EP 42: Zach Weinberg Returns, His Take on FTX, Venture’s Culpability and the Possible Death of Twitter

In the 42nd episode, Zach Weinberg returns to have everything he’s said about crypto suddenly proven right. Logan and Zach break down FTX, DeFi, SBF and venture’s role in it all. Plus why you can’t spot a successful company in finance like you can in tech, what makes a smart founder, and Rashad joins to help recap the last week of Elon and Twitter. (0:00) Intro (2:02) This week on Twitter (10:01) The FTC (13:41) What’s next? (21:37) Other social platforms (23:57) Welcome back Zach Weinberg (27:56) Zach’s take on FTX (43:17) Smart people don’t get rich quick (44:52) Venture’s culpability (51:35) Interest rates (54:48) Would DeFi have been better? (1:01:23) End of Web3? (1:07:43) Outro Show Notes: https://milkyeggs.com/?p=175 https://forum.effectivealtruism.org/posts/xafpj3on76uRDoBja/the-ftx-future-fund-team-has-resigned-1?commentId=hpP8EjEt9zTmWKFRy Mixed and edited: Justin Hrabovsky Produced: Andrew Nadeau and Rashad Assir Executive Producer: Josh Machiz Music: Griff Lawson 🎙 Listen to the show Apple Podcasts: https://podcasts.apple.com/us/podcast/three-cartoon-avatars/id1606770839 Spotify: https://open.spotify.com/show/5WqBqDb4br3LlyVrdqOYYb?si=3076e6c1b5c94d63&nd=1 Google Podcasts: https://podcasts.google.com/feed/aHR0cHM6Ly9mZWVkcy5zaW1wbGVjYXN0LmNvbS9zb0hJZkhWbg Follow on Socials 📸 Instagram - https://instagram.com/cartoonavatars 🐦 Twitter - https://twitter.com/cartoonavatars 🎬 Clips on TikTok - https://www.tiktok.com/@cartoonavatars About the Show A Saturday morning podcast hosted by Logan Bartlett (Partner and Managing Director at Redpoint Ventures) covering the tech news with his friends and other people with industry expertise. 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 42nd episode of Cartoon Avatars. I'm your host, Logan Bartlett. I am joined again today by Rashad Assir. Rashad, a busy, a busy week over the last seven days. It feels like we are living in, every day seems to like dog years, seems to count for seven days or something here. So how has your week been outside of, I guess, how are you feeling first and foremost? Last week when we spoke, you were, you were not in the best place. And I don't know if that came through on the actual episode itself, but I, yeah, at least from the recording standpoint, I feel like I had to, I had to pull a little bit of energy out of you after the, after the offsite that you had with our team internally.

• 0:48Speaker 01

  Yeah, it's funny. Like, I feel like every month with this job, I learn new things that are unique to it. And one of them is like, turns out losing my voice, pretty big impact on my overall job as a podcaster and video content creator. So I'm almost back.

• 1:07Logan Bartlett?

  Your voice actually was the least of my problems last week. It was more, it was more just your, your general energy and like responsiveness to any observation I had. But yeah, no, your voice was a component of it as well.

• 1:20Speaker 01

  This isn't a surprise to you, but this SPF stuff and crypto in general is, is deep waters for, for.

• 1:28Logan Bartlett?

  Yeah, it seems like, it seems like really taking an emotional toll on you such that, I'm not sure if it was related to the offsite or really FTX going under last week that you were, you were struggling. But yeah, no, well, good. I'm glad, I'm glad you've recovered as, as you have. So I guess people are going to hear on the backside of this, Zach Weinberg coming back to, to talk about everything that, that has happened here. So that's definitely fun. So maybe we'll punt all the FTX stuff for people to listen to, to me and Zach talking, talking all that through. But it's been a, a big week in Twitter as well. We, we seem to have two stories dominating the news at all times.

• 2:10Logan Bartlett?

  So I guess a quick recap here over the last, the last seven days. So.

• 2:17Logan Bartlett?

  I guess I forget the exact timeline of this, but Elon laid off, I think it was last week, laid off 50% of the workforce. So it was roughly 3,700 employees. And it's funny, in Twitter time, like I think Elon actually closed the deal two weeks ago. And it's just like, we're definitely living, it feels like 10 years ago that that all this stuff has happened. But I think last week he laid off 3,700 employees. And then this week, he gave the remaining employees an ultimatum to either commit to the company's new hardcore work environment, and hardcore was his, his words, or leave.

• 3:00Logan Bartlett?

  And so on Wednesday, he, he asked employees to formally state whether they were willing to keep working at the company, a commitment that would include working long hours at high intensity. Employees had till 5:00 PM Eastern Time Thursday, we're recording this on Friday morning, to fill out a Google form. The form only included one response, which was yes. Anyone that failed to accept the form by the deadline was told that they would be out of the company with three months severance. I think when people started getting wind of how, how this was actually received by employees, it seemed like Elon softened the tone a little bit. One of the components

• 3:41Logan Bartlett?

  of it was that they were, they were going to be, I think, nearly 100% in person. And Elon subsequently sent up a follow-up email that, that basically softened the tone on Thursday. He said all that was required for remote work was that your manager take responsibility for ensuring that you were making excellent contribution. And so a little bit of a backtrack there. And then I guess over the course of the day on Thursday, so few people. Had accepted, had clicked the yes button on the Google form that Elon and other executives spent, spent the week or spent the day on Thursday trying to convince critical employees

• 4:25Logan Bartlett?

  to stay on board. So that's kind of the, the brief recap of everything that I saw happening. I guess Joey Siffer, Zoe Schiffer from the, the platform or a reporter also reported that at the end of the day yesterday, Twitter shut down all their buildings and denied all badge access. And the reason they did that was Elon and the core team said that they were terrified that employees were going to try to sabotage the company. And so they're trying to figure out, make sense of who all, I think was fired last week, who all didn't accept their, the terms of the new work. And they said that they were going to open

• 5:07Logan Bartlett?

  the office next week, once they had everything sorted out. So that was everything I took down. I don't know any observations, anything that I, that I missed from your perspective that was Twitter over the course of the last seven days or so.

• 5:21Speaker 01

  No, I think that pretty much covers it as I understand. I mean, my immediate thought was like, obviously went to how we could create a sketch about this sort of bait and switch. I think it's hilarious that he put out, well, again, hilarious disclaiming that I understand the magnitude of, you know, and how serious this is for some people, but like.

• 5:41Logan Bartlett?

  It's okay. We can, we can laugh. I mean, it's, it, there's, there's a, you know, it's okay. Yeah. There's, there's humor in all of this. At my core, I'm very sad because I like the product so much. And like, this has been, my favorite, my favorite tweet of all time is from a guy, Darren Revell, who tweeted going into, he's like a sports journalist. And he tweeted going into the presidential election, "I feel bad for our country, but this is amazing" content. This was in 2016. And I always think about that, like, that's sort of the way I feel right now. Like, I feel bad for our country. I feel bad for Twitter. I feel bad for all the users. But this really is amazing content. Like, the hilarity of all these things is, is incredible. So I think recognizing that, that people

• 6:24Logan Bartlett?

  both like make their living on Twitter, right? As well as, as Twitter is a business. I think we can, we can skip all those acknowledgements. Like, this is obviously very serious in a bunch of ways, but touching on some of the funnier elements of it.

• 6:39Speaker 01

  Yeah, I mean, I need to sit down and write something, but the the sending out the ultimatum only yes form. No one responding to it and then being okay. Well, you don't, you know, I know I said hardcore, but you don't technically need to come into the office.

• 6:54Logan Bartlett?

  Softcore.

• 6:54Speaker 01

  It's like, well, actually, you could, you know, summer Fridays. That's a good idea, right? Like him just getting softer and softer and then just like to the point where he's just begging employees to stay because on a more serious note, like my question to you is actually, I'm interested in your perspective, like, you know, half the employees laid off last week. I don't know how many of those were engineers and critical to sort of like day to day operations. And then another percentage of these people that are not, you know, saying yes to this hardcore ultimatum. At what point does it start to get into like day to day operations like and not and no longer about like, you know, building future products or enhancing the product, but actually like just sustaining the product at as it exists.

• 7:37Speaker 01

  So if I remember like back to my Google days, like security and all these like really

• 7:44Speaker 01

  critical functions within the business, they had teams of people that were like doing surveillance and all this stuff, like a lot of it was not very like said it and forget it, like it required actual people to be there, watching the security cameras, making sure things were going okay. Assessing vulnerabilities in the application, making sure that they're being addressed in real time. Like if people that are doing that right now are leaving, at what point does Twitter just become like not not just not getting better, but like just collapsing?

• 8:13Logan Bartlett?

  Yeah. So so I guess a couple of things. One, I would say that the the infrastructure of these businesses are much more resilient than I think people give them credit for. Now, if some of the numbers I saw was, so they had whatever 7,400 employees and they laid off half, and so that's 3,700, right? And then I think I saw 75% of people didn't accept the terms for for what Elon was suggesting. And so that means they have 700 people left, right? Less than 10% of what they had three weeks ago or whatever. And that's cutting to the bone for sure. And there's definitely going to be a bunch of failures from an infrastructure standpoint. The product's definitely going to be lagging. A bunch of like the maintenance stuff that you normally need to do with normal hygiene. It's going to flow through to the end user.

• 8:58Logan Bartlett?

  I do think there's a far, one, these systems are far better than people give them credit for. And so the RIP Twitter and all that stuff, like I don't really believe any of that, especially since the tolerance of users to this product is is pretty high. And Elon tweeted that like they've had the highest engagement that they've ever had. And, you know, it's one of those like schadenfreude car crash things that people want to want to see the, the, you know, slow down and see the car that's that's exploding on the side of the road here. So I'm not sure that like the usage numbers are actually reflective of like long-term durable growth. But I do think that these systems are going to be able to stay up for the most part, right?

• 9:41Logan Bartlett?

  And early Twitter users will remember like the fail whale was a very regular thing that popped up that, that, you know, the service would be down and people still come back and all of that. And so I guess I do think that that there's going to be some product that exists in a week time that 700 people are going to be able to run. Is it going to be perfect? No. Are there going to be bugs? Is it going to be frustrating for sure? Right. But I think people's tolerance for that stuff is is fairly high and the infrastructure is pretty good. The one thing that I think is a little bit scarier for Twitter is they did have some issues with the FTC dating back to, I think, 2011.

• 10:21Logan Bartlett?

  They they had some settlement associated with how they handled customer privacy and user data. And basically, I think the output of that was they had to subject themselves to biannual security and privacy audits that get get submitted to the FTC. And they have to make sure that they're treating data and privacy. They must do reasonable efforts to maintain data and privacy for personal information and all that stuff. And that's just like, it's a lot of. It's a lot of like compliance, it sounds like, and a lot of form filling and dotting i's

• 11:01Logan Bartlett?

  and crossing t's and all that stuff. And I know that Elon's not paying attention to this, right, as he's trying to get this company profitable and change the culture and all of that stuff, right? You know, that's not being paid attention to. The one problem with all of that is the FTC can find them a large amount of money, right? And so now you're seeing senators kind of call for investigations and all this stuff. And this is kind of a public utility in some ways. And obviously, there's a lot of intrigue and resentment towards Elon in general here. And so the reason that's material is they're already going to be struggled to make debt payments as the business currently exists. And so if you layer on a huge fine on top of that to the tune of 500 billion, a billion dollars, like, it actually could push the company into bankruptcy. And so I don't worry as

• 11:46Logan Bartlett?

  much about the the infrastructure components as I do, like, the process-related components and what that might mean long term for this investment for Elon.

• 11:55Speaker 01

  Yeah, I mean, I just see it as a very vulnerable time. It feels to me like when you're watching, I don't know, like, one of the Ocean's movies or something, and they, like, do some diversion thing to distract the security guards so that they can, like, sneak into the bank vault. Like, if you're anyone, except in this case, he's distracting his own security guards by doing all this crazy shit. So it's like, if you're anyone that's against Twitter, whether it be, to your point, like, senators and jurisdiction and stuff like that, or, I mean, another thought I had was like, what about a competitor? And you can speak to the likelihood of something like that happen, given the, you know, the moat that they've built, or I don't know anything about that. But like,

• 12:38Logan Bartlett?

  Yeah, I don't think anyone, I don't, on the competitive side, like, I don't know, man, like, I don't know, there's a handful of, one, these network effects are really hard to displace, right? And so to pick up and start a whole new network, I think is really difficult. And two, to what end, right? Let's say Twitter today, it was bought for whatever, $45 billion or whatever the number was. And let's say Twitter today is worth half of that, maybe. And, uh, and then like, think how big of a pain in the ass it's been, uh, and how much negativity it's drawn and like, running this company, no one seems to want to do it. Like to have this job is to, like, Jack Dorsey had to have other jobs to keep himself, like, I think sane and Dick Costolo probably

• 13:23Logan Bartlett?

  lost years off his life running this company and Parag barely made it six months and Elon, you know? And so I think, I don't know, I'm sure someone will try, but between the network effects and also just like, the, to what end are you actually doing this? I just don't really think there's going to be really ambitious people going after this opportunity. Now, could, could Instagram get into this in some more meaningful way? Could WhatsApp, uh, start publishing alerts in some way, right? Like, could there be other things in and around this that come in? Probably. But I just don't think this is a valuable enough, uh, from a, from an economic value standpoint, company for people

• 14:03Logan Bartlett?

  to really go off after it in a really meaningful way, particularly when like, you know, video is a much more important medium and all of that stuff that Twitter has never really been able to capture. And you've never really had monetization here that's particularly meaningful on the scale of how many users and how like aware it is from a public good. I just think text-based communication doesn't monetize nearly as well as visual-based communication. And so I, I, I think the network effect is probably 90% of it, but I think 10% of it is like, to what end are you actually even, even doing this, right? The one miscalculation, or I guess two miscalculations

• 14:44Logan Bartlett?

  on Muck's side among like, probably a million, but the two things that, that stood out to me in this is one, Why issue the ultimatum after you laid off 50% of the workforce, right? Like, why not do it fir- why not issue the ultimatum first and then figure out what you actually have left? Instead of doing it in this way, that feels like just kind of a gross miscalculation instead of doing reversing the order of all of this. And then the other thing that I don't fully think was comprehended is like, the way Elon has run this business is akin to how he runs, I'm sure Tesla and SpaceX and Waring Company and all of that.

• 15:22Logan Bartlett?

  They have a lot of specialists at each of those companies that are working at the forefront of their fields in a really meaningful way, right? Without a ton of alternatives that are nearly as compelling as working at SpaceX or Tesla, right? If you're a, if you're, if your skillset is around space manufacturing or about like getting rockets into space, sure, there's like one or two other companies you could go to, but like, that's kind of it. And Tesla, like, yeah, maybe you could go work at another, you can go work at Rybien, or maybe you want to go work at Ford,

• 16:02Logan Bartlett?

  but like, your skillset isn't as transferable as being like a front-end software engineer or a back-end software engineer, right? Or whatever. And so, and then you think about all those people at those other companies have made a ton of money and they're mostly out of like the public vitriol that Twitter is in. And so you think about these people within Twitter that have very, very transferable skillsets, right? It's not like they're a rocket engineer, they're a front-end designer or something. And then, and then two, they've gotten beaten up in the press, they've been jerked around between like Jack Dorsey and Parag, and now Elon, and Elon saying this is a shitty company and there's bots everywhere. And then, and like, you know, they have other opportunities to go to other jobs.

• 16:46Logan Bartlett?

  And so I think running a software tech company like it is, the specialized hardware company, was a miscalculation because these people just have so many other alternatives and they, they've been through so much pain and haven't made the money that if you've been at SpaceX for four years, your stock options are worth. Or if you've been at Tesla for four years, your, your stock options are worth, right? And so, or RSUs in that case. So I think that, that was probably a miscalculation on Elon's part as well.

• 17:14Speaker 01

  But what do you think the likelihood, or again, like, is this a realistic scenario? There's no shortage of really smart people, probably engineers with chops and the skills that you would need to displace some of these people at Twitter. Do you think he can call upon those people and sort of like rebuild this ground up? Or is that super unlikely to be able to do?

• 17:39Logan Bartlett?

  No, I think, I mean, I've heard recruiters are out there reaching out and the title of their email or like how they're framing the company is Twitter 2.0 and Elon Musk company or something, right? And so I think there's a certain type of person that this is going to be very appealing to. And if you're existing on the outer end of the risk curve and like you want to be in Elon Musk's orbit for the better and the worse of it all, I think this is a great opportunity for a young, ambitious person that's willing to take that level of risk and also exist within Elon Musk's orbit. I wouldn't want to do either of those things, right? I probably wouldn't professionally recommend it to that many people, but there's a certain

• 18:24Logan Bartlett?

  subset of people that I think this could be very uniquely appealing. And so the question is just like, how many of those people and how quickly can they get them in the door to replace the people that have walked out, right? And all these things, like, we've talked about this a bunch, particularly with Zach, but companies are so rooted in their founding and like the decisions you make from a core principle standpoint in the design of the product architecture, the cultural architecture, the operational architecture, all that stuff. And Twitter's was always chaotic and like slow to innovate, which I think we've covered a few different times.

• 19:03Logan Bartlett?

  And so this definitely is a cultural reset to the highest order that if they're going to make progress, not incremental, but step change, I think this is something that they need to do. Now, would I have done it as hastily as they've gone about it? No, I wouldn't. I'm sure Elon would have backed some of the decisions and tactics that he's made. But resetting a company's culture, especially whatever 15 years into their life or whatever it is that Twitter is now, is really hard to do. And he's definitely doing that for for for better or for worse. And I will say, one of the things that I've appreciated most, and I guess this is the the world of Elon Musk, and I am not

• 19:45Logan Bartlett?

  an Elon Musk. I mean, I I admire a lot of the things he does. I think at a personal level, his tactics are are not my favorite, but he certainly is amusing in a lot of different ways. And his sense of humor about all this stuff, even even as all of these things are going on, is is really just amazing. Like, you know, tweeting out things like, how do you make a small fortune in social media? Start out with a large one, or tweeting out all the like, my Johnson things, and actually meeting with those guys, which is hilarious. Like, I will say, while it seems this is pure chaos, and they're like locked in the fort, scared of employees coming back to the office, he has been pretty funny on social media

• 20:27Logan Bartlett?

  throughout. So I've at least appreciated that element of this whole thing.

• 20:31Speaker 01

  I wonder if he's the same astrology sign as Donald Trump and Kanye.

• 20:38Logan Bartlett?

  Do you actually believe in astrology signs?

• 20:40Speaker 01

  No, I don't. But that's always their thing. They are always like, look, like Donald Trump, crazy, and he has like, the crazy one, whatever it is.

• 20:46Logan Bartlett?

  Who's their thing?

• 20:48Speaker 01

  The astrology, the astrology community.

• 20:51Logan Bartlett?

  How do you know the astrology community?

• 20:53Speaker 01

  I have to, I have to be, I have to keep one foot in for all of our Gen Z skits, because that's, I found that if I spend a little bit more time learning the things that like, are actually true and accurate and are gonna resonate there, the videos do way better, because then they're all like, oh, my God, he gets it.

• 21:10Logan Bartlett?

  I feel like you're gonna like, start going down this rabbit hole. It's gonna be like a snowballing effect, almost like SBF, you know, in Alan Media, and like, it started really small, and then all of a sudden, but, you know, we're gonna, we're gonna flash forward in two years, and you're gonna be running like, a tarot card reading thing on the corner of, like, in the West Village or something, and you're gonna actually have that earring that you wear in those videos?

• 21:30Speaker 01

  I'm not gonna lie, I do like the way it looks. Sometimes I wear it just like on the weekends at home alone.

• 21:36Logan Bartlett?

  That's good. No, I'm happy for you.

• 21:37Speaker 01

  One more thing I was gonna say to your point about WhatsApp earlier and like being able to swoop in and the network effects. I was talking to Andrew, who's a producer on the show earlier, and he was telling me like a couple of the communities that he's part of, one being like comedians, are starting to move towards or are at least starting group chats on things like Discord because of the threat that they feel to Twitter and like that kind of being their main go-to platform to, you know, communicate with their community and feel part of the community. And so those are just something I wanted to call out.

• 22:15Logan Bartlett?

  Yeah, I, I, I think that's interesting. And I guess my one recommendation for creators or whatever, like people that's business is on social media. I mean, being single-threaded to any, any individual platform is a, is a risk, right? And Twitter is by far my biggest platform. And I am not existentially worried about that because if my Twitter followers go away, I mean, my, my job will survive. I think I can just focus on whatever this is and doing investments or whatever. But like, there are a bunch of people who, who

• 22:54Logan Bartlett?

  need some social outlet for distribution and their jobs and all of that stuff. And so I guess being single-threaded to Twitter as a medium, I would certainly diversify that at least a little bit. And I don't know, it sounds like Discord is a good one. I mean, Instagram obviously has, has been pretty, pretty successful for people in migrating over. We've done a bunch of TikTok. I've joked that like LinkedIn is gonna have a bunch of people shitposting now, coming on and just like cracking jokes. And the really serious people on LinkedIn aren't really gonna understand what's going on. But I, I definitely would think about like what other platforms you can diversify your, your risk,

• 23:37Logan Bartlett?

  particularly considering this is such a chaotic one right now.

• 23:40Speaker 01

  Yeah.

• 23:40Logan Bartlett?

  Well, good. All right. Well, next up, what you're gonna hear is Zach Weinberg and I talking through the FTX and crypto saga. So I know everyone's been excited to hear this. So, so yeah, trust you'll, trust you'll enjoy it per usual with Mr. Weinberg. Welcome back to Zach Weinberg.

• 24:09Logan Bartlett?

  Zach, everyone was asking for you last week. I'm glad we were able to make it happen. I feel like the dust has settled. It might have been a little preemptive to rush out and do it last week.

• 24:18Speaker 02

  Yeah, I needed to digest all the things that happened and have about 8,000 people send me tweets over the last few weeks. Like my entire WhatsApp is just friends of mine sending me crypto tweets left and right. It's pretty remarkable.

• 24:34Logan Bartlett?

  What role do you feel like you played in all of this?

• 24:36Speaker 02

  Oh, clearly the cause of the whole thing. Actually, I take 100% full credit.

• 24:41Logan Bartlett?

  I feel like a real central, I don't know about interest rates or Celsius, DeFi, all that stuff. Yeah. Backdoor into accounting systems between Alameda, no corporate governance. I feel like you're really the cause of all of these things, at least. You know, it's like that Domino meme.

• 24:58Speaker 02

  Yeah, it had nothing to do with them, actually.

• 25:00Logan Bartlett?

  The Domino meme where the one guy keeps over all the, it's just you yelling, what are the use cases? And that tipped over the entirety of this.

• 25:08Speaker 02

  You know, it's not that complicated to knock over a house of cards, but the harder part, I guess, is building up the cards in the first place. I don't know. There's some saying in there that I can't fully appreciate, but it's been fun to watch. I have to admit, I'm like,

• 25:24Speaker 02

  not that I would have predicted this, to be very clear, like I would not have predicted this, but I think just the, I think a lot of like just interest rates and then interest rates forcing people to really think about where they're putting their capital. And then that kind of question, putting pressure on anything that was assuming we'd have like unlimited liquidity and access to it. It's just the whole thing. You can kind of see it teetering and this is the, this is the outcome.

• 25:49Logan Bartlett?

  I never in a million years imagined this specific thing and it shows, I mean, I don't know what your big extrapolations or takeaways from this whole thing are. It shows what a role even, you know, myself, a crypto cynic in all of this and probably not to your level, but at least someone that was like a little skeptical about all of these things. I would have bet a lot of money on this being legitimate, just given all the PR that had been done, given who the investors were and all of this. And like you keep peeling back the onion on what was going on.

• 26:29Logan Bartlett?

  And it keeps getting more and more ridiculous. Like, I don't know what the most ridiculous part of this whole thing is, but it's, it's honestly so, like, we joke about how we're reinventing finance in like, you know, 1930 or whatever. Like, we're really inventing finance back to caveman days when they were like discovering fire. This is like the most basic stuff that was going on that they were sort of failing in.

• 26:53Speaker 02

  Oh, I mean, the, the letter that the new FTX, the guy who's like doing all the unwinding wrote today that I saw of just like, they didn't have separate accountants, they had no governance. Look, I agree with you. Like, I, even though I probably am one of the more skeptical people of the whole thing, would I have predicted that FTX specifically was essentially like a, you know, unregulated Ponzi scheme to some extent? No, no, definitely not. It had all of the makings of the one that like might be legitimate, you know, it had great investors and.

• 27:28Logan Bartlett?

  Well, because an exchange is a real business. Like, like, they, they were the underpinning of all the other bullshit, right? And so, sure, but this is like a, a business that's been around for a long time. And the fact that it was actually, I mean, I guess Alameda was the real Canary in the Coal Mine and all of this. And they were just terrible traders and had no corporate controls that existed between the two. But it's actually fascinating. I thought exchanges were like the one real thing in all of this.

• 27:56Speaker 02

  Yeah, it turns out that the reason this exchange was so popular was that everybody who showed up in the last few years to trade made a ton of money off of Alameda. And so, you know, when you're basically like selling dollars for 80 cents, it's like, it's actually not a great long-term business model, but it does generate quite a bit of customer interest. You know, the, here's what I was thinking about this last night because I knew I was coming on and didn't have anything to say besides like, ha, ha, ha, which is not like a good 30 minute podcast. And here's like what I, what I think I learned. Maybe this is my philosophical take. You know, when I was.

• 28:38Speaker 02

  When I was first getting started in startups and just like in business, whatever that means, you know, you kind of look at these people who made a lot of money in any context, doesn't have to be in software. And you're like, oh, look how smart and amazing these people are. And you know, you kind of like are very deferential to them because somehow they made a bunch of money. So clearly they must be smart. And so we make this assumption that anybody who like accumulated wealth is intelligent.

• 29:04Speaker 02

  And I think as I've gotten older, I've realized like, that's just not true. There are like a lot of people who have accumulated wealth by just taking insane amounts of risk and just being the one person in the distribution who didn't get caught. And like in, in classic software, it's really hard to do that. Because you know, if you're not good at what you do, it shines in your product. People don't buy it. They don't pay for it, right? And so most people who are in this industry are like classic software people, myself at least included. Where you go, you look at like, oh, there is more customers, there is more revenue, like this thing is growing. It must be doing well.

• 29:46Speaker 02

  And it turns out that growth in finance doesn't actually necessarily mean that the business is doing well. It just means that there's like interesting things for people from a finance perspective to participate. It's the same reason why like the buy now, pay later stuff to me. It's like every time they talk about customer growth, it's like, well, yeah, if you loosen your lending standards, as an example, like of course people are going to show up because your product is giving people money. Right? If you think about like what the actual product is, it's I lend you money. Like if you're really bad at lending, you actually grow faster. And this is the same thing in, in the exchanges, the same thing in crypto in a way, right?

• 30:28Speaker 02

  Which is like, if you're really bad at trading, the other side of it, more people are going to show up to trade with you. And I think what we got wrong, or a lot of people got wrong in an industry is they looked at growth as this like, Perfect. This is product market fit. Like, look at the numbers. And it turns out, actually, what's happening is those who are the craziest and the riskiest grow the fastest. It's like inversely correlated with the people who do proper risk management, because if I can show up and trade with an idiot, I'm going to keep showing up and trading with an idiot. In the same way, I'll happy to take that, you know, that loan that I don't deserve. And it's that same, you said it earlier, and I continue to reiterate this to people. It's like, we're learning the rules of finance, just a bunch of software people, learning the rules of finance

• 31:11Speaker 02

  over and over and over again. And anybody who has experience in finance would tell you this. Like, yeah, if somebody is like handing out free money, guess who shows up? Everybody who wants free money. And that tends to be like a fairly large number of people. And that's, I don't know, that's my take.

• 31:28Logan Bartlett?

  And if it's free money, it also lends to grifters and, you know, all of that. I will say, like, SBF's, the Twitter DMs that he had with the reporter from Box, there's some, like, pretty deranged and delusional things that he said throughout that, like, we've talked in the past about, like, how when you reach a certain level of people saying yes around you, like, I think Kanye West suffers from this, your worldview just gets so distorted, because, like, everyone is just treating you so differently. You're like a zoo animal, right? And it's clear that his, uh, his world is just, has been so distorted over the last two years. But one of the actual profound things, and he said it in a very nihilist,

• 32:11Logan Bartlett?

  like, uh, cynical way, obviously, but he said, "Some of the decade's greatest heroes will never be known, and some of the most beloved people are basically shams," right? And it's like, it's an interesting concept of this whole fooled by randomness thing, that actually, the people that are on the outer end of the risk curve... End up one of two ways. We never hear about them, right?

• 32:38Speaker 02

  Yeah, because they blow up.

• 32:39Logan Bartlett?

  Yeah, or we over extrapolate like what they did and say, hey, these are the lessons that we should, we should learn. And one of the things that I think I've learned throughout this whole crypto thing, and I give you credit for it, but I also, you're, you're, you have a very close buddy who I quartered at a bar for basically three hours, just asking questions, who like, might be the most cynical person I've ever spoken to from like a first principles perspective of like investigating things at their root, right? And one of the things that in general, I guess I've learned over the last couple of years is there's all these experts, so to speak, or just people that we don't have

• 33:20Logan Bartlett?

  enough time in our day to go to the root cause of all of the things that actually occur. And so we have all these gatekeepers, or we have all these experts that like basically synthesize the information for us and then tell us some version of events, some narrative that we internalize, just because we, I don't have the time to go analyze all the different regulatory filings that exist, nor do I have the time to go down the YouTube, Google rabbit hole to like, understand all the different scams that like could exist in these different industries. And it's just to see how willfully manipulated those people can be by these narratives and then how

• 34:02Logan Bartlett?

  they're then fed to us in such a way. And it's across all industries, like SBF is, is actually, you think about the, the brand co-opting that he did through this effective altruism thing, through the investors that he had, through the association with celebrities, like all of these things were basically lending credibility to someone that deserved none, right? And it's like, gosh, how many times are these going on at a smaller scale? It's really depressing to think about like how misrepresented so many narratives are to us and how many to his words, the most beloved people are basically shams.

• 34:43Speaker 02

  I don't disagree with anything you said. I agree with what you said. I think in finance in particular, it's exacerbated.

• 34:52Speaker 02

  Because risky behavior is incredibly well rewarded in the short run. Unlike in almost any other industry, right? Where like the cycles take a while to play out. There's like a real, you know, investment period before you can see your progress. Actually, in finance, like the riskiest people in a bull market look like geniuses, right? Because you're taking on the most risk. And as the bull market continues up, you look like a genius. And so all of those people that were like the crypto experts, right? The people who did super well early on. My perspective is they were just the ones without any sort of like controls and risk management.

• 35:34Speaker 02

  And yeah, you look good when the entire category is growing because you're the one on the front end of the risk curve and everything looks great. And then when the music stops, all the behaviors that got you there are the exact same behaviors that caused you to blow up. It's the same thing. The fact that you like were unwilling to look at the risk of a particular investment that got you there because you're like, you're the one at the first, you're the first in because you don't do any diligence, right? And then the whole thing goes wild. Now you look like a genius. You're like, well, why would I ever do diligence? Like, look how much money I make when I don't do it. And all of a sudden, the whole thing blows up. I think that's what happened here. That's kind of my guess is like, imagine for a second, if you were trying to run like

• 36:17Speaker 02

  a crypto exchange that like didn't offer crazy insane leverage. Or, you know, that wasn't like basically handing money to its customers through some like hidden hedge fund. You probably would not be a successful exchange. And so all the people who were like reasonably running these businesses with proper controls were effectively competed out by actually being good at their job.

• 36:39Logan Bartlett?

  Yeah.

• 36:39Speaker 02

  The thing you were supposed to do is what got you in trouble in terms of growth. And then like, well, you know, FTX picked you up or the business collapsed and here we are. And just looking underneath the hood, you're realizing like, wow, the lack of controls here is like shocking, I mean, shocking even to our own perspective. Anyway, that's what I think what happened. This industry has evolved in like four years. It's been like four years, five years where this whole thing blew up recently, recently. And it's all the crazy people.

• 37:07Logan Bartlett?

  I shared you that note of a LP introducing me to someone that's now caught up in this entire thing. And it was like, Logan, please meet the brilliant X person. And then it's like, X person, please meet Logan, you know, and it was funny. It was like, this person was brilliant because they were early in FTX, right? And I was Logan, right? And that was, that was the context of the intro. But it was interesting as like some of the stuff surfaced on the, the, the risks that these folks were taking. And I think, you know, I mean, Tiger Global falls in the, the same bucket and SoftBank falls into the same bucket of like, uh, being on the outer end of, of risk.

• 37:49Logan Bartlett?

  But then you see all these things, sort of the, the signs were there, but you see some of the tweets that have now serviced and just surfaced. And Justin can pull them up on the, uh, on the, the screen here. But I mean, basically like one of their Alameda's investment, uh, theses was front running Doge, right? When Elon was tweeting about it and that was like something that, uh, whatever, Trubuco, who was one of the big guys at Alameda actually tweeted out. And that's like the most basic of retail investor thought process on all this stuff. And so obviously they're going to be indexed to all the market machinations. And I guess I just sort of-

• 38:31Speaker 02

  By the way, that is like, that's the perfect example right there for one second, right? Like, yes, front running Doge in a entire like bull market, retail mania, low interest rate environment is a reasonably good short-term idea because like retail is generally not the most sophisticated group of people in aggregate. Okay. But then you also have to think about, but now I own Doge. Like, now I have to like, hold this thing that has literally no inherent value. And so like now, when do you unwind it? How do you not flood the market with all the Doge that you bought? Like what happens when you try and front runner, you get it wrong? I mean, there's just so many things that like, if it's, if it doesn't always work, you have to really think through.

• 39:16Speaker 02

  Like, how are you gonna, are you gonna actually play this out over the long run? But in the short run, it's incredibly well rewarded. And so you never develop- The habits, you never developed the skills and the infrastructure to figure out what to do when your alpha in this hilarious front-running trade doesn't work anymore. And that's Alameda.

• 39:36Logan Bartlett?

  There was a long blog post by an account, we can link it here, but Milky Eggs, that kind of, it's milkyeggs.com, that basically linked together a bunch of forum-related gossip, a bunch of Twitter-related gossip, a bunch of like first-party actual reporting from the Wall Street Journal and Bloomberg and all of that stuff. And there was one forum post, it was in the Effective Altruism Forum that we can pull up here. But the most interesting part of all of this was the Japan arb, right? That was like successful in the formation of Alameda. This was like the whole, hey, there was this inefficiency that existed with, I think it was Bitcoin sale between Japan and other countries on the price.

• 40:21Logan Bartlett?

  And what they said was, is that what created his early wealth? Not really. Before we all left, pretty much all that profit had been lost to a series of bad trades and mismanagement of assets. Examples included some million dollars lost to directional bets on Ethereum that Sam made directly counter to predictions of our best event trader, a few million more on OTC trades and some liquid shitcoin that crashed long before we could get out, another couple million, blah, blah, blah, right? And so it's like this whole narrative that was spun about this Bitcoin arb and the god complex that probably came along with like, hey, I can spot the inefficiencies of the market, basically were wiped away immediately after.

• 41:03Logan Bartlett?

  And so what we took to be these like amazing traders, it's really just a fooled by randomness thing, and not to overly quote the book, but like statistically, we should have a Warren Buffett, right? I think Warren Buffett has proven it enough over a long enough period of time that like he's probably pretty good at his job, but like statistically, someone, you know, if we have enough traders in the world over a long enough period of time with some types of accumulating advantages, statistically, we should have a Warren Buffett. Similarly, when you have people that are much, much less sophisticated than Warren Buffett, existing at the outer end of a risk curve in a bull market, like, obviously, they're going to look super smart here. I just wonder, how much of this do you view as, you know, this is going to be

• 41:47Logan Bartlett?

  the, if we compare it to Elizabeth Holmes and Adam Newman, I remember everyone was like, oh, you can't extrapolate too much from those examples. Elizabeth Holmes, you know, that was no institutional VCs or whatever, right? And so you can't overly take that as an example of what actually happens in Silicon Valley. You look at Adam Newman, hey, he never did anything fraudulent. It's board management gone awry, founder power construed way too much. But that was only like, what, two and a half years ago? And all the blame was sort of shifted on Adam Newman specifically and SoftBank. Here, like, you can't really, I mean, maybe we can blame the crypto ecosystem and like this go-go times, but like clearly, this has more ramifications in terms of like

• 42:30Logan Bartlett?

  just the players involved and the lack of controls that existed and the diligence and all that. Like, I actually think this one is a fair extrapolation of like, how did this actually even come to be? And it's interesting that like, the blow up was so spectacular, because it actually could have been just like a very marginal blow up, right? And then like a handful, like, maybe $500 billion are missing, rather than whatever it is, $16 billion, right? And so it's interesting that this was such a running into the door. And I do think it's a reckoning for a lot of different systems and practices. And it's obviously going to be the iconic example of like, this last bull run. But I don't know, what do you think's actually, like, you can take away

• 43:11Logan Bartlett?

  from this example specifically, either related to crypto, or venture, or startups, or whatever?

• 43:17Speaker 02

  Oh, man. I've never met a really smart person who got rich quick.

• 43:25Speaker 02

  Like, I know a lot of smart people. I now know a lot of rich people, I guess, because, you know,

• 43:32Logan Bartlett?

  The podcast.

• 43:33Speaker 02

  People you end up meeting when you do this business for so long in the podcast. And yeah, exactly. Mostly the podcast.

• 43:37Logan Bartlett?

  Yeah, yeah.

• 43:37Speaker 02

  Yeah, really just the podcast, actually. But after that, you know, I, any, any of the ones who are like really, really smart, it was never fast. They hustled, they spent a long time and, you know, they had to make multiple good decisions over an extended period of time. You know, I mean, there's like a few exceptions, probably, uh, but I would argue really not that smart. They're just kind of lucky. Like, uh, I get killed for this one, but like Mark Cuban. I don't know. And I'm supposed to say that, but like the guy who sold.

• 44:07Logan Bartlett?

  Friend of the pod.

• 44:07Speaker 02

  Yeah, friend of the pod. Uh, I guess I'm never gonna get him on when I'm on. But like, yeah, congrats. You sold basically a cash burning machine at the absolute peak of the market to Yahoo, who then shut it down. But like, and then guess what he's out there doing? Like shilling crypto and talking. It just, I don't know. I, I, I, I think when you reward risky behavior in a short run, you tend to reward a bunch of people who actually aren't that smart. And the actual real smart people think logically over an extended period of time. And that's probably a lesson here. Like, there were a lot of like get rich quick schemers, and those are usually not the best and the brightest, because the best and the brightest think about risk and think about like steps and how this works. So maybe that's one little takeaway for me. Uh.

• 44:52Logan Bartlett?

  What do you think about venture's culpability in all of this? Like institutional venture and, you know, I mean, obviously, uh, not to call out specific people or anything, but like I, other than, do you demand a board seat? Uh, or not a board seat? Do you demand like there, there being a board before you invest?

• 45:08Speaker 02

  Yeah, I mean, our general philosophy when we're doing startup investing is that we want there to be some governance and oversight by a capable organization that knows what they're doing, meaning like a lead VC, right? I want to see a board. I don't want to be on the boards, to be clear. I don't, I don't have the time, but I want somebody who has a reputation to uphold, to be on the board, to know that like, all right, this is a smart person who has risk attached. It's an incentive thing, right? It's not that I think the board itself is going to solve all problems, but I want somebody to be worried. That if this thing turns out to be a fraud, or you know, more likely just like the business doesn't work, that their name is attached to it. They were supposed to be doing their

• 45:51Speaker 02

  job and they didn't. And that actually causes people to do their job. So yeah, we, we almost always look for like some lead VC fund who is taking a board seat and doing the proper governance. I actually had no idea that FTX didn't have an operating board. Like, I didn't really know anything about the details of this business until it blew up. I mean, I knew what it was, but that's about it at a high level. So I don't know who's to blame.

• 46:15Logan Bartlett?

  We tried so many times. I went back and checked. I went back and checked. I tried nine times. I sent nine separate emails, half to SBF and half to his, uh, uh, executive assistant, or maybe it was a PR person to get him on here. And, uh, I, I am glad that that tape doesn't, uh, exist. Mostly, I mean, maybe we would have, uh, pressed him on a bunch of this stuff and, but I actually thought he was like one of the rational, uh, actors in this. And so I worried that would have been, uh, given him a pass a little bit on, on some of these things, or maybe we would have found some of the interesting questions around this, but it was an opportunity. I think-

• 46:55Speaker 02

  He was the one out there being like, well, crypto is mostly bullshit.

• 46:58Logan Bartlett?

  Yeah.

• 46:58Speaker 02

  Right? Cause he was, he was basically saying, yeah, it's lots of, and for me, that I read this situation completely wrong was like, oh, okay. That guy actually knows what he's talking about. Like he's a somewhat logical thinker. And it turns out, I guess there's just not, I don't know.

• 47:12Logan Bartlett?

  He, he does know what he's talking about because he's, he's doing it. Like, he very much knows that all bullshit. It's actually, uh, it's, it's amazing, even with the effective altruist stuff, like it's amazing how he came to believe that this was almost just a means to an end. And like, it kind of spiraled out of control. And I, you know, on the venture and the board point here, I mean, I, I've been involved in very hot fundraises where people are doing everything in their power to try to get into individual investments, right? And like- Thankfully, uh, those companies weren't, well, one, knock on wood, weren't frauds.

• 47:54Logan Bartlett?

  But two, uh, thankfully, those companies, when they reached the boiling point of like, super hot, everyone wanted to get in, falling over each other to invest. They had already made incremental decisions along the line with regard to governance and board and all of that stuff. If, if not, right, if they hadn't, I can't imagine they would have willingly volunteered for a, for a board, right? I don't know, maybe they would have, but it's an interesting thing of like how this team to be. And then also just the

• 48:30Speaker 02

  See, that's the thing. I actually think, I actually think good founders want some accountability just on their own work. Like you, if you're good at what you do, you know that like without somebody constantly pinging you going like, are you sure? Is that, you know, that's actually really helpful. You know, cause you don't want to, it's like that South Park episode where all the people in San Francisco, like they love the smell of their own farts. And then some like Cartman episode where he, yeah.

• 49:01Logan Bartlett?

  Yeah.

• 49:02Speaker 02

  And like, there's a part of your brain as a founder going like, am I Cartman? Like, do I love the smell of my own fart? And you want that, that like questioning and you may not want to give up control. To be clear, you may not want like voting control given up at the board. Like I curious, like I don't, I don't want someone who can vote me out, but I do want somebody in there asking questions and making me think and explain myself because I think that's just like a healthy habit to have.

• 49:29Logan Bartlett?

  And no, it's, it's great. Hi, and I, I agree. Uh, I, listen, I, I espouse the virtues of boards over and over again, but if you're living in this world of everyone. Kissing your, your ass. Maybe you set up a board of just the advisors or the people you most trust, right? But, uh, and those people want accountability, but I'll give you like a crude example of like, have you ever done one of the like whoop or like fitness, you know, whatever the patch thing is where it like monitors your glucose, uh, levels and all that stuff? Have you ever done one of those?

• 50:02Speaker 02

  I don't need technology to tell me I'm some lazy asshole. Like I already know.

• 50:05Logan Bartlett?

  Exactly. That's, that's basically what it is. It's like, hey, I know that like, you know, I sleep shitty after I drink. Like I, I know that, right? And I know that like I should, I should exercise in the morning and after I eat, eat a meal. I, I know that, right? And it's great. It's great to have that reminder over and over again, from like a hygiene standpoint, and just like a health standpoint that to have that slight nuisance or reminder around it. But I don't know. If someone told me, Logan, you're the most physically fit person I've ever met and everyone's around me saying, you're going to live to 120 and that's like all I'm hearing all the time. I'm like, ah, fuck it. I don't need this whoop. Like, why do I want

• 50:48Logan Bartlett?

  this thing on my arm bothering me all the time? Right? So I get how you end up there, but I agree. I mean, ultimately, hopefully this is a lesson in like corporate, uh, governance and, you know, whatever institutional controls. And it's crazy that the guy that came in with, from a restructuring standpoint, said that this is like, I served on Enron. I've served on all these different frauds and this is actually the worst one. It's the worst one because of like how, it's not some master heist here, right? It's like actually just the, the most commingled. I think Matt Levine called it like, hey, if I had right out of college, started a huge financial institution with my buddies, like I hope I would have done a better job, but like, maybe not, right? And maybe I would have commingled all these

• 51:31Logan Bartlett?

  things and made mistakes along the way like this, right? And that's basically what happened.

• 51:35Speaker 02

  We need interest rates to weed some stuff out. Like I think it's just like good for society for money to have like some cost to it, some hurdle that you have to get over for, you know, someone to like, give you that money that isn't basically 0% in, you know, US treasuries. Cause all of a sudden when. When interest rates are zero, it's like any idea is probably better than 0%, you know, parking my money in 0% treasuries. So like this kind of crazy stuff gets funded and we just had interest rates so low for so long and everybody's chasing like, oh, maybe that'll work, maybe that'll work. And I don't think anyone is to blame, to be clear. Like this is just a function of the system.

• 52:17Logan Bartlett?

  Outside the company, you mean?

• 52:19Speaker 02

  Yeah, clearly he needs to go to jail, to be very clear. Like, he should be in jail for the rest of his life. But like, you know, no, I don't think there's like an external actor who's to blame here, right? Nobody's like nefariously planning. I mean, no one's benefiting from this, to be clear, right? Like, the only people that benefited were the folks who were probably trading against Alameda in the last 18 months and just clipping all those stolen funds, basically. So, and I guess a lot of stuff's probably gonna end up going back, right? Like, you know, the, the people who are gonna unwind this bankruptcy will probably figure out like who made money off of FTX and try and clawback quite a bit of that capital. So that's coming. That's what happened in the Madoff stuff. I was actually at dinner with some friends of mine yesterday, and one of them who works in finance

• 53:02Speaker 02

  was saying that something like 80 to 85% of the dollars from the Madoff scandal will actually were like were recovered, like cost, not the gains, but the actual cost basis that went in, uh, which is really surprising to me. I didn't think it was gonna be that high. So I do think we'll see some of, I don't know, that's the question.

• 53:19Logan Bartlett?

  You did that by like, hunting all the gains that exist? Like, how, how do you actually go about, let's say theoretically, there's a portfolio company that FTX invested it out of their venture arm, and it was done with customer, uh, deposits or whatever. Do you think that company is now gonna have to, I, I actually haven't even really thought of this. Like, do they really go to that level of trying to figure it out?

• 53:41Speaker 02

  Yeah, they traced, they traced the gains. They traced the gains, like who's sitting on all the gains? And then you kind of go to, there's some statute that allows you to sue to, to go and recover the gains, not the, not the, not my cost, but the gains themselves. Now, what'll be interesting in this situation is how many of these people are actually subject to US law?

• 53:59Logan Bartlett?

  Yeah.

• 53:59Speaker 02

  Because I think a lot of the folks who were trading here, especially in the, not the FTX US, but the FTX.com one, were all like, Not based in the United States. So I don't know what recovery of gains looks like outside of our country. Another reason why like, you know, rule of law matters and US government matters, going back to this whole insane idea of like, avoid the government decentralization, you know, like, there's a reason, again, we have this, I mean, it's just playing out over and over and over again. Like, the folks who are in the United States will probably have a better chance of recovering their stolen money. And the folks who are like, not subject to a first world country set of laws, you're probably not going to get

• 54:41Speaker 02

  it back. And we're just going to see like, how rule of law and the court system matters yet again. Here we are.

• 54:48Logan Bartlett?

  What do you think about the narrative that like, hey, this actually proves decentralized finance because this centralized actor was, you know, like, this would have been figured out had it all been decentralized?

• 55:01Speaker 02

  Well, I think it proves that like, the centralized finance on crypto was a ridiculous proposition at any point in time. I think that's probably accurate. Here's, this is the part I don't get. I understand these are a bunch of people who are like, oh, well, you know, DeFi was always the thing. Those same people are always talking about, it's just going to take a little bit to get into the mainstream and then it'll blow up, right? They're saying like, one minute they say it's all about DeFi, and then the other minute they say, and then we'll get it into the mainstream. And I'm like, you cannot hold those two beliefs in your head at the same time. Those do not make sense. Normal, rational

• 55:43Speaker 02

  people do not want to self custody their money. As much, as much as our friend Sam Lessin likes to think that bearer bonds were a good idea, and like, I mean, they're just the dumbest thing I've, it's still the dumbest thing I've heard in like, the last few years was like, that comment. People don't want to self custody. And until, there's no mainstream use case when you have to like, hold your Bitcoin in a physical hardware, it just doesn't make any sense. And so, either what I think is going to happen is, There's the like fringe Bitcoin self custody thing will always exist. There is a market for it. I think as we've discussed, right? There are places where it actually does make sense in rare cases to like not own your local government currency

• 56:28Speaker 02

  and probably to self custody your Bitcoin and like, okay, so Bitcoin will stabilize somewhere. And like maybe Ethereum, because it has some mind share globally is like decentralized and stable. The rest of it, I'm gonna laugh at this, but like literally, what's the use case? What's the use case for the rest of it? Like, I don't, I still have not found one that makes any logical sense besides like the original thesis of Bitcoin, which is governmentless money. And that's the thing I think is gonna be funny. We're gonna do this like giant loop, right? It starts as this like white paper about governmentless, permissionless, you know, money essentially, like digital cash, digital gold. And that's what it was supposed to be. That was the, that was the Satoshi insight.

• 57:14Speaker 02

  And then we had free interest rates. So everyone's like, what if, what if we add on top of this? And what people started to do incorrectly is they fell in love with the solution. They're like, I have this solution. And that is just like the worst way to start companies, right? The right way to start a company is to fall in love with the problem. To really understand fundamentally, like what is the customer problem? What is the need? Because then you can kind of like tweak the solution along the way. That's what good founders do. You're like, I really deeply understand this problem. I have an idea for the solution and I kind of like tweak it. But what happened here is we fell in love with this solution. We're like decentralized tech is the solution. Then we went searching for a problem and we're gonna go all the way around and we're gonna end up right back at Bitcoin. That's, that's what I think is gonna happen.

• 57:57Speaker 02

  Bitcoin will survive and will have its place in the world and the rest of it will eventually go to zero.

• 58:00Logan Bartlett?

  I do like the malleability of the narratives that, that people can have around this and that they can hold these thoughts so subsequently in their head and shift from

• 58:15Logan Bartlett?

  Immediately when it blows up like, hey, this was actually an indictment. Even investors in FTX were saying, this is an indictment. This proves out the decentralized opportunity of finance. And this is an indictment on the centralization of this, right? And it's actually, it goes back to like, the Bitcoins and inflation hedge. And then it wasn't, right? Bitcoin is going to be used for transactions and like, no, it's not, right? And it's actually interesting. It sort of goes to this like crypto to web three branding thing. And sort of back to the original conversation that I started with was like, the narratives around this stuff.

• 58:54Logan Bartlett?

  I've been really impressed by the intellectual flexibility people are having in all of this to continue to shift the marketing and branding and messaging forward so that they knew that that was probably wrong. But here's the other thing, right? And you're right, it's probably going to loop all the way back around to, you know what? This is sovereign, this is money that isn't held any sovereign entity and we can hold it offline and it has some store about. Like, we're just sort of reinventing. And then when that, you know, when people want to create more value or show more tokens or whatever, then we'll advance it forward to whatever. And we're just going to keep reinventing this until people finally give up

• 59:38Logan Bartlett?

  on like what these actual use cases are.

• 59:41Speaker 02

  Even like, even DeFi, just as a term, like, to me, describes a solution. What problem does DeFi? You know, like we, even the branding of it is backwards, right? The branding should be-

• 59:56Logan Bartlett?

  Versus TradFi.

• 59:57Speaker 02

  Right, TradFi. What the fuck is Trad? You mean banking?

• 1:00:01Logan Bartlett?

  Trad, traditional finance.

• 1:00:02Speaker 02

  Like that thing that like took us out of the stone ages? That allows us to like take deposits and lend, like, I mean, just-

• 1:00:09Logan Bartlett?

  People internally, by the way, know, like, I've been, uh, people will say like, you know, web two, something internally. And I'm like, no, no, no, no, no, no. Like, that is, those are things that work. Like, we're not going to call, we're not going to brand it like the, uh, the past version of something that like doesn't seem to work. And people lose millions and millions of dollars like on a daily basis.

• 1:00:31Speaker 02

  But this is what I'm saying. Web two founders, no founder of a like successful SaaS company describes themselves as a web two founder. Ever.

• 1:00:43Logan Bartlett?

  Yeah.

• 1:00:43Speaker 02

  You would say, I built enterprise storage technology for customers of a certain size that had this problem, you know, I built whatever, like they describe it based on the customer problem. And then like all these other companies were described as like, we're a web three company first. It's like, cool. You just described like the hammer that you have, like, what are we using the hammer for? And you, it's just in the, it's in the branding, it's in the culture, like the whole thing is just again, like hammer searching for a nail and you can see it play out. I think we just got lost in the hype and the fast money and all this stuff. And it's good to see we're coming back to like rational business and behavior. So.

• 1:01:23Logan Bartlett?

  It's going to keep unwinding and I have this guilt, like I have read every single, I think, long form SPF like thing that has come out in the last 10 days and I, the level of intrigue into all of this at like a psychological level, at a financial level, out of like, nothing has topped it for me. The Elon Musk thing was, you know, interesting for sure, but the, there, there's so much, just, just so many tenants of like interesting takeaways or things taken to their extreme that sort of happened here. And so I think it's, it's fascinating, but it does feel like the end, right? And there's going to be more fallout from it. I think,

• 1:02:08Logan Bartlett?

  uh, whatever the Winklevoss's Gemini thing is now seem to be moving towards insolvency. And like, there's people with their lives, uh, you know, it seems like a lot of the people that worked at FTX, uh, were, are like very, very traumatized by the experience. If you hear from, you know, all the reporters talking about it and they weren't culpable in all these things. And, uh, so the fallout from it, like, we can make light about, um, how ridiculous this is and just the absurdity of it. There's going to be a lot of fallout that come from it, but it does actually feel like nothing's going to top this in absurdity, right? Like, people are going to say, hey, where, where were you when all of this stuff broke? And so it feels like kind of the end of the, once we figure out what actually happened here,

• 1:02:53Logan Bartlett?

  it does sort of feel like the last chapter in this whole book of like fast money, you know, whatever, no rules, web three, all that stuff. It feels like the end.

• 1:03:04Speaker 02

  Yeah. I mean, Binance is still out there. I don't know, Tether. I mean, we'll see, right? Like, there's some stuff out there, but.

• 1:03:13Logan Bartlett?

  But even then, now, now that we point so directly out them and we're like, this could so spectacularly fail as well. I think, I don't think anything.

• 1:03:23Speaker 02

  That's true, it would be less surprising.

• 1:03:25Logan Bartlett?

  It would be like, even if it's not the last thing that happens, which it probably won't be, it seems like, you know, Tether will fall at some point, I would think.

• 1:03:32Speaker 02

  Here's why I do think it's the, I can, I, I mean, you know, there's no, you don't win by saying it's the end because it's, it's always hard to time it. But I think what is, the why I actually do believe it's the beginning of the end. And we'll see if there's a second chapter, but so much of why many of these crypto ideas were successful early on, right? From the NFT craze to obviously like the trading components here to sell whatever the wifi one, I keep, I can't remember the names of all these in my head. I just.

• 1:04:08Logan Bartlett?

  Helium.

• 1:04:08Speaker 02

  Helium, sorry. Yeah. I just, it's just in my head, it just goes scam. So I can't, can't distinguish them, but like, they're all predicated on speculation. Like inherent to the idea and the business model is this idea of like, well, imagine if this coin is worth more later. And that actually kind of works when people buy into the speculation, especially retail buys into the speculation. And so cool, like that's the cycle. That's, that's how it works. And that's why a bunch of people did make money doing this because the speculation was, was happening. I just think these like very public blowups. No longer will people, normal, rational, the vast majority will like speculate on this stuff.

• 1:04:52Speaker 02

  And so the mechanics of it, the like, how it works are going to fail a lot faster because the speculation cycle will get tighter and tighter and tighter and shorter and shorter. And so you don't see these like crazy little runups anymore.

• 1:05:06Speaker 02

  And that's the, that's the, that's the killer, the death nail of this thing, which is like when the whole like economic, like the machine behind many of these ideas is based on like speculate for a while until you like backdoor the product. When the speculate for a while doesn't work, like, well, now you actually have to start with a product that people want to pay for, like a normal business. And so

• 1:05:27Logan Bartlett?

  We're back to web two.

• 1:05:28Speaker 02

  We're back, we're back to like make something for X and sell it for more than X that people actually want to buy. And the only way crypto, and this is should be true of any business survives, is when you make a product that somebody wants to pay for, not a product that somebody wants to like purely speculate on. And we're going to see the shakeout because of that nuance, I think.

• 1:05:53Logan Bartlett?

  Well, I, it feels like the end of an era for, for all of that. So I guess we'll, we'll leave it, leave it here. I, I know you have a, an actual business to run now. So at some point, we'll, you'll, you'll still be around on all this stuff. I'm going to keep bugging you to come on. And at some point, we'll, uh, yeah, we'll, we'll get you to tell the actual story of your company and all that soon enough, right?

• 1:06:16Speaker 02

  Yeah, we'll do the, here's what Zach was actually doing while shit talking crypto for nine months. Uh, and the actual business that we're

• 1:06:26Logan Bartlett?

  It's amazing your ability to balance both, to bring down the entire, to be the guy pushing the domino over and also have a company.

• 1:06:32Speaker 02

  Yeah, just a man with two arms. So, no, look, I, I will, I'll come talk about it. I think we're, I'm, I don't know if we recorded this, but you know, we're, we're, we're at the finish line with the new co in terms of all the financing and the team, you know, we're, it's a real thing. It's obviously it's nothing to do with crypto. Uh, and it doesn't even really have anything to do with tech. It's all focused in biotech and therapeutics. And I, at some point, will come on and tell the full story of what it is and how we got here. So we're, we're gearing up to talk Publicly early next year.

• 1:07:03Logan Bartlett?

  You know, my last, uh, my last, uh, quasi co-host is now number one on the App Store. Uh, and I think for a month. So, uh, there's a pretty good, there's a pretty good, uh, spinoff. You know, I, I'm building this like coaching tree, I think of, uh, of people. It's like the, the Bill Walsh coaching tree or whatever, where, you know, I spend people off and they go start these really successful companies. So I, uh, I'm glad to, you know, actually take credit for all your work.

• 1:07:30Speaker 02

  You're the next one then, right? Get rid of this VC thing. The returns are going to be terrible. Anyway, you just said it yourself.

• 1:07:35Logan Bartlett?

  Not me. No, I never said that. I never said that.

• 1:07:38Speaker 02

  Okay.

• 1:07:43Logan Bartlett?

  So that'll do it for the 42nd episode of Cartoon Avatars. Uh, thanks to Zach Weinberg for reprising his role as Crypto Cynic. Thanks to Rashad, Andrew, Justin. Hope everyone enjoyed this week. I guess a little bit of a programming note, we are, uh, actually going to be off next week for, uh, for Thanksgiving. And so we'll see everyone back, whatever the following week is, uh, November 28th for the 43rd episode of Cartoon Avatars. Have a good weekend, everyone.