We Study Billionaires - The Investor’s Podcast Network - BTC032: Bitcoin Mining & Entrepreneurship w/ Jason Williams (Bitcoin Podcast)

Starting point is 00:00:00 You're listening to TIP. Hey, everyone. Welcome to our Wednesday release of the podcast where we're talking about Bitcoin. On today's show, I have an incredible entrepreneur and Bitcoin influencer with Jason Williams. Jason sold his first company FastMed for more than $300 million and has made many other venture deals throughout the years totaling a half a billion dollars. He's an author, a Bitcoin miner that uses renewable energy harvested from used tires, and he's got one hecker. of a story. This was such a fun conversation and we get into a lot of relevant topics near the end of the show about mining and the current negative 25% difficulty adjustment due to policy

Starting point is 00:00:41 decisions in China. So without further delay, here's my interview with the one and only Jason Williams. You're listening to Bitcoin Fundamentals by the Investors Podcast Network. Now for your host, Preston Pish. All right. So like I said in the introduction, I'm here with Jason Williams. Jason, welcome to the show. Man, thanks for having me. I'm a huge fan, man. This is a long time coming. Dude, I'm a fan of yours. And I'm just going to start off. I love your book. I think the thing that I like about your book so much is it's able to kind of like show the really big picture, but then get down into the weeds and the sections where it's important for people to understand it. And so for people that are just coming into the space and they're trying to wrap their head. it around the big macro picture, also drill down into the smaller nuanced things that are important, but kind of get a lot of people confused. You do such a great job at kind of painting the canvas

Starting point is 00:01:50 in a way that a person can kind of capture. Before we go down that path, I just want to start off like hearing your story because I know you have one heck of a story and just the background and everything. So this is all I'm going to say. You were born in Queens. Take it from there. Born in Queens, immigrant family, mom's Sicilian, my dad's Jamaican and British, left when I was born. Mom is a bartender and loves me very much and provided for me, gave me a great home. You know, we were low-class, poor family and eventually moved to Florida, had aspirations to be a doctor, got on my rocket ship, played a little soccer around the world too, Preston. but eventually arrived back in school and fortunately became a physician assistant. So, P.A.'s, that profession was started like around 1974.

Starting point is 00:02:49 In regards to physician assistants, I'll give you a little color and then continue, but they were like naval corpsmen returning from the Vietnam War. And when they returned, they didn't have a place. These were highly competent, like medics that could save your life and do all kinds of field medicine, but there was no transition for exiting military people into civilian life in the practice of medicine. So Duke University started a physician assistant program. I think there was this guy named Harvey Steed. I think that's his name.

Starting point is 00:03:19 But anyway, I was in the first class of physician assistants at a small school called Methodist University. And from there, was accepted to Yale. I thought I wanted to be an orthopedic surgical PA. I was a licensed physician assistant. ended up dropping out of Yale, starting a company. That company was fast med, and I grew that over my kind of entire adult life into the nation's second largest privately owned urgent care and primary care practice. Cross country, I had 1,400 employees, about 400 PAs and doctors working for me, and then sold that company in totality in 2015 for right around half a billion

Starting point is 00:04:00 I'm kind of fascinated at just the drive, first of all, to want to become a doctor, became a physician's assistance from everybody that I've ever talked to that's almost a parity with each other as far as the schooling and difficulty to get the education there. What drove you at such an early age to want to achieve at such a level? What was the driving factor behind all of this? I appreciate the question, but I don't think it's any different than what drove you to your career, I believe your military career and beyond. It was for me kind of the fear of the life I knew, that level of poverty, the lack of options, all the other things, this isn't

Starting point is 00:04:46 a psychology session, but growing up where I did, there was substance abuse, psychological abuse. There was all types of abuse. And I just wanted to break free from it, Preston, and my escape was through education and becoming a professional of some sorts. Again, I had no roadmap. There was no one to call and say, okay, I want to be a doctor. How do I become a doctor? That just wasn't available to me, unfortunately. I just hacked it together and landed on physician assistant, right?

Starting point is 00:05:18 Schafer the moon landed on some meteor close to the moon. I'd say you did quite well. So the transition to Yale, that transition, I just can't imagine how driven you would have been when I'm hearing this story. So you go to Yale, then you drop out. It's one of those defining moments. I've had this discussion with friends recently where you get to a certain point in your life where you've transcended your CV. You've transcended the social norms, the defining things that you think you need so that you can continue to be employable, be a good partner, like, those things. Like, early on, I bought into the fact that I needed Yale on my resume

Starting point is 00:06:02 because my resume was weak. Yeah. And again, it was more fear-driven. Like, I've got to get here. I've got to have these trophies or these things to help me get away from where I am. That poverty has tremendous gravity. To get escape velocity, it was like, I can't tell you the drive. And that's why most people don't escape Queens. They don't escape Bork Hill Place. Like, they're stuck there. Everyone wants to leave. It's just the common discussion.

Starting point is 00:06:35 But it's very hard. But look, I got there, came up with an idea, socialized it to my professors, called my mom, told her I was going to drop out and go for this, Preston. She wasn't happy. But it worked out for me. It's one of those things where when people can see it in hindsight is just so obvious. And, you know, Jason, so like, I follow you on Twitter. I think somebody who would look at your Twitter feed and see you on the surface would say, oh, that guy's just joking around or he's out there having fun, but has never sold a company

Starting point is 00:07:10 for a half a billion dollars and build it over decades, dropped out of Yale to do it all. Like, the risk factor there is just crazy to me. So you start the company and what was the product or service or kind of idea around the company that you started? FastMed, the thesis was I could do 80% of what you'd find in a U.S.-based emergency department. So it would be like non-life saving procedures and diagnosis that you'd find in an emergency department using allied healthcare professionals or physician assistants and leveraging technology to do it at one-tenth of cost. So 80% of the service offering of an emergency department at one-tenth

Starting point is 00:07:52 cost, placing it in a retail setting. So not going where all the doctors are or the hospital, but going where Starbucks is. And this is 2001. So super early, pioneering in that space, no physician assistants own medical practices, let alone employ doctors. So I was like public enemy number one, you know, from a career perspective. That was it, Preston. Then I just kind of self-funded and went one, two, three, ten, more private equity, 20, 100. You just skip over this stuff. And I'm telling you, like, for somebody who's, who has never built a business before, even if you do this at a local level and you have success, growing it then across the nation at a point where you don't take on too much leverage or you get yourself

Starting point is 00:08:41 in trouble or you just hire too quickly with bad people and bad, and bad, strategic. So much of this is way bigger than you just kind of brush stroking over it than I think people realize, like this is, this is massive. So talk us through the growth piece of this. So you have, you set up one site. It's successful. Now it's copy and paste. Let's do it again. Talk us through some of that growth that you had to manage and just walk us through the decade plus of that experience. So you have like so many things happening at once over the let's call it 15 years that I was building that company that it's going to be it'll be too much to unpack. But just imagine opening up a doctor's office. You've got a technology package. You have to have some type of charting

Starting point is 00:09:32 system. You have to have some type of recruiting HR culture. All of those things, right, you're building. I had no business training. So I'm waiting. it with a bunch of college friends at first. But over time, when the systems start to break and new technologies start to show themselves, you're just implementing as you go, right? So you're essentially, you know, building the plane while you're flying it. Most people are uncomfortable doing that. Like, I meet founders that they're stuck in prototype forever, raising enormous amounts of capital to protect and perfect their craft. Then there are those who don't know what they don't know and rush fast in the wrong direction. And then those same people who don't know

Starting point is 00:10:14 what they don't know rush in the right direction and build something extraordinary, right? For me, retrospectively, we got it right more than we got it wrong, Preston. We built these systems. We adopted electronic medical wreckers. We went from traditional x-ray to PAC systems and digital X-ray. We went from, you know, trying to train people how to code to having coding algorithms, assist people, to how do you deal with real estate? Do you buy all the buildings? Do you build them de novo? Or is there some plug-in-play? When we went into our blitzscaling phase, blockbuster video stores went out of business. So those were like in this perfect location for the kind of retail play I was doing. So I just went out and warehouse.

Starting point is 00:11:01 all these Blockbuster video stores so that we could open up. And you're just recognizing kind of patterns and aligning these things. But again, it takes a different mentality. You know, someone who feels very comfortable, not knowing, has the self-confidence to stand before his mistakes, make corrections, be confident, like changing his mind. Like these are like mantras. I always reserve the right to change my mind. I say it all the time to people because it's kept me out of trouble in my life.

Starting point is 00:11:31 But yeah, FastMed was an amazing moment. It took me from this start that I had in life to someone who had options. Selling that company was like the hardest thing I ever did because when I raised some capital in 2010, I had to sign a 10-year non-compete. So my 10-year non-compete started in 2010. I exited the whole company in 2015. So I had five more years where I was blocked out of health care. So everything I knew, my whole adult life, I spent working on that business, Preston, and then after I sold it in 2015, I was done.

Starting point is 00:12:09 Like, couldn't work in that space any longer. So they gave me a boatload of money to do that, right? And so that's why you had to go off in a completely different direction in 2015. Totally different direction. Wow. So I've had some patents that I've written in robotics and synthetic polymer science. and I was really interested in doing some type of renewable energy thing. But I didn't want to, I don't know how this is going to come off.

Starting point is 00:12:34 I didn't want to do something that had any subsidies, like that needed any type of government support to survive. Like it's pure free market capitalism. Like if I'm going to build something, I'm going to build it so it's profitable. So you were anti-Elon Musk before it was popular. Right, right. Yeah, it was like Peter Drucker, right? my first social responsibility is to be profitable. After I'm profitable, then I can go give all my money away, but let's deal with that first. So yeah, man, that's where the idea for PRTI came up. Like, let's take this massive worldwide problem of trash tires. You can use an equation like one tire per year per person is disposed of around the world for the most part. So here in the United States, we dispose of about 350 million scrap tires a year.

Starting point is 00:13:24 That's not counting the blemish tires that come out of the factories or heavy industrial tires. These are passenger tires or light truck tires. And 20% of them end up on the side of the road in water, ponds and lakes in the woods. And then we don't have a nice or a good solution for them. And that's where PRTI was born. So where in the world do you get this idea? Because most people have maybe one brilliant idea, but then don't have the means.

Starting point is 00:13:54 to execute it in their lifetimes. And here you are still very young, 2015, and you're already on this second idea that you're ready to kill it. So, like, how did you grasp this idea? I was always interested in, like, early stage seed investing. So I would tell you, like, starting in 2012 to 2015, I had been looking at things that were interesting and putting small amounts of capital, $50, or $100,000 into things. So I had arrived at some areas of interest. For me, energy, robotics, medical applications, service offerings. I've got some restaurants and stuff like that, but that is probably not as impressive. But that was really it.

Starting point is 00:14:36 So I had developed a bit of cognitive diversity in my own kind of approach to things and thought I had a good solution. I had looked at some patents that had made some claims on how they dealt with synthetic polymers and tires and de-manufacturing them. and I thought we could iterate on them. So I just hired a bunch of organic chemists, and we sat in a room and broke this thing down and came up with something that I thought was viable on paper. Then I took like a, I don't know, a 50-gallon barrel, cut a tire into a fourth, and insulated it.

Starting point is 00:15:12 It looked like a satellite and heated it externally until we got the temperature around 300C internally. and I started to pull a vapor stream off of it and condense that into a really crappy oil. That was the beginning of it. I had that on the back of a pickup truck, and then we went to scale. I put a bunch of money in, bought a 10 acres of land close to where I live, and lived in that field for a year. I really lived in the field. I had a very small team of engineers, and we perfected the technology.

Starting point is 00:15:50 I want to get back to this, but when I'm hearing this, my background coming up with this military background, it's all about leadership. And it's all about being able to prioritize and like separate which variables are important and just being able to synthesize what's important and what's not important and like get to the point. And you have this in spades at such an early age. I was formally trained on this for years and I would argue, you know, still very lacking in many areas. But when I'm hearing this, this does not happen. All these things do not happen unless you just have like this natural gift for leadership. So where did you learn that? I don't know, Preston.

Starting point is 00:16:27 I can just tell you that looking back, like if you were ever at a pickup game, like pick up basketball game or like I was the guy that people would pick, like, hey, I want Jason on my team. And then like I would be the guy picking the teams as I started to get older. And that just naturally happened. You had a social sense. Yeah, and my mode has been conflict resolution, focus on aligning goals, you know, finding everyone's unique motivation and pushing hard in that direction. So when you find someone's unique motivation,

Starting point is 00:17:01 you align goals and you resolve conflict with like absolute intensity, those are fun people to be around. And if you share success along the way and everyone understands what winning is, oh my goodness, you can build some amazing team. So really, for me, I don't need to need to be the smartest guy in the room. I just want to be a part of the team. And sometimes I'm the quarterback. And sometimes I'm just running the ball hard. So is it humility? Do you think that Yeah, part of it. But I also like, it's all those things. It's all those things. But I don't know, again, I'm not formally trained. Like my formal trainings in medicine and hard sciences, I'm not an engineer, but I built a very big waste management business at scale that eventually mine

Starting point is 00:17:46 cryptocurrency. So, like, we can go down that path. I'm as proud of PRTI as I am fast med, because it really, to your point, like, I kind of got lucky that life-changing idea and realized it and monetized it. You know, my second gig was PRTI. And right now, you know, that company's valued at about $125 million and is expanding. And I'm very proud of that. And we survived, you know, COVID, the shutdown, etc. Did you find that some of the medical training that you had, because so much of it is deep critical thinking, a thirst for continuing to learn and knowledge in order to properly diagnose and treat people? Did some of that influence you in the way that you operate as an entrepreneur or maybe something that you find very beneficial that you think maybe others

Starting point is 00:18:36 don't necessarily get access to because of that background? Yeah, like I think there's some things that I can lean on. One of them is when you're dealing with highly technical, highly sensitive situations, specifically around people's health, you have to be able to deliver the message. And you have to be able to deliver that message to people who speak English, to people who this isn't their primary language through an interpreter. I mean, you've been trained this way. So you understand what I'm talking about. For me, I think one of the things that I'm able to do is take complicated processes and systems and speak very plainly. I write like I talk. And that I think is why people relate to the book. Like, I needed to write that book because it imprints in my brain,

Starting point is 00:19:24 these complex things. But I didn't want to write it in a highly academic kind of way. Because I, that's just not how I talk. Well, you were writing for your audience. That's right. And I wanted it to be, even though it wasn't in my voice. I wanted people who know me or have ever talked to me to say, that's him talking. You can hear him saying that. I apply that same type of philosophy to engineering. It's funny. Only recently have I realized, like, that's kind of Elon Musk's mode as well.

Starting point is 00:19:57 Like, he doesn't let people use, like, industry-specific nomenclature. Like, it's banned. Like, if it needs to be big, use the word big. If it's small, small, light, heavy. Like, that's me. It's funny, I wonder if that comes because Elon Musk is really out of discipline. You know what I'm saying? Yeah, I think you're right.

Starting point is 00:20:17 Yeah, like, I'm out of discipline. Like, I sit in a room with electrical engineers, welders, computer engineers, programmable logic coders. I'm totally out of discipline. But I'm like, I need this to work in 13 steps. That step doesn't make sense to me. Explain to me why we're doing this. Like, what does a vacuum pump do? You know, and then I'm like, draw that for me.

Starting point is 00:20:39 You're getting to the essence of why it's working, right? And just trying to fundamentally understand. Like, don't get all the fancy language here. Let's, it's a pump. And it needs to pump this much, this far. Right. And it doesn't need to break. And I need to be able to anticipate its failure.

Starting point is 00:20:56 And I know that failure mode analysis is a whole like engineering discipline, but it's nothing like I'm going to arrive at that instinctively. Like I'm going to say that pump keeps breaking. That's a crappy pump. Like, find me another pump and put some system in place so we can predict its failure because when it fails, I lose primary control of the whole system. We can't let that thing fail. Let's take a quick break and hear from today's sponsors.

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Starting point is 00:25:18 Go to Shopify.com slash WSB. That's Shopify.com slash WSB. S-B. All right, back to the show. Just put your team at ease, too. When you're talking like this, they don't feel like they have to perform or be something different than what they are. The communication barriers kind of open up and then the flow of knowledge is being shared with the team. I love this. And everyone can participate. There's not like some guy who's a like nuclear physicist sitting on top of everything because I've had those guys come to PRTI. We're just like, okay, that sounds interesting, but it's not applicable because we just don't understand it. The PRTI is a cool thing. So you said a 10-acre plot of land, you lived out there for a year, testing.

Starting point is 00:26:10 You were going through like developmental testing to prove out that like this is something that I can actually move out on. This is a big scale endeavor. And no one has, this is 2014. No one has ever built something like this to scale and had it persist. So the waste management, waste industries, Republic, Goodyear, Bridgestone, all of these companies, they've always wanted some other solution to dispose of tires other than throwing them in a landfill or shredding these things. Here I come making these claims and they're like, yeah, we've heard it all before.

Starting point is 00:26:44 You've got a magic machine and you can put this in here and get that. We built it, Preston, and we built it at scale. So what you would see if you came to PRTI is I've got six, 40-foot cylinders, and they rotate on an axis point, they're all independent. So one of the things that I didn't like about massive industrial complexes is they're all connected. You've got like conveyor belts feeding this into that and this, and then it goes here, and then that has to go into here. But if any of those systems breaks, the whole plant goes down. So I wanted to make sure that we had something called like a continuous batch system that was modularized.

Starting point is 00:27:27 Now you're getting into Lean Six Sigma type stuff. You're speaking a language I don't know. I did the same thing with a hospital emergency room, right? I said, this thing is big and inefficient and people are unhappy. Let's make it small and, you know, kind of tactically more replicatable and usable. And so we took these systems, these cylinders, each one of them had its own programmable logic controller. It worked independent of the other system. So there was some redundancy. You had this 40-foot chamber. You had an oil processing and containment system behind it. Then you

Starting point is 00:28:03 have an emergency flare behind it. The cylinder rotates forward. You load it with about 300 whole tires. Wow. And that's really novel because no one had ever produced one of these tire disposal systems where you had no preparation of the tire. You could just take a dirty tire and throw it in my machine. So you put 300 tires in the machine. The machine then goes back into a vertical position. It's all done by computer. And then lid closes on top of it. It, and it forms a seal. We put a vacuum pump or some pressure and we evacuate the atmosphere out of that vessel. So all you have is tires and we pulled out the atmosphere. I insert a torch into the bottom of this giant cylinder and you've got all the tires randomly inside of it. And I blast it with this torch and create

Starting point is 00:29:05 like a Coke layer. So it's not on fire. I'm blasting those tires with this torch for 20 minutes and creating coals, like hot coals at the bottom. The bottom of the cylinder is actually, there's thermal concrete and some other really cool technologies in it. But in essence, it's just a green egg. So after 20 minutes, I pulled a torch out, close that port, and then I start to drag oxygen or atmosphere back over those hot coals. So there's no additional fuels, there's no catalyst, there's no other energy. I've spent 20 minutes of some type of gas to create hot coals. And now I'm dragging atmosphere over that with vacuum pumps. That becomes super hot at the base. Imagine blowing on a coal. It gets red hot. A tire is 40% oil. It's got carbon in it, steel,

Starting point is 00:29:58 Kevlar. It's got a lot of things in it that are volatile in terms of the synthetic polymer. That heat is monitored with about 80 different sensors up the stack of tires and up this 40-foot container. So I'm measuring the temperature differences up the stack. And over a 11-hour process, moving those tires down to this hot spot, just using gravity and turning them from a semi-solid to a gas. I'm not lighting them on fire. I'm heating them and they turn into a gas.

Starting point is 00:30:31 and then I'm pulling that vapor stream off at a certain temperature. It's around 350 to 400 C. And I'm pulling that vapor stream off and collecting and cooling a fuel. And that fuel is like a bunker fuel. When I say bunker fuel, you'd use that in a high sulfur fuel that you would use in a ship once it gets into international waters. The vapor stream that I can't condense into an oil is like a high sulfur fuel that you would use in a ship, is like a sin gas, so it's all the butane's propains, methane, it's got a lot of the different

Starting point is 00:31:07 combustible components. I can pull that in, scrub it, and combust it in terms of energy as well. So I've got liquid fuel, I've got a gas stream, and then after 11 hours, I'm left with a carbon that's like a mid-grade Appalachian coal. So it's a solid fuel and then steel. There's a fair amount of steel and a tire. So I dump that out after 11 hours. I shake off the carbon. I sell the steel. They just come pick it up and give me scrap steel price. I use the solid fuels or I sell them into the solid fuel market to create power. I use the oil, either sell it into the blended fuels market or use it for our own energy use. And the gaseous fuel I use, the vapor stream I use for power as well. All of those things, when I first endeavored to monetize them, I thought I would just produce power for the grid.

Starting point is 00:32:06 But that led me to cryptocurrency mining. There's a whole another track or discussion. But that's kind of the story of PRTI and its evolution to that point, where I had at scale, taking care of 10% of all the waste tires in North Carolina. So we have 12 million waste tires a year. We were taking care of like 1.2 million of those tires ourselves. And I had a replicatable model that could exist in certain environments that would allow us permitting. Wow, that is crazy. Okay, so let's talk about the transition to the cryptocurrency piece.

Starting point is 00:32:44 So you're doing all these things. You're doing these things successfully. And how did you come across cryptocurrency as being another opportunity to leverage with the energy? Yeah, so I had said to you, I was doing some like early stage investing. And one of the investments I had done is in a technology that had made a claim that was a nail polish that could detect date rape drugs. It came out of NC State University. Wow.

Starting point is 00:33:12 The claim was that a young woman or man could put this nail polish on, dip it in their drink, and detect six typical date rape drugs. I had invested in that company early and we're working with the founders to perfect it. Mark Cuban had invested in that as well. A friend of mine, and I didn't know at this point, a friend of Anthony's, Pompliano, had said, hey, this guy named Pomp is leaving Snapchat and moving back to Raleigh. You need to meet with him. Like, I think you guys would get along well.

Starting point is 00:33:43 He put us in contact. This is like 2015, 2016, and we set up to meet in downtown Raleigh for 30 minutes. We ended up staying for two and a half hours. It's like you meet someone and you just have a, yeah, it's like us talking right now. It's easy. We immediately said we got to do something together. And what we did was we developed the concept for full tilt capital, which was going to professionalize friends and family investing.

Starting point is 00:34:11 And we raised, I don't know, about $3.5 million to go into early stage stuff. We put it into like 60 different companies. And then we had another maybe 15 million bucks that we put. into late stage pre-IPO stuff, SpaceX, Reddit, Airbnb, Lyft, like a lot of cool stuff. And man, we were deploying capital. We were kind of local heroes in terms of like the early stage venture stuff, getting to know each other, and then recognize that there was a lot of talent going into blockchain and a lot of pro-money moving in that space.

Starting point is 00:34:49 So we had started to think about could we raise another fund? and focus it directly in this space. Another thing happened that was really interesting, Pop and I were driving to Charlotte to buy a McDonald's to turn it into a coin laundromat. He had met J.P. Barrack, who owns the mining store. And JP was like mining Ethereum in his dorm room at NC State when he was in college.

Starting point is 00:35:17 He and Anthony had started to tinker with GPU mining. So on that car ride to Charlotte, Pomp's telling me about GPU mining and Ethereum. And, you know, I'm sitting on a plant that generates six megawatts of free power as a waste stream here in North America. And, you know, I'm kind of like hitting a wall because I'm like, they're only going to pay me three cents a kilowatt hour for this power. Yeah. I'm trying to drive the best economics I possibly can on this business is the startup. So POM's like, well, why don't you mine cryptocurrency? at PRTI.

Starting point is 00:35:55 And what kind of return was that at the time? You said three cents per kilowatt hour. Yeah, so I could have been paid three cents a kilowatt hour, but they're paying me a certain amount of money per pound for the tires as a waste stream on the front end of the business. And that is material. It's a waste management business on the front end. They're paying me for the fuel.

Starting point is 00:36:18 I have some OPEC in the middle, but the waste stream of the demanufacturing process are all of these rich fuels. So when I started mining, so Pomp, myself, J.P. Barrick, we all built the first mine and you see it. There was an article that was in Decrypt, I think, and it was like OG bitcoins show their initial mines. It shows Pomp and I's first mine at PRTI there. We were mining like Ethereum at like 40 bucks, 45 bucks, that that was the price of it. and it was nearly free for me to mine it. I mean, after I made the CAPEX investment, right now, just to give you a sense,

Starting point is 00:36:57 I think we mine Ethereum still. It cost me about $285. Wow. And so let's call it one-tenth. One-tenth the cost. I'm not going to tell people the Bitcoin one, but I'll tell you the Ethereum one. So everyone's going to want to know this as they hear that you have an Ethereum piece. Are you selling the Ethereum?

Starting point is 00:37:19 Right. So just like we trade the solid fuels and liquid fuels, we do the same thing with our crypto. That was like the whole adventure, right? So pomp and I return from Charlotte. We get the McDonald's, turn it into a coin laundromat. And then we start building this cryptocurrency mine and learn about custody and taxation and what's Ethereum and what's proof of work mining and what's Bitcoin and Satoshi's white paper and oh my goodness, this Bitcoin thing has this programmatic monetary policy. and oh, it's got a supply cap at 21. You know, he would go through the whole thing, and him and I are just like going crazy

Starting point is 00:37:54 and Pomp's capacity for work is like off the chain. Like, he's like unbelievable savage. Like he just dives in and never comes back. And I'm chasing him as fast as I can. So the two of us are just going absolute crazy. And I have a little bit of money and I've got this crazy science experiment, you know, that we can plug all this stuff in.

Starting point is 00:38:17 And when people are doing things in a crate, Preston, I'm doing things on acres. Yeah, yeah, yeah. And so it's different. It's just different levels, right? And then you have Polaniacs and you've got the birth of Gemini and like, we're there for everything. It's exploding, yeah. They're still paying you to take the tires as fuel.

Starting point is 00:38:37 Still paying me. Right. And we've been, Preston, I've been continuously mining nonstop through COVID, everything. We just haven't stopped. So the cool thing that happened once we got through the application of the mine, getting it to scale, proving that we can understand control and navigate this kind of complex regulatory environment that continues today. That's when we were like, let's raise some money. Let's put a $25 million fund together and just focus it all on blockchain technologies and cryptocurrency. And that's when Mark Eusco contacted Pomp.

Starting point is 00:39:15 Mark's in Chapel Hill. Like, it was just like crazy. And I really just came out of Twitter. Like, I think Mark was like following Pomp and Pomp was following Mark. And Mark, the story goes, was like reading Pomp's tweets and being like, hey, that's pretty smart. That's something I would say. And so I think they just went and like had breakfast together.

Starting point is 00:39:37 And then that relationship evolved. And Pomp's like, you got to. meet Mark. And then I roll up big beard, reflective vest. Like, Mark's like, who is this maniac? Mark's like, I like him already. So, yeah, and then like the rest is history. I mean, I think you're a fan of Mark as well, right? Oh, yeah. In fact, it was the first time I got to meet Mark face to face down in Miami. So it was really nice to just kind of get off to the side. And two of us were able to, you know, finally meet face to face because we've been talking for years. but he's this nice,

Starting point is 00:40:11 such a great guy. One of the things I wanted to ask you, because you posted this recently, and I know you said one-tenth for the Ethereum, but I saw a post recently where you said, if you've got a mining rig, you need to turn it on right now. So for people that are listening to this,

Starting point is 00:40:26 most of our listeners are from the future. If you're listening to this, we're talking about a period of time where the Chinese have banned mining. They're forcing the rigs to come over here. We're right in the middle of a big bowl, market, and we're seeing a negative 15% difficulty adjustment after a negative 5 difficulty adjustment, nothing like a previous bull cycle that we've seen. The price has been punished over 50%

Starting point is 00:40:52 from the previous high through this bull run. And you had the tweet, if you've got a mining rate, turn it on. So talk to us about kind of more of a current event situation right now, where it appears like it's very profitable if you do have a mining setup. And and you're taking advantage of cheap energy cost. I was running a number of kind of mental models. So if you'll allow me to be a bit kind of all over the place, because my initial read was wrong. But I have lots of contacts in China to where we source our equipment.

Starting point is 00:41:27 So I was reaching out to them and saying, you know, what's the story? Like, is this real? Like, is this China ban real? And the initial stuff I was getting was this is sort of like 2017. The guys who are mining off of coal and stuff, There's a bit of a crackdown and a reorg going on, but people are moving to the providences that have hydro. So it's more of a shuffling of the deck inside China.

Starting point is 00:41:51 My initial read was that. And I said, you know, the real indicator will be, are there thousands and thousands of used mining rigs coming online for sale? And I hadn't seen that yet. I totally misread it, Preston. And this is, I think, a real countrywide ban, and they're even shutting down the hydroelectric plant stuff. Here it goes. We've lost significant hashing in the Bitcoin network.

Starting point is 00:42:19 Does hash kind of lead price or does price lead hat? I don't know. I was having this discussion with a number of people on Clubhouse recently. But all I know is that hash is falling off a cliff because those miners are shutting down. There was a significant number of miners in China. I believe the difficulty adjustment, it happens about every two weeks. It can only adjust at maximum 25%. So it will only drop 25%.

Starting point is 00:42:47 So the max is 25%, but we're coming close to a maximum difficulty adjustment down of 25%. So there's some real pain going on with the displacement of these Chinese miners. They're going to do a few things. They're going to move to friendly neighbors outside of China that allow for this. A lot of people are talking about a migration to Kazakhstan. But remember, if you go into Kazakhstan, there has to be infrastructure in place for you to set these rigs up. You can't just take massive amounts of these power-hungry miners.

Starting point is 00:43:24 There has to be something to plug them in. And that could take 12 months, 18 months or longer to set up. So if that's not there, then those guys go away, right? So there's going to be a segment of Chinese miners that go away. There's going to be a segment of really smart Chinese miners that have moved to favorable close proximity countries. And there's going to be some that are coming to the United States, without a doubt. That's probably the migration. But we're seeing the difficulty drop. Hashing is dropping. So it allows for S-9s, which are a prior generation of miner, to be profitable again. So that's when I said, look, if you've got a minor, plug it in right now, because you're going to participate in capturing some of the mining reward, you know, the 900 Bitcoin a day that come out, go get it. There's the cool thing about it. Regardless of the Bitcoin network losing China,

Starting point is 00:44:22 Bitcoin network really doesn't care. It's still going to put out its 900 Bitcoin a day, which is a fantastic thing. When you think about the programmatic monetary policy of Bitcoin, and I hate using these kind of buzzwords, but it is a fantastic innovation. The supply cap and the difficulty to me are the things that are so mind. Yeah, so mind-blowing to me. So massive opportunity for miners who have infrastructure in place right now, have technology, systems that control OPEX and CAPEX. They're going to be huge winners. The price is affected, China Fudd. There's more draconian kind of messages coming out, right? That sort of Damocles is still hanging over Bitcoin's head right now. But Bitcoin will survive this. And I think it comes out

Starting point is 00:45:11 better. Like, this feels like bullish kind of news to me. I'm with you. The price action in the short term, I'm sure somebody who got into this in the last three months. or whatever and was chasing the big run, is hearing this right now and just rolling their eyes at us. But I'm right there with you. This, for me, is insanely bullish to watch this amount of disruption to the hardware that's securing this network. It's rerouting itself geographically so that we even have more decentralization geographically, which I think is a huge win fundamentally. it's doing it with zero downtime. Sure, the block's got a little slower, not much. And it's going off without a hitch and it's doing in this completely decentralized way where nobody's managing

Starting point is 00:45:59 her leading anything. It's just naturally happening. So like you, I see this as being extremely bullish. It's going to be really interesting. I think the interesting thing right now is like how long and how much pain is actually going to materialize out of this because I just can't imagine the costs, especially to all these miners in China. Because I think, honestly, Jason, I think they were just as shocked and confused as you were, as I was, as everybody else in getting mixed signals as to how the government was going to regulate this and not regulate it was really kind of their opinion. And it's nothing of the sort as it appears right now.

Starting point is 00:46:36 So if you just think of it from an expense standpoint, from a business owner's standpoint, If you just got notification for an extraordinary expense that you were not expecting to shut down, relocate maybe into a completely different country, like the cost associated with that is huge. If you're a mining company that's been denominating your retained earnings in Bitcoin, for all these years, you have to sell some of your Bitcoin to pay for these massive expenses to relocate a significant portion of the hashing for the entire network. So, you know, when I watched the price action, at first I was like, hmm, 50% is not anything I expected on the cycle because the biggest we saw in the last cycle was like 38%. So we're seeing 50%, 50%. Then it was just dragging and it was hanging out and I was saying, man, something is different. Like, this is way off.

Starting point is 00:47:31 And then we're starting to see the videos come out of China of like these rigs just like massive, massive like companies and entities over there. that had these rigs and they're all coming off line. They're shipping them. And I was just like, okay, finally it's starting to make sense, to me at least, of as to why we're seeing what we're seeing. Preston, I mean, you know this world better than I, but it would be naive of me to not think that these miners hadn't short positions on Bitcoin going into this event as well. They denominate their treasury in Bitcoin. So there's huge cell pressure. They probably had short positions on as well, which continues it. You know, I call this kind of a Black Swan event,

Starting point is 00:48:12 right? Because China constantly does this, but this is what's super interesting to me. This is a really important time. You have this El Salvador move to make Bitcoin legal tender. You've got the discussion in major, you know, developed nations around central bank digital currencies. And you have China trying to institute their digital currency right now as a premium control mechanism to surveil, extract, control, etc. Bitcoin threatens that, right? So obviously you have to take out Bitcoin and put in this thing. I was making a joke. I was saying it surveil some more. I mean, you're exactly right. Like, I think for them, they were watching the price go. And they were like, okay, we're at the event horizon here.

Starting point is 00:49:05 This is getting to the point where we're going to lose control if we don't do something right now. Again, more bullish news. I'm not here pumping my bags, but it feels bullish to me. I have concerns. I'm worried about Maxine Waters at the end of this month talking this event and suggesting similar type kind of control mechanisms here in the United States. I don't know how that's going to all go down.

Starting point is 00:49:32 We'll see. So I think there's still, we're kind of a range bound. And I think that we still have some kind of potential moves down coming off of that meeting. But I still am hugely bullish on a six-figure Bitcoin this year. Let's take a quick break and hear from today's sponsors. No, it's not your imagination. Risk and regulation are ramping up. and customers now expect proof of security just to do business.

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Starting point is 00:53:11 All right. Back to the show. Yeah, I like you raising the concern. And, you know, if I was going to push back, it'd say, hey, there's others that, like Loomis, who are very bullish and that have positions. And I think that's the beauty in the United States is, it's not like one person is going to be able to influence this. It's going to be the collective and the interest of all those representatives that are going to have to hear both sides of this. And, you know, what's great is, is there are so many people that have substantial positions in this that I think are going to weigh in and try to

Starting point is 00:53:45 influence the elected officials to not make it such a big concern. But maybe that's just me being hopeful. But I like the fact that you raise that concern. I try to be very sober and realistic when Pomp and myself and Mark are looking at the market, managing our investments. And I know those guys do too, but I think you have to look at both sides of this thing. I don't want to just be here. They're like, oh, everything's going to be fine. They're banning all mining and China. Oh, it's fine. You know, it's not great.

Starting point is 00:54:16 Yeah. And the other thing that I find fascinating is in the same month, you have the biggest country population-wise in the world that's banning the mining process, maybe banning the exchanges and whatnot. And then you have, for simplicity, we'll just say, you know, El Salvador is one of the smallest nations on the planet that just made it legal tender. That irony is not lost on me, and I think that it perfectly encapsulates what this is all about. This is all about freedom.

Starting point is 00:54:47 This is all about giving power to the person that doesn't have access to banking, and like the whole Jack Muller's thing was incredible. So what a time to be alive, man. That's all I can say. It's incredible. And I think the president of El Salvador said something really wonderful. You know, I think it was like maybe 2001 that they adopted the U.S. dollar in El Salvador. And I may be wrong about that.

Starting point is 00:55:11 I hope it is correct, 2001. They did it because of banking. And he made the decision to make Bitcoin legal tender for the people. It hits right in the wheelhouse of what you're saying. But again, I can't ignore all of these events happening all at once. That to me is going to produce the kind of coiling event that produces the escape velocity to do this big move. Because people keep asking me, like, what's going to change to get to $100,000 Bitcoin, Jason, or $200,000 Bitcoin by the end of this year? Well, it's coming out of all this.

Starting point is 00:55:46 It's the resolution of the Chinese mining situation. It's, you know, we come out of the fog of war and we're like, hey, we're alive. It's okay. And I think we're off to the races with new entrance into this legal tender discussion because they are coming. More countries are coming. So, yeah, talk to us about some of your opinions on that. Well, I think you've seen some of the kind of central American countries and even some South American countries start to talk about it. I think Mexico is on the table as well. This is big.

Starting point is 00:56:19 And again, I don't know if having a discussion here in the United States about Bitcoin being legal tender is the right one. You know, I've got some views on that. I think we need to continue to clarify kind of how we tax it. And I'd love for it to be more accepted in regards to a currency. But the whole legal tender thing here in the United States probably is not the right direction to go right now. Well, I think with so many people were missing with the El Salvador piece that maybe haven't listened to Jack Mallors is it's not necessarily about Bitcoin the store of value. It's about Bitcoin the network and providing people that have been unbanked, access to something that immediately clears without having to have the infrastructure in place. So if you're a person in El Salvador and you want to still deal in dollars, and let's say you want to collect dollars from people that are living in America, you can now do that

Starting point is 00:57:18 instantaneously at no fee and you can still receive the dollars without, let's say, you're concerned about the volatility of Bitcoin and storing that in your personal treasury. That's not a concern. That's not what I think El Salvador is pushing. If people want to do that, well, fine. If you can handle that volatility in your personal treasury, well, then handle it. But what it's really providing is the remittance and just the evaporation of fee because you're now using the Bitcoin rails and it's happening instantaneously from dollars

Starting point is 00:57:50 to lightning back to dollars again. I think people here in the States, they don't have that problem. So it's just completely lost on them. But when you start going to some of these other nation states, like what you're saying, you think it's going to go into some of these other countries. I think you're right. And I think it's going to go there for Bitcoin the network, not necessarily Bitcoin the store of value.

Starting point is 00:58:10 That's just going to be an added perk later on, right? That's such a great point. I think a really extraordinary example of what you're talking about in regards to cross-border remittance is Nigeria. What's going on there is I understand it. Billions of dollars go across traditional cross-border remittance. rails historically. And what I think Nigeria saw was that fall off a cliff because people were using Bitcoin to do that. And then they, I think they made it or tried to make it illegal

Starting point is 00:58:41 to use and it's continued to persist. And I think it's not something that U.S. citizens are me really dealing with. But it's a huge situation in second and third world applications. And I'm an investor in enlightening, strike, zap, Jack Muller's stuff. I just want to preface this. The stuff he's doing is so mind-blowing and amazing. It's incredible. Think about what you said. Someone can be agnostic to cryptocurrency.

Starting point is 00:59:11 Like, there's no onboard. Like, you don't have to buy Bitcoin, understand Bitcoin, or some other kind of, you know, denominated cryptocurrencies. None of that. You can use your dollars and send them anywhere in the world. And that person can receive whatever denomination, of currency they want without the tax implications of buying and selling Bitcoin. It's looked at as a commodity or property here. So there's different tax laws not looked at as a currency. You're not

Starting point is 00:59:38 dealing with any of the volatility. There's no slippage associated with that transaction. And Jack and that company's resolved all of those issues, right? You can hold Bitcoin and no fee. You can hold Bitcoin if you want at the end of that transaction or you can just get your currency of choice. But that is absolutely fascinating. amazing and it's so disruptive. It's so disruptive in so many ways that I understand his passion. I understand why everyone is so excited. And I'm so excited for him. And I'm so excited for the application. Like this test case of a nation state is crazy. Like, think about this. It doesn't make any sense. I think the thing that's even crazier is how in the world is this guy 27 years old?

Starting point is 01:00:22 You listen to him talk and you're like, this guy has to be like 40, 45 years old with the experience and the knowledge that he has. It's just. I'm waiting for like Walmart to say that they bought some Bitcoin and Jack drops that El Salvador has made Bitcoin legal tender and they're using it over, you know, zap and strike over the Lightning Network. It's amazing. And if anyone's ever used the Lightning Network, like if you run your own node and ever use, like I have a node and I have a node and I use, like I have a node and I use. the Zapp wallet, but it is instant transfer. There's no 10 minute block time or 45 minute delay or anything. Instant transfer. It's pretty amazing. It's really fascinating. So I always bring that up because anti-Bitcoiners talk about the fact that you can't move money over the Bitcoin Noworg,

Starting point is 01:01:13 blah, blah, blah, blah, blah, blah, blah. But this is the beginning. And I think Bitcoin is the end as well. It's the beginning and the end. Somebody might be listening to this that just hears your story and they're motivated and they're saying, I want to go out and I want to be a minor. Explain from your vantage point the challenges that a person like this faces, how realistic something like this is, just kind of, I guess, put the reality check into what this would be for a person like that. If you want to do it at scale, this is an expensive endeavor. And there are a lot of technological hurdles, infrastructure hurdles that you're going to have to overcome to do this,

Starting point is 01:01:54 right? So if you want to hook up a few rigs at your house, you can do that. You have to get an electrician and you have to buy them from Amazon and you can do that. It'll cost you. If you buy some S-19s, they're about $8,000 each. So it's expensive. You'll make change every day. You know, you'll get dusted Bitcoin, right? But at scale, this is a big endeavor, right? And just to frame this, buying megawatts of power, if you went to a data center and you said, I want one and a half megawatts of power, they may charge you here in North America anywhere from six to 15 cents a kilowatt for that. So you're talking about paying somewhere between $80,000 and $100,000 a month in a power bill. So just again, just to do a megawatt, megawatt and a half

Starting point is 01:02:49 of mining. Your megawatt, you'll be able to maybe stand up 200, 250 of those S-19s because they take about 3,000, give or take watts to the wall. So, 200, 250 times $8,000. So there's your capital expense for just the machines, right? And the power supplies. Now you need some kind of racking system to set them all up, right? So that's going to be more infrastructure. You'd then commit all of that to this environment and then tie it to a mining pool, pay the mining pool 1%. And off you go. Now you're a miner. That's probably oversimplified. I absolutely love this because as we're thinking about this price action right now, and we're thinking about the CAPEX associated with doing this type of business and the capital outlay that's required to do this type of business up front.

Starting point is 01:03:48 And then the loan that's maybe borrowed against because debt is super cheap right now if you're borrowing. And so now you've got to continue to make those payments. And now you're just, you basically have been told shut it all down, move or sell it all. That's really expensive, super expensive. And if you've been collecting Bitcoin and holding in in your treasury, you now got to sell it. And I just painted the picture for one megawatt. These minds that we're talking about are 500 megawatts, 1,000 megawatts, 3,000 megawatt minds.

Starting point is 01:04:24 So take everything I said and just multiply it. It's simple math. This is a heartbreaking scenario for people who were, like, this was their escape from poverty. This was their holy grail moment. And it's been taken from them because of a government's initiative. and intentions. Bitcoin loves freedom, and it's going to naturally migrate to where freedom is. So true.

Starting point is 01:04:53 A couple last questions here, because, man, that hour went really fast. The first thing I want to tell you, so I'm down in Florida on vacation, I go into a sunglass shop because my sunglasses broke, and there's a kid in front of me, and he's asking the guy, hey, do you have pit vipers here? And I was like, whoa, so this isn't just the Jason Williams thing. Like, this is a really popular. And so I asked the kid, I was like, hey, pit viper is so I immediately asked him. I said, are you a Bitcoiner?

Starting point is 01:05:23 And he goes, no, man. He's like, look to me like, what kind of questions at? I just want to get some sunglasses. And I said, are these really popular? And he goes, oh, yeah, like, these are like the most popular sunglasses for like my generation. He's obviously younger guy. And he's just like, this is the most popular sunglasses for my generation. I was like, I know the guy who's like behind some of this.

Starting point is 01:05:43 So were you an investor? Did you stand this up? I know this is kind of an off-the-wall question, but this just happened to me. Yeah. So I was not an investor, but I will say this to you that I stumbled upon the website, which was like a 1980-esque video game kind of website. It's really, it's done by intention. I just said those are the most ridiculous Randy Macho Man.

Starting point is 01:06:10 glasses ever. Like, I want to get a pair. And so I do things sometimes just to decompress and, and like, I like to have fun. I would wear them around and they were ridiculous. Like, I'd be at the beach, you know, drinking a natty light. And I've got these sunglasses on and people are just cracking up. But no, I will take credit for starting the Pid Vipers kind of the whole launch. Yeah, man, that's, that's me. I definitely will take that one, Preston. I have pit vipers everywhere. My kids wear them. Everybody rocks the pit vipers.

Starting point is 01:06:46 So this naturally goes into my next question. So Dave Portnoy, when he goes on his rants, he's always talking about the parabolic guy with his ugly sunglasses, right? He's like, he's playing the whole thing. So my question for you is, is what kind of salad dressing does Dave actually like with his salad? He puts weak sauce on his salad, which is something. that you may not see, but they produce it at Barstool specifically for Dave. So that's what he uses. And they actually poured for him because he drops it a lot.

Starting point is 01:07:22 I think that's all we've got. All right. On a serious note, that was fun. On a serious note, you are a guy who's extremely successful at what you've done in your life. What is some advice? People are hearing this. People look up to you. what's some of the best advice that you can give them and just things that maybe they can really

Starting point is 01:07:44 kind of internalize or maybe take away from the conversation that can carry them through the rest of their life. We're at an amazing moment. When I was in college, the internet was born. The internet was there and I had no resources, but I realized it would be a big thing. So like you and I are sitting here, we're talking about something that I would expect, Preston, it's overwhelmed your life. Like, it's everything to you.

Starting point is 01:08:08 Like, you're not thinking about, I need to go buy a mall. That's not like something that you're out like hunting for the next piece of real estate. Like, I just can't imagine you're doing that. My single best advice right now beyond believing yourself and all those cliche things, like, it's really buy Bitcoin. This is an amazing moment right now. And you're not priced out. It seems expensive right now.

Starting point is 01:08:34 And soon, like people will. be. I mean, $35,000 Bitcoin is probably an enormous hurdle for people. Bitcoin's divided into 100 million Satoshes. You can own some of this. And owning some of it is critical. Like, I just can't emphasize that enough. And like, I could spend another hour talking about self-help and how to be motivated and going after life and all the rest of it, just like you can. But I don't want to miss this point, buy Bitcoin, own Bitcoin, learn how to self-custody Bitcoin. And what would you say for a person who hears that and they're saying, well, you know, I'm just, I'm not there yet. Is it something that you have to have just an intense amount of knowledge and hard work to really understand

Starting point is 01:09:15 it so you have the conviction like you obviously have? This is where I break from a lot of fundamental principles and get into some moral hazard where people will block me or think that I'm being irresponsible. I don't think you have to have a total comprehensive understanding of Bitcoin before you participate because it's really difficult. I'm saying buy a little bit of Bitcoin and learn along the way. Build this airplane while you're flying it because I've been around since, like I first heard of Bitcoin in 2012. I really started learning and studying 2015. I still don't know it all. Like I'm learning every day. If I waited to buy Bitcoin until I understood it in totality, I'd never own it. Like I never own it.

Starting point is 01:10:00 Well, it goes back to you starting your first company. It's very similar to what you were saying earlier in the discussion. The best way to learn about Bitcoin is to buy Bitcoin. The best way to learn about Bitcoin is to custody Bitcoin. Deal with an exchange. Connect your bank account to an exchange. Move some stats from an exchange to some cold storage device. Think about how to protect your seed.

Starting point is 01:10:25 That's how you learn. It's really through doing. This is a little scary right now. And I know if you bought Bitcoin at the top at 60 some on thousand, 64,000. I just want you to know I did the same thing. I did the exact same thing. I bought the top of Bitcoin every time there's a top. And I do it with intention. So I'm right there with you. I don't ever want to be like a guy that like, oh, he's saying this, but doing that. I bought the top. I bought every top of Bitcoin. I'm not worried about it. Just hold this asset, never sell it.

Starting point is 01:10:57 The thing we are all thinking about is like how do we live off of Bitcoin without ever selling our Bitcoin? That's the discussions I want to have with people. What are the strategies in the future so that I don't have to sell my Bitcoin, but I can somehow monetize it, borrow against it safely, like really deal with multi-sig? Like, is there a trusted third party that's an intermediary in this, but I still hold my keys? Those are the kind of discussions that we're going to have in the future because we're talking about owning New York real estate. And I saw some questions that people had posted as far as how you think about receiving an interest rate on that. Posits. You're, I think, BlockFi sent you a belt for receiving so much interest in a year. Talk us through how you think about this from a risk standpoint, because this, if there's one thing that'll, you know,

Starting point is 01:11:50 get people on Twitter emotionally responding, it's typically around this, this conversation as far as custody, you know, what's a responsible level of deposits with a third party versus holding it yourself. What are some of your thoughts on this, Jason? This is my opinion and this is what I was doing for me. I want to be known as someone who was pioneering in trying to create yield on his Bitcoin and digital currencies. And when I say digital currencies, I'm talking about stable coins at first. Because I'm retired. And even though I'm building companies, I was building PRTI since 2014 after I left fast med, I don't get a salary, right? I had an exit and I still have young kids and a wife who

Starting point is 01:12:40 goes to the tennis courts and all the rest of the stuff. Like, I still like watches and cars. So I want to continue to create more wealth, not tap into my principle and have a certain lifestyle. I got out of the stock market. I'm managing my own family trust. And I'm looking at the fact that I have an increasing position in Bitcoin, but there's no real mechanism. to drive yield on it. Like, really, it's just a, you buy the asset and you hold it. You get it off in exchange, you put it in cold storage, and that's that. BlockFi comes around, and they have at the beginning, like they're paying 6% APY on Bitcoin,

Starting point is 01:13:16 8.6% on stable coins, yada, yada, yada. And there's a number of companies out there, Voyager, Celsius, etc. So I'm not pumping any individual one. But I immediately said, look, let's test how stable this is. So I took $2.5 million, cash, turned it into july, GUSD, which is Gemini USD. It's a stable coin that the Winkle Voss twins produced out of out of Gemini. And it was domiciled at BlockFi. And they paid me 8.6% APY in Bitcoin. So it generated $215,000 of Bitcoin a year. Something like that. That's material. So in my mind, I'm like,

Starting point is 01:13:56 okay, data point. I can fiat mine Bitcoin with cash. I don't have to buy. mining equipment. I don't have to buy two and a half million dollars worth of mining equipment. I can buy this interest. There's some risk. You've got, how is BlockFi paying me 8.6%. They have a whole world of mechanisms and re-hypothication strategies and lending mechanisms. They've done a pretty good job of that. I'm an investor through Morgan Creek Digital in that company. I took it to another level. I said, look, compounding is like one of the most powerful forces in the universe. Let's drive some yield on Bitcoin as well. So I had a stack of Bitcoin in there getting 6% paying me in Bitcoin. So I had the cash. I started putting all of my

Starting point is 01:14:45 cash. And I don't know if you keep three months, six months of cash reserves, blah, blah, I took it all. So I was like 99% digital currencies. And then I had my Bitcoin asset shoved in a significant amount of it in a strategy to earn interest as well. Not popular, right? I don't own my private keys. So from a Bitcoin maximalist situation, a Bitcoin risk assessment, people just thought I had lost my mind. It's not popular. I didn't have any loss of my principal. BlockFi did an excellent job of protecting that asset. It was always available to me. and it paid a lot of yield. Is turning over your private keys to C-Fi the right mechanism?

Starting point is 01:15:33 Probably not. It probably isn't the right way to go. And I think Unchained Capital, they've developed a multi-sig kind of situation where they own a key, you own a key, and then a third party. I don't know who the trusted third party is that has a key, but that's a little interesting as well. That can work. I think Sovereign has developed a mechanism.

Starting point is 01:15:59 But I'd love to hear your thoughts as well on this. I'm someone who tolerates extraordinary risk. Like that's where I get the rewards. And knock on wood, I've been lucky that it turned out okay for me. It could have turned out terribly. My concern, especially with the CFI entities, is they're achieving a lot of their yield because part of their books are to institutional clients that aren't over collateralized. So like if you and I go to Blockfire, we open an account and we are over collateralizing

Starting point is 01:16:32 if we're borrowing money. And if we're making a deposit, it's not necessarily over collateralized because they've got the institutional side that's then borrowing. So I think that for me, that's the kind of the crux of the issue. The thing that I keep bringing up with Blockfire or any other platform we could be talking about Celsius as well is I think they need to. kind of manage some of their retail clients, separately firewall them from the institutional clients through corporate governance, basically breaking it into two different companies,

Starting point is 01:17:01 and then have a parent company at the top so that it forces the two entities beneath it to protect the retail investors that are over-collateralizing, that it's just completely over-collateralized at all times and then obviously settles in a 24-7 kind of marketplace. I think that as you look at that whole industry moving forward, I would like to see that being more transparent where they're kind of breaking the institutional books away from the retail books. But yeah, I think my concern, Jason, is more if we get into a really strong bull market. Like if we saw the price of Bitcoin run to 300,000 and at the same time we see traditional markets selling off hard, I would have a lot of concerns of the institutional under-collarrow.

Starting point is 01:17:47 Lateralized portions of their books, spilling over and producing risk for the retail clients. That's where I think that there's risk. So personally, like if I had money in these platforms, if I saw the price really start to run, not to the downside, but to the upside, I would start pulling everything out of there, personally. I think you're on to something, because those are the conversations that, you know, I've had internally, not with BlockFi, but with like my group of friends. and people who I check things out with.

Starting point is 01:18:19 And my concern is the upward volatility of Bitcoin as well. I've invested in unsuccessfully to date in a number of companies that are trying to provide insurance. What I want is a one-to-one Bitcoin insurance program so that in the event of a loss, not of my doing, but if I had my Bitcoin in a C-5 product, I put 10 Bitcoin there and they screwed the pooch on it. I had an insurance product that gave me 10 Bitcoin back.

Starting point is 01:18:54 I would pay, even if it was five Bitcoin, like you know what I'm saying? Like, I don't want to necessarily be paid some Fiat because I'm concerned about that. I would love, though, to get some percentage of my Bitcoin back. That would be interesting. I just don't know how to do it. And I'm looking for some company to provide me some type of insurance policy that I can pay with the application of my Bitcoin into these environments. If I go into CFI, I want some type of insurance. I don't know why it doesn't exist and why BlockFi, Celsius, they don't offer it. I think

Starting point is 01:19:30 Celsius may be working on something like that, but it's not something that is like a leading edge of their marketing campaign. That's what I would do. If I was the CEO of one of these companies, I would be offering an insurance program that's better than the next guys every day. Yeah, at a lower yield, and I think people would sign up that. Figure it out. You know, at the end of the day, I think if we warped ourselves five, ten years into the future, I really think that the market is going to view the unchained capital kind of model where you have one of three keys is actually being lower risk than something that is,

Starting point is 01:20:05 you know, has kind of a black box to it. So it's huge. I think the reason I like personally talking about it so much is because I think I think that if this actually presents the case for what real risk-free rates are, the repricing of everything on the planet of all equity-based instruments gets dramatically different than where we are today where these risk-free rates are just such a lie of epic proportions. If premiums are based off of a 6% return or higher, which is where I think this is going, I just can't imagine what that does to equity premiums in the coming five to 10 years, it's just going to be insane,

Starting point is 01:20:46 to say the least. I totally agree. What do you feel about, I know we're closing up, but what do you feel about the Fiat mining strategy that I'm talking about? Well, I'd never thought of it through the lens of a miner. So when you were describing that, I'm thinking, okay, so Jason's looking at it like, hey, I just spent $2.5 million on hardware and CAPEX to start a business, and I would produce this much Bitcoin in a year. And here's this thing over here that's doing the same thing without me

Starting point is 01:21:14 having to manage all this hardware. And at any moment, I can pull it back. I really want your listeners to think about a Fiat mining strategy where you take that three months or six months of like emergency money. You lose your job. This is what, and put it in a stable coin mechanism and allow it to compound in Bitcoin. Very powerful opportunity. This is why I'm really excited about what Caitlin Long's doing with Avanti. She is all about not re-hypothicating anything and really kind of building those firewalls. If you have a paycheck and you're sending it to Avanti and she's immediately turning it into her stable coin and you're receiving yields that are even close to what we're seeing, I mean, it's just a total, it's a total game changer. I'm an investor in Avanti too.

Starting point is 01:22:05 I can geek out and smile because I'm a huge fan. And I agree with you 100%. It's a totally different iteration of what BlockFi and Celsius, like this is a bank that's not going to re-hypothecate. Like, she's saying that that's the danger. That's an exploit. I think at the end of the day, when I'm looking at these two different worlds being constructed side by side, the legacy system and this whole Bitcoin economy, one is all

Starting point is 01:22:33 about over collateralization without rehypothecation. And the other one is the polar opposite. The traditional is the polar opposite of that. and they're completely incongruent with each other. As the printing presses going strong, these two worlds can have overlap without there being issues or concerns. If we get into a really strong situation where it appears like the one world is starting to take over the other, Bitcoin starting to take over traditional markets with this risk to the upside and everything in the old traditional market getting repriced with these higher interest rates, I'm just concerned

Starting point is 01:23:08 at how the two worlds can coexist simultaneously. You're going to have one that's melting down where everyone's fending for themselves. I'm a little concerned of when that happens, how it happens, and it's just kind of made me take a much more conservative approach to doing that. In the meantime, I think you're going to have a lot of kind of signposts along the way that are suggesting that that event's about to take place. In my opinion, we're nowhere near that right now. You've got a lot more time to react than kind of what we're seeing right now. But at the same time, I think that that's the risk. That's the thing that I'm concerned about when it's here. Who knows if it happens? I don't know. And then, like, yeah, we didn't talk about DFI, which is different than C-Fi.

Starting point is 01:23:51 Like, there's huge regulatory issues coming up for D-Fi. I think Mike Novogratz made a comment today about it, and I've been concerned about it ever since. It's why Pomp and I avoided the ICOs. educate me on this because I'm not up to speed on some of this. Yeah, I just think there's AML KYC issues everywhere when it comes to Defi. You've got taxation black hole event going on. I mean, you've got people taking Ethereum, converting it into a WAP BTC product, putting it on curve, putting it in WN. So now you've got a WBTC wrapped curve WN in a stake mechanism making 150% APY.

Starting point is 01:24:33 You know, it's like, then you have to unwind it. There are all these fees associated with it, getting back to ETH, no AML KYC. I mean, how are you allowing that to exist? Kinsler was before he took the job at the SEC was talking about specifically why he had many issues with a lot of this. So do you think that he's going to be coming out in the coming year and taking a much more aggressive stands because since he's been there, nothing's really kind of come out of it. My concern is it's so nuanced, so complicated, that it gets lumped into like Bitcoin.

Starting point is 01:25:10 That's what kind of sucks. And I try to stay kind of neutral in my political perspectives when we do these interviews. But listening to Elizabeth Warren talk about like energy fud, it scares me if then she turns her focus on C-Fi, D-Fi Bitcoin. Her lack of understanding about like the moralizing power thing that's going on right now, it's scary if you get in this complicated like hot potato game of defy and the tax ramifications, the easiest thing to do is shut it down. Yeah. Like, shut it down. Just say, look, this is a, an untracked dark pool of tax avoidance and money laundering. No, I think you're right because if you're not spending a lot of time to fully, fully understand it. It takes a lot of time to fully understand a lot of this.

Starting point is 01:25:57 It's just too easy to just lump it all together. And luckily, Ginsler has the background from teaching it at MIT and some of his previous comments before he came into the job where he has specifically said Bitcoin is not like these defy type projects and ICOs. He has a very distinct delineation between the two, at least in some of his previous comments. So hopefully he's the guy sitting at the head of the table kind of shepherding a lot of these conversations. But as you well know, they can go astray and go in many different directions with short narratives attached to them. Everything, though, is converging now. You're going to have these discussions this year on DFI, C-Fi, stable coins, central bank digital currencies, Bitcoin, is it a currency? Is it

Starting point is 01:26:45 property? Because of the pressure that El Salvador is putting on the world now? Like, what if I go to El Salvador or am I selling them property or am I using money? Like, it's money there, right? So why isn't it money here? Like, I'm confused. It's getting crazy. But you know, where there's a lot of volatility and risk and not necessarily knowing the outcome is where your massive rewards are like attached and tethered to.

Starting point is 01:27:13 Totally agree. That's why I'm like, you know what? Get in the game, buy Bitcoin. It's the single best advice I can give you right now. Because buying Bitcoin is an investment in yourself. Like when you buy Bitcoin and you're a Bitcoiner in front of me, I know you have your crap together. Like I really start to think about you differently.

Starting point is 01:27:30 Like I really don't have time for people who don't own Bitcoin. At this point, like I don't want to talk about anything else. So if you don't own Bitcoin or are interested in it, you're not going to be interested in me. And why would you talk to me? Because I look insane with my pit vipers and my Natty Light and all the rest of it, right? Ferrari and as Dave Portnoy said. Jason, thank you so much for making time.

Starting point is 01:27:56 This was an amazing conversation. I thoroughly enjoyed this and we definitely need to do it again. My pleasure, man. Hey, so thanks for everybody listening to the show. If you enjoyed the conversation, be sure to subscribe to the show on whatever podcast app you're using. We really appreciate that. And if you have time, leave us a review. So thanks for joining us this week and we'll catch you next Wednesday.

Starting point is 01:28:17 Thank you for listening to TIP. To access our show notes, courses or forums, go to theinvestorspodcast.com. This show is for entertainment purposes only. Before making any decisions, consult a professional. This show is copyrighted by the Investors Podcast Network. Written permissions must be granted before syndication or rebroadcasting.

We Study Billionaires - The Investor’s Podcast Network - BTC032: Bitcoin Mining & Entrepreneurship w/ Jason Williams (Bitcoin Podcast)

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