Blockchain technology is here to stay. It offers too many business benefits, but
it is also an existential threat to the existing banking industry because it disintermediates them.
I don't need a bank to hold my money. I don't need a
bank to approve me for a loan. I don't need a bank to facilitate
the settlement of my trade. I just simply don't need a bank. And
this is an existential threat. And that is my opinion why Jamie Diamond runs
around the country saying I hate bitcoin and if I were the government, I
would ban it. This content is brought to you by Bitco, which is
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the description. Welcome to the Thinking Crypto Podcasts. You're home for cryptocurrency news
and interviews with me. Today's Rick Edelman, who's the founder of Edelman Financial
Services, also the founder of the Digital Assets Council of Financial Professionals, as
well as the author of over ten books on personal finance, and the host
of the Truth About Your Future podcasts. Rick, Welcome back. Always great
to be with you, Tony. Thanks Rick. We've spoken over the years,
we've talked about the adoption of crypto and you know, over the years
we've talked about the upcoming bitcoin e t apps. Well, they are here
and I would love to get your thoughts on these ETFs going live. The
performance we've been seeing with the inflows. Yeah, it's been a long struggle.
It's been ten years since the first application was submitted to the SEC by
the Lincoboss Twins back in twenty thirteen. Every application, as we know,
has always been rejected by the SEC over the past decade, and finally,
as a result of the Gray Scale lawsuit last summer, the SEC was forced.
They didn't want to, but the court forced them to approve not just
the grayscale application, but the SEC agreed to approve all of the applications that
it had in front of it. So there are now ten, as of
January tenth, ten ETFs now trading on a daily basis, and it is
an exciting time for bitcoin as a result of this. This has been widely
regarded for years as the holy Grail of crypto. We knew that this was
the key lynchpin that would push crypto and particularly bitcoin into the mainstream for investment
management. Now, Rick, would the launch and how things have been going
so far? Has it blown past your expectations or were you anticipating this type
of demand. We were widely expecting this based on all the research we'd done,
all the surveys of advisors over the past several years. We knew that
there was an extraordinary level of demand for this product and advisors were just clamoring
for it. Without the ETFs, the vast majority of financial advisors have not
been able to recommend bitcoin to clients because there was no vehicle available for them
to do so. Their compliance departments did not allow them to recommend Bitcoin in
any other format or methodology. They couldn't open an account with an exchange like
coinbase or Kraken. They couldn't provide clients with a hot or cold wallet in
a DeFi platform like MetaMask. The esoteric, cumbersome products private placements and hedge
funds are generally available only to accredited investors. They have significant issues lack of
liquidity, high minimums, high fees. Firms were not making those products available
to their advisors, and so for all these reasons, advisors were shut out
effectively from the crypto marketplace from an investment recommendation perspective, and everybody knew that
ETFs solve all of those problems. Investment firms would be able to recommend them,
Compliance departments would approve them, investment management teams would okay them, and
everybody Investors and advisors alike are highly familiar with these ETFs because ETFs the most
popular investment vehicle in the country with trillions and trillions. I think it's thirteen
trillion dollars now in assets, and so it's a no brainer. So we
knew that once these ETFs became available, financial advisors and investment management firms would
jump at the opportunity, and we're already seeing that. Having settle that,
Tony, I do have to say that the speed of adoption is exceeding my
expectations. I thought it would take a year before we'd see massive inflows,
but we're seeing them already. You know, we've had twenty billion dollars of
inflows already. We're seeing a billion dollars a day at this point, and
so the rate of adoption is even faster than I thought. But we're just
still at the beginning. I'm expecting one hundred and fifty billion dollars of flows
over the next year and a half from independent advisors alone. That doesn't count
the wirehouses or regional broker dealers, or family offices, or institutional investors or
retail investors. Just independent advisors alone. We're looking at hundreds of millions of
dollars, hundreds of billions potentially flowing into bitcoin over the next several years.
Now, why do you think there is such a demand for bitcoin? I
partially notice answer, but I want to make sure that folks who are new
to the asset class hear from someone like you in a sense that is their
pent up demand. Like you were saying people couldn't touch it because of the
regulatory aspects, but also maybe rising debt and they're looking for harder assets.
What do you think are the catalysts. Well, you have two separate issues
here going on. Number one is what's the bitcoin premise? Why are people
interested in bitcoin as an investment or asset class? And there are lots of
reasons that people cite. Some of it is store of value. They like
the idea that bitcoin is an asset, that it retains its value compared to
the dollar, which diminishes in value over time. Some people view it as
an alternative investment opportunity compared to stocks and bonds in real estate, where bitcoin
is a wonderful additive for diversified portfolio because it's price movements are non correlated to
those other assets classes. So Bitcoin's price moves independently of stocks, bonds,
real estate, gold, oil, commodities, you name it, and that
makes it a wonderful addition under a modern portfolio theory to add to the portfolio.
So some people, a lot of people, hundreds of millions around the
world, argue that bitcoin is an outstanding investment opportunity. Some also argue that
it is an outstanding technological innovation for commerce. They note that blockchain technology allows
businesses to operate faster, cheaper, safer, with greater transparency and inclusion than
you can with existing business methodologies. Bitcoin, at the end of the day,
is just software, and this software code is better than the existing software
code that businesses are currently using. And this is why we're saying mass adoption
of this by banks all around the world. Nike generated two hundred million dollars
in sales last year of its NFTs, dropping right to the bottom line because
the NFTs are virtually no cost to Nike to create. Starbucks been doing its
loyalty rewards program with NFTs. We have companies from Parmejana Reggiano to the Norwegian
Seafood Association all using blockchain technology for anti counterfeiting purposes. So there are tremendous
commercial use cases which is growing exponentially. So a lot of people cite the
value of bitcoin and other digital assets for those reasons, but at the end
of the day, you have the investment management piece. Even though you might
like the idea of bitcoin, even though you might be favorable to it,
if it's not available to you in a format that is conducive for you to
do business as an advisor, then you're not going to be able to allocate
to the client. This is a big reason why financial advisors don't recommend artwork
to their clients, or comic books or rare coins. There's simply no effective
vehicle for an advisor in their practice management to do this. The ETF solves
all those problems. So people who like the idea of bitcoin for whatever reason,
store value, investment benefit, commercial benefit, whatever the purposes you like
bitcoin, now you finally have a way to exercise that, like to activate
your interest and allocate to bitcoin via these ETFs. And that's why we're seeing
firms falling over themselves getting involved at this point, Rick, could you take
us behind a curtain a bit. I'm very curious about this process. So
let's say black Rock, right, They're out there educating different folks about their
ETF. Here are their fees, here's the custody, so on and so
forth. As an RIA and investment advisor, and I'm hearing this, what
are my next steps that I will be able to access that and then start
talking to my clients about it. Yeah, the real key, Tony is
to recognize that at the end of the day, we're talking about practice management.
You know, the real issue is, you know, great, I
like the asset, but how do I do it? So it's a daunting
issue because a lot of advisors don't know a whole lot about bitcoin, Their
staffs don't know a whole lot about it. They don't understand the underlying technology
necessarily, and they've never had experience explaining this to their clients, who know
even less than they do. So how do you begin? It's really quite
simple. First of all, simply recognize these are exchange traded funds, and
you, as an advisor, know all about ETFs. You use them in
your practice. Your clients are familiar with them, your staff are familiar with
them. They're not complicated at all. They're just ETFs that are investing in
a particular sleeve of the investment world. And you already have gold ETFs.
You have oil atfs and energy ETFs. You have commodity ETFs, you have
foreign ETFs, you have emerging markets ETFs, you have small cap stock ETFs,
you have bond ETFs. Well, now there's a bitcoin ETF. So
you don't have to do a whole lot of due diligence on these different ETFs
to evaluate them for their investment purposes. Because all of them own the same
thing, bitcoin, This is a single asset ETF. There's nothing easier than
that. You don't need to become an expert in bitcoin or blockchain technology because
all of these are identical. They're all only buying bitcoin. So the analysis,
the due diligence you want to engage in is which of these ETFs do
you want to buy? Recognizing they're all buying the same thing. So what
therefore are their differences? Number one is their fee. The fees range from
nineteen basis points to one and a half percent, which is eighty percent more
expensive, so they range all over the board. Franklin Templeton is the cheapest
at nineteen BIPs. Bit Wise is the second cheapest at twenty BIPs. Many
would argue there's really not much of a difference between those two. Several others
are at twenty five BIPs. A few others are in the thirties. The
outlier is Grayscale Bitcoin Trust, which is one hundred and fifty basis points.
So very simple and easy. Look at their prices. Second, look at
their custodian who is the company that is custodying their assets, and what are
the safety mechanisms, the security protocols that they have in place. How confident
comfortable are you that the bitcoins are safe that you're buying on behalf of your
clients. Third, who's the surveillance partner. This is something that is unique
to these ETFs. You don't have that in a normal stock fund. The
surveillance partner is very simple. This is a company that each of these ETFs
are hiring to determine what is the current price a bitcoin. They surveil the
marketplace on a global basis to identify the actual, one and true current price
of bitcoin. So you want to know who is their surveillance partner and what
is their trading methodology. Are they going to trading desks like Jane Street or
are they going to public exchanges like Coinbase. This will determine how tight the
spreads are. It'll determine how low they can keep the trading expenses. So
you want to look at different features like those, and we've produced at DAKFP
a really nifty grid. We have an advisor toolkit that's free that has a
lot of content educational material on these ETFs. But there's a one page grid,
a comparison chart that compares all these ten ETFs across sixteen different categories,
so you can very easily compare one to another to help you make the decision.
So that's your first step. Choose the ETF that you like. We
find a lot of advisors are choosing two rather than just one, because this
way you can have two different ETFs that have two different custodians, for example,
to reduce your hacker risk. So choose one or two ETFs. Second,
decide which of your clients you want to recommend these two. Some advisors
will give them to every client, but many advisors recognize that not all clients
will want it, or maybe it's not in the best interest of every client.
So decide which of your clients you feel should have an allocation. Third,
contact those clients, tell them what you're planning to do, what your
recommendation is, and why. The bitcoin is an excellent diversification tool for long
term diversified portfolios that it can be additive to the portfolio. It actually improves
all of the smart all the modern portfolio theory statistics. You improve the Sortino
ratio, the sharp ratio, max draw down standard deviation. All of these
statistics get better by the addition of bitcoin to the portfolio, which is kind
of counterintuitive because everybody thinks bitcoin is so volatile, why would I want to
put such a risky asset into the portfolio. Actually, history tells us that
adding bitcoin to the portfolio lowers the overall risk, so it's really good for
an awful lot of clients. Once you do those three things, choose the
bitcoin, decide which of your clients to recommend it to, and talk to
them. The final question is the allocation. What percentage of the portfolio will
you allocate? Most advisors, according to our research, are doing two to
three percent and simple and easy. Now, on that note, we've heard
the eighty twenty investment rule, then I think some folks have changed is sixty
forty. But as this asset class grows and you have other ETFs that are
issued aside from bitcoin, do you see the portfolio split evolving to maybe sixty
thirty ten ten being to digital assets. I think different advisors will make that
decision on their own. I think that over time, as two things happen,
you will see higher and higher allocations. The two things that have to
happen. Number one is a broader array of crypto products. Right now,
we have Bitcoin futures ETFs, we have spot bitcoin ETFs, we have two
X and three X funds, we have inverse funds. That's about it.
They're all on the bitcoin frame. There are applications pending before the SEC now
for ethereum ETFs that will bring about ethereum futures and two X and three X
inverse and inverse funds. And then you'll have since you'll have ETFs of bitcoin
and ETFs of ethereum, you're going to get combination funds that will own both
bitcoin and ethereum in a single fund. Some of those will be actively managed,
some of them will be passively managed. Some of them will be fifty
to fifty, others will be seven five. So the ETF industry is really
good at inventing products. So you can expect a huge array of product availability,
and that product availability will create opportunity for the advisor to increase the allocation.
You know, if I'm doing two percent to bitcoin, maybe i'll do
two percent to ethereum. That's a total of four percent. While all that
is happening, one other thing has to happen. In addition to product availability
has to be tolerance, meaning as more and more investors own bitcoin through the
Bitcoin ETF and they become more and more comfortable with it over time, and
they begin to see bitcoin's price performance, which we think is going to be
very strong over the next several years, people will become more and more comfortable
with allocating more and more money to it. So between availability of product and
a willingness to invest in those products, you might well be right Tony that
the two to three percent allocation as I'm referring to today are going to become
five, and then seven and perhaps even higher. It's interesting that when I
first wrote my book The Truth about Crypto, I recommended a one percent allocation,
and now everybody is pretty much talking about two to three percent. The
CFA Institute talks about as much as five percent. So people are becoming already
far more comfortable than they were just a few short years ago. Yeah,
it's fascinating, and we're seeing because the US approved the big pin ets.
We're hearing out of London. They want to explore and eat what they would
call an ETP. Hong Kong is also talking about this, so it seems
like there's going to be grown demand for bitcoin since the US has made its
move, and game theory is going to play out. It's fascinating to watch
this unfold before us. It really is. And these ETFs are available all
around the world already. They're in Canada there, as you said, in
Europe, London's looking at them, so are many countries in the Far East.
They're going to be everywhere simply because of investor demand. Larry Fink was
very blunt about this. The main reason black Rock launched its ETF was because
they were getting demand from their clients. And let's face it, they're in
the ETF business. If there's a product you want to buy, they're going
to make it available to you. You know, they're they're not taking an
attitude other than that it's smart business and so everybody's going to get involved.
You made an interesting comment I want to highlight on, Tony. You mentioned
that in London they're looking at an ETP, not an ETF. What most
people don't know is that the ten ETFs here in the US, the spot
bitcoin ETFs, are in fact not ETFs, they are ETPs. This is
a distinction that nobody other than finance. Nerds care about an ETP in exchange
traded product is brought to the market under the Securities Act of nineteen thirty three.
ETFs are brought to the MA market under the Investment Company Active nineteen forty.
I don't think anybody other than nerds like me are going to care about
that. And people will sometimes ask what's the difference between an ETF and an
ETP. It's kind of like the old dogs and animals riff. You know,
all dogs are animals, but not all animals are dogs. So all
ETFs are ETPs, but not all ETPs or ETFs. You also have etcs
and etns. You have exchange traded commodities and exchange traded notes and exchange traded
funds. I don't think anybody really cares, but nerds like me. Oh
yeah, so that's you know, it's funny. I was reading up about
it just the other day because someone in my live chat doing a livestream asked
about it. I was like, let me google it right away, and
I saw that ETPs already banner overarching banner, and you have underneath these different
products ETF, etns, etcs, And what is so fascinating is that seven
of these new funds call themselves ETFs, even though they technically are not read
the S one. Every one of them acknowledges they're organized under the Securities Act
to thirty three as an ETP, but they call themselves an ETF. But
I guess it doesn't really affect the performance or anything. It's just naming.
Convince. There are some investor protections that exist under ETFs that don't exist under
ETPs, but those investor protections are really not terribly material in my view.
The protections that do exist under ETPs are the protections that investors really do care
about. Disclosure, transparency, equal pricing, fair trading, all that kind
of good stuff. What really matters does exist. Otherwise the sec wouldn't allow
ETPs to be on the market. So I don't think people need to worry
about it very much. So Rick, hard question for you, and this
is something I'm personally curious about as well. We are a bit in uncharted
territory because this is a first time we have these ETPs in the United States.
Will there be a sell off some to sell off at the peak of
this bull market As we've seen Bitcoin follows a four year cycle it'll go from
the bear market low to a euphoric blow off top. So will these etf
sell off or you think maybe fifty percent will be long term holders who don't
care, I'm waiting till twenty forty or something like that. Oh, I
think there's clearly going to be lots of sell offs. This is the inherent
nature of bitcoin. It's a very volatile speculative asset. In fact, as
we're doing this recording, bitcoin is down ten or fifteen percent, So we're
going to see this kind of thing. That's the way it's been for fifteen
years, ever since bitcoin was invented. There's nothing new there. People who
use these bitcoin ETFs as part of a diversified portfolio will take advantage of this
through rebalancing. This is a wonderful strategy that we routinely use for our client
portfolios, and the fact that we're adding bitcoin to it just simply helps,
you know. So it's a wonderful opportunity. So yes, I think we
will continue to see volatility. And no, I don't think that should upset
or worry you or shock you, because it's just an inherent nature of the
asset class. Absolutely, No, not everyone is a fan. There's still
some blaggards on Wall Street. You got Vanguard and some of these other folks
coming out and saying we're not going to list this, although I'm starting to
see some of them change their tune. What do you think that Vanguard and
these folks will eventually capitulate. Well, we saw two things happen at Vanguard
recently. Number one, they made the announcement that they are not going to
make available any of these bitcoin ETFs to their customers, nor are they going
to launch their own bitcoin etf. They do not believe bitcoin ETF is appropriate
for their client base. That's their first announcement. The second announcement a few
weeks later was that they are CEO is leaving the firm. So I'm saying
Vanguard realized they made such a big mistake in making this announcement about no bitcoin
that they fired Tim. Of course I'm making that up. That's not true,
but it's a funny story. Yeah. I think in the future of
Guard will change their mind. They are going to recognize that bitcoin is not
as scary and risky and inappropriate the way they're claiming it that it is,
and they will instead ultimately realize they are annoying their investors and they're missing out
on a big investment and market opportunity. And it's also I think hypocritical of
them. I mean, they offer gold ETFs, they offer emerging market ETFs,
they offer foreign ETFs. I don't understand Vanguard's position at all. But
other than Vanguard, I have not seen any firm draw a line in the
sand saying hell no. Instead, the opposite is happening. Every wirehouse in
the country is very busy evaluating these ETFs to determine which of them they want
to make available to their clients, which of their clients they want to recommend
it too, and what the allocation ought to be. Those three questions I
mentioned earlier. Wirehouses are moving at a much faster pace than we expected.
We thought it would be a year or more before they would engage, but
any of them are already beginning to engage. Morgan Stanley, JP, Morgan
Wells, Fargo UBS, they're all, according to media reports, very active
in this. And independent regional broker dealers are also moving very quickly. LPL
has already added to their platform, has has Commonwealth. Many others are doing
the same. Some of the biggest investment management firms and independent rias are also
very busy with their due diligence. So there's a lot of activity going on
really really quickly. Yeah, there are naysayers on Wall Street, but at
the end of the day, Wall Street will sell the product you want to
buy and that's going to win the day. So Rick, not to get
too conspiratorial or too philosophical here, but do you think the likes of Vanguard
and to Jamie Diamonds they hate the disruption that's happening. Maybe there's a bit
of that where capital is flowing out of the traditional investment products, not all
of it obviously, but a good amount and going to crypto, whether it's
people investing directly or going through ETPs that they don't like that. It's a
disruption, right, It changes things, It changes the stronghold maybe they've had
on the markets for a long time. Hi, everyone part in the interruption.
I'm Tony Edward, the founder and host of the Thinking Crypto podcast.
I have a you favor to ask you. If you haven't subscribed as yet
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to the content. Yeah, there's no question about that, Tony. This
disruptive technology. Let's remember Satoshi's goal when inventing bitcoin was to replace fiat currencies
around the world. Satoshi was fed up with the global financial system, which
brought us the two thousand and eight credit crisis, and Satoshi on it a
better way. And although that experiment failed, Bitcoin is not a currency he
never will be. You know, it's too volatile. This is why stable
coins were invented to solve that problem. Blockchain technology is here to stay.
It offers too many business benefits, but it is also an existential threat to
the existing banking industry because it disintermediates them. I don't need a bank to
hold my money. I don't need a bank to approve me for a loan.
I don't need a bank to facilitate the settlement of my trade. I
just simply don't need a bank. And this is an existential threat, and
that is my opinion. Why Jamie Diamond runs around the country saying I hate
bitcoin and if I were the government, I would ban it because he hits
a competitive threat. Jamie has now fully recognized that he's looking really silly when
he makes statements like that, and in fact, his bank JP Morgan,
is one of the leading users and developers of blockchain technology. The Onyx blockchain,
built by JP Morgan, settles to two billion dollars a day in transactions.
His traders are among the most active in bitcoin activities around the world,
and it's now gotten to the point where Jamie Diamond just a couple of weeks
after he said in a Senate hearing, I would ban bitcoin if I were
the government, two weeks later he said, I will defend your right to
own bitcoin, because he recognizes there's too much money to be made, and
banks around the world who are recognizing that blockchain technology is an existential threat.
Rather than trying to ban it, which they've failed to do, they're now
embracing it. You know the old adage, if can't beat them, join
them. So banks around the world are all developing blockchain technology. They are
all embracing this. They recognize the incredible business benefits, and this I think
will prove to be the ultimate realization of Satoshi's original goal. Now on that
note, to your point, right, they're trying to stop this, and
we see within the government, specifically the SEC, look the EI A and
the Elizabeth Warrens of the world and so forth are trying to put up as
many roadblocks as possible. The SEC only approved the Bigcoins body tess because the
courts made them do it right. They took a massive loss, got called
arbitrary and capricious. What are your thoughts on that? Is it just an
administrative thing, but also or maybe going back to these folks are getting disrupted.
They don't understand it fully, they're trying to catch up, and they're
just having knee jerk reactions. Yeah, there's speculation that Gary Gensler is in
the pocket of Elizabeth Warren. You know, how does a guy who taught
blockchain at m I T become so anti crypto when he gets to the SEC.
It doesn't make any sense. He's never been able to offer a rational
explanation for his opposition. Congress is furious at him. He just got nailed
again yesterday a court ruled that the SEC acted with severe overreach far beyond their
regulatory authority. In a lawsuit had taken out against it. Yet another crypto
company runs around the country bragging about all the enforcement actions he's taking against the
crypto community in the absence of regulation, and nobody's in favor of it.
There was a meeting last summer, and part of an annual meeting they do,
of all the former SEC commissioners, and unanimously they all opposed Gensler's handling
of crypto. So Gensler's on an island all by himself, and he's out
of office at twenty twenty six. We have to tolerate him between here and
there. Bottom line is, there are politicians who don't like crypto for the
same reason bank executives don't like crypto. It eliminates government control the way it
eliminates bank control, and people like Elizabeth Warren, who love to control the
American consumer don't want to lose that control. This is why so many who
believe in free markets, who believe in capitalism, this tends to be a
Republican platform. They love crypto. Even Donald Trump has said that he likes
bitcoin. It is routine to see Republican members of the House and Senate.
Indorset, there are dozens and dozens of members of Congress on both parties who
are members of the Senate Blockchain Caucus. So there's a lot of support on
Capitol Hill, but there still remains some opposition, but their numbers are getting
fewer as their arguments are getting weaker as Bitcoin continues to get stronger. So
we've seen this in every new innovative technology. You know, when you go
back to the automobile, people hated those things. They were noisy, they
were loud, they were dirty, they were dangerous, and everybody who sold
horses for a living considered cars an existential threat, and buggy Witt manufacturers wanted
nothing to do with automobiles. They ended up losing the argument, and the
crypto haters today will end up losing the argument as well. Yeah, it's
funny. I've seen some of the political cartoons and the things that were in
media back in the early nonineteen hundreds about electricity and there's like demons coming through
the electricity lines and then assuming they did the same thing for the automobile.
So every new technology does disruptive you have people. Look, in general,
humans hate change, right, change is hard. But then you have this
very disruptive technology, you're going to have the incumbents and people will make crazy
arguments to oppose a new technology. One of the arguments used against railroads when
that technology came out is that if people ride in a railroad in a railroad
car, they'll suffocate. They'll be moving so fast they won't be able to
breathe. That's incredible, but I guess it's just human nature playing out.
Rick. Well, you know, those in power, those who are successful,
don't want to give up their position. They don't want to be at
risk, and they don't want to go through the disruption, and they're not
always looking at it selfishly. They're often looking at it for the benefit of
their employees. I mean, let's pretend to world where instantly blockchain technology rendered
banks obsolete. How many tens of millions of people would be suddenly out of
work. That disruption is very, very scary, and we need to recognize
that fact. We can't be so cavalier that this new technology is the greatest
thing since sliced bread that we don't care about the implication that the disruption is
causing. We need to help people adapt and it takes people a while to
do this. Historically, as we've gone through changes, we went from the
agricultural economy to the industrial economy, that change occurred over a generation. The
farmer didn't have to adopt, their children were able to move into the industry,
and then the industry was able to move into the offices. When we
went from the industrial age to the information age, these changes occurred over a
generation. Now, due to computer advances, we're engaged engaging in these changes
not over a generation, but over a decade. Yeah, and that is
creating massive disruption and real challenges for policy makers as we keep everybody employed,
maintain the economy while fostering the innovations so that we end up winning as opposed
to creating a lot of damage in our effort to achieve the nirvana we're trying
to get to. So it's complicated. So, Rick, tough question to
follow upon what you just said, because I've been thinking about these things.
I have a six year old daughter, and I'm thinking what does her future
look like. You have, like you said, these technologies very disruptive,
moving at a rapid place, changing the economy, changing the way we do
commerce. You have AI, you got blockchain and crypto, and you have
all these other technologies, evs and all kinds of things. There's talks of
AI taking jobs away. I think that will happen. How do we run
the economy moving forward? Is it UBI universal basic income? And maybe blockchain
is a part of it, and maybe cbdc's unfortunately, which have benefits,
but people are concerned about the privacy rights. Where they pull these levers,
they give you money and it's verified on the blockchain. It's settled instantly.
You can pay with it, and that's the way part of the economy is
runing. Because there's nine h jobs. There's no question that technological innovation is
massively disruptive. In my book The Truth About Your Future, which was a
New York Times bestseller, I talked about all of this, that AI and
robotics are very big deals. Blockchain technology is a very big deal, nanotechnology,
big data, three D printing, bioinformatics, fintech, ed tech,
ag tech. All of these innovations are disruptive. And the scientists are telling
us that they are anticipating that over the next decade, half of all the
occupations in America will disappear. They'll be replaced by automation in some way or
other. We're already beginning to see this. Amazon has two hundred thousand robots
running around its warehouses. Cars are being made by robots. We drone technology
is rapidly being developed. So we see this happening in real time, and
it means that a great many occupations are going to disappear. Brick layers will
be gone because robots are already being able to make bricks and lay them and
build a building with it. Three D printing or making three D printed homes
at a concrete in a day, So we're already beginning to see this technology.
While millions of people will discover that their jobs are gone, we will
also see an incredible development of brand new occupations that never before existed. I
mean, let's face it, blockchain developer didn't exist fifteen years ago, and
today it's one of the highest paid software engineering degrees and occupations that there is.
So we are going to enjoy a renaissance. We're going to get rid
of the jobs of the past that were boring, that were dangerous, that
were low paying, and we're going to create jobs of the future that are
more interesting, more exciting, of more value, that are of higher pay,
that are easier to do, that provide a better lifestyle and advance society.
We have to retrain people who were bricklayers how to become workers in the
twenty first century, and business has a huge incentive for doing this. PwC
just released a survey two weeks ago of the CEOs of the largest companies around
the world. These are companies with one hundred million or more in annual revenue.
Twenty five percent of them said that they are firing five percent of their
staff this year because of AI. They also said they are simultaneously adding jobs
because they need better skilled jobs. So they're getting rid of the people that
AI can do the job for and they're replacing them with people that know how
to use AI. Is what it really comes down to. And at the
same time, the most fascinating statistic out of that survey, forty percent of
these global CEOs said that if they don't change the way they do business,
they will not be viable in ten years. Wow. So we have to
recognize we are under going right now a massive evolution as we move from the
information age. Remember we were agriculture age to the industrial age to the information
age now to the digital age, and the speed at which things move in
the digital age is unprecedented in human history, and it's affecting every aspect of
life on the planet. A lot of it, most of it is extraordinarily
good and exciting. Some of it is a little scary, not just job
loss, but everybody's fears of AI taking over the world. Or we can
now three D print guns at a plastic that an X ray machine at the
airport doesn't detect, the ability for people to make dangerous weapons and move them
around through rogue nations or drug cartels or bad players. So the world has
gotten scary, you could argue, scarier, while it has also gotten more
exciting than ever. There's nothing new here. We've been in this kind of
turmoil for millennia, and we need to recognize that what we've been doing for
the last fifty years is not what we're going to be doing over the next
fifty years. We need to learn, we need to adapt, we need
to embrace, and we need to engage and protect. And some of us
are going to do a better job at that than others. Sure, it's
the same, like you said, same story playing out right. Adapt or
die. Always be learning and update your skills, right, because it's moving
faster now. Right. There was a one point somebody made the comment of
an innovative invention and warfare that was described as the most devastating weapon ever devised
that would fundamentally alter mankind's future. They were talking about the crossbow. Wow,
are you going to say, like the nuclear weapon or something? Now,
crypto is on the rise. You know, we talked a lot about
adoption and so forth, and you know, we talked about the regulators not
getting it right, the SEC. But Congress has to act. There's a
couple bills and house couple in the Senate. Are you optimistic we might see
something within this year or next year? I know elections make things a lot
really messy, but what are your thoughts on that. We're not going to
see any legislation this year because of the election. We have to wait till
next year. Depending who is elected will determine what we see. I am
confident we will see legislation, but I'm not confident as to what it'll say.
Depends on who wins control of the House and the Senate and the White
House. Speaking strictly on a crypto perspective, ignoring all the other issues of
the day, immigration, right to life, environment, education, healthcare,
national debt, ignoring all the other really important things. So I don't want
to be taken out of context here. If your lens is strictly focused on
crypto, you must vote Republican. Because the Democrats have it clear. Joe
Biden personally has made it clear that they hate crypto and want to eliminate it,
want to control it restricted, and some like Elizabeth Warren and Bernie Sanders
want to outright ban it. So if you believe in if you want to
focus on the fostering an environment for the innovation and further development and broader ownership,
distribution, access, use of blockchain and digital asset technology, you must
vote Republican. Now, I will say what I just said, you have
to put that into context. That's only that single issue. And I'm not
suggesting that the crypto issue is as important as any of those other issues or
should trump all of those other issues. But you need to simply not a
bit of bad use of word, but we need to just recognize the attitude
of the two political parties when it comes to the context conversation of blockchain and
digital assets technology. Yeah, you're absolutely right. And you know, we
saw in Super Tuesday many of the candidates who align themselves to Elizabeth Warren they
started losing and the pro crypto candidates were winning. So this is a ballot
issue. But like you said, it may not be number one, but
many crypto investors are single issue voters. I've noticed a lot of folks saying
that, and I think most Americans are single issue voters, and partly because
of the incredible complexity of being a multi issue voter, because you might love
your candidate's views on immigration but hate their views on right to life. You
might love their views on capitalism but hate their views on the environment. So
ultimately you're going to have to pick, and who knows the basis of which
people pick. It might be because I like how they talk or I don't
like how they talk. And how many of us are going to be making
a negative vote where I'm not voting for anybody, I'm voting against the other
guy. So at the end of the day, I think that it all
comes down to a single issue, and you've got to decide what is the
single issue that matters most to you and the rest of it. You just
told your nose. Rick another question and it was related to the disruption of
technology, and I just want to make sure I ask you about this,
the growing debt problem, right, and I'm thinking about the future. How
long can they keep printing and printing and printing? Are we going to end?
Is the United States? At least I can talk for the United States
because I live here, end up like Argentina, right? Or is there
some sort of debt jubilee or can they use bitcoin blockchain? How do you
think they solve this? So the debt has been an issue for a long
time and it is now at blinking red zone light status. We are now
at a point not only in the massive size of the debt, but what
really matters more is the deficit. It's not just how much how much do
I owe? But how much do I have to pay this month? On
what I owe? And Joe Biden's budget that he just submitted to Congress for
the first time ever, has the government spending more money than the country produces
in GDP. That is a very scary turn of events. And what we
have to recognize is that the vast majority of the budget is obligatory, meaning
entitlements, medicare, Medicaid, social Security, and similar federal programs that are
mandated by law to pay certain amounts of money to certain individuals. And there's
no debate, there's no option, there's no conversation. This is what is
required. Total discretionary spending is only about twelve to fifteen percent of the total
federal budget. Defense spending is largely not optional. They can only choose a
little bit at the margin how much to fay on the Defense department. But
most of defense spending is equally mandatory. So you add the final element to
this, and that is interest on the debt. We had a wonderful renaissance
at the beginning of this decade because interest rates were at zero, treasuries were
near zero, so we were spending very little to pay off our debts.
But now that interest rates are at five percent, treasuries are paying four and
a half or better. The federal government is paying a massive amount of interest
on the debt, and that is an expense it didn't have five or eight
years ago, and this is making the problem a lot worse. So the
question becomes how long can the government keep this up? How long can it
sustain it? The answer comes down to economic growth. In other words,
as long as our revenues and GDP, government spending and government cost of the
debt, then you can have as much debt as you want, as long
as those other numbers are bigger. The problem is those other numbers aren't getting
bigger, and we are, like I said, now seeing that the total
expense for the government is exceeding our GDP. So we don't know what's going
to happen yet. This is one argument people have for buying assets like bitcoin
or gold or artwork, you know, assets that are inflation proof, so
to speak. We're going to have to wait and see how it plays out,
but inevitably there's going to become a reckoning. The issue is whether the
reckoning is an Argentina style or a Zimbabwe style reckoning where in Zababwe they're printing
five trillion dollar bills, or whether it is more manageable the way the government
has managed it so far. We'll have to wait se but I think you
make an argument Tony for owning a lease a little bit of bitcoin. Yeah,
that's why I own bigcoin. I have some. I am not selling
them. It's going to go to my daughter because I don't know what they're
going to do right, and there's no solution being brought for that. Hey,
look this fiat currency system. Fiat currencies fail every I don't know at
what the timeline is they updated, but what is the future going to look
like? So well, our currency is the oldest currency in the world and
it's only a couple hundred years old. That tells you something because humans have
been around for many, many thousands of years. Governments also don't last very
long. Our government is the oldest in the world and that doesn't bode well
either. In Italy, their government since World War Two has lasted on average
eleven months. So we have to recognize that turmoil is routine, and along
with political turmoil is economic turmoil, and the two tend to go hand in
hand. This is why revolutions occur, and kup's occur, and assassinations occur
and so on. So it does get a little bit dicey, a little
bit scary. We do need to recognize the macro environment that we're in,
which is why I believe diversification is the right approach. Don't make a big
bet with any bit of your money. You should make a series of small
bets, and I think that's a safer, more prudent approach. We have
to recognize at the same time that we've been through this generally generationally in the
past. Sometimes it takes a long time to work through crises. Look at
the crash at twenty nine, which took fifteen years. Look at worlds World
Wars one and two, look at the pandemic. We're still feeling the impact
of that. So people sometimes I feel run out of patients. And when
we complain the Congress that they aren't fixing it, we have to remember that
it's our fault because we say to Congress, do not raise my taxes,
and we also say to Congress, do not cut my benefits. So on
the one hand, you've got people telling Congress, don't raise taxes, and
on the other hand, you have people saying to Congress, I want you
to waive my student loan debt. Joe Biden just put in his budget he
wants to give every American family ten thousand dollars to buy a house. He
didn't say any where that money was going to come from, nor did he
acknowledge what's ten grand going to do for you? When the average house costs
four hundred and twenty thousand dollars. It's just so yet another government giveaway because
people love free money. So Congress isn't fixing it because we're not letting them
fix it. Final question here before I let you go. AI, we
were talking about on the Rise. How do you think that impacts investing?
And maybe fifty years from now, AI is your registered investment advisor, the
humans are not involved anymore. Putting your thoughts on that. AI is going
to change everything as we know, we've all seen Hollywood movies that are an
AI lived world, and a lot of that will come to pass. I
think ultimately in the end, AI is going to make the world a much
better place, a much safer place, a much more affluent place for all
of us. We are already a more peaceful world than we have ever been.
We are more affluent world than we have ever been. We are a
safer world than we have ever been, despite the fact that we hear all
the stories every day of robbing, robberies and shootings and mass mayhem, and
we're all horrified by what's happening with Ukraine and against Israel, and we're fearful
of what's going to happen next in Taiwan. I mean, we've always bounced
from crisis to crisis. But the fact is technology makes the world a better
place. It doesn't come without disruption, it doesn't come without turmoil. But
in the end, I think we can all agree the world is a better
place because we're driving cars instead of riding horses, and so we just have
to figure out how to get from here to there with minimizing disruption and pain
for those those whose lives will ultimately be disrupted. Rick always great stuff,
Always learn something new when I listen to you. So I appreciate you joining
me. Thank you so much. It's been a pleasure. Tony, thank you.