you don't have relationships with these companies and they're a dime a dozen right And there's three or four companies in each vertical. So that had to be disrupted. And I think what Robinhood got right, what got us excited at the beginning was, you know, knowing the industry and knowing that the only way to really win in FinTech

was to arb the customer acquisition cost. So if you could get the cost of customer acquisitions down to zero, which basically Robinhood did and Snapchat did before it and Facebook did before it, and you could have a friend screenshot and show him, I just bought one share of Apple. You were going to win. if you could raise enough venture capital but the second part is do you can you reinvent a business model which Robinhood also did you know in the early days of talking with Baiju on the

phone and how they were thinking about you know flipping the the margin model meaning you know turning you know getting people to pay for the for the feature of margin without actually having to use margin giving people enough of a user experience and and satisfaction from the core product that they would pay a amazon prime like service fee was the second phenomenon that robin hood created uh which will see major innovation this is why i'm bullish on on fintech robin hood solved one problem that got him to a billion which was how do i get a million customers for zero dollars because if if it costs td ameritrade 350 million dollars in marketing to acquire their first hundred thousand customers well then robin hood's worth a billion dollars

because they solved that problem yep the second problem is how do you build a business and i think this is what gets me excited about fintech and amazon prime and netflix same thing is if you can create a great user experience and if you can run a lean operation using software as a service products which robin hood will eventually and fintech needs to solve this too because of the sec and finra but if you can onboard them then create a business model because of the scale of of software you've just i mean the walls like whether jp morgan or goldman sachs believes it or not they are basically in a continuation of doom meaning robin hood let's say they have five minutes let's say let's just agree they say six million let's say they have five million customers

they can hire a corporate guy from goldman sachs to do ipos they can go to airbnb and say listen give us 200 million dollars of the ipo which is a fat profit center for uh the banks right now right and we'll distribute it 200 shares to every one of our customers that wants them and none of these people want to sell so there won't be the flipping problem there won't be you know instead of black rock vanguard and uh state street getting 90 of the allocation for an ipo robin hood just solved it just they're not even focused on this i'm sure but they just figured out a way to disrupt the whole ipo market because dutch dutch auction should have disrupted the ipo market like google did or spotify did why haven't every company done that well robin hood and maybe

uh acorns or new brokerages that are starting can get into the ipo game and get true distribution for ipos and this is probably this is part of the problem for crypto right now is crypto is too far ahead of what really in the united states is important you know i believe what the problem in the united states around crypto and this kind of strong opinion loosely held is that um crypto is too far ahead you should get your there should be more robin hoods right there should be people innovating on the actual brokerage model like trust you know americans trust brokers american trust the idea that 250 000 of my money will be uh insured by the fdic right and so i think the crypto stuff just got too far ahead of where it is you know everything's on the blockchain well

why not just work with the sec and finneran do it legally do and build a moat like a nine-month moat around you know doing this stuff properly so i think these are the exciting things i think we're going to come back more to an era of you know using uh broker dealers finra uh more table stake stuff where entrepreneurs need to go spend the six to nine months in the you know working with lawyers and getting the the trust built at the ground level so so i think long story short There's just old banking businesses with new business models and better UI are going to be the solution. It's funny because what you're talking about is using all of the advantages, the iteration speed, the engineering talent, etc., that the tech companies just understood better than anyone and really leveraged into hundreds of billions of dollars of value creation, etc. and applying it to an industry where there's artificial governors on what you can do, right?

The regulations, the licensing, all of this stuff. And one thing that, you know, the Robin Hoods, et cetera, of the world were able to do that I don't see a lot of crypto companies doing is they actually understood the inside baseball of Wall Street brokerages, et cetera, right? They do certain aspects of how to make money while offering a free product to the customer and things like that. Do you think that in crypto, more and more teams are going to have to look early for employees that know that inside baseball? Or do you think a true outsider or a team of outsiders can come in and completely disrupt the financial markets? Yeah, it's a great question.

Having been to China, I say two things. First, gray means go in China, and gray in the United States means slow the fuck down, talk to the SEC. I think Naval did a great job as an angel investor back in 2010 in AngelList, and Naval did the hard work, right? He was paying both sides of the government. He was using software to lobby. He was flying to Washington every week. I don't think anybody will ever appreciate or understand the stuff that Naval and Angelus was the hardcore work he was doing as a,

just trying to be a legal, trying to get this stuff all legal for people. And then sure enough, everybody goes around the system. It just, you know, the system is the system, right? I have two kids. My daughter lives right on the rails, right? She's like, and I always tell her like she's a great student. She's a great kid. she she believes in the system and you know when she has her first job she's gonna go fucking system blows right like she's so on the rails and i keep reminding her that like it's great to be on the system but the system's gonna let you down and you've got to learn to live sometimes and

step off the rail my son on the other hand does not know the rails exist right he's pushing buttons and and money comes out of thin air on venmo and uber eats delivers whatever the fuck he wants to his room and netflix and youtube he doesn't know that there isn't actually a system he's the kid who doesn't vote because he's he's a he doesn't even know what socialism is but he's a giant socialist because he thinks everybody has an iphone and the world is kumbaya and so i'm trying to teach him to get on the rails like oh there is a system you have to play the game a little bit at least in the united states because otherwise you're just going to be you know left you know you're you've got to be on the grid a little bit so there's there's that whole thing of like what's

the fine line around fintech fintech just is there are rails right there's micro there's visa and mastercard which everybody's still paying whether you're square or whether you're uh stripe or whether you're um paypal and so those are the those are the warren buffett railroads that those stocks continue to go up because no matter how much innovation happens even google can disrupt those guys and you're paying them so you've got to like really understand what the u.s financial landscape is you know for for me with crypto is like fuck man visa mastercard and for my kids um venmo even usaa i mean there's just enough great product on the current financial system where you hold your nose and and you just play the game what upsets me about the system is is

how the investment world works like so give you a typical example of a great idea that's going to happen and eventually change the financial markets is vanguard sitting on a product where you would this is why the robo advisors aren't to me great uh venture businesses you know vanguard is like google of of of money uh just with you know they don't really care about tech that much but they had a really great idea which was you know uh an etf you know package it as passive investing as really an active product and get the fees down to zero right like and and and acquire dollars at exponential rates and and and they somehow created this myth about you don't have to pay anything and you'll have active management which it really is that's the genius of vanguard and leave your

money alone okay which is great except that it's created an environment where companies can cheat and be rewarded. Wells Fargo is in the S&P 500. So it doesn't matter how many people they kill, how many mortgages, how many people they screw over about their mortgages, how many tweets complaining about them are, how many fees they charge.

Because when Betty Lou in Iowa wakes up the next morning and allocates money to her 401k, a percentage goes into Wells Fargo. And so until we fix that, until we can punish the companies by voting with our dollars, if all our money's flowing into Vanguard and Wells Fargo and Equifax and all these,

Facebook, and all these companies cheating, get their allocations for being in the Fortune 500 or S&P 500, then the game is broken. And that's why Robinhood and all this education around do it yourself matter. Vanguard should be coming out with S&P 490 funds where you can kick out Goldman Sachs, Wells Fargo, and on the fly tell you that this fund that excludes these 10 rapist companies uh who are who are misbehaving endlessly uh and we can give you the exact same returns that the s&p 500 does or you know it differs by fractional amounts over 10 years then you would have people voting then you would have true reform at the core level right the way indexing works in the way pensions work and the way vanguard the s&p 500 kind of everybody owns

the same stocks, there's really no incentive for these companies to behave. And that's an opportunity for fintech. I don't want to build my, everybody's trying to build their own ETF, build their own robo. It should be more of de-selection, meaning here's the 500 you can have, unclick five of these miscreants and have an S&P 495 fund. And now those companies will really be punished because they won't be getting money. All right. Before we continue with this conversation, I want to mention our sponsor again, BlockFi. Remember, they do crypto lending. So you posted your crypto as collateral, they give you a US dollar loan, and you can use the US dollars to do whatever you want. You should visit blockfi.com slash pomp and then tweet at me

that you went. If you tweet at me after you went to blockfi.com slash pomp, maybe I'll throw you a like, a smiley face, or the fire emoji. The fire emoji is the best. Remember, go to blockfi.com slash pomp and i'll see you on twitter what do you think if you had to switch seats right so you're in the seat of the disruptors the startups the entrepreneurs now and that's who you're looking to back and the best one to make money if you had to switch seats and sit in the seat of the large banks the legacy financial institutions um and kind of the institutions what would you do to prevent this or to get ahead of it well i think goldman much as i hate them have done a pretty good job right the question is is is the boat that they're building big enough

to take over the boat that they've got the legacy right because at one point eventually Robinhood when they if they if and when they get public is going to have to make more and more money and they're going to use their their distribution and the fact that they have a lean operation to get into every aspect of Goldman's business right as soon as they build enough trust they'll be able to offer more products so I start with IPOs because that's a fat part of the system if they can go do airbnb and uber's ipo with their six million users and do it in a better way at a lower cost boom they're going to win and by and by robin hood going and building out their own clearing firm they can now do that so it's going to take much you know i've always been shocked that there

hasn't been a lift to robin hood's uber in the united states right we've got all these robo advisors but no one's wanting to go do the hard work of acquiring customers and offering a great product you know what i mean everybody's just packaging investing like it's just set and forget and a robot could do this it's bullshit um so if i was sitting in their seats i would be you know spinning off you know goldman sachs uh uh you know new bank into an entity so people could truly own the part of goldman sachs that's interesting right um so i don't i don't think they'll do that i think you know they're so used to like the power coming the way the entities work you know the money flowing to the top um and i think the fact that all these brokers

and the laws under clinton and before that around you know the the like city bank how you can't fucking run that entity with that many employees around the world you don't know what anybody's doing so i think spinoffs need to happen spinoffs are good giving people access and knowing exactly what they own and the entity matters i don't think conglomerates you know they're they they sound great for warren buffett but i think people should know what they own so i think these banks have to spin off you know units and focus on growth and on you know the bottom line per unit versus this conglomeration of assets and we're seeing that goldman sachs stock is the same price it's been for 10 years but within goldman sachs there's great talent and there's the markets and

all their new banking stuff is really interesting but they got to spin that shit out absolutely what um let's talk crypto for a second in comparison to the traditional or to what we'll call the new age financial markets right so the these disruptive things like robin hood etc so we saw robin hood uh go into crypto by basically taking their core uh public equities business and matching it up with crypto and now they've got kind of this hybrid offering i think you see Square, adding more kind of functionality or services around crypto. Do you think that the wave of fintech disruptors that have come online over the last five years are just going to incorporate crypto and keep marching forward? Or do you think that the crypto companies that are

being built today or in the next two, three years actually will compete against those fintech disruptors in the last five years? Is there like a melding of just fintech in general and these new companies have a shot to take down the banks or does there end up becoming this like infighting between the disruptors and they've got to beat each other before they can take on the banks yeah a really good question i'll give you my my take my weird take is that i don't even know what a bank means because i don't go into it my son this summer i'll talk about my son again because again i own and operate two millennials and i live by watching them right it's fascinating he's never so my son who who's venmo and and you know uh can live on almost nothing um because of you know

the tools that they have he has you know a job this summer he was making real money and he demanded to be paid in cash he had never held cash he wanted to go to his friends to casinos you know uber over the night in san diego so he was like carrying around a wad of cash like a bank meant nothing all a bank meant to him was like fucking guys need signatures and on my driver's license i don't even you know he didn't want any kind of information from his bank he trusts his parents you know we've been saving money for him he has his money but he wanted cash in his hand so i don't even think a bank i think a bank's the wrong term i think we've got the cloud and we've got the smartphone and we've got a and we've got we've got this constellation of brands that we're

going to trust because you know in china it's alibaba and it's we pay in alibaba so it's a different world over there because like i said great go but in the united states i believe the kids will have 9 to 20 financial apps depending on how much money they have and who gave them the money from which generation that money was given down to that kid uh depending on when we die and hand our money off to the kids but um so they're going to have a constellation of financial apps because it's easy right and um you know you know we can we can i don't know how much time we can go through all this but they're going to have some money at robin hood like right now even though i'm i'm a venture capitalist i've got schwab i've talked to a broker at morgan stanley i got

robin hood i got koi finn i got a rally road i got uh coinbase i got etoro i've got uh like i said a Schwab account still I'm not loyal to anything I just have my different things I trade a little bit at Robinhood but I do most of my big investing by calling a broker at Morgan Stanley I have my IRAs at Schwab I mean it's weird but it works and because money is important to me I don't want to have it all in one place you know and I guess if I was going to have it all in one place I'd still have it at more if i had to choose gun to my head i'd still have it at morgan because i'm of the size that i'm comfortable talking to a person i don't want them giving me any advice i don't want them i don't mind if they charge me but i want them to pick up the phone on the first ring

and provide the service that i give them directions to do that's a snowflake i am in a like in the i have a weird way of looking at at my money and financial this next generation is up for grabs They're going to have money in their machines. They're going to have money in the cloud. They're going to have apps. They're going to have money that they just keep in the Venmo world to pay out bets. I mean, and they can juggle it all because they don't have that much of it. And the second thing is they don't need as much.

You know, I was in Hawk to Best Buy until my mid-30s, right? These kids, they don't need to buy anything. They've got an iPhone, which is their TV. They have Uber, which is their car. they have food paid for that if they're good at sales and engineering their food's mostly paid for at work um so they're going to spend their money on experiences and they can just grab little assets from different wallets all over the place so i think i think the idea of a bank makes no sense to me right um i think what what about investing right so i agree with you on um you

know and so I'm 30 years old and a lot of the things that you're saying right now resonate in terms of what I own how I live my life etc right and I think there is a cultural I don't know kind of trend or tailwind if you will that really the keeping up with the Joneses is very different than the keeping up with the joneses of probably my parents or their parents age right yeah um with that how do you think investing changes right because i don't think that the the desire to invest or make more money will go away but it definitely looks very different yeah i think what i liked about the robin hood strategy and again i aren't your quarterback only i you know i would have gotten the crypto much earlier if i was them but it turned out perfectly you know

for them they didn't invest too much they jammed it through and they haven't had they're not as reliant on that as a revenue source but i feel where and i'm an investor in etoro as well so i'm lucky because you know i'm an investor way back in etoro which is not an overnight success with an incredible company out of israel and now london and 140 countries it's kind of like a mix between robin hood and coinbase and a bank um which you can do if you're not in the united states but i think the idea of of of selling some bitcoin and buying you know using my bitcoin profits or losses and swapping that into apple in one app is important that's where i think coinbase it just never understood their decision and then they've gone institutional and god bless them and

good luck but i think the idea of having all your money in decentralized or blah blah blah whatever we're going to call these assets is weird okay so it's weird in this environment meaning every time i open my coinbase account it's down from the day before right and i can't do anything about it except go to cash or wait it out okay so i think they've lost me like i can't wait to you know i don't have much money there but they they very little in case you're trying to hack me okay i've just deleted everything by the way no but i mean like they have they've lost me you know my daughter who had three thousand dollars there what do i tell her to do like she can't do anything with it except wait it out and that's not that's not that's just pisses me off towards the brand

whereas robin hood i can go from apple to bitcoin ethereum back to microsoft this third layer in between a digital asset and a stock like with a goat and stock x and rally road rally road we're an investor in or the ability like with a company like sec fi which we backed in fund three the ability of bringing liquidity to actual assets in a wallet type environment like rally roads doing uh or stock x where you can come where you don't want to move all the way into digital but you want to have eight cars or you want to have a piece of your eight cars or or um some art and some jordan shoes and you want to be able to see that all in one wallet as an individual it's pretty cool idea to me so that that stock market of everything the people that can solve that as a

watch list in a wallet are really interesting to me where i can really in a good ui see where all my assets are and like how diversified i really am is pretty cool does that help you no it does i guess i want to kind of go a little bit further on this right so one part that um i probably over rotated on from a time frame was this idea of the tokenized securities so the thing that you just described of the ability to go from true cryptocurrencies you know bitcoin ethereum etc and go into stocks real estate some other good i'll give you a perfect example so tom and gary my partner's fucking smart guys right and we were laughing smarter who's smarter you or him well tom is they're both smart i mean listen it like when

you built a stereo system at your bar mitzvah when i was 13 i had a lloyd stereo system people used to say your system's only as good as the weakest component in your existence so you got like a thousand dollar subwoofer and 11 speakers you got an 11 system so at so when we invest we like to be the dumb company we like to be the dumb investors in the deal obviously because we don't want to fucking have everybody rely on us and that's why the party rounds have ended um but i think tom is you know i call him our app right tom does everything gary is more like me uh he's more front-facing and has an experience around enterprise and i'm the guy who's like front man it's like a band and so i don't know if it's smarter or dumber but we each have a unique

thing but they rely on me these guys like harold what should we do like with our with our stocks what should we do with this what should we do with that and then bitcoin comes along and they became the experts right i all of a sudden was the dumb guy and i remember this like forgetting my nephew you making money and all the nonsense on twitter i remember my two really smart partners who rely on me for everything if i say sell apple they sell apple if i say buy this they buy that all of a sudden i'm an idiot hey guys let's i'm so i'm selling some bitcoin at seven thousand haha you should be buying okay i'm selling some at eight thousand haha you know like all the way up i was selling and they were they were not listening to me all of a sudden they knew more

than me and i think the fact that they couldn't quickly move their money into like i was buying watches i was i was just trying to buy shit i was doing putting money in private deals i was buying fucking goat i was on goat buying shoes i was just trying to get out of bitcoin and i didn't want more stocks i just wanted to buy hard assets and that's when the light bulb went off in my head it's not only do i want to buy hard assets i'd like to be able to buy hard assets that were liquid enough for me to sell you know even if i take a 20 hit on a watch it's better than an 80 hit on bitcoin so i think this this world of like physical meets digital meets cash flows from stocks is just blowing my mind i think people are just going to fucking buy into what what this what

is happening and and there's going to be all these financial service companies that allow you to move in and out of all these esoteric and regular assets in one app. Do you think that it becomes commoditized? So let's say that that thesis is correct. I tend to agree that there will be one single location. Think of it as kind of a blend between a bank account and a brokerage account. You're able to put multiple assets in there and you can trade in and out of them and do all kinds of crazy stuff that would be great for individuals in the financial system. But does it become so commoditized that there's very little difference between them and so it's really a fight over kind of either fees or some of some sort of you know pricing war or do you think that there

can actually be differentiation um that that can kind of set one or two out uh head and shoulders above everybody else no i think just like banks before there'll be hundreds of them right like i don't think i don't think there's one app to rule them all in fintech or one bank to rule them all one it's not coinbase or robin hood or or uh etoro or acorn you know i don't even know if there's anything else interesting yet but um so i think we're early days i have no idea i think just i don't think the branch makes sense you know i you know i saw a number from wells fargo that said uh you know they're still mailing 70 percent of people still want statements somewhere between 50 and 70 you know my mind was blown i'm like we got to be really patient this is why crypto was like

also a telltale sign why i was like really nervous last fall it's like 70 of america still wants their goddamn statement mailed to them there's no way that these new fintech companies can can can work within the realm of middle america right um so i think everything just got so far ahead of itself And I think we've got to go back to the basics and say, how do we solve problems for real Americans, right? Ready for a wild stat for you? I believe this is still true. When ATMs came out, everyone was screaming and yelling that it was going to be the end of the bank teller and the branch and all that. There are more bank tellers today than ever in history.

Okay. And I believe that. But I'm saying the bank teller will change, just like there's WeWork, just like there's The Wing in New York. I think, why can't there be, why can't, like, for example, StockTwits, I've talked about this, or Rally Row, why can't there be retail locations? Why can't social meet? Why isn't there, you know, Schwab built their own stores? But that's dumb. I don't want to fucking hang out with just Schwab people in like a Schwab named building. Why can't there be a WeWork for money? You know, something that I've talked about and talked to entrepreneurs I want to see built. And there's a company in New York called Financial Gym, which is a startup, right? Like, these are interesting ideas. Why shouldn't the branch be a place where people can go and actually talk about money all the time? What you're describing, though, is the community is the most defensible part, right?

It's the most defensible. The thing about community that sucks is you're not going to get a good valuation. look at twitter look at reddit look at stock twits even though we're great products and people love us we're never going to get valued properly because of the nazis and i joke about the nazis but i'm saying you know if i go on stock twits and just start talking about nazis i like nazis i'm fascinated by nazis you know maybe they weren't so bad all of a sudden stock twits community that i've built for 10 years may become like a shit show and so communities are really fragile and I think that we've taken that for granted and you know I'm always mad at Jack at

Twitter you know because of the way he's let these things kind of infiltrate under the auspices of free speech you know what I mean these communities are not having rules that's the problem they're not they're not they're they just keep changing the rules of what behavior really is and I think communities need rules and so I think there'll be hundreds of them that's why I don't think there's one to rule them all i think there's i think there's going to be communities for money where people you know trust centers that people you know i just don't think it can be cornered i just don't think this whole thing can be cornered i think why robin hood's worth so much is because they're providing a service that appeals to millions of people like amazon prime and so they have the

early lead um but that's how early we are i mean they they go down for three days all of a sudden there's no switching costs and there's another robin hood that looks and feels like robin hood and promises this you know three million accounts will switch so we're still early days it fascinates me um talking about twitter uh one of the things that facebook did a great job of on the advertiser side was turn it into a platform right so they basically said look you can come in self-service you know auctions of the whole nine yards one thing that i've always thought twitter could have done that would have been really interesting is if they had created a uh platform strategy for communities so you know you probably would identify the dollar sign was like it was a

no-brainer for them yeah well and think about if you could create like a fin twit and actually cordon it off and it had to be somebody in the community has to vouch for other people who get invited into the community and then you just have the same twitter experience but it's in like a semi-walled garden um which is kind of like telegraph within stock twits you have to each community can set up its room so that that that helps you grow like again i don't know if we'll have scale to do it but we we've launched it and they've done a great job the team you know i'm just chairman i'm not operating but justin who created rooms on stock twits you get the best of stock twits but if you're unhappy with the community go start your own community

and it's kind of like why discord worked for gamers and why uh slack worked for work right there's not one to rule them all i think communities are fascinating like you said but it's a really hard business what made so this goes to why robin hood was valued at six billion recently not only did they build a utility they also built a service that disrupted the business model on top i think uber has done a great job in the last two three years building services on top of the utility rather they're trying different packages or whatever i mean i got the numbers that i'm spending on uber and i'm like i'm crazy but yet i have no complaints about the product so i think uber could get into the financial business much easier than anybody

else right um what about facebook i'm bullish and here's why i'm bullish on facebook i hate i've never liked it i you know i've never liked the team he looks like a weird dude let's you know go through all that stuff but they have it the fact that they had the nerve to risk their business and go and build the constellation like whatsapp and instagram i mean they could go spend 15 billion on robin hood tomorrow and be and everybody would forgive them because robin hood such a good product and they could be in the financial business do they have the nerve or the or the to do that well they should they should go out right now and make an incredibly bold acquisition like shopify or robin hood and just stake a claim in another corner of the world with

a constellation of apps and leave it alone like they did with instagram okay will it end up great i don't know but that was that's their way out of this hole is to buy their way out of this hole the other way is to just be a value stock which i don't think is what he wants which is just to be philip morris which is to you know fuck the u.s excuse me fuck the u.s we'll just worry about indonesia and you know we don't you know they have a huge international business they're not even an american company at some level so the two things facebook i think so i agree directionally with you that they can buy their way out or kind of take a bold bet in another industry to me it's finance or health it's the only two areas that they can go into with

you know relatively high probability of being somewhat successful uh it's old enough to change the narrative um and there's great advantages from their engineering kind of dna that they could bring uh to actually changing or creating value in those industries yeah i mean back in the day 0708 when i was fascinated by twitter and i was an investor in tweet deck and bitly and beta works and you know indirectly through some eyes so i had a lot of twitter shares myself was like why aren't they bloomberg like forgetting and we can go back to this today they had tweet deck they had all the data they had their own data the only the biggest mistake twitter's made and they've made hundreds of big mistakes and little one is that they cheapen their own data by selling

it to the people that would pay the most the people that their data disrupted the most they didn't understand that's bloomberg reuters uh the the press release companies twitter is a press release company you know warren buffett owns business newswire that company makes billions of dollars doing nothing that is twitter right uh you know you sell your data to bloomberg for 100 million a year you know the head of sales comes back and go look dad i got a great sales deal bloomberg behind the scene you just say bloomberg because now they have the data and they didn't have the data before so and bloomberg charges to bloomberg is a social network right they sell their their social network for two thousand dollars a month to rich people

people that that need their data twitter had all that and more and could have done it at a much lower price and in a much broader scale and internationally and instead you know they they cheapened it by selling it to the very people that that they shouldn't have sold the data to not a broker dealer and and fan and and got into the they should have gone into gambling and finance and and that's where twitter could have been a hundred to two hundred billion dollar company and i think at best they can be until they get into that transactional side of the business uh i always feel they'll be undervalued because they're going to be like more as a community than as transactional got it what what's um what's your view on bitcoin and how it fits into uh

the financial world well i mean i rely on a few investments i made yoni asia who you should interview for sure have you interviewed yoni i have not okay so i'll introduce you that that'd be a great interview for you because he's much wise i i go to people that got me into it earlier than me right like i feel like yoni in 2010 who was you know an 11 worth of buying bitcoin at 12 and still hold some today um those are the people that i prefer to talk to and so i talk to yoni via whatsapp or whoever you know i'll see him next week for dinner but in new york but the the way they think about it around just the financial products just around you know uh settlement just around packaging of financial products is what i believe you know the rest everybody can

have you know have their way at it but i think i've only ever believed it as a disruptor to financial systems not as payments not as you know hoarding not as hodling blah blah blah it it that and the blockchain we're about to get rid of what happened in 2008 rebuilding of trust where we've gone with it since or some butchered idea of it's going to change the world so i still believe around you know the areas where wells fargo jp morgan real estate stuff which i just is so i don't trust and is heavy with paperwork i think crypto and blockchain have a thing i think around getting it into people's hands where they can really understand it like in a like coin mine is doing right now yep is cool like an easy bake oven for crypto like coin mine is like let me

understand how it's made let me have my first savings account that actually works and i don't have to remember passwords and yeah the bank takes its fee coin mine will take its fee for storing it and everything else but that seems fair right like everything can't just be free and lollipops Like people have to make money and their services provided and, you know, trust built. And so I think we're taking a step back towards like, Hey, how did this all start? How do I get this stuff in my hand? How do I try new products? Um, and I think we're square one there and I'm excited about that.

Got it. What, um, what's your biggest fear in the current like macro environment or investing environment is it public equity sell-off is it something in the private markets around venture like what keeps you up at night you know keeps me having that is running out of ambience so that's just a known fear of mine um because i'm sadly reliant on a sleep problem the uh but the only thing that keeps me up at night is just stupidity right like i really know i mean you know power and government and stupidity right like it bugs me that i think trump could have a 90 approval rating and chooses to have a 38 approval rate and that just scares me because

what is he thinking like america likes to play ball like we like kumbaya we don't necessarily need to be fighting over every little thing and so that scares me i mean that's the only thing that scares me is like what the hell's going on in the heads of our leaders and they seem to be playing with fire and I don't know when I when I get nervous about stupid stuff like that I never I've never been nervous about politics so I'm 53 years old never watched CNN or MSNBC and for some reason I'm like and I'm not an MSN I'm not even a left or right I'm more I'm more right wing than I liberal and I feel like I don't I just don't understand what each party stands for so I think politically and government wise the fact that the Trump can say I'm going to do a tariff on the

iPhone when they may not even just be could be floating that idea is just dangerous you know just reckless comments about the market and around companies and picking winners at the government level I know it happens but I didn't I've never seen it done this way and so that's and I'll even put that comment on steroids right because i think the the part that i i agree with you on uh that i've never seen before and again you you've got you know um much more experience than i do is just i've never seen somebody be able to go from idea to impact on the market so quickly right i think that the first more than trump of course i was just gonna say i was just gonna say that uh where i first saw this was uh carl icon right i remember like one of the first times i

ever saw where he was using twitter to basically announce things but he abused his power and that's why he has no power anymore meaning it only works if you're right trump doesn't care so he doesn't care if it goes up or down he just likes the impact what icon did and he fucking blew it was he he was too self-promotional right like he's in the markets you're going to be wrong a lot so if you come out with your bullshit like this is this and i'm attacking this company people see threw it rather quickly because you're gonna even if you're the best you're gonna be wrong what makes trump great and this is again like dave chapelle said last week it's not it's not about trump he's riding a wave that was given to him in a non-twitter world he's just a fucking tv

guy and we see how he is on tv he's a blathering orange idiot no one can defend the guy when he has to put five sentences together on twitter he's entertaining because the platform is great and the ability that he's in control of the paparazzi not the paparazzi in charge of him so it is him it is the platform this goes to twitter being underachieving again the fact is if you're going to keep trump on there make it worth my while as a shareholder don't fucking underperform so um so twitter ready for this crypto twitter uh i think fintech twitter as well it's like the wwf there's the the villains you know the heroes the tag team partners the you know whatever and everyone is playing a role that's very much a character of themselves or

some uh you know some some uh role they're supposed to fill and it is so entertaining and that's why we all tune in but guess what completely undervalued entertainment is is underachieving if that was their fucking goal kudos but they have shareholders to report to know they fucking mismanage they've mismanaged the company from a shareholder point of view the company this stock should not be as volatile as it is because they should be tied to the financial markets not the wwf that's exactly what uh what uh i got one more question for you and then you could ask me a question to finish it up uh what's your favorite book or the most important book you've ever read you know i don't not again books for me are are as a non-tech person and as someone

who tries to think more like an art you know with my eyes and ears not my not my brain um you know I'm a feel type of investor I like to hang with the people I'm not a book guy so the best book is is Phil Knight's I love Shoe Dog because it was kind of like he was writing a bible he was laying like a new testament for branding he was like saying even if it wasn't true it was like Jesus he was like he he wasn't he was he was embellishing but not to the point where you hated him he had a lot of human parts of the story and he was handing that book off to the next generation of nike saying hey while you guys are fighting and bitching about your boss look what we had to do for 40 years to hand you this company and i thought that was the best

business book i've read in a while because it wasn't even that much about business i'll buy that uh i'm gonna add to this question because it's you uh who's the best person to follow on twitter that people may not follow right now like who's the person that you're like man this is great account yeah my friend charlie if you like markets my friend charlie you know there's there's a few on twitter the people that i check in the most on i guess charlie even though he doesn't post that much ballella because he frames the markets really well and it gives me context for understanding uh you know relative and context around market moves to charlie bellello um i also like um because he makes me laugh josh brown

we had we had josh brown come on he was ridiculous he literally told me he believes in ghosts more than he believes in aliens i believe in ghosts i've seen a ghost my i've sat i've slept next to my wife who talked to a ghost and so even though i can't explain it hold on you've seen a ghost yeah and i there was i was in london and we were they warned us when we checked in that the hotel we were in a countryside at a wedding and they warned us when we checked in that our room was you know haunted but it was a friendly ghost and so obviously the seeds were planted and uh next thing you know i wake up and my wife's talking to a woman who says she's a nurse and floating around the room and i immediately got naked because of potential for a threesome

but uh i'm mad incredibly the you know incredibly of course the the ghost disappeared as soon as i got naked the ghost disappeared you me and josh brown are definitely going to record one of these together because i can only imagine the stories you two will tell each other all right uh what one question do you have for me so again i think what he does read so in the end the best people that i'm going to follow are people that aren't like me i don't want to follow people that don't read i'm that guy uh so i like josh because he reads kind of stuff that i would read if i had the patience and so you know i'd like to i'd like to follow people who read jim o'shaughnessy who's funny as hell and patrick who's interviewed me people that just read all the time are more

interesting to me um um what's his name morgan housel from collab fund jim jim o'shaughnessy came out of nowhere with the gif game yeah i mean i feel like i helped make him i feel i helped make him you did you know because he's yeah because he's an old man a little bit cranky you know he's like a he's like a he's like a he's like a teddy bear he's so funny and he's so quick and obviously so intelligent so uh when i started seeing his gifts and now i've like stolen some of his ideas but um he's just a really nice guy too and he's and he's just a good family man so i really like jim he uh he's one of the first guys who ever came on the podcast and he started it out with I don't know, I don't know, I don't know.

Anything about crypto, I don't know. I thought that was the best sign of intelligence. I defer to people who I think know. And that's the only difference of my strategy with gyms is like I do believe in expert networks and I do believe some people know more than me. And so I defer up the food chain a lot. That makes sense.

But I do say I don't know a lot, but I do know people who know. I pride myself on trying to find people who do know. That's fair. All right, let's wrap it up. What one question do you have for me? Hair products. I know you're young, but it's really fascinating.

It's very tight and perfect. What are your hair products? Water. Water is the best hair product. It's highly, highly underrated. You and I should start a company where we put water in a bottle and call it some sexy hair product name and sell an obscene amount of money and get all the millennials to buy it through venmo only

and if you're gonna start uh uh if you were to start a company today like what what's the area that you'd focus on endless capital and you had permanent capital and where would you focus yeah so there's a there's three areas i think are really interesting um one of them is uh uh all around the idea of augmenting our intelligence and brain with computing power i'm not even necessarily sold on like let's implant the computers in our brain type stuff but just there is so much information in computing power and processing speed etc around us how do we drastically change or create an inflection point of human intelligence utilizing all that i think is a really fascinating problem

The second thing is I think that there's a huge business to be built in changing the way that people think about philanthropy and social impact. i'm shocked at how many people buy into the idea of giving money away versus the idea of using their capital to create quantifiable change while also doing good etc right so i think like what uh zuck has done with the czi um is fascinating uh i don't know if it'll be successful but i do think that there's a a really big business there because if you can basically figure it out um you're able to take most of the philanthropic dollars that go out and and really change the way that humans and markets and and kind of assets etc all interact um and then the third one is uh it really is around this idea of young people um and asset management

i think the system is completely broken so maybe not like necessarily a bank as much as it is how people are educated, how people think about managing their assets, how people look to others for that information. I am shocked, for example, today, how many high school graduates leave school and do not know how to do simple things like balance a textbook, understand you know assets and liabilities just all the personal finance stuff and so i i am in the camp that machines and software will probably change what all that looks like over the next 10 15 20 years yeah just basic budgeting and yeah but advice as like more automation type stuff happens finance we need that google maps finance right like something yeah right like i just did this

you know what are my choices yeah and i think the finance or the advice piece becomes more valuable right so so here's the thing that uh i thought a lot about now but everyone talks about automation like oh it's going to end the world right so we're going to automate away lawyers we're going to automate away financial advice we're going to automate this and that and whatever and let's just you know we'll just concede that that will happen right and maybe it does maybe that's but let's just say it does happen. I actually think that if the lawyer's workflow gets automated, lawyers become more valuable if they give good advice

because that's really what separates most good lawyers from everybody else. And people forget that it's not that lawyers are going to go away. It's just that the bad lawyers are going to go away. The travel agent is still a really successful travel agent. Absolutely. So, yeah, I agree with you there. i think google maps of of of advice is coming right like you can have all the machines you want but you're still going to trust a person that tells you how to do right turns and left

turns and there's no perfect way to get anywhere in finance there's just the end and the beginning and uh so i agree with you there i think that's that's good focus for you yeah so we'll see all right sir thank you very much we'll do it again when do we go live with this uh we we actually it hasn't come out yet or maybe it'll be out by the time this gets posted but we recorded the first live uh podcast last night uh with ceo of kingdom trust uh it went very well so when you come to new york we can definitely set one up uh my only request is that uh you you don't try to be funny you just do it naturally yeah i don't act i don't know when we post this interview uh this will get posted in the next two

weeks okay let me know i might i might expedite it just because you told me that you saw seen a ghost i seen a ghost and i stripped in front of it if you see a ghost and it makes you nervous get naked that is my advice that's perfect advice all right thank you sir all right you reached the end of the podcast congratulations i appreciate you listening all the way to the end you deserve a trophy but before i hand out the virtual trophies, remember to go visit BlockFi.com slash Pomp. They're the crypto lending leader in the US. They do it in 45 states, interest rates as low as 8%. And you can use the US dollars funded directly to your bank account to do whatever you want. You should definitely

go visit BlockFi.com slash Pomp. You know you want to do it. So just do it. BlockFi.com slash Pomp. Before I let you go, though, I wanted to mention Draper University one more time. Remember, Tim Draper is one of the most legendary venture capitalists in the world. He's funded many of the biggest companies that you've heard of. Today, they have two separate programs around blockchain at Draper University. The first is for entrepreneurs looking to get their idea off the ground who can attend their pre-accelerator program. And the second is a week-long intensive program for corporate executives looking to learn about blockchain and crypto. You can check out draperuniversity.com and apply there.

The deadline is approaching fast because the programs are in January and February. So definitely check out draperuniversity.com. Again, that's draperuniversity.com. And one more time, draperuniversity.com to make sure that you can apply. Thanks so much, and I'll see you next time. you see the five blank stars taking 15 seconds to fill those stars in and leave a quick review goes a long way in helping us take the entire crypto ecosystem to the top of the charts i appreciate you listening and see you next time on off the chain