WEBVTT

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We have scaled it up, so
we yeah, depending on what you think

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crypto's worth, we manage somewhere between
zero and two billion dollars. Sort of

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the joke I always tell if you
ask Warren Buffett, they'll say it's probably

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zero. And you know, if
you look at our accounting statements, it's

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please visit the link in the description. Welcome into the Thinking Crypto podcast.

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I'm your host, Tony Edward,
and with me today is a vich

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Ol Garg who's the co founder and
general partner on the investment team at Electric

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Capital. Viachel. Great to have
you on, Good to see you,

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Thanks for having me. Vichel.
I followed Electric Capital over the years.

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I've watched the number of funding raises
that you guys have done, and who

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you've had on your advisory board,
what's on your portfolios. I'm really excited

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to speak with you and get to
learn more. But let's start with your

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background, where you're from and what's
your professional background. Well started the very

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beginning I was I was born in
India. I grew up mostly in the

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Midwest in the United States, went
to Stanford for undergrad and grad school,

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and then had a career in tech, worked at Google, worked on start

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Drinking and ads rinking. I started
this, sold two companies, the second

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Facebook and then ransom Teams to Facebook, and learned a bunch. In about

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twenty fifteen, started angel investing and
was very fortunate. I got involved with

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a bunch of companies that have done
well over the years, a lot of

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sort of up the middle SaaS and
productivity and fintech CUNTS companies, so things

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like Notion and Figma and Airtable and
a deal and a bunch of great event

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a bunch of great companies in that
sort of traditional world. And then I

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was doing a lot of frontier tech
investing, so things like self driving cars,

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super sonic airplanes, and crypto and
increasingly spending time on the crypto side.

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My co founder curtis my co founder
at Electric and he is my co

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founder at startup that we sold to
Facebook. We thought we started another company,

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and so when we're thinking about we're
to spend time, we were spending

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a lot of time in AI and
we're spending a lot of time in crypto

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in twenty sixteen. We have a
machine learning background, so that that world

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is sort of familiar to me,
and as we thought about it more and

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more, kind of the thing that
we came to believe was that the AI

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stuff will be very impactful, like
you would have a huge, huge impact.

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And obviously, I think at this
point the thing that we weren't so

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sure about was what would the implications
be in terms of who really benefited and

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who really won and so kind of
as startup people, the thing that we

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were thinking about was is there some
structural advantage for the startups and can they

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really win? And our thinking on
the AI stuff was there will be lots

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of interesting startups, but the people
who have lots of data, who have

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lots of compute, are at such
an advantage that it wasn't clear to us

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that it would be quite disruptive in
the same way that say, the Internet

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was. And what struck us about
crypto was it felt like a fundamentally different

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way to think about software and data
and money and capital markets, and so

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different that it almost was not being
taken seriously. This is in twenty sixteen,

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and when we looked at it,
we said, actually, this is

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really interesting because we think that technology
is real is on a path to getting

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better and better over time. But
most people are not taking it seriously enough.

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They don't really understand it that deeply. And if this stuff works,

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it's such a different way to build
software that the incumbent will actually be at

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a strategic and structural disadvantage. Like
you know, re architecting your systems to

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be privacy first, or to use
distributed data storage, or to use you

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know, a USD stable coin instead
of using the legacy payment rails. Like

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these things are actually pretty fundamental changes
to how we're business works, and so

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our thinking was a lot of the
legacy businesses would not be set up to

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make that transition, and that's actually
more fertile ground from a startup perspective.

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So the analogy here might be something
like, you know, the Internet was

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so fundamentally disruptive, like very few
non Internet native businesses were able to make

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the transition. So most of the
media companies got disrupted. For example,

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a lot of like traditional retailers got
disrupted by e comm and they weren't able

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to make the transition. If you
look at mobile, a lot of the

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legacy software businesses were actually able to
make the transition to mobile, Like Facebook

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moved to mobile and did fine.
Google moved to mobile and did fine.

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Apple was able to move to mobile
and do fine. That's not to say

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there weren't new things like Uber or
something created Instagram, but many legacy businesses,

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actually Airbnb, they were able to
sort of move over to mobile and

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it was okay, sort of accelerated
their business in a lot of ways.

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And so that's kind of how we
thought about it. Is like, the

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crypto stuff to us felt a lot
more like the Internet, and the AI

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stuff felt a lot like mobile.
Both obviously huge impact, but the Internet

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was very fundamentally disruptive in a different
way in my opinion, And so we

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said, that's really interesting. We
should spend time there. And as we

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spent more and more time there,
we realized that actually there was an opportunity

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to build a new type of investment
firm that looked kind of like a VC

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firm but was built differently and worked
with founders differently and created value the world

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differently, and we could talk about
that. So we set to create that.

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In twenty eighteen, we formalized that
do Electric Capital and then these days

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we we have scaled it up and
so we you know, depending on what

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you think crypto's worth, we manage
somewhere between zero and two billion dollars.

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Sort of the joke I always tell, you know, if you ask Warren

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Buffett, he'll say it's probably zero. And you know, if you look

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at our accounting statements, it's you
know a couple of billion dollars. And

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so, you know, we invest
in you know, launch token networks,

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we invest in in equity businesses.
We primarily do seed in series A,

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so early stage sort of first check
in kinds of investors. But given that

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we've done this for a few years
now, we have the portfolio has matured

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and some of the companies that we
work with, you know, like bitnow

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Meal or bit Wise or you know, they started very very small and now

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they're you know, large billion dollars
plus kinds of companies. And so the

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portfolio is the end of of people
that we work with is evolved quite a

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bit. But kind of the core
of what we do is find early stage

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founders and give them money and help
them build stuff. For sure, and

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congrats on this success. A follow
up question on the AI blockchain relationship item.

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You know, I see them being
symbiotic. I don't know if you

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agree where blockchain can be used to
help validate some AI things like deep fakes

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and so forth, and AI can
be used on top of blockchains to enhance

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certain attributes. A first question,
do you agree with that? And second,

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are you looking at any AI themed
blockchains, whether it be near render

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and so forth. Short aster,
yes, I agree. I think these

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two worlds converge. They are two
sides of the same coin as sort of

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you're getting at, which is,
you know, AI in a lot of

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ways, I think gives us digital
abundance, and so the cost of creating

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content, for example, goes to
zero. And what cryptography really gets you

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is digital scarcity and provenance. And
so I can prove to you that I

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did a thing with a cryptographic proof
and that's the other side of it.

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And so, for example, if
you're Joe Biden or Donald Trump and you're

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running for president, you may need
to issue videos that are provably not deep

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fakes. And the way you would
do that is you would issue cryptographic hash

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alongside the video that asserts that you, in fact did create that, and

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all of that cryptography and technologiesist today, So yes, they're definitely complimentary.

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Now there's this new flavor of sort
of blockchain plus AI, and I think

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some of that stuff is very real. So we receive investors in Near in

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twenty eighteen, and Ilia and Alex
are good friends of ours, and so

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I think a lot of the work
that the Near ecosystem is doing is very

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real. Those guys are spending a
lot of time thinking about, for example,

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what does a developer AGI look like, Like can you create an AI

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that could write code? Because if
you could do that then you would unlock

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a lot of other things. And
so that work that they're doing I think

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is very real. I mean Ilia, for those of that you don't know,

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this is not open AI Ilia.
This is a different Elia, but

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this Ilia pull asukin Ilia p was
on the attention is all you need transformer

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paper that kicked off LLLMS, Like
it's a fundamental underpinning. So he's he's

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an author on the paper that created
LMS. Ultimately, so very smart.

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Guy, really knows his stuff,
and so, you know, I think

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the work that they're doing is very
real. I think a lot of other

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AI crypto projects right now are basically
vaporware. Like if you sort of wood

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through, it's like there's no real
usage. Nobody's actually using them. Unclear

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if anybody would use them. It's
unclear with their competitive advantages, So it's

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a little bit reminiscent. I think
of maybe the ICO boom in twenty seventeen,

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which is the ideas are probably right. It's early for that stuff to

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really work, but you know,
by twenty twenty two, twenty twenty three,

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a lot of the ideas from the
seventeen ICO boom and that speculative menia,

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they were basically the right ideas.
There's a lot of DeFi ideas or

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things like stable coins, there were
things like you know, non custodial DEXes

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or things like you know, ex
separate execution, and environments like L two

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saying some of those ideas were being
kicked around in seventeen eighteen and they just

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didn't come to fruition until twenty three. So I think a lot of the

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ideas are right, but they're probably
five years too early. And that sort

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of an environment where there's a lot
of speculative energy can be a little bit

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dangerous, So we generally are wary
of things that are sort of sitting at

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the intersection of cryptonai right now.
But I think like twenty percent of that

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stuff is very real given your web
to experience right working at Google, working

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at Facebook, what are you hearing
and seeing As far as those companies looking

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to transition to Web three, it
seems it's been a bit slow. There's

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talks of them testing things, investing, you know, on their venture arms

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and so forth. And do you
think there's going to be a tipping point

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or you know, maybe in five
years or so that they Okay, oh

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man, we need to get on
board because we're getting left behind. It's

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an excellent question. I think there
will be a moment that a lot of

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Web two companies look around and say, oh, we're way behind. Not

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that dissimilar from let's say, media
companies in the nineties not really understanding the

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Internet, and then when YouTube and
Facebook happened and social media happened, they

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sort of said, oh, no, we've been left behind. What now?

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But by then it was too late. But I think there's sort of

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isn't it. It may be a
different way to ask that question, or

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sort of an angle on that question
is who are the companies that sort of

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seem to get it, and like
what categories do they fall into? And

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in addition to startups that are sort
of native to the space. I think

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you are seeing companies like Stripe and
Visa sort of financial infrastructure companies that seem

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to get this because they look at
it and they say, oh, this

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actually the ability to move money twenty
four seven and write code around money makes

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a lot of sense. And so
for those folks, like the notion of

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the stable coin is very natural,
they get it, and they're good engineering

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teams understand it. I think the
second category of people that seem to sort

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of understand this are some of the
traditional finance people, so folks like black

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Rock or Fidelity. So you have
the crypto natives like bit Wise, which

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is a portfolio company, but then
you have an largest index fund ETF provider

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in crypto. But then you have
companies like black Rock, which are legacy

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TraFi companies, and some of those
guys get it. So I think TRADFI,

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which just had to deal with like
the guts of really terrible financial infrastructure

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for the last thirty forty to fifty
years, a lot of those folks get

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it, and you're like, oh, this is just better infrastructure to do

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what we already do. And then
when you look outside the US, when

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you look into developing markets, you
see a lot of companies that get it,

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and it's because they deal with a
lot of day to day problems that

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the technology solves, like the ability
to move money around twenty four seven,

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or to get access to US dollars, or to have you know, non

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custodial sorts of arrangements where maybe you
don't trust your counterparties, like a lot

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of the problems that these technologies solve
people internationally, like here in Southeast Asia,

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are Latin America. You deal with
these kinds of problems every day,

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and so those businesses seem to understand
it and are sort of crypt native,

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and in those markets often you actually
don't even see necessarily a h a distinction

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between Web two and Web three,
Like you might just be a fintech company

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that happens to use much crypto and
behind the scenes and you don't even mention

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it. Or you might be like
some healthcare company and you just happen to

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use distributed systems off the shelf like
maybe Peo, pull like the Cosmos SDK

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off the shelf and use tenderment,
and it's just because it solves a problem

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for you, so you don't even
you don't even mention that you're a crypto

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company. So it's interesting that internationally
you see a lot of companies just solving

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problems just using the infrastructure. But
there's a lot of baggage in the United

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States, I think around this stuff. And it's in part because so much

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of so many of our systems work, you know, and like there's you

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can get you can get a bank
account, you can get an API,

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we have Stripe, we have plaid. Like the infrastructure is like decent to

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do a lot of things. And
so the companies here often are they think

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of themselves as Web two or three, and internationally we actually don't see as

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much of a distinction. Yeah,
that definitely makes sense. Now, you

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mentioned Electric Capital has about two billion
of assets under management. Tell us if

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you can, how much of it
is it? Is it fifty to fifty

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summer into companies building the infrastructure kind
of the picks and shovels, and the

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other half of the capital is into
tokens and things like that. Good question.

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Well, and and it goes without
saying, but maybe it's worth saying.

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Obviously, none of this is financial
advice, and you should not listen

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anything I say. In practice,
it's a little hard to answer that question.

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And the reason is because the numbers
change every day. So anything like

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we own a bunch of bitcoin and
ethereum, for example, and the price

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of that moves like a lot on
any given day might move five percent,

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so that that ratio might move a
lot. The other reason it's a little

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tricky is I think tokens versus equity
is not necessarily even that's often not how

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we think about it, because you
know, even with the tokens that we

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may invest, and often we're locked
up for multiple years because we're venture investors,

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and so the way we think about
it is how do we how do

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we think about this playing out over
the next five to ten years, And

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in those kinds of situations, often
you can create alignment between the investors and

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the protocol if you're willing to lock
up. And so most of our stuff

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is actually locked up. So it
might be a token in terms of an

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instrument, but for all intents and
purposes it be is exactly like our equity

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investments and insomuch as it's locked up, so we you know, I think

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usually when people think tokens, they
think it's like a thing you're trading or

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moving in and out of sure,
and we just don't do that. So

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actually at the portfolio level of that
distinction. The other thing that's sort of

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tricky about that distinction is sometimes you
ended up in situations like, you know,

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we don't hold any B and B. But maybe let's use that as

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an example. You could imagine that
Finance, the equity business issued B and

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B, and Finance has on its
books some B and B, and maybe

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some of the equity holders of Finance
receive some some Finance token as a distribution

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for being equity holders. So I
think increasingly you're going to see companies that

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start as a company realize that there's
some sort of token network they could be

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launching that is very beneficial to the
ecosystem and allows them to accelerate their business.

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You as an investor may have had
exposure to the equity initially because that's

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be invested in, but you also
get exposure with the tokens. And so

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actually it's not even fifty to fifty
like in some sense, it's that the

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the assets allocated will be greater than
one hundred percent because some of your investments

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will have equity that also issue tokens. So anyway, all that states,

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it's kind of nuanced and influctuates on
any given day. But the mindset that

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we have in any of the investments
that we make is we want to hold

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this thing for ten years. That's
how we think about it. And on

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that note, you know you were
an angel investor, you invested in different

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companies outside of the crypto industry.
Is there any major difference maybe aside from

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tokens that stands out to you.
Is it more challenging you know, anything

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you can share there? Yeah,
I think there's a lot. You know,

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I think the global nature of this
market is really interesting. You know,

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you're you're dealing with customers all over
the world from day zero. I

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think the token network aspect of it
can create distorting effects because you have you

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may have to deal with competitors that
are willing to launch them token and do

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sort of short term optimize things that
allow them to acquire a bunch of customers,

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and then you have to compete against
that. There is tremendous market volatility,

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so there's a cyclicality in the cryptocycle
roughly in four year cycle, and

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a result as a result of that
cycle, you have to I think you

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have to be a better operator.
So if you look at somebody like Brian

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at Coinbase, Brian Armstrong, it's
such a tough business to run, right

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because your your revenue might might go
up five x, and then it might

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come back sixty percent, and then
it might go up another five x.

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And so the volatility in your business
means you have to be really smart about

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how you manage your balance sheet.
You have to be really smart about how

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you incidivice your employees, so how
to compact it just work, for example,

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when do you reap people and how
much and so so it actually introduces

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complexity into the business. But I
think as a result, the founders who

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are successful here, I think if
you will get Brian Armstrong, if you'll

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get Jeremy A. Lair at Circle, if you'll get Jesse at Kraken,

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you know, Joe at Joe Lubin
at Consensus, I think you just end

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up having to be a better founder. And so if you look at a

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lot of the things, for example, that Coinbase has done over the last

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few years, because they're dealing with
such a degree of difficulty relative to a

279
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lot of the other businesses. You
know, after twenty twenty one, when

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the market's really changed for let's say
SaaS businesses or marketplace businesses, a lot

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of people really struggled. Like there
were a lot of companies that were like,

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I've never done a layoff, how
do I do a layoff? I've

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never had to manage my balance sheet. I've never had to have investors that

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are worried about my revenue going down. I've never had to think about how

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to reprice my options. All of
those things were things that crypto companies that

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had to think about for years because
of the market volatility, and so they

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were ready for it. So when
the market downturn, the broader macro venture

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downturn happened in twenty one, I
think crypto companies were far better equipped to

289
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handle what was happening than anybody else
because they just have to do that every

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four years. So I think net
actually makes for better founders because you're dealing

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with a greater degree of difficulty.
Yeah. I can't imagine dealing with that

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volatility and the faster pace I guess
of the markets because I don't think I've

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seen anything move like crypto. Yeah, yeah, it's wild. Now,

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tell us about the type of clients
that work with you is a high net

295
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worth individuals is it institutional investors?
Primarily institutional, So our capital based the

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00:20:40.839 --> 00:20:45.680
folks that give us money for our
funds are almost entirely US university and dowment's,

297
00:20:45.759 --> 00:20:48.440
large nonprofits and so on. So
that's the overlong majority of our capital.

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We do have some net worths in
the funds. Those are usually people

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that supported us very very early twenty
eighteen, and we sort of brought along

300
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as a gesture thanks for supporting us
early. And then a number of our

301
00:21:03.279 --> 00:21:07.519
founders are also involved as infustors and
our funds, and so we do that

302
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very deliberately and sort of creating ecosystem
around the firm by having founders involved as

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well, but on a dollar weighted
basis, it's almost entirely at this point

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US university endowments and large nonprofits and
healthcare foundations and folks like that. I

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00:21:23.400 --> 00:21:26.720
love if you can take is behind
the curtain in pitching those folks, because

306
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you know, I would love to
be a fly in a wall to tell

307
00:21:32.000 --> 00:21:33.839
them about bitcoin, because you know, there is certainly a stigma that has

308
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been around for a long time.
I mean, go back to twenty eighteen

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00:21:37.440 --> 00:21:41.039
Larry Fink of black Rock was saying
bitcoin was an avenue for money laundering.

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Now he's all in, they have
an ETF, so certainly a one to

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eighty from him. But I can't
imagine folks who are not paying attention to

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this at endowments in these places.
How do you get them to feel confident

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and to give you money. It's
a good question, you know. I

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think we really benefited by being able
to have warm intros. This wasn't by

315
00:22:06.160 --> 00:22:07.599
design, but in our very first
fund, which was very small, it

316
00:22:07.640 --> 00:22:12.039
was a sixteen million dollars fund,
a lot of the people that gave us

317
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money were people that had worked with
us in the past or had had known

318
00:22:15.160 --> 00:22:19.640
about our track record as angel investors
or our startup track record. And so

319
00:22:19.680 --> 00:22:29.559
it was folks like a let Gil
Acoustison and Mark and Dreesen hey Month Tanasa

320
00:22:29.640 --> 00:22:33.599
were at General Catalyst, Joe Lonsdale
at AHVC, like people that we'd known

321
00:22:33.640 --> 00:22:37.480
for a long time or had you
know, we'd worked with in some capacity

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00:22:37.000 --> 00:22:40.960
gave us a little bit of money
to get going. And as a side

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00:22:40.960 --> 00:22:42.960
effect of that, it turns out
if you look at those people's businesses like

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00:22:44.000 --> 00:22:47.160
Andrews and Horowitz, A sixteen Z
or General cattast. These guys areis billions

325
00:22:47.200 --> 00:22:52.000
of dollars and so their capital base
is very institutional, and so they you

326
00:22:52.039 --> 00:22:56.000
know, they're they're trusted advisors to
a lot of these institutions. So as

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00:22:56.000 --> 00:23:00.680
we were getting off the ground and
with our first fund, if there were

328
00:23:00.759 --> 00:23:06.839
ever an endowment that had questions about
crypto, we started getting inbounds. We

329
00:23:06.839 --> 00:23:08.200
started, you know, Joe would
send us people. A lot of would

330
00:23:08.200 --> 00:23:11.279
send us people, Hey, I'm
sendence people and they just say, hey,

331
00:23:11.640 --> 00:23:14.319
if you're trying to understand this crypto
thing. In twenty seventeen, twenty

332
00:23:14.319 --> 00:23:17.119
eighteen, as the markets are going
crazy, go talk to a Vitel and

333
00:23:17.160 --> 00:23:21.160
Curtis. They're really thoughtful about this
stuff. And our approach with these conversations

334
00:23:21.160 --> 00:23:22.519
always was we're not trying to sell
you, We're not trying to convince you

335
00:23:22.519 --> 00:23:26.119
of anything. We'll meet you where
you are, like, tell us what

336
00:23:26.240 --> 00:23:29.359
questions you have, and we'll tell
you how we thought about it. We'll

337
00:23:29.359 --> 00:23:32.240
tell you why we are so excited
about this, We'll tell you how we

338
00:23:32.240 --> 00:23:37.079
think about the technology. And I
think one of the lessons here is probably

339
00:23:37.119 --> 00:23:40.160
that if you're not trying to sell
anybody. You're just sort of stating facts

340
00:23:40.480 --> 00:23:41.519
and you're just like, here's how
I think about the world. It's very

341
00:23:41.519 --> 00:23:45.279
honest, and I think especially for
people who are pitched all the time.

342
00:23:45.759 --> 00:23:49.079
Sure, this is a good lesson
for founders too. I think if you

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just sort of say, like,
here's what I believe, here's why I

344
00:23:52.039 --> 00:23:53.960
believe it, here's my thought process, and you just sort of lay that

345
00:23:55.039 --> 00:24:00.519
out in an intellectually honest way.
Even if the other person doesn't get to

346
00:24:00.519 --> 00:24:03.000
the same conclusion as you, they
walk out of that conversation saying, oh,

347
00:24:03.039 --> 00:24:07.160
that's an intellectually honest person and that's
a trustworthy person. And then over

348
00:24:07.240 --> 00:24:11.799
time if they start to see the
data points and you said, hey,

349
00:24:11.799 --> 00:24:12.880
look, I think the world's going
to work this way and here's why.

350
00:24:12.920 --> 00:24:17.000
And let me explain to you why
I think the money printing has to happen,

351
00:24:17.160 --> 00:24:18.480
Like politically, there's no talible solution. We got to print more money,

352
00:24:18.519 --> 00:24:22.160
We're going to cut rates, or
let me tell you why the successive

353
00:24:22.200 --> 00:24:26.240
pools of capital inside the bitcoin ecosystem
will fall, Like yes, it's starting

354
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with altern ahead networks, but like
once the endowments get off zero all the

355
00:24:30.279 --> 00:24:32.759
endowments will come in. And if
the endowments come in, then all of

356
00:24:32.799 --> 00:24:36.799
a sudden, the pension funds have
to start considering it. And if the

357
00:24:36.799 --> 00:24:40.440
pension funds consider it, the ETF
tips one day. And once the ETF

358
00:24:40.440 --> 00:24:41.839
tips, then the black arts of
the world are so you can lay out

359
00:24:41.880 --> 00:24:44.880
sort of what you think is going
to happen, and then as those things

360
00:24:44.880 --> 00:24:47.799
start to happen, you start to
crew credibility where you can walk people through

361
00:24:47.799 --> 00:24:49.359
the technology and say, actually,
let me walk you through wh this tech

362
00:24:49.400 --> 00:24:52.680
is really interesting, and let me
show you the data. We do this

363
00:24:52.720 --> 00:24:56.480
annual Developer Report that actually came out
of these conversations because we would talk to

364
00:24:56.519 --> 00:25:00.599
all these people and we were explaining
to them why we had some such conviction

365
00:25:00.640 --> 00:25:02.759
in space. And one of the
things that gave us a lot of convictions

366
00:25:02.799 --> 00:25:07.559
we could see folks like Vitolic or
Zuko or you know, so many engineers

367
00:25:07.799 --> 00:25:11.640
from kind of like this sixteen seventeen
eighteen era gets like Ilaga that were starting

368
00:25:11.720 --> 00:25:15.880
projects and so many of those seed
investments that we made back then. If

369
00:25:15.880 --> 00:25:19.759
you just want to talk to those
engineers, you immediately walked out of the

370
00:25:19.759 --> 00:25:23.440
conversations saying, Wow, this is
a brilliant person, like technically brilliant person

371
00:25:23.480 --> 00:25:27.200
and they're choosing to spend their time
on this. And so our thought was

372
00:25:27.279 --> 00:25:30.160
in twenty eighteen, well how do
we quantify that, Like, yeah,

373
00:25:30.160 --> 00:25:33.920
we have a bunch of one off
conversations with these technically brilliant people, but

374
00:25:33.039 --> 00:25:37.000
how many such people are there?
And we can quantify that? So Curtis

375
00:25:37.039 --> 00:25:40.319
built this crawling system to go crawl
get hub and get lab and a bunch

376
00:25:40.359 --> 00:25:44.000
of websites and started trying to quantify
how many developers they are on ecosystem,

377
00:25:44.000 --> 00:25:48.359
which turned into the annual Developer report
that we do. But again that was

378
00:25:48.400 --> 00:25:52.359
sort of from this perspective of like, we think developers are leading signal for

379
00:25:52.440 --> 00:25:55.920
where value will accrue over time,
because if developers are willing to commit their

380
00:25:55.920 --> 00:26:00.839
time to the thing, they'll create
value. And that came out of this

381
00:26:00.880 --> 00:26:04.400
conversation. So a lot of our
approach with the institutions always has been and

382
00:26:04.480 --> 00:26:07.279
continues to be, We're not going
to try to convince you of anything,

383
00:26:07.559 --> 00:26:11.079
because I think if you convince people, if you try to convince people of

384
00:26:11.119 --> 00:26:15.079
stuff and you try to sell them
on it, if it turns out they're

385
00:26:15.119 --> 00:26:18.759
not there, then six months in
they're going to have buyers remorse right,

386
00:26:18.799 --> 00:26:22.559
They're going to feel like you sold
them on something. Whereas I think if

387
00:26:22.559 --> 00:26:25.880
you just lay out the facts and
you're like, I'm not trying to convince

388
00:26:25.920 --> 00:26:27.279
you anything, let me just give
you the facts, let me show you

389
00:26:27.359 --> 00:26:33.039
the data, you decide, and
then the decision is theirs. I think

390
00:26:33.079 --> 00:26:36.640
the psychology of that is very different
because then they had to get there themselves.

391
00:26:37.640 --> 00:26:38.839
And in our opinion, like,
if you lay out the facts,

392
00:26:40.119 --> 00:26:44.160
then smart people will come to the
right conclusion. And so that approach has

393
00:26:44.200 --> 00:26:45.640
worked really well for us, and
I think it's a very collaborative approach and

394
00:26:45.640 --> 00:26:48.960
it continues to be how we think
about it today. And so I don't

395
00:26:49.000 --> 00:26:52.319
know, I Frank, you know, I always we always talk about this

396
00:26:52.359 --> 00:26:55.000
internally. I've never worked at a
venture fund. Curtis has never worked at

397
00:26:55.000 --> 00:26:57.559
a venture fund, So it is
not clear to us that this is actually

398
00:26:57.559 --> 00:27:02.200
how venture funds operate. This just
happens to be how we operate, right,

399
00:27:02.519 --> 00:27:04.359
and it's sort of our approach to
it, and you know, it

400
00:27:04.640 --> 00:27:11.279
seems to have worked well for us. I'm curious with the influx of Wall

401
00:27:11.319 --> 00:27:15.880
Street and launching ets, Blackrock,
Fidelity, all these big names. Has

402
00:27:15.920 --> 00:27:21.000
that given more or has that generated
more demand from these folks? Hasn't made

403
00:27:21.000 --> 00:27:26.440
your pitch easier because it's like social
proof, Yeah, so answers, Yes,

404
00:27:26.680 --> 00:27:29.880
I think that especially like kind of
what you were saying, right,

405
00:27:29.920 --> 00:27:33.920
I mean, if you go back
to twenty eighteen, Larry Think was anti

406
00:27:34.000 --> 00:27:37.119
this stuff, and then you can
see there's like these really amazing CNBC e

407
00:27:37.119 --> 00:27:41.759
clips of him evolving his thinking over
a few years and getting to where he

408
00:27:41.880 --> 00:27:48.519
is. And I think when the
world's largest asset manager, you know,

409
00:27:48.559 --> 00:27:51.799
the CEO of that organization, it's
making these kind of statements, it's very

410
00:27:51.839 --> 00:27:56.200
hard for other people to set up
and say it's a total scam, right,

411
00:27:56.240 --> 00:27:59.400
and so it is a very very
important moment. I think once black

412
00:27:59.480 --> 00:28:03.440
Rocks are the once a layer to
think tipped. And we kind of saw

413
00:28:03.480 --> 00:28:08.319
this with the endowments too. You
know, it's like when everybody is at

414
00:28:08.440 --> 00:28:12.359
zero allocation on a thing, it's
sort of like an interesting chame psychology thing.

415
00:28:12.400 --> 00:28:15.920
I think to understand when everybody was
at zero in crypto, like no

416
00:28:17.079 --> 00:28:22.599
endowments had gone in. Every chief
investment officer, every CIO could look around,

417
00:28:22.240 --> 00:28:26.200
and they didn't have to justify their
zero, Like you didn't have to

418
00:28:26.319 --> 00:28:30.319
justify to your board why you are
at zero percent crypto allocation because everybody else

419
00:28:30.359 --> 00:28:33.039
was at zero. Now, as
soon as one or two of really high

420
00:28:33.079 --> 00:28:37.240
quality people tip in you as an
organization, your board is going to say,

421
00:28:37.240 --> 00:28:41.039
wait a second, why is Harvard
in? Why is he Yale in?

422
00:28:41.200 --> 00:28:45.000
Why ist in? And we're not. Now you have to justify your

423
00:28:45.079 --> 00:28:48.759
zero, and once you start looking
at the facts, it becomes very hard

424
00:28:48.799 --> 00:28:52.519
to justify the zero. So this
act of like one or two or three

425
00:28:52.640 --> 00:28:59.039
really credible people like a black Rocker
Fidelity moving off of zero and bringing much

426
00:28:59.079 --> 00:29:03.000
people along the question for everybody else. So it's not just that like the

427
00:29:03.039 --> 00:29:07.079
money that they bring in, it's
actually creates this downstream second order effect where

428
00:29:07.079 --> 00:29:11.480
now Vanguard has to justify being on
zero, and all of a sudden,

429
00:29:11.519 --> 00:29:14.799
once you start looking at it on
the basis of the data in the facts,

430
00:29:15.000 --> 00:29:17.559
it becomes very hard to justify a
zero, like, well, maybe

431
00:29:17.599 --> 00:29:19.960
we should have ten BIPs, maybe
we should have twenty five BIPs, you

432
00:29:21.000 --> 00:29:22.359
know, like half a percent of
the portfolio should be in this stuff that

433
00:29:22.359 --> 00:29:25.880
doesn't seem crazy like if you lose
half a percent of the portfolio, but

434
00:29:25.880 --> 00:29:29.200
if it really works and you add
five percent or ten percent to your net

435
00:29:29.240 --> 00:29:33.359
worth because this stuff really out performed, that's a pretty good risk word,

436
00:29:33.480 --> 00:29:36.839
right, So it sort of forces
the question. And so I think the

437
00:29:36.839 --> 00:29:40.880
black rock movement was actually really important, not in so much for like how

438
00:29:40.920 --> 00:29:44.359
much money they'll bring into pick on
ETFs, Like, I think that's not

439
00:29:44.480 --> 00:29:47.720
really the point in my opinion.
The really interesting thing is it forces a

440
00:29:47.759 --> 00:29:49.880
conversation for all of the asset managers
in the world now for like, wait

441
00:29:49.920 --> 00:29:52.680
a second, why are we on
zero? Why do we not have a

442
00:29:52.680 --> 00:29:55.680
cryptive strategy? Is that the right
thing for our clients? And now you

443
00:29:55.720 --> 00:29:59.079
have to start trying to justify your
zero and it turns out justifying being on

444
00:29:59.160 --> 00:30:03.160
zero it's very hard, yeah,
because they have a food uciary duty and

445
00:30:03.200 --> 00:30:06.000
in addition is a bit of game
theory, right, and no one wants

446
00:30:06.079 --> 00:30:10.519
to get left behind exactly. Yeah, So it's fascinating. And in your

447
00:30:10.599 --> 00:30:14.240
pitch, are you talking to them
about macro factors as well, given that

448
00:30:14.319 --> 00:30:18.720
bitcoin has been the best performing asset, bonds are not doing well, and

449
00:30:18.839 --> 00:30:23.000
just looking at the trajectory of the
outlook of the markets and different assets.

450
00:30:23.680 --> 00:30:26.119
It's like you're almost forced to,
like, if you want to have a

451
00:30:26.160 --> 00:30:30.240
reasonable return, you have to go
on to crypto. Yeah, so it

452
00:30:30.279 --> 00:30:34.960
depends a lot on who we're speaking
with. So some firms are, you

453
00:30:34.960 --> 00:30:38.759
know, some asset managers, some
LPs are very top down macro oriented,

454
00:30:38.759 --> 00:30:42.160
and so they do think about things
like track record and you look at the

455
00:30:42.200 --> 00:30:45.720
last ten or fifteen years of performance
history. They think about things like well

456
00:30:45.720 --> 00:30:52.559
fixed supply assets and interest rates in
supplying demand and liquidity. They think about

457
00:30:52.559 --> 00:30:56.079
things like inflation. So there's absolutely
set of capital allocators in the world that

458
00:30:56.160 --> 00:31:00.359
are very sort of top down macro
where the money flows and currency exchange rates

459
00:31:00.359 --> 00:31:04.680
and interest rates and inflation that's what
ultimately drives the world. There's a different

460
00:31:04.720 --> 00:31:10.599
set of people who are a little
bit more bottom up rather than top down,

461
00:31:11.279 --> 00:31:17.039
and their world view is much more
technical and technology breakthroughs create new use

462
00:31:17.079 --> 00:31:19.559
cases, and those use cases create
new markets, and that's really where you

463
00:31:19.559 --> 00:31:23.960
have outsize returns. And of course
those are impacted by capital flows because you

464
00:31:25.599 --> 00:31:32.039
risk capital needs to drive this innovation. But they care much more about what

465
00:31:32.160 --> 00:31:34.279
can you do with this stuff?
So for example, in the first category,

466
00:31:34.279 --> 00:31:37.359
you may get a lot of people
that are open to doing investments in

467
00:31:37.400 --> 00:31:41.000
commodities or gold because they look at
these sort of as driven by liquidity and

468
00:31:41.039 --> 00:31:45.200
macro effects, and those people think
about perhaps some bitcoin in a particular way.

469
00:31:45.200 --> 00:31:48.960
And the second category is there's a
lot of people in the world that

470
00:31:48.000 --> 00:31:52.279
actually don't own gold in their portfolio. They think it's a non productive asset

471
00:31:52.319 --> 00:31:56.480
and it's speculative and like what does
it really worth? Yeada YadA. But

472
00:31:56.519 --> 00:32:00.480
they're very right now into like AI
and so a part of part of the

473
00:32:00.559 --> 00:32:06.519
job for us is understanding how where
people are and what their mental models of

474
00:32:06.559 --> 00:32:10.359
the world are and how they think
about it, and trying to explain to

475
00:32:10.400 --> 00:32:15.119
them what's happening sort of given that
context, so that they can understand it.

476
00:32:15.079 --> 00:32:17.799
It's almost like you're a translator and
there's a bunch of technology and there's

477
00:32:17.839 --> 00:32:22.079
a social movement, and there's capital
flows and liquidity flows, and they're absolutely

478
00:32:22.119 --> 00:32:27.839
impacted by interest rates and all this
stuff is all true. How you sort

479
00:32:27.880 --> 00:32:30.759
of translate that into the language of
the person that you're speaking with is sort

480
00:32:30.799 --> 00:32:35.039
of the challenge that that you have, and when you're trying to fund raise.

481
00:32:36.640 --> 00:32:37.839
Tell us about your twenty twenty four
row map. Are you planning to

482
00:32:37.920 --> 00:32:45.160
do in any additional raises? We
are not. And you know we normally

483
00:32:45.440 --> 00:32:49.279
just per SEC rules, even if
we are raising, we can't we can't

484
00:32:49.279 --> 00:32:53.559
tell anybody that we're raising. It's
because we it's a bunch of downstream restrictions

485
00:32:53.559 --> 00:32:58.519
on the SEC side. But we're
rais certain investment advisors, and so we're

486
00:32:58.759 --> 00:33:02.559
constrained in a lot of voice as
we should be, and so even if

487
00:33:02.559 --> 00:33:07.079
we were, we really couldn't say, but yeah, we're actually you know,

488
00:33:07.160 --> 00:33:10.519
we we announced the last fundraise that
we did and we're still sitting on

489
00:33:10.559 --> 00:33:15.880
a lot of cash and deploying it
into great companies. And so yeah,

490
00:33:15.880 --> 00:33:19.799
no, no plans to raise it
anytime soon. Now. I saw former

491
00:33:20.000 --> 00:33:23.079
SEC chair Ja Clayton is an advisor. How did you guys get Jay Clayton?

492
00:33:23.079 --> 00:33:28.559
And I want to talk a bit
about his views? Have they changed

493
00:33:28.880 --> 00:33:31.799
given you know, under his administration, I would say it was much better

494
00:33:31.839 --> 00:33:37.240
than in would Ginster right now.
It was by no means perfect, But

495
00:33:37.240 --> 00:33:39.000
look, I think all these folks
were trying to frigere it his technology and

496
00:33:39.039 --> 00:33:44.839
his acid class at Yeah, Yeah, Jay has been fantastic. Jay.

497
00:33:46.720 --> 00:33:52.359
How are we originally Jay? I
believe we met Jay, I don't remember.

498
00:33:52.519 --> 00:33:55.920
Maybe through Ja, maybe through Kevin
Worsh. Kevin is a former FED

499
00:33:55.960 --> 00:34:01.200
governor. He was actually the youngest
governor of the FED. He was he

500
00:34:01.279 --> 00:34:06.160
was basically Ben Bernanke's right hand guy
during the two thousand and eight crash,

501
00:34:06.640 --> 00:34:08.519
and he was like the architect of
a lot of the bailout, of the

502
00:34:08.639 --> 00:34:12.559
V one bailouts in two thousand and
eight to try to like the Tark bailouts

503
00:34:12.559 --> 00:34:15.639
and stuff to try to save the
financial system, which they executed on phenomenally.

504
00:34:16.039 --> 00:34:21.719
He ended up leaving, I believe
in twenty ten after being there for

505
00:34:21.719 --> 00:34:28.400
a few years because in his opinion, like he's like a pretty moderate economist,

506
00:34:29.159 --> 00:34:34.719
so he's like very anti modern monetary
theory MMT. And his belief was

507
00:34:34.760 --> 00:34:37.400
that I think he was right in
retrospect. His belief was that if we

508
00:34:37.519 --> 00:34:43.519
kept doing these stimulus packages, we
were on a road to disaster because you

509
00:34:43.519 --> 00:34:49.440
would create massive downstream inflation and asked
a price appreciation, and that would be

510
00:34:49.480 --> 00:34:52.000
really bad for the average person.
But also it would really distort the markets,

511
00:34:52.039 --> 00:34:54.599
and we didn't really need it,
and what we should do is let

512
00:34:54.639 --> 00:34:57.480
the markets be the markets. And
so it was supposed to be like a

513
00:34:57.519 --> 00:35:00.760
one time thing and we're supposed to
be done. We kept sort of kept

514
00:35:00.760 --> 00:35:04.519
it going for like a decade,
and he was very very opposed to that.

515
00:35:04.559 --> 00:35:07.719
So he ended up leaving in twenty
ten, I believe, and went

516
00:35:07.760 --> 00:35:12.960
into the private sector, and he's
an advisor to Electric and he's been phenomenally

517
00:35:13.000 --> 00:35:16.000
helpful just helping us us understand.
His perspective is so valuable. It's just

518
00:35:16.039 --> 00:35:21.000
really really smart these days. He's
he works very closely with Stan drucken Miller,

519
00:35:21.320 --> 00:35:25.039
if you know, Stan sort of
a legendary investor, and so they've

520
00:35:25.079 --> 00:35:29.880
always just given this fantastic advice.
So I believe Kevin introduced us to Jay.

521
00:35:30.239 --> 00:35:32.760
To your question around Jay. I
think Jay's thinking has evolved on this

522
00:35:32.840 --> 00:35:36.119
a lot, as as it should. And I think he's a really smart

523
00:35:36.199 --> 00:35:38.639
guy. I think he understands,
you know, even if he looks back

524
00:35:38.679 --> 00:35:45.159
at his positions during his tenure,
you know, he was very open to

525
00:35:45.199 --> 00:35:49.960
the idea that these things would be
transformative and that the technology underlying technology was

526
00:35:49.960 --> 00:35:53.440
going to be transformative to Wall Street
and so on. But he was actually

527
00:35:53.519 --> 00:35:59.199
quite moderate, especially compared to currency
see in terms of how he thought about

528
00:36:00.360 --> 00:36:07.079
managing these because I think he does
have this perspective that you want to have

529
00:36:07.159 --> 00:36:10.320
responsible innovation. So I think there's
sort of one worldview that's sort of on

530
00:36:10.320 --> 00:36:14.519
the spectrum, and there's like one
end of it, which is innovation drives

531
00:36:14.559 --> 00:36:17.039
everything, like let it go,
don't touch it all the way. On

532
00:36:17.079 --> 00:36:21.320
the other end of the extreme is
this stuff is really bad. We need

533
00:36:21.360 --> 00:36:24.719
to protect people against it, so
like, be extremely, extremely extremely cautious

534
00:36:25.199 --> 00:36:29.719
about what you led through and why. And it's basically you want you want

535
00:36:29.719 --> 00:36:31.519
the system to be permissioned almost as
kind of how to think about it,

536
00:36:31.760 --> 00:36:34.960
and we and we control the keys, and we're going to tell you if

537
00:36:34.960 --> 00:36:37.480
you have permission. And I think
Jason the middle, which is like innovation

538
00:36:37.679 --> 00:36:40.960
is really important. You just want
to be responsible with it. You don't

539
00:36:40.960 --> 00:36:46.559
want the retail user to get blown
up because you were irresponsible with letting bad

540
00:36:46.559 --> 00:36:51.960
things happen. And so I think
he's always at his core been pro innovation

541
00:36:52.079 --> 00:36:53.880
and pro trying to figure this stuff
out, which is why I mean,

542
00:36:53.880 --> 00:36:58.440
like the Hindman stuff happened with him, right, and he's he's sort of,

543
00:36:58.519 --> 00:37:01.800
like I think, understood that this
stuff could have huge, huge implications

544
00:37:02.199 --> 00:37:05.840
and was always open to it,
and I think is as the space has

545
00:37:05.880 --> 00:37:09.039
evolved, as Bitcoin has become more
established, as ethereum kind of established as

546
00:37:09.079 --> 00:37:15.400
a decentralized thing, he's always been
sort of pushing for the applications of these

547
00:37:15.440 --> 00:37:20.239
technologies in all sorts of ways,
and very open to the downstream consequences of

548
00:37:20.599 --> 00:37:24.280
things like ethereum being fully decentralized and
not a security and so on. So

549
00:37:24.440 --> 00:37:29.320
I actually give him a lot of
credit. I don't think that's it's easy

550
00:37:29.360 --> 00:37:32.280
to be inside the government and to
try to do this balancing act of like

551
00:37:32.639 --> 00:37:38.199
more pro innovation. We want these
things to exist and flourish, but do

552
00:37:38.239 --> 00:37:42.719
it in a responsible way, and
over time, as the ecosystem evolves,

553
00:37:42.760 --> 00:37:45.639
to evolve your own thinking and say
like, actually things are different today than

554
00:37:45.639 --> 00:37:47.679
they were seven years ago, and
we should update our models because the world

555
00:37:47.760 --> 00:37:51.960
is different today. And so I
give him a lot of credit for updating

556
00:37:52.000 --> 00:37:54.519
his models. And he pushes a
lot. He's the chairman of the board

557
00:37:54.519 --> 00:37:59.280
at the Apollo Group, like the
big, big asset manager, and I

558
00:37:59.280 --> 00:38:02.360
give him a lot of credit for
for pushing this in the Apollo ecosystem as

559
00:38:02.360 --> 00:38:06.599
well. He does a lot of
stuff behind the scenes too to push push

560
00:38:06.599 --> 00:38:08.760
this sort of thinking of like this
stuff is really valuable and interesting and we

561
00:38:08.800 --> 00:38:13.559
should be thinking about incorporating it.
I don't know if you can answer this,

562
00:38:13.639 --> 00:38:17.920
but has he spoken to Gaens or
is he trying to talk to the

563
00:38:17.960 --> 00:38:23.159
current administration about their approach to crypto? I don't know, you know,

564
00:38:23.239 --> 00:38:28.000
and I'm not. I wish I
were more versed on politics to understand how

565
00:38:28.039 --> 00:38:30.960
these things work in terms of like
who talks to who and how these dynamics

566
00:38:30.960 --> 00:38:37.519
work. So yeah, I don't
know. I mean I think if if

567
00:38:37.559 --> 00:38:43.280
I were in the administration today,
I think I would be thinking about who

568
00:38:43.360 --> 00:38:45.400
has experienced with these kinds of issues
and trying to get their own foot in,

569
00:38:45.400 --> 00:38:50.000
no matter where they are on the
political spectrum, because I think the

570
00:38:50.079 --> 00:38:54.320
reality is, you know, crypto
AI, so the chip manufacturing stuff,

571
00:38:55.480 --> 00:38:59.559
you know, drone technologies, like
there's there are these handful of technologies that

572
00:38:59.599 --> 00:39:05.599
actually have like real geopolitical consequences,
and so setting aside where you go are

573
00:39:05.639 --> 00:39:08.239
on the political spectrum, you know, I think trying to get all input

574
00:39:08.280 --> 00:39:12.320
so you can make a really good
decision, either in the executive branch or

575
00:39:12.320 --> 00:39:14.840
in the legislative branch. I think
the best people tend to do that,

576
00:39:15.320 --> 00:39:17.360
and so I hope they are.
I think Jay has a lot of good

577
00:39:17.360 --> 00:39:22.800
thoughts on this stuff. So before
the recording, you mentioned you're heading to

578
00:39:22.840 --> 00:39:27.320
the White House, I think next
week, and you're doing some advocacy and

579
00:39:27.440 --> 00:39:31.280
education with members of Congress and so
forth. Obviously it's a shit show with

580
00:39:31.360 --> 00:39:36.239
the SEC right now. They're losing
in the courts. The industry is countersuing

581
00:39:36.280 --> 00:39:39.239
them, they're suing the industry.
We had a bill come out the House,

582
00:39:39.280 --> 00:39:42.599
the Fit twenty one. We're waiting
for it to go to the Senate.

583
00:39:43.039 --> 00:39:45.000
We'll see what happens with the election. Donald Trump says he's the bro

584
00:39:45.119 --> 00:39:49.440
crypto candidate Biden. We haven't heard
anything. We don't even know by it's

585
00:39:49.440 --> 00:39:51.920
going to be around. But tell
us about the work you're going to be

586
00:39:51.960 --> 00:39:54.760
doing next week. Yeah. So
I do a lot of work on the

587
00:39:54.840 --> 00:39:59.800
DC side. So I'm on term
of the board at Crypto councilor Innovation CCI,

588
00:40:00.800 --> 00:40:04.159
the leading advocacy group in the in
the space. It's US and in

589
00:40:04.199 --> 00:40:10.639
Dryson coinbase paradigm fidelity block relatively small, like high powered group of people,

590
00:40:12.679 --> 00:40:15.599
and so we do a lot of
advocacy work behind the scenes, and especially

591
00:40:15.599 --> 00:40:17.519
with the twenty twenty four elections,
there's been a lot of sort of senators

592
00:40:17.519 --> 00:40:22.119
in Congress, people and people in
the executive you know, staffers kind of

593
00:40:22.119 --> 00:40:24.199
coming through San Francisco, and I'm
going to DC to do a bunch of

594
00:40:24.280 --> 00:40:29.880
conversations next week as well, and
so you know, a lot of it

595
00:40:29.000 --> 00:40:34.159
is actually similar to how we approach
the LP conversation, which is why I

596
00:40:34.159 --> 00:40:38.760
think we have been effective, and
we have the good fortune of having the

597
00:40:38.800 --> 00:40:45.440
access that we do to you know, we're probably like you know, on

598
00:40:45.480 --> 00:40:50.960
an email or text basis with probably
a dozen senators and probably twenty five members

599
00:40:50.960 --> 00:40:58.559
of Congress and some folks inside you
staffers inside agencies and stuff that we can

600
00:40:58.559 --> 00:41:00.159
speak with. And because our approach
is all always been we're not going to

601
00:41:00.639 --> 00:41:04.639
try to convince you of anything,
but let me just show you the facts.

602
00:41:04.679 --> 00:41:08.280
Like I can show you the data
about what's happening with software development,

603
00:41:08.320 --> 00:41:13.880
and I can show you that the
US used to have sixty sixty five percent

604
00:41:13.960 --> 00:41:17.159
market share of the open source development
that was happening in crypto back in twenty

605
00:41:17.199 --> 00:41:21.920
sixteen, twenty seventeen, and today
we're down to like twenty seven percent.

606
00:41:22.400 --> 00:41:27.679
Wow, And that's, in my
opinion, not good. If you're if

607
00:41:27.719 --> 00:41:30.159
you're you know, in an elected
official in the United States and your job

608
00:41:30.320 --> 00:41:34.719
is to create jobs in the country
and to think about where software development is

609
00:41:34.719 --> 00:41:42.239
happening and things like cryptography and distributed
systems. Cryptography is really important. You

610
00:41:42.280 --> 00:41:46.760
know, do you want that to
be happening in East Asia, do you

611
00:41:46.760 --> 00:41:50.920
want that to be happening in Eastern
Europe? Or would you rather have that

612
00:41:51.000 --> 00:41:53.679
happen in the United States. Now
I can't, like, I'm not going

613
00:41:53.719 --> 00:41:57.280
to tell you what to do,
but like I can show you the data,

614
00:41:57.320 --> 00:42:00.960
and the data is very clear on
what's happening. And you know,

615
00:42:00.000 --> 00:42:02.239
I can show you the data on
stable coins, I can show you why

616
00:42:02.239 --> 00:42:06.199
they work, I can show you
who's using them. I can show you

617
00:42:06.239 --> 00:42:09.159
the downstream consequences of how much of
that might end up in treasury demand.

618
00:42:09.599 --> 00:42:15.119
And if you're thinking about the dollar
as a national security asset, because now

619
00:42:15.119 --> 00:42:17.320
you can do sanctions on people,
and you know, you want to monetize

620
00:42:17.320 --> 00:42:22.159
the debt and so on, I'll
just show you the data. You decide

621
00:42:22.159 --> 00:42:23.239
if you think it's a good thing
or not. But it's very clear if

622
00:42:23.239 --> 00:42:28.280
you look at the data the role
that this thing can play. So that's

623
00:42:28.280 --> 00:42:30.519
the approach we've taken, and I
think, as a result, very similar

624
00:42:30.559 --> 00:42:32.000
to the LP side, where we're
not trying to convince anybody of anything.

625
00:42:32.039 --> 00:42:36.119
We're just like, I'm I don't
like literally, I have no idea how

626
00:42:36.239 --> 00:42:38.159
the government works, right, Like
I don't know how it build becomes a

627
00:42:38.239 --> 00:42:43.599
law, like you know, I
study software engineering, but I can show

628
00:42:43.599 --> 00:42:45.559
you the data and so you guys
need to figure out what to do with

629
00:42:45.599 --> 00:42:50.039
this. And I think because we
take that approach of being non partisan,

630
00:42:50.239 --> 00:42:52.639
like I don't really care if you're
a Republican or a Democrat, or if

631
00:42:52.639 --> 00:42:54.360
you're in the White House or you
know what agency you're in. I just

632
00:42:54.400 --> 00:42:58.920
want I just want people to make
the right decision that seems to land,

633
00:42:59.000 --> 00:43:01.360
that seems to work quite well well, and it is I mean, that's

634
00:43:01.360 --> 00:43:05.800
genuine. It's not we're not trying
to like run a playbook or something.

635
00:43:05.880 --> 00:43:07.400
We just want people to make good
decisions. And it would be such a

636
00:43:07.440 --> 00:43:14.880
missed opportunity in our opinion for politics
to get in the way of creating better

637
00:43:14.920 --> 00:43:20.880
products for consumers, for creating companies
that are more accountable to their customers because

638
00:43:20.920 --> 00:43:25.840
there's transparency and audibility. I think
it would be a huge strategic missed opportunity

639
00:43:25.920 --> 00:43:32.400
to have things like cryptographic research move
outside the US, and so I think

640
00:43:32.400 --> 00:43:36.559
those would just be really big misses. So that's how we talk about it,

641
00:43:36.719 --> 00:43:37.559
and we've had the good fortune of
a lot of people say, you

642
00:43:37.599 --> 00:43:40.159
know what, that's actually a very
reasonable way approach it, Like you're not

643
00:43:40.159 --> 00:43:43.719
trying to convince me of anything,
You're trying to give me the fact,

644
00:43:43.760 --> 00:43:46.079
so I make a good decision.
I think that resonates. Yeah, absolutely,

645
00:43:46.159 --> 00:43:49.840
And look, it shouldn't be a
part of an issue. Obviously,

646
00:43:50.159 --> 00:43:54.719
certain people like Elizabeth Warren haven't made
it that and that yeah, unfortunately,

647
00:43:54.760 --> 00:44:00.400
And that kind of is why I
think it's become so political, because the

648
00:44:00.400 --> 00:44:01.639
other side is like, you know, what do you guys doing, Why

649
00:44:01.639 --> 00:44:07.840
are you so anti crypto blockchain and
so forth? It's just nonsense. And

650
00:44:07.880 --> 00:44:12.440
then now I think we're seeing some
Democrats waking up because they're working with their

651
00:44:12.440 --> 00:44:16.079
colleagues on the Republican side to get
some bills through to repeal certain things from

652
00:44:16.079 --> 00:44:22.559
the SEC. But we'll see what
happens is election. It's it's fascinating if

653
00:44:22.599 --> 00:44:29.400
you told me you know crypto will
be an election issue. Yeah, that's

654
00:44:29.400 --> 00:44:30.559
pretty wild. And I give a
lot of credit. I mean, I

655
00:44:30.840 --> 00:44:35.639
do think there's been a lot of
work behind the scenes by folks like Cci

656
00:44:35.880 --> 00:44:37.920
fair Shake Pack. Fair Shape Pack
is now the largest super pack in the

657
00:44:38.039 --> 00:44:44.119
United States and of all packs,
and it's a crypto pack. And you

658
00:44:44.119 --> 00:44:47.199
know, huge, huge credit to
Ripple and Coinbase and andrews Norwitz for putting

659
00:44:47.239 --> 00:44:50.679
in one hundred and fifty million between
the three of them fifty million each.

660
00:44:51.679 --> 00:44:58.079
We're very small contributors compared to those
guys to that thing. But you know,

661
00:44:58.119 --> 00:45:00.440
I think there's sort of been a
lot behind the scenes work and advocacy

662
00:45:00.440 --> 00:45:04.239
work that's been happening for two years. And then there's this sort of spark

663
00:45:04.320 --> 00:45:07.079
moment where Donald Trump leaned in hard
and said I'm pro And I think that

664
00:45:07.159 --> 00:45:12.719
sort of forced a lot of people
who are in tough reelection districts to sort

665
00:45:12.719 --> 00:45:14.760
of wake up and say, wait
a second, like is this actually a

666
00:45:14.760 --> 00:45:16.280
wedge issue? Like do I want
my opponent to be able to take this

667
00:45:16.320 --> 00:45:21.559
issue from me, And I think
a lot of Dems realize that they don't

668
00:45:21.559 --> 00:45:23.480
want to give that up. Given
the demographics of who's here. It's disproportionately

669
00:45:23.559 --> 00:45:30.679
young and over indexes on black and
brown people, you know, over indexes

670
00:45:30.719 --> 00:45:32.480
on people who actually have been left
out of the existing financial system. So

671
00:45:32.519 --> 00:45:36.480
when you look at it on the
merits, you're like, why are this

672
00:45:36.559 --> 00:45:38.480
is like this is the democratic base, Like what are you doing? And

673
00:45:38.519 --> 00:45:40.519
so the smart people sort of sat
up and said, Okay, we can't

674
00:45:40.519 --> 00:45:45.639
lose this issue. And now it's
sort of similar right like before you could

675
00:45:45.719 --> 00:45:47.760
kind of ignore it, kind of
like we're talking about with the with the

676
00:45:47.800 --> 00:45:52.480
foundations. Before you could ignore it. Now a lot of people and tough

677
00:45:52.519 --> 00:45:54.800
races can't ignore it and they have
to take a position on it. And

678
00:45:54.800 --> 00:46:00.119
now that's forcing the downstream hand of
a lot of other people. But I

679
00:46:00.119 --> 00:46:01.199
said, I think this is really
at its core as a non part is

680
00:46:01.280 --> 00:46:05.159
the initiation. I think it's really
a question of do you want jobs in

681
00:46:05.159 --> 00:46:08.119
the United States? Do you want
companies that you have to you know,

682
00:46:08.280 --> 00:46:14.000
don't own all your data. Do
you want financial products that don't take fees

683
00:46:14.039 --> 00:46:15.920
from poor people, right, Like
you think about the way the banks work

684
00:46:15.960 --> 00:46:19.599
disproportionately, how do the banks make
money? They make money off of fees.

685
00:46:20.320 --> 00:46:22.920
I'm not paying any fees, So
who's paying ATM fees if people who

686
00:46:22.920 --> 00:46:24.960
don't have enough money in their bank
account. So it's basically money coming from

687
00:46:24.960 --> 00:46:28.599
poor people. And so when you
start looking at the issues, you're like,

688
00:46:28.599 --> 00:46:30.519
actually, these aren't totally non partisan
issues like this? Should not people

689
00:46:30.519 --> 00:46:34.440
with this ask? This is like, we can make better products for American

690
00:46:34.440 --> 00:46:38.679
consumers, and we can lower fees
on people, and we can keep jobs

691
00:46:38.679 --> 00:46:43.039
in the United States and make new
jobs like this, these are totally non

692
00:46:43.079 --> 00:46:46.320
partisan issues in my opinion. Absolutely. I'd love to give your thoughts on

693
00:46:46.519 --> 00:46:52.000
the Bitcoin ETF performance of what we've
seen so far with the inflows we've got

694
00:46:52.000 --> 00:46:55.639
the Etherorem ETF potentially being approved this
week according to Bloomberg analysts, what are

695
00:46:55.679 --> 00:47:00.800
your thoughts on how things have gone
so far? I think the bigcoin ETF

696
00:47:00.800 --> 00:47:05.960
has really outperformed. It exceeded my
expectations like I had. You know,

697
00:47:06.000 --> 00:47:07.679
I did not expect it to do
as well as it did. You know,

698
00:47:07.679 --> 00:47:09.880
how's the ETF gond I do I
have? I have no idea on

699
00:47:10.159 --> 00:47:14.519
the east side. I also think
that, like we have to think about

700
00:47:14.519 --> 00:47:16.559
these things on very long term time
horizons. You know, the guys at

701
00:47:16.559 --> 00:47:22.440
bit wise have published some data a
few times referencing the GOLDIETF, and so

702
00:47:22.480 --> 00:47:25.000
if you look at the GOLDITF,
actually i'll see, I'll see I find

703
00:47:25.039 --> 00:47:29.800
the tweet. Actually I just saw
it well by today, but from Matt

704
00:47:29.840 --> 00:47:34.440
Hougan. Matt is there. Yeah, I've had Matt on the podcast a

705
00:47:34.440 --> 00:47:37.280
few times. Yeah, he's really
great. But here's yeah, here's the

706
00:47:37.280 --> 00:47:38.719
Tweet's like, in two thousand and
four there was one point five billion dollars

707
00:47:38.719 --> 00:47:42.280
in the GOLDIETF. In two thousand
and five it is three point three billion,

708
00:47:42.639 --> 00:47:44.599
two hund and six. It was
four point eight, two thousand and

709
00:47:44.599 --> 00:47:46.440
seven is five point six, in
two thousand and eight it was eleven point

710
00:47:46.440 --> 00:47:50.159
two, and two thousand and nine
is nineteen point three. So actually,

711
00:47:50.199 --> 00:47:53.559
for like the six years after the
launch of the ETF, every single year

712
00:47:53.920 --> 00:47:59.800
had more inflows than the prior year. That's how like the machinery of the

713
00:47:59.760 --> 00:48:04.840
true financial markets works. And so
I would not be surprised if this is

714
00:48:04.840 --> 00:48:07.079
actually, like now a very very
long term trend. And so really to

715
00:48:07.119 --> 00:48:10.079
evaluate the success of these things,
you need to be looking on like a

716
00:48:10.119 --> 00:48:13.760
five to ten year time horizon,
not a like six month time rising and

717
00:48:13.840 --> 00:48:16.320
ECTF sort of like the begudy T
is like six lessons six old, so

718
00:48:16.480 --> 00:48:19.920
it's dramatically autperformed. I thought it
would be able to do. But also

719
00:48:20.000 --> 00:48:23.239
if you look at historically, it
would not be surprised that actually the vast

720
00:48:23.320 --> 00:48:28.239
majority of the influencer are yet to
come. Yeah, for sure. Uh.

721
00:48:28.519 --> 00:48:31.840
And I know many of these issuers
are going out educating rias and wealth

722
00:48:31.840 --> 00:48:36.880
managers, so you know, it's
a process, and you know, I

723
00:48:36.880 --> 00:48:38.559
think you could probably judge it next
year, you know, based on okay,

724
00:48:38.960 --> 00:48:42.360
the past year, how did it
perform. Yeah, yeah, yeah,

725
00:48:42.360 --> 00:48:45.159
I think that's right. One more
item herefore, I let you go,

726
00:48:45.639 --> 00:48:49.000
Uh, tokenization. We'll love to
get your thoughts on that. And

727
00:48:49.079 --> 00:48:53.639
are you guys looking to do any
investments on the tokenization side. Yeah,

728
00:48:53.679 --> 00:48:57.280
I think tokenization is very interesting.
I mean I think I think of this

729
00:48:57.320 --> 00:49:01.440
as generally under the umbrella of this
is just better infrastructure to move money and

730
00:49:01.519 --> 00:49:07.559
assets and do financial transactions. And
eventually this is going to do to all

731
00:49:07.639 --> 00:49:12.360
of the capital markets of the world. What the Internet did to all of

732
00:49:12.400 --> 00:49:15.440
the information markets of the world.
And so, you know, it would

733
00:49:15.440 --> 00:49:19.000
have been crazy town in nineteen ninety
five to say, you know what,

734
00:49:19.599 --> 00:49:22.440
like you're gonna get all of your
news on the internet, You're going to

735
00:49:22.519 --> 00:49:23.559
only watch videos on the internet.
You're not even going to turn on your

736
00:49:23.599 --> 00:49:28.159
TV anymore. All of the communication
you do is going to go through your

737
00:49:28.239 --> 00:49:30.920
Internet devices, on your computer,
on a little mini computer in your pocket.

738
00:49:30.960 --> 00:49:35.159
It would it would been crazy town, right like that all that has

739
00:49:35.320 --> 00:49:37.039
happen. But it's actually that's what
happened. And I think if Peo look

740
00:49:37.079 --> 00:49:39.719
at it today, I think it's
not It sounds a little bit crazy town

741
00:49:39.760 --> 00:49:44.440
to say, you know what,
You're gonna have a wallet, likely multiple

742
00:49:44.440 --> 00:49:46.320
wallets on your phone. Most apps
will actually have some sort of wallet built

743
00:49:46.320 --> 00:49:50.760
in. All of the money movement
of the world will shift towards these twenty

744
00:49:50.800 --> 00:49:58.679
four to seven global decentralized crypto networks, primarily on stable coins, and all

745
00:49:58.679 --> 00:50:00.400
of the assets of the world,
all the funial markets of the world will

746
00:50:00.440 --> 00:50:06.320
move to this infrastructure. So bonds
and securities and derivatives, it's just better

747
00:50:06.360 --> 00:50:10.280
infrastructure to create these capital markets.
It's cheaper, faster, more transparent,

748
00:50:10.360 --> 00:50:15.320
more auditable, everything is better.
And so that's just this infrastructure eats up

749
00:50:15.320 --> 00:50:21.159
all of it and tokenization is one
of those. And so we think it's

750
00:50:21.239 --> 00:50:23.239
just basically at this point, is
any fintech company. So the way we

751
00:50:23.280 --> 00:50:29.559
think about is actually it doesn't even
like it's the litmus tests. Basically is

752
00:50:30.000 --> 00:50:34.239
what problem are you solving and if
you can solve that problem using this infrastructure,

753
00:50:34.800 --> 00:50:37.400
you should probably do it. So
I'll give you an example. We

754
00:50:37.480 --> 00:50:42.039
invest in a company called re which
is a reinsurance company. On the front

755
00:50:42.119 --> 00:50:47.400
end, it's just it's a Cayman
Island registered reinsurance company, has the same

756
00:50:47.440 --> 00:50:52.119
collateralization ratios, it's licensed in the
Cayman Islands. Yeah yeah. On the

757
00:50:52.199 --> 00:50:53.880
back end, they've built it on
top of smart contracts. And now this

758
00:50:53.920 --> 00:50:59.199
has two really really important properties.
One, compliance gets really easy. You

759
00:50:59.239 --> 00:51:02.159
can just tell the Cayman Island regulators
exactly how much collaterally you have and what

760
00:51:02.159 --> 00:51:05.920
your leverage ratios are, and like
all the auditing that they need to do

761
00:51:06.000 --> 00:51:07.320
is instant, super easy. So
they love it. Actually, the Cayman

762
00:51:07.360 --> 00:51:10.039
Island guys do love it. I
mean the company loves it. Which actually

763
00:51:10.119 --> 00:51:15.199
just makes their jobs easier on the
compliance front. Two, you potentially open

764
00:51:15.280 --> 00:51:17.880
up new capital markets because all of
these people that have US dollars on chain

765
00:51:17.920 --> 00:51:22.519
are looking for yield, and this
is a productive use of those US dollars.

766
00:51:22.559 --> 00:51:25.679
If you could make twenty five percent
a year underwriting insurance companies for non

767
00:51:25.719 --> 00:51:31.119
catastrophic risk, then that's a great
place to put capital. And so if

768
00:51:31.119 --> 00:51:34.880
you're in Vietnam, if you're in
Nigeria, if you're in Brazil, not

769
00:51:34.960 --> 00:51:37.000
only can you now get access to
US dollars, but you can actually make

770
00:51:37.239 --> 00:51:42.079
twenty percent of your money in US
dollars. You're crushing like you're thrilled,

771
00:51:42.119 --> 00:51:45.239
and now you have access to new
financial products that you didn't have access to

772
00:51:45.320 --> 00:51:50.239
before, and that's just good good
for people's productive financial products. Is that

773
00:51:50.280 --> 00:51:53.800
a crypto company? That kind of
right, It's actually just a reinsurance business.

774
00:51:54.679 --> 00:51:57.639
So that's how we think about it, is like these sort of you

775
00:51:57.639 --> 00:52:00.760
know, the real measure of success
here in the same way, you know,

776
00:52:00.800 --> 00:52:04.360
like the analogy here is there was
a time in the nineties, let's

777
00:52:04.360 --> 00:52:07.559
say, where you would call yourself
an internet company, and today if you

778
00:52:07.599 --> 00:52:09.599
launched a company a software business and
you weren't on the internet. People would

779
00:52:09.639 --> 00:52:12.480
be like, what are you doing? Like, of course you're an Internet

780
00:52:12.519 --> 00:52:15.800
company, like what else would you
be, right, Or a mobile company

781
00:52:15.800 --> 00:52:17.480
if you're building like a consumer app. There's a time in two thousand and

782
00:52:17.519 --> 00:52:20.599
eight, two thousand nine you'd say, oh, I'm a mobile company and

783
00:52:20.840 --> 00:52:22.639
I'm an iOS app and I do
this, And today you just say no,

784
00:52:22.519 --> 00:52:25.360
no, no, just I just
do food delivery. Of course you're

785
00:52:25.400 --> 00:52:28.880
on mobile device, right, and
so I think that's where we're headed.

786
00:52:28.920 --> 00:52:30.960
It's like, of course you're going
to build it on crypto rails, like

787
00:52:30.000 --> 00:52:32.239
there's no other way to do it. It's just a better way to do

788
00:52:32.320 --> 00:52:35.559
it. You just happen to be
a fintech, or you happen to be

789
00:52:35.559 --> 00:52:37.800
a social company, or you happen
sell digital assets. You're an NFT marketplace

790
00:52:37.840 --> 00:52:43.360
company or your creator economy business because
you help creators move on some money around

791
00:52:43.400 --> 00:52:45.119
and work with their fans directly.
Like of course you do it on crypto

792
00:52:45.159 --> 00:52:50.760
rails because there's no other way to
do it. Yeah, great point wrap

793
00:52:50.840 --> 00:52:52.800
up questions here for you. First, if you could create your own metaverse,

794
00:52:52.880 --> 00:52:58.679
what would the theme be? Oh, the thing be uh I don't

795
00:52:58.719 --> 00:53:07.719
know what if people said before,
what's like a space deep deep sea ocean

796
00:53:08.039 --> 00:53:15.639
exploration? Oh? Interesting? Oh, I think I would probably I don't

797
00:53:15.679 --> 00:53:19.239
know. Actually I kind of like
real life as it is, so I

798
00:53:19.239 --> 00:53:21.159
don't even know if I would do. I think what I would do is

799
00:53:21.159 --> 00:53:23.480
do an overlay of the metaverse into
the real world more so than like a

800
00:53:23.519 --> 00:53:30.000
separate universe that makes sense. Rapid
fire questions, favorite food, pizza,

801
00:53:31.000 --> 00:53:37.199
Favorite musician or band. Oh,
I don't if I have a favorite musician

802
00:53:37.280 --> 00:53:45.920
or band, so nobody. Favorite
movie. I don't actually really watch movies,

803
00:53:45.159 --> 00:53:47.360
so no favorite movie. Well,
okay, what was the last movie

804
00:53:47.400 --> 00:53:52.199
you watched? What was the last
movie I watched? I think I watched

805
00:53:52.760 --> 00:53:54.199
Idiocracy. It was probably the last
one I watch, which is actually pretty

806
00:53:54.199 --> 00:54:02.000
good. Favorite book, favorite book. I would say it's a tie between

807
00:54:04.760 --> 00:54:09.679
the Geetha and the Bible, because
I think they're like the fundamental like substrate

808
00:54:10.239 --> 00:54:15.599
that basically the Eastern and Western societies
sort of like understand themselves. And when

809
00:54:15.639 --> 00:54:20.280
you're not working at Electric Capital,
what are you doing for fun? Oh?

810
00:54:20.320 --> 00:54:22.159
This is what I do for fun? This is literally what I did.

811
00:54:22.280 --> 00:54:23.800
Was I turned my I turned my
hobby into a job, so this

812
00:54:23.920 --> 00:54:29.679
is literally what I do for fun. Awesome man Avico, a pleasure chatting

813
00:54:29.719 --> 00:54:32.639
with you and congrats on all the
success and looking forward to their future updates

814
00:54:32.679 --> 00:54:36.559
around Electric Capital. Well, thank
you so much for joining me, Thank

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you for having me. It was
good. Yeah,