The Wolf Of All Streets - The First Man Who Tried To Buy YouTube And Facebook Is All In On Crypto | Lou Kerner, Founder Of CryptoOracle Collective

Episode Date: October 25, 2022

Lou Kerner is a man you want to listen to when there is a bear market - he believes Bitcoin will reach $1000,000 and is extremely bullish on crypto in general. Lou is not a typical investor, he operates a fund of funds, and invests in the industry through index investing thus covering all the aspects. Listen to our conversation from Mainnet where we cover why Lou is considered a unicorn whisperer, his attempts to buy YouTube and Facebook, and why and how he went all into crypto.  Lou Kerner: https://twitter.com/loukerner ►► JOIN THE FREE WOLF DEN NEWSLETTER https://www.getrevue.co/profile/TheWolfDen  GET UP TO A $8,000 BONUS IN USDT AND TRADE ALL SPOT PAIRS ON BITGET FOR ZERO FEES! ►► https://thewolfofallstreets.info/bitget    Follow Scott Melker: Twitter: https://twitter.com/scottmelker  Facebook: https://www.facebook.com/wolfofallstreets   Web: https://www.thewolfofallstreets.io  Spotify: https://spoti.fi/30N5FDe  Apple podcast: https://apple.co/3FASB2c  #Bitcoin #Crypto #Trading The views and opinions expressed here are solely my own and should in no way be interpreted as financial advice. This video was created for entertainment. Every investment and trading move involves risk. You should conduct your own research when making a decision. I am not a financial advisor. Nothing contained in this video constitutes or shall be construed as an offering of financial instruments or as investment advice or recommendations of an investment strategy or whether or not to "Buy," "Sell," or "Hold" an investment.

This is one of the most interesting conversations that I've ever had. Lou Kerner is a renowned investor and venture capitalist. He was the first person to ever make an offer to buy YouTube for hundreds of thousands of dollars. He was the first person to approach Mark Zuckerberg about buying Facebook when it was just a small social platform. He has a history of picking unicorns, companies worth billions and billions of dollars. Now you can learn how he does it. Word on the street is that you are the unicorn whisperer, that you have a unique knack for finding incredible investments that'll be worth a billion dollars or more down the road.

Is it true? Yeah. Actually, I don't feel that at all. I say the only people that I found in my travels who know that a company is going to be successful is the founder's mothers. Yeah. But aren't the founder's mothers also the ones who 99% of the time are wrong about their kids who they believe in too much? Yes, they're doing that as well. They're completely on their face. You know, I really thought the macro lesson,

I learned the first macro. And I had angel invested. And I didn't realize how different it was because angel investing, like, you know, it wasn't my career. People would say, hey, you want to invest? Wow, that looks awesome. Two years ago, I would invest.

But once you raise other people's money, well, now you have to invest all the time. And, you know, I really believe that the best VCs, and why is it that the same VCs are in the top decile year after year after year? Are they smarter than me? Are they working harder than me? No, I think they had built brands such that I think companies start off, nobody knows they're going to be successful. And they beg VCs for money and beg and beg and beg. And then one day something happens to a small percentage of them

and everybody thinks they're the next Google and Facebook. And then the VCs call them and beg and beg and beg to get on the cap table. And the best VCs are the ones that when they call and beg, they get on the cap table their share of the time. So how do you become that VC? Is it that you get lucky once? Or is it... No, no, I became a VC...

Obviously, I mean, listen, Andreessen Horowitz gets to invest in whatever they want, period. Look, Andreessen didn't used to be that, and then they solved for that, right? And so the way actually I solved for that was I became a guy in Israel. And before I got into crypto, I was investing in tech companies founded by Israelis. And the quality of companies I was getting there was markedly higher. You know, I think my returns, I'm sure, will be top decile, you know, US VCs, but it won't be top decile Israeli VCs. Right. Because I wasn't getting the best of the best, but I was getting really good deals. So it sounds like sometimes you just need to find a smaller pond. A smaller pond or redefine the pond.

And so how did that lead into your cryptocurrency investing? So I went down the rabbit hole 13, 14 deep, so deep that the Wall Street Journal wrote a story on Bitcoin, quoted me as Wall Street's Bitcoin expert. But while I looked in and looked at it, I did not see it. It was harder to see then. It's still hard to see, obviously, for most of the world. And on June 29th, 2017, I held a conference call. And I got four experts to teach me about ICOs, what the hell was going on. And on that call, somebody said something, and I had a gestalt shift.

And I've been 24-7 ever since. What'd they say? You know, it was inconsequential what they said. It was like a puzzle piece with a squiggle. But when you put that in with the rest of the puzzle you have, now you can see. But do you remember specifically what it was? I have no idea. But what I do know is I described it as, I felt like I'd had blinders on.

Like, oh my God, oh my God, how did I not see all of this? I think a lot of people have that moment with Bitcoin and with crypto, or you have this aha moment. And what I find interesting is once you have it, you never go back. No, no. And once you take that pill, right, it's a great metaphor. Yeah, but most people don't realize that until it happens. You don't see billionaires and companies saying, we're going to invest in this space and then say, you know what, we were wrong.

It doesn't happen. Well, yeah, I mean, yes, I agree with you. And one of the weird things is, for me, we have our problems as an industry. For me, I've been now five years, 24-7. Biggest disappointment is we've made little progress on the two things we need to solve, token economics and governance and consensus, if we're really going to get to have communities take over complex things. That's been the biggest disappointment.

So you think DAOs aren't ready yet? I think you can be on the path to decentralization today. I think that's, and that's fine. Look, and you can, you know, and I think even those organizations today, the nice thing is what we're competing against is such a low bar. That's true. One could argue that it's impossible to start truly decentralized. For me, it's all about community. This is all

about community. For the first time ever, we have a tool set to solve for the community instead of the man in the middle. That's really what I'm here to help really people understand even what a community is. You know, like at the atomic level, I realized communities do people. I realized I'd gotten married without a single conversation on governance and consensus. How did you possibly do that?

I would say that if you want to stay married, you should also not have conversations about governance and consensus. Well, you know, we didn't, and we just kind of settled it non-verbally for about three years by whoever cared more, which made a lot of sense, right? That seems, you know, whoever cares more should get their way. And then it took me three years to realize she cared more about everything. Well, it's funny. And then you never get your way. Universal. Yes, exactly. Exactly.

So you've invested in 40 plus companies. You could call yourself a fund of funds. Correct. What exactly does that mean for those who don't understand? So a fund of funds. So we invest in VC. So we're like a VC, but instead of investing in companies, we invest in VCs who then invest in companies. So they call that a fund of funds.

So that goes back to the model you were talking about. You don't need to be the one who everyone picks up your phone call. You just need to invest in the one who everybody picks up their phone call. That's how I've solved for it. The pitch that I give for blockchain co-investors is there were $5 trillion companies created in Web 2.0. There are going to be 10 or more multi-trillion dollar companies built in Web 3. And we're going to own them all. So why do those VCs need your money? They don't.

I mean, but they don't now. But we were first money into not quite half of them, you know, including going all the way back to blockchain capital. So Allison Davis, one of my partners, still chairs their advisory committee. Incredible. So you obviously are not just passively throwing money at these venture capitalists and hoping for the best. You have a deep understanding of this space and what they're investing in. So what that's happening in the space right now is exciting you?

You know, quite honestly, everything excites me. You know, I travel the world going from Crypto Mondays to Crypto Mondays, you know, and seeing the different communities everywhere. They're all the same. People are really building shit. The smartest people in those cities around the world are leaving and building really cool shit. And, you know, for me, the analogy I use is I was there for the beginning of YouTube.

I actually called the first person to call YouTube and try to buy them. Really? And yeah, yeah. It was great. They invited me back to their five-year birthday to tell the story, because that was the first time that I thought, hey, maybe we're a company.

And the amazing thing about online video and that thing was I had a bigger company than them and one day somebody uploaded a video called lazy Sunday it was an Andy Samberg Saturday Night Live video on YouTube that day they became the fastest growing website in the history of the world why because the pipes were finally fat enough to have to be a great experience and somebody put something really funny up that people wanted to watch. And I'm like, for me in this industry, I'm just waiting for our lazy Sunday moment. That describes a massive challenge.

I was just going to say in crypto is that people can build all these incredible things, but sometimes it feels like it's a solution looking for a problem and not the solution to an existing problem. You know, I think people are trying to figure it out. You know the first things they put on television? No, I don't. It was radio shows. They would put a table with a mic and go,

hey, now we're on radio, because that's all that they knew. Right, and we're doing that now. And by the way, I mean, you know, while on one level, the old world is really, really broken, you know, two billion people really fucking like Facebook. So don't build the better Facebook. Build something completely new and different with this set of tools.

Or just let Facebook steal all of your great ideas, you know. Snapchat, you guys are doing short videos? We'll just add those to Instagram. It's amazing. Amazing business model, but I digress, obviously. No, no, it turns out capitalism

has its problems. Funny how that works. I want to go back to YouTube because that's an incredible story, which obviously shows how you identify incredible ideas early. What was it about YouTube when it was a small nascent idea, was not viral, was not a widely used platform that you identified and said, I want to buy this thing? And why did they say no? not viral, was not a widely used platform that you identified and said, I want to buy this thing? And why did they say no?

So I'm fourth generation of. So I've spent my career in and around media. My first company was the largest streamer in 2000. But it sucked because the pipes weren't fat enough. Fast forward 05, I was running Bolt. It was the largest social network in the world before MySpace. We peaked at 23 million kids. And I've been waiting for the pipes to get fat enough.

Now they were fat enough. And so it was simple technology. I could buy it myself. I could build it. We could have built it ourselves. We had a great tech staff. You know, but there were three tiny companies. I looked at buying all three of them.

I bought the largest one. It was called Yashi. I paid them $250,000 and 5% of my company. I have no doubt I could have gotten YouTube for that. And what would that be worth now? Is that probably your story in your mind where you say? I was the first person to call Zuckerberg and offered to buy Facebook a month after he lost. And how did you even know about Facebook or identify it as?

I was running Bolt and our core audience was 16 to 18 year olds. And at the time I was a 40 year old guy who very quickly realized had no idea what 16 to 18 year old-olds. And at the time, I was a 40-year-old guy who very quickly realized, had no idea what 16 to 18-year-old girls wanted to do on the internet. But it turns out that there were plenty of 16, 18, 20-year-old kids building viral sites, going like that, and it was worth much more

to me and my ability to monetize it with Fortune 100 youth brand advertisers than it was to them. And I think a lot of people forget that Facebook originally, you literally had to be a college kid to even sign up. At first you had to have a harvard.edu. Yeah, and then it expanded one by one.

That was how they let new people in. Yeah. Okay. So you said don't build another Facebook, build something different or better. Can that be built in web three or in crypto? Can we have decentralized social media that's superior and our data is not being sold? Look, there's nothing constant but change, right? That's what gave me the hope.

So I started writing about what I call FAMGA before I saw the crypto light. Facebook, Apple, Microsoft, Google, and Amazon and their ever-increasing market share of tech market capping. That was great for them and their shareholders, really bad for the rest of the world. And there was nothing on the horizon that I saw

that gave me any hope at all, except the fact that there's nothing constant but change. And, you know, this is, has the potential, and I hope that this is the next thing, right, that comes along, you know, and in my lifetime, right, you know, there's this amazing chart in The Economist that shows market share of market cap of the top 100 tech companies

from 1985 to 2015. And it starts with IBM at like 80%, and then IBM, you know, and then you get the rise of Microsoft, and then Microsoft, and then you get the rise of Apple, right? And that chart, like in one chart, there's nothing constant but change. But to me, where I think we are today is I think we're in a fight for the soul of the metaverse. Okay, talk about that. Well, no, I mean, I think this is the big thing going on.

I say when I saw the crypto light on June 29th, 2017, what I saw was for the first time in history, we had a tool set to solve the community. And I thought that was going to be the biggest thing to happen in history. And I thought so a little more so every day for four years. And then one day I saw something even bigger. I saw the metaverse, right? Which to me is just, you know, to me when I call this reality, but once, you know, and when you have an Oculus Rift, right, that's virtual reality. But even once, to me, you're on your telephone telephone you're now in the metaverse I agree as long as the metaverse man and and I'm pretty sure that for the rest of my life humanity as a whole is

Going to be spending more time Higher percentage of their time in the metaverse as I just defined it and getting closer to the oculus rift. Yeah. Yeah, it's interesting to Write on the call of the are anymore literally I call it the oculus rift, right? closer to the Oculus Rift. Yeah, it's interesting to ponder what we'll find out. I don't even call it VR anymore, literally. I call it the Oculus Rift. Because that is VR, and that's Facebook. We're just literally... A Xerox copy, right? So to me, that's

the future kind of computing platform. That's where we're going. We're going to the metaverse, and the question is, okay, who's going to control that? Is it going to be controlled by FAMGA or by the community? And to me, it's epically, epically like Star Wars. And we're the alliance and they're the Death Star. Yeah, exactly. And most of the time,

I think the Death Star wins. I don't think so in this case, though, because of what you just described. I mean, you look at the top 10 companies in the world by market cap in 2000. None of them were tech companies. Complete. That's a great thing. Yes. And so you have to just assume that in 10 or 20 years, the same huge tech companies from Web 2 right now that have the largest market cap, they will not be. I agree.

There's nothing constant but change. There will not be. I agree. There's nothing constant but change. But to me, if I look at like kind of the playing field and where we are now and the lack of progress we've made at solving our solutions and the fact that the vast majority of people do not care about what you and I care about and think is better, right? They're well served by Google and Amazon and Facebook, right? The reason that our monopoly laws don't work to go after them was ours were written based on hurting the end user. And we don't look at it in a big picture, right? We look on that use cases and they're giving this stuff away for free. It's very hard for anybody to argue

that people are worse off for this free thing that these people are offering. Right. But there has to be the product and that product has to be you in the end if you're going to get benefit from that for free. And we know what they do with that, right? They push it to the edges. I write about Zuckerberg, who, by the way, I wrote the first Wall Street-style research report. I was a Wall Street analyst earlier in my career. I've written two reports since, one on Facebook, and I came out with a million dollar price target on Bitcoin in January of, I published it in January 2021. It was a 10 year price target.

So you still think that that holds water? Yeah, definitely. Every day I feel more comfortable with it. I mean, the community is continuing to grow. There's nothing fundamental, you know, and I'm looking, I keep my eyes open because it might not be right, but nobody has a crystal ball. But for five years, we seem to be marching in that direction. If Bitcoin makes it to a million, what other projects and coins are you excited would also

see 10, 20, 30, 40, 50x returns? There are a lot that I like, but I don't, you know, the major investing trend of my lifetime by a wide margin is indexing because it turns out we're all stupid. It turns out just indexing is the best thing you can do. And so that's why, you know, I'm a fund to fund because I'm just indexing the entire industry. And so, you know, it's very hard to pick winners. You know, there are ones that I certainly think are better, and maybe I do better than the average VC, but the average VC actually doesn't do very well.

Well, that's why the access that you just talked about before is all that really matters, right? It's very easy to spray and pray, so to speak, but you have to have people that are allowing you to spray. Yeah, well, correct. I mean, and what's interesting was so, right, then the question is, okay, another way, the most popular way of being one of those people who gets access, the main way that VCs solve for that is they try to get to be that guy's friend.

Right? I have a, my favorite VC joke. You've heard about the VC who walks into a bar? No. And the bartender asks him what he wants, and the VC looks at the room,

at everybody else. He goes, I don't know. He goes, what does everybody else want? I mean, that's pretty accurate, but to that end, and not because of that. And I do that.

That's exactly what I do, by the way. I'll invest in anything that any of the VCs are investing in. If they can get more, I'll invest in it. Why do you think there's been such a shift in stigma about venture capital, certainly in the crypto space, not viewed upon so positively?

I try to help people understand we're just people and that it's not like we're lawyers. Okay, people maybe like lawyers less than they like VC, but it seems like people are resentful of the early access or the discount. The weird thing is all of us do something very different. None of us went to VC school. We all do what we do for very random reasons.

I think the biggest ways that humans are irrational is we take very small samples. And if you're a VC, you call that pattern recognition. But it's not a, in my view, there's nobody seen a statistically significant number of patterns to really, and the world changes and so. Well, can you start a VC school? So maybe we could all attend and figure out how you're finding all these unicorns. Yeah, I think it would be great.

I mean, I think, you know, YC is kind of the VC school. It really is. Combinator really is. Have you invested in any companies that have come through Y Combinator? Oh, sure. You know, I mean, I should know what they were. But to tell you the truth, I mean, it's not something like, obviously, the moment you invest in them, the fact that they're from Y Combinator loses all relevance. Yeah.

So I don't have that imprint on them. But certainly at the margin, I think of it as a positive thing, right? These guys, more than anybody else in the world, they're smart guys and they've sifted through more companies than anybody. So more than your ability to find unicorns, you have an ability to find talent and invest in smart people. Well, I think my superpower is actually looking at something that's already doing this and going like that and saying, oh my God, right? That's what I did with Facebook when I wrote the report.

It's like my 2014 revenue estimate was off by less than 1%. I just extrapolated out and multiplied their percentage of the internet from the time spent by the internet advertising. Okay, well I'm calling you up for our next conversation when Bitcoin hits a million dollars then. Actually, we'll do it before then because it's ten years. Maybe we can do it at road block. Well, no, it might get there any time, but I say I know exactly how it's going to get there.

Within, yeah. If it gets there, right? And if it goes to a million, what I really try to help people understand is if it gets to a million, for 99% of us, this is just noise. Right. And any time spent on it, if you're a day trader. And 98% of their people will have gotten washed out or rinsed at some point in that process. It's hard not to.

Sadly. That's why you index. Yeah, absolutely. Well, I look forward to seeing what you come up with next and what you invent next. And I'll be your first student at VC School if you let me. Well, terrific. Well, thanks a lot for what you do for the community there's a lot of education that you guys do and that's awesome really appreciate it awesome thanks for the conversation Let's go.