The Pomp Podcast - REPLAY - Mark Yusko, Founder & CEO of Morgan Creek Capital Management: Inside the Minds of the Best Investors in the World

Episode Date: January 3, 2020

Mark Yusko is the Founder & CEO of Morgan Creek Capital Management, and one of Pomp's two partners at Morgan Creek Digital. In this conversation, the 150th episode of Off the Chain, Mark and Anthony Pompliano discuss Mark's background, what it's like running a university endowment, the Morgan Creek founding story, how institutional investors think about portfolio construction, how demographics affect financial asset performance, why inflation steals wealth from the poor, how banks take control of your money when you deposit it, the best advice he's ever gotten, why governments help companies manipulate their stock prices, what the benefits of Bitcoin are to institutional investors, and where he expects Bitcoin to go in the future. BLOCKFI-----BlockFi allows you to keep your crypto, put it up as collateral, and receive a USD loan funded directly to your bank account. They do loans ranging from $2,000 to $10,000,000, and they're perfect for helping you reach your financial goals of all sizes. Visit BlockFi.com/Pomp to learn more about putting your crypto to work without having to sell it. CRYPTO.COM-----Crypto.com is a pioneering payment and cryptocurrency platform that seeks to accelerate the world's transition to cryptocurrency. With the vision of "cryptocurrency in every wallet", the Crypto.com App offers a full range of financial products with competitive pricing, well designed UX and high security. It is the best place to buy, sell and pay with crypto. COINMINE-----The Coinmine One is like an Xbox that turns your electricity into Bitcoin. You just plug it in, connect to wifi, and tap on the crypto you want. It’s so easy anyone can do it. Everything is controlled from the Coinmine mobile app and the Coinmine keeps getting better with over the air updates that add new coins, features and services to your Coinmine. Visit coinmine.com/pomp to get a Coinmine and earn crypto for powering a new world. ETORO-----This episode of Off the Chain is sponsored by eToro, the smartest crypto trading platform, and one of the largest in the world. Join 11 million other traders and create an account at etoro.com and build your crypto portfolio the smart way.

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And don't forget, go subscribe to the Off The Chain daily newsletter. You can go to offthechain.substack.com. I write a letter of news, analysis, and opinion every morning that goes out to more than 40,000 investors. See you there. 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.

The following conversation is with Mark Yusko, the founder and CEO of Morgan Creek Capital Management and one of my two partners at Morgan Creek Digital. In this conversation, we cover a lot, including his background, what it is like to run a university endowment, the Morgan Creek founding story, how institutional investors think about portfolio construction, how demographics affect financial asset performance, why inflation steals wealth from the poor, how banks take control of your money when you deposit it, the best advice he's ever gotten, why governments help companies manipulate their stock prices, what the benefits of Bitcoin are to institutional investors, and where he expects Bitcoin to go in the future.

I really enjoyed this conversation, and I hope you enjoy the 150th episode of Off The Chain. Anthony Pompliano is a partner at Morgan Creek Digital. All opinions expressed by Pomp or his guests on this podcast are solely their opinions and do not reflect the opinions of Morgan Creek Digital or Morgan Creek Capital Management. You should not treat any opinion expressed by Pomp as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. This podcast is for informational purposes only. All right, guys. Bang, bang. This is one of two one-year anniversary episodes that we're going to record. I'm cheating, and I've brought one of my partners, Mark Yusko, in for this

episode. The other episode is with Jason Williams, our third partner. And Mark and I are going to sit here and pretty much talk about everything that we talk about every day. And you guys we'll all see the intellectual horsepower that he brings. And hopefully by the end of this, this becomes one of the most popular episodes that we've ever recorded. So thank you so much for coming and doing this. Oh, thanks for having me. I am beyond excited. And he scared me this morning when he said that he was bringing questions as well. So we'll hopefully avoid those. All right. So I know you, but a lot of people listening might not. Let's start with your personal background and uh kind of what you did pre morgan creek yeah yeah i i will go back to

go forward i guess i always say i don't do short well so good thing we got a lot of time uh but how far back do you want to go so i'll go all the way back you know i grew up on the left coast grew up in seattle washington uh left there a long time ago but that's where i grew up uh moved around a lot in high school went to three high schools hated my parents uh i have doesn't everybody yeah exactly but think about it i went from seattle washington hair down to my shoulders and bell bottoms to weston connecticut had to cut my hair and wear corduroys to houston texas had to get a cowboy hat and go to the rodeo so yeah it was a difference yeah so but i learned how to be resilient and how to fit in and all that good stuff

uh went to notre dame for college um went to be an architect for most listeners who have no idea who mr brady is i wanted to be mr brady from the brady bunch and uh it was a show about the family you know coming together uh he was an architect i thought it was a cool job but i lasted one semester in that uh didn't really like it turned out i'm not a subjective person i need objective things um so change electrical engineering that's what dad wanted me to do uh i didn't love that either and had a girlfriend who said well why don't you do what you like to do like well that's a novel concept uh so i i did that and i did biology and chemistry thought i wanted to be a doctor um graduated pre-med took the mcats bad decision if you're not going to be a doctor don't

take the mcats decide before uh but didn't go to med school went to business school instead and came out and took the first job offered uh as an insurance if i was a resume inflator i'd say i was an m&a analyst i'm not a resume inflator so i was a business analyst but what did i do i made spreadsheets because back then no one knew how to do spreadsheets because they had just started existing from VisiCalc to Lotus123. And my boss didn't know how to do spreadsheets. So he said, hey, do spreadsheets. We bought little insurance companies into the bigger insurance company and fate would have it. I said, my life is a series of happy accidents. The guy who was doing investments retired and my boss said, hey, you want to do investing? I'm like, great. So we

started managing a fixed income portfolio. And what was interesting about that is we did a little bit of both. We ran some of the bonds in house. So I learned about how to do analysis on fixed income, but also we allocated some out and we found, went out to search for managers. So I had my first exposure in searching for talent and got lucky, hired Dan Fuss before he was famous, legendary bond manager. I had another guy, Mike Brilly up in Minneapolis that no one had ever heard of that had this really cool way of buying bonds that were prepackaged into these deals but were backed by u.s treasury so you got a big boost in yield even though he had real good security so we did that and uh interestingly and this kind of goes to my whole history of how i got to notre

dame is uh i got a letter you know people like what the hell is a letter a physical one a letter like physical letter with a stamp on it and it was from my alma mater from notre dame and said we're looking for an assistant investment officer. I'm like, I don't know what that is, but hey, I want to go back to my alma mater. So great. So I applied and went down, I interviewed and came down to me and another guy to work in the investment office at Notre Dame, which was just being started. And it turns out the other guy had equity experience. I only had bond experience. And Scott Malpass, who was the CIO at the time, said, I'm going to go with the equity guy. I'm disappointed, but I didn't really think too much of it.

And I had my first experience with everything happens for a reason. There was a reason that happened. And the big reason was for those next two years, Scott really wasn't ready to let people do investment stuff. He just wants someone to build the spreadsheets in the back office, the infrastructure, which I would have hated not being a detail guy. And the new guy, the guy who took the job, hated it. And two years later, I had gone to work for an equity manager. I was down at Notre Dame talking to Scott. pitching him our product and he said hey you still interested and i said yeah i turned my page

paper around and said yeah write me an offer i'll sign it today he unfortunately didn't do that he actually made me interview again he made me take a test to make sure i could actually do spreadsheets and i was a little concerned because we were a year apart at notre dame we live in the same dorm same major pre-med um two guys end up in investing really we'll come back to that topic which is a really important topic, why I think science training is the best training for investing. And I was nervous about working for someone who's only a year ahead of me. And he had this great line. He said, don't worry, it's going to be Batman and Batman. I was like, all right, that works for me. And it was great. So I went, spent five years at Notre Dame. And what was great about

it is, you know, I'd gone to work for two professors at Northwestern. We ran a value investing style and we had a billion dollars back when a billion dollars was a lot of money and these were like the first professors that spun out of the university to manage money and one of the cool things about it it'll come back to when we start talking about technology is they were using technology in a way that no one had before in investing in that they were running screens of stocks using the vax computer the big giant mainframe computer at northwestern so they're professors during the day they ran these screens at night and they had this business on the side that made them way more money than what they got from the professor from being

professors and they built this great business and i probably would have stayed there forever you know we had a nice little business the top guys kept all the money those young guys would eventually got something but i wanted to go back to the alma mater and there's this the story i tell that it's true that Lou Holtz was the coach at Minnesota at the time, football coach. And he had a lifetime contract, unless Notre Dame called. Notre Dame called. He went to Notre Dame and had a great career there, 11 years. And I had the same thing. I probably would have stayed at Discipline Investment Advisors, but I wanted to go back to Notre Dame. And the cool thing, again, things happen for a reason, is I thought investing was all about stocks and bonds. It was just about

analysis and picking stocks and bonds. And when I got to Notre Dame, I realized, geez, that has hardly anything to do with it. Investing is all about the big picture, about asset classes and about getting out in front of big demographic and secular trends. And that's what we did. And we did a bunch of things at Notre Dame that to this day, I tell stories about that, you know, were really amazing. I mean, we started looking at international private investing long before other schools and And we followed Stanford into some venture capital deals that were extraordinary, one being Google. You know, we literally gave this company that no one had heard of at the time called Sequoia. Now everybody knows Sequoia.

And Michael Moritz had never done a deal at the time. He was a brand new guy at Sequoia. And we gave him $5 million. They took 10% of that, put it in this little company called Google. And at the time, people were like, Google, it's a stupid name. And why do we need Google? There's 20 search engines. We got AltaVista.

We got WebCrawler. my personal favorite uh why do we need google well they had better technology that nobody knew at the time well the guys at google knew but they didn't of course and um you know the rest of the story is that 500k turned into 200 million right there should be a quad at notre dame called the google quad and uh so we did a lot of good stuff and i learned a lot of great things um but uh you know spent five years there loved it and then started to get the calls and Jack Meyer had been a mentor he was at Harvard I'd kind of run into him through some conference stuff and he decided to take me under his wing and when the recruiters would call him say hey who should be a CIO he'd

say hey call that Yusko guy and it was great and I appreciated it and Chicago called my other alma mater my business school alma mater and interviewed there and looked at that but then North Carolina called. And I said to my wife, there's a job in North Carolina. I should take it. Don't you want to know what it is? She says, no, I just want to live in North Carolina. And she was right. And so we moved down there, sight unseen. And the real thing about North Carolina was it was broken. If I had gone to University of Chicago, Chicago was good school, had a good board, had a good portfolio, good performance. The great thing about going to North Carolina, it was totally broken 84th percentile in performance they had like 11 managers they

had no diversification it was managed by a board of 11 guys no all guys okay and nine of them from the same fraternity now this is uh what 97 97 98 right you go and take over the endowment at uh university of north carolina yes and this board go ahead and explain think about it so we all know that diversity of thought is a good thing and new ideas a good thing but they had nine guys from the same fraternity all roughly the same age you know no diversity on the board at all and they would get together three or four times a year for a football game or basketball game and they would try to time the market great strategy right yeah great and the technical term is they stunk yeah uh in fact they stunk so badly that the guy right across the street behind us julian robertson had

stepped off the board and said, guys, you are terrible at this. So just give me 5% of the endowment and I'll manage it and do great things. He actually turned that five into 17, more on that later. But they really needed help. And so the chancellor at the time, Michael Hooker, one of the most visionary guys I've ever met, said, come to North Carolina, help us build this. And I use the basketball analogy since it's you know the mecca of college basketball uh i got there the first year and everything reverse tomahawk slams everything we did looked like a genius now not because we were doing anything smart but just because things were really broken second year layups third year free throws fourth year had to take a jump shot wasn't until the fifth year we

had to take a three-pointer so we went from basically me to a team of eight investment professionals over the course of seven years, built out the back office. We actually spun ourselves out of the university into a private management company and did some fun things. For those that don't understand, explain the difference between having the endowment inside of the school versus the management company outside, because a lot of schools have kind of pivoted to that model and just what the difference is. Yeah, it's an important difference. What a funny thing. So I get down in North Carolina and you know we start to do things like introduce an investment policy i mean i mean you're laughing

they didn't have an investment policy statement i'm laughing because i know this story and it's fantastic so you have to tell the whole story okay so the crazy thing is so i come in and i will admit i was a little raw i was young i was 34 years old and i didn't really understand politics and so the first thing i did is i did my first hundred days report you know like the president does and I said, here are 40, you know, recommendations. Now, what I should have said was 40 observations because recommendation implies that they were doing something wrong. So they took it negatively. So I got a little chastised for that. But the second thing I did is I introduced this idea of an investment policy, you know, not a novel concept and everyone had one. And so I started

January 1998, all through 99, things were going well. We were super long, super strong, super concentrated in small caps and international, and we crushed it. And what people forget is back in the fourth quarter of 99, the Fed actually put half a trillion, back when half a trillion was a lot of money, into the economy to try to ward off Y2K. Everybody was afraid that literally the world was going to shut down on December 31st, 1999. And so we did really, really well. And we got really overweight domestic equity, international equity, small caps. And so I go into the board in February of 2000. And we had this board meeting. And a lot of things were happening. One, stocks were super overvalued. And the forward projected returns looked really unattractive. And

I showed this chart from GMO, Grantham, Mayo, Van Aertel, and it showed that the expected return for US stocks for the next decade was minus 1.9. And my board chair said, Mark, that's impossible. That could never happen. And in fact, you're not allowed to use the letters GM or O in a sentence ever again, because this guy's always wrong and he's going to be wrong. And I said, okay, fine, fine. But our policy says that we're super overweight US stocks. We need to trim back to the policy guidelines. Basically, what you're talking about is there's an investment policy that had certain targets of asset allocation and you had made investments. They'd grown so large that they had gone outside of those boundaries. If you follow the policy, you rebalance. But if you are

going to meet up with your buddies and make stock picks, then keep doing what's working. what's working. And the thing is, no one likes to rebalance. Everybody likes to think trees are going to grow the sky and what's going to work yesterday is going to work tomorrow. And we actually know in hindsight, that's not the way it works. And you should definitely rebound. So I go into this board meeting and say, hey, it's time to rebound. Are you kidding? These are our best managers. Why would we take money away from them? I said, because that's the policy. That's the discipline. And they're like, you know what? We don't like this word policy. You introduced this idea of policy. We're the board. So I want you to change that word from policy to guideline.

So I had to literally go to the lawyers and change it to investment guidelines. So another meeting in May. And now I said, you can't do anything. So in May, the market started to roll over in March, starting to go down a little bit. The tech wreck was just starting. And they're like, all right, fine. You can go to the top end of the new guidelines, but no more. Because these are our best managers. No way we can take any money away from them and uh i come back in september and they're like get this shit out of here yep and oh yeah change that word back to policy and like okay good so now they got it and and we went on to do a lot more active rebalancing and a lot more discipline and in fact over the next um couple

quarters we rebalanced the portfolio from long and strong to very hedged because by the middle of 2000, end of 2000, into the first part of 2001, we were starting to come up on a recession. People didn't really see it coming. Actually, kind of like now. And we said that it was time for getting hedged. And so I go to the board meeting. I said, all right, we want to add hedge funds. Like, well, that's going to be a problem. I said, well, why is that? He said, well, we banned hedge funds. What do you mean you banned hedge funds? Well, back in 1996, Julian Robertson, And again, had taken the assets from the portfolio, and he had grown them to a really big weighting. But he had a bad year in 1996.

He was down 9%. The market was up a few percent. And Businessweek wrote this article called The Fall of the Wizard. And it basically said that Julian was washed up. He'd never be good again. He was up 100% the next 12 months. But who's counting? And so I said, well, that seems like a really bad plan.

But OK, fine. No hedge funds. So we'll have no hedge funds. We'll have opportunistic equity, long, short equity, enhanced fixed income, and absolute return. And the chancellor looks at me and says, that's just nomenclature, right? I said, yeah. He says, good, as long as we're clear.

And so we did go to 60, 6-0% in those four strategies over the next 12 months. And from 2000 to 2002, markets fell almost 60%. Average endowment lost 25% of their money, and we were flat. And I would say, I'm never going to break my arm, pat myself on the back for not making money. But flat was good when the rest of the world was down a lot. And it taught me the value of discipline, following your policy, the value of hedging, the value of not really focusing on past performance, but focusing on what's going to happen in the future, and really focusing on talent.

Because at the end of the day, what we were doing is we were concentrating the portfolio in the most talented people. And it worked out really well. And because of that, in 2002, I got approached by a couple of wealthy families that hadn't done as well during the downdraft. And they said, hey, come be our CIO. I said, well, that's interesting, but I'm not sure I want to work for just one family. But hey, I could create a business that could manage money for lots of families. And so we set out to do that. And we had this idea to create this, this company, uh, came up with lots of names and all the good names were taken, all the birds of prey, all the big cats, um, everything was taken. So a lawyer finally said, Hey, if you name it after a

physical place, then you can use it. So, all right, well, I live on Morgan Creek. So what about Morgan Creek? And, uh, you know, my house was back up to Morgan Creek and Morgan Creek runs through middle Chapel Hill. It's actually the creek that James Taylor grew up on with his family when his dad was the dean of the medical school. And the song Copper Line is all about Morgan Creek. So if you look at our card and our logo, it has a little copper line through it, a little nod to JT. And so we decided to leave, or I decided to leave. So I went with these two families who set up Morgan Creek. And the idea was to bring the endowment model of investing to families, high net worth individuals, smaller institutions that didn't have staff and resources.

Explain what the endowment model is for those that don't know. Yep. So the endowment model of investing is really pretty simple. It's a model that says, if you think about investing, there's only four ways you can make money, right? They all require you to take risk. So you can take credit risk. You can buy a bond and a bond, you know, if they don't pay you back, you can sue them. So it's a contractual claim. So you don't make a lot of money for bonds above risk-free. Then you can take equity risk, so stocks and hedge funds. The idea is you get paid more for that because it's a contingent claim. You only get paid if the bondholders get paid first. And then you can take illiquidity risk, so private equity,

private real estate, private energy, private debt, and you get paid more for illiquidity because you're willing to lock your money up for some period of time. And then there's structure, which is just a fancy term for leverage or derivative structure. And what the endowments figured out was bonds really aren't going to work for me because I need to make 5% real, meaning 5% above inflation to pay my spending. So I need to take more risk to achieve that. If I'm only going to make 2% real in bonds, that's not going to work. So I'm going to have less allocation of bonds.

I'm going to have more allocation to equities, long-term equities. But then within equities, there's all kinds of equity, right? There's private equity, there's real estate equity, there's commodity equity, there's stock equity. So I'm going to take advantage of this illiquidity premium, and that means I'm going to have a high weight in private investments. And then I'm also going to have a value bias, and I'm going to have discipline. I'm going to follow this policy.

So all of these things are what the Yale model and the endowment model were all about. And if you look over the last 20 years at that time, the endowments and foundations had outperformed everybody by a wide margin. We're talking 300, 400 basis points per year compounded for 20 years, which is a lot of return. And it was really from the simple having a policy, having discipline, focusing on talent, focusing on illiquidity premium. And then the last thing, and we'll probably talk about this more later, is this idea that innovation as an asset class is really important. And that always backing innovation back, like when we backed Google at Notre Dame or other companies that did interesting things. one of my favorite stories about that is there's this great story about a company called sienna

and uh back during the recession in 01 this guy gets laid off from bell labs and he says hey can i take my project with me and then people are like i don't know what you're working on you know okay fine take it knock yourself out and uh yeah knock yourself out and so he takes it and no one would back him and uh he he had this idea he was going to shine light through a prism and that that would break the light into multiple colors. And each color of light should, in theory, be able to transmit the same amount of data as white light. So fiber optic cable could be expanded without having to add more cables. And no one believed him except this retired school teacher who gave him $300,000, which was probably her life savings. Now, the cool thing is it turned

into $300 million for her. So that's cool. But he created this company, which went on to change the way information flowed around the world because you could now increase the capacity of fiber optics. But that was innovation, right? That was thinking differently or thinking, not even thinking like out of the box, but thinking like there is no box, coming up with a whole different way of attacking a problem. So this endowment model and this way of thinking, be a value investor, really resonated with a lot of families. We grew the business. The term outsource CIO really didn't exist in fact i we might have even coined it in our original presentation ocio um but we did something that in hindsight was dumb um we picked a good business but a bad business model all right

so first let's talk about what the business itself so the ocio model explain the difference between uh when you're an endowment cio you basically manage the capital that the endowment has itself when you get approached by these families the initial pitch is basically come work for us, right? Come run our investment arm. So you are working for a single pool of capital. The OCIO model is doing variation of that, but now you're doing it for multiple pools of capital simultaneously, right? And before I answer that, I'll actually answer the original question you asked me, which I do all the time. You ask a question, I'll just go down some rabbit hole. But you asked the question about why was it important that we spun out of the university?

And this is an important question in the sense that universities for years were run by teams of people internally. Most of them were kind of pretend CIOs. They were like the accounting office that started to do it or back at Notre Dame before Scott and I got there. It was literally a priest who once a year he would go to New York and whoever bought him the nicest dinner, he would allocate them some money. And that's how he did it. And he was a nice guy, but he wasn't an investment professional. and uh the problem is a steak expert yeah exactly it's steak expert and at a play you know he was good at broadway and um i said really nice guy the funny thing is he actually got the job this

greatest title ever as procreator general at the vatican which is like the top finance guy at the vatican interesting name um but what's interesting about it is uh if you think about the pay scale at a public university or any university it's pretty low and so you're not going to attract the best talent. And so you're doing the best with what you can. And so there are two ways you can fix it. One is you can allow people to consult, like a med school prof that, you know, sees patients on Fridays or a dental school prof that drills teeth on Wednesdays. So one of the things they did for me is they said, okay, you can consult, right? We'll pay you, you know, your salary, but then you can consult to wealthy families. And I did that and it supplemented

my income, which was nice. But the second thing is, when I went to hire my first guy, It's amazing. So I found this guy, and he was a Moorhead scholar, which is the top scholarship at UNC. I'll talk more about that kind of stuff later. But he was amazing, right? He was being recruited by Goldman Sachs. He had been voted Greek Man of the Year. I mean, really impressive guy, top of his class.

And I wanted to hire him. And he was willing to stay and work for us for $35,000 instead of $50,000. back in 1998 and because his girlfriend was a year behind and still at school and I go to the university and say okay I want to hire this guy and they say well you don't have that

position I said what do you mean I said I just want an analyst they said well what do you mean I said well an analyst an investment analyst they said well you don't have that position I said well okay but the state you know has an investment management firm and they've got that position

and I can just borrow their position description from the state FOSS, because you had to do everything through the state because we're a state university. And they said, well, they manage money. I'm like, well, what the heck is our billion dollars? Like, well, but you don't physically manage. I'm like, oh, we allocate to other people and they manage, but we're still managing money. Long story short, they wouldn't ascend. They said you could pay them $22,000. I said, but I won't get them for $22,000. I need $35,000. They said, sorry. So the attorney, you know, the guy who helped me with the guidelines thing, said, hey, you know, there's this thing. If you hire someone as a consultant, then you can

pay them whatever. So we literally had to sell him to a temp services agency and then rent him back and we paid 35 plus 15 percent. So we ended up paying 15 percent that we shouldn't have, but we were able to hire him. And so getting talent is really important. And what Yale and Harvard, and Harvard's the epitome of it, is they spun the whole organization into a management company and it allowed them to attract the best talent. So we followed suit and Duke had done it. And if Duke does, then Carolina's got to do it. And so we spun into a management company and it allowed us to hire better talent. So the same thing in terms of forming Morgan Creek is we knew that we wanted to have this investment company structure that would be then a resource to

multiple families or institutions. And so like when I said Michael Hooker, who is the chancellor at UNC, was a visionary, the reason he got me to come to North Carolina was he said, hey, I have this idea. We could manage money for UNC Chapel Hill. Then we could manage money for all the other schools in the UNC system. Then we could manage money for other public universities around the country. Heck, then we could manage money for, you know, the alumni. We could create mutual funds and then we could take it public. I'm like, that is a guy I want to hitch my cart to or horse cart to his horse. Unfortunately, he passed away two years after I got there unexpectedly from cancer and the board never really bought into his vision. They're like, well, we don't want to share. Like

it's not sharing. If we manage other people's money and we charge a fee, then we have more resources. Then we can hire better talent and you get better performance. It's a self-fulfilling prophecy, but they didn't see it that way. So I moved into this model where I could say, all right, we're going to build a resource, a management company. And I brought most of my team from Carolina, hired a couple of the guys that had my eye on. And I said, all right, we're going to build a shared resource, an outsource resource. So you could hire us to be your team. And for the price of maybe one person, you could get a whole organization and a better team. And it was a way of building access to talent in a way that really hadn't been done before. So it was great. And the

mistake we made, though, in the business model was the model we chose, OCIO, Outsource CIO, doesn't scale. It's a great business, bad business model. Because if you say I'm an outsourced investment office and you're going to have account reps, like I have 10 people I serve and you have 10 people you serve. The problem was every time I'd say, okay, Mike's going to be your person. They say, no, it says, oh, CIO, you're the CIO. I need to see you. Well, I can only see like 15 people. So we, we capped our growth. Whereas other firms like Cambridge Associates and Northern Trust figured out if we have more equal based people, you know, senior investment people, but not the CIO, then we can have lots of people have 10 people. We can scale to hundreds or even

thousands because it basically comes out of what people think they're buying right they are they buying an office are they buying the cio are they buying some other resource and it's almost like you did such a good job selling them on this you're buying the outsource cio that they said well where is he yeah where's the guy show up and uh and it was a great run and we we really enjoyed it we still have you know some of that that business today 15 years later hard to believe it's been 15 years but uh more just turned 15 just turned 15 we just celebrated our 15th anniversary which was pretty cool absolutely um all right so you do the ocio stuff obviously you start to realize uh hey this is great but um i want you to tell a story about how you get from

the ocio model to more of kind of a dedicated fund model yep and uh some of the challenges of tracking down wealthy people oh no that is great so you know we we start with these these handful of families and they grew that to to a number of families um but we launched in in july of 2004. And September, October, November, that's when Thanksgiving is, November of 2004, literally, we're trying to get a deal done for a million dollar investment in an energy fund. And we had to track down the patriarch of this one family on a yacht in the Mediterranean, trying to use faxes and ship to shore radio and realize this is stupid, right? So we need to have a vehicle where we have discretion. Because one of the challenges of investing with talent,

you know, the best hedge fund managers, the best venture capital managers, when they give you access, you have to take it. You don't have time to go, you know, touch everybody and ask, you know, do you want this or not want this? Because you have to then educate. This is really is the best person. You know, when Blue Ridge opens up, they got a small window. You need to grab that capacity. capacity and so uh we said all right here's what we're gonna do we're gonna create these commingled vehicles and so for hedge funds for private investments for venture capital real estate we're gonna create these commingled pools and all the families are going to participate in those if you still want to have custom hedge funds or custom uh individual funds fine but the bulk of

the exposure has got to be in these commingled vehicles we set up you know morgan creek partners to do private investments. We set up the Opportunity Fund to do hedge funds. We set an absolute return fund. And we did these commingled vehicles or fund of funds. I like to call them manager of managers because we were actually managing the portfolios. And we had a unique model in that 75% of the money was with external managers. 25% was with co-investments. And we would co-invest in deals or in individual ideas side by side with the managers. And that turned out to work really, really well. And so over time, some of our biggest investors said, hey, we love what you do in fund-to-funds,

but what we really love is this idea of co-investing. And so we created co-investment vehicles. In fact, you and I met through a co-investment that we'll probably talk about later. And what was interesting is, at first, people were resistant, right? Because they felt that they were going to lose control. They wanted to make individual decisions. And what we got them to realize is it wasn't the individual decision of whether you're in manager A, B, or C. It was, are you moving into energy at the right time?

Are you moving out of stocks at the right time? Are you moving into venture capital at the right time? Are you going into tech or healthcare? And so once they got comfortable with that, and once they had a relationship that they felt comfortable with, we moved them towards that business. But it was really this idea of accessing talent. And I say all the time that I literally, for most of my career, you know, 30 plus years, I had the best job in the world. I get paid to go around the world and talk to the smartest people in the world about investing. How awesome is that?

I mean, literally, I've talked to Nobel laureates. I've talked to, you know, some of the greatest investors of all time. I've been mentored by some of the greatest investors of all time, like Julian across the street. you know what a blessing to spend you know a decade or more with that guy i could go see him anytime i wanted uh he would give me ideas he would give me uh you know philosophy and he'd give me instruction he'd tell me when i was wrong but you learn so much by going out and interacting with really talented people and it's also pattern recognition because if you don't see everybody in the business, then you don't know what's good and what's bad. In fact, a good story about that,

one you might not have even heard. I don't know. You've heard most of my stories, but this one might be unique. So the first family that hired us, one of the challenges they had is they had a really bad experience in private investments. Well, the reason is, very simply, is back in 2000, right before they hired us, they had met with 34 private equity groups and they had hired 17 of them. Now, they committed three deadly sins in investing. And I'll ask you, which one was the worst? So was the worst that they only met with 34, because there were actually 450 in the market that year, but they met the 34 that Credit Suisse and Merrill Lynch brought to them, because those are their marketing people. Or was the worst sin that they had hired more than 50%, where you

should really only hire kind of one, two, 3% of the people you see, or was the fact that the 34 they saw were all tech because tech had done great. 96, 97, 98, 99. So I'm going to go with option three as the big mistake. Yeah. It was a big mistake, very big mistake. And, and, and, you know, I wouldn't tell the story if it didn't have the ending I want, which is, yeah, it didn't work out. And it made them realize that one, they needed someone to help them understand that you shouldn't chase the hot dot. You shouldn't just go with what's been good. You've got to actually look. I say all the time, the best performance comes from people who have a great long-term track record who've just gotten their butt kicked and they just had a really tough period.

That's when you want to buy them. Well, what you're talking about, there's two pieces here. So one is if you were to ask many great venture capitalists, et cetera, would you rather bet on the team on a specific company product or the market they're like look a great team is actually really advantageous uh and kind of talent you're talking about but if you invest in the right market you can actually invest with a bad team and the tailwinds will take care of a lot of the faults right i'll kind of cover that up if you invest with a great team in a horrible market good luck right even the best teams in the world just if there's not customers or if there's not whatever and so it's similar to the asset allocation of are you in the right assets yes

you still have to go do the work on the managers and the right strategies, et cetera. But a good portion of it is just simply in the right assets or in direct investing in private, just actually in the right market. Look, being in the right place at the right time is everything in investing. And I do think that founders and teams can make a big difference and that talent ultimately wins. And I'm sure we'll talk more about that. But to your point, when I first got to UNC in 98, literally my first board meeting, right? I've been there seven days. I go to a board meeting and at the time there was this famous cover of the Economist magazine. And it basically said the world of washing oil. And it was a picture of these oil guys on the front trying to stop

a geyser, a gusher from, from flowing. They were covered in oil. And, and in the article, it said that oil, oil was about 11 bucks at the time. It said oil was going to $5. and it actually had a line saying someday oil might be free okay so i go in and again we just had our new policy uh implemented and you know uh i'm saying okay with our new policy put a five percent target to energy and natural resources we have zero and i want to give one percent to this firm called natural gas partners even though they really did more oil and gas there was three guys trained by Richard Rainwater, one of the famous investors of all time out of Texas. And I make the pitch and the board chair says, Mark, that's the dumbest idea I've ever heard. But if you

really want to do it, okay. And I'm like, great, awesome. Okay. And the rest of the meeting goes on, calls me in the chancellor's office after the meeting. And he says, Mark, when I say that's the dumbest idea i've ever heard that's what i meant the rest of the stuff was just to be nice in front of all the people because we knew and um uh the chancellor says well max right i mean if we're not going to take his ideas we should just fire him right now but if we're gonna take his ideas which i think we should try at least and we just brought him down here you know maybe should try a couple ideas then if they don't work out we can fire him like guys i'm sitting right here I want day seven.

I'll talk about firing is not interesting to me. What's interesting is they did let us put 5% in energy. And that 5% in energy generated 25% of UNC's returns the next decade. Again, not because I'm a genius, but because we were in the right place, right time. We partnered with great people, Merit Energy Partners and Natural Gas Partners and a few others. But to your point, it was really about being in the right asset. And I also think not only is it the right asset class, right market type stuff, but one of my favorite sayings that you have is about timing, right?

And this idea of people buying and selling things maybe when they shouldn't. So maybe go over a little bit of your framework there. Well, I mean, it's everything to what we talked about up to this point on the board, right? There's this great piece by Barton Biggs that he wrote, two pages. He was a famous strategist for Morgan Stanley. and he wrote this thing called Group Stink. And it's the best two pages I think I've ever read about the psychology of investing and why there's truth in this idea that an investment committee should be made up of an odd number of members and three is too many. So groups don't make good

decisions. Groups, particularly boards, make really bad decisions. And why is that? It's not because they're not smart people. They're incredibly smart people. That's why they get to be on the board. But once you get on the board, what's the most important thing? To stay on the board. And so what you do is you make decisions that are homogeneous and that aren't controversial. And so I used to keep track. And when we would recommend stuff to the board, about 95% of the time they would approve it. And the 5% that they didn't approve were by far our best ideas. And that's not a criticism of them or saying we're geniuses and they're idiots. No, no, no. Just the opposite. It's we were kind of being idiots at the time because we were really pushing the

envelope and the things that sound the craziest at the time, the things you get the most pushback are usually the best ideas because they're really pushing the boundary or the edge of the opportunity. And so when my board chair says, Mark, that's the dumbest idea I've ever heard. well that's the trigger ding ding ding ding ding that they do ring a bell when it's time to go because when everybody's telling you that something is terrible that's why one thing i love about twitter right is i can put an idea out there and i get instantaneous vitriol or hatred i'm like oh that's a good idea if everybody says oh mark that's the greatest thing ever geez okay that's already in the market and so well and a lot of it's coming from just it's probably something

that's either controversial or pushing the edge is something that not a lot of other people are thinking about or doing. And so if you're able to do something that other people aren't doing, and it's right, that's where a lot of the returns end up being anyways. Come on. It's my pin tweet, right? The greatest wealth is created by investing in something that you believe in before people even understand it. And that has been true forever, right? From the early days of when the idea of carried interest was started. Queen Isabella sends Christopher Columbus off with these ships. And she says, I want carried interest. Well, let's think about that for a second. 20% of profits. The stuff they carried back in the

ships, she got 20% of. So she was a venture capitalist. No one thinks about her as a venture capitalist. And actually, it even goes back further than Queen Isabella in that if you go to greece where i know you were last summer um and you go down the peninsula uh there's a very thin point um where um i forget which the corinthians built a track seven miles long uh the the narrowest point and if you went down around the panoply i can never pronounce forget how to pronounce it but when you were sailing back then back in uh the early days it was really treacherous and so literally people would pull into port and they'd load up the boat on this track and the slaves would push it across the isthmus and get to the other side and you'd be safe well there was a

carried interest i mean they took a percentage of what you had in the boat probably made it lighter too um and so that idea of of sharing the wealth came from an idea that no one had really thought about. Or again, thinking outside the box. But in terms of investing and timing, it's definitely clear that the best investment ideas are the ones that are the least popular. Well, I think the one saying that you say all the time that it cracks me up because it's so true is about people basically buying the things that they should have bought and then selling the things that they need. Come on. It's so easy to do what everyone else is doing. And when is it easy to do what everyone else is doing. Well, after something's gone up. So human beings do

two things really, really well. One, to your point, is they buy what they wish they would have bought. And we're spectacular at it. And it's true of everything. It's true of fads, right? You know, people buy the hot piece of clothing right at the end of its life, not the beginning when people would say it looks stupid. And then it doesn't have a good, useful life. Or they buy an investment after it's already gone up. Back in 2000, we set the all-time record for money flowing into tech stocks in three months, January, February, and March of 2000. Not in 1980, when the cover of Businessweek said the death of equities and stocks were super cheap, and you could have bought all the equities in the United States twice with all the gold in the world. No, nobody bought stocks

then. They waited 20 plus years until they had gone up and they had gone up a lot and people piled in and bought Cisco at crazy prices and then watched it fall 90 plus percent. And so human beings are spectacular buying what they wish they would have bought. But the second thing they do, which is equally bad, is they sell what they're about to need. And so, you know, you look at, let's take energy right now. Energy stocks are on their ass. Everything is, everyone hates energy and electric cars are going to be, you know, the next, yeah, great. In 20 years, it's going to take a long time to get rid of the internal combustion engine. Even if we should get rid of it faster, it's just going to take a long time. And so oil is going to be with us for

a long time. And there are a lot of oil companies that have just gotten obliterated and everybody's flowing into FANG. And I say, you know, right now you should be selling FANG, Facebook, Amazon, Netflix, Google. You should be buying FANG, Diamondback Energy, because nobody wants to own it. Same thing with hedge funds. You know, hedge funds have underperformed during the QE era. They've had a horrible performance because it's tough to short stocks. Because the idea of shorting is you're supposed to sell short companies that are bad. And usually companies that are bad go out of business. But if you artificially suppress interest rates and make money free and allow companies that have no business borrowing money to continue to borrow

money to stay alive, then shorting stocks is really hard. And so hedge funds have struggled. But right now we're at the precipice of a really tough period in markets where you're going to wish you were hedged. And it's just like back in 99, 2000, 2001, when I was at UNC and telling them they need to get hedged. They're like, no, I want to give money to Tom Marsico because he's been up. Like, well, right. And I think part of it is it goes back to, you know, when you're sitting there saying, look, equities over the next 10 years, you know, negative one point nine percent. And they're saying that's impossible. Right. It is. Humans are very revisionist in history. Right. In terms of when they look back, it's of course, this is going to continue. Right. And they will

even say things like, well, it won't continue forever, but it's going to continue for the next five years or the next 10 years, right? It's this, um, that the market shift, or I think, you know, Ray Dalio recently wrote this thing about paradigm shifts where timing those are really difficult, but actually, uh, kind of looking around the room is a great signal as to when maybe I should be thinking differently than everyone else in this room, because they are so excited that if everyone is excited, it may pay to actually not be as excited as they are. Yeah. It's really interesting too, because, um, you hit on a really important point and it's subtle that the people don't think about is doing the opposite of everybody else all the time is a

really bad strategy, right? And Soros has a great quote about this is that the trend actually is your friend. Oh, the only time it's not is that inflection points. And one of the things that's interesting is you don't want to just resist the market's movements or the trend, or whether it's a secular move or a cyclical move, just to be contrarian. So being a contrarian for a contrarian sake is a dangerous strategy. But what's really important is the subtle point you said is when you're looking around the room and suddenly everybody is leaning one way or everybody's on one side of the boat, that's when it starts to pay to start walking towards the other side. Not necessarily right away, but pretty quickly.

And making those decisions at inflection points and people say, well, how do you know when there's a reflection point? Well, inflection points are really cool in the sense that they advertise themselves. It's like a phase shift back to chemistry. It's like a phase shift between water and ice or water and steam. is what happens is right before that shift, the atoms start to vibrate very rapidly. And the same thing happens in markets. Markets have low volatility during a trend. And then what happens is they start to have really high volatility.

So if you look at, you know, just take last week in the equity markets, we were up 3%, up down 1%, up 2%, down 2%. And that volatility tends to spike right as things are about to shift or change. For those that are only used to the crypto markets, those are big movements in the equity world. In crypto, that's like an hour, but a huge deal in the equity markets. So another piece of this, I guess, is you said you don't necessarily need to shift immediately, right? So when you kind of get the gyration of the markets or the volatility, the other thing that I see a lot of people, especially right now, given that there's some people yelling and screaming, saying, hey,

there's some gyration going on is you don't have to go from long to immediately 100 short oh right right there's an element of uh making a move to cash for example is actually a decision it is an investment right and what you're doing is you're basically taking risk off and you are not necessarily betting on the inflection point but what you're doing is you're hedging yourself to some degree and when something does happen right let's say the markets do roll over the people who have done that have actually positioned themselves the best because they're the ones who have all the liquidity and can buy when everyone else is selling. Again, such an important point. And if you think about the greatest investors of all time, they are very judicious in their use of

cash and they don't view cash as not an investment. You know, the industry has gone to this point about, you know, unless you're fully invested, you're not a real investor. Well, no, that's silly cash is an investment it's a choice to to your point and and being short uh is a really tough business you know shorting companies uh john griffin who ran ran the famous hedge fund blue ridge described it best uh it's like playing chess you know if you try to short during the opening you know three phases of a chess game the opening the middle game and the end game if you try to short in the opening it's just a waste of time because you have no idea you and I start a chess game, you have no idea who's the better player at the beginning. It's just a waste

of time. In the middle game, where the strategy is coming and the big moves are being made, that's when it can just be lethal because it can go against you really badly. It's only in the end game, right, where you know who's going to win when you want a short. And so you do get signals in, in equities, uh, as to when that, that, uh, end game is occurring. And I'm sure we'll talk at some point about Tesla and all, and all that. But, uh, uh, I think about this all the time in that if you, if you think about cash, uh, I even have a hashtag for cash is king that, uh, cash tags, by the way, um, cash is king in that the reason it's king is it has very high option value. and you know somebody i can't remember who it was it'd be better if i could remember give him

credit but they call it um market valium because it takes the stress out you know if you're fully invested or fully short you have stress right if it goes against you you're you might make bad decisions because you know you're you're trying to um you're trying to stop the bad things from happening to your portfolio whereas in cash you just get the ability to sit back and watch and observe and then to your point when you have liquidity when no one else does you win i mean think back it's the kill shot it really is it's the kill shot it is right in markets where if nobody else has liquidity and there's a liquidity crunch and you're the one sitting there with liquidity you dictate what you not only do you dictate you get to buy all the best assets

because no one else can buy them and you can uh they're at the perfect price uh a huge margin of safety. You get all the upside. And you also get flexibility in how you structure. It's kind of like after the global financial crisis, who was there with lots of cash? And he didn't even buy stock. He bought convertible bonds, Warren Buffett, because he got the first call. And why did he get the first call? Well, who had enough cash to bail out Bank of America or Goldman Sachs or any numerous other deals that he did and it's funny the people who have bailed out the government or bailed out banks they always are the wealthiest with lots of liquidity oh come on i mean one of my favorite stories right is you go back to you know the last time the banks were threatened

okay 1907 you had this thing called the knickerbocker panic and what was the knickerbocker Panic. Well, the trust companies were trying to create alternatives to banks. And there's this guy, J.P. Morgan, you might have heard of him. He didn't like that so much because he was the banks. And he basically started a rumor that some of these trust companies were insolvent and that you better get your money out fast. So he literally triggered a bank run, the Knickerbocker Panic of 1907. And these trust companies all started to falter. And magically, he and John D. Rockefeller, one of his good friends, were able to pick them up at a very bargain basement price and get rid of the competition. And then they went even further. And it turns out John D. Rockefeller's

father-in-law was Avery Aldrich. And they came up with this plan to create the Federal Reserve bank. And it took them four years from 1909 to 1913 to actually get it passed. They call it the Jekyll or the monster of Jekyll Island for a reason. One of the worst things that ever happened. But unless you're a banker, because it was created basically to keep the bankers rich and it's done a really good job at that. But when you have liquidity, right, when you can write a $25 million check when that's a lot of money back then to save the banking system, so to speak, even though you created its demise in the first place um but it's it's what is it the the arsonist who sets the fire and then shows up as a fireman and pass himself on the back i guess somebody

who's doing that in other places yeah um but it's really interesting over time when you think about um this idea of of liquidity and having liquidity um at exactly the right time is how you make the biggest returns. And Stan Druckenmiller has a line about this. He says, you know, the way you make big returns is preservation of capital and home runs. Well, how do you preserve capital? Well, one, you avoid buying overvalued assets.

Two, you don't reject the idea that cash is an asset and can have huge protective value because you can't be wrong, right? you own cash you're not going to lose money on it um and then third is this idea of home runs is how do you get home runs well when you get an edge and my my big thing in my twitter feed is hashtag edge when you get an edge whatever that edge is uh you have to have the courage or the guts to really bet big and you think about when Druck was with Soros and all the things they did when they had an edge whether it was with the pound or whether it was in a certain company

or a certain asset class, and they would wait patiently with lots and lots of cash. They would preserve capital, and then they would pounce. And the other thing about this that's really interesting, and most people don't understand this about investing, but preservation of capital is really important, and it's what differentiates the real long-term winners from the losers. But the thing that separates the really great investors from the just good investors is the uncanny ability to double up and to press the winners. So I want to make sure that we talk about this because I've talked about it before on the podcast. One time I asked you, I said, what is the biggest difference between the top five best investors in the world and the top 1%?

So I wasn't interested in, you know, what separates the good from the not good or even the great from the good, but the absolute five best from the really, really, really good, right? So basically what separates that, you know, five best from their peers? And you said to me. Well, it's that ability to double up, to have courage. I think your specific statement was they cut their losers faster than anyone and they press the winners harder than anyone. Yeah, okay. Yes, there are two parts to it. thank you for reminding yeah that's exactly right so um you know soros has the line right i'm only

rich because i admit my mistakes faster than other people and what most people do is the exact opposite of what you should do is we water our weeds and we pull our flowers as soon as we make a little bit of money we pull the flower i'm up 10 i won no no add more because it's going to continue to go. And what we do is when we're wrong, we try to justify, oh, the market's wrong and I'm right, or I'm early, euphemism for wrong, and I'm going to be right later. And so the dollar cost averaging down. Yeah. And everybody said, I'm going to average down. Never, ever, ever average down. It's just, it's a horrible decision. And people say, well, Mark, you're a value investor and you say all the time that you should average down. Well, averaging down is different

than buying more of something as it becomes cheaper. The difference is when you're speculating on something, when you're buying something just on price and it moves against you, you're just wrong, right? When you buy something with a margin of safety and it continues to deteriorate because everybody else is puking it out, like the energy stocks today,

then you've done the analysis, you have the edge, you have the ability to buy more. So some could nitpick and say that's the same thing. I'll grant that, actually. But what you're talking about specifically is this difference between price and value, which I think that is very, maybe not very well understood, but well discussed in traditional markets. In the crypto world, it's almost a non-existing conversation. A non-existing conversation.

And what you're specifically talking about is if you're making investment decisions based on price alone, then you very quickly know you're right or you're wrong right it's very easy to measure on a quantitative basis when you are making a value-based investment so not necessarily related to the price but you understand what an asset is worth based on whatever that analysis is and the price is below that value yep the price movement is almost less important as is it still below the value correct right the relation to the value is much more important than is it up five or 10% today or down 5% or 10% today because you want to continue to buy the asset that is undervalued in price as long as it is undervalued. No, that's exactly right and really well said.

We must have been hanging out together. But it's interesting in the sense that cutting losers is critically important. And the first loss is the best loss and not trying to convince the world you're right and the market's wrong. But this real uncanny ability, and to me, what separates the truly top five from everybody else is this uncanny ability to double up. And I had the luxury of having Julian Robertson as a mentor and friend, and he helped seed Morgan Creek when we got started. And the funny story is, I got this email when I announced my resignation and it said say it ain't so julian you know like shoeless joe jackson and i joke i don't get a lot of emails from billionaires in fact at that time that was my first one and i got a couple

others since then but that was the first one and uh hit the bid and i i came up to new york and uh walked in the building across the street went up the 48th floor and and i joke i thought i was gonna get my nike shoe deal and people said what are you talking about like well nike shoe deal is works like this, is the coach at the university doesn't make a lot of money from the university. He gets the money from his Nike shoe deal and television and radio and all this stuff or an alumni slush fund. And so I figured that Julian was going to say, hey, Mark, I know we can't pay you enough, but we'll find a way to get you some more money. And instead I walk in, he comes out, he puts his arm around me and says, Mark, I'm surprised you lasted that long. I like you and

i want to work together like i hit that bid and uh so he's better than nike deal better than a nike deal way better and uh but but because i i got close to him um i had the the luxury one of then investing with all the great firms that spun out of of there from blue ridge to lone pine to maverick to you know just dozens of firms and got to know those guys and one of the cool things i did is i would i would interview all these guys on on julian and i had these notebooks full of pages prior to book um on what made him great it was amazing you know everyone had a different perspective you know the macro guys would talk about his macro views or the the underlying guys would would say you know one of the favorite things about julian he said you know never fudge

the numbers if you don't know don't start talking because he'll know and uh you know the other one was just about competitiveness, right? If you're not competitive, you're out. And it doesn't matter if you're competitive in what, right? It can be tennis, golf, tiddlywinks, equestrian, doesn't matter, just he wants you to be competitive. And then the other is honesty and integrity. There's nothing else without that.

And so, but the thing they all said, you know, 30 plus of these interviews that I've done, they all said he had this uncanny ability to double up. So when most people are afraid because, you know, they've made money and they don't want to lose it, he's adding to it. And that ability to see the future, it's the Jeff Bezos to say, I'm going to make this a world changing technology. And people are like, no, it's a bookstore online. Who cares? Like, no, it's bigger than that. And, you know, it's the ability to ride with it. And here's the amazing thing about Amazon.

So Amazon went public in 1998. It's been public for 20 years. in every single year, including this year, it's had a double digit drawdown. The average drawdown is 31%. So I say, how many people actually bought the IPO in 98 and still hold the stock today? That would be Jeff and his parents. That's it. Because everybody else got shaken out because twice it was down more than 90%. But to have the ability to hold through that volatility, because you just have a belief and a passion in this being a great business and a great business model and a great investment is really a superpower. It is an absolute superpower. And I've only had the experience on a handful of occasions over time. So I've literally met with

thousands of managers. I mean, you know, did 400 meetings a year for most of my career. people always call bullshit on them i'm like well i give you my calendar do it um and uh only a handful of times if i walked away saying you know that person has it and it is um the ability to to be a true believer to really hold something dear that everybody else questions and i remember having this, this conversation with a manager, um, out in California and, and, uh, we still invest with him today. Um, and he worked at this firm called Integral Capital with this famous guy, Roger McNamee, you know, kind of Grateful Dead kind of rocker. Um, and, uh, Glenn worked with him and, and it was amazing. And Google had just gone public and was starting to fall. And a value

manager friend of mine uh said oh you know google's not not worth 50 bucks and it you know gone public at 50 gone to 100 it was falling back and and i'm sitting there saying you know i i really don't know why you own google and and you should you should really uh probably sell according to my value manager friend and glenn looks at me says mark you're crazy you just don't you just don't understand this has nothing to do with value today it has to do with what this technology is capable of and how it can be monetized in all these ways and and i listened to him and i just went wow okay he's a true believer and clearly google it a thousand glenn was right and you know richard was wrong um but that ability to not just own it and be happy just making some money but to

keep buying more of it and uh to really press those big winners and you know that's where great fortunes. Want to know who has the best URL? Crypto.com. That's right. Crypto.com. They're a crypto platform with one goal, motherf***ing mass adoption. That's why we're all here. We're trying to get crypto in every wallet. Crypto.com is helping people do that through buying, earning, lending, and card payment. Everything you could want at Crypto.com. Go help your boy out. Tell Pomp sent you. Download the app or visit crypto.com. Pomp's got you always. Ever wanted to get into mining and didn't know how? Don't worry, your boy Pomp's got you. Everybody got some electricity and Wi-Fi. All you got to do is go to coinmine.com. You buy a CoinMine. It's like an Xbox or a

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annual interest paid monthly in cryptocurrency. This rate actually compounds. So you receive a 6.2% APY, which is very attractive given the alternatives. So you can actually take your Bitcoin, you can deposit it with BlockFi and get paid an interest rate of 6% in return. Go check out BlockFi.com slash Pomp. Again, BlockFi.com slash Pomp to sign up and start earning interest on your crypto today. It always cracks me up. The one saying that I love, which is you have to be very careful with because if you're wrong, this works against you. But the idea that concentration builds wealth and diversification preserves it. Yep. Everyone knows the saying everyone is scared you know frankly shitless of deploying it because you are increasing the risk

of loss of capital if you're wrong yep but you are increasing the probability of uh outpacing the returns if you're right oh my god well look it x post it's the easiest saying in the world it is so easy after the fact to say oh concentration builds wealth of course you should have put all your money in amazon of course you should put all your money in apple apple at seven dollars when people were saying it was going to zero because they had nothing new and no real competitive advantage and microsoft was kicking their ass that was tough to hold on at single digits um and what's interesting about about that point pop is that if you think about i love this screen so we can pop our peas on the podcast and it doesn't sound bad um but uh

if you think about this, this construct of, of concentration and diversification, right? I spent my life, um, I always talk about it in chapters. So chapter one is I work for not-for-profits and I loved it and it was great. And I love, I love the psychic income of getting up every morning and going in and knowing that we're making, you know, faculty's lives better and students' lives better and the university's better. And, and, and that was great. And then chapter two was building Morgan Creek and building this asset management business. And chapter three is what we're doing together in Morgan Creek Digital. And then chapter four is I'll teach. But what's interesting is if you think about what most people think about me is they think about me as this endowment investment

guy. It's all about diversification. And what are you talking about this concentration thing? And I'm like, no, what you're missing is, again, what I've learned about great, great investors, those top-tier investors, is their ability to do a couple things. One is the willingness to concentrate. Two, being visionary to see where the puck is headed. Everyone says it's Wayne Gretzky. It wasn't Wayne. It was actually his dad.

People said, why is Wayne so great? He says, well, because he skates to where the puck is going to be, not to where the puck is. It was actually the dad. And the key is that those are requisite skills to be a great investor. You have to be visionary. You have to see the next thing. You have to get out in front of it. And you have to be willing to double up.

But one of the things that's really, really important is you have to be willing to be wrong. And so many people are paralyzed at the thought of being wrong. And Twitter's full of this, right? People go back and they'll search through my Twitter feed and say, you were wrong a year and a half ago when you said this. I'm like, what are you talking about? Of course I was wrong. I'm wrong all the time. But I don't stay wrong.

Being wrong is fine. Staying wrong is not. And so great investors are wrong way more than bad investors because bad investors don't act. They're so paralyzed at the fear of being wrong that they don't make investments. And so they can't be wrong. But a great investor keeps trying things, keeps pushing the envelope. And when they're wrong, they fix it immediately, right? They do the Soros, admit they're wrong, move on to the next idea because they've always

got great ideas. The key is if you don't have lots of great ideas all the time, well, then you're not doing it right, right? You should constantly be looking and reading and thinking and talking to people and looking for great ideas and pushing that envelope and keep trying them all. And one of the things I love about venture capital investing is you want zeros, right? You want to put money into something and lose it all. People say, what are you talking about?

That's not what a fiduciary does. I'm like, well, of course it is. Because if I make 10 investments and three of them go to zero and five of them are just in, but two of them make 10, 20, 30, 40, 50 X, I win. and so that ability to be wrong to be comfortable being wrong to i say it all the time is um my wife has said you know that i'm frequently wrong never in doubt i'm like well occasionally wrong never in doubt um definitely never in doubt and we said wow in fact my wife's only seen me speak one time and i speak a lot and i give speeches all over the world and and i've done it for years and

and uh so she finally came to the conference in in vegas and uh she came and she sat in the back and at the end of the speech she comes and she says oh my god you can't say things like that like say things like what she says you say things with such conviction like you're sure i well what's wrong with that she says well well people believe you i said well that's actually kind of the idea she said but what if you're wrong i'm like well then i'll change my mind so strong opinions loosely held. If you don't have strong opinions, you don't have conviction. If you don't have courage, you won't act. If you don't act, you can't win. If you make, if you act and you're wrong, then fix it. Yeah. And then go to the next thing. And how do you get conviction? Well, you do

the work. Most people don't want to do the work, right? They want to hear about a good idea. They want to hear. And great lesson in life, right? We all learn from our mistakes more than our our successes in fact i keep on my desk right right on my desk it's a little thing it says failure changes for the better success for the worse from seneca the younger and it's so true right when you're successful you get lazy because you think it's you and then you get caught off guard and you get smashed when you fail you learn and another good friend of mine great hedge fund manager out in California has a great line. He says, with every investment, we get richer or wiser, never both. Because you don't get wiser when you're right. You only get

wiser when you're wrong. And when you recognize that mistake, you acknowledge that mistake, you learn from it, and then you forget about it. That Ralph theory that Dean Smith used to talk about. So, you know, recognize it, admit it, learn from it, forget it. And I had this first job. So I'm working at this Discipline Investment Advisors. We have a billion dollars and people are calling us all the time and the brokers are giving us hot stock tips. And so I had just gotten my rollover 401k for my first job and I had, you know, a few thousand dollars and I was going to be a big swinger and uh you know instead of of doing what i should have done so i grew up in seattle and a bunch of my friends don't work anymore because they went to work for this little

company called microsoft now if you've ever seen the picture of the original seven you wouldn't have gone to work with those guys they look like freaks but i should have gone to work there like some of my friends but i didn't and so here it is 1991 you know i had this money all i had to do is buy microsoft cisco intel a couple other tech companies i would have been set no no no no no this broker calls up he's got two hot stock tips and the uh the receptionist calls me i said hey you know joe says uh you should you should buy these two companies i'm like okay so i take half my 401k distribution i put it in one company i put the other half concentration i had done no work I had done the homework. I didn't know this guy from Adam, but I was in this new job. And this

guy had to be smart. No, he didn't have to be smart. He was trying to sell shit. And long story short, obviously, I lost my ass. Now, what's great is one of the stocks literally went to zero. The cool thing about the broker that I use, when something goes to zero, they don't take it off your statement. So every month when I opened up my statement, it was still there. It was a great reminder, don't ever do that again. Don't ever take a hot stock tip, do the work. And, uh, but I learned so much from that experience about if you're gonna take concentrated positions, if you're going to, um, focus on an area, do your own work, um, find people who have real expertise in the area and then follow them. Uh, don't take hot stock tips. So I want to talk about, uh, as part

of doing that work, this idea of innovation as an asset class. And, you know, I think that what it really is saying is tying a lot of these ideas together of innovation is the things that are being built today that will eventually become the trend later. Right. And so it's very early opportunities to get in front of things is where the innovation is. And so this idea of innovation as an asset class, maybe describe a little bit about what you mean by that and how people should think about that as they think about investing and portfolio construction? Well, you and I have talked about this a lot in that there's only four asset classes you can own, right? There are stocks, bonds, currencies, and commodities. And everybody else talks about all

these other things. What about venture capital? What about private equity? What about hedge funds? I'm like, no. At the end of the day, I own a stock, a bond, a currency, or a commodity. Let's take private equity. In private equity deal, I own common stock, preferred stock, or a convertible bond. Well, what about real estate? Well, I own the equity of the deal, the debt of the deal, or the land, the commodity. What about hedge funds? Well, hedge funds, mutual funds, private partnerships, separate accounts, they own stocks, bonds, currencies, and commodities. I mean, a hedge fund is just a legal structure, just like a mutual fund. It's a legal structure. So I came up with this idea of innovation as an asset class, which is antithetical to what I just

said in the sense of, well, no, if you're going to invest in innovation, you're either going to own a stock, a bond, a currency, or a commodity. True. But the idea of innovation as an asset class is basically saying that I want to focus on owning, and mostly I'm going to own equity. I might own some convertible debt. But I want to own ideas. And I want to own the future. And I want to own big secular trends over the long term. And the way I came to this was, again, I've been blessed to have great mentors and have great relationships and really hang out with some of the best investors on the planet. And when you watch what they do, if you look at the best performing funds over the years, they share a couple of common traits. One is they have very high

weighting in private investments. So they take advantage of the illiquidity premium. The second is they have a high weighting in venture capital. So what is venture capital? Venture capital is allocating capital to entrepreneurs who are going to build something. And it could be any number of things. But they're pursuing ideas. They're pursuing business models. They're pursuing innovation. And so as I experienced over time, I started with bonds. And bonds are just lending money to somebody and you get a small fee for that. And it's a nice, safe investment. It's actually a horrible investment for a young person. In fact, I actually say it should be against the law for people under 40 to own bonds. We'll come back to that later. But what do you mean against

a lot. I'm like, just trust me on that one. You should own no bonds. Because the bond is really your future income stream. Think of that as fixed income over your life. And you can own bonds later when you're retired. The second is that equity is a claim on the cash flows of a business. And that's what makes it great. But what you really want to own is the innovation behind the business that's going to build new assets or new industries. And it can be things that are little E entrepreneurial or big E entrepreneurial. You have a great line that I stole from you guys

and people have heard me talk about this, that what I love about spending time together is from the very beginning, even when we didn't know each other that well, I say, it's like talking to myself, right? I mean, everything you do on Twitter, I like. It's like, wait, I would have said that. Wait, I might have said something like that.

That's scary. You see some of the stuff I say? Yeah, that is scary. But I always say it's like talking to a younger, better looking version of myself. But what's cool is I stole this line that you talk about that technology or innovation can do two things, right? It can make an old thing better or it can make something totally new. Well, big E entrepreneurship, making something new, that's freaking hard. I mean, it's really hard.

There's people who do it. There are a lot of people who've done it. And there are a lot of ways to capitalize on it and make a lot of money from it. But literally, entrepreneurship, you know, making old things better is actually not as hard. And, you know, when I first started thinking about leaving the university and starting a new business, you know, I was trepidatious. And people would say, well, Mark, you're such an entrepreneur. I'm like, what are you talking about? I've worked in the safe environment.

I worked for not-for-profits my whole life. I'm the least entrepreneurial person on the planet. He said, are you kidding me? You created a management company. You spun out of the university. You built two offices. You helped build Notre Dame's office. You're totally an entrepreneur.

I said, oh, okay. I'm a little e, entrepreneur. I love to build things. But I don't want to try to invent things. That's not my thing. It's the one thing I think I've said to you before is I spent most of my life technology, startups, that world. And as I've learned more about the Wall Street asset management and kind of finance world, if you look around, every single person who is one of these world-class entrepreneurs, they don't call themselves entrepreneurs. They're all investors.

Every single one of them has the identification of I'm an investor, I'm an investor, I'm an investor. But you look and you say you built a business that has hundreds if not thousands of employees or 50 employees and you've got all these assets. and you built a company it just might not look like a software-based company right or might not look like a restaurant or something like that but it is a company you did start it and you did build it and you know you can call yourself whatever you want yeah you started a company right and it's just one little nuance of the two industries where you know you would never find a tech entrepreneur in building a FinTech to say they were an investor their

founder. It's a really, it's a great insight again. And, and, and so true. And, and it, it really helped me when I, you know, got over this hump of thinking about it. It's like this kind of thing that's funny. Someone said to me once, you're a great salesman. I'm like, I am not a salesman. I'm an investor. And they're like, no, you're a really great salesman. I'm like, no, I am not a salesman. I am an investor. And he said, well, no, you're just looking at it wrong. He said, sales is simply transferring your enthusiasm to another. I'm like, oh, dang, I am actually pretty good at that.

I can get enthusiastic about stuff and I can make other people enthusiastic. And that's ultimately how you build stuff, is you harness enthusiasm and you get other people excited and you bring them along. Um, but this, again, this goes back to this idea of innovation and, and whether it was Glenn understanding the innovation that was occurring inside Google and that it was a better way to do search and a better way to look, it's a verb. I mean, think about it, right? It didn't exist in 1996 and now it's a verb, uh, that I use every single day. Uh, crazy, crazy. And so, um, that's really astonishing and the wealth that's been created by it. And it's why I get so excited about blockchain technology and Bitcoin and all the things that I'm sure we'll talk about at some

point. But I've never lacked for enthusiasm about what I do. One, because I get to interact with such great people. Two, because I'm constantly exposed to these new ideas and these things that that literally are changing the world and change the world for the better sometimes you know a little little less less for the better uh if they get abused or or not used properly but uh i i just find so much um intellectual stimulation and challenge in trying to intuit uh one where that puck is going you know what what cyclical or secular trend should we be focused on you know what area of innovation should we be focused on, and then how to get that innovation into our portfolio. And I'll just give you two quick examples. So if you think about, most people

would tell you, if you ask them, who's the best investor in the country? They'll say, oh, David Swenson, Yale, number one. Actually, number three. That's not taking anything away from David. He's amazing. And Dean Takahashi. Number three is pretty good. And Dean Takahashi, who's been the number two at Yale that no one ever talks about. It's like, I always feel sorry for Caulfield and buyers, Kleiner Perkins, because no one knows Caulfield and Byers, but they're really good investors. But it's Kleiner Perkins or sometimes even Kleiner. And they don't even talk about Perkins. They were all really good. So Dean Takashi doesn't get mentioned, but Yale's pretty good. And they've got 52% in private and they've got 17% in venture and innovation. And that's

fantastic. But the number two performing fund was actually Jeremy Grantham, contrary to my board chairman saying he's never right. His foundation and his asset allocation is even more simple. 40% hedge funds as a fixed income replacement, 20% emerging market equity, because that's where all the growth is, and 40% venture capital. Think about that. 40% venture capital. And it's because he believes in innovation as an asset class. But the best performing fund is neither one of those. It's a firm called the Dietrich Foundation. And their asset allocation goes back to the investment committee. It should be an odd number, and three is too many. The guy said, I'm the investment committee, so I don't have to argue with anybody.

I'm going to put 15%, 1.5% in cash to fund two years of spending, and then 85% in private. And the bulk of that is going to be in venture and growth equity. And 25 of the 85 points are going mean China. So Chinese private investments is 25%. People are like, oh my gosh, that's so risky. Not risky at all. It's where the growth is. He's doing proven business models that make tons and tons of money. But most people perceive risk incorrectly in that they hear China, they hear risk. They hear venture capital, they hear risk. Well, it's only risky if you did one thing. If I made one venture investment in China, that's pretty risky. If I made one venture investment in the United States, pretty risky. But if I have a whole portfolio of innovation, I'm going to have

great outcomes. For sure. I want to go through a couple of thoughts that you have. I'm cheating because I know you well enough to know that the buttons that hit here, but we'll go through a couple of these and then we'll get to Bitcoin and crypto. The first is inflation steals wealth from the poor. Now, Mark could talk about this for hours. Yeah, we'll try to keep it short. But look, I told the story about, you know, the creature from Jekyll Island and why the Fed was created basically to enrich banks and steal wealth from. The second part of that is it's created to steal wealth from the poor and the middle class. People say, what are you talking about? You know, it saves us. No, it doesn't. So the idea that inflation is a good thing and we've been sold a

bill of goods over years that inflation is a good thing. Well, it means my income's rising or I get a raise every year or get a cost of living adjustment. Well, yeah, that's fine. But what it's really designed to do is to inflate the value of assets, real assets, real estate, stocks, et cetera. The problem is 49% of people in this country don't own any assets. Half the people in this country couldn't raise $400 for an emergency. So they don't own the assets that are being inflated by this mythical devaluation of our currency. So just to give everyone who's listening a quick kind of context here, there are two ways that this 49% are essentially affected by inflation. One is they don't have something called an inflation-adjusted wage contract,

which basically means if you have a job that you're working and every year you get a raise that's about 2%, 3%, whatever it is, what they're essentially doing is they're increasing your salary enough to mitigate the effect of inflation. If you happen to work, let's say at an hourly job that doesn't have this inflation adjustment, you're getting paid the same amount. So let's just say $10 an hour, $10 an hour every year, year after year. The problem is that actually you're getting paid less on a purchasing power basis because your $10 that hour that you worked is that can buy you less and less goods over time. So you think you're getting paid the same, but it's slowly devaluing away the currency that you're getting paid. That's one.

Two is what Mark's talking about, which is that 49%, they have no real assets. So they don't own anything. They actually leave their wealth in cash, mainly because they're living paycheck to paycheck. And so what inflation does is it frankly just ravages their wealth because it is being devalued away. And we're talking about the most developed country in the world where it's not like we have hyperinflation but if you go and you look in the hyperinflation markets like let's say you know venezuela's got 10 million percent you're talking about literally one day you know 10 boliviar can go and buy a loaf of bread the next day 100 boliviar can't buy a loaf of bread right that the inflation there is much more obvious because it is hyperinflation the same thing

happens in the u.s with inflation it's just not as obvious because the the numbers are smaller well we're boiling the frog right it's still back to science right if you put a frog in water and it's hot he'll jump out if you crank it up a couple degrees it's like a bath by the time he wants to jump out he can't because his muscles don't work so the same thing's happening to us we're being boiled like frogs and that the fed was created to to create this inflation and inflation said robs wealth because what it's doing is it's devaluing the currency from 1776 to 1913 a dollar was worth a dollar that fluctuations up and down recessions wars etc but it was basically worth a dollar today a dollar 100 plus years later 106 years later is worth about you know three and a

half cents so it's been 98 percent uh decrease in purchasing power from 1913 been devalued all this amount and it and it because it's happening slowly people don't really observe it And so when people talk about, well, we can fix income inequality and wealth inequality, and we just need to cut interest rates again, and we just need to stimulate the economy more. I'm like, no, cutting interest rates doesn't stimulate the economy. QE doesn't stimulate the economy. What stimulates the economy is job creation, whereas job creation occur, small businesses, not big businesses. We didn't need to cut taxes for the super big companies. that's all bogus something called stealth qe it's a way to financially engineer higher stock prices

for the rich people we'll get to that in a second it's just anyway so the flip side of the inflation is there's basically 50 50 split in the country right so you have the bottom half who is inflation is absolutely crushing their wealth the other 50 they own the real assets yeah and so if you're going to inflate the asset prices what ends up happening is they actually are getting wealthier at the expense of the bottom 50% because their wealth is not stored in cash. It's stored in these real assets. The real asset prices go up. And literally, the inflation, they like it because it is making them richer. Of course, yeah. And the top 1% owns the vast majority of those assets. So they love it. And they're the ones that control the government by placing the people in power who

they want in power. And I make the joke today that there's no Democrats, Republicans, no left, no right. There's just in and out. When you're in power, you do or say whatever it takes to stay in. And when you're out of power, you do or say whatever it takes to get in. And that's the way we've gone is we have Republicans in charge, Tea Party Republicans in charge. And we just created the biggest deficit in history. Forget Republicans, Democrats, left, right. It's just in, out. And what that does is if the 1% controls the government, you know, absolute power corrupts absolutely.

what we're going to get is a corrupt environment and this stealing of wealth from that middle class and that, as you said, decimation of the middle class. And so talk maybe a little bit about the relationship between how inflation works and the interest rate cuts and the QE, basically the two tools that central banks have whenever we get towards recessive periods, the cut rates, they print more money, which is now, I love the term you use, the new abnormal. The new abnormal, yes. So maybe talk a little bit about how that has impacted asset prices over the last decade or so, and then also really the middle class.

I mean, it's pretty obvious in terms of the wealth inequality, kind of the inflection point that's occurred over the last decade or so. Yeah, I mean, look, the idea that, if you think about fixing of prices, any type of Fixing prices, minimum wages, fixed prices in rent control or interest rates, right? That's a bad idea. The market should set prices and the price of money or the price of interest rates should be set by the markets. But no, we have this, you know, bunch of stale white guys that pale, stale and male, you know, that that that determine, although we did a Janet Yellen. But mostly these older people who are PhDs and they set this price.

And it's very non-transparent. It's very based on human decisions and analysis. And I say all the time, why would we trust a group of people? And it's not an exaggeration. There have been 244 quarterly estimates of growth issued by the Fed. they're over zero right i could coin flip and be right half the time they're over so why would we think that they are going to make good decisions on interest rates policy they're not so then it makes the assumption that they're trying to make good decisions they're not so the idea that the

fed can stimulate the economy by lowering interest rates and giving um better access to capital for businesses made sense when interest rates varied between some lower bound and some upper bound. And we had the craziness of the 70s, and we had the normal period of the 40s, 50s, 60s, 80s, 90s. But once you get below 2%, once you get in this zero bound of interest rates, that tool loses its effectiveness. And so raising interest rates didn't slow the economy as much, and slowing and lowering interest rates hasn't stimulated the economy as much. Well, really what that is, is what people forget is the economy isn't driven by interest rates.

It's driven by people and it's driven by demographics and demographics are destiny. And you're going to ask me later, I know you're going to ask me, what's my favorite, most important book? And I don't want to give one, so I'm going to weave in a couple, but one that I think is really important is this idea of Harry Dent wrote a book called The Great Boom Ahead. And what's interesting is his first book is awesome. The rest of the books, not so much. And I like Harry. He's a good guy, but people don't like him because he's been very bearish on the market and predicting doom and gloom. But his first book is amazing. And in it,

he talks about a couple of things that are really, really important. One is this idea that demographics drives everything. And we can tell exactly what's going to happen in a society based on the number of 25 to 45-year-old people, the number of 45 to 65-year-old people, and the number of 65 to 85-year-old people. When you have 25 to 45-year-old people, you have low productivity and high inflation. And that makes sense. It's not because young people aren't smart or nice or good. It's just that they're not trained. They're not highly productive. And so you borrow from your customers in the form of higher inflation to train your workers. When you're 45 to 65 age cohort dominates, you're going to be really highly productive and

you can have lots of spending. The maximum spending in your life is age 46 and a half. You got the two kids, you got college, you got cars, you got vacations, you're spending all this money. It's like potato chips. You eat the maximum number of potato chips when you're 13. You'll never eat more potato chips in your whole life than when you were 13. And you'll never spend more money when you're 46 and a half. So things happen at certain times in your life. So it's not surprising that we had this great boom when everybody in the US, the baby boomers, were turning 45 to 65. Now, every day, 10,000 people turn 65 every single day for the next 17 years. And it's no surprise that we have less productivity and less spending because it turns out 65 to 85

year olds don't spend a lot and they're not very productive. It doesn't mean they're not nice people. But the demographics drives everything. And so ultimately, that demographics can't be trumped by interest rate policy. And so if you look around the world, Japan was first. Japan has the oldest demographics. And so they started down in 1989. And they've had now 29 years, 30 years of bad economic growth, low interest rates, zero interest rates. And people think that that's not going to happen to us. Well, it is, because it's happening in Europe. You see, almost all of European debt now is trading below zero, negative interest rates.

And US interest rates, despite everybody saying that the bond bull market was over and bond prices had to go down and interest rates had to go up, I mean, yields had to go up, exact opposites happen. So demographics is destiny and the Fed is less omnipotent. In fact, this friend of mine has a great line. He says, I remember a day, I'm old enough, I remember a day when I didn't know the names of central bankers. I long for that day to return. And so what they've gone to do is QE. And people think QE is new. It's not new. We did it in the 30s. And Ray Dalio writes about this and talks about it, is in the 30s, we had this thing called the Great Depression. And if you think about the 1930s, we were an emerging market. The United States was an

emerging market. If you've seen the movie Gangs in New York, this was not a good place to live from 1860 to 1920. It's kind of rough and you could die walking down the street. By 1929, the Italian gang beat the Irish gang, you know, Viva Italia. And so now we're a country run by single gang, but no one would buy our debt. And because post-World War I, and we were in emerging markets, so no one would buy our debt. So we bought our own debt. So we bailed ourselves out. And then in 1937, we had zero interest rates, just like today. And we tried to raise rates to 25 basis points. And we turned the Great Recession into the Great Depression. And then it wasn't until World War II when we were able to stimulate our way out to get out of it. And so we had this

20-year period of really badness all around this idea of QE and zero interest rate bound. And so Fed policy becomes less powerful. And so now you have these central bankers who they feel powerful, right? They're voted Time Man of the Year. Ben Bernanke saved the world. Ben Bernanke did not save the world. China saved the world, right? China pumped $4 trillion into the global economy. It wasn't the US cutting interest rates and doing QE. It was China. And so the key here is we're at this point now where everyone thinks the Fed is invincible. Everyone thinks central banks have it all under control. But what we've seen is it's not working, right? You had all the ECB in straight cuts, they're in recession. Japan in straight cuts, negative yields. Bank of Japan

now owns 75% of Japanese government bonds and three quarters of all their ETFs. It hasn't worked. So US is going down that path. I said I would talk about stealth QE. Everyone talks about the Tax Act. Why do we do the Tax Act? Tax Act had nothing to do with taxes. It had to do with the Fed, by law, is prohibited from buying stocks. They bought all the bonds they could buy. And so they need to buy stocks to try to keep the stock market up, to keep the wealth effect going, to keep stealing from the poor. And so the government said, hey, here's the deal. We'll go to the companies that have a lot of cash, Apple, et cetera. We'll give you all a big tax cut. But you have to promise to buy back your stock and pump up stock prices. So they're not allowed

to do CapEx. They're not allowed to do investment for the future. They're not allowed to invest in innovation they just got to buy back their stock well why is that well because people like warren buffett own lots of stock so it's all a big circular thing of concentrating the wealth closer and closer in the the top one percent so i'll call it stealth qe so now we're at this point where you got the president browbeating the guy that he hired right how how weird is it that the guy has hired seven people and then within months called them incompetent that's just weird right Why would you tell somebody, why would you tell the world that you hired an incompetent person? But maybe the incompetence is coming from someplace else.

But the key is that, you know, Jerome Powell is doing the best he can in a flawed system because under or approaching the zero bound monetary policy stops working. And what you really need is fiscal policy or more importantly, what you need is innovation, right? It was up to me. I would create a massive venture capital fund funded by the government, funded by Social Security, and I would invest in all the great entrepreneurs and I would own a piece of what they do. Wait, somebody does that. It's called the government of Singapore. They take their Social Security money, and they invest it around the world with the best entrepreneurs, and they are wildly overfunded in their entitlements programs because they actually invest. Instead of using a Rob Peter to pay Paul system, they actually invest. And investment, particularly investment innovation, would solve all those problems. And then we wouldn't need this Ponzi scheme-esque way of you keep working so I can retire.

We solved that problem. It's pretty crazy when you start to tie in the history of how this stuff was created, why it was created, who created it. You tie in the data of the impact that it's had, and you add in pretty educated estimates of what is likely to occur in the future, whether it's demographic or just other examples around the world. You look at a system that I don't want to call it failing, but it's definitely flawed in many ways and the part that to me is the most shocking is uh

one there's incentives whether it's from the government side or or the banking side uh to continue the charade right and kind of everyone keep doing what they're doing because you know hey i'm such and such age i only got another you know 15 20 years yep not my problem not my type that type of thing at the same time what you see is um one of my favorite examples to give people is uh every disruptor becomes the man right and uh i think it's a naval ravikant at one point he made the comment that if bill gates was a teenager today he'd be working on bitcoin and crypto of course right because at the time working on microsoft was the equivalent of working on bitcoin crypto blockchain stuff today and so he has gone from one of the kind of most fringe

disruptor i'm gonna go and build this massive company and take on the incumbents to now he is the man of course and if you look across a bunch of these that happens in entrepreneurship it also happens in politics and i think part of it is your example of like the in and out crowd when people are out and they want to get in they're very disruptive they're they're very this is what's gonna happen and it always cracks me up that once they get in and it's both sides of the aisle has nothing to do with political ideology all of a sudden the um the vernacular right the way they articulate ideas it all gets tempered it kind of gets to this world let's not rock the boat as much because now i'm in the crowd because now i might get kicked out right

It's like why boards make bad investment decisions. Once I'm on the board, now I just want to stay on the board. It's like in this group of people in this room, right? If I asked, what's the best restaurant in New York? The group will give me McDonald's. If I ask anybody individual, I'll get a really good answer. But the group will say, well, I don't want to tell them about this Indian place I know because he might not like Indian and he might like American continental food,

but it's kind of spite, McDonald's. It just gets dumbed down, and that's the same thing that happens in politics, is it gets dumbed down back to this level of, I just want to stay here. But the real problem is the framers set it up as a voluntary service. Two years, you went back and ran your family farm, and you couldn't be a lifelong politician. The problem is today, it's not voluntary. It costs you $100 million to become a senator. Not very many people have $100 million lying around. Meg Whitman tried.

But most people have to raise money. Well, if you raise $100 million, you're going to owe people stuff. And it turns out when you owe people stuff, you're mal-incented, mis-incented. I don't have a lot of opinions about politics, but the one idea, and I forget who gets credit for this, but the one that I really, really agree with is if you are elected as a representative, if i don't care what part of government what ideology you should not be allowed to participate in the legislation creation or editing of the industry that backed you to get there oh amen amen so yeah so if the health care you know if the drug companies put you in you can't talk about

you can't participate in any legislation that's to do with drug companies right if it was the tobacco industry if it was whatever you you just what you start to do is you change the incentives right and you change the way that um that things are are kind of occurring we're running out of time so we've got probably about 20 minutes or so oh my gosh i want to talk i want to talk about two things uh well three things because we have to talk about aliens as well but uh the first is real quick in like three minutes talk about um the fact that when you deposit money in a bank it's not your money anymore ah again little known fact right people put their money in the bank and They're like, okay, that's my money.

Fact is, no, it's the bank's money. Look on the bank balance sheet. It shows up as their asset, and you have an IOU from the bank. But I can get it any time I want. Well, yeah, you can, unless they lose it. Well, how could they lose it? I'll give you an example. So I met a guy.

His dad founded Syndicated TV. He inherited almost a billion dollars, $960 million. And I said, where's your money? He said, it's in the bank. I'm like, what do you mean it's in the bank? He said, well, I don't want to lose it. like but you could lose it really easily because it's not your money anymore he says no no it's insured i said well it's insured up to 250k um but not 960 million big delta between 960 million

and 250 yeah and and so make a long story short he did diversify he put it in four banks and the sad part is in the global financial crisis one of the banks went bust and he lost 25 of his money minus the 250 he got back from insurance and people just don't understand whether it's cyprus literally you wake up one morning and 75 of your money is gone because they you know take it because it's a bail-in tax one of my favorite terms ever a bank levy right which for uh in english format all that means is they literally went in and said we need to raise money really fast let's go to the banks and tell them take 75 50 10 whatever the number was per bank just take that money, call it a bank tax. And now we've got the money that we need to go do what we need.

And look, I'm not a bank hater in the sense that I actually believe fractional reserve banking is what separates the great countries from the less good countries, right? If you think about, if you can make a dollar work harder by fractional reserve lending it, it's a wonderful system, but it can be abused. And I think it has been abused. And I think the biggest problem is that we don't hold people accountable for their actions and we bail out the powerful instead of letting them fail. I mean, Iceland's a good example. They let their banks fail and they didn't go down the drain. Iceland's still around, last time I checked. But this idea that the money in the bank is not yours is a fundamental premise that people need to understand because everybody

thinks about it as, no, I can go get it anytime, but you can't. And it's like stock, right? In a brokerage account, it's not yours either. Like, what are you talking about? No, your paper stock certificate sits at DTCC, and then it's registered through a registration process with the broker, right? That you work with, but you have an IOU from the broker for that particular stock certificate and then you get a q-sip electronic version but you don't have ownership of the asset which can change with digital and this is all fine when things are going well it's when things turn sour that that's where the issues of course introduced of course um all right bitcoin we've got almost two hours and haven't talked about that's crazy i don't do short well so that was

my secret uh goal um you and i uh and jason have gone around the country uh talking about this get off zero. You, unlike Jason and I, have sat on the other side of the table as a fiduciary, managed these endowments and really kind of thought through asset allocation, etc. Just spent a couple minutes talking about how you think about Bitcoin, why it's interesting, and then how it fits into some of these institutional investors' portfolio from a portfolio construction standpoint. Yeah, I mean, we talked earlier about this idea that you got to focus on innovation. We talked about this idea that you know, disruptive technology is really important and disruptors are important.

And if I think back in my career as a fiduciary, I've sat on boards, I've managed portfolios as a fiduciary, built a business around being a fiduciary for clients. One of the things is I've always found myself hanging out with the fringe, with the disruptors. And, you know, when I first brought the idea of hedge funds to Notre Dame, they're like, no, that's where all the bad people are. I know they're not bad people. They just make a lot of money because they're really talented. And then we wanted people to invest in distressed debt. And the board's like, oh, we can't do junk bonds. I'm like, well, you do realize that the bulk of your investment is in equity, which is junior to subordinated debt in terms of claim on cash flows. So maybe it's OK

if you own distressed debt, even though you want to call it junk. And so this idea that you want to go where the disruptors are, where the fringe is, has always been pretty important. And people confuse this idea that that's not fiduciarily correct. And it's only not fiduciarily correct because it's not accepted custom. If you go back to 60 years ago, the Average Endowment Foundation didn't own stocks, right? It was all in fixed income. And then someone said, well, that's a really bad trade. And then in 1973, there was this idea that, hey, maybe we should think about international diversification. And ERISA came in and suddenly you could do international stocks and bonds. And so what seemed outlandish or crazy then becomes customary. And one of the

things I talk about in this whole theme that we've talked about together, this get off zero is 10 years from now, you're going to look back and everyone's screaming today about how, oh, you can't invest in this because it's not fiduciarily proper or it's not an acceptable asset class or a customary asset class. You're going to look back and say, oh my gosh, you are a bad fiduciary if you didn't invest in this. The same way that today, if you don't have hedged assets in your portfolio, you're not a good fiduciary. If you don't have a diversified portfolio globally, you're not a good fiduciary. If you don't think about low correlation assets, you're not a good fiduciary. So all these ideas, people forget the CAPM, Capital Asset Pricing

Model, is only 75-year-old technology. It's not like it's multiple hundreds of years old. So all these ideas about bringing new technology and innovation and new areas of investment into the portfolio, what start out as radical end up as accepted. And the key, again, is being early and taking advantage. And you think about, you know, why has Yale been great all these years or Notre Dame or Duke or UNC? It's because they're always out ahead. They're always putting the new asset classes, the new strategies into the portfolio before everybody else. Well, I think that, you know, look, when we first started really talking about this stuff, the one thing that you said to me that everyone knows but no one understood, I think, is you have to talk to a fiduciary institution in their language, right? And so where the Bitcoin community is racing around and screaming and yelling about, you know, it's going to be a new global reserve currency, you don't need a central bank, a dollar is screwed, right?

All these things that there's a high probability are true, right? It's possible. Or definitely possible, right? And some people would argue are probable. It's definitely possible and likely probable, yeah. Yeah. And so if you if you kind of say, OK, that's the way that you would speak to technologists, to other Bitcoiners, to people who are looking for innovation and and kind of the ideological revolution, stuff like that. Institutional investors, all that language they run so far, so fast that it just scares the hell out of them. No, come on. I mean, look. So here I am. It's six years ago, 2013.

You know, one of the guys I backed that came out of Julian's shop, Dan Moorhead, he found a firm called Pantera 13, 14 years ago. We were first money into his macro hedge fund. And six years ago, he calls up and says, hey, Mark, I'm shutting down the hedge fund and I'm going to open up two funds in crypto, one in Bitcoin and one in infrastructure. like, what are you talking about? And I had heard of Bitcoin. I would say I was neither a drug dealer on Silk Road nor a cryptography student. So I hadn't really gotten exposure. But I kind of heard about it. And I went out and met with him in San Francisco. And he went from a billion dollar fund to 15, $1.5 million raised for this fund. And the first of my many bad decisions in crypto is I could have gone to Bitcoin fund or the infrastructure fund. I'm a picks and shovels guy. I get picks and shovels. I get infrastructure. I'm like, good,

Dan, let's do that. I should have gone to the Bitcoin fund, right? The picks and shovels fund, up 10x. No one's complaining about 10x. Awesome. Great. But the Bitcoin fund's up 180x. That was better. So that's late 2013. So my son's getting ready to graduate from Notre Dame. I send him out to meet with Dan. I'm like, go work at Coinbase or Zappo or something and just get in the industry and get in front of the trend. And he goes out and he meets with Dan of a couple of companies and he comes back and says, yeah, dad, I'm not sure. I think I'm just going to go with KPMG. And it's safe. They'll get me to San Francisco where I want to be. And we got a chuckle out of it last Thanksgiving. He's like, all right, fine, dad, you were right. But you're not as smart as

you think you are. I'm like, well, what do you mean? Of course I'm smart. What do you mean? He says, no, you didn't lever up the house and buy Bitcoin. I'm like, huh, good point. But here's the crazier thing. So first quarter 2015, you know, Bitcoin has dropped from $1,000 down to $500. And I wrote one paragraph in these crazy long quarterly letters that I used to write, you know, 40, 50, 60 pages, 41 page letter, one paragraph about Bitcoin as a special situation, thinking it's good investment. okay this first quarter 2015 500 i had people call up and say we'll fire you if you don't stop talking about this crazy stuff like wow that's an extreme reaction and there was just fear there's

fear of this new technology of this crazy magic internet money you know the bad guys and the mount gox's and the you know silk roads and just stop talking about now it went from 500 to 175 bucks by september like maybe they're right no they weren't right so then it zooms back to a thousand and now i'm back on it i get some of our clients into it i get some of our people excited about it we do some more infrastructure and we start thinking about maybe we should do something here and another year goes by and i still haven't done a lot but we've got we've got people invested we've got a little bit um and then ethereum comes along we got a little bit of interest in that Again, not as much as Novo and others, but we got people to kind of get off zero.

But what was interesting is I hadn't really had the big epiphany yet. And, you know, you and I met briefly, you know, 20 minutes in our conference room talking about Lyft as a private investment. I couldn't believe they let me in the office. Morgan Crease got this nice office in Chapel Hill. I came in in a T-shirt and a baseball cap, and I was like, I think that I might have underdressed for this one. Well, and it was worse, right? because you were that guy from California who had just left Snap and moved back home and kind of had the myth and legend of the Facebook time.

So there was just this kind of, yeah, it's just nice to meet you, but we didn't spend that much time because I didn't get it yet. And, you know, about maybe three or four months later, you did actually run up doing a podcast. You did a podcast with O'Shaughnessy. Patrick O'Shaughnessy. Yeah, Patrick O'Shaughnessy. And it wasn't even that long.

It was like a 25-minute podcast. And, you know, Patrick's a Notre Dame guy. Jim's a Notre Dame guy. And so I listened to the podcast. I was like, huh, that's an interesting guy. We need to meet. I was like, wait, I did meet him. I was like, give me his contact info.

And, you know, I sent you a direct message on Twitter because, you know, I started following you. And it was, I said, like, like, like. And it's just weird. It's like everything coming out of your mouth is something I would have would have said. And we got together for breakfast. And, you know, my famous line, I'm not a morning person. And you showed up early and you had your coffee and and we got talking. Then we had breakfast again the next day and then a couple of days later.

And it became very clear very quickly that there was something here and it was something we needed to focus on together. Yeah. And I think part of it is when you go and you talk to these institutions. Right. And you told me that early on, hey, look, this is likely going to be interesting, but not interested type relationship or conversation. And what I realized was in a number of those early conversations, I had the same experience that pretty much I think every fund manager in the space had where people just didn't get it. The second that you and I sat down and Jason and I really were like, hey, OK, what about this? What about this? What about that? You know, hey, this is why we are excited about it, whatever. you very quickly said okay don't use that word right use this word hey don't talk about like you know taking down the financial system maybe talk about like a non-correlated asymmetric asset

yeah and you really learn that oh wait a second you're saying the exact same thing you're now saying it in a different language that resonates and kind of checks these mental boxes for an institutional investor and when you do that what you give them is less to worry about And you give them a much cleaner kind of framework to evaluate the opportunity. And I joke all the time when I say the idea of a non-correlated asymmetric asset to 99% of people in the world means nothing. When you show that with data to an institutional investor, they have to pay attention. Have to. Right?

And they'll argue with you the qualitative nature, if it's sustainable, all these kind of nuances. but just that one thing it is this trigger that kind of flips them over from i'm not interested to i have to be interested let's see what happens well you're exactly right and and again it's it's why we've been great partners uh as we feed off each other and the ideas and and to your point you know back to my first mistake with my board right 40 recommendations no no no no no no these were observations. Don't threaten them. So don't go in to an institution saying, hey, this thing's going to take down the financial system because, oh, by the way, 100% of my assets are in the financial system. I don't want to hear that. So what I do want to hear is, okay, technology has

progressed. And this is something that became very clear for me. It was like this aha moment, this eureka moment that you know i've been investing in this technology cycle 54 mainframes 68 microchip 82 personal computer 96 internet 2010 mobile net and now 2024 the trust net my term use it frequently but people want to call it the internet of value or the internet of things or whatever it is or the blockchain era but it became very clear that that as dos was to operating system for PCs, iOS and Android are the operating system for handhelds. And now we're going to have this operating system for the internet of value. And that is going to be blockchain technology. And I did have this epiphany moment. I even wrote about it, you know, from Eureka, California,

that I had this Eureka moment. And I was like, oh my gosh, we have to do this together. We have to build and and you have to do it because it's way better coming from you is you know you very successful guy lots of background and i it's amazing i had all these questions i was going to ask you and i didn't do any of it um but give me the the dude give the story of why did you and jason decide to partner with us you know stodgy stayed institutional firm i always use the example of like a Venn diagram, right? Which was we had, Jason and I had been investing

in kind of a micro VC style into a bunch of these companies. Kind of started out, are we good at this? Okay, we might be good at this. Okay, I think that actually we can go find a lot of these deals. Let's go raise more money.

The institutional world's interesting. You and I started talking. I always joke with Jason and said, I tricked Mark because Mark was learning from me about crypto. He didn't realize I was learning about the institutional world. good trick good trick but i think that in those conversations what became very obvious was

uh we had talked to a bunch of people in kind of the institutional asset management world and they were all bankers right and i use bankers as like kind of a a banner title that is not a negative title it's just a um they come from the traditional financial world they're training the traditional financial world that's how they think that's how they act that's who they surround themselves with and it's a very specific uh mindset on the other side you have all the crypto folks right all the bitcoin folks who are just hardcore you know decentralized the world this is new technology very innovative very disruptive etc and when you bring together those two separate buckets of people in the kind of event diagram the overlap it's actually a

really really small set of people who come from the institutional asset management world understand kind of traditional finance markets asset allocation portfolio construction and also understand innovation disruption right technology etc obviously you've been talking about a lot of those things today. And so in that bucket, there was even a smaller group, literally one, which was you and Morgan Creek, that I think aligned with us in terms of you're not a trader, right? You're not going to go out and hedge fund in the sense of let's go pick stocks and trade. You're not going to um just long passive index right um there's a very specific kind of equity uh you know bent or or uh bias um and more venture capital private equity type uh infrastructure etc and so you know

very early on i remember having two specific investment thesis which was hey bitcoin's interesting as this idea of a algorithm is going to store value uh for people you know um i can i've said this on the podcast a million times and now that mark's here i can say it and i'll say it and Jason's here as well, I'm 31, Jason's mid-40s, you're mid-50s. And when you put that together, it becomes a really interesting collection of experiences and perspectives because I can sit there and say, trust me, there's a whole group of people like me who are going to trust this algorithm to secure their value, their wealth. And while that's weird to somebody who's sitting there saying, look, I've been doing this for 30 years and there's no freaking way that somebody's

not going to put their money in a bank and then they say oh hold on a minute actually there's a lot of people like a lot of people right um i think that that's a a really kind of beneficial thing and the second thing was this every stock bond currency and commodity was going to get digitized and i think that you know kind of the historical perspective of the shifts already happened before from the analog to electronic world electronic digital it just made a lot of sense of there was things that you guys brought to the table that we had no clue about not even that we couldn't do just we had no clue about and i think vice versa there was things that we brought the table that you guys were like look we kind of heard about it but you know help accelerate this

no i mean the point you make about um youth and and aged you know look you get wise as you get older right just because you made mistakes and you survive it's like it's like the firefighter who says you know they have he has a sixth sense no he just fell through a lot of floors and didn't die so now he knows to touch the door and before he goes in and he's got he's wise and so but with with that wisdom becomes this intransience about, oh, no, no one would not have a bank account or a brokerage account. Well, geez, I know people who don't have either of those and have 80 plus percent of their assets in crypto. And actually, when I think about it, that's actually not illogical given where we're headed. And so what was great for me was, again, that epiphany of

saying, you know, one plus one plus one is five or 10 or more as the three of us together created this asymmetric upside potential in terms of building a new venture that took all the benefit and all the wisdom and all the experience and all the relationships and all the knowledge that we had for 15 years at Morton Creek to then kind of lasso this shooting star that we want to ride along with that is going to be this new asset class and this new fiduciary standard or Bitcoin standard that's coming. And I said the interesting thing for me was also there's a, if you go back in history, all of the great intellectual and technological innovations come from young people. Mark Andreessen was not a 55-year-old guy when he invented the browser. He's doing great stuff now.

too as an older guy but but the youth is is you know uh where this comes from and i said bill gates you know he got mistaken as the coffee boy by ibm right ibm passed onto microsoft the first time because they thought he was the coffee boy he's better than coffee boy but uh youth is is really where it's at and and the the most i've had more fun in the last two years than i probably had in the last 20 one because i get to hang out with young people who are enthusiastic and and and really doing interesting things and and while i can't keep up the pace right i used to think i worked hard until i started you know working out with you and you know i i love the fact that i i am reverse aging uh i'm i'm becoming less rigid in things that i thought were absolutely true and

i'm going back to that wonder ahead look when i was 34 year old as a cio of university people like what the hell you how'd you get that job and it goes back again i pick on my board chair um, from UNC, but he was actually an amazing guy and he was very successful. And, uh, he had a great line when I asked him, I said, you know, why, why, why'd you pick me? He says, I've never hire anybody over 35. I was like, why not? And he says, oh, because the way it works in this world is your twenties are for getting educated. Your thirties are for building your reputation. Your forties are for capitalizing on your reputation, your fifties and sixties are for enjoying your reputation and so by 35 you don't want to work hard and i need people to work hard i'm like wow

that's really interesting and there is this this sense of wonder this sense of of of potential achievement and and motivation and and i feel like i've i've got reinvigorated uh and and have it again so i i clearly am not 35 again but but i i feel like it plus i have an eight-year-old to prove it. Um, so, uh, I think that combination of youthful enthusiasm and a sense of understanding of, of, uh, that generational shift, uh, along with a business builder like Jason, who you'll talk about on the, on the next pod and, and my experience in, in, in building an asset management business comes together, uh, to do something really special. I agree. I'm biased, but I agree. aliens real or not uh um the concept of aliens definitely real okay the idea that that we're

alone in this in this you know series of universes impossible um the idea that aliens have visited this planet i'm not there i think the i'll agree with that i my thing is that um like the last the Last week, I've been laying in my backyard, staring up at the sky, trying to find the Perseids. And it just ticks me off that we had a full moon right at the meteor shower peak. So I couldn't see as many as I wanted to. But when you're sitting up looking at the stars, it's kind of, again, fills you with a sense of wonder. And when you look at one of the sky apps on your phone and you see just the gazillions of stars and universes and you think, no way we can be alone. So mathematically, you know, combination of things you need for life.

But I think it would take a different form and a different format. But the idea that that, you know, little green men have landed on this in Area 51 or stored there. I'm not there. I think that that is probably the most intellectually sound way that people look at it is life probably exists somewhere from mathematical basis. um they probably doesn't probably look and you know act the way that we see it in movies uh and if it's anywhere it's like in an area 51 type thing but uh unlikely that i mean my thing is it's space travel is just too hard yeah right the idea i mean somebody had a great line um yesterday that i saw on twitter it said uh if there were a planet that was 51 million light

years away and i don't know why they picked that number uh and they could actually see here they'd see dinosaurs and i'm like okay yeah that puts it in perspective that you know star trek like i i you know one of my twitter moments was you know william shatner added me and i'm like wow that's kind of cool because i grew up you know watching the guy and the idea of star trek you know going from planet no it's just not happening colonizing mars not happening just we won't go there that's pretty good not not letting me go down the tesla rabbit hole for uh uh i'll let you ask me the one question to end this but just for the record mark is a is a tesla bear and i have a tesla bull and we have a very uh spirited debate it's good um all right if two people always have the same

opinion one is unnecessary very true what uh what one question do you have for me i told you you're I'm going to get one question this whole time. Uh, I have so many, uh, but, but the, the one is, um, and one of the things I really admire, uh, about you is, is your, your, uh, commitment, uh, to everything you do. I mean, you are, you are all in a hundred percent of the time. Um, and you know, one of the things that had to be just devastating in some ways and challenging and others um was you know basically being disrupted in the middle of college to uh go off to the army um but what was the one thing you took away from that experience so uh the all-in thing there's a saying uh as kids we uh my brothers and i and then a number

of our friends used to joke about but there's you know in every great joke there's a hint of truth type thing um is uh anything worth doing is worth overdoing and now we used to use it as kids of like oh well if it's worth eating ice cream just eat the whole bucket right and you can imagine all the ways you could apply that as a kid to basically piss off your parents um but but i do think that there's a lot of truth in that and things in life uh and if you use that as a um filter you start to change some of the things that are worth doing right um and so when i went to uh iraq i'd signed up basically for like this reserve contract and then i would know some time after college uh i'm a junior uh i had known that it was a possibility but very small uh they call

and like i'd kind of not paid attention so it's like oh if i don't pay attention to the possibility that absolutely it can't happen right it's like the ostrich turning his back on the lion yeah and so all of a sudden they said hey in one week you have to report it's like oh that's like real and so i went and for me i was 20 and i was joking say i went to basic training when i was 17 uh they were yelling and screaming at me anyone that was like over the age of like i don't know 25 they had enough self-respect to realize like why are you treating me like this at 17 i was like oh you're nicer to me than like the football coach was so you're kind of just in your that time of your life you're used to everyone yelling your parents yell at you your coaches yell at you your

teachers yell at you it's all whatever um when i went at 20 uh i was too dumb to realize how dangerous it was because you kind of think like you're superman right it's just like yeah oh like this is going to be fun um which is really weird now you look back you know literally it's 11 years later and i'm like whoa like that was pretty crazy but the other piece of it was uh i was there with a bunch of older guys so um i think that like the average age was like 28 or something which was very uncommon so this isn't um kind of the active army this was a reserve unit so the guys are a bit older uh they've been in for longer and uh it was weird at first to go from like the 20 year old playing football in college and like what's the party on friday night you know or saturday

and after the game to the dude who's sleeping next to me literally like six inches away on a cot is talking about his mortgage yeah or his kids at home right or whatever and what you realize is like you just get this crash course and uh when i came back is when i noticed the the big difference because all of a sudden the things i'd cared about before i went really didn't matter right it's like where's the party i i got other things yep got other things to do right but what it taught me was uh the idea that like the people you surround yourself with you very quickly adapt to right and and kind of your mindset changes to that and it wasn't so much like oh they were great investors or entrepreneurs or you know anything that like the business world cares about

it was the fact that they had really these guys were from like the backwoods of pennsylvania yeah yep they had good values they had real lives yeah and there was no kind of like you know uh travis came on the podcast with me so we're fuckery right it was just like this is life right and so when you're surrounded with that for a year you kind of grow up pretty quickly and you realize like hey there's a pretty clear line here of like the things that matter things that don't matter um and so when i came back all of it like everything changed right so it was very much for me uh an accelerated i grew up yes it was a dangerous situation but when you get back and you kind of survive that now all of a sudden you're like hey man it's like a new lease on

life type thing yeah so you hear you know people who go to jail people who are in these near life uh you know situation or near death uh situations yeah they all kind of the same takeaway of just like just live life to the fullest or kind of anything worth doing yeah but i think the real the real thing for me in listening to you give that answer is is the who you surround yourself with and and i talk about this all time is look at the five people you spend the most time with that is who you'll become choose wisely choose wisely and i think that's why why choosing your partners is important why choosing your associates is important your spouse your significant other uh all those things are critically important and uh it's a great takeaway i couldn't uh i

couldn't agree with it more and i think that it's uh people know that it's really really hard to execute until they get in a situation and then when you get in the situation um you know the thing i'll leave everyone with is uh when jason myself and mark decided to work together uh i remember we walked out of the morgan creek offices and i said what'd you think and he literally said to me he goes we just jumped from high school to the pros and i always remind myself of you know there's an element of you're forced to raise your level of effort your level of your game etc when you surround yourself with that and so it's the same reason you know why do all these nba guys that are stars their kids end up being really good at basketball well because they're

playing with nba players every day yeah kind of accelerates the things that you do so it's been well and to that point and and i know we're running out of time but uh you didn't ask and and but i i do want to talk about it real quickly is uh most important book and you know it's such a tough question and i was joked that you know my wife reads more books in a month than i read my whole life so i don't read many books i read so much for work and stuff that i just don't read books but the one book that i that i have read that i do think is a life changer and it it has a little bit to do with why we're together and doing this is the alchemist um and what it talks about is this idea of a personal legend and you know knowing what your destiny is and pursuing it

and and a friend gave it to me at the right time um you know things happen for a reason of course and i read it the right time and it was just all the things that went into it and and there's there's a line in there that i love which is you know if you if you really wish for something if you really want something to happen the universe will conspire to make it so and and i think this is a great example of that that uh i i knew i was interested in blockchain and bitcoin and crypto and and i knew there was something there but the universe had to conspire to bring you and i together and then to bring Jason in to give us the opportunity to create Morgan Creek Digital and to change our business model, right, from fund to funds to direct investment, from manager to managers

and public markets to really focusing on venture capital and innovation, and to get me to kind of revert back to my entrepreneurial let's build this uh and and and also um in that conspiring it's it's getting you guys to conspire against me and in a positive way of saying hey you know let's sharpen the edge and let's you know let's not focus on stuff that isn't as important or can't make as much a difference and let's focus on what's really important and and that's been good And so, whereas a book, people think, can't make a big difference sometimes, but in many ways, that single book or that single idea can make a huge difference. And then one throw-in to best investment book is a book called The Dow Jones Averages. And Dow is spelled T-A-O.

And it's a mixing of ancient Chinese philosophy and investing. And what it talks about is most investors are too left-brained, right-handed, analytical, backward-looking. And the best investors are whole-brained, and they have to have that creative side and that ability to see things differently. And there's a whole part about why women are better investors. It's called women intuition for a reason. And I was listening to your your pod the other day with Scaramucci and I was listening to the one with Novogratz. And and one of the things that they talk about a lot is this idea of intuition and trusting that intuition and my intuition on you, on Jason, on this opportunity, on morphing Morgan Creek. And, you know, in Taoist philosophy, you know, water, a creek, more creek, it comes to the obstacle, it goes around it, it shapes the obstacle.

And I think that's where we are in this journey, in this alchemist type journey. I think there were going to be more right than wrong. So we'll see how this plays out. Absolutely. All right. This is officially the longest podcast we've ever recorded, which I appreciate you taking so much time to do this. hopefully everyone listening to this really enjoys it and we will we'll have to do it again in the future when we've got more stuff to talk about yeah exactly so much fun thanks for having

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