Kind: captions
Language: en
[Music]
Ral Paul, welcome to the show, man. I am
super excited to talk to you.
I'm really excited to be here. It's
going to be a lot of fun, I think. All
right. So, for people that don't know
who you are, you're a globally
recognized macro investor, master
investor as well, uh co-founder of Real
Vision, but if you don't mind just
walking people through uh a quick
synopsis. And for anybody um that isn't
used to me talking about finance and
cryptocurrency, I am just on a mission
to get people to understand what I think
is happening now, which is uh I've heard
you use these words and you are a far
better person to listen to than me. uh
but that there's a a massive wealth
transfer happening right now that gives
people who have traditionally been
disenfranchised a chance to get in. So
everybody even though um you know this
is sort of beyond the scope of my
traditional mindset conversations I
think it's one of the most important
conversations to be had right now. So
with that Ral if you don't mind giving
us the background that'd be amazing.
Yeah I'm going to give you a background
about me and why I got into crypto as
well as that's kind of where we're going
with this conversation. So my background
was 30 I'm 31 or two years financial
markets. So I grew up in that world. I
grew up in the world of what is known as
macro investing. Macroin investing is
when you look at all the asset classes
everywhere around the world. So bonds,
equities, commodities, currencies,
um credit, all of these things and you
try and look for what is the best return
you can get. Maybe that's in India,
maybe it's in China, maybe it's in the
US. So that's the mindset. We have this
3D ever evolving jigsaw puzzle in our
heads of the world driven by the global
economy. Hence why it's called macro
because it's macroeconomics. So it's
driven by the business cycle trends of
the global economy. So I did that. I was
on the sales side for many years. Uh I
ended up at Goldman Sachs where I
started and ran the hedge fund sales
business in equities and equity
derivatives. My whole career basically
had been getting to know the world's
most famous hedge fund managers from
kind of 1990 to 2000. It was like being
taught acting by Robert Dairo or, you
know, Lawrence Olivier. I mean, it's
ridiculous. You know, my my daily calls
would be Stan Duckul, Paul Tuda Jones,
you know, the guys at Soros, etc., etc.,
etc. So, that was it. Plenty of crises
and exciting stuff happened over that
period, very macro. Then I decided to
make the switch in 2000. I saw the
recession was coming and I wanted to
invest and make money from it. So, I
moved to one of my biggest clients,
which was the biggest hedge fund firm in
Europe at the time called GLG Partners.
and I started and ran the global macro
hedge fund there. So that was now me
taking these bets uh on a global basis
over that kind of very rocky period of
2000 2001 2002 2003 in 2004. Then I
decided I had enough and I moved to the
Mediterranean coast of Spain um and
started writing macroeconomic research.
I'd been around the hedge fund business
longer than most people at that point
and I had a huge amount of experience
both in knowing all of the players and
also being a player myself. So I started
writing from that perspective um
macroeconomic research called the global
macro investor which I still write 17
years later. Um and that's read by most
of the world's most famous hedge fund
managers, sovereign wealth funds, asset
managers, that kind of stuff. Really
privileged position. And it's that
privileged position that got to me where
I am today. Why I started Real Vision
and why crypto because they're all part
of the same thing. So there I am 2007
and I'm thinking the world is about to
fall apart and I'm writing about it and
you know I'm one of the people that was
you know on the right side of that and a
lot of the people in the film the big
short were clients of mine and we all
kind of knew what was going on. The
world falls apart. Tons of people make
tons of money out of it. Tons of people
lose their entire livelihoods.
This is not good and it's not. And so I
started asking the question because
people come up to me in the street and
say, why didn't we know?
And I'm thinking, yeah, why did I know?
Well, fine, I've got a lot of experience
and I managed to piece together the
jigsaw puzzle, but why does nobody else
get to know this knowledge? This was
wrong. And this was the rise of Occupy
Wall Street. This is the rise of the
anger of we're being screwed somewhere.
We don't know how we're being screwed.
And I re I believed in that, too. Then I
was in Europe for 2012. We almost lost
our entire banking system plus the EU
itself. I remember having to go buy a
generator and dried food because I
thought we were going to follow uh
Cyprus and we were going to lose the
banks over one weekend. We would have
lost the banks on Monday. The IMF forced
Spain into taking an 18 billion bailout
which rescued it in time. Then
eventually we end up with this draggy.
I'll do anything, you know, that it
takes to stop Europe falling apart
essentially. And that stopped the tide.
But the same thing happened. I was at
the epicenter of it. I knew it was
coming. We all made money out of it
and everybody around me and I was
yelling to everybody, listen, you've got
to be careful. You know, friends of mine
got destroyed in that in Spain. The
property market imploded. Everybody's a
real estate developer. You know,
everybody got killed. Friends went
bankrupt. And they were like, why didn't
we know? And first I'm like, I have been
telling you this endlessly, but because
I wasn't on television at the time, they
don't take you seriously. I'm like, it's
bizarre. You know, I write stuff that
the world's most famous investors read,
but if I'm not on television, for an
average guy, I don't have credibility,
right?
I'm like, okay. I at that point started
having two tangents, which is realizing
I needed to do something about it. that
this dis disparit information level that
one group has everything everybody else
has nothing and the other thing is I
needed to make the world safer because
we're kind of screwed
because of this over financialization
all the debt that we could lose the
system at any point nothing had gone
away the printing of money was just a
way of wallpapering over the cracks that
the that the um earthquake had left
behind so I'm like okay what can I do so
the idea I had with a bunch of people
was try and set up the world's safest
bank. Um, and I tried to go and do that.
It was slightly arrogant or stupid
probably to try to do because it's not
easy. And we got together quite an
amazing group of people still. We tried
in Singapore, we tried in Switzerland,
we tried in the US, we tried it was just
hard to do. The system is not there for
you to try and change.
And so in that process, a friend of
mine, one of my uh clients tapped me on
the shoulder and said, "You should take
a look at Bitcoin." This was 2012 and
I'd been aware of Bitcoin and I took a
good look at it and he explained to me
both the store of value proposition and
the blockchain element that anything
could be trusted on the blockchain. I
looked at this and I'm like, "Oh my god,
this is the future that we need."
Because the problem we've got is when a
firm like Lehman Brothers goes bust,
nobody knows who owns what and
somebody's going to get screwed in that
equation. Just one of the very issues at
the center of the system. Nobody knows
who owns anything. So I started looking
at that and I wrote I started writing
articles and invested in it first time
in 2013.
2014 I started Real Vision because I
wanted to democratize the very best
financial information.
Nobody gets access for an hour to the
world's most famous hedge fund managers
unless you invested $100 million. Real
Vision changed that equation entirely
and said listen forget all these sound
bites on CNBC of three minutes. It's
worthless. we're going to give you an
hour of the world's most successful
investors, the best independent analysts
and strategists, and then you have a
level playing field. And that was a game
changer. I mean, since Real Vision
started in 2014, there's probably been
200 podcasts that's copied that model.
So, this is this movement. There's two
things. There's the democratization of
information and then there's crypto. So
crypto as it starts building out as an
ecosystem, you start to realize that,
okay, this is now the fastest adoption
of any technology in all recorded human
history. Dude, you you have to say that
again. This is this is the idea that's
gotten me obsessed with you, with
crypto, is
you talk about how there's something
broken. we're getting screwed and we
don't understand where and
now this new thing has come along. But
it's it's entering the system at a
moment where it's sort of peak distrust
and peak sort of throwing your hands up.
You're giving up. You tried occupying
Wall Street. It didn't work. Uh you
tried voting in Donald Trump. You've
tried voting in Joe Biden. You've tried
everything and nothing changes. So, hit
people with that quote again because
this is something that and I'll I'll
give my background for people that are
hearing me talk about this stuff for the
first time in a minute. Um, but but that
quote about this being the fastest
adopted technology, I think is
important. The internet from 1990 to
2000 grew at 63% a year. That was the
fastest adoption of any technology in
all recorded history. Prior to that,
mobile phones was the other one. But
what happens is the internet technology
and the mobile phone technology allows
for these networks to be built and once
that network's in place it's faster to
build the net next network. So in India
for example they've just basically given
out free data to every mobile phone in
India. So guess what uh data usage is
the highest in the world
and so their internet scaling becomes
faster. So this so the internet was huge
as we all know and it remains huge. So
at 63% a year it then flattened out over
time as more and more people got
adopted. So at 1997 it was growing at
63% a year and there was 140 million
users of the internet.
In 2021 there are 140 million crypto
users and it's growing at 113% a year.
Jesus.
Double the speed. Now this is where
humans struggle. linear numbers and
exponential numbers. Because it's
exponential,
it means that growing at 113% a year,
we're going to go from 140 million
people to a billion people by 2024.
Jesus Christ.
I mean, so so when you go back
and what you how you introduced all of
this. So if you know that something is
being adopted at this speed and it's a
network of money at its core
and you can buy an infotimal fraction of
it. So everybody can buy 10% of their
net worth then everybody who takes this
opportunity will probably have the
biggest opportunity in history. Other
part that I want people to understand is
that it's also coming at a moment where
somebody like you no longer has to
convince a gatekeeper to let you on TV
that you can just spin something up
because the other part of this equation
is what I'll round to YouTube. So it
isn't exactly YouTube, but it's that
idea that you can put out this long form
content that's video that allows people
access to ideas and information that
they never would have had before. and
getting people to see that you you're
now moving into a new phase where you
and I I think share a similar sense of
like, okay, entrepreneurship was very
good to me. It changed my life. It made
me fantastically wealthy. And now I'm
looking around going, "Hey, there's
nothing that special about me. The thing
that made me successful is I'm a
relentless learner. So, I'm just
unafraid to embarrass myself, to fall
down, to look stupid." And because of
that, while other people are laughing at
me, I'm laughing on the inside because
I'm like, [ __ ] on a long enough
timeline, I'm going to win because I'll
learn and I'll figure this stuff out. So
now you get a group of people like me
who succeed tremendously in a system
where I'm looking around watching
everybody else struggle. And I'm like, I
will tell you everything I know. Like,
I'll just give it out as fast as I
[ __ ] can because I want to live in a
world where other people can rise up.
for whatever reason, I I just am
emotionally incentivized to also see
other people succeed. And so, you're now
in a position where someone like you who
who essentially could have retired, you
know, lives on this tropical beautiful
island and like does not need to be
doing all this re-engages with the world
and tries to give people that
information. And so, you get this.
Go ahead.
I did a piece that was probably the most
viewed piece I've ever done on YouTube.
It was like, I don't know, 2 million,
two or three million views called the
retirement crisis. And it resonated
because I I kind of showed how people
haven't seen it. Check it out on
YouTube. It's well worth your time. And
it's a long time ago. It predicts a lot
of what's going on now. And um the point
being is that there's a bunch of
retirees, the baby boomers, and they've
kind of screwed it all up because
they've got all the debt. Um they've got
too much equity exposure. It's really
hard for them to retire. This is why the
Federal Reserve don't like equities
going down because you got this richest
group on earth who are kind of stuck.
They never got enough money to retire
on. But I want to look through the eyes
of the millennials.
So they are at 32 years old at the same
age their parents at 32, the baby
boomers had all-time cheap valuations of
equities, all-time cheap bonds, alltime
cheap credit, all time cheap property,
right? So they couldn't help but make
money. They kind of screwed it up
because they actually ended up going
into debt as well, but they couldn't
help but make money. So then the
millennials had the opposite. Alltime
record valuations, equities, all-time
record valuation for bonds, alltime
record credit, all-time record highs in
property. So I'm like, these guys are
screwed unless something else comes
along and that thing is crypto
because the future expected return of
crypto, it's been growing at 213% a year
in returns. I that's how much it makes.
Even though it's very volatile,
sometimes it's down 70%. Over time,
you're making 213% a year. It has grown
as an asset. It's gone up, I think it's
2 million% since inception. No other
asset in all recorded history has ever
done this. And we haven't even started.
I still think there's probably another
100x from here. Not even the baby
boomers got given that. The S&P didn't
go up 100x since 1980. So this is the
magnitude of what's there. So I'm
screaming from the rooftop saying you
might be cynical. You might think you
don't understand it. You might think you
can't afford to play in this, but you
have to listen because this is the
opportunity. You can't come back to me
in 10 years time and say, "Well, we
missed all of that. All the rich people
got richer." No. you, I, everybody else
is saying now is your time. Don't be
irresponsible. You know, dollar cost to
average, do all the right things, but
here is your opportunity. This is the
biggest opportunity I've ever seen, and
I'm going to take advantage of it, and
so should everybody else. This is not
rich or poor. This is an every person
opportunity, and we've never had this
before, ever. Dude, you just gave me
like sustained chills. This is not rich
or poor. This is an opportunity for
everybody, but you really have to move
on it. So I'll tell my own story. So for
anybody that is uh pushing back, feels
late to the party, whatever, find some
solace in my like willful ignorance. So
I have always seen myself as good at
making money and terrible at investing
money. Now you have to be very careful
what story you repeat about yourself to
yourself and I just kept saying that
like I'm I didn't want to focus on
learning about money. Math doesn't come
easily to me. I don't like whatever that
ability is to conceptualize numbers, I
don't have it. So, it's like I really
struggle with that stuff. And one of my
employees was like, "Tom, are you
looking at crypto?" And I'm like,
"David, I'm just not interested in
investing. Like, it's not it doesn't
speak to me at all." And and he just
kept coming back. Like, Tom, you really
need to look at this. You need to look
at this. And I'm like, "David, how many
times do I have to say like, I don't
find this interesting. I want to build a
company and I'll make Yeah, I've already
made myself wealthy. I'll continue to
generate wealth and help other people by
building this company. I'm not going to
look at it." And then I had been
introduced to the idea of digital
scarcity about six years ago and I
thought oo that's going to change my
business and then but the technology
wasn't there and so or I should say the
networks weren't there and I promptly
ignored it and then when it popped back
up at the beginning of 2021 I was like
I'm all in because I I understood what
it was going to be. So, I start
researching NFTTS, the technology behind
it, and that inevitably leads you to the
blockchain, of course, which then leads
you to crypto, which then I was like,
wait a second, what? Like, this is
literally somebody is essentially going,
hey, you know, all those things that
make gold like this wonderful store of
value, we're now moving that onto
computers. And so, I've been saying for
years, technology is a one-way street.
I'm a total like techno optimist. There
is no going backwards. Like, this only
moves forward. So now I was like, "Wait,
people are digitizing money." And then
the the poor David who'd been telling me
for God knows how long, eight months,
that I needed to look at it. I was like,
"What the hell?" So I start researching
hardcore about what it is. And I'm like,
"Wow, not only do I have a a fiduciary
responsibility to myself and my family
to learn about this, I now felt
absolutely compelled to tell people one
simple thing. research it. You may
decide that it doesn't make sense
because I don't think I'm smart enough
for people to listen to me. I I do think
that you're smart enough for people to
listen to you and you're certainly
educated,
but even if they reject it, like there
there is this moment of you pull back
the curtain and you see the Wizard of Oz
and you're like, "Oh my god, this is
going to change everything." And it's
it's like a dime drop on how it works.
And that's when I was like, "Whoa, I
have to move on this and I have to tell
everybody." So like you, I'm screaming
from the rooftops. I just don't know how
to do it as intelligently.
And what's what gets worse about this is
this affliction, this crypto affliction
we all get, right? The rabbit hole as
it's known. You start with understanding
money, which most of us don't think
about. Then you kind of understand how
we're getting screwed by central bank
printing and the the debt laden economy
and what it means.
And then you start saying, "Okay, that's
Bitcoin." And then what's this Ethereum
business? And then you start realizing
decentralized finance and you're like,
it's kind of a finance thing, but that's
kind of cool because I can get yields
now. You know, I can get instead of
getting zero on my bank account for my
hard savings, I can now get 6% a year.
Wow, that's a difference. It's like
going back 25 years in time.
And then suddenly NFTTS come and
community tokens and suddenly your mind
is completely blown that this is not
just money. It's the entire exchange,
transfer and storage of value for the
internet.
Whole business models are about to
change massively because of what this
technology unlocks. And then once you
get your head around that, you're like,
"Oh god, I can't even hold this in my
mind any longer. it's so big. Um, and
that it's not just buy some Bitcoin, I'm
going to make some money over time, you
know, it's actually an entirely parallel
financial system and business structure
for the world and it's being adopted
faster than anything we can ever
imagine. So, walk people through what is
it and let's start with Bitcoin because
I want to take cares to differentiate
between Bitcoin and Ethereum. Um, and I
guess full disclosure to anybody
listening, my uh I invest in essentially
three things. Bitcoin, Ethereum, and
Chain Link. I I'm a use case maximalist,
I guess. Uh, and I understand those
three. I'm not saying they're the only
three. I'm saying they're the only three
I understand well enough to invest in.
Um, what is it that makes Bitcoin
interesting enough that so many smart
people see this as ultrasound money? And
what does ultrasound money mean? The
world has a history of money whether
it's backed by gold or not
where government
gets themselves excessively into debt
and they devalue the money. So the
Romans used to clip the edge off the
coins so there was less gold in each
coin and eventually people would lose
faith in the coins because they would
blend them with silver and then blend
them with copper and you know the coins
were worthless because that was supposed
to be worth the value of the of the
dinari in Roman times. But governments
can't help themselves. Humans, we're
just humans, right? Humans are
fundamentally flawed creatures and we
always will be.
So then we have these gold standards.
You know the US and the UK were on gold
standards. World War I, World War II, we
all have to leave it because we've got
too much in debt again. We've overly
financialized yet again because humans
love leverage above all things. It's
kind of sex and leverage are the two
things that drive humans for some
reason. Then we adopt a new system which
has been around before but it keeps
getting abandoned called fiat money.
Fiat money is money not backed by
anything. It's backed by the promise of
the central bank paying it. So that's
the dollar bill that we all are familiar
with and every country in the world now
adopted fiat currency.
But
as with everything, if you're really
thirsty and I gave you a bottle of water
or sold it to you, you probably pay me
10 times too much for that bottle of
water. If I give you a million bottles
of water, they're worth precisely zero
to you. So scarcity has value. That's
art, that's cars, that's almost
anything. Um, humans value scarcity for
whatever reason we do. Um, and so if
you're printing too much money, you're
creating less scarcity. So yes, there's
money everywhere, but the money has less
value.
So once you understand that, you say,
well, what does it mean? The dollar
hasn't collapsed. It's kind of where it
was versus the euro in the last 5 years
or whatever it is. And then you say,
"Huh,
but my $50,000 salary
now can buy me much less shares in
Apple, Amazon, Google, Microsoft. In
fact, units of the S&P 500, right? I
suddenly can't buy as much since 2008.
It's a fraction. I can buy like a third
of what I could." Same with real estate.
Same with gold. And then you're like,
"Huh, assets have suddenly got
expensive." They haven't. The value of
your savings has gone down or your
money.
So, you can't afford to buy assets. What
is an asset? An asset is deferred
consumption from the future. I buy a
house. I sell it in the future. I get to
retire. Whatever the the the things are,
right? We don't buy the S&P because we
want to hang it up in our wall. We buy
it because we want to sell it at a
future date to realize money.
So that means our future selves are now
poorer. That's essentially what this
means. That's what currency debasement
is. So Bitcoin comes along in 2008 in
the middle of the crisis. It's kind of
like it was perfectly prepared for this
and said Satoshi goes, "Hey, look at
this. I can create an algorithm that
only creates so much of this thing, the
Bitcoin, and it can never vary ever. So
therefore, this is scarcity that humans
can't [ __ ] around with. Now, humans have
this propensity to [ __ ] around with
scarcity because they're economically
incentivized to do so. Here, they can't.
So then they become economically
incentivized to own this asset because
it's scarce and it cannot be changed
because it has this consistent supply
curve and a limited number. So Bitcoin
becomes this great store of value and it
would look like gold because gold's a
good store of value. It's worked for
thousands of years. But Bitcoin has this
other thing to it. It's a network which
gold isn't and it's technology which
gold isn't. So we have use cases and the
benefits of building a network. So
suddenly it goes up exponentially in
price.
roll on to 2015
and suddenly somebody's looking at the
blockchain
and they start saying
imagine if these bits on the blockchain
which is where you record the ownership
of something in Bitcoin it's Bitcoin
itself what happens if we could put a
contract in there
because humans live off contracts you
know everything is basically a contract
in in our legal terms and that was the
rise of Ethereum it became a platform
form where you could programmably change
the blockchain. Not the attributes of
the blockchain. You couldn't remove
anything off that ledger, but you could
change the little holding buckets and
say, well, it can look like this, can
look like that, it can adopt to this.
And those things were verifiable as
well. So, they couldn't change. So, this
created Ethereum, which became the
platform. So if you think of Bitcoin as
this store of value, this very pristine,
beautiful thing,
then you think of Ethereum as also a
very beautiful thing, but it's a much
broader application
because it's like programmable money.
Yeah. There's one concept that I want to
nail down here, and if you think I'm
crazy, let me know. But when I think
about, so I've worked in the inner
cities a lot and you begin to realize,
wait a second, the generational poverty
is a mindset knowledge problem far more
than it's a money problem because they
manage to pass on a likelihood of being
poor. And so when you think about okay
well right now in the in the US for sure
and I would imagine most of the western
world that your zip code is the number
one predictor of your future success
more than your IQ which I'm just not
willing to live in that world but that's
a really fascinating phenomena and when
you begin to ask a question how is that
possible so you have extraordinarily
smart people that regardless of their IQ
are going to be trapped in a poverty
cycle. Why is that? And some of it has
to do with what a guy named Jeffrey
Canada discovered in terms of the
language centers of your brain. And if
you're not hearing enough words when
you're an infant, just the language
centers don't develop well and you're
going to have a hard time interviewing
for jobs and climbing the sort of
traditional corporate ladder in that
way. Uh and then they just also help you
with communication. But the other part
is what is what I call your frame of
reference? What do you believe to be
true about yourself and about the world?
And one of the ideas that fails to get
passed on in that poverty cycle is an
idea of ownership. And once you
understand ownership, now you get into
that cycle that you're talking about
where you can you can sell something in
the future because you own it today and
you hopefully buy low and then sell
high. And that really is like just the
dead simple equation and I just a plant
to flag that we'll come back to. Hold
all these ideas in my head. You had
mentioned earlier as like a throwaway
that a lot of wealth was generated in
the collapse and of the economy. And so
I want people to understand that this is
a game and I don't mean that in any sort
of derogatory way but it has rules and
if you understand those rules there's
always an opportunity especially in
moments of disruption and we're living
through this incredible technological
disruption right now. Okay so back to
this idea of ownership. So when I look
at Bitcoin what I see is something that
I can own right there will only ever be
21 million of these. Now like anything
as Noah Yuval Noah Harrari says even
money is just a story right it's a
fiction that we all tell and it only has
value when we agree that it has value so
Bitcoin has that same sort of Achilles
heel that if tomorrow everybody stopped
believing that owning that has any value
then it would have no value but we have
this ultra scarce thing that the last 10
years have proven people believe has
value and you can own a piece of that
And as we go, if it is true that more
and more people will pour into this
digitization of
economic value essentially, then that
those 21 million units are going to
become hyper scarce and hyper valuable.
Now the great news is that you can
fractionalize it. So you don't have to
own one. You can own some tiny tiny tiny
uh fraction of it. But now you you have
ownership. So you're able to buy
something now that you can own as it
appreciates in value and then you can
sell it later. And so it becomes just
this buy and wait game that real estate
maybe still is, but that's why real
estate has worked over time. You owned
it. You could also live in it, which is
certainly advantageous. And then the
expectation was that it would go up in
value. When I think about Ethereum,
at first I was like, okay, I like how
much, you know, we haven't even talked,
we haven't named Metaf's law. we've
talked about it, but this how you can
value something based on its network
adoption curve. And so I could see there
was something going there. And then when
I got into NFTs, I realized I just had
to buy a bunch of Ethereum to use it.
And so I was like, okay, well, wait a
second. If I'm over here like scrambling
just to buy it to spend it, I'm like,
this is me being able to buy into the
dollar when it's like new and nobody's
sure if we're going to use it. I
thought, whoa, I would take that
opportunity. So that's how I see the
difference in the two. One is just sort
of straight ownership of something and
then one is like, well, I know people
use this and because people use it and
there's controls around the supply that
the odds are that it will go up in
value. Ethereum is kind of like owning a
part of the internet. It's, as you said,
I mean, everybody has to use Ethereum
basically that uses this crypto rails
unless you're just in the Bitcoin world.
But everything that we've talked about
and everybody will have even if you're
not very familiar with the space will
have heard the term DeFi or NFTTS or
tokens basically most of that is still
being built on Ethereum and as you said
the network so what is this metaf's law
that you and I have referred to metaf's
law is it really started to become
understood
in the 80s and then much more so as
mobile phone networks started these
giant connected networks right because
digital technology allowed networks to
connect. Before it's humans, we couldn't
connect with each other in the same way.
So networks connect with mobile phones.
Suddenly they explode in value. You
know, all these phone companies, huge
companies. And if you added them all up
around the world, they'd be worth tens
of trillions probably. We just don't
even think of it in those terms because
they're fragmented networks. Then the
internet comes along, this free network,
and everybody builds on top of it, and
they create network effects. Like the
most classic example is Facebook.
Facebook connects us with friends and
family and in exchange they get your
data, they sell you adverts and they so
you've got a bunch of people using it.
Bunch of businesses now building on it
and this advertising monetization
structure. Shareholders get rich. The uh
you know you and I get to unfortunately
meet somebody from university that we
don't want to talk to that we met 20
years ago and we're now connected with
again. know it's that
but the network that Ethereum and
Bitcoin does is different. You're the
owner of the network and the user. So as
a user like you said with the NFT you're
actually owning a share of the network
itself. So everybody uses it owns a part
of it.
Therefore if the network's going to get
used a lot you're all going to get rich
and the value of the network is going to
go up massively. and the more people
built interconnection. So the metaf's
law is not only just the number of
nodes, i.e. the number of users, but how
much they connect with each other. Well,
you're seeing it because there's NFTs
and there's DeFi and there's all of
these applications or the store of money
aspect. These things all together and
and then there's the linking of all of
these like chain link or you know some
of these other protocols um polka dot
they're linking all this ecosystems
together. So I can send you a dollar
instantaneously and we have no idea
whether it went on Bitcoin rails, XRP
rails, Ethereum rails and guess what? We
don't care. I promised you a dollar. You
want to get the dollar instantaneously.
That's interoperability. That's all
coming. So this is what Ethereum is
about. It's the magnitude of this
network where everybody's developing
everything on top of it and it's scarce
supply. So it's seeing an even faster
adoption rate than Bitcoin now. um for
for the reasons that seem pretty clear
because it has more use cases than
currently the Bitcoin blockchain does.
Doesn't mean Bitcoin blockchain can't in
due course, but right now there's a lot
more use cases in Ethereum. It's super
exciting.
Do you think that Bitcoin would need to
do something like that in order to
retain its value proposition?
No, I think its value proposition stands
above all things. It is pristine. It's
pure. It is what it is. Um, and you
know, the way it's so impossible to
change any of the attributes of Bitcoin
makes it a bit clunky and that
clunkiness is its beauty. It it is so
secure. It's the most secure of all
protocols. So, let it be what it wants
to be. Now, people are building things
like the lightning layer, which allows
you to do lots of fast payments over the
top. Maybe that scales, maybe it
doesn't, doesn't really matter. that
store of value for every person to think
of like it's owning a piece of Manhattan
real estate at low prices. That's never
going away.
Not in the conceivable future because
humans have now said it has value and
it's being adopted very fast. So no,
Ethereum is a very different thing. It
doesn't compete. That's how I like to
think about it. And unfortunately, when
you go online, people will tell you,
well, it's competing and it's not as
good. You have to ignore all of that and
look at the whole space overall and say
and just be honest saying we don't know
where this is going to be in 10 years
time and like you say so therefore I can
own three of these things and
probability is I'm going to capture a
large part of this and maybe I'll adapt
in due course and
yeah one thing sorry go ahead
yeah so it's it's don't over force the
narrative just be broad be open and
always be learning as as you rightly
said because we don't No, this is all
new and it's happening at lightning
speed.
Yeah, that's the thing that I I am
certainly most attracted to with you and
the way that you are and seems to be
something that people echo a lot about
you is you're very open-minded.
Is your open-mindedness the reason you
have been successful or is it a response
to the struggles of getting to where
you've gotten in your life?
I you know it's I think it's part of it
is my background. You know, my father's
a first generation immigrant from India.
My mother's a first generation immigrant
from Holland. They met on a blind date
in Birmingham in the UK. I've lived in
India. I've lived in Spain. I've grew up
in the UK. I've lived in uh the Cayman
Islands. I've traveled the world. Um so,
it forces you to be open because you've
got different religious backgrounds
there. You got different massively
different cultural backgrounds. Um all
of this stuff forces you to be
open-minded. I'm generally open-minded
by nature just because of that. And
macro investing
is all about being open-minded to other
possibilities.
So once you learn the trick that it's
okay to say you don't know, but I think
this might be how it plays out. So you
think in what's known as probabilistic
terms. Then for that to happen, for you
to say, look, I think there's a, you
know, there's a 80% chance that Bitcoin
over the next five years is going to
$250,000.
That's a reasonable odds. What's the 20%
chance that it doesn't?
Okay. So you need to open have both of
those things in your mind at any one
stage and be assessing them. I learned
that from the book
uh I think it was the alchemy of finance
by George Soros who was probably the
most famous of all of the macro
investors and he would talk about this a
lot that you have to have these kind of
logic trees of think of probability
trees and once you understand that you
can even bet against yourself which is
really hard to do and I can't do it but
some of the best traders can be you know
long the S&P they think the S&P is
rising but and they think the odds of it
falling are getting higher and they
start selling against themselves. It's
like it's it's very hard to do. But that
kind of investing teaches you to keep an
open mind because you're looking at the
whole world and you have to know that we
don't know the outcome. And anybody who
tells you that they know what's going to
happen,
it's just a fraud.
It's just the open mindset. I don't
know, but I think and this is why I
think that's all you need to do. That's
open-minded in a nutshell, admitting
that you are fallible.
Yeah, I think that that is
extraordinarily smart. Um, one thing
that I've noticed about entrepreneurs is
the most successful are the ones that
are able to hold competing ideas in
their head at the same time. And you so
uh when I'm teaching entrepreneurship,
one thing that I talk about is okay, you
have to have this narrative. So, you you
have a goal. You're trying to get there.
You know where you are. There's a chasm
between where you are and your goal.
your goal is probably uh you know skate
to where the puck is going to be. So
it's something where you're making a bet
about how either culture is moving or
technology is moving and then you have
to create a narrative that says this is
how I'm going to go from where I'm at to
there. And what that narrative does is
it it smooths out some of those like
leaps of faith that you're going to have
to make in order to get where you want
to go. But then, you know, bringing this
back to um somebody in the finance world
that I've learned a lot from, Ray
Dallio, where he had that just
catastrophic learning event where he
realized, you know, he had all this
conviction about something that was
happening in the market and he ended up
being wrong and it just obliterated his
company. And he realized, okay, you can
believe you're right, but you have to
hold open in your mind, how do I know
I'm right? And constantly be looking for
disisconfirming evidence. So, it's like
I tell people, you have to have all this
conviction. You have to be able to lead
with conviction. You have to be able to
go into something believing this is
going to work. My narrative is true.
That's how I'm going to cross this chasm
to get to my goal. But, [ __ ]
you better have open in your head this
idea of I have to challenge this
narrative. I have to constantly look for
the the ideas and reasons why I'm wrong.
And if you can't do both, race forward
with conviction and constantly battle
test that idea, you are in trouble. And
that's why being an entrepreneur is so
damned hard.
The narrative of entrepreneurship is
start thing in garage, borrow money off
parents or start it on your credit card,
three years later billionaire.
Right? That's the narrative. And then
you write your book on on how I manage
my company. Right? That's actually not
true. The best book ever written on this
is Ben Horowitz's The Hard Thing About
Hard Things.
What you have to do is battle both your
assumption as you say and test it
endlessly. You have to be paranoid,
excessively paranoid, but still
confident in that you're right. And you
also have to accept the risk of failure
because the moment you accept the risk
of failure, which is very high in
startups, you'll start hedging against
it. Once you stop worrying about failure
as the narrative, you tend to attract
it. It's a really difficult thing.
People who fear failure above all things
tend to fail more.
People who don't look at failure and
just look at the moonshot tend to fail
too. It's the people who can see failure
as a wolf behind them
and the testing of their ideas but still
having the conviction and maybe changing
paths because the wolf is catching up.
they tend to fail less, but it's hard.
Makes you feel sick. You don't sleep at
night. And that's, you know, the
beginning of Ben Horowitz's book
basically is two pages of what that
feels like. It's called the struggle.
And that the struggle is probably the
most profound two pages in all of
entrepreneurship. And it's true and it's
hard.
That's a great book. Um, so going back
to investing, I want to lay out for
people that might be new to this.
They're not seasoned investors.
The idea of dollar cost averaging was
extraordinarily comforting to me. Um,
and I'd love to go into what it is, why
it's useful, and whether you think that
applies to what's happening in crypto.
So, there's a mythology of investing.
The mythologies investing is hedge fund
manager George Soros spots the
opportunity, gets in at the right price,
makes a fortune.
The reality is most people have no idea
where the price is going over a short
term. So, what happens is you buy
something, you put all your money in,
you've saved up your 5,000 bucks, you
put it all into Bitcoin, Bitcoin falls
50%, you panic, you sell it, you feel
terrible, Bitcoin goes back up again,
you f feel even worse now. You can
scrape together, you know, you've you've
lost, you know, half of your money now
and then you've you you keep compounding
these errors, right? It's called market
timing. And market timing is
extraordinarily difficult. You know, I I
do some market timing because that's
been my job and 30 years I've done more
than my 10,000 hours, a lot more than my
10,000 hours. And that doesn't make me
very good at it either. I'm not bad at
it in long-term investing. I'm terrible
at short-term. So, what is dollar cost
averaging? Dollar cost averaging is
basically what everybody does with their
401k. The problem is with 401ks or
retirement funds is nobody cares about
them. You don't know what's in it. You
have no ownership. You just put some of
your salary away and it goes in this
mythical thing that you probably assume
won't be worth as much money as you hope
it is. That's what that's become. And
you put it in every month. Why do you do
that? Well, because you're averaging all
of the highs and lows over time because
markets tend to do this. So, you're kind
of indifferent. In fact, you love it
when it falls because you're buying more
units at a lower price because your game
is to own as much as you can at the
lowest possible price.
But if you don't know how to market
time, and 99.9% of people don't and
can't and shouldn't, then you just
average in over time and magic will
happen. You just average a beautiful
price over time. And had you done that
in the S&P or anything else, you make
money. Now, what's so lovely about
Bitcoin is it's not a passive investment
like your your retirement fund because a
retirement fund you can't access until
later. So, you kind of write it off and
you you know, everybody's heard that
it's never going to be worth as much as
it should be anyway. So, it's become a
bit of a pain as opposed to something.
But this you own. You live and breathe
that volatility and you live and breathe
those gains when they happen and you
will be like wideeyed. I did it to my
sister-in-law, forced her to do this. I
said, "Listen, I'm going to make it easy
for you. Just go open a PayPal account
and start that way." And she had some
savings. Um, she could take out of
another thing. She had like 5,000 bucks,
10,000 bucks. And she put it in and we
got the timing relatively right. So, it
shot up a lot. I think she got in about
13,000 in Bitcoin.
Wow.
It shot 17. Yeah. And it shot up a lot.
So, she's like, "Wow." And then it falls
a lot. And she's calling me up saying,
"What do I do? Should I sell some?" I'm
like, "No, you keep putting in part of
your paycheck."
And after all of these falls, these
several falls, she starts to really
understand. And when they start falling
a lot, she starts doubling the amount
that she would have normally invested.
And now she's taught herself to invest.
Next thing I hear, oh well, I bought
some Ethereum and this is how I'm
dealing with that. So, she's now looking
at two different things and she's now
thinking about the asset allocation.
what's going to outperform Ethereum with
she knew nothing about this stuff. This
is a year and a half and she now
understands because of that dollar cost
averaging and taking ownership that you
exactly as you said once you actually
own something that 401k you don't
actually really own. It's like some
other guy does something with it and
hopefully he makes money. This is you.
You're taking responsibility for your
own finances. That's so empowering.
One thing that I think is really
important that I haven't heard people
talking about and just because my mind
is so simplistic when it comes to
investing is I look at the stock market
and I've got a money manager and like
all that and she's trying to explain to
me puts and calls and all this. I'm
like, "Ah, this is so [ __ ] confusing.
I don't want to think about this. I want
to go run my business." And so I yeah, I
just never wanted to get on the phone
and talk about it. It was just too
complicated. Part of the glory of what's
happening right now in Bitcoin is if you
stay or crypto, if you stay sort of at
the top of the ones that have the most
sort of crowd validation, because you
can get into the deep weeds on what's
going on in altcoins, but if you just
stay at the top, which has massive crowd
validation, and you go, "Okay, I'm going
to buy a bit of Bitcoin. I'm going to
buy a bit of Ethereum." And then you
learn like your sister did about the
volatility and like how to ride that
wave and to recognize and and for
anybody listening if you're new to this
idea have a thesis. You dollar cost
average based on your thesis. So here is
Tom's overly simplistic thesis
that I believe that technology is a
one-way street that very few people are
in cryptocurrency right now. I believe
that over time it will take over some
massive percentage of uh the financial
system. So let's say that it goes to I
don't know become a 10 trillion asset.
So I can buy that. I don't it doesn't
take an extraordinary leap of faith.
It's at just below I think$1 trillion as
of the time that we're recording this.
So I'm like whoa 10x my money like that
would be incredible. Okay. Well as long
as I believe in that thesis I want the
price to drop. So when the price drops,
I'm not panicking. I'm like, "Yeah,
buddy." Because like you said, now the
amount has gone down. So when I first
got into this, it was the height of the
euphoria. Like Bitcoin was just going to
the moon. It was just insane. And so I
was like, "Oh my god, I have to buy into
this." And so I bought in. I started
dollar cost averaging. And the price is
going up up up up. And I'm still dollar
cost averaging. And I'm like, "Oh man,
should I be going faster? Like the price
is going high." And I'm like, "No, no,
no. Dollar cost average. You never know
what's going to happen. And then boom,
whatever happened uh you know, I guess
it was like a month ago, six weeks ago,
something like that, it just [ __ ]
went down like 30, 40%. And I was like,
"Oh, thank God. I still have one, my
thesis is still intact. Two, the amount
of money I was willing to invest, I
haven't hit yet." So now at this much
lower price, so what I am training
myself to be obsessed over is the the
break even point. So, if my original
break even point was, let's say, $52,000
for Bitcoin, as that came down and I
kept buying in and buying in and buying
in, now my break even point goes from
52,000, I got it down to like 30
something. And so, I'm like, this is
incredible. So, now that we're riding
that wave back up and I'm telling my
wife like, we're up this much in 48
hours. We're up this much in a week.
We're up this much in 10 days. She's
like, what? Like, it's it's almost
impossible to believe. And I'm very
careful to check that like the hey the
euphoria is dangerous. You have to be
careful. You have to constantly like the
wolf is right behind you. Like you
really do have to be thoughtful. But
dollar cost averaging based on a thesis.
That's the way to go.
There's another thing I think it needs
to be said is you're now faced with
something that really offers people
enormous opportunity. You're talking 10
for one. I think the space over the
whole space over the next 10 10 12 years
is probably a 100x right that's a whole
asset class we've never seen that in
history in that space of time but humans
are humans we go back to that
fundamental flaw is we love leverage
tell people what leverage is for the the
leverage is when you borrow money to buy
something
so let's say you had borrowed to buy the
original Bitcoin purchases and let's say
you put down half of the money.
So basically at 27,000 or 26,000 you've
lost all your money. Now Bitcoin hit
that you'd have been wiped out
and you'd have had to pay somebody and
you'll have been liquidated and then
Bitcoin goes back up in price and you'll
have missed it all. That's what leverage
does because it's okay in a house
because house prices aren't very
volatile. So occasionally once in a
generation you get a 2008 thing where
the house prices start moving a lot and
suddenly the people's equity in their
house wasn't enough and everybody gets
liquidated. I.e. the bank says we want
our money back.
That's okay to take that risk if you're