This Week in Startups - TWiST News: Startups & Wealth Taxes, The Bitcoin Boom, and The OpenAI Browser | E2051

Starting point is 00:00:00 Maybe that's reasonable. Maybe a 1% origination. I wonder if that is on the table. I know that I had heard some people talking about that concept. Well, Norway didn't follow that path, Jason. What Norway has instead proposed is an exit tax, according to BDO Global back in about a week ago. You're staying. Yeah.

Starting point is 00:00:21 So this tax, by the way, is 37.84% on unrealized capital gains if you leave the country. Oh, my God. So they put a gun to your head. Yeah. So it's a total disaster. Like instead of, you know, seeing a bunch of their top taxpayers leave, all the entrepreneurs being like, hey, this makes no sense, you know, taxes, but please do it when we actually have or make money. So instead of being like, hey, maybe we should just like make some reasonable adjustment, they like double down. So basically what's happening now is like you have to leave before you start a company.

Starting point is 00:00:51 This weekend startups is brought to you by Squarespace. Turn your idea into a new website. Go to Squarespace.com slash Twist for a free trial. When you're ready to launch, use offer code Twist to save 10% off your first purchase of a website or domain. Open Phone Create business phone numbers for you and your team that work through an app on your smartphone or desktop.

Starting point is 00:01:17 Twist listeners can get an extra 20% off any plan for your first six months at openphone.com slash twist. And DevSquod. Most dev agencies only offer developers. Why? Because product management is hard. Get an entire product team for the cost of one U.S. developer, plus 10% off at devsquod.com slash twists. All right, everybody, welcome back to this week in startups. I am your co-host, Jason Kalakanis.

Starting point is 00:01:48 I'm an angel early stage investor here in Silicon Valley, Austin, and New York, but based in Austin. But now you can join me if you have two or three friends and you want to start a company. Go to founder.com. We run it three times a year, 250 teams. And we invest in about 10% of those, 20% of those. We'll give them their first check to incorporate. We love investing in startups. And with me, my co-host, Alex Wilhelm, you probably know him from Crunchbase,

Starting point is 00:02:19 Mattermark before that. And Tech Brunch, he is. a deep knowledge expert on the technology and finance spaces. And we're going to run through your top tech news three times a week, Monday, Wednesday, Friday typically this week, Monday, Tuesday for the holiday week. Alex, how are you doing, sir? I'm actually fantastic because I'm looking forward to overeating and becoming a couch potato on Thursday and Friday. Don't call me because I will be on the couch unconscious.

Starting point is 00:02:47 I love it, love it. I am in New York, my hometown with my brother. I'm in upstate New York hanging out here. I went to the giant game yesterday and watched the abomination of a football team play another abomination of a football team. And we tailgated. I've had a, my dad's had season tickets since the 70s. Wow. And so I, you know, I think I paid for the PSL, PSL, you know, this per seat license when they make a new stadium.

Starting point is 00:03:11 Oh, yes. Yes, yes, yes, yes. You know, that was like 20 years ago. I haven't been to a game in like 20 years. I've been in California. It's never worked out. So I go. And, you know, a kid from Brooklyn, it's a big deal to have season tickets.

Starting point is 00:03:22 You'd always tailgate for the games. Tailgates, when you drive your car, you park in the parking lot, you drink and you eat, you know, heroes from Diker Heights, you know, like big Italian subs or whatever. Sometimes you get a grill going. So I went, it was freezing. It was freezing. And I'm like, my God, it's so cold. And they're like, it's 50 degrees. What are you talking about?

Starting point is 00:03:40 It's not cold. I have another beer. So shout out to everybody who have the giant game. And it was just a miserable, terrible game. Incredibly cold. And I'm like, well, least I get to see the new stage. that, you know, these... My dad always had good seats.

Starting point is 00:03:55 It had 12th row, like, just off the end zone. It was just amazing seats. But, you know, these bastards did this PSL on him. And, you know, it's a lot of money, like 10 grand, five grand of seats. So I'm like, at least I get to see the great stadium. Worse than the old stadium. Really?

Starting point is 00:04:12 The worst stadium I've ever been to. You know, you start going to Chase Center and you start going to these new stadiums. I was at UT's game. You know, this is not like some... It has a college football arena. I mean, unbelievably gorgeous, tons of amenities. Disgraceful. Disgratziad.com for the giant stadium.

Starting point is 00:04:33 The Meadowlands still remains one of the worst places on Earth that you can go. I understand we didn't have the World Cup there as well. So in advance to the rest of the world, coming to America, the Meadowlands is not representative of the best of America. it's representative of the worst of New Jersey and New Jersey's pretty much considered the worst state in America unfairly because there's some beautiful parts

Starting point is 00:04:58 but there are. There are. You literally are going to the worst place in what most people joke is the worst state so we're not hosting the world up there. If you will. I have to say the Giants got smoked I'm not shocked by that. The Eagles, however, won and are now nine and two. So if you are an Eagles fan, go birds. We're looking pretty good for a team

Starting point is 00:05:17 that no one actually believes in. I think we're the opposite. I think we're 2.9 and the giants or 28 or something terrible. Look, at least you're not the Patriots who are still dealing with having gone from the, well, they were the dynasty. And now they are the laughing stock. Yes. Well, look, I'm not a Patriots fan.

Starting point is 00:05:33 I don't have a dog in that fight. Anyways. Let's call it what it is. They cheat. Anyway. They're the Astros of the Northeast, if you will. Anyways, on today's show. Big show.

Starting point is 00:05:41 We're talking to Dunes, CEO, about the impact of taxes and how that deals with basically startup formation across Europe, Jason. He'll be up first. Then micro strategy and the Bitcoin trade. What is Michael Saylor doing? Is it genius? Is it going to fail? We'll talk about that.

Starting point is 00:05:57 Then on the lightning round, quick thoughts on open AI building a browser. What's going on with Blue Sky? The burgeoning IPO cohort of next year. And if we have time, the cost of AI in human terms. But let's start with Dune's CEO. Jason, this was an interesting conversation about taxes, Norway. How did this catch your eye? Well, it was something.

Starting point is 00:06:18 friending on X where a Dune CEO is just talking about having to pay taxes on unrealized gains. And the impact this has on startup founders, as you know, you can become incredibly wealthy on paper when you are at a private company. And you could have no access to that wealth. And if you have to pay taxes on it, you could be in a very strange situation where you're forced to sell any liquid security. And we've had this discussion in America a number of times. on taxing unrealized gains.

Starting point is 00:06:52 Wealthy people, you know, you can be the CEO of a giant public company and you've got a billion dollars in stock or a hundred billion or anything in between. And you can take loans against that, never sell the stock. The stock keeps going up. And this happens in 0.01% of the cases in startups. And so it can look a little unfair. You're getting loans against your stock. You never sell the stock, so you never pay taxes.

Starting point is 00:07:14 And so people get very confounding. Well, this person owns. essentially a house that's worth a lot of money that they built. They still live in it. They've taken a loan against it, but they never pay taxes. It's only when you sell those shares that you do pay taxes. Now, for rank and file or for every other company, you probably fail. That's the majority outcome.

Starting point is 00:07:36 That's the default for startups is you fail. And that equity becomes word zero. The people who invested in your company and they put $10 million in, they take a loss on that $10 million. And that's called capitalism. them is build these companies constantly. People get equity in them and the default is they go to zero. So let's bring in the CEO here and we'll just walk through the example here of what happened to Frederick.

Starting point is 00:08:01 Yeah. So Frederick Haga is here and I have to say I have a fanboy moment, Jason, because I'm a big fan of Dune, his company because it is essentially a repository of inless information on all things Web 3. And so if you are a chart dork like I am, it's essentially Candyland. So, Frederick, thanks for being here, man. Thank you so much. And thanks for those kind words.

Starting point is 00:08:22 Yeah, explain to us what happened to you. And how taxes, wealth taxes, paying taxes, unrealized gains works in the Nordics, in the EU. Yeah, for sure. So maybe I could just start quickly explaining sort of the situation in Norway. And, you know, basically, I think Norway was more or less like a middle of the pack in terms of economic prosperity in Europe type of situation. situation in mid-last century, in 69 Norway found oil. So great, right? And then a lot of countries

Starting point is 00:08:55 really mess up finding a bunch of resources, right? You know, some few people will like capture all of it, whether it's corrupt politicians or some elite, that really just like gets all the profits. Norway has been like managing this really well for like half a century. So basically what they first did, like the politicians essentially did like two genius moves. So one was, At the time Norway found oil, there was no expertise in the country. So we understood, or like the politicians understood, like, you know, we need to build up the industry and get people in here to help us international companies. But they also understood that like Exxon and Shell taking all the profits of this is sort

Starting point is 00:09:32 of not a great deal for the Norwegian people. So they've started taxing the oil companies on 80% of their bottom line. So very aggressive tax, but, you know, you get to drill the oil on Norwegian territory. So that was like a brilliant move because then the like Norwegian people benefits from this amazing, you know, valuable resource. And Frederick, just to be to be clear here, that is the sorts of wealth that has led to Norway having essentially a $1.7 trillion sovereign wealth fund. Yeah. Exactly. Yes. So the largest in the world.

Starting point is 00:10:05 And they just announced last year that they were going to engage in venture capital and maybe private companies, which I think everybody was waiting for because they were in public. considering it. Yeah, considering it. This week in startups is brought to you by our friends at Squarespace, the all in one platform for you to build a beautiful website and for you to grow your business. Whether you're starting out or you're scaling up, Squarespace is going to make it easy to create an incredible website.

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Starting point is 00:11:53 That was essentially the second genius move, right? So this oil fund now owns like 1.5% of all the stock in the world. So it's like a pretty massive thing. And yeah, basically in the 90s, the politicians, you know, even understood that the revenue from the oil industry that was coming in was so massive that they couldn't responsibly spend it on the running basis. over the budget and that's when they set up the oil fund so you know very impressive like austere sort of forward thinking you know the opposite of america they were financially responsible

Starting point is 00:12:26 they have a massive surplus and the is it five 10 million people in norway it's one of the smaller noradish yeah five-ish so you have a trillion dollars five million people it's a lot of money per individual citizen in this fund and do people get like some benefit every year from it? Do they get a small stipend or a distribution or do they just get to live in a country with incredible healthcare and low taxes? Not low taxes, but you get good health care, right? So basically, the way it works is, so this is also like very impressive from the politicians. Essentially what they said is like, we'll only take profits from the fund and we'll fund state operations on that. So it's basically a rule that says three percent is the max or like the average that we will

Starting point is 00:13:11 spend. So in theory, if we have 3% return on it, it will go on forever because you never draw down from the fund, right? So very impressive and there's a broad political support to do this, and they've been doing it for like 20 plus years. However, basically now the whole thing is like sort of catching up to the country and the politicians a little bit. Let's just pause that for a second. Basically, you have great oil wealth, but you also have a lot of oil industry, and like the whole economy is extremely oil oriented, so in terms of the companies being built and whatnot. And then of course, like, oil will not go on forever. There's climate things, and you don't know how long it's going to be in the ground anyway. Everybody's starting to

Starting point is 00:13:48 acknowledge that, like, oh, actually we need new companies and different types of companies, not just oil companies, right? So just to take our story, me and my co-founder, we started doing in summer 2018, crypto, we're a crypto data tool. We make it super easy to analyze anything happening on the blockchain. And basically, when we started this was not a cool hot, hot sector, right? It was like after the ICO bubble had popped and people basically thought the thing was dead. So we had to hustle like extremely hard and coming from Norway, you know, pre-COVID, all these things like, you know, you're kind of like nobody's from nowhere and in an industry that not a lot of people thought much about, right? So basically we spent like over half a year

Starting point is 00:14:31 with no salary. We had no money at all. If we traveled, we shared hotel rooms, you know, just kept it extremely lean and scrappy. then we managed to raise some funding, but still, like, we went over two years just the two of us. Like, we didn't hire anybody. We had, like, $40K salary after we raised some funding, basically, you know, really, really hustled. And then with COVID and, like, the new, so 21 era, you know, we really had the right product in the right market and grew a ton. And suddenly we were able to raise a bunch of VC money, so we basically raised our C in Series A. and be in just over a year.

Starting point is 00:15:11 So suddenly we went from like, you know, very small and scrappy to, you know, big company in a way, right? And basically then we have a very strong balance sheet because we raised, we raised $80 million. And what happens then is basically Norway has this wealth tax. And if you're like, you know, if you're an oil company, if you do real estate, things like that, like you can have depth, you can do various things

Starting point is 00:15:37 so that you don't have cash necessarily, have other things on your balance sheet. And so for some, it's always been sort of call it annoying, but for some people or some industries, you can kind of cope with it. But then for, for us, suddenly we have like this balance sheet full of cash, which obviously we're going to burn and we're a startup and we're lost making all these things. And we're faced with a wealth tax bill on the cash of the company. And I said one percent tax.

Starting point is 00:16:06 And if you're not public, it's on the, on the balance sheet. So if you're public, it's on the actual market cap of the company on the 31st of December every year. But if you're private, it's the balance sheet. So essentially, we had a strong balance sheet, and they multiply that by our ownership share, even if we just have common shares, and then by 1%. So if you have $80 million in the bank, you own 50% of the company or 40% of the company, you get a tax bill every year for $800,000, $800,000, 1% of $80 million. something to that effect, and then you're responsible for half of that 400,000 or whatever,

Starting point is 00:16:46 40% of it, 300,000, something in that range, yeah? Yeah, you know, sort of is, the logic is right. And so basically, we were about to face wealth tax bill of like a few times our net income, essentially, you know, we made something around the bulk of $100K,000, and this was like multiple 100k dollars. So, you know, it's absurd. And then at the same time, around the same time,

Starting point is 00:17:15 there was like a new more left-wing government, and they actually cranked up the rates on the wealth tax, on the dividend. Can I clarify? Because I was doing a lot of prep on Norwegian taxes before today's show. That was when they raised the wealth tax percentage from 0.85% to 1% if you have a net worth of less than $20 million, right? Yeah.

Starting point is 00:17:35 So you can subtract. you know, $2 million-ish. If you have less than $2 million, it's not counting. But basically, they cranked up the dividend tax and the wealth tax at the same time, which was essentially an effective doubling of the wealth tax because you have to take out dividend to pay for the wealth tax. And so in two years, Norway actually lost and lost 100 of their top 400 taxpayers accounting for 50% of the wealth of the top 400. So where did they all go? They just left town? I mean, it's like Atlas Drug, essentially.

Starting point is 00:18:11 You know, people disappear. But everybody goes to Switzerland, and the reason for that is Switzerland also has a wealth tax. And so for sort of tax treaty reasons, you end up in Switzerland because then you pay a wealth tax, which is lower and differently sort of set up, but still a wealth tax in Switzerland. And the way taxes work in Europe is you pay the taxes of where you're domiciled, as opposed to in America, Alex, if you were to leave the country and still remain a citizen of the United States, you still get charged your federal taxes. So no matter what you do, the American government will make you pay taxes. Whereas if you're in a lot of European countries, wherever you move to, you pay the taxes there, which kind of makes sense, but America will follow you around the world. You will not have to pay state taxes, but you're going to have to pay your federal no matter where you are.

Starting point is 00:19:02 I think at least America is like one of the biggest talent and capital magnets of the world, right, as opposed to a lot of countries in Europe. So, yeah, have a bit of a different. This wealth tax continues, I assume in Norway, even though they have this massive amount of wealth from oil that they found offshore that they've been slowly pulling out of the ground. Yeah. Yeah. So this is kind of like the paradox, right? because obviously the state has a lot of money. It doesn't need.

Starting point is 00:19:33 So the wealth tax is like less than 2% of the budget. And you could have easily like improved, you know, the corporate tax rate is like 22%. You know, make that like 24, 25. No one would have left the country because of that. But they're very ideological and very strong like socialist ideas, right? And to some extent, I think it's like great that the oil fund can provide the healthcare and education in these things. I mean, it's a fantastic thing.

Starting point is 00:19:58 The problem is that they have so much money. from the oil wealth now, that sort of the sitting politicians kind of just assume money grows on trees, right? They don't really care if so many people live. They're just like, hey, we have to tax the rich. So we have to have these taxes, even if they don't make sense. Even if people are living in mass. Now, what's the wall of shame? There's some wall of shame going on now? Explain that to us. Yeah. So this is kind of the crazy thing with the story is like I personally like I did some opinion pieces. I called out like, hey, you know, I can't pay this tax. It's many times my net income, there's like, no one can answer me as to how I'm supposed to do this.

Starting point is 00:20:36 But what made this story go kind of viral was the socialist left party were interviewed in their offices in parliament, actually, the other day. And it turns out they have like a wall of shame, which is like newspaper articles on people criticizing the tax system. And my face was on it. So basically, I'm on the wall of shame. Yeah, here you go. So I'm on the wall of shame for having criticized the tax code. Yeah. Yeah.

Starting point is 00:21:05 And no one has ever told me how I'm supposed to pay this tax, but you get this stuff. Well, I mean, in terms of paying the tax, if the company was sitting on $80 million in investment, I guess what would have to happen is you'd have to give shareholders a dividend of the money they just put in. That dividend would then have to be prorated. So if the investors own 40% of the company at that point, they would be getting their own money back in a dividend so that the founders could pay the dividend or could they do a special dividend just to the founders? It becomes so unnecessarily complicated,

Starting point is 00:21:41 but is that what winds up happening in these kind of situations? I mean, you essentially do dividend or you have to sell shares, right? But it's also kind of absurd that just for being based in Norway, where you have to like sell your stake in the company, you know, even if you haven't made any money. Frederick, I want to clarify a distinction between the,

Starting point is 00:21:59 the corporate side of this and the personal side of this, because the way that I understood this was your company raised money, your paper wealth, your personal paper wealth went up. And then because of the wealth tax and because of that money was unrealized gains, essentially, you were therefore staring down essentially a 1.1% bill for your personal wealth, which wouldn't impact the corporate account.

Starting point is 00:22:21 Am I confusing the issues here? This is why everybody is leaving because it's like a personal thing. So you save your company essentially by leaving because then your company doesn't need to do all this stuff. So if you own 30% of a unicorn, your co-founder owns 30% of a unicorn, and that's 300 million in paperwealth. And you have to pay 1.X on it or 0.85 on X. That's like $3 million tax bill. So then you have to sell $6 million in shares or $5 million in shares every year just to work at your own company. over 10 years, you've got to dilute 50 million shares or something crazy.

Starting point is 00:22:57 Yeah, I mean, it's on the balance sheet if you're not public. So just to be clear on that, so it's somewhat lower. But it still can be excessive amounts. And the thing is- Maybe a 409A maybe could the 409. Did you have the equivalent of a 409A? The like book value of the company that you know. Yeah.

Starting point is 00:23:16 So the book value could be the 80 million dollars in cash, some multiple times. the revenue, some goodwill for the logo and the brand name. So maybe you're paying, uh, you know, tax on 30% of 200 million or 300 million, some smaller number than the high watermark paid for preferred shows. Either way, you can see how complex this is. Unnecessarily so. That's the thing that kills me, Jason. Like, it just, look, I know it's, it's popular to dunk on European socialists and the

Starting point is 00:23:46 American business community. And I think in this case, pretty warranted, because this is such a self-inflicted. wound. All you have to do is tax people borrowing against their unrealized capital gains. And then everything works out pretty well. You can build wealth. You can still have some of it be liquid. You can pay a tax on that as a sort of regular income. And I think everyone wins. So to me, this is just such an unnecessary mess. Yeah, small tax on a margin loan against your shares would be, think, a great compromise here. So if your, you know, let's pick Jeff Bezos and you had a million dollar a billion dollar margin loan that you were living against against your 200 billion in

Starting point is 00:24:25 amazon shares if you paid one percent of that you paid 10 million a year on it or 2 percent 20 million a year on originating the loan one time for using the loan and then after you pay it back your stock's gone up more than 2 percent it's all a wash anyway maybe that's reasonable maybe a 1% origination is that i wonder if that is on the table uh i know that i had heard some people talking about that concept. Well, Norway didn't follow that path, Jason. What Norway has instead proposed is an exit tax, according to BDO Global back in about a week ago. You're staying.

Starting point is 00:25:02 Yeah. So this tax, by the way, is 37.84% on unrealized capital gains if you leave the country. Oh, my gosh. So they put a gun to your head. Yeah, but starting now, Frederick, right? Because you're able. I left. Yeah.

Starting point is 00:25:15 So it's a total disaster. Like, instead of, you know, seeing. a bunch of their top taxpayers leave all the entrepreneurs being like hey this makes no sense taxes but please do it when we actually have or make money so instead of being like hey maybe we should just like make

Starting point is 00:25:31 some reasonable adjustment they like double down and introduce a new payable... When does that go into effect and did that accelerate people leaving? Yeah so basically what's happening now is like you have to leave before you start a company because if you get successful you will be screwed over by the wealth tax

Starting point is 00:25:48 crazy is this. You can't move. Like, if I were in this situation, and we had a billion dollar valuation, you know, on the last round, and I leave, and I'm supposed to pay for, yeah, like, you literally, you know, now you have to pay bankrupt for life.

Starting point is 00:26:03 Hundreds of millions of dollars in real ice gains. You might as well just shut the company down or whatever. Wow, it's really interesting. Flea to the United States. We'd love to have you. Well, I mean, and I think we'll land on that, Alex, which is the lesson in all of this is, if you're bold enough to create a billion dollar company,

Starting point is 00:26:22 you're also smart and bold enough to pick another location, and you're the there there. You ever hear that expression, Alex, the there are there? There has to be a there there there. The there is the core brilliance of the thing. Now, the there in Silicon Valley is the entrepreneurs and the capital allocators. if that there goes there, there being another there, which is Texas or Sweden or Italy or Singapore, like Bollagy went to Singapore, right? A lot. And so did the, and he's been public about that. And so did the, uh, uh, they got one of the co-founders of Facebook and he gave up his citizenship. Eduardo, I believe. Yes. Went to Singapore. Yeah. And he paid some fee to leave. So I think those are kind of the tip of the spear. make it simple, make it easy, make it fair, is my best advice.

Starting point is 00:27:20 Thanks so much for coming on the program. Don't tax underline capital against. That's basically the moral. In France, went through the same thing. I mean, literally a bunch of French citizens became citizens of Russia of all places, like, Draude de Purdue and a bunch of other people are like, you know what? I'm going to take Putin's offer up and move to Moscow.

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Starting point is 00:28:41 Hey, but just before we left Frederick go, though, We have him here, Jason, live, so we can abuse him a little bit. How's Dune doing? How's revenue growth? How are you doing next year? Did you cut costs? Are you thriving? Are you still a unicorn?

Starting point is 00:28:53 I mean, who knows? We haven't been to the capital markets for a while, but we have, you know, we have our very, had our very, like, humble upbringing, so we've stayed pretty lean. We have a little one in the back still. We've been doing great this year. It definitely was, you know, a few rough years. previously, maybe Jason suggested we should have pivoted, but

Starting point is 00:29:16 we stuck to it. Well, I mean, if you believe in crypto and you think the issue has been regulation, an over-regulation, which has been an issue for crypto in the United States, if you think there's a new regime in town that's going to be pro-crypto

Starting point is 00:29:35 and allow more experimentation in the number one market in the world, the United States, then now you'll be rewarded for that. You know, I mean, a lot of my, my criticism of crypto has always been twofold. One, not producing actual products that consumers love and use, like, just not delivering products. And number two, just breaking, um, the rules around, uh, and the rules are very strict in

Starting point is 00:30:02 the United States. So, and maybe those go hand in hand, no, like, it's hard to be innovative if you're shackled by rules. And so my hope is, you know, that, uh, some middle ground between you have to act like a stock and follow the books on you know, 100 year old regulations and the wild west, maybe there's something in between those two. Like do it the way we've voiced on it or no no rules, Yolo, anybody's a bag holder. Yeah, no, I agree. I think that's a that's a fair take. Yeah, so we actually launched,

Starting point is 00:30:35 we had our annual conference, JuneCon just a couple of weeks ago in Bangkok. We had a thousand people come out. We had Vitalik on stage and a bunch of great people. And we launched an index product. So we have a lot of on-chain data. And now we've launched like an index for on-chain adoption. So there's all this hype. There's all the prices going up and down, all these stories. And essentially now we index how much people are actually using the chain. So we have a metric that is like composite of like transaction fees. So how much people spend on writing to the chains? You can look at like the run rate. So you could see, oh, there's like now a, I think, The last 30 days, it was like $600 million spent on writing to blockchains, the transactions

Starting point is 00:31:16 fees that people pay. So that's like a $6 billion run rate. So it's like in the ballpark of like open AR revenue. In a way, that would be what people spend, you know, on their AWS accounts or their cloud computing accounts. But for crypto, so that's an interesting proxy. I guess the counter to that is how much of that do you think is painting the tape, creating false trades, people just screwing around.

Starting point is 00:31:40 in order to manipulate and make stocks go up? And is there a way for you with your analysis to kind of pull out what they call wash trading or painting the tape? Because that's always been a criticism that Alex and I have had of these spaces is how do you know reality? How do you know that there's a billion dollars in Doge

Starting point is 00:31:58 being traded every day or if that people painting the tape? And we have the Dune Index coming up on screen. Well, Belford answers that question. Yeah, so we can actually look into this. So this is like the overarching, number and it's just like tells you something about adoption. So you can, for instance, if you go the 365 days on the chart here, you can make that like

Starting point is 00:32:18 five years or all time. And then basically you could. So then, yeah, okay, explain what we're seeing here for people listening. Yeah. So essentially this metric is a composite of the three metrics on the left. So transaction fees, transfer volume and transaction count. So we sort of take these metrics and put them into one to get a sense of like how these things are doing.

Starting point is 00:32:40 So if you do transfer volume to answer your question, if you go on the left sidebar and hit transfer volume, basically, and then you can go further out, maybe do five years here as well. So this one we filter. So this is like monthly value transferred on chain, but we filter if it goes to the same entity on both sides, we filter it out.

Starting point is 00:33:02 And if we only take the net effect of a transaction, so if it calls a bunch of smart contract and does a bunch of weird stuff, we only take, you know, not all the things going on, but only the net value transfer effect. So essentially, this tells you something about, you know, how much value transfer, real value transfer is happening on chain. So we think they're great, and if you scroll down, you can see which blockchain's contribute to this, like, um, we have.

Starting point is 00:33:27 Yeah, look at that. Tron is just like, has half as much as a Bitcoin. Why? Why is Tron so active? So it's a big stable coin. There's a lot of stable coin activities. So like a lot of, this is a lot of, you know, Turkey, a lot of like Middle Eastern and Asian countries use Toronto law to transfer a tether around. So that's a tether trading where it's just a stable coin moving back and forth, which is people just, yeah, trading dollars essentially.

Starting point is 00:33:59 They're trading digital dollars because they're all pegged to the dollar, right? Yeah, yeah. Amazing. But yeah, so essentially you can now or get like a really, neat high level overview. And since we have the run rate and stuff, you can benchmark, you can get a sense of like, so I think if you look at your scroll up,

Starting point is 00:34:14 there's, I think the run rate is, yeah, 8.7 trillion right now. So if you take the last 30 days, multiply by 12. Visa, I think, did like 12 trillion last year in like total transfer volume. So it's actually in the order of like magnitude as Visa in terms of like value transfer

Starting point is 00:34:33 that's being provided by these systems now. What percentage do you think of that is, like if you had to break that into buckets, how much of that is speculation, how much of that is money transfer, how much of it is the gray market or people doing, you know, nefarious things, let's say. You know, is there any way to get more insight into that

Starting point is 00:34:57 and to also understand by region? Because the wallets are so anonymized now, the VPNs are, you know, so deft at high. hiding stuff. Like, how do you even know what's going on there? You know? That's a great question. So this is the next on our roadmap. So we will break it down by like product category. So, you know, is it sort of defy? Is it stable coins? This is like other things. We also have a lot of labels tagging. So we have the geo of a lot of the main entities on chain. So we haven't built this out yet, but you can, you know, follow the, the Dune metrics page.

Starting point is 00:35:36 you know, post more. Awesome. Yeah. Frederick, we have to wrap it up there, but we're going to have you back next year because I want to know

Starting point is 00:35:42 about the revenue side of things. I know you have a series of paid tears, but thank you for breaking down European taxes. I hope Switzerland's chocolate is as good as, as everyone cleans it is. I know the fish is good. The fish is really good.

Starting point is 00:35:54 Go to, uh... Norwegian fish is very good. Yeah, you can go to Japan or Jason, right? You should get some Norwegian salmon on your sushi. It's very interesting.

Starting point is 00:36:02 You say that. They will literally have Norwegian salmon in Tokyo and they'll have Santa Barbara Uni and then you go to Santa Barbara and they have Hokkaido Uni. Both are exceptional. It's just

Starting point is 00:36:17 literally, they fly by each other on planes and people like the branding of the other. All right, good to see you. Thanks for coming on and explaining it. We love Alex to have the main character of the moment on the pod. One of our commitments

Starting point is 00:36:33 and Frederick was definitely the main character last week. And this week, the main character is once again Michael Saylor. And Bitcoin has gone on a huge run-up. All right. Take a second and picture the ultimate all-star team for your startup. Okay, you got that mental image, maybe the Avengers, maybe even X-Men, Wolverine, Cyclops, pick your favorite superhero team. And let's be realistic. Until you've raised your Series A or your Series B, you might need some help building that dream team and finding top-tier talent, managing all the timelines you've got and maintaining quality.

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Starting point is 00:38:29 but my lord the amount of dumping on retail of this stuff and the lack of actual products in the world that actually perform a function for people has been very troubling i i assess this because in the early days of crypto when i'm talking 2011 2012 when i first got hip to it i met with about a hundred founders and i would say one or two were like really good teams that were actually producing product and the other 98-99 were kind of crazy dreamers, fringe kind of anti-establishment slash grifters. That's turned out to be exactly as I assessed it because all the ICOs resulted in no competitors

Starting point is 00:39:11 to Airbnb, to Uber, to Google. They all said they were going to defeat all these products and services just by being on the blockchain or using crypto. But the one thing that has been extraordinary is Bitcoin. Bitcoin has not been hacked or compromised, which was a possibility. Any system that could be compromised, there could have been an attack vector, 51% attack, or a country could have maybe taken control of the majority of the servers and the mining. Like China, there was a fear.

Starting point is 00:39:42 And then there was government intervention where governments could just say, hey, it's illegal to do this. It's turned out neither of those two attack vectors have happened. I thought the default case was going to be Bitcoin would go to, to zero. I was wrong on that because governments have accepted it and there's been no way to compromise the network, even with so much at stake. So does it mean that a government couldn't ban it in the future or tax it heavily? As we just heard, governments can do all kinds of weird things in taxes. And if you had a government like the United States or another major government get really nervous

Starting point is 00:40:16 about Bitcoin, there is a possibility they could do something very simple, like put a 10% tax on buying and selling it or something like that, a crypto tax. this administration seems to be the ultimate pro-crypto. At least they said that to get votes. We'll see if that actually happens. And that's part of this. So it seems like that it is. I mean, I saw a headline about,

Starting point is 00:40:36 I think Brian Armstrong is helping to vet people for the next administration. I mean, that's, well, yes, as long as you think that people should be allowed to regulate themselves. I worry slightly about that. But I do agree. It's very pro-crypto. They didn't regulate themselves. There's a long history of people not regulating themselves. And then there are examples, the move.

Starting point is 00:40:53 industry and the video game industry came up with our own rating systems and self-regulated so that they didn't have the government do it. Let's hope crypto does that. But this Bitcoin surge is based upon regulatory change. Now,

Starting point is 00:41:09 it does seem like there'll be regulatory change, so maybe it should have popped. But it popped from 62. I don't know if it's broken 100K yet, but it was kind of bouncing right around 97, 98, 99,000. Yep. And this has made Michael Saylor's bet

Starting point is 00:41:26 look really good at the moment but he's doing some really interesting, innovative slash crazy stuff. So maybe you could tee up for the audience the publicly traded company micro strategy.

Starting point is 00:41:42 Michael Saylor has said before, played the clips of this before like if you believe in Bitcoin, sell everything you own, mortgage your home, sell your cars, and just acquire as much Bitcoin as possible. In credit to him.

Starting point is 00:41:54 He's been saying that from, you know, $10,000 Bitcoin up to 90 and everything in between. He's remained consistent. Sell everything you own by Bitcoin. That's his position. Now, he's doing that. So explain what's going on with micro strategy because this is, to say it's an all-in strategy would be an understatement. Absolutely. So micro strategy for people who don't know is two things.

Starting point is 00:42:18 One is a software company. No one cares about that. Jason, it's shrinking. So whatever, put that to one side. It's also the vehicle for Michael Saylor's Bitcoin strategy, which is to sell debt, to sell shares, and use that money to acquire more Bitcoin. And we're talking about Jason, not just dozens of Bitcoins or hundreds of Bitcoins. The company's latest purchase announcement was that they bought 55,500 more Bitcoins for $5.4 billion in cash.

Starting point is 00:42:47 And they announced that on November 25th. So that is today, you will note. So that is the scale of these purchases. Now, the question. So they bought $5 billion, just to be clear, $5 billion in Bitcoin. And they acquire that in some trading window, which we don't know over how many days they did that. We do. November 18th through November 24th.

Starting point is 00:43:08 And the average price paid was $97,862 inclusive of upfeats. Okay. So in five days, they bought a, that would be on average, a billion dollars in Bitcoin a day. Yes. Yes. I see your point. I just think that's super important to point out here, because what happened to the Bitcoin price during that window,

Starting point is 00:43:28 there is a supply demand issue here. Many people who own Bitcoin or hoddlers like myself, who bought it at $100 to $200. Would it be even more accurate? My wife bought it at $100 to $200. Credit words due here. Credit words due. Credible trade by my wife.

Starting point is 00:43:46 That has resulted in, you know, a very large position in Bitcoin that we will never sell. That's our position where, you know, we're holders like anybody else. So here's the price of Bitcoin was around 90,000, 992,000. Yeah. One of 10%. And now it's coming back down. Okay.

Starting point is 00:44:01 So that means quite possibly that last bump, the 90 to 100K bump, that window, 91 to 99, was the Michael Seller bump where he swept another $5 billion worth of Bitcoin in the market. Because you need a seller in order to acquire Bitcoin. and it is a finite resource, which is why everybody thinks, you know, this is, uh, you know,

Starting point is 00:44:27 is the equivalent of gold, right? There's only so much of it. Yes. And just to put this into context for everybody, in micro strategies, Q3 earnings, they said that they are going to raise

Starting point is 00:44:36 $42 billion worth of capital over the next three years, 21 billion equity, 21 billion fixed income securities. This is their 21, 21 plan, and they're going to use it to buy more Bitcoin. So basically, micro strategy is all in on using its resources.

Starting point is 00:44:50 this whatever it can marshal, mortgageing its corporate house equivalent to your earlier point, to buy more Bitcoin. And when they do this, this is where it gets fun. When they do this, they purchase more of a finite asset. And then, as Jason points out, the price goes up. And then the way the game is currently plagiarism, and I know we'll get into the mechanics here, but the market is willing to afford micro strategy a premium on its stock price as it pursues this Bitcoin purchasing strategy.

Starting point is 00:45:15 So they're essentially selling more stock at a price that you might think is aggressive, compared to the value of their Bitcoin holdings, and then using it to buy more Bitcoin, which then gets rewarded by the market, and then they have more capital to play with. Essentially, they're kind of making their own magic here, which in financial terms can be a little bit worrisome. Yes, I've seen people on Twitter saying this is a Ponzi scheme.

Starting point is 00:45:37 I've seen people saying this is not sustainable, because if they hit a bump in the road, the whole thing blows up. The bump in the road being a 30, 40, 50% Bitcoin pullback, which has happened many times in the history of Bitcoin. So let's maybe start to unravel this onion. And we're not going to do it in one episode, folks. So we're going to talk about it today.

Starting point is 00:45:58 But when we get back after Thanksgiving or maybe even tomorrow we have a live show, we're going to talk about it again. But what is the value of all of the holdings that micro strategy has in Bitcoin? That's number one. I've been trying to figure out. Okay. So I ran that number. And in their latest SEC filing, they said they now have 386,7,000.

Starting point is 00:46:19 700 Bitcoins. Okay. At the current price before we recorded, that was worth $36.7 billion, which Jason is less than half of their $82 billion market cap. And we also established their software business is shrinking. So it's not worth anything. So that means the market- There is no software business.

Starting point is 00:46:34 Let's be, I guess, it's like if the software business is there, and that's the other kind of thing people felt was a little non-traditional here. You had a software business that built a quote-unquote Bitcoin treasury, but it's just almost like, This is almost like a SPAC or something where they had a shell of a company and it's being, it's doing something else now. So the software business is not even reported on here.

Starting point is 00:47:00 It's, it's, it's values maybe one billion of the 82 billion or something. Yeah, it's all about a $400 million run rate shrinking. So it's going to be worth what's three X. So call it 1.2. It's de minimis compared to the main thing. Let's make it two billion of the, what we'll give it a huge valuation five times what it's, so you take two billion out of 81 billion, $79 billion, $7.9 billion, $6.6. 36 billion in actual Bitcoin. So it's two times plus or something like that. Which means if you were to buy micro strategy,

Starting point is 00:47:30 you're buying half the amount of Bitcoin you could buy in your Coinbase account. So if you buy $100 in, if you were to buy a Bitcoin, you have $100,000. You could buy one Bitcoin on your own with Coinbase or Robin Hood. I'm a shareholder in Robin Hood. Um, or you could buy half a Bitcoin by buying micro strategy. Yes. Why on earth would anybody buy the micro strategy stop if it's worth half,

Starting point is 00:48:06 you get half as many Bitcoin that you don't control and you have no agency over it. Michael Sellers determination what he does with Bitcoin. So why would I pay twice as much for Bitcoin? I'm perplexed by that. That is the thing that I cannot understand. And all the analysis we've seen of this says that he is using overvalue stock to buy more Bitcoin. Smart. Literally, I wrote in the notes, why put a premium on their stock when you can just buy Bitcoin?

Starting point is 00:48:31 It makes no sense to me. The only question, the only idea I have is maybe people are unable to purchase Bitcoin even through an ETF for certain accounts. And so this is the best way to get Bitcoin exposure. That's not possible. If you can buy an ETF, you can buy Bitcoin. You can buy micro strategy. And if you have a Robin Hood account or you have a Coinbase account, crypto sits next to on Robin Hood stocks.

Starting point is 00:48:56 On Coinbase said they don't have stocks, but you could just open a Coinbase account. So that's not true. That's cap. And that would only be worth what, a 2% premium if there was some cool shenanigan there to give more access to people? But if you can buy the ETF, why would you pay more for it? And so to me, this micro strategy strategy sounds genius.

Starting point is 00:49:15 You sell stock, you raise debt, you buy bigger, Bitcoin, your share price goes up, everyone's happy. But to me, it's predicated on them maintaining this enormous premium, which is just the market being irrational. So to me, this is going to eventually stop. So people would short micro strategies. But if you short micro strategies stock, seeing this other side of the arbitrage. So Michael Saylor's arbitrage is, I use this market cap to get more loans.

Starting point is 00:49:42 The loans are collateralized by micro strategy stock or the Bitcoin. We don't know. So if he gets that $5 billion loan, is that $5 billion alone collateralized and is it the top of the preference stack on micro strategy stock or the underlying Bitcoin? Because if it was the underlying Bitcoin in a scenario where the Bitcoin dropped 50%,

Starting point is 00:50:04 and we're at Bitcoin 50K again or Bitcoin 40K again, which by the way, history would say is the inevitable outcome because it goes through boom-bust cycles. But if you think, hey, it's only going to trade in a tighter range now, So it goes down to Bitcoin 70K, let's say, or 60K during a recession or whatever.

Starting point is 00:50:22 People need their money. It's correlated with stocks now. At what point does he get a margin call, essentially, where he can't pay their, because they pay 6% interest, I think I saw go buy on X that he's paying 6% on the $5 billion. So that means every year he has to pay $300 million. No, it's better than that. It's better than that. The latest $3 billion offering, I'm reading the terms right now of this.

Starting point is 00:50:49 It's senior notes due 2029 at 0% coupon, but a 55% conversion premium. And that's what I was trying to chase down because you asked how this is, this is structured. There's a lot of new ones. They have to return $4.5 billion, but they don't pay interest. I believe that's, I think the conversion rate for the notes is 1.5 shares per anyways. All right. So this is where we're going to need some help for the people. who are shorting this, we're starting the discussion here of what actually is happening.

Starting point is 00:51:20 Michael Saylor's welcome to come on this week in startups any time to talk about this. I saw him on CNBC, and he talks so fast and he's so enthusiastic, and it's a little bit of word salad. We don't use the buzzwords here. We're just using plain English simplicity. How much does he paying an interest on the loan? What do people get when the loan matures? And then what happens if, um, what happens in the same?

Starting point is 00:51:45 scenario, Bitcoin goes down to 30k, right? It loses 70% of its value. Does he have to, if that's due on 2029, he's got a lot of time, but what if in 2029 the price is lower than it is today? What happens? How much gets liquidated? And so the same way this could be going up, is there a scenario where it could go down? Because I know people who've been highly levered in their equity positions, and they have gotten margin calls and have been unable to liquidate assets fast enough to pay them down, to pay down their margin call. You know what? So I'm just looking to the financial documents as we talk about this.

Starting point is 00:52:20 And I'm going to bring up my dad's phrase again, Jason, that excessive cleverness usually fails. And so to me, like to me, this seems like a lot of structure, as we say, in the investing world around what is effectively a hodal strategy. It seems like a very complicated way to acquire Bitcoin inside of a corporate entity when people can just purchase the asset themselves. So I guess maybe my lingering question is, why is Michael Saylor doing this? Why not just buy Bitcoin with your personal wealth and then sit on it?

Starting point is 00:52:50 This is also why I don't understand Bitcoin conferences. What do you do? Get into a room and all go, we like Bitcoin, huzzah, and then sit down? Like, I mean, my God. Well, I mean, I think it's fun to hang out with other people and socialize and dream. But, you know, it is pretty clear. Bitcoin is a great way to store money and to transfer money. It's not necessarily the cheapest way to transfer money.

Starting point is 00:53:12 There are cheaper ways to move it. But of all the cryptos, it seems like the only one that's different. The only one that has this massive people who believe in it like a cult. And if, you know, that is what belief systems are. You know, if you have a billion dollars in U.S. dollars for yen. and we all believe in them. You could go have fun with that billion dollars, right? Or let's just make it even easier.

Starting point is 00:53:45 You have $10,000 in U.S. to hollers. You go to Vegas. People will give you chips for that $10,000. They will. Now, you go to the middle of the Amazon, you whip out your 10K, and it's a tribe that's one of these pre-modernization tribes, and you show them the $10,000. They light it on fire, and they start a fire with then they cook some, you know, whatever. Fish on the fire with it, because that,

Starting point is 00:54:07 That's its value is to start a fire. It doesn't have $10,000 in actual value to them. No. And that's, you know, that's what the brave people who bought Bitcoin for a long time have been rewarded with is they believed in a system that has caught fire and people believe in it. I think it's kind of hard to unravel it now. Because there's so much belief in it.

Starting point is 00:54:28 But I do think that there could be people who are shorting the stock right now, making micro strategy go up, which then gives Michael Sala the ability to get more loans and in a more audacious strategy and own half the amount in his treasury of the actual value and that spread between its holdings and the market cap should be, what, 10%? Max, Max, there shouldn't be more of a premium as we established earlier. There's no reason for there to be premium. I do want to quibble, though, very slightly with your point about Bitcoin being the only thing of its ill.

Starting point is 00:55:01 We forget, I think, about light coin, which back in the day was supposed to be silver to Bitcoin's gold. if you go back in time far enough. It's also proof of work. It also runs on a decentralized, you know, compute system. And so to me, if Bitcoin is theoretically going to Zamun,

Starting point is 00:55:19 why wouldn't Lightcoin also? It's also secure, decentralized, et cetera. So I'm always curious about that. Last point, though, companies that are not all in on being Bitcoin holding companies are still holding the coins. Tesla, Jason, you'll recall, had at least 765,

Starting point is 00:55:36 million in Bitcoin that they moved, I think it was last month. And then, uh, they had bought a billion in Bitcoin at like 30 or 40k. So I wonder if they doubled their money and then they've now sold it or they're just going to keep holding it as part of their treasury. I tried to go through their investment, um,

Starting point is 00:55:56 their IR documentation couldn't find anything. I could only find it press stories about them moving some of their coins in different wallets because you can track that on the blockchain. Uh, but the point is they're holding lots of Bitcoin and other companies. companies are having often some of their, what would have been short-term investments in treasuries, cash and other similar assets,

Starting point is 00:56:13 also held in Bitcoin, which I don't think is, I don't think that's terrible if it's one, two, three, four, five percent. I don't think that freaks me out too much. I think that's where Bitcoin's going to wind up in my family's portfolio, probably about one, one or two percent.

Starting point is 00:56:27 Somebody sent me this, the crypto people, I've been sharing this meme, apparently on the back, uh, on the back channels. I don't know what it means. Oh, okay, so SBF, Sam Bankman-F

Starting point is 00:56:38 Fried, currently behind bars And Michael Saylor Has a history of getting in trouble with the government. So does he? Really? There's a trucker? So, back in 2000, charged by the SEC for inaccurate financial reporting,

Starting point is 00:56:51 $350K in penalties, $8.3 million in disgorgement and got into a scrap with the Attorney General of D.C., Jason, had to pay a $40 million dollar settlement about where he lives and where he was paying taxes. Oh, okay, there you go.

Starting point is 00:57:05 All right, well, listen, I don't know what's going on here. Thanks for doing it to this weekend startups. It doesn't make much sense to me. I do hope that crypto becomes legalized. And if there's somebody who can help me architect, maybe my guy Vinnie Lingam or Sundee, you know, my friends who are deep in this game, but who are legit guys,

Starting point is 00:57:30 if my legit guys can help me make jay coin, I would love to have a way for all this crypto wealth to flow into a coin that we then invest in startups and then I get 20% carry on that, just like I do on the funds, and people could take 10% of their crypto wealth and put it into startup wealth or 1% or none percent, whatever their jams are.

Starting point is 00:57:54 Okay, so this is a way to unlock, extend crypto wealth and have it go into nascent startups either are crypto-focused or not. I like that. Okay. Well, I mean, everybody's trying to take, everybody's trying to achieve diversification and seeking alpha, right? They're looking for some way to beat the markets. If you thought crypto was that and you built up enormous crypto wealth, right? Like I have Bitcoin holdings from $100, $200 a share.

Starting point is 00:58:19 Thanks to my life. We have these. If you could then say, well, I want to take 10% of that, that's gone up 1,000x and take 10% of that 100x of it and put it into the startup game. Great. And then it would be fluid in that you could trade the coin. So if you need it out, right now, if you're in a venture firm and you try to get out of it, it's just, it's, I mean, you can, you might be able to sell it to the GPs your interest. So let's say you owned 1% of our $45 million last fund. Sure.

Starting point is 00:58:48 And you have $450K in it. Let's say the value of that was in half or double. So let's say you have $225K, you got 900K, and you want to liquidate it somehow. you're in the J curve and it's worth half as much. We're now out of the J curve, it's worth twice as much in this imaginary scenario. How do you get that money? Or if you wanted to sell just 10% of it,

Starting point is 00:59:09 let's say you needed 10% of it and you were down in the J curve, but you needed 25K. You can't really get it. There's no fluid way to do it. You have to call me. You'd have to find somebody to buy it from you. And you're going to pay through the nose.

Starting point is 00:59:21 I presume you're going to your face ripped off. The legal expense is going to be 5, 5, 10, 15K. Whereas, you know, on both sides of the transaction probably. Whereas with, if it was just a token and it traded, well, you could just say to my wallet, to your wallet, yeah, I'll buy it off you for 25 cents on the dollar or 200 cents or 200% of the original cost basis. Sure. And we could just trade it and it could happen globally with a billion people participating. And then it could be a coin on Coinbase where, you know, you could see the underlying value of the assets and people would just be trading it all day long. Imagine a venture capital firm that just traded 24 hours a day, seven days a week.

Starting point is 01:00:01 It would be awesome because if that firm hit Uber or Coinbase or Robin Hood or Com or whatever, then the shares could be worth something and people could get intermediate liquidations in it, right? Or liquidity. Have you seen the, the Arc family of funds? Yes. They're Arc VX that's investing in venture capital. Yes. I know it's not a big fund yet, but I'm keeping.

Starting point is 01:00:26 my eye on that, but you're referring to this kind of in the other way around. Like, do it on crypto to get money into. Yes. And so I think that'll be popular if you could pull it off. I think it could be popular, but here's the thing. I think the, what, um, they're doing with that other fund you mentioned, um, or Kathy Woods. Yeah.

Starting point is 01:00:46 I think that's some sort of a closed end fund type thing where you can take out five percent a year if you're a member of the fund. So you're limited in your drawdowns. every year to a window where they have a drawdown window. And I believe the way it works is she gets a fee that's not carry. That's just a percentage of the holdings every year. In other words, like a management fee. So then the incentive is to make it as big as possible,

Starting point is 01:01:13 get your one, two, three, four, five points on it. Kind of like a money manager does. But you're not incented to grow it in terms of the multiple, like you would with a 20% carry that venture capital has got. Like we make our money through the growth of the underlying asset, i.e. carry.

Starting point is 01:01:34 Just like a ship captain would by going trading the spice route and whatever you bring home to the queen is the, you know, you get 20% of whatever you bring home and the value of it. This is the opposite. You're just getting paid a fee

Starting point is 01:01:47 of how large it gets. So your incentive is to make big, get more people to put money in, but your incentive is not to get big returns. So you just, It doesn't make a lot of sense for me, these financial structures. And the financial structures should be open to anybody to creative solutions with disclosures, with responsibility, and education on both sides.

Starting point is 01:02:06 Okay. I just think that's the way forward. And we're not there yet. And I hope that we get faster to it. But I will say, Michael Saylor, uh, congrats on the market giving you a two X multiple on your Bitcoin holdings because apparently you can do that now and everyone goes, okay. Okay. Here we go.

Starting point is 01:02:19 All right. Lightning round time. Jason, this is a new idea that we had. And we're going to do four really quick. Ready for this? Okay, sure. All right, Open AI, building a browser. The information broke this story.

Starting point is 01:02:31 Essentially, build a browser, integrate chat GPT into it. They're working on search products. This is very contra Google, I would say overall. And they've picked up some big names like Darren Fisher, who worked on Chrome. And Shiva Kumar, uh, Venkatar Rahman, who was part of Google search advertising business. I think this is awesome. Curious what you think. Yeah, there's two reasons why they're doing this.

Starting point is 01:02:51 Both of them are equally brilliant. Number one, you intercept searches. So when people have learned, you just, instead of typing in www. www.drudge report.com, you just type drudge report. Now, you've intercepted that and done a search instead of, you know, setting people directly to the thing. So that's a reason to do it in and of itself. Number two, if you on the browser side, in other words, on the device side, analyze a web page

Starting point is 01:03:21 I'm on, I can do whatever I want with that web page. I can do speech to tech, I can do text to speak, I can save that page, you're allowed to do whatever's in your browser window. So while a company like Open AI is not allowed to take, I don't know, a video that's in the browser window and ingest it without permission, they're not allowed to take a news story from the New York Times as we see with their lawsuit and ingest it into their large language model. You, the user,

Starting point is 01:03:53 can take that document and feed it into a local LLM and do whatever you want. Right? So you can remix it. Just like I could buy a book or I can buy Star Wars and I could edit Star Wars on my computer

Starting point is 01:04:08 and George Lucas can't do anything about it and Disney can't do anything about it. The reason they're doing this, nobody's brought this up, is this is going to allow them to remix and to do analysis on top of copyrighted materials that they cannot do in their main index. So, let's say you had a website that was very protective of their content like Instagram or LinkedIn. You're not, these things are not allowed to be indexed. You can index like a little

Starting point is 01:04:38 snippet of a person's LinkedIn page or maybe the top level, their bio of their X or Instagram profile. But those contributions of meta products are not in the index. They're not in Google search index, and they're not allowed inside of OpenAI. That's why Open AI, I believe, did a Reddit deal, right? And they were licensing their data, and Cori did a deal with them. But you can do whatever you want in the browser.

Starting point is 01:05:02 And so that's going to allow them to store every single LinkedIn Instagram page you look at Alex and everyone I look at and put them in our personal LLM. So get ready for a bifurcation to happen. everything in that browser, the open AI browser, goes into your local storage and you're running a local version of chat GPT and LLM on your desktop or on your laptop or on even your phone and then you're merging that with the language model provided.

Starting point is 01:05:31 Hopefully I did that in under a minute, I think I did. You did. I want to add one more thing about why I'm excited about this. So one thing that I've been shocked by is how much I live in my browser now, apart from playing games on my gaming PC, I essentially just always live in the browser and that's kind of where I do my work, Spotify aside, right?

Starting point is 01:05:47 And maybe Slack. And zoom. And it's amazing how in browser we are. So to me, if you're open AI, you want essentially to build an operating system, but you don't want to build an operating system because,

Starting point is 01:05:58 oh my God, can you imagine how hard that is? Just to like build a chrome. Ask Android. Yeah. Yeah. And you know what? How many OSs do we have in the world,

Starting point is 01:06:06 total that are mass? Three? Four. Yeah. Three or four. I mean, if you've got a harmony OS now in China and so forth. But like essentially,

Starting point is 01:06:13 they don't want to do it. A browser, much easier to do. So if you're open AI, what's the, what's the shortcut to control? It's a browser. And so I can see myself eventually becoming an open AI Chrome guy. All right. So next up on the lightning round is Blue Sky. Uh, Jason, I'd forgotten that Twitter had incubated Blue Sky back in the day. Jack Dorsey was on the board. It's been blowing up and I pulled some data just so everyone can see this. Uh, July 31st, 203, 434,000 users. July 31st of this year, 6.1. And then today, 22 and a half million users, Jason. It may actually finally be a breakout Twitter competitor or ex-competitor.

Starting point is 01:06:51 We've been talking about this for a long time, and maybe one finally has come around that people will use. Thoughts. Is it run with, what's a differentiator for Blue Sky is my question? Is it just that it's not X? Or is it that it's federated? Is it that you can post there and post other places? In other words, why am I going there?

Starting point is 01:07:12 Am I going there because I don't like X and I don't like Elon and I don't like the mag of nature of it? I don't like the anonymity there and the trolling, whatever. And then I go to threads and that's where all my, if I were to look at all my journalist friends and like people really on the left, like not centrist, but lefties, right? Yeah. The lefties are all on threads, right? If you want to look for Caras Swisher or whoever, they're going to be on threads. They've deleted their accounts on X. protest. So they're going to be there. So then what,

Starting point is 01:07:45 what space is blue sky? Yeah. So, so I think actually, is it kind of like an alternative to threads more than X? I've always thought of threads as like the super corporate version of X. And so that's why I've never really cared about it. Because when they launched threads, they had all these brands that were like, threading their excitement about threads. And I was like, guys, I never want to hear from Coca-Cola or Southwest. I'm good. Thanks. Yeah. Blue Sky to me is different in feature terms.

Starting point is 01:08:12 easier to do like block lists and pass those around. But the reason why I think Blue Sky is doing well is not the features, but it's the users. So I think you nailed it with the people leaving. So I'm on both X, which is where I live and have lived for a thousand years. But I'm also on Blue Sky, Jason, not because I care about the software, but some people that I miss, like John Scalzi, an author that I love. He's over on Blue Sky. He's no longer on X. So if I want to see his stuff, I literally have to go.

Starting point is 01:08:39 You have no choice but to be there. No choice but to be there. And I'm finally, finally checking it on a semi-regular basis now. So that to me is my personal barometer of- That is progress then. I had an account. I can't remember my login. I'm going to create another account over there.

Starting point is 01:08:53 I'll start playing with it. But yeah, whatever. I mean, I really am finding that social media is a detriment to my overall life experience. And I want to do less social media. I want to do more podcasts and writing. I don't like the nature of, either or any of the social networks right now. Actually, if I do like one, I kind of like TikTok and I like LinkedIn.

Starting point is 01:09:19 Okay. I'll explain why. I like LinkedIn because I'm seeing a lot of our portfolio companies and other entrepreneurs doing threads about their business. And I like business. I don't like in-mail because my in-mail sometimes is a lot of people, um, try to sell me SaaS products or whatever. And I, I don't make those SaaS decisions in my organization.

Starting point is 01:09:41 so it was a little annoying. But I have seen actually my email is a little bit better. I would like LinkedIn to just make me an email account, which was what Raul was going to do at LinkedIn. People don't really know too much of this history. But I think when Jeff was running it, he had told me he was interested in making a LinkedIn email product. So imagine Alex Wilhelm at LinkedIn.com.

Starting point is 01:10:05 Jason Calicanus at LinkedIn.com just started working. That would be amazing. And then if they could, you know, intercept the email or, you know, have inmail be part of that. And then I had quick keys. So I've been begging them to make the email interface better and make it more like Gmail or superhuman. And then I would actually use it more. And I would have a lot of my business stuff over there. So I am liking what I'm seeing over at LinkedIn in terms of our portfolio company,

Starting point is 01:10:32 sharing what they're working on, tagging each other. And where we've been doing our live feed over there. So this week and startups is live over there. And we actually get some good contribution. So I like LinkedIn for business. People are in a business mindset over there. And then TikTok, you know, there are some world positive folks over there who I just like following.

Starting point is 01:10:51 And there are some storylines over there that I like. But the intellectuals, you know, and the powerful people in the world are still all on X. And so I think it's unrivaled. I don't like being a super router on X as much anymore because the MAGA folks really do target you if you're on the left. So I have brigades of people who no matter what I write are just violently attacking me. Like in some cases, and I tweeted some of the DMs, like, in some case, literal violence. Most cases, just harassment. And so I could understand people opting out

Starting point is 01:11:27 of X because of the harassment issues that you get as a left-leaning person or even a moderate. I'm a moderate who is socially left. But if I do something, that's out of the norm over there, man, I get brigaded. And it's just like, okay, well, now I've got to, like, scrub my comments for people saying, like, really horrific things, and I'm hiding and blocking people. And then if I put it on only people I follow can comment, then it was, quote, retweeting me, oh, you're a coward, and then you've got to pile on in quote retweets. Or screenshoting you and calling you a coward because you just don't want to deal with their abuse?

Starting point is 01:12:05 No, that means that I'm just curating my experience of life. for golf. Exactly. And so that's the problem is like the as you get more popular, you are, the detractor spend more time harassing you. Yeah. And so there is a challenge, I think Elon and the X team are going to have to figure out, which is anonymity and not being able to block the the block feature now is actually kind of cool. Um, if and I think they have to keep working on it. I would like to be able to ban anybody from reply. who has an account under a year old and under 100 followers.

Starting point is 01:12:45 Because I would say 99% of the spam I get are accounts verified or unverified, under a year old, under 100 followers. In other words, they're burner accounts. And I'm getting inundated with burner accounts, you know, essentially swatting me in my replies. And it does make me want to participate less because it's like,

Starting point is 01:13:08 I'm there for intelligent, challenging discourse, not drive-by comments. It just feels like if you have a burner account, you can drive-by with no cost. So there's more work to be done on the drive-by accounts for me. And the balkanization of social media or short-tech social media is a bummer. Absolute bummer. One last thing about the block feature. I know people are concerned about, especially women are concerned about not being able to block certain people as much as they had before. And I think that's perfectly valid.

Starting point is 01:13:38 But one thing I like about the change, I'll just throw into positivity here about X because it's where I've lived since 2008. I can now see Mark Andreessen's tweets again. Yay. But you can't reply to them. I can't reply to them, but I can now see what was previously accruited to me. And everybody knows that everybody who uses X on a regular basis has a backup account. So I have my Jason Callicanus account and my At Jason account. people who when Mark and Treason blocks me or Scott Adams was blocking me

Starting point is 01:14:09 whoever's blocking me I will once every couple of weeks or whatever or if I need to because somebody sent me a tweet and they're like oh check out this tweet and I'm like oh I can't see it but it's mentioning me or it's meant to be I will go to that account

Starting point is 01:14:23 and then go see it there and I just flip it you just flip it in your app you re-click the link to it so it's kind of doing what everybody did as a route around anyway but you can't comment on that person which is kind of nice.

Starting point is 01:14:35 So I have now spent my time deleting drive-by comments from one-year accounts that are not intelligent. If it's, I mean, if somebody wants to make, if somebody makes a funny roast of me, I kind of like it and I'll reply. I'll actually engage it. But just dumb ones. You are very far about that. I've seen that. Yeah. Yeah.

Starting point is 01:14:53 But dumb ones, I'm like, well, you're just wasting everybody in the class as time with a dumb drive-by comment. So anyway, it's going to continue to be balkanized. It's a bummer. but you know X is still growing threads is still going and Blue Sky is still growing so I think I got to get on Blue Sky again just like I'm I check threads once a week

Starting point is 01:15:14 twice a week and I comment once in a while I don't get a lot of replies there but I have 10,000 followers so yeah whatever is what it is here's the last thing I want to ask about this because I think put her incubated Blue Sky back in the day does that mean that X today would hold any shares in Blue Sky? because it'll be pretty funny if Blue Sky has its moment, everyone freaks out about it. And it turns out X owns, you know, 40% of it.

Starting point is 01:15:37 All right. Lightning round. Last one. Big news. Corwee is going to go public next year, Jason. Reuters reported this. This is one of the GPU Neo clouds, $35 billion reported valuation, looking to raise $3 billion more. I think we're seeing this IPO go out next year because they want to raise more cash.

Starting point is 01:15:56 So they're actually using this as an IPO versus kind of a capstone event like Stripes going to. I think it's super cool. And I'm literally now hype as hell about all GPU clouds, because if one's going public, more are going to go public. Thoughts. Yeah, Neo clouds means new clouds, obviously, Neo. And they are clouds with GPUs. This one, Corweave in particular, had very presently bought a lot of H-100s, I think, early on.

Starting point is 01:16:25 So they had an advantage. And they've got large, large amounts of private equity capital that's been loaned to them. So back to big public entities taking loans. I'm not saying that there's a Ponzi scheme aspect to this one. Or I haven't heard anybody say that. But I have heard people say, you know, this is an all-in type moment for a company like CoreWeave. What if H-100s get replaced by something or their shelf space or the demand goes down?

Starting point is 01:16:52 So if you are betting on a NeoCloud, you're making a very consolidated bet on AI, on H-100s, you know, and the downtream versions of those A100s, whatever else they're making. So it's a very concentrated bet. It's probably been fully realized. A lot of the gains will be fully realized. So one of the things with these IPOs to keep in mind is, you know, if you look at the prices of them,

Starting point is 01:17:22 a lot of times when they go public, they've been fully priced in my experience or maybe generously priced, which means the founders, when they raise money and they sell shares are getting full value, sometimes great value from selling those shares, because then it trades under the IPO price for a while. What was the IPO price of Robin Hood? Somebody today told me that they just passed their IPO price. So Robin Hood, I view of price was $38 per share

Starting point is 01:17:49 and a hood today is worth 3742. So they're back. I mean, I haven't sold the share of mine. I distributed ours to our shareholders, our LPs. I held all my personal shares. Even down to $8 a Because it was down to 821. I actually, I think I bought some more when it was down on the ground. I bought some more Uber when it was down on the ground. Smart. Because I was like, well, this doesn't make sense. And this is, I think, goes to what Warren Buffett is doing right now,

Starting point is 01:18:15 which is he sold a bunch of his Apple because he thought it was overpriced, perhaps, or fully realized, built up a huge cash position of over $300 billion. He's going to wait for the market to correct in the next 24 months and then buy back in. I suspect that's what's going to, I think that's why if people are selling their Bitcoin to Michael Saylor, my guess is the people who are selling it are those really experienced Bitcoin traders who know, hey, this thing boom busts. I'll sell Michael Saylor all my Bitcoin's at $195,000 a coin, $99,000 a coin, whatever the range is there. And then I'll sell them again. I'll buy them back again at $50,000 and then find the next bag holder. So I'm not saying anybody can tell you what the

Starting point is 01:18:58 price of Bitcoin is going to be a year from now. But I think, if you asked all the savvy people, if you asked Vinning Lingam or Sandit Madra or Tramath, if you asked anybody who's been in the game for a long time, they will tell you the price of Bitcoin will go down 30 or 40% in the next two years, and they just don't know when that is. And they don't know if this is the high. It might be going down 30 or 40% from 200K. But man, if you were to look at BTC over the years, you will see these boom bus cycles. And if we just pick the top two, you know, you had back in 21, a 60- Oh, you got to go back, you got to do the max here to really understand this, because there were a couple of boom bus cycles that now looked de minimis,

Starting point is 01:19:41 but there was that 11,000, and then it went down. Yeah, there you go, 11, 12,000 back in 2018, it came smashing back down. But see, this isn't even the full chart, even though this is max, if you just look at the two boom-bus cycles, you know, you had that 11,000 in 2019 go down to five, so you lost half your money and could buy back in. Then you'll look at that first one in 2021, that little mini-peak, even to the left of that. At the start of 2021, you're up at 30, 40,000 comes back down to maybe 30, yep, goes back down to 30, so you got 25% pullback. Then you peak again in 2021 at 60. What is it peaked down to? 31, 29, so you lose half your money. Here we go again, back to a peak of 60-ish.

Starting point is 01:20:30 And then, man, that comes way down to what? 2019, 18, 16. So, man, you went 60 to 16. You lost 75% of your value. Then bang, back up again. And who knows what's going to happen here, right? Because here we go. Is this time different?

Starting point is 01:20:49 Maybe. Maybe it never reaches 60 or 20K again. My gut tells me it does. I think it does. I pulled up the first story I wrote about Bitcoin from this was April of 2013 and it's just so funny to read. It's like Bitcoin's currently trading at $125.

Starting point is 01:21:07 Oh, just breaks my heart. I wrote a story of most dangerous open source project we've ever seen and I wrote that in 2011. Ah, you win. You were earlier. Nice. Yeah, and you can see people debating this story here on Zoom. on, here's the story on Y Combinator.

Starting point is 01:21:28 Ah, very good. You know, people hate me. You know, this is, uh, the first comment's amazing. I basically said, this is one of the most dangerous. Uh, and people are like, oh, Jake Howl's promoting Bitcoin. You know, I was tracking this thing since 2011. Wow. This is so, so funny.

Starting point is 01:21:47 So this comment from May of 2011 says, if you're left wanting a high level technical explanation, the Wikipedia page seems decent. That's the level. of knowledge people had about Bitcoin in 2011. In Hackern News, the savvy group was like, go read the Wikipedia page. How times it changed. I literally, you know, talked about Silk Road on this thing. And I made some predictions.

Starting point is 01:22:08 Currently, there are six million coins that's $6.70 each for a total economy of $40 million. So they have it, folks. I've been covering it since then. And when you know something is valuable, my best advice to myself is to buy it and hold it because the power law. And so if I had only put $100,000 and that's $6 a share, oh my lord, let's not even get there. We wouldn't be here today, Jason. We wouldn't be doing the show together. Of course I do the show. I love doing the show. You'd be off on an island somewhere. Anyways, guys, we have more coming up tomorrow,

Starting point is 01:22:45 including Klarna's financials. There's a couple of things that we want to talk about. You're going to be open AI, University of Austin. We're going to have a couple of founders. So we'll be back tomorrow for another live show. Jason, as always... 1 p.m. Eastern, 10 a.m. Pacific. Yes, sir. 12 p.m. Central time in Austin. See there? Yeah, but I'm not in Austin. I'm here. Oh, yeah, right. I'm in New York. All right. We'll see you tomorrow. Bye, bye.

Starting point is 01:23:06 Bye, everybody.

This Week in Startups - TWiST News: Startups & Wealth Taxes, The Bitcoin Boom, and The OpenAI Browser | E2051

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