Avichal Garg, Managing Partner at Electric Capital: An Ex-Facebook & Google Product Manager Talks Crypto Investing

Avichal Garg is the Managing Partner at Electric Capital. In this conversation, Avichal talks about the early days of working at Google and Facebook, building a machine learning company, and his career progression from employee to founder to crypto VC. ---- Totle is a rare blockchain investment opportunity, one that offers a live product, active customers, an established revenue model. Totle solves three significant problems with blockchain asset exchange: 1) Security 2) Complexity and 3) Pricing. Over $4 trillion of blockchain assets were exchanged in 2018 and growth is forecast for at least the next 10 years. Totle’s sophisticated platform powers the blockchain economy with safe, simple decentralized asset exchanges at the best price for traders, wallets, businesses and other financial apps. Totle’s B2C Web App and B2B API are live and serving customers today. Visit totle.com/pomp for more info. ----- Ethereal Summit returns to New York City this May 10th to 11th to kick off Blockchain Week and offer you a chance to go deep into the heart of crypto, blockchain, and Ethereum. Get up close with outspoken crypto leaders like Mike Novogratz, Joe Lubin, Tushar Jain, Danny Ryan, and yours truly Anthony Pompiliano. Ethereal Summit is where you can get in the mix with the builders of blockchain. Check out Etherealsummit.com with discount code POMP to get 20% off tickets to come hang with the brightest minds in blockchain at Ethereal Summit New York, May 10th to 11th at Pioneer Works in Brooklyn. ----- 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.

• 0:12Anthony Pompliano?

  Avichal Garg is the managing partner at Electric Capital. In this conversation, Avichel talks about the early days of working at Google and Facebook, building a machine learning company, his career progression from employee to founder to crypto VC, and aliens. His takeaways from working at Google and Facebook are fascinating, and Avichel has interesting insights into the diversification and risk mindset of being a founder and a VC. I hope you enjoy this conversation nearly as much as I did. I'm sure a lot of you have used Kayak to find the best flight. Total's kind of like Kayak, but it don't find you no flights. It helps you find liquidity on decentralized exchanges and it optimally routes your trades for execution. So Kayak, you find flights. Total, they help you find liquidity.

• 0:56Anthony Pompliano?

  We should get Kayak on for this spot that I'm providing them, but Total instead is our advertiser, and you should go visit totle.com/pomp. Again, that's totle.com/pomp, and let them know that I sent you. Tell them you love their product. Take a screenshot, tweet it at me, I'll drop you some fire emojis, and then we'll all be happy. So totle.com/pomp. This May 10th and 11th, Ethereum Summit is coming to New York City to kick off Blockchain Week. It offers you a chance to go deep into the heart of crypto, blockchain, and Ethereum. Come hang out with Mike Novogratz, Joe Lubin, Tushar Jain, Danny Ryan, and yours truly. You get into the mix with the builders of blockchain and Ethereum, it's less shiller, all killer.

• 1:36Anthony Pompliano?

  Go to etherealsummit.com and use my discount code Pomp to get 20% off tickets. I'll see you there on May 10th and 11th at Pioneer Works in Brooklyn. 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.

• 2:12Speaker 01

  Alright guys, I'm super excited. I've got a virtual here. Sir, thank you so much for coming on.

• 2:18Speaker 02

  Yeah, my pleasure.

• 2:21Speaker 01

  I think that you've got a fascinating background. So maybe let's start with the kind of pre-Facebook days, some of the stuff you're working on, and then we can go through Facebook and eventually into crypto.

• 2:32Speaker 02

  Yeah, sounds good. So I started my career at Google. I worked on search ranking and ads ranking. I have a computer science, machine learning background. I left Google to do my first startup, which was a machine learning plus education company that we sold to a publicly traded company. And then we started our second company, which was kind of like a TiVo for your phone. It was a company called Spool. And what you could do with Spool is give us a URL and we would crawl whatever's on the other side of that URL and cache it offline for you on your phone. And to do that, we built a bunch of crawling infrastructure. And those crawlers were basically VMs that we ran in remote data centers and instrumented them so we could control the file system

• 3:12Speaker 02

  and the audio card and the video card and built a bunch of cool tech there. And then Facebook acquired us in 2012, early 2012, and took all that IP. And then we spent a little bit of time kind of rebuilding some of that stuff inside Facebook. And then spent most of my time at Facebook, working on the local product team and managing that for the product side of the house. And was a hobbyist in crypto kind of all along. So the reason that Spool story is kind of interesting is Curtis, my co-founder from Spool and my co-founder at Electric, we dabbled with crypto after reading the white paper, maybe like 2010, 2011.

• 3:52Speaker 02

  And it was because we had all these servers that we were running. We could spin up thousands of machines. And so the idea sort of crossed our minds. Hey, maybe we should just do a bunch of Bitcoin mining because we can run a bunch of servers at scale. And so we played around with it and decided, you know what, this thing's just way too early. This is probably never going to happen. Super cool from a distributed systems perspective, but probably not going to happen. And so we ended up at Facebook and interacted with this for a while. It's obvious and bought some ether and Monero along the way. And then in 2016, I left Facebook and had some free time and was reading white papers and going to conferences. And was just blown away by how much things have progressed in four or five years.

• 4:34Speaker 02

  And it felt like it might actually be time to tip. And so went full time in crypto kind of at that point. And then the rest is history.

• 4:45Speaker 01

  So there's two big pieces there, I think, right? One is, let's start with the non-crypto piece first. You know, you had the benefit and luxury of working at two of the great technology companies of our time, Google and Facebook. What do you think are some of the main takeaways you had from those experiences? Maybe that other people who haven't worked at those companies could learn from?

• 5:11Speaker 02

  Oh, man, there's so, so many. I mean, I think we could talk about that stuff for hours. People, people write books about all those things. You know, I think even, even outside of Facebook and Google for a second, kind of stepping back. I think one of the things that makes us a little bit unique in the space that makes both Curtis and I unique in crypto is we are coming from, from this perspective of having, having seen these hundred billion dollar plus, 500 billion dollar companies scale. And going from product market fit and sort of a group of engineers that believed in the thing and got to scale. And all of the other things that you have to get right just beyond the technology to make that work. And so that really, I think, informs our worldview and how we think about things.

• 5:51Speaker 02

  And so we're definitely, you know, that sort of mindset of a small group of people can accomplish really amazing things. And then really, once you have product market fit, like what are all the other things that have to fall into place to, to actually bring that vision to reality? And we think that's, that's something that is not really common in crypto right now. I think there is this sort of sense of if you build it, they will come. There's a sense of engineers that are so technically gifted and so brilliant that they see how all these pieces fit together and they kind of want to build everything at once. And a lot of our worldview is informed by actually what most of the time you want to do is solve a really, really narrow problem, crush it at that problem, and then that's actually how you back into building a platform. Or actually, to get these things right, you have to figure out what your go-to-market

• 6:36Speaker 02

  is. You have to figure out who really needs what you're building and how to identify where those people are and figure out how to communicate that value proposition to them. And those kinds of things, we think, are sort of under-indexed right now in crypto. And so, a lot of where we spend our time when we're working with some of our early portfolio companies is thinking through how to do those kinds of things and trying to bring some balance to the companies. You know, even outside, I think, Facebook and Google, I've been a pretty active angel investor for many years. And if I look back at so many of the companies that have turned out to be very successful companies and been the best return for me, it's companies like Optimizely, or Color Genomics, or Cruise, which is now GM's self-driving car unit, or Boom Supersonic, which is building supersonic airplanes.

• 7:21Speaker 02

  Kind of the thing that I think the thread is, you know, the common thread through all of that for us is really that there are these moments in time where technology lets people do a thing that they just couldn't do before. But what all of those companies got right was the ability to not only build the thing, but communicate to people why that thing was important and interesting, useful, even though they may not have initially realized that they needed that thing. And I think that's kind of where we are with crypto right now. There's a lot of stuff that's possible, but we haven't really figured out how to communicate what the really new, novel, interesting things are that you just couldn't do before and why people might want those things, and how to make those really great experiences and bring them to market.

• 7:58Speaker 01

  And so, that's a really interesting way of kind of framing the past successes that you've seen as an investor where crypto is today. How much of those previous successes do you think founders kind of had this innate ability? They were born with the charisma or the ability to communicate effectively and articulately versus that was a learned skill and something that they kind of built over time in a very intentional way?

• 8:28Speaker 02

  It's a little of both. I mean, I think it's like so many things where people have natural proclivities and some people are just really good at this stuff. And then they surround themselves with people who are really good at this stuff. But you know, it's actually funny you mention that. I think if I look at in general, you know, I've invested in several dozen startups at this point. And if I look at the single, if I depict one thing that correlates the most with whether or not a company is going to be successful, it's a little surprising, but it's actually the quality investor update. It's like so, so highly correlated with whether or not a company is going to be successful. And it's because ultimately, if you can communicate clearly to your stakeholders, what you're working on, what the priorities are, how you've progressed against those things, what's going well, what's not going well.

• 9:11Speaker 02

  All of that clarity of communication is really preceded by clarity of thought. Like you can't communicate clearly if you're not thinking clearly. And so I think there's actually this really strong correlation between people who are really successful and people who are able to communicate the value proper of what they're doing. But I think it's actually because kind of like from a Bayesian perspective, kind of behind the scenes, the thing that's actually correlated with both of those is that those people tend to be very, very clear thinkers.

• 9:34Speaker 01

  It's fascinating to hear you say this. My partner and I have talked about this a bunch. And one of the questions now when we do diligence is to have the founders send us their previous updates and past fundraising decks. And some of it is kind of how detail oriented and kind of concise and clear something is. But also their ability to explain why certain things they thought were going to happen at some point in time did or didn't happen. Right? And kind of talk through, you know, hey, 18 months ago, when you raised your last round, you thought that you were going to be able to use that money to accomplish X, Y, and Z. Why has that not happened? Right? What were you actually able to accomplish with it?

• 10:16Speaker 01

  And I think it hits at this point that you kind of articulated very well around just clear thinking. And really, it comes down to, you know, one of the things from Facebook that I took away personally was just kind of the seeking of the truth. Right? And kind of this fanatical, you know, obsession with it really seems to set apart a lot of the great founders.

• 10:39Speaker 02

  Yeah, that's actually a fantastic observation. It's one of the things I love most about entrepreneurs. And ironically, I guess, people don't really put entrepreneurs and hedge fund managers in the same bucket that often. But it is, it is like one of the core properties of both entrepreneurs and investors, like really good investors are the same way. Uh, you know, if you're not, because you're betting with your money, right? It's like if you're not, if you're not trying to figure out whether or not your version of the truth is actually the truth and trying to prove yourself wrong all the time, you're going to lose a lot of money and entrepreneurs are going to lose a lot of time. So entrepreneurs, the best entrepreneurs are a hundred percent obsessed with what are all the ways that my version of reality is false? Because if I can, if I can falsify it very, very quickly, then I'm going to save myself a year or two years of development. Um, and I think that, that goes back to the same idea of, well, in order to do that,

• 11:23Speaker 02

  you have to be able to go through this kind of thought process, which is what do I believe? Why do I believe it? What are my hypotheses? What are my assumptions? And then start to challenge those. And to do that, you have to be a really clear thinker. You have to be like a very structured thinker. And I a hundred percent agree with you. Having been at Facebook for a few years, it's like Mark is just so exceptional at that. I think the whole management team is exceptional at that. And just being in that environment for a few years, you get so much better.

• 11:44Speaker 01

  Yeah. And, and it's funny because, you know, it, it's almost become cool at this point to talk about first principles, thinking and all this stuff.

• 11:52Speaker 02

  Yeah.

• 11:53Speaker 01

  Kind of throughout the startup ecosystem. But, but when you see it in practice at scale, right? Because I think a lot of kind of young companies that have two, five, 10 employees, um, it's probably a little bit easier to do that if you've got a strong leader who comes from that type of mentality. But to do it with 10,000 plus employees is a whole different ballgame. Um, and, and it's pretty incredible to see how the organizational structure, kind of the way that the culture is built, et cetera, can, can have that permeate through, um, an organization. Uh, and I think that's what makes, you know, the Facebooks, Googles of the world so special.

• 12:27Speaker 02

  Yeah, a hundred percent agree. I mean, I think that, that's, those are the kinds of things that I think over time, um, you're going to see the best crypto companies and crypto projects, not necessarily companies even, and ecosystems and communities, um, really coalesce around. I think it's, it's the communities and the leaders that are, are truth seeking and figure out how to scale organizations that are truth seeking, um, and bake that kind of mentality into the ecosystem and their communities, they will ultimately, I think, be the big winners.

• 12:54Speaker 01

  For sure. And so let's go to, as you were at Facebook and kind of towards the end of your time there, you guys were obviously spending some of it looking at crypto. And from what I understand, you really didn't have a desire or a plan to start a crypto fund, right? I think you were kind of just investing in founders, investing in projects, and really kind of learning and deploying capital in things that were interesting. Maybe talk through a little bit how you go from that approach to crypto and blockchain to actually running a fund.

• 13:29Speaker 02

  Yeah, great question. Yeah, we never actually thought we would end up being fund managers. You know, we, sort of in our own heads, we're still, we're still founders and entrepreneurs and we still, we actually try to run electric very much like that. So everybody we hire has a technical background and we actually build all our own software. So we're kind of a weird hybrid between a fund and a startup in a lot of ways. But kind of the way it happened was after I left, I'd already been an active angel investor for a few years and just organically over 2016, 2017, had found myself spending more and more of my, of my time in crypto and blockchain. So was an angel investor in things like DYDX and Anchorage, which is a custody solution that just launched, Bitwise, which

• 14:13Speaker 02

  is an index fund, like a lot of great projects. And then was doing ICOs kind of through 2017 and, you know, had bought into all sorts of stuff over the years. And then, kind of what happened over 2017 was the Silicon Valley VCs that Curtis and I had co-invested with over the years started reaching out and saying, hey, we know you guys have been into this stuff for a while. And, you know, have been going really deep on this. Can you help me do diligence on this thing? Or can you help me figure out if this thing is real? Or, you know, should I do this round in this company? And then by the end of 2017, that had really turned into a lot of sort of, wow, this is just a totally different world. Like, I, you know, the round constructions are different. The custody is different. You know, what, like, one day I'm just gonna get $3 million on a USB stick? Like, what do I do with that?

• 14:58Speaker 02

  And so, the VCs, I think, very quickly realized, the traditional VCs realized that if they wanted to do this... It's not going to be a part-time thing. They were really going to have to go deep on it. And then operationally, they may not actually be set up for it. I mean, and you and I talked about this, but even even things like, well, do you want to be a registered investment advisor? And the fact that these are liquid assets, all of a sudden it creates these knock-on effects where if you're an existing firm, you know, your CFO is going to say, yeah, we're definitely not doing that. Like our venture exemption is pretty awesome, right? So there are all these sort of operational barriers as well. Not not to mention that, you know, what do you what are you buying when you buy Monero, right? There's not there's not a company there. Like, what you know, what is the thing that you actually just bought? Or how do you track that? How do you mark that up when it comes to time for your audit? There's all this sort of complexity there.

• 15:42Speaker 02

  And so a bunch of the VCs came to us and said, hey, you guys really understand this stuff. There are not that many people who are technically really deep and understand the technology here, have actually built and shipped product before and could be helpful to entrepreneurs on the early-stage side, and have some experience doing doing the liquid side of it and could could be credible at sort of managing that liquidity. You guys should really think about doing this full-time. Like, you're you're pretty good at it. Your track record is really good, and we trust you. So if you ever wanted to do it, we we would be interested in talking to you guys personally, because a lot of the the general partners at the VC firms wanted personal exposure, and they understood that there was this whole world outside of Bitcoin. And so that kind of kick-started it for us. We said, you know what? We're spending all of our time doing this anyway. It's a lot of fun.

• 16:27Speaker 02

  It'd be great to have some capital behind us to scale up some of the things that we're doing and and be able to hire some people and help some of the companies that we that we work with really closely and kind of have some infrastructure there. And if we're doing it all the time anyway, might as well formalize it. And so that's that's kind of how Electric happened. Like, spring of 2018, so like, spring of last year. We formalized all of that into Electric and hired a few people. And we went back to those same GPs at the venture firms and and said, hey, yeah, we're doing this. And they were all the folks who who kind of got us off the ground. So at this point, we have, you know, like, one or two general partners out of all of the major Silicon Valley firms were were our first LPs.

• 17:06Speaker 01

  That's awesome. What um, what's the kind of story behind the name Electric?

• 17:11Speaker 02

  That's a really great question. It's multi-

• 17:15Speaker 01

  That's all I do is ask great questions of each-

• 17:17Speaker 02

  No, man, that's- You know, what's funny is people just assume, well, there's so much that went into it. It's one of these things where, as founders, we spent so much time assessing over names and there's so many-

• 17:30Speaker 01

  I was gonna say, the name's the hardest part.

• 17:32Speaker 02

  It's so hard, right? You could spend months on it. And so, there's a lot that went into it. So, one, the domain was available. So, electrocapital.com, we could actually get.

• 17:41Speaker 02

  Two, we think crypto, blockchain, like a lot of this technology is gonna be ubiquitous. Like, we're gonna look back in 25 or 30 years and it's gonna- In 50 years, it's gonna feel like electricity does to us today. It's just not a thing that you think about, because it's just permeated everything. In the same way that today, if you're a non-crypto investor, a company came to you and pitched you and said, "Hey, we're a mobile company and we use like Postgres on the server side with like some Mongo." What are you talking about? Like, none of that matters. Of course, you're a mobile company, right? You're just a company. And so, we think crypto's gonna be that level of just baked into everything. And then, it's also a little bit of a nod to Electrum, which is the first coined money in the Lydian Empire,

• 18:27Speaker 02

  which was a stand coin out of some precious metals. And so, our area of focus specifically, we think is- What we think is happening with crypto is that this is software-eating money. And so, our area of focus was sort of a nod to where we think the value is actually getting created.

• 18:45Speaker 01

  That's awesome. I like how you guys kind of triangulated there to the name. When you set up the fund and kind of, you know, and I don't want this to kind of cheapen the way that you guys did it, but you kind of professionalized the investing you were already doing, right? So, you kind of were experienced in doing this and then you decided, okay, let's raise a fund and hire some staff and kind of build some tools and everything that you've described. What's the biggest difference you've seen between the way that you guys either evaluate companies, work with founders, some of the decisions you make? Like, are there noticeable differences? Or is it pretty much almost everything you were doing before, now you're just doing it at a greater scale?

• 19:24Speaker 02

  You know, in terms of the decision making and in terms of working with founders, it's pretty similar. You know, the sort of the bar that you want to hold is similar. You know, the way that we try to add value in terms of helping people actually think through their product strategy, think through their go to market, you know, helping them raise subsequent rounds of financing. All of that is, a lot of that is basically the same. You know, I think the two big differences that jump out. So, one, a lot of times you have to be a lot more thoughtful about how much capital you can actually deploy into a company or into a strategy. And as an angel investor, if you're cutting 25 or 50 or even 250K checks, the dynamic is just different, right? Your ROI is going to be different. You can get in much earlier, at an earlier stage.

• 20:09Speaker 02

  You're not really elbowing anybody out for allocation. There's like a lot of mechanics there that do change. But that's more from a, you know, how do you deploy the capital efficiently perspective, rather than how do you work with entrepreneurs and make decisions? You know, it doesn't really change that. And then, of course, the other big difference is you have, you have LPs, you're managing other people's money. And so that, that, you know, creates a whole different level of responsibility in terms of reporting and accountability and, you know, keeping other people in the loop. And, you know, at that, at that point, there's a whole bunch of infrastructure that you need to be able to scale that up, which is just, as an angel investor, you're not thinking about it all.

• 20:47Speaker 01

  Absolutely. No, no, I think that makes a ton of sense. And for you guys specifically, right? Because you guys have the technical backgrounds and you probably are able to go deeper with founders. So far, have you seen that that has led to a desire to invest in more companies than maybe some of the other non-technical managers in the space? Or does that actually shrink the number of companies that you guys find, you know, potentially interesting?

• 21:15Speaker 02

  Yeah, it generally shrinks them. And I think the big reason is if, you know, we kind of hold the bar of you need to understand this stuff way better than we do. And if you can't cross that bar, then like, why are we the investors and you're the founders, right?

• 21:32Speaker 01

  Yep.

• 21:33Speaker 02

  That is the bar. And so that all automatically, I think, unfortunately eliminates a lot of people in the industry. And that's not to say that they won't necessarily be successful, but specifically in the area where we focus, which is store value coins, kind of layer one, things that can actually accrue value down to the token and might be these foundational ecosystems in the next decade. We think today to really win at that layer, you do have to be very technically deep. In addition to a lot of other things, like I think you have to be exceptional at building community, you know, the leadership skills that are required are different, understanding who your users are as developers, you know, what your go-to-market is, all of that is also necessary. But the bar is pretty high in terms of being technical and being able to think through these things and actually deliver.

• 22:16Speaker 02

  And unfortunately, most people, even the ones that are operating at L1, you know, I think are gonna find that they hit a wall on that dimension relatively quickly.

• 22:25Speaker 01

  Yeah, I mean, look, your background, obviously, investing in color genomics, right? In, was it sonic airplanes? I mean, just, this isn't specific to crypto, right? I think you've kind of shown that these back founders who have very specific skillsets and knowledge in kind of deep applications of technology, even before you were focused 100% on crypto.

• 22:49Speaker 02

  Yeah, and it's, and you know, the other thing I think that goes hand in hand with that is the really best founders, not only are they really technically deep, but back to this idea of being able to communicate it, they're often really, really exceptional at being able to communicate why the technologies are useful, or what you can do with them, or what the trade-offs are that they're making from an engineering perspective, and why those are the right trade-offs. And so there's a great feedback loop there, too, where if you're able to sort of suss out, here are the people that are in the top 1% or top 5% in terms of understanding the underlying technology, just by being around those people for long enough, you're Depth of understanding goes up and up and up because those are the people that are actually the best teachers. And so, you know, as an investor, just being around those people, all of a sudden you learn really quickly. Like I was not

• 23:33Speaker 02

  an expert at supersonic airplanes. I'm not, by no means, an expert today. But I've been able to learn so, so much just because the founding team at Boom is so good at explaining why, in very simple terms, you know, like, oh, it turns out the reason supersonic airplanes can work now is fuel economy. And they can walk you through very quickly in three bullets, like why all of a sudden the business model makes sense. And then over, you know, a couple of years of working with people, you can go really deep. And I think crypto is the same. Like, we're very fortunate to be able to work with a bunch of really great founders who are also really great teachers. And so we get to learn a lot from them.

• 24:06Speaker 01

  Yeah, what's the saying that basically, you know, the people who have the deep understanding of a topic can actually describe it in the simplest terms?

• 24:14Speaker 02

  Yeah, that's right. A fine, a fine end quote.

• 24:16Speaker 01

  Yeah, yeah, something like that. So, you know, look, you've got a bunch of interesting views and I want to kind of run through a couple of them on crypto. One of them is, most people today believe crypto will permeate globally in a very kind of distributed or decentralized manner, and this is a global game. I think you probably lean more in the camp of there will be like a recentralization of a lot of this work in Silicon Valley. Maybe describe a little bit as to what you mean by that and why you've kind of arrived at that, that idea.

• 24:50Speaker 02

  Yeah, so what I mean by that is I think there, that doesn't mean that there won't be successful companies in other parts of the world. There absolutely can be some successful companies in all parts of the world in crypto. But I think the biggest and most important companies and ecosystems will have their center of gravity in San Francisco, in the Bay Area, and in China. Those are kind of like the two ecosystems where I think this will recentralize. And if you look back at the last, say, 20 years, 25 years of the internet, that basically has happened over and over again. Silicon Valley actually is usually not the first mover into these new ecosystems. It wasn't the first mover into share economy or social or mobile.

• 25:34Speaker 02

  But they're usually the first to jump into it and say, okay, this is real now. And once Silicon Valley sort of says this is real, this horde of talent starts coming in. Yeah. And it really generally uplevels the quality bar, like pretty dramatically usually.

• 25:50Speaker 02

  And the critical thing that really happens is if you think about what you need to succeed, it's not just figuring out that there's an opportunity, but it's executing on it, delivering it, and then scaling behind it. Right? So, you know, Facebook wasn't the first social network.

• 26:06Speaker 02

  Google wasn't the first search engine. You can sort of like play this through history and really what matters is how do you scale? Once you've figured out that the opportunity is real and you might even have some semblance of product market fit, how do you not just collapse into your own weight? And that is just tribal knowledge. That isn't written down anywhere. Other than like Elad's book, Elad Gil's book, High Growth Handbook. That's literally one of the few places where some of this is written down. And as you can imagine, that's 1% of what actually exists in Elad's brain. And so, you know, the people who actually understand how to build these companies and scale them and scale these ecosystems and think about all this stuff, they exist within like a 30 square mile radius here. And so it's not an accident or coincidence that every wave of technology, even if it starts somewhere else,

• 26:48Speaker 02

  re-coalesces in the Bay Area or in China because of the tribal knowledge of how you actually, like how do you coordinate thousands of humans to actually produce meaningful work? How do you actually scale that culture? How do you actually create career paths for people? How do you actually find the right balance between extracting value and creating value in an ecosystem? Like, there's so much that's just tribal knowledge that doesn't exist anywhere else in the world. And so I suspect that tribal knowledge will actually be the limiting factor. But once we figure out what the killer use cases for this stuff are, a lot of those will then scale in Silicon Valley because the tribal knowledge about how to make things scale only really exists here.

• 27:25Speaker 01

  It's funny to hear you describe it this way because when I first went out to Silicon Valley, it was to work at Facebook, and I think the part that shocked me was it was almost like sports, right? Literally, there was entrepreneurs and executives who had playbook, right? And it was like, oh, okay, you found product market fit. Now you run like play, you know, one, two, three, and then you're gonna run, you know, play A, B, C, right?

• 27:50Speaker 02

  Yeah, 100%.

• 27:51Speaker 01

  And I think that there's a lot of entrepreneurs all around the world, frankly, who are trying to figure it out, and you know, maybe not reinvent the wheel, but just, you know, they don't have that kind of guidance and mentorship there. Whereas, you know, in Silicon Valley, it is very well-known, right? Hey, you should run a platform strategy, right? And here's what that means. Here's 10 people to go talk to that have done that successfully. And maybe here's even two or three people who tried it and failed, right? And you can kind of do all of that very quickly, and it really does, just that that iteration speed is different, right?

• 28:23Speaker 02

  Yeah, that's right. And all these things are feedback loops, right? So it's, what really matters is not entering the feedback loop. What matters is how many cycles through the feedback loop can you make? And how quickly can you make those cycles happen? Because all these things have network effects, all of them have feedback loops, and to the extent that you can avoid all of the known mistakes, you just cycle through those feedback loops that much faster. And that's really what happens here. To your point, it's just like, you can go talk to a dozen people who have run that playbook, and they'll tell you all the ways that it might apply to your business and all the ways that it might not. And that saves you 12 to 24 months of iteration. And over a decade, that compounds. And that compounding means that everybody else gets crushed, and then the people who are here basically win.

• 29:05Speaker 01

  Yeah, it's, whenever I've talked to founders, I always use the example of if you learn one lesson a week, and I learn five a day, who do you think's gonna win?

• 29:13Speaker 02

  Yeah, it's all about compound growth, right? And just that little 1% or 2% magnified week over week, year after year, just coalesces, and that feedback loop is how you win. And that just, it's so much faster to go through that, and that extra little 2% really adds up.

• 29:29Speaker 01

  For sure. So let's go back real quick to this idea of decentralization and centralization. The other thing that I think that, you know, you spent some time on, is many of the big winners in crypto may not be decentralized, right? They may be more like the Coinbase's of the world. Just kind of elaborate on that a little.

• 29:48Speaker 02

  Yeah, so kind of at a like a hundred thousand foot view. Our perspective on what's happening is there's been this massive collapse of trust in society. And you kind of, there's a lot of like Pew and Gallup data, and we've been talking about this stuff for years now. But you know, people don't really trust the government the way they used to. People don't trust the media the way they used to. People don't trust, you know, the, uh, the social networks. People don't trust journalism. There's like all these places where trust has just collapsed. And along comes this technology in the last decade, which really is about trustlessness. Just how do I get things done if I don't trust the bank? If I don't trust my intermediary? If I don't trust my counterparty? If I don't trust some third party who may be looking at what I'm doing?

• 30:31Speaker 02

  And so really for us, it's about solving trust problems. And that's, that's what crypto and blockchain really lets you do, kind of in an abstract way. And then the most interesting trust problem, the biggest market from an investor's perspective, we think, is money. That's actually how we intermediate trust today. That's actually how we sort of have, you know, scalable solutions to trust problems is through money. And so what we think is happening kind of at a first step here is this is offering money. And we're really starting at like the base layer of the financial stack, which is if we have this non-sovereign store value that can emerge out of the system, it will create the foundation on top of which we could reimagine things like cash, central banking, you know, derivatives, securities, you know, retail banking.

• 31:15Speaker 02

  Like every, everything that sort of exists in the financial stack today can now be built in this parallel ecosystem. And our worldview is that at the bottom of that stack, these things are going to be very, very, very decentralized. Because the decentralization is what gives them their critical, uh, their critical dimension on which they can beat existing fiat money, which is that they're seizure resistant and censorship resistant and they're non-sovereign. And to do that, you really do have to be decentralized. And that's why our focus in the, in the near term is relatively narrow. There's just not that many things we think that can have that sort of property. But as you move up the stack, kind of at the top of the stack, something like Coinbase, which sits on top of this infrastructure, and is sort of an equivalent to like a Schwab in the traditional world, right? That's your, your retail interface into this ecosystem and just abstracts away all the complexity.

• 32:00Speaker 02

  That we think likely ends up very centralized. You know, for most people, key management is hard. Understanding and getting their heads around how to do this stuff is going to be really challenging and they need a brand. They need a customer support person that they can email or call. You know, for institutions, they're used to certain back patterns and they're gonna, they're gonna operate that way. And that's okay, right? Like, we think that as long as the rest, you know, the sort of foundational pieces of the stack are still decentralized and they're auditable and they're transparent. Even though something like Coinbase looks like a traditional company, it's actually gonna have to run very, very differently. And kind of by analogy, I think you could look at something like Walmart versus Amazon.

• 32:41Speaker 02

  You know, Amazon is just built on this entirely new infrastructure of the internet that, that didn't exist when Walmart was getting started. And you would look at it and say, well, they're kind of retailers, like, why can't Walmart just do what they're doing and, and sit on the same infrastructure? But it's because everything else in the business would have to change. Right? Like, who you hire would have to change, how you make decisions would have to change, who has power inside the organization would have to change. The metrics that you look at would change, like, everything downstream changes. And so Coinbase just has to operate day to day dramatically differently than Schwab does. In order to actually take advantage of the, the properties of that underlying infrastructure. But our worldview is kind of at the bottom of the stack, things will be very, very decentralized. They'll have these sorts of properties of, you know, anonymous founders or founders who give up control, you know, pretty aggressively over time.

• 33:26Speaker 02

  But at the top of the stack, they probably look like traditional venture capital companies, you know, like a Coinbase.

• 33:33Speaker 01

  Yeah, and in, in this separation between like, well, what I'll just call it, the foundation of value or the unit of, of value, if you will, being separated from the state and then kind of a rebuilding of all of that infrastructure applications on top of it is pretty fascinating because what you're talking about is a different kind of trust in the actual foundation, right? It's based on math and software and transparency and kind of all the aspects of crypto that I think people are familiar with. But also, the reason why maybe our parents trusted Schwab and why we trust a Coinbase, it revolves around trust, but it's different elements of trust, right?

• 34:16Speaker 01

  It, it's not exactly the exact, the, the same ingredients which lends itself to crypto in a very different way.

• 34:25Speaker 02

  Yeah, 100%. Like, I think the sort of end result is the same, but the means by which you build and accumulate trust, or how you might lose trust would be very different. I mean, I think it's really, really good net for the world that the next generation of banking and securities and derivatives, you know, if it sits on top of this infrastructure, you can start to ask questions like, well, is my bank actually solvent? You know, is that's, you know, like-

• 34:51Speaker 01

  Crazy question, crazy question.

• 34:53Speaker 02

  Really, it's like shocking, or, you know, like, how much leverage has really gotten into this, you know, X, Y, Z ecosystem, where people are like taking these derivatives, slicing them up, repackaging them, and then passing them on to somebody? Like, how much of that is actual, you know, notional value? How much of this is like levered up? Who owns what? Like, even sometimes, just in some of these ecosystems, you don't even know who owns what, which is kind of crazy to think about, right? So, you know, I think you'll get trust rebuilt, but it'll actually be built on this foundation of transparency and accountability, because the infrastructure allows you to have transparency and accountability in a way that you just can't today. So now it's not, hey, take my word for it. It's, no, no, no, like, I can prove to you, and here's the proof. And I think that's going to create a whole new kind of trust.

• 35:33Speaker 01

  For sure. And so, you know, one of the aspects of money historically has been that a lot of the trust was because money was controlled and backed by the government, right? And I think that there's a, an underlying belief that if you separate money from the state, the state will respond in a negative way. They'll, they'll come down on it, they'll regulate it, they'll ban it, et cetera. You know, you've talked about previously the idea that actually one of the greatest threats may not be the government banning crypto, for example, but it may be them embracing it, right?

• 36:18Speaker 01

  What do you mean by that?

• 36:20Speaker 02

  Yeah, so I think a lot of people think that the real risk here is that the government might ban this stuff, and I don't think that's a real risk. You know, I think that if you look at how the US government, just to sort of scope it down a little bit, but sort of, you know, the US government as a proxy for most of the rest of the world, has thought about this stuff, they've been very measured and thoughtful, right? They've said, hey, look, here are the things that we think are securities, and here are the things that aren't, here's why, you know, we don't want to do an ETF right now because we have certain concerns. They've actually been very thoughtful, I think, about how they're doing this. And I think they're being smart because they realize that there is a significant upside here, right? There is innovation happening, there are billions of dollars coming into this space,

• 37:02Speaker 02

  there are tier-one entrepreneurs coming into this space. Why cut that off, right? And really, at this point, I think if they were to try to do that, the real risk is that another country opens up and says, hey, why don't you guys do this here? And now, if you're the US government, do you really want that to happen in, you know, let's say China? Like, is that really, is that really the world that you want to enable? And so I think both from like a game theory perspective, but also just from a, you know, they're being smart and rational about this perspective, they're saying, okay, we need to, something's happening here, let's foster the innovation in the right ways and make sure that certain bad things don't happen. And those bad things basically are, you know, what does the government really care about? They want you to pay your taxes, which is totally reasonable, people should pay their taxes.

• 37:45Speaker 02

  You know, they want to make sure average people are not getting scammed, also very reasonable, people should not lose their money to scammers. And they want to make sure that you don't, you know, give your money to terrorists, also very reasonable, right? Like, people shouldn't give money to terrorists. So I don't think their demands or, you know, their requests are actually that unreasonable. And they'll put guardrails in place and use things like KYC, AML and fiat on-ramps and off-ramps to enforce reasonable rules. So if you sort of say, okay, well, through that lens, it seems like the government's actually been pretty reasonable, then I say, well, actually, if you look at the history of how governments have embraced technology, what have they actually done? And historically, they haven't said, no, you can't do a thing, especially in the last

• 38:28Speaker 02

  20 or 25 years, if you look at, especially authoritarian governments around the world, what they've done is co-opted the technology. They've said, oh, this is really powerful. This allows us to have scale and leverage and influence in a way that we didn't before. So how can we actually co-opt this and embrace this to do the things that we want to do? So imagine, you know, like a, a non-American country, like I generally trust the American government. There obviously, you know, no government's perfect, but generally I think, you know, for the long term has done, has done reasonable things. But there are governments in the world or leaders in the world where I look at that and I'm like, you know what, I definitely don't think you're, you're doing what's, you know, in the right long-term interest of your people or humanity in general. What would those people do? And it's not at all crazy to imagine that certain governments around the world embrace this stuff and they say,

• 39:12Speaker 02

  you know what, we're going to do a digital fiat and it's going to be sitting on blockchain. And we're going to back it with half a trillion dollars worth of our currency. And so now you can walk into any bank and you can turn this digital money into paper money if you feel like it. Here you go, developing world. Here you go, Southeast Asia. Here you go, Africa. Here you go, LatAm. Why don't you guys use this? Because your native currencies are hosed. You know, why use this way better infrastructure and it works on mobile and it's instant and look, isn't this great? And what do you know, now they have full visibility into what's happening in all these different parts of the world. And the average person is just not that sophisticated in, in the sorts of privacy trade-offs that they, they might be willing to make. And to your earlier point, it might look to them like a thing that they understand and actually feels really good.

• 39:55Speaker 02

  Oh, there's a country behind it. There's half a trillion dollars sitting in a bank account somewhere. Like I can always go get my money. This feels really good, but they may not realize the trade-off that they've made and what the consequences of that are. So I actually think if you, if you look at how successfully modern governments have been able to embrace technology on the internet, the real risk actually is that, that governments get really smart about this and start launching things that to the average person feel really good. But actually the trade-off that they're making between convenience and privacy actually moves us more towards like a 1984 kind of world, which I think would be really unfortunate.

• 40:29Speaker 01

  Yeah, I, I, I think it's a really unique view and, and one that probably hasn't been explored enough, but, but, but definitely has merit. But let's switch gears a little bit. And one of the things as, you know, you continue to invest, you know, initially kind of across sectors and now much more focused on crypto. You spend a lot of time with founders and that includes, you know, vetting them, their projects, companies, but also giving a lot of advice in, in, you know, this idea that maybe your peer investors or also entrepreneurs don't value or underwrite risk as well as they should.

• 41:09Speaker 01

  What's kind of the thought process there as to why you think that happens? And then two, you know, what can they do to actually improve their ability to underwrite that risk?

• 41:19Speaker 02

  Yeah, so I think what you're getting at is this conversation that we were having around. I think there's this interesting property I've noticed, and I think it's just a human thing, which is humans have kind of these two interesting patterns. So one is we're intrinsically bad at exponential growth. We don't quite have the right mental model for exponential growth because exponential growth doesn't really happen at a macro scale. You know, like bacteria have exponential growth. We don't really see that in the macro natural world, and so our brains are not really wired for that. And another sort of, you know, related bias that we have is like, we're really bad at long tail probability events, right? This is like sort of a gambling effect. It's like if a thing happens very, very infrequently, like a lottery, we're just bad in calculating

• 42:04Speaker 02

  those expected values and understanding what the implications of these tail events really are. And so fear kicks in on very, very low probability events, like a plane crashing, and yet people drive around and, you know, don't buckle their seatbelt. And you're like, this makes no sense, right? Like, your understanding of tail probabilities is totally off intuitively. And so when you mash those two things up, you know, the perfect storm of those, both of those things happening is startups, right? They're tail probability events where they, you know, the odds of creating a hundred billion dollar company are so, so, so tiny, and it relies fundamentally on exponential growth for that actually to happen. And so what ends up happening, I think, for a lot of founders and a lot of entrepreneurs

• 42:42Speaker 02

  and investors, is they dramatically overestimate the odds of success for things that look not that risky, like a SaaS business. And they dramatically underestimate the odds of success for things like supersonic airplanes or rockets to take us to Mars, or non-sovereign monetary stores of value that might actually replace gold one day. And it's because those things just seem so crazy that you say, you know what, there's like a 0% chance that that happens, but you've seen SaaS startups before, and so you look at it, you're like, oh, of course, like, this is far more likely, there's like a 10% chance this happens. And in reality, those probabilities are way Way closer. Um, you know, start, SaaS startups are really hard, actually, because it's so competitive.

• 43:25Speaker 02

  Uh, it's really hard to hire. There's, you're just, you know, like the odds of success of any startup are actually quite low. Um, and by the same token, uh, no pun intended, you know, a lot of these companies that are getting started, they're doing these really ambitious things. That look crazy. It turns out you have no competition and it's actually the, you know, what you're doing is not reinventing anything. You're actually operating within the bounds of physics, um, or, you know, within the bounds of technology. Um, and so I think we're actually like, as investors and as entrepreneurs are intuitive, understanding this risk is totally off. And so when I look at something like crypto, I actually like that. Most people look at it and say, that's absolutely batshit crazy. Like, there's no way that's gonna happen, right? Um, uh, to me, like when Warren Buffett says that's rat poison, that's actually a little bit of a positive signal, right?

• 44:10Speaker 02

  Like he missed Facebook, Amazon, um, you know, he bought into IBM and a tank like, you know, I, I look at signals that, um, say like, wow, these, there are these like weird, clair probability things that happen all the time. Um, and as humans, most humans look at those and say, there's just no way that's gonna happen. And anytime somebody says that, my ears kind of perk up because I actually think the probability of those things happening is literally order of magnitude more likely than most people would intuitively think. I think crypto falls squarely into that bucket.

• 44:39Speaker 01

  Yeah, it, it's, it's speaking of Buffett, um, the one thing I always think back to, uh, he's got this quote where he says, um, you know, diversification is just for the people who don't know what they're doing, right? And, uh, it, it really is, um, when you talk to founders who are building, uh, incredibly ambitious, uh, higher probability than not of success type companies, uh, what you find is they don't think what they're doing is risky at all, right? It, it's actually, they understand it at such a fundamental level, um, that it, it, it really is pretty incredible to talk to those people. Uh, because it just looks like a very different opportunity than to those who maybe aren't as familiar or, or who don't have the, uh, the understanding that they have.

• 45:21Speaker 02

  Yeah, 100%. And I think as investors, that's the real opportunity, right? Is if you can find those mispricings in the world where you're like, wait a second, everybody thinks this has a certain risk profile. And when you get up close to it and you start digging in, you realize it's way less risky than most people think. And as a result, the bet is so asymmetric that the return profile is so dramatic because everybody thinks it's really, really risky and actually it's not. Those, in my opinion, are the best investments. Like, those are, you know, if I look at my portfolio, I have, I just stack it with those things. It's almost like the black swan approach, right? The Montezale approach of just stack your portfolio with those because it turns out those things happen way more frequently in aggregate than you might expect. And so that's where you get self-driving cars and supersonic planes and, you know, are

• 46:06Speaker 02

  you really going to get into a stranger's car and drive around or stay at a stranger's house? Or like, all the most bizarre things to me are actually the best investments.

• 46:15Speaker 01

  Yeah, I mean, you know, one of the things that as I've invested more and more over the years, that every great investor I've ever talked with has some form of or variation of saying is, you know, you've got to do something that's different and you have to be right. And that's really where the returns are. And the things that are different are usually the things that look weird, dumb, you know, they look like a toy, right? We've all heard these kind of cliché sayings, but they're all rooted in fact, right?

• 46:43Speaker 02

  Kind of true, yeah.

• 46:44Speaker 01

  And I think your portfolio definitely shows that. So let's go to another group that thinks a lot about risk that you spend some time with is the institutional investor crowd, right? So I know that you've spent some time talking with different institutions. Maybe just give us an update in terms of how those conversations have played out, you know, how the institutional investors are thinking about this asset class, given kind of the performance in 2018.

• 47:12Speaker 02

  Yeah, so I think over 2018, what we saw in the folks that we were talking to was a really interesting mix shift. So, you know, in the kind of bubble era, I think you had a lot of people who were looking at this and looking at the return profile and leaning in and a certain, I would say, significant percentage of those people then backed out of the ecosystem as the market corrected in 2018. And then what you had was people who had been tracking it in 2017 but said, hey, I think this might be the mania phase. Let me let it cool off. All of those people started leaning in in 2018. And I would argue, actually, the people who were a little bit patient and really tried to understand what was happening and were thoughtful about it and then started entering the market in 2018 and going really deep on it.

• 47:55Speaker 02

  I call that really the smart money. So people who sort of are like paying attention and taking a very long-term view. And the fact that the asset prices are down gets them even more excited because they're like, okay, now is like the place where actually a lot of people are getting scared. This is the capitulation and despair zone, and that's really when you want to start getting aggressive. And so for a lot of the top-tier institutions that we've seen, when we talk to them, there are pockets of people inside these institutions, inside these firms, inside these, you know, endowments and pension funds that really, really understand this stuff. They've gone really deep for the last two years. And they can talk to you about, you know, the ETH 2.0 timeline and what they think about it.

• 48:39Speaker 02

  Or they can talk to you about, you know, what's happening with Tezos or how the Merkel mine for life here was super interesting. And they're really championing this internally and they're pushing it. And they're really, I think, making the case that the fact that this has been uncorrelated in the ups and the downs for so long, it's super interesting and additive to any portfolio. And that because the market is corrected, now is actually the time to start leaning in more than leaning out. And so we've seen a really interesting shift, but the people who spent a bunch of time understanding this stuff in 2017 and 2018, I think, have started to actually lean in pretty heavily. And I think you're starting to see that. Like if you talk, you know, most people don't really share who their LPs are,

• 49:19Speaker 02

  but if you go talk to a lot of the tier-one funds and you start sort of poking around and asking them off the record, like, who's involved? You'll start to see that, you know, there's some really tier-one institutions that have started to get involved with these things. You know, it's very, very small exposure. It's not, they're not taking, you know, very opinionated positions yet, but I think a lot of smart people have realized that. Some degree of exposure likely makes sense here.

• 49:42Speaker 01

  Yeah, well, and I think you know, you and I have talked a lot about a big reason for that is the amount of intellectual capital that's rushing into the space. Right. It's the whole idea of just follow the talent.

• 49:51Speaker 02

  Hundred percent. Yeah, hundred percent. I mean, and this is, this is just one of those other heuristics. You know, like Chris Dixon at Andreessen has this, the sort of rule of thumb, which is just to look at what the engineers do in their spare time. And wherever they're spending, you know, wherever they're spending their cycles, that's, that's a great place to be poking around as an investor. And I think a lot of the institutional investors have their own version of that. And, and they look at it and they say, wow, people who were at Facebook and Google and Square and, and Docker and all these great companies. And have seen those run, run ups and have actually scaled those companies and have started those teams and built and shipped those products. They're all coming into the space. Something is going on. And, and by the way, I think it's very rational.

• 50:32Speaker 02

  I don't, I don't think it's just greed for a run up. I think as an entrepreneur, if you look around today. And you try to pick a market, you know, where, where do you actually want to spend your time? And you start running through it and you're like, well, if I do something in social, you know, Facebook probably comes along and, and has, you know, distribution. Do they just crush me? You know, if I do something in media, does YouTube or Netflix just come along and crush me? I try to do something in e-commerce, does Amazon just come along and crush me? You know, if I try to do something in one of these other areas where those guys aren't, you know, I have to deal with bits and atoms usually. Like genomics or self-driving cars, like a lot of where you've seen the best entrepreneurs move in the last few years have this property of being both bits and atoms. And so crypto is really unique in that it's still all bits. There aren't any atoms.

• 51:16Speaker 02

  And the incumbents aren't here. So there isn't this sort of fear that the incumbent has a distribution advantage or, or all the users already. And that they can just steamroll you. None of that exists today. And so as an entrepreneur, I think very rationally, a lot of entrepreneurs are looking at it and saying, wow, all white space. All bits, no, no having to deal with atoms. And so I can move that much faster. And the incumbents can't come after me. And if they try, the incumbents might actually have a structural disadvantage. They may not actually be able to do the things that you need to do to really succeed in crypto. That's where I should be. And so you've just seen this shift, I think in the last 12 to 18 months of the highest quality of people. The very least considering crypto and a lot of them have decided to actually commit to starting companies in, in the space.

• 51:57Speaker 01

  For sure. It, it is. It's something like I haven't seen previously in my career. I think you're a little bit older than me and so you were able to see this, I think, one other time, but the kind of cascading effect or the acceleration. Three years ago, there was people who were, oh, that's interesting, right? I'm aware of it. I'm paying attention through now kind of full-on obsession and I'm going to go dedicate years of my life to work on this. That transition, I think, happened very quickly. And to those who are paying attention, it's just very obvious that that's kind of happened on an industry-wide basis in technology.

• 52:41Speaker 02

  Yeah, absolutely. And it's, you know, if I look at even my own career as an employee and as a founder, that has always been the best heuristic, right? I went to Google because I did an interview with there and everybody on the interview loop was brilliant. You just had a conversation with people like, oh, wow, these are all the smartest people are here right now. I should just be here. I don't know what happens. I don't know if the search thing will work, but this is like all the smartest people are here right now. And same thing at Facebook. When we were selling our company, you know, we talked to a bunch of the other companies in Silicon Valley. And when you went and talked to the people at Facebook, if you went and talked to Mark or Chris Cox, you know, the leadership at Facebook in like 2011, you were just like, yep, these people are definitely going to take over the world.

• 53:26Speaker 02

  Like, it's just, they are so much better. Like, the amount of talent in this building right now is just so astronomical that they're definitely, something is going to happen here and I don't know how long it takes, but something amazing is going to happen here. And crypto, to me, feels like that right now. If you go to like the really high, you know, Stanford just had the watching conference and, you know, it's 150, 200 people. I think it was up to 400 this year, maybe. But you walk through the halls and you're like, oh, my God, the brain power in this room is just so crazy. It's astronomical. Something is going to happen. If you just go to one of these places where it's really high-quality, well, not the kind of people showing their ICO, but the really high-quality conferences, it's just, it's unbelievable the amount of talent in one place.

• 54:06Speaker 01

  Absolutely. Going back to the institutional investors, there's quite a few that listen to the podcast. If I put you in their seat, how would you think about gaining exposure to that high-quality talent and kind of some of the innovation and opportunities that are going to pop up in crypto, let's say, over the next kind of three to five years?

• 54:27Speaker 02

  Yeah, that's a good question. I think when we talk to the people that we built relationships with, generally what we advise is, I think there are kind of different categories of investors here and different ways to get exposure. You know, one is you might want to have some sort of really lightweight direct exposure. Maybe that's something like a Bitwise where you're getting kind of market exposure. Or maybe it's you just go buy some Bitcoin and put it in Zappos. But having some kind of exposure directly to the space, essentially for the beta, can make a lot of sense. And there's some operational challenges about how you do that. I think there's a category of value that's going to be created here that's going to look like traditional venture businesses. And so having exposure to venture-style

• 55:11Speaker 02

  vehicles that are investing in those kinds of companies makes a lot of sense. And so this is where something like A16Z could make sense, or some of your traditional venture funds, you know, like the Sequoias of the world or benchmarks of the world have started to do more of these and get some exposure there. And so looking inside your own portfolio as an institutional investor and saying, which of my existing managers are already giving me exposure here and how much more do I want? But I think there is going to be significant value created there. And then the third is kind of crypto-native, which is where I would put us and, you know, folks like the Metastables of the world, where we're doing these things that just, you know, you're buying essentially alphanumeric strings, right? And you're customing them and you have to write your own software and you're running nodes.

• 55:54Speaker 02

  And it's just like operationally, day-to-day, what you're doing is different. And the exposure that you're offering in terms of for your LPs is just often a very different set of stuff. And the tactics that you're using to do that are very different. And so I kind of think of those three buckets. So you might just want some broad beta exposure. You probably want some venture exposure specifically from experts in the space, folks like Chris Dixon, who really get it and have gone deep on this, and Katie Khan, and Ali, and Dennis, and all those folks at A16Z. And then there's a category of sort of crypto-native, like doing a little bit more esoteric, but really interesting stuff that doesn't quite fit into one of the existing buckets. And that's kind of how I think about it. And then it's a really question of how you size that position.

• 56:36Speaker 01

  For sure. Um, yeah, it's fascinating. I spent a lot of time thinking about, let's call it, you know, mid 90s, um, the people who started, uh, what became the globally dominant investment firms. They didn't look very much like the ones who came before them, right? And it was kind of a new approach, new structure, uh, new skill set, kind of new frameworks, all that stuff. And

• 56:58Speaker 02

  Yeah, well, and actually that happens every 10 years or so, right? If you look back at, you know, whether it's, um, sort of actively managed funds or index funds, or then kind of the hedge funds and then high frequency. And then on the venture side, you know, like the 90s was sort of the beginnings of like the venture capital era into, you know, kind of the early 2000s. And then kind of like mid 2000s was the rise of the micro VC for the cost of doing a business really, really plummeted. And that's where you got kind of the Y combinators and the SV angels and the initialized of the world. Um, and now we're seeing this next wave. Um, and, and each time through, it is very much this like, wait, this looks a little different. Like, really? You're just going to give people $10,000 to start a company and give them three months to launch? That's not what a VC does. That's

• 57:40Speaker 02

  weird. Uh, or really? Like, you're not going to hire traders? You're going to hire a bunch of PhDs and you're gonna, you're gonna write code and the code is going to do the trading? Right? Like, they always, at the beginning, looks a little weird. Um, but I think, uh, you know, it happens, it actually happens about every 10 years that you see these kind of openings happen as the market shifts.

• 57:59Speaker 01

  Absolutely. Well, and, and what ends up occurring is the things that looked weird, right? Just like with the companies, the funds as well, that becomes, you know, whether it's the standard or, or, uh, becomes more popular over time. Um, I think history tells us that's, uh, that's likely to happen.

• 58:16Speaker 02

  Yeah, I agree.

• 58:17Speaker 01

  Um, all right. So, uh, before we wrap up, um, two non-crypto things I want to talk about. One is, uh, what's the most important book you've ever read?

• 58:26Speaker 02

  Oh, most important book I've ever read? That's a great question. Um,

• 58:32Speaker 02

  You know, I have to think about that for a minute. Um, you know, honestly, this is maybe a weird choice. Um, but it might be the Bible. I'm not actually Christian, uh, but I think it might be.

• 58:42Speaker 01

  Oh, interesting. Well, explain that more.

• 58:45Speaker 02

  Um, I think it's, it's, so religion to me is fascinating in all sorts of ways, but, um, for, if you think about, uh, religion or, you know, a community of people managing to survive for thousands of years through various degrees of, of, um, uh, of oppression or intolerance. It's a pretty fascinating thing, whether it's Judaism or Hinduism or Buddhism or Christianity. Um, and Christianity, having had the impact that it's had on the world for the last 2,000 years, um, sort of going to the seminal text of that and understanding it and looking at the properties of it and how it emerged like as a historical thing and how it's managed to survive and evolve for 2,000 years, I think this is pretty amazing. Um, and so it just has like a collection of best practices and a collection of knowledge

• 59:28Speaker 02

  that billions of people around the world sort of snap to and use as their framework to interact with, with the world day to day. I think it's like, um, to understand that deeply actually helps you understand a lot of the world, I think.

• 59:40Speaker 01

  For sure. The, um, it, it's a really fascinating way to look at it. Um, and then, uh, speaking of fascinating, uh, I don't want to, uh, over promise and under deliver on you, but, uh, you are somewhat of an alien expert.

• 59:54Speaker 02

  Oh, yeah.

• 59:58Speaker 01

  So, uh, those who, uh, who listen to this quite often know that I usually end up, uh, I, I ask about aliens and then I let you ask me a question. But, uh, but with aliens, tell us kind of your, uh, your theory and then why so, uh, so interested in, uh, in all of that?

• 1:00:14Speaker 02

  Yeah, and actually, um, oh man, I could talk about this for hours too. We should do a separate, we should, uh, we should do an hour on just aliens at some point. Um, so.

• 1:00:24Speaker 01

  Absolutely down. People will hate it, but I'm in.

• 1:00:27Speaker 02

  Oh, yeah, that's, yeah, it might have to be all one on one. We'll go get some beers or something. So, um, so it actually, it comes from a really similar, uh, place as the religion thing, which is, I think aliens are like the modern form of religion. Uh, like, uh, it's like a technologically sophisticated, uh, master race that has solved a bunch of problems. Um, and there's, and if you look at it, kind of like maps really similarly in a lot of ways where, um, you, you can sort of like ascribe the things that you would have ascribed to God or religion or, um, you know, uh, whatever, and you can sort of ascribe it to a technologically superior master race. But I think, um, uh, kind of more from like a, a science perspective, I think it's one of these things that if, if we were to find,

• 1:01:09Speaker 02

  uh, intelligent life somewhere, I think it would, it would like really, really reset how humanity thinks about humanity. Like it would put us in a totally different context, I think. Positive or negative? I, I think positive. I mean, I'm, I'm long on humanity, so I tend to be an optimist about this, but I think in a, in a very positive way, actually, because I think all of a sudden we would realize we're, we're maybe not that special. Um, and, and we would start to have to think about what are the consequences of this? Um, and it would, it would actually, I think, create, you know, I think like Ronald Reagan had that quote in the eighties. It's like, um, uh, you know, what would happen if all of a sudden, you know, would, would the nations of the world all of a sudden put down their arms if we all of a sudden realized that there were aliens and that there was potentially an alien threat?

• 1:01:49Speaker 02

  Um, so it opens up a whole interesting, like, set of questions. But anyway, that sort of sparked my, my interest years and years ago and, um, and I kind of went down the rabbit hole and have read everything about the space. Um, and I'm, I, you know, I think I'm, I'm basically convinced at this point that I think inside our solar system, we're going to find microbial life. And I give that like a 98% chance, like in the next 10 years, I think we'll, 10 to 20 years, I think we'll find that. Maybe it's inside, you know, under the surface of Mars, or maybe it's in Europa, but I think somewhere in our, in our solar system, we'll actually find microbial life, which I think will be amazing. Uh, and will reset humanity in a, in a new way. Um, and I think the odds of, of intelligent life existing, um, outside of our solar system, but inside our galaxy is, is probably 50%.

• 1:02:31Speaker 02

  Um, the really interesting question in my mind is, do they coexist with us on the same time horizon, right? We've only really been around as intelligent species for 10,000 years, let's say, 20,000 years, you know, as a civilization. Um, and so, you know, it's, I think it's basically a hundred percent that, that an intelligent species existed somewhere inside the galaxy at some point over the last 10 billion years. And there's, you know, I would say 50% chance that somewhere you have an intelligent species that exists right now, probably separated by a significant distance that we can't actually meaningfully interact with them, but unless we invent, you know, faster than speed travel or something, but, but I think that's actually like 50/50. So I, I think it's actually, we'll,

• 1:03:14Speaker 02

  we'll figure a lot of the stuff out probably in the next 30 to 50 years. I think we'll, we'll stumble into the microbial thing for sure. And I think there's a 50% chance that we figure out that there's actually intelligent life somewhere else in the universe.

• 1:03:26Speaker 01

  So I'm definitely on board with the microbial life. I'm actually shocked at how many people don't think that's gonna happen, which, you know, kinda makes me question why I believe so heavily that it is. So good to know that there's somebody else out there that thinks.

• 1:03:40Speaker 02

  Well, it goes back to what we were talking about before, man. It goes back to that tail probability event, right? It's like, we, if you think about where we have existed as entrepreneurs and as investors, everything that's happened positively in our lives has really been this really low probability tail event that really shouldn't have happened. You know, like Facebook shouldn't have ever been as big as it is. Google should never have been as dominant as it is. The internet may never have happened. There are like all these things that just, such crazy things had to happen for all of those things for the world to be as it is today. But I think we're probably primed to think about these things as much more likely than most people are.

• 1:04:12Speaker 01

  Yeah, no, I think that's fair. Alright, so with the, the alien event, the reason why I started talking about it at the end was, one night I was laying in bed and I had this thought that almost every time that we've seen aliens represented, whether it's movies, you know, sci-fi, etc., they are in a human-like form, right? We basically think of them, they make it look a little weirder, maybe their heads are a little more kind of oval and slimy, right? All that kinda stuff. But I never saw alien pets. And so I started thinking about, you know, are there, is, are aliens a multi-species type, you know, thing that's gonna show up? And, you know, do they actually have pets or not? So what, given all of your years

• 1:04:56Speaker 01

  of deep, deep education and, and interest in aliens, what's, what's your take on the alien pets?

• 1:05:03Speaker 02

  My answer would be yes. If there ends up being any biological form that emerges that's intelligent and sophisticated, I think the leap from single cellular life to multicellular to really complex life is such that you're not going to get just one animal that emerges. You likely get multiple life forms that emerge into that multicellular stage. And I think any intelligent life form eventually evolves to this place of realizing its place in the universe and seeking that connectedness. It sounds a little hooky, but I don't think that's that crazy. And so I don't think it's that crazy to imagine that if there is intelligent life, that they have something to the equivalent of pets that give them companionship.

• 1:05:45Speaker 01

  Yeah, I think if somebody can get to the point where it's more than 50/50 odds that aliens exist, they've got to be pretty heavily weighted towards that it be alien pets.

• 1:05:57Speaker 02

  Yeah, that's right.

• 1:05:58Speaker 01

  I get really scared. Josh Brown actually came on and he swore that he thinks ghosts are more likely to be real than aliens. And I banished him from the podcast. He's not on the podcast anymore. That blasphemous view.

• 1:06:18Speaker 02

  That's hilarious.

• 1:06:20Speaker 01

  All right, man. So before we finish up, I should let everyone ask me one question. Anything that you want to talk about?

• 1:06:27Speaker 02

  Yeah, I have two questions. I'm really curious what your favorite book is, your most influential book, as the first question.

• 1:06:32Speaker 01

  So actually, it's pretty similar to yours in one way. It's got to be Guns, Germs, and Steel. And it's probably similar in the sense that it's kind of the evolution of humans across different geographies and different societies, not as much of what I would consider the religious or more unethical bent and more of just like science and facts, etc. But I remember reading it years ago and just thinking to myself like, wow. Not everyone has lived the same life that we've lived, right?

• 1:07:11Speaker 01

  You're kind of like, you know, the idea of the people who dominated early kind of ancient civilization, they just figured out how to get from one island to the other, right? They figured out how to sharpen a weapon. I mean, just very simple things like that. And I think that had a really, really profound effect and just, you know, you put in context, things like the internet, right? Like crypto, et cetera. So I'd have to go with that one.

• 1:07:39Speaker 02

  Okay, so I was just curious about that one. My real question for you is, what do you think is like the craziest thing that you believe that most people don't actually believe? Other than crypto?

• 1:07:49Speaker 01

  Yeah, so crypto, there's probably a whole bunch of stuff.

• 1:07:54Speaker 01

  Look, I'm actually probably, it's similar to some of the alien stuff in that I am more in the Elon Musk camp than most, I think, of this idea. Maybe not so much that we have to be a multi-planet species, but that it's a good idea and that it is likely for us to accomplish that in my lifetime, right? Like, the idea that it's probably not a huge colonization. It may be just science, you know, only type thing. But I just have this like inevitable feeling around Mars and kind of the colonization

• 1:08:39Speaker 01

  of Mars. And then actually, kind of tangentially related to that, also this like inevitable feeling, it's probably not this idea of like curing death, if you will, but more of just like a significant extension in life expectancy, right? And so, you know, it almost fits in the conversation of like, once you've seen a number of these kind of outlier situations become reality, or outlier potential.

• 1:09:10Speaker 01

  Everything else becomes more likely than not, right? Or maybe not more likely than not, but just like it's not as big of a stretch to think that the stuff that happened. And the idea that like, I don't want to bet against technology. I don't want to bet against innovation and progress. And so those two things are probably, you know, when I talk to other people, some of the more far out things, we actually invested, I invested in a company that it uses some special technology to deliver like cryogenic freezing to the brain. And so then you, you're gonna love this, right? So literally, what they basically do is they have a way to structurally preserve the brain. And they started out doing this with, you know, like a rat and a pig, et cetera. Oh, is this a nectum?

• 1:09:54Speaker 01

  Yes, it is actually. Yeah. And, yeah, and really the, the thought process behind it was like, there's a bunch of science that needs to be figured out, how to just, human brains, you know, how do you deliver the technology, et cetera. But really it was, could you, once you preserve the brain structure, could you actually download the electrical connections and the memories and the knowledge and the frameworks and kind of all that stuff to preserve it? And I don't know, there, the probability's probably less than 50% today, right? That, that that stuff is possible or gonna happen. But if it happens, one, it's super powerful and two, at the rate that technology is advancing,

• 1:10:37Speaker 01

  I probably feel like every day or every year gets more likely than it was the previous year. And, and so I think that stuff is, you know, one, just personally interesting to me and then two, you know, I don't think there's a lot of people who walk around thinking we're gonna be on Mars or, you know, the life expectancy's gonna be 200 years type stuff. Yeah, yeah, I agree, I agree. But, all right, man, listen, this was a lot of fun. We're gonna have to do this again. We might even do a alien special at some point. Looking forward. Yeah, listen, I'm a huge fan of what you guys are doing. I think that, you know, you, you guys are definitely at the forefront of a lot of this in the crypto space, so I really appreciate you coming on and I'll have to do it again. All right, looking forward. Thanks for your time.

• 1:11:24Speaker 01

  Alright, still there?

• 1:11:27Speaker 02

  Yeah, still there.

• 1:11:28Speaker 01

  Okay, alright, cool. Um, give us two seconds here, let me just make sure, uh, Mike, are you there?

• 1:11:38Speaker 01

  Yeah. So yeah, we've got somebody who's, who's, uh, recording it remotely and I want to make sure that, uh, before we hang up, that, uh, he's got it here. Probably, let me call him to, uh, who knows, he may, might have fallen asleep.

• 1:11:56Speaker 01

  He must say we're really boring.

• 1:12:01Speaker 02

  Hey Tom, what do you think the odds are that, that aliens have actually visited us?

• 1:12:06Speaker 01

  Oh, man. Uh, so.

• 1:12:08Speaker 02

  One basis point?

• 1:12:10Speaker 01

  I, I, I don't know. No, I, I, I, listen, it's the number one thing people ask me about aliens after listening to me joke around about the alien pets. Uh, is like, you know, what if they're already here type stuff? Um, I'm probably in the camp of like, they haven't visited us and like, revealed themselves to us. There is probably a higher potential that they are aware of us and we're unaware of them.

• 1:12:38Speaker 02

  Yeah, like the, the zoo hypothesis, basically, we're like quarantined off.

• 1:12:41Speaker 01

  Yeah, like, like, you know, the, uh, the whole thing with like the hardware professor who's, you know, doubling and tripling down and swears that, uh, you know, that, that, you know, unidentifiable, unidentified object was like a spaceship, right?

• 1:12:55Speaker 02

  Yeah.

• 1:12:55Speaker 01

  I mean, again, you can let the conspiracy theories run wild, but that's a pretty big claim and they're like, even more important double or triple down by somebody who's very well respected and so, maybe he's right, maybe he's wrong, but that probably is worth paying attention to.

• 1:13:14Speaker 02

  Yeah.

• 1:13:15Speaker 01

  What, what do you think?

• 1:13:17Speaker 02

  I think it's probably unlikely that like any life forms actually visited. I think that the odds that it's like a robot probe is definitely pretty high. I mean, we've already made it out of our solar system, so I don't think it's crazy that like von Neumann probes are floating around and inspecting stuff and they're pretty sophisticated about being able to hide themselves.

• 1:13:35Speaker 01

  Yeah, I mean, look, that would be wild if we uncovered that basically they were somewhat aware of us, but were trying to figure out more. You know, because part of it is also it's not just like the fact that we now know that. And so what are all the reactions that we have to that? But it's if the public knows, what happens?

• 1:13:58Speaker 02

  Yeah, totally. Well, I mean, this is this is the yeah, I mean, this is this is the the sort of conspiracy theory around like how the military is just 10 years ahead of where everybody thinks they are. And so they actually have acquired some of this tech, which I don't think is actually true. But I mean, even some of the stuff that the military can do today is just so crazy relative to what people think the military can do.

• 1:14:21Speaker 01

  Exactly.

• 1:14:22Speaker 02

  So to me, it's like the tie back to aliens is like basically if that's what humans can already do, and we're I mean, we're really only, I don't know, 300 years into science. Like, how how old is like modern science, really?

• 1:14:35Speaker 01

  Yeah, that's a very good point.

• 1:14:38Speaker 02

  Like, we're actually not that far along.

• 1:14:41Speaker 01

  How old would I'll call like telescopes and kind of, you know, things that are not the naked eye and our ability to probe just outer space, not even, you know, galaxies, etc. It can't be that old.

• 1:14:56Speaker 02

  Yeah, let's say Galileo, Galileo was like 1560 ish. That's like when he was born. So, you know, he's an adult, so like 1600, let's say, is the telescope. So that's, you know, that's only like 400 years old.

• 1:15:10Speaker 01

  Man, we're, uh, we're, we're pretty

• 1:15:12Speaker 02

  That's like

• 1:15:12Speaker 01

  technology thing.

• 1:15:13Speaker 02

  Dude, but that's crazy progress. In 400 years, we went from like figuring out that you could look through a lens to look into space to like going to Mars in 400 years. That's bananas.

• 1:15:25Speaker 01

  For sure. And, and part of it too is, um, you know, the, the part I think with Musk that just absolutely blows me away. He, you know, when you were talking about this idea of like the first principle stuff is the guy just literally gets right to the point of, okay, so the most expensive part is the rocket. Why is the rocket so expensive? Oh, because we can't reuse it? Well, why don't we just build a reusable one?

• 1:15:50Anthony Pompliano?

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