The Pomp Podcast - Hunter Horsley, CEO of Bitwise Asset Management: Why Crypto Should be on Every Financial Advisors Radar

Episode Date: December 17, 2019

Hunter Horsley is the Founder and CEO of Bitwise Asset Management. In this conversation, Hunter and Anthony Pompliano discuss his time working at Facebook and Instagram, layout the case for Financial Advisors to get exposure to crypto, address the common detractions, alien invasions, and Mars colonization. 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. CRYPTO.COM-----Crypto.com is a pioneering payment and cryptocurrency platform that seeks to accelerate the world's transition to cryptocurrency. With the vision of "cryptocurrency in every wallet", the Crypto.com App offers a full range of financial products with competitive pricing, well designed UX and high security. It is the best place to buy, sell and pay with crypto. COINMINE-----The Coinmine One is like an Xbox that turns your electricity into Bitcoin. You just plug it in, connect to wifi, and tap on the crypto you want. It’s so easy anyone can do it. Everything is controlled from the Coinmine mobile app and the Coinmine keeps getting better with over the air updates that add new coins, features and services to your Coinmine. Visit coinmine.com/pomp to get a Coinmine and earn crypto for powering a new world. ETORO-----This episode of Off the Chain is sponsored by eToro, the smartest crypto trading platform, and one of the largest in the world. Join 11 million other traders and create an account at etoro.com and build your crypto portfolio the smart way.

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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. hunter horsley is the founder and ceo of bitwise asset management in this conversation we discuss his time at facebook and instagram we lay out the case for financial advisors to get exposure to crypto for their clients we address the common detractions and we even discuss alien invaders and mars colonization i really enjoyed this conversation and i hope you do as well

All right, guys, bang, bang. I've got Hunter here with us. I'm super excited to have this conversation. I feel like Hunter has been on the front lines of talking to investors about Bitcoin and cryptocurrencies for as long as I have and been deep in the weeds. So thanks so much for coming to do this. 100%. I'm so happy to be here with you. All right. Before we talk about crypto, though, we both worked at Facebook and the Facebook ecosystem or family. Let's talk about that what what um what got you to instagram i think is where you started right that's right yeah so uh i came out of the wharton school went to went to instagram um uh worked at instagram for really a magical moment uh there's no substitute for for luck i was there at 70 million in revenue

and i left at a billion in revenue and uh they gave me the easy projects which turned out to be the big projects that we just knew would work uh and that was about 300 million uh in revenue that I got to work on. These are advertising products. It's actually funny, just as an aside, I sometimes get little moments of deja vu because in the early days of Instagram ads, something we would hear from big advertisers, Unilever, Procter & Gamble, was, we're not sure that these are real ads. You know, we can't, you know, they're not in magazines, not billboards, you know, not TV. I know that you're saying that the numbers look good, but how can we know? So we would get test checks from these giant advertisers for a year just to make sure that the money didn't evaporate

what is a test check a test check yeah a test check for depending on the size of the advertiser could be a million bucks or 20 million bucks of ad spend but not a real allocation of their budget um because again it's it's these these ads in an app uh on the phone and this is i'm supposed to take some of my tv budget and put in an app i mean my my my son my daughter uses this but i you know i just i don't have an account i don't have an account yeah exactly that type of thing and and at the time, I think, when I joined Instagram, it was 200 million users or something. So it wasn't a billion, you know, sort of unavoidable, like it was today, like it is today. So anyways, it's kind of funny how, you know, that that pattern of sort of skepticism, despite the evidence

that existed in in ad and digital ads is, of course, something I think both of us see some symmetry with, with institutional allocators and professional investors as they look at this space but anyway so so so was there was a product manager working with uh as you were uh with engineers data scientists engineers designers etc um what was your biggest takeaway from working there um well one of them is there's no substitute for just a giant change in the world right you know when you see something like uh instagram and you see the numbers doing what they're doing and you see the conversion numbers on ads and the CPCs, you know, it takes a little while for the emotional realities to catch up, for their competitors to realize, for the advertisers

to realize. But it takes a while to slow a train. And so if you see a train that's up to speed, that's a really rare and valuable thing. And I think that's also what's so compelling to many people, especially from the tech world about crypto and Bitcoin. You look at the numbers and you say this is this is incredible this is a phenomenon um uh i think this the second thing i don't know you know just just problem solving uh and you know how to professionally you know work with a team and and um uh hit metrics and and you know it's the one thing that they're really good at that um i don't think people can appreciate because it's like oh facebook was successful of course it was going to be successful right or i saw recently like balaji and a bunch

of folks were debating on Twitter, the Instagram acquisition, right? People were like, oh, what are you talking about? Like how, that wasn't a contrarian view. And he was like, uh, newsflash. That was a pretty controversial thing that they did. I can't even imagine. I wasn't there at the time,

but how many users did they have? They had 80 approaching 100 million. They shut out a billion bucks. They only had 12 employees, no revenue. Yeah, that's right. It's so extraordinary. I mean, but in hindsight, what an incredible and prescient deal.

I mean, you could argue the same thing, Obviously, if YouTube is an easy one to point to, you could argue the same thing of WhatsApp. I think at this point, you probably are. But I think that a lot of those, like Instagram and Facebook both had very similar DNAs in the sense of like, we're just gonna figure it out, right? And like, we can look at the data,

we can come up with products, like we can test things, like, but we're just gonna figure it out. And that I don't think is very common in a lot of companies. But these large technology companies, like that is a common theme throughout them. Yeah, well said, well said. All right, so you're there, uh, you're working with, uh, we're both biased. So like, we're just going to own the bias,

uh, the smartest people in the world and, uh, and, uh, these massive user bases. Like I always try to explain to people, like when you go to work every day and you're like, wow, there's a billion people touching this product today. Right. And we're going to make, we're going to run a test on 1% of the population. Right. And you're like, wait, what's 1% of a billion? Jesus. Yeah. Um, what was like the first time you ever heard of bitcoin or crypto or blockchain and like what was your reaction yeah well i just i actually just want to just want to linger on on on that point the testing for a second i i do think that's something that's sort of uh uh you're forced to encounter at a place like facebook or instagram

that you not don't necessarily need to encounter it at other institutions is um you know if so after instagram i worked at facebook facebook 2.5 at the time it was one or one and a half billion users. Most of your users are not Americans. So when I was there, 87% were not in America. Yeah. I think today it's something like 200 million of the 2.5 billion are American. So, so it forces you, you know, in, in academic institutions, when you, when you read the news, you know, that there are different types of people, different societies, different, uh, you know, legal jurisdictions. Um, but then at Facebook, you have a small, you know, maybe you're on a on a team with 20 people and you're designing for 150 different countries uh and you know 130

different languages and um i think that that embeds you know an understanding of the sort of scale of the internet and uh the heterogeneity of the people participating and there again i think you can sort of see the insane beauty of of something like bitcoin that you you create this this standard layer across all of that uh uh cacophony they're all and i'll even take a step further it's more of like a 3d view of the of the world and what i mean by that is like um a lot of people think okay great you've got to come up with uh the latest you know ad product or something right and maybe there's some language component or some like cultural component you got to be cognizant of um but also like one of the things that i took away was uh i forget what

they called it you'll probably remember but there was a place at the facebook campus that you could go and you could test your product on all sorts of different connectivity environments yes yes it's called the connectivity lab connectivity lab right so it was like what is it like to have like an android phone in indonesia where they have 3g a tiny little screen yeah yeah all that's the standards issues i mean to get a clean shot where you have a large group of people on the internet all with roughly the same interaction is just so is so and you've got to do it like i remember um One of the big things that we had, so I was running the growth team for Facebook pages and we had this huge upshot in usage, but it all came from mobile web in less developed

countries. So it was basically they go to not an application, not on their desktop, but on their phone to Facebook.com. And we had figured out that they were all using phones, kind of like the T9s, where you have to click a bunch. and so they would try to scroll over and to get to pages it was like three rows down yeah we literally just moved it up yeah so it was less clicks for them to scroll over yeah and usage shot up those types of things matter and you're like man that's pretty simple like you just made

it easier for them to get to it yeah right yeah but it was the numbers it was understanding the devices the connectivity like all these things yeah and when you start to think that way it's uh we're still probably too early in a lot of the crypto applications to uh the layers of fiction are immense you know if the difference between not having to scroll and having to scroll can make that huge of an impact then the difference between using metamask and not using metamask uh pretty big pretty big giant thing yeah yeah so uh so yeah i think that that that that's definitely a present part of uh the friction in the crypto space and friction is very real for sure all right first time you came across crypto bitcoin blockchain yeah so my journey into

into crypto um we actually had the opportunity myself my my business partner co-founder and starting bitwise a guy named hon kim did software security in the korean military uh worked google knew him from from uh university pennsylvania uh we're close friends and uh we actually this this rare opportunity uh to uh um some investors offered us money to quit our jobs and just prototype uh something just to work on something um and uh was this the uh the google slash twitter slash facebook uh mafia uh it was uh it was in and they were both ex-google it was it was it was uh it was a mutual garg and a lot gail um uh can we can we talk about the the angel investor mafia that's going on there these so for those that don't know there's uh each technology company

in general it's over generalization but they all have a group of folks who uh have a bent towards uh angel investing towards early stage technology and uh they are notorious for finding usually younger talent at the company that they don't think is going to stay and be a lifer and either one saying here's some money go figure something out or uh people know who they are and go and pitch them and say hey i'm going to leave and go do this would you like to invest yeah they've been fantastic investors over the years because they've got great talent very early like all the ingredients you need to be a good angel investor um and so they uh came to you guys and basically said here's some capital yeah i mean there's a bit of a longer story to it i don't want

to use it too much of our time where it's the end of being a facebook retrospective podcast um which which is fine by me but uh uh you know the short of it so so i left and and and hong and i raised some money and then we were working out of you know a living room putting our heads together and prototyping different concepts um and uh if you're two software people in san francisco at the beginning of 2017 before too long someone says hey do you remember that bitcoin thing yep and uh i was like gosh i think i bought some on some website at some point and of course that website was coinbase.com uh i don't know if you've heard of it i'll look it up it's like gem nine um uh uh but uh i bought some at some point in 2013 or 2014 and i've totally forgotten about

it and uh it was actually a friend from from wharton who was working at a stout stout arb hedge fund and he said hey they're they're 40 spreads uh in markets on this stuff and we were just like huh that doesn't seem that doesn't seem right so so our journey into crypto was we we we started out by arbitrage trading um and that's not what we're doing today but i think that everyone sort of has that one project or experience that gives them uh pause to to look at it more seriously and for a more concerted amount of time. And that was what it was for us in February or April or March. That time frame, we started arbitrage trading.

And that gave us the opportunity to learn about different protocols, meet some people who are building blockchains, deal with the ecosystem of trying to buy different assets. If you remember, at that time, I think Coinbase was only brokering Bitcoin and Ethereum, I think. um uh and also to think about uh why are why would we root for this you know i think when you work in crypto for long enough you forget that um at the outset it's not obvious to everyone if this is like the team you want to root for like de novo it doesn't necessarily sound like something it

sounds complicated it sounds like it's going to complicate everyone's life like uh you know your mom's now going to have to deal with not just cash credit and her portfolio but now this is a whole another set of things you have to deal with. Is that something you want to root for? And so, um, you know, so give us, give us the moment to think about that. And where we, where we landed was, uh, thinking that this, this could be one of those trains that's hard to slow down and could be one of the most important, um, you know, breakthroughs or pieces of progress in technology over the next decade or the next two decades. And we just felt like we'd love to contribute something to this. We'd love to be part of this. This feels like the type of thing that's going to

get a chapter in the history textbook there are other things that we you know we worked on insurance for cyber security incidents which is a growing industry and a great opportunity concepts obviously haven't come from facebook and instagram concepts around entertainment experiences social media but then you know i think we just looked at this and said wait a minute this is not only not only is there opportunity here to to create services that are valuable and build a business in doing that but also maybe this is maybe this is going to change the world a little bit so well it goes back to the idea uh you can bet on products you can bet on teams you can bet on markets right and when you bet on the right market uh the market can

carry you pretty far yeah yeah even if you mess a lot of stuff up if you bet on the right market at the right time you're gonna be a good hand yeah yeah yeah yeah um uh andy rackliff the the founder of benchmark capital and and uh uh ceo of wealthfront has has a great quote that goes something like uh uh bad team good market market wins good team bad market market wins um so uh so yeah i do think there's something to that so um uh to to close the loop uh uh you know so there we are feeling like wow this is really exciting thing playing out right in front of us and we have time uh you know uh to to be building things uh and we were talking to people about crypto and a common refrain that we heard in in in march or april of 2017 uh from people who are

executives in tech people who are you know in in financial services you know they have investable money uh they're tech savvy they're financially competent they're they're confident in making their own decisions uh we heard uh you know i'd like to invest in this crypto thing but i don't have time to figure it all out uh and to be constantly monitoring it and i'm not sure which one i'm supposed to buy and we heard this enough time from people like that again this is not like um your uncle who and i don't know your uncle so no you know i hope your uncle doesn't take offense yeah he might fit the bill here but you know these are people you would expect to be on the sort of upper tiers of of ability to figure out yeah they're folks who are normally in

technology who understand user experiences they can deal with some friction yeah and the common frame was you know i'd like to participate i just i'm not going to spend if i you know i looked it's too complicated and and and so we said wow that's that you know we're hearing this and and we realized that there is from our perspective uh a piece of marketing infrastructure that was missing at that point in time you had uh and even still today and this might frame up a little bit how we think about what bitwise is trying to contribute um you had on sort of one in the spectrum for enthusiasts uh who wanted to you know trade it throughout the day or who wanted to pick specific assets or participate in icos you had great tooling being built out you had you could download

coinbase you could um you could get more involved with kraken where you could even take margin you could do esoterics um uh you could hold it on a ledger or trezor you could do research on on-chain fx and you know so you had an emerging ecosystem for the person who was excited to to spend the time um on the other end of the spectrum you know uh for very wealthy families some of them knew a guy who was just spinning up a hedge fund like one of their friends just decided to go ahead and spin up a fund but in between you had most of the rest of the people who were like i'm interested enough to consider something i'm not interested enough to you know decide between the following apps the following coins to upload a driver's license to request it you know withdrawal increase um uh and

I also, you know, so, so, uh, what we realized was missing is, um, uh, the ability for their financial advisor, uh, and, you know, for, for them to use a conventional mutual fund, ETF interval fund, what, you know, what have you. Yep. Um, and as we said, was it, is it really, uh, and as I previously mentioned the introduction, right. Um, we're obviously investors at Bitwise, right. Huge fans of what you guys are doing.

Um, and the way I think about it is it's an access component, right. It's, I've got to do some education. I've got to learn in terms of how do I think about this in my portfolio, why would I get exposure, how do I size it, all that kind of stuff. But then once I've made that decision, that's where all the questions come in, right? And this is something that looks like, smells like, acts like exactly how I get exposure to other assets. And therefore, I'm comfortable because I'm already taking, quote unquote, risk by going into something new, right? I don't want to take risk by going into something new plus going into a new type of vehicle plus having to sign up for a new account. like all of that stuff just compounds it makes it harder and harder to get there i think really

when i look at what you guys are doing it's just how do we break down the frictions to access and make it look and smell just like everything else that you do that's right right you know that's that's exactly right we think of ourselves as an infrastructure company or as you know from from my tech friends you know i would say we're like an api company but the api is so important that we put it into a legal structure and call it a fund yeah um uh but uh yeah we're trying to empower people to lean on the same financial professionals that they use to manage investment grade bonds, emerging markets, commodities, natural resources, high yield debt, et cetera. And to be able to go to them and say, yeah, I think that I want to do something here.

And they say, okay, no problem. Yeah. So I want to get into kind of like the argument for crypto in somebody's portfolio. But before I do that, give us an update, just any metrics or kind of milestones you can share from Bitwise itself to give us a sense of kind of where you guys are. Yeah, absolutely. Uh, uh, so Bitwise today, uh, we're about 20 people based out in San Francisco. We're boutique.

Uh, all we do is, uh, index funds and, and access products for particularly today, you know, financial advisors, multifamily offices. We meet with some endowments and, and, uh, and others, but you know, the conventional people are most interested in, in those types of products. Uh, and then we do a huge amount of, uh, of education work. I, you know, I mentioned to you before we do about 10,000 conversations, excuse me, not 10,000, 2,000 conversations with advisors a month between events, phone calls, et cetera.

We never disclosed, or historically we haven't disclosed the assets in the fund, but I can tell you that we've had inflows every week for the last two years. P.S. for those listening at home, that's good. Yeah, yeah. I can tell you that additional subscriptions are well in excess of redemptions. I think that we've seen in the life of the fund

something like 7% of investors redeemed from 2017 to today. And to our knowledge, it's the largest public index fund in crypto today. Awesome. So that's a little about the firm. You're very familiar with our firm. If there are listeners who aren't familiar with us,

the other thing that I usually like to mention is that we've tried to assemble a group of people who straddle backgrounds in software and traditional asset management. So we started this conversation talking about our backgrounds in tech. and obviously your partner, Mark Yusko, marries that with a background in asset management

and asset allocation. For us, we today have brought on a number of veterans of the ETF space. Matt Haugen, our head of research, 15 years, is one of the foremost experts on ETFs, co-authored the CFA exams book on ETFs. Teddy Vassar, our COO, was former senior vice president, head of portfolio management at New York Life Investments, which is a giant conservative shop

before that at IndexIQ, which did liquid alternatives before that direction. Mick, our head of distribution, 10 years at iShares from 2001 to 2011, Russell Investments, and then most recently was the head of distribution for Deutsche Bank's ETF business, grew that from $70 million to $20 billion in assets. So I think that for our clients and when people think of the firm, what we hope that they think of is a professional group that can straddle those two perspectives um and uh a partner for uh building building their understanding and then deciding how they want to play it um and also some people don't end up playing it through our vehicle some people uh talk to us to build that understanding uh and

end up investing through venture vehicles um uh which is um uh i would say one of the very popular approaches today so um that's uh that's a little about the firm and and uh but yeah focused on advisors uh have this market access vehicles spend a huge amount of time on education matt actually jokes that we're an education company that happens to have index funds uh and uh uh and then the other thing we're known for is uh uh this etf filing but so we'll get to the etf filing in a second but i want i want to do um you spent hours and hours and hours going and talking to ras wealthy family offices etc yeah and uh we are not giving investment advice here but I basically want to give people kind of a peek behind the curtain because most people

listening to this are not going to be part of those conversations. And so help me understand kind of like what's the argument or what is the education that's happening kind of in those like, I think of it as kind of like intellectual hand-to-hand combat where you're walking into a room, whether it's a meeting with like an RAA and a team, or it could be walking into like a lunch or a dinner with their clients, et cetera. What does that look like? Yeah. Um, so let, so let me, I want to tell you the sort of the three things that are motivating advisors to come into the space. Um, and it might be fun to talk about some of the common questions we get. I know that you get, uh, uh, as well before even doing that for a second, I want to sketch out who is the,

who is this advisor person? If they're, if they're advisors listening to the podcast, uh, we love you and you know what you do. Um, but you know, believe it or not in crypto, I think very few people are actually familiar with financial advisors, and I actually tell you you might get a kick out of this you know there's a number of venture firms at firms investing in our company and You'd be surprised by the number of venture firms who aren't aware of financial advisors so With that having been said I want to you know before I describe how they think about the space I just want to describe who they are so if you if you Sort of draw out the landscape of cohorts that are investing in crypto today

I think by and large, you can map them into four buckets. The first is self-directed individual accounts. So these are people who are investing their own money, making their own decisions. They might have bought Lyft's IPO through their Robinhood account because they like Lyft and they heard good things. They trust themselves with their money. They're nimble. These are the first movers into crypto. Some people call them retail.

But it's also you and me. It's people making, everyone does this in some amount. That audience in the U.S. controls $3 to $4 trillion in assets. And by and large, they use Coinbase, Gemini. If they get more involved, it's Kraken. Exactly. They might use a ledger. They might do research on CoinMarketCap.

Then you have financial advisors, who I'll come back to. Then you have institutional asset owners, the pensions, endowments, and foundations. They manage $24 trillion in the U.S. That's $600 billion with the endowments, $800 billion with the foundations, and $22 trillion with pensions, which are giant. And Morgan Creek Digital is famous for having the first partnership with a pension that had the courage to publicly undertake adding this to the portfolio. That audience tends to prefer active managers, is happy to take the illiquidity in many cases. And today, they work with a lot of venture managers like Morgan Creek Digital, like Andreessen, like Paradigm, Electric, et cetera. um uh then one over you have so so 24 trillion there one over you uh you have the institutional

um asset managers so so there would be like um uh you would think like drw or um but drw is actually a different piece so we'll set that aside blackstone yeah exactly exactly those people by and large today are not yet in the space um okay so those are those are different cohorts and the reason i say that is because i think sometimes in crypto when we talk about investors uh depending on who you're imagining you intuit differently how they'll react to something what might be on their mind what else this might be trading off against uh and what solutions they're looking for um so we have a self-directed guy uh you know first into crypto uh we have the institutional asset owner which we talked about and you're gonna add sovereign

wealth funds and insurance uh companies and hospital systems etc to that uh in between The financial advisor manages $22 trillion in the U.S. on behalf of individuals, wealthy families, and high net worth individuals. And that can be anything from a Wells Fargo advisor that's down the block or a J.P. Morgan private banker. But a huge portion of it is also what we would call RAs or independents. Mark Zuckerberg famously works with Iconic out in San Francisco. The Rockefeller family works with a firm in New York called Rockefeller Capital Management. Those are advisors or multifamily offices. And what they're doing with their clients is, you know, in some ways, the same way you work with a physician on your health, you work with this financial advisor on your money, which is, I think for everyone, three priorities are their family, their health, their money.

And so many people choose to work with a professional on their money, and that's the financial advisor. And the financial advisor is helping you think about what are your cash needs this year? Do you have retirement goals? Is somebody going to college? You're going to have to support aging parents. And then they're orienting the investments you make around those liquidity time horizons, et cetera. And so that is just the frame that I want to set for describing the conversations we have with those people. But what we are working to do, that audience generally doesn't use venture funds, and they're definitely not using apps.

It has to go through their existing workflows, their infrastructure, and that tends to be ETFs, mutual funds. and then a whole set of workflow. So we're working to build a bridge to that audience. It's a giant audience. And from my perspective also, crypto cannot be successful as an asset class if mainstream people can't rely on that financial professional to handle it for them.

I think it's a beautiful thing that individuals like ourselves have the enthusiasm to create accounts, to make investment decisions on our own, to interpret the volatility. But I do think that that enthusiasm has a half-life. And we even see this sometimes. People who invested some money in 16, 17, 18, getting a little worn out and exhausted,

something else in life becomes busy, and then they ask their advisor to handle it for them the same way the advisor, again, handles the options they have from some tech company, the high-yield debt, the private credit, everything else. They say, can you handle this for me? So that's the audience we're focused on. That audience has a lot of clients. They're very busy. They're thinking about everything.

They're thinking about equities up 20% plus this year, gold up 18%. They're thinking about we're 10 years plus into an expansion. They've been worried for the last three years that the party's over and we need to start to get defensive. But you can't come out of risk assets because then you miss the 20% return on equities this year and your client is confused. So that's all swirling in the backdrop, and it's a very busy time for the advisor. Uh, and then we come along and say, you know, we'd love to be helpful and talk to you about crypto if that's something that you're interested in. So that's, that's where they're starting.

There's a huge setup to your, your initial question, which is what is the, what is the case for them? There's three reasons, uh, that advisors think about, uh, uh, crypto today. The first is, uh, in relation to sort of what I just described, their clients doing it and they work for the client. We do a survey every year. We commission a survey that's a benchmarking survey on advisor attitudes and decisions around crypto. We'll have a new one coming out in January.

Last year's survey, advisors reported one-third of advisors said that their clients were investing in crypto without them, without their oversight. Another third said that they don't know. So the first reason, and there's three components to what advisors think about, but the first reason that advisors are thinking about crypto is because their clients are doing it. and they're there to help their clients. Their clients are pulling them into it. They're pulling them into it. And also what can sometimes happen is the client gets in trouble,

like they get simported or they get locked out, they forget their password or they get busy and they say to the advisor, can you deal with it for me? Or they have to pay taxes and they say to the advisor, can you pay taxes? And then the advisor's like, oh my gosh, what is this?

When did you buy it? What was the cost basis? How did you decide this? Do you want to keep it? Do you not want to keep it? You know, all these things. So advisors are incrementally, month after month, getting pulled into it because of their clients um and they want to protect the client they want

the client to achieve their their financial goals they want their clients to pay their taxes they don't want their clients to get you know hacked lose their passwords etc i was chatting with this one advisor uh who's telling this funny story about his client uh said uh hey i'm gonna buy some i mean this is a very wealthy client uh i'm gonna buy 10 million dollars this bitcoin thing uh i just downloaded the coinbase app but i'm kind of confused can you help me and so so he sent his password to the coinbase app to the advisor and then the advisors in the coinbase app uh trying to like get the withdrawal limits pushed up so you can wire 10 million you know so so this this sort of like news flash for those that don't have 10 million dollars and trying to get into coinbase

uh coinbase will not let you put 10 million dollars on the app that'll be difficult um yeah yeah uh or you know or just one other case is another client who uh she had 400 000 in in uh in in uh in bitcoin and she did get simported uh so her her phone got hacked she and she lost control over her coinbase account um uh and and then she asked her advisor for help so the first reason that advisors are looking at crypto is because they serve the client and the client there's 40 million coinbase accounts like the client is is doing it already uh and they want to know okay how can i if they're going to do it i want to support them doing it how can i do that in a uh sustainable no risk you know it's it's hard for them to discern the difference coinbase

is is is uh is an incredible service in their minds coinbase and quadra cx are like the same thing um and so they're like i just don't know which of these things uh so so so they want it they want to help they wanted to be sustainable they wanted to be secure and they're dealing with a lot of complexity it's not their expertise and they don't have time because they're also dealing with the you know equities and and and figuring out refiguring out fixed income and figuring out 2020 um first reason second reason uh is what i think you know you you read about it's more theoretical more academic which is just uh objectively what it can do in a portfolio you do a portfolio analysis it does very compelling things so um and this is the argument for non

correlated asymmetric assets that's exactly right so so uh we have a study and others have done studies if you if you do a one percent allocation into the bitwise 10 the bit x uh over the life of the index and you rebalance it um into a 60 40 portfolio so very standard portfolio you do one percent allocation uh it added 1.3 percent to the annual return of the portfolio uh and it reduced the volatility uh it's funny how like modern portfolio theory works huh right right so people people are surprised by that uh and uh um and so you know i think some people look at that and say wait a minute this can help me accomplish my goals i'm sure that this is what's going through the pensions mind it's not that they picked a team they're not rooting for something they're saying

we we have a funding goal we have something we're trying to accomplish this portfolio and i'm looking at the math and what i'm seeing here is that i can take minimal risk i can i can even diversify some of the portfolio and i have a reason to believe that there's upside here so the second reason is that i'll append to that for financial advisors specifically there's this thing looming in the background and the thing looming in the background is um markets are in a very weird place right now more generally uh this year actually i think just a month or two months ago morgan stanley came out and said uh they think that 60 40 is basically dead as a standard asset allocation why uh their view is that assets are are way overpriced and that correlations are going to

so you know conventionally bonds are negatively correlated with equities uh that hasn't always been the case that wasn't always the case in the 20th century that was mostly the case in the last 30 years of the 20th century, they predict that over the next 10 years, a 60-40 portfolio will return 2.8%. That contrasts with historically, the historical average of the last 100 years is 8%. So what they're saying is, this time it's different. Something has changed. We could discuss what might have changed, asset prices, the injection of capital through quantitative easing and other measures. But Morgan Stanley saying this, Bank of America came out and said This GMO, which is a macro analyst firm, expects negative returns from U.S.

large cap equities as well as U.S. bonds over the next seven years. You've probably read the pieces by Ray Dalio this year. Ray Dalio is a Bitcoiner and doesn't even realize it yet. It is really sometimes you read that stuff and you think, gosh, well said. But, you know, a statement is most recent. I think it's from November. 6,000 words on LinkedIn. God bless him for publishing on LinkedIn,

especially given how difficult it is traditionally to get Bridgewater research. He says something to the effect of you can't rely on cash and bonds as a safe store of value for your money. So the advisor is thinking about all these things. And what a lot of them are seeking to do in response is you can't hide in cash for a few reasons.

You just heard the case that you can't hide in bonds and yields are not attractive anyways. And there's anxiety about inflation in high yield. So what do you do? Alternatives is what a lot of people are looking to, particularly in the advisor community. It's in that context that crypto becomes a solution to a much bigger problem that advisors have right now, which is, okay, so I'm naive. I'm going to look silly if I just stick 60-40 for the next three years, despite all of these credible sources telling me that that is not a legitimate strategy for what's coming. But what are my options? You look at alternatives. And in that consideration set,

crypto is this magical thing. You don't have to reallocate your entire US equities portfolio. You don't have to, you know, diligence-specific venture firms. You can simply take a 1% exposure, get off zero, as some people say. I can't remember who came up with that, but they're deeply influential. And introduce, you know, these favorable things to the portfolio, demonstrate to the client that you're doing something, and it's liquid. It's liquid. So that's the same thing. And do you feel like the advisors, as they're thinking through those three reasons for crypto, they're further ahead than the clients or the clients are further ahead than the advisor, right?

Like, where do you see the enthusiasm? The client has done more action and the advisor has done more thinking. Okay. Interesting. So, you know, the client heard that XRP is the next big thing or that Ethereum is the next big thing. This, of course, I'm generalizing. So this is not always the case. some very sophisticated individuals directing their own portfolios and accounts but uh i think

you know the advisors have approached this from a position of oh whoa whoa you know different counterparties it's it's moving you know a lot in short periods of time and do you find that the advisors are um hey okay i i get this i think i should have my uh clients have exposure to this um let's start with like 10 basis points let's go to 500 but like like how do they think about i've gotten over the hump of whether i should do it or not now i've got to think about sizing yeah yeah yeah yeah it uh it it it depends a lot uh on the advisor but also depends a lot on the client so what we usually see actually is the firms that we work with they have one to five clients that they know are like are the ones that are investing in crypto uh who have the right risk

appetite um and from there it's it's like it's like 25 to one and a half basis points there are a few who are very uh either the client is very passionate about it but we we don't see i think you know one to two and a half we don't see much uh outside of that the the third thing i want to mention so advisors for i have a million things to say about advisors pump um the first thing but This is what we do all the time. I love it. I'm here to learn. We're traveling around the country doing that today.

The first thing is that they're responding to the client comes to them and says, taxes, lost my password, trying to buy it on Coinbase, not being successful. I'm going to pull you in. Yeah, so they pull them in. The second is they're looking at the numbers and they're going, I've got to do something about the asset allocation I've got here, but I'm not sure what to do. If I go into cash, again, I'm going to miss the returns,

and then my clients can ask me, why is my portfolio not returning as well? If I go into alternatives, this is a pretty uncharted territory, and I'm going to have to deploy into things that maybe aren't liquid. And small sizes, I can do interesting things with portfolios. And so that's the second thing. The third thing for advisors is advisors care about attracting new clients by demonstrating, particularly for the independent advisors, things that they can do that the old guard can't. So if you're an independent, you're trying to win clients from UBS. All the people who are turning their nose up at crypto are your competitors for winning new advisory clients. It differentiates the RIA from the RIA down the street.

Yes, exactly. From the wire house in particular, from the Wells Fargo, UBS, Bank of America. And at some of these firms, the advisors at those firms want to do it. Their hands are tied by the much larger institution. The reason that they generally went independent was to be more nimble, to be able to serve the needs of the client in a more bespoke way. And to be more progressive in what they could offer and not have to conform to J.P. Morgan wants you to distribute J.P. Morgan funds to J.P. Morgan advisory clients. And so the third is business considerations. They want to win clients.

The other aspect of that is they want to retain the next generation of their aging clients. And the next generation is a millennial. And the millennial is almost more bullish on crypto than they are on T-bills. I see two groups that are pulling those advisors in. And the first is I'm a young, I'll put an air quote, self-made because I don't even know what that means anymore in this world. But there's somebody who has become wealthy without inheriting the wealth, right? And they're usually on the younger side. And so they're into this stuff and they're pulling their advisor in.

The second is the situation you're describing, which is somebody else made the wealth. The person now is inheriting it. And, hey, my family made all their money in real estate. I want to do something else. I want to make my own name, right? Or I'm personally interested in this. I want to divert some funds. You know, my grandfather died, so he's no longer around.

He would buy Bitcoin if he was here, right? That type of stuff. And it feels like the common thread through both of those is that these clients are usually on the younger side. Yes. More so than the 60-year-old client who's, you know, retired and, you know, quite wealthy. But they're still pretty much asking a lot of the questions we'll get into. And I don't see them jumping in as much as maybe the younger people are. I think in general, yeah, at this point, well-trodden thing.

But millennials tend to be the driving force. Millennials are 23 to 38, something like that. 23 to 38, wow. That's a big gap. It's a wide window. All right, so let's go through. I want to play a game of I'm going to throw out detractions that I've heard in a lot of these rooms. I've never heard a single detraction about Cripple.

RIAs and some come from the endowment world. But I think you and I have spent a lot of time doing the same thing of just get people in a room. Here's kind of the case for this. Ask me your questions. The first one is security and custody. So I heard that somebody stole somebody else's Bitcoin. Why would I buy Bitcoin or other crypto if it can get stolen from me? How do you think about that?

Yeah. So this comes up quite a bit. And oftentimes people will point to a story like Quadro CX. Literally today in one of our sessions, Quadro CX was brought up. Some Canadian exchange getting hacked or somebody lost their USB and lost their funds. My favorite has been the guy in Korea. I say, what? The guy in Korea.

And I had to ask him, in North Korea or South Korea? Yeah, yeah, yeah. So I think the beautiful thing about crypto for much of your audience is you have the option to uh hold these things yourselves i think to the advisor you say um uh this is one of the ways in which you can add value uh you the advisor is helping your client parse the landscape of different ways uh to hold this exposure from you know the exchanges to the brokerage apps to uh the venture funds uh to the the today the sort of enterprise grade institutional custodians like fidelity bit go um uh i gotta give shout outs to all my favorite custodians now don't i uh uh

they're all in there they're all in there yeah yeah yeah i mean there's tons of great custodians uh they're all super you know super sharp um but so so so so to but to many taking a step back many uh professional allocators they're operating off of a snapshot of the world that they took in November of 2017 and in November of 2017 you know there was basically Kingdom Trust which they hadn't heard of Kingdom Trust pioneer for the industry great firm but they hadn't heard of it and so all they really knew of is people holding things on USBs and on these on these apps they're not aware that today you can hold it in an insured regulated custodian and that they'll hold it offline and they won't even put it into a trading environment and so so so there I

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blockfi.com slash pomp again blockfi.com slash pomp to sign up and start earning interest on your crypto today a lot of people will argue it's so volatile right it um it went down a bunch in uh uh recently yeah right they won't exactly know the price movements to a t but just it's really volatile and a bunch of people lost money or somebody i know lost money yeah thoughts yeah Yeah. Oh, how about that? Thoughts. Volatility isn't in and of itself an indication that something is a bad investment. You have to ask yourself, why is the volatility happening? What does the volatility mean for me? The volatility is happening because people don't agree on the value of these assets. And it's a very nascent, controversial space. The analogy we

like to give is, you know, people often compare Bitcoin to gold. We wrote about this over the summer, I think the apt comparison is Bitcoin to gold, but not gold of today, but gold of the 1970s when the Bretton Woods system ended and the US dollar came off gold as a backing for international redemptions. It was unclear to the investment community if gold would stick around. Keynes called it a barbarous relic. Maybe it was time that we would shed this piece of antiquated monetary history and just move on from it. And so there was a period in the 70s where there's a lot of volatility because some people said no no no this is a thousand years of a track record of being valuable this is an independent you know uh store value and other people said no

no no this is worthless metal uh and and now it's not even the you know being used to back the dollar uh and in in in the 1970s uh there was a year where gold was up 120 percent there's another year was down 30 percent it ended the 70s up uh 1300 percent after the 70s those discussions those arguments were had, the volatility played, you know, people, you know, expressed their points of views in the market, created the volatility, and we landed on the understanding of gold that we have today. And since then, gold returns on average, you know, something between one and two percent a year. So the volatility in crypto, I think, is similar. It's that people are working through what is this thing? What is the value of this thing? Is it here to stay? And that's causing

the price to move. The volatility is moving in one direction. Over the last 10 years, the average daily volatility of Bitcoin has come from 10% to around 3%. So we are forming a tighter band of consensus. The other point I make about volatility, which we talked about a bit earlier, is if viewed in the portfolio context, it's a real boon. What's important is that it's being volatile in different moments than your equities are

and that your fixed income is. um and uh and as a result of that as as mentioned before one percent allocation rebalanced quarterly of the the bitwise 10 uh reduced the volatility despite um the volatility of crypto reduced the volatility of the book so this is a really important point because i think a lot of people uh who aren't well versed in finance or just haven't spent the time to kind of learn about this um modern portfolio theory there's a really big importance on non-correlation and on if you put a lot of assets into a basket that have the non-correlation

or are all volatile at different times, you actually are diversifying the risk, right? So the idea that, hey, I take this hyper-volatile thing and I put it into my portfolio, well, the odds that you have a bunch of other things in your portfolio that are all hyper-volatile and are driven by the same value drivers is very low, right? And that's where you get the correlations

And then obviously, my favorite example is in May of 2019, when the trade wars are all raging on. I mean, literally, the world leaders are tweeting at each other all this crazy stuff, right? There's a lot of political and geo uncertainty. The Bitcoin correlation to stocks and gold went negative. Oh, interesting. So it went negative 0.9 to the S&P, negative 0.8 to gold, and it was up 55%. Wow, wow, wow, wow. And so it was this weird situation where we talk about non-correlation, but it actually went the opposite, right?

It went to the negative correlation. And so when you see those moments, it goes back to this idea of like the insurance, the smuck insurance or the chaos hedge. All these kind of things that I think in the crypto community now have become more accepted. Advisors have never even heard of this stuff yet, right? And I think that's some of the work you guys are doing is trying to get them to understand that. Of course, yeah. And to your point, in those moments, that's really valuable to have that negative correlation. The other thing about volatility, I have a million thoughts on everything, but the last thought on this is obviously we feel this way because we serve advisors.

Those are our clients, principally. But it's also one of the reasons that it's so valuable to have advisors managing this for clients. I have the Coinbase app. I'm sure you have the Coinbase app. The first thing you will see is the 24-hour price chart of the movement of the price. People are not well matched against daily price volatility. They don't know what to expect. It is emotionally scary.

2% drop looks big on a 24-hour chart. Yeah, that's exactly right. Yeah, so I think the other meaning, the other implication of the volatility is advisors can really add some value, some very basic value, which is just to insulate their clients from bad trading behavior. In the same way that if they were day trading their Netflix position, they probably would have a suboptimal return for the year because they sold at a bad moment. So I think volatility is really essential to the asset class. I think it doesn't intrinsically make it a bad thing. In fact, because of correlations, it's a good thing for portfolios, but it's also a reason that advisors can add a lot of value. The government won't let this happen.

They're going to lose power and regulators or the law enforcement, somebody's going to step in and shut all this nonsense down. Yeah. Well, I mean, so I think there again, we live in sort of a very different world in 2019 than we did in 2017. So, you know, the mental model people have is that, you know, regulators of the government are sort of a parent who heard a loud noise in their kid's bedroom in 2017. They started walking towards the door. At the end of 2018, they opened the door and they saw the mess. And, you know, the SEP subpoenaed everyone. And there are 25 charges.

But today, where we are in 2019, that's happened. Of course, there's lots of different regulators in different places. But FinCEN, NYDFS, the SEC, the CFTC, even this summer, Congress, through the lens of Libra, are all staring it in the face. they know what's happening. Obviously, the SEC set up FinHub, the CFTC set up LabCFTC. So I think that regulation today is in a dialogue with the industry. And sometimes the industry is happy with the progress it's made. Sometimes they wish it would go faster. And that's a natural tension between private sector and regulators. But I think that sometimes the concern that, the intuition that as soon as the regulator walks in the room, they're going to be livid, and everyone's going to jail, is just not the state of affairs in 2019. We met with the SEC eight times over the course of this past year. And I think, you know, for many others,

this is ongoing dialogue. So I think that that is in a really good place. And that's really important for people who want to participate as investors as well. Crypto is just speculative assets. It has no real value to it, and no one's using it. Yeah, yeah. So on the using it front, I think that the analogy I like to give is, so first of all, a lot of people are, you know, again, we're talking about mainly people who are not working full time in the industry. So for the listeners who work full time in the industry, we're not talking about you. You know, I think for many others, for individuals, families, institutions, advisors, you know, as silly as it sounds, it's called currency. So you start from, okay, well, if it's currency, show me how it's being used like currency. And this manifests itself, and I'm not buying coffee with it.

And the reality is, you know, I don't think that BACT is going to work with Starbucks to make that possible. But that's not the most important thing. And the mental model that I would suggest for looking for use cases is not, what are all the places where it's not better than the U.S. dollar today? But rather, there just needs to be one thing that it's good at. and here's the the analogy in 2007 everyone's using laptops and desktops and along comes the iphone a new computing platform it's not the case that the iphone replaced all desktops and laptops we still use desktops and laptops for spreadsheets uh you know i pity the individual who's doing spreadsheets on mobile uh for uh powerpoints um writing a bunch of writing email mobile

There's some other things that are just way better on mobile. Maps, Uber, taking photos wherever you are. And you do email on both. And I think similarly, when we think about public blockchains, the heuristic we should have is not, has it wiped out all other payment systems, all other currencies, you know, has it replaced everything? It doesn't have to.

It's going to coexist, just like the iPhone coexists with your laptop. It just needs to do, it needs to find its Google Maps. It needs to have the one thing that, oh my gosh, is so much better. There, I think, we see burgeoning examples, specifically, the most obvious one is people using it to transport money across borders. That could be fleeing inflation in Venezuela. There's a great op-ed in The New York Times, this Venezuelan economist who talked, the headline is, and you can look it up, Bitcoin saved my family, and he's talking about moving

out of a million percent annualized inflation is going to destroy his family's savings. That's very real, so being able to get it. But also, I think two weeks ago, $500 million was moved across the Bitcoin blockchain for $36, something like a de minimis fee. So I think the thing it's doing a really great job at is you're not buying coffee. You're not at the register and every second counts. You're happy to wait 10 minutes. Well, and people forget, too, you're not using dollars to buy coffee, usually. Right, you usually cut it.

This is one of the things that we go pretty deep with people and just say, listen, it feels like dollars. It's denominated in dollars. It's a great user experience, but don't forget that you actually are paying it off at the end of the month. Right. That's a pretty long settlement timeline. Yeah, yeah, right. That's a great point. Yeah, yeah, yeah, yeah.

And now there's great advantages as to why to do it. There's a very, very good argument as to the impact, the positive impact this had on society, et cetera. But you are actually not using dollars in that scenario. There you go. That is a perfect example. So to the use cases, I say first, as investors, I'm worried that we'll miss the boat if we wait for coffee. What we need to see is just a great use case for a or multiple public blockchains. And I think the leading candidate today is some version of what you call remittance, capital expatriation.

There are 260 million people who change the country they live in each year around the world. uh you know if you're moving from you're moving your family from uh i don't know i'm gonna say indonesia to spain um oh my gosh you know is there any moment where you could simplify that um or if you of course there's a giant remittance corridor between the u.s and the philippines is easier to send some money that way is it easier if your limit on venmo is two thousand bucks and you have a friend or you have a you know a kid in college is it easier to send five thousand bucks some other way so um and most of those platforms a lot of people don't know this but Venmo, Apple Pay, PayPal, they're not available

in these other markets. Oh, that's also a very good point, yeah. Right, so it's, in the U.S. we sit and we say, hey, I'll just Venmo you, right? But I forget, we did the analysis and it's like, the countries that it's not available in would shock you, right, because it's just, now they have something else, right, but Venmo can't get sent to M-Pesa, right,

for example, like those two don't, they're not compatible with each other, Whereas when you look at something like a Bitcoin, right, now you've got something that is globally available as long as you have an internet connection, which I think is really important as well. Yes, absolutely. So that's how we think about what even to be looking for is the heuristic for progress. And it is important that people are looking to see progress. You can't just close your eyes. But I think it's important that you're being realistic about what success looks like.

And I think it's seen one, two, three of those use cases, and I think we're seeing those today. Okay, fine. You can miss me. People use it, but they're just terrorist drug dealers and bad people. This is simple. This is simple. So, I mean, the two things there. First of all, the D.A. said, I believe this year that less than 10 percent of activity on blockchains is today illicit activity. It's fair to point out that that is a part of the origin story of crypto and in Silk Road and that history. But, you know, just take the D.A.'s word for it. So, you know, and then I think that the second thing that, you know, we point out, depending on the interest level of the audience, is depending on the blockchain you're using, it's pretty trackable.

And so I think what a lot of central banks and governments are coming around to, and one of the reasons people are excited to sort of sprint into central bank digital currencies is, oh, wait a minute, we don't have to deal with cash. We can give people the flexibility of cash, the bare instrument that they can exchange wherever they want, whenever they want, with whoever they want, but we can track it. We can't track the $100 bill. The choice currency of the drug dealers is still physical cash. Right. So if you said to a regulator, you don't have to restrain any of those use cases, but you can witness them all. You can surveil them all. Then I think the regulator feels good about that.

So, you know, I think increasingly this notion that you can hide nefarious transactions through the Bitcoin blockchain, say, or another, with the exception of the ones that are specifically trying to facilitate that, will fall away. And people realize it's not the best way to do that. And it's a permanent ledger. So they don't have to get you this year. They don't have to get you next year. they'll get you in 10 years like uh so so so so anyways so so so that when i say relevant consideration uh there are aml requirements in place for interacting with the regulated part of the uh of the ecosystem uh you know if you work with a counterparty like us or like you you know

their diligence in who they're trading with and and who they're buying and selling from and there's aml uh requirements there uh but more generally um that has reduced in part because it's not uh it's not the easiest way to get away with something for sure um last one for you uh i heard that countries that are not great with the united states are heavily involved so uh mining is controlled by china or uh russia is really interested in this or some other country in the world that um is trying to avoid sanctions for example etc uh why do i want to have something in my portfolio that is uh being used by um you know someone who's not an ally of the united states in some cases um that's that's an interesting question i mean i i do think here

it's it's a bit it's a bit like oil um you know um or even the you know the dollar uh it's it's uh it can be surveilled it can be enforced on uh the u.s can extend its jurisdiction you can limit the counterparties that you interact with to ones that are regulated um ultimately if somebody wants to take a hundred dollar bill into north korea or you know if uh if somebody uses oil uh to fund it you know a terrorist effort or my favorite is uh i think it was the drug office of the uk or something like that uh they did a study and bloomberg published a big report that said two trillion dollars of uh two trillion u.s dollars per year is money laundered yeah well and uh when they started looking through it you know

they've got all the numbers whatever and you look at it you're like wait a minute two trillion dollars is laundered and the entire crypto market cap is like at the time was like 250 billion right so we're talking about literally 10x the entire market cap of crypto is being laundered I do think, though, that the thing that to many people, they're like, okay, fine, you've pointed out a blemish on the existing system, but we're in the existing system, so that's what it is. But I don't have to step into this new system, and if the new system is as bad as the existing system, why would I – but I think that the improvement in the new system is what we discussed, which is it's a transparent ledger. um everything that's taking place in the ledger either now or in the future uh can potentially um be acted on enforced on uh and that is an advantage uh public blockchains have uh towards existing in compliance existing uh in above board uh context so um the other one

that you didn't ask that we get all the time uh got today uh was um it is uh look people say that this thing is scarce but i hear that people just creating dozens of new bitcoins that you know they're creating there's hundreds of these bitcoin things now um thousands there's thousands of yeah thousands is what you know i went on coin market cab you see how many bitcoins are on there yeah there's a bunch of them now there's a ton of them now uh and uh uh you know they're they're what we try to articulate is um it's a little bit like saying uh my uncle just launched a blog wikipedia is in trouble like there there there are there's something like uh three million apps on the app store people mostly use 10 there's like 350 million websites on the internet people

mostly only use google amazon wikipedia youtube um facebook um the mere because it's software the marginal cost of creating a new one is de minimis uh and so the same thing will happen with crypto People are going to create new ones. That doesn't have any bearing on the reality of the existing ones. I think that the mental mode that one has to be in to understand. So there's two types of technology companies generally. One is Intel. They make some breakthrough in IP and they figure out how to put more transistors on a smaller nanometer of silicon.

They create like the world's first fabrication lab for doing that. And then they go to you and they say, would you like more speed for less money? And you go, dang, that sounds good. And that's the sort of IP hardcore technology type of tech company. There's another type of tech company, which is the Uber, Airbnb, WhatsApp, Facebooks, Ebays of the world. It's not explicitly that they made some scientific breakthrough, but rather they've gathered a multi-sided marketplace that has sort of a centrifugal flywheel that causes it to just be superior as a simple example uh uh hp created web os a mobile phone

operating system you know great ever heard of it yeah yeah yeah you know what you have to imagine is um uh you know the the the the consumer isn't going to buy unless it is apps and the app developer isn't going to write an app for it unless they're consumers you and i could create you know could rewrite some of the uber software but the driver is not going to download the app unless they know they're going to get calls from riders. And the riders are not going to make calls unless the driver's on there. So similarly with public blockchains,

I think that because it's so unfamiliar and there's so much jargon in crypto, people have an inclination to believe it's the Intel type of tech, which is like this patentable, it's not. It's a network effect type of tech. It's the Uber type of tech. And so if somebody forks,

um uh if somebody forks you know bitcoin and and uh uh you make some modification or somebody you know writes a new uh uh protocol and expands on the prior art uh you still have to go get all of the the constituents you have to get the miners you have to get the app developers you have to get somebody create futures on top uh you have to you know you have to get the custodians to to support it you have to get people to actually want to buy it and so that uh creates a lot of defensibility so to summarize um like the app store or the web the mere creation of a new one doesn't matter in and of itself doesn't change anything uh and the defensibility doesn't come from sort of novel ip uh it comes from the network effect that emerges around the protocol

got it um before we wrap up with a rapid fire uh you guys are uh one of i think two or three now who have uh been slowly beating down the door yeah for uh for the bitcoin etf approval in the the United States. Maybe just give us kind of a why are you guys interested in getting that approved? And then where do we stand today with various applications? Yeah. So the why is two things. One, it's a very simple piece of infrastructure that would simplify for a lot of investors getting access to the asset class. There are many investors who say, look, we're interested we see it could do something in the portfolio but we can't you know we can't do it through these other structures we use mutual funds we use etfs this is going to be a one percent

allocation we're not going to rewrite our compliance manual we're not going to rewrite our workflow we're not going to hire this new personnel we're not going to undertake a two week long uh it needs to slot in just like the same bar that we applied to everything else so uh it's a it's it's sort of a bridge that needs to be built uh uh to for some people to come across um and that's a really big deal the other for some you know there's there's some uh large institutions who said to us um you know even you know uh hedge fund uh manager selection people said we'll probably first allocate to a bitcoin etf i said why that way that's crazy uh and he said well realistically uh if if a bitcoin etf launches it means that the sec did diligence on

all of these aspects custody market manipulation volume pricing uh and the exposure is enough for us so it'll just but it'll be really valuable to have the sec stamp on it uh and so i think those are the two reasons that it's so high stakes it opens up uh you know a huge group of people who just can't walk across until that happens um and then the second is it does it does uh and this is why it's you know it's such a big deal to the sec they don't take it lightly it does represent the sec's done homework and said that this is feasible um and that matters to other investors um so so So where is the Bitcoin ETF journey at? The Wink of Losses kicked off the journey back in 2013 with the first filing.

Crazy, by the way, that's how early they started. Incredible, incredible. Yes. In some ways, hard to imagine. And then our filing is the most recent. So our filing had a disapproval order in October, and then that was stayed. So the staff that works for the commission issues the disapproval order, and then the commission stayed the disapproval and is now examining it. So that's sort of the latest with Bitcoin ETS is our filing and that.

The backdrop, I would say – so this year we did it – we tried to contribute a huge amount to helping the SEC build their view and address the concerns they have. We wrote 500 pages of white paper. We went, you know, eight times. There were over half a dozen industry constituents who wrote letters advocating for our filing and the ability to do this effectively today. That includes Coinbase, the Blockchain Association, a number of others. And, you know, what we saw in their response was what we've experienced and what everyone understands by the SEC, which is they're paying attention. They're spending time on it. And they have a nuanced understanding, and they still have some concerns. There's not much more you can ask for from a regulator. Their job is to protect investors.

And the gift that we all get as an industry is the fact that they've staffed people on this. It's a budget-constrained organization. People were furloughed at the beginning of this year when the government ran out of funding. People forget. People forget, yeah. So the fact that they've even staffed people on this is a huge gift to crypto and obviously to the ETF efforts. And I feel grateful for the people internally at the SEC who are doing this work. It's not easy, but it's also not easy for a pension to allocate to crypto.

It's not easy for an endowment to decide to allocate to crypto. And so it's definitely not easy for the SEC to say, we're comfortable with this, but they're moving along. So then the question is, OK, well, they've been moving along for a long time. What should we make of this? And, you know, truthfully, I would like them to move faster, even though I really respect the work they're doing, because I think that this, for many investors, would save people from a lot of pain, a lot of harm, and a lot of the risks embedded in the other services that people are using because they can't do it this way. So they're sort of being, you know, forced through omission are being forced to the fringes of solutions. um but you could say okay you know so so so they're spending time um uh what should we make you know the the the journey here where are we in the journey and and here we like to provide

as context matt our head of research uh one of the foremost experts on the etfs wrote the etf section of the cfa a great partner in in in educating um uh on etfs leads our our work on on, on the ETF, um, uh, uh, uh, you know, points out that the first gold ETF took two to three years. Uh, the first fixed income took like four, five, six years. Uh, first leverage took seven years. First non-transparent, which was just approved this year, took nine years. Uh, crypto is five to six years in, depending on how you count, uh, for all, you know, for all these novel, different novel structures uh it's taken time uh and so the question is not you know will they disapprove this filing the question is are they are they you know is the thinking moving along

a devastating outcome would have been on the filing if they demanded that we withdraw it uh if they said do not make us write a public memo uh or uh because they don't want you know they just don't care and they don't want to spend the time right or another bad outcome would be if they wrote

a two page memo not say it's manipulated you know they didn't they wrote 112 pages when was the last time you wrote 112 I mean you acutely know

how long it takes to write things now imagine writing 112 pages and having 30 people weigh in on it about something that you don't care about yeah yeah

potentially yeah yeah not gonna happen yeah yeah right right right and it's public precedent that you'll be asked about for the next five years

that's a huge undertaking so why do you do that you do that because you're working through a lot of issues and you want to communicate out we're working help us solve these things so so we're we're grateful for that response we you know we think that the market would really benefit from from something coming to market we think that you can securely operate uh an etf to just be very clear about that we've been operating funds for two years we believe that you can securely operate in the market uh we've written a lot to that extent and we're committed to seeing this thing through so um that's the latest on that yeah we're all cheering for you man come on it's uh it's one of these things where uh i think that people will look back and say oh of course

an etf was going to get approved right and and they'll kind of forget all the hard work that goes into yes so it's important to kind of talk about the hard work that goes i do think it's true i mean even it took it took a little while to get fixed to get bond etfs approved that's what i'm saying i'm saying it took a while to get bond etfs approved you know and exactly your point you would say what there was yeah of course they were going to do that right um all right rapid fire what's the most important company in crypto other than bitwise it's uh i would say it's hands down coinbase why i think that coinbase um provides air cover for so many other companies in two ways number one it demonstrates to capital allocators that you can build a giant business a giant

valuable business and you need those those tentpoles those success stories for people to fund uh new businesses um and i think that that is sort of the shining example that people look at today and say wow i wish i'd invested in that business uh and look they've successfully built a giant business in this space uh the second is that they you know they um uh they're above board they play by the rules uh they interact proactively with regulators they register they get licenses um and they have massive scale and so they're doing all of that with massive scale um uh and uh and i think that that is it i think it's i think sometimes they're you know like so many other things once it becomes familiar start to take it for granted start to

you know notice the things that we're frustrated with but uh i think if you remove coinbase from crypto uh i think that that the on the regulatory front and on uh the private capitalization of new ventures um you lose a lot so i coinbase i would say for those reasons what's the one regulation you would change or improve if you could wow you know i mean so so uh commissioner clayton's looking at it but i do think that there's this interesting aspect of um the 33 act the securities act of 33 which divides the universe into accredited and non-accredited and it defines accredited investors as having over two hundred thousand dollars in income over a million dollars in net worth in 1933 uh materially what it means

today there's about 11 million accredited uh investors today is really you have sort of like the people who can do what they want and then you have uh and then you have everyone else uh and uh as increasingly you know this gets to a much bigger trend that's playing out right now but but uh in 2000 in the year 2000 there were 8500 publicly listed exchange traded companies today there's 3500 the wilshire 5000 index does not have 5000 companies in it so companies are not listing they're staying private for longer the amount of time the average venture-backed company stays private has gone from 4.2 years to five and a half. They're getting their capital privately. They're staying private. People take them seriously privately. Nobody questions how

serious Airbnb is because they're private. Of course. And so a lot more is happening in private markets, but private markets are only available to accredited investors. But Commissioner Clayton is specifically looking into this, which is how can we provide the protections that prevent people from, from, from losing their shirts, which are very important. Uh, and, uh, at the same time, allow people access to, to the fact that a lot, that a lot of value is shifting, uh, to these alternatives to private markets. So, so I think that's the one that feels to me like, uh, um, there's a sensible, there's a sensible opportunity to, to, to improve. Uh, that's the one that jumps out at me. I'm sure that there's a lot of others. I agree. The accredited, uh, the accredited

investor laws are a violation of the american dream in my opinion wow what's the most controversial take right there baby it's true yeah well we wrote into law you have to be rich to get rich right yeah yeah there there is definitely something to that i mean i think what what has really has really become you know in sharp relief over the last 20 years is uh there's two ways to make money you can make money from capital and you can make money from labor uh and they're two very different ways they're taxed differently it's two different tax codes for capital gains and versus labor labor wages um and uh which one's more advantageous yeah right right exactly and so so you know uh times change and i think that you know while maybe the mix of capital

gains versus uh wage labor in the 30s was one thing you know i think today it's what's the most important book you've ever read oh the most important book i've ever read that's a great question all i do is great questions that's right that's what i was just thinking i said how do you have so many great questions um boy done this 200 times go ahead yeah right right uh joe's laughing in the corner for everyone who uh who didn't hear him yeah there's uh there's a uh now his face is ready he's embarrassed that i called him out now we're looking at joe he's been mostly laughing at my jokes though uh he promised to um uh you know nothing nothing i'll tell you i'll tell you the book more recently that's such a big

question you know i love reading so much opportunity there's a book called engines move markets have you heard of that book engines that move markets i have not um it's it's written by a former i believe cio or um uh chief economist for franklin templeton okay uh alstair narn i believe uh now i'm embarrassed to not have said it correctly but it's called engines move markets And it looks at some of the most important technological breakthroughs of the last 150 years through the lens of an investor who was there at the time. So it looks at the railroad. It looks at the electrical grid. It looks at the telegraph.

It looks at the telephone. It looks at the automobile. It looks at the PC. And it looks at things like gross margins. Did the investors that backed these companies make money? Were the businesses profitable? Were there a bunch? Were there a few? Was it the first mover? Was it the incumbent? And I think it, you know, most people are familiar with the stories of many of these different platforms.

And some of the characters involve Edison and the railroads, Rockefeller, et cetera. But they're not, they've never actually thought about it from the lens of, you know, of allocating capital. Someone comes along and says, I have an idea for a telegraph that transmits voice. And I'm raising $100,000. There's a great quote from the CEO of Western Union who said, you know, who turned down for $100,000 Alexander Graham Bell's offer to sell the patents. He said, what use does anyone have for a toy like this? And within 10 years, AT&T bought Western Union, which at the time had been the largest company in the country. So I think one of the reasons I love it.

Crazy. Yeah, it's totally crazy. I love history more generally. I had the opportunity to TA the history of business class at Wharton. and I love history, love business history. I love this book in particular because I think it just shows you the behind the scenes of how a lot

that feels fixed in the world came into existence and how uncertain it was and the sort of arbitrariness of the path that things took. So I highly recommend that book. Engines That Move Markets. Engines That Move Markets.

Aliens, believer or non-believer? believer non-believer i i uh i think if i was betting money that i would bet money on there being aliens uh why there's uh two two uh two things i point to number one um humans always think that they know and then they're always wrong that's like the only thing that humans are consistently good at uh the world is flat oh no it's not uh uh yeah small detail yeah Oh, yeah, yeah, yeah. We botched that one for a little while. You know, bloodletting, cure for, you know, ailment.

Oh, nope, actually not at all. There's nine planets. Wait, nope, now there's 1,400. Yeah. So I default to, you know, unless there's strong evidence that something's not possible, I default to possible. Yeah, what else? I mean, there's Fermi's paradox or Drake's equation. So the reason why I ask this question is it started out as if aliens are real.

So you have to just, okay, they're real. Yeah. do they have pets or are they all one single species and there's no concept of alien pets i love this question that's where that question came from originally people forget i used to ask every single person do aliens have pets you would define the the smallest union uh you what is the minimal criteria at which you would consider something an alien this is your show you define oh man you're pro uh i mentioned consciousness just anything with consciousness regardless of form size something like that yeah that's fair um and then you know on a different planet i mean

dude they're definitely aliens there's got to be aliens but are there alien pets oh i'm on the side of alien pets all right uh so am i so am i but i'm i'm just that's my thing is if you if you've looked at all the movies yeah every sci-fi yeah there's no there there might be maybe that's why they're always invading that are together they're sad you know if they had dogs well here's a good one for you uh do we want them to come in contact with us in all of human history yeah the invaders have had a huge advantage yeah yeah no yeah 100 i mean i think they're yeah yeah uh no probably the answer is no the answer realistically is no and and you know it's actually interesting right now um there's sort of a burgeoning you know

private space sector uh that's emerging commercialization of space uh undertakings but you even simply you could see this through the lens of of um spacex and blue origin and virgin galactic and these are private um and it's it's funny because in in my mind there's some some parallels to um uh explorers in in uh european explorers uh you know if you if you imagine what christopher columbus or uh some of the other names for francis drake from that period we're doing that you know they're they're going on very long journeys where you could easily die just in the process of getting in the direction of where you're going and you don't know what's on the other side um and uh some of those journeys were financed privately by merchant banks and and

essentially wealthy families uh but but uh nobles um and and it is kind of interesting to draw a parallel the the the form has changed it's not sailboats uh but uh now it's uh rocket ships and and they're they're going you know uh the journey is perilous today it's being privately financed the jurisdiction that countries have over where they're going is kind of unclear so it's likely to be the wild west in terms of how rule is enforced who gets to claim Mars first

you can get into all kinds of questions that I don't think people really want to know the answers to do you think in our lifetime people are living either in space on an international space station

type uh so obviously virgin galactic is is is pushing the frontier of uh space tourism do you think people are living uh in space or on another planet in our lifetimes i think humans will make it there in our lifetime so let's i'm 31 i'm assuming you're a similar rate um so let's say that we've got let's be real uh ambitious to say we got 80 years in our life so another 50 yeah average is 78 but yeah all right so so perfect so we're both gonna get hit by a bus on the way yeah i'm not walking out with you don't make joe tell you about cloak is luck but uh no so the um long story uh no but if you think about that so 50 years

uh we are what 60 years uh give or take since man went to uh the moon so the odds that we can get to mars probably happens in our lifetime i don't know if it is like true colonization like like there's a difference between like can we basically probe or is it possible to get somewhere and then like hey are you sending your family right and the the colonization i think is that one's a little bit tougher for me to see that happening but getting there I'm like pretty confident that we'll get there in a lifetime

I'd love to know some of your other predictions about the future can I ask you two more questions yeah well actually that's how we end you get to ask me questions so go ahead well I've got a crypto question but I want to ask you two other questions about the future there's 170 odd countries today in nation states

do you think we have more or less than 100 by the end of your lifetime 170 170 today the mauritius is this island country yeah yeah obviously so uh i've got a nuanced answer i think that there will still be the quote country but the definition of a country will change and what i mean by that is it won't be so much tied to the physical borders of like this is my land get out uh it'll be much more a uh a group of people who choose to have themselves governed under a collective rule right so like estonia is a good example of this like all of a sudden estonia is taking citizenships from people who've never even been to estonia is that right

yeah they've got like a they've got like a digital citizenship well so like you could become a digital citizen of estonia and never go within their physical borders yeah and so like i don't think that the country of estonia goes away yeah but all of a sudden wait a minute like Their sovereignty And how they think about citizenship Like all that starts to shift The harder part is like what does it become I'm not sure but I do think that

The idea of what a Country is changes In that environment where you no longer have the Physical constraint which is you don't have to Co-locate these people but you just have to share a set of values A set of standards You would actually expect there to be More of these right because the

Barrier to entry would be lower and you could also Potentially have multiple membership I mean that would that would depend but you you could actually see like um that's so interesting that that well california is going to be a country by like the next election right i don't know about that i i or what is it what is it uh who yeah tim draper's got three three countries coming out of california yeah yeah that's right that's right well you know that that is but think about the internet the internet's a country right like like i think a lot about this idea of everyone is a citizen of the internet and uh it's the largest country in the world and yeah there's some ramifications of

the physical place in which you access the internet but it's kind of like the ready player one like you go into the portal yeah right and once you're in the portal yeah here we go right and so i think that uh it's you know is twitter a digital country because it has its own fiefdom its own rules it's everyone's a citizen we all act along it there's a quote-unquote government right but it's twitter censoring us deplatforming and what well you say the same thing about uh you know so you've nation states then you just said you have you you'd say the same thing about uh uh islam or judaism or catholicism or um yeah it's sort of an interesting spectrum there but you know conventionally the internet um allows a long tail uh a fragmentation to to emerge um

that's you know uh uber allowed a long tail of people to become drivers airbnb a long tail people to open hospitality youtube a long tail of talk shows and uh wordpress long tail publications facebook long tail of communities um so you can imagine you could imagine sort of a long tail of more formal human organizations there's a great article do you know jesse walden at indresen uh i know who he is yeah he wrote a great article on on um crypto networks as co-ops uh as a digital way of instantiating a co-op so um uh uh you know land of lakes is a co-op There are a number of other co-ops sort of, you know, among us today, but the preferred way of organizing humans is a corporation or a limited partnership.

But, you know, his argument is that a protocol is a way of forming a co-op is shared set of rules. You mentioned Airbnb. I'll give you a great quote somebody said to me. They said, Airbnb is the largest hospitality school in the world. Oh, wow. Because what'd they do? They taught people how to run hotels.

Yeah. No kidding. Or run rentals. Yeah. And there are usually people who had no formal training And Airbnb said here's some best practices That's so fascinating Uber

The largest taxi School in the world There's so many parallels Ford in the early part of the 20th century In like 1918 Had a school There was a Ford school Ford by the way also had a bank

And also built housing So you have Ford credit There's a Ford store so um yeah it's so interesting i mean the the reason i love business history is because nothing is new nothing is new it just changes colors and it just changes clothes but uh so um you know yeah the idea the idea that the way of conceptualizing airbnb is as both a labor training program as well as uh as well as uh businesses is a fascinating way of looking at it what are the questions you got um uh uh another question i want to ask you um uh it was on on the crypto front um

and uh i was curious to ask you from from your from your venture seat um how do you think about what are there particular pockets of crypto that are most interesting to you today um and has that changed over the over the last year um changes all the time i'm sure it changes i'm sure that changes all the time and and uh you know i i remember there's a lot of enthusiasm for um new protocols obviously at one point um uh there's a lot of enthusiasm for custodians at one point um uh there's i'm curious i'm curious yeah it's their themes there is it tend to be more so i tend to think of it as um we've got some very core thesis those thesis plays out in a lot of different ways so two of the core like probably the the two core thesis we have is

every stock bond currency commodity will be digitized over time and the second is that humans will trust algorithms and software over other humans so take the algorithms and software over other humans first uh that plays out bitcoin as a store of value like i trust that this software system is going to correctly store and secure my value for long periods of time okay but then you can also go to well what about defy right there's a whole world there of me trusting software over humans right um but again to your point about like nothing's new yeah well like i trust google maps for directions i don't trust the person on the street anymore right like yeah like i'm gonna ask somebody a question hey do you know you know how many world series do the new

york yankees win and you ask three people in new york and literally you might get three different answers google always right right right and so it's like i trust that algorithm or that software um and so if you go down the line um i think that that's like a really key theme but it plays out in a lot of different ways uh when you go to every stock bond currency commodity gets digitized that is um playing out in uh people who are digitizing them people who are uh providing custodianship for them people who are providing marketplaces for them like you almost have to think of as like the thesis is a bucket and within those buckets are the applications or the execution of that idea um but one that i'm uh becoming much more um i think uh excited about that people

aren't talking about is using until now well it's using this technology this being um decentralization governance etc uh as the escape hatch for privacy and individual freedoms so like you were talking about earlier governments historically have done nothing but continue to encroach on individual freedoms everything from simple things like there used to not be a federal income tax right got introduced in a time of need right and it never went away i shouldn't know that that's fascinating things around surveillance state you know you just why do we need that security camera on the street corner now there's 20 of them right you know all that kind of stuff so what ends up happening is there's usually pretty decent explanations as to why to do this at some point it's just that

the slippery slope is slippery right and you you just don't go back yeah so right yeah the only way to go back or to reset or to give back freedom it's not to argue with the government or fight the government etc because actually they're doing what the rational thing for a government to do is they actually are trying to protect people it's just that there's a balance between protection and freedom what you have to do is you have to give people tools that they then to opt into right and so if you look at like bitcoin versus a central bank digital currency there's going to be tons of people who use the central bank digital currency because it's easy their government backs it blah blah whatever but there's going to be a group of people who opt out

of that system and opt into the more individual freedom privacy type world and so like i don't know exactly how that plays out but it's something that i'm starting to pay more attention to because it feels like it's applicable to money it's applicable to surveillance it's applicable to your data it's applicable to um the the way that you interact with things right so you know if we move to this automated world uh and let's say that you're driving your car down the street and uh rather than pay your taxes your car just pays for what it uses yeah so as you're just paying sensors along the way well like who's getting that data right you know you could really quickly see this like kind of orwellian dystopian type world that uh i don't think is

like five years away but like if you walk backwards let's say it takes 30 years to come we're doing some things today that are going to accelerate us getting there yeah um so i think that's a big one uh and then the last one is um this idea of uh the people who have nothing can leapfrog the people who have something and so if you look at like mobile banking in uh like eastern african countries right um m pesa did a great job going from we have nothing to we have better mobile banking than most people in the u.s right um and so like money's one thing but there's a whole bunch of other things around technology and you and i were both at facebook around a time where like they were running out of users on the internet right what they do let's go give a bunch

of people connectivity yeah like you know and let's go give internet to everyone well now increase the population of the world we're gonna so like now as these technologies get built whether it's a bitcoin whether it's um you know the financial services or protocols or whatever they're going to be built and scaled on the back of that connectivity that didn't exist 20 years ago so i actually think that companies can grow faster now yeah right of course yeah um and they can become global from day one because people forget already you know talk about history of business a company in the u.s used to penetrate the u.s market yeah and then like let's have a board meeting should we have international expansion this year right yeah well now like you just turn

a website on and bam you're global yeah and so i think like those are all trends that come together and then i'll kind of summarize it with one other piece i think is important is it's not just about blockchain or crypto it's the melding of a lot of different technologies so machine learning is not going to be uh siloed from a blockchain or from voice or from you know some other technology it's really going to be the culmination of a lot of these or the melding of them together and if you go and you look at you know amazon's a great example google's a great example you know even facebook etc it wasn't just like hey i'm gonna build this internet company yeah there was a whole bunch of other technologies that were all getting integrated with the quote internet

that allowed some of those companies to be successful and so i don't think that's going to change now either well do you think um at what when you think we'll see a country where people just start using uh maybe it's a stable coin maybe it's some other coin uh but you know it's integrated into what they do and i think that we're going to see two different types of countries be the first we're going to see like the china the government is heavily incentivizing a little surveillance action going on you know yeah this is good for you wink wink stomp stomp you know we're watching type thing um so i think that's going to be one attack vector to get there which i think most people in the democratic kind of american values world disagrees with

but the other one is going to actually be the countries that uh have very innovative leadership but realize they have very little to lose and so uh you see like bvi um recently tried to digitize or tokenize their currency um you've seen countries that are under heavy sanctions basically throw the hill mary um and and so i think like that's the the world where uh it goes back to what is it the uh is it jim collins book um good to great uh which basically or i'm sorry what's the saying the good is the enemy

of great I'm sorry so good is the enemy of great and like if you think about the US great is the enemy of good

no good is the enemy of great so like the US is good but we don't have great payment infrastructure we don't have great

you know monetary policy all this stuff but it's good enough it serves the purpose you and I need right it's worked for so long that we get complacent

somebody who has nothing who has no infrastructure who has no you know discipline and monetary policy etc they are able to leapfrog us and become quote-unquote great but if you go back the u.s was great at one point yeah right in the sense of uh when we came and the industrial revolution and all this stuff like we leapfrogged others yes and so it's this constant competition in a free market globally that um we've got to remain i think vigilant yes and uh

mark usko has this thing and i'm going to mess up the numbers but you'll get the general gist uh for every one uh engineer that graduates in the united states i think that there are 12 engineers that graduate in south korea but for every one lawyer they graduate we graduate 45 right and the and his point is and again those those data points probably somebody's going to tell you know tweet me and say hey i got the data wrong but that general trend right and the point of the story or the joke is they're a country of wealth creation whereas we are starting to become

a country of wealth redistribution, right? And I think that it all goes back to this one point kind of in closing which is I have the fortune to talk to a lot of investors, right? And investors that frankly, one, shouldn't be in the same room as me, right? And two, that I admire

because they're good at the thing that they do, right? And I'm usually there to try to convince them about Bitcoin or crypto or whatever. But I always ask them one question. And I say, what is the thing that separates the top two or three people in your strategy from the top 1%? So the absolute world-class best from the people who are really, really fucking good. And historically, the most common answer is something to the effect of they cut their losers faster than everyone else. and they press their winners harder than everyone else right so pretty much strategy across the board the second best answer or the most common answer has something to do with following

demographics wow which is very similar to the market conversation when you're building a company pick the right market yeah well when you're investing yeah follow the demographics pick the right market and so i think that there's a lot of parallels there that um just people forget right we all think we're smarter than than we really are all this kind of stuff but when it's hidden plain sight to to some extent demographics and yeah yeah i mean like imagine if it's just hey i'm going to invest in the public equities in countries that have fast growth rates in young populations populations high school i have no clue what that's looked like over the last 50 years my guess is it's probably performed pretty well linear regression over the last 400 years of

history if you either through subjects or population had the most you know you generally did well and i think we're about to see that with china that's definitely the story with the u.s It's easier to get per capita from $30,000 to $40,000 on a larger number of people. Absolutely. So, yeah, I think demographics are huge. So it makes sense. Yeah. All right, man.

Listen, thank you so much for coming to do this. Absolutely. This was fun. I'm a huge fan of what you guys are building, obviously. We have invested. We are partners. Thanks for being a great backer. And everything.

Where can people go find out more about Bitwise? Bitwiseinvestments.com. Our Twitter is at Bitwiseinvest. Where can they find you? I'm Hunter at BitwiseInvestments.com and I'm at HHorsley on Twitter. H-O-R-S-L-E-Y. S-L-E, wow.

Wow, that's extraordinary. You got that. People mess that up all the time. Where they switch the E and the L. That's right, yeah. Yeah, well, they just don't pay attention. Attention, no detail. Until now.

All right, man. Thanks so much. Thank you. Thank you. This is great. Hey, everyone. Pop here. If you like this episode of Off The Chain

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