EP 16: CEO of Box Aaron Levie gives founder advice, Founder of Flatiron Zach Weinberg returns as guest host, and crypto expert Eric Golden joins to discuss UST-Luna!

(00:00:00) Intro with Zach Weinberg (00:02:22) Public Market Bloodbath (00:07:10) Distribution of Risk (00:12:56) Update on SoftBank and Tiger (00:28:30) Eric Golden joins the pod to talk Luna (00:30:04) What happened in the market this week? (00:40:55) What is Luna? (00:53:21) Why is this pulling down Bitcoin as well? (01:02:04) Do Kwon sucks (01:13:43) Interview with Aaron Levie (01:36:08) The state of Web3 (01:38:37) Interesting use cases for Web3 (01:41:01) The rhetoric of crypto skepticism (01:48:02) Companies and politics Follow the show: https://twitter.com/3cartoonavatars https://www.instagram.com/3cartoonavatars/ https://www.tiktok.com/@3cartoonavatars Follow the hosts: https://twitter.com/loganbartlett Mixed and edited: Justin Hrabovsky Produced: Andrew Nadeau and Rashad Assir Executive Producer: Josh Machiz Music: Griff Lawson Links: Coinbase Article: https://decrypt.co/100089/coinbase-share-price https://rss2.flightcast.com/jlx9l0yn04wt3r710o051jtm.xml UST-Luna Article:https://www.coindesk.com/business/2022/05/09/ust-stablecoin-falls-below-dollar-peg-for-second-time-in-48-hours/ UST-Luna Article: https://www.cnbc.com/2022/05/11/terra-ust-stablecoin-dives-below-1-peg-luna-cryptocurrency-down-80percent.html https://rss2.flightcast.com/jlx9l0yn04wt3r710o051jtm.xml Gavin Baker Thread: https://twitter.com/GavinSBaker/status/1524389193551687680 SoftBank: ​​https://www.nytimes.com/2022/05/12/business/softbank-earnings-report-loss.html https://rss2.flightcast.com/jlx9l0yn04wt3r710o051jtm.xml Tobi Lutke Tweet: https://thedeepdive.ca/shopify-ceo-tobi-lutke-wants-financial-analysts-to-be-held-accountable/ https://rss2.flightcast.com/jlx9l0yn04wt3r710o051jtm.xml Do Kwon Tweets: https://twitter.com/stablekwon/status/1523075465384136704?s=20&t=rwEvRfBHtsIM-D9ILGTzxg https://rss2.flightcast.com/jlx9l0yn04wt3r710o051jtm.xml https://twitter.com/stablekwon/status/1501552275919015941?s=20&t=rwEvRfBHtsIM-D9ILGTzxg https://rss2.flightcast.com/jlx9l0yn04wt3r710o051jtm.xml https://twitter.com/stablekwon/status/1506411835934732293?s=20&t=rwEvRfBHtsIM-D9ILGTzxg https://rss2.flightcast.com/jlx9l0yn04wt3r710o051jtm.xml https://twitter.com/stablekwon/status/1478192466629369859?s=20&t=rwEvRfBHtsIM-D9ILGTzxg https://rss2.flightcast.com/jlx9l0yn04wt3r710o051jtm.xml https://twitter.com/stablekwon/status/1522420839244697600?s=20&t=rwEvRfBHtsIM-D9ILGTzxg https://rss2.flightcast.com/jlx9l0yn04wt3r710o051jtm.xml https://twitter.com/stablekwon/status/1411466847166205952?s=20&t=rwEvRfBHtsIM-D9ILGTzxg https://rss2.flightcast.com/jlx9l0yn04wt3r710o051jtm.xml https://twitter.com/stablekwon/status/1355131416527335426?s=20&t=rwEvRfBHtsIM-D9ILGTzxg https://rss2.flightcast.com/jlx9l0yn04wt3r710o051jtm.xml https://twitter.com/stablekwon/status/1410491186196795398?s=20&t=rwEvRfBHtsIM-D9ILGTzxg https://rss2.flightcast.com/jlx9l0yn04wt3r710o051jtm.xml https://twitter.com/stablekwon/status/1481540752056324098?s=20&t=rwEvRfBHtsIM-D9ILGTzxg https://rss2.flightcast.com/jlx9l0yn04wt3r710o051jtm.xml Executive Producer: Rashad Assir Producer: Leah Clapper Mixing and editing: Justin Hrabovsky Check out Unsupervised Learning, Redpoint's AI Podcast: https://www.youtube.com/@UCUl-s_Vp-Kkk_XVyDylNwLA 🎥 Subscribe on YouTube: https://www.youtube.com/channel/UCugS0jD5IAdoqzjaNYzns7w?sub_confirmation=1 Follow on Socials 📸 Instagram - https://www.instagram.com/theloganbartlettshow 📱 X - https://twitter.com/loganbartshow 🎬 Clips on TikTok - https://www.tiktok.com/@theloganbartlettshow About the Show Logan Bartlett is a Software Investor at Redpoint Ventures - a Silicon Valley-based VC with $6B AUM and investments in Snowflake, DraftKings, Twilio, and Netflix. In each episode of The Logan Bartlett Show, we sit down with the people behind today’s most important startups and extract the tactics, lessons, and frameworks they’ve learned the hard way. Conversations span hiring to GTM, product, growth, fundraising and everything in between - collectively forming the ultimate playbook to make you a better CEO, investor or board member. Tap follow and enable notifications to stay ahead of the game.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:05Logan Bartlett?

  Welcome to the 16th episode of Cartoon Avatars. I'm your host, Logan Bartlett, and I'm joined today by a recurring guest host, Zach Weinberg. How are you doing today, Zach?

• 0:15Speaker 01

  I'm good. Am I like the, who's the guy that shows up on Coden all the time?

• 0:20Logan Bartlett?

  That is, yeah, Andy Richter?

• 0:22Speaker 01

  Andy Richter?

• 0:23Logan Bartlett?

  Yeah.

• 0:24Speaker 01

  Okay, I could do that.

• 0:25Logan Bartlett?

  Is that good?

• 0:26Speaker 01

  Seems like a win to me.

• 0:27Logan Bartlett?

  Yeah, yeah, yeah. Listen, I will take you on as much as you want to come on when you're not in, where were you when I tried to get you the last time? You were on a bachelor party somewhere in like the Netherlands or something?

• 0:38Speaker 01

  Yeah, that's exactly where I was. That's about the end of that conversation. I'll leave it at that.

• 0:42Logan Bartlett?

  And, and in story, that is the extent of it. I've heard there's wonderful sightseeing and brewery and all that over there, so.

• 0:49Speaker 01

  We were actually there for King's Day.

• 0:52Logan Bartlett?

  What is that?

• 0:52Speaker 01

  Which I didn't, it's like basically every single person in the Netherlands comes out to party during the day. Everyone wears R. It was a chaos. I had no idea what we were walking into.

• 1:04Logan Bartlett?

  Well, I've heard famously tame the Netherlands for their, for their alcohol and substance usage. And so I'm glad that you, you guys were able to find one of the few days that they like party and enjoy themselves over there. That's great.

• 1:16Speaker 01

  Yeah, it's very quiet, very quiet.

• 1:17Logan Bartlett?

  I am coming off a red eye, so I am dragging pretty hard right now. So if I sound incoherent, I, I'm all hopped up on coffee and, yeah, and a little delusion by the market in general. So kind of in a bad place over the last week here, but.

• 1:34Speaker 01

  Did you look, did you check?

• 1:36Logan Bartlett?

  I try not to that much. It's actually one of the advantages of having a very liquid private portfolio is you're not that exposed to the day to day marking over some period of time, I guess you are, but I don't actually have to watch too many of my companies get eviscerated on an hourly basis. I can still hold in my, my precious mind that they are worth what they were worth in, you know, April 2021, and that they will grow through all this stuff. But, yeah.

• 2:03Speaker 01

  Do you hold any like public stock yourself or no?

• 2:06Logan Bartlett?

  Oh, yeah. Oh, yeah, yeah. Well, we get stock distributions, right? And so I, Snowflake has been a very successful holding for us and they have traded down quite a bit over the last, the last little bit. But I'm a long-term believer in, I don't know. I mean, it sort of feels like, I guess we can segue into the public market bloodbath here. But yeah, I feel like this is probably something we're going to be talking about for a while. In terms of the actual numbers, so I was looking up these before we jumped on. So Nasdaq is down 30% per all-time high. S and P 500 is down 19% from the all-time high. Dow Jones is down 15% from the all-time high. I was looking at SaaS specifically.

• 2:47Logan Bartlett?

  So SaaS NTM multiples have halved from 11 and a half, which was their all-time high in January 2022 to 5.8x today. And they are, if they're growing over 30%, they're, they're, they're actually down from the high of 18.3, which was in October 2020. And now they are trading at 6.7x. So kind of a bloodbath across the board. I was looking Shopify is down 78%. They peaked at around $1,700. Now they're at 372.

• 3:23Logan Bartlett?

  Zoom peaked at 559. Now they're at 84. Peloton 162. Now they're at 13. Netflix 690. Now they're at 171. So pretty brutal out there. I don't know. Do you have, do you have a bunch of exposure to the public markets?

• 3:39Speaker 01

  You know, when I was going through this decision-making of like what to do with the money we made from flood iron, to be clear.

• 3:47Speaker 01

  I just like the headache of owning individual names felt like chaos to me. And so I own a little bit directly and we have a big like. Google Alphabet holding, but the rest of it, I really try my best not to hold too much in individual names. There's some, and I'm the idiot that checks it every time because I'm just curious and it looks gross. Like I looked like a genius for 12 months and now I don't, I don't look that smart.

• 4:12Logan Bartlett?

  Yeah, it turns out, turns out maybe like, I think there's a whole generation of venture investors that convinced themselves over the last couple of years that they were like amazing pickers when in truth it was just like a basket of software stocks. It turns out of multiples, if you bought in at 10% and then went up to or at 10 times revenue and now it was trading at 50 times revenue, like it might be the multiple arb and not your investing prowess necessarily. But yeah, it's a

• 4:36Speaker 01

  By the way, on that Shopify was one of those. I bought it when the market crashed in March, April of 2020. Said, I don't know, I think people are going to buy stuff on the internet. That was the extent of my diligence.

• 4:47Logan Bartlett?

  Yeah, it's a good thesis. I believe it.

• 4:49Speaker 01

  Yeah. And apparently they do, but not enough. And it was up, you know, as you said, maybe five X or four X. I was looking like a genius. And this guy who I had at Goldman, who I do stuff with, that was a horrible humble brag, was like, how did you know? And I'm like, oh, I did this, you know, really thoughtful analysis of people buying stuff on the internet and now it's down from when I bought it. And I think that crash to reality is really, it's good. I think it's good. It's good for you. You need it.

• 5:16Logan Bartlett?

  Yeah. I mean, it's, it's healthy. I talked to Aaron Levie, which people will hear on the back half of this podcast about that. And he's sort of been the grizzled public market, you know, software CEO who's gone through all the ups and downs. And so it was an interesting conversation or perspective. I, Toby, this week, they announced earnings on Monday and he's gotten pretty salty, I think with, with research analysts and stuff. And there's this, it's interesting where Elon's obviously had this pulpit where he's been antagonistic to short sellers, obviously the Bill Gates memes and all that stuff with people that had Tesla shorts. And it was interesting to see Toby kind of come out and clearly there's some annoyance. I mean, they're trading below the levels that they were pre pandemic, right? Like pre pandemic, they were at, I don't know, 550 and now they're at 370. And so

• 6:01Logan Bartlett?

  It's not even like a pull forward thing now. It's like actually the fundamentals of the business are so much better. Right. And so I don't, yeah, it's, it's a whole interesting, at some point I want to have someone on that's like a real macro prognosticator. Uh, about like all this stuff that's going on. Uh, I think VCs have this mindset of like, oh, we'll just pick right. And at low and with absolute valuations, we should be fine, which I think is probably largely true. But, um, as things creep up to like 500 billion, 2 billion valuations, like those are real numbers. Right. And so, yeah, it's interesting, the multiples.

• 6:37Speaker 01

  I mean, entry point price as a venture capitalist matters a lot. You know, and I think a lot of times people historically have pretended that, well, the good ones will just be worth a bunch. And it's like, yeah, but it's all relative to the entry point price, right? If you invest in a five pre or you invest at a 10 pre. Regardless, that's a 2X difference in return. That's a difference between a 3X fund and a 6X fund right there. If you kind of like play it out. So it matters. It matters quite a bit. I think a lot of people haven't been through like a full cycle. They haven't seen it all the way through.

• 7:10Logan Bartlett?

  So, uh, you guys started Invite Media in what, 2008?

• 7:14Speaker 01

  2007.

• 7:15Logan Bartlett?

  2007. So you went through a cycle here and like, how did you think about originally with that? How did you think about like, you got money from that? You worked at Google, right? Uh, you, you went on your little vacation hiatus over there and then went and started Flatiron. How have you thought about like your positions in general? Obviously you've started a venture fund or not, not a fund, but you're, you're doing venture investments, right? And so how do you sort of think about like, you're, you're also young, you have kids. Like, how do you think about the distribution of risk in being in some of these index funds? Maybe holding a little Google going long software or, or venture, right? Also, you know, all the other stuff that you're doing.

• 7:55Speaker 01

  Yeah. I mean, we thought about it. I don't necessarily know if this was the right way to think about it. But it was, you know, what percentage of the money are you willing to lose? Like almost from like a first principle standpoint, if this disappeared tomorrow, would you be upset? And whatever that number is, that's what you put into startups. Because, you know, whether that comes back in 10 years, 12 years, or it comes back as zero, you know, you just can't rely on that capital in any way, shape or form. And it's still true, by the way, like some of the best investments that we made as angels are still illiquid. 13 years later, 12 years later, I mean, we were the one of the first checks into Plaid. We were one of the first checks into Rig Up.

• 8:35Speaker 01

  We have a few others that look reasonably good, but you know, as my mom used to say that and a MetroCard gets you on the subway. And there's like real truth to that, right? Like there's no, you can't, something you can do with it. So tried to pick a number that felt reasonable of like, are you willing to lose it? It was something in the 20, 25% range or so.

• 8:54Logan Bartlett?

  And then the balances index funds and you know, whatever wealth management products and all that stuff.

• 8:59Speaker 01

  Honestly, two things, S and P 500 index, that's it. Just pure US equities for the long term. Don't look at it. And then some real estate funds that have, you know, preferential tax treatment and actually like pay a coupon and you have some liquidity and kind of kept it simple. Basically startups, real estate in particular, like yielding real estate, if you will, like multifamily homes, things like that. And then the S and P 500 index, and I don't own any China. I don't own any Europe. I don't own any ex US anything actually, except for like a little piece of a Indian equity index. Cause my theory was, you know, over the long run, at least our current system for now is the best performing

• 9:44Speaker 01

  system out there. So it's pretty diversified within the S and P 500. Why do I have to go above and beyond that? And that was probably of all the things, maybe the best decision from an allocation standpoint we made. It had nothing to do with anything else. It was just like, don't invest outside the US.

• 9:58Logan Bartlett?

  It's, it's, it's looking very prescient today. I, I am very indexed, you know, uh, my percentage allocation between crypto and tech and you know, whatever, a liquid, all of them seem to mirror each other as a, as a percentage in that they, they decline together. But, uh, yeah, I, I, my, my philosophy was kind of like, hey, you know, I'm still young and early in my career and might as well, if I believe in these tectonic changes, I might as well play long on the names that I have, like snowflake, for example, right? And yeah, I don't know. It's interesting now to see, see how all this stuff is shaking out, right?

• 10:31Speaker 01

  Everyone fancies them a stock picker and then you meet like a real stock picker. Right? And you go, oh, I don't know shit.

• 10:39Logan Bartlett?

  Yeah, I remember, I remember that with, uh, I was talking to one of the late-stage consumer guys, uh, that does like crossover, uh, investing. It was one of the big hedge funds and I was talking to them about their investment in a, one of the delivery companies. And they were going through, they had the whole database built out and zooming in at like a cohort level of, you know, by county, by type of food where Postmates was beating Uber Eats, which was beating DoorDash. And like they could zoom in and be like, okay, so LA County Postmates is gaining share. But then if you go up and like, whatever, you're, you're three miles north and you look at the Greek restaurants, like it's actually interesting. DoorDash is coming in. I'm like, holy shit. Okay. Uh, I do not want to play.

• 11:22Logan Bartlett?

  If that's the people I'm competing with right now that have SKU level data of all the competition, I'm like, maybe I should stay away from, uh, trying to pick some of these like late-stage consumer, uh, crossover consumer names. Like I am, uh, fighting a, uh, I'm fighting with a, with a knife against someone with a gun, right? And so, yeah, that, that was a very idle.

• 11:41Speaker 01

  Yeah. There's you and I being like, people buy stuff on the internet still, right? Like that's a thing. Like, okay, that thesis seems good. The funny part about all of it though, is if you actually go and you look at like what drove the returns, in particular, like the outperformance of the NASDAQ over the S and P. It's not any of like the, it's just Google, Amazon, Google app, you know, it's just like that. It's, it's, it's funny what actually ends up driving the returns. And especially now, if you look at the reset, I don't know the exact math, but I would bet the vast majority of the gains over the last few years in kind of like the tech portfolio, probably in all of the NASDAQ is probably like five names.

• 12:21Logan Bartlett?

  Yeah, no, it's interesting. Uh, Gavin Baker actually had a really interesting thread who, uh, we can link to it in the show notes about like how long, uh, how, how good this cycle should be right now as a buying opportunity for the, the big whatever, uh, Amazon, Apple, Microsoft. I don't even know what to use the term anymore. I want to make sure it's FAANG is not the right term because Netflix does not deserve like to be in that group at this point, but. Yeah, I think they've driven a huge amount of the return to date and and you know, it seems like have a really good buying opportunity going forward. But at some point, we can do all the prognostication about what multiples are and all of that stuff. It feels like there's a healthy reset going on. I mean, so two of the things this week, both SoftBank came out and reported a $27 billion

• 13:04Logan Bartlett?

  loss for its Vision Fund unit for the fiscal year ending 2022. And then we talked last week, Tiger was hit by a $17 billion loss. And one of the interesting things, I guess, that came out in addition to the Financial Times article for Tiger is they've actually almost deployed the entirety of their $12.7 billion fund that they raised earlier this year, I believe. And so it's actually crazy to see. I sort of think these two groups were the ones that people held in this esteem of like fast and big money and all that. And now you're sort of seeing the, I don't know, the tide's coming out on that.

• 13:47Logan Bartlett?

  And it'll be interesting to see how much opportunity these guys have to continue to do what they're doing. I've heard rumors about Tiger's public book and what they're going to look to do with that going forward. And with Masa, I mean, that's just such $27 billion to lose in one year is pretty wild.

• 14:04Speaker 01

  Well, I would say, I think they're, they're all different categories of stuff. Like the Tiger Public Portfolio, you know, look, if you were heavily weighted tech in any way. I'm sorry. I apologize. What's your address? I should send you like some tissues or something. But that was everybody. I don't think that was just, that was just them. I'm sure the same is true of any large public book. You know, their private book, I would assume is doing reasonably well, given they essentially had like indexed small, smaller private companies and you know, you'll do as well as the index, but they kind of own the index there. And you have to think over time, those companies will perform. The SoftBank thing, I mean, I know I'm gonna get myself in trouble by like opening my mouth here,

• 14:49Speaker 01

  but it takes skill to lose that much money in venture. It's hard. It's hard to kind of like pick which of the companies are most likely to go bankrupt and then write them the biggest check you possibly can. Like their percentage of companies that they've, and this is not about the public book. This is the private one. The public one, look, everybody looks like an idiot now. But on the private side, how many, like what percentage of their portfolio actually, not only is marked down, but it went to zero or recapped or something. It's a shocking number and that just takes like a lot of skill to be that bad.

• 15:22Logan Bartlett?

  It's almost statistically improbable for it to just be like the accidental outcome. It's almost like them putting their finger on the scale makes it a little bit more self fulfilling that it's going to end up that way, which I actually think has happened. I mean, there's been some examples of, I think WAG notably was one. Brandless, I think we were investors in way back when and they put a ton of money in, tried to bend the curve, but it actually, it is impressive just that they've, that they've been able to dig such a deep hole. And I think it was the magnitude, I think it was the audaciousness of what they were going after. Right? And yeah, I mean, they almost got dealt a lifeline with DoorDash and Coupon over the last year. And then now those stocks have gotten absolutely crushed as well.

• 16:07Logan Bartlett?

  And so I, I don't know where they go, where they go from here. I mean, it seems like they have an irreplaceable amount of capital to make this kind of stuff happen. But yeah, it is, it is actually pretty impressive to see.

• 16:19Speaker 01

  There's no way there's a new vision fund after this. It's impossible. Who's gonna fund it? You know, so I, I highly doubt that that fund survives much longer. The private fund, the public book is their own balance sheet. So they can do whatever they'd like. They also picked the single worst time to go big in tech.

• 16:36Speaker 01

  So it's just, you know, how many bad decisions can you make before somebody says, maybe you shouldn't be doing this? And that's just, I, this feels like it. You know, if I were to help you, I'd be like, ah, no more. I'm gonna go buy, you know, something else.

• 16:49Logan Bartlett?

  Do you ever see the movie Black Sheep with David Spade and Tommy Boy? There's a, there's a line I love that David Spade says to Tommy Boy, it says to Chris Farley. And he says, How could you have such terrible instincts and survive so long? Right? And I always think about that. It's like, how, how have you been able to? And to Boss's credit, I mean, honestly, I always think about like distribution of outcomes and probability that, you know, someone that takes this level of risk, right? It kind of is an outlier situation that statistically, someone that leans in and puts all their chips on the table, it's going to work for some people, right? And maybe it's Masa or maybe it's Michael Saylor, right?

• 17:30Logan Bartlett?

  With Bitcoin, like there's some people that do this just are going to end up fabulously wealthy by making these all in bets, right?

• 17:39Speaker 01

  It's a survivorship bias. It's a, there's, you know, you don't, you don't write about the ones that didn't work. You only write about that like 1% that did. And you think they're geniuses, but it's just a random distribution of like, yeah, every once in a while you do get, you do get lucky, you know?

• 17:55Logan Bartlett?

  What are you seeing in the early stage funding for like the types of stuff you guys do out of your, with, with Nat? Like what's, what is it still, I mean, because theoretically, yes, it matters in aggregate what the returns are going to be and probably across a portfolio, or at least across the entire basket of private, you know, how these things, how returns are going to look for the vintage. It matters what valuations are, but maybe any individual investment, you know, is probably either going to work or not. At the five or 10 or 20 or 30, right? It's going to work or not, and it's going to impact the overall fund, but maybe not the individual investment. So what are you guys seeing there?

• 18:33Speaker 01

  Are we done shitting on SoftBank? Is that finished?

• 18:36Logan Bartlett?

  Yeah, well, I don't know. Do you have more? I, I'm welcome.

• 18:39Speaker 01

  I could do this. We could do a whole session on can you believe this company still exists? No, in the, in the private, you know, I don't, it's so hard to tell because you don't see valuation resets in privates, right? Like you don't see that happen in any sort of short time period. Obviously eventually it happens. I would say we're definitely seeing companies. Who I think thought raising an A or a B would be a walk in the park, rethink, you know, what are the numbers I need to show, start to think about margins and profitability, all the normal stuff. And I expect over the course of this year, you will see valuations come down and markups that you expected to be 5X will be 2X or flat or something like

• 19:23Speaker 01

  that. You know, one thing, you know, just to do like a little bit is I had been through a crash, actually, right when I was graduating college in 2008, the world collapsed upon us and we were running a startup. So at least had been through like one of these before. And we've been fairly valuation sensitive, at least as a seed check. And so we don't have too many where I think we got out over our skis on a valuation standpoint. But you know, the multiples are coming down, the markups will come down. And then one of the most interesting things about being a seed investor is none of it matters until the end.

• 19:56Logan Bartlett?

  Yeah.

• 19:57Speaker 01

  I don't know, you know, maybe it cycles back and all of a sudden we see, you know, things come.

• 20:02Logan Bartlett?

  Yeah, it's, it's a very long time horizon. What advice, uh, it will, I, I'll go into what we're sort of seeing on the growth stage, but what advice would you have for founders, having lived through one of these environments before and, um, you know, talked a little bit with, uh, with Aaron Levie about this as well. But, um, do you have like, if, if you have either cash on the bank, uh, on the balance sheet already, but maybe your mark is high or whatever, you need to go fundraise and this, like, what, what advice would you have for people that are kind of in this situation, having lived through this once before?

• 20:35Speaker 01

  I mean, the first thing, and we've done this with our founders and our portfolio when they ask is just stop and think critically about the business first. Like, do you understand the model? Do you actually understand your own economics? Cause I think, given there hasn't been a press on founders to really think deeply about their own economics for the last few years, not their personal economics, but of the company, there's definitely a group of founders out there who never really thought deeply about this and deeply meaning like, can it make money? How, when, what's it going to take? Like, can you put this into Excel? Not that you need everything in Excel and show me a scenario where this thing is reasonably profitable at some scale.

• 21:17Speaker 01

  And then try your best to work backwards from there. So let's start with what do you actually believe, what needs to be true? And then think through like, all right, if this is the path I'm going to go on, what are the milestones that the next wave of investors are going to care about in this new world? So we've always been like plan forward and then work backwards from there kind of people. So most of what we're trying to do with founders when we do this is say, what do you need to raise your next round? What is it? Is it to prove your margin structure is improving to show a repeatable sales model? Is it some like CAC to LTV ratio? Every business is a little different. Make sure you fundamentally understand what that is, work it back, and then

• 21:58Speaker 01

  add like six to 12 months of breathing room to make sure you can get there. And then you're just doing the basic analysis of like, what's your cash balance? When are you going to run out of money? Do you have the flexibility to add more now? I don't think there's like a one size fits all approach, but you do need to understand your own business and you know, it just starts with the with the model.

• 22:19Logan Bartlett?

  Yeah, on the growth side, it's interesting. Like, I mean, last year, I joked that my job was being a Hollywood agent, right? And I was just like selling in and glad handing and trying to get, and the founder would say, hey, here's the price. And I would either say yes or no, or how high do you need me to jump? Or what flight do you need me to get on? Or what celebrity do you want to meet? Or whatever it was, right? And then it became increasingly as this started to pull back, like, the number of people that were clawing into deals in January or February was just, it was fewer, right? That were like proactively trying to get in. But the prices actually didn't change that much. The process was a little longer, right? But and then the, and then founders started getting a little proactive about like reaching out, and they were probably still getting the

• 23:03Logan Bartlett?

  same valuation, but had to go talk to 10 people instead of just having the two people show up at their door, right? And now we're sort of at this point where I actually think for the A plus companies, like, there hasn't been that big of a falloff for the, I imagine from valuation standpoint in general, right? And I'm talking series B and C ish. Like, we're gonna see material fall off. But for the A-plus companies, all it takes is one, right? Like, it just takes one firm to say, hey, we would've done it in December and gotten beat by Sequoia or Redpoint. But like, now, we're still going to, we're gonna just do it at that price, because we still believe, right? And one firm that's underwriting to a different set of considerations is willing to do that.

• 23:44Logan Bartlett?

  But I made the analogy that it's kind of like a bar in New Orleans where, you know, the bar stays open as long as someone wants to keep drinking. And so, like, the price hasn't fully corrected. And so, there still is one person drinking at the bar. And so, my advice for founders has been like, go out right this second, or two weeks ago, or two months ago, and fundraise, right? Because maybe you'll find that one that's still drunk at the bar, and you'll get the price you would've in December, and maybe that's a good thing. I actually don't think that is a great thing, but whatever. We can, like, that's, in some ways, self-serving to say that. The other thing is like, or, like, put your head down, wait till September, and when we all agree to valuation, because right now, you're seeing such a distribution of spread of what things are worth, right?

• 24:29Logan Bartlett?

  And so, you're getting jerked around a little bit if you're a founder going out. And it's like, oh, one person thinks I'm worth 200, one person thinks I'm worth 800, right? And so, to some extent, like, at least in September, everyone will have agreed a little bit more to what price looks like, right? Or, you know, go pick the partner you want right now, and get, get what they are willing to pay, but don't over-optimize for valuation. Maybe just lock in the dilution and just get the incremental money that you want, right? That, and get that partner on board to build for two years. Because I feel like we're sort of in this weird thing where no one's really sure. I talk to my buddies at hedge funds, and they're like, hey, we don't know what anything's worth. We're sitting on our hands, right? And there's a lot of that sentiment.

• 25:10Logan Bartlett?

  And so, I think it's gonna take another, you know, it, it, it's one thing for it to happen, and then it's another thing for it to happen to individual founders. And then it's another thing for it to get around the ecosystem, and a bunch of founders to agree that that's all happened, right? And to reset, oh, December prices are no longer. And so, I don't know, I've sort of given the advice of like, go do it right now, talk to who you want to talk to, or wait till Labor Day, right? And it feels like the market sort of figured, will, will have figured itself out a little bit more. And you might get a lower price, right? You might only get Eight times ARR, 10 times, or whatever it is, but like, at least you'll be able to run an efficient process rather than being jerked around.

• 25:48Speaker 01

  Yeah, I mean, I always separate, like, do people want to invest in you versus what price are they going to pay for that, you know, investment? And our advice to founders, which is maybe always counterintuitive to some of them, which is, you should always be talking to investors. You should not always be fundraising, but you should always be talking to investors, A, because it's good practice to learn how to tell your story, and B, you need to build those relationships over time, even if you don't need cash now. And in a market like this, you know, people want to see multiple data points. They want to see that you can execute. So even if you have two years of cash, I would still tell founders to take a meeting every two weeks. And if anybody says it's distracting, there's other problems going on. Like, how could a one-hour meeting every two weeks be distracting you?

• 26:31Speaker 01

  If that's the thing, like, we should talk about your time allocation. And usually, when you explain it to the people in that way, they're like, yeah, I guess that's fair. I do have an hour. Here I am on a podcast, spending an hour. You know what I mean?

• 26:43Logan Bartlett?

  Yeah, exactly. You uniquely are able to do a bunch of things, I think. I think your ability to manage multiple things as Andy Richter of a podcast, as, you know, running a quasi VC firm, having your new company, all that stuff. But I agree. I mean, it shouldn't be a distraction, right? Like, to just keep in touch with, like, there's enough VCs in the world to just, like, build a relationship, right, and try to qualify down who actually is interested. It shouldn't be overwhelmingly distracting to do that.

• 27:13Speaker 01

  By the way, it's the same story you tell when you're hiring people. You have to tell the same story. At the end of the day, what is this business? How does it work? Why is it good? Well, how big is it going to be? It's all the same questions. So, yes, maybe financial investors ask, like, slightly different things, but you're still telling the same story. The multiple thing is the biggest problem right now, right? Like, the multiple assigned to your business is controlled by the Fed. Not by you, not by the investors, but just like, where do interest rates settle? And you could be picking great companies, but if the Fed decides to, like, turn it up a little bit, unfortunately, your multiples get reset down. And so, you have somewhat limited control. I agree with you, like,

• 27:54Speaker 01

  everybody's waiting to see where they settle within a range. That will take a few months. And, you know, founders are going to have to realize, like, first of all, revenue multiples in the first place are insane. And so, they're all just proxies for, like, future earnings potential. Let's see, let's see where it settles and you know, you could see a overcorrection and undercorrection, it'll vary market by market. At the end of the day, can your business make money? That's it. And like, if you can just understand how that works and you can articulate, you know, a clear story, you'll get some funding for some things.

• 28:30Logan Bartlett?

  Eric, what's going on?

• 28:31Speaker 02

  Hey, how are you?

• 28:33Logan Bartlett?

  Good, good. Thanks for doing this.

• 28:34Speaker 02

  I'm happy to. Would have been more fun to do Bored Apes, but let's do Luna.

• 28:38Logan Bartlett?

  Yeah, well, we can do, we can do both. I'm sorry. I'm sorry. I axed you from, you know, from the Bored Apes, but it seems like you're a man well-studded to weigh in on everything going on in the crypto ecosystem here.

• 28:50Speaker 02

  Try my best.

• 28:51Logan Bartlett?

  Can you give us a little bit of just background and why you are someone appropriate to weigh in on investing in the crypto ecosystem and all that stuff?

• 29:00Speaker 02

  So I was in, I was at Fidelity for 16 years, built a bond business, traded an $18 billion book of assets, over the counter, illiquid, you know, investment grade bonds, got into crypto several years ago, been doing it full time, trading my own capital, investing. And so this is just what I do 24/7 and this is the topic du jour of the week.

• 29:21Logan Bartlett?

  It most certainly is. I, you know, I mostly stayed out of crypto and as I started to do this, like it has just converged so much with like all things culture. You almost can't put yourself behind a microphone and like try to talk about stuff going on in tech without talking about crypto, especially this week. So maybe, so give us a little bit about like what's happened this week. Rashad, who's one of the producers and one of my coworkers says he wants to know why his portfolio is down 80%, but I think that's the, the question du jour. So maybe we'll take crypto at a high level and then as it relates to this Luna, UST, Doquan thing, I think would be helpful as well.

• 30:02Speaker 02

  Sure. So and I think it's super interesting, your take on it from the venture capital. There's a lot of things converging. From a market side, the way I think about it is crypto is the furthest out the risk curve. And so there's a lot of prospects for how crypto could decorrelate from traditional assets and act differently. But I just think that will come with maturity. So right now, risk assets are getting hit hard. High tech stocks are down. You know, the the riskier assets are down and Bitcoin can act as a proxy. If you're a liquid hedge fund, if you're a macro trader, what you've learned is Bitcoin is large enough to be used in your portfolio, traded 24/7. You can go long or short. If you're nervous about earnings going into Friday night or opening on Monday, you can position yourself using Bitcoin.

• 30:45Speaker 02

  So it's just a natural risk asset right now. It also deserves to be a risk asset because it is an emerging technology. I know people are happy it's been around for a long time, but it's gonna have to be around a lot longer to see that volatility drop or it becomes more adopted as a as a hard currency.

• 31:00Logan Bartlett?

  And so that's one of the things that I always like, you know, if you listen to Michael Saylor drone on about about Bitcoin and inflation hedge and all of that stuff. Like this seems as if it would be the opportunity, if ever Bitcoin were to perform, right? Like we have a war going on, we have inflation, we have like supply chain issues, all that. Is it ultimately that like that's only a small percentage of the reason people are holding it today? And speculation is the vast majority and so it's a risk asset. And that might only be 20% of the reason people have it at all right now. And 80% is like, you know, the not gonna make it, we're all gonna make it mindset of like, we're gonna be rich.

• 31:40Speaker 02

  It's a really fair point and you know, Saylor owns a lot of Bitcoin. I believe that that is the prospect of what Bitcoin could be, but it takes time. Like any technology that's being adopted, you know, it goes from dismissed to ignored to people are angry about it to acceptance to adoption. And so we're just in that cycle to me. So I believe in the future, it's very possible that it acts as an inflation hedge, but it would have to be so much more mature. I mean, you talk to anyone who has studied markets. What you're looking for is a pattern of inflation and how stuff reacted to it. And so how many inflation spikes have we had? Since Bitcoin was created, this is the first time we're even seeing it. So this is the first time it's behaving and to your point, it's not behaving appropriately to get that title of inflation hedge. So you're gonna have to go through decades of watching Bitcoin stabilize

• 32:25Speaker 02

  to be an inflation hedge. My opinion is it's a bet on a new asset class formation, a new way to store value. It's a tradable asset. People think about it differently, but I don't think that the majority of it is for inflation hedge.

• 32:38Speaker 01

  What has to happen?

• 32:40Speaker 02

  What has happened for what?

• 32:41Speaker 01

  For it to become an inflation.

• 32:43Speaker 02

  To get there?

• 32:43Speaker 01

  Yeah, like I we say, well, it needs more time to mature. I mean, most technology cycles don't take this long. What happens? What is the steps? What's next?

• 32:53Speaker 02

  Yeah. So the reason why I say it has to take a longer time is although Bitcoin is a technology and it's a really good point, you're talking about comparing it to gold or other assets that have been around for a really long time that have weathered crashes, have weathered volatile situations. And so I think the market has to adopt it. It is adopting it. The fact that, you know, hedge funds are using it, they're just using it in a way that is different than, I think, maybe some of the hardcore Bitcoin people might prefer. But to me, it's a, how long has it been in the market? Does it start to get on banks' balance sheets? Does it become a central bank reserve currency? Is it used in a way that would have it act more like an inflation hedge? And we'll only see that with adoption over time.

• 33:31Speaker 01

  Well, you've said two different things. So one is it becomes digital gold, which is more of like a cultural acceptance that it's worth something. And then you said currency, which is a different thing because currency to me means more about payments and acceptance for like commerce and transactions. So which one is it?

• 33:47Speaker 02

  I personally believe that I think that it can be both, but I'm more of the believer that if it's gonna have a place and it's going to be to the point you're asking about the inflation hedge, it's more the digital gold that it has to be used as a reserve that it's not. The reason why I think people will say that I don't think those are mutually exclusive, it has to do with the volatility. You can't go into a 7-Eleven and pay with Bitcoin if it's going to move, you know, 10%, you know, that's just not going to work. And so what I'm saying is that as adoption increases, as it's more widely accepted, I would presume volatility would drop. And so it would become less of a speculative asset and more of a store. And then perhaps you could see it as a currency, but I'm more of a believer as thinking about it as an asset, if that makes sense.

• 34:30Speaker 01

  Yeah, 100% no, and I agree. And if it's viewed as a risk asset right now, which clearly it is, and 70, 80% of the holders are holding it from like a speculation standpoint. Isn't the downside pretty material from here? If the speculation use case goes away and it just becomes digital gold is the only use case? Why is it worth anything? What is that holding? You know, like that, that point where it holds its value, why is it not $2?

• 34:56Speaker 02

  Yeah. Great question. You're going down. The thing I ask myself every day, when you go into a space where you're not using discounted cash flows, like what is the price of an asset?

• 35:04Logan Bartlett?

  I imagine your former coworkers at Fidelity when you are, that are still doing like bond level analysis. And you're like, no, no, this, this monkey picture that I have and you know, all that. I'm sure they're like, what has happened to Eric?

• 35:17Speaker 02

  Yes. For me, it's, um, uh, it's all about like the position sizing of a portfolio. I consider this all wildly speculative, but I also find it very exciting to learn. The reason why, um, I probably switch between technology and asset is to me, this is a very speculative market that I want to learn about, and I don't know how to learn about it without participating and understanding how it's being used, how it's being traded, how it's being viewed, because so many assets are a belief of what is this worth? You, people feel comfortable using terms like discounted cash flow, but everyone's guessing on the growth rate. Everyone's guessing on the discount rate. Are these amazing American companies worth so much 80% less than they were a couple of months ago? Everyone clearly valued them wrong. It's the market kind of guessing, what do we think this is worth?

• 35:59Speaker 02

  And in the long term, you know, I do believe we get closer to what real value is. But in the short term, you can have definite speculative boom and busts. These are clearly speculative assets. There is no cash flow. This is more of what I would think of as your art portfolio, wine, watches, luxury goods. And the adoption of Bitcoin is it's a very interesting thought experiment to think about a global currency with a limited units that people might put on their balance sheet as a stable source. To your point, Zach, it's not holding up to that. So maybe everyone abandons it and there's a probability that that happens. I don't believe that will happen, but that, that's a real probability. You would factor into any valuation analysis of how volatile this asset could be.

• 36:38Logan Bartlett?

  That's the one structural thing that I think is interesting about. Obviously these, there's been a bunch of pullbacks and, uh, that have happened over the years. But from a structural standpoint, and this is kind of stupid, but. It's on CNBC on the television in the bottom right corner like banks have now built like ways to custodial or like hold in hot storage or cold storage, all this stuff like PayPal is figuring out the infrastructure to do it. And so to some extent, from a self fulfillment standpoint, we've laid a lot of the tracks to at least have some use case or something that at least from a store of value standpoint, there's enough mainstream acceptance that I think some of these things will persist in some way. Is it going to be Bored Ape? Is it going to be Crypto Punks?

• 37:21Logan Bartlett?

  Is it going to be Solana Ethereum? I don't know. I feel reasonable about Bitcoin that, you know, that's going to have some residual value over time. And I don't know what that is. If it's 2000, if it's 10,000, if it's 100,000, if it's a million dollars, like literally no idea, but I at least.

• 37:37Speaker 01

  Quite the bull case there, Logan. This will have some residual value over time. That's a great bull thesis. I love it.

• 37:44Logan Bartlett?

  Yeah, well, listen, I'm a skeptic. That's what we've drawn on Eric.

• 37:47Speaker 01

  This might be worth something less than today at some point in the future. You might as well buy.

• 37:52Logan Bartlett?

  You know, I mean, honestly, it doesn't have the history of like a Picasso painting, right? But.

• 37:57Speaker 01

  Well, there aren't 23 billion Picasso. How many Bitcoins are there that you can chop into smaller pieces?

• 38:02Speaker 02

  There will be 21 million.

• 38:04Speaker 01

  All right, whatever the number is, but it like chopped and chopped and shot, you know, it's a they're all it's like.

• 38:08Speaker 02

  Yeah, I look, I don't like, I'm not here to sell you something. I don't believe in like trying to convince people. And I think that I'm a big believer, having been an investor, I think that being a skeptic will always sound smart and being an optimist will always sound like a fool. The thing I recommend to people is don't ignore something and don't be naive and foolish. There's a spectrum there of you should be, I like to try to be optimistically skeptical. And I totally, as I was a credit guy, all we do is figure out what goes wrong. We're not venture capital guys figuring out.

• 38:37Speaker 01

  Is that true, though?

• 38:38Speaker 02

  What?

• 38:39Speaker 01

  That's not true. That's not true. Like.

• 38:41Speaker 02

  What's not true?

• 38:42Speaker 01

  I mean, how many, how many times do people look at that Paul Krugman article where he's like, I don't know about this internet thing and they use it to discredit him? Like being a skeptic kind of makes you look like an asshole. And it happens like.

• 38:53Speaker 02

  Well, with the passage of time.

• 38:55Speaker 01

  Yeah, I guess with with time, with time.

• 38:57Logan Bartlett?

  Well, like 15 years later, once it's proven out. Yeah. At the time, like me joking on Twitter about like these monkey JPGs being like, listen, that sounds way funnier than the than the person that's paying 250 grand for the monkey JPG, right?

• 39:12Speaker 02

  And that's why it's what I'm saying is, and I think it's, it's a thing I feel strongly about is coming out of the crisis. Everyone told me that because the government was pumping the system with money, we were going to hit inflation. Hyperinflation was around the corner. Some of the best investors in the world took out a Wall Street Journal article. Those are the people that we looked up to and respected as everyone's saying hyperinflation is coming. And I was looking at the productivity rates, what was happening with companies being started and being like, I just, I get it. That there's a number of which we print money, but what if that's not true? You were crazy to be long duration, coming out of the crisis after quantitative easing. Now, years go by, it completely gets discredited and just as it's getting discredited, you have hyperinflation.

• 39:52Speaker 02

  So the thing is, in that moment, it's very easy to sound skeptical and say this app, like, there's an article I love that goes on Twitter of how the state that I live in Massachusetts banned people from buying Apple computer because it was wildly speculative. That was a very responsible decision to make though. Fidelity just put Bitcoin in 401ks and the Department of Labor has a problem with that. Right now, it's a lot easier and it's a good state to be in, especially with finance, with people's money. I think you should approach from a position of skepticism. The stuff that's happening with Luna, like seeing people use leverage and lose all their life savings is terrifying to me. I want people to be skeptical, but as an investor who can take risk, if you're constantly saying no to things, you're never going to be exposed to any upside.

• 40:33Logan Bartlett?

  Yeah, I, I feel like this is a very pragmatic take on all this. So maybe you're transitioning to Luna, which can, can you tell as much background as what the hell is going on right now? And like how it seems like that's having broader rippling effects across the entire crypto ecosystem and also impacting things like NFTs and stuff. So can, can you just level set on, I realize it's a pretty complicated topic, but at least in layman's terms, like we're five years old, like sort of what is going on right now in the Luna, UST, like all that stuff?

• 41:09Speaker 02

  Sure. And I'm going to try to do my best to quote the numbers that I feel confident about right now. It's still a very fast moving situation. When these things happen, the signal and noise ratio, noise is through the roof. There's rumors flying around. Everyone's trying to make stories. So.

• 41:23Logan Bartlett?

  Let's level set on facts. So this, this guy, Do Kwan, seems like a douche. So fact number one. And that, let's start from there. That's a baseline we have to assume going forward. So now, after we've established that premise, you go.

• 41:35Speaker 02

  All right. So last week, uh, U S T was worth about $18 billion and Luna was worth 28 billion. So

• 41:42Logan Bartlett?

  Sorry, U S T like literally as simple as U S T is a, yeah.

• 41:46Speaker 02

  Yes. All right. So Luna, Luna is a, is a blockchain network. It's a

• 41:50Logan Bartlett?

  A man and a woman love each other. They make a baby. Let's do them all the way out. Uh, okay. Yeah.

• 41:54Speaker 02

  Okay. So Luna is a blockchain. Uh, it's a proof of stake network and Luna is a chain. Just like we have Bitcoin, which is proof of work and we have Ethereum. Luna is like that. It's another chain. And so as people, you know, we had Bitcoin and then Bitcoin Ethereum evolved from that. Let's do smart contracts. People started to launch new chains that were, took the best ideas of the old and tried to put a new spin on it. So Luna, Luna was a new chain.

• 42:18Logan Bartlett?

  Luna is a new chain. So it's the same thing as Bitcoin and Ethereum, but it's a different flavor of that.

• 42:24Speaker 02

  And then we had this idea of stable coins. So a stable coin is traditionally like a money market fund. So you have U S D C and you've got U S D T, which are tether. Those are the two largest. You give them U S dollars. They mint you a token. They go invest it just like you would do at a money market fund, but it's unregulated. Hopefully they're investing it in non-risky investments, but that's what backs a, a stable coin.

• 42:47Logan Bartlett?

  And it's basically the same concept of if, if gold, right? Like once upon a time we had a, we, we switched to the dollar, but gold was backing the dollar, right? And so this is, and the reason for it to have stable coins is at all is basically, you don't want to be necessarily indexed to the highly volatile, uh, movements of crypto necessarily. And so having some hedge of dollar, like something that's not as volatile and ties back to the dollar. And you don't have to trade in and out of, uh, you know, like actually go through transaction fees and all that stuff that you would if to actually move it back to U S currency or whatever, right?

• 43:29Speaker 02

  Right, so I, there's a couple of good analogies here. I like, someone pointed out, thinking about blockchains like separate countries. So you're in a country and you want to move around, and I think of stable coins as a little bit of the oil that makes the country go. You can go in, you can move around, you don't have to keep going back and forth. You can go into a stable currency, which allows you to do stuff like you can borrow and lend. I can send you exactly how much money you want. If I owe you fifty dollars, I can send you fifty dollars. I don't have to send you X amount of Bitcoin. We're constantly settling up. It's a unit of exchange that is fixed, that we, that's very important in any base level financial system.

• 44:03Logan Bartlett?

  Yep, got it. Okay, cool.

• 44:04Speaker 02

  And that's, that's why we have stable coins. So what Doe did was, there's this idea of an algorithm, algorithmic stablecoin, which I think a couple of people this morning on Twitter did a good job of trying to explain that like, it's probably one of these dangerous words of people where semantics matter. Calling something stable, that's inherently unstable, but so like from finance, this is far more like structured products. This is not like a stablecoin. I think Matt Levine, who I, people who haven't read it, did an excellent job of kind of explaining what's going on. So in an algorithmic stablecoin, what you're saying is, I'm not going to necessarily back this with anything. I'm just going to use my fake money I just made on the chain, the Luna native token, which back to Zach's point, he believes is worth zero already.

• 44:48Speaker 02

  So if, if you think that's worth zero, this gets even crazier in your head of, now you're going to have a stablecoin, which lets you convert back into the native coin.

• 44:55Logan Bartlett?

  So Doe Kwan was the founder of Luna, of U S T, of Anchor, of, of all of this stuff. And he basically made this up one day and said, hey, all these things are going to exist, and this is going to be worth, I have to convince people this is going to be worth something, right?

• 45:15Speaker 02

  Yep. And so I think that like, a good analogy here is the forming of a country. Like, to me, this does look a lot more like an emerging market and like, you know, buying its currency. You have a new country started, it's called Luna, their, their stable currency is U S T. And there's a risk there because what they're trying to do when they bootstrap their, their new country is they're still pegging to the dollar. This has actually caused sovereign crises in the past, when you study. Like a country pegging itself to someone else's currency. But that will get people's attention and then anchor. What you mentioned was the hook of how do we get people to use our blockchain? Let's create something that people want to use. In this case, it was a DeFi program that let you um deposit your U S T. You would lock it up for twenty twenty one days, I believe, and you would get something between eighteen and twenty percent interest,

• 46:00Speaker 02

  which is obviously attractive to people.

• 46:02Logan Bartlett?

  So definitely there's Luna, which is the the Ethereum Bitcoin equivalent that Dog made up. There's U S T that is the stable coin that should be pegged to the dollar. And then there's Anchor, which is the uh basically a a mechanism to get people to buy into this ecosystem. And you would do that by you basically earn twenty percent interest by buying into the ecosystem uh and and staking, right? The the Luna, right?

• 46:36Speaker 02

  Uh staking the U S T.

• 46:37Logan Bartlett?

  Staking U S T, okay.

• 46:38Speaker 01

  I feel like we are watching, we are watching software engineers relearn the financial system like we did in the nineteen twenties, where everyone's like, this is their first exposure to like currencies and equities and all that. And everyone's just learning the same lesson in a totally different context.

• 46:57Speaker 02

  Yeah, I think that um I feel like that a lot, that people are always like, oh, we need solidity developers, we need this and this. And I'm like, if you, if this industry is going to continue to go down DeFi, we need to start doing some like ad economics into this of like how this works. Like central banks have attempted this, countries have attempted these models, they usually don't work. The idea is that, you know, I can only imagine, and I've, people have read this or interviews with him, that the thought, at least in your head, was it's a Ponzi scheme at first, but if we get enough traction, and this is, this is the process they were in, actually, they could start diversifying the reserves in their own central bank, which they controlled, which would give it more safety. And if it lasted for enough time, to our point earlier, it would become a belief, just like you believe in the U S dollar.

• 47:41Speaker 01

  No, this is like what people tried to do when they started banks before they were regulated, you know, like offer a crazy return profile, try and gobble up as much cash as you possibly can to like stabilize your balance sheet and then hope that there isn't a run on the bank. I mean, like, we've seen this story before, this is just the digital version of it.

• 47:57Speaker 02

  Yeah, so it's a fractional banking reserve system where you control all of the levers. And so I think what got people interested, well, I looked at is people telling me they're putting money into Anchor. And then if you start, you know, understanding it or learning how it works, the idea of what gave some people confidence was you could always burn your U S T into Luna and vice versa. So if you went on Anchor and you had a hundred dollars, you could convert it to Luna and vice versa. So if Luna is rising, everyone's happy, you know, you bought some Luna, it goes up, you convert some of that to U S T, you put that in the bank, now your savings rate is 20%.

• 48:31Logan Bartlett?

  So the algorithmic part of this, and I'm putting that in very heavy quotes, is basically should be the market and the arbitrage should exist where if one thing goes up, people should be incentivized to buy or sell until it goes back to equilibrium. And so it's basically the algorithmic part of it is basically just almost like a prisoner's dilemma kind of market making situation, right? So that was the, the, there was no, I mean, sure, there's some code backing this and all of that, but for the most part, it's just like, this is the way an efficient market should work.

• 49:07Speaker 02

  Yeah, I would say that it's a, it's a great explanation. Just assume Luna is stable, which that's probably, I'm going to say that, but like, that was the big miss of everyone. You took a highly unstable asset and tried to convert it to a stable asset. That's always dangerous when you have such a big risk conversion. But just for this example of how the algo works, assuming Luna was stable, if the peg dropped from a dollar to 95 cents, you could go buy 95 cents, convert it to Luna, sell it for the dollar and get your five cents.

• 49:36Logan Bartlett?

  Now, And the peg with the tie that U S T had to the dollar so that it was always stable, quote unquote.

• 49:44Speaker 02

  Right. And then the idea was you could do it in reverse. And for some reason, it was, it went above a dollar, you would sell those and convert back the other way. And so that works until, you know, you got into a death spiral where if you're doing that, so you see the peg broke and you're like, oh, this is free money. Look, I can buy a dollar for 90 cents. To do that, you have to go buy U S T, then go to the protocol, swap it on chain. But by the time you sell it, if Luna has fallen, continued to fall, it doesn't work anymore. And so what happened was over the weekend, people started to see now, this is where it gets into like some crazy conspiracy theories. And everybody, I know people have lost a lot of money and people want someone to blame.

• 50:25Speaker 02

  But if you've ever seen it, and this is where I think bank run is probably better just because it's more visual than seeing a country collapse, even though that's worse. But a bank run is, you know, during the crisis, when the TV news ads saw, uh, sorry, the TV cameras were showing like Washington Mutual. And you saw a line of people, you see a line of people, you start running to, you don't ask questions, you don't ask what their balance sheet has, you want your money out. What's interesting about the blockchain is you can see all of this real time on chain. And there's multiple places that a run can start, both on decentralized exchanges where people will swap this type of stablecoin for another stablecoin as well as on chain. And so what people started to see is there started to be some large movements. Now, we've seen this before, stablecoins de-peg, when there's low liquidity, these things can happen.

• 51:09Speaker 02

  But this was an unusual amount of activity of people starting to run. And that's what started to cause, whatever caused it, there's all these rumors of who might have done it. I think if someone actually did this trade, people are talking about, so it was, people thought it was Citadel and BlackRock. And I'm like, it's definitely not major firms, they wouldn't risk their reputation.

• 51:27Logan Bartlett?

  They actually had to come out, both of them had to deny that they were in this. And, and just order of magnitude, how big was Luna as an ecosystem, like prior to all this shit going on, it was, it was how big?

• 51:37Speaker 02

  Yeah, great question.

• 51:38Speaker 01

  Can we just talk for one second about that meeting at Citadel?

• 51:41Logan Bartlett?

  Yeah, yeah, exactly.

• 51:42Speaker 01

  Where they're like, we run a $30 billion book of whatever the fuck the number is, something massive. And like, people think we're playing around with this Luna thing, can you believe these morons?

• 51:54Logan Bartlett?

  You know, I honestly don't put anything, I don't put anything past King Griffin at this point, after the Constitution Dow thing, his willingness to troll, uh, the crypto community. I, I think that's, the BlackRock one, I imagine, like, is what the hell is going on in this world, right?

• 52:09Speaker 02

  I, I, I think the team at Citadel knows what it is.

• 52:11Speaker 01

  Fair. Yeah, I could. The troll incentive, you never underestimate the troll incentive. That's fair. Yeah.

• 52:17Logan Bartlett?

  Yeah, exactly. Exactly. So how big was this before?

• 52:20Speaker 02

  So if you look at, so those numbers I had, call it 40, if you put, if you combine, um, U S T, which is like 18 billion before the run and Luna was worth like 28 billion, call that 46 billion. And of the crypto industry, it was like roughly two to 4% of all assets. So like for context, that's like, I think today that would be like Amazon going to zero in the S and P. It'd be a big problem, but if a single company did that, this is where the question of what are the knock on effects of? How much is, how much does that impact? The other number I think is interesting is in comparison to money markets. So of stable coins, so 18 billion was in this, this Terra U S T algo stable coin. That was roughly 10% of 180 billion of stable coins.

• 53:04Speaker 02

  So when I think back to the crisis, when the reserve fund broke the buck, that was 2.4 billion on a, I'm sorry. That was 60 billion on a 2.4 trillion dollar market. So this is bad, but it's nothing like, when people are saying like this is 08, I'm like, you, you weren't trading in 08. If you think this is what a wage felt like.

• 53:21Speaker 01

  Well, maybe, right? Because they're all inherently linked together, right? There's a, there's a system of belief that ties them together.

• 53:29Logan Bartlett?

  That's what I was going to go to is why, so why is this pulling down Bitcoin as well?

• 53:34Speaker 02

  Yeah. So there's a couple of reasons, I mean, that are, that makes sense. I mean, I, I don't believe exactly that they're correlated, nothing like the way the crisis was. The amount of inter dependence that banks had on each other is not how this is. So in this case, the last time that Luna de pegged and they wanted to kind of show that they were a force. They said they were going to buy Bitcoin. So they ended up buying about three and a half billion dollars of Bitcoin. They were in the process of kind of diversifying that balance sheet, if you will. Now, the irony is the whole point was you said that people would have so much belief in Luna, you wouldn't have to do this. So. In a way, you could have looked at that as kind of a scary event, like, why do we have to do this if this thing's so valuable? So they did own three and a half billion dollars of Bitcoin.

• 54:17Speaker 02

  And so the notion that they're in trouble, and this is, this to me is realistic of like, what actually happens in all sorts of markets that are more professionalized, more institutionalized. When something goes bad, don't worry about the citadels or the BlackRocks, but there's very large trading firms in crypto that are very professional, have chief risk officers and CIOs. When they see a loss of this size on your balance sheet, you get called into the teacher's office of like, what are you doing to de-risk immediately? And what you end up doing is selling your other assets to get your collateral up, to get your leverage down. So if you have to post collateral in other places because this blew up, you're going to have a knock on effect to other assets. But it's not direct in the same way of like, it's not like, it would be a lot more concerning

• 54:59Speaker 02

  to me if a Luna was a lot bigger, if they had bought a lot more assets, if they were, it was more commingled, if that makes sense.

• 55:06Speaker 01

  I think that's a fair statement. Like, they're not as tied together, although you have to believe at a certain point, if like, people are doing much of this on leverage and they're getting capital called because whatever they pled, they pledged as their, you know, underlying assets is now worth one tenth of what they thought, there is a slow knock on effect that will happen. I agree it's not as tied together, but if there's leverage in the system, it will delever over time if, if something blows up.

• 55:32Speaker 02

  Yeah, I would say what's fun about crypto, fun's probably the wrong word, I just love markets, is that when you have cascading liquidity events with leverage, it happens right away. Like, this market will tear your face off. It doesn't happen slowly, you're not like, oh, who else owes us money? They're like, because it's all on-chain, right? So in the crisis, people were trying to figure out who owed what to who? Like, that wasn't this, a computer has a tick that drops down and your money disappears like that. It settles pretty quickly. The actual concern now is that this isn't just a levered sell-off. This is long-term spot holders starting to have fear in the markets in general, general macro contagion and just selling the asset outright, not just the lever traders. The leveraged traders got wiped out. Very quickly when this happens.

• 56:14Speaker 01

  My favorite is that's the people are like, here's some really cool features of the blockchain. One of them.

• 56:18Speaker 02

  I think it's amazing. I, I, I mean, I, I know that you might, I guess maybe we're morbid, but like, when you understand how complex it is and the traditional system and what happens and the negotiations and the back and forth, the instant settlement of getting these risks out of like, it's bad when risk builds up in a system. But it's really bad when it builds up and nobody knows where it is or what's going to happen. Cause that causes the ultimate fear. Here it is really hard to disentangle this. If everything was on chain, it wouldn't be that hard to disentangle. The part that's hard right now is not all the information about the Luna, um, the terror labs that did this is like, we don't have all the data because it wasn't all on chain. The on-chain data I feel good about because people can monitor it.

• 56:59Speaker 01

  But just, I just like, no, like, no, because this, this idea that like, everyone gets liquidated immediately and we don't have to understand who owns what as a feature is insane. So basically we said the elevator has no stopping controls. We have no mechanisms to actually let the court adjudicate who owns what. There's a whole point of having a bankruptcy process, right? Because the market in a route undervalues assets because it doesn't know what to do. And it's like, nothing is worth anything. And all of a sudden you're down to zero. But in reality, like, that's not true. And there's a process to untangle that stuff. This idea that like, don't worry, all the leverage will settle itself because guess what? Your, your money's gone. That is not a feature. That is a bug.

• 57:42Speaker 02

  Yeah. So I can tell you've got a, an interesting personality on this. So, um, the way I would say this is, um, it, it's, there's two things there. The first thing, what you're saying is I try to listen is that it's not regulated. This is an unregulated market and I do believe you'll have regulation of who can actually get themselves into that situation in the first place. And that's true. And, and that, that worries me. And I think that there really should be regulation that you shouldn't, um, you know, at $50,000 in life savings and then go 10x leverage on a single coin.

• 58:13Speaker 02

  I don't think you should be able to do that equities either. But people do have a right to lose their money any way they choose, Zach. And if you want to bet all your money on a house and lever yourself up or put yourself into a startup or, you know, work for a company that goes bankrupt, you have that right to do it.

• 58:26Speaker 01

  Oh, 100%.

• 58:27Speaker 02

  The part that what geeks out market people about it is how efficient the backend operational side of it is. If you actually saw the life of a trade of buying and settling a bond and saw how many intermediary steps are, how many people are employed to move this to that? And then you see the speed with which trades can be settled. This isn't about, this isn't a bankruptcy proceeding where it's confusing. You signed a contract that said you would buy X token. If it falls below this, you get wiped out. By the way, that happens in traditional margin trading at traditional brokerage firms too. That's not new. It's the fact that I'm not doing this with, you know, Charles Schwab. I'm doing this with another counterparty.

• 59:06Speaker 01

  No, I understand that and I get your point of like, we don't have to go through all the back office processes here. But my argument is that's actually a bug, not a feature. Right? Because in an irrational moment in time in a market, wiping people out because there's this like blip in liquidity is probably not the right thing to be doing. Like part of the benefits of the, of having the bank system and having the government and having like the, the court system is during a crisis, you can kind of like pause and think and figure out, all right, where do I need liquidity? Clearly not every mortgage is underwater, but if you treat them all as underwater, you wipe everybody out. And all of a sudden you have massive deleveraging immediately. That's not a good thing. That's a bad thing.

• 59:49Speaker 02

  I guess what I would say is in the crisis, you make it sound very nice. Like we were all going to sit down and pause and we were going to say, hey, let's go to the courts. That's not what happens in real life either, Zach. What happens in a real market unwind is everything gets sold intermittently to try to get the money back to safety as fast as possible. Nobody was sitting down with Lehman and Bear Stearns and being like, why don't we, why don't we go to the courts? We'll talk about this. We'll work through it. In a market meltdown, what you want to have is information.

• 1:00:16Speaker 01

  No, but that's, but. That's not true. That's actually exactly what happened, right? Like the US federal government stepped in and it

• 1:00:24Speaker 02

  Had to intervene.

• 1:00:25Speaker 01

  Yes.

• 1:00:26Speaker 02

  So like the point is like the only thing so the system that you've architected, which is how the world works is it got so bad. The United States government had to step in to bail out the entire banking system.

• 1:00:39Speaker 01

  I mean, we can argue about whose shit smells worse, but like definitely, I'm not suggesting that the US system is particularly great.

• 1:00:46Speaker 02

  Did the US taxpayers pay anything on Luna, Zach?

• 1:00:49Speaker 01

  No, of course, because Luna, thank.

• 1:00:51Speaker 02

  Are the, are taxes going up because another stablecoin blew up?

• 1:00:55Speaker 01

  Thank God that the stablecoin system is not yet tied to the core capitalist system in the United States. Thank God. If it is, you bet your ass people are going to be pretty pissed about this when their stablecoin is tied to some like physical asset that they actually own. I agree with you because it's like on the periphery and it's a risk asset. Poof, we're okay. It's just a bunch of idiot speculators losing their money and like everybody should be fine with that. And I agree, it's very American to be able to say you can lose your money the way you want. I kind of agree with you there. I mean, as an investor, it's like, yeah, I can go do dumb shit too. When that stuff gets tied into real financial systems, that's where that risk ends up being. So we tend to, I think we actually agree on the regulatory piece of this, which is like, if you start to

• 1:01:37Speaker 01

  put these hooks into normal channels, like US banking system style channels where there's real like real commerce happening. These risks are material and an immediate unwind is not a good thing.

• 1:01:48Speaker 02

  I, and I, and I don't think we're going to go from A to B. I think that you, I think what this is going to do, Yellen immediately before it even fully blew up, uh, mentioned it in her testimony, there'll be regulation probably before year end. We'll have something that looks a lot more like the money market industry than something like this.

• 1:02:04Logan Bartlett?

  Well, Eric, maybe, maybe to that point, like, why do we, why do we give a shit about this? So how much money was, how much money was lost? Like I did not expect BlackRock Citadel Janet Yellen, like I, I did not expect something that I didn't even know existed a week ago. Uh, to now be at potential risk of bringing down the financial system, or at least, you know, having implications for the financial system. So like why, how much was lost? Who lost it? Why is, why did I lead with this guy being a douche, uh, as my premise of it?

• 1:02:34Speaker 02

  I don't know why you did that.

• 1:02:37Logan Bartlett?

  Well, I can tell you why is because his entire rhetoric around all this stuff was like, it was the most you're poor, I'm rich, like the tweets that he's had along the way of how condescending he was to people and everything he said about like, you know, you're still poor, calling out people left and right about like the rhetoric that, you know, he had was just, it was filled with so much hubris, right? And we can, we can pull all the tweets together, but he said like, continues saying, poor sir. He actually went on eight days ago and said, 95% on a television interview, 95% of, of coins are going to die, but there's also entertainment in watching companies die too. I mean, this guy like power douche, right? Everything he

• 1:03:21Logan Bartlett?

  did was like, he had this whole thing. That's what makes me mad about this is not like, we're testing the features of, of what is possible in this new financial system, which, you know, whatever, like to Zach and your point, I think that's actually, uh, healthy and we're going to lead to regulation and a bunch of this stuff in this wild west and like, there needs to be speculation and blaze paths. But my, my problem in this is, and if you look at like Sam Bankman Fried, uh, called out that like, this was going to happen inevitably. A bunch of smart people were calling this out and the level of condescension and hubris this guy had was just like, I don't know. I found the whole thing appalling a little bit.

• 1:03:59Speaker 02

  Oh yeah. I, I was just joking about it. I just don't use that word, but I call, um, I a hundred percent agree. And I think that that's actually as an investor, a huge red flag when someone is acting this way. I mean, I believe that if you look at what the, the vision or when someone goes on and takes one of these, you know, huge ideas on, there is a level of egomania to say, I'm going to change the world. I'm going to make it different. And that, you know, VCs get so excited about these like huge personalities. You've got this cult of personality. I think that crypto has a, um, a history of like the, the, the joking and stuff, but this was at a whole nother level of God complex. And if anything, before you even read the white paper, if the people did, just dealing with someone like that is, should be a red flag.

• 1:04:44Speaker 02

  In the future, I think that also to your point, there was a lot of people that supported it. Um, not just him, but the program. And so I think that although Luna doesn't have the systemic risk, I believe that like a crash has, I do believe it set back the industry. Um, I think it's actually, I'm always like I said, more eternal optimist. I do believe we need regulation and I think that, um, as I talked to other crypto friends, they were like, uh, they were asking what I thought and sitting in the world of still having traditional finance connections. I'm like, you realize everybody knows about this. They're like, really? I'm like, everybody. And so, um, I think that the regulators specifically had been looking at stable coins. So some of Zach's points that what happens if these get bigger, when a retail starts to add more money to them.

• 1:05:28Speaker 02

  And so they've been waiting for something and all regulation, even, um, Gensler's tweet today. Every regulation comes out of a crisis, money market reform, because in the crisis Volcker, Dodd-Frank, every, you, you need to have a, and I know, again, that's why I like this is I want someone experimenting and breaking things. And I was happy Luna broke at this size because if it broke at 180 billion, or my point of like, if it got to the level of the money market industry, I'd be a lot more, I wouldn't be on the phone with you right now, talking about this, right?

• 1:05:56Logan Bartlett?

  No, totally. We're lucky that this isn't bringing down more things with it. And hopefully this will lead to a better, a better place from here.

• 1:06:04Speaker 02

  Yeah. And, and I, and, and so I just want to sandbox for P, I want entrepreneurs to try to innovate and play. The, uh, a, a sector that has been, has lacked innovation, like modern banking, needs this, but regulation's always been the concern. So I think we need to find a regulatory way through this, which I have no idea how to solve, where entrepreneurs can try and build, but con artists and scams and stuff is reduced as low as possible.

• 1:06:30Logan Bartlett?

  Oh, well, I don't know the, the, the use case associated with this specifically, but I, I, I'm glad that there's this experiment. I mean, that's back to the ethos of crypto in general and, uh, and, and all of that stuff. So I, I don't know. I think it's, I think it's fascinating. So where does this net out? This nets out with regulation, this nets out with, uh, this nets out with this. It seems like they're, they've gone under or are going to go under. Is that fair?

• 1:06:55Speaker 02

  Uh, I would assume they're going under, but that's not, that, that bet's not over yet. That story is still being written of, they have a lot of developers in their ecosystem building on it. There's a question of do they? Um, let this kind of eventually settle out wherever it is, however, a few dollars are left and and try to rebuild it. Do they get an injection of capital that someone wants to, you know, keep it going? My thought would be you let it die and you start over and you learn from your lessons and you say, we shouldn't do, you know, algo stable coins. Um, and if we do, they, they, they would be very different or a different scale. This isn't an appropriate product. Um, but right now it's still being worked out because those people I told you about who put money in for that 20%.

• 1:07:37Speaker 02

  If they had entered less than 21 days ago, they're still waiting for their money to be unlocked to try to get out at whatever they can. But you're seeing stuff that makes it even worse where the price of Luna dropped below a penny. So now it's being delisted from exchanges. So just the other side of it, like eventually there actually is no bid. It will go straight. There is a zero. We're extremely close to it and bouncing around a little bit and everyone's watching it. But you have to have a big announcement of a new capital injection for this to survive. Yeah, it's, it's done. It's done. There's no question.

• 1:08:07Logan Bartlett?

  Yeah, it's sad because, you know, there are venture firms and there's financial institutions and there's a bunch of people that like have the money to lose. But I mean, if you go look at the Reddit boards and there's, there's a lot of like retail, like anything else, right? It's a lot of people that were speculating and I mean, there's on some of the boards, I've heard there's, you know, talks of like people contemplating suicide because of the amount of money they've lost and just like some really, really sad shit here. And so it's a.

• 1:08:33Speaker 02

  Yeah, I would say that I think for people that weren't professionally trained as investors in trading, it's really hard. I do firmly believe that if you've lost money, you should talk to people, you should talk to your friends, like you're not stupid, you're not like wrong. You made a big mistake, but it's just money. Like I'm detached from it because of my background in a different way. But that I don't want people to make a crazy rash decision all because of this. Yeah, it kind of comes down to any dollars you play in this area, you should be comfortable losing. Yeah, no, we started off with this, right? It's a speculative asset. So it's not a, you know, it can make sense, just like, you know, betting on a bunch of startups and wondering if it's going to work or not. The people that do that, you know, are not preparing for everything to make money. Some of that stuff goes to zero.

• 1:09:17Speaker 02

  And so I think you want to take more of a venture risk like approach to it and learn about the space and see what you feel comfortable with. So that when you go through a period of volatility, you know, you're not overly levered or overly exposed.

• 1:09:29Speaker 01

  Yeah, the whole thing to me is crazy because we basically said, let's let software engineers who are very sharp people and creative minds, but are typically known for, and I've pretty much only worked with software engineers my entire life, are like hammer search for a nail, right? I've got this really clever, creative, technical idea. What problem can it solve? And that's like the history of bad engineering right there. Like build something because it's cool, not because it's useful. And we took that entire problem and we said, also, by the way, you can issue this as a security that's not regulated. Just this like layer of take your technology and now you can like pre-sell it to retail. That is not, that's not going to end well in any way, shape or form. And the regulation can't come soon enough.

• 1:10:14Speaker 01

  I'm all for like technical experimentation. There are probably some interesting use cases for stable coins, probably interbank transfers. So you can actually make those wires faster. But the idea that we should allow like an engineering product to be a security, because that's effectively what this is, not cool.

• 1:10:31Speaker 02

  I mean, there's a lot of engineering in modern securities today that retail gets their hands on. That's completely, you know, approved as a security. And I think regulation can help. But I think that is really people trying to push what problems are you trying to solve? What makes sense for people? There are people that are very excited about, you know, censorship resistant money. There are people that are excited about being able to not have a government inflate your currency or devalue you. I mean, that's where it feels like a country. There are people that wake up, we're lucky to be in the United States. There are people that wake up in other countries and it feels a lot like Luna. Where suddenly their their money is absolutely worthless and they had no chance. But if they were able to get an internet connection and get some Bitcoin or whatever it was, they might have had a chance to combat against authoritarian regime.

• 1:11:15Speaker 02

  So there are all sorts of things that have use cases globally that I think I'm excited to see people building and trying to do. I think stuff like this hopefully serves as a learning lesson to people of this isn't the type of products that the industry needs. And I do think it hurts everyone involved, the people that owned it, the people that are trying to build the market in general.

• 1:11:33Logan Bartlett?

  Yeah. Well, Eric, thanks for doing this. Next time we'll, we'll talk about something lighter than than the potential systematic risk of, you know, crypto collapsing and, you know, people losing their life savings and all that. Maybe we could do Bored Ape Yacht Club and Other Side and all that, something with a little bit more levity associated with it. But I appreciate you standing in the line of questioning and there was, there was a bunch of, a bunch of good stuff here. So yeah, I really appreciate you guys both talking through all this.

• 1:12:04Speaker 02

  Absolutely.

• 1:12:04Speaker 01

  Do we get to be TikTok, TikTok videos at the end? Is that how it works?

• 1:12:08Logan Bartlett?

  I think we got some TikTok videos. I, someone said we're gonna get, we're just gonna get clips of, of, of you like incredulously asking questions or something. I think it's gonna be a real, a real cloud craft pleaser.

• 1:12:20Speaker 01

  He's a good sport. I had no idea you were Eric when you came on. And so I was.

• 1:12:24Speaker 02

  I don't know you either.

• 1:12:25Speaker 01

  Yeah, which is great. That's the best part. We were just like, who's this asshole? And I'm sure you're thinking the same about me. But it's great. No, I think you have a nice logical head about it, which most people don't. And I think, you know, this idea of like, it's a risk asset, treat it as such is that's it right there.

• 1:12:41Speaker 02

  Yeah, I think, I mean, I love the, to me, the search of truth is a spirited debate between people. That's how you learn. I think my point earlier, like when people write stuff off, you can't talk to someone who's like, this is all scams. And you can't talk to someone who's like, you don't understand that this is going to change the world forever. Like what you like is when smart people try to take different runs, the same idea and come up to a point of like, maybe that resonates with me because I, this isn't a black and white.

• 1:13:06Speaker 03

  Uh, type of answer.

• 1:13:07Speaker 02

  Yeah, there's nuance for sure.

• 1:13:08Logan Bartlett?

  Cool. Well, thanks, guys. Zach, thanks for running along. Eric, uh, thanks. Thanks again for doing this. This is awesome. So that, uh, that was fun, uh, hopefully for everyone involved. Definitely two friends made between Zach Weinberg and Eric Golden there. I appreciate both of them being a good sport and pushing, pushing through, uh, the, the, the different nuances associated with that topic. So what you're about to hear next is, uh, the conversation I had on Wednesday with Aaron Levie. We go through a bunch of different stuff. We touch on Luna, uh, we touch on the markets, we touch on, um, Box and the public, public company. So, uh, as a public company, so excited for you to hear that. Okay. Well, Aaron, thank you for doing this. Appreciate sitting down. We're in, uh, we're in Box's lovely HQ looking out over Redwood City.

• 1:13:51Speaker 03

  Welcome to our HQ.

• 1:13:53Logan Bartlett?

  It's, uh, it's weird to do this stuff in person.

• 1:13:55Speaker 03

  Yeah, this is very weird.

• 1:13:56Logan Bartlett?

  Yeah.

• 1:13:56Speaker 03

  Uh, do I look at your eyes or like a little video?

• 1:13:59Logan Bartlett?

  That's right. Yeah. I sort of forget the, uh, the way to do actual human interaction.

• 1:14:02Speaker 03

  Why can't I see my face right now?

• 1:14:03Logan Bartlett?

  Yeah, it's, uh, it's unusual. Normally checking yourself out the entire time. You look great.

• 1:14:07Speaker 03

  Thank you.

• 1:14:08Logan Bartlett?

  So, uh, well, I appreciate you doing this. I, uh, I think cover a bunch of topics, sort of go through market valuations, web three, uh, crypto, all the, all the fun. We're going to play the hits here.

• 1:14:18Speaker 03

  Okay, cool.

• 1:14:19Logan Bartlett?

  Um, so first, I guess we're recording this, uh, on a Wednesday afternoon and-

• 1:14:24Speaker 03

  When does it go live, you think?

• 1:14:25Logan Bartlett?

  Saturday morning.

• 1:14:26Speaker 03

  Oh, man, anything could happen by then.

• 1:14:28Logan Bartlett?

  I know. I know. The world could be upside down.

• 1:14:29Speaker 03

  Luna could be priced. We don't even know.

• 1:14:31Logan Bartlett?

  I think, I think it's face, it's pretty safe to assume where Luna's headed at this point. Yeah, I was checking it out this morning. We'll get there in a second. But, uh, so I assume anyone that's actually listening to this knows the Box story, knows you, but maybe give us a quick, like, since you went public, where is Box today in its journey? Um, what's the steady state for the company vision going forward?

• 1:14:53Speaker 03

  Sure. So, um, uh, the, you know, really simple story is we, we started the company with a very, I think, you know, uh, relatively simple, but broad kind of value proposition, which was we want to make it easy to access and share files from anywhere. And, uh, as we scaled the company, we, we sort of expanded that vision, uh, to really trying to solve all of the use cases that companies have around working with their most- Important content. So automating workflows around your data, being able to get e-signatures, securing your most sensitive information. So if you think about an enterprise, you know, could be hundreds of employees or hundreds of thousands of employees, you're working with incredibly sensitive contracts and financial information and marketing materials and new product designs.

• 1:15:35Speaker 03

  All that data has to be stored, secured, automated, governed. And so our platform helps organizations all around the world, about 110,000 customers now be able to go and do that. And so since going public, we've just, you know, continued to scale the platform. We're nearing, at least our guidance was nearly a billion in revenue this year. And, and so just super focused on continuing to scale the platform with now, you know, certainly the past couple of years with an added focus toward profitability. And so we're now a little bit above 20% operating margin. So trying to balance the both.

• 1:16:07Logan Bartlett?

  Sorry.

• 1:16:07Speaker 03

  Yeah, we can get into, is there a way to do like a sidebar lesson?

• 1:16:11Logan Bartlett?

  Yeah. And you said a billion, that was revenue.

• 1:16:13Speaker 03

  That was revenue.

• 1:16:14Logan Bartlett?

  Yeah, that's unusual for in my world. Yeah. Interesting. Well, it's quite a journey. And I guess at the time of going public, right? You guys, the financial profile of the business was much different than today.

• 1:16:26Speaker 03

  Much worse. Yes.

• 1:16:27Logan Bartlett?

  Much worse. It's a, but I mean, at the time, I sort of, you guys were burning cash and focused on long-term customer health and all that. And you've grown up as both a person, I'm sure, but then also as a company in the public markets. What's that experience been like kind of having all these public investors looking at you every day?

• 1:16:45Speaker 03

  Yeah, I think, I think you, you certainly get a much greater appreciation for how companies get valued over the long run. And I think in the valley, we have the luxury, certainly while companies are private of, of being able to think about, you know, building great businesses. You know, how do you build long-term durable value? And when you're in the public market, everybody wants you to build long-term durable, durable value, but they want to immediately know how profitable is that value going to be? And what's the long-term economics of that? And that's something that maybe the valley doesn't have as much sort of kind of fluency around, at least in the private market. And then, you know, I think private VCs sort of build these great businesses. And then they sort of say, okay, the public market will now take care of it. From here, and I think there probably could be a bit more discipline even in the

• 1:17:29Speaker 03

  earlier stages of companies as you think about, you know, cash flow and profitability and long-term economics, because it, you know, when you go public, it will hit you in the face. And that's certainly happened to us. And our particular dynamic was we were very, very high growth, high burn. We then became kind of lower growth, lower burn. But and we then had to transition to sort of, you know, mid-growth and actually profitability. And that's been the transition that we've been kind of going through in the past couple of years.

• 1:18:02Logan Bartlett?

  Well, it's impressive. I think year-to-date, I mean, I don't know where the stock prices are today, but year-to-date, SaaS, to say the least, has been underwater a little bit. But your stock price has performed quite well.

• 1:18:16Speaker 03

  We're like a government bond. So that's what we offer to investors in this market. Now, I mean, it's, you know, obviously multiples have come down dramatically. Our multiple was never that high. So the good news, you know, I think for our story is there was, there wasn't as much pressure because we never really had an inflated valuation. And we've been literally working for the past two years to drive a lot more profitability in the in the model with a lot more to come, frankly, kind of going forward.

• 1:18:43Logan Bartlett?

  What's your perspective on the state of the public markets for SaaS today? Obviously, the high-growth businesses are down quite a bit year-to-date. Do you have any broad perspective on what's going on at a macro level?

• 1:18:59Speaker 03

  I'm very boring and simple on this, which is, again, public investors, eventually, like, the last shareholder that you have is going to measure you on discounted free cash flow. Like, that's the only way to make the math work. And so every other shareholder up until that one, you know, is sort of speculating maybe on what somebody will pay eventually for your asset, you know, up until the shareholder that only cares about your cash flow. And so when you have, you know, companies that trade at 20x or 50x or 100x revenue, and particularly if those companies aren't even profitable, you know, you're underwriting, you know, like, years and years, maybe a decade. Of insane growth levels and then the expectation that that company somehow is going to transition into being wildly profitable. That's a lot of risk to take on for an investment.

• 1:19:45Speaker 03

  And but but there's been a lot of, you know, kind of risk capital that's been in the market, especially, you know, hedge funds and others that are willing to pay for that. But then, you know, whether it was the Fed or other things that that eventually sort of, you know, said, hey, we're kind of like, we've overheated the market. You know, these asset prices just can't be this high. You do see a dramatic unwind because because there's no reason like, why should something trade at 50x or 70x or 100x? Like, there's almost no reason why you would, why you could ever determine any of those differences. And so, so the the natural conclusion is that things should probably just trade it at, you know, 8x or 10x.

• 1:20:25Speaker 03

  Because not not just for historical reasons, but that actually maths out to at a 80% gross margin, at a 20 to 30% operating margin. That's generally what a company then would be able to produce in cash flow. And so what you'd be willing to pay for that. And so, so kind of anything above that is sort of just like impractical from a valuation standpoint. And you really need to be growing 50 or 100% a year with incredible economics. And so, so I kind of just, I mean, you know, this is a general statement. I think the market for SaaS and cloud is as healthy as has ever been. We're still going through a tectonic shift of IT environments moving from on prem to the cloud. But the prices for those assets just need to be much more realistic and reasonable. You know, given just how markets work.

• 1:21:08Logan Bartlett?

  Is it weird to be able to be the cerebral kind of OG gray hair weighing in on this stuff? Like back in my day, it used to be 8x. I mean, what's about you, you were the original kind of irreverent, you know, young founder and now?

• 1:21:20Speaker 03

  Yes, I was. So first of all, A, it's helpful that I actually have like probably more gray hair than anybody.

• 1:21:24Logan Bartlett?

  The literal gray hair.

• 1:21:25Speaker 03

  Yeah. So like, like, actually, it's, it's, I can pull that off now. But but it's funny. So so we burned a lot of, a lot of capital as we were scaling. It's interesting. We never actually had a valuation more than maybe 10x. Maybe we touched 15x in one round, like some kind of like crazy secondary or something. So so I never even got to. Experience the inflated valuation period. We did burn a lot of money because we were, we were scaling the platform, scaling engineering, you know, being able to acquire customers that, that, you know, ultimately ended up proving to be a good investment strategy. But we certainly didn't get the, the benefit of the, of the valuation environment. So I think we've always been a little bit conservative on that front, simply because we, we never, you know, really experienced the frothy side.

• 1:22:08Speaker 03

  And it's, it's so funny. And I was just going back and forth with Mark Cuban on web three stuff and Mark was one of our initial angel investors. And, and, and he actually, at least back in the day, I can't speak to his current investment strategy was maybe the most conservative of all, of all investors. Like we were, we were an angel investment with, I think our valuation maybe was $750,000. That was our, that was our valuation.

• 1:22:32Logan Bartlett?

  USD.

• 1:22:33Speaker 03

  Yeah. In USD. Exactly. There was no other option back in 2006. So the world was, was USD based in, in, at least in, in America. And, and he cared about cash flow, like when we were three employees. So, so like, we got that stuff built into us and then eventually venture capitalists that we had, fortunately were probably more on the conservative side. They cared about cash flow. We didn't generate any, but they, they cared about like, what will the economics of this business look like at scale? So, so it was all kind of, I think, you know, relatively built into the foundation of the company, but we did burn a lot because we were, we were definitely taking the kind of get big fast approach in the early years.

• 1:23:10Logan Bartlett?

  Made a joke that, uh, like, all right, I'm ready to learn what free cash flow is today. And I realized, I realized my LPs probably wouldn't love that. You know, it's a little too much bloodbath in the public markets to be making.

• 1:23:19Speaker 03

  You can edit that out, I'm sure.

• 1:23:21Logan Bartlett?

  Oh yeah. I, I, I deleted it. So I don't think anyone watched this anyway. Well, so, so I guess to that end, like what advice would you have? You guys have been through some ups and downs along the way. I think maybe when you originally filed to go public, then you took a private round with some like

• 1:23:37Speaker 03

  We've been through everything.

• 1:23:37Logan Bartlett?

  Structure around it.

• 1:23:38Speaker 03

  Lots of ratchets everywhere.

• 1:23:39Logan Bartlett?

  So for CEOs and for employees that maybe are looking at their stock price and they were trading at a hundred times and now they're trading at, you know, a ridiculous eight times or whatever.

• 1:23:47Speaker 03

  Exactly.

• 1:23:48Logan Bartlett?

  What, what advice would you have for those? Employees are the people, the rank and file that have gone through this journey today.

• 1:23:55Speaker 03

  Well, I mean, the really bad news is don't expect to go back to the 100x. So it doesn't mean you can't go back to that value. It's just that could be five years of work to get back to that valuation. Just, you know, you got to keep doubling the company at a pretty reasonable rate. So I think I would, I would look at historic norms and, you know, whether that's 2006 to 15 or 18 or whatever you want to choose and just say, where did SaaS trade? You know, 6x, 8x, 10x, 12x. Those would all been very good valuations. Those were not sort of made up. There wasn't, it wasn't made up why those were the valuations. Again, it all flows from how much profitability can a company have? What will people pay for that profitability?

• 1:24:36Speaker 03

  And then, and then revenue is sort of just a, maybe a good proxy for, for how you can generate that. And then, you know, there's a growth rate variable there. So the higher the growth rate, obviously the higher the multiple. But you have a lot of companies that have a really high growth rate where we still don't have a lot of visibility. And what's the actual underlying profitability of those customers? So, so kind of even growth rate sort of masks some of the value creation that, that, that we, that we see in the value. So, you know, the first thing is, is possibly unfortunately, we should expect valuations to go down. And in a sustainable way. But, but probably, you know, less for the employees and much more for the founders and people thinking about kind of building these businesses. I think focusing on just business fundamentals.

• 1:25:17Speaker 03

  And, and I would, I would say that in the frothiest of times, but certainly now it's, it's much more appropriate, which is, you know, what's your customer acquisition cost? What's your profitability with the unit economics of, of customers? You have to care about your gross margin. We have a lot of companies out there that are like 40% gross margin businesses, but they trade like they are 80% gross margin businesses. That's dangerous because at some point that 40% difference means it's going to be much harder to get to real levels of profitability. And so I think this is some of the reckoning, which is like, the market is starting to figure out what things actually have software economics and what things are software enabled businesses, but they still have the economics of whatever that historic kind of industry looks like. And that's a very different model than. For how you can value a company and an asset.

• 1:26:03Speaker 03

  You know, there's a reason that, that, you know, a Coca-Cola or Procter and Gamble probably like five or 10%. You know, operating margin businesses, I'm making that up, you know, but, but those will not trade like a Microsoft, who has a 30 or 40% operating margin. And so, uh, so you have to be kind of cognizant of like, what's the underlying unit economics that, that your business model has and then, and then build the company that's appropriate to that.

• 1:26:26Logan Bartlett?

  And so, do you think that in that sense, this is actually just a healthy reset? And it's going to be psychologically difficult and it's going to have RSU implications or option implications and reset evaluations.

• 1:26:38Speaker 03

  Hundred percent.

• 1:26:38Logan Bartlett?

  We're back to a steady state.

• 1:26:39Speaker 03

  I, well, I don't know where we will be by Saturday and, and next week and the next couple of months. But, but the idea that we needed a correction and that, that is, is like, that's a good thing. And we need to have a more sustainable environment, a durable environment, things where, where, uh, you know, again, the problem with having something that, an investment that is, you know, trading at 100x revenue, whether it's private or public market is that's just, at some point that's gambling that, that like the thing is going to be able to sustain that. And it's way better and way healthier to build an environment where, you know, every day you show up, you build more value, you sell to more customers, you build a better company. And if you do that, if you do your work, the valuation will then incrementally sort of respond as a result of that.

• 1:27:23Speaker 03

  Otherwise you're just paying for some company predicting what it's going to look like in five years from now, which again is speculation as opposed to, you know, really investing in, in durable businesses.

• 1:27:32Logan Bartlett?

  If you were a private company right now and took a 100x, 200x ARR round, right? Like, and one of the things that's interesting, and I talked a lot about this, but like, public markets are consensus and there's thousands of transactions a day, right? People agreeing on it. Private markets, you know, all it takes is one to make the market, right? And if there's one person standing there that says you're worth a billion dollars, you might be worth a billion dollars.

• 1:27:52Speaker 03

  And as everybody knows, with protections though, on that, on that investment. And that's the, like, that's the, that's the little fine print on the whole thing that makes the whole thing kind of like useless as a valuation kind of methodology.

• 1:28:05Logan Bartlett?

  Totally.

• 1:28:05Speaker 03

  Cause like, they can't lose money. So you could call the thing $10 billion and if they can't lose- Money, then it doesn't really matter. That's just a certain amount of like, they're just appetite for upside is they just don't have as much appetite for upside. So, but they still are protected on the downside. Keep going, sorry.

• 1:28:19Logan Bartlett?

  Do you think private companies are a little overly precious about down rounds, given you have down days all the time and you have up days? And like, if you had taken one of these valuations, would you think about being proactive about maybe resetting the 409A? And issuing options at a lower price or resetting the valuation? Or is there too much of a psychological barrier associated with something around a down round and what that means for employees?

• 1:28:44Speaker 03

  If I were being totally realistic of if I were in that, in my shoes in that situation, I would, I would probably be sensitive because

• 1:28:50Logan Bartlett?

  Because of the perception.

• 1:28:50Speaker 03

  You have, you have people you've hired under certain circumstances and they have a certain, you know, belief in what the value is. I, so, so the thing is, is I'm actually, firstly, I'm insanely optimistic about the future of software. And so if you have 100x ARR multiple company as a private company, like, congrats. Conserve that capital.

• 1:29:10Speaker 03

  Try whatever you can to maintain whatever growth rate you can, but do it more efficiently than you were initially anticipating. And if you pull it off, then there's a very possible chance you'll just, you'll, you'll kind of grow into that valuation. And you just maybe won't have to go to market from a, of a funding standpoint for an extra couple of years. And then when you, when we reemerge and things are more sustainable, then you could do an up round in three years from now. But like, the worst position is you get that high valuation, you brought in a hundred million dollars of, of investment and you're just, you know, you're, you're quarterly, you know, monthly burn rate is five million bucks a month. I mean, then that, that's a very, very dangerous spot, in which case you will definitely experience a down round or something with crazy protections and ratchets that'll look so ugly.

• 1:29:52Speaker 03

  You wouldn't want to participate in that. But, but I think that like, you know, I, I would say people that are fundraising now, obviously expect lower valuations. People that just fundraised, keep that cash, get more efficient and, and, and see if you can kind of, you know, just work through this environment.

• 1:30:07Logan Bartlett?

  Got it. Well, you recently tweeted it's counterintuitive, but raising less money will often lead to building a better business. It forces you to have constraints, which leads to more focus and higher quality decisions, which results in better product and more sustainable business models. So you know, that's bad for my business model, right?

• 1:30:22Speaker 03

  You have to deploy capital.

• 1:30:23Logan Bartlett?

  That's actually really bad advice, and I don't think that's true. No, but what are the constraints when you're operating in the like, public markets, you know, you have to show cash flow and there's trade offs associated with that. How have you actually seen that manifest itself and why might these constraints be good for entrepreneurs today?

• 1:30:38Speaker 03

  So, so this took me a while. I had, I had to like, A B test every possible thing, whether I knew it or not. And, and I can just say to anybody listening that is a founder or whatever, I like, the constraints are actually lead to a better business. In the unconstrained environment, what you found, and we found this as well, is we needed to get more profitable. You would just see so many different sort of like projects emerge. And so like, like you've got a project for, for, you know, that will pay off in a year from now. Then you got a project that'll pay off in two years from now, and a project that'll pay off in five years from now. And like, like instinctively, you're like, that's great. We're making lots of little bets and we'll sort of see what plays out. But all of those little bets are taxes on the organization. It's meetings that people have to be a part of. It's, it's coordination you have to be able to go and do. It's more people that

• 1:31:22Speaker 03

  have to be hired. It's more support infrastructure for all those initiatives. And then all of a sudden, you kind of start to, to maybe you'll be a bit less sort of judicious on your, and disciplined on your decisions. Like, well, maybe that, maybe that speculative future AR thing maybe could work. And so I'll throw five people on that. And you kind of, you start to don't, you don't even have like, then a real heuristic anymore for when, for how to make decisions and what kind of investments to make. And so in that unconstrained environment where capital is free, because you're not really getting diluted that much and it's abundant, you start to build up all of these little things across the organization. And that's actually will make your company worse off. Because what people, you know, really thrive on is clarity, alignment, focus, a clear plan, being able to execute in a,

• 1:32:07Speaker 03

  in a sort of a, kind of a very forceful way in a single direction. And the more kind of just distractions and chaos and meetings and inner integration sinks you have to do across the organization, that's going to slow you down. It's going to serve your customers less and sort of what they need from you today. It's going to kind of just reduce your ability to make good business judgment decisions. So. So I've generally found that that having those constraints and it can be in some cases, it can be truly arbitrary. You could just say, we're going to run the company at a 10% operating margin. And then every decision we make has to be made from the lens of of what, what, you know, we have scarce amount of resources, we're going to put that scarce amount of resources in the most impactful things. That will force you to rank and prioritize what is the most important

• 1:32:49Speaker 03

  set of things that will let you channel your energy in those areas, which will actually likely lead to a higher predictability that it actually plays, you know, pays off. So in our world, that that today is 20 plus percent, you know, operating margin. And in the future, that will only continue to go up. But those are the constraints that we've sort of put in place. And then as a result of that, we have a bunch of sort of underlying components to to those, you know, constraints. What is the sales efficiency we need within our sales organization? What's the amount that we want to be able to deliver on gross margin? And guess what? Like, just another random one. Gross margin is this perfect one where by having, again, whether it's arbitrary or something that is like super, you know, pertinent to your or your industry, having that as a fixed level that you need to commit to is going to force or the organization to build much better products,

• 1:33:33Speaker 03

  much better unit economics. You're going to think about your infrastructure very differently. So those are the kind of constraints that actually lead to better business building.

• 1:33:41Logan Bartlett?

  Has most of that stuff from your perspective, like, is that lessons that you've taken, I mean, from public markets and having to exist under that scrutiny? Is that where you've gotten a lot?

• 1:33:50Speaker 03

  It is. But I mean, I want to give credit to even, you know, many of our VCs thought that way. You know, we had a cohort of VCs that had been at companies in the 90s and they'd seen the dot com bubble. It was fantastic to have VCs that had been through the dot com bubble, because because they know exactly how things can kind of turn the other direction. So we had many of those constraints. We, the reason we were high burn at the periods we were high burn was, was we made a calculated bet that every customer we acquired would be worth, you know, two, three, four, five times more from a lifetime value standpoint versus the cost of acquiring them. And in enterprise SaaS, if we can, if we can acquire, you know, an annuity of a million dollars for $200,000, that might look like we're burning, you know, $200,000 in that first year or whatever,

• 1:34:34Speaker 03

  but we think it's going to pay back a million dollars. That was why we burned so much. It was On our particular market because the economics were sort of built into what we were doing. But that's not true of every business. And even in that case, we were still, we still spent money on things that we shouldn't have spent money on. I mean, I remember, um, you know, uh, that at the sort of peak insanity of our, in our particular situation from a burn standpoint, that's like seven or eight years ago, you know, I was like, gosh, should we, should we do an enterprise software Super Bowl ad? And I sent an email to a couple of board members, be like, would this be a good idea? We'd be one of the first companies in enterprise software ever in SaaS that would do a Super Bowl ad. They're like, no, it's a horrible idea. And we're like, okay, shouldn't do it. And we didn't do it. So like, but like that kind of discipline getting built in is, is usually a good idea as you're, as you're scaling a company.

• 1:35:15Logan Bartlett?

  That's a good segue, Super Bowl ads is a good segue into crypto. So you're here to announce your crypto strategy for Box, right?

• 1:35:22Speaker 03

  Yes.

• 1:35:22Logan Bartlett?

  So, uh, obviously Box doesn't actually have a crypto strategy.

• 1:35:25Speaker 03

  There's room for more stable coins right now.

• 1:35:27Logan Bartlett?

  It seems like it, honestly. It's a little bit of an oxymoron there, jumbo shrimp, stable coins. So do you, I guess, just a level set, do you, do you own crypto personally?

• 1:35:38Speaker 03

  My exposure right now is, uh, last time I checked Coinbase was $2,400.

• 1:35:43Logan Bartlett?

  It's amazing how, uh, that your exposure keeps going down as a percentage. For me, uh, being indexed to high growth stock, uh, tech, both of them are actually following each other in lockstep, but it has been a little bit of a volatile, uh, situation. So, um, I guess you're, you were one of the, uh, out of the web two world, I guess, which seems to be used pejoratively by the web three community, but.

• 1:36:04Speaker 03

  Out of people that just build software, yes.

• 1:36:06Logan Bartlett?

  As people with real businesses, uh, you were, you were one of those. What's your perspective on the, uh, like the state of web three right now in general? And where I guess the ecosystem is?

• 1:36:18Speaker 03

  You know, the web three is, is, this one's a complicated one. It's like, there's a lot of cognitive dissonance because I actually think like, I'm answering a thing which is just a made up, like, I don't even know, like, like if you made up a thing and then I had to answer about it made up, I don't know what to do. But like, but like, sure, the concept of, of, of, you know, more protocols on the internet and more openness on the internet and, you know, more open source and more interoperability, those are great concepts. And those are things that people have been striving for, for decades and decades and, and. And you know, there's so many robust ecosystems, building amazing open source projects and new protocols that that that allow for more interoperability between software. The the sort of arbitrary idea that that somehow we have to do that on a blockchain.

• 1:37:01Speaker 03

  I just I just like think of as as well, somebody just said that that is the case. And then somehow we have to now talk about it. Like, why? Why? Why would it have to be a blockchain? Why would I have to? Why do I have to pay? Why would I have to pay a tax to replicate data 1,000 times for censorship resistance when like censorship, you know, for these types of use cases are not like that? That sort of relevant. So so I would just say like, there's some philosophies that are being talked about within web three that are totally, you know, interesting, great philosophies. And those are things that that many people have been talking about for decades and decades. Matt Mullenweg at WordPress, I mean, like, like, that is like the foundational, you know, of WordPress is like, let's have more open source software that powers the internet. And then we'll have some commercial elements to it that people can participate in. And that's great.

• 1:37:45Speaker 03

  But but, you know, every, you know, most of at least today, how web three is defined as we're going to use blockchain technology to power, you know, things outside the financial realm. They just don't. They just don't add up technically or user experience wise. Or frankly, I don't even believe demand for regular consumers. So so I just don't think there's that much to even work off of.

• 1:38:10Logan Bartlett?

  I mean, some of the premises of like sheer governance and ownership and decentralization, I guess I think are all interesting. And the currency example, I think there's stuff there. And it seems like people, maybe less so today, but people are willing to pay for some of the NFT use cases. Right. But has there been a has there been a use case of web three that you've you've said like, oh, this is? This is interesting. I actually, this feels like a hammer and a nail rather than a nail looking for a hammer.

• 1:38:39Speaker 03

  So there have been actually. And but then somehow I haven't seen the industry do the things that that would relate to those use cases. I guess I guess to me, like, if you if you started the most abstract concept of all, should there be a way to store things in a in a in a data store that is sort of always going to be universally accessible by you within some context that that you can always get back to and don't require any corporation to sort of intermediate? Should that exist on the internet? I think that's actually a fine. Yeah, absolutely. That's cool. That sounds good. Does that thing have to fluctuate in pricing? Does that thing have to be 24/7 traded? Does that thing have to be be something where you lose it?

• 1:39:23Speaker 03

  Because you you you know, you you lose your keys on a phone and then it's gone forever. Does that like like it's so so like some of the underlying concept of of the idea of a decentralized data store that lets us access, you know, and retrieve things from is like, OK, fine. I I I totally I stipulate that's interesting. But then by the time it ends up manifesting as actual use cases, they get it gets so derailed. And there's there's a good reason for it. It's because that thing that we just talked about would probably like on a global scale be like a $10 billion idea like that. That would be like the TAM of that use case because it would just be like, well, OK, how many things do you need to store? And what's the cost of that storage? And how many people need to access that thing? And it's just not there's not that many things that that fit that attribute.

• 1:40:06Speaker 03

  So the only reason why it's a $2 trillion TAM or whatever we want to say the market cap is is because people have said, no, no, no, no, that thing is going to power the ability to have, you know, virtual Gucci products. And those things then can be traded between people and then there's going to and you'll get rich. So like, so it's like, yes, like the idea of a of a distributed data store that nobody controls is interesting. But the manifest the manifestation of it that has made it in the popular zeitgeist is because people are spending unbelievable amounts of money on virtual goods and things, which basically, I mean, the funny thing about even NFTs is like on a technical basis, they all basically just approximate another altcoin. They're all like, so everything is really just another altcoin, whether it has a picture associated or something else, it doesn't really matter.

• 1:40:50Speaker 03

  So it's just it's just like, do does somebody going to believe in the future that that X new coin is worth something? And I haven't been convinced that there's a lot of use cases that would cause you to say yes.

• 1:41:01Logan Bartlett?

  What do you think the rhetoric? We were joking about it earlier, but what do you think of the rhetoric of like not going to make it and Peter Thiel calling Warren Buffett the the grandpa from Omaha or whatever? And, you know, you've you've mixed it up of who owns?

• 1:41:16Speaker 03

  I think it was the sociopathic.

• 1:41:17Logan Bartlett?

  Sorry, sociopathic grandpa from Omaha. Yeah. And yeah, there's there's been the like, who owns box? I think someone tweeted. And showed all your

• 1:41:26Speaker 03

  Retirement funds, yeah.

• 1:41:27Logan Bartlett?

  Yeah, yeah, exactly, like pension plans, yeah, all these, all these terrible people. What do you think that rhetoric is? Like, is it just, is it acting in poor faith in like a religious sort of zealotry that you're trying to convince people to go somewhere because you think it's where it needs to go? And so you have to be that vitriolic in how you approach all these things? Or?

• 1:41:46Speaker 03

  Um, well, I, I think, um, uh, I, here's the, um, I'm going to sort of pivot the question because I, I don't want to, I can't get into people's like psyche of

• 1:41:55Logan Bartlett?

  No, no specific.

• 1:41:56Speaker 03

  Yeah.

• 1:41:56Logan Bartlett?

  In general, they're not going to make it ethos. What do you think that is?

• 1:42:00Speaker 03

  I mean, part of that, I think, is the shitposting and silliness on the internet. Like, I'm not, I'm not so kind of, you know, worried about that. Everybody kind of, you know, it's, it's obviously, you know, kind of goofy that there's a lingo around it or whatever. But, but I, I think it's, um, I think that there's a lar, I think there's a group of people, I don't know how large it is, that, that do think that the internet could operate differently. And, and there's an excitement around that, especially because the prices of these things have been going up. And I, I totally, I mean, like, I feel bad because I, like, somehow I look cynical, uh, by just saying totally normal things, like, like, no, just like build software that people pay for, um, uh, and then, and then that's how you'll know if you're creating value. Like, but like, I don't know why that's cynical. But it's like, that's just like pretty normal.

• 1:42:45Speaker 03

  But like, so I don't, I don't want to like, like rain on anybody's parade, but the, the problem is, is that, is like, unfortunately, when you really break it down, the technology is not a good fit for most of the things that are being sort of, you know, sort of theorized that it's going to solve. I mean, it, it, you know, like the idea that it is a slow database is just, yeah, it's a slow database. So then the reason you need L2s is because the database is super slow. So we have to build up all of this other infrastructure because the underlying foundation of this, of, of this, you know, concept is not particularly germane to most of the use cases people wish that it would relate to. And so, so I, I mean, that, I think unfortunately, there's maybe an audience that is not, uh, as, as sort of like, they haven't

• 1:43:28Speaker 03

  done, you know, all of the in-depth research on that and tried to think about, well, how does this all play out? And I happen to, you know, have Had maybe too much free time to think about and and you know a cohort of tech people also that that don't agree with it. And so and I kind of built my conviction that it's not going to work as a result of that.

• 1:43:46Logan Bartlett?

  Yeah, got it. You're you're a student of internet history and you've lived a lot of this. How do you think this all ends on the crypto web three side?

• 1:43:55Speaker 03

  Well, I mean, again, I think that there's like, you got to stay super grounded in just the pure facts. Like, what would you use one of these these data stores for? And if it doesn't kind of comport with the the use case that you're presenting, then it's not going to ever work. So so when people say, OK, we could rebuild Twitter or social networks or a search engine or YouTube on the blockchain. It's like, no, you just can't. So so the only way that can end is like it won't, it can't happen. So so that that one's out. You know, the idea that people want to sort of have digital goods in a metaverse that they store in a in a public blockchain, I guess, is like, OK, I could I could see that scenario. But the problem is, is think about all the intermediate steps that have to go right.

• 1:44:39Speaker 03

  Like, the metaverse has to be there that people want to be a part of. Like, that needs then large scale ubiquitous consumer adoption for the for the goods to be valuable, you know, valuable in them. So, you know, by any reasonable guess, that's five to 10 years away. And that's even asserting that people want that. So so what would you invest in now that would that would deliver a valuable outcome? And so from the internet, you know, student of internet history is like, like, you know, people always say, well, this is like the internet in 94. Well, the problem with the internet in 94 is nobody made money on the on the on the investments in of the internet in 94, because nothing had been yet sort of built out. And so yet we have $2 trillion going into this thing. I mean, again, it's not really $2 trillion, but but like notionally $2 trillion of value is in a thing

• 1:45:23Speaker 03

  before before we have any of the actual infrastructure that would credibly produce the outcomes that people are talking about. So it's like, so you just, why would you then invest? Like, wait for the thing to exist and then invest in the assets that are related to it? But that's not happening. So and and I am, I mean, like, this is, this would get too technical. But unfortunately, I'm also just convinced that that we will always say that it's it's the internet in 94, whatever the timeframe is, that that's a perpetual thing that will exist forever. Because there are there are there are also just unfortunately, like, like game theory reasons why very few of these things ever reach scale, which is the moment that that you have any sort of scale from a coin or a token or an infrastructure.

• 1:46:04Speaker 03

  The users or investors of that infrastructure start to see less upside on an incremental basis. And so then they're looking for a new asset that they can go and invest in and participate in for the next rise up. And so you have a very unstable kind of network effect, which is the more people on these things, actually, the worse it is for the future users on these platforms, because they don't have the same financial upside as the earlier users. And so the reason why that's super problematic is that's the exact opposite of how we know how to build internet scale systems. Like, the more users on Airbnb, the more houses are on Airbnb, which then creates more users on Airbnb. The more users on YouTube means more content gets generated, and then that brings in more users.

• 1:46:48Speaker 03

  The more users there are on bored apes or whatever, at some point, someone says, wait a second, like, this has to plateau. I need a new asset to go and buy into. And then you start, then there'll obviously be some asymptotic point where then it should then just go down at that point. So there's anti-network effects in every single one of these models.

• 1:47:09Logan Bartlett?

  When you're speculating for returns around this stuff, it's just inevitably the last person in is not going to get the same amount. Yeah, no, it makes sense.

• 1:47:15Speaker 03

  But like, that's not, like, you can't, like, you can't solve that.

• 1:47:19Logan Bartlett?

  Yeah, that's perpetually true.

• 1:47:21Speaker 03

  More software, more human behavior changes, like, everybody says, well, no, like, the community will shift to being about utility. It's like, no, no, come on, you can't, you can't for the first X number of years, build a community that wants profit. And then somehow you're going to like navigate this very graceful shift to then they all of a sudden only want utility. And then they're doing it, then they hold on to their tokens, just, you know, for the good nature of, you know, for some reason. Like, that's not how people work, like, they want a financial profit at that point. So what happens when they start to sell the tokens, because you've now shifted utility? Well, then the asset collapses, and then people move on to a new network. So it's just, that's just an ongoing, ever, you know, that will happen for every single asset.

• 1:48:02Logan Bartlett?

  Shifting gears. So recently, there's been a move by CEOs, I guess, led by Brian Armstrong from Coinbase, and then Toby Lukey from Shopify has followed as well, where it's like, hey, we're going to keep social issues and political issues out of the workplace. It seems like I was looking at the Box official Twitter account. You guys issued a statement about Roe v. Wade and the leaked Alito opinion on what's going to come out. So clearly, you've taken a different tact there. How do you think about that from a conceptual standpoint?

• 1:48:31Speaker 03

  I think you have to certainly pick the topics that you think are important enough for your culture and the health of your culture and your organization. And so we're not going to take on every single topic that would sort of not be practical or appropriate. But there are some that, you know, maybe it's a healthcare topic, maybe it's a social justice topic, maybe it's something that is purely economics oriented that we'll take on where the company needs to make a stance or a statement or have a message in support of something. And it's, you know, this is not, it's not a consensus. It's not like we're not going to vote on that. It's going to be the topics that, in our best judgment, represent the stuff that's going to be important

• 1:49:15Speaker 03

  to our workforce and our culture over the long run. So, you know, only a few people can really ultimately be accountable for what those things are. I'm one of them. But it's based on what I'm seeing from the organization and our own kind of culture and beliefs about our organization and business going forward. So, I mean, I think it's actually fine for companies to take completely different approaches to this. So I certainly watch Toby and Brian and what they're doing. And that's one approach. And we have a different approach. And I think it's kind of, you know, interesting and good, probably, that there's a diversity of approaches and how organizations operate on this front.

• 1:49:49Logan Bartlett?

  No, it makes sense. What about shifting gears to Elon and Twitter? You've joked quite a bit about this, but are you optimistic about the platform as someone that uses it regularly under Elon's leadership?

• 1:50:06Speaker 03

  I think, you know, this is, you have to kind of like parse out two concepts, right? So on one thing, you have to say, okay, well, it'd be a well-run company with lots of innovation, you know, executing super well. I actually would say yes. Like, if you just look at his businesses, they tend to have that characteristic. So as a, as a business leader, entrepreneur, yeah, I'm not sure that I'd ever want to like, work directly under him. It sounds like that would be like, oh my gosh, like you get an email at 3:30 in the morning and, and you've got to, you know, do like, I think he does like standing meetings at 11:00 PM for like new SpaceX, you know, rocket design. So it's like, holy shit. So, so.

• 1:50:41Logan Bartlett?

  Concentric circle of working for Elon and at Twitter seems like a tough. That seems like, seems like someone that enjoys pain doing that.

• 1:50:48Speaker 03

  Those could be pretty, yeah. So, uh, so, so on, on that end of like, will the company do great things? I would say yes, I have no, no, no, at least immediate concerns or paranoia about that. On the other thing, which is like, is he going to somehow solve, you know, world hunger on censorship and free speech online? I, that's dubious because I just think it's a much harder problem than, than even maybe he's kind of thinking about. I, I've watched his Chris Anderson interview at TED and it was a little bit maybe too high level for my liking of like, okay, like, do you really understand that the intricate details of every single region has different kind of cultural norms and, and laws? And you're a global platform and how do these things interrelate? And so, um, so I just think it's a super hard problem.

• 1:51:33Speaker 03

  I think it's so easy for people that have a particular point of view, including, I mean, both sides, actually, this will sound like it's sort of, you know, talking about more of the right, but actually I see equal stuff like the Joe Rogan controversies of, oh, we should censor Joe Rogan. It's like, well, no, but like, so where, where does that, where does that line get drawn? What sentences can you say? What top, like, so, so I actually, I think both sides don't really understand how practically, you know, how hard this stuff is. But my basic guess is like, other than maybe like crypto bots, like nothing really gets that much better. Like maybe an extra 100 people have their account on Twitter. But like, you know, you still have to solve harassment. You still have to solve abuse. You still have to have, um, you know, systems in place for the different regions that you're doing business in.

• 1:52:16Speaker 03

  So I'm less sort of, I think there's less of a delta of what will actually happen from a, you know, censorship standpoint, just because I think like, these are just really hard problems that will have to continue to get solved if you want any, any chance of having a, a healthy, uh, you know, kind of platform.

• 1:52:32Logan Bartlett?

  I think if you go back and watch that, the Chris Anderson interview, it's clear, at a minimum at that point in time, it wasn't the most thought through in terms of like what the long-term vision is.

• 1:52:43Speaker 03

  Yeah.

• 1:52:43Logan Bartlett?

  And he's obviously a brilliant guy.

• 1:52:45Speaker 03

  Well, no, but here's the thing, and it's not, it's not even unfair to him, actually. This is the thing, the, I mean, Jack, if you're out there, like, like, I've, I've seen the same answers from Jack. It's, the reason is because these are truly not, not binary things. So you always, like, the, like, after you do like the five whys, eventually you get to like, well, in this case, we'll do this, and in that case, we'll do that. Like, there's not, there's no prints, like, there's no way to write it down.

• 1:53:08Logan Bartlett?

  Which, which ironic is the platform itself, it actually doesn't need any nuance at all.

• 1:53:12Speaker 03

  Right.

• 1:53:13Logan Bartlett?

  And so it's ironic that the problems on the platform require nuance, and the platform itself doesn't allow nuance.

• 1:53:18Speaker 03

  Right, right. So there's no, so like, I don't think that there's anybody that is going to solve this. I actually think we have to accept, like, a certain degree of unhappiness.

• 1:53:26Logan Bartlett?

  Yeah.

• 1:53:27Speaker 03

  And actually, maybe that was maybe the most thoughtful of Elon's thing, which is like, 10% of liberals, 10% of, of, of conservatives are going to always be unhappy because, because yes, Joe Rogan will be able to bring on anti-vax people, and, and also somebody who does, you know, a Capitol riot is going to get banned. Like, like, you might just have to accept that those are going to be the polls of what things people are going to be unhappy about, and, and we gotta just sort of be pragmatic about this a little bit.

• 1:53:51Logan Bartlett?

  Yeah, no, it makes sense. Do you, uh, do you feel responsible for Elon's tweeting in some way?

• 1:53:56Speaker 03

  Um, I, no, what do you mean?

• 1:53:58Logan Bartlett?

  You don't. I, I feel like you were one of the first, uh, people to be public and say, hey, I can have a serious job and also make jokes online. And I feel like Elon has taken that to its outer extreme, but...

• 1:54:09Speaker 03

  I think based on the tweets Elon does, um, uh, he would have independently come up with that conclusion.

• 1:54:14Logan Bartlett?

  Yeah, he's, he's...

• 1:54:15Speaker 03

  His meme game is at a level that nobody could have influenced that.

• 1:54:18Logan Bartlett?

  Yeah, I know. I, I, I agree, I agree with that, but, um, no, it's, it's interesting. I will say, I mean, I, I've benefited from this as well. I, I remember when I was, first started tweeting, uh, in, in earnest, it was the beginning of the pandemic.

• 1:54:31Speaker 03

  Hmm.

• 1:54:31Logan Bartlett?

  And someone said... Someone said to me, which I took as a great compliment, like, oh, there should be an Aaron Levie of VC. I think you can-

• 1:54:39Speaker 03

  Just like high burn and-

• 1:54:41Logan Bartlett?

  That's right. That's right. Yeah, that's right. I think they wanted me to be able to make jokes on the platform, I think was what they were alluding to. But have you had any funny anecdotes or things that have come out of tweeting and being a public figure? I assume enterprise sales deals don't get closed from it, but you probably have higher visibility than-

• 1:55:02Speaker 03

  Yeah, I mean, I think like I'll interact with CIOs that are like, ah, thank you for, you know, talking about immigration reform or something. So like, that will happen-

• 1:55:09Logan Bartlett?

  More substantive side of it. Not the jokes.

• 1:55:11Speaker 03

  Usually not, not like, thank you for making fun of robots. So that stuff doesn't come up as much. But no, probably the most fun of all time was like six years ago, I don't even know what caused it, but Snoop Dogg responded to a tweet. And we went back and forth where I made some marijuana jokes that I didn't understand. And he responded. And that was, that was a great time in my internet-

• 1:55:34Logan Bartlett?

  Yeah, you were being fed, you were being fed those jokes. I-

• 1:55:36Speaker 03

  Yes, yeah. I was at like pinging all my friends. It was a good response.

• 1:55:39Logan Bartlett?

  Yeah, if your public investors are listening. Yeah, yeah, definitely being told that stuff. Now, how far we've come. Now Elon's literally smoking weed on Joe Rogan-

• 1:55:47Speaker 03

  It really doesn't matter anymore.

• 1:55:48Logan Bartlett?

  And making 420 jokes. Yeah, I had, I made a joke that Jack Dorsey, after the web two, web three thing, was never going to be able to work at Andreessen Crypto anymore.

• 1:55:57Speaker 03

  Yep.

• 1:55:58Logan Bartlett?

  And he responded to that.

• 1:55:59Speaker 03

  What'd he say?

• 1:56:00Logan Bartlett?

  It was a picture of him with like tears streaming down his face. And I will say, my mentions, like I still get responses from that. It's actually amazing as a-

• 1:56:10Speaker 03

  It just keeps going.

• 1:56:11Logan Bartlett?

  As a platform. Yeah, it's, it's interesting. I, now, I will say, VCs and CEOs seems to have taken it to its outer extreme now.

• 1:56:20Speaker 03

  Yeah, we're just getting bored at this point, is what I think. I think, I think we have too many VCs and people that have been just on their computers for now too many years and-

• 1:56:31Logan Bartlett?

  Our brains are all broken collectively at this point.

• 1:56:32Speaker 03

  Yeah, I think that, I think that's probably right.

• 1:56:35Logan Bartlett?

  Well, one of the other things, we're obviously in Box's HQ today. What, so where are you guys in the state of working now?

• 1:56:45Speaker 03

  We work.

• 1:56:45Logan Bartlett?

  We work.

• 1:56:46Speaker 03

  Yeah, we're working.

• 1:56:47Logan Bartlett?

  Yeah, you are. Yeah, that's awesome. That's good to hear. Yeah, doesn't smoke weed to your public investors.

• 1:56:52Speaker 03

  Work a lot.

• 1:56:52Logan Bartlett?

  Doesn't smoke weed and does work.

• 1:56:53Speaker 03

  Yeah. So we have, we've opened up offices and we're probably on the, I don't know, like 90th percentile of orienting toward flexibility, which is funny because two years ago, I was the most in-office oriented person like that, like I was basically six days a week in the office and you'd have meetings, you know, on some planning session that go till midnight and pandemic, I was like at first, like, how are we going to replicate all of that? And, you know, we've seen a lot of benefits of the, just the diffuse nature of, well, now you can actually involve more people in the conversation. We get, we can be more global, you know, on the margin. There's obviously much more flexibility of like, okay, maybe people, you know, do need to spend more time with their kids or whatever, like, ah, like what a brilliant idea.

• 1:57:39Speaker 03

  And so, so that flexibility has been now baked in. And so people, I think, will come in a couple of days a week if they're around in office. And, but then we're going to stitch it all together still with a very digital first orientation. We benefit from like literally the product of Box is about being able to, you know, collaborate from anywhere at any time with anyone. So in the, in the, literally the initial business plan of the company, we talked about being able to work from anywhere. So that was, that was just like a founding characteristic. And so we're just going to exploit that to the extreme of the kind of software we build to help companies that need to collaborate and share and work from anywhere at any time securely.

• 1:58:15Logan Bartlett?

  How do you make the hybrid employee that isn't in the office not feel like a second-class citizen? Because I feel like we're entering this world now where historically there were the automatics of the world or the elastic, so the people that really pushed remote. And then we all went remote, right? And now we're sort of stitching back together into this weird hybrid world. And one of the things, one of the concerns I have are a lot of the people that aren't in office are going to end up feeling like they're not

• 1:58:38Speaker 03

  Yeah.

• 1:58:38Logan Bartlett?

  as valued of an employee as the ones that are.

• 1:58:41Speaker 03

  I think that's a good sort of concern to have because we're going to have to work Against it so far. I'm almost seeing the opposite of like the people that are in the conference room. You know, are actually at the disadvantage because the people who are are in whatever the remote environment is they they. They've got a bigger, you know, screen real estate for looking at whatever they're do the the presentation is they see each person. So I I'd say there's almost like a, you know, kind of counterbalance because technology has gotten so much better. For that remote or or offsite, you know, kind of worker that that it kind of is balancing out so. But we're so early. I mean, literally, and even in the case rates, you know, people are are deciding to come in less frequently. And you know, as as there's more COVID, at least in in the Bay area. So I think we'll have to, you know, let's check in in like two years from now. And see where things land.

• 1:59:26Logan Bartlett?

  Yeah, it's interesting. One of the last ones, do you do you feel like, I mean, you obviously rode the cloud trend and then we had mobile and potentially. We have blockchain, but do you feel like there's a shortage of. Frontiers right now from a technological standpoint for entrepreneurs to pursue because to some extent, the cloud was the same cloud that you started. I mean, obviously it's changed how you approach and build these companies.

• 1:59:52Speaker 03

  Well, so I'm glad you brought this up because actually I should have said this in the web three thing.

• 1:59:57Speaker 03

  So some, I can, can you like splice this?

• 1:59:59Logan Bartlett?

  Yeah, yeah, sure.

• 1:59:59Speaker 03

  Okay, I don't know. So so this is actually maybe the maybe this is the part that I maybe I take most kind of personal offense to, which is. Which is when you say web three, it from just a terminology standpoint, obviously like implies the successor to to the web like.

• 2:00:15Logan Bartlett?

  It's pejorative to web two.

• 2:00:16Speaker 03

  Yeah, well, like iPhone 12 was better than iPhone 11 like, I mean, like, and I don't even know where pejorative like, I'm not like offended as in like. Like, like, because I just know how software works. So it's like not offensive. It's just, it's just it, the the implication is that web three somehow is better than than web two. So first of all, there's two issues with that. One. Is you're kind of saying that like web two has run its course and so now we need the new successor and then and then. The second is that this is somehow better, which it's clearly not on every economic, technical UX, you know, basis. So let's let's even remove that for a second. And now web two, let's just say. The thing that, and this is probably coming from a place because I'm in enterprise, so I can afford to just be more boring. Like, we just do, we just need to build software that people like, and then we sell it to them, and they pay for it, and if we're solving their problem, that's how you build a business. So I think some of that, some of my instincts

• 2:01:01Speaker 03

  come from just where I spend my time. I just, I think there's still unlimited potential on the internet. And so like, I just don't think we've like, we don't like, there's always this sort of search for a new frontier.

• 2:01:12Logan Bartlett?

  Yeah.

• 2:01:12Speaker 03

  And, and I think that we get more bored much sooner than the rest of the world gets bored with, with what, what they have, or with, within some of these paradigms. And so, so I think, you know, whether it's VR, or AR, or, or AI, or blockchain, or all this kind of stuff, a lot of this is, is just our industry is sort of like seeking more stuff.

• 2:01:32Logan Bartlett?

  Yeah.

• 2:01:32Speaker 03

  And we are, we, so it's our own impatience, and it's kind of ADD as an industry that's sort of saying, well, this is definitely the next thing. And, and I would just say like, well, you know, mobile is, is, we're now a few billion people into mobile, and cloud computing, we're probably still in the early phases of all things going from on-prem to, to the cloud. So, so both of those trajectories still have a lot of, of runway. When everything goes into the cloud, most things that are in the cloud still kind of look a little bit like the things that were on the desktop. So there probably needs to be an all-new era of then the stuff that actually gets built in the cloud, like Figma is just 100 times better than what came before. And I'm seeing the same thing in like CAD design software and video editing technology. And so, so like, those things are no longer just replicas of what was, was on our desktop, but they like-

• 2:02:16Logan Bartlett?

  Client server to cloud.

• 2:02:17Speaker 03

  Yeah.

• 2:02:17Logan Bartlett?

  We're actually building new-

• 2:02:18Speaker 03

  They do new things. Exactly. Shopify was, was really the first breakthrough in some kind of decentralized or distributed commerce model that, that could actually-

• 2:02:26Logan Bartlett?

  Much better than ATG or whatever.

• 2:02:28Speaker 03

  Yeah. So, so, so these things can, are actually fundamentally better. And I think that we still have hundreds or thousands or tens of thousands of ideas left that, that are within that realm. And so, so part of the frustration is like thinking that we need to like, like randomly change the architecture of the internet for a next, you know, kind of wave of innovation, when actually, cloud computing is still in its infancy, and is, it has so many more things that it can be delivering from data models and cost of storage and cost- Of compute and graphics and just all the things that we still have left to build for just like literally how the internet works today. So I'm very optimistic. I think there's a ton of innovation. I don't think we are are sort of in need of more frontiers. I think those will, I think the frontiers will emerge as consumers demand them.

• 2:03:12Speaker 03

  And and it's like kind of as simple as that. So when all of our friends outside of tech and family are saying, oh, my God, VR is amazing. That's when the frontier emerges, but you're not gonna like force a frontier onto the world somehow like like. Like the physics have to be great, like the, I mean, like, like the, from the device side. The the compute has to be fast enough. So so we're still early in many of these new frontiers. Um, and and so I I think people have to entrepreneurs, especially have to be very pragmatic about what they bet on. Last point on this. Sorry, we're gonna throw you on the bus. Um, the this is the VC asymmetry with the entrepreneur kind of model. Like, as an entrepreneur, you basically, you come into a job and you just like work like all day long on one thing.

• 2:03:54Speaker 03

  As a VC, you get a portfolio. So you can be like, OK, I can like, these are three things. These are 10 things. These are 20 things that I can, you know, kind of bet on across different industries. And and so the challenge is, I think sometimes VCs are the ones wanting these new frontiers because, you know, there's capital that needs to be deployed. But and and I've I just have seen friends in, you know, 15 years worth of doing this where like they'll just go follow some new trend. But like, there was no real consumer demand for that trend. It was just something that like we created a an investment bubble around. And then people thought that there would be a real trend there. So so I think we have to be kind of pragmatic of like of like where are where's where's the really the consumer pull? What problems do consumers have, consumers or businesses have that some new technology is going to solve?

• 2:04:35Speaker 03

  And you gotta just kind of simplify at that level. Um, otherwise, we're kind of manufacturing and inventing a bunch of of trends ourselves.

• 2:04:41Logan Bartlett?

  No, that's a good, that's a good one. Well, last one. ABBA?

• 2:04:44Speaker 03

  Yes.

• 2:04:45Logan Bartlett?

  Huge ABBA fan?

• 2:04:46Speaker 03

  Uh, mostly. That's a, that's a joke also. Sorry.

• 2:04:49Logan Bartlett?

  It's been going there for a long time.

• 2:04:50Speaker 03

  Yeah.

• 2:04:51Logan Bartlett?

  Well, good. Well, Aaron, thanks for doing this.

• 2:04:53Speaker 03

  Thank you for coming over.

• 2:04:54Logan Bartlett?

  This was fun.

• 2:04:54Speaker 03

  All right.

• 2:04:55Logan Bartlett?

  I appreciate it.

• 2:05:01Logan Bartlett?

  Alright, that concludes the 16th episode of Cartoon Avatars. Thanks everyone for joining, thanks to Aaron, thanks to Zach, thanks to Eric for coming on, that was a lot of fun. And yeah, look forward to seeing everyone next week.