This Week in Startups - Growth stocks, Inflation impacts, SPACs & more with Beth Kindig & Knox Ridley from I/O Fund | E1281

Episode Date: September 10, 2021

Beth Kindig and Knox Ridley from the I/O Fund came on to discuss with Jason their top growth stocks, market indicators, how to manage risk in an all tech portfolio, potential big tech spin outs, Roku's incredible expansion and more!

This Week in Startups is brought to you by LinkedIn Marketing. To redeem a $100 LinkedIn ad credit and launch your first campaign, go to LinkedIn.com slash This Week in Startups and Drata. Don't let requests for SOC2 compliance reports slow down your business. Go to drata.com slash twist for 15% off. Beth Kindig and Knox Ridley are here to talk about stocks. our analyst investors in the IO Fund. Welcome to the program, Beth and Knox. Thanks for having me again, Jason. Good to be here. Okay. So I wanted to talk to you about what's going on in the

public markets, especially through the lens of startups, which when I started 11 years ago investing in private market companies like Thumbtack, Robin Hood, and Uber, they kind of were staying private longer, stay private longer, was what everybody was saying. The private markets are more efficient than the public markets. Something changed along the way. What changed, Beth? And what is changing today even more with SPACs and companies going public, kind of when we would be investing them in in private markets before they even have product market fit?

Yeah, SPACs are an opportunity for investors to, you know, get into early stage tech. I cover tech. So for me, it's early stage tech. And I think there comes, you know, some pros and cons to that. So, you know, the positives are what you said, which is that, you know, the pricing is much better because it's so much earlier. By the time that Robin Hood or Coinbase or some of these other ones go to the public markets, a lot of, you know, the returns are taken by the private markets and then, of course, the institutions. And so, you know, SPACs are an interesting opportunity because now you have individual investors that can get in very, very early into stories. but with that comes a new skill set because usually by the time,

you know, some of the companies I mentioned, DoorDash or whatever it might be, go public, their financials have a very steady story that you can analyze. When it comes to SPACs, it's very, very messy. You see probably like you said, you started to invest 11 years ago. when you see these early stage rounds, your, you know, seed or your series A, you're not dealing with perfect financials typically. I mean, a lot of investors will go after that growth. So you have to rely on a different set of skills. And I think that you need to be really careful about those that have a lot of forward growth that they are banking on. Because what we've seen

is that some of them have missed those, you know, estimates. And the stock sells off, you know, 50, 60, 70%. So, you know, it's a different skill set. And I would almost say, like, the reason why I want to put it in the bucket of early stage tech is because startups are also early stage tech. And when you bucket it correctly, you know what level of risk you're looking at. You're really looking at like a seed or a series A level of risk with specs. But again, like, as stated, the returns can be much bigger as well, if you know what you're doing. Yeah, I think that is a really interesting way to look at. at it. I never heard anybody say that, but when you look at a company like a Nikola doing electric vehicles and becoming worth $30 or $40 billion, and I'm looking at it, and there's a

group of public market investors who are looking at this and comparing it to Tesla, and I'm comparing it to a Series A company that has proven very little other than they have an idea and a business plan. Knox, when you see companies going public like that and you see either retail investors, I think it's retail investors maybe who are in brink. racing these, what is your thinking of how they need to change their thinking, which Beth kept saying, like, hey, you got to maybe develop a different skill set. What do you think that skill set is? And should they even be touching those? I wouldn't say you shouldn't be touching them. I think, you know, for me, what I do is, you know,

I've been in the public markets and equities since 2007. So that's what I know. That's what I, that's the skill set to bring the table. And there were some strong winners for a time being in the SPAC market still are some good names. So to ignore that completely, I think could fall on the trap that I see a lot of people doing finances. They'll look at valuations and they'll say, this is insane. It makes no sense. I'm staying away. And they miss out on one of the most epic bull markets, I mean, arguably in history. And so SPACs being a part of that, you know, I think the main thing I would say is you have to invest in something with very little price data to analyze and that is an untested, that is an untested product in the public markets is you have to have some kind of risk management plan. You have to have some kind of exit strategy when doing something like that. I mean, that's how we approach the SPAC market is, you know, we found some stories that we liked. We played some momentum, some price setups that we liked, and we had an exit strategy. And when it got triggered, we stepped away.

Oh, interesting. So give me an example, either one of you, of like an interesting SPAC story that you embraced and either stuck with or just decided, wow, this is getting overvalued and decided to just take that win. I can give you the one that we liked that we are, the I.O. fund is still invested in. It's called STEM. It's batteries, but it's also software that optimizes how the battery is used because the statistics are about 40% of solar energy or any whatever it might be.

Renewable energy is wasted because of the lack of optimization. When should you be on a generator? When should you be relying on the battery? So it's called Athena software. And the reason why we like STEM is that they had already met their full year revenue guidance and they had no debt. So that combination puts them in a little bit of a different category than one that might turn around and raise really quickly, dilute shareholders and or is projecting some

number that they cannot meet. And then we are... That's really interesting. Just as a follow-up there. That stock traded, I guess, like all specs at $10 while they were looking for it, then popped up as high as it looks like, well, 50 bucks a share. And then now it's trading at 23. So you doubled your money if you bought into that story early.

But it's one you want to stick with. And if I read into it, they have a product that they have customers for and they're paying for it. So you've checked a couple of boxes there. A paying customer and a real product are two of them. Am I correct? Yeah. That's always helpful. I mean, I say that. It sounds so stupid when I say it. But then you look at Nicola as the opposite. And I don't know if you were involved in that train rack. No. No. No. Not at all. Okay. Great. Because I had that dip on the pod. And when he explained the product to me, there were so many red flags going off from as a private market investor because he's like, Well, we're going after these hydrogen stuff, and I can do it 10 times cheaper.

I said, how do you do it 10 times cheaper? And he couldn't answer the question. And then he said, well, I'm also going to do electric and do a badger thing. And I just thought to myself, wow, I watched Elon and other people suffer just pursuing one electrical new energy model. This person's going to pursue two simultaneously and it's worth 40 billion now. And they don't have a car on the road. So this is a really important lesson for people.

no customers, no product, no revenue is a really different class of business. Is it not? Yes, I would even extend that to say Lucid Motors, which I think one day could be a quality company, but today as a stock investor, there's not much I can do with that company because they haven't put cars on the road. And it is very hard to get the first car on the road. Right. Yeah.

Right. I mean, it's a tough business model, just auto companies. I mean, historically have been some of the worst, I mean, aside from Tesla, obviously, but some of the worst industries to invest in. So once you get past the high growth tech store, you then have to deal with the auto industry nightmare. I don't know any other way to put it from just a financial standpoint. Literally the worst companies we look at as private market investors that we get the most concerned about, anybody going into healthcare, higher education, cars,

you're just like, and the music industry because it's a combination of incumbents and regulation and just how in some cases dogged it is and cars fall into that. This is a company that has a market cap of $32 billion today at

$20 a share and it was as high as $60.4 show. So if I'm correct, doing my math here, I'm no genius. It was close to $100 billion company. What do you attribute that kind of insanity to? at this moment in time. Actually, Knox is a great person to ask because his trait, I mean, his talent is that he

tracks sentiment in the markets. Yeah. So he's actually the perfect person for that. So I think one of the most interesting hurdles we've had to address, and I'll tie this into your question, was how this market is not like 1999. I think 1999, I mean, is still earmarked in a lot of people's minds. And so people will look at these valuations and they'll look at the growth and they'll say, oh, this is a bubble. And so what followed that bubble was just a terrifying, awful,

multi-year bear market, you know, and so people- You live through that? I'm not sure how old you are, but- Oh, no, I lived through that. I wasn't investing during that. I started, I got licensed in 2007, so I got to start out basically in, you know, a multi-year bear market. That was absolutely be horrifying, you know, and, and I mean, that was 12 years ago. And so many investors today think that a bear market was what happened last year, you know, just right now, no, no big deal, you know, and they're very big deals. They're awful deals to go through. Um, so my point being is that you had this bubble. It didn't make sense. It was irrational. It was momentum driven. It was human psychology followed by a bear market. And think of all the bubbles that we've seen in the last

few years. I mean, I can round off. We just saw a bubble and lumber, for example, you know, that popped. And so bubbles don't mean bear markets. It definitely means there's an excess of liquidity. And it definitely means that there's an exuberance in the market. But what leads to bear markets and recessions typically is central bank policy, which is incredibly loose right now. They're stuck in, they have backed themselves into a corner. And they just told us a few weeks ago that they're, they're going to let the party go on a little bit, a little bit longer. Every startup founder and marketer needs high quality leads.

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business is set up and maximize its potential. Here is an amazing offer from our friends at LinkedIn. They're offering $100 in advertising credits so that you can get started today. Learn how to connect with customers on LinkedIn's dime. Visit LinkedIn.com slash this week in startups. And you've got to spell this all out with no spaces and no dashes. LinkedIn.com slash this week in startups to claim your credit. Terms and conditions do apply because they're giving you 100. When we look at a company like that, Lucid Motors, if I'm interpreting correctly, there are real companies in the world like Netflix or Disney or whatever, Airbnb, Uber, or Stripe that are printing money. They have customers, they have products people love. And then

you can have this mixture that occurs in an up market because there's so much liquidity where people will conflate one with the other or the potential of a, the reality of a Tesla, because they see Tesla's everywhere. And they'll conflate that with the speculation. of a Lucid or a Nicola, and they're not thinking straight. Look at the all-coin market, for example. I mean, many of the all-coins, I think a lot of investors are invested in

don't really know what they are, where they came from, the story behind them. They just know they're up 1,000 percent and want to participate in that. And so when you start seeing these big moves, it just, you know, gains are magnets to people to try and get more gains. It's just humans like,

we've seen it all throughout history, and it goes back hundreds of years, and it's never going to change. So something goes up, therefore it's worthy of investing in because it went up and that can make it go up and become self-fulfilling prophecy until somebody is left holding the bag. Yes. Which happened to Nicola or in this case, you know, somebody got three times. So I like kind of where we're going with this. Beth, you had another company you wanted to bring up as an example in the smack space that either you stuck with or sold.

Yeah, we actually invested. Well, I think the the buzz that was a good. going on was a lot of renewables. And I think one that we stopped out on was Pro Terra, which they do electric vehicle buses or electric buses. And I think that space can be really tough because there's 30 competitors there. But we like the, you know, we like the management. And there are a few other things that we had liked, but we did not write that one down. And that's where risk management really comes into play. And back to what you both were talking about, I would say, too, that when you look at Nicola or some of these other, you know, unexplainable runups with, um,

stock prices, 80% of the market right now is machines. So what machines will do is they will tell, they can tell that there's a tipping point of exuberance, if you will. And they'll push that so that retail pile in and then they'll pull the rug out because machines can move very quickly. So yeah, so I think that as a market, this has changed drastically over the last five years as to how, and I think that's some of the exuberance you've seen. So when there was limit down in March, I had been writing a lot of that was really, you know, some of it was coming from the machines was that they were like exiting so quickly. And just to realize that you're not up against another

human right now typically. So machines can tell when there's a sentiment is running high and it'll pile in and then it can get back out very quickly. So for the most part, I would say as an individual who wants to beat the market, we call it long term buy and hold, making sure that you are invested in very high quality companies. That piece you cannot beat even as a machine. Because they're going in and going out so much. But if you can determine these quality companies and just remain, you know, invested long term, your gains often exceed those who are trying to get in and out very quickly.

But getting in and out and trying to be a day trader as a retail investor is a suckers game today, right? Because of these bots and because of the quants and high-speople. speed trading, our frequency trading. This kind of stuff makes it impossible for a retail investor to compete writ large, yeah? It's very tough. Knox is, you know, consider himself a trader. I do not.

I'm writing, you know, in-depth analysis that I don't budge on for years. I mean, that's kind of my, you know, my niche is that if I'm writing about the company, I'm ready to go to bat for it, I'm ready to take on the market. Like, I know the market is going to come for me and it's going to tell me I'm wrong. And my thesis is this, you know, in price and price movement. So, you know, I've held personally, and then the IO fund has also held companies that heads 50 to 60% drawdowns. I mean, one of our, you know, classic calls was Roku at $30. And it looks like a darling today. But there were many times that Roku was down, I think,

three times in the last three years, Roku was down 60%. Roku seems like the most impossible bet to me, to me as a venture investor, because you have Apple TV, as an incumbent. You have Google as an incumbent, and then you have these other big streaming services who, you know, maybe they don't have hardware yet, but maybe they could buy something. And so walk me through how you have the audacity when something like Roku is trading at 30 bucks a share, you know, whatever, a couple of years ago, to say that company can compete against the duopoly, Google and Apple, and then Amazon, all three of them, well, actually, two out of the three, do not care about margin on hardware.

The only one who cares about margin on hardware is Apple. So you're up against three giants who don't care about money. And Roku does the same thing. How do they win? I think that's a great question. And the audacity is a great word for it because the Wall Street will always make you think that you're wrong. And so you've got to be really firm on why you might be right. And so all of this has been carefully written about.

But A, I would call Roku technically the incumbent here because they were the first to market. And they actually came out around the same time as Re Hastings, Netflix. So it just took this long for ad-supported to come out, Avod, versus subscription video on demand to be picked up specifically, not by the cord cutters, you and I, but by the brand advertisers. And so the other thing is that they own the whole stack, which Google owned the whole stack and Amazon eventually got into, but they had designed an operating system that was flawless for very cheap and it fits well into low-cost television sets or smart TVs. All that is great because they have this hardware and they have the operating system that they can do very well with. But ultimately,

Roku's path to a lot of Wall Street gains still is today is that they are an ad platform. So we are moving into a world where brand advertisers, which are on, you know, linear pay TV, are moving on to, they're cutting, you know, they're moving towards the cord cutters. So they're going over to OTT. So Budweiser for the first time did not advertise in the Super Bowl.

They are moving over to Roku. I mean, you know, Roku and its competitors, those brand dollars are actually worth as much as mobile. Pay TV ad dollars have been a holy grail for some time. So you're talking your Pizza Hutts. Pizza Hut can't really advertise on Facebook

as effectively as they can advertise on a television screen. and if you can add in the data that comes from you viewing OTT set top box or smart TV, Roku's, you know, Android, Google, that data is now informing your Pizza Hut ads, your Budweiser ads, whatever it might be. That's a big deal for pay TV advertisers who did not budge and did not spend on mobile very much. So it's a budget migration.

Yeah, it takes a really deep analysis of that because what you're also realizing in all of this is, okay, sure, hardware is a commodity, but audience is not, right? And the ability to aggregate an audience together like that, even though you can commodify the hardware, there was another trend going on, which is, I don't know if you've had this experience, but with my NBA League Pass, there's an option to turn off ads, Hulu I can turn off ads, HBO Max, no ads, Netflix, no ads, Disney Plus no ads. So I'm looking at consumers and thinking, wait a second, the highest end consumers are opting out of advertising

across some of these top platforms like when's the last time you saw an ad, right? And I, oh, I actually pay for YouTube, I don't know if you do this. Do you pay for the YouTube premium service that takes ads out? I'm curious if either of you pay for that. Oh my God, it's the greatest bargain

in the history of media. You don't know how many YouTube ads you're watching, but my Lord, just not having to click, skip the ad after five seconds, 20 times a week or a day or how long you're on there. It's incredible. So where do those advertising dollars go? Roku, right?

Like, it's a really interesting funneling there of consumers. Hmm. Yeah, and I guess the other way to reframe it is that technically Roku has always had the biggest audience by a small lead. But how were they able to do that for so long with Google and Amazon chasing them? And Apple is, TV is, I'm not even sure if they're still, are they, producing much for that anymore? I don't even know. It didn't do well. It's known to have not done well. I always thought, this is a very weird thing about Apple, you know, like for them to do content

always seemed like strange to me because they're not willing to do the content that a lot of people would want, which is adult fare, FX, HBO, Sopranos, Game of Thrones just wouldn't work on their platform because they're unwilling to show sex or violence to that level, right? They want Ted Lassow stuff. So I don't understand Apple's mission there, I guess. They have to do something with that money. Let's talk about that. You have these giant war chests.

What is the story with these, how do you value companies and their usage of capital in relation to M&A and putting it to work? Because, I mean, Beetz was a completely uninspiring acquisition. Is Tim Cook a great CEO for not acquiring companies and staying? focused and making sure everything's built there, or is this a huge mistake? How do you think about that with Apple specifically? I'm curious. The price keeps marching higher. So regardless, I guess, of what I think Apple has done very well with Tim Cook. But if you were to ask me casually, what do I think of Tim Cook? And I'm not a big fan. I have never, and it's really important to

always stick to your thesis as a investor, which means like I don't, I need, you know, if someone just put on Twitter the other day, you know, Peter Lynch, like you've got to be able to sit back and watch other people make money on what you passed on. And I'm okay with passing on Apple, even with the gains, because I couldn't find the growth market for the company. I mean, I get at iPhones, you know, high dollar, average sales price, et cetera, but great margins, cash machine. I mean, this company's a cash machine. I just can't find the growth market. And that's my investing style. So even with all of that cash, I don't know the growth markets that Apple is going into in the near term.

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acquisitions, how does this going to affect the Amazon's of the worlds and as well as the smaller companies and by extension, all of us as investors in these companies because maybe exits aren't going to happen as much. And what do you think that does? That's a good question. And I mean, the sandbox you play in as we're trying to identify. the apples in 2009 and the Amazon's in 2011. You know,

a very intriguing study that seems, it seems difficult to wrap your head around right now, considering how dominant these companies are, but an analyst, whether or not do a study called the Top Dog thesis, which he looked at the top 10 companies in the SB 500 going back every single decade. And they all change, all of them.

Every decade, they rotate out. GE was in there. for a couple decades. GE is now out of the Dow. Microsoft has stayed in there for 20 years. Apple has as well. But the likelihood that they're just going to stay in the top 10 becomes unlikely just based off history and studying history

and how companies grow and become so big that they're unable to really compete with innovative, nimble companies. So I think Apple is a phenomenal place to be if you're managing billions and you have a charter that says you have to put your money somewhere. But if you're looking for high growth, we just don't see that. They're not really giving us evidence right now that they're going to compete in the high growth arena as some other companies that we're looking in right now. So then when you're, it's very interesting because I wonder if the app, I don't know if you said

the news that Apple was going to let Spotify link out and, you know, maybe you could sign up that then manage your subscriptions, you know, around the app store and maybe they're loosening their grip there. It seems like maybe they realize regulation is coming. What would you think of Amazon spinning out AWS, maybe a Google, or I'm sorry, alphabet spinning out YouTube? Would that be accretive to shareholders? Would the combined entities be worth more than,

would the combined entities be worth more, or would the separated entities combined be worth more? I think it'd be helpful because one of the challenges for a growth investor like myself looking at Amazon is you're looking really at two different businesses. And if I want to invest in the cloud infrastructure as a service segment, you know, I have to accept e-commerce and vice versa. And then I think with Alphabet, even better would be can you spin out the AI projects that they have? Yeah. You know, because that would allow people to invest in AI without having or maybe you know, you know, you're a little more, less risk, lower risk.

Ad tech is a great place to be. So it's very cash efficient, low R&D, typically, things like that. So in that case, you're not having to choose between the two because it may be different profiles. So I think for these companies, they could do better if they were split off, open up more investors. The interesting thing about you mentioned DeepMind. Larry and Elon were both, I think, on the board of DeepMind,

both were big investors in it. The deep mind crew has been trying unsuccessfully to spin themselves out from Google. And I think they had like a little bit of a revolt in there. And I know Elon has been very public about he wanted them to keep going independently. Of course, you do have Open AI and some other folks pursuing the stuff. But I mean, AWS as a standalone company would be a juggernaut. And you would be a pure play and YouTube. I mean, what would YouTube be worth now?

500 billion? And if they could then pursue their own product stream, that might actually interfere with some things happening at Nest or the Google Pixel, you know, they can make their own cameras, whatever it is that Susan Wojekki could come up with could be extraordinary, no? Yeah, I mean,

video was projected to be the top segment in ad tech a few years back, and it certainly became that top segment. So YouTube was able to capitalize a lot on that. We have, I'd say at our fund, we tend to have a little bit of a limit because growth, you know, it's the law of big numbers, which is, you know, on such a large base, it's harder to have, you know, 100% growth or 80% growth. So for us, we're typically looking for a slightly different profile. We like 40% or above minimum. So that would, just the law of large numbers would start to disqualify a lot of the thing. and then...

40% year-over-year growth? I'd like to start with that baseline. I mean, it's not firm, but yeah, that's where we like to target minimum. And what is it about that, to you, that signals a better bet than, say, you know, the slow growth of 10 or 20% that you're seeing in the fangs or something? It's really hard to re-accelerate beyond the 10 to 20%. There just seems to be a line, whereas you can see companies hover in the 32. they'll go up to 48, and that's a really nice move to catch. But when it comes to the others, I mean, if you're looking at, you're ultimately

investing in the growth of the company. So regardless of what price does, like, people really get hung up on earnings. They get hung up on news headlines. Ultimately, if I put my money into a company and it's growing 40%, I should be able to see 40% return over time. So, you know, the 10 to 20% with the risk that tech can often carry is not enough for my profile, if that makes sense. Nvidia falls into that for you, I take it.

Yes, I'm very bullish on Nvidia. I think the reason is that we haven't even begun to tap into its real market, its real micro trend, which is, of course, AI. A lot of people are looking at, you know, gaming, they talk a lot about gaming, they talk a lot about crypto mining. Forget about that. This is a data center, AI accelerator play. everywhere that the economies worldwide go or industries or doesn't matter if you're an

SMB or enterprise, all of it, in my opinion, let's say 90% of it will be run on Nvidia. And that's a big statement. I mean, that's something that I have, you know, researched very well and looked into and been writing about for years. So I think we're starting to see some movement there that it stands out, especially compared to the thing. It's had, you know, two to three X returns.

since I started covering it compared to Fang, and I think that will continue. What is it in terms of the product, though, offering that differentiates it from their competitors? And who is their real competitor at this point? Yeah, I mean, it's GPUs. It's a parallel processing that can happen with GPUs that serendipitously, it can also be used for AI and training.

And basically, they recently combined training and inference onto a single chip. So they continue to iterate. to a level where for, you know, machine learning, training, models, and AI inference, it's really hard to beat. And it's because just like Amazon had the AWS serendipitous, look, we've got all these servers, let's run them out. Oh my gosh, we just stumbled upon an even bigger market than our e-commerce. It's exactly kind of a similar path is that Jensen Wang and InVIDIA were doing GPUs for gaming. And whoops, look, GPUs happen to be the strongest chip or the best general purpose chip for

AI. There are more specific chips. They call them ASICs that come out of Google and Microsoft. Google, actually, not Microsoft. They use field programmable, but Microsoft does. But basically, ASICs are a very specialized chip that can be harder for software developers to learn. So it's very common for software developers to learn CUDA, the CUDA platform and how to program GPUs. So it just serendipitously occurred for them that they're gaming exposure, doubled up well for AI. I mean, it is one of the amazing things about technology is, like William Gibson said, the street finds its own use for technology, right?

Like, okay, this graphics card is great. Okay, yeah, let's put 10 of them in and we'll solve some AI problems. And all of a sudden, here we are. They just discover a whole market or somebody who's selling books is like, you know what, we racked a lot of servers. If we can make this a profit center as opposed to a cost center, man, the company would grow faster. So let's just flip the model here. one theory I have on increased regulation and maybe breaking up big tech or pausing large acquisitions by big tech, which I think would be more likely.

I don't know how easy it's going to be to break them up. If they do break up, my theory is they do it because they want to unlock shareholder value or maybe just make peace with Washington so they don't get overregulated. But here's a theory I have, and I'm curious what you think. This is going to be amazing for us as investors because, founders who have the opportunity to sell like Slack did to Salesforce. If Slack was getting bought by Salesforce today, you know, or under Lena Con and like a new administration, would that pass or not? Maybe not. Would they even try to buy it? Well, Salesforce isn't that big, so maybe they would. But boy, does this seem like a way for us to ride our winners longer?

In other words, you know, Airbnb and Uber, Lyft, DoorDash, these would have been takeout targets by Amazon and other folks, Google, who want to maybe open up and get into commerce or some new market. But can they even think about that now? What do you think about my theory? Yeah, I think that as far, one thing, I like your theory a lot. You get to run your winners longer. I would also say that it may allow more emerging tech to succeed. So you wouldn't have so much of this concern. This is an example,

but you wouldn't have so much of a concern over like Microsoft Teams versus Slack. You would just be able to write out Slack until it became its full potential. Where I think, I guess let's put it this way, big tech tends to buy its way to success these days. I mean, we haven't really seen much from Facebook outside of acquisitions.

And people are always like, what if Facebook? You know, I remember Facebook's getting into date dating and match stock plummeted or Facebook's getting into stable coins and like crypto, you know, had a bad couple days. It's like, I don't know, like is Facebook, is Facebook really, you know, that great at going into anything? I can answer that question. I mean, I've known Zuck from the beginning. He was, he's a mememic machine. He's great at copying other people's innovations and scaling them faster. I mean, that is his core skill set. And I mean, and some people might consider that an insult. Other people might consider it a compliment. I mean,

I think he's just like the world's best photocopy machine. If you think about when he came in and did Facebook, you had Friendster and MySpace couldn't keep their servers up and running. So of course everybody went over to Facebook. It was stable. It was up and running. And then he just copied everything and bought everything.

But they're not going to let him buy anything now. I mean, those days are over. So let's talk about Robin Hood for a second. I was an angel investor before they launched, yada, yada. I'm curious about how you view a company, with 22 million active members, and then what extensions they could put on it. I'm very long the company. My position is I'm not selling this share, my same position with Uber, which is, I believe

the story before it launched, and I believe it more now. I believe that there's no reason Robert Hood couldn't have 100 million members, and I don't know any finance company that's ever hit that number, just like Netflix and hit a number that nobody ever believed was possible for a subscription service. I think Robin Hood could be the equivalent. And Uber, I think they had 50 cents a ride. So I want you to tell me if I'm crazy with my two DC, D-Sai, that I'm holding both those stocks for 10 years.

Let's start with Robin Hood. Do you think this is a great company that will 10 years from now have 100 million or 200 million members? Retail is really tough. You know, we actually work in a similar market. And I think you have to really win their loyalty and have a lot of integrity. And right now, it's being questioned. So until Robin Hood can clear that up, I think they may have some roadblocks.

But, and it's specifically because retail goes into the space already not trusting much. I mean, they get on CNBC and they're like, oh, gosh, you know, how much should they pay you to talk about Apple today? You know, or like, how much Apple are you holding to tell me more about Apple? I mean, you know, so it's like, I think the trust piece with retail is going to be essential for Robin Hood. Yeah, it's going to be essential. I think they're in the retail market. Do you think it's a fundamental flaw that they do payment for order flow versus a subscription like a Netflix and that they should eventually move over to that model over time?

Have people pay $10, $20 a month to be a Robin Hood member? I mean, I know that there were some red flags that came up just from my perspective. Like, I know there were issues with them being FDIC insured or SBIC insured. and then when it came out that they were selling order flows so that, you know, bigger, bigger players can front run them, you know, I kind of lean with Beth on that. I mean, I think, I'm not even sure retail is aware of that predominantly, you know, I really don't think so. Yeah, no, I think they're getting free trades and that's great.

Free trades are worth whatever pennies they lose on that and they're holding it for years. It doesn't matter. Right. And so I think if you were to go to the average investor who's in Robin Hood and let them know, hey, this is what's happening, is they're taking your order flows and giving that to bigger institutions so they can get in before you or, you know, do whatever they want with that information. There's a lot you can do with that information, actually. I'm not sure how they would feel about that, you know.

So it's interesting what they did because it really changed the game across the board. You saw E-Trade and Charles Schwab having to go to like zero commission. So it changed the situation in a very drastic way. at force competition that was actually beneficial to retail from like a price perspective, but it's pushing more people into the market. So I think it's going to have a very interesting climax, if you will. So we'll have to see how it goes after that climax. I think that's going to be the real tell.

I feel like in some ways Facebook users are like, oh, yeah, I know that I'm the product here. I'm, you know, my data makes money in ads or whatever. But I'm cool with getting, sharing photos for, free with my family. It's all good. But I do think when they add those next three services and get your Roth IRA or your 401k or your 529 built into your robin hood account as those 25 year olds turn to 35 year olds, have a baby set up a 529. And I think it's going to, I just love the fact that there's financial literacy at these young ages. I mean, net net, do we like all these retail investors embracing the markets? We think this is a good thing, right? Yeah. We do. Yes. And just my, about my comment about

trust, like, you know, we have noticed that a lot of people will put their portfolio returns out, screenshots, things like that. So we took it to the next level and we actually get audited by an accountant and we are coming out with our audited results again, which are very good. Actually, next week. Thank you. Yes. And so what I'm trying to say is like we constantly have to say, like, how can we get retail to trust us? Like that is something, I would say that that's central to our brand and the reason why I'm bringing up with Robin Hood is I think we share a similar audience. And so I would say like our mission is trust, integrity, transparency. And I think it has to be. I think that that's the way that you went over retail. And I'm, I think retail should be

involved in the markets. That is why we do what we do. I think they need to be very careful as to who they listen to, who they follow. It's, it's funny because like if you have an electrician come into your house, you want only a licensed electrician, you want somebody who's actually done this. They will invite anyone into their portfolios, anyone, anyone, into the retirement, people who have not qualified themselves, who are on Twitter, who just started to tweet about it randomly. And it's like you want to put more emphasis on it than like a home repair, you know. And they put less emphasis. And I think that, you know, you should put your, you know, whatever analysts you're following, whatever financial advisors you follow, make sure that

they're super quality. And that's something that retail struggles to do. And one thing I want to say about the Robin Hood thing, just kind of backtracking on that, was I think we saw kind of a flaw in the system not too long ago with the GameStop situation. I know that the folk story is that retail took on big institutions, but if you look at the data, it was institutions taking on institutions. You saw big money seeing that institutions were way over leveraged into the short position with GameStop, and then they just raised the price just to force them to squeeze. And then they actually went into the stocks that they're going to have to cover in order to meet their demands. And so you could see that order flow going on. And so it was an institutional battle. And retail jumped on board to make just to exacerbate the problem.

And so one of the biggest, you know, one of the bigger clients of Robin Hood, I believe from the money end, from the institutional end, was in GameStop. And then Robin Hood comes out and says, oh, to protect our investors, we're going to prevent them from selling GameStop or buying GameStop. And that, you know, that was obvious. It was really obvious what they were doing. You know, I have friends that are invested in Robin Hood. They were trying to get out because of that. They're like, this is messed up, you know. So that to me was a pretty big crack in the system that could continue in such an economy

that has such liquidity just basically flooded everywhere. So that would be something I would want to watch. We're basically stress testing in a lot of ways what the system is capable of handling, putting 20 million more participants who have social media as a communication mechanism. It's sort of like dictatorships dealing with their citizens coordinating on WhatsApp. And all of a sudden, you know, you're in Egypt and there's, you know, 100,000 people in a square. And then it's, you know, a million people. And you're like, holy cow, there's a revolution going on.

You didn't even see it coming. Yeah. Let's talk a little bit about Chinese stocks and China. WIS have been pretty crazy and unprecedented. I was on CNBC years ago, and they're like, hey, what do you think of these Chinese stocks? And I said, I would never touch any Chinese stocks because they could be cooking the books and we would never know. It's an authoritarian country. And someday they could just say, you can't trade our stocks. And they looked at me like I was crazy. And I was like, well, I mean,

if this was Saudi Arabia or Iran or North Korea, wouldn't we think the same thing? Have we been in a delusion that this is a democratic country and that they're following the rules? And do you touch Chinese stocks and how do you think about them with this black box and now Xi Jinping just saying like Jack Ma going on vacation go paint some oil paintings, Beth? Lot, lot of that question I know. I just had a big ice coffee. Well, that was very astute of you to say that a few years ago for sure, especially when Tencent and Baidu and people were pretty bowling up on that. We do have some exposure, but it's it's kind of more unique and they are quality like they're not you know we don't think they're

cooking the books um we have the ev exposure in china we have an evi stock and we also have a cloud infrastructure stock um that's more of a pure 100% pure play so we stayed in those markets because the one thing that uh you know i try to wrap my head around is 1.3 billion people you know a lot of them making decent money. So that's a lot of people. And when you start to think about EVs selling into a $1.3 billion market subsidized by the Chinese government or cloud infrastructure, they're supposedly going to rival us on AI.

Well, how's that going to happen with such a small cloud footprint? Right now they have a pretty small cloud footprint. So we've strategically played in that market. But if I were to be on podcast such as this, I would say it's a tough one. So it's only if you're really doing it every day. Knox, you can add something in. Yeah, I mean, just the investment thesis of China, I don't know if you'll ever see something like that in our lifetime with so many people just being plugged in.

I mean, there are cities in China that are the size of LA that no one even knows the name of, multiple cities like that who are basically getting plugged in. And so the investment thesis is phenomenal, but the political risk is quite high. What I find fascinating, just the human psychology around this, you see this every single time. Whenever there's an asset class that is just hated, nobody wants to own it. And everyone that's sold has sold, there's only one way that it will go. And that's up. And a great example of that was, I'd say French stocks. Who is investing in France last year. No one. I mean, so I said, hey,

I wasn't sure any of the companies in France were publicly traded. I mean, you can buy the French broad market index ETF. But anyway, they announced that they're going into their second lockdown. And what do you think French stocks did? They were up 25% a month later, up 25%. And the reason being is because everyone that sold has sold, and there's only one direction for it to go and that's up. And so I think that that will inevitably and eventually happen with China.

We're seeing evidence of that. One of the positions we're holding right now is showing technically pretty strong signs that is bottomed and looking to go back up. So, yeah, we'll see what happens. We're definitely not adding to it. The relative strength right now is quite awful. We tend to add to winners. And so that's a portion of our portfolio that's quite low. and if it starts showing strength,

they may look at it. Maybe the capitulation trade. Like just everybody has just given up on. Yeah, China and then we'll see what happens. It is really fascinating to me how this is going to play out just with Taiwan as well and the chips there and just geopolitically. It seems like a very, I don't think anybody could have predicted that they would be starting to opt out or want to tamp down the price of their own.

stocks. Anybody have any game theory here of what's going on? Is it just a pure power play by Xi Jinping? Like, is he just doesn't want rivals? It is very odd. You know, it's hard to really wrap your head around what the rationale is of that. And you're starting to see them trying, you're trying to see backtracking on saying, hey, you know, we're not, we're not really going to go after, you know, because I can't remember when that was. That was about a month ago, uh, CCP.

came out and said, no, you know, there's still great investments here. We're just doing very strategic, targeted, you know, regulatory, you know, oversight of certain companies. So we'll see. We'll see what happens. I mean, the markets tend to force the hand of people, you know, so if they keep getting sold off, and it's probably unlikely that you will see them continue down this path. But who knows? Who knows? Let's wrap up with what we're seeing, in the almost post-pandemic world, the never-ending pandemic world, Beth, 10 million open jobs,

people don't want to go back to work. I think some people are deciding, maybe I'll make a life change. Obviously, a lot of people retired early. They were like, eh, I was going to retire anyway, so I'll just get out of the job market. Other people are like, you know what, I'm going to live somewhere.

I've been living somewhere at a lower cost basis, therefore I don't need to take that job. Or one of us can maybe raise the kids and or we'll both work part-time gig economy. It feels like this is seismic and could be a permanent change in how people look at employment and maybe consumption even. So what do you think this is going to look like? Let's assume we get through Delta and the pandemic goes away.

City is going to come back or employees going to come back to work because I don't know if you saw today. Amazon is like offering free bachelor's degrees to their employees. they just desperately need employees. I'm having a hard time. I'm hiring a lot of people in Canada right now. I'm having an easier time hiring talent in Canada than the United States because a lot of people in the United States are like, yeah,

I'll come work for you if I can work two days a week and go to Coachella. What do you think, Beth? I'm very bullish on hybrid work from home, and I think it's really interesting the way the market has started to question that. I think that's just part of why I do what I do. I've been covering tech for 10 years in-depth reports, And I feel like it, one of the reasons why I really like working in the public markets is that the realities don't always match. And that's an opportunity for, you know, me to cover the what I'm seeing not match.

And I feel like the tech industry and your gardeners and your foresters and I think everybody's really clear like hybrid is the way of the future. 60% of companies are going to be embracing hybrid no matter what happens with the coronavirus at any given time over the next five years. that's up from about 20%. So that place is very investable. I like that place as an investor. I like it when the public markets are very confused over whether we're going back to work or not. To me, I think the chances of us going back

to the way things were pretty low. The other thing that I find really interesting that we've been tracking is there was the digital transformation as you've seen in Azure, AWS, Google Cloud, revenue, and we're starting to track some movement in data analytics, databases, data warehouses. Obviously, Snowflake is a big story,

but there's others where we're starting to see that trickle-down effect, which is like, okay, everyone moved over. Now I need hybrid and cloud-native, you know, tools, solutions, databases, etc., platforms. so we think we're revving up for that piece of the stack where, you know, maybe it was just,

everyone was just trying to get migrated. And now we're going to be moving into databases and data analytics and things like that. So there's other stories beyond Snowflake that we've been tracking and we hope do well long term that if you had asked me a few years ago, could have been plateauing slightly because it needed those companies that were on-prem to move onto the cloud. And now there's all these enterprises on the cloud. And I think there's some opportunity there. I think you're 100% right.

It feels to me like the office space market loses cities and those stores beneath them. You know, whether that's retail or sweet cream, I don't know who's in those retail spaces that might have, you know, Starbucks, whatever, below, you know, the Soma office spaces because the top talent are working from home. And then the other thing I'm seeing, which I would be interested in your interpretation on the public markets, if a large amount of talent learn during the pandemic how to be a free agent and or start their own side hustle company and instead of making 100 or 200,000 working out Facebook, they figured out a way to make two or 300,000 on their own terms being their own micro entrepreneur. What wired and other people called freelance nation back in the day, that everybody would have their computer and their server and incorporate. I actually see that happening now where people who I would have hired or who used to work for me started their own little business and they're doing better.

You know, they're making 20% more or double more. How does that make its way into public markets and what do you think of that thesis? Either of you or both. Yeah, Fiver's. done, Fiverr did well for a stretch. It's, you know, it, it has tougher comps. It's just like what happened with Zoom. It's what happened with a lot of these companies where they had such an explosive year last year that the year over year needs time to recoup. But Fiverr was a company that moved from having, I mean, $5 gigs, which is crazy to think about where they began and where

they're at now. And now they're starting to do subscription services to where, you know, it's monetized a little more consistently for public markets. And Upwork has struggled. So, you know, I know there's TopTel in the private markets, the developer recruiting. Yep. Yep, that one's kind of interesting. We haven't had our big public market, darling. If I were to have to put my money somewhere, I would definitely say Fiverr just because they did execute very well.

They do have a corporate plan. Now, one of the things they realized was a lot of corporations are saying, hey, if you can manage the freelances for us and, you know, know, it's less of a marketplace, but more of a concierge, I'll do a lot more with you. And so that concierge service works because they just skim the top talent like TopTel does. I wonder if they ever converted their notes. I don't know if you know that crazy story, but they were on a safe, which is a way to give debt to a company that doesn't have a conversion date as opposed to a convertible note. And they never converted. And the founder just took all the profits for themselves and never converted anybody.

And they never had equity, so there's no recourse. And the whole concept behind the Y Combinator Safe was like, well, that'll never happen because there'll be an liquidation event. And the founder there was like, yeah, I'd just take all the profits for myself. None of the employees and none of the investors ever got money from it. It's been like a crazy outlier case here in Silicon Valley. It's gnarly. And so since that time, I just went to my attorney and so, hey, Wilson, can we put a date

on this safe for when it automatically converts. We don't see why not. I was like, okay, let's do it. And so people are like, oh, you have to sign our safe. And we're like, yeah, we'll sign the safe. Just put in that conversion date. They're like, why don't you need a conversion date? I just point up to the episode of Top Talent.

I'm like, watch this episode with the employees revolt because they never got stock options. Like, really gnarly, but it's only happened once at scale here. Knox, what do you think about this never-ending pandemic slash coming, you know, post-pandemic world. Let's assume we have some ability to keep society going, which I think we all will. So what do you think this looks like in 2022 post-pandemic? I think the movement is to open up. I mean, we can see what people, what the economies want, just based off the exodus from states and going into other states. And the other thing that I find fascinating, and you were hitting on it, is like this reshuffling of how markets work,

just based off innovation and innovation ingenuity. People are finding that with the new tools that tech has provided, they can actually make more money with more time on their own terms. And so it's just almost like a free market natural redistribution of wealth, which is really shuffling the market in a very fascinating and I think a positive way. Pretty inspiring, right? Like markets work? There's competition for,

entry-level workers at a level that even the socialist crazy, Bernie Sanders, Elizabeth Warren, they didn't even ask for this outcome of Uber drivers and DoorDash drivers making 30, 40 bucks and getting $1,000 signing boses. It eclipses whatever they were asking for. Yeah, it was the, it was just the, you know, the human mind can't imagine what the innovation of new technology will bring. It's just like all of a sudden the internet coming onto a cell phone can lead to anybody getting their own personal limousine driver at any time they want. You know, you couldn't really fathom that back in the 90s, but that's where technology led us naturally. And it's just doing it again. It's just doing it again, you know? Yeah. I find it to be pretty exciting. I'm fascinated by real estate too. I know

I got to let you guys go, but it's so great talking to intelligent people who are considering and thinking about placing bets. I, you know, I was thinking about Airbnb and I realized I had this it was a great revelation I had about Uber at one point, which was Bill Gurley and I and others were talking about Uber, the early investors. He did the series A. I did the seed with Chris Hocka, and he said, you know, J-Cal, it's, I don't know if you know the market for taxis is X, but Uber's doing X times three in this market. I'm a bad Bill Gurley impersonation, but, and then he's like, and then there's Hertz, and then there's car ownership. And then Sachs was like, yeah, I got rid of my car. And I was like, what? He's like, yeah, I'm full Uber. I never heard that term before. He's like, yeah, it cost me $3,000 a month to, you know, do full Uber. And it was costing me, you know, with my payments and insurance and parking, $2,400 with my, you know, Porsche Cayanna. And now I can work and I recaptured those.

So I got all that time back for 600 more. It's like having a personal driver's better. I actually thought for Airbnb, it's actually a second home for people more than it's owning and going against people who are owning, who are looking for hotels. and that I don't know if you saw this company Picasso and there's another one. I'm having the founder on. They're making LLCs out of second homes. So the same way Uber made everybody a personal driver. Imagine the three of us wanted to buy, you know, a ski condo in Park City.

Okay, it's a million five. Okay, the three of us buy it and we include three other people. We each take a sixth of it. We have an app. Picasso gives you an app to book it. I don't make it's commercial with Picasso. I'm not an investor, but I thought there's a fascinating concept of It's not time sharing.

It's just they facilitate an LLC being done. Boy, that's crazy when you think about it. Housing is a crazy market right now. Are you guys betting on housing right now? I actually started my investing career actually almost 20 years ago as a real estate investor. So about 15 years ago. So I've always been keen on real estate. It's my first real true investor hat.

Yeah. I don't know how you publicly play that. But my God, It's like real estate is crazy. Redfin. A lot of people like Redfin. I had Glenn on. He's amazing as a founder.

He really innovates. He's embraced like on this stuff. Okay. Crypto. Is this going to come apart at the seams here to stay? Both? You guys mess with crypto? Oh yeah.

Yes. Okay. But from a tech perspective. I mean, it has to speak for Beth, but have like a place within the disruptive tech world. And so we don't really play momentum and altcoins. If you're doing a new, a better version of Bitcoin, that really doesn't matter to us because Bitcoin has done the unthinkable, which has become a true store of value on par with gold and with the dollar. Some people may question that, but you're just as likely to go to Ecuador, Peru, or Germany, just anywhere and pay for something in Bitcoin as you are in gold.

you know what I mean? So it's done something quite unique. Yeah, it's done something quite unique. You'd be better off doing that than doing it with like, for example, you know, something you tether or something like that, for example. So it has to have like a real world disruptive quality for us to invest in it. And then we just run technicals on it and, you know, and ride the trend when it's there. Does it have to Beth have an actual reason to etra?

Like, does it have to have customers for the technology and actually be solving a problem in the world? Or are you, okay, investing when it's a project that might at some point potentially have users as opposed to speculators? That's a good question. I think that either has to have users or it has to have quality partners that are adopting it, integrating with it and championing it for, you know, the blockchain infrastructure layer. I think the infrastructure layer is where a lot can be made, which is how do you take data that is off chain and bring it on chain? I mean, that's what the biggest problem is with blockchain today, which is it's supposed to be a very secure network. So how do you take weather data or how do you take whatever other kind of data you might want? You can even do health care data.

How do you bring that on chain in a secure manner? That, for instance, is more of an infrastructure question. And so do they need to have a lot of customers right now? I think it's just important that they have a lot of partners that are working with the technology. And we're seeing some Ethereum competitors right now. that I think are interesting because Ethereum has, even though it seems like it's cemented its place

for decentralized apps, what the crypto markets communicating to us is that developers and whatnot have not fully decided yet if there will only be Ethereum or if there will be more for DAPs. So it could be like a Beta Max VHS. One was there first, but who knows,

maybe there's some better reason to go after. I mean, Solana's had a pretty incredible run. I'm really interested in these oracles and like there's some data, talking about getting data onto the chain. Like, we want to place a bet or a wager, you know,

and all this data is going to be able to do a smart contract and we can trust it. So we make some bet on the weather or the Knicks game and the Oracle tells us who won. Kind of really fascinating to me. Oh, yeah. It's a big problem to solve. Even, you know,

with all the genius of Ethereum and some of the other, you know, more operating system layer, if you will, blockchain geniuses, they have not figured that piece out yet. So it's a big piece to figure out.

Yeah, my theory on it is like, this reminds me a lot of the dot com in early days of the internet in the 90s where, and I don't know if this will be analogous, but, you know, a lot of people made a lot of noise and a lot of charlatans came in and talked a lot of bullshed. And then all of a sudden, you know,

like it was pretty easy to identify the bullshit. And then there were some things that were like, oh, that's not going away. Or that actually, yeah, I like using that or that's starting to work. and I know this sounds ridiculous, but I look at the NFT space, and even though I'm not a participant

and I think it's overheated, I'm like, you know what? Owning some object, a musical object or a photograph is interesting because I looked at a lot of these stock photo libraries and I've looked deeply in rights management and I've never found a great investment there,

but I was like, you know, if somebody created a stock photo company where you could take an image bath, I, you're an amateur photographer and I say, you know what? I'll give you $100 for the rights to these hundred photos and you're like, great, I get $100. And I'm like, and you get to keep 20%

if anybody uses it. So you get a residual. And you're like, great, this idiot gave me $100 for 100 pictures I took in Central Park this afternoon. And then Knox is the idiot who comes along and he's like, you know what, I'm going to put you on the cover of my magazine. I need an image and you have a beautiful image of Central Park. I would have spent somebody, you know, $10,000 to do a photo shoot.

I'll give you $1,000. Now you get $200. the 800. Like that trickle down rights, my God, if somebody is building a company or wants to build this company, I will seat it. But I just thought the smart contracts combined

with the residuals, which I think if you buy these NFTs, you could keep making money, even if you're the artist and it's been sold 20 times. You're just making 10% each time. It's brilliant. I don't know. Yes, and I think it's one of those spaces

where it will probably see a massive sell-off of some kind, everyone will doubt it. And I think that that is the sentiment, it's exuberance that can occur around these spaces where the chances that NFTs continue, you know, in a perfect up trend, is pretty few. Yeah. So I think it's a really interesting concept. I think it'll definitely have its moment.

And I think there will be moments of doubt, too, which is a good time to capitalize on it if you're interested in it. There's always opportunities. You just have to be patient. Not you're going to add something there. Oh, and I mean, it's, yeah, I mean, I was just thinking actually when you were saying that, because I know a little bit of NFTs and hearing you talk about the trickle-down residuals. I was just blowing away at the innovation. I mean, it's just something you can't really wrap your head around just a couple years ago.

Right. That is now like a real possibility. And like even decentralization of like finances is something that is really difficult to wrap your head around because the entire history of pretty much, you know, civilization has been centralized finances. And so, I mean, this is really, you can look at it from, oh, this is a bubble and something that's, you know, just going to die away and go to zero. But then you look at it from the tech perspective, and it's really doing something, I mean, immensely innovative and very fascinating.

And the ramifications of where it will go and is going is also just incredibly fascinating. So we're excited about the ones that were in for that reason. Like Beth was saying, I mean, we're seeing like Bitcoin, for example, just whether it would have a 50% drawdown, that's nothing. I mean, one of the actual coins that were invested in, I mean, it would go down 30% in a few days. And it's just like, don't you just shrug it off. And then it's back up 50% in a few more weeks. And so you're dealing with extreme volatility. So you got a position size.

What does that mean in English position size? For example, when you're building a. portfolio, everybody looks at like the pie in the sky, how much I'm going to make. And people that put that first tend to go under, they go underwater, they go bankrupt. They get out saying investing's too hard. But whenever you approach investing in the perspective of how can I not lose money, you know, and then just invest in the quality companies, gains will come and you'll survive these downturns. So you want to overweight companies that have the lowest volatility. the lowest standard deviation.

And so we track that stuff. Realized volatility is a good way of putting it a good example. So the S&P 500 has a realized volatility of 9%. One of the momentum plays that we did recently that was invested. It was a small cap company doing blockchain, had a realized volatility of about 120%. That's massive. You don't make that a core position.

You will fold, you will freak out, you will not sleep. So you just start off small. And whenever it starts doing its thing, and going up, if it does, then you start adding to it and you make sure you have an exit strategy. But a stock that's big, you know, Microsoft, I mean, it goes down 20%. That's painful, but, you know, it's something that you can hang your head on. Yeah, and people are not throwing away windows or Xboxes or Office or Word or whatever those products are.

Microsoft will be here in 10 years. The worst thing that ever happened to me was early in my poker career. For some reason, I played 8-5 and the board came down 4, 6, 7, and I hit the nut straight. and everybody poured their money in, I quadrupled up. And then I was like, oh, yeah, 8.5 is my favorite hand. I haven't won with it since. And, you know, 20 years later. But I do think that you're the, I love the fact that regulation is coming to crypto.

I know that crypto people hate it and it's big brother. But if you build that level of trust, what Jeremy O'Lear is doing with the USDA, I don't know if you saw he pegged it dollar to dollar and he's like, we're not going to do commercial paper, whatever. It's just going to be like really, really what Tether was supposed to be. it's like actually I think could have get people off the sidelines who are like, I don't want to play in a rig casino

and the loans are, I think, the tipping point. The reason why the SEC is really concerned about that Coinbase lend product and if you saw that brouhaha is if you can make 6% and you're making 60 basis points or 25 basis points in your Bank of America account, well, that's a reason enough

for somebody with $100,000 to put it into their Coinbase app and loan their crypto out. like, or do it with $25,000 or $50,000? Like, I think people are going to start going, yeah, I just, I want to get that return. And I can't make that anywhere else. So I'll just, I'll make it loaning my crypto. And some regulation there would be pretty, pretty cool because it would make it feel safer.

If they had some FDIC or SPIC insurance, and yes, definitely. Otherwise, and now I think people realize the risk, there's always a risk. Someone is getting paid. If you're not paying, then they're taking your asset and someone else is paying them. And so there is counterparty risk. If coin base, I mean, I don't see it happening, but if coinbase goes under, you're probably waiting in line with all the debtors to get your coins back and you're probably not going to get much of it back.

And so that's the risk you take. I would love to see some kind of insurance on that nature within these exchanges. I had somebody on the program who was talking about they loan out only to hedge funds or whatever and for them to make short trades or whatever. And they're like, yeah, we can just liquidate that person's crypto if the market collapses. or they don't pay. And so they have crypto on, I guess, you know, they have, they have, they have custodianship of their crypto, you know, as the, at the collateral. So it's like, well, if smart contract, you just liquidate, right? But I guess you can get underwater.

Oh, well, it runs the risks. It's a story. It's a timeless story we've seen throughout American history. I mean, how many runs on the banks have you said, have we have basically led to FDIC insurance coming into play. If all of a sudden everybody wants their coins back at once, you know, you got a problem. You got a big problem. That's when bankruptcies happen. That's when people start standing in line trying to get their money back and they can't get it back. So that is a very real risk. That's why, you know, we look at that risk. We warn her readers about that risk whenever investing or holding their coins at these exchanges. What would you put that at, Beth? If you had to, like, you're talking to a friend who, you know, the systematic risk that Bitcoin gets hacked.

I mean, it hasn't happened. It seems impossible. But somehow it gets compromised. The coins become worth nothing. So 1% chance, a 0.1% chance, an unknowable, but a chance. Actually, I wrote about this. Bitcoin is more secure than 10,000 banks because of the hash rate right now because it just grew, the network grew.

But if you're worried about it, you can put on cold storage, which is like a digital wallet. And then if you're really looking for an exchange that insurers coins, Gemini actually is one, there are some exchanges out there that will actually insure it because they run more like a trust. So I think there's ways to make it even, you know, take risk off the table. But I would not let it prevent you from getting into the crypto market or Bitcoin. I'm talking like the top 10 crypto tokens. Who know it's the wild west after the top 10? Yeah.

Yeah. Coinbase, I think, I mean, they hold like 90 plus percent of all coins in cold storage, and they ensure the other part that's in, you know, hot storage that could be hacked. So, I mean, that risk has become, it's not even really an issue anymore, I think, when it comes to exchanges. Awesome. Listen, you guys have been amazing. Where can people follow you on the Twitter?

Yep, Beth Kindig on Twitter, Iofund.com. We publish a weekly newsletter. Very, very informative. We give free stock tips. We do macro market analysis on the free newsletter. Awesome. Knox, how about you? How can they find you?

Knox Ridley on Twitter. There aren't many of me out there. You should be able to find me pretty easily. And yeah, I work with Beth on I.O. Fund. Beautiful. All right. Thanks so much for coming on the program.

And we'll see you all next time on this week's time. Thanks for us. Bye-bye.