The Pomp Podcast - Mike Jones: How the Former CEO of MySpace Thinks About Disruption

Episode Date: November 14, 2018

Mike Jones is the CEO of Science Inc, a start-up accelerator based in Los Angeles. He previously was the CEO of Myspace, along with a number of other companies. In this conversation, Jones and Anthony Pompliano discuss disruption, Myspace, the future of finance, and how valuable companies can be spotted early from great investors.

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. Mike Jones is the CEO of Science Inc., a startup accelerator based in Los Angeles. He previously was the CEO of MySpace, along with a number of other companies. In this conversation, we discussed disruption, MySpace, the future of finance, and how valuable companies can be spotted early by great investors. This conversation was a lot of fun, so I hope you enjoyed it as much as I did. This podcast is presented by BlockWorks Group, the only blockchain event and media production company I trust. If you're an investor, lawyer, accountant, or entrepreneur and want to attend exclusive events and dinners, visit them at blockworksgroup.io. I promise you won't be disappointed. Anthony Pompliano is a partner at Morgan Creek Digital.

All opinions expressed by Pomp or his guests on this podcast are solely their opinions and do not reflect the opinions of Morgan Creek Digital or Morgan Creek Capital Management. You should not treat any opinion expressed by Pomp as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. This podcast is for informational purposes only. before we get into this episode i want to give a quick shout out to one of our sponsors saluna is a blockchain computing company powered by its own renewable energy the team is planning

to build a 900 megawatt facility on top of a 37 000 acre location one of the best wind sites in the world in southern morocco you'll hear more from them later in this episode but i'd love if you could go check out their website you can find them at saluna.io all right guys i'm super excited to have Mike here. Thank you so much for coming. No problem. Thanks for having me. All right. We've got a, we've got a lot to cover. So I think a lot of people know you as the former CEO of MySpace and now obviously with all of your guys' success at Science, but you did things before that. I did. So let's, let's maybe cover that first. Sure. So I had, you know, I'd started my first company when I was a, when I was a sophomore in college and that company eventually

grew, opened an office right here in New York, as well as an office in Los Angeles, eventually sold that business. I started my second company right thereafter, and that ended up becoming a company called Userplane that AOL acquired about five years after we started. Within AOL, I was a senior vice president and ran some of their product divisions and some of their M&A, you know, strategy. Then I jumped into private equity, bought and sold companies for a large private equity firm, and then ran one of those businesses that we subsequently sold. And I was recruited out of that into MySpace when News Corp had acquired MySpace and MySpace was having challenges and Facebook was obviously a coming up strong. So, um, at that point, you know, I was an active

angel investor in Los Angeles. I had advised and mentored and invested in quite a few different very early stage startups, um, was running my space. And, uh, at the conclusion of that, then I, then I started science with a handful of partners. Got it. So let's go back to AOL real quick. Cause this is, uh, during kind of the early days of the internet, AOL is on an absolute tear. Um, what was that culture like? You know, what was kind of people's thoughts in terms of the potential of the internet, of the company, et cetera? Sure. So it was after AOL had been acquired or kind of merged with Time Warner. So you had this massive media behemoth. AOL was coming off the back of their huge revenue growth

from their dial-up business. They still had substantial dial-up revenue, even when I joined, and they began acquiring their way into the kind of web 2.0 movement. And we had built a distributed communication platform that reached, you know, hundreds of millions of users. And they liked this kind of object-oriented web development where we had little components of our technology on lots of different websites touching millions of users. And AOL started seeing that they really want to be big in web versus just relying completely on their dial-up and their client traffic. So they bought my company, they bought a company called Weblogs, and they began an acquisition spree really driven by their CEO at the time named John Miller to kind of expand into

the web business. And frankly, the core of that strategy is what AOL is today. So they actually navigated a very difficult transition, if you can imagine, coming off the back of billions of dollars of subscription dial-up revenue in the midst of this ever-changing connectivity environment and then built themselves into a big media company. Absolutely. That's super interesting and has obviously a lot of parallels to today. All right. And so when you get to MySpace, I think a lot of people don't know kind of the MySpace story other than kind of the jokes of, oh, don't be the MySpace. But I think that there's a lot of important lessons in there, right? Because MySpace ultimately was a successful business for a period of time. What was kind of the things that

drove the positive side or the growth of that company? So if you think about the time when MySpace launched, it was right on the back of Friendster. And Friendster was one of the first social networks. And one way I think about it is that everything was kind of a magnitude of 10 in social networks. So if you assume that Six Degrees, which is one of the first social networks, maybe reached a million users. Friends reached 10 million users. MySpace reached 100 million users. And then, of course, Facebook succeeded in reaching beyond a billion users. So at the point of MySpace coming forth, I think we were at a time where people were still really nervous around putting their real name into a website. That was a controversial concept. You still

weren't in an Amazon-infested world. You weren't putting your credit card in to buy things online. There was still general fear around identity in the internet, which meant that at the beginning of MySpace, they couldn't build a real social graph, right? They had to build your internet identity. So people would say, I use MySpace to connect with my internet friends. Like it was never my true friends. It was always this parallel shadow of yourself that was representative through MySpace. You know, there was this early stage mistake that was written into the code by a guy named Gabe Harriman, where you could manipulate the HTML. And suddenly people started personalizing their pages and customizing all their identity through MySpace. So once again, it became

kind of your, your aspirational self. Um, it wasn't really your true self and that network grew. Um, but at some point, um, when Facebook came out, I think everyone realized, my gosh, you know, if you actually connected to your real friends, this product gets even better. Right. So if social is good, it's obviously way better when it's connected to real people. And my belief is that at the point of my space growing up, you know, hitting a hundred million users, you know, really reaching for big ad revenue, obviously being acquired by News Corp, it was too late for them to do a fundamental change into like your real identity. Like the DNA had been set and planted, you know, what the company had grown was it was a big company, but it was never quite in

the position to do a full restart saying, well, we're not about your internet friends. We're not about your fun, customized profiles. We're actually about your real identity and your real people that really just wasn't going to happen. Absolutely. And do you think that part of this was, um, my space was successful in capturing the market, uh, that was available for what the product was built to do. And then Facebook figured out, Hey, there's just a bigger market for a different, a different type of product. Yeah, I definitely agree. And I think that, you know, it's like they say that, you know, the first person to crash through the wall ends up bloody, but the second person has a clear path. So I think like my, you know, you know, six degrees started

the wall, started crashing the wall, Friendster crashed through, MySpace really opened it up. And then suddenly Facebook just glided right through there and built like, obviously the behemoth it is today. So I don't think Facebook exists, um, if my space hadn't done what it did, but I don't think my space at the time could have done what Facebook did. So it's an interesting path. Absolutely. And then, um, you know, while you're there, uh, obviously there's, you know, press, uh, pressure and all that kind of stuff. Like, is there like, is Facebook a rating the my space talent and trying to say, Hey, you guys know stuff about social networks or, or did you guys feel like um you know it was fairly separate in terms of the the types of people or just talk

about the talent we didn't have a lot of talent crossover i mean myspace was headquartered in los angeles but we did have global operations they might have picked up some of our global people the core la team was not descended upon by facebook recruiters and facebook played its own playbook i mean extremely effectively obviously right um and so yeah we we watched Facebook closely, mainly because I'm beyond them out strategizing us and putting product out their way faster than MySpace did. The other big concern for us is we were driving a lot of revenue and that brand revenue is recognized off of com score ratings. And so, you know, the, the month I joined was the month that Facebook's com score became bigger than MySpace's. And that was a big problem,

right? Because we're out there floating, you know, hundreds of millions of dollars of revenue and insertion orders with big major brands. And suddenly they're like, Whoa, how the, how'd that happened so fast. Um, and then suddenly we were on our heels. And so, you know, I, I, it was, it was, you know, if you ever get the, if you're, if you're a student of business, like I am and curious about so many different things in technology, there's, there's no better experience than walking into a massively distressed company because, um, it really challenges you as an athlete on how you can really navigate your way through this. So the people that were in that journey with me, um, over, you know, whatever that was like a four year period until we eventually

sold off the assets of MySpace to three or four different buyers, um, you know, we're kind of some of the best people I've ever worked with because in the face of massive distress and huge market questionability for MySpace, we built and ran still a substantial size business. We were able to maintain team. We're able to build, you know, break it off into pieces and sell it subsequently. So, you know, an incredible experience not to miss. Absolutely. No. And so, you know, obviously that experience kind of pushes you forward into, uh, what is today science and you guys have built a couple of, you know, pretty notable companies there. Yeah. What was the original thought process behind science? Was it just, hey, let's go invest in companies? Was it

full on incubation? Kind of how were you guys thinking about it, you know, as you started it? So we had, you know, at this point in my career, I had done a lot of angel investing and I had some big wins. I was at, I was an angel in DocStock and Goodreads and Maker Studios and seeing like a lot of the kind of top companies in LA come through my portfolio, which made me happy. But I also saw that, you know, startup struggle, right? There's a massive information asymmetry between investors, corporate partners and startup founders, because you're taking, you know, typically very young founders, and you're throwing them in the midst of big business. And they're often unprepared for the skills that they need to go off and become successful. And my belief was look as an asset class, although some venture funds outperform standard market, you know, from a portfolio view perspective, we sit on a lot of failures. I mean, you know, when you're, when you're talking about venture capital, I'm like, well, they're great returns for certain funds, but eight out of 10 startups fail. That's a really bad statistic. And my belief was that, um, that if we had a group of operators, you know, that sat in,

uh, co-mingled with the startups that we could reduce that failure rate. Maybe we could get in front of that problem, get in front of those problems and really, you know, handhold or help train or help accessorize the talent of these startups to become more successful. And so that was the principle behind science. So, you know, luckily I found, you know, three other like-minded individuals. We all four kind of covered all the core critical skill sets that a startup we thought would need. And then we, you know, hung a shingle, raised capital, and then incubated, you know, at this point, you know, hundreds of companies. Absolutely. And so was there a specific focus on consumer at the time? Was there just, hey, we think we can help all companies? How did you guys

pick what you wanted to focus on? So similar to, you know, any startup founder, we did what we passionate about. Typically, I lead the general strategic direction of the firm. And at that point, I was very passionate about not being in the ad-based business. If you'd imagine coming off the back of MySpace and worrying about daily banner ads served and CPMs and big insertion orders, I just didn't want to do that. It was just mind-numbing for me at that point. And so I said, look, I want to sell stuff with a credit card. I don't want to worry about retention. I just want to worry about happy customers. And so when we originally opened our doors, we focused really on two sectors, direct-to-consumer commerce and marketplaces.

The belief was that, A, in direct-to-consumer commerce, we thought the legacy CPG brands were unprepared to compete in a D2C world. We didn't think they understood their customers' names. They really understood the name of their Walmart rep or their Sears rep at the time. And we thought that there were big brands to be built direct-to-consumer. And then in marketplaces, we just believed in the changing nature of employment, income, and salary, uh, where areas where people can come together through technology and earn money and share goods and services. And so the two big companies that came out of the strategy were, uh, was dollar shave club and then a dog vacay. So let's talk about those. I want to talk about

the big ones first. Um, dollar shave club, for example, uh, your guy's idea, somebody else's idea, how does that all come together? And then, you know, once you guys decide, okay, we think that this can be big, um, kind of what are those first steps? So, yeah, it was, definitely not our idea. We were looking at different CPG startups from founders, obviously evaluating both the concept and the founder. It happened to be that a friend had referred me to this fellow named Mike Dubin, who came in and told us his vision around Dollar Shave Club. And he had done some lightweight testing on Groupon. He had access to some product and he felt that there were too many choices for men to make in the bathroom compartment.

They thought that there was too many brands. He needed a strong brand that would connect with men and make that choice really simple. And he wanted to start with Razors. And he happened to have cut this really fantastic video. Oh, he already had the video cut. He had already cut the video. Legendary video. Legendary video. And it hit upon two themes that I really was hunting for. One was, I believed that at that point, YouTube would break a company. Like that YouTube is a platform. There would be this merger between content and commerce. And I, you know, and when he first pitched me the idea, I think the team and I were like, oh my gosh, you know, a dollar a month, this is going to be so

hard to get to scale. Like this just sounds so hard, you know? But then when he showed me the video at the very end of the meeting, which I believe he was reluctant to do because it wasn't final cut. And he had, you know, he had honestly talked to a lot of venture guys and they weren't really supportive of this concept. You know, he, you know, I saw this and I was like, look, you know, I think that could, I think that could really open up YouTube. Like you really understand your brand. And suddenly he really shown, you know, shined through to us on, on his vision. And so, you know, we, you know, we invited him to become part of science. You know, he came in, we made an investment, we joined the board, we became both his incubation partner and his

investment partner. And he, you know, moved into our offices along with a handful of other, you know, direct to consumer startups at the time, including like MeUndies, which became another big brand for us yeah and so at what point do you say you know along that journey man we hit that this is going to be a you know billion plus company is it you're looking at the data every day and you kind of just know look at it's trending well or is there like a big inflection point where you you know it might have been it's just when you release the video right i mean at some point you just know that this is a hit yeah so we um we do one thing that's unique about science is that, and we can even talk about it relative to crypto, is that we are intimate to

daily data. So we want to have access at founder level data within our businesses, as long as they'll permit us, because we are looking for the insights. Either this is working, this isn't working. Maybe we see something that we think works, but the founders aren't quite seeing it. With Dollar Shave Flips, certainly you saw that the audience broke out with that video. Certainly we saw that the, that the conversion retention data was kind of industry, you know, industry leading, but also what we saw was, you know, an incredible CEO that really rose up to that challenge, you know, attracted incredible talent around him, built an early stage team that was just like one of the best early stage teams. Um, and, and, you know, and all those things came

together and, you know, we obviously ended up with a lot of conviction on that business because we were so close to it. Absolutely. And so talk to me about one that didn't go well, Right. Like you bring somebody in, they've got a great idea. You think again, hey, great founder, great idea, all this stuff. You bring them into the incubation model. We're like, what are the common fail points? Is it just bad idea that doesn't work? Is it the founder doesn't listen? You know, kind of where do you see there? So we had, yeah, we had two fairly phenomenal misses. Um, so one was this fellow walked into our office one day and he showed us this, um, this dating app that, um, that had swiping, not to Tinder. Meanwhile, literally within that same week, this old friend of mine named Sean Rad showed me this dating app that was Tinder. And the phone, the, when I first saw the non-Tinder dating app. And because I had in my private equity days, you know, I had worked with a firm and

acquired a big dating network and then we subsequently sold it to match. So I understood the industry. And the moment I saw this app, I was like, oh my gosh, like this, this methodology is going to crush. I still have no idea how in the same week I saw the same app with two different brands. Like I meant, and I've never asked Sean and I've never asked the other founder on like, did you see something from each other? How did this come about? It just, and sometimes it just happens that way in startups where literally it feels like two people have the same concept at the same time. And I'm not under, I cannot explain why. They're pranking you. Maybe, maybe they were pranking me. I mean, it just felt like a weird cosmic convention to be honest. So

we, so without understanding the gravity of either of these two companies, we back non-Tinder because obviously Tinder was already backed by IC. Within a week of us backing it, the developer takes the app off the App Store and initiates a lawsuit against the founder who we had backed. Turns out the founder, without us really fully knowing, was in this like payment dispute with the developer. And the developer was the one that had control over the Apple iTunes account. And if you ever go into a dispute with Apple, at the end of the day, they default with whomever owns the iTunes account. So at this point, as far as Apple's concerned, the developer owned the code, the developer owned the app. We had no access to the binary. We couldn't manipulate it and we

couldn't take it down or change it. So the founder then spins up another team to basically clone the app that just got taken down, even though it had users and traction. And by the time the clone was done, the complete battle was over. Tinder was so fast and so on fire that even the three months it might've taken us to prop up a new app. Like the battle was already, already completed. And so it's something we talk a lot about. Uh, it's just like speed kills. Yeah. Right. And you know, once you get momentum going and literally taking an app off the app store, removing a feature, anything you do that kind of kills that momentum can be fatal, fatal, but, but at the same time, if you have two companies, same ideas, similar talent, the one that could just iterate faster

is likely to win. That's exactly right. Yeah. I'll tell you, I can tell you a second one. Second one was we had been witnessing this change in consumer behavior around food out of Sweden, which was that people were buying basically ready-to-cook meals out of supermarkets, pre-chopped, pre-ready. So we took the concept. We immediately raised a million dollars and launched this company called Fresh Dish that was like a pre-prepped meal kit service. It was before Blue Apron had launched. We had it on subscription. it quickly jumped to like a quarter million a month in sales, like kind of the fastest we had seen. We hated dealing with cold chain. Our team just hated dealing with, you know, dicing raw

chicken and figuring out how to basically put it into a box. We brought in a very senior founder who was an older executive that came out of a very successful e-commerce company. The first thing he did was remove the subscription concept. He was like, no, I just, I don't believe this concept is right for subscription you know consumers want one off we were we were like six months into dollar shave club so we didn't understand exactly how powerful subscription was at that point how critical the moment he removes off subscription is the same time when plated and blue apron and these contenders come up obviously they they dominate right so in that case you know the whether the founder was right or wrong if that decision was wrong we as on the

board should not have allowed that decision to be made um missed out on a major opportunity right like so again it was another weird moment in time that us along with you know multiple other startups kind of launched the same thing at the same time one maneuver in our business model essentially killed the killed the concept yeah well so let's move to crypto now right you guys have science blockchain um similar team similar structure as the non-blockchain side of the business? Yeah, somewhat. We did a security token ICO in 2017. We took that pool of capital the same way that we have incubation pools of capital. And we have a dedicated team that works with startups. They pitch us every day. Sometimes we co-found the startups with them. Sometimes we

invest in the startups. In all cases, we want some level of operational involvement to kind of help them on strategy. Yeah, so very similar. Got it. And what are the types of things that pushed you into the blockchain space? Was it the developers you saw were going into it? Was it just, hey, this piece of technology? What kind of initially got you guys interested? Well, so we originally got very interested in 2013 and 14. And so we had set up a lightweight mining operation. We were actually about to launch our own exchange. But similar to a lot of people at that time, because we're funded by institutional investors, I got very nervous over the legality of what we were dealing with. And so we kind of put everything on pause. In late 2016, you know,

there's a network of crypto enthusiasts out of LA. We're very tied into these people. And in late 2016, you know, you could feel it was happening, like it was all coming back. Ethereum was just starting to really move and people understood that there was something special happening there. So you go into 2017 and we said, look, look, we have to build here. So so at that point, we dove into the yeah, we dove into creating our own bespoke vehicle to see what we would to see what we could do. Got it. And what are the areas you guys are interested in right now? So, you know, when we looked at blockchain broadly, I felt that although, you know, everybody and, you know, everybody and their mother has a concept of some token ICO, 95% of it is like incentivizing users to do stuff, which is almost like the most boring and obvious concept around blockchain. you know we looked at things that we thought were you know i have an original strategy map that we built early 2017 that still just holds true we like certainly fintech fine like let's just assume

obviously that's logical second was securities fine like creating uh liquid tradable objects around you know around securities i love that right but then we thought about technology we looked at things like ticketing you know ticketing is a highly logical use of blockchain we looked at encrypted messaging. We love that. We looked at areas where it was logical for users to have a non-centralized and non-corporate controlled data store. Medical records, I still love. Credit scores, I still love. Areas where there's a piece of me that needs to exist in this digital manifestation. I don't want Experian owning that piece of me, but I do want that piece of me to exist someplace where it has some level of control and encryption and permission-based systems.

and so we we found these areas where we thought it was logical to build and then we found founders and startups that were building in those areas got it and when you look out across the landscape right now where do you think we are in terms of i don't want to say cycles but just um you know it feels like there's a lot of talent rushing in it feels like there's a lot of experimentation going on i think on the infrastructure side so you've got companies like coinbase gemini circle you know even robin hood etc that that are kind of what i would consider more crypto incumbents So these are people who have figured out business models with revenue, are either at profitability or headed that way. And they seem like true technology companies in a centralized fashion for the most part.

On the other side is where all the experimentation and the decentralized world is happening. It doesn't feel like we have traction there yet. It feels like there's a lot of ideas. There's a lot of people trying. But we haven't really seen a breakout company application, et cetera. Is that what you guys are seeing or do you guys look at it differently than just kind of centralized, decentralized? So, yeah, I think your assessment's correct. And the way I kind of framed it up is imagine if we imagine if, you know, I've been meaning to spend a lot of time to look at the early days of the stock exchange.

But it's almost like the stock exchange and all the supporting financial infrastructure around the stock exchange was suddenly built. But there's no really good companies to put on the exchange. Right. That's kind of it feels kind of like where we're at. Which is even the companies you're mentioning, Coinbase and Robinhood and Gemini and these different custodian platforms and trading platforms and exchange platforms, it's all predicated on something of actual high value and desirability to be floated on these things. But to your point, outside of a magical store of value that is or is not Bitcoin or ETH or whatever you want to call it, there's not that many products that we all would want to trade on an actual stock exchange if we looked at it that way. So we do look for companies like actually building and using whatever chain they're going to be on. One of the reasons why I think this pickle we're in right now, which is basically that

finance and finance infrastructure and capital is so far ahead of development is a direct result of 2017 in the ICOs, which is that people with bad concepts and people with great concepts all were essentially overfunded. And they were overfunded also without any governance, which means that they ended up with pools of capital with essentially zero accountability, which means that there's not a lot of pressure on release dates, board reviews, executive comp. There's small groups, typically engineering-led, sitting on a ton of capital with no urgency, which is why we're just not seeing the right stuff come to market. Now, you know, of course, I believe that our portfolios do have more discipline because we're working with them hand in hand and getting their products to market on whatever chain they're supporting. But for the most part, I think a lot of these projects are very stagnant. Yeah. And, you know, I come out of the kind of growth, the metrics, et cetera, world, you know, having worked at Facebook.

So we can we'll talk about the MySpace, Facebook stuff later. But I think that the people who figured out how to be data-driven, high levels of iteration or frequent levels of iteration in a centralized world won big. If you look at the Facebooks of the world, the Twitters, the Googles, et cetera, they figured out how to do that. Something I've been thinking more and more about is, is it actually going to be true? The people who figure out how to do that stuff in the decentralized world on a global scale will actually win magnitudes bigger, right? Is that the opportunity or are they actually somewhat parallel, right? Facebook's a global company and so whether it's centralized, decentralized, it's not really going to matter. Well, I think that focusing on, and very similar to the philosophy that you experienced inside Facebook, obviously with our equity-driven startups, everything looks like a live hedge fund.

They're trading, and they're marketing, and they're performance, and all their apps are monitored on a live basis. They have the religion of data. Beautiful. On the crypto side, I wish we were at that point, but I don't think we are, because that's also predicated on general adoption of this tech. Right. And so, you know, the challenge that we're dealing with, and I think we're about to break through with some major deals, is getting large, massive corporations to pick up and adopt these protocols of these, in essence, kind of B2B software platforms. Because for the most part, most of these technologies are B2B software platforms. And for the most part, they're going to need mass level, you know, partnership and adoption. After they get that, I would love to focus on the optimization and the daily data.

Right now, I just want big breakthrough deals just to start getting volume on these networks, which is what people really need. Absolutely. Yeah. And part of this is you need some technology. It doesn't have to be the best technology, but you need some technology. They need the validation and trust, whether that comes through corporations, that comes through time, right? There's a whole bunch of ways you can get that. Yeah. And then you get the usage and can kind of get into the data. Right.

Because part of this is you can't really do a lot of the, you know, powerful data-driven decision-making and iteration unless you have data. That's right. That's exactly right. Yeah, you need volume. Right now, most of the volume that we all talk about, and even looking to our earlier conversation before this podcast around active dApps, a lot of it is self-supporting within the industry. So the data people, it's like even you think about somebody releasing their next chain that's X times faster than one of the current chains. But the only use case right now is really the current chains trading among each other or these dApps trading tokens within their current chains. It's not like somebody's like, oh my gosh, only if I had a stronger chain, I have this massive corporate client that wants to onboard.

I don't even think we're at that point. Yep. Yeah, I think that's completely fair. What do you think about Bitcoin itself? Right? So obviously there's a bunch of company building that's going on. Yeah. Bitcoin may be the most obvious, most simple, you know, quote unquote, company being built right in front of our eyes.

And it's almost too easy, right? It feels like people kind of overlook it and they're like, oh, what about all the other shiny stuff? How do you guys look at it? So there's a I had a really great conversation Saturday night with some Bitcoin enthusiasts and then some, I guess, counter Bitcoin enthusiasts. And the conclusion I pulled back from was this is that in the broad based global consumer world, the best product does not always win. Right. And right now, like aside from people that might listen to your podcast or people that I know within the crypto industry, most people know only one thing, which is Bitcoin. So if you think of Bitcoin as a brand, from a crypto perspective, it is probably the only mass-recognized brand that exists today in crypto.

It may not be the best. Someone may have a faster transit mechanism or have a better chain with additional features. But for the general person, if they're going to enter into crypto, I still think they're probably going to enter into Bitcoin. And if a normal place is going to, God forbid, actually accept a payment system in crypto, they're probably going to start with Bitcoin. It doesn't mean that Bitcoin's best. I just think that that brand may prove to actually hold more weight than we're all giving it credit for, which means that it might, you know, it might have a lot of long lasting power.

Yeah, it is. It's funny because as like with all rules in life, there's always exceptions. And so there's this book, I think it might literally be called Think Bigger. And it talks about this idea of, you know, in many categories, the first mover one. So Coke, right? Pepsi can try as hard as they want, but Coke's out in front, right? And so you kind of go through a bunch of these. Now, flip side goes social networks, search engines, et cetera.

Technology world, actually the first one hasn't won, right? And so I don't want to say that it's binary in terms of, oh, tech industry operates one way and other industries operate the other way. But with Bitcoin around this human psychology, this brand awareness is one component. And then two is also by being first, it was able to grab a lion's share of the computing power. True. Right. And that's like the network lock in. Yeah, that's right. And it becomes pretty hard. I think that to me, that's the part that you have to not only convince somebody to donate their computing power or rent their computing power, but you have to get them to leave what they're doing. Yeah, that's right. Right. And I think that's going to be the big challenge for anyone who wants to unseat Bitcoin is how do you convince a miner to do that? I don't know if you can agree. Yeah, it might be really hard. And if you think historically, like, why was why did gold become gold? Right. It's not gold isn't the certainly titanium is more valuable than gold or platinum or, you know, other other raw minerals could have been a competitor to gold. But at some point when gold was recognized as the default currency or the default standard of trade, suddenly that lasted, what, hundreds? I mean, I don't know, 5,000 years, right?

And so it's not that it's the best, right? And so I definitely agree. Bitcoin has a substantial advantage because of the miners and because of the amount of network lock in the tap and the amount of capital that's poured into it. But I think from a consumer perspective, it would take something very major, right? So a major global platform, a major product coming out with the ability to access billions of people to truly unseat it. And, you know, unlike the Facebook MySpace wars, I mean, at the end of the day, if MySpace and Facebook at their heart, they're more entertainment than they are utility. You know, crypto at this point is more of a utility. So it's not like I can like or not like Bitcoin.

Like I might have an opinion on whether I do or don't like my experience at Facebook. if you look at Bitcoin as purely a payment mechanism or a store of value, like I shouldn't have a feeling about it. It's a utility, right? Now with that stated, Google certainly is a utility and certainly broke apart from Yahoo and the other search engines at the time that almost felt a little bit more like entertainment. So if Bitcoin stays in utility bucket, they probably have a lot longer lasting power than we expect. Yeah. Look, I, I I'm fascinated by the narrative that bitcoin could become money store value global reserve currency all this stuff and um the part that to me feels like there is accelerating momentum is when you look at places like

venezuela right where you know bitcoin is not the best store of value sure right if every venezuelan could they would buy us dollars right right because that is a more stable store of value than the boliviar or bitcoin right but when you start talking to some of the people who either are there or have family there what they say is you know look the boliviar is absolutely not going to be sustainable yeah and so i could try to get the u.s dollars it's dangerous right so the actual the the ability to get there they've got to do some pretty crazy stuff to be able to get the u.s dollar and then two is the government can come take it from right right if it's under their mattress if it's in their bank account i mean all these different things and so you not only get the

currency issues but you get the government issues agreed and with bitcoin obviously you start resolving some of that stuff and so it's almost like this trade-off between the store of value is good enough right and i also want the other advantages that come along with this digital asset that's true and so the part that feels much more like a tech company that is valuable right take a dollar shave club some people want dollar shave club because they don't want to pick a brand right some people want it because i just forget to buy razors yeah right and it shows up some people want it because it's cheap it brings different utility or value prop to different people with the same offering. With Bitcoin, it feels very similar to that. There's different

values that people can get out of the same asset. That's right. Well, and I mean, I like the Venezuelan example. I think that you could swap all those terms for China too. So, you know, there's a lot of, there's substantial restrictions on Chinese people moving their money into other currencies. And I have a feeling that, let's just say, like, I've talked to enough people to believe that if you're in China, you're feeling very happy about being able to move your money into crypto more so than keeping it within your local currency. And it's almost easier than going into other international currencies. And I know we don't talk about it a lot and people don't really want to recognize that that's a big factor in this, but I think it's actually a really huge

factor. So I definitely agree with that. I also think that one of the beauty, you know, I've had two counter arguments on the Bitcoin side of the world. One is with enthusiasts that are really upset because they believe because Bitcoin doesn't have a CEO and a management team, that it's somewhat directionless. And they're frustrated by that. And they think it should be much more powerful and much more valuable than it is because, frankly, it's been depressed because it doesn't have kind of consolidated push. On the flip side, the companies right now that do have clear management teams on top of their token or their platform, I'm not sure they're clearly telling the audience what it's for, you know, and I spent a lot of time with

these CEOs of all the major tokens. And I often leave the conversation feeling like I'm really unclear what they want this thing to be. So on one hand, I'm kind of happy that no one's telling me what Bitcoin wants it to be in the public's like, look, you know, yeah, I'm in Venezuela and I want my capital in Bitcoin because that's just a safer place for me. Or, you know, or I just believe it's a long-term store value because I believe in the brand. And in a certain sense, that's almost better. Because Bitcoin was out there saying, we're creating a venture fund to fund millions of little tiny startups that are all going to be built on top of Bitcoin. And some of them are going to be doing all sorts of different things. I'm just not sure it would be as clean as it is

now. Absolutely. Yeah. And part of this too is, so there's the technology argument around the utility and different use cases. And one thing that we've really tried to unpack, and I don't even know if we actually have answers to this, but today your interaction with the financial system is you probably have a bank account you have a brokerage account sure two separate things used for two separate things but in all that's where you store and buy and sell yeah value yeah right in the digital world what we're seeing is we've got a tokenized or digitized currency right in a bitcoin or others um now we're starting to see these tokenized securities right so obviously you guys tokenize some equity type stuff that's right um and i think that you're going to end up

seeing the commodities uh bonds all this stuff will get tokenized or digitized agreed well like a coinbase a circle of gemini they actually are going to create a world where you could hold all of those different assets in one single location that's right and it changes the user experience not of a single asset it actually changes the user experience that individuals have with the financial system that's right right and you start thinking through the repercussions not just in the western world yeah right and um you know you guys have built big global companies and brands right and and the one trend that i think goes untalked about in crypto is uh the african countries who were almost completely unbanked a decade ago that's right actually have better mobile banking

than here in the u.s that's right or you know we may see this with the rest of the financial system in other parts of the world where they just leapfrog yeah the western world stays behind That's right. I totally agree. And there's a few themes you hit upon there that I think are really fascinating. And one is, we were looking at a bunch of startups that are approaching the merger of your brokerage account and your checking account, where their statement is like, look, what we're going to do is you're going to deposit money with us, we're going to give you a standard ATM card. when your money's sitting with us, we will be investing it into bonds and we'll be investing into things that are low yield, a low risk, but actually get you X percent return on this trajectory. And then every time you swipe your ATM card, we're going to dynamically be selling your position in those products to basically get your capital available to pay for your, you know, your restaurant bill that night. And so I like this, this bleeding where you're

combining the performance oriented brokerage with your kind of cash account. And I think that banks have a lot of financial incentive right now to keep those two things separate because you can then charge a lot of fees on both. And then banks can arbitrage your checking account balance or your savings account balance into their own debt products. And then, you know, brokerage can lock up your cap, all this stuff. So I think there is a change to the financial system where you have startups thinking about bringing these two things together. So I love that. The second theme you hit upon which um somebody also was talking to me a lot about is this concept where like could you be in a world where your bank account was all obviously in the digital assets and you could

be holding commodities and then every time you you know swiped your card you would be dynamically selling the right commodity at that time based on price and arbitrage right so again like having your money work for you in a different way and do it through tokenized securities i love that view as well i worry that the the u.s financial system is highly motivated not to allow that view to happen. And it's hard to bet against that US financial system. And the third piece of your argument, which I definitely agree, is that where you have countries where, for instance, they didn't have landlines and they jumped right to cell phones, that was an incredible leapfrog moment on infrastructure for those countries. When you have countries like Kenya, where they typically

didn't have typical banking and credit card infrastructure, and they immediately went right onto M-Pesa, their digital payment platform within their telephone providers, that was a huge change for them. Right. And they're arguably, you know, one of the core countries in Africa that are already existing on a digital currency that no one seems to want to really talk about that has nothing to do with Bitcoin is probably not even truly decentralized, but highly effective. Yeah. Look, look, we, we like to say the US dollar is the first digital currency most people interact with, right? 92% of the money supplies digital. And so, you know, if you look in New York City, for example, people who carry around cash, right, versus credit, it has been a dwindling

number yeah and then if you look at the subway system so subway card is like a real world utility token yeah that's right right a lot of the way the projects are trying to do this is i have to take my u.s dollars i have to exchange it for my subway card and then i go and i can swipe to use something that's right right how many of those do we need in our life i agree there's some for sure that it makes sense in a system so sub is a great example in the real world yeah you maybe some gift cards at like a certain company whatever but but when you really think about your everyday life there's just not that many opportunities for that and so i think we're gonna get big compression on the utility token side i agree and on the financial side though there's a lot of opportunity

yeah and so so you know it just feels like there's going to be a migration there over time to like more quality type problems to solve i totally agree yeah you have to ask yourself like how often have you been like i really want transferability of my airline miles like i really need to do that every day. I wish this was a transferable token without a centralized system, right? The reality is like, we all, we all have lots of point systems. You know, we have credits on our, on our, on our gift cards. We have, you know, whatever, you know, subway rides on our Metro cards. We have miles with our airline accounts, but it's not that frequently. I want to move them all around, right? Which in theory would be the benefit of a decentralized system.

So we're already doing all this. It works pretty, pretty well, right? Everyone interacts with these things all day, but on the flip side, you know, in the security system, our security tokens, you have a lot of products that are liquid, which become really interesting for me. So we focus really heavily on REITs and a company in New York called RealBlocks that we'll eventually be announcing a big partnership with. And what we love about them is they are figuring out ways to onboard REIT products into a tokenized security system because REITs are fairly vanilla. We can take portions of REITs and put it into a tradable object. They're not really traded now. There's a lot of REIT inventory, like an unbelievable amount of capital locked up in REITs. There's

small players that want to buy into REITs, but they can't afford the minimum size blocks when the big players do their offerings. And so I think that if we see an asset class like REITs start putting out hopefully billions of dollars of product in security tokens that allow the tradability of such, I think you could see a lot of volume on that. And that could be one of the first products that really opens up that security token exchange. Solves a real problem. Yeah. Right. Makes sense. All right. So let's do some rapid fire questions here before we wrap up. What's the one thing that you think in crypto that a high majority of other people would disagree? Well, I think, you know, you obviously have a lot of people really believing almost every pitch, as I mentioned earlier, talks about you can incentivize people's use is the main use of crypto.

and coming out of my space, right. And, and building a lot of consumer products. I think everyone here would be surprised at how hard it is to get people to change their behaviors, even if you do incentivize them. So the number of times I've been pitched the, like, we're Spotify on crypto, where you get paid for every song you listen to. I'm just telling you, it's not going to work out for you. You know? And by the way, every, I've gotten so many pitches that were the Facebook for crypto, right? Where you earn money back off of your ad views. There have been incentivized-

My friends aren't there though. I can't, I don't care. I can't see my friends. That's what they don't get. It's like, there's no network effect on this stuff. And there's so many ways right now, by the way, like in the internet world where you can get paid to click on ads, trust me,

it's out there, but no one uses them, right? Or if they use them, it's small buckets. So coupons were one of the first like incentivized used products out there, right? And if you think about the population and actually clips coupons. It's not actually that large. So I really don't believe that tokens as an incentivized system to compete against major Fortune 100 consumer product companies is a realistic use case. Absolutely. I tend to agree with that. All right. So if you could wave

a magic wand and change one regulation, what would it be? Change or improve. You don't have necessarily choose to change it but you can improve it well um i mean right now you know i feel like there's so many regulations i would love to change or improve um you know i really don't like the 99 you know investor limit that we have off of what reg d holdings it causes a really big problem in crypto which basically means that even if i go through the process of only working with accredited investors which is what we do i still have this 99 investor limit the purpose not necessarily purpose of one of the upsides of, of a crypto security token offering is that I could be much more broadly, um, available to a lot of people. The moment you restricted to 99,

you essentially are just basically limiting it back to high net worth. Um, and so the concept of you getting lots of people involved in your offering and you doing it the right way through a security token offering, and then you're also adhering to the 99 investor rule. I don't know, it just kind of flies in the face of innovation and a little bit. So I think that would be a nice regulation to change. Absolutely. Other than a company that you guys are building or have funded, what do you think the most important company in crypto is? I mean, let's see. I mean, there's obviously, there's obvious companies in crypto with Coinbase and et cetera. I'd like to give you a non-obvious answer. Oh gosh, I have to really think about this. Listen, I think the

miners are substantially overlooked, you know, I mean, when, when I spend time with miners, I'm spending time with these like hardware nerds that are operating the core of our infrastructure at a very quiet level. I think that they move price more than anyone wants to actually recognize. I think there are a massive underlying force of this industry that people don't talk about. So I, so I, why don't we give some attention to the miners and say that the miners are somewhat unrecognized as like a massive component to the story. I think that's fair. Yeah. All right. So let's forget about crypto for a second. This is my one non-crypto question. And then I end every podcast with letting you ask me a question. So think about that for a second. We have to admit that aliens are real. Okay.

All right. We always think of aliens as human-like, right? Whenever you see them depicted in sci-fi and movies, et cetera. Okay. Nobody ever really talks about alien animals. Okay. So do we think there's alien animals? And do we think aliens have pets? That's a good question. I'm going to assume yes to both of those answers. I mean, well, I'm assuming that whatever form an alien's going to take shape

will be really based on, like, the biology and the physics of whatever planet they're on. So if you assume that aliens might look different than us in any form, then you have to assume that their animals are going to look different than us. If you believe in evolution, then you have to believe in evolution from an interplanetary scale. So, like, you have to assume that they had subspecies before they were highly intelligent creatures. and they if there is different physics on that planet it has to be different than what it is here so 100 i think that's a pretty uh reasonable argument there i wish i could use something more unreasonable yeah everyone thinks about space no one thinks about the animals no i agree and i'm

sure they have pets actually i've never said i'm gonna start a uh a space pita just to protect the rights of alien species i like that um all right so what uh what one question do you have for me Hmm. So what are the, like you see a bunch of projects. Um, if you were to, you know, if you had $50 million to invest into one company and you had an Epic team that was going to run that company, uh, and it was going to support the overall growth within the crypto industry, what would you want that company to do? So, uh, there, I'm going to answer this in two ways. There's if I was going to invest the capital and just push the industry forward in general, yeah right and not worry about financial return sure and there's if there was financial return

okay uh on the financial return side i think that whatever company wins um building the global securities exchange so there's nothing to be token just digital securities on a global scale so not jurisdiction by jurisdiction but anyone anywhere can buy any asset anywhere in a regulatory compliant way yep that will be a you know multi-billion hundreds of billions of dollar worth company. So whoever figures that one out is going to be a huge winner. If you know who that is, let me know while I'm in. If I was not worried about the financial return, I would actually put it behind an effort to go and drive adoption of Bitcoin in developing worlds, specifically around governments and central banks. And the thought process there being, we're already seeing kind

of the fiat experiment fail on a couple of countries yeah and so if if we could go in however through technology through literally just conversation whatever it is and convince these countries that you should switch over to this decentralized you know technology yeah now they're gonna lose some power mm-hmm right and so there's got to be you can't just go in and say you have to do this yeah I'm not gonna work but but I do think that once you get kind of the slippery slope going of some of the smaller less developed countries uh switching over yep there will be an acceleration of adoption yeah um and it won't be just a binary

like the like i don't know the eu is not just like oh we're gonna get rid of the euro and we're gonna go you know bitcoin yeah you get more coexistence at first right and then what i believe will happen at some point in the future could be 100 years out people will be able to vote with their dollars right or their euros or whatever and they'll say look i'm gonna put my value in one of these two stores of value mediums of exchange yeah and you'll just see the flows of that value will tell you what is better what's more desired right and so i think that like right now we're not even at a point where people have like they believe they have the option right so it's more of just like i have the us dollar oh i took 10 basis points you know and i bought some

bitcoin yep when it actually becomes more kind of like a decision and i can choose between the the two and they're somewhat uh equally weighted yep i think that's gonna be pretty powerful and so there's there's probably some like um i don't know i don't know it's not a a technology piece really that drives that adoption i really do think it's education and and it's the um you know kind of just going and banging on doors agreed right so i don't know that's what i would do i like that 50 million bucks would uh would get us like three days in crypto world though depending on how So the volatility will be brutal. Absolutely.

No, man, look, this is awesome. I really appreciate you coming on and we'll have to do it again. Sounds great. Thanks for having me. All right. And we're back here with John Belisere, the CEO of Saluna. You can check them out at saluna.io. So, John, you got to tell me, why did you choose to leverage wind rather than solar power for this project?

Thanks, Bob. Why wind versus solar? I get that question a lot. It's a great question. I mean, there are many benefits to consuming and applying energy on that site, you know, from a wind versus solar perspective. But our location in Dakla made it pretty easy. We're sitting on one of the best wind sites in the world. Wind travels there at 22 to 23 miles an hour consistently.

If you look at a wind almanac, it is one of the reddest parts of the world. But, you know, we did look at solar. And when we looked at that difference, what was interesting was wind blows all the time. In fact, the wind blows fiercer at night in the Dakla region than it does during the day. Solar doesn't have that benefit, right? It actually, you can only benefit from solar during the day, and you've got to combine that with a really large battery. And when we loaded that into our calculations, we found that we were deploying more cost than we needed to for the amount of energy that we'd be getting out. So wind proved to be a much better application of this site, especially since it's a wind site, than solar.

We also looked at blending it, so wind and solar. But the wind was so productive that solar was not really more additive than the wind on the site. And so that's why we went with solar to start out versus, I'm sorry, that's how we went with wind versus solar. Very cool. So in Morocco, we're long wind, short solar. If you guys want to learn more about the project, you can go to saluna.io. Pop here. If you like this episode of Off The Chain and want to help us take crypto to the top

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