We Study Billionaires - The Investor’s Podcast Network - TIP260: Bitcoin Math & Value - w/ Plan B

Starting point is 00:00:00 You're listening to TIP. On today's show, we are super pumped to bring you our second part interview covering Bitcoin. Last week, we had Dr. Safedina Moose on the show, and he talked about some of the fascinating ideas like the stock to flow and time preference. But on today's show, we bring you another rising star within the Bitcoin community that complements much of Safedine's work quite well because he put a lot of mathematics and statistics into the ideas of stock to flow. Our guest is an anonymous personality in the Bitcoin space, but he has experience as a quant in a multi-billion dollar international fund, and he goes by the name Plan B.

Starting point is 00:00:40 This is a riveting discussion, and it will not take much time for people listening to this to realize that we're dealing with an extremely intelligent individual who's presenting some ideas that will undoubtedly give you a lot to think about after you're done listening to this episode. And so with that, here is Plan B. You are listening to The Investors Podcast, where we study the financial markets and read the books that influence self-made billionaires the most. We keep you informed and prepared for the unexpected. Hey, everyone. Welcome to The Investors podcast. I'm your host, Preston Pish, and, as always I'm accompanied by my co-host, Stig Broderson. Today we have Plan B with us, like we said in the introduction.

Starting point is 00:01:32 Plan B, I'll tell you what. We have been chatting on Twitter. We've crossed paths and it's just so exciting for me to be able to just talk with you and have a conversation for once. Thanks for having me. And it's great to be on your show, man. All right. So, hey, I want to start off just talking about a little bit of who you are because some people that are listening to this are not familiar with your work. And a lot of our community is not hardcore crypto or Bitcoin background. They're actually value investors. So what I want to do is I want to give people an introduction to your background as a quant investor. So talk to us a little bit about that and how you found yourself in the Bitcoin community and in this Bitcoin world of ideas.

Starting point is 00:02:14 I'm based in Amsterdam. We manage a multi-billion dollar balance sheet, mainly focused on mortgages, fixed income, loans, and well, the usual derivatives and structured finance products as well. I'm not a hardcore Bitcoin on myself and entered from a financial perspective. But of course, as an investor, the supply cap, the 21 million supply cap jumped right to the foreground. And I was interested in that, how you can keep a cap like that in a digital world. So the digital scarcity thing was what hooked me from the start. I'm an investor. I like the story.

Starting point is 00:02:46 I like the narratives, but I need the numbers. So there's a lot of numbers out there, but it's all TA, technical analysis and not much solid statistical, econometric analysis. That being my background, I thought that would be a spot that I, could add and help at least the investor part of the Bitcoin community. And that's what I really like about it, because whenever you talk about Bitcoin, one of the questions that always pops up is, so what's the value? Please tell the audience about your research. I started with the numbers. Of course, Bitcoin is a different animal than the things I normally

Starting point is 00:03:20 model. So there's no cash flow like a company or a fixed income instrument or a derivative. It's a bit like gold. It's just there. How do you value it? In fact, The same problem is there for gold as well, because you could, of course, look at the cost of mining of gold or Bitcoin. I just went with the digital scarcity idea. Also, after reading Safedin Amuss's book, the Bitcoin Standard, he has a whole chapter in there about stock to flow. And stock to flow is, of course, also known in the commodities world, gold, silver.

Starting point is 00:03:50 So I use that as a stock to flow measure as a quantification of the scarcity and then use that as an input in a valuation model. So maybe for the listeners who don't know, stock is the reserve, the amount of Bitcoin or the amount of gold that's above the ground that is just there. And flow is the yearly production. And then you just divide the two. Bitcoin, you have 17 or almost 18 million bitcoins right now. 750,000 per year are added. That number is rapidly declining, by the way.

Starting point is 00:04:20 But if you divide those two, you get a stock to flow multiple of 27. And what I discovered was that the stock to flow number is correlated with. the market value. So, for example, the stock to flow of gold is 55 or something, and the market value is about 10 trillion US dollars. If you put all those stock to flow numbers of all the commodities out there and put them on the line, you get this straight line, it's actually a power law with a super high R squared, super high correlation. It's just amazing. So there's actually two models out there. So there's the cross-acet model where it all started with gold and silver and that's that, et cetera. But there's also the time series model where you, if you plot the

Starting point is 00:05:04 stock to flow time series of Bitcoin of the last 10 years against the market gap, you can also see the correlation there and measure the correlation. And it's also really high, like 95%. Well, I know personally, whenever I read it, I was like, this is it. It's about time. Somebody has put what I felt was happening, but didn't know how to describe it, right? And I think a lot of people in the community had this intuition that what you were describing and what you were actually applying mathematics to was happening, but we just didn't know how to describe it. And so here you come into it and you start describing it. For people that are not familiar with R squared values, describe what this is.

Starting point is 00:05:46 Describe what it means whenever you model something and then the actuals compared to what the projections were, what that means. R squared is a statistical measure for goodness of fit of a market. model. So if a model fits really good to the data, like perfect fit, it has a high value, 100%, and if there's no fit at all, it's zero. If you look at the numbers for the cross-asset, Dr. Flow model, 99.5%. It's like almost a perfect fit. That's amazing. I've never, ever seen that before. And if you look at the 95% of the time series, stock to flow model, that's also very, very high. So it measures the amount of variance in the price, how much of that is explained by the amounts of variance in the stock to flow. And in fact, it's not the most important measure.

Starting point is 00:06:35 There are other measures, but it's a frequently use measure. So that's why I use it. So you come up with this model, and this model explains using mathematics what the price of Bitcoin should be. And a lot of that has to do with the halving function. So could you please elaborate on what that is and also give us an idea of the estimated price levels depending on the year that we end. The halving is a very important thing because every 210,000 blocks, that's about four years. The subsidy that miners get when they mine a block is halved. From an investors point of view, the supply is half. That doubles the stock to flow measure and increases the value as well. So especially those stepwise nonlinear function is very, very interesting because market are anticipating on it.

Starting point is 00:07:23 There's a lot of debate and narratives always around halvings. But if you look at the numbers, so we're now at a stock to flow of Bitcoin of 27. And that gives a value of about a little under $10,000. So we're about there a little bit over right now. But after the halving, if the stock to flow doubles, that's in May 2020. So that's eight months away. very interesting, very, very awesome event. The stock to flow doubles, but the value of Bitcoin goes eight or 10x, somewhere between,

Starting point is 00:07:53 let me give a rough range, somewhere between 50 and 100K, starting somewhere after May next year. Four years later, there's another halving in 2024. The stock to flow will go to 100, something we as humans have never seen before. Spectacular moment in time. and the value that goes mathematically with an asset that has a stock to flow of 100 is somewhere between $400,000 and $1 million per Bitcoin. When you say this has never happened in history, I just want people that are listening to this to understand what you mean by that.

Starting point is 00:08:28 And what you're saying is because we've never had a digital asset that had scarcity, and that's what we're dealing with here because that's what blockchain technology provides, which is a decentralized fixed supply of a digital token. And because of this halving function, you're introducing this in the past. If you were mining gold, you can keep mining and pulling more gold out of the ground. But with Bitcoin, that noose is tightening with this halving function. And that's why you're seeing the stock the flow gets so insanely tight. And we've never seen those kind of numbers before like you described.

Starting point is 00:09:02 And so you're suggesting that that's going to potentially create this situation where we see these very high prices on a digital fixed supply asset. Yes, and I think people underestimate the speed at which this is going. The stock to flow will double to around the gold levels after May 2020. That means the market cap of Bitcoin will be around the same as or a little bit under, but in the trillions, like one or two trillion dollars. Compared to the monetary base of the US dollar, which is three trillion dollars, that's already order of magnitude in the same range. Four years later, 2024, stock to flow, 100 and the market gap will be in the 10 or 20 trillion, that way above the US dollar. So it has all kinds of implications.

Starting point is 00:09:47 We're not going there smoothly, I guess. Now, I have to ask you, what is the end market cap for Bitcoin? Say that this goes all the way and replace the fiat currencies. And I'm not saying this is possible at all, but I think it's important to understand the impact of your model should this materialize. So for Bitcoin right now, we're around $180 billion. You mentioned gold's mind cap before, around $8 trillion. What are we looking at here?

Starting point is 00:10:15 First of all, I think if we hit $10 trillion, $20 trillion market cap, that will be the point that your unit of account will change maybe. It wouldn't make sense to measure things in dollars. The model is in dollars as well, of course. So that would be the point in time where you have to think about measuring maybe in Bitcoin. If we look at the dollar world, like you said, derivatives, what is it, $500 trillion or a bond market, $200, $200 trillion, I think. There's real estate.

Starting point is 00:10:44 It's amazing. And all those markets have a monetary premium that's beyond the fundamental value of those assets have. If you look at stocks, for example, the fundamental value of stocks, it's derived from dividends, but the dividend yield now is very, very low. Same with bonds with the very low, even negative interest rates. What is the value of a bond like that? That's actually real world problems that we have to deal with as institutional investor. And look at real estate. Real estate is bought as an investment, especially in big cities like New York, London, Amsterdam. The value of living is also there. But the monetary premium, if you will, is bigger. I think the monetary premium will go to the asset that captures and holds it best. And that will be Bitcoin. So it might as well trigger some very unintended consequences. like stock markets and real estate markets losing that monetary premium.

Starting point is 00:11:38 So when we look at the market cap of Bitcoin today, and I think this is important because a lot of people that are participating in this are looking at it from a very myopic point of view just because it's not something that they dedicate a lot of their time to. So they're looking at the price today and they're saying, wow, it's $10,700. That's really expensive for a Bitcoin, right? That's kind of the end of their analysis because they're looking at it from a very short-sighted point of view. But when you scope out and you hear those huge, huge numbers, those trillions of dollars, let's just say

Starting point is 00:12:11 $10 trillion or $20 trillion. And you're looking at the market cap where it sits today. So if one Bitcoin is priced where it is today at $10,700, the market cap is only $192 billion. Now you're looking at, if we go 10x from here, that's $2,000. If you go 100x, now you're at $20 trillion. That's where the price, if you would see these numbers that Plan B's talking about going up to a couple hundred thousand dollars or a million dollars, that's how you get there from here is because that market cap's going to go into the trillions instead of just being $200 billion

Starting point is 00:12:47 like it is today. I love asking this question. What is an interesting conversation that you've had recently, maybe with some of your friends that are quants, or you're saying that you're getting some pretty interesting emails from some interesting folks that are in some very high places. Has there been a conversation or has there been an engagement that is at the top of your memory as being like, wow, is this really happening? What amazes me most about a lot of the conversations I have with my traditional colleagues,

Starting point is 00:13:15 if you will, not with the Bitcoin colleagues, is the level of misunderstanding. And even the people that are a bit positive, they don't really trust the high predictions made by the Stock to Flow model, for example. They just don't believe it. That's something that reminds me of the Black and Shoals model at the time. I really like that story. Black and Shoals won the Nobel Prize in economics. They invented in 1973 the option pricing model.

Starting point is 00:13:43 And they put it out there. It was in public. Not much people understood it. Not much people believed it. And basically, there was like 10 years of time to exploit the model while it was out in the open. That's also what's going to have. happen with the stock to flow now. People just don't believe it or don't know it or are so far behind. And that's what amazes me in all the discussions I have.

Starting point is 00:14:06 Let's take a quick break and hear from today's sponsors. All right. I want you guys to imagine spending three days in Oslo at the height of the summer. You've got long days of daylight, incredible food, floating saunas on the Oslo Fjord. And every conversation you have is with people who are actually shaping the future. That's what the Oslo Freedom Forum is. From June 1st through the 3rd, 2026, the Oslo Freedom Forum is entering its 18th year bringing together activists, technologists, journalists, investors, and builders from all over the world, many of them operating on the front lines of history. This is where you hear firsthand stories from people using Bitcoin to survive currency collapse, using AI to expose human rights abuses, and building technology under censorship and authoritarian pressures. These aren't abstract ideas. These are tools real people are using right now. You'll be in the room with about 2,000 extraordinary individuals, dissidents, founders, philanthropists, policymakers, the kind of people you don't just listen to but end up having dinner with. Over three days, you'll experience powerful mainstage talks, hands-on workshops on freedom tech, and financial sovereignty, immersive art installations, and conversations that continue long after the sessions end. And it's all happening. in Oslo in June. If this sounds like your kind of room, well, you're in luck because you can attend

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Starting point is 00:18:36 are different than one settled in cash? Yeah, great question, especially today since Bact is opening its warehouses today. Derivist markets are very important because of the network effect for Bitcoin. It's one of the network effects, and it opens the market, makes the mark more attractive for institutional investors. Big investors are always on the lookout for a way to sell their investment. It has to be a liquid market, a deep market. They must always be able to sell at a normal price. And futures markets enable that. So you can always sell outright, the Bitcoin in this case.

Starting point is 00:19:14 But with the future markets, you can also sell and close your position in the futures market. There are several futures markets and one big one in Chicago, the CME, open since 2017, I think. And the CME, that is a cash-settled futures exchange. So you can sell and buy Bitcoins for a price somewhere in the futures to be settled in the future, but always settled in cash. So you could theoretically sell more than 21 million Bitcoins, even if there's not even 21 million Bitcoin. So, of course, you need a lot of cash for that, but you could do it, especially in a context of quantitative, and governments having endless access to the printing prices. That is not a favorable thing.

Starting point is 00:19:55 There could be Fiat games out there, and that's why it's very, very important to have bucked opening his warehouses today and going live 23rd, I think, of September, with a physically settled futures contract. So in order to sell Bitcoins in the future, you actually need to have those Bitcoins. If you don't have them, you can't sell them. And that changes the whole game,

Starting point is 00:20:16 because first, it can be arbitrage between CME and Buck, between Chicago and New York. If the price are very different, you just buy and sell at the same time in the future against different prices. It will be like free money. So that will be arbitraged away very soon. And the second thing is it will be very, very hard to open a short position. Because if you sell your Bitcoin and you know you have to deliver those Bitcoin, you have to have them. You have to buy them. And when the price goes up, it's not a matter of putting it.

Starting point is 00:20:46 in more fiat, you really need to buy those Bitcoins. So I think people will be very, very cautious shorting that thing. My personal opinion, I was hearing you talk about the sharp ratio and position sizing. And this has been something that I've been kind of shouting from the mountaintops after hearing you talk about it. I personally think this is the elephant in the room for all of financial planners and managers in the world right now. I think this idea is absolutely massive, this whole idea of correlation, sharp ratio, position size. Yes, and it ties into the derivatives pricing as well. So a sharp ratio is a measure of risk return, a risk adjusted return. Actually, you divide the return of an asset by the risk, and the risk is usually measured

Starting point is 00:21:37 in standard deviation. Now, it's very hard to see assets that have a sharp ratio above one, where the risk is smaller than the return. Usually the return is higher than the risk, and the return is lower than the risk. So you get a sharp ratio of less than one. And in theory, of course, the more risk, the more standard deviation, the more return. And that's what you see in the sharp ratio.

Starting point is 00:22:00 Now with Bitcoin, it has a superior sharp ratio, because it has average, it does are all average numbers. It has average returns of above 200% per year, and the worst loss is about 80%. in a year, which is a lot, of course. It's the reason why people don't invest in Bitcoin. It goes, whoa, it has such high volatility. I never understand why people say that. Because, okay, 80%, that's a lot. And I actually did that three times, right? It did 2011,

Starting point is 00:22:29 2014, and 2018. All those three times, you see the papers and the mainstream media write about the tulip bubbles, and it's all a Ponzi and blah, blah, blah. But it's just an 80% drawdown and 80% is less than 200%. That's what I wanted to say. The sharp ratio is above one. And for a quant, someone who is used to pricing derivatives, that's like a light bulb, bang, okay, we can use this from very neat mathematical tricks. To keep it simple, it's all about investment sizing if you see numbers like this. It's the same with poker, by the way. Maybe that's recognizable. It's the Kelly criteria. Depending on the odds that you have, you can, can size your bet. If your odds are low, if your sharp ratio is low, you're not going to bet the

Starting point is 00:23:16 farm, you're going to bet a little bit. And if your odds are better, you bet more. For example, size your investment to 50%. You would not have the risk of minus 80%. You would have a risk of minus 40%. That's more or less what stocks would give you. And the return would be not 200%, but would be 100%, which is much, much more than stocks would give you. So if you go to the extreme and invest just 1% of your portfolio in Bitcoin and let the other 99% do nothing, keep it cash or something, only 1% in Bitcoin, that would outperform the S&P 500 over a four-year period for all years in the past six, seven, eight years.

Starting point is 00:23:58 So every single year, Bitcoin, 1%, 99% cash would outperform the SMP 500. Yeah, I think you're right about the elephant in the room. That opens all sorts of doors for arbitrage. So I was reading a book where they were interviewing Ray Dalio and Ray was giving his points on how he does his approach and for people, you know, most people on our show are familiar with Ray Dalio. But if people aren't familiar with Ray Dalio, his personal net worth is anywhere from like $16 to $18 billion. He runs the biggest hedge fund on the entire planet, hundreds of billions of dollars. Ray was asked, okay, so like, what's your secret sauce? and Ray says, well, I believe the holy grail of investing is really kind of two things. It's finding something that has a very high sharp ratio, which is what you just described, the highest sharp ratio you can find. And then you have to mix it with 10 to 15 uncorrelated, at a minimum, 10 to 15 uncorrelated positions that also have high sharp ratios. So when you combine the

Starting point is 00:25:00 uncorrelation with very high sharp ratios with which you just described, that's how you can optimize a portfolio that minimizes your downside risk, but maximizes your upside return. So we've already established the return relative to the risk, your majoring volatility with risk, that Bitcoin has outperformed the U.S. stock market, all the commodity indices, the fixed income market, even though central banks are bidding them into oblivion. I mean, you could go on and on. You can list every single asset. Bitcoin is outperforming them from the sharp ratio on every single one of them for the last five years without incident in the last five years. I totally agree with Ray Dalio. It's all about the high sharp ratio and Bitcoin has a high sharp

Starting point is 00:25:43 ratio and that is not even taking into account the correlation, diversification potential that's there. Bitcoin could be that safe haven asset, that gold was in the past. There are some studies out there that show this already that Bitcoin has a negative correlation to equities, for example, them to other assets, all other assets, basically, which will make it the holy grail, right, of all investments. It has a high, sharp ratio and negative correlation with all the other assets. However, we haven't had a real financial crisis in the last 10 years. In a way, we haven't been able to really stress test this correlation, diversification potential of Bitcoin. Because Bitcoin was made at the beginning of 2009, just after, at the height of the global financial

Starting point is 00:26:30 crisis as a response also to the global financial crisis. So that was the last big dips we saw in equities. And we're actually heading, of course, fast towards the second recession and the crisis. Inverted yield curves and all the other measures are pointing to a next recession. And that will be the time that we really test Bitcoin for negative correlation with other assets. And that would make it undeniable for even the most traditional institutional investor. Interesting. So let's zoom out here. There are $17 trillion of negative yielding bonds in this world.

Starting point is 00:27:08 I know you have some very interesting thoughts on how that plays into the Bitcoin thesis. Could you please elaborate? The negative interest on $17 trillion worth of bonds is together with the quantitative easing the reason I am in Bitcoin. That was actually the reason I was actively looking for a high-sharp ratio, non-correlated asset, a hedge, if you will, against the next crisis. And that's how I came on the path of Bitcoin. I find it amazing, the amount of negative interest rate bonds. It's uncharted waters for sure. We have never seen this before. I also think it's unsustainable and it has unintended consequences.

Starting point is 00:27:45 The matter of fact, there's a very important report out there. It's an IMF report about deep negative interest rates. And it's not a research. It's a proposal. It's a readily implementable proposal. Deep negative interest rates means minus 5, minus 10%. That report is out there, ready to implement. I actually talk to the writers of that report. One of them is very active on Twitter. It's Miles So Kimball. Very interesting to see what the intentions are, what the thinking of the central banks is behind those negative interest rates and especially the deep negative interest rates, because we will go there. And in fact, the intention is really good. It's like a bank tech. They are saying, okay, the banks and all the big bad boys, they are getting.

Starting point is 00:28:27 negative interest rates, so they're earning nothing. But of course, for the public, the retail investor, they cannot go to zero. They'll be at zero, which is low, but still better than all the big investors. That's a way to make it better for the common man. That's the intention. It is a good intention. What's also an argument of that IMF paper is that it's better to go negative interest rate route than to let it all explode, have a recession, and then build it up from there. The losses are bigger in that scenario. So let's go to negative interest rate trade route. That's one opinion. I think the unintended consequences like gross misallocation of capital is making it worse than better. Most people like me or either an investor or a quant or something are looking at the markets,

Starting point is 00:29:12 they are starting to see the unsustainability of this because we're talking about 25 to a third of all the bonds out there that are negative yielding at the moment. Of course, you can still buy them make money if the interest goes even deeper, you make a lot of money in fair value on those assets. That army of people hedging, not trusting this negative interest rate scenario and hedging their positions accordingly with Bitcoin, that army is going to grow slowly but steadily every day. Back to the idea that you stated there as far as well, if people have an expectation that the rates are only going to go lower, then they could buy them and sell them at a profit. It is the definition of the greater fool's theory of investing, where you're entering into a contract that you fully

Starting point is 00:30:02 know you're going to lose money on. If you hold it into maturity, you are guaranteed to lose money. It would be like you and me saying, hey, let's shake. I'm going to give you a hundred bucks fully knowing that you're going to give me 95 back in the future when this matures. You're literally signing up to lose money. The only way I can make money in that deal is if I find a fool that's greater than myself, I'm issuing it there at a $5 loss. The only way is if somebody else comes along and is willing to take an even bigger loss, there's just no way that's sustainable. There's no way that's sustainable. It's the very definition of a Ponzi in a way, right? Yes, yes. I mean, it's, it is the definition of a Ponzi scheme.

Starting point is 00:30:43 So historically, there's plenty of examples of hyperinflation in the world. So we could go back to the 1920s. That's the most famous one with the mark against gold. you kind of look at that chart and you can just see this massive printing of the mark through that period of time. I'm kind of curious because if we're measuring the value of Bitcoin compared to all other fiat currencies, this chart looks very similar. The parabolic shoot-to-the-moon kind of printing of fiat in relation to the value of these 21 million bitcoins that has a fixed supply. I'm kind of curious if you've ever thought about doing any kind of research or that you've heard of any kind of research as to how long that takes to play out because we're dealing with the global

Starting point is 00:31:29 supply of fiat versus just the fiat supply of a small country that we've seen in the past, because we've never seen anything like this on a global scale historically. Actually, two things. I have one chart out there that compares the Wimar, 9023, hyperinflation in Germany with Bitcoin. Really scary how well it tracks that Weimar picture. And the Weimar picture is, as you described it, it's very parabolic, even on a lock scale. Last 10 years, Bitcoin tracks that Weimar chart, that hyperinflation chart, perfectly. As a matter of fact, I was looking for some other asset that had the same performance as Bitcoin had the last 10 years. So that did the 10x every two years, for example.

Starting point is 00:32:09 That was nothing I could find, nothing even close except this Weimar chart. I think we can add the Venezuela chart and Zimbabwe chart by now. But yeah, on a global scale, it might be even worse. I'm actually doing some research to predict which country will be the first one to adapt Bitcoin, which I mean, you can calculate which ones are smaller monetary base than Bitcoin already, which countries don't have large exports, so they don't have the Triff and dilemma that you see very well, displayed in the Trump tweets at the moment. US has a big Triffin dilemma.

Starting point is 00:32:49 They have a World Reserve currency, US dollars. You can print it. That's the advantage. But of course, the high value, the strong US dollar, makes it more difficult for the companies like Boeing and Caterpillar to export because their export will be more expensive for other countries, say for Europe or Japan. So the Triffin dilemma is real, but it's not there for a lot of countries,

Starting point is 00:33:09 especially the smaller countries that don't have export. So you can rank all the 150 countries against those kind of criteria and actually quite easily predict which countries it will be very beneficial for to make the jump to Bitcoin. 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. That's why VANTA is a game changer. VANTA automates your compliance process and brings compliance, risk, and customer trust together on one AI-powered platform. So whether you're prepping for a SOC 2 or running an enterprise GRC program, VANTA keeps you secure and keeps your deals moving. Instead of chasing spreadsheets and screenshots, VANTA gives you continuous automation

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Starting point is 00:36:53 I think the United States has too much to lose to give up their reserve currency position. Same, for example, for Germany, it has too much export to make that jump. If you think about it, the Triffin dilemma is a real monster and Bitcoin is the solution. So that's one of the big misunderstandings at the moment. I hope gets out of the way soon. I might play a role in that as well. I would really hope that central bankers, the IMF and all the big banks, come together, talk about this situation that's out there now with quantitative easing and negative

Starting point is 00:37:26 interest rate yields and maybe the next recession. Because the intention, I'm sure, is good. They want to solve it. And Bitcoin, if well explained, could very well be a solution, our only way out to all this. It gets rid of the Triff and Dilemma, but you can only do it if everybody does it. So nobody has the disadvantage. So if you can come to an agreement with China, with the U.S., with Europe, Japan, and all the big countries, the G7, was China.

Starting point is 00:37:55 For the world, that could really mean much. That could be the next step to a better money technology that Bitcoin is in my age. in my opinion. I think if there will be a coalition of countries, it will not be the big countries because they're fighting over a lot of stuff and they have too much to lose. But it could very well be a coalition of smaller companies that go together. And there are some very pro-Bitcoin small companies out there and growing like Singapore, like Malta, like Aslan, La Littal, small high-tech countries that probably will cooperate. So Plan B, what is the number one thing that you think people misunderstand about Bitcoin.

Starting point is 00:38:33 Yeah, that is a tough question. This being an investor podcast, I think one of the big misunderstandings is why Satoshi left. If you know the answer to that question, if you research it and know the answer to that question, you protect yourself against a lot of misunderstanding because there is a lot of scammers and fraud and misinformation out there. Why did Shatoshi leave? Why is it important not to have a leader? no CEO, no corporation, no government, no pre-mind.

Starting point is 00:39:03 If you understand why that is and why you need just a peer-to-peer network and peer-to-peer mathematical protocol and some energy to protect it, you know the answers to a lot of things in Bitcoin. So one of the last questions that we always like to ask is, where can the investor go and make their own informed opinion about the topic? Where should the novice investor go to seek the best? on biased information. I would certainly advise them to go look into their circle of friends and family

Starting point is 00:39:35 who is already a Bitcoin export or knows about Bitcoin to teach from them. That goes a lot faster. But of course, you don't know how good they are. So I'll give some resources. Please read the white paper. The white paper is a must read. If you haven't read it, go read it. It's only nine pages, including the references.

Starting point is 00:39:54 It's very concise and easily written and it has everything in it. It will make a lot of things clear and you won't be sensitive to scammers anymore. So read the white paper then. Safedina Musa's book, the Bitcoin standard, of course, is the Bitcoin Bible. You should read it. It's longer, but it's a good read. And I would say all the podcasts that are out there right now, your podcast, Stefan Levera has a nice podcast. Lots are down what Bitcoin did.

Starting point is 00:40:22 Things are going so fast that books are too late. Articles also. Podcasts are really a great thing. I never listened to a podcast before I was in Bitcoin. Now I listen to a Bitcoin podcast every day in the car. That's really good. Make sure you have the right ones. So the ones I mentioned, that's important for investors, but also for journalists. There is a site out there. It's called H-I-V-E.1. H-I-V-E-1. And it has a list. It's a sort of Google for who is who in Bitcoin land. So you can see who is number one, two, three. It goes to a thousand. But if you want to know something about Bitcoin, follow those people first. And then you can spread out to others. But make sure you follow those people because they know they are mathematically chosen to be on that list because they did a lot of podcasts. They wrote a lot of stuff and they are respected by the community. I absolutely love that last point.

Starting point is 00:41:18 It is so important that you get your information from the right people. We'll have a link to that Hive site that has that list. And I'm telling you, folks, make sure you follow the right people. Just don't follow some random person that you come across on Twitter because they might be trying to push or shill something that is in their self-interest and not yours. And I think that when you go to a person like Adam Back or Nick Zabo, these guys that actually have contributions to writing the code for how the encryption works. Trust me, you're going to get a much more quality response and understanding as to how things are happening, what's the vantage point to look at that's not going to get you

Starting point is 00:42:01 in trouble because there's a lot of different interests out there in this community, mostly because people don't understand what it is that they're doing. So I would tell you that to hyper-focus on the top few people that actually are the ones that are creating and designing all of this. Plan B, fantastic comment there. I'll have that in the show notes. Please give people a handoff to yourself and anything else that you want to put out there for the community about yourself? So you can find me on Twitter. Plan B at $100 trillion dollars.

Starting point is 00:42:33 There is a medium article with all the stuff and the model described in it out there. It's on the Pint Tweet. If you want to calculate Dr. Flo yourself, play with the models. There's a GitHub as well. It's under the PIN tweet with all the models and data available for the Qants that love to do it themselves. Yeah, I think that's about it. But Plan B, we can't thank you enough for coming on the show. Your research is just fascinating.

Starting point is 00:42:58 It's so excited to see somebody. I'm so excited to see somebody come into the community and just drop these really high quality papers with a lot of analysis in there, a lot of math in there, and it's just really exciting to be able to chat with you. So thank you so much for coming on our show. Thank you. All right, guys. So this part and time in the show, we'll play a question from your audience. And this question comes from Adam. Hey guys, I'm a huge fan of your podcast. Thank you so much for your amazing work. So I recently listened to Ray Dalio's The Impact of China's Growth on the World Economy interview. During the

Starting point is 00:43:33 discussion, Dalio describes China as the rising power that challenges the U.S., the existing world power. Here are my questions. How should one invest considering China's rising power? Would you suggest investing directly in Chinese stocks? If yes, which one would you consider? Thank you so much and have a wonderful day. That's a great question. I think it's important not to overestimate the effect of the rise of China for a U.S. stock investor. The rise of China is known by stock investors in general, just like the rise of India is known. Based on the Shillard PE, you can expect something like a 6 to 7% return investing in the Chinese stock market, which is definitely not expensive. but it's also not very cheap.

Starting point is 00:44:19 So it's a valuation that reflects both the potential in China, but also the risk of investing in a country where regulation is very different than what we're used to in the West. So to your question, I personally only own one Chinese stock, and that is Alibaba. And this is not a recommendation by any means. I also bought the stock at a different price than what it is today. But it's more a bet on e-commerce in general,

Starting point is 00:44:43 which of course is heavily dependent on GDP growth, which is favorable in China compared to the West. But it's also because I think that China has an advantage in collecting data, which is very important for big tech companies. And I think that's fundamental for the very structure of what Edibaba is trying to achieve. But it's important for me to underline that this is not a bet on China per se, but on the specific company. So keeping that in mind, I do not recommend that you invest in China for the sake of investing in China if the sole reason is that you think it would prosper and grow stronger. If you were to target specific Chinese stocks, you would need to understand the Chinese culture better, as it is to a last extent a closed

Starting point is 00:45:25 economy compared to many other economies. You could buy a Chinese ETF tracking the stock index, and I can't see why you won't make a decent return, say, if you hold it for at least a decade. But if you do, I have a few words of caution. Some of them are quite expensive in management fee, which they shouldn't be for a passive managed index. And another issue is that the market-weighted funds are tilted heavily into financials. Up to 50% is not uncommon, which pose a risk in itself if you decide to go for a specific Chinese ETF.

Starting point is 00:45:59 So, to sum up, yes, like Redalio, I'm bold long-term on China. I do think there's a paradigm shift, but I do not invest differently. and it doesn't change my overall strategy. So for me, I think investing in China is fairly straightforward. First, the ETF approach that Stig mentioned earlier is the simplest way to get exposure, watch the fees like Stig said, and also make sure that there's not too much exposure to the financial companies. If you're feeling more adventurous in looking for individual companies, I'd tell you to focus on three things.

Starting point is 00:46:33 The first thing would be find a company that originated in China. The second thing that I would tell you is look for companies that are fairly large in market cap, but still have room to grow. And then the third thing I would tell you is look for companies that have government leadership entrenched into the company. So companies like Tencent and Alibaba are perfect examples of businesses that started in China. They're large and still have even more room to grow. And they have tons of government entrenchment. I know this sounds really simple, but let's face the facts.

Starting point is 00:47:07 China is a dictatorship that is dressed up in a capitalist costume. So if you're going to try to participate in those markets, I think the best way to try and achieve that is through that three simple step process. If you're buying individual companies and if you want to do the ETFs, that's fine. So as a side note, I don't personally have any investments in China. but Adam, for asking such a great question, we have an online course called our intrinsic value course that we're going to give you completely for free. Additionally, we have a filtering and momentum tool, which we call TIP Finance. We're going to give you a year-long subscription to TIP finance completely for free. Leave us a question at asktheinvestors.com. That's asktheinvestors.com.

Starting point is 00:47:52 If you're interested in these tools, simply go to our website, theinvestorspodcast.com, and you can see right there in our top level navigation, there's links to TIP finance and also the TIP Academy where you'd find the intrinsic value course. All right, guys. That was all the Preston and I had for this week's episode of the Investors podcast. We see each other again next week. 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 - TIP260: Bitcoin Math & Value - w/ Plan B

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