The Wolf Of All Streets - Why This $1.3 Trillion Asset Manager Is Bullish On Bitcoin | Sandy Kaul, Franklin Templeton

Starting point is 00:00:00 For years, the idea of institutional adoption of crypto assets and of the crypto space in general has been sort of an amorphous concept. We wondered what institutions were involved, how involved were they, were they scared off by the bear markets? Well, I can tell you that the people at Franklin Templeton are building massively during this bear market, utilizing the technology now for years, offering products, and they're one of the biggest asset managers in the world with over $1 trillion under management. I spoke with their senior vice president, Sandy Call, and I have got to say, sometimes you don't know much about your guests.

Starting point is 00:00:36 When you show up, you don't know where the conversation will lead, and you are just insanely impressed and blown away by their insight. If there are more people like Sandy at these institutions than I can tell you, the future and vision for crypto is extremely bright. I was truly inspired by this conversation, and I'm sure you will be too. I think we should start with you giving the listeners a bit of context about Franklin Templeton and how they got into the digital asset space. I think that most of the time we don't need to start there with this show, but since you

Starting point is 00:01:17 guys are coming from a completely different world, it's a very unique story and really very helpful one for the digital asset space, I'm hoping. So can you just talk about how big Franklin Templeton is and the path that got you into digital assets? Franklin Templeton has a very interesting story because Franklin Templeton has, in addition to being one of the top leading active asset managers in the world with over $1.3 trillion in assets under management, Franklin Templeton has also, for many years, been running its own transfer agency business. So taking care of all of our own funds and doing the transfer agency work on the funds. And transfer agency, for those not familiar with it, is when you have a mutual fund,

Starting point is 00:02:04 people have to subscribe to the shares to be issued shares in the mutual fund. And when they sell out, they have to be have those shares redeemed. And whenever there's a dividend payment or something, that's a corporate action that needs to be applied. And the transfer agent does all of that operational work. So Franklin Templeton was its own transfer agent. And when Bitcoin started to come out and people were talking a lot about it, people really started becoming quite interested in the blockchain that Bitcoin was built on. And Franklin Templeton thought, well, blockchains are ledgers, right? And we maintain thousands of ledgers for these funds that we do the transfer agency work on.

Starting point is 00:02:46 So let us experiment with this blockchain to see if we can create some operational savings in our operational work to be able to bring down costs for the organization. So it kind of started in a very non-crypto way, right? But what started to happen is as they started learning more about the blockchain and as they started getting engaged in the space, we realized that to build on the blockchain, you really needed to understand how wallets work. You needed to understand how tokens work. You needed to understand how node verification took place and consensus mechanisms worked. And so we kept moving deeper and deeper into understanding the crypto domain in order to just run this experiment. And at the time, we chose a money market fund because money markets

Starting point is 00:03:42 are funds where there's a lot of movement of assets into and out of the fund. And as active asset managers, we tended to have more buy and hold type strategies. So probably a money market fund was going to be the fund that we could experiment with that was going to have the most activity. And remember, at this time that we started this journey, interest rates were basically zero. So this was not really, this ended up being a very smart move, but it kind of started for other reasons. And so Franklin Templeton started building out this capability, and we worked hand in glove with the SEC, really taking them on the journey with us as we were doing this. And we built out a transfer agent system able to operate on blockchain. We built out a wallet

Starting point is 00:04:32 system able to hook into KYC AML, which we need to be able to do as a regulated player offering mutual funds. And we ran a pilot side by side with our traditional transfer agency and our on-chain government money market fund for a long enough period that the SEC got pretty comfortable that we could maintain our transaction records on the public blockchain. So that was kind of Franklin Templeton's initial journey into crypto. Since then, they have really embraced the ecosystem. We create our own research on individual coins, examining the underlying business rationale and opportunity and the tokenomics. We have several model portfolios that we are offering that are multi-coin portfolios that are able to really cover the gambit from fully systematic to fully discretionary. We have a venture capital fund that we are doing seed and series A investing. And we run our own

Starting point is 00:05:36 node operations because we really believe that to understand a network and its growth, you need to be a part of that network. So we've become quite engaged in the space, but it all really just started from a desire to be operationally more efficient. You guys are one of us. That's what we'd like to believe. And that's what we hope we believe in the future. And we really want to be a part of seeing the great opportunities that are emerging really make it into everyone's portfolios, because this is really where we feel where a huge new growth opportunity is emerging, Scott. Well, it's one thing to adopt the technology, and then it's another to say this should be in everybody's portfolios. So how do we make that jump from the technology to actually viewing Bitcoin?

Starting point is 00:06:26 And then I guess down the tail of risk from Bitcoin. But how do we make that jump to Bitcoin becoming a mainstream investable asset that becomes a part of everyone's portfolio that Franklin Templeton is pushing everybody to have some exposure to? So I'm going to broaden your question just a little, because I think one of the issues we have right now is that people fixate too much on just Bitcoin and oftentimes don't think about the broader ecosystem. And that's actually not that Bitcoin is not. Bitcoin is a huge innovation and we think it's going to have massive opportunities in the future, but we think it's only one opportunity, right? And what we like to help people understand is that investment portfolios always look

Starting point is 00:07:18 for the next set of frontier markets, right? The next set of markets where there are emerging opportunities where not a lot of other investors are yet focused because those are the marketplaces that offer the biggest potential return, right? And the way that we look at the crypto ecosystem is as a set of digital nation states, right? We think that these are the next set of frontier risk assets because we think of each of these big blockchain ecosystems as almost its own

Starting point is 00:07:54 nation state. It has its own currency. It has its own governance. It has built its own economic rails. It is fostering economic activity and an entire community of users, right? So if you think about that as an ecosystem and you think of it as a nation state, but a digital nation state, you want to, as an investor, get into those emerging market opportunities as early as you can, because that's when you can get the greatest return. And so I think the first step in getting this into people's portfolios is simply educating them about why this is such a unique opportunity, and then getting them to get past this thought that it's just Bitcoin, right? Bitcoin is one piece of the ecosystem, but there is a much broader set of engagement that's emerging and innovation that's emerging. There's a lot more opportunities to invest and

Starting point is 00:08:55 create diversified portfolios that aren't solely reliant on Bitcoin. We need to see the ecosystem itself mature and stop having everything correlate back to bitcoin as someone like to tell me it's kind of like having gold and tech stocks and saying that tech stocks should be um valued based on the basis of gold they don't really relate to each other they're two different opportunities that is literally my go-to statement you just made you're the first person I've heard make it. I always joke with the Bitcoin maxis because I love to poke at them for the very same reason. It's like gold bugs being angry at Amazon investors. And I don't understand

Starting point is 00:09:36 why they have anything to do with one another. Yes. I agree with you 100%. I think there's Bitcoin and everything else. I view everything else as a speculative venture capital technology investment, but that doesn't mean that speculative technology investments are bad. Well, and what's really fascinating is when you say venture capital, when you think traditional venture capital, Scott, really only a very limited set of investors are able to get into venture capital funds because of all of the investor requirements to get into those private fund structures. What's interesting to us is the tokens being issued by many of the initiatives and projects in the crypto ecosystem are creating almost a

Starting point is 00:10:19 liquid venture capital opportunity that anybody can join into. So we think this is a great democratization of this idea of being able to get in at a venture stage. Well, it's interesting. You talked about your development and sort of holding hands with the SEC and guiding them through. But what you just described is antithetical to what the SEC is saying now. They certainly don't want us to be able to launch tokens, instant liquidity for your average person to be a venture capital and something that they largely view as an unregistered security. So now, I don't know if it's with this administration or with this particular chairperson, but how do you view now in the

Starting point is 00:11:03 lens of regulation, the challenges of pushing the narrative that you just described? Well, the first thing I would say is that not every regulator in the world is in the same place that the SEC is at. Almost none of them are, actually. We're starting to see pushes almost in every jurisdiction everywhere in the world. Exactly. And even within the U.S., the CFTC and the SEC are in the world. Exactly. And even within the US, the CFTC and the SEC are in different places, right? So look, a regulator has to be so careful because the minute they make a rule, that rule is in place for decades, right?

Starting point is 00:11:39 So I do have some compassion for what the SEC is facing in the speed with which this whole ecosystem has developed. I think it's hard for anyone to know exactly the right way to regulate it. That said, I do think the SEC is much more amenable inside the staff to learning. And I think that they are making a lot of efforts to really try and understand the space. And I think sometimes the output of that and the input of what they're wrestling with just gets a little out of sync. I fully expect the SEC to come up with rules over

Starting point is 00:12:20 the coming years that are going to be supportive and allow the crypto ecosystem to grow in the United States. In the meanwhile, I think that other regulators are stepping forward a little more quickly, and they are being more encouraging at this point when there is still a lot of innovation taking place and the models are still being evolved. And you see this with the Middle Eastern regulators are very accommodative. Singapore, Hong Kong has stepped up in a big way. The European regulators are coming out with MICA to try and set some rules. And even though they're not perfect, at least they're jumping in there. The UK regulators, Irish regulators. In Brazil, you see a very advanced regulatory regime putting out a sandbox and really helping to foster the industry. So I think that there are lots of

Starting point is 00:13:14 regulators who are very open to this vision of the future and that the US is behind in this way, but the US has the largest markets in the world, right? And so the US maybe has to be a little bit more careful and they have to go a little slower. And I think that the speed with which the crypto ecosystem works and the speed with which the SEC works, that's where a lot of the friction is coming in. I don't think that there's negative underlying intent, but I think that there is a very vastly different perception of what is an acceptable timeframe. Yeah.

Starting point is 00:13:50 I mean, people in crypto expect everything to be six months from now and you're appropriately saying this is going to take years to give us a framework. I guess my only concern is how much regulation by enforcement we will see during that time. But for you as a fiduciary, as an asset manager of literally over a trillion dollars, as you mentioned, does it affect the way that you launch or determine what your products will be because of the fear that retroactively it could be determined to be an unregistered security or something that wasn't allowed to be sold to Americans? Or basically, can you just say that's all solved by only allowing accredited investors and we move on

Starting point is 00:14:29 with our lives? Well, I think we're coming at it from a couple of different angles, right? So, you know, the first big product that we're out with is actually a listed security being offered as a token. So, you know, this is a security, it has to be offered by a registered broker dealer. It is fully, you know, regulated, we do all the regulatory filings. So, you know, the biggest product we're pushing, which is our on chain government money market fund, that has been a product that really is a traditional security product. I think in our crypto portfolios that we're creating, we are aware that at this moment in time, they may not be suitable for every investor. And so our vision is that this will end up being something that is everyone's portfolios,

Starting point is 00:15:19 but it's really going to be up to the advisor who has discretion over a client's account, whether this is appropriate for their client, for the allocator at a major institution for them to decide if this is appropriate for their institutional fund, right? So, you know, we have the, we're applying our active management expertise and putting together portfolios, but we understand that these portfolios may take time to get adopted broadly because we're ready to list them however regulators tell us to, right? That's a security, a commodity, or something completely new.

Starting point is 00:16:00 Whatever they decide, we'll figure out the right way to adhere to that. But in the meanwhile, the ecosystem is there and it's growing and it's possible to analyze it and really start to create hypotheses around where value is to be found. And we don't want to miss that part of the opportunity. Yeah, there's certainly been a notion within the crypto community, the companies in the United States that there really is no way to come in and register. We see the regulators say, just come in and talk to us. And then obviously, we see an enforcement action six months later, generally.

Starting point is 00:16:35 But you have been able to securitize these assets and find a way to offer them by working with the SEC. Is that because of the size of the company, the respect that you have, the access that you have, or is it just because of the nature of the product? I mean, you can talk more about that product. It's on Polygon, right? I mean, you guys are really down this rabbit hole. This is really a digitally native product that you're offering. Yeah. But to be really clear, Scott, we've been talking to the SEC about it for almost five years at this point. Just to make it clear, it takes a lot of patience. I think that is the number one requirement is it takes a lot of patience. And this is with a firm that the SEC deals with every day in hundreds of different touch points. So even with a firm that the SEC deals with every day in hundreds of different touch points.

Starting point is 00:17:25 So even with a firm with that deeper relationship with the SEC, it's taking a very long time because they want to go very carefully and we have to go at the pace that they're ready to go. So I think that, you know, with the on-chain government money market fund, this has been an opportunity to show regulators that these rails work well for being able to maintain transaction records. We're really helping and hoping the regulators start to understand it gives the regulators a better foothold in being able to monitor what's happening inside of the trading of these different securities in a way that they simply don't have in their current traditional financial ecosystem,

Starting point is 00:18:13 right? Regulation is a backward looking activity in the traditional financial ecosystem, in the blockchain based ecosystem, it can be real time, right? And so we think that it's a whole matter of education. Don't forget the rule set we're dealing with was created in between 1933 and 1940. So this takes time to get people to understand where upgrades need to be made to those rules. I mean, the rules have worked for almost 90 years. People are going to be pretty hesitant about getting rid of them too quickly. That makes sense. It sounds like you're able to thread the needle because you have such a robust business relationships with the SEC and like, it's just a massive business that has

Starting point is 00:19:00 nothing to do with crypto. So I think there has to be some sympathy for the frustration, maybe that people who are crypto native feel because this is the only thing they're offering, right? You can't say, hey, I want to be a crypto exchange and then expect to wait five to 10 years to be able to offer any products because you don't even know

Starting point is 00:19:18 what the industry will look like then. So you guys really actually have a really nice position to be able to be patient, I think, and to build these products in that manner. Well, we're 75 years old, so that helps. But I do want to say one thing, though. I do think I completely get it, right? I think some of the most creative minds in the world right now are engaged in creating this crypto ecosystem. It's so inspiring. It inspired me personally

Starting point is 00:19:47 to walk away from what had been a very secure role in the very traditional markets for over 30 years because I'm so excited about all of this innovation and this creativity and want to be a part of making it happen. And so I can completely understand the frustration. And, you know, I love the creativity and the innovation and the willingness to push the boundaries and rethink models. I mean, to me, this is the most exciting period I've ever seen in my life in terms of how markets are changing. So I do hope we find the right balance because I think the creativity and the innovation happening in this space is really unparalleled. I've never seen this type of thinking really being deployed at such scale. And this is someone who's been in the financial services industry for over 35 years. So obviously it takes time to get these

Starting point is 00:20:47 products to market, to be able to offer them, to build them, to get them regulated. The other challenge is getting people to buy them, right? So how much interest is there in these products right now? If it's not as much as you would expect, is that because of what we've seen over the past couple of years in the crypto space? How much has that contagion and the bad actors affected your business conviction? Where do you stand now with your actual customers and selling them on these products? Yeah. So this is where I think a really super interesting shift is happening, right? So first off, everyone loves a bull market, right?

Starting point is 00:21:29 Everyone loves bull markets. And they're all geniuses in that bull market. And they're all geniuses in bull markets. And you make lots of money in bull markets until you don't, right? And so the bull market that we had in 2020 and 2021 in crypto was really so retail driven. And a lot of that was because a lot of people were home, right? We forget there was an old pandemic. We were stuck at home. We were being given these government payments and there wasn't a whole lot to do with it. And meanwhile, the investments that were being made were paying off so handsomely.

Starting point is 00:22:05 So I would say when you think about the 2020-21 period, this was a retail-driven investment surge. What has happened since we've moved into crypto winter is we're really seeing the interest shift. And more and more institutions, I think, are saying, okay, we have seen waves of bull markets in the crypto domain now ever since, you know, 2011 or so. Every few years, we've had these waves of bull markets, and they keep becoming amplified, right? And we believe that we want to position for the next big wave. But institutions hate buying in already rising markets.

Starting point is 00:22:52 Right. They want to get positioned when things are cheap, when nobody is really looking at a space and they have the patience to wait. And so I think that you have seen a migration of interest from the retail to the institutional side of the equation. And I think that many of the leading institutions in the world who were the first into hedge funds, who were the first into private equity, who were the first into private debt, they are looking at the crypto domain as the next, as I say, kind of frontier risk marketplace. And they are using this period of crypto winter to begin to put their programs into place. It takes about 10 to 15 years, believe it or not, for institutions to fully position themselves in a new asset era, right? When you think about alternatives, the move into alternatives really began back in 2003.

Starting point is 00:23:55 And it really wasn't until about 2018 that you really saw that move of institutions into alternatives begin to flatten out. And so I think that you're starting to see that institutional interest. I think that they will come in each time the market falls and put a little bit more on and a little bit more on. And over time, that will start to create a good foundation for the markets. And then when the next bull run really starts to occur and retail interest starts to build again, that institutional floor will be under the marketplace. So I think that this is a cycle and we are at the part of the cycle that's actually super healthy for the long-term growth

Starting point is 00:24:39 of the marketplace because these institutions have staying power. I tend to agree with you. I guess my concern was that I know they're not worried about price. They salivate at low prices, right? If you've seen something go to $69,000 and you see it at $15,000, you know $69,000 can happen again, right? And so you're obviously interested in the price. So I just meant from more of an optical standpoint, SPF, FTX, Voyager, BlockFi, Celsius, Luna. There have to be some institutions out there that just fear even the risk of saying the dirty word of blockchain or crypto at this point because they'll just get fired or laughed off. It's funny because two years ago, I would say we had a shift to where if you didn't have a positive opinion on blockchain, you could get fired, right? You had to be the CFO all of a sudden has to have an opinion on Bitcoin. And now it seems like

Starting point is 00:25:34 certainly politicians, regulators, a lot of institutions are just wiping their hands of it. But quietly, I think they're building to your point. But you don't think that the optics of all that contagion is keeping some people more permanently sidelined? Oh, yeah. I mean, I think that there's going to be a significant portion of the institutional audience that will not touch this space for years to come. Right.

Starting point is 00:25:59 And I don't think, you know, that that is unusual. Right. It took them years to get into hedge funds and years to get into private debt. So they will always be hesitant. I think certainly what happened with many of those issues that we've seen over the past year that you mentioned is that it's scary at a headline level, but has also opened up a really great dialogue about what is a centralized business model operating in the crypto realm versus a decentralized business model. And I

Starting point is 00:26:33 think that that is a necessary part of the education that needs to happen for institutions. And so what happened with FTX is suddenly people woke up to the fact that even though we think of exchanges as these highly regulated, highly reliable marketplaces, just because it's called an exchange doesn't mean it's a regulated exchange like the New York Stock Exchange or the London Stock Exchange or NASDAQ. These are unregulated exchanges in many degrees, and they don't have the regulatory oversight. And I think that woke people up to this idea that, am I really participating in the decentralized markets in a way that aligns to my investment thesis? So I think that it's forced a lot of rapid education.

Starting point is 00:27:22 And I think the more sophisticated leading players have been able to learn from those experiences and refine the way that they want to participate in the market. I like that. I mean, I tend to agree. It's just hard sometimes to see the forest through the trees when things are bad. And certainly in retail and the news flow and just sort of this onslaught, I think, of what feels like bad news. Sometimes it's hard to remember how passionate we were about these things in the previous cycle. But as you said, that's the best time to be buying. Not financial advice, but that's usually

Starting point is 00:27:57 the best time to find a way to gain exposure. And certainly the best time, which you alluded to, to be building. And that's what I hear from every single project leader, CEO, programmer, developer that I talk to. They love this. Yeah. They don't love that price is down, but they love that nobody is focused on price and they can just put their head down and build things for the next bull market. Well, and each thing they're building is getting better. It's getting safer. It's getting smarter. It's getting better tested, right? I mean, this is, I think, really going in retrospect

Starting point is 00:28:34 to have been seen all of these blowups that we've had in the past year are going in retrospect, I think, to have been seen as the catalysts that created a more successful crypto ecosystem. And you're going to always get the shakeout of weak business models. We saw it with the dot-com boom, but that didn't mean that companies like Google or Amazon didn't come out of that and be able to build huge businesses. Like you're in my brain. Right. We make the same exact arguments. When I

Starting point is 00:29:06 go on the other side of this, I say people love to compare crypto to the dot-com bubble as if it's a bad thing. Yeah. But all those failures advance the ball and you get the biggest companies in the world. So maybe the next five huge companies 10 years from now will be Coinbase and four other things that haven't been invented yet in blockchain. That's right. Well, as the head of our digital asset unit always says, wouldn't you rather have bought Google in 1998 than in 2018? Sometimes you had to stick with it. You might have bought it in 1998. Nobody does. Like the worst investment in the world in 2002, but it turned out okay. Yeah. My friend Mark Yusko loves to

Starting point is 00:29:46 point out that one of his famous anecdotes that he tells probably way too often says, how many people do you think still hold Amazon stock from the IPO? And he says, the answer is four. It's Jeff, his wife, and their parents. And that's it. Everybody else at some point was weak hands and sold when they were either up many multiples or down 95% and panicked. And now Amazon's one of the biggest companies in the world. But to your point, it's extremely difficult to not only identify the opportunity that we have now, but then to actually maintain the conviction and the, I guess, diamond hands, as we love to joke in this industry, to actually be there when it comes to fruition. Yeah. And let's face it, Amazon started as an

Starting point is 00:30:32 online bookseller, right? Some of the most successful initiatives and projects that are going on today may look nothing like what they look like today in five years or 10 years. They may look completely different. But that spark of creativity that got them off the ground, that's what you need to look for. You need to look for people who have a vision and can be adaptable and flexible. And I've never seen such a concentration of that. Even during the dot-com era, where I was very engaged, you didn't have the same degree of creativity being applied. And I think that really speaks to the open source nature of the crypto ecosystem. And I think that that's going to really give such an amazing foundation over

Starting point is 00:31:21 the long run. Yeah, I giggle at the idea of Amazon being a bookstore when you said that, because I remember literally being sent DVDs by Netflix. Yeah, exactly. And I used to think that was the most innovative, incredible thing ever, and never even imagined that streaming would exist. Well, this is where I usually like to throw in my Schopenhauer reference, which is, you know, he, this philosopher said, all truth passes through three stages. First, it's ridiculed, then it's violently resisted, and then it's accepted as self-evident. So we might have moved from the ridiculed to the violently resisted stage, which is progress towards being widely accepted. I mean, I do think our conversation and conversations like this in 10 years will be looked back on as like,

Starting point is 00:32:10 oh my God, I can't believe people ever had so much doubt. Yeah. The other famous one that we like to reference is, you know, then they, at first they dismiss you, then they laugh at you, then they fight you, then they win. I think misattributed to Gandhi. It's actually somebody else. But regardless of how you skin it, dismiss you then they laugh at you then they fight you then they win miss i think miss attributed to gandhi it's actually somebody else but um regardless of how you skin it we're definitely in the fight you phase right we're definitely in the then they fight you phase it feels like but it seems like your take is not necessarily that they're fighting us it's just that they're trying to sort of wrap their head around it i feel like they're fighting us, to be honest. I think it feels like they're fighting because they're not answering. And they're only jumping

Starting point is 00:32:50 in when they see something that they think is egregious. But because they're not explaining themselves well, it feels like they're being very arbitrary. And I think that they don't want to explain too much because every utterance they make comes back to haunt them. I really think it's a timeline divergence, right? The SEC's pace of movement versus the crypto industry pace of movement is just so vastly different. It can feel very obstructionist, but I fully believe that they are trying their absolute best to really try and understand what works and what doesn't work of the current rules and not to jump the gun and make rules that are going to last for decades that might be wrong.

Starting point is 00:33:35 And at the very least, they have to understand that no matter what rules they make, this innovation is just going to happen elsewhere. And it's obvious because it is. And this is a global market. And all it's going to do at the end of the day is deprive Americans of great opportunity. Yeah. I mean, and that's always, I think, I think to me, that's my biggest concern, but, you know, I also believe that as the largest marketplace in the world, you know, when the rules get into focus, which may have to happen after other jurisdictions set

Starting point is 00:34:07 them, they will return to the US and the US will take its place along with the other nations in this space. So there's a number of institutions like Franklin Templeton that have taken a very positive role, obviously, in building in this space, both in the background and very publicly. Fidelity, obviously, is the one that comes to mind the most. Then there are others who outwardly speak very negatively about the space, but are probably building equally as much in blockchain like JP Morgan. I think they're the most famous. Jamie Dimon comes out and says, anyone who trades this works for him is going to be fired. And it's a Ponzi scheme and it's a scam. Meanwhile, they settle on blockchains and they're building all these things.

Starting point is 00:34:51 And their wealthy clients have access to Bitcoin and Ethereum, I believe, trading. Do you feel like there's something brewing at every institution and it's publicly they just speak about it in different manners? Well, you've got to also remember that JP Morgan is a vast organization. It's not just Jamie Dimon, right? He can hate it, but his customers can want it. I totally understand that. Yeah. It's like, I think that any organization that is committed to growth and plans on being

Starting point is 00:35:21 around over many decades needs to be thinking about this space. And I do think the majority of them are, whether it's under the radar, whether it's happening just in small teams in their organization, whether it's just thinking about the potential of the space. But I mean, I certainly feel that the momentum, you know, I first wrote about tokenization and crypto markets and the opportunities offered by blockchains and by, you know, a layer one ecosystems back in 2017. And I went into, you know, the C-suite in many organizations all over the world.

Starting point is 00:36:02 And I can tell you, I mean, I had people get up and walk out of some of my presentations. Yeah, you went from seven people to four. We've all been there. Right. But I think that, you know, that whole sentiment is very different today. And even if people don't personally believe that it has a lot of value, they realize that from a business perspective, they can't ignore the innovation happening. And again, I keep coming back to where is the creativity the most focused right now? And just like we saw with a lot of the social media platforms in the early 2000s, I think that the biggest concentration of creativity in the world right now is in this space. And inevitably, that is where value is going to be created and people have to think about it.

Starting point is 00:36:55 Next, it'll be AI, right? But I agree with you that it's in crypto. The good thing about AI is that it'll just be a bunch of AIs that are focused on building an AI and the humans won't actually even need to go over there. But the AI will have much less personal bias. That's true. She talked about it. It's so true. And you talked about 2017 getting into the space. I got in late 2016, but really in 2017 as well. So we're sort of the same class of crypto. Things have changed, obviously, dramatically. But you just talked about tokenizing assets and all sort of the catchphrases and things that we know this technology can do. So now, I guess from a personal perspective, but also for Franklin Templeton, present me your grandest vision of where this can be in 10 years. Let's say the regulator is the most friendly on the planet.

Starting point is 00:37:38 They say, have fun, innovate. Americans can invest in this stuff. What can we reasonably believe that we can build and how far can this actually push? What can it replace? Okay. Well, this I actually have a great answer to because I do have a wonderful vision of where I think we could head with this. And that is, we are such good consumers, right? Everyone, particularly in America, are excellent consumers. We are very active in our commercial lives. But our commercial life has nothing to do with our investment portfolios. And what I believe the potential in the next 10 years is going to be is that tokenization

Starting point is 00:38:26 and the ability to embed a contract in an asset and to use that asset, that tokenized asset with the embedded contract as its own investment asset that has its own value, right, is I think that we are going to see this blending of our commercial life and our investment life. And what I mean by that is things like, I'm going to be able to invest in royalty pools that are being offered by my favorite band and get to go to great exclusive shows that they're putting on only for owners of their tokens. I'm going to get to use the bridges and the tunnels that I need to commute in and out of work or to the city and be a partial owner of that infrastructure and get convenience through being able to use an owner's lane. I am going to get to be able to sell my own personal data in data markets and be able to accumulate income from

Starting point is 00:39:35 people getting access to and being able to model my personal data. So I see so many instances where the opportunity to put an asset into my investment portfolio and have it accumulate in value and generate some type of income or yield is going to become part of my day-to-day activities and that I am going to be able to basically live a better life because of what I am invested in in my investment portfolio, and that my investment portfolio is going to be very much reflecting who I think of myself as a personal brand and as the personal communities that I want to be affiliated with. And so that to me is my most exciting vision of where I think we're heading with all of this. What I love about that vision, which I share, is it's so empowering to the individual. And in light of, I kind of touched on it before, but in light of AI and sort of the

Starting point is 00:40:38 naturally deflationary aspects of technology, I'm a huge fan of Jeff Booth, you know, The Price of Tomorrow. He's a guest I have on here all the time. Inevitably, things become cheaper. There's less work to do. And that should be a perfect utopian world. But that's not how markets tend to work. But if that happens, if you can actually make a living as an empowered investor who has a skin in the game in everything that you use and do, you could literally have a renaissance of entrepreneurship and people with free time living out their passions and making enough income passively doing the exact things that you described. It'd be just a much better

Starting point is 00:41:19 world. I know it sounds hokey like utopia, but I mean, why not? Well, and even more so because that renaissance and the creativity that it will unleash actually feeds that type of economy, right? Because I, as the creator, all the creativity that's unleashed in me that I can then go out and create with, again, becomes additional instruments for my investment portfolio because of the ability to maintain ownership through subsequent resale with smart contracts. So I do think that there is potential to significantly reset the way society works for people. And you mentioned AI, and maybe the role of AI in all of this starts to be to support the platform that lets that renaissance take place. So,

Starting point is 00:42:13 you know, I think, I mean, I'm always an optimist, Scott. So I think that it's going to be a great world. Pascal Gaultier, the CEO of Ledger, who's obviously been under fire of late, but he was on my podcast a week ago, and made a really interesting point, which he said he had stolen as well. So I'm stealing it. But he said, AI is digital abundance and crypto is digital scarcity. So when you inevitably put the two together, it's going to create this exact sort of world and vision that you just described. I thought that was... I love that. I'm stealing it too. Yeah, I really did. So listen, you're Senior Vice President

Starting point is 00:42:50 at Franklin Templeton. Crypto is not your only job there, right? No. So it seems like you speak about this so passionately, but on a day-to-day basis, how much of your time is actually spent educating people on this, talking to potential clients?

Starting point is 00:43:04 What is really the workflow for you and where does this, talking to potential clients? I mean, what is really the workflow for you and where does this side of it fit in? Oh, this is definitely, I would say at least 75% of what I focus on. Because my other job of what I do is I create thought leadership for Franklin Templeton that really looks at the future of the investment and wealth management industries. And so because digital and the crypto ecosystem is such a big part of that future, I get to look at it on both parts of my job. But it's not the only thing about where wealth and investment management is heading. So I also think very much about how does the role of the advisor change? How do delivery platforms change?

Starting point is 00:43:48 What does the portfolio construction process look like? How does technology support that? Where do institutions rotate their investments? How do they build out their investment capability? So I get to look at a whole slew of really fun and interesting questions. I want to come work for you. It sounds like a lot of fun. It's a lot of fun.

Starting point is 00:44:09 So how many employees at Franklin Templeton are committed to the crypto side of this? How big of a part of the business do you see this being? Obviously, I know that it's nascent. It's small probably at this point. But it does seem like you are purposefully preparing to scale massively on this side. Well, we've grown over the years. More and more people internally have become committed to it. we also have what we call is our digital universe exploration meeting every week that's open to anyone in the company who's interested in learning more or participating in a dialogue about what's

Starting point is 00:44:52 happening in this digital space. And what's really satisfying is seeing the numbers there grow, right? And so sometimes those weekly meetings have more than 100 participants in them now from inside Franklin Templeton. So we're growing our team. We're growing our interest across the whole platform. And we're even starting to see some of our leading portfolio managers who are investing traditional portfolios starting to understand that many of the sectors that they're focusing on are going to start to incorporate tokens over time. And they're beginning to think about how could they evolve their investment models to potentially begin to think about that. So I think there's a lot of really great things happening

Starting point is 00:45:36 inside Franklin Templeton. And I don't want to overstress it. Our business is still primarily in almost exclusively traditional markets. But I think that that spirit of innovation and exploration is very much alive inside the firm. And it's really exciting to see at a 75-year-old company, right? Well, I'm going to flow you this idea. Those meetings every week should happen in the metaverse and everybody should be a PFP and you should have a bunch of board apes and pudgy penguins talking in the metaverse about the future of crypto. We get that? Metaverse exploration as well.

Starting point is 00:46:11 Yeah. I think that's what you should be doing. I find this really inspiring that there's people like you working in these institutions because I think just externally, people believe that it's like this evil Wall Street takeover coming for our industry. It doesn't sound like that's what's happening at all. We're going to be the best partners you can find because some of the problems that people in the crypto ecosystem are coming up against are problems that we might have answers to through the many years of experience we've had with markets. And I think that embracing some of the people who have

Starting point is 00:46:46 this passion that are coming from TradFi really is going to open up the next wave of really innovative and really effective solutions. I feel like you should be our industry's spokesperson. You should just be on every stage and podcast. Do you do a lot of this? I'm doing more and more. And I think it's really fun. I really enjoyed it. I really enjoyed our conversation today. Me too. But not only is it really fun, but I just feel like there's very few people

Starting point is 00:47:11 in your position that speak so passionately about it. And just trust me, I feel like I've spoken to all of them. Well, good. Well, thank you. I mean, I think I'm on my, we're like out of before 500 podcasts, a thousand live streams and who got, gosh knows. But I really think that, uh, what you're doing is very important.

Starting point is 00:47:28 And thank you. I think it's just incredible. I would love to have you back anytime. We do lots of panels and Twitter spaces. We're going to be going in very big. Do you, do you use Twitter at all? Yes, maybe. My team does much more than me.

Starting point is 00:47:46 Yeah. And then that's when the funny thing is every time we're like, well, we do this live thing and then all the institutional people are like, I'm not allowed to speak live. We need to have it recorded and hear it four times and then check it by the lawyers. Well, I will be happy to come back on and I really do love these conversations. So whenever you'd like. Well, thank you. I love the vision that you put forth. And honestly, you gave like my favorite two anecdotes that I thought were kind of my own. So it's like we're sharing a brain. I love it. Excellent. I love that too. Thank you so much, Sandy. Okay. Thank you, Scott.

The Wolf Of All Streets - Why This $1.3 Trillion Asset Manager Is Bullish On Bitcoin | Sandy Kaul, Franklin Templeton

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