E233: Why Stablecoins Could Rewrite Global Finance — Faster Than Anyone Thinks

What happens when an investor treats crypto like software infrastructure, not speculation? In this episode, I sit down with Avichal Garg, Co-Founder and Managing Partner of Electric Capital, to unpack the evolution of crypto investing—from speculative hype cycles to infrastructure that powers the next era of the internet. Avichal explains how Electric Capital measures developer activity across blockchain ecosystems, why he believes the next trillion-dollar opportunities are being built quietly by open-source engineers, and how software-based incentives will transform everything from finance to governance. We discuss the reality of investing through crypto winters, the rise of modular blockchains, the lessons learned from building at Google and Facebook, and how AI and decentralization are beginning to converge.

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

• 0:00David Weisburd?

  Another thought experiment that a lot of people in crypto play is that the US dollar has gone down 75% against Bitcoin over the last several years, 50% against gold. People like to think in one Bitcoin, one Bitcoin equals one Bitcoin. Tell me about the usefulness of that framework and also is it just a thought experiment? Is it really how investors should be thinking about it?

• 0:31Speaker 01

  I think it's a big mental shift, at least it was for me 10 years ago when I first got my head around it, which is it's not that my assets are necessarily worth more, it's that dollars are worth less. I mean, it's empirically true, the dollar is worth far less every year. And I think people are starting to realize it in other sort of intuitive ways, and not even capital allocators, but your average person is saying, wait a second, how can I be making $30 an hour now, but I still feel poor? Like, I can't buy the stuff that I thought I should be able to buy. When I was a kid, my parents made $30 an hour and we could go to Disneyland and we could buy a house and my dad didn't have to work overtime all the time. Like, wait a second, what's going on? And so the intuitive light bulb, I think, has gone off for a lot of people over the last 20, 20 years or so, and I think especially in the last five or six years because the

• 1:13Speaker 01

  rate of inflation, the ability to perceive it sort of kicked in because of the rate of inflation that we had. And so from an allocator's perspective, I think it's if you don't understand that it's actually the dollars are depreciating, then I think you're in for some tough times.

• 1:26David Weisburd?

  Welcome to the How to Invest Podcast.

• 1:28Speaker 01

  Good to see you. Thanks for having me.

• 1:30David Weisburd?

  Good to see you as well. So, tell me about Electric Capital's very first fund.

• 1:35Speaker 01

  It was back in 2018. We kind of accidentally started it. You know, we were doing a bunch of personal angel investing and investing into digital assets. And back in, you know, 16, 17, there's no tooling available to do anything with digital assets. So custody, multi-party computation, just like even knowing where your assets were. And so we built some tooling for ourselves to be able to do these things. Some of our friends who are GPs at various venture firms started reaching out and saying, hey, I don't really understand any, you know, what is Bitcoin, what's Ethereum, what are ICOs? That's kind of what was happening in that era. And people started saying, I don't understand this, it's out of the scope for my venture fund.

• 2:20Speaker 01

  I trust you guys. Would you consider taking my money and doing whatever it is you do with your personal assets and doing with our money too? And so we got a, we got a fund off the ground in 2018, early 2018, took in some capital from, from some of those folks and scaled it up.

• 2:34David Weisburd?

  It's interesting you said, I trust you. Can you, can you manage our money? I, I went through a similar thought experiment. I saw some crazy returning funds and I'm like, well, in theory, maybe, but it's crypto. People could hide things. I'm going to go with this one fund, which might not be top decile or top 5%, but it's, I trust the guy. I've known him for a while and I'm willing to put my money with him, my own personal hard, hard earned money with him.

• 2:57Speaker 01

  Yeah. Yeah. Trust is very important. Fortunately, fortunately, our funds have been top 1% funds.

• 3:02David Weisburd?

  So no trade off.

• 3:03Speaker 01

  Worked out in both dimensions. But, uh, no, trust, trust is really important. You know, it's especially with this stuff where, you know, audit and finance and tax and accounting, all these little, the vendors didn't really even exist, right? So a lot of it was sort of, you had to trust the GPs of these things to, to make sure they weren't hiding assets, for example. So yeah, there's, there was a huge amount of trust involved when these things were first getting off the ground several years ago.

• 3:26David Weisburd?

  And we'll get to the story of how you grew to a billion dollars, but obviously a lot of people trusted you to get that kind of scale. Double click on the reasons why people trusted you, in your opinion.

• 3:36Speaker 01

  We were known quantities in Silicon Valley. We, we'd done some startups. We exited a company to Facebook. And so a lot of the first people that came to us had worked with us across, across those projects. And so there's part of it is just, you know, knowing people and, and I think people, people observing your behavior for long periods of time. I think at the very least, they know that you're not running away, that you live in the area. They know, you know, you have friends here. It's, you know, there's sort of social connectivity that, that gets created and that makes it certainly easier. When you're dealing with large amounts of money, I think the, the best signal often too with trust is how have people dealt with similar situations in the past when they've been entrusted with, with capital and other people's trust and what did

• 4:18Speaker 01

  they do with it? And our startup was, um, was a small success and, and, you know, relative to the scale of Facebook and Meta today. Um, but I think the way that we handled that situation was, was actually what, what gave people a lot of trust. So it was, it was some of the people that were investors in that company were the first ones to come to us and say, hey, I trust you guys for this, because I think the way that we handled that. We ended up adjusting the cap table to make sure that the investors got a very healthy return on their investment. And we ended up for the employees adjusting the cap table. So Curtis, my co-founder and I took a big chunk of it and sort of redistributed it between employees and stuff. You can only really know somebody's character, you know, when you have sort of these kinds of difficult decisions that have to be made and there's real money at stake. And so I think the way that we handled all that was give people

• 5:02Speaker 01

  a lot of confidence that we were trustworthy people.

• 5:06David Weisburd?

  When there was X amount of money to divide up, you gave from your pocket to somebody else. You did it behaviorally, not through some virtue signaling.

• 5:14Speaker 01

  Yeah, reveal preference, right? It's easy to say the thing, it's hard to do the thing. I also think it's, you know, after, after it's also, it's kind of like dating or it's kind of like any relationship. If you're in the relationship for long enough, it's, it becomes increasingly difficult to hide who you really are. You know, like all the small things sort of, sort of add up. And at the end of the day, Curtis and I are not money motivated people. So it would, it would be out of character. It would be, it would break the pattern for us to somehow just like steal the money and run away with it or hide it. It's, it's, you know, that's just not, if you know us, you know, that's not what motivates us. It's like, we've always been curious about how does this tech work? And what can we build here? And, you know, being a little bit contrarian, but being right, like those, those things matter to us a lot more than, than a little bit more money. And so I think part of it is if you just see, see how people operate for a while,

• 5:57Speaker 01

  they, they sort of reveal preferences will, will reveal themselves.

• 6:01David Weisburd?

  Said another way, if you pretend to be a good and honest person your entire life, you will be a good and honest person. If you keep on, if you keep on pretending to be honest, eventually you do become, you're honest through your behavior.

• 6:14Speaker 01

  Yeah. I mean, people can run scams for a long time, right? People can, can be, appear to be good and honest for many years and then, and then it flips at some point when there's enough money at stake. But I think.

• 6:23David Weisburd?

  I, I'm curious to hear your thoughts. So I do think actually it's short-term versus long-term greedy. Obviously it's good to have a moral view on it, but I find that if you're truly long-term greedy, if you're trying to run this, you know, billion dollar scam, the best way to really do that is to just provide value. The best way to make a billion dollars through, through the long-term scam is actually not to scam and to make a billion dollars to providing a lot of value. And I think the people that are scamming are just shortsighted.

• 6:50Speaker 01

  Yeah, a hundred percent. Yeah. I mean, Long to your to your point in some sense, like a long term scam is indistinguishable from like, you know, short term value creation, right? Because the right way to be a long term scammer is to create short term value. And then at some point, you know, like you've accrued enough goodwill or access or whatever that you can fully scam or hit, you know, exit. The rational perspective on this might not even be, you know, scam is like a value oriented term, but there is a great blog post or newsletter post from Ben Thompson at Strategery years ago, probably 10 or 15 years, 10 years ago, maybe, when when Benchmark was suing Uber. And he sort of made the case that that even if you're a good actor, like from from a numbers perspective, if this one outcome was going to be more than

• 7:32Speaker 01

  the sum of all of your future venture investment, you know, GP carry proceeds, you were probably like rationally, it made sense to to like sue Uber and try to extract that billion dollars or whatever. Rationally made sense. And so it's not even necessarily like a value term. Like you might argue, actually, the values only go in the other direction, which is like, if you truly have some principle, are you willing to forego large amounts of money when it's rationally the right thing to do? That's that's a much higher bar. But actually, in some sense, like it's not even a an extraction thing. It's just like rationally speaking, that's that's the right thing to do.

• 8:04David Weisburd?

  It's an interesting thought experiment, which is, would you rather have misalignment with a very good person or alignment with a very bad person? Neither neither of them are ideal, but.

• 8:14Speaker 01

  Yeah, neither neither is ideal. Obviously, you'd rather be aligned with very good people. But we thought about this, actually. I mean, we this was this was part of the reason, I mean, we've made lots of mistakes over the years in our firm. Directionally, we've been right, which, you know, one big lesson is like, if you're directionally right, all the small things will take care of themselves. But we we dodged FTX for this exact reason, actually. Like the vibe I got from from Sam very much was a like, you will be economically aligned with somebody who does not appear to be.

• 8:49Speaker 01

  Who, who, you know, in, in all those conversations, it was pretty clear to us that Sam would make a lot of money. It was unclear if you would make a lot of money, you know? And so that it was sort of like exactly that where there, there have definitely been cases where, you know, I've taken leaps of faith. I'm like, look, this like legal agreement is not like bulletproof. This is like a weird situation. There are a lot of edge cases here. You know, handshake, we're going to do this. And if it's with a good person, it's always worked out well. So, you know, lived experiences, like the misalignment with a good person is way, way better than, you know, sort of contractual or economic alignment with a, with a low character person.

• 9:26David Weisburd?

  Sam's a great example of somebody too smart for their own good. If he was truly smart, he would just build a hundred billion dollar company and make $10 billion and stay out of prison. But it's, it's, it's almost like a, it's like a compulsion. It's like a character flaw. It's an Achilles heel. He is really smart. He's brilliant. He's good at all these things, but he has this Achilles heel, which he perceives as he's smarter than everybody else, but it's really actually just a weakness.

• 9:52Speaker 01

  Yeah, yeah, it's, it's beyond me. I don't, I don't know him well enough to, to opine on like what, what sort of ultimate light to that. But yeah, what a, what a missed opportunity. I mean.

• 10:00David Weisburd?

  So speaking, speaking of not missed opportunities, I think a lot about this is like, how does the next generation of GPs capitalize on the next generation of opportunities? So most recently it was AI. Some would argue next might be nuclear defense, whatever that next one. It's not only knowing the next wave, and you're actually a great, a great example of this. It's necessary, but not sufficient to call the right shots, but you also need that reputational capital or that right to be one of the people that people will bet on. So it's not enough to know what to bet on. It's to have that social and political capital that you will get a bet from other parties on. So you can't really build it just in time.

• 10:43David Weisburd?

  You can't just say, oh, hey, uh, hey, hey, everybody, I'm, I'm really bullish on nuclear. Here's a 55 page PDF on why nuclear is best. No one's going to give you money because you haven't gotten the right to win to take that bet.

• 10:56Speaker 01

  Yeah, I think that's right. And, and there, there are a couple of learnings there, right? Is one thing I always think about is if you think about companies versus investing, X axis is time, Y axis is difficulty. Starting a company actually is pretty easy these days. There's a lot of capital out there. And as you get bigger, it actually gets harder, right? So the curve, for anybody listening, is sort of exponential up, right? Once, once you're raising a hundred million dollars, it's harder. Once you're raising a billion dollars, it's even harder. There are fewer people who can give you the money and your competition gets more stiff, right? Like it's, you know, competing against every seed stage startup that's trying to do something is like one degree hard. But man, it's way harder to compete against Nvidia and Jensen right now, right? Like, how would you even do that? So, so as you get bigger, it gets harder, right?

• 11:38Speaker 01

  So you kind of go up the X axis and it's, or sorry, up the Y axis and it's exponential up. Venture is basically like reflected over the Y axis. It's basically the inverse, which is it's basically impossible to start a new venture firm. Like, nobody wants to give you money to just invest and you're locked up for 10 years. And why am I going to trust you? And what are you going to do with the money? And are you a good investor? What are my alternatives? I can just buy the NASDAQ and make 14% a year. But, but actually, as you get farther along, it gets easier. So like the, the difficulty like drops off after a certain point. And it actually becomes easier to raise, like, you know, raising, in some sense, raising 500 million is easier than raising your first 10 million. Because you've got a track record, you've got proof points, like there are bigger LPs that need to put more capital to work. There are fewer places to put it. The bottleneck becomes what do you do with the money? Like, all the things work in your favor.

• 12:22Speaker 01

  And so, yeah, for, for getting off the ground, it's, it's very, very, very hard as a new investor. And so you have to have something that kind of gets the flywheel going. Whether it's, you know, personal angel track record, whether it's, hey, you wrote a newsletter. Like, a lot of great investors have started as, as writers. So you write it down and you say, hey, I'm calling my shots. I'm, I'm going to tell you what's going to happen. And then if you're consistently right, people start to pay attention and say, hey, maybe you should start putting money behind these bets. You know, going to an existing platform, proving yourself and spinning out. There are lots of ways to do it, but, but they all, I think you're right. They all sort of converge around this idea of why am I going to trust you? You know, do you have some sort of track record that I can bet on? Which is, it's, it's quite different than startups, right? Like, in startups, a lot of, a lot, there's a lot of capital available to take a leap of faith and, and get, you know, a $2 million seed round these days.

• 13:07Speaker 01

  There's a lot of money slushing around to do that. It's very hard to go raise a, you know, even a $20 million seed stage fund is not easy.

• 13:16David Weisburd?

  I like to put it, the absence of a right to win is no right to win.

• 13:21Speaker 01

  Yep.

• 13:21David Weisburd?

  Or said another way, it's a hyper competitive market. And if you don't have a very clear way why you have a right to win, you are default dead.

• 13:28Speaker 01

  Yeah.

• 13:28David Weisburd?

  To your point versus startups started to fall to live in the beginning, which was not always the case. Going back to when I, when I started, I first started 2008. It was incredibly difficult, especially if you're under 30 to raise a seed round. Took us 18 months, so markets change. You just have to pick your hard and, and what challenge you're, you're willing to take on. So I want to get back to electric. Tell me about your original thesis for electric.

• 13:54Speaker 01

  Yeah, it was actually, well, there's, there's the business thesis and there's the investment thesis. The investment thesis was, our belief was that this infrastructure, distributed systems and cryptography and,

• 14:05Speaker 01

  you know, tokens and all that stuff, ultimately was, was the best way to move money around and better than anything else that had ever been invented. And what would happen over the next 25 years is it would replace all of the financial plumbing of the world. It would become the new backbone for fintech. It would replace all of Wall Street. It would replace all of the capital markets of the world. So we, we wrote a paper in like end of 2017, I think. I say like November 2017, have to go back and look internally, which was essentially the, the investment thesis that became electric. And we called it programmable money, sort of wrote this stack diagram that said, look, if we, if we think that this base layer that's emerging is a store of value, like a, like a Bitcoin or Ethereum, on top of that, you're going to get stable coins. And on top of that, you'll get all of the financial primitives.

• 14:50Speaker 01

  Cause, cause really like what, what is all of, all of global finances? Just here's a pile of money. Here's some rules around who has access to that money. Here's what I need you to do with the cash flow from this pile of assets over some period of time. And we just, we encode that into legal code and into legal documents. And that could be software code. There's no reason it couldn't be software code. Once money becomes digital, it would be software code. And so that was the core thesis, which directionally turned out to be correct. You know, I think that's, that's essentially what we've seen happen over the last several years. And we're the last seven or eight years. And, and you know, I think we're probably something like seven or eight years into a 20 to 25 year transformation. Like I think it's just now that Wall Street is starting to figure this out. It's just now that we're getting regulatory clarity in the United States. It's just now that the fintechs, you know, the stripes of the world are saying, wait a second, this is a thing.

• 15:37Speaker 01

  So I think, you know, directionally, directionally, we were right on that. In parallel, there was a, there was a business thesis for the firm, which said, hey, look, If this comes to pass, if we think that the capital markets of the world all move on chain, because this is in fact, the best way to move money around, then capital deployment has to change. And if you look at the history of technology, you know, every time the infrastructure changes, you actually have to change the companies that are built on top of that infrastructure. You have to change the human organization on top of the infrastructure. I'll give you an example. If you look at an e-commerce company, e-commerce companies like Amazon were built very differently than Walmart. Like the structure of the organization internally is very different. Like who reports to whom, who has power, who gets paid the most, who makes the decisions? Like all these things are different.

• 16:22Speaker 01

  And when you change the infrastructure, what you have to do is put in charge the people who understand the infrastructure. And so in a modern sort of software environment, what that means is you have to put engineers and product people in charge, because that's who understands the nitty gritty of the software. And the software is what gives you operating leverage. That's what drives your customer acquisition cost down, and that's what drives your LTVs up, and that's what drives your gross margin. Everything gets driven through software. And so the people who really understand software need to make all the decisions, and you need to put them in charge. So at Amazon, all the engineers run the show. And it took Walmart like 30 years to figure out how to do that, right? They just weren't able to do that. And in large part, it was because they just didn't have the right people in charge, right? And so we have to do is blow up the human organization and put the right people in charge, and that's very hard.

• 17:05Speaker 01

  And this is where startups have an advantage, is like when new infrastructure emerges, the startups are built natively for that infrastructure. And they put the right people in charge, whether it's Darwinian and the market produces what it produces, or cognizant, you know, founders are saying, hey, I need to put certain people in charge to make certain decisions. Sort of irrelevant. What ultimately happens is the startups end up winning in that. And so we said, hey, wait a second, if these capital markets are all moving on chain, there's no reason that the financial firms should look the same 20 years from now. What's going to happen to the financial firms is what happened to the newspaper companies in the 90s and 2000s, which is there's no longer a local monopoly. They have to compete at global scale. It's going to require a different set of skills. And really, if history is any guide, what you're going to need to do is put the engineers

• 17:50Speaker 01

  in charge and have them making a bunch of decisions. And so we said, that probably happens to venture capital. And so the best venture capital firms in 2030, many of them will probably have engineering at their core, they'll know how to build stuff, they'll know how to operate on chain, they'll understand how to move these assets around on chain. And tapping into these new capital markets to do interesting things. And that that more or less has also played out. I think we were we were correct in that. And so, you know, at Electric, we don't hire. We don't hire investors. We just hire engineers. And then it turns out some of the engineers end up having a great commercial instinct and they end up being great investors. But we actually, we don't hire anybody with, you know, prior investing in the experience per se. And we have like traders or people who have written code for for, you know, high frequency kind of stuff, but not sort of like classically trained.

• 18:34Speaker 01

  I, you know, I went to an MBA program where I studied business at Wharton. And then I got a, you know, internship, you know, on Sand Hill. Like then we don't have any of those people by design.

• 18:42David Weisburd?

  A lot to unpack there. There's the venture side and then there's the market side.

• 18:48David Weisburd?

  If I subscribe to your thesis that traditional finance, TradFi will be disrupted by by crypto.

• 18:56David Weisburd?

  Is the next step essentially mapping out all the TradFi industries and figuring out whether they'll be disrupted, whether they'll cease to exist and kind of doing it piecemeal? How do you go about kind of mapping the future? Is it based on TradFi or do you just think from first principles? What would people love to do that they're not doing today?

• 19:15Speaker 01

  A little of both. So so some of it is, you know, I actually like the traditional financial markets have been around for a long time. There's Wall Street, let's say, since World War II. But just broadly speaking, I mean, like banking and accounting, you know, let's say, you know, these these sort of basic ledgers go back to like the Medici's, right? So you you have several hundred years of of, you know, financial thinking that's happened. And so, and, you know, financial people tend to be very creative. So there's, you know, CLOs and tranching, as we saw in 2008 and, you know, HELOCs. And people have invented like really clever instruments that solve all these problems. And so if you think of those things as products, in some sense, TradFi has already created a lot of products.

• 19:59Speaker 01

  And so you don't need to necessarily reinvent the wheel because those things solve real problems. And and so part of it is looking at those things and saying, look, there's there are payments problems. There are global remittance problems. There are trade factoring and invoicing challenges and money solving problems. You can start to go through, you know, all the big businesses of the world and say, what would what would this look like if it were software first and on chain? And stable coins moved all the assets around? I think there will also be entirely new categories of things that emerge. The analog here would be social media was uniquely enabled by the internet. Anybody could now become a content creator. And so many of the biggest outcomes from the internet were things that didn't have an analog in the in the old world.

• 20:41Speaker 01

  It wasn't just that newspapers had to be digitized and stores had to be digitized. And you could see those things, right? I still need to buy stuff. That's just, you know, an itch that I need to scratch. And hence, Amazon is going to make sense. There are flea markets, so eBay is going to make sense. But some of these new things, you know, like a Twitch were just sort of a bizarro thing, or Twitter is just a bizarro thing. And they ended up being some of the biggest outcomes. And so those are the really interesting ones. And I think, you know, things like prediction markets might fall into that. Like, they've sort of been theoretically possible for a long time, but it just didn't make sense. You didn't have enough people, you know, to aggregate that you could do this. And the money rails internationally were really hard. Things like NFTs and digital art are like this. Like, you know, I have a print of an NFT behind me. And digital art is sort of a weirdo thing.

• 21:25Speaker 01

  Like, I'm going to value pixels more than I value, you know, like the painter who made it. Like, it might even be computer generated. Like, somebody wrote some code to generate the art. And so I think you're starting to see, and that gets, that sort of bleeds into digital luxury goods and digital signaling. So I think you get entirely new markets as well that can be, like, shockingly large. But you could get pretty far, I think, as an investor, if you just looked at TradFi and you said, what are the big markets in TradFi? And how do they move here? And who's going to win? You could actually do quite well, I think.

• 21:53David Weisburd?

  And you can see that some of these TradFi markets may just prove to be non-disruptible for some reasons. Maybe they're purely relationship-driven. There's some incumbent advantage. There's some connection to the Federal Reserve, or whatever that reason might be.

• 22:08Speaker 01

  I think, you know, unlike information, unlike the media, you know, money is a thing that governments hold very close. And so who has access to print money? Who has access to buy treasuries? Who has access to put money in banks? What kinds of licensing do you need to perform certain kinds of financial activities? This falls into, you know, in the United States, things like broker dealer or money transmission, you know, licenses or money service businesses. You sort of have these designations because the government really cares about how money moves around.

• 22:39Speaker 01

  Both for economic reasons and security reasons, right? You don't, you don't want to be in a situation where, where there are nefarious activities happening. You need some sort of oversight over those. So yes, absolutely, there could be regulatory moats. There could be incumbent advantages because the government needs to pick winners. It could be that some of those licenses are difficult to acquire or costly. And so that makes it hard for startups. So yeah, it's entirely possible, I think, in this world that some of the incumbents will survive and potentially do well. And being thoughtful about where those industries are, I think, is, is important. At the same time, I think you'll see, you know, take, take the example of somebody like a Coinbase, which is now roughly a hundred billion dollar company, eighty to a hundred billion dollars, depending on the day. You know, they started with this sort of fringe set of, set of things around things like Bitcoin and Ethereum.

• 23:25Speaker 01

  And have since evolved into a full fledged financial services firm and institutional grade financial services firm, offering a lot. And it seems inevitable to me now that they, they have some derivatives licenses, they're going to move into securities in the same way that Robin Hood, you know, is moving into crypto. And so I think what you tend to also see is that startups that get to scale start to be able to compete with the incumbents. And so I think some of the incumbents will be fine, but I think the slowest moving incumbents, even the regulatory moats, or even sort of those relationships and so on, won't be enough. Like, I think, you know, a very sizable percentage of the incumbents also get disrupted and become irrelevant.

• 24:01David Weisburd?

  It's so interesting. To further your point, let's say Coinbase in five years, they have all these aspects. Maybe they start investment bank focused on fintech because they have this right, this tangential right to win. Then they become one of the top fintech investment banks. They go head to head with JP Morgan and Goldman Sachs. And then they're able to, they're able to poach a, a top fit group. And now they're in like financial services and they keep on expanding. And at the end of the day, kind of they're doing, you know, consumer retail IPOs. And people are like, how did you get there? Well, you did it kind of incrementally every time. Having a dominant market position and or overpaying for talent in order to kind of incrementally gain market share. So it's an interesting backdoor kind of theory.

• 24:40Speaker 01

  In this specific case, and I think you saw this with media companies, for example, right? Like YouTube being able to back into the music industry, like, you know, a huge percentage of global music listening happens through YouTube, which is if you have a profit center in one place that generates a bunch of revenue and you have some sort of technological advantage, you can leverage those things to create new value. So it's not, it's not even, not saying you were saying this, but you know, it's, it's some people might say, hey, like investment making is zero sum. And, and I think what you could say is actually, you know, there is going to be a something like $5 trillion global capital market on chain. There's about $250 billion in stable coins today. There will be, in my opinion, at least, you know, two and a half trillion, if not five trillion worth of dollars on chain. That's an entirely new group of people that can't buy US equities today.

• 25:25Speaker 01

  Right? So if what Coinbase is doing, if you're, if you're an IPO issuer, and Coinbase came to you and said, hey, look, we can do all the stuff that the old guys do. We'll take you to Wall Street. We'll get you in front of the banks. You can like buy the pop, whatever. We'll also tokenize your stuff and put it on chain. And by the way, there's an extra $2 trillion worth of demand, which otherwise can't buy equities. And now those guys are going to bid you up, which means that the banks over here all have to pay more. And so now your market cap just went up because you have a new pool of capital. That's a strategic advantage, right? So, so it's, it's, you know, yes, you have to buy the talent. Yes, you have to be, you know, have the relationships and all those things. But I think there's an argument that, that the right to win here might be the global capital markets that are on chain, which you could bring to bear into legacy markets. And if you have the pipeline to those, this is why I think Coinbase doing something like Base, this L2 that they built,

• 26:09Speaker 01

  Robinhood is now also doing L2, Kraken has done an L2. You know, all these companies are doing this because what they really want is those global capital flows. They want all of those dollars sitting in their ecosystem because that gives them this fire hose that they can redirect into products. And that gives them leverage, not, not in a financial sense leverage, but strategic leverage to go in and win in new markets because they can, they can bring an extra trillion dollars of capital markets to bear that, that Wall Street doesn't know how to access.

• 26:33David Weisburd?

  As are many people, I'm concerned about the political unrest and the amount of fake news on both the right and the left and the amount of misinformation in the market. Is crypto looking at any kind of incentive mechanism to solve the number of fake information in the market?

• 26:52Speaker 01

  Yeah, I mean, the sort of hand way of the answer here would be prediction market, right? It's like, well, if you really believe a thing, then you should be able to put some money behind it. So let's use a concrete example, like who's the next Fed governor going to be? Maybe there's some fake news that gets leaked that it's so and so. And maybe that's true, maybe it's not. But probably there are people out there that know that it's not true, whether it's the person who wrote the article, or somebody who gave that fake news, or somebody who knows what the real answer is. And so what you end up having is these market participants that say, hey, wait, I think I actually might know the answer, or I believe that that's fake news, and so I'm willing to bet that it's somebody else. And so they're putting money behind some other Fed governor. And so prediction markets actually can be a really interesting source of truth.

• 27:33Speaker 01

  We saw this with, we've seen this now with multiple elections, for example, where the sort of real signal seems to be in that, in that zone. You're seeing this with like AI models, where people will create markets that are, you know, like what, which company will have the, the, the best foundational model based on whatever benchmark, you know, scoring mechanisms, eval mechanisms you want to use by October 1st. And, and you'll see after OpenAI launched GPT-5, very temporarily it spiked on the, on those prediction markets that OpenAI would have the best by October 1st, and then it actually crashed and Google ran up big time, suggesting that like people who knew what

• 28:15Speaker 01

  the Google model was that was coming, knew after playing with GPT-5 for a couple hours, they were like, oh, Google's is going to be way better than this. I already know Google's is better. And so you could see the market kind of flip, right? Like in real time, like in a couple hours it flipped and Google's was, was number one. And so, you know, prediction markets, I think, are actually potentially a really interesting mechanism for this.

• 28:33David Weisburd?

  Yeah, I love this idea of policy via prediction markets. So the president wants to

• 28:41David Weisburd?

  Enact a policy, you could throw it up on the prediction markets and then people could with their money bet on it and then they'll kind of take you to the ground truth on the policy versus kind of just having the different talking heads, essentially actors on TV throwing around different narratives with no skin in the game.

• 28:58Speaker 01

  Yeah, the hard, the hard part ends up being, how do you adjudicate this, right? Like, what is, what is the oracle that you're going to use to say? Yes, this is the, this is true or not. So I'll, we'll give you, we'll use a concrete example here. We just had this sort of like, does Tylenol cause, you know, increase the rates of autism? Yes or no?

• 29:15Speaker 01

  How would you, how would you determine that? Like, because agreeing, like, everybody agreeing on what, what the adjudication mechanism is, is it like a particular judge says it? Is it that a particular medical journal says it? Is it? Like, how do you, how do you know? What is, what is the final answer here? And agreeing on that, actually, I think ends up being the hard part. Like, the prediction market mechanisms, I think, are fine and easy. It's like, what is, what is the precise mechanism by which we just determine the answer is yes or no? That, that sort of ends up being tricky, I think, in a lot of these cases.

• 29:42David Weisburd?

  So you believe that crypto will be baked into the economy by 2030? What does that mean? And maybe give me one use case where that happens.

• 29:51Speaker 01

  What it, what it means is that, you know, if you take something like Polymarket in the prediction market world, people don't even think of it as a crypto product. Or, you know, this idea of stable coins, it's just money moving around. People don't think about that as a, as a crypto product. And so the, um, you know, what happens with technology is once it becomes sufficiently useful and sufficiently accessible, it sort of disappears. Like, you don't think about it. It just sort of exists. And, you know, this is part of the reason we named the firm Electric, actually, is inspired in part by Electrum, which was the first coined money in the Lydian Empire. And so it was a, it was a technological breakthrough to have denominations of money rather than like, here's a chunk of gold. Um, and now we have to weigh it and figure out if it's real. Um, but it's also

• 30:34Speaker 01

  inspired by electricity, uh, which is electricity is just baked in everything. We don't think about it. It's, you don't call things like electrical appliances, right? Things just sort of, that, that term is sort of in an acronistic term at this point. There's a time at which that made sense. And so, because everything's battery powered, right? Everything's gonna, everything's gonna be enabled by electricity. And so our belief was crypto would be that way. I think stable coins are probably the first place where people will sort of experience this, where money movement just becomes 24/7. It becomes real time. It becomes, you know, integrated into your, into every application. The yield profile can change now that we have, you know, some regulatory clarity in the US, where, you know, you, you as a, as a mobile phone app user could make 4%

• 31:18Speaker 01

  because that's the treasury rate, you know, it's north of 4%. So somebody can hold US dollar coins on their phone in their wallet and actually earn yield on it, which, you know, if you go to most banks, you can't. You're gonna get, you know, 0.1% in your savings account. You're kind of getting fleeced by the banks because they turn around and lend it for 7% to mortgages, you know, or buy treasuries with it. And so that's their business model. Now, all of a sudden, that yield just passes to the end consumer. So these kinds of things, I think, well, you're already seeing on the ground. I mean, Tether has, you know, 100 billion plus. There are some, some very interesting wallet products out there that have lots of deposits and are passing through yield.

• 31:51David Weisburd?

  Are you bullish on, on Circle, Tether, stable coins? Do you think new players will enter? How do you look at that market?

• 31:59Speaker 01

  Stable coins are gonna be a big unlock for all the global capital markets.

• 32:03Speaker 01

  You know, specific companies is tough because there's macro stuff rolled in. You know, so much of the business model today for Circle or Tether is what is the yield on treasuries? Because they're just sort of sitting on that float. And so as those come down, obviously, that's trickier. At the same time, these are really smart people running these companies. And so Jeremy at Circle is, you know, they're building out additional business units. Paulo at Tether has already done that as well. So they're building their own chains. They're building infrastructure. They're building developer platforms. They're investing in other companies. And so, you know, do the companies do well? TBD. They're smart guys and so they're, they're sort of figuring that out. There's, it reminds me a little bit of, you know, back in. Seventeen, eighteen, nineteen. People used to talk about how Coinbase's margins on the retail side would have to compress.

• 32:48Speaker 01

  Like, there's no way people would keep paying one to two percent transaction fees. You know, if you compare that to zero-dollar fees on equities or something in a lot of brokerages. And they were right, those fees have compressed over time to a degree. But what Coinbase was able to do was spin up a bunch of other business units using all that revenue. Right? And so the business today is worth 10x what it was worth five years ago. And so the market will be what it will be, but it's entirely possible, actually, that Circle and Tether figure out what to do here. And they're smart guys, so they very well will. But stablecoins, I think, is a big unlock. You know, it's just all the capital markets will move in this direction. This is why, for example, you're seeing Stripe. You know, Stripe recently announced they're gonna launch their own Layer One. And they're gonna try to rerun, I think, effectively, the Libra playbook, which, you know, Facebook tried to do this several years ago.

• 33:30Speaker 01

  And we sort of build a consortium of people to come in and sort of snap to a standard around how to move this money around. Because, you know, if you've ever dealt with the guts of payment systems, it's pretty gnarly, like globally speaking. There's all these edge cases. It's a bunch of it was code written, you know, in the seventies and eighties. And sometimes there's bugs that are, you know, and some of these payment systems are bugs that actually everybody expects the bug. So actually, if you return like the non-buggy answer from your code, people will be upset because it'll break their code. Legacy systems, you end up in like really gnarly situations like that. And so, you know, just this can be like a wholesale rip out of, you know, let's just get rid of the old system and finally, 50 years later, fix it. People may or may not experience that directly, but I think you're gonna see a lot of companies running at this.

• 34:12Speaker 01

  This is like a plumbing, infrastructure, enterprise, business kind of place to start, I think. In the US at least. You know, globally speaking, dollar use case is clear. You know, people want dollars. It's actually, I always joke, you know, we do these brands, brand surveys, you know, like, oh, what's the most well-known brand in the world or most respected brand in the world or most valuable brand in the world? And it's like Apple or Google or something. But I actually think it should be the US dollar. Because the US, the dollar, like, even if you hate the United States of America, you want dollars. Like, and it doesn't matter where you're on the world, you know dollars. Because the entire world is denominated in dollars. And so anybody that lives in another country that has experienced inflation relative to the dollar would much rather have dollars. It's kind of funny, right?

• 34:57Speaker 01

  Like, stablecoins will be this retail phenomenon, I think, globally speaking. And like domestically in the United States, very likely that it's like an enterprise, infrastructure, business phenomenon, more than it is a retail phenomenon, at least to start.

• 35:12David Weisburd?

  Another thought experiment that a lot of people in crypto play is that the US dollar has gone down 75% against Bitcoin over the last several years, 50% against gold. People like to think in one Bitcoin, one Bitcoin equals one Bitcoin. Tell me about the usefulness of that framework and also is it just a thought experiment? Is it really how investors should be thinking about it? And how should non-crypto investors? So let's say you're an institutional investor, you're University of Michigan, and you're trying to get the alpha from that way of thinking. Just double click on that and unpack this thought experiment.

• 35:53Speaker 01

  Yeah, I mean, I think it's a big mental shift, or at least it was for me 10 years ago when I first got my head around it, which is it's not that my assets are necessarily worth more, it's that dollars are worth less. And between sort of money printing and between the fiscal situation in the United States in terms of how much money the government needs effectively to operate, therefore creates money printing effectively, money creation, money supply creation. I think it's very much true, I mean, it's empirically true, the dollar is worth far less every year. And I think, actually, I was looking at some data recently, I think this year may be relative, you know, if you look at like the Dixie, you know, the dollar relative to other currencies or other assets, I think maybe one of the worst years on record, you know, over the

• 36:37Speaker 01

  last like 70 years, it's a pretty terrible year. Now, you might argue, was it a high a year ago, yada, yada? But I think people are starting to get their heads around this, that, you know, a government that runs 7% debt load, you know, twice what the socialist countries of the EU are, is unsustainable. And so people are sort of getting their heads around this idea, especially I think post 21, it's sort of clicked for a lot of people that this is an unsustainable path. And I think people are starting to realize it in other sort of intuitive ways, like and not even capital allocators, but your average person is saying, wait a second. How can I be making thirty dollars an hour now, but I still feel poor? Like, I can't buy the stuff that I thought I should be able to buy. When I was a kid, my parents made thirty dollars an hour and we could go to Disneyland and we could buy a house.

• 37:22Speaker 01

  And my dad didn't have to work overtime all the time. Like, wait a second, what's going on? And so like the intuitive light bulb, I think, has gone off for a lot of people. Um, over the last twenty, you know, twenty years or so. And I think especially in the last five or six years because the rate of inflation, the, you know, the people's ability to perceive it sort of kicked in, um, because of the rate of inflation that we had. And so from an allocator's perspective, I think it's if you, if you don't understand that it's actually the dollars are depreciating, then, you know, I think, I think you're in, in, you know, in for some tough times. I think what that ultimately means, if you buy this sort of, hey, look where we are is in a, in a, in a fiscally untenable position. I think we have to think is what are the paths forward? And I think there's four paths forward.

• 38:06Speaker 01

  Path one is you somehow fix the spending, right? You, you cut entitlements, you change the retirement age, you somehow fix Medicare and Medicaid. Um, and the reality is it's really hard to do that and, and you have to pick some winners and losers. And I don't think there's any political will to actually do that. I, it's just, it's not politically tenable to actually cut spending. Option two is that you somehow raise taxes to cover these deficits and, and the debt. And the reality is there's no political will to do that. Um, option three is what we have been doing, which is basically print your way out of it, just currency debasement. Um, that's actually politically the most, uh, palatable because no, no one person has to take the fall for it.

• 38:49Speaker 01

  And it kind of feels good because the stock market kind of keeps printing all time highs. And so the number is going up, so people feel good, but it's, it's politically palatable, but it's actually like long-term has real consequences. This exacerbates wealth inequality, for example, because if you have assets, you're doing fine. If you don't have assets, you're kind of screwed. So that's option three. And then option four is you grow your way out of it, which is, you know, you, you hope that AI productivity happens and all this infrastructure spending actually turns into something real. And so if you assume that like, there's no political will to actually solve these problems meaningfully, then really option three and option four are the only paths forward from here. And if you believe that as a capital allocator, I think you have to do two things. You have to say, look, I need to allocate a significant portion of my assets

• 39:33Speaker 01

  towards things that are fixed supply, that are hard to replicate, that the government will have a difficult time creating more of, that is hard to seize, and that pushes you towards things like gold, that pushes you towards Bitcoin and Ethereum, that pushes you towards the California coastline, like the government can't create more California coastline, that's just, there's a fixed supply there. So, you know, I think it sort of reshifts how people think about their assets. And then in category four, it's what are the high growth things? Like, what are things that can have a yield and have a return profile, compounding return profile that that outstrips all this inflation and debasement and the, the potential significant inflation that's downstream of all these things? And so you have to be in high growth tech. That's the only thing that can grow 30, 40,

• 40:17Speaker 01

  50% a year plus. And then so at a portfolio level, you can compound at a rate that you can outstrip all of this stuff. And so I think you end up in a very barbell situation. Like, I think you end up with a lot of fixed supply assets, and I think you end up with a lot of high growth tech. I think a lot of other stuff just gets crushed. Like, I think, you know, government debt, government bonds, a lot of private credit, you know, a lot of private equity that's not high growth, things that are compounding 15% a year. That's just like, not enough, in my opinion, to really be high growth. So I think it actually, for people who understand what's happening on the backdrop, I think it's, you know, most, most capital allocators, I suspect, are very under

• 40:59Speaker 01

  allocated to these fixed supply assets, especially the novel ones, where most of the capital markets have not figured out that they need exposure. And they're probably under allocated in high growth tech.

• 41:08David Weisburd?

  I'll also throw some things commodities, equities, as you mentioned, real estate, whether California coastline, I have a whole thesis on Miami high end real estate and Miami Beach high end real estate. I think that's kind of almost an index to billionaires. You also have sports teams, which are these essentially NFTs for billionaires and yeah, which essentially has played out over the last 10 years. One thing dimes, still trying to square frankly, and I've had some high profile guests, I've pushed them on this inflation and they keep on basically pushing me towards a CPI. So CPI last 12 months, 2.9% if you

• 41:49David Weisburd?

  take away food and energy, 3.1%. But if you look in terms of like ground truth, what is getting more expensive? That is more or less reflective of goods. Now you could say real estate and other assets have grown, have grown faster. But how do you reconcile kind of the purchasing power only going down by 3% versus what people in crypto will say, you know, true inflation is 7% or 10% and reconcile that for me?

• 42:16Speaker 01

  Yeah, well, there's, there's a thing I learned in product development, you know, doing startups and working at Google and Meta, which is sometimes what you'll have is you'll have all of your metrics will say one thing. And then if you go talk to a bunch of users, they'll say something different. Right? And so like if all of your metrics say, oh yeah, our users really, really trust us. And then you go talk to 100 users and all of them say, yeah, we don't really trust you. The, the answer is not that the users are wrong. The answer is that you're not measuring the right thing. And I think that's basically what's happening with inflation. Like, yeah, like you can look at some CPI metrics, you can like argue over the minutia of like when we changed how these things are measured in the seventies or eighties or whatever that we like changed it. That's

• 42:58Speaker 01

  all minutia. I look at, wait a second, are, what are people on the ground saying? And if a lot of people on the ground are saying, I can't afford the quality of life that my parents had. I can't buy a house. I'm choosing not to have kids. Like, that, that is the data point that the users are telling you that you're measuring the wrong thing. So I think we're just measuring the wrong things. And the kinds of things we should be measuring are like, you know, what percentage of people under 30 are married? What percentage of people under 30 own homes?

• 43:28Speaker 01

  You know, what is the debt load that we put on, on our young people?

• 43:33Speaker 01

  You know, who is doing the spending? So like you were talking about the, the, you know, Miami real estate billionaire index. I saw some data that, that showed that like half of consumer spending is now the top 10% of Americans, right? Which is really bad. That means like, there's a lot of people who can't afford to spend anything right now. And/or the people who have a lot of money can afford to spend a lot and everybody else can't keep up. So there are all these other measures that I think you could look at that sort of map to the lived experience of a lot of people, which suggests to me that we need to be measuring other things.

• 44:04Speaker 01

  And so I sort of fall into the camp of, I think we're probably measuring the wrong things. Like, I think CPI is probably not an accurate measure of what's actually the lived experience of most people. And it's sort of a wonky economist, like, oh, but it does. And, and, and I, my, my take on that is no. Like, if you go talk to 128-year-olds and they're telling you that like, something is broken, then probably something is broken and we need to be changing what we measure. That's what any good product company would do, right? Any good product manager who's like built products would tell you that like, if, if, if that is the experience, you know, you're talking to users and the users are saying something is broken, I'm not happy. And all your metrics say, well, why aren't, you know, my metrics say you should be happy? That means you're not measuring.

• 44:46David Weisburd?

  Yeah, the, the finance equivalent is, it's not on the spreadsheets.

• 44:49Speaker 01

  I think there's, there's elements to that too, which are really hard to quantify, right? Which is, and you're starting to see it play out, which is.

• 44:59Speaker 01

  It's hard to know what's moving it, but you can feel it. I'll give you like a concrete example. If you have a lot of people on the ground, if you have young people saying, "I'm not going to get married, I'm not going to have kids, I can't afford to buy a house," then something upstream is broken. And so the question I would have for the economists or the Fed, whoever, is like, "What should we be measuring?" If we're seeing the out, like, what, what, the question here really is like, what are the inputs? Because we know what the outputs are. And the outputs are people having fewer kids, we know that the outputs are fewer young people own homes, we know that the debt load on young people has gone up. And so like, if those are the outputs, what are the inputs that would tell us that these things that we think are important, right? People getting married and having kids and owning homes and feeling stable and feeling optimistic about the future, like, all of these things, you know, are the outputs. And so what are the inputs that we should be measuring?

• 45:43Speaker 01

  Because it's probably not what we're measuring right now.

• 45:49David Weisburd?

  I've given a lot of thoughts to this because I hear both perspectives. And, and just to steal a man, the economist's side is there's a lot of independent agencies, there's different universities, there's different... It definitely is not this global conspiracy where there's these 10 people at a table deciding that CPI to price it low. There are independent actors, so there's no conspiracy there. But I think it's, if you look at spend and housing is a big spend, and I think it really just comes down to real estate has appreciated higher than wages and interest rates are high, so you can't really, you know, borrow your way into it. I think that's kind of the back of the napkin explanation. Then all the other expenses beyond real estate are kind of, maybe they're growing at this 3%,

• 46:33David Weisburd?

  but real estate is, that's kind of my best explanation. It's not very scientific, but I think there's some confluence of factors that, that are driving. And also, I think people are, want to live in cities, they don't want to live in the suburbs where prices might be a fifth of the price and they could actually afford to have their home. I think there's all sorts of things being, a confluence of factors going into that.

• 46:53Speaker 01

  The real estate thing is a big thing. I think the move towards cities is a thing because then you need enough housing for those people. That is sort of a downstream effect, I think, of, of economic and tax policy, right? It's like, where have we, where have we enabled job creation? Now that we're 30 years into the creation of the internet, how, how are we not giving more thought to how to take some of that and make sure that it's not just, you know? 10 zip codes in the Bay Area that benefit. How do we really make sure that those benefits are available in other places? How do we make sure that high skill manufacturing doesn't leave the United States? Because those jobs would be created in some of these other places that have a lot of land that's cheap and build up big factories. I think housing is a big part of it. I think there are other sort of like economic policy and geopolitical things that have been

• 47:37Speaker 01

  just abject failures for the last 30 years. I think there are like tax policy things that have been just abject failures for 30 years. I think there is this sort of lie that we told a bunch of people that you should go to college and just get any degree, which has not been true for 20 years. And so all these people suck on a bunch of debt. And the way that government financing worked on these, you sort of gave these people a bunch of debt, which is really bad. So just like poor economic decision making, planning and guidance being given to a bunch of people and market forces taking over at that point with low quality education. I think you're right. I think it's a big part of it. I think there are other things that are big parts of it too, which lead to the intangibles. So that's, you know, it's hard to measure that.

• 48:22Speaker 01

  It's like, what is it? I'll give you, there's a, I grew up in the Midwest. So I grew up in Kentucky and Ohio. And so what I think about is if you do the back of the envelope math, right? Let's say you were born in 1982 to 18 in the year 2000, right? And you did what you were raised to do, like as a good Midwestern American, you know, young man, like let's say you did the right thing. You went to church every weekend. You like, you were a good member of your community. 9/11 happened, so you signed up for the military. So what do we do? We like ship you off to like Iraq and Afghanistan. You know, who knows what you had to do there? Maybe you learned some skills, maybe picked up some PTSD. You come back and you didn't go to college yet, right? You're like 18 or 19 when you shipped off, maybe 20.

• 49:07Speaker 01

  And so maybe try to go to college for a few years, pick up some skills, or maybe you go work in construction for a few years after you're back from your four year tour duty. And like two or three years into that, you get 2008, so you get a crash. And so now all the construction jobs are gone and you didn't finish your education. If you try to get an education, get out, maybe the job market kind of sucked for a few years. And so now it's, you know. You're, you know, in 2012-ish, like, the market's been kind of up and down for you. You don't, you didn't accrue any assets, you didn't have any money, you didn't get to participate in the stock market boom after the internet came back in 2005 because you were too young. And so now, now you're like 30, maybe you have a kid, what are you gonna do? Like, you're gonna go back to school? How are you gonna, like, who's paying for the childcare? Who's taking care of your kid or your kids? And your spouse is probably in a similar situation. And so now those people are like 40 or 42, 44.

• 49:52Speaker 01

  Like, what do you do with this entire generation of people that basically did what they were supposed to do, right? They went to high school, they, like, tried to get a college education, they signed up for the military and got shipped off for four-year tour duty and like, good upstanding people, but now they're 40 and they don't have any assets. And this is like a non-trivial portion of the population. And so even if you fixed housing, like, I don't think you would capture the fact that, that a lot of what the social contract was for these people, the, the government kind of broke the contract, like, society kind of broke the contract with those people. And those are the people that I worry about. Like, even if you fixed housing, I think there's like 10, 20% of the population that's, that's now stuck in this situation. And we don't really have a plan to get those people out of that situation. And we haven't for the last 20 years, right?

• 50:37Speaker 01

  It's, it's not, this is like, not a new thing. It's like, even if we built all the housing we wanted, like, what gets those people out of that situation? And so that's why I think you need the, like, okay, well, what is, like, the economic plan? What is, what is, like, the strategic plan to get high-scale manufacturing or to have solar manufacturing in the States or to have battery tech back or have, you know, robots or whatever it's gonna be? Like, I think without that, it's, um, you're gonna, I think, maybe a succinct way to put it is, I think if you fix the housing thing, I think you would help a lot of people, undoubtedly. I worry it doesn't fix the problem for another 10 to 20% of the people and, and those are actually, we, we need to bring those people along too. It's, it's, it's a big part of the doom loop that we're in if we don't fix it,

• 51:19Speaker 01

  which is because then those are the people that are on Medicare and Medicaid, right? Because they, they got messed up in Iraq and, and, you know, they're on disability.

• 51:29Speaker 01

  Or, you know, those are unfortunately people that if you got the PTSD, then like some company was pushing opioids on you. And so you ended up with like an opioid addiction and now you're fucked for the last 10 years. And so now you're on, you know, disability. And so all these things, I think are really very, very tied as a country. I think we let a lot of people down. And so we let a lot of hardworking, middle-class kinds of people down with the housing situation that we put a lot of young people into. And I think we let a lot of what would have been otherwise middle-class people down because we took away the blue collar path to the middle class. And then we kind of fucked those people for the last 20 years. And that's, you know, that's like now the undercurrent because that's what creates the fiscal spending, right?

• 52:12Speaker 01

  It's like if you have all these people on government programs, like that's what's creating the problem. And so I don't think we can like fix the government spending fiscal situation that we're in and the money printing situation we're in without like addressing the underlying thing, which goes back to what you were talking about, which is like, well, if everybody's saying I have a problem and the inflation is not showing that we have a problem, do we have a problem? And my assertion would be like, the inflation doesn't capture any of that. The inflation doesn't capture the fact that we put all the, you know, got all these people on opioids and we put all these people into a war situation and came back with PTSD. And now all these people are 40. And so like, what do we do with that population of people? And I don't think that, none of that, in my opinion, is captured in the CPI metrics.

• 52:52David Weisburd?

  Yeah, that's heavy. What are some policy prescriptions?

• 52:57Speaker 01

  AI might be the way out, right? It between AI and robotics, we have a shot. We need to build like giant energy plants. We got to get like, you know, nuclear reactors built. We got to figure out how to like build, you know, data centers in all these places. We got to figure out how to get robots so that we can actually, as all these people get old, we'll have robots to help take care of people and everybody can have a personal doctor, right? And so there's, there's a lot of building to do. We need like a proper national strategic plan to go do these things because these are the kinds of things that a good government could do. And these are sort of beyond the scope of any one capital allocator. Like, I think we can all kind of do our part and say, hey, look, high-growth tech, if done well, means everybody gets a teacher, everybody gets a doctor, everybody gets a robot in their home to help them, you know, as they age.

• 53:40Speaker 01

  This will be awesome. And so like, as a VC, I can invest in that stuff. But without like a comprehensive government plan to think about how to like incentivize the right sorts of behaviors, it's very hard. You're swimming against the current. We saw this with digital assets, right? Like between 2020 and 2024 is just swimming against the current. And it's so much easier now that the SEC is like, okay, let's be reasonable about this. And the CFTC is saying, okay, let's be reasonable about this. It's just night and day in terms of like company formation and founders and.

• 54:06David Weisburd?

  Do you think that created anti-fragility? Did that make that wave of companies stronger, having to deal with Gary Gensler and the previous SEC? Do you think that made them better?

• 54:17Speaker 01

  Yeah, it's an interesting take. I think it did, but it had it had some other consequences. So it certainly did. And I think like Coinbase is a much stronger company as a result of having to deal with that. But what it also did was it pushed a bunch of jobs overseas because there was too much risk to being in the United States. It created the FTX situation because what you got was people who moved to the Bahamas and had, there was no US oversight. And so all of a sudden, you had all these people who looked like they were an American company, back to your sort of opening around trust. A lot of people trusted FTX because it looked like an American company, but they didn't realize it wasn't an American company. There was no American oversight, right? It was in the Bahamas. And so what you get are these like systemic issues where where you've actually like hidden a bunch of risk, you know, you're actually gambling with your your trust and the brand of the United States.

• 55:02Speaker 01

  You pushed a bunch of technical development overseas. So essentially, you're subsidizing technical development in other markets because of this policy. So it did make companies that survived stronger, but but net net, I think it was negative because you all these other externalities, right? Like, like as a VC, let's say I give them money to a company, right? And that company in this space says, okay, I'm a really talented founder. I have a PhD from Stanford in cryptography. I'm going to start a company. But if they take half those dollars and hire a bunch of people in in Southeast Asia, because they're worried that the government here is going to try to shut them off and they need resilience in their business, and business doesn't get shut down. What you essentially just did was took millions of dollars and trained a bunch of people in Southeast Asia how to become really good cryptographers, right? Which is like the opposite of what a good economic policy would do.

• 55:45Speaker 01

  A good economic policy would say, wait a second, this is, this is like important technological development. Let's not subsidize the creation of expertise overseas. We should, we should be creating expertise domestically, right? And so. I think the externality has actually outweighed the sort of anti fragility.

• 56:03David Weisburd?

  Going back to 2018, you start out with a $15 million fund, you now have over a billion AUM. What is one piece of advice that you would have given the younger version of yourself in 2018? That would have either accelerated your success or helped you avoid mistakes?

• 56:22Speaker 01

  That's a good question. I don't know if there's.

• 56:27Speaker 01

  It's sort of two forms of that question, you know? One, one form of the question is like, what are the mistakes that you could have avoided? And I think there are relatively few mistakes that we could have avoided knowing what we knew at the time. You know, it's sort of like a bad mistake is like, if you knew everything you knew at the time, and you should have made a different decision, then that's a bad mistake. If you sort of like, given all the information you had, you probably would have made the same call. Then then that was a right mistake. That was an okay mistake and you can learn from it. I think probably the biggest one is to just be patient. I think the hard part, especially when you're early in the investment career development is, you know, these theses can take years to play out. And so you can be directionally right and it's kind of working. And it just will take a couple of years to really fully prove out.

• 57:11Speaker 01

  And if you're willing to be patient, then you can make really long term minded decisions. It's a sort of a luxury now that we have that we have a brand and people know us. We have a great LP base that trusts us and so on, that we can just say no to a bunch of stuff.

• 57:24Speaker 01

  And I think, you know,

• 57:25David Weisburd?

  It's easier.

• 57:26Speaker 01

  It's just because you know, if

• 57:31Speaker 01

  you're willing to be patient, you have the luxury of willing to be patient.

• 57:36Speaker 01

  Whereas I think when I go back to like 19, 20, 21, I think there was a lot of sort of fumow going on. And I think we ended up investing mostly in very good companies. We just ended up paying too much for some of them. And so as a result, you know, you, you, you know, in retrospect, like, I think we could have said, hey, you know, we just won't make some of these investments. And it'll be really painful because we won't be involved with some good stuff. But from an investment perspective, we won't.

• 58:03David Weisburd?

  Unpack why it's easier to be patient. So that just you have higher status. You have more management fees, you have less scarcity and more reputation. Or why is it easier to be patient today?

• 58:14Speaker 01

  All of the above. I think for venture in particular, I think a big part of it is that you can't be out of the game for long enough. Like if you're not in the flow, if you're not in the conversation, if you're not top of mind, then when the market does turn, whenever that may be, you're not going to be one of the ones that people are coming to because you didn't do the last four investments or the last, you know, six times that those founders came to you, you just keep saying no. And so you're sort of swimming against the current a little bit if you if you sort of sit it out for too long. And so you have to be really careful about where you where you're sort of still in the game.

• 58:47David Weisburd?

  And maybe to reframe that, you beta during frothy markets is the price you pay for alpha in good markets?

• 58:56Speaker 01

  I think there's some truth to that. I think there's also a, you know, like, how do you call the top question? Like, there are people who have been calling the top since like 2012, right? You know, like, oh, it's over, it's over, like tech is frothy. You can go back. There's like every two years, there's an article about how like Facebook is overvalued and Google is overvalued. And it's all going to crash. And if you if you sort of took that approach rather than a, you know what, like, I don't know when the top is. I don't know when the bottom is. There's good companies all the time. And if you get the Nvidia of that cycle, nothing else matters. And so I'm just going to be slow and steady. If you try to time it, then then you may have sat out 2012 to 2020, which was like an epic, epic window to be investing, right? Even though for many years, 16, 17, 18, 19, 20, people were calling tops. They're like, this is, you know, zero interest rate, zerp, like bad, bad, bad, bad.

• 59:39Speaker 01

  But actually, there are some great companies created between 16 and 20 in the in the zerp era, right?

• 59:43David Weisburd?

  So I've been spending my time more with politicians, not because I'm getting more political. I just think that it's underpriced. So I don't think macro investors do a good job pricing in politics. One of the things that's very obvious to lobbyists, politicians, all these people, is how the the power of incumbency, so something like 95% of incumbents win in Congress every single two years. And the reason for that is they they make these policies that make it easier for incumbents, Democrats and Republicans to win. And one of those gauges is the stock market. So there's this interesting idea that. Incumbents will never allow the stock market to be more, to be down for more than a kind of a two-year cycle. Essentially, they're gonna, the negative aspect is that they're

• 1:00:25David Weisburd?

  gonna inflate that away. It's not only the Fed that has the Fed, but it's also kind of the government and the president that's kind of buttressing these, these assets. You want to ride the upwave and also when there's a downwave, there's a good chance it won't be, it'll be temporary because of this kind of pressure from incumbents to, to buoy the market.

• 1:00:45Speaker 01

  Yeah, I agree with that. Hence, the money printing, hence the debase of currency. Because the politically expedient

• 1:00:50David Weisburd?

  Full circle.

• 1:00:51Speaker 01

  Yeah, the politically expedient thing to do unfortunately is to not have a, have a like a five-year, let's fix the market.

• 1:00:57David Weisburd?

  And then to gaslight the public into their perception that things are getting more expensive.

• 1:01:01Speaker 01

  Yeah, it's just the way, the way the election cycles work. It's just, that's not the politically viable option. And so that's, that's not supposed to happen. And so, um, yeah, you know, and I think the other, the other thing I worry about with that too is, you know, it's, it's true until it's not, right? Um, and so at what point does that, does that break? And hopefully it doesn't break. Hopefully, you know, we have a long, long way to go and we can manage, manage it. And hopefully we can grow our way out of it. You know, like all these problems go away if you can grow your GDP at three and a half percent a year, right? It's just like, if you can, if you can manage to grow three percent a year instead of 1.5% a year, most of these problems just kind of go away, in my opinion. Um, you can actually pay your debts, you can service the costs, you can pay for your old people, like everything works.

• 1:01:40David Weisburd?

  The most bullish fact I see in AI specifically is that it's not just that, uh, the early adopters are lowering down their costs. You have this kind of seat strapping idea where at Henry Shi, who runs the AI startup leaderboard, where you have like these two, three people, teams making it to unicorns. You have that, but it's also on the revenue side. So a lot of people think it's just lowering costs. But now if your three salespeople could do the work of 30 salespeople, you're also able to scale more on the revenue side. So you're both lowering costs, increasing revenue. So it's a pretty bullish, at least early signal. And it doesn't seem like AI is limited to technology in any way. It seems, nobody has really found a limit to AI, even within the commodity space in terms of like order flow

• 1:02:25David Weisburd?

  and all these things that's disrupting and helping that. So that, that is my bullish case for the

• 1:02:31Speaker 01

  Yeah, I think we have a real shot. The fact that, you know, the so many of the world's leading researchers and leading foundational models are all based in the United States. You know, the Chinese ecosystem is doing some great work, too. But the, yeah, the US has a real shot here. And, you know, there's a lot of building to do. I think even if you said it's like just pure software layer, it's just like the infrastructure spend that's going to be required to build data centers and power. And, you know, just the plumbing to make all this stuff work, I think, is a potential economic boom. I mean, I think if we could rejuvenate some of these communities that have been left behind, I think you might fix a lot of these problems. Like growth, growth is the best way out.

• 1:03:09David Weisburd?

  Well, Avishaw, we only got to a third of my questions. We got to run this back soon. Thanks so much. Really enjoyed it and looking forward to continue this conversation live.

• 1:03:18Speaker 01

  Likewise, thank you.

• 1:03:19David Weisburd?

  Thanks, Hafid. Thanks for listening to my conversation. If you enjoyed this episode, please share with a friend. This helps us grow, also provides the very best feedback when we review the episode's analytics. Thank you for your support.