John Wu, CEO of Digital Assets at SharesPost: What Assets Should Be Tokenized Next

John Wu is the CEO of Digital Assets at SharesPost. In this conversation, John and Pompliano discuss tokenizing assets, the current infrastructure landscape, how institutional investors are looking at security tokens, and what John believes are the best assets to tokenize moving forward. ----- Join the Off the Chain newsletter. Pomp's daily email analyzes the crypto market for institutional investors. Simply, it’s the best crypto newsletter delivered to your inbox every morning. No frills. No bullsh*t. Just everything you need to know in a 3-minute read. https://offthechain.substack.com/ ----- ZenLedger simplifies crypto taxes for investors and CPAs. We provide the best software for importing crypto transactions, calculating gains and income, and auto-completing tax forms like 8949, Schedule D and FinCEN. If you had losses in your crypto investments, ZenLedger can help you save up to $3,000 on your income taxes, with our tax loss harvesting tool. ZenLedger is also a TurboTax partner and has the best support for EOS owners. Finally, a simple tax tool that saves you a ton of time and headache! Visit Zenledger.io/OffTheChain to get your taxes done with ease, and as an Off the Chain listener, save 20% of your 2018 tax forms! ----- If you enjoyed this conversation, share it with your colleagues & friends, rate, review, and subscribe. This podcast is presented by BlockWorks Group. For exclusive content and events that provide insights into the crypto and blockchain space, visit them at: https://www.blockworksgroup.io

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

• 0:01Anthony Pompliano?

  What's up everyone, this is Anthony Pompliano. Most of you know me as Pomp. You're listening to Off the Chain, simply the best podcast in crypto. Let's kick this thing off.

• 0:13Anthony Pompliano?

  John Woo is the CEO of Digital Assets at Shares Post. In this conversation, we discuss tokenizing assets, the current infrastructure landscape, how institutional investors are looking at security tokens, and what John believes are the best assets to tokenize moving forward. I really enjoyed this conversation, and I hope you do as well. Alright guys, before we continue with this episode, a quick word from our sponsor ZenLedger. For all you accountants and crypto investors out there trying to get through this bear market, ZenLedger is a fast and simple tax reporting tool that saves you a ton of time and headache. Ain't nobody like dealing with their taxes, so let ZenLedger do it for you. You can learn more by visiting zenledger.io/offthechain to get your taxes

• 0:54Anthony Pompliano?

  done with ease. And as an Off the Chain listener, you'll save 20% of your 2018 tax forms. That's right, listening to this podcast makes you smarter and saves you money. I got you. One more time, that's zenledger.io/offthechain. Anthony Pompliano is a partner at Morgan Creek Digital. All opinions expressed by Pomp or his guests on this podcast are solely their opinions and do not reflect the opinions of Morgan Creek Digital or Morgan Creek Capital Management. You should not treat any opinion expressed by Pomp as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. This podcast is for informational purposes only.

• 1:35Anthony Pompliano?

  Alright guys, super excited. We've got John here with me from Shares Post. Thank you very much for coming on the show.

• 1:42Speaker 01

  Hey, thank you very much, Pomp. It's a pleasure.

• 1:44Anthony Pompliano?

  Absolutely. Maybe let's start with your background, because you've got kind of an interesting investing and technology background.

• 1:50Speaker 01

  Yep. So I came into this space via, as a technology investor. I spent most of my career as a tech investor via the hedge fund mechanism at places. You and Mark Yusko were no, Tiger Management first, and then Kingdom Capital, and then I ultimately ran my own hedge fund that was sponsored by Blackstone.

• 2:07Anthony Pompliano?

  Very cool. And how do you see the parallels maybe between some of that work and what you're doing today?

• 2:13Speaker 01

  So it was because of my last experience running my own fund that I, as a user of crypto or buyer or investor of Bitcoin, that I realized how difficult it is for institutional investors to get into the space. So around 2013 and 14, by definition, as a tech investor, you're looking at new emerging technologies. So while I was looking at Bitcoin, trying to figure out if it's a good investment thesis, I instantly realized that even before I figure out the investment thesis, can this be operational for my fund? Was I going to fulfill my fiduciary responsibilities to my investors by investing in this class where there's custody at the time was just completely unknown. Settling and transferring these securities were also questionable in terms of regulation.

• 2:58Speaker 01

  Internally, there was no accounting OMS systems, anything to record these trades in an efficient manner. So ultimately, I said, no, there's no way I can do this because you can't, you can tell your investors that you lost some money, but you can never tell your investors you lost their money and it's unrecoverable. So luckily for me, at least, I started investing in it personally, but it was that firsthand experience as a user that I realized what needed to be built. And that ultimately led me to SharesPost where I am the CEO of the Digital Assets Group inside of SharesPost and we are creating some of that infrastructure, trying to create the liquidity and create a secondary trading marketplace for digital securities or security tokens.

• 3:39Anthony Pompliano?

  Got it. And maybe give us a little bit of understanding of, you know, what is SharesPost's kind of legacy business? How does the digital assets fit in there? Maybe some of the, how it's structurally set up?

• 3:48Speaker 01

  Yep. So SharesPost has been around for almost 10 years. It's the largest marketplace for private securities in the secondary market. Those today are Lyft, you know, Uber, Airbnb, Palantir. We make markets and well, we provide a marketplace for the transaction of those types of securities, which are unregistered securities. So the infrastructure from a compliance perspective, you need to allow the transaction Of those securities, settling, clearing broker dealer that we have and an ATS is very similar to that of a digital security or security token.

• 4:26Speaker 01

  Security tokens are also unregistered securities and it's pretty much, it's pretty clear now that the regulators have deemed you need an ATS in order to affect transactions in electronic manner. So what we're doing at the Digital Assets Group is creating, using the existing broker dealer and ATS registrations that we have as shares both. And working with the SEC and FINRA and creating a technology stack that allows you to match orders and trade in a compliant way. Both secondary trading of this as well as providing private placements of security tokens.

• 5:03Anthony Pompliano?

  Got it. And let's maybe talk a little bit about the difference between security tokens and what I'll call cryptocurrencies and utility tokens, right? So like, I think it's FinCEN came out with this guidance of, look, there's three separate buckets of digital assets. They can be broken down into cryptocurrencies, which are money, right? The ability is store value, medium of exchange. Utility tokens, which are giving access to a network. And then just give us the description of how you guys see a tokenized security or security token and what that means in kind of the more macro financial market.

• 5:36Speaker 01

  Sure. So first, obviously, I guess most people on this podcast will know what a currency is, you know, Bitcoin, Ethereum. You know, ironically, that's, you know, where most of the market cap is right now in the space. Then utility tokens was the craze and the rave and back in 2017. And I think, you know, six, $7 billion was raised in 17 and the first half of 18 also about $7, $8, $9 billion was raised in that format. But that was raised in a way that was not compliant in terms of the SEC or in the eyes of the SEC. You were going out and raising from unaccredited investors. You were marketing and soliciting in ways that probably would not be approved of in the United States.

• 6:18Speaker 01

  So security tokens or digital securities, the way we think about it is it's really an extension of private placements and how the private markets work. Unregistered securities. The rules there are pretty clear. The rules for public securities are pretty clear. The security token functionality, in my opinion, sits somewhere in between private placements and public. It gives you more liquidity than private placements, but it doesn't obviously have as much liquidity as public companies. At the same time, you have to obey by the private placement rules.

• 6:51Anthony Pompliano?

  Yeah, and I think that's kind of the promise of this whole space, right? It's this kind of hybrid where you're able to maybe not completely mesh public and private, but smooth over what used to be a pretty black and white line and create a little bit more of a gray area. Not from a regulation standpoint, but more of just how they interact with the financial markets, right? In terms of what regulation you use, different jurisdictions, etc. Is that kind of how you guys feel as well?

• 7:17Speaker 01

  That's exactly right, Paul. It's a bridge. In other words, I mean, if you've seen what's happened in the private securities world, obviously, there's a lot of money for entrepreneurs out there from seed all the way to the later stage today. It's like D, E, F, G, etc., etc. It used to be just D and E, and then you go public. Anyway, but the funds that invest in these companies have gotten so big. Now that you're seeing the valuations get more distorted at the later-stage companies than at the earlier-stage companies. So it's almost like riding up a yield curve or riding like, you know, bond math. People ride down the yield curve, but this is the opposite. Like, if you get in and find the good seed or A company,

• 7:58Speaker 01

  you know the valuations will get further extended, further out, because there's more buyers, more demand, because the funds are so big for those large companies. So that's created what I think is somewhat of a gap in the B, C-type stage companies. Those companies, you know, $500 million market cap companies also would like, you know, access to more capital. They have, to be clear, they have access to more capital, but they're having a harder time than the later-stage companies. I see the security token or the digital security format as great for those companies. So here's another channel of capital formation. And that's where I am seeing from, you know, our vantage point,

• 8:40Speaker 01

  a lot of companies go and at least investigate whether the digital security capital formation manner is good for them.

• 8:48Anthony Pompliano?

  Got it. And so maybe let's go through a kind of a market update, if you will, right? What is the state of tokenized securities today? We can start with infrastructure. How do you see the landscape in terms of how much of what we're being told is kind of pipe dreams versus it's being built and it should be online soon to actually operational? Like, what's your guys' view of that?

• 9:13Speaker 01

  Yep, that's like a three-part question there. So first,

• 9:16Anthony Pompliano?

  I'm really into the complex questions today.

• 9:18Speaker 01

  So I will give a market update, what we see today. And but first, the vision of what we see ultimately happening here. I think SharesPost is in a unique position because it sits at the intersection of two major macro trends. One of the macro trends we just talked about is that growth companies in the technology sector, particularly in the private area, is staying private a lot longer. And the valuations are getting ridiculously large for some of these. The average unicorn now is, I think, you know, 2 billion in market cap. There's about over 300 of them now. And, you know, by definition, unicorn, it's hard to find 300 of them. And they're staying private for 12 years.

• 10:02Speaker 01

  Just 15, 20 years ago, that same type of company would be a 400, 500 million market cap, and they would be private about four years. So public-private market structure has completely changed. That sets the tone for what we're seeing in the markets today. You know, we are, again, because we have a great biz debt effort at SharesPost for the security token, and we are very in touch with issuers on the private shares. What we're seeing that's very interesting, I think people don't get a view of, is that these unicorn or unicorn-like companies are now starting to at least investigate, how do I use a coin?

• 10:43Speaker 01

  Whether it's for a utility, like a Starbucks, or, you know, some sort of loyalty program? Or do I create actually a cap structure-related security token offering? They're investigating it. Now, the other stuff we're seeing is more of what we talked about earlier. And frankly, those are most of the inquiries. Those are the Companies are, you know, B or C, they can get access to capital, but they're wondering if it's better to try to do in this digital security manner. Because you get different type of capital and you probably give up less control to a venture capitalist. Those are really where, you know, the two types buckets of people from a issuer perspective that are coming to us.

• 11:27Anthony Pompliano?

  Do you think we'll see, I don't know, maybe next 24 months, a late-stage private unicorn? Rather than go public, use the digital asset or security token path? Is that over 50% probability?

• 11:44Speaker 01

  So I think, you know, again, the two macro trends we sit at, one is the, the private companies staying private. And the second is the burgeoning macro trend, which is digital securities. I see in three years, you're going to have, you said one, I know, but I think it's more like three. In the next three years, you're going to see a unicorn company do a security token. And you're going to see a company that did a security token as its primary way of raising money become a unicorn.

• 12:12Anthony Pompliano?

  Got it. So, okay. So that's interesting. So this is a private unicorn will create a tokenized security. So an actual equity-based token where shareholders will own equity by owning the token.

• 12:26Speaker 01

  Correct.

• 12:26Anthony Pompliano?

  And then you also think that, and that will be somebody who's already a unicorn and then they'll convert over to this tokenized securities world.

• 12:33Speaker 01

  Correct.

• 12:33Anthony Pompliano?

  But we'll also see somebody who earlier in the lifecycle of their business started with a tokenized security. And then convert or, and then eventually reached a billion dollar plus in market valuation.

• 12:44Speaker 01

  Correct.

• 12:45Anthony Pompliano?

  Got it. Look, I tend to think that both of those things are going to happen, right? I think to your point, the timing's the hard part, right? It's how, because there's multiple facets that go to this, right? You've got to have the infrastructure available for people to use, right? You've got to have the investor, educated investors who have a desire to own these assets, right? So you've got to have the, kind of the demand side. And then you've got to convince the issuers that this is a better way to move forward. And so you kind of have those three market forces all have to converge at the same time at some point in order to get that to happen.

• 13:23Speaker 01

  That, that's exactly right. And then the long vision in 10 years, you won't even be discussing this because it's just going to be one and the same. You know, what is tokenization? People will say, I don't know, it's just part of capital formation.

• 13:35Anthony Pompliano?

  Yeah, it it's funny because I I went back, it's probably two, maybe three years ago now, and spent a lot of time thinking about and learning about equity, right? And this idea that like the first time somebody invested in somebody else's company, there was no idea of like enterprise value, right? It was, I'm gonna give you, you know, a hundred bucks. I own 10% of your business and you own a corner store. And when you get your monthly books done, you give me 10% of the money, right? And that was quote unquote equity was I owned the cash flow or a portion of it. And at some point, there was an entrepreneur who said, hey, rather than give you that 10% of the cash flow, I'm actually gonna keep that.

• 14:18Anthony Pompliano?

  I'm gonna reinvest it and over time, you're going to actually be able to get access or claim on a larger amount of money if we reinvest rather than distribute the capital. That switch today, we don't even think about, right? And then you look at like the shift between the mechanisms in which funding happened, right? So it used to just be, hey, I'm gonna buy equity. Then there was this idea of a convertible note and that became all the rage and it became the standard in early stage investing and and all that. Well, today, nobody thinks about a world when convertible notes didn't exist. I think what the point you're making is probably in the future, there's going to be a world where nobody thinks about tokenized securities as something new or different. It's just, of course, people do that. That's what everyone does.

• 15:03Speaker 01

  Just the way you do business. But what's even more fascinating is if you think about the potential, you mentioned equity, then there's obviously security tokens related to debt and up and down the cap structure. But the the beauty of tokenizing and security tokens or digital securities is obviously it's programmable. It's a more eloquent way to do structured products. And there are gonna be hybrid solutions out there, packaged solutions, taking bits and pieces of different parts of a capital structure and different companies putting together and creating, you know, very much similar to what the structured products companies or or banks did to structured products back in pre 2000. Eight. Now, we all know how that ended, but that wasn't because of the structured products.

• 15:48Speaker 01

  It was the leverage associated with the structured products. Leverage will bring anything down and take correlations to one. But the point is, there are going to be a lot of hybrid solutions. And I've seen those types of security tokens already exist globally. You know, rev share type security tokens. There are companies in Asia, you know, Asia Banking, Southeast Asia. A lot of these companies and countries don't have great banking infrastructure. You have large mega banks that help the large conglomerates. And then in the lower tier, the SMEs, you basically have pawn shops that charge users rates. So I've seen companies in Southeast Asia where they have, they need, there's a need for a fleet of mopeds

• 16:30Speaker 01

  or bikes in order for their employees to get around, deliver, or do whatever they need. They've actually raised a security token where someone, basically it has cash, it has a yield associated with it. And after three years, the salvage value, the residual value of that fleet gets sold and goes back to the investors. So all of a sudden, they've lowered their cost of capital, the issuer did, because they did this creative financing via digital security. And they actually took that package and sold it across, you know, border to Japanese investors who are yield starved. And Japanese investors ate up this because of the yield associated with this. So a lot of this is already happening in these hybrid solutions across the world.

• 17:13Anthony Pompliano?

  It's crazy to think about not only the world where we are today, kind of going digital, if you will, right? So this idea of, hey, there's a stock and it's really an electronic stock today on the stock market.

• 17:31Anthony Pompliano?

  If it goes into a digital world, there's a bunch of advantages, right? So kind of more global, the market doesn't have to shut down, right? All this kind of stuff. Those are incremental or evolutionary type improvements. There's a world, though, that could be incredibly revolutionary. And I think you started to talk a little bit with like on-chain cash flow and the stuff where. You almost start to rip out bureaucracy, middlemen, paperwork, but you also are increasing trust, transparency, reducing counterparty risk, right? It's just automation. Like, I just keep going back to this idea of all this is automation, right? This idea that I own tokens, I can quote-unquote stake those tokens on a chain,

• 18:16Anthony Pompliano?

  and as part of participating in this, I actually am automatically paid a percentage of the revenues or the cash flow from the participation in that network or that business, etc. That feels a lot less like, let's decentralize the world and let's, you know, burn down Wall Street type stuff, and much more about, of course, moving to an automated world. That's a no-brainer, right?

• 18:40Speaker 01

  That's right.

• 18:40Anthony Pompliano?

  What's kind of your take on that?

• 18:41Speaker 01

  I think you're absolutely right. I mean, if you think about what compliance and regulation's done and how it's done today, you know, basically, it's done at multiple parties, and they have multiple servers, and they ring-fence that because they feel it's more secure to be able to keep their own servers and keep track of everything. There's a lack of trust. If we get into a distributor manner and people actually have a trustless mechanism, all of a sudden, you just save so much money and you don't have to have every single organization with multiple layers of their own servers and keeping track of things on their own. That's really how ledgers are done today. Individuals, law firms, everyone's keeping track of their own thing because they feel

• 19:27Speaker 01

  like they have better trust in themselves than everyone else.

• 19:30Anthony Pompliano?

  For sure. What are you seeing from the projects today, right? Like, what types of projects are interesting to you, and what does that investor demand look like?

• 19:40Speaker 01

  So, the projects I think are interesting are actually funds as well as real estate projects, and for two different reasons. So, on the fund side, we've actually, at Shares Post, helped trade in a secondary manner and custody a security token, the blockchain capital token. And on the primary side, we're helping a company call Cityblock do an issuance on the private placement side. So the funds coming to the platform makes a lot of sense because you're, especially in these two cases, you're, you're investing like you would in this type of company. So it's not a hard concept to understand. The wrapper of a digitalized token around this as opposed to a normal paper from a private placement

• 20:25Speaker 01

  is also not that much of a leap of faith anymore. So this type of project is a lot easier to understand. I think a real estate project, although it makes a lot of sense because you can fractionalize ownership, is still a little bit hard to understand for the buyer of this because it's very regional and they're not sure if that's a good real estate project or not and who are these people that are doing it. Whereas a funds is a good bridge step into the whole security token world. So we're seeing a lot of funds. We are seeing a lot of real estate like projects. And there's a lot of potential in debt products. The complexity with debt products and structured products make the blockchain

• 21:06Speaker 01

  and the smart programmable contract a natural operational efficiency that gives that whole asset class something everyone's thinking about.

• 21:15Anthony Pompliano?

  Yeah, look, you, you, you guys are doing the Cityblock thing. We're obviously investors in, in Cityblock. And I think the idea of creating a brand new type of asset management firm where everything is tokenized and transparent and kind of liquid is really interesting and will become the norm over time, I think. So the fun stuff makes sense.

• 21:37Speaker 01

  And that's a big part of that transparency. Because in any new asset class or undiscovered asset class, information and understanding of the product is very important before buyers can come in. You know, at Shares Plus, we had that experience way back when with private securities. So we created data and research unit in order to educate a lot of the buyers and volume and transactions started happening. That's another benefit of coming to Shares Plus to do your trades is that we have a research arm to help support that and get the right message out in terms of what you're about, what your fund's about or what your project's about. And let people and the buyers know that this is what is out there.

• 22:16Anthony Pompliano?

  For sure. And I guess. The other thing you mentioned is debt. And from my standpoint, it's one of the more interesting applications of this technology. Part of it is just reduction of cost and counterparty risk, right? So that just the idea that you can again automate a loan, you can govern that loan, and then you can recoup the loan, the principal plus profits in a semi, if not fully automated way, super interesting. It becomes even more interesting when every single person that is

• 22:57Anthony Pompliano?

  a party to the transaction has full transparency, full confidence in the code, the way that the smart contract is going to be executed, etc. It feels like a lot of attention is running towards real estate funds, you know, all the equity based type stuff, which makes sense, right? But the debt market is probably the underestimated component here. It's huge. It's pretty easy to take debt instruments and put them on to these automated platforms or networks. And it's actually

• 23:36Anthony Pompliano?

  less complex for an investor to understand, right? Like with equity in a company, for example, you've got to not only understand the technology, the market, the infrastructure, you also got to understand the founders, the business, the competitive, you know, risks, all of the things that are going to happen and can prevent someone from building the business itself, right? So you got to kind of underwrite tokenized securities and you got to underwrite the business itself. With debt, it's much more simple, right? How do you guys view rolling the product out that you guys are building today in terms of funds, real estate, and then that big debt market that seems to be going a little unaddressed by folks?

• 24:15Speaker 01

  So I think, first of all, everything you said that is absolutely correct. It's easier for people to think, what's the yield on that product and what am I going to get for it than it is to possibly think about who's the, who am I underwriting? The people, the business model, on the equity side, etc., etc. On the debt side, It's actually happening and big transactions are happening. It's just happening right now in the private blockchains. So the major banks have done massive debt offerings, massive in terms of the size for a security token as we know it, but you know, for debt offerings actually relatively small. So that market is probably like 10 times that of the equity market. And the debt offerings right now being done by banks are being done on blockchain.

• 25:00Speaker 01

  And the efficiency that they are getting in weaning out operational inefficiencies is the main attraction, as you said. So, and it's always easier to sell something that you say, I'm going to save you X dollars as opposed to saying, you're going to see so much, so many more benefits from this. So that is happening. We are addressing it at Chair's Post by looking at potential debt security offerings. You know, we're going to be the first to admit though, you know, our, you know, down the fairway, our strong suit is the private security side. That's been the DNA of the firm.

• 25:34Anthony Pompliano?

  That's where you guys have a competitive advantage.

• 25:35Speaker 01

  Absolutely. We have a huge competitive advantage and we have a large investor base, 170,000 registered users and over 60,000 accredited investors who know how to buy equities. But we are definitely looking at that and we recognize that largest transactions right now in security tokens are happening in the debt side, on the debt side.

• 25:56Anthony Pompliano?

  And how is this being looked at in different jurisdictions around the world, right? Because I think that you and I are in agreement. It's going to happen, right? From a technology standpoint, issuers are going to want to do this for a whole host of reasons. Investors are likely to want to do this for a different set of reasons. The one question outside of like, when is the infrastructure going to be available? Is the regulatory environment, right? And kind of how people are looking at it. And we see, you know, CZ and Binance kind of go and play the regulatory arbitrage game in the non-tokenized securities world. A little bit harder to do that in the securities world, just because they are securities.

• 26:39Anthony Pompliano?

  What are you guys seeing? How are you guys thinking about, you know, kind of attacking the different jurisdictions and kind of staying, you know, on the right side of the rules, but also trying to push innovation and build a business?

• 26:51Speaker 01

  Yeah, that's a great question. Obviously, the rules are different in every single jurisdiction. That is what makes equity trading in general very hard. So, you know, if you're an individual, your Schwab account, you want to buy Tencent, which is trades on the Hong Kong Stock Exchange, you usually pay a commission of like $200 versus like $5 these days. And that's because they have to go through many intermediaries to facilitate that trade for you in a compliant way. Now, what we're doing at SharesPost is actually, we see that same problem in the private security world. So, we actually are very close. We're getting the RMO in Singapore, which is the equivalent of ATS in Singapore. And we're doing the JV in Hong Kong and Dubai

• 27:32Speaker 01

  in order to get those licenses as well. Ultimately, what we want to create is what we call the GLAS Network, a global liquidity and settlement system, where very different jurisdictions can help settle and clear trades for trade referrers, exchanges, brokers in various jurisdictions in a compliant way, but allow this to happen on a global scale. So, it's a big project. I think we've got over 15 different trade referrers, exchanges, brokers, and settlement providers all signing up. And we're all going to try to figure it out together. So, that would be, I think I would call it a great B2B network and great teamwork in order to create that to happen.

• 28:15Anthony Pompliano?

  For sure. I saw a stat, eToro actually released this, that said, I think it's like 43% of millennials that they surveyed trust crypto exchanges over legacy stock exchanges. That is a wild statistic.

• 28:34Speaker 01

  That is a wild statistic. And, you know, we went, going back to earlier, where you talked about adoption. I've covered so many different emerging technologies and ultimately the people who grow up in that technology is when that inflection point happens. And I don't know if people realize, but by 2029, just about 10 years from now, the disposal income of millennials will flip and go and get bigger than the baby boomers and Gen X. In terms of also in about 10 years as well, their net worth will also be higher than any other group.

• 29:13Speaker 01

  So at any prediction we make in security tokens and crypto, I guarantee you about 2029 and further, it's going to flip very, very fast. I mean, I used to cover the advertising, online advertising names, everything from the early search engines to the ad tech companies. And everything just made so much sense to me. Okay, you have a good ROI, you can figure out exactly how you spend and calculate the conversion of that dollar to actual, you know, business. But yet, it was not adopted. And, and, and people were still coming to New York for what they call these up fronts, where CBS, ABC, NBC, and Fox would parade

• 29:53Speaker 01

  their shows for the season. And these mad men like guys would sit there and look at these shows and then they go and have their cigar and have a steak and drink a glass of wine and, and use a rate car to decide how much to pay for a 30 second spot, 15 second spot. It just didn't make sense to me. You know, ultimately, I realized, whoa, that happens because these guys ran, were in charge and controlled the system. And there was no way that they were going to give up the way they did it until another generation came and forced them to do that. And that's ultimately what's going to happen in any emerging technology, including crypto and security tokens. Come around 2029, when the buyers of this stuff are more millennials than Gen Xers or baby boomers, you're going

• 30:38Speaker 01

  to see rapid change. Until then, we're probably going to have evolutionary change. And I'm hoping that, you know, we have fast change even before then, but definitely within 2029 as millennials take over in terms of wealth.

• 30:50Anthony Pompliano?

  Look, I affectionately joke all the time and say technologists are successful because they're lazy, right? And what I mean by that is most technologists that are incredibly successful actually use software to make something easier, to make it less cumbersome, right? Less friction. And you can look across, you know, Stripe's a great example, right? Hey, it was really hard to get payment solutions integrated into your website. Well, what the brothers do, they literally just made it easier, right? And so now I could copy a couple lines of code and I didn't have to go through all the steps I previously had to go through, right? If you look at, you know, Uber or Lyft, I press a button on my

• 31:31Anthony Pompliano?

  phone and a car drives to me. And I think what we're seeing is it's easier to onboard onto a crypto exchange than it is a stock market exchange, right? It is easier to offload those assets in terms of a 24/7, 365 marketplace on a global scale. I will likely not have to have a bank account and a brokerage account in the future at all. It'll just be one account because every stock, bond, currency and commodity will be digitized or tokenized. Like, we're just breaking down these barriers. And so when I saw the stat that 43% of millennials prefer or trust a crypto exchange over a stock exchange, the first thought I had was,

• 32:12Anthony Pompliano?

  wow, what happens when the quote-unquote "stock exchanges," the equity exchanges are based on the same technology that today the crypto exchanges are? You're going to see a rapid influx of this millennial interest into that market to buy these equities, I think, over those traditional stock exchanges. And so at least the question, what does stock exchanges do? Right?

• 32:33Speaker 01

  That's great. And ironically, I was just at the New York Stock Exchange yesterday. And I walked around all the different posts. All that is right now, frankly, is broadcast booths for CNBC and Fox and CNN. They're Money Center Broadcasting. They don't really transact there. You know, it's all done electronically. So I think the big difference in fintech. From advertising and from other technology disrupting Silicon Valley style tech people is that the banks here, the exchanges, they all get it. They've seen this now. They're not going to be the retail that gets disintermediated by Amazon. They are all spending tons of money.

• 33:18Speaker 01

  And I think Fidelity spends like two and a half billion on R and D, not just for blockchain and crypto, but for everything. They are all spending tons of money in the background and they are just, they're aggregating the troops and they wait for the market to actually be there before they deploy the troops. So that is the big difference, I think, between this generation of tech development versus previous developments. And this is a, there's a reason why fintech and healthcare were one of the last places for California to come and try to disrupt because this is very hard. And the size of financial institutions and the regulation behind that make it very hard. So I anticipate a lot of partnerships or ultimately

• 33:59Speaker 01

  these banks buying out some of these startups in order to get their technology or get their book of business or get their DNA, venture DNA to lift off a specific project or, or a technology. I don't see them sitting around doing absolutely nothing like other industries and just let their lunch be eaten from them.

• 34:22Anthony Pompliano?

  Yeah. Look, I tend to agree. So it'll be fun to, to watch. Before I finish up, I usually do rapid fire questions. Most controversial thought you have in crypto. What do you believe that most other people disagree with you on?

• 34:35Speaker 01

  In three years, there's going to be a unicorn that does, does a series D via a security token.

• 34:40Anthony Pompliano?

  In three years?

• 34:42Speaker 01

  Less than three years.

• 34:43Anthony Pompliano?

  I actually agree with that, but I do, I do think that most people would disagree with that. So that's a good one. If you could change or improve one regulation, what would it be?

• 34:52Speaker 01

  There's a lot of regulation out there already.

• 34:57Speaker 01

  I would like

• 34:58Anthony Pompliano?

  You notice I don't ask anybody if you could create a new regulation? So I see we want to change or improve the ones that exist.

• 35:02Speaker 01

  How about this? Let's get some Reg A companies out there.

• 35:07Anthony Pompliano?

  With tokens?

• 35:07Speaker 01

  Yes.

• 35:08Anthony Pompliano?

  Yeah, because what you're talking about is, as far as I understand, and correct me if I'm wrong, there's not been a Reg A filing with the SEC that involves a token that's been approved to move forward yet. Right? I think a lot of people are waiting for that because you can tap into the unaccredited investors.

• 35:23Speaker 01

  That's right. Because I want more people to have access to this. So let's get one of those out there. And then you're going to start the greasing the rails and making this thing happen.

• 35:33Anthony Pompliano?

  Yeah, look, that would be incredible. I think that's going to be a huge opportunity. Most important company in crypto other than your own?

• 35:41Speaker 01

  I'm going to say Fidelity because it's

• 35:43Anthony Pompliano?

  Interesting, why?

• 35:44Speaker 01

  It's about access.

• 35:45Anthony Pompliano?

  Okay.

• 35:46Speaker 01

  And the most important people in crypto are not in crypto right now. And Fidelity will have custodial solutions for funds. Fidelity will have mutual fund products in the crypto space for retail investors. And we're going to, there, you need someone that big in order to get more access for broad swaths of people.

• 36:07Anthony Pompliano?

  What is the most important book you've ever read?

• 36:11Speaker 01

  So I'm going to give a shout out to classmate of mine at Harvard, Chris Ye, who just wrote Blitzscaling with Reid Hoffman.

• 36:18Anthony Pompliano?

  Oh, it's fantastic.

• 36:19Speaker 01

  It's an awesome book. It's easy to read for people out there. And it gets a, it's good shortcuts on how to be an entrepreneur. It's a lot of fun.

• 36:28Anthony Pompliano?

  It, the, so I read it and the part that actually made the book pretty interesting is the ability to share tactical kind of lessons learned, right? And then immediately follow it or relate it to, here are two or three examples, you know? The example where they use like Airbnb and Rocket Internet. And, you know, do you buy versus build and kind of those scaling challenges? I found it educational and entertaining at the same time, which is not very common for a book.

• 37:00Speaker 01

  That's exactly right. And knowing Chris, who helped rewrite that, that's how he actually speaks. You know, he's a very smart guy. He's able to boil things down into a few points and explain and communicate it very well with actual examples, like you said.

• 37:14Anthony Pompliano?

  Yeah, I love it. Aliens, what, uh, what do you think is the probability that they exist?

• 37:23Speaker 01

  I'm sure there is beings out there that we can't comprehend.

• 37:27Anthony Pompliano?

  Are we over or under 50% on your confidence that those exist?

• 37:31Speaker 01

  Under, because I just don't understand.

• 37:34Anthony Pompliano?

  Under 50%.

• 37:35Speaker 01

  But I'll tell you, if they exist, they are going to be highly intelligent beings, just like we are. And I don't think things are that different in this parallel universe over wherever they are. Because if, maybe I'm projecting my humanness, I guess, but they're going to have the same things and have the same challenges that we have because they will desire, the fundamental traits of beings are going to be the same for those guys as well as for us.

• 38:02Anthony Pompliano?

  Do you think that the simulation theory has any credibility? This idea that we're all actually just living in a simulation?

• 38:14Speaker 01

  That's a good one.

• 38:14Anthony Pompliano?

  You're the first person I'm asking on a podcast.

• 38:16Speaker 01

  That's a good one.

• 38:17Anthony Pompliano?

  Because aliens, now people come expecting the alien question. Now we're going to add in the simulation question.

• 38:23Speaker 01

  Wow.

• 38:25Speaker 01

  I don't know, actually. I can't answer that one, but I'll think about it.

• 38:30Anthony Pompliano?

  To be fair, I probably give it more credibility than I did originally, like the more that I thought about it. But it's still pretty low probability, in my opinion.

• 38:43Anthony Pompliano?

  But it's a thing where if you believe that aliens exist, then like the next kind of iteration is like, well, do you believe the simulation, right?

• 38:50Speaker 01

  Interesting.

• 38:51Anthony Pompliano?

  So you'll have to come back at some point and tell us what your theory is and that. Before I finish, I always let everyone ask me one question. What one question do you have?

• 39:02Speaker 01

  So you're incredibly busy. You're always on podcasts, Twitter, etc., writing things, running a fund. What do you do in your free time?

• 39:10Anthony Pompliano?

  This is my free time.

• 39:13Anthony Pompliano?

  I got a great piece of advice.

• 39:17Anthony Pompliano?

  Frankly, I don't even remember who told me this, so shout out to whoever told me this. They basically just said, "Look, you'll know that you're doing what you enjoy when you want to do it every waking second," right? And the only thing that that is at odds with is my girlfriend probably wishes sometimes I didn't spend all my time doing this stuff. But it's this idea that...

• 39:43Anthony Pompliano?

  I really truly believe what crypto is in the process of building is probably the most important thing that anyone could work on today, right? And why I say that is, there's a lot of other important things, you know, everything from kind of renewable energy to all the kind of healthcare, your disease eradication, shit, go to Mars, you know, all this other stuff could be incredibly valuable. But in terms of the effect on the total global population in the next 50 years, this is

• 40:25Anthony Pompliano?

  probably the thing that has the ability to affect the largest number of people with the most depth in their life, right? And the reason why I say that is if you fundamentally change money, for example, if Bitcoin becomes the, I don't know, a top 10 currency in the world, you're going to touch billions of people. Let's say, you know, CRISPR, for example, the gene editing type technology, incredibly important, right? I'm super excited, people way smarter than me are working on it. The odds that it's going to permeate and affect billions of people in that same 50 year period, probably a little less likely, still possible, right? But less likely. And so I think of impact in terms of how many people can you affect and almost how

• 41:08Anthony Pompliano?

  many seconds of their life can you impact with that technology? And it just feels like this is probably one of, if not the most important. And so if you take that, you know, kind of 50 year timeline, what would the things that you would do today be, you know, what would you do today that sets you up to be around 50 years from now and kind of see everything, participate in what you want to participate in, et cetera, stuff that we're doing, right? And so I joke on the internet a lot and say, look, I'm just happy to be kind of learning alongside everybody else, but. The reason why I do the podcast because people like you are willing to come in and talk, right? And so I got to learn a lot. And the reason why I spend so much time on Twitter,

• 41:49Anthony Pompliano?

  I learn a lot. And it's just a new kind of way of collective learning and community that I find enjoyable.

• 41:58Speaker 01

  I think that's absolutely correct. And I think everyone that comes here and listens to you or just listens to you out there, they really appreciate your conviction. And I think your phrase is ruthless conviction attacking this space. And you definitely have it. And without people like you, we're not going to move forward in this space.

• 42:14Anthony Pompliano?

  I am a big believer in this idea that you can speak things into existence, right? And so if you continue to say something is possible or something will happen, you increase the probability that it will happen or that you can make it possible or happen. There's a lot of people, I think, that are in and around crypto. They're interested. They're intrigued. They are hedging hard. They've got a very small percentage of their net worth in. They are working on it, but they're planning, hey, if this thing fails, what's my escape plan? What's my plan B? For me, if everyone does that,

• 42:58Anthony Pompliano?

  then we're unlikely for it to be successful. And when it is unsuccessful, what we'll actually end up questioning is, were we working on the wrong stuff? Or do we not give it 100% of our effort, right? Were we not 100% convicted on it? If you control for 100% effort, 100% conviction, we're going to find out real quick whether this stuff works or not, right? And so I don't expect everyone to be able to do that, right? I'm in a very fortunate position in my life where I can kind of go all in on something. And if it fails miserably in, you know, a crater in the earth five years from now, I'll be okay.

• 43:35Anthony Pompliano?

  I have no fear of failing in public in that way. And I think that's the part, as I talk to people, that's the part that scares them the most is it's not being wrong, it's being wrong in public and thinking they can't overcome that in their future careers, etc. I don't think we're wrong, obviously, but I think that's probably if I could change one thing about the crypto industry, it's that more people had no fear about kind of going all in and being 100% convicted.

• 44:02Speaker 01

  We need to get more people with no inhibitions in here.

• 44:04Anthony Pompliano?

  Yeah, I think, I think it's true. So I appreciate all the work you guys are doing. You guys are obviously pushing the envelope and working with, with City Block and kind of doing all that stuff. So I appreciate you coming and I'll have to do this again.

• 44:19Speaker 01

  Thank you very much. I appreciate it.

• 44:21Anthony Pompliano?

  I appreciate you guys listening to that great episode. Before we go, remember to go visit zenledger.io/offthechain. Zenledger is the best crypto accounting software available. If you had investment losses in 2018, you may be able to save up to $3,000 on your income taxes using Zenledger. Simply enter your transactions into their easy to use software, get completed tax forms ready to be imported into TurboTax and reviewed with your CPA and sent to the IRS. That's visit zenledger.io/offthechain. No spaces or dashes, just straight zenledger.io/offthechain and you get 20% off your tax forms for 2018. Thank me later. Hey, everyone. Pop here.

• 45:04Anthony Pompliano?

  If you liked this episode of Off the Chain and want to help us take crypto to the top of the apple, Spotify and other podcast charts, please do us a favor and rate, review and subscribe. To review, simply go to the Off the Chain homepage, scroll down until you see the five blank stars. Taking 15 seconds to fill those stars in and leave a quick review goes a long way in helping us take the entire crypto ecosystem to the top of the charts. I appreciate you listening and see you next time on Off the Chain.