The Pomp Podcast - Meltem Demirors: The Dark Side of Crypto

Episode Date: August 27, 2018

In this conversation, Meltem and Anthony Pompliano discuss the intersection of technology and finance, why she believes stablecoins are the new CDOs, and where cryptoassets fit into an institutional investors' portfolio.

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. Meltem Demirz is a cryptocurrency investor, advisor, and advocate. Meltem previously worked with some of the largest companies in the world, was a vice president at Digital Currency Group, the founder of Athena Capital, and is the current chief strategy officer at CoinShares. In this conversation, Meltem and I discussed the intersection of technology and finance, why she thinks stablecoins are the new CDOs, where crypto assets fit into an institutional investor's portfolio, and finally, we covered a concept that she calls the shitcoin waterfall.

Meltem is one of the most important voices in crypto. I hope you enjoy this discussion as much as I did. Anthony Pompliano is a partner at Morgan Creek Digital. All opinions expressed by Pomp or his guests on this podcast are solely their opinions and do not reflect the opinions of Morgan Creek Digital or Morgan Creek Capital Management. You should not treat any opinion expressed by Pomp as a specific inducement

to make a particular investment or follow a particular strategy, but only as an expression of his opinion. This podcast is for informational purposes only. All right, Meltem. We've got a lot to get through. What up? Keeping it cash on a Thursday.

Yeah, we had a great warmup before we turned on the recording, so it should be fun. Let's go over real quick for people who don't know just your background. Sure. And then we can dig into all of the controversial ideas that I'm sure you're excited to talk about. I don't think they're controversial. They're just, you know, thoughtful, I hope. But we can debate the merits of that. So look, I don't want to be boring. So I, math and finance background, started my career in the oil and gas industry during the onshore shale boom, have seen what irrational bubbles look like from the inside of some of the world's

largest corporations, focused primarily on oil and gas M&A, oil and gas strategy, and then decided to go, as a consultant, decided to go in-house at ExxonMobil, worked for the treasurer of the corporation there, and got to sort of see the inner workings of which at the time, the world's largest corporation, which is really interesting, learned a lot there, went to business school at MIT, did a lot of work there on kind of the fintech startup wave that started around 2012 2013 got into the venture space and really just saw so many interesting problems in venture with incentives between investors and entrepreneurs had been bitten by the bitcoin bug and then met barry silbert who'd been working on this idea

called digital currency group joined him in 2015 to build that out spent three years there took the firm from 20 portfolio companies to 120 built a bunch of great businesses did a lot of really interesting things and also was there really for the move from Bitcoin only to enterprise blockchain, then to tokens, and now it's back to blockchains via security tokens. So it's been interesting being a part of that evolution and really being involved in many different parts of the ecosystem. Now what I do is I'm at CoinShares, which is a digital asset management business. I'm really focused on building the next generation of financial products and services for retail investors, institutional investors, and most importantly, the crypto space.

We need to start bringing more institutional asset management principles into this industry to really make it credible in an investable asset class. And it needs to be done in a way that is kind of true to the principles of crypto, but also incorporates the last 150 years of knowledge around corporate finance, behavioral finance, incentives, etc. Absolutely. What originally drew you to Bitcoin? Why Bitcoin? Yeah. So the original draw to Bitcoin was I needed to send a transaction and I needed to send it to a market where there was no real banking infrastructure. My family's from Turkey originally. And I looked at a bunch of different options. And one of my friends like, oh, have you

heard of Bitcoin? And so I went on Reddit and I went to r slash Bitcoin. And I was like, wow, there is a lot to unpack here this is wild it's weird um i had to then get bitcoins so i pinged my brother who you know he and i grew up playing video games together he's a programmer and a developer so he's always kind of on the bleeding edge of these things and he's like yeah local bitcoins.com so i went on local bitcoins and i met someone in a parking lot and it felt like a drug deal but it was a bitcoin deal which was pretty exciting and from there just the more i started learning, the more interested I became. Luckily, in grad school, I had a lot of free time. I was at MIT where there was a lot of work going on on campus with students who were mining in their

dorm rooms. Some students got sued by the state of New Jersey for running an illegal lottery because they were running a Bitcoin faucet. So it's just really fun, really interesting. And then the whole crypto anarchist thing, just add an extra layer of interest. I never really thought about the relationship between money power politics and societal structure and so i think for me that was really a moment where i started to just become a lot more aware of what was happening in the world and the implications of changing the structure of how how money works absolutely it's um i think not talked about enough that uh not only is this a technology solution right but it's also opening the mind and really drawing attention from a psychological standpoint what what do you think

is the most misunderstood concept in crypto i i do think the word d says so there are two things that really trouble me um i make this comment often i say a lot of times when people who are new to the crypto space and who are skeptical enter the crypto space or go to a meetup or a conference what they say is i feel like i walked into a dystopian anran novel filled with 25 year white dudes. And look, that's not a criticism. Oh, I just got a check mark. I think we have two 25-year-old white dudes in the room here. But look, here's the two things I think we do that don't really translate well. And to the point you made earlier about this being psychological, the way I would phrase that is this is a battle for hearts and minds. If we look at innovations,

if we look at big shifts in structure in human history, it's really about moving hearts and minds. And I think we're missing that a bit right now. The first concept that's really overused is this word decentralization. And decentralization means many different things. You could have decentralization at the protocol level, both from the distribution of wealth, so kind of a Gini coefficient analysis, as well as the distribution of power and who gets to write the code and set the rules. And we're seeing that being challenged, you know, Bitcoin, huge power struggle all the time. Ethereum has Vitalik, who more or less has been their anointed leader. And I think every protocol kind of struggles with decentralization.

Then you have the networking layer decentralization. So mining power, how that's distributed, staking power, how that's distributed. And then at the application layer, are there a lot of different entities producing applications? Are those applications decentralized? That word is so poorly defined, and it's used as an ad hominem attack on projects without any qualifications. So I think that's one kind of concept that we use a lot that we don't really articulate very well. I think the second component is there is this moralistic bent the crypto community has, where I think a lot of people who adopted Bitcoin and other cryptocurrencies early, they have become wealthy they've gained independence of thought through luck and

some degree of conviction but I think for a lot of people is really luck being in the right place at the right time and they've now started to attribute that to intelligence and some sort of moral superiority and I think that's a troubling narrative and it's also not a very inclusive narrative so I think for people for hearts and minds to really shift we need to start moving away from this moral high ground and really start thinking about, OK, what does the next billion Bitcoin users look like and how do we get to that point? It's probably not by talking about decentralization and, you know, all of these political and economic principles by giving

people something they can use that makes their life better in some way. Absolutely. I think that's fair. So let's go back first to this idea of decentralization. Right. In non crypto, you know technology uh the idea of a founder being able to you know really drive go through obstacles uh recruit people and set this vision that uh we've kind of made it you know really sexy to be a founder right and as a former founder it's the least it's really crappy you're like you haven't showered in a week you haven't eaten a proper meal you have no idea what's going on you're emotionally exhausted you're constantly living between a state of euphoria and like tremendous soul-crushing anxiety but yes the narrative is it's sexy the the duck analogy

right so if you look at a duck in water above uh the water they're cool calm and collected below water they're just paddling as fast as they possibly can so they don't drown right uh but but you know in this decentralized world this idea that there is no leader right and and you don't need to um have a single point of failure or that uh you know threat uh component how do you think founders and leadership play into a decentralized world and is it important that's a really interesting question i don't think i have a definitive answer but again going back to this idea of hearts and minds and how humans operate i think that people are drawn to characters even even though the crypto community to some degree tries to be decentralized,

what's really interesting is we have a very strong cast of characters, and they're very opinionated and very loud. What I think it goes back to ultimately is, look, I've been in the venture space for quite some time, and what's interesting about it is in the venture space, the way that founders operate, you're running a company, right? Companies require organization. And the reason that the corporate form was created, it's really just a governance structure, right?

Because establishing contracts for every single piece of work, every single transaction doesn't make sense. So the corporate form was created to align incentives between investors, employees, managers, stakeholders in that entity. And they're all incentivized to work together towards a common set of goals. And that's reinforced by legal contracts, financial incentives, and the terms of shareholder value and bonus structures and how people get compensated. And it's taken us 200 years to get to a workable corporate form, right? And we see that reflected in the size of the equities market. People are willing to put trillions of dollars into that corporate form in the form of investing in stock. What's interesting about crypto is there is no such form, right?

The crypto firm, or what I like to call the theory of the crypto firm, is highly immature because this is new. But what we see is people are trying to replicate things that have existed in the corporate form for the last two centuries in the crypto firm, and it doesn't quite work. Because right now, if you're an investor and you're putting capital into a crypto firm or someone who's capitalizing their company through a token, you have no rights. You have no preferences. There are no covenants. There's no legal contract that binds that founder to do anything on your behalf. And what you then see is there are tremendous abuses of power. There's tremendous degree of moral hazard.

And I think I don't mean that to say that people set out with that intent. I just think the form we're using is perhaps not appropriate for what we're trying to do. So I think the narrative around security tokens is really compelling because investors can understand that. But when you say to someone, if you read the terms of some of these tokens, you know, there's a disclaimer in every token sale that says you've no rights, you're not entitled to anything, we're not promising that we'll give you anything. So the idea that we're going to give people billions of dollars on the basis of social trust, I think, is an imperfect idea because blockchains don't change human nature. Absolutely. Well, and I think that what's interesting is, you know, people forget that these securities started out looking very different, right? So when equity was first, you know, created and somebody said, I'll give you money to run this company, it wasn't for enterprise value to then go public or to be acquired.

It was literally a claim on cash flows. Exactly. Right. And so it's almost like we're coming full circle to some degree with, you know, all this on-chain governance or claim to, you know, transaction fees, et cetera, in the blockchain world. How much of that do you think can be solved by technology versus the psychology? That's a really great point. And I think that's probably a great way to summarize what I just spent five minutes articulating. So I think what's interesting here is you have a lot of people, a lot of the people

in the crypto space who are working on these ideas tend to be younger. I think a lot of them haven't worked in corporate structures before. And that's not a bad thing. There's a lot of value in experimentation and innovation because you can learn things that can be applied at scale i think the challenge here is is that the learning process has gotten a bit bastardized because we are building things that are highly imperfect that are very flawed in a lot of different ways both from a technical perspective government's perspective and actual scalability and implementation perspective with the practical application perspective

yet these projects are being capitalized at valuations that exceed the average ipo by factor of 10, right? And so I think we kind of have created this false sense of success where people feel, hey, I'm able to raise a shit ton of capital. It's literally a shit ton. And they have no plan on how to deploy it. And I think the interesting conversation I have with founders, because one of the things I've been focused on is helping people with treasury management, is there's a difference between need and want, right? So maybe I need $50 million to build this idea but the market wants to give me 500 million so what do you do yeah exactly and blockchains don't change human nature right there's a lot of ego involved um this this crypto environment right

now the narrative is so focused on price and how much money was raised that we're kind of getting to that stage where i think the money needs to get flushed out of it and we need to go back to building and this goes right along with carlotta perez's research around capital formation bubbles and how that corresponds with technical innovation cycles. But a lot of this is we have this technology, but can we articulate a clear reason that this technology needs to be utilized for things that we already do in the existing world? And I think that narrative just isn't there yet.

It's the tradeoff between, because there's so many technologists, right? They want to talk about technology. They call it like the hacker mentality of they're tinkering. They make technology do something that they haven't seen before or it's faster it's better or whatever and they start showing people people get excited but i think there's too much focus on that technology and instead if you look at it the opposite side and say let's look at it from user behavior yes right now the user actually doesn't care what's under the hood right exactly the you know there's some users that will right obviously

some small subset but but the mass consumer mass user doesn't actually care what that technology is they just want to accomplish what they're trying to do with the piece of technology but i think this is part of the challenge when you have um a movement that really started with engineering and technology is you have a bunch of developers and engineers who for the first time are discovering finance. And they're saying, oh, we can treat finance like code. And there's an input, and then there's a contract, and then there's output. And the thing is, like, you and I have worked in traditional finance.

That's not how people think. People don't respond to an input function with particular output. And I think my friend Jill Carlson says it best. It's not you put in a token, you get out an action. That's not how incentives and systems work. It's a little bit more complex than that, because human beings react to emotion. Human beings, I think, are fundamentally irrational, and again, behavioral finance is a field of study that's only really half a century old, 50, 60 years old, and we're still learning

a lot. Look at what happened in 2008. Not a lot of people saw that coming. Look at what happens in individual asset classes. We have all these great ideas, and what we see is the breakdown of markets. look at the equities market right now. Look at the FAANGs, right? Absolutely.

It's an imperfect science. But I think treating crypto like a math problem, treating it like an engineering problem, treating finance and money in that manner is interesting. But I don't think that works. And so I think the next five to 10 years are probably going to be spent trying to figure out how to integrate other disciplines into.

so so i think that uh an example where the finance community has previously treated money and finance as a math equation or a math game right is with cds like cap m and whack and dcf and all these valuation models like well so if we go to the cdos right you recently said um you know stable coins are basically the cdos of crypto explain what you mean by that right so so i think here's the problem is the the crypto community has latched on we tend to latch on to narratives and then we work through a narrative for six to nine months right so the narrative that started developing last year was oh the reason that people don't want to invest in crypto is because it's too volatile and moving into and out of fiat is too difficult and so people started saying why don't

we create this concept of a stable coin and we've already seen iterations of it i think part of the impetus frankly was the fact that tether was so successful and so widely adopted that it kind of shocked everyone um but i think the problem with stable coins now and now every platform is launching their own stable coin right so you have collateral backed stable coins like tether or like digix which is backed by gold then you have um collateralized stable coins so things like maker or haven that rely on kind of a two coin system where you can redeem or create the stable coin through a secondary mechanism and then you have the idea of a programmatic quote-unquote decentralized almost decentralized bank structure or sovereign issuance structure where people are

issuing assets then there's complex governance structure and i think the problem is this is number one the thesis as to why stable stable coins need to exist has not been proven true right same problem with fat protocols like that caught on and then we saw billions of dollars of financing flow into nonsensical protocols because everyone was so addicted to this idea of fat protocols i think we have the same narrative with stable coins where we're creating this false narrative in our minds because at first blush um it makes sense right it's like if a then b therefore c must be true and we know that's not always true so what i think we're doing is we're number one we're financing stable coins through an investment structure that doesn't align

incentives right so going to an investor and saying hey if you buy this asset early on then you're going to get to participate in value creation or in the flow of payments through this network like that doesn't really work no one's paying the fed to create dollars so i think that's a weird structure and i think again what we're doing is we're creating all of the systemic risk right because now we have stable coins on protocols and then on top of the stable coins there are more coins like it's coins all the way down coin coin coin coin coin and the thing is at some point we stop being able to untangle how any of this works. And the degree of systemic risk in the system is already so incredibly high. You think about the fact that Zappo custodies 10%

or more of the world's Bitcoin. You think about the fact that Coinbase holds a lot of crypto assets. You think about the fact that Binance probably hosts 50% of traded volume in all assets. We already have a lot of systemic risk. We don't need to layer in 50 to 100 to 150 different stable coins that are all abstractions of themselves with no governance structure, no auditability and frankly like no one has the appetite to monitor this shit either yep so it's unnecessary part of it too is and i think we agree that uh if you have a heavily an engineer heavy team or a finance heavy team right you're at a disadvantage than the team that is more diverse right so having a combination of people who come from the engineering world from the technology

and product world from finance from design etc by bringing all those people together you get different experiences, different perspectives, different knowledge bases. And so the product is probably going to be much more usable, right? And also technically sound, right? It's kind of the theory. The other piece I'll just add to that is I think it helps to have people with different backgrounds and different experience. What I always like to say is history doesn't repeat, but it rhymes. And I think a lot of times when people come in and they pitch an idea to me, I'm like, that's interesting, but this has been done 50 times before. Have you gone back and just looked at it?

And so I think sometimes we sort of jump on ideas because of the newness of the idea, when in fact it's really just an iteration of what's already being done in other industries. So I think there's a little bit of intellectual arrogance in the crypto community. And I myself, I think when I started in Bitcoin, was probably guilty of it, and I was a little bit of an asshole.

But as I've learned, I've really started to appreciate when I go into meetings now with people outside the crypto space, I actually spend most of the time not talking. I spend most of the time just asking questions and trying to understand someone's mental model. And so in that, where do you think crypto assets sit in a traditional capital allocators portfolio? How are they thinking about that right now? Yeah, so I just put out some content around this, and hopefully in the next few days we'll push out a longer report with a lot of great data in it. So, look, if we look at this institutional investor class, there's about, in the U.S., there's about $28 trillion of institutional AUM. And that's mostly pensions, but that's endowments, family offices, hedge funds, venture funds, PE firms. Crypto market cap is $220, $250 billion on a daily basis right now.

And so what I think is challenging is right now those firms are allocating to low-risk securities, right? So T-bills, strips, bonds, et cetera. That's a small percent of their portfolio of cash, money market stuff. They have traditional equities. They have real estate. And then maybe 15% of their portfolio is in higher-risk assets that focus on early-stage capital formation, to growth stage capital formation so that's growth equity and pe it's hedge funds and it's venture and so as we look at that where do crypto assets fit in monetary instruments probably the closest

analog to something like a bitcoin right so that's more like your money market bucket real estate um that's probably more like securitized assets right so can we securitize assets and make them and more flexible, maybe. Equities, that's more like token offerings that represent equity in privately held companies. That kind of displaces that PE bucket. ICOs probably fit more into the VC bucket, where it's really early stage ideas getting capitalized.

So what I'm trying to think of in the context of an institutional investor is, what are those analogs? Because I think there may be new capital that flows in, but likely it's more of a displacement of existing allocations into some of these new asset classes. And I think what's challenging there is you have to frame the narrative in a way where an institutional investor, A, understands what they're buying. It fits into the mental models they have that have been trained, you know, over the last 50 years.

And then they also have to be able to hold it, trade it, deal with it, talk about it to their investors in an easy way. And I think that's where the market infrastructure side is a little immature. We've been so focused on the creation and distribution of assets that we really haven't started thinking about the management of assets. So that post-investment life cycle is pretty underdeveloped. And then end of life of an asset, right? So what happens when a token is dead? How do you redeem a token back into cash? What do you get?

So there's going to be a lot of experimentation. But I think the slice of the pie that's going to go into cryptocurrencies, true store value cryptocurrencies, ICOs, security tokens, and securitized assets is initially going to be much smaller than we imagined. But then when we start being able to prove that, in fact, that efficiency, that liquidity, and that sort of usability component that we talk about can actually be realized once there's proof of that, I think it'll grow much more quickly. But we're not doing a very good job right now. So I definitely agree with that. And I think that what one hope of a lot of people in the crypto world is that some of these traditional legacy players can come in and legitimize the space. Right. And so ICE, for example, coming in and saying, hey, we're going to create this platform. Right. We're going to kind of put our name, our experience behind this. How do you think that impacts the space, not only from the development of crypto assets and networks, but then also from the institutional investors perspective?

Yes, I think the ICE announcement is one that I'm still processing. In one way, I do think it's really good because it adds legitimacy to the space. I think particularly Bitcoin, right? Bitcoin is that asset that's been in the market long enough. There's enough data around that investors are starting to get more comfortable with the idea of Bitcoin. It's familiar. Exactly, right? But also that body of knowledge exists, and we now know how to deal with it.

Most importantly, you know how to value it and market. I think that's a huge problem. we don't really talk about as much um so bitcoin's starting to feel familiar so ice coming out and saying look we're going to enable you to really easily with a trusted partner that you already can trade with buy and sell bitcoin like that's that's material um i think the hard part is is once the financial institutions start moving in they're gonna do what they do right like banks got a bank so people started talking to me now about the idea of extending leverage on top of bitcoin and i'm like oh it's coming oh shit um that is not gonna go over like that's the

antithesis of why bitcoin was created um so i do think there's this component and what i always say is there's the revolution camp which is where i started out when i got into bitcoin like down with the banks like fuck the institutions um and that's one narrative and then there's the evolution narrative which is hey we're gonna start with something that looks smells tastes feels like what's already happening in the world of institutional finance and then over time it will evolve in form to be more reflective of all the technical capabilities of a blockchain based asset or cryptocurrency which which do you think is more likely to occur today the revolution or the evolution okay so here

it actually depends on the broader macro environment which is something I don't think we think about often inside the crypto bubble if we have another 2008 if we have another Cyprus or another Greece then I think we're gonna go revolution and the thing I always think about is are we ready right like when that narrative starts to really accelerate and when people have that impetus when there's that what I always think is path dependence right so if we stay on the current path we're going to go evolution but if there is a massive force that jolts us out of that path then we're going to go revolution so this is fascinating because uh somebody asked me uh recently what did I think would get us out of

this bear market right and I said there's got to be some kind of catalyst right that will that will create some inflection point and i said you know it's a retail product is one option um not necessarily because i think people have a hard time buying bitcoin but it's more of the legitimacy insurance custody all that kind of stuff uh another could be that you know just some huge institution reveals that they've got you know a position that no one knows about right so if you know a sovereign wealth comes out and says listen we've bought you know billions of dollars worth of bitcoin right something like that where again you just get a bunch of legitimacy but the third one happened then like capital inflows you know that would really

drastically yeah well and so here's the third one and actually one I think doesn't get talked a lot about and you just mentioned so it's worth spending time on is if there is an economic chaos that occurs in a specific region or country that causes people to flow into Bitcoin for example because it is the best option available it's almost like we get to watch it play out as an example but let's go back to hearts and minds right so i don't think it even has to be economic i think if we look at the political climate in a lot of economies we look you know globalization was the theme in the 90s 90s and the 2000s um and now what we've started to see is like yes

globalization has changed the world integrated markets more efficient markets more assets more capital more cash has um lifted a lot of people out of poverty like objectively speaking if we look at the data people are living a better quality of life there is more wealth in our world than there was in the past but inequality has grown and um i think this is the the challenging part is a lot of what's happening it's social there's a lot of social unrest there's a lot of political unrest um and there's a lot of uncertainty and fear even in even with investors absolutely we look at what's happening in equities like the the dow hit 25 000 and everyone's like peak peak sell liquidate um what are we gonna do and it kept going up everything feels overvalued

you look at real estate real estate feels overbought vc everything's overvalued um and so investors are looking at the world at this macro environment they're like in a world where everything feels overvalued and overbought in a world where we're really not sure where alpha's gonna come from what do we do absolutely i think that creates a lot of room and i think again what we as an industry need to start to think about is how do we win hearts and minds this is uh this is where the virus is spreading the phrase came from literally the the thought process was uh i originally said uh one of bitcoin's greatest qualities is that it's captured i i said the mental energy of a generation right people were so excited and the talent was flowing into the space

The capital was flowing into the space. And so you get these boom and bust cycles. But innovation follows that talent and capital, right? Because there's just so much mental energy being applied to it. But what I worry about is like we look at what happened with retail in late 2017, early 2018. And this is what I worry about is a ton of retail investors got crushed. Absolutely. And I think the hard part is those people aren't going to come back for a while because their trust has been destroyed.

and we did it through this financing vehicle where we created a bunch of wealth under the guise of decentralization that really flowed into the hands of a few people and and you see this right reflected in like all these crypto conferences and like people going to exotic locations and living really lavish lifestyles and then this gets glamorized which brings in you know less educated wave of retail and i find that a bit problematically crypto has a little bit of an image problem and yes like the sexiness like the sex drugs rock and roll appeal of crypto is definitely there um but i think it's a double-edged sword because a lot of people have gotten really burned and i think a lot of people look at it and they're like

yep well if you think of the last 12 months so uh we're doing this august 2018 so august 17 right is really when i think kind of the more mainstream audience started to at least hear about it. And then you go into October, really November, December. And then you look at the price depreciation since those days. There's a possibility that more people lost money investing in Bitcoin in the last 12 months than made money, right? On an aggregate number of investors. Absolutely. I have so many stories from retail investors and institutional investors, by the way, who really got burned. And I think part of the problem here is people like stories, right? Where Humans have a rich oral history because we tell stories.

That's how we share information. That's how we connect with other people. So the story around crypto up until January 2018 was this. Everyone had a friend or someone they knew who bought Bitcoin early or who bought Ethereum early. And the asset they bought went from X to Y. And that delta was, you know, 1,000%, 12,000%, 5,000%. And so people look at that and they're like, ooh, Bitcoin, Ethereum, Ripple. People got into these assets early that have been around for five or six years.

They made 100x, 200x, 1,000x their money. I want to do that. And then all of these ICOs are pitching, we're the next Ethereum. We're like Bitcoin, but better. And so people buy it. And then that doesn't materialize. And I think this is the problem with growth stories. And this is the way equities markets work, right?

like we see it happen there as well um it kind of reminds me of penny stocks absolutely no no and part of it is uh you're trading or gambling right you know that if you look at a hundred of them but you get to say you're in a tech investor right like you get to gamble full-time i love gambling i'm a degenerate i tell people i tell people that you can't you can't claim your investing if you don't have a thesis you don't have underwritten the risk and you don't have a price target well and i think this so this actually

is a really good point so um people are so focused in investing and this is true venture as well right i worked a lot on the post-investment side people are so focused on everything up to the point of writing a check and then once they write the check they're like okay my work is done no no actually your most important job as an investor one the investing process is about controlling entry price and it's articulating a thesis and a strategy as an investor but as a fiduciary your primary responsibility is that post-investment life cycle you have to monetize it how do you track the status of these projects right how do you articulate a cogent thesis on where your liquidation points are and how do you periodically rebalance and de-risk and take out some of the

principle and then reinvest how do you think about your role in the governance of these companies that you're capitalizing and what's so funny to me is like i've been doing this in the venture world with the portfolio companies i've been working with for the last five years and now crypto funds are like, oh, like maybe we have to be partners to these projects. I'm like, I feel like I'm taking crazy, like, am I taking crazy pills? I think so. It's just really interesting, the naivete and just, and again, I sound like a skeptic, but I just, I feel like we're not learning lessons. I feel like we're so unwilling to accept fundamental truths about human nature that we're forgetting that like hey when you write a check like what's part of the

revolution right is if you go from you know step one to step seven yeah you don't get the benefit of learning what two three four five and six actually the other thing is people have gotten away with free riding right both in their diligence process so people are like oh if andreessen invested if you usv invested i'm investing so that's there's free riding on the investment process side where people basically do no work and are able to raise crypto funds and then the second component is there's a lot of free riding in the post-investment process and it happens in traditional venture which why everyone's like oh find a strong lead because i don't want to do the work let's have someone else who is more capitalistic do the work to help you grow same

thing in crypto world right like and the problem is when you have a bunch of investors who are free riding off of everyone else and they don't actually own equity they just own tokens which are liquid right away what's the incentive to actually help people long term and this i feel bad for projects who raised money from investors they basically sold their souls to raise this money and then as soon as the token lists everyone dumps the token takes their cash out and they're trying to build so they're like passionate about building a vision and everyone who told them they were also passionate about it just fucked them right they're like cool we got our cash by and that's not a good paradigm either so i do feel bad for companies who have a big vision who are

trying to build it like that's why i think a lot of these projects who didn't set a date for releasing their token they're probably better served to not release their token until they've gotten the max juice out of their investors in terms of helping them so uh okay let's go to the dark side of crypto right i love that shit three three uh three things so one is let's talk about uh what we'll call air quotes professional investors right so funds and venture capitalists etc buying tokens at huge discounts and not disclosing positions and then dumping on retail what the shit coin waterfall i love the shit coin water all right so so so explain kind of your perspective as to what's been going on really i think you know some of it hopefully

is dissipating a little bit but uh maybe not as fast as we want it to but but explain kind of how that happens and then where you think um things need to change sure so i'll quickly describe the shit coin waterfall um it's it's a terrible way of saying something but um okay so the shitcoin waterfall is this you get a bunch of um people together and they're like we want to do this crypto project we're going to build a decentralized computing protocol right great um and so they go to a small group of investors typically insiders known people in the crypto space they're like hey we're doing a pre-seed round we're doing like a pre-pre-sale we're going to give you tokens at this price and everyone writes their checks and they raise a couple

million bucks great they then get to go market and hire more people and then they get to a point where they put out a white paper or something more articulated to the market and they go to a bigger group of investors and institutions, they're like, hey. Who are less on the inside. Who are less on the inside, right? And they're like, hey, we're doing a pre-sale.

Look at the people in this pre-pre-sale. They're awesome. But we're doing pre-sale now and we're going to give you a price that is 10x what they paid. Okay, great. So they pay 10x more and then they're like, okay, we're going to pre-sale.

Bigger audience, less informed. You get less information, less insight. and they're like hey we're we're gonna let you in and it's at 100x what the pre-presale people paid and 10x what the pre-sale people paid so you create this laddered structure right and this kind of resembles liquidation preferences right in in a traditional corporation and so you have this structure and then like okay we're gonna list the tokens on the market and they have all these announcements and they're going around telling their pre-presale investors like hey here's our plan here's what we're gonna do here's what's going on and then the pre-presale investors

by the way all collaborate together to say okay we're gonna buy we're gonna sell they can manipulate the price of these assets and actually my research team's been working on analyzing movement of coins like the network topology of some of these tokens through the process of listing and how that sort of evolves over time there's some shady shit people do and what ends up happening is people start dumping their coins on the market retail starts buying it there's this narrative that gets created like this is an amazing coin look at how innovative it is look who backed it look who backed it right look at the founders this is amazing this is so phenomenal they do a bunch of marketing they throw a bunch of events they do maybe a couple of press releases or partnerships or

announcements where they're paying people for partnership and then retail buys up these tokens everyone's exiting their position and it just starts dumping and the thing is the reason the shitcoin waterfall has worked historically is because investors knew there was always a buyer of last resort who was not them i think in this market right now because retail has lost their appetite there is no buyer of last resort it's institutions selling bags to one another and so i think ultimately this just becomes a game of who gets the most information the fastest and who can dump the fastest absolutely well and it now leads us to a problem of how much capital inflow is actually going on versus are we just recycling funds right and i think the circularity of capital

is really problematic and you see this like when a venture funds invest in a in a crypto protocol they do an ico they raise money from other vcs then and take that money and give it to another vc to invest in more startups who then create tokens that the vc buys that then the protocols it's like the circularity is incredible and i think part of it is there is no utility for these tokens there's speculative assets for ideas that are poorly implemented in some cases um and look it's not a criticism i sympathize with people with really big visions and are trying to build them But I think the circularity of capital problem, if everyone's motivated by financial return, what ends up happening is you have people who have a short time frame, they have a short attention span, and the minute that it's no longer worth spending a minute of time on a project because you're not going to get any juice out of it, what's your incentive as an investor to spend time on it? Yep, they're gone.

So, all right, so we've got the shitcoin waterfall. Yeah. Let's stay within bad actors in the investing community. Yeah. Uh, so I think the narrative normally, I don't want to use bad, right? So bad is a prescriptive word that imbues some sort of judgment. I don't think it's bad. People play this game in every market known to man.

So, so shit coin waterfall, I don't think is necessarily bad, right? As long as there's some understanding of what's going on. You said transparency. Yeah. The bad actor I think is, uh, the insider traders, et cetera. And where, where is that line? Right. Cause we've got some commodities, some security, some unknowns.

And so what I specifically am interested in is recently New York congressman, right, was arrested for insider trading, actual insider trading, right? And so how do you think about a traditional, established, well-governed market like public equities, right, where obviously people who are in positions of power, right, are coming under scrutiny, right, and arrested, et cetera? The Tesla example is a great one, right? Like, did Elon Musk commit some sort of security fraud by announcing something? If we took that level of scrutiny and applied it to the crypto markets, what's the end result? How much of it do you think is actually, you know, bad acting versus, hey, these aren't securities, they're commodities? Like, just walk me through kind of how you think that looks if we apply that level of scrutiny to crypto markets. Okay.

So, first, I want to differentiate between two things. There's the law, which are a set of written rules that are enforced by agencies that have teeth, right? They can put you in jail. They can fine you. So there's the law. And then there is morality, which is very subjective. It's cultural in nature, right? Something that might be deemed immoral in the U.S. could be moral in China or vice versa or another part of the world.

So I think separating the law from morality is important here. So legally speaking, the shitcoin waterfall, market manipulation, et cetera, it's permissible. There is no agency that has come out and said, here are disclosure standards, here are reporting standards, here are standards for how you publish research. That doesn't exist yet. So legally speaking, what people are doing is permissible under the current state of regulations and the markets they're operating in. So, legally speaking, when there is no threat of enforcement, when there is no threat of going to jail or getting fined or getting removed from the investment community, there's no real grit behind these claims people are making, and you're not doing anything wrong in the eyes of the law, so it will continue. morally speaking i think that's where it starts to get interesting so if the premise of crypto is based on moral arguments around fairness decentralization these ideals and principles

around the democratization of capital then morally speaking this behavior is inconsistent with the narrative we're selling to people when we're selling crypto and that incompatibility that incongruency makes the whole asset class really unappealing and so i think the bigger problem is the end because there are no regulations in law the industry itself needs to set a standard so last year i created my standard for transparency and disclosure i also wrote a disclosure policy for digital currency group around how we were going to invest in tokens and announce that and let people know i i disclose everything i own every company i have an interest in every project I advise before I get on a stage.

I put it all online. I update it every two weeks to a month. I think the biggest thing is intent. I will speak about certain assets. I'm excited about projects, but it's important to state to the general market that I have a financial interest in these things. That's why disclosures exist. Right now, it's voluntary.

I would love to see more people practice disclosure, so it's opt-in. And again, I think if the industry can create an environment, particularly the investment community, if we can set an internal code of conduct and if we can sort of raise the bar for how we conduct ourselves on the moral side, not legally or regulatorily, one, it's going to change the perception of this industry. But two, it's actually going to impact the regulators and lawmakers because the perception of the industry will change a bit. The question is, is are we going to hold people socially accountable for committing fraud or violating that moral code? And the problem is there has been no social cost to being a scammer in the crypto space. Well, and morality is very much driven by those around you. Right. The moral rules are, you know, unwritten, but they are created and upheld by those in your community, those in your industry, etc. and so if you know it's kind of like um you know criminals right of yeah they have a code like

there's a code of conduct don't snitch right but but and that would be deemed immoral but obviously the things that they're doing are illegal right and so once you get into these communities and i think what you're saying is um you know crypto is very different there's you know many many many more good actors than bad actors or people who are nefarious or malicious but it is so we hope yeah that that is true uh but but it is up to the community itself to enforce those moral standards and hold people accountable to some degree for uh you know any bad acting etc i think the hard part is um what i always like to say and i know i'm fairly vocal about my views on things but i'm not the judge i'm not the jury i'm not an executioner um the only thing

I can choose is my behavior, right? I have no control over other people. And my only goal in what I'm doing and the way I talk about what I'm doing is to just set a standard that feels right for me. And I know personally what my values are and how I want to operate. And I personally am willing to forego financial return if it violates my personal principles. Not everyone feels that way and that's fine. I'm not making a judgment as to whether or not they're a good person or a bad person. I think everyone's incentives are different. But I just want to I'm trying to point out I'm trying to use facts and I'm trying to use data driven evidence to demonstrate that a lot of what we're doing here is not going to help us win hearts and minds. And really my goal

like is money important. Do I like money. Yes because it buys me freedom and freedom means I can do and say whatever I want which I really kind of enjoy. But I think freedom also comes with responsibility. And I passionately care about Bitcoin in particular, but the broader idea of cryptocurrencies and this idea of the democratization of capital, I deeply care about that becoming a reality. And so if those two things are true, then for me, it creates a responsibility. And so I've chosen to act on that personal sense of responsibility, I feel. I think there are other people in the community who are doing that. I'd love to see that type of leadership come from the investment community, but I think, unfortunately, the investment community, you know,

the reason people give you capital is to earn a return. And so until we start to see intent and purpose align with capital formation, it's difficult. And I don't begrudge anyone because, like, look, that's your job. You can't go to your investors and say, hey, like, yeah, we didn't dump this token at 50x because, you know, hashtag morals. Arguably, you're violating your fiduciary responsibility to your investors, right? So it's a sticky problem. It's a thorny problem. I just think talking about it and experimenting with it a little bit could be helpful for us. Absolutely. No, I think that makes sense. All right, let's go back to the lighter side of crypto and get out of the dark side. Can we do favorite shit coins?

Well, hold on. Before we get there, I'm going to ask you a couple of questions and be as honest and controversial as you want. I'm never. I'm so shy, though. I'm so afraid of expressing my opinions what what what is the most controversial thing that you believe is true that you think the highest number of people would disagree with you on in the industry oh how many enemies do i want to make today how many death threats do i want to get today let's see um okay here's the best part about this question is people know what their controversial thoughts are and so you already know the top two or three things you want to say so just say just say number one okay number one

is this i think there is actually a less than zero percent chance that bitcoin will not succeed interesting explain and that is um i love bitcoin as there's so many things about bitcoin that are just beautiful and just so incredibly well designed and satoshi um it was just brilliant and not just in in its technical design um but the social design um the messaging around it the political design there's so many things about bitcoin that are really elegant um and really interesting like fundamentally innovative in that they challenge long-held assumptions about how humans can collaborate to get something done which i think is really interesting um but i think the hard part with bitcoin i spent a lot of time in the bitcoin community from about

2014 to 2017 and decentralization right is one of these things that's appealing but centralization creates efficiency decentralization has a really high cost and in bitcoin decentralization has had a really high social cost and i think um every day that goes by that bitcoin continues to operate in this sort of very unstructured manner is a day that talent flows to other spaces and interest flows to other spaces and like the bitcoin community doesn't necessarily do a great job being communicative it doesn't do a great job with the hearts and minds piece and i think um the predominant attitude whether right or wrong is bitcoin doesn't need to change you need to change i think that's unwelcoming and that that's fine um but i think that kind of approach and it's

really the ideology and the mindset of the bitcoin community just makes it tough for people to embrace it so i agree with you that that's what's happening um what if they're not wrong what what if actually part of the beauty of Bitcoin is that whether you like it or not, it is a better designed. Oh, it absolutely is. Right. It's not a flaw. It's a feature. Um, agree with that. And I think to a hyper rational person and a thinker who's been in the space and has the time to really think about it, that, that works. Yep.

It's the people who don't have the advantages of spending time thinking. Yeah. Freedom of thought. Um, And I think that's the hard part. And again, institutions now getting on the Bitcoin bandwagon, if they become the mouthpiece that sells Bitcoin to the broader retail and institutional community, they're going to completely bastardize all those ideas and just steamroll everyone and destroy this beautiful thing we spent 10 years building. And so I think either the Bitcoin community takes more ownership of the narrative or someone else is going to do it for us or going to try to do it. And I just I worry about the impact that we'll have. And that's the problem of social coordination. Right. That's always been the problem.

That's the fundamental problem. Bitcoin itself with Byzantine fault tolerant consensus mechanism tried to design for. And it's it's a very hard problem. Part of it's related to usability. part of it's related to just the language we use part of it's related to the relative immaturity of the tools we have to buy sell trade hold store learn about absolutely um but it's a big problem what do you think is the most important company in crypto over the next 10 years i was having this debate with someone the other day um look i think bitmain has been one of these

companies that like has been so underappreciated and just has silently built an empire same thing with bitfury we don't really talk about mining but like these companies are building next generation not just bitcoin infrastructure but compute infrastructure absolutely um and for blockchain to work at scale the networking layer has to be really robust which is going to require a lot of like next-gen compute infrastructure and so we see the existing fabs are just starting to get on the ASIC and GPU mining bandwagon, but these guys have already been there, and so I think

that's going to be really interesting to watch that battle. The other company I think is really underappreciated. I mean, everyone talks about Binance and how revolutionary Binance is. I actually think people aren't paying enough attention to platforms like Shapeshift and Abra, and really their mantra is

we want to enable users to transact and invest in trade in a private secure way. These non-custodial designs I think are really important to enabling crypto to really spread. If we want to truly create a better financial system, owning your own assets, truly owning your own assets is really important. And Coinbase and Binance and all of these platforms that facilitate trading,

they've become central banks. They've become points of failure. So I think companies like Abra and Shapeshift and others in this vein who are enabling trading, holding, storing, where you have full custodial, where you have full control and full discretion over what happens, really critical. Absolutely. Let's go back to mining for a second, because I think that your point about how undervalued these companies are, right? So the two things that are top of mind for me, Bitmain specifically. So one is a lot of people in the crypto community, when they see success, right, there's two paths they can go down. One is either they walk, right? And hey, you know, I made a bunch of money and I'm going to take it and go enjoy life. Or the other is they get really, really bold and ambitious, right? And I think that's what we're seeing with Bitmain, right?

they're saying look we've had a bunch of success we've been able to drive a bunch of capital right they when they uh their last round they raised i believed that outsiders of the company owned less than five percent right all of a sudden now they're talking a little bit more about artificial intelligence machine learning compute that is used for non-mining or non-crypto applications and it goes back to this idea that you know everyone says data is the new oil right and if data is the new oil i threw up in my mouth for everyone listening right so it's everyone who says that i always respond with if data is the new oil computing is the new steel right because you actually need the infrastructure to let that whole data-driven

world exist so hold on let's talk about this so i think the most underappreciated layer of the crypto space is the network network space right so um we think about icos and tokens all the capital formation is happening at the protocol layer right everyone's like and then we see sorry and then we see the application layer right that's where the vcs like traditional vcs are like i only do equity and they're investing in applications and then we see people trying to get around that by doing these app coin things but no one's really focusing on that middle layer that enables protocols and technical design to get implemented in physical compute space and we see this because these networks people are building are not robust

Absolutely. Like, look at what's happened with Ethereum. Look at what's happening with EOS. Look at, like, these new networks that are launching. They're not secure. They're not robust. And the problem is, is that if we're going to live in a world with thousands of blockchains, they're all going to require expression and physical compute space.

And where is that infrastructure going to come from? How specialized does it need to be? And then does that actually become the new domain for competition? Because we can easily raise capital at the protocol layer and at the app layer. But at the networking layer, there's an actual physical constraint to implementation. because there's a limited amount of compute. Absolutely. And so to me, investing in compute,

and I want to create structured products that offer compute capacity to protocols. Like if you raise money through an ICO for your protocol, you should be buying compute with that money. You should be buying dedicated networking infrastructure that's resilient and robust and that is secure and de-risked so that your protocol can run in all sorts of adversarial environments.

Well, if you think of the compute that's previously been available, it's been very CPU heavy, right? Because that's what the networks and the consumer applications, et cetera, required. We're now moving to a world where ASICs, GPUs are becoming much more valuable. And I think you and I have talked about, like, the idea to even go and start to get legacy infrastructure companies under your control and then start swapping the CPUs out for GPUs, ASICs, et cetera. Super interesting. Now, it's also really, it's a cost of production game, right?

So if we think about vertical integration, integrating power production with manufacturing, with actually operating the facility, right? Absolutely. This is the perfect oil and gas example. I spent, you know, seven years of my career, started my life in building big infrastructure projects that took 20 years to build and cost $20 to $40 billion. Yep. We look at the crypto space, right? If this is truly going to be a massive industry that's heavily focused on building new network infrastructure that's resilient, secure, decentralized, whatever, we need a physical expression of that. That's infrastructure financing.

that's very different from financing a protocol that's structured finance it's principle press interest and finding new ways to to and get effectively like infrastructure financing is all about reconciling the mismatch of cash flows right you end up using a bunch of cash but you don't get any in until five ten years from now same thing in the crypto space very few people have had the vision and the foresight to understand that that networking space and that physical compute layer is so critical well it was uh it's actually how i got involved in crypto was this is how you and i became friends what was uh what so my family's been in the data center business forever right and what i saw was in the in the traditional data center business space power

hardware operations right in my technology by the way yeah yeah in mining you have space power hardware and operations it's just the hardware is different right and the part that got me was you can drive more yield and take the same amount of risk right and then you don't have to deal with customers well and the yield component that's because like right now when people bid on compute space yep on aws right and um when they're doing that there's a limited amount of margin you can capture and really um the amount of margin you can capture capture is a function of demand right there's a demand component what people don't recognize is mining is the same thing but in addition to that supply and demand sort of price point, you also have this inflationary reward in

a lot of these protocols, right? And so I think what people aren't understanding is the intractable relationship between protocol design and physical compute implementation. And this is where I think the idea of decentralization really isn't truly possible until we find a way to remove this compute infrastructure constraint. That's where I think like really new ideas around consensus this design so algorand's gossip protocol gossip passing protocol um chia and space mesh so there's very different implementations of proof of space and time even i think some of what file coin's thinking about is really thinking about like how do you disintermediate and decentralize the compute layer um and to me that'll be the narrative that dominates crypto from like 2020

till 2025 i don't know wild ideas super fun though i love it's just such these are such fun thorny problems and sometimes thinking about them like makes me dizzy but yeah it's really interesting for sure what um what do you think it's going to take for the quote-unquote crypto world to completely blur the line with the non-crypto world and it's less about is that a crypto project or not a crypto project and it's just is that something that users are going to use yeah i think we haven't this is a really hard part okay so what i always say is we figured out how to create crypto assets we figured out how to distribute them and sell them through these new forms of capital formation um we figured out how to speculate on them right like most of the

quote-unquote infrastructure the picks and shovels people are investing in our exchanges it's about financial speculation um what we haven't figured out yet is how to utilize this stuff and what we haven't figured out yet is the specificity between proof of stake protocol a proof of stake protocol be like what it's like a fork right a fork is a very specific tool that you use for a very specific thing um what's the specificity for something like bitcoin versus something like zcash or monero or dash right that specificity narrative hasn't really started to evolve yet because no one's really using this stuff so i wrote this post um back in march of 2018 called drowning in tokens and my whole premise was that what we're doing right now is we're just pumping out a ton of

supply but there's no demand there's artificial demand and speculative demand but there's no utility demand and without a real demand function you can't really model growth and and that's the problem until we find natural demand for this stuff it's very hard to see where the future might go we can have ideas but we haven't seen that many projects reach the mass market and start to eat away at the market share of payments companies or to generate an entirely new type of demand we just haven't seen that yet yep um and that's what's interesting to me and it goes back to like these concepts that have been around in the business school community sorry where i come from for a while like adoption curves the innovation s curve right it's really trying to

think about we're so early we're either so early or we're so late in the adoption curve i actually don't know anymore like maybe the total addressable market for bitcoin is really small maybe that's just a reality and i think in its current iteration the total addressable for market market for bitcoin is actually quite small because it's too hard to use right there are limited number of people with the competency and the capacity and frankly the interest of using it in its current iteration so then it's technical innovation but also product innovation that creates a larger addressable market and i don't think we've really started to think through that yet people had ideas like when earn.com went back when it was 21 came out with their initial

idea that was a cool idea at the time right like i actually thought that that could have been an interesting way to spread adoption and i know people laugh at the idea of mining with a toaster i think that's kind of the narrative that stuck but it was actually a really cool idea it was just way too early and the form factor the 21 computer was way too hard yep and i think they realized that and they were like this this was a great idea but probably like too early 10 years too early yeah got it um sorry that was a like i'm not very good at answering questions i just ramble listen you're you're uh you're speaking your mind i love it um so last question for you what is the one do i get to ask you questions at the end can i do like a rapid fire sure go ahead

three three questions for pomp all right go no no you ask me your last question well what's the one thing you do on a regular basis either daily or weekly that you think it has done the most to inform your opinion about the space uh go hang out with non-crypto people go to non-crypto events interesting any specific types of events or people yeah i love hanging out in the um consumer retail space like i think uh retail is going through a mass mass shift um the shift from physical to digital and digital to virtual is a really interesting one it's effectively what we're trying to do with crypto right we're trying to take money from being physical and digital to being truly virtual and virtually native digitally native um and that's also happening in the retail

space and so i think it's really interesting to spend a lot of time in the retail space where everything people do is driven by purpose and brand right like retail is brand first execution later and everything in crypto is idea first brand like never and so spending time in the consumer space is really interesting um spending time in uh the arts and sort of music space is really interesting there are a lot of these really interesting industries that are going through fundamental shifts in how they reach their market and sell and produce and distribute product and to me it's really interesting to hang out with people in those communities and to go like i don't go in like let me talk to you about crypto like that i hate that i have gone to so many events where

people are so pedantic and they're like let me explain how bitcoin works i'm like these people don't care i just like to go in and ask people i'm like how do you go about creating a strong brand but what do you think about every day when you go to work like if you're the cmo of one of the world's largest retail brands what do you think about um what do you think of crypto like what's your what's your perception of it and what you'll find is people's perception of crypto is not that flattering they're like it's intriguing it's interesting but it feels real gross it feels unapproachable it feels weird so to me there's like this really interesting kind of brand and narrative problem and so it's just good to get out of the crypto bubble and just go spend time

with people we think about a totally different set of problems that are very analogous to what we're going through so i find that fun my favorite people in those scenarios are the people who have like their professional perspective right and so they're like oh you know it's all the people in the basements and you know bad actors all stuff and then as you're walking away they're like hey by the way which coin's gonna go up tell me what shit coins it's like their personal question on the side but blockchains don't change human nature right like what do people want they want a get rich quick button you know how staples has like the red easy button we all want that money button where you just hit the button and you're like give me that sweet sweet cash baby and so um i'm not

gonna say what i said earlier but the flash cash you know yeah yeah i'm not gonna say very true that's not acceptable on this podcast i was told to keep it pg i did not obey um but but i think that mentality right like inherently human beings are self-interested of course what do i want to do I want to put in the least amount of effort and get the most amount of value out. Crypto is perfect in that way. And that's why it's kind of been the perfect Trojan horse. Everyone's like, well, I can't really talk about this. But they're like, I want to make money.

I want to be rich and I don't want to do shit to get there. It's a great incentive. It's the great American dream. Yep. America, baby. I'll let you ask me one question. What question do you want to ask? Three, I'd get scared.

Okay. Hold on. Question number one. I'm going to be incendiary because I can be. Okay. Question number one. Um, you have gone from being fairly unknown in the crypto space, I would say, like when I first met you, I was like, who's this pomp guy to now people talk about the pomp as though it's an

adjective, which I love, like kudos. So ridiculous. Um, so you have engaged in a very effective growth marketing strategy. Yep. What's your thought process there? So, uh, the man, the pomp, tell us more one one is uh i have a very unique advantage in that i've worked on growth at large technology companies right so i understand how you understand the pump i understand how a lot of the algorithms work etc i think that two is uh i'm a huge believer that uh audience is currency right in terms of um if you have an audience it doesn't have to be everyone but if you're able to find like-minded individuals you can use that to your advantage right um and for those around you to the advantage as well uh and then i think the third thing is um and i get a lot of uh shit

frankly for this is i think that a lot of the people in this space are very heavy and very talented on the technology side and so they tend to be i think they are well but there's a lot of pseudo-intellectual bullshit that gets said or i'm like nah you're wrong well and i think that's every industry but probably even more here right and so what you get is you get very like technical jargon you get like the overly um you know uh just kind of heavy conversations it's unnecessary i'm just like dude no and so when i solved this i said you know look our our uh our business is to manage money for investors right mainly institutional investors and help them get access to what we really think of as the digital age so not even the blockchain age but we think

that blockchain and cryptocurrency bitcoin etc is like 90 95 of that today but i would argue that things like robin hood or robo advisors etc all are you know analogous to this world and so the one area that i saw that nobody was doing a good job of or at least not doing it at scale was can you take these highly technical concepts and basically boil them down to the simplest form and then share them with an audience and so it's not really going after hearts and minds right Because I think that's a piece of it, right? If you do this successfully, you may get some hearts and minds. But really, it was just, I'm not smart enough to look at a very technical white paper and

understand every single detail. I want to reject that notion for a minute. I think people in this space are like, oh, well, I'm not technical. Oh, I'm not smart enough. Yes, you are. Like, growth marketing is a highly technical field. It is. Every field has a technical component to it.

And I categorically reject the notion that being technical in a non-engineering field is not valuable. I think you're super smart. Oh, no, no, no, no. I just give you a compliment. I don't like that. I take it back. Just to clarify, it's not that I think that non-technical people aren't valuable. What I think is that if you sit me in a room and you say, hey, explain, you know, zero knowledge proofs and you bring an engineer in, they're going to be able to explain it better than I am at a very deep technical level. Now, the difference is. But that's what they're paid to do exactly their audience is other people like them who understand that deep technical language my audience is very different and so i think that by focusing and understanding here's who i want to

talk to right now here's so that that's helpful i think that that you know twitter all the stuff that's where a lot of those people are who want that message now the flip side of that right and the people who detract from that message are the people who are the deep technical people who are like you're dumb right like you're you're you're using simple language you don't understand it right and so it's just the the disconnect between i'm talking to a different audience right and so at first you know when somebody you know look the internet's a wild place i've given you shit on twitter i give you the venezuela thing i was like i love you look we can talk we can talk about it you ready so so so do you want to do you want to lay the context yeah so pump so let me give you

my reaction oh this is great so we're gonna like everyone loves tension i'm just gonna throw it out there i do i dish it i also take it okay so pom put out this tweet um i think it was like march right so venezuela issued um its own cryptocurrency called petro that was going to be backed by its petroleum reserves right um and i like to call them hunger tokens which is terrible it's like it's a bad situation but you have a legitimate reason for describing it that way yes but but i think what what troubled me is pom put out this tweet and you were like mr tokenize the world spread the virus which i love right easy succinct messages but i do think it like they rile up spread the virus sounds way worse than the virus is spreading you're infectious i love that it's a

great compliment slash insult um so so uh pom put out this tweet that said um uh the virus is spreading like i look at everyone adopting blockchain and tokenization best example yet Venezuela creating the pet show and what you said um factually was true but it was a terrible example yep and I think again it goes back to like there are things that are correct um technically and then there are things that are correct morally and my objection wasn't on the correctness of the statement um from factual perspective it was the fact that you had a really big audience And the statement from like a moral and subjective perspective was just it felt like implicit endorsement of something that was subjectively horrific. Absolutely. Yeah. And I think that, you know, when you when you put it in that light, first, it was, hey, I didn't think that me saying this, obviously, is me endorsing the Venezuelan government.

right and so if you thought that i think we would have larger problems but but but i think part of it too is and this is something that you know look i think we struggle with a lot internally we talk about when you're in an area where experimentation is very important right there's going to be people who try things that cross the line or or push to an edge that you don't agree with right where's that moral line etc and so it's how do you encourage experimentation how do you speak out against the bad applications of the technology so that's like an expression of there are no sacred cows uh right like there we should be able to experiment with anything and everything even if it pushes the boundaries of what currently is socially acceptable well so i think that okay

i think the thing that we struggle with is well here's the thing that i think that we struggle with is so there are probably sacred cows right what if we actually don't understand everything well enough yet to know where those secret counts are? Well, we don't know anything, right? That's really the crux of this conversation is I know nothing. All I know is that I need to ask better questions. And so, um, and then I need specificity. So people make statements like, oh, our protocol is decentralized and specify what decentralized means. Let's think better questions. And like, let's accept, I agree with that. We don't, we don't know what we don't know. And here's the really bad part of this or even other areas where a lot of technology is being experimented with

and uh and um applied is actually like if you looked at their blockchain petro solution versus what they're doing outside of the blockchain space i think that there would be a really deep you know kind of emotional argument that people would have on either side as to which one was worse right which is almost gets you down into now you're not just talking about technology now you're talking about you know human rights sociology psychology power government and this is absolutely one final plug um because i know we're getting really long here this is why representation on teams that are building technology matters the technology i use today was largely designed by people who don't look like me who are not like me and the problem is

if we're going to fundamentally disrupt money it can't be a room of people who all look think feel the same it has to be representative of the people the seven billion people soon to be nine billion people who are going to use it and that is the fundamental problem is how we design technology impacts how it gets used absolutely and there are material social political economic and moral implications and this is the problem with the traditional like i want to blow shit up because i'm tired with the existing power structure because it does not serve me or people who look like me and it's 2018 the fact that we're fucking celebrating that women can be gps at venture funds is pathetic it's so like people are like oh let's congratulate ourselves first female gp i'm like

it's 2018 we've had female presidents in almost every country except america like let's get with it this isn't a word sad we're pathetic as an economy and the part that always you know when it comes to so is sad so that the female argument right the immigrant argument etc the part that i always have a disconnect with people is it's data data proves that it is actually true if you have a more diverse team right and i forget all the data points but it's like if there's a female on a public board for example the company performs better right if you know and people are like oh diversity it's so hard i'm like you hire someone who has a vagina like step one hire someone with a vagina step two give them authority step three give them capital like it's a three-step solution

there goes the pg rating jesus i or i should say buddha might be offensive um it's like i feel like i'm taking crazy pills because i always talk to her they're like it's so hard it's so difficult like how do we change the the problem i'm like it's a three-step solution absolutely find people and hire them one to give them authority and real power three give them money i don't know that's like that's pretty straightforward but look what do i know i'm just a crypto person we we will end there because i think that is uh that is the general feeling if you spend time in the crypto world and with you know traditional asset managers etc is uh you know the the world as we know it going forward i think is going to look different it's just trying to figure out what

What is it actually going to end up being? That's the fun part. Absolutely. I'll see you on the flip side. Thank you so much for doing this. Thanks, Tom. Hey, everyone. If you like this podcast and want to help crypto take over Apple, Spotify, and wherever else you're listening to it, please do us a favor and rate, review, and subscribe.

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