EP 27: Convo with Lux’s Josh Wolfe and Our Best/Worst Crypto Debate with Slow Venture’s Sam Lessin

Lux Capital’s Josh Wolfe joins to discuss startups in the current market, and the long-awaited release of the crypto debate between Zach Weinberg and Slow Venture’s Sam Lessin that got so heated we weren’t sure we could publish it. (0:00) - Intro (1:27) – Welcome Josh Wolfe (3:10) – Market updates (13:21) – Anti-bubble (16:28) – Consolidation (19:57) – Everything times pi (22:35) – Welcome Sam Lessin (25:43) – NY tech founders in ‘07 (30:44) – Slow Ventures (33:12) – The crypto debate begins (41:57) – On chain real estate (49:19) – Legal protections (1:03:10) – Does it hold up in court? (1:09:52) – Final walk through (1:14:42) – Bearer bonds (1:19:58) – Zach’s reasons against crypto (1:31:37) – Zach’s point (1:33:51) – Carta for your DAU (1:37:11) – Back to liquidity (1:41:24) – Why is it not awesome? (1:45:17) – Users (1:52:40) – Unsettled case law (2:00:29) – Final arguments (2:04:10) – The boiling point (2:06:59) – Maybe we can publish this part (2:12:15) – Zach ending (2:22:08) - Outro 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... Spotify: https://open.spotify.com/show/5WqBqDb... Google Podcasts: https://podcasts.google.com/feed/aHR0... 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.

• 0:00Logan Bartlett?

  Welcome to the 27th episode of Cartoon Avatars. I'm your host, Logan Bartlett. What you're going to hear on this episode is the, the long anticipated crypto debate between Sam Lessin and Zach Weinberg. I'm not sure if this is the, the best episode we've ever recorded because it's pure entertainment throughout them kind of yelling at each other, or the worst episode because we only really cover one use case and one point over and over again. So I'll leave that to you to decide which one it is, but it's definitely, definitely entertaining. I should preface, I did not do the best job as a moderator. I'm reminded of a little bit of the, the first Biden

• 0:43Logan Bartlett?

  Trump debate where the moderator kind of was out of the picture and Biden and Trump just yelled at each other. That's kind of the equivalent of what we got here. So if we're, if we're going to do another version of this, I will certainly need to be more proactive in it, but preemptive apologies for that. And then what you're about to hear before that is a conversation I had on, on Thursday with Josh Wolfe from Lux. Josh is a wonderful thinker, a, has been a mentor to me throughout all this. And so we sort of talked about the state of the market and what they're doing with Lux. So excited for you to hear that now.

• 1:24Logan Bartlett?

  Josh, thanks for, thanks for coming on.

• 1:26Speaker 01

  Good to see you, man.

• 1:27Logan Bartlett?

  It's a

• 1:28Speaker 01

  You're like, you're like, you're like true pro with this. This is super impressive.

• 1:32Logan Bartlett?

  You know, I've, I've, I've been at it now for 27 episodes. I think what people are going to hear on the back half of this episode is a conversation, as we were just talking about, between Sam Lessin and Zach Weinberg, which is, depending on your definition, either the best or the worst conversation we've recorded to date. And so this is going to be like the veggies of the, of the dinner, right?

• 1:53Speaker 01

  You're going to get potatoes, yeah?

• 1:55Logan Bartlett?

  Yeah.

• 1:56Speaker 01

  Well, I, I, I agree and disagree with both of them. So it's going to be good.

• 1:59Logan Bartlett?

  Yeah, and so we'll be the nutrients and then there'll be the empty calories of arguing at each other at the end. But how are things in your world? I guess we probably spoke, it's probably been, I don't know, two months or something, three months since we spoke. I think it was the end of April, beginning of May, maybe. So what's going on in the world of Joshua Wolf and Lux right now?

• 2:20Speaker 01

  All is reasonably well. I mean, we've had this period for two years where it probably sounded like a Cassandra. And we had a series of quarterly letters that came out. The first one was basically saying, as an admonishment, both to our LPs and to our portfolio companies, capitalize on the current capital markets. This will not last. Raise as much money as you can. Then the next admonishment was, husband that cash. And don't invest in growth because that is really the only thing that's been rewarded for the past 10 years. Whether you had negative gross margin growth or whatever, it's just growth, growth, growth. And I think that we're facing recessionary headwinds and probably going to hit very hard. And investing in growth would be sort of a fool's errand. It's like spitting against the wind. So what can you do with that money instead? You can use it to consolidate your sectors, buy up your competitors, buy up their talent, buy up channels to market, buy

• 3:02Speaker 01

  up products, and buy the time that you're going to need so that you get a market that reemerges that cares about whatever it is you're doing. So.

• 3:10Logan Bartlett?

  Do you guys, do you publish every quarter? How long have you been doing that, like your updates? And what was the impetus for it?

• 3:18Speaker 01

  We've been doing our quarterly letters, you know, for, I don't know, 15 years or something. I mean, at least a dozen years. Writing for me is both catharsis and a way to get thoughts out, but it helps to sort of set the guidepost for what we as a firm are positioned and posture. So some of it is poetic, some of it is prose. But it's a way for us to, you know, think in narratives and guide our behavior and then look back at the stuff that we thought was going to happen and, you know, did it. And then, like right now, amidst a lot of uncertainty, people are pining for playbooks. You know, what do we do? What does this most closely resemble? And everybody's got their analogies from the past, from lived experience and from whatever history books they've read. You know, I've said this before, but if you were 37 years old, and it's been 15 years

• 4:03Speaker 01

  since the last real downturn, at least in a credit crisis, you were 22 at that point, 15 years ago, graduating college, you've never really seen an equity downturn. You know, people said, oh, March 2020, there was this big equity downturn nonsense. That was a record fiscal and monetary stimulus, but. You know, we were born is a firm coming out of the dot com crisis. And so I remember both being a retail investor speculating in Pacific Century, Cyberworx and all these companies that don't even exist anymore that were up 5X, 6X, and then they were down 80%. And then from that 80% point, right, they went from 100 to 20, they went down another 80%, right, and so they were down 90%. And that was painful, but it was a valuable lesson in what happens when people stop believing or start believing something new. Back then, it was going from eyeballs, you know, to suddenly path to profitability and

• 4:48Speaker 01

  cash is king, and I think the same thing will happen now. You will go through these stages of denial, anger, bargaining, depression, acceptance. I actually think that that will be reflected in the structured terms, which you have not seen in companies that you will begin to see. So that means that you will go from firms that raise money at crazy prices, or will seem like crazy prices, to doing extensions, and then extensions turning into some structured positive preferences for people. So, you know, they get some warrants, some kicker, some liquidation preferences, particularly in the growth rounds. Then you will see people saying, you know what, we're not paying money and investing in these companies and letting these free riders stick around. So then you're going to get something that people haven't seen in a really long time, which is pay to plays. And those will start out clean vanilla, then they'll go 2 to 1, then they'll go 20 to 1, meaning that if you're not participating, your preferred is getting crushed down, you

• 5:32Speaker 01

  know, to 5% of what it was into common stock. Then you'll see down rounds, and then you'll see full on recaps. And in this current moment, my view is we're probably Q3, March 2000, you know, to like September 2000. That's what the thing that I viscerally feel this is like. And what happened from that point was you had two years of range bound markets where markets didn't really go anywhere. They sort of came in and out. Then you had the next five years, which was basically the rise of long short hedge funds and the heroes therein. You had people that were great stock pickers, people that knew how to value businesses, read accounting statements, read financial statements, K's and Q's, break down balance sheets and income statements, cash flow statements, and understand and reconcile them with what

• 6:16Speaker 01

  people were representing and not many of these community adjusted EBITDA and these nonsense measures. In fact, There was a tweet, mm, two weeks ago or something. I thought it was a joke, but it went viral and it's like, what is EBITDA and why does it matter? And I was like, man, there's no better punctuating, you know, moment of absurdity of, you know, people going to relearn these basic lessons. So.

• 6:37Logan Bartlett?

  I tweeted, I tweeted something to that effect. I think, I think I did what is free cash flow and then I decide it started to get viral. And sometimes these jokes, they, they get out of the escape velocity of people that know I'm kidding. And then they start to touch like, right, they get that one and done. People that want to dunk on VCs and then it gets out of that orbit. And I realized, uh, I, I deleted it because I started to feel like, one, it was starting to escape that orbit. And two, my, as many as my LPs probably understand the joke of some of that stuff. It didn't, it felt like a little tone deaf, even joking about it right now. But I guess my question to you in all of this is like, or I guess not in all of this, but one of the things having lived through that point in the cycle,

• 7:19Logan Bartlett?

  I, I guess I have two questions. Like if I were a founder and there's all this money sitting on the sidelines right now, right? Like, how do you think that plays itself out? Because I think people, maybe people know this, maybe they don't, but like there were a ton of, uh, LPs or, uh, GPs that ended up giving, trying to give money back to their limited partners, right? And I guess I, I sort of view that as two motivations. One is that the, the altruistic one is, hey, we can't pragmatically invest this money, right? The, the, the more cynical one is, hey, we're ready to restart the carry clock on, we've invested in these, these funds. And this was kind of shitty marks and, uh, this fund's a wash at this point.

• 8:01Logan Bartlett?

  And so we're ready to start over because that, we're going to call that whole fund a wash. And so like, let's, let's find a path to getting to the next fund so we can more quickly get into the carry. Do you think we start to see people try to give back some of these big funds? Be it, you know, the, the billions of dollars of crypto money that's been raised or the five, six, seven, eight billion dollar funds that keep coming out there?

• 8:23Speaker 01

  Yeah. I mean, and some of it isn't even public yet, but I know for a fact that there's some funds that have raised multi-billion dollars. And they intend to give back between 30 and 50% of it to LPs.

• 8:30Logan Bartlett?

  Is that right? Okay.

• 8:31Speaker 01

  Yeah. So, so you will see that and it'll be, and it'll be some. It will be from some prominent names. So yeah.

• 8:37Logan Bartlett?

  And do you think, do you think, how much of that is like, hey, we can't pragmatically invest this versus, hey, we're ready to restart the fun clock cycle versus any other machinations that you think exist?

• 8:47Speaker 01

  In the case that I'm thinking of, I think it's much more of a pragmatic rational, like this is what we think is rational to deploy. And I think that they think that, you know, they'll, their pace will slow, valuations will come down, they will, the interesting thing in this, and to your question of like, what do you do as a founder? Firms will be investing slower. You'll have less FOMO and the speed with which everybody was going. So that's where it slows down. You will have some LPs that actually slow down. And I talked about this before about like this LP indigestion that's going to lead to the slowing of the champagne falling down the pyramid, you know, that goes trickles all the way down to founders. But funds will have to increase their reserves because there is greater risk than ever of syndication risk. We are looking through, and I'll share

• 9:30Speaker 01

  our playbook publicly because, you know, some of these maybe people can replicate, but I feel that Lux is relatively experienced in being able to deploy these. But we are looking through, not just to the quality of the company and the management and like their own balance sheet, but we're looking through the cap table to see, you know, where's there going to be dead weight? And if you go back to what I was saying before about denial, anger, bargaining, depression, acceptance, and the presence of terms, you know, I can tell you, like, if we have a great peer that's in the cap table, like, we're not going to do anything punitive. But if it's a group that we don't know, like, we're not carrying free riders. And so we're going to put structure in there. But if we're taking the risk, you know, and you don't have the means to continue to invest, these people are going to be washed out. And so.

• 10:05Logan Bartlett?

  Which is, which is kind of the situation of pay to play. Hey, you have to participate in this round. There's going to be structured terms. We're going to support the business going forward and help it get to the next milestone. But if you don't, you're going to get crammed down, right? Is that a fair consideration?

• 10:19Speaker 01

  And being crammed down is converted at a certain ratio of your preferred stock to your common stock. And because there is. You know, normally, everything is parapet sue and everything is great. You know, you go public, you get acquired, everything gets converted, you know, submitted as a as converted basis. If you are

• 10:34Logan Bartlett?

  Which which just to just to say with that, so the shares end up acting, they get converted all to common and they all act effectively. If you were the series A or the series D, wherever you got involved, the share count basically is going to be equivalent from a voting and structure standpoint.

• 10:50Speaker 01

  Right. And so in layman's terms, let's say that a company raised, and I'm just, you know, doing huge numbers here, but like $500 million, you know, there might be $500 million of preferences. And if the company gets sold for $600 million, then the 500 million goes to the preferred investors. And so it's not on a on a pro rata basis. And of the incremental $100 million, depending if it's participating preferred, that might not go on a on a basis to common, but again, to the participant to the preferred on the percentage of the company that they own. So when everything is rosy, structure doesn't matter. And when things, you know, it's something we wrote about in our last quarterly letter. But when when things start to get tough and there's distrust between different people

• 11:33Speaker 01

  with different incentives and different stakes and companies, it starts, you know, to become more zero sum. So in this environment, you know, the other piece of the range bound markets, you know, from 2000 to 2002. And remember, by the way, for people who have only known that markets sort of come back and you got this Fed put and BTFD, you know, buy the fucking dip, that has worked with people, right? And then

• 11:57Logan Bartlett?

  Yeah.

• 11:57Speaker 01

  And then people have to remember that from March 2000, it took with dividends reinvested in the NASDAQ, 17 years to get back to those levels. It wasn't like, oh, this is coming back in two or three, four years. So you had entire generation that was basically burned by this, which is why you have, you know, some of those older folk that were basically like, yeah, this isn't going to end well, right? And the next generation, 15, 17 years from now, will be thinking the exact same thing. They will remember crypto and what happened. They remember the meme stocks and what happened. They remembered, you know, tech, high-flying tech and what happened. And you'll have a younger generation where you need that ambitious naivete that doesn't have any memory. And it doesn't matter if you read about it. You have to viscerally feel lost. You have to

• 12:36Logan Bartlett?

  Yeah.

• 12:37Speaker 01

  know what that feels like. So in this environment,

• 12:40Speaker 01

  Our playbook at Lux is three strategies. We've got what we call the bubble, the anti-bubble and consolidation. And the bubble is not like the old bumper sticker going back to the dot com of please God, give me another bubble. Let me hope that, you know, asset prices will be crazily euphoric, inflected in irrational exuberance. It is actually invest in new co's. So to your point of like, what does a founder want to look for with 30 months of cash? Give them 30 months of cash, structure around where two and a half years, they do not have to worry about the volatility and the vicissitude of the market. They do not have to worry about geopolitics and Ukraine and food crisis. They don't have to worry about the resurgence of Trump and domestic politics in 2024 election. They can just focus on eliminating technology risk and product risk and ultimately market risk, but we've eliminated the financing risk for two and a half years. Okay? So that is bubble. Anti-bubble is what we historically have done in special situations.

• 13:25Speaker 01

  And I'll give you an example of this. So it's like visceral, but great company, great company, great balance sheet, great prospects, probably have to rationalize their cost structure, spend a little bit less, maybe lay off some people, make sure that they got the money to survive, but they got a cap table that's totally impaired and that cap table is like dead funds. Last crisis, uh, my partner, co-founder Peter Abner, he led an investment company called Lux Terra. I'm going to get the numbers roughly right. It was the last mile fiber optic cable company. They were selling into data centers. There was a question where we were taking main market risk if we were to invest in this company with Facebook and Amazon and Microsoft going into all the different cloud constructs that they had by this, by the, the product. They had raised, I want to say a hundred million dollars.

• 14:07Speaker 01

  And what's interesting, and you will see the same thing now, they, they raised it from August, capital, Seven Rosen. Do you know those guys? Yeah, I mean, you didn't know. I know them from history. Right. History, right? Because they are in history's dustbin. And these were great guys. Dave Marquette, first Microsoft investor, Andy Rappaport, incredible board member, great at governance, right? Something that a lot of younger investors aren't. You had Seven Rosen, Ben Rosen, the original investor in Compaq Computer, gave me great advice when we were starting Lux, but these guys are out of business. Okay? Us and NEA came in. Oh, and the other groups that were in there were DAG, I think, and Advanced Equities, which were the, the. Boiler room, you know, dial for dollars dentists and, you know, which are today's SPVs with these like random people that are here to get into FOMO companies. So we came in from

• 14:52Speaker 01

  that 220 post at a 10 million pre, we refreshed management. They were ready to go. We capitalized the business sold at Cisco for 660 million a few years later. There's going to be a select few examples of that where you got a great company with a great technology and needs fresh capital and the prior investors are basically going to get burned out because they are either old, can't get an extension, can't raise an Alex fund, didn't invest in the succession of their junior partners. And, you know, it's just a natural ecosystem, right? That'll lead it.

• 15:19Logan Bartlett?

  I've lived through one of those before I inherited a board C when I was at Battery and it's a setting up that structure. It's so interesting how many perverse incentives get come to play where, hey, you're a fund that's in a position of strength. To some extent, the founder oftentimes is somewhere between neutral and proactive in making this happen, right? Because they're like, hey, I would rather have one throat to choke on my board or two throats to choke and have them have more ownership and then I will get refreshed effectively to some level, right? That gets me close to what the last round valuation is and therefore I can hire more easily. And then you have these older dead weight funds that are kicking and screaming to avoid this from happening, right? And

• 16:03Logan Bartlett?

  they're trying to raise this, these SPVs to participate in the pay to play because you can't say, hey, we're gonna fuck you to the, to the weaker investor. But if they don't have money, they can effectively get screwed over.

• 16:15Speaker 01

  No, and the litigation is going to go flying. I mean, I would be, you know, you will, you will see law firm consolidation in this way, but you'll also see a ton of litigation and, you know, for some it'll be actually a profitable strategy. The, the last piece of this, so you got the bubble, 30 months of cash, you know, give them protection, the anti-bubble, take advantage of great companies but are basically later stage coming in at earlier prices than you've ever seen. And then you got consolidation. And consolidation for us is twofold. It's the existing companies we have with a billion dollars or more on their balance sheet. I mean, that's an insane amount of money, right?

• 16:47Logan Bartlett?

  Yeah, totally.

• 16:48Speaker 01

  You take Anduril on the defense side, you know, billion dollars plus of cash. They've done their third acquisition. They are going to consolidate lots of companies in the defense, and they will keep getting bigger in the companies that they acquire. So organic growth plus acquisitions, but they've got a killer war chest balance sheet. Icon, E I K O N, one of our biotech companies, 620 million of cash right now. They'll raise another billion dollars. You've got 800 publicly traded biotech companies, half of them with less than two years of cash, 150 of them trading at negative enterprise value, meaning below their cash. Leadership team there, unique time, unique technology, unique team, going to go and pick up all the assets and, you know, get them for cents on the dollar. So we are also looking at other companies that we may not be invested in that have killer balance sheets and killer teams that are going to do consolidation in the sector, because they are the ones that

• 17:32Speaker 01

  will compound all set up for that environment where two years from now, two and a half years from now, you're going to have the celebrated resurgence of these long short stock pickers. That's what happened in 2002 to 2007. I think it's going to happen again. You'll see headlines in the Journal, the FT, the New York Times, talking about this guy or girl just made 30, 50, 70% in the month. Why? Because they were short a lot of these companies, you know? And while you've got some of the big growth guys who have been, you know, great partners to some of our companies and have been the heroes for the past decade, they're down 40, 50, 65, 80%, and it's hard to recover even from modified high watermarks in some of those cases. So.

• 18:06Logan Bartlett?

  Bubble, anti-bubble.

• 18:07Speaker 01

  Yeah.

• 18:07Logan Bartlett?

  Consolidation. That's an interesting framework by which to think about all this. Is there a point in time, are you thinking, like, when you're making new investments or as you're talking to founders, is it that 30-month period out? Obviously, no one has a, has a crystal ball to actually think about this stuff, but do you have any point in time from the recollection of having gone through this, the last go-round in 2000, where it was really similar to this? Any point in time that you feel like? Hey, you could at least feel somewhat certain that there will be funding available for you if Mr. Mr. Mrs. CEO, when you're out there and at least there'll be a sense of normalcy. You

• 18:48Logan Bartlett?

  might not like it, right? It could be down rounds and all that because right now, at least at the growth stage where I spend most of my time, it feels like most stuff is frozen, right? And a lot of people are saying, oh yeah, we're ready to invest. But you just look, you go through the Axios Prorata like funded deal announcements thing and it's really not happening. And I think there's two functions there. One is that a lot of people aren't raising, right? Because they have the amount of money on the balance sheet to go do it. And then two, I don't know how many participants really know what price is even worth in this market, right? When you have these high watermarks and prior rounds and, you know, funky cap tables and all that stuff. And then three, I think a lot of firms have kind of taken off,

• 19:32Logan Bartlett?

  you know, these, these couple of months and are just waiting for the market to settle down a little bit when more people go out, back out and start fundraising again. And so if you're, if you're a founder, as you advise founders, like, is there any point in time that you're saying, hey, here's far enough in the future that, you know, at least we'll reach somewhat of a sense of normalcy in the venture market?

• 19:52Speaker 01

  The 30 months for us, the two and a half years is, is a function of it's definitely not in the next year. Like you need to have way more than a year balance sheet. And generally, because I think everything times pie in life, you know, if somebody tells you it's going to be $2 million to do something, it's going to be, you know, 6.6. If somebody tells you it's going to be 6.4, if somebody tells you it's going to be three months, it's going to be 10, you know, so just everything times pie. So roughly, you know, could be three and a half years, but the more cash you have, the better. Now, I actually, you're going to talk to Sam, um, you know, and I think he wrote a piece a week or two ago talking about cash runways and the virtues of that. So you can dig in with it with him on that. But, um, yeah, I just think that, you know, between two and three years of cash will let you get through this period where again, some people are frozen, they're frozen because

• 20:37Speaker 01

  they're looking at who is the incremental investor. And it was cleared in this construct that I had before of the minnows and the megas, the many large number of small sub hundred million dollar funds and the few very large and crossover and soft bank, GC, GA, Andreessen and others that, you know, were able to do these late stage rounds and be priced. Ticker setters, price setters, top tickers, that's frozen. And so there needs to be new pools of capital formed and there will be, right? People will be going out there and saying the secular trend, the digital transformation of healthcare, the resurgence of revanchist Russia and China demand for new defense. Like people will form new pools of capital and have a good thesis and they will be able

• 21:20Speaker 01

  to say, of course, these trends are real and prices are lower. And so over the next year or two, you will have new pools and new players that form. People will leave firms, they'll come together, they'll form new firms. I mean, that's the natural, you know, evolution in any ecosystem. And, um, and, and that will be when you will have fresh, you know, um, untainted new money that can look at around and, and a true sort of, you know, if this is a seed or a series A, a series A or a series B, two and a half years from now and be a good partner. And by the way, at a reasonable price, not at, you know, going from like, like I'm leading a company right now, uh, $55 million series A, we're doing 20 of it. Uh, it'll be, that 55 million will last two and a half years.

• 22:03Speaker 01

  But when we come out for the next uptick, I'm not expecting like a 10x uptick, right? It might be a 2x. And so, um,

• 22:09Logan Bartlett?

  $55 million series A, that's a, that's quite a, uh, that's quite a big round. I, I assume it's a pretty special, unique company that

• 22:18Speaker 01

  This is, um, it'll be publicly announced, I think by September, but this is the result of a 12 year quest to find digital olfaction and I found it.

• 22:27Logan Bartlett?

  Wow. Well, I'm excited to hear that, uh,

• 22:31Speaker 01

  It's damn, it's damn for smell.

• 22:34Logan Bartlett?

  Well, Sam, thanks for, thanks for volunteering. Uh, you're, uh, yeah, and, and scheduling, uh, scheduling this on, uh, on fairly short notice. So I guess people know Zach at this point, but maybe give a quick primer on, on, uh, on yourself, what you're, if you had a dating app bio, what would it say?

• 22:53Speaker 02

  You know, I haven't had one because I've, I've, my, my wife and I have been dating, started dating halfway through college, so I've never done that whole thing. But, um, no, I mean, like professionally, GP at Slow Ventures, kind of got that thing going. You know, we think we've done well. Before that was VP Product at Facebook, reported to Mark, ran a bunch of product engineering and design teams there, including Profiles and Privacy. Started a company before that called Drop.io. I'm actually very proud, I'm one of the founders of Digital Dumbo. So we were like the second company to move into Dumbo. Turns out I probably should have just bought real estate rather than starting a company there. And started my career, if you go all the way back, at Bain and Company for two years,

• 23:33Speaker 02

  where I did a lot of private equity diligence buyout stuff, which was entertaining for almost exactly two years, but not a day longer.

• 23:42Speaker 03

  Did Mark Zuckerberg manage, did he manage the product teams directly?

• 23:45Speaker 02

  Um, so there's been many iterations in the history of Facebook's, you know, how they organize teams, right? But in my era, there was a set of product groups that all rolled directly into him. Yeah.

• 23:57Speaker 03

  Wow.

• 23:58Logan Bartlett?

  Jay-Z had a line about buying in Dumbo in the story of OJ. Yeah, yeah, that was you. You and Jay-Z.

• 24:05Speaker 02

  Yeah, no, it's, I feel that line deeply. 68 J Street, you know, it was a different era back then. And totally, I mean, that, it was wild.

• 24:14Logan Bartlett?

  So when were you at, when were you founding a company? When did you sell to Facebook? How long were you at Facebook?

• 24:21Speaker 02

  Yeah, so I started, I, approximately, because it's actually been so long, I'm so old now that no one's, I'm gonna get dates wrong slightly, but started a company in 2007. And that was kind of before kids started companies. So we raised money from our reventures, like we kind of were off doing our own thing. I think Y Combinator had just started. It's kind of a weird thing to have a startup in those era. We started on, literally a file sharing platform. It was just when S3 and AWS were coming out. And we had a point where actually an important Amazon customer. I was, I was on the original AWS Customer Advisory Board.

• 24:56Logan Bartlett?

  Wow.

• 24:57Speaker 02

  It was like me and a bunch of CTOs. It was fascinating, I had no idea what I was talking about. But, so we started that, I sold the company, we sold the company to Facebook in 2010. It was one of those things where it was pretty clear that we were doing well, we had millions of users, but it was clearly becoming an also ran. And Mark was just made a very compelling pitch. He said, look, what you're doing is honestly not important, right? Like, it's gonna happen. Come work on profiles at Facebook, which is something I cared a lot about and I thought was really important, and identity at Facebook. So, kinda ended up doing an aqua hire thing of that era. And then was there through the IPO, through late 2014, doing, you know, first profiles, and I took on actually doing a big privacy rewrite and trying to simplify the privacy of a model for Facebook a bunch.

• 25:41Speaker 02

  I think we got a lot of good stuff done, but clearly not everything.

• 25:43Logan Bartlett?

  And you guys don't know, I mean, you're both New York kids, right? You're both started companies in '07 in New York, right? Zach, were you in New York or were you in Philadelphia at the time?

• 25:54Speaker 03

  We were in Philly and then New York when we started the sales team. And it's really funny to hear and meet somebody who also started a company, like, when it wasn't cool. Because I was, I was the same thing. I was in, I was at Wharton, I was in business school, and everyone's like, you're not gonna take the Blackstone interview, you know, whatever it was that people were doing at the time. But we were so New York. I'm assuming everything you did was West Coast?

• 26:17Speaker 02

  No, no, I mean, we probably should have overlapped, you know. We were very focused in the New York ecosystem, you know. I, like, back in that era, if you remember, like, Birchbox was, like, started in our office. Muckrak, which has actually become incredibly successful, was started in our office. You know, I gave Venmo their first money and helped them get off the ground. So, there's probably a lot of overlap. We're probably like half a degree disconnected somewhere.

• 26:41Speaker 03

  Yeah, maybe I'm just like a weird introvert.

• 26:46Speaker 02

  But it was a good era. I mean, that was a really exciting time in New York. And it was also kind of fun, because New York was so clearly not the cool place to do tech stuff, right? You know, which I actually liked. It made the community super small. Everyone knew everyone. It was fun.

• 27:01Speaker 03

  You know who else was doing tech stuff right around that same time in New York?

• 27:04Speaker 02

  Who?

• 27:05Speaker 03

  Chris Dixon.

• 27:06Speaker 02

  Yep, 100%. I remember Chris Dixon from that era. I was not close with him, but, you know, for sure knew him.

• 27:12Speaker 03

  Yeah, because there was that small, little community after eBay bought his first company that was working on, like, there was a building on Sixth Avenue and, like, 21st Street or something.

• 27:22Speaker 02

  Yeah, it was like the AppNexus guys. There was, like, if you remember, like, Glip TV. I literally was talking to Mike Hudak this morning, who ended up coming and working for me at Facebook for a while. And, you know, it was a, it was a great era. There's a lot of great people have gone on to do great stuff.

• 27:34Speaker 03

  Yeah, the AppNexus, the AppNexus team in particular, with Brian O'Kelly. I mean, we used to spend... Hours in Brian's office, learning ad tech.

• 27:42Speaker 02

  Yeah, well, Brian, I mean, Brian pitched us on actually using the original, you know, AppNexus wasn't an ad tech thing. It was a, it was a cloud computing thing, right? And that was, you know, he was pitching us on using that instead of AWS.

• 27:55Speaker 03

  Logan, this is the tech equivalent of Jewish geography.

• 27:58Logan Bartlett?

  Yeah, I was gonna say, I need to keep you guys away from that part of it, like, you know, which you went to or something. I, yeah, let's get back to.

• 28:05Speaker 03

  Which Rabbi bar mitzvahed you, Sam?

• 28:08Logan Bartlett?

  Yeah, Rabbi Block. It was Rabbi Block. Yeah. You guys are really losing the listeners at this point. No, interesting. I mean, do you guys have, by the way, speaking of New York, I was, I was here, but I was in finance at the time. Is there any ecosystem that you guys had been to that sort of had that similar feel? Because people will be like, oh, you know, Toronto, I heard this last week, Toronto's like New York in 08, 09, or Miami is like New York in 08, 09, or something. Have you guys actually been to an ecosystem recently that had that similar kind of going to break out? You sort of knew it was coming, but you weren't exactly sure where it was going to come from? Is there any city that has that or any ecosystem?

• 28:47Speaker 03

  I was gonna say, honestly, it's like, I think what's happened is it's gone virtual.

• 28:52Speaker 02

  Yeah, I agree. It's everywhere. It's, it's the era, that era was, you know, you had the Silicon Valley group, right? Which was, felt very corporate and professional, whatever. You had a bunch of New York kids running around. And it was also just like the era of the internet, right? Like, I think, you know, if you think about back in that era, it was like, wow, like, you just got PHP and MySQL and things that lie just felt, AWS is just coming out. All of a sudden, you could do shit, right? And like, there was a very interesting moment where it was all possible, but it also wasn't like hyper serious yet. Like, there was a lot of just silly things going on. I think the problem now is it's, it's big business. And to your point, Zach, I think the other big part is like, there's no, I mean, it's everywhere, right? So maybe there's some Discord server

• 29:36Speaker 02

  I'm not invited to, but I don't, I don't think it's in any specific place.

• 29:40Speaker 03

  I mean, I found myself in a weird way. I don't know, Sam, if you guys even care about this, it's slow, but. I would listen to a pitch. We would do some homework, do some diligence. And I didn't know where actually, I had no idea where the company was based. I didn't even ask.

• 29:54Speaker 02

  Yeah, it's not really relevant anymore. But there wasn't, I mean, like, I remember, you know, again, we'll stop the New York memory lane trip, but it's like, you know, I remember like, you know, there's stuff like, because of the New York tech meetup, it's like Bree Pettis would like, I had MakerBot number one. And I was like, here's a credit card and how do I invest? Right? And like, that was kind of like, there was just a crazy, you know, there was, what was it on? NYC Resistor and like all this weird stuff going on. It was super fun.

• 30:19Speaker 03

  It was so early. We didn't know what was gonna happen.

• 30:22Speaker 02

  Yeah, exactly. There it is. He's getting the digs in early.

• 30:25Logan Bartlett?

  So did you move cross-country for Facebook? Is that what brought you out there?

• 30:30Speaker 02

  I did. Yeah. So, um, yes, exactly. Basically, Facebook acquired my company. You know, the heart of Facebook at that time and now is Silicon Valley. If you wanted to actually be doing anything super impactful in that era, you were going to be in, you know, 1601 and then Menlo Park.

• 30:44Logan Bartlett?

  Yeah, makes sense. And so, so you were there through the IPO and then what? Take us through Slow's journey. Like, how did that come to be?

• 30:52Speaker 02

  Yeah, Slow was interesting. So basically, you know, I, Slow had initially been just a few friends who basically were all doing angel checks, pooled some money, were kind of like messing around, kind of investing. So there's like three, there were three early Slow funds that I think together were about $14 million, right? Like, and this is again, like, talk about being early rather than being good. This is like in the era before kids were running on checkbooks largely. And certainly before there was all these micro VCs, right? So we were doing these like super early angel checks. You know, I would seed Venmo and I'd say, hey, let's also put some Slow money in. Like, it was very kind of a collective, really just some early Facebook folks who pooled some capital.

• 31:31Speaker 02

  When I left Facebook, Kevin Collarin, um, you know, who had actually been, he was employee seven at Facebook and then had been at General Cattails was like, hey, like, let's make Slow a real thing, right? And so we went out and raised our first actual fund. It was $65 million. And like, you know, we've done a few 150-plus million dollar funds now. Our most recent vehicles, you know, it's about 350 million bucks across, you know, a growth carve-out for later stuff. But our, our bread and butter is doing super early seeds from zero. So, you know, we seeded everything from You know, sometimes, starting out small checks, right? They've gotten bigger over time. But, you know, everything from Allbirds to Roman Health, who were the first investors in? We were super early in Airtable, or super early in, I don't know, like Postmates.

• 32:16Speaker 02

  We were super early in like a lot of stuff over the last 10 years or so. And then, obviously, you know, I think, you know, we can get into this now or later. We also got very active as a fund in crypto in like the 2016, 17 era. I had personally started investing in crypto and been super excited about, you know, things like I bought a bunch of Bitcoin, like everyone else, not like everyone else, like some people back in like the 2013 era, you know, 2012, 2013. And then, you know, was a seed investor in Ripple, kind of, you know, a bunch of other like Ledger X, like a bunch of early stuff, you know, messing around. And then we kind of got more institutional about it. And, you know, again, like, I think some of the most exciting stuff we've done, you know, we were series zero seed investors in Solana, which has been a massive win for us.

• 33:01Speaker 02

  We were super early in algorithm, we were super early in, you know, company, one of my favorites is Clayton, which we're the only American investors in, which I'm really psyched about,

• 33:10Speaker 02

  as well as a bunch of other stuff, so.

• 33:12Logan Bartlett?

  So what gets you excited about, before Zach goes, what are the use cases? What gets you excited about, about like crypto in general? Like, what, is there areas that, I know some of those names, I don't know others, but like, is it, is it the different protocols? Is it the application? Is it DeFi? Is it NFT? Is it all the above? Like, how, walk us through like what your core beliefs are about crypto?

• 33:39Speaker 02

  I mean, I, I did it, I'm like a first principles guy more than anything else. And I got excited about this idea, you know, when we were talking about what the internet was early on, I always talked about like the superpowers that it gave, right? You think about, I always like, imagine the internet is really just a new bundle of superpowers. You wake up one day and all of a sudden, you can talk to everyone on earth instantly for free, right? You know, what does that do to society? Like, what does that do to the world? You know, a lot of, I think, the fallout and the complexity we have, it's like easier to say, this isn't about technology. This is just about new human superpowers being unleashed and what it does to our ways of interacting. You know, obviously, at Facebook, I spent a huge amount of time on identity, which I think is like a really interesting abstract problem area.

• 34:24Speaker 02

  You know, reputation, identity, how do you deal with those things? And these kind of new superpower contexts? For me, crypto is really just, honestly, when you get down to the basics, it is just the idea that for the first time, you're basically layering in memory in a distributed, trusted way into the internet. Like, the internet was born, in a lot of ways, I would argue, broken. And a lot of the problems we have around spam and trust and da-da-da. There's some, like, very good parts about how the internet was started and some very bad parts. And like, to me, the crypto is just like adding a new layer in. We were like, oh shit, like, we could also have distributed memory. And there are, you know, again, we'll, I'm sure, get into this. There's, the question is, what the hell do you use distributed memory for? Who the fuck cares, right?

• 35:08Speaker 02

  Like, and we can get into the use cases from that perspective.

• 35:12Logan Bartlett?

  And what is distributed memory, even, I guess, to you, what does that mean? Before we get into the use cases, like?

• 35:18Speaker 02

  Well, look, I mean, right now, the way memory works, right? Well, let's take a human context and then a technology context. The way human, pretend there's no writing, there are no books, there's no nothing. We're just a network of humans that, you know, have inputs and outputs and memory onboard, right? What is memory, how does it really work, right? You have a bunch of nodes running around, interacting with each other. And they're recording their version of a thing, right? And then if you want to know what is truth, or what is it, how do you do that? Well, you'd pull, you'd say like, do I have a memory of it firsthand, right? Do I have some sort of onboard recollection? If you don't know, you're gonna like ping the nodes you trust, right? There's gonna be lots of nodes, they might have lots of different viewpoints on different things, but you ping the nodes you trust. And like, there's a full game to why do you trust people?

• 36:02Speaker 02

  And retribution and all this type of stuff that bundles around. But that's like a very distributed model, where there is no single truth on anything. There's only perspectives, and then incentives, and then ways to pull it together. Now, if you think about writing, right? And a lot of technology over the last several hundred years, there's been this pattern of like, effectively centralizing truth, or centralizing trust in a lot of ways. And I think if you think about, you know, what a database is, right? It basically is everyone saying, like, you know, the Facebook database, or whatever, you know, in the abstract sense. It's basically everyone kind of writing to a single store and saying... This is the truth. We're all gonna, we're all gonna agree that this is reality. The problem is, is that as we all know, those are owned, right?

• 36:44Speaker 02

  By people, by organizations, by context, like they're, they're, it's a very different model than what we're historically used to in a lot of ways. And so, you know, crypto, it is different than this kind of every singular seven billion people, there's seven billion different memory stores floating around. They like pre-writing a human way of existing, right? But it at least gets us back to some level of saying, okay, like, there's a form of ledger, there's a form of, of memory that can exist where we're gonna use a smart combination of math and economics to say that, no, there's no one who can just go in and change, change, change reality as they see fit, right? And I think that's like a super interesting, abstract,

• 37:27Speaker 02

  organizational, technological principle. So that's, you know, what got me excited is like, wow, like, take, start with Bitcoin, like, wow, that's super cool. Like, I, there is no central database, you know, that's, no one's gonna print, you know, more Bitcoin. That's a really interesting alternative piece of technology. It's a really interesting alternative organizing principle. Um, you know, and I think when you get into smart contracting and blah, blah, blah, and everything's built on top and, you know, we could, we can go there. It's like, you know, none of it's, there's nothing that you can do with crypto, or really any of this stuff that you couldn't in theory do if you could pull it off with some sort of single centralized trusted node. His problem is you're just never gonna actually get that in human society.

• 38:08Speaker 03

  There were a lot of things in there. Now I'm like, my brain is, is like, slow, the creeks are turning and I need some oil. I should have had a drink or something before this.

• 38:17Speaker 02

  I got it.

• 38:19Speaker 03

  Let me, the Bitcoin thing, I thought, I thought was very interesting, right? Because the reason, the reason the trustless piece works in Bitcoin is because the data that you trust is inherent to the chain itself.

• 38:33Speaker 02

  A hundred percent. It's self-contained, right? It's a self, it's a closed loop, a hundred percent.

• 38:37Speaker 03

  Right. How do you think about like, trust and what is trust and what is the data on the chain when the source of that information obviously isn't coming from the chain itself, right? Like really, it's like, it's a ledger of someone else's data, basically.

• 38:51Speaker 02

  Yeah, yeah. I think this is like, I, this is- If there's one problem in crypto that is the biggest problem, right? That requires the most thought, it's the interface between external data sources and like the internal self-consistent system, right? It's the oracle problem. It's like, how do you get a digital system to mirror a physical system? By the way, same problem with the internet broadly, right? It's not like, this isn't unique to crypto. This is like, you think about like, a lot of problems with the internet. The problem is the internet's an incredibly good machine from a self-referential standpoint. But the second you have to sync it out somewhere, or it has to represent truth rather than entertainment, for instance, it's really hard, right? And so, those interfaces are the key, the key components.

• 39:35Speaker 02

  I mean, and to me, like, there's nothing inherent in crypto that solves oracle problems, right? You need, that's true, right? Like, there's basically two approaches. One is, you have economic systems, right? That enforce some sort of version of, it has to mirror reality with some smart economics, or people are gonna like, be basically liable for big losses, right? And I think a lot of the systems you see around like, state game and, you know, prediction markets and things like that, like, trying to mess around with that. The other is, guess what? You're still trusting institutions. You're still trusting people somewhere in the chain, right? And crypto will never, crypto cannot, as a self-consistent internal system, solve that, right?

• 40:16Speaker 02

  That has to be solved by other technology, and candidly, like, by other human institutions, no question.

• 40:22Speaker 03

  Yeah, so if we go and we say like, the reason it's interesting is because it's decentralized and trusted in the sense that no third party really controls it, but then we go and say, "Well, that's true, except for the fact that anytime we bring on off-chain data on-chain, technically, we're now trusting the oracle, right? Whomever entered it, whether it was, I think, in the mortgage example, it was Kathy in the clerk's office or something."

• 40:48Speaker 02

  Yeah.

• 40:49Speaker 03

  Sorry to Kathy, or anyone else. So, when that kind of real-world impacts, the data comes in and impacts the chain itself, like, don't you lose the story? Don't you lose the value?

• 41:00Speaker 02

  I don't think so. I just think, I think that's too black and white, right? Like, the idea that technology fully solves any human problem, I think is like... Candidly, like an overstatement of technology's abilities, right? Like, technology layers and new tools and new ways of trading or interacting. But in the end of the day, it does, you know, it sort of turtled all the way down. It does always hit back to humans, humans and institutions and how we coordinate, how we act. So let me, let me, let me just kind of dive in though, because I'm not really answering your question. Look, here's the way I look at it. There's a bunch of things that the internet in theory should enable that we fucked up, right? Um, in terms of actually getting there from my perspective and getting the lap, the value of what it means

• 41:43Speaker 02

  you'll just speak to everyone on the earth instantly for free, right? I think what crypto does is it creates opportunities, um, where we can actually go out and like, not necessarily fix a lot of those things, but take second shots at them is almost the way I would look at it. Right? So, you know, again, the ones I call out, like you talked about the mortgage thing. I actually think on-chain real estate is an awesome space to be exploring. On-chain hard assets, it's actually something we've been spending a lot of time on it slow. Like we've run a Montana land out where we literally are buying, um, you know, real world assets and tokenizing them. We have really cool stuff coming with timber IP, like we're really into this theme. But let me be clear about what I mean when, when we're doing this and what the point is, right?

• 42:26Speaker 02

  Um, the way this actually works is we say, okay, cool. We're going to do capital formation in crypto effectively saying, hey, you know, people can contribute USDC and fund, you know, you know, an S Dow is what we're calling them, right? It's like a pocket of cash to go do a thing. We're saying that crypto can provide really interesting liquidity opportunities for people on-chain. And we can get into why that matters in a second. But you know what's underneath? An LLC, right? With accredited investors, right? We're not trying to blow, you know, we're not working around the law. We're not trying to do anything different. We're basically saying like, there's a structure for this, you know? Crypto doesn't change the underlying structure, you know, there's been reaps or whatever.

• 43:06Speaker 03

  So bef- before we get to the actual use case, just so I understand it. So basically you've got an LLC, which is like normal corporate protections, which makes sense.

• 43:14Speaker 02

  Hundred percent.

• 43:15Speaker 03

  Uh, people send you money to own a piece of that LLC. They happen to send it to you in USDC, but in theory they could have sent whatever it is they wanted.

• 43:24Speaker 02

  Hundred percent.

• 43:25Speaker 03

  And then you've got. Ownership of that LLC, you have an operating agreement for the LLC. There's a manager for the LLC, blah, blah, blah.

• 43:33Speaker 02

  Yep.

• 43:33Speaker 03

  Okay, so it's an LLC.

• 43:35Speaker 02

  It's an LLC. It's like the most boring thing in the world, right? Here's the thing, on top of it, we say, hey, after a year-hold period, you accredited investors effectively get tokens, which are bearer tokens. They say, if you own this token, there are 499 maximum possible issued tokens. We say, guess what? You own that pro-rata percentage of the LLC, right? This makes liquidity easier, right? If you want to actually do this in the real world with a traditional LLC, or candidly, a good old-fashioned REIT, totally doable, right? The problem is, is that it's pretty illiquid. It's pretty hard to trade, just like startup equity is.

• 44:11Speaker 03

  You're gonna let LLC owners in, or I guess like individual owners of your LLC, sell and trade their stake in the open market by selling their token?

• 44:24Speaker 02

  Well, they can trade it to other accredited, yeah, they can trade it to other kind of investors, which by the way, is like what you can legally do, right?

• 44:30Speaker 03

  So how does that work?

• 44:32Speaker 02

  In terms of what? Like practically, how does it work?

• 44:34Speaker 03

  So I have a token, I have a token, and I like, I have, I have the key. I have the security key. Maybe I keep it in a lockbox or I store it. Where do I store the key?

• 44:45Speaker 02

  Were you talking about like your key to your wallet?

• 44:47Speaker 03

  Yeah.

• 44:47Speaker 02

  Yeah, yeah. So wherever the hell you want, right?

• 44:49Speaker 03

  So I store it in a wallet, I store it in my own wallet, basically.

• 44:52Speaker 02

  Sure.

• 44:53Speaker 03

  Okay, I stored it in MetaMask or Coinbase or whatever, basically.

• 44:57Speaker 02

  Whatever you want. That's the beauty. It doesn't matter.

• 44:59Speaker 03

  And then Logan wants to buy it from me.

• 45:03Speaker 02

  Yep.

• 45:04Speaker 03

  And so how does that work?

• 45:05Speaker 02

  So if you, the easiest way, right, is Logan, which, and there's a bunch of companies that are starting to work on this, so we're front-running this being a major thing, but it's certainly happening, because these public, the blockchains are all public. Logan put up a thing and say, hey, I would love a share of this LLC, right? Here's my bid, right? And you can be like, oh shit, I want to hit that bid, right? Like, I'll sell, I'll sell Logan my LLC share, right? And all of a sudden, you could do it on crypto rails, right?

• 45:28Speaker 03

  Let's stop there for a second. Logan wants to buy the token. Why?

• 45:33Speaker 02

  Because it is a financial asset that can appreciate because he can, because in the case of something like Timberland, it can be income producing.

• 45:42Speaker 03

  Right. So he wants to buy it because he thinks this company is worth something. Does he have access to the financials?

• 45:46Speaker 02

  He can, he cannot. I mean, that's again, like, that's completely up to how want to manage.

• 45:51Speaker 03

  Assuming he's a sophisticated investor, and this is Logan we're talking about, so clearly that's not true. But assuming he was a sophisticated investor and he wanted to buy one of these governance or whatever, ownership tokens, he's going to want to know something about the company, right? He should know like your assets and your income and what you own. So how does he get that? How does he get that?

• 46:10Speaker 02

  The cool part is some of that stuff actually can be public on chain, right? So for instance, take a Timber Dow, right?

• 46:15Speaker 03

  You mean, you mean like just a database or an Excel file that you share?

• 46:20Speaker 02

  Let me explain to you exactly what I mean, which is like, take like a version of a Timber, like there's a Timber Dow, right? So we stand up one of these standard old LLCs, we wrap a Dow on top, right? It was a, hey, good news, it's Timberland. Every year is going to produce income. And the way the income resolves, right, is the LLC takes it in, turns it into USD, sends it to all the token holders, right? Does it for 10 years, does it for 20 years? That income flow, right, is public. That's cool, right? And like queryable and you could do that at scale. So that's one version. But I think Zach, the thing I'd say more broadly is like, this question of like what information access you have or don't, it's like, this is no different than the world of startups, right?

• 47:00Logan Bartlett?

  I'm struggling with what is the difference here between this and what you can do with a startup or with a REIT?

• 47:08Speaker 02

  Friction and therefore liquidity, right? There's the thing that you get out of something like a crypto, because like, by the way, let me step back for a second because I'm sure this will be Zach's next point. In theory, you could absolutely do all of this if the federal government stood up a server everyone trusted and said, hey, guess what? You can register all your LLC shares here, right, in some way, shape or form. And if you want to trade LLC shares for not just the 2,000 publicly listed companies or whatever, but for literally any company, right, with some basic requirements around it, totally could do a sound. It'll never fucking happen. Right. And since that will never happen, right? For a whole bunch of reasons we can get into. This idea that you can have a platform, which is like, look, the transaction costs on flipping around, you know,

• 47:51Speaker 02

  long tail assets and long tail equities, right? In any sort of like papered way with DocuSign and lawyers and any sort of traditional policies, it's a complete nightmare. It's too expensive, right? To even make it worthwhile with what crypto would you get? Is the ability to say, look, we'll drop transaction costs of actually doing all this stuff to zero. We have bearer tokens, right? Which represent real equity and real cash flows and real, you know, real underlying ownership, as well as some governance stuff we could get into. That's super cool.

• 48:21Speaker 03

  Okay, I just want to make sure I walk this through. So I am aware of your token because you've posted your private financial information to the public blockchain about how this works and the amount of money you're making. So you've basically given up a bunch of your corporate secrets to the public.

• 48:35Speaker 02

  Not necessarily, oh, exactly. Just to back up for a second, and I don't mean to cut you off. I just want to make sure we're on the same page. You could, the example I give you about income flowing through the chain, I think is actually a pretty cool and easy one. You can build a track record, blah, blah, blah. That's kind of a side, I don't know.

• 48:50Speaker 03

  But you can also, you can also fake it too, but that's a whole different story.

• 48:53Speaker 02

  You can fake anything, like, you know, that's why they're.

• 48:55Speaker 03

  Well, no, you can't fake like audited financial statements because that's what an auditor is supposed to do. But you definitely can change, you can fake like income on a blockchain because it's not audited, but let's assume for a second that doesn't exist.

• 49:05Speaker 02

  Whether or not, given, given what's happening right now at Ernst & Young, whether they can fake audited statements is another question. But the, the basic point.

• 49:10Speaker 03

  Sure, let's just throw out the whole auditing industry, you know, because like.

• 49:14Speaker 02

  Well, but let's, let's be clear that everything comes down to trust. Right. And my point is there's no such thing.

• 49:19Speaker 03

  No, no, no, no, it doesn't come down to trust. It comes down to legal protections and rights in, in the court system. When you don't send me the money or you faked your financial statements, I get to sue you. Uh, I also get to do like a whole bunch of homework on you.

• 49:32Speaker 02

  To be clear, Zach, there's zero difference between what I'm proposing and what we're talking about. And the only thing that crypto adds, which is the key component, is dropping transaction costs to zero. Your point about audit financials, like, look, of all the assets and companies in the world, right? You know, the percentage that afford and do fully audited financials to the like standards of, you know, NASDAQ, right, into some of these registered, you know, tiny, right? Like, actually, most assets in the world are not publicly listed, right? That stuff doesn't exist for them. It doesn't mean they don't trade. That doesn't mean they're not valuable and accessible to, right?

• 50:04Speaker 03

  Well, yeah, like, if I want to go buy, I agree with you. Like, if I want to go buy a share of a private LLC that owns some real estate, you know, obviously, it's not like a listed asset.

• 50:14Speaker 02

  Nope.

• 50:15Speaker 03

  And I've got to go do my homework because I want to make sure.

• 50:18Speaker 02

  Deal with that. Exactly. And that's what.

• 50:21Speaker 03

  There's a lot of things I want to make sure when I'm buying a share. I want to make sure that it exists, that it's real.

• 50:26Speaker 02

  Yep.

• 50:26Speaker 03

  I want to make sure.

• 50:27Speaker 02

  Which, by the way, blockchain solves for you instantly.

• 50:29Speaker 03

  That's not true because you can put anything on the blockchain and not have it registered in the real world. I need to make sure the actual LLC exists and it's governed.

• 50:36Speaker 02

  Oh, yeah. You need to make sure that the connection between the token you're buying and the underlying LLC is sound. Absolutely.

• 50:42Speaker 03

  Right. So I need to learn and to do that and to check it. I need to make, I need to make sure that the income stream history is real and not faked, right? So I have to do like auditing work on the financials themselves.

• 50:54Speaker 02

  Yep.

• 50:55Speaker 03

  I should. Maybe, let me, let me take the word I have to and I replace with I should. Uh, I need to make sure that the token that I'm actually buying is real and owned by the person who is selling it to me and hasn't been hacked and listed.

• 51:10Speaker 02

  Again, I would say marginally much easier with crypto than any other system. Not perfect, but way easier.

• 51:17Speaker 03

  Not if you make a mistake and you buy a stolen token and, you know.

• 51:21Speaker 02

  Sure. Again, that's, that's life, though, right?

• 51:23Speaker 03

  Well, it's not life, actually, right? Because like lawyers take on.

• 51:27Speaker 02

  It is that.

• 51:27Speaker 03

  No, because if you go to buy stock in an LLC and the lawyer representing the group, who's selling it to you actually like faked it, like, guess who shows up? The police, the courts, I mean, there's a reason we have these protections in place.

• 51:40Speaker 02

  I think your perspective or how, how these transactions are generally done and the number of layers between people is like very overstated, right?

• 51:49Speaker 03

  I still want to go back to the basics. I I buy I buy the coin. Let's assume we've done all this work and we believe that this coin is tied to the LLC and that the LLC is real and it's run by real people.

• 52:01Speaker 02

  Yep.

• 52:02Speaker 03

  Just like a normal LLC. I'll give you all that, which makes sense. And I buy the coin. What legal document do I sign?

• 52:09Speaker 02

  You don't need to sign. Well, actually, let me really clear because the way our structure works, there's there's two steps to this. To take possession, to buy it, right, to take possession of it, there's no illegal contract you need to buy, just as, you know, if I sold you this Apple Watch, there's no legal contract. I give you the Apple Watch, you give me cash, right? There's nothing you have to sign for that. Now, if you want to get access to the downstream income from the LLC, right? Like the way we're going to go do a dividend, if you want to vote in governance, you actually need to go through KYCML or the underlying group again, right? So it's not like we're saying, you, so in the end of the day, you do have to re-register with the LLC before like, you know, you're going to get a dividend stream off of it or whatever, but you could hold it and not register if you wanted to.

• 52:49Speaker 03

  Why would I want to own the coin without the future income stream?

• 52:53Speaker 02

  Again, it can appreciate, you can't take receipt of the income stream, right? Because we can't touch things like KYC and mostly anti-money laundering issues, right? So there's like.

• 53:03Speaker 03

  Well, also like I actually have to.

• 53:05Speaker 02

  Share doesn't necessarily appreciate in terms of the income streams do it. It doesn't mean that you couldn't trade it again, things like that.

• 53:10Speaker 03

  So I can speculate on it, but I can't actually get any of.

• 53:14Speaker 02

  I feel like it's a loaded word, given this month especially, right? Like you can.

• 53:17Speaker 03

  Sorry, I can, I can trade this coin of which I have no legal right to the underlying income stream.

• 53:24Speaker 02

  You do have a legal right. Again, you have to.

• 53:26Speaker 03

  But you just told, you just told me that I don't until I go and do all of the KYC.

• 53:30Speaker 02

  It does. It's just like a bearer certificate, right? Like it's literally just like having.

• 53:35Speaker 03

  God, it's a whole bond. What we're saying is that the token owns this thing. Let me ask one, one maybe simpler question then. So you guys get some income from a real estate property you own. Mary pays you rent.

• 53:47Speaker 02

  Sure.

• 53:47Speaker 03

  She sends you the rent in US dollars because

• 53:50Speaker 02

  Goes into the normal LLC.

• 53:51Speaker 03

  Because she's a normal person. Uh, and she sends you that money into your Chase bank account in US dollars.

• 53:57Speaker 02

  Well, to remind me of the LLC is Chase bank account. Yeah.

• 54:01Speaker 03

  Yeah, sorry. You being the LLC. That's what I mean. To the LLC's bank account. And then you now have to change that from a dollar to a US DC. And then I have this. Okay. What happens when you don't send me the money?

• 54:15Speaker 02

  Who is you in this case?

• 54:17Speaker 03

  The LLC that of the coin I own, but I don't have any legal documents signed.

• 54:21Speaker 02

  It would be the same thing as if you're a shareholder of a company and the company decides to not honor its agreements. You just sue the LLC.

• 54:28Speaker 03

  But I don't have a legal agreement with you. You just told me I didn't sign anything.

• 54:30Speaker 02

  You, you, you, the token holders do. The registered token holders absolutely do.

• 54:35Speaker 03

  So what, what?

• 54:36Speaker 02

  No, no, no. So wait, hold on. So I buy the token. Yep.

• 54:39Speaker 03

  And

• 54:40Speaker 02

  Right to register with the LLC if you choose, right?

• 54:43Speaker 03

  And then, and then I sign all the legal documents to show and I actually own a piece of this LLC.

• 54:47Speaker 02

  Correct.

• 54:48Speaker 03

  So where did we just save on transaction costs?

• 54:50Speaker 02

  Well, you say the transaction costs because the actual sending back and forth of like, I'm trading you this watch for some US DC. Right? Is seamless. The posting to an exchange to actually

• 55:01Speaker 03

  But that sending of

• 55:02Speaker 02

  Buy.

• 55:03Speaker 03

  But sorry.

• 55:03Speaker 02

  Figure out like

• 55:04Speaker 03

  You don't send

• 55:05Speaker 02

  Wait right now. Zach, if you

• 55:06Speaker 03

  When you buy, sorry, when you buy a share, let me be clear. When you buy a share of the LLC.

• 55:11Speaker 02

  Yeah.

• 55:11Speaker 03

  You're not sending me a physical box of the LLC in the mail. Right? Like it's a ledger that the attorney for the LLC keeps of which I have a legal document that says I own a piece of it. So where are the transaction costs that you're getting?

• 55:25Speaker 02

  The way that, the way, the way that this works, it's their bearer shares, their bearer tokens, which is the key. Whoever has the shares, those are the unit owners, right? That cuts out a huge amount of

• 55:35Speaker 03

  According to what document?

• 55:36Speaker 02

  According to the formation of the LLC and the agreement signed when you set it up.

• 55:40Speaker 03

  And what happens when the LLC doesn't send the money?

• 55:43Speaker 02

  The people who own the LLC sue it.

• 55:46Speaker 03

  Right, so I basically, I'm still like lost, like I ultimately, for me to have a claim, let's just go through the actual bankruptcy process here, like for me to have a claim on the income that you were supposed to pay me when I bought this coin, right? I agree, I can buy a coin over the internet, take me four seconds.

• 56:04Speaker 02

  Yeah, and it's way more efficient than any possible way you can buy a share of an LLC right now.

• 56:09Speaker 03

  Well, that's part of what I'm not 100% sure is true, nor is that necessarily like an important problem.

• 56:14Speaker 02

  Well, but it actually is a very important problem. It actually argues one of the most important problems that we face today is

• 56:18Speaker 03

  Look, when I buy something

• 56:19Speaker 02

  Your liquidity in long-term assets.

• 56:21Speaker 03

  It's not about liquidity, right? It's about protections and rights.

• 56:25Speaker 02

  It's not liquidity.

• 56:26Speaker 03

  No, so like, the reason, the reason it takes a little bit of time for me to go and purchase a piece of an LLC, is there is a LLC operating agreement, right? That I need to do diligence on and read to make sure that whatever it is I'm buying is legit. I have to look at the financials, and then, there's an equity purchase agreement. And in the LLC documents, it can be like a profits interest or whatever, but there's an LLC doc, there's a purchase agreement. It's a legal document that I sign.

• 56:54Speaker 02

  Yeah, and that's the thing that with our structure, for this one example, there are five more we're gonna get into, I hope. This is an example where that is the, that is the piece, the purchase agreement, the market making, the transfer that crypto has leverage on, it's massively valuable.

• 57:07Speaker 03

  But when I buy your coin,

• 57:10Speaker 02

  Uh huh.

• 57:10Speaker 03

  Do I sign a purchase agreement?

• 57:13Speaker 02

  You don't need to.

• 57:14Speaker 03

  So you're telling me, and I just want to make sure I get this, I can buy, I can buy your coin?

• 57:19Speaker 02

  You need a purchase agreement to buy this iPhone, this, this, this watch for me.

• 57:22Speaker 03

  But you're not telling me that that watch is gonna deliver a thousand dollars a month?

• 57:25Speaker 02

  Doesn't matter, because you're an accredited investor, right?

• 57:28Speaker 03

  An accredited investor has absolutely nothing to do with the fact that you could not send me the money.

• 57:32Speaker 02

  It doesn't actually really matter, because here's the thing. You, no, let me, if you, instead of just being, let me just try to explain this to you, because it's very important to understand, it seems like we're missing each other. There are lots of things in the world, most things in the world are transacted without purchase agreements. Do you agree with that?

• 57:46Speaker 03

  When you take physical possession of the thing, and that is all you care about.

• 57:50Speaker 02

  I agree with that statement. Do you agree that most things in the world are transacted without a purchase agreement?

• 57:56Speaker 03

  Most physical objects that aren't about a future price.

• 58:00Speaker 02

  I'm saying things. Most transactions by most people are conducted. There's no purchase agreement when I go to dinner. Is there a purchase agreement when I go buy dinner from someone?

• 58:08Speaker 03

  Because you ate the food.

• 58:10Speaker 02

  Well, well, that could be argued.

• 58:12Speaker 03

  They're not. If you show up, if you show up at, at like, you know, Del Posto, it just closed now and you're like, hey, you know, you owe me 17 future dinners. Get him's getting a contract.

• 58:26Speaker 02

  Yeah.

• 58:26Speaker 03

  You and Del Posto.

• 58:27Speaker 02

  Really clear. You're, you're conflating things, which I.

• 58:30Speaker 03

  Oh, I'm conflating the difference between a one-time transaction and a promise of future cash flows.

• 58:35Speaker 02

  I'm sorry. That's not, there's no promise of future cash flows for owning a piece of an LLC, by the way. That's another thing you're conflating. You buy an asset. You buy anything. You buy.

• 58:43Speaker 03

  I find this thing without a promise of future distributions?

• 58:46Speaker 02

  A hundred percent. You know, how many, how many equities, even the public markets, you get future distributions from just out of interest? Almost none. Right? It's a promise of maybe someday some profit. That's actually how most equity markets work. Right? So this conflation where you're saying, oh, no, it's different because you promised me a cash flow. That's bullshit. When I invest in startups that I do all day long, maybe someday I get paid back on the equity value. Am I buying it because I think there might? So it doesn't. So the thing you got to step back and understand here, right? The beauty of the crypto system for doing something like this, right? There are tokens which are pretty damn hard to fake. You do have to do your diligence. They're real. A hundred percent. You do have to do a bunch of diligence on what you're investing in, right? A hundred percent.

• 59:27Speaker 02

  But it is literally just like buying in any other form, an asset or anything you can buy. Where by the way, this idea that, oh, there has.

• 59:34Speaker 03

  So Sam, you're telling me, you're telling me, so I'm going to do, I gotta do all the transaction costs of homework. Not the like natural transaction.

• 59:41Speaker 02

  Things in the world.

• 59:42Speaker 03

  Right. I gotta do, I gotta do the diligence on the company. I gotta do diligence on your financial statements. I gotta diligence on the LLC. I gotta read the operating agreement.

• 59:49Speaker 02

  If you choose to, I buy, I invest in tons of companies with none of that diligence, but I, if you choose to, you have that option. Yes.

• 59:55Speaker 03

  Yeah, I mean, if I'm gonna buy an established LLC and trade it and do all like, I might as well probably check the mix.

• 1:00:00Speaker 02

  But again, it depends on how you value your time and how you value the trust of the people who otherwise hold it. I mean, the reality is I buy, I mean, talking about equities, it's like, you think people, most people buying a stock go and do all that homework?

• 1:00:12Speaker 03

  No, because they're registered with the LLC and they have to file financial statements. And there's like layers of regulation that force them to do real things.

• 1:00:20Speaker 02

  And that's what, by the way, that's the whole point. Let's be clear, what those layers of regulation do is make those securities relatively, setting aside 70% sell offs and where the market actually traded these things, for retail investors, very safe. They also make them very low growth, right? They make, and they make it available to a tiny sliver of the assets in the world.

• 1:00:38Speaker 03

  Sorry, you're telling me, no, let me, let me just unpack this.

• 1:00:41Speaker 02

  Assets in public.

• 1:00:42Speaker 03

  You're telling me, you're telling me that the, the, the SEC rules make them low growth, which is like, I don't know.

• 1:00:50Speaker 02

  Rules make, are so, are onerous in a way that protect retail investors at the cost of making it almost inaccessible for almost every company to access, right?

• 1:00:59Speaker 03

  Being a public company is hard. I agree with that because the bar for not scam people is high.

• 1:01:04Speaker 02

  Fewer public companies today than there've almost been in all of human history, human history's strong in the last 50 years. That's why, right, um, you end up with a world, by the way, well, those assets are massively overvalued because they're the only liquid things people have access to, right?

• 1:01:19Speaker 03

  I just want to go back to, I want to go back to.

• 1:01:20Speaker 02

  There's an illiquidity discount, uh, cost to everything else, right?

• 1:01:24Speaker 03

  So I just want to go back to the, to the coin transaction because like, I don't want to conflate public equities with private all and all this stuff. Because I feel like we're in, I feel like we're in crypto solves this land and I want to go back to the actual like, how this crypto is. Well, hold on, wait, one, I just, one specific question, okay?

• 1:01:39Speaker 02

  Yeah.

• 1:01:39Speaker 03

  Assume I do all my homework or I'm like an idiot and I just want to buy this coin because Sam says it's cool, right? Like, I buy the, I buy the, I buy this bearer coin, which I really want to unpack here for a second. And I've already, I've already incurred all my like homework transaction fees. I buy this bear coin.

• 1:01:56Speaker 02

  Just by by an Android phone or an iPhone, you do some homework?

• 1:02:00Speaker 03

  Yeah, so you've told me, Zach, this bearer coin is an owner of this LLC and has rights to the future distributions of it. That's what you've told me. Now I've purchased this coin via a wallet that I own. Okay, coin goes to me.

• 1:02:16Speaker 02

  By the wallet, you custodied in a wallet.

• 1:02:18Speaker 03

  Custody, yeah, I sent you USDC, you gave me custody, totally understand. That makes sense. Okay, now, you don't send me the money.

• 1:02:28Speaker 02

  Who's you?

• 1:02:29Speaker 03

  You're the LLC. You have always been the LLC this time. Like, so you send me, you said you told me you would send me the money.

• 1:02:36Speaker 02

  To be clear, there's a distribution. Let's be really specific about what you mean. There is a distribution coming from the LLC to the owners of the LLC.

• 1:02:44Speaker 03

  Correct. And you just like, don't do it.

• 1:02:46Speaker 02

  Oh, does it send it to no one? Does it send it to some, some?

• 1:02:49Speaker 03

  How about this? How about this? You get in a fight with me about crypto on a stupid cartoon podcast, and then you decide Zach is kind of a shitty person. I don't like him that much. And now I'm gonna distribute the rental income I received to everybody but Zach. Because fuck that guy. I don't really like him.

• 1:03:10Speaker 02

  You just sue me in normal courts.

• 1:03:11Speaker 03

  Okay, so now I take you to court, and I want to go through this. I go to court, I hire an attorney. The attorney.

• 1:03:19Speaker 02

  I want to clarify one thing, which is important. It's not impossible, but it's a hell of a lot harder, right, with crypto than with a lot of systems to say, fuck that Zach guy. It's potentially easier to say.

• 1:03:29Speaker 03

  It's literally not true, because you control the bank account and you can do whatever you like.

• 1:03:32Speaker 02

  No, that's wrong. Let me explain why. It's like, the bank, the money flows from a traditional bank account into USDC into the Dow, okay? I could say, and that is actually how distributions go out.

• 1:03:43Speaker 03

  No, I get it. Like, stop right there for one second.

• 1:03:45Speaker 02

  Yeah.

• 1:03:45Speaker 03

  You put the money from the LLC bank account into the Dow, right?

• 1:03:50Speaker 02

  This is my point, actually. This is why I was asking a very specific question, which is, is your problem that I sent it to no one, or I just sent it to everyone but Zach?

• 1:03:56Speaker 03

  Look, whoever controls the bank account can do whatever they want.

• 1:03:59Speaker 02

  Well, no, that's actually, that's like, again, I just want to be really clear. That is, in the most abstract sense, true. But when you get into crypto, I'd actually argue you get actually additional guardrails for free, which is that it is way hard, it is easy for the LLC person who owns the bank account to say. Fuck all the LLC members, right? Like, I'm not gonna like, put my USDC inside to anyone. I agree with you. And then, by the way, all of the owners of the LLC go and see the shit out of the person who's administering it and doing that, right? Normal court system, no advantage there, but like, whatever. The scenario you pointed out is somehow I'm mad just at Zach, right? But not at all the other, like, LLC members. So I somehow just target him.

• 1:04:39Speaker 02

  That's actually reasonably hard to do. Not impossible, but maybe I have to fork something. I have to go do a Celsius weird shit where I'm-

• 1:04:45Speaker 03

  Let me just start with like, look, you know, angry vindictive clever people are angry vindictive clever people. And this is how people get screwed up.

• 1:04:51Speaker 02

  It doesn't have to have hinges none of that.

• 1:04:53Speaker 03

  Right, exactly. And so you decide not to somehow, because there's like, probably 30 ways now to do it, because you could do it at the bank account level, and you can do it at the DAO level, to not send me the money. And then I go and I have to sue you. I agree with that. And I hire an attorney, and the attorney says, this is, this is really interesting. Can you send me the purchase agreement that you signed for your shares in the LLC?

• 1:05:14Speaker 02

  I'll see it because you have a bearer token. It's gonna, and that'll stand up.

• 1:05:17Speaker 03

  In what? Okay, I have a bearer. What does it even mean?

• 1:05:20Speaker 02

  It hasn't been tried yet. You're gonna need to bring it through the courts. I agree with you at some point, but there's a lot of things that work like that, where the reality is the first-

• 1:05:26Speaker 03

  What am I, what am I showing the attorney that I owe?

• 1:05:30Speaker 02

  Your, your transaction on chain and your access to the wallet.

• 1:05:33Speaker 03

  So I, I'm walking-

• 1:05:35Speaker 02

  The idea that you're pushing that for some reason, courts will like, completely disregard that? Look, you might be right. There's gonna have to be case law developed about it. I think it's extremely unlikely, right? And that's a system, I think, that you're gonna, like, if that's your key pressure point is, courts will never look at digital systems and understand digital bearer rights and transactions and who sold things. I think that's a pretty weak argument.

• 1:05:56Speaker 03

  That's not my argument. This is my actual argument, which is we've walked through kind of like, basically, you have to do all the same homework, all the same diligence, all the same, all the same checks. Also, by the way, also by the way, we now have two layers of places where you can screw me over, because we have the bank account and the DAO.

• 1:06:11Speaker 02

  We can get into that. I think it's a lot less, and I, but, but you can, we can argue. I think that's a minor, yeah.

• 1:06:16Speaker 03

  Take it all the way back to the beginning, which is you said- Cheaper transaction cost.

• 1:06:21Speaker 02

  Totally.

• 1:06:21Speaker 03

  How in the world is this going to be cheaper transaction cost?

• 1:06:25Speaker 02

  Bear token, you have a bearer token for an LCI I want to invest in, right? I want to invest in it, not because I've read every single line of every rule of my, by the way, I bet money as a professional VC and probably a lot of people on the table, no one reads every line, right? Like, so the idea that there's this perfect diligence in the physical world that goes away is bullshit. But I want to invest in it, like, I want to invest in it, a bunch of people I trust are invested in, and I've heard a lot of great things. I saw some cool analysis that I want to invest in it. The idea that I can basically broadcasting, I'd like to buy it, right? Every person that's a holder can get a message and say, oh, I'm interested in selling, hit a bid and transact in seconds versus going through a bunch of lawyers and paperwork. Not to mention to figure out who the hell even owns the thing in the first place and who to talk to. Like, I literally do this, I'm sure you have too.

• 1:07:08Speaker 02

  Go try to sell private shares on a, of a startup. Let's make this really easy. It's a complete pain in the ass.

• 1:07:14Speaker 03

  You know why? Because the company prevents me from doing it because they have legal documents.

• 1:07:18Speaker 02

  Zach, that's completely wrong, right? It's not because they're going to buy it. I have signed plenty of agreements and I invest in plenty of companies that are free and clear to transact. The problem is, is that there's nowhere, there's no server in the world, right? Where this stuff is all registered and easy to message around. Crypto creates the opportunity to create that, and that's a massive deal.

• 1:07:36Speaker 03

  The reason, but that's just not true. Like, it's just simply not, no, it's not. Because the reason this stuff exists is because if you want to buy my token in a company or my equity ownership in a company,

• 1:07:47Speaker 02

  Yeah.

• 1:07:47Speaker 03

  you want to have financials of that company.

• 1:07:50Speaker 02

  Zach, again, you're.

• 1:07:51Speaker 03

  I'm sorry, it's bullshit to want to understand the underlying financials of that thing I buy?

• 1:07:56Speaker 02

  That's, Zach, it's bullshit that that's your argument, right? It's bullshit because that's like being like, I just, I would challenge you, it's such an abstract, it's such an abstract argument because it's basically saying like.

• 1:08:07Speaker 03

  It's the opposite of an abstract argument. It's a specific argument that like, if I want to buy something, I need to see, I need to know what it is.

• 1:08:16Speaker 02

  Your model of the world that you're putting out as, as like such gospel is that somehow like every company in the world has perfectly honest financials that everyone accesses before they buy things? And that's complete bullshit, right? Like, that's actually not, that's almost no companies in the world function.

• 1:08:30Speaker 03

  No, I'm not suggesting they have to be perfect.

• 1:08:33Speaker 02

  The public markets are a tiny section of the asset base of the world. Tiny segment.

• 1:08:39Speaker 03

  My suggestion is that even private companies, startups, ones I've run, I've run multiple private companies, I've, I own shares in private companies.

• 1:08:47Speaker 02

  Do you have financials every year for every startup you're invested in?

• 1:08:50Speaker 03

  Of course not.

• 1:08:51Speaker 02

  No.

• 1:08:51Speaker 03

  But if I'm going to.

• 1:08:52Speaker 02

  Do you even have financials every year for every company you invested in from zero?

• 1:08:56Speaker 03

  I have legal rights to them.

• 1:08:58Speaker 02

  No, I enter the company all the time that have no financials because they just got started.

• 1:09:02Speaker 03

  No, totally. Of course, but you're not talking about, sorry, because if I'm going to purchase something at any point, I want to understand the thing I'm purchasing.

• 1:09:12Speaker 02

  Yeah, to some degree, there's a spectrum, right?

• 1:09:15Speaker 03

  Right. So what I, so you're suggesting that you're putting a, a real estate coin, right? And real estate coin is in some public address somewhere.

• 1:09:24Speaker 02

  We'll call it a, a, let's call it a specific REIT coin as an example.

• 1:09:28Speaker 03

  Coin, okay. So like for me to purchase this REIT coin and to know what it is, I still want to understand the same things, whether it's a coin or not.

• 1:09:36Speaker 02

  It's something, right? That is just going to be very dependent on who you are as an investor, what your thesis is, like who else is involved? Like this idea that, oh my God, like there's not perfectly audited financials up to the standards of like a public company and therefore it's bullshit is crazy.

• 1:09:52Speaker 03

  All right, let me, let me walk through and then we can move on from this one because it's so crazy.

• 1:09:56Speaker 02

  I can keep, I just, I think that, I think you're really setting up a straw man here.

• 1:10:00Speaker 03

  It's not a straw man. It's actually the opposite again of a straw man, which is very specific use case of like how this works and why it's better.

• 1:10:06Speaker 02

  I've given you a very specific version of the, which gives you advantage in, which is.

• 1:10:10Speaker 03

  We have, okay, so we have, let's just create two different entities and do the exact same thing.

• 1:10:15Speaker 02

  Sure.

• 1:10:16Speaker 03

  There's two LLCs. One is a normal LLC that owns like a shopping mall in Wyoming. And the other is a normal LLC that owns a shopping mall in Wyoming, except it's like run as this Dow thing, right?

• 1:10:29Speaker 02

  It has a rapper on it. Sure.

• 1:10:30Speaker 03

  It has a rapper on it. Okay. So they own the underlying assets. It's still a legal entity. It's an LLC. It owns the, the underlying income. There's an operating agreement.

• 1:10:40Speaker 02

  Yeah.

• 1:10:40Speaker 03

  That that LLC has that governs the, the actual operations and like who's supposed to own what.

• 1:10:45Speaker 02

  Sure.

• 1:10:46Speaker 03

  There are owners of this LLC.

• 1:10:49Speaker 02

  Yep.

• 1:10:49Speaker 03

  And each one of those owners. Signs, a legal document that says, I own a piece of this thing. I have a either profits interest.

• 1:11:00Speaker 02

  Yeah, and that's how this thing starts on day, day one, when we inception these things, that's basically how they get set up, correct?

• 1:11:06Speaker 03

  Right, okay, so there's like legal rights, legal ownership for people who have done the same thing.

• 1:11:12Speaker 02

  Yep.

• 1:11:13Speaker 03

  And now what we say is, we have this problem we're trying to solve theoretically, which is, we want to be able to like freely trade the ownership in this.

• 1:11:23Speaker 02

  The trading these years has to be way lower, right? Because it'll make them more valuable, right? Because liquidity is valuable.

• 1:11:31Speaker 03

  Okay, well, they don't.

• 1:11:32Speaker 02

  Liquidity benefit and illiquidity discount. That's how the world works. Because if I can trade something, it makes it more valuable for me to own it.

• 1:11:39Speaker 03

  Okay, but it doesn't change the underlying cash flow from the thing. So this idea that it makes it more valuable is a whole separate speculative question that is.

• 1:11:47Speaker 02

  To be clear, there could be zero cash flow. It could be this thing just pulled up.

• 1:11:50Speaker 03

  Well, let's just do, let's just do the thing, like normally, humans like to buy something because they're going to get future cash flow.

• 1:11:59Speaker 02

  In theory, except for the fact, again, the public, the public markets, we'd argue, there's almost no actual dividends to issue out, right?

• 1:12:04Speaker 03

  Sure, but you believe that this company's equity is going to.

• 1:12:08Speaker 02

  It's only your model of like, oh, this is why you buy a thing a little bit rich, right? People believe in appreciation. Cash flows is part of that potentially.

• 1:12:17Speaker 03

  Okay, they believe.

• 1:12:19Speaker 02

  They believe, they think they'll be more valuable tomorrow than they are today, whether it comes out as cash flow.

• 1:12:24Speaker 03

  And the reason, yeah, let me just, we don't, let's not conflate cash flow with dividends for a second. I think that's what you're getting hung up on is the idea of distributions versus cash.

• 1:12:32Speaker 02

  Sure, so companies also lose money every year that have, that have negative cash flow that are, maybe they're worth less today than they were six months ago, but.

• 1:12:39Speaker 03

  Sure, but like the reason people own pieces of anything, real estate or.

• 1:12:44Speaker 02

  Because in the future, they'll be worth more than they're worth today.

• 1:12:47Speaker 03

  And the reason they think they're going to be worth more than they're worth today is because eventually, they make money. And eventually, eventually, that money-making machine can pay me as a shareholder. That is.

• 1:12:58Speaker 02

  In some form, yes, I agree.

• 1:13:00Speaker 03

  Right, that is the literally equities by definition. Okay. So, we now have these two things, and you say, for some reason, we want people to be able to freely trade ownership.

• 1:13:12Speaker 02

  What do you mean for some reason? It's for a very specific reason, which is that liquid things are more valuable than illiquid things. That's, that's just how it is. And there's a very good reason for that, right? Which is like, if tomorrow I need some money, I have a liquid thing.

• 1:13:24Speaker 03

  Sam, I would tell you that the private markets of technology companies in the last one year would tell you that that is not actually true. When you have highly liquid stock up trading.

• 1:13:34Speaker 02

  We had a weird anomaly. We can get into why there's nothing to do with this. I think it'd be exact.

• 1:13:41Speaker 02

  Is liquidity valuable?

• 1:13:42Speaker 03

  Sometimes yes, sometimes no.

• 1:13:44Speaker 02

  Is liquidity ever not valuable? Was the option to sell something ever not a bad thing?

• 1:13:49Speaker 03

  Why don't startup founders want people trading their stock all the time?

• 1:13:53Speaker 02

  You know, the reality is this is changing a lot right now. The answer is they don't want it because they basically want to be able to sell more and more stock to people like VCs to raise money for the company rather than just people picking up secondary shares is one reason. Two is when you have a tightly controlled calf table, it's nice to not have a thousand weird investors, not for the reason of, by the way, a legal reason, which is if you end up with too many shareholders, you have to go pummel them. So the fact that private companies don't want freely traded things in like the tech world, whatever, completely fucking irrelevant. The point is liquidity is valuable. If you drop transaction costs, make it easier to trade a token, which is a bear token. By the way, this is how.

• 1:14:29Speaker 03

  I'm sorry, but we're still, we're still not doing this because I, I just want to, because there's so many, there's so many statements dragging.

• 1:14:36Speaker 02

  You ever get called by a company?

• 1:14:38Speaker 03

  No, I know what a bear bond is. I'm not a moron. I understand what a bear thing is. There's a reason we got rid of them because people were killing each other to own them.

• 1:14:47Speaker 02

  Why did we get rid of them? Why do you think we got rid of them?

• 1:14:49Speaker 03

  It's absolutely insane that somebody can murder me and take my bear bond and have my money. That's why we got rid of them. That's a crazy thing.

• 1:14:57Speaker 02

  Nah, there's two reasons bear tokens went away, right? And I think they're, they're, they're important to understand because they were bringing them back, right? In turn, in a sense, right? One reason absolutely is from a security standpoint, right? By the way, banks talk about regulatory capture.

• 1:15:12Speaker 02

  Or bearer certificate is good for banks? No, banks don't want bearer certificates. Banks want to custody this shit for you so they can make profit off of it, right? So there's a whole regulatory capture story to why they went away. And two is, you don't want to lose the fucking certificates. I would argue this is a place where crypto has real leverage, right? Which is, yes, some idiot's gonna lose their private key, right? And that's bad. And like, systems should evolve to like, help them with that or whatever. And you can't save people from their opponents.

• 1:15:35Speaker 03

  Help them with that or whatever. When they lose their token to the equity, we'll help them with that or whatever.

• 1:15:43Speaker 02

  There's plenty of people, there are, let's be really clear. There are plenty of companies that work on the custody problem for people who are unable and unwilling to self custody, right? The option is self custody.

• 1:15:52Speaker 03

  Everybody, by the way, no one's gonna self custody their like, you know, interest. I just want to finish this story, sorry, Sam.

• 1:15:59Speaker 02

  I'd self custody a hell of a lot. I mean.

• 1:16:01Speaker 03

  I know, you're crazy, man. Like, that's crazy to do that.

• 1:16:04Speaker 02

  What, really?

• 1:16:05Speaker 03

  Yes, because if you get, if you get hacked or corrupted in any way and you're like.

• 1:16:10Speaker 02

  Yeah, sure, then it's, I think on a spectrum of risks. I'll give you an example, I, I both self custody Bitcoin and I had Bitcoin with third parties. You know what I've been doing the last day? I've been calling third parties and saying, are you solvent? Are you gonna sweep my Bitcoin? Where are we on this, right?

• 1:16:24Speaker 03

  Well, let's not get into the.

• 1:16:26Speaker 02

  I know, this is important.

• 1:16:27Speaker 03

  But that's self custody of a, that's self custody of a, Tim, that's self custody of a, of a, of a digital asset, which is a totally different thing than self custody of a physical asset, which is not getting into.

• 1:16:36Speaker 02

  Same fucking thing. I don't, why do you think that's a different thing? Explain to me why having a, a, a digital bearer bond, right? Effectively, we use that example, or digital self custody is any different than me holding this watch?

• 1:16:46Speaker 03

  Okay, because when you, we, we got rid of physical bearer bonds in the world, right?

• 1:16:54Speaker 02

  Or regulatory capture reasons as, as, and security.

• 1:16:57Speaker 03

  No, no, we got rid of physical bearer bonds because it's the single dumbest way to hold money. Because having physical possession of something is making, showing that that's.

• 1:17:10Speaker 02

  You know what, you know why having physical custody is bad? It does historically make it harder to trade. If I have a physical stock certificate, I'm like, hey, I want to sell that to Logan and Logan's halfway across. Well, it's really fucking hard to organize that sale.

• 1:17:22Speaker 03

  You know what else is like really annoying? You know what else sounds really annoying when you have a physical thing? Tim, Tim, what about a hurricane? Or a fire? Or a? Or someone robbing you or like, I don't know, the electrical grid goes down and can't open your seat. That's

• 1:17:39Speaker 02

  Nothing that self custody was a bad idea was yes, there's some security issues, right?

• 1:17:44Speaker 03

  Some security issues?

• 1:17:46Speaker 02

  You can't have a market, but that's the beauty again of crypto, which I think you have to understand, which is

• 1:17:51Speaker 03

  You've recreated bear bonds is what you're trying to sell me?

• 1:17:54Speaker 02

  Valuable. That's hugely valuable in a world where, by the way, those bear bonds have a new property.

• 1:17:59Speaker 03

  You have literally turned back time to 1840, where I had to physically own the thing and show possession of it to get my money back. We got rid of this stuff in like the last 150 years.

• 1:18:11Speaker 02

  Okay, for pre technological reasons, now that I can

• 1:18:16Speaker 02

  No, no, no, Zach, the, the fact that I can now self custody something, right? Own it, hold it. And when Logan, by the way, you have your

• 1:18:24Speaker 03

  Lose it, have it stolen, have it scanned.

• 1:18:28Speaker 02

  You have your LLC units. No one who the fuck owns them. I want to put a bid and I have no idea to talk to. I have no idea how to organize a trade or Beautiful new system. I can self custody shit. They're on the chain. They're matched ones.

• 1:18:40Speaker 03

  Sorry, because I wanted to get through this.

• 1:18:42Speaker 02

  Second, that's, I can't, I mean, as long as you believe that liquidity is valuable, which maybe you don't, it sounds like, then that is effectively more better system.

• 1:18:50Speaker 03

  I think liquidity has value in the right places, at the right times, for the right things, with the right protections.

• 1:18:55Speaker 02

  Explain to me one scenario where liquidity, where you take two assets, say, I'd rather have the illiquid one versus the exact same liquid one. Explain as an investor, give me one example where that would ever be true.

• 1:19:06Speaker 03

  Well, for me to have this illiqu- this liquidity, do I have to own a coin that can be stolen from me and then I lose possession of it?

• 1:19:14Speaker 02

  Specific question you're not answering, which is

• 1:19:16Speaker 03

  Well, I'm not answering it because in isolation, it makes no sense because I have

• 1:19:21Speaker 02

  Liquid version, Zach, when would you ever as an investor choose the liquid version over the exact copy that was liquid?

• 1:19:28Speaker 03

  Because I'll, I'll give you, okay, besides the fact that this is like, you know, do you This thing that is

• 1:19:34Speaker 02

  Because you don't

• 1:19:36Speaker 03

  I mean, I do have an answer and I'll give it, I'll give it one second. Okay. First of all, I would prefer to have liquidity on most things as long as.

• 1:19:46Speaker 02

  On everything.

• 1:19:48Speaker 03

  No, as long as that liquidity doesn't put the underlying asset at risk.

• 1:19:53Speaker 02

  Yeah, which I would argue that our structure has no risk, this creates no risk to the underlying structure for that.

• 1:19:58Speaker 03

  Okay, so let's talk about this in, in, in, in its real form. So you've created bearer tokens, which we means we have like the 1840s version of owning something. And now.

• 1:20:10Speaker 02

  Superpowers of the modern technological age, which gives us a lot of problems.

• 1:20:13Speaker 03

  Totally. So here's what happens, right? In this bearer token thing, you've got, I don't know, let's call it like a hundred owners of this bearer token. Sure. Five of them get hacked.

• 1:20:23Speaker 02

  Sure.

• 1:20:23Speaker 03

  Not a hundred, five of them get hacked, right? Now they lose their money, right? Cause they can't like physically show that they own this thing. And now that liquidity that I really wanted, cause it was cool and I could trade it. All of a sudden everyone's going, well, wait a minute, I can get hacked and lose all my money.

• 1:20:40Speaker 02

  This is, this is the argument you're gonna rely upon? I'm just pushing you, your argument that you're gonna rely on crypto not being valuable and bearer token not being valuable is because people might get hacked. That's like your summation?

• 1:20:52Speaker 03

  No, I'm gonna go through like 40 reasons why it's not valuable. But I'm gonna start with the first one, which is that if somebody steals it and I have no recourse. I've now traded liquidity for massive risk that all of my money is going to be stolen. And this is not, sorry, so just to be clear, sorry. It's not just, it's not just the five people whose money got stolen.

• 1:21:13Speaker 02

  Okay.

• 1:21:14Speaker 03

  Right? Because now everybody who's potentially going to invest in this, including the other holders go, wait a minute. In order for me to get liquidity on this thing that I want to own, I've now got this like risk over here that actually happened to my people.

• 1:21:29Speaker 02

  Being hacked, that's the risk you're worried about?

• 1:21:31Speaker 03

  That's one risk.

• 1:21:32Speaker 02

  I'm just trying to explain, I'm trying to go through your example, but I don't understand it.

• 1:21:35Speaker 03

  That, well, the, okay, the first risk that we can talk about here is the fact that like, if I have to bear this, hence your bearer token.

• 1:21:42Speaker 02

  You don't, to be real, you don't have to, if you want, you can custody with someone, you can custody with a thousand people, you can have insurance on it. You can do all the traditional stuff you already do, if, and you can pay for it, by the way. You're just saying it's an option to self custody it.

• 1:21:55Speaker 03

  Sure, I can give it to a third party who now I have to go through all the

• 1:21:58Speaker 02

  Exactly what you do with your equities and exactly what you do with your cash and everything else in your life.

• 1:22:03Speaker 03

  Totally, yeah.

• 1:22:05Speaker 02

  You're not forced to sell custody things. It's an option and a valuable.

• 1:22:08Speaker 03

  I understand it and my point is what we're going to end up with at the end of this isn't exactly the same centralized system we have today.

• 1:22:13Speaker 02

  No, no, I disagree completely.

• 1:22:15Speaker 03

  You just said you're going to centralize the custody. You literally just said you're going to centralize.

• 1:22:19Speaker 02

  People have. And by the way, I'm not even focused on this issue because again, we go back to the point. The point is long tail liquidity for the majority of human assets, which does not exist right now because they're impossible to trade.

• 1:22:29Speaker 03

  I want to go back to this because I have it in my head and I keep getting distracted with some of these other weird detours. Okay. So then we go back to this retail thing. Look, and we could probably cut to this maybe.

• 1:22:39Speaker 02

  This is the problem. You guys didn't control the edit, but keep going.

• 1:22:41Speaker 03

  Oh, we're not gonna, we're not gonna screw you over or anything like that. It's just more we went on detours and it's like a little.

• 1:22:46Speaker 02

  Wait till Leron gets his hands on.

• 1:22:48Speaker 03

  I promise, I promise I'll do that. No, no. So we have, I want to go back to the LLCs. We have these two LLCs.

• 1:22:55Speaker 02

  Sure.

• 1:22:55Speaker 03

  One has a bearer token, one does not have a.

• 1:22:59Speaker 02

  You know, they're going to get a query, easy to bid against, easy to transact, and one is nothing.

• 1:23:05Speaker 03

  Got that. So if I want to buy into one of these LLCs.

• 1:23:11Speaker 02

  Yeah.

• 1:23:11Speaker 03

  Right? Because I, the reason I want to buy into an LLC that owns some underlying asset is because I think it's interesting to own that underlying asset, right?

• 1:23:22Speaker 02

  Well, you think it'll be worth more if the LLC will be worth more in the future than it is today. Yeah.

• 1:23:26Speaker 03

  Okay. So how do I find out about that underlying asset?

• 1:23:31Speaker 02

  Okay, this goes back to, this is your other argument. Your other argument is to think of as one is like, oh my God, self custody is scary if you want to. Your second argument is there's not enough to diligence, right? I can't look at some financials.

• 1:23:41Speaker 03

  No, I'm not saying there's not enough. I'm not saying there's not enough. I'm just asking how I do it.

• 1:23:44Speaker 02

  How do you, what do you want? The way I do it as a private market investor, you call people who are involved, you look at what you can, you ask for, you can ask the Dow for, for statements or some sort of information. You can go look at the property. There's absolutely no difference, right? Between either of these routes, right?

• 1:24:01Speaker 03

  Yeah, I agree. Same thing, right? Like I, I agree with you actually. Like so.

• 1:24:05Speaker 02

  Yeah.

• 1:24:06Speaker 03

  At first I have to find out about it.

• 1:24:08Speaker 02

  Sure. Which is again, gonna be a lot easier to digital space than not, but not massively the point.

• 1:24:12Speaker 03

  Well, also, I mean, like the LLC can also create a website too. Um, and like market it. So like being on a chain doesn't actually make it discoverability any better.

• 1:24:20Speaker 02

  No markets and no liquidity and no one, I mean, this is why they didn't, for a whole bunch of reasons. We keep going.

• 1:24:25Speaker 03

  Well, the reason most groups don't do this is because they don't want random shareholders, but that's a different story. Like the re, so I, I put some information on the company now. I put some information about my LLC on the web.

• 1:24:39Speaker 02

  Or they might not, and the third party might do it, but sure. There's some information that you makes you want to invest.

• 1:24:45Speaker 03

  Uh huh. Which is like the first step to having someone get interested is I have to like share a bunch of intel about the business. I like literally what it does, uh, what it owns, how much money is, whatever.

• 1:24:57Speaker 02

  Who knows?

• 1:24:57Speaker 03

  There's something about this business. So there's a discoverability. I'm just like going through like, how do we actually create liquidity here?

• 1:25:02Speaker 02

  Discoverability. Not a problem crypto really dramatically. I will, I mean, I think I can come with arguments. I don't think it really matters. I agree with you on that.

• 1:25:09Speaker 03

  Somehow I've got to discover it. Okay.

• 1:25:11Speaker 02

  Sure.

• 1:25:11Speaker 03

  Then I want to know.

• 1:25:14Speaker 02

  I want to see it. I want to transact. That's where crypto has leverage.

• 1:25:18Speaker 03

  Well, I'm not there yet. So like, now I want to understand, okay, these are the financials that you've sent me or I've looked at that or whatever.

• 1:25:25Speaker 02

  Financial thing, it's such a red herring. You do some research, you want to buy a thing. Okay. Can we agree with that?

• 1:25:30Speaker 03

  Yeah, I'd like to buy it.

• 1:25:33Speaker 02

  Okay, great.

• 1:25:34Speaker 03

  And now, now I call my, which by the way, just to be very clear, is the exact same thing all the way up and down the stack.

• 1:25:40Speaker 02

  A hundred percent agree. There's no difference. I mean, I'll make arguments some other with some of those, but for the sake of this debate, no difference in discoverability and diligence.

• 1:25:48Speaker 03

  Right. So we're, we're like 98% of the way to the finish line. We've found out about this thing.

• 1:25:53Speaker 02

  That's the thing. That's the thing. You're not 98% of the way to the finish line. I just want to know you want to invest and play. You're there.

• 1:25:59Speaker 03

  Well, no, I'm gonna walk you through how I do it in the real world and then we can talk about how we do it and because I've done this. So I

• 1:26:05Speaker 02

  I've divided any time.

• 1:26:06Speaker 03

  I've I've found something that's interesting because someone told me about it or they had a website or whatever.

• 1:26:11Speaker 02

  By the way, I wouldn't have access to their full financials.

• 1:26:13Speaker 03

  No, but I got access to some information, right?

• 1:26:17Speaker 02

  Some information, nothing new, but audited financials, maybe we're starting with nothing, none of that stuff has been scoped.

• 1:26:22Speaker 03

  That's that's solved by the fact that there's an LLC, which I I I think is fair. Uh, so there's an LLC that like underlying has the governance structure here. I go, I do my homework, I call, I talk to the CEO. This is something that's actually interesting.

• 1:26:37Speaker 03

  Okay, I'm like a normal rational investor who wants to understand what I'm buying. And and then I say, towards the end, by the way, of the timeline here, because I've done most of the work.

• 1:26:47Speaker 02

  Maybe towards the end, keep going.

• 1:26:48Speaker 03

  I would like to buy this thing, uh, or really, I want to buy a share of this thing. Okay. In a in a non crypto world, let's just describe what happens. My attorney requests an equity purchase agreement from the company.

• 1:27:06Speaker 02

  Well, maybe, maybe there aren't shares, maybe this company doesn't want to sell you shares. Maybe you need to buy from second, you're buying from some other person. Maybe the CEO says, you know what? We don't need more capital. We're not going to actually take money into this.

• 1:27:16Speaker 03

  But at the end of the day, we're still in a situation where there is a seller of a thing I want to buy that we how I got to that thing is the exact same. We've already agreed.

• 1:27:24Speaker 02

  The point is you're trying to simplify by saying you're buying from the company. We're actually

• 1:27:27Speaker 03

  I don't care who I'm buying from.

• 1:27:29Speaker 02

  You're buying it from a holder.

• 1:27:31Speaker 03

  Okay, fine, I'm buying from a holder. I'm I'm happy. Okay.

• 1:27:33Speaker 02

  You don't know who the holders are.

• 1:27:34Speaker 03

  Well, that's because the holders haven't marketed it because they're not allowed to. But this is, I'm just saying, at the end of the day.

• 1:27:40Speaker 02

  You're allowed to say you're a holder of something.

• 1:27:42Speaker 03

  Well, I can't.

• 1:27:43Speaker 02

  Rule that says you can't say you're a holder of a thing.

• 1:27:45Speaker 03

  Yeah, no, I mean, it's I mean, you can see what I own. The point is, at the end of the day, I'm buying something from a person that I found. I found this human.

• 1:27:52Speaker 02

  No, you're taking a market and saying, I'd like to buy a thing. This is what I'm going to offer. Who's willing to sell to me? Big difference, I mean.

• 1:27:59Speaker 03

  You just created what is like essentially a website that matches buyers and sellers. There's nothing to do with crypto, to be very clear.

• 1:28:05Speaker 02

  Exactly my point. This is my point from the beginning, fed of the fed server. Could you have some magical meta website like on top of some magical meta server that had all the LLC shares and the owners and their email addresses so that whenever you wanted to make a buy, you could hit a button and say, I did this on these shares. In theory, sure, never gonna happen.

• 1:28:24Speaker 03

  Okay.

• 1:28:24Speaker 02

  They're still allowed to create this from the ground up, which is super cool.

• 1:28:27Speaker 03

  No, it doesn't. No, it doesn't. Because the person still has to take their shares and turn them into coins and put them on the website. No.

• 1:28:37Speaker 02

  No, no, no.

• 1:28:39Speaker 03

  Yes, it does. How are you gonna buy them? I'm a startup shares and I have it listed.

• 1:28:43Speaker 02

  Let me, let me be really clear. If your point is that there's a lot of LLCs in the world and this is a new structure and there has to be a translation, 100% agree.

• 1:28:50Speaker 03

  But that's not what, that's not my point. My point is at the end of the day.

• 1:28:53Speaker 02

  If I have an agreement, right, which is a legally binding, normal world agreement, which gives you bearer tokens and not a new concept, bearer shares, just it is a new technological platform, which has some really fucking cool properties, which drops transaction fees and increases liquidity, what's your problem? It actually creates wealth for everyone.

• 1:29:11Speaker 03

  I mean, it doesn't do either of those things, but like, at the end of the day.

• 1:29:14Speaker 02

  It does. Liquidity, we're gonna, we're gonna go back to this whole thing where you're gonna make an argument that liquidity is invaluable. Are we back there?

• 1:29:20Speaker 03

  No, my point is that I can do the exact same thing once I make.

• 1:29:26Speaker 02

  Okay, at the same, at the same transaction cost? No way. You can do exactly the same thing.

• 1:29:31Speaker 03

  I go on, I go on.

• 1:29:32Speaker 02

  Which makes it feel irrational for more.

• 1:29:35Speaker 03

  It's not higher transaction cost. The, what I was gonna get to is the equity, equity transfer agreement's like 2000.

• 1:29:40Speaker 02

  I'm literally selling private market shares of a company as we speak. I can tell you the transaction costs are astronomical.

• 1:29:45Speaker 03

  Uh, then you're getting screwed by the attorneys because.

• 1:29:47Speaker 02

  You're gonna find the right buyers and sellers. It's a fucking mess. So like, the idea that you would argue that the make, creating more liquidity with bearer, the bearer tokens, which can be custodied if you're scared about someone hitting you with a wrench, right? And like, that doesn't create wealth and prosperity and is, is absurd. Now, you can make the argument that you don't need crypto for that, that you could do with Fed server. That can be a different debate. It's never gonna happen, as you well know.

• 1:30:12Speaker 03

  Well, you can, I mean, you can do it. You don't need Fed server. You can do.

• 1:30:16Speaker 02

  What do you need? You need, you either need Fed server or you need Goldman Sachs to stand up a private LLC market exchange, which they could do. The problem with that, right, is one.

• 1:30:25Speaker 03

  Well, you could literally go to Carda, because Carda has Carda Axe.

• 1:30:29Speaker 02

  What's the point to do this? Have you ever tried to transact that way? I mean, the reality is that's kind of the point is that it gets way too fragmented. It's interoperable.

• 1:30:36Speaker 03

  No, no, no, no, the reason, sorry, that's just not true.

• 1:30:39Speaker 02

  The intensely right to some bank or Carda or someone to say, we're going to sit on this exchange and extract transaction fees on it. Or you can do it using really fucking cool technology in an open way.

• 1:30:50Speaker 03

  The technology is not, the technology is not the problem. The reason Carda is hard to transact on is because companies don't want to list their shares on it.

• 1:30:59Speaker 02

  Well, that's, again, this is why Carda is not the right model because Carda charges an absolute fortune to companies. A lot of people are leaving Carda for this reason with respect and love for them. And they're designed for technology companies, right?

• 1:31:10Speaker 03

  Where they're designed for startups, yeah.

• 1:31:12Speaker 02

  The problem with their shares transacted are very, very simple. They don't want to have to list, right, and go public with too many shareholders. They generally want to be tightly held, right, for a whole bunch of reasons we can get into that are separate, right? And they, when they want to go out to your earlier point, they want to sell the shares because they need to raise capital for their operations. They don't want a bunch of secondary shares floating around.

• 1:31:31Speaker 03

  My point that I've.

• 1:31:33Speaker 02

  Their leads, that's very different than most of actually the asset base of the world.

• 1:31:37Speaker 03

  I guess the point I've made poorly over an hour is that in order for you to acquire shares in something, to legally own the right to a piece of an LLC, you need to sign a document that says that you own those shares. You need a legally binding piece of paper that says you need, you own those shares.

• 1:32:02Speaker 02

  And my argument to you, just to be clear, is yes and no, right? My argument to you is yes, and that, yeah, when we start S downs, everyone starts out with those normal agreements, all exactly as you described, right? Part of the agreements is the existence of bearer tokens, which represent that ownership. Does that need to be legally challenged in court someday by someone or repeatedly to establish it as case law and relied upon? Sure, that's actually how innovation happens, right? You need to actually create test cases and go through it. If you're arguing you don't think that that'll happen or that that'll be invalidated, I think that's just insane, right?

• 1:32:35Speaker 03

  I mean.

• 1:32:35Speaker 02

  We'll find out, won't we?

• 1:32:36Speaker 03

  Yeah, I mean, I, I think the idea that.

• 1:32:38Speaker 02

  But I think the thing I'd like to acknowledge, maybe, maybe if I can get to acknowledge it, is that a world, like, let's just start with principles. Liquidity, good. Do we agree with that?

• 1:32:48Speaker 03

  No. No, I don't. I don't. It's not always true.

• 1:32:51Speaker 02

  That's a fair answer. You're a smart guy. You're a smart guy. How can you possibly not believe that if you had two things, that creating more liquidity for more things is bad?

• 1:32:59Speaker 03

  It's literally because

• 1:33:01Speaker 02

  More value.

• 1:33:01Speaker 03

  Because this idea that like liquidity good in isolation is a reality is not true. There are trade

• 1:33:08Speaker 02

  Hundreds of years of economics say you're completely

• 1:33:10Speaker 03

  There aren't

• 1:33:11Speaker 02

  Sam

• 1:33:11Speaker 03

  Dude, you're trying to, sorry, hold on, hold on, hold on. You're, you're, you're about to argue hundreds of years of economics and you're trying to go as back and take us back to 1840 where you need custody of the

• 1:33:19Speaker 02

  They're talking about to improve the They had certain things right in 1840, right? As like I said, Bitcoin is a really interesting. There's a whole era of free banking in history, which had a lot of problems, right? But some of the benefits of it, you get to come back with Bitcoin and I think that's awesome.

• 1:33:33Speaker 03

  Well, the reason free banking fell apart is because everybody lost their money all the time. The reason

• 1:33:40Speaker 02

  But again, like that's because it was really hard to know about the creditworthiness of the bank that was issuing notes.

• 1:33:44Speaker 03

  Because they weren't banks. They were, they were, they were made out banks.

• 1:33:48Speaker 02

  They were banks that were issuing notes. That's how that era worked.

• 1:33:51Logan Bartlett?

  Sam, you, can you answer one specific question of if there's a card that isn't charging astronomical? Let's say card exactly takes the exact same thing we're talking about and does it for your, your down.

• 1:34:05Speaker 02

  For free.

• 1:34:06Logan Bartlett?

  Right? But lowers their fees.

• 1:34:08Speaker 02

  Yeah, for their fees are zero and they're always going to be zero and they're guaranteed to be zero.

• 1:34:12Speaker 03

  How are you going to get a company? Sam, it's, it can't be free because you need a company to do the work.

• 1:34:21Speaker 02

  They can charge a penny per transaction. The point is that's not how regular credit capture works. Whoever owns Fed server of the liquidity of everything that's not listed in the NYSE, I promise you

• 1:34:31Speaker 03

  This has nothing to do with, this has nothing to do with Fed server.

• 1:34:34Speaker 02

  The point is It is because the argument is that is why you need a decentralized protocol for doing this stuff and not centralized Fed server or centralized Carter.

• 1:34:41Speaker 03

  You don't need centralized, decentralized, anything.

• 1:34:44Speaker 02

  Platforms. I can promise you how rent

• 1:34:46Speaker 03

  You need

• 1:34:47Speaker 02

  I've seen it through banking.

• 1:34:48Speaker 03

  You don't

• 1:34:49Speaker 02

  That's how it works.

• 1:34:50Speaker 03

  Need any of these things to buy? No, if I want to go buy, share

• 1:34:55Speaker 02

  You're right. We can spend thousands of dollars on lawyers. I mean, I literally, here's a funny thing. I sold some shit. Here's a funny, specific example. I sold some shares of Ripple, uh, which I was a seed investor in the company, right? The other day. You know what the fee was literally for just signing the paperwork to move their shares? Big a yes.

• 1:35:13Speaker 03

  I don't, I have no idea.

• 1:35:15Speaker 02

  It one signature that was on a standard form, how much do they charge just, just for the signature?

• 1:35:20Speaker 03

  A hundred bucks? I have no idea.

• 1:35:22Speaker 02

  Thousand bucks, three thousand bucks. You know why? Cause they can be, right? Because I don't fucking, because in the big picture, but that's a fucking high transaction fee and that keeps a lot of transactions out of the game. Right? So again, I just go back to the whole thing. Like, you know, look.

• 1:35:35Speaker 03

  There is no way.

• 1:35:37Speaker 02

  The best theme I would put on a view, just to scope out for, we can keep going. I have to scope out for a second because I gotta put my kids to bed is like, look. The idea that crypto, right? Enables some magical end to end use case that's perfect, that has no human intervention and no human institutions. It is like, whatever. The only way that's even possibly you could think about that is some sort of self-contained. Crypto world we live in of 3D avatars. I think that stuff's all bullshit to very, very far off. What I would say is this, there's a bunch of problems that the internet screwed up and almost got there, but didn't. One is long tail liquidity. I can, I can know about a lot more apps. I can Google a lot more things. I can't buy them.

• 1:36:14Speaker 02

  Two would be like identity, like what we were trying to Facebook. You know, again, identity is one of those problems where like, could you have a centralized identity server? So we know who to trust and his real reputation.

• 1:36:23Speaker 03

  Let's leave the identity thing out. This is a whole, whole separate.

• 1:36:27Speaker 02

  But I want to make this point because I think it's important Zach for you to, for you to hear and think about, which is like, you know, you could poke holes all you want in like a specific layer and is it specifically better for this? That is not the point. The point is that crypto creates an open framework and ecosystem, which allows effectively enhancing the internet, which there's a lot of things the internet missed, right? And I think it's extremely exciting and there's an extremely valuable future to it, but it largely is things which, yeah, yeah, of course you could in theory have a centralized server and one trusted. It's just not going to happen. Or, and it doesn't, and there's no chance, there's no chance that anyone will win an argument with you or is even rational that says, oh, there's some magical, the crypto in some ways delivers. No reliance on any human institutions. That's crap, right? That doesn't mean it's not valuable.

• 1:37:11Speaker 03

  But you said, I, cause I, I, I want to talk about the liquidity thing. Cause I, I, I still think this idea of like.

• 1:37:16Speaker 02

  I believe you're saying liquidity isn't fundamentally valuable.

• 1:37:19Speaker 03

  Because it's not. You don't get liquidity without some trade off, right? It's not liquidity in isolation. Sure.

• 1:37:26Speaker 02

  Well, actually, in some pieces is.

• 1:37:28Speaker 03

  No, but it's not because there's clearly trade offs. And I just want to talk about the trade offs.

• 1:37:32Speaker 02

  Companies want to go public. If you don't think liquidity is valuable, what? Why do you think companies go public?

• 1:37:36Speaker 03

  No, I agree that at a certain point.

• 1:37:39Speaker 02

  Because liquidity is valuable because you're massively better off with a liquid currency. Right? That you can use for all sorts of things as well as it makes your people richer.

• 1:37:48Speaker 03

  Sam, if that, if that were true, if that were true in isolation, if it were just better to have liquidity, then every company in the world would be trying to go public all the time. There's a reason.

• 1:37:59Speaker 02

  A bunch of other problems like if the, if the answer was the, the public markets worth the way they were way back in the day, I'd agree with you. Problem is that's not how they work.

• 1:38:07Speaker 03

  Sam, the reason, the reason it's hard to go public in many cases is because people were going public with scams and stealing people's money. They just fact, right? Like that is why. Yes, it is. That's why we have rules. It is.

• 1:38:24Speaker 02

  You think Sarbanes-Oxley is 100% because of scams?

• 1:38:27Speaker 03

  It's not just Sarbanes-Oxley. There's layers of rules.

• 1:38:30Speaker 02

  This is the burden of being public. This is the cost of liquidity. The cost of liquidity is shit like Sarbanes-Oxley. There's a reason there are fewer public companies than ever before.

• 1:38:37Speaker 03

  But I just, this is my point. As you're, as you said, I'll use your words. There is a cost to liquidity now in, because there's always a cost to liquidity.

• 1:38:47Speaker 02

  Well, it's directly your words, not my words.

• 1:38:49Speaker 03

  You just said it like two seconds ago.

• 1:38:51Speaker 02

  Liquidity as a public company is what I said. I didn't say there's a cost of liquidity. I'm trying to fix that fact.

• 1:38:56Speaker 03

  Okay.

• 1:38:56Speaker 02

  Right? I'm trying to fix the fact that there shouldn't be such a high cost of liquidity.

• 1:38:59Speaker 03

  The reason, let's just start with the reasons, right? Like the reason there is costs associated with being public is because people were going public with vehicles that didn't exist and fake income and fake companies. They were screwing people over. So let's just leave that aside for a second.

• 1:39:15Speaker 02

  Well, again, I don't fully take that, but I agree that happened. And again, that's why again, like what I look at when I look at investing, it's just for accredited investors. It's for people to say like, I don't want the protections. I'd rather have liquidity. I'd rather access a whole other set of assets and I'm illegally allowed to legally. Exactly myself.

• 1:39:32Speaker 03

  This is my point of like liquidity and isolation is not exactly always good because there are trade offs.

• 1:39:38Speaker 02

  No, no liquidity. This is the thing. I think you're saying it backwards. Liquidity and isolation is good. Liquidity in the context of how you generate liquidity in 2022 America has a lot of trade offs to it.

• 1:39:48Speaker 03

  Yeah, I exactly. No, I agree with that. My point is like.

• 1:39:52Speaker 02

  What you're saying, you're actually saying the exact opposite of what you're saying. Liquidity in isolation is good.

• 1:39:58Speaker 03

  But that's it's a fake thing. It's like saying unicorns are great.

• 1:40:00Speaker 02

  I mean, we're trying to start from philosophical things. Do you agree the liquidity in isolation is good?

• 1:40:05Speaker 03

  Yes, but that's not real. It's not a real thing.

• 1:40:06Speaker 02

  Great. So like, that's actually a big breakthrough because we started.

• 1:40:09Speaker 03

  Because there's trade offs.

• 1:40:11Speaker 02

  Because there's.

• 1:40:11Speaker 03

  There's trade offs. There's trade offs. There is a cost.

• 1:40:14Speaker 02

  There are trade offs. Those trade offs don't have to be so dramatic. Like, it's just the point. There's the opportunity, dude. The opportunity is, is that right now the trade offs between liquidity, right? And all the shit that you have to do to have liquidity are insane. And we're trying to fix those.

• 1:40:29Speaker 03

  Here's, here's, here's the two trade offs. I just wanted, I just wanted to like take us back for a second. Okay. Cause we said, we think liquidity is better. There are trade offs.

• 1:40:40Speaker 02

  Which, which is great. I'm glad we had that breakthrough.

• 1:40:42Speaker 03

  There, there are trade offs in liquidity. There's trade offs. Uh, there are trade offs in being a public market liquid company. Now let's talk about.

• 1:40:50Speaker 02

  It's gonna be public market. That's, and that's right now the trade you have to make.

• 1:40:53Speaker 03

  Cool. Now we talked about private. Here's the private, here's the two, there's the two private market. I'm sure there's more. Here's the two private market crypto liquidity trades you've decided that we need. Because we're asking for liquidity to be able to trade these coins around, right? The first trade.

• 1:41:09Speaker 02

  I need liquidity. I want liquidity in the vast majority of human unlisted assets. Crypto tends to be, has an incredible framework coupling messaging, custody, and a lot of other key principles that with bearer tokens make that super doable. That's awesome.

• 1:41:25Speaker 03

  Cool. Let's just talk about the cost.

• 1:41:28Speaker 03

  No, because I just want to talk about the cost of it.

• 1:41:29Speaker 02

  Why? Why? Why is that not awesome?

• 1:41:31Speaker 03

  If you'd let me tell you why it's not awesome, I'll take two seconds. And I'm sure there's, I'm sure there's more, but you know, here's, here's two. One, uh, which we already talked about. If anybody

• 1:41:42Speaker 02

  Is the rent attack? Is your scary rent attack? Is that the reason?

• 1:41:44Speaker 03

  It's not a rent attack, but like if anybody loses their bearer token.

• 1:41:49Speaker 02

  Uh.

• 1:41:50Speaker 03

  In any way, shape or form, their money is gone.

• 1:41:54Speaker 02

  Yeah, just as if you lose a hundred bucks in the street, it's gone.

• 1:41:56Speaker 03

  Correct, correct. Right. Which is why we don't like use cash for private transactions.

• 1:42:02Speaker 02

  If you're worried about that, you put it in a bank. If you're not worried about it, you keep it in your wallet and you might lose it. That's, that's freedom, baby.

• 1:42:08Speaker 03

  Okay, cool. So, so, so one cost, what, Sam, one?

• 1:42:13Speaker 02

  That's not a cost. That's just, keep going.

• 1:42:16Speaker 03

  Okay.

• 1:42:16Speaker 02

  It's a choice. You can choose to pay for more custody, right? Which lowers your chance, you trust a third party, lowers your chance of losing your hundred dollar bill, right? But there's a cost. You can choose to bear that cost if you want.

• 1:42:27Speaker 03

  Right. So one cost of crypto liquidity of long tail.

• 1:42:32Speaker 02

  Is that you have to pay a bank to custody for you if you're scared of things? Yes, but that's not an incremental cost.

• 1:42:37Speaker 03

  Or if you lose your password, you lose your admin, you lose your whatever.

• 1:42:40Speaker 02

  That's not an incremental cost. Like, that's exactly the system we use today. So you're saying is crypto has the option of being better. And in the absolute worst case, is exactly as bad on custody as we exist in today.

• 1:42:51Speaker 03

  So we've, right, we've stuck, we've, we've, we've said.

• 1:42:54Speaker 02

  Is that, that's the, it's if you, it's

• 1:42:55Speaker 03

  Just, just

• 1:42:56Speaker 02

  Much better or equal. Not worse. Equal, better or, or equal. And then, then you get to choose. How is choice not a problem?

• 1:43:04Speaker 03

  I guess what I'm saying is like, in, because the risk of owning and holding the bearer token is losing it and using my money.

• 1:43:12Speaker 02

  You can choose to take that risk or not.

• 1:43:14Speaker 03

  Right. So now I have to own it with a custody. So I've already put this third party image creates.

• 1:43:18Speaker 02

  You don't have to. You can choose to if that is a concern you're worried.

• 1:43:21Speaker 03

  I'm a normal human being. I don't want to hold a hundred thousand dollars under my bed sheets, man. Like, that was it. Okay.

• 1:43:27Speaker 02

  Again, and then for the transaction, I bet there's a price at which you would choose that.

• 1:43:31Speaker 03

  And I, and I shouldn't always use the I shouldn't use the security one because it's always like, it's like, it's too weird. The second fee, second

• 1:43:38Speaker 02

  It's very 2012 to use a three dollar rent attack argument against crypto. So keep going.

• 1:43:44Speaker 03

  It's really more like 2022, given how much money was stolen this year.

• 1:43:48Speaker 02

  But I'm not, I'm not, again, it's, it's, it's demittivus in the grand scheme. Keep going.

• 1:43:52Speaker 03

  It's only like a few billion dollars.

• 1:43:54Speaker 02

  Um, yeah, exactly. That trust.

• 1:43:55Speaker 03

  And it happens like increasing frequency, increasing frequency all the time. Uh, because it can't be reversed. And so it's really incentivized to hack stuff.

• 1:44:03Speaker 02

  Uh, keep going, keep going. This is a weak argument. Keep going. You got better ones.

• 1:44:06Speaker 03

  That's, yeah, losing billions of dollars. Sounds great.

• 1:44:09Speaker 02

  Give me a better argument.

• 1:44:11Speaker 03

  Okay, now you said, hey, here's the, the other price of liquidity. I'm sure there's like five others if we actually dug into the detail.

• 1:44:17Speaker 02

  The price of liquidity, to be clear, is that I can choose to pay no custody fees, or if I want, I can have a competitive custody solution. That you think is a cost of liquidity.

• 1:44:29Speaker 03

  No, I, I think there's a cost to liquidity of the fact that

• 1:44:32Speaker 02

  That doesn't make any sense.

• 1:44:33Speaker 03

  That, that there is a bear. Just hold on for a second. There's a cost to liquidity of having to take physical custody of an asset.

• 1:44:43Speaker 02

  You don't have to. That's, you have the option to.

• 1:44:45Speaker 03

  I, I understand. I mean, you said the same thing 17 times.

• 1:44:47Speaker 02

  I just, you can't say, so that you can choose is a hard cost. It's a thing you can choose to do.

• 1:44:53Speaker 03

  Okay, that's 99% of normal investors.

• 1:44:58Speaker 02

  You, it's not a cost of liquidity. It's you can choose to layer, just as I can buy insurance.

• 1:45:03Speaker 03

  Okay, all right.

• 1:45:03Speaker 02

  Insurance is not a cost. Insurance is not a cost of, you know, of

• 1:45:08Speaker 03

  Okay, yeah, let me, then, then I'll, I'll, I'll say it in a

• 1:45:12Speaker 02

  There's no cost, there's no cost to custody in, to liquidity. Let's keep going.

• 1:45:17Speaker 03

  So, huh, so now we'll go to users. Okay, I'm the user that, that wants to self custody my asset.

• 1:45:26Speaker 02

  Sure, if you want.

• 1:45:28Speaker 03

  Okay, just on that person for one second.

• 1:45:30Speaker 02

  No cost of liquidity. Keep going.

• 1:45:33Speaker 03

  Well, the cost is that I take a risk that I lose it.

• 1:45:37Speaker 02

  Okay, we can argue. You could choose that, that cost is price of the price of insurance and how you feel about it. There's a price you could choose to incur.

• 1:45:43Speaker 03

  Right, I, I choose there is the risk that I take for self custody of some digital token that promises future.

• 1:45:49Speaker 02

  It's in value as you see that risk personally. Sure.

• 1:45:52Speaker 03

  Sure. Think most people would think that's pretty high. Second.

• 1:45:56Speaker 02

  I, I don't think that's accurate at all, but keep going. Most, the most people argument is like pretty weak. So keep going.

• 1:46:02Speaker 03

  Well, I guess if we described a scenario where you owned a hundred thousand dollars and if you lost your private keys, you lose your hundred thousand dollars, the number of people who would choose to do this. We're talking about accredited investors, by the way, to your original point.

• 1:46:15Speaker 02

  With no, with no insurance.

• 1:46:16Speaker 03

  Right.

• 1:46:17Speaker 02

  It's not. That's completely false. I mean, I've.

• 1:46:19Speaker 03

  No, I don't think it's none. I don't think anything is binary. I think it's a very small percentage of people would be like, I'll stick it under my bed and I'm cool with that.

• 1:46:25Speaker 02

  Yeah. So the point is marginal competitive insurance industry based on people's preferences of how they want to custody.

• 1:46:30Speaker 03

  Right.

• 1:46:31Speaker 02

  Let's move on. I think it's a really weak point. Keep going.

• 1:46:33Speaker 03

  What you, you, I know you think it's a weak point, but I think for a normal investor, they're going, okay.

• 1:46:38Speaker 02

  It's a cost. It's a cost to, to, it's a cost. And I don't think it's a cost of liquidity. So keep going.

• 1:46:43Speaker 03

  Well, it's a, you described the benefit as being liquidity. So I'm saying the cost of self custody is the risk of losing it.

• 1:46:52Speaker 02

  Okay.

• 1:46:53Speaker 03

  Or.

• 1:46:53Speaker 02

  That's a big argument.

• 1:46:53Speaker 03

  Just, just, just.

• 1:46:54Speaker 02

  Self custody.

• 1:46:55Speaker 03

  Yes. Let me just like work this through for one second. There is a.

• 1:46:59Speaker 02

  But I just, move on because I don't think it's a strong argument. What's your number two?

• 1:47:03Speaker 03

  I, it's impossible to even finish it because you keep repeating this whole like liquidity is good thing like a religious guy.

• 1:47:08Speaker 02

  It is. And even you said it was a good in a vacuum.

• 1:47:11Speaker 03

  In a, yeah, in a vacuum, which is not where we live in normal human times. Uh, so going back to this, uh, there is a risk to self custody of this thing if I lose it and, and let me, ah, ah, ah, ah. And I can pay for insurance if I so choose, which is a cost.

• 1:47:30Speaker 02

  Yeah.

• 1:47:30Speaker 03

  Okay. Now we've got, now we've got this second issue, which is like, all right, now I'm going to introduce this third party custody, who also bears a bunch of risk in case they lose it.

• 1:47:41Speaker 02

  Get carte blanche, supposing I can buy insurance in lots of ways. I could say like, I'm going to self custody, but I'm going to pay, sign an insurance broker in case I lose my key. Like the. Again, I think you're, but keep going, keep going.

• 1:47:50Speaker 03

  No, I

• 1:47:50Speaker 02

  Your argument's gonna be, it's all gonna re-centralize because you're gonna have like custodians of all of it. Is that gonna be your argument?

• 1:47:56Speaker 03

  No, I'm just gonna go through the trade-offs and there's more. Although by the time I finish going through the trade-offs, I'm gonna be 85 years old and hanging myself from the rooftop here. In the second one, right, there is now, yes, in this specific use case, there is a new middleman. It could be a bank, it could be a Coinbase, it could be whatever, who custodies my 1980s bear bond or whatever coin. Right? So there's a fee that they'll charge me to custody it. There's a risk.

• 1:48:24Speaker 02

  Which will be a competitive market because it's an open protocol, which means I can easily move it if I don't like how they're charging. Correct?

• 1:48:30Speaker 03

  Sure, sure, yes, it'll be a competitive market to custody.

• 1:48:33Speaker 02

  Competition to zero among custody solutions for custody for me because since it's a protocol and not a centrally hosted server, I can just move it if I see a better deal.

• 1:48:42Speaker 03

  Well, I'm not sure when I'm holding custody of something worth hundreds of thousands of dollars that I want the cheapest option. I probably want the safest option.

• 1:48:49Speaker 02

  Whatever, the basic point is, the basic point is that it's a competitive market that will be priced to near zero.

• 1:48:54Speaker 03

  Right, and if anything happens, we all know we always lose everything because it can't be reversed. Now, now, then, which we've seen happen multiple times. Now, now we say, now we said, when I, because we're talking about reducing transaction costs for liquidity purposes, right? So now we say, when I buy this token, second to you, I don't have to sign anything, right? I can just buy the token.

• 1:49:21Speaker 02

  Well, you're signing it digitally, I'd say. You're signing, you're making, you're signing a transaction in a digital space. You're not signing with your, your jockey sign, which by the way, is also a digital space. We can argue about that versus a wet signature versus a notary.

• 1:49:34Speaker 03

  Whatever.

• 1:49:34Speaker 02

  Like, yes, you're signing a digital thing rather than a traditional paper contract with or without a note.

• 1:49:40Speaker 03

  I'm not signing, I'm not signing a contract. Okay. And then we're, at that time, right? And then we're saying that if I don't get paid.

• 1:49:51Speaker 03

  Or I sue somebody and then we're saying in order for me to have certainty that my lawsuit will hold water in a US court system because I haven't signed anything. We have to go.

• 1:50:06Speaker 02

  Again, you did digitally sign something which I'd figure we'd keep going.

• 1:50:09Speaker 03

  Well, I didn't sign. I didn't sign what a normal document looks like, which is a equity purchase agreement.

• 1:50:17Speaker 02

  You sign something digitally, which we could argue is actually way more secure, but keep going.

• 1:50:21Speaker 03

  It's not about security. I'm just talking about what document, what document I have. Okay. And now what you're saying is.

• 1:50:28Speaker 02

  Okay. And just as, you know, again, we can trade these things and there's no purchase agreement because most human assets don't have purchase agreements.

• 1:50:34Speaker 03

  Right. But I'm not, it's not the, I'm not buying a watch.

• 1:50:40Speaker 02

  The most human assets don't have purchase agreements. So again.

• 1:50:43Speaker 03

  Because those purchases are final.

• 1:50:44Speaker 02

  Actually, this is finality, a great crypto principle. That's exactly the point.

• 1:50:50Speaker 03

  Sam, the difference between a final purchase of buying a watch is that I have physical possession of the watch. The difference between buying.

• 1:50:55Speaker 02

  And you have digital, that's again, you're.

• 1:50:57Speaker 03

  No, no, no, you're wrong. But this is, this is, this, I'm sorry.

• 1:51:00Speaker 02

  It's irreversible. That's been your whole argument about why it's so scary. It's exactly like.

• 1:51:04Speaker 03

  You know what? Part of it is irreversible. The digital representation of it is irreversible.

• 1:51:10Speaker 02

  The, the, it's a, just as this, if I sold you a bear certificate in 1800, right? It's the exact same thing. It's exactly the same thing.

• 1:51:19Speaker 03

  Yeah, I agree with you. That's part of why it's crazy.

• 1:51:24Speaker 03

  I agree that it is the same as in the 1800s when I sold you a bear.

• 1:51:30Speaker 02

  You know that you're, because it was old, we have new technology and new tools. We don't find ideas in history and re-update them with new technology. That's awesome. And so we're in a disagreement. If your view is because it was old and we stopped doing it, it must have been bad and we should never look at that as an example. I think it's pretty weak, but fine.

• 1:51:48Speaker 03

  I mean, we can, we can agree to disagree about the utility of physical bear possession.

• 1:51:54Speaker 02

  We're not actually disagreeing. What I'm, what I think you're missing.

• 1:51:57Speaker 03

  You think it's bad.

• 1:51:58Speaker 02

  There were cool properties of that system. Which, when updated with modern internet technology, communication platforms, etc., gives them all the benefits, right, of tradability, things like that, that those things lacked, which is why they went away, but actually some of the benefits those things had back in the day, and that's sweet, that's mixing what was awesome in history with new things which make them viable again, it's great.

• 1:52:22Speaker 03

  Fine, I would give you that if you think bearer bonds are cool, this system is gonna be amazing for you.

• 1:52:34Speaker 02

  Upgraded bearer, upgraded bearer bonds.

• 1:52:37Speaker 03

  We can go with the branding there. But now, the thing that, I've been trying to get this for 45 minutes, but it's impossible. You said that it's unsettled case law.

• 1:52:51Speaker 02

  Yep.

• 1:52:52Speaker 03

  Okay, I just want to talk about that for one second, okay? I bought this digital representation, I know I own it, because I know it's a bearer token in the world.

• 1:53:04Speaker 02

  Yeah.

• 1:53:05Speaker 03

  Now, I don't have a signed legal agreement, because, oh, just wait, just wait, just wait, just wait, just mute yourself for like two seconds, okay? Like, I don't have a legal agreement, because we said, we don't want, it's a bearer token, and we don't want to transact.

• 1:53:22Speaker 02

  It's just historical precedent, with a lot of historical precedent, but keep going. Because we just talked about how they're so old from the 1800s, so keep going.

• 1:53:30Speaker 03

  Okay. Are we, I don't want to go down this path of like, are we saying bearer bond law applies to crypto bearer token law?

• 1:53:39Speaker 02

  I'm not a lawyer, I'm not a lawyer, but when this does come to court, I think that'll probably come into play.

• 1:53:44Speaker 03

  Okay, maybe, that might be true.

• 1:53:46Speaker 02

  I'm just saying, it's not without precedent, I think this idea that's not, you know, is, I think is wrong.

• 1:53:52Speaker 03

  Okay, I mean, I just, I want to pitch you your bull case, right, which is, I now have this like bearer token thing, right, which I can trade freely, because I can prove that I own it, and we're not going to talk about the losing it thing, and the custody thing, and the insurance fees, and all the other stuff that comes along with that kind of.

• 1:54:10Speaker 02

  Kind of minor bullshit issues, yep.

• 1:54:11Speaker 03

  Right, just losing your money, which is minor, and then, and then, okay?

• 1:54:18Speaker 03

  You don't pay me because LLCs are private companies and they don't have all the rules.

• 1:54:24Speaker 02

  Everyone sues each other.

• 1:54:25Speaker 03

  Everyone sues each other all the time. And by the way, private LLCs, especially, just pause for a second, especially long tail assets, right? These are long tail assets run by non-big companies that have reputations to uphold. It's usually like individuals, could be a lawyer, could be a doctor, could be a person you met on the street. Right? So there's inherent risk in this, which is part of why you have LLC protections in the first place. If I want to sue this, because remember, I don't want to sign this legal document. Cause oh, $3,000 legal bill. So I don't want to pay that $3,000 legal bill. That is a scary $3,000 bill.

• 1:55:02Speaker 02

  Transfer for the transfer, but keep going.

• 1:55:05Speaker 03

  Right. I don't, you said, I don't want to pay. There's $3,000.

• 1:55:07Speaker 02

  Transfer fees, which then crushes the market and liquidity, which is the value. So keep going.

• 1:55:11Speaker 03

  I understand. You, you self said, self accredited, accredited investors and qualified purchasers are scared of $3,000 legal fees, which is a whole different.

• 1:55:19Speaker 02

  No, it just means the market's much smaller and less liquid and less efficient, right? It's hard to argue.

• 1:55:25Speaker 03

  Well, we've already, again, just wait, just wait.

• 1:55:27Speaker 02

  It's already. Less liquidity.

• 1:55:29Speaker 03

  We've, we've already limited to qualified purchasers and accredited investors.

• 1:55:32Speaker 02

  A hundred percent, because I don't want to touch non-accredited investors. It's not worth it.

• 1:55:36Speaker 03

  That I agree with. And, and I don't want to pay the legal fee, transaction cost.

• 1:55:43Speaker 02

  Well, and I want efficient market of coaching and I want efficient transactions. Yeah.

• 1:55:46Speaker 03

  Hurts liquidity.

• 1:55:48Speaker 02

  Yeah.

• 1:55:48Speaker 03

  I want to pay this fee. But now, when I sue.

• 1:55:53Speaker 02

  Mm-hmm.

• 1:55:53Speaker 03

  To get the money that you told me you owe me.

• 1:55:57Speaker 02

  Sure. Which will eventually happen in some weird form. I agree.

• 1:56:00Speaker 03

  Okay. We have now agreed that there is no legal setup in the current world, because I don't, just wait, just wait.

• 1:56:07Speaker 02

  It has to be timed.

• 1:56:08Speaker 03

  Just wait, just let me finish it. Okay? Because you've said.

• 1:56:12Speaker 02

  Yeah.

• 1:56:12Speaker 03

  I don't want to pay this transaction fee. Eh, for a second, you said, I don't want to pay a transaction fee because what that transaction fee is paying for, what it is paying for is a legal document that I sign and the company signs. And just wait, Sam, Sam, Sam, just wait, just wait. Okay? The reason I normally sign a document that says I am purchasing this thing and the company is selling me this thing. So that I have a legal agreement.

• 1:56:40Speaker 02

  Company in third party, but keep going.

• 1:56:42Speaker 03

  Doesn't matter. Some LLC is signing it.

• 1:56:44Speaker 02

  Yeah, because yes, keep going. Okay. Do you think that people who buy and sell things from each other with legal paper don't sue each other all the time?

• 1:56:51Speaker 03

  No, I agree. They sue each other, which is where I'm going with this. Uh, the reason I sign this document with the LLC and myself is so that I know that I can go and sue in the court.

• 1:57:04Speaker 02

  You don't need the paper. You don't. You can sue in the court without it. Look, do you remember?

• 1:57:09Speaker 03

  Wait, wait, wait, wait, wait, Sam. I'm not done. I'm not done. Sam, Sam, Sam, Sam. It's like talking to my four year old. Like, Sam, listen.

• 1:57:17Speaker 02

  It's mutual.

• 1:57:17Speaker 03

  I'm gonna.

• 1:57:18Speaker 02

  I was my five year old. It's the same thing. Listen, Zach, do you remember when we were starting companies in New York? I don't know if you had this experience, but your people wouldn't let you do digital signatures. Do you remember that? You know, you had to actually send around wet paper with couriers because people would DocuSign absolutely not like, oh, that's not legally binding because that's a digital signature. It's not a physical wet signature. Remember that era?

• 1:57:39Speaker 03

  Sam, we never talked about removing the.

• 1:57:41Speaker 02

  Do you remember that era?

• 1:57:42Speaker 03

  I'm asking you a simple question.

• 1:57:44Speaker 02

  Ask you a simple question. Do you remember that era?

• 1:57:46Speaker 03

  Of course I remember the era.

• 1:57:47Speaker 02

  Of course you do. So what is the, do you think that, does that mean that DocuSign didn't happen? Are you not happy that transactions are easier to do now because of DocuSign?

• 1:57:56Speaker 03

  Sam, you're suggesting we remove the contract.

• 1:57:59Speaker 02

  No, I'm not actually. I'm suggesting the contract is embedded in the bearer token, which is an old issue. I'm not a lawyer, so I can't speak to exactly how bearer token, bearer bonds, translation, the idea of a bearer asset, which denotes something, right? And the idea that that is somehow completely invalid. Look, I agree that eventually the courts need to try lots of things and.

• 1:58:19Speaker 03

  We've. We've just described.

• 1:58:22Speaker 02

  With digital signatures, what's the big deal? It's the exact same fucking thing.

• 1:58:26Speaker 03

  It's not the same thing because it's not actually a signed contract. And also because it doesn't involve like an actual contract. And then separately.

• 1:58:35Speaker 02

  Where I just I get at least can you at least give me can you at least give me that there was an era not too long ago where digital signatures non wet signatures were scary and not to be done because they weren't legally binding and case law got updated and people got comfortable with them.

• 1:58:51Speaker 03

  But there's no.

• 1:58:51Speaker 02

  You at least give me that.

• 1:58:52Speaker 03

  Yeah, of course, because.

• 1:58:54Speaker 02

  Great.

• 1:58:54Speaker 03

  Yes, yeah.

• 1:58:56Speaker 02

  But why is your argument your big argument is that oh, because there isn't settled case law on this already, it can never happen or shouldn't be done.

• 1:59:03Speaker 03

  No, I'm not suggesting that it can never happen. It shouldn't be shouldn't be done. Uh, what I'm saying is we've now created a way of purchasing tokens. So that I can get liquidity in this company because I want to save on some.

• 1:59:17Speaker 02

  Incredibly, which is incredibly valuable and creates prosperity. Yep. Keep going.

• 1:59:22Speaker 03

  Create theft and bear. Okay. Anyway, like, because I want to purchase, I want to purchase a equity ownership in an LLC so that I can make money in the future.

• 1:59:34Speaker 02

  I want to be so you'll invest in things that aren't listed on the NASDAQ. Yes.

• 1:59:38Speaker 03

  Yeah, I want to buy into like an illiquid company that has some asset.

• 1:59:42Speaker 02

  The point is not illiquid anymore, which makes it way more valuable.

• 1:59:45Speaker 03

  I want to work on a, I don't, I want to buy into a private company. Sorry, that has like.

• 1:59:50Speaker 02

  More valuable with liquidity.

• 1:59:53Speaker 03

  Okay, I want to buy into a private company. For future cash flow. I want to be.

• 1:59:59Speaker 02

  For appreciation, which might be cash flow, might be something else. We don't know what it is, just as is with any other private company today, but I agree that I like cash flow.

• 2:00:08Speaker 03

  I would like to invest in a company that at some point in time.

• 2:00:13Speaker 02

  Just stop. Can you say you want to invest in a company? Full stop. There's no qualification needed.

• 2:00:18Speaker 03

  No, I mean, the qualifications are in the details are what matter in life. Uh, like, what does the company do? And do I actually own it?

• 2:00:26Speaker 02

  Again, again.

• 2:00:27Speaker 03

  But like, I'm not, we're not, we're not back to it because like I have an inability to actually even get to the end of this. Hold on, just, oh my God.

• 2:00:36Speaker 02

  Take us home. Take us home. We gotta get there, Zach.

• 2:00:40Speaker 03

  In order. Woo. Okay. I want to save my $3,000 legal bill. I want, ah, ah, ah, ah.

• 2:00:50Speaker 02

  Okay. Transaction fees don't matter. Keep going.

• 2:00:53Speaker 03

  I, I, I want to save money on the transaction costs, as you said, right? Because we want like. We want.

• 2:01:01Speaker 02

  Say more liquid market.

• 2:01:02Speaker 03

  We want instant liquidity because those pesky legal documents that get in the way of the instant liquidity.

• 2:01:08Speaker 02

  It's hard to find the right buyer and seller. We want to fix those problems.

• 2:01:12Speaker 03

  Yes. So that pesky legal document that gets in the way of unlimited equity.

• 2:01:16Speaker 02

  Buyers and sellers and actually moving the assets in a trusted way and all that other stuff.

• 2:01:20Speaker 03

  Legal document.

• 2:01:21Speaker 02

  Want to blow away the friction. Blow away the friction.

• 2:01:24Speaker 03

  Okay. The legal document doesn't get in the way of finding buyers and sellers. That's a different problem.

• 2:01:30Speaker 02

  This is, you're, you're, you're trying to focus in to make a point. I'm trying to make a point that there's a whole layer of transaction fees. The 3,000 bucks is part of it. It's not the only part. The crypto improves. Everything else is the same. I don't see the big deal.

• 2:01:41Speaker 03

  And this is a classic crypto. No, it's a classic crypto argument of you never let the person get to the actual use case because once you do that, it's not so good.

• 2:01:50Speaker 02

  Uh, hold on. Just so awesome. I've been very clear with the use cases. Zach, I'll let you have the last word because it's your show and the whole nine yards. But I really would push you, and I'm happy to do this some other time and some other venue. We can do this over in writing, which I think is a lot clearer than doing it on a podcast in an argument. But like, I really have not heard from you a compelling argument. You've agreed with me that liquidity is invaluable. You've agreed with me that we're, I think that we're not going to get a Fed server to do it, or that if we ever did, rents would be extracted from it.

• 2:02:17Speaker 03

  That's not what I said.

• 2:02:18Speaker 02

  I think the protocols and custody fees, right? The protocol, things like protocols versus APIs allow for a more competitive market and custody fees to be lower. And I think, unless I'm missing something, I have not heard a compelling reason why accredited investors shouldn't have lower.

• 2:02:32Speaker 03

  Just so you know, there is no custody fee for, uh, holding my LLC shares. There's no fee to do that. There's only.

• 2:02:40Speaker 02

  Is, oh, are you kidding?

• 2:02:41Speaker 03

  No.

• 2:02:42Speaker 02

  Lawyers you're paying.

• 2:02:43Speaker 03

  No, you pay the lawyers for the transaction costs, but it's different than actually the.

• 2:02:46Speaker 02

  You're not paying anyone in custody leader that, well, keep going, keep going. I certainly pay lawyers because of these.

• 2:02:52Speaker 03

  No, you pay the lawyer.

• 2:02:53Speaker 02

  Not on an AUM basis, but I pay lawyers and account there's a lot of money to quote unquote custody things.

• 2:02:58Speaker 03

  No, you pay the lawyer for the transaction. There's a separate entity that does the custody. It's like a few hundred bucks a year. Uh, you pay the accountants to do your taxes and make sure you don't go to jail. These are different things. Most people don't actually understand this in crypto. They all serve a different purpose. Uh, my point is, we have tried, we've gone through this whole thing to say, we're going to try and create liquidity and lower fees in long tail, private assets for accredited investors. These are probably assets that have like tens or not hundreds of thousands of dollars in terms of enterprise value.

• 2:03:32Speaker 02

  But make up the majority of the US economy.

• 2:03:34Speaker 03

  Yeah, like it's a real estate and it's a doctor's office.

• 2:03:37Speaker 02

  I want to be clear. The, the public equity market where there's liquidity is a small minority of the US economy.

• 2:03:43Speaker 03

  Yeah, I agree that private businesses.

• 2:03:45Speaker 02

  We're trying to unlock the liquidity of the majority of the economy.

• 2:03:49Speaker 03

  Yes, I agree. We are trying to allow people to speculate on the ownership of their local bodega.

• 2:03:54Speaker 02

  It's such a turn word, invest. Why can't you just say invest?

• 2:03:56Speaker 03

  We'd like them to invest in their local bodega.

• 2:03:59Speaker 02

  We would like the majority of people who are accredited investors, well, at least majority of dollars, I should say, right? To have access to the larger part of the illiquid economy for us.

• 2:04:10Speaker 03

  Sam, okay, for one second, just please, just please.

• 2:04:13Speaker 02

  Well, I'm the same way, man. We're, we're, you know, I'm just as frustrated here. Like, I just don't understand why this is so difficult.

• 2:04:19Speaker 03

  Primarily because I can't actually finish a thought without you going on a diatribe. That's why it's so difficult. It's nothing to do with the actual ideas. Uh, it's more of your personality and general approach.

• 2:04:29Speaker 02

  Clearly, it's clearly my demeanor.

• 2:04:31Speaker 03

  No, I, that's right, actually.

• 2:04:33Speaker 02

  Uh, okay.

• 2:04:34Speaker 03

  Yep. What we're saying is we would like accredited investors to be able to invest in private companies, which just, just, just like.

• 2:04:46Speaker 02

  More efficiently.

• 2:04:49Speaker 03

  How you actually convince somebody to marry you and have kids is beyond me. Like, you just like.

• 2:04:56Speaker 02

  Ad hominem, eh?

• 2:04:57Speaker 03

  Yeah, like.

• 2:04:59Speaker 02

  We just like dropped the pretense entirely.

• 2:05:01Speaker 03

  I just like, it is impossible to finish a thought with you without having you interrupt for whatever belief system.

• 2:05:08Speaker 02

  I'm trying to clarify the points.

• 2:05:11Speaker 03

  You can't even not interrupt me commenting on you interrupting. You literally can't, I'm saying you interrupt me and then you interrupt the point that I'm making about you interrupting.

• 2:05:21Speaker 02

  I really, I'm actually really late to kid bedtime, so I'll let you finish your like statement and then we'll, we'll, we'll pick this up some other time.

• 2:05:28Speaker 03

  Sam, whose fault is that? Whose, whose fault is that?

• 2:05:31Speaker 02

  I think this is great, guys. I, I, I, I truly.

• 2:05:36Speaker 03

  I apologize for the wife, like, the, the, I shouldn't have said that because I'm just so frustrated that I literally can't finish a sentence.

• 2:05:42Speaker 02

  But when you put this out, please edit that part in because I think it's an important part of the story. Keep going.

• 2:05:47Speaker 03

  I really, I truly don't care. You probably.

• 2:05:50Speaker 02

  Own it. Just own that you're in pure ad hominem land.

• 2:05:53Speaker 03

  Yeah, I, I, I don't know if anyone will get through it because you probably interrupted that statement too. Uh, let's, let's talk about, we would like qualified investors, which is a subset of the market. We already said this, we have to KYC them, we have to figure out who they are, we have to know everything, there's costs associated with that.

• 2:06:11Speaker 02

  Sure, yep.

• 2:06:12Speaker 03

  It is complicated. I agree. Uh, we want them to be able to purchase private assets. We want them to be able to buy stock in LLCs. I just want to be clear for one second. They can do this today. It's not easy. It's not easy. There's transaction costs.

• 2:06:29Speaker 02

  Not easy.

• 2:06:30Speaker 03

  There's, there's transaction costs. Mm-hmm. There's risks.

• 2:06:33Speaker 02

  Liquidity. Limits liquidity. Limits liquidity. Can you give me limits liquidity?

• 2:06:37Speaker 03

  Yes, it limits liquidity. Sam, it limits liquidity.

• 2:06:41Speaker 02

  Great. And value? You give me that because of the liquidity is value, they're, or they're less valuable?

• 2:06:46Speaker 03

  No. It limits liquidity.

• 2:06:47Speaker 02

  Wow, okay.

• 2:06:48Speaker 03

  It limits liquidity.

• 2:06:49Speaker 02

  Liquidity is abstractly a good, we already, we did establish that.

• 2:06:54Speaker 03

  In isolation without taking contacts and anything else.

• 2:06:57Speaker 02

  Yeah, it limits the.

• 2:06:59Speaker 03

  Okay, maybe we can publish just this part because I only had interrupted seven times instead of 7,000. We would like them to be able to more easily.

• 2:07:12Speaker 03

  Then they can today purchase access to private LLCs. And those LLCs, those LLCs represent some underlying business, real estate, dollar store.

• 2:07:24Speaker 02

  We also acknowledge the majority of the US economy.

• 2:07:27Speaker 03

  Yeah, there's lots and lots of private businesses, totally agree. Doctors offices, stores, restaurants.

• 2:07:32Speaker 02

  It's like, it's like, it's like 80%, 70 to 80% of the underlying equity value in the United States is not in public companies.

• 2:07:38Speaker 03

  I don't know the actual number, but I know it's a big number. I agree. There's a large number. Now, today. Current world, non crypto world, regular human world. Okay. There are no reasons besides friction, what you think is friction, what do you think is friction? For me to be able to purchase an interest in a private company. I can buy a piece of my bodega. I can buy a piece of some lawyer's office. I can be, all right, I can do all of those things. Now, obviously I have to find it.

• 2:08:12Speaker 02

  Yeah.

• 2:08:13Speaker 03

  The company or LLC has to share a bunch of information.

• 2:08:17Speaker 02

  Again, your words is not mine, but we can all go with it. So keep going.

• 2:08:21Speaker 03

  Okay. Normally, a regular investor would like to understand something about the thing they're going to.

• 2:08:29Speaker 02

  Please move on. Please move on because we've already talked about how different investors have different thresholds. And you agree that you don't need audited financials for every.

• 2:08:36Speaker 03

  I'm not talking about. There's some information.

• 2:08:40Speaker 03

  There's some.

• 2:08:40Speaker 02

  I really have to.

• 2:08:43Speaker 03

  There's some information that I would like to know about this company. This has nothing to do with the blockchain. Nothing to the blockchain, right? So I've got to find, I've got to find the company listed somewhere, you know, they have to share some information.

• 2:08:57Speaker 02

  Someone has to share, I have an opinion, I have to wanna buy it. Can we just say I have to wanna buy it?

• 2:09:02Speaker 03

  No, because it's not how the world works, man.

• 2:09:03Speaker 02

  This is so relevant to the conversation because I agree that blockchain doesn't change it. So I'm just asking you to acknowledge that they don't have to share shit. Some, they just have to have an opinion, they wanna buy something.

• 2:09:12Speaker 03

  Sure.

• 2:09:13Speaker 02

  It's just, you're not giving me anything.

• 2:09:14Speaker 03

  Well, what I'm, what I'm, what I'm.

• 2:09:16Speaker 02

  Need help here.

• 2:09:17Speaker 03

  What I'm trying to get to is that there is friction in the whole process that

• 2:09:23Speaker 02

  Yeah.

• 2:09:23Speaker 03

  The blockchain piece of it touches the very last piece and it introduces risk. And introduces, and if, and if you, if you would let me get through this, I will actually make the point, which is I have to, first of all, be a qualified purchaser. I have to find this business, nothing great blockchain, great investor. Sorry, you're right. It's a lower threshold. Uh, I need to find the business. There's friction in that. There's friction in that. Uh, I have to understand what the business is, learn about it.

• 2:09:54Speaker 02

  Again, we're back to this. Please move on.

• 2:09:56Speaker 03

  I have to talk to the company, ideally.

• 2:09:59Speaker 02

  Again, you don't have to talk to me. Why are we back on this? I've asked you to move on. That is like not true. And you keep, we keep acknowledging the different investors, different thresholds, and then you bring it back to us as though it's like, has to happen.

• 2:10:10Speaker 03

  Well, generally speaking, Sam, people would like to know about the thing they're giving money to.

• 2:10:17Speaker 02

  Keep going. I, I don't think you're giving.

• 2:10:19Speaker 03

  It's, it's impossible, but like, people would like to know about the thing that they wanna invest in. They would like to do a little bit of homework on it. I'm just talking about all the frictions. I'm talking about all the frictions that exist today. Okay.

• 2:10:31Speaker 02

  Crypto has solved one key part of the friction, not all.

• 2:10:34Speaker 03

  At the end, at the end. I, I, I agree.

• 2:10:36Speaker 02

  Again, it's not, it's not necessarily the end. And when you solve one piece of friction, you also can cause a cascade to solve other frictions, but we don't have to argue about that right now.

• 2:10:43Speaker 03

  Okay. I go through this whole process of homework. I make a decision. Where we are, where you want me to be, that I would like to purchase this thing. Okay. Now. Even though I've just done like a whole bunch of work to make to get here. Right to figure out what this is and do all the homework, whatever. I now want to make a purchase and so we're at the last stage of this transaction, which is the purchase itself.

• 2:11:05Speaker 02

  Yeah, this is about the purchase itself. I give you that.

• 2:11:08Speaker 03

  We're at the last point in a long process, the purchase itself. Then we say that pesky legal document and

• 2:11:17Speaker 02

  yourself. This is

• 2:11:18Speaker 03

  Just let me finish the sentence.

• 2:11:20Speaker 02

  Let me finish and then I want to ask to expand. Can you can we make a deal on that? I'll let you finish, but you have to let me expand because I feel like you're taking pieces and framing them as like, it's just the legal document, not just the legal.

• 2:11:31Speaker 03

  Sam.

• 2:11:31Speaker 02

  So please fit like getting an opportunity.

• 2:11:33Speaker 03

  I'll tell you one thing.

• 2:11:34Speaker 02

  You can you have edit control, so you can edit however you want later.

• 2:11:37Logan Bartlett?

  Zach most certainly does not have edit.

• 2:11:39Speaker 03

  I don't, I don't.

• 2:11:40Logan Bartlett?

  I assure you, I have edit control and Zach make the point, Sam make the counterpoint, Zach say one last thing. Let's go. I I want to do a part two. Hopefully, I don't know if you guys are going to want to be around each other after this, but I have thoroughly enjoyed this. I've already tweeted out images of you guys mad at each other. This has been awesome for me and I'm sure, you know, this amazing content. Can we bring it home?

• 2:12:02Speaker 03

  Yeah, I would like to. And Sam.

• 2:12:04Speaker 02

  Please, I literally, but he's been asleep for 15 minutes.

• 2:12:07Logan Bartlett?

  We're two hours in and we're one example in. I don't know how this is half possible.

• 2:12:12Speaker 02

  We can do the others some other time. I'm all for it because I got more. I got more.

• 2:12:15Speaker 03

  Let me tell you, you will get it. Trust me. If if if there's anything we've learned in the last 90 minutes, you will have a chance to talk. Ah, okay. Let me let me get to to the end of this. Okay. Uh, I promise. Uh, at at the end of my homework, at the end of this process, I don't want to pay the legal fee because I agree with you. I agree with you. There is friction in that process. Okay. And what and we now have this bearer token that doesn't have a $3,000 ish. Let's call it. I mean, I've done equity purchase agreements for what? It's like three grand. Is that about right?

• 2:12:52Speaker 02

  I'm just saying that's not actually to be with us. I love the equity purchasing. That's just the side, the fee for a single signature as part of the overall transaction. The actual fees are much higher, but keep going.

• 2:13:01Speaker 03

  Okay, you pay a lawyer at the end of this process. Usually Laura who represents you has your interest in mind and there's a company attorney who has their interest in mind and you sign a document usually usually at the end of this you sign a legally binding contract that's covered by US case law blah blah blah that shows that shows that I own the equity interest in this LLC that the company has agreed to sell it to me there are a bunch of representations and warranties in this document about the company saying the things they've told me are true that blah blah like there's a bunch of stuff just let me finish there's a bunch of stuff in this legal document there's a bunch of stuff in this legal

• 2:13:45Speaker 03

  document I can show you a copy I'm sure you've seen a thousand uh that says I now am taking possession of the ownership in this LLC and that document is legally binding it allows me as a purchaser of this to sue the LLC and potentially you know the individual who represented that this was okay that is how this transaction works today uh it is how it's worked for a long time we definitely have switched from paper to digital signatures thank God it was really annoying to do the FedEx thing I could totally agree with you

• 2:14:16Speaker 02

  What legal precedent had to be built for that?

• 2:14:19Speaker 03

  Uh it's not really legal precedent so much as like the

• 2:14:21Speaker 02

  There was

• 2:14:22Speaker 03

  The attorneys had to agree that this was like an acceptable signature

• 2:14:25Speaker 02

  Well no no there literally had to be lawsuits about it and it had to be decided as case law digital signatures were acceptable

• 2:14:31Speaker 03

  Sure uh but there was still a document there was still a document uh and now what we're saying is at the end of this fairly long process you can disagree with me that's long but at the end of this fairly long process that requires a whole bunch of manual steps and work that introduces friction because I actually want to understand what this company does and that it's real and the person selling me this stuff owns what they own and like is they who they say they are leaving the crypto thing aside for a second then I make a transaction at the end and yes there is a fee associated with that transaction I totally agree with you it is a little annoying it's lawyers charging fees I agree with you

• 2:15:08Speaker 02

  I really

• 2:15:09Speaker 03

  I mean I'm literally I have one in my inbox right now I'm gonna sign it it took me maybe three hours um now just this this legal part of it not the diligence diligence took a lot longer uh what we're saying is that last piece that we want to be able to like freely transact back and forth and not have to do this legal document over over and over and over again even A normal, regular, thoughtful investor should want to do all the steps upfront anyway. No matter what, it's nothing to do with crypto, right? Like, they would like to under- ah, just wait. They would like to understand what this business is and how it works and doesn't have to be audited financials. It could even just be like an Excel spreadsheet. There's some stuff they want to do before they make a purchase of this private company that isn't regulated

• 2:15:54Speaker 03

  and doesn't have all the SEC rules and like all the other stuff. Cause it's a private business and the US allows us to do this. So you probably want to understand it. At the end of this process, what we're saying is that I want to be able to use like instant transaction liquidity, right? Be able to like move my potential, my share, my digital version of my share in this company around. And I want to be able to sell it and speculate on it or trade it, trade it. Don't use the word, the negative word speculate. Now-

• 2:16:20Logan Bartlett?

  I think, I think SBF uses price discovery. I think that's what you want to do.

• 2:16:25Speaker 03

  Well, ah, fine. That's a fair statement, although you can do price discovery in like a normal auction. Anyway, however, the transaction fee is annoying. So in order for me to add this like final piece of liquidity, the whole end of this giant transaction, at least the ones I can think of off the top of my head and I haven't like gone crazy yet. One is obviously this custody issue and then the insurance that I have to pay on top of it because of the custody issue, because it can be, because it can be stolen and lost. I agree. It's rare-ish and like, yes, I probably can self custody it if I was like, you know, crazy. And then I would, normal person would probably want to, probably want to use a bank or some third party. I'd probably want to insure.

• 2:17:08Speaker 03

  There's a whole bunch of fees associated with the fact that it can be stolen because the, the risk of a bare asset is like pretty big. So there's insurance. It probably comes all the way back to the legal fee I just paid anyway. And, and what we're saying is it's unsettled. This is my, this is the part I've been trying to say for 45 minutes. And it's unsettled case law about whether I actually own anything. It is unsettled case law about whether I even own this thing. Because we have to go and like work it through the court system and the courts have to look at some digital token transaction and somebody's got to sue and then there's going to be a whole bunch of rules about what is a digital transaction? What is it? And we do, want to do this entire thing and I'm going to take on the risk that I actually might not even own it.

• 2:17:55Speaker 02

  Okay, are you done? Because this has been like a 10-minute closing statement.

• 2:17:58Speaker 03

  That's, that's the bull case, more liquidity in private companies. Because all the other steps have nothing to do with blockchain.

• 2:18:07Speaker 02

  Look, I really, I really have to go, but I would like, I mean, that was, that was a long closing statement. I would like to kind of just, in a second, can we scope out for a second? I think we're on the same page after a lot of back and forth that A liquidity is fundamentally valuable. And B, the vast majority of wealth in the US and assets in the US are held in highly liquid forms. Right? That's an opportunity. I think I am with you from prior things you said, that in theory, the idea that you can have a Fed server or somehow Carta has an API and subsumes the whole world into one place. That if that weren't going to end up being a disaster long-term for a whole bunch of reasons, which I will not rehash.

• 2:18:48Speaker 02

  Right? That it is not necessary to have crypto to do this, but I'll tell you that protocols are way better for it. I agree with you that if you want to make an investment, the diligence, deciding what you want to invest in, your strategy is important. It might not be with the company. It might, there's this idea that it has to be some of the company. I think you add a lot of things in to try to make a stronger point, which aren't true. We'll set those aside. The thing that, that I believe very strongly, and then crypto is an incredible candidate platform for, right? Is what is a very high transaction fee, right? Of saying, I actually want to buy something, right? I want to buy something from a bunch of holders. I don't know who they are. I don't know who holds what or what their interests are. The price discovery component, it's not just about the $3,000 transaction fee, although that is annoying. It's actually very high transaction fees. It's the broker fees you currently pay.

• 2:19:33Speaker 02

  It's all the middlemen you're actually having to pay in the middle. When all I want to do is buy some shares from Logan or sell some shares to you, right?

• 2:19:40Speaker 03

  What, what middleman?

• 2:19:41Speaker 02

  Oh, I really asked, I, I.

• 2:19:43Speaker 03

  I'm asking what middleman? I'm asking what.

• 2:19:46Speaker 02

  There's a lot of setters. I mean, I could name six middlemen I use right now for selling private, private, um, stock.

• 2:19:52Speaker 03

  You mean like a broker to list it, right? To be able to like, find buyer.

• 2:19:57Speaker 02

  Zach, please, Zach, I really do have to go to bed. So I'd like to finish and let me have my space because I gave you yours. We're going to get that out to the air. When you get it out to the air.

• 2:20:06Speaker 03

  Now, I'm like, I gotta do it to you, bro. I just want to like, let you see what it's like, but I'm not going to.

• 2:20:11Speaker 02

  Zach. Your two big arguments is one, the $3 retic attack argument, which is that self custody is scary. If you won't want to do it and there's fees associated with custody, fine. I agree with you that having the ability to insure things and custody things, there's no reason to not like we'll do that. I think the fact that the fundamentals not baked in the profile is very powerful and interesting and will create efficient markets for that stuff. Your second argument is something along the lines of, I mean, how to even put it? It's like, this isn't that big a deal, I guess, right? And I'm just like, I just think that that's just really myopic, right? And the end of the day, the ability to create a market for private stock, right? In these companies and create liquidity is going to be, can be a massive engine of prosperity, right?

• 2:20:57Speaker 02

  You know, we have tons of businesses in our portfolio that are solely based on the fact of businesses are liquid. Things like team shares, like et cetera. There's a huge, and so I'm very excited about that opportunity. Crypto is not a panacea. It does not solve everything. You and I agree on that, like human institutions matter. But I, you know, I just, I think that your arguments on those fronts are weak. And then the last thing I'll just add is like this whole settled case law thing you kept coming back to. Again, we talked about digital signatures and the evolution there, case law changes. It is a risk. There's a risk, right? That like for some reason, some court rejects something and these transactions are invalidated and it's a mess. I totally agree with you, but I think it's extremely slim. And I think part of progress is being willing to like push the envelope on what these things are with good foundational grounding.

• 2:21:40Speaker 02

  But again, if no one were ever, if you never did anything in business because there isn't quote unquote settled case law on it, right? Then like nothing would happen and we'd still be signing wet signatures, right? And sending them along via couriers on bikes in New York, right? And we wouldn't even be able to use DocuSign. And if you don't believe that that's annoying and a meaningful difference, like, I don't know what to tell you. So that's kind of my piece.

• 2:22:01Logan Bartlett?

  Thank you guys for doing this and bearing through.

• 2:22:08Logan Bartlett?

  So that'll do it for the 27th episode of Cartoon Avatars. If you, if you made it this far, thank you for sticking with us as we, as we got through the episode. Also, thanks to Josh Wolfe for coming on, Sam and Zach for being nothing if not entertaining. I guess a little bit of a programming note as well. We had mentioned that we were gonna do, I guess when I got going, we said we were gonna do four months, or sorry, four weeks and then see where we were. And then I said we would do 12 weeks and see where we were. And that was where this kind of new framework evolved where, where it was just me and ultimately me and Zach. And then I committed to do 26 episodes.

• 2:22:53Logan Bartlett?

  So I guess we've officially crossed that Rubicon. We're now at 27. So I, I, I think I've, we're gonna keep going. I'm not sure exactly to what end. I think we'll probably commit to do another 26, kind of take it to 52 and then sort of see where we are. But thank you to everyone that has listened along the way, supported, all the kind words are, are super appreciated and look forward to seeing everyone again next week for the 28th episode and hopefully at a minimum through episode 52. So thanks everyone for listening.