#307 – Brian Armstrong: Coinbase, Cryptocurrency, and Government Regulation

Brian Armstrong is the CEO of Coinbase. Please support this podcast by checking out our sponsors: – Audible: https://audible.com/lex – Skiff: https://skiff.org/lex – BiOptimizers: http://www.magbreakthrough.com/lex to get 10% off – Fundrise: https://fundrise.com/lex – Athletic Greens: https://athleticgreens.com/lex and use code LEX to get 1 month of fish oil EPISODE LINKS: Brian’s Twitter: https://twitter.com/brian_armstrong Brian’s Instagram: https://www.instagram.com/brian_armstrong Coinbase’s Website: https://www.coinbase.com ResearchHub: https://www.researchhub.com NewLimit: https://www.newlimit.com/ PODCAST INFO: Podcast website: https://lexfridman.com/podcast Apple Podcasts: https://apple.co/2lwqZIr Spotify: https://spoti.fi/2nEwCF8 RSS: https://lexfridman.com/feed/podcast/ YouTube Full Episodes: https://youtube.com/lexfridman YouTube Clips: https://youtube.com/lexclips SUPPORT & CONNECT: – Check out the sponsors above, it’s the best way to support this podcast – Support on Patreon: https://www.patreon.com/lexfridman – Twitter: https://twitter.com/lexfridman – Instagram: https://www.instagram.com/lexfridman – LinkedIn: https://www.linkedin.com/in/lexfridman – Facebook: https://www.facebook.com/lexfridman – Medium: https://medium.com/@lexfridman OUTLINE: Here’s the timestamps for the episode. On some podcast players you should be able to click the timestamp to jump to that time. (00:00) – Introduction (08:19) – Programming (14:17) – Coinbase (45:05) – Startup advice (1:02:56) – Economic freedom (1:12:06) – Coinbase technology (1:23:33) – Listing on Coinbase (1:32:47) – Regulations (1:47:25) – Crypto dominance (1:51:42) – Employee activism (2:08:00) – Leadership (2:10:39) – ResearchHub (2:20:17) – NewLimit (2:24:44) – Advice for young people (2:28:55) – Meaning of life

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

• 0:00Lex Fridman?

  The following is a conversation with Brian Armstrong, co-founder and CEO of Coinbase, the largest cryptocurrency exchange platform with 98 million users in 100 countries, listing Bitcoin, Ethereum, Cardano, and over 100 popular cryptocurrencies. I recorded this conversation with Brian before this week's SEC probe into whether some of the crypto listings are securities and thus need to be regulated as such. As always, with conversations that involve cryptocurrency, I try to make it timeless so that the price soaring high or crashing down low doesn't distract from the fundamental technological, economic, social,

• 0:41Lex Fridman?

  and philosophical ideas underlying this new form of money, energy, and information. Our world runs on money, the exchange and store of value. And cryptocurrency seeks to build the next chapter of how money works and what it can do. Coinbase and Brian are trying to do this by working together with regulators and governments, which is a long and difficult road. Bureaucracies resist change, for better and for worse. The latest SEC probe is a good representation of this. It is a serious attempt to limit fraud, but one that also runs the risk of limiting innovation and limiting financial freedom of individuals.

• 1:24Lex Fridman?

  This is a complicated mess, and I applaud everyone involved for trying to work through it. I hope in the end, the interest of the individual wins. Decentralization, after all, is a hedge against the corrupting nature of centralized power. And now, a quick few-second mention of each sponsor. Check them out in the description. It's the best way to support this podcast. We've got Audible for audiobooks, Skiff for email, Buy Optimizers for health, Fundrise for investing, and Athletic Greens for performance. Choose wisely, my friends. And now, on to the full ad reads. As always, no ads in the middle, because I hate those. I try to make these interesting, but if you skip them, please still check out our sponsors. I enjoy their stuff. Maybe you will, too.

• 2:11Lex Fridman?

  This episode is brought to you by Audible, an audiobook service that has given me hundreds, if not thousands, of hours of education through listening to audiobooks. I should probably go and measure the amount of hours I've listened to, you know, exactly, or at least approximately, because it probably would help me reflect on how amazing Audible is. Some of the greatest experiences of my life have been through Audible. It's like a companion through different places, different time periods in history. The Rise and Fall of the Third Reich by William Shire, just the voice actors or the

• 2:54Lex Fridman?

  voicings of that book is just, it just takes you to a place. Or Animal Farm by George Orwell. They have thousands of titles to choose from. New members can try it free for 30 days at audible.com/lex or text Lex to 500-500.

• 3:16Lex Fridman?

  This show is also brought to you by Skiff, a private, end-to-end encrypted email. It has fast search. You can have custom domains if you want. It's easy to migrate from Gmail, Proton Mail, or Outlook. One really important thing that I often think about is that there's a hard-to-put-in-to-words difference between an interface that sucks and an interface that's awesome, enjoyable, compelling, efficient, empowering. And outside of the security, outside of the end-to-end encryption, which I think is the thing that makes it truly amazing, they got the interface right, and that's not easy to do. And that's a big props to them.

• 3:57Lex Fridman?

  I really enjoy using Skiff both for email and collaborative document editing. But of course, the big feature that's really important is the fact that it's end-to-end encrypted. Nobody has access to it except you and the people you directly collaborate with. That's S-K-I-F-F dot com slash Lex, skiff dot com slash Lex.

• 4:22Lex Fridman?

  The next sponsor is BiOptimizers. They have a new magnesium supplement. When I fast or when I'm doing keto or carnivore, sodium, potassium and magnesium are essential. Those are the electrolytes that make the difference between yes headache or no headache. And of those electrolytes, I think magnesium is the most difficult to get right. And that's why I use magnesium breakthrough from BiOptimizers. Most magnesium supplements contain only one or two forms of magnesium, like glycinate or citrate. When in reality, there are at least seven that your body needs and benefits from.

• 5:02Lex Fridman?

  One of the people I trust on this topic, I talk about this topic is Andrew Huberman. And it's fascinating to learn from him outside of glycinate and citrate, all the different kinds of magnesium. That said, I do think that magnesium is the thing in my experience that made the difference between sort of a good fasting experience and not. It's much easier, I think, to get the sodium right. Or at least for me, the magnesium piece was the tricky one. You can get a special discount at magbreakthrough.com/lex. This episode is also sponsored by Fundrise, spelled F U N D R I S E.

• 5:45Lex Fridman?

  It's a platform that allows you to invest in private real estate. If you're looking to diversify your investment portfolio, this is a good choice.

• 5:55Lex Fridman?

  Boy, is 2022 a giant mess. From an economics perspective, I have no idea. You definitely don't want to take financial advice from me. But I think diversification is still a really powerful tool to have when you're doing investment. And in this age of cryptocurrency and all the different options that are out there, I think it's nice to have a tool to do easy, accessible investment into private real estate. Over 150,000 investors use it. So go check out Fundrise. It takes just a few minutes to get started at fundrise.com/lex.

• 6:39Lex Fridman?

  This show is also brought to you by Athletic Greens and the AG1 Drink, which is an all in one daily drink to support better health and peak performance. It replaced the multivitamin for me and went far beyond that with 75 vitamins and minerals. I wonder if they have an AG2 drink at some point. Why is it named AG1? Every time I look at that, I wonder. It's like when you do that prank on people and you release like four turtles and number them one, two, three, and five in an apartment or house. And then everyone will be looking for the number four turtle. So here I am looking at AG1 and looking for AG2.

• 7:21Lex Fridman?

  But AG1 is enough for me. It's my strong grounding nutritionally in all the crazy stuff I do in terms of the stuff I eat, in terms of the mental workload and the physical workload, all that kind of stuff. I can count on the fact that my nutrition at least is in the right place in terms of the vitamins and minerals I have in my body. I also take fish oil and now you can get one month's supply of fish oil when you sign up at athleticgreens.com/lex. This is the Lex Fridman Podcast. To support it, please check out our sponsors in the description. And now, dear friends, here's Brian Armstrong.

• 8:19Lex Fridman?

  Let's start with the fact that you're a programmer. What was the first program you've ever written or the first one that you remember?

• 8:25Speaker 01

  The first memory I have of programming was probably in middle school. And I remember it was recess and they had this like this time period where you could read books and the other kids were like reading comic books and stuff. And for some reason I had gotten into this idea that I wanted to get into computers and I was playing with computers at home. And so I got this book, I think from the library. It was called like How to Learn Java in 30 Days. So I was, I was reading this book at like, you know, the recess and I didn't understand anything. And I remember I went home and I tried to get this thing working and you know, the, if you've ever written a Java program, the first lines are like public static void main string arguments or whatever. And it's just like, it's so foreign and it's so difficult to get started.

• 9:09Speaker 01

  And so I was kind of frustrated. I was like, I don't understand anything that's happening in this book. So the first, the first thing I wrote was probably just like a hello world app in Java. But it was so, I felt like I was so confused about what was actually happening that I later learned a bit of PHP. And PHP was like more fun for me because it was like, oh, just print out what you want, you know? It didn't have all this complexity around it. So then I got more into PHP. I started building like some simple websites. I think learned some HTML. So I think that was my introduction to programming, at least the very beginning part.

• 9:43Lex Fridman?

  Yeah. You know, Java has a lot of, uh,

• 9:48Lex Fridman?

  out of all the hello worlds you can possibly write, Java is the one where I think it's the longest.

• 9:53Speaker 01

  Yeah.

• 9:53Lex Fridman?

  Which is, which is quite interesting because Java is often, at least for a long time, was used as the primary programming language to teach people how to program, or at least about object oriented programming. I think most universities have now switched and high schools switched to Python. I'm not sure if that's the case.

• 10:08Speaker 01

  Probably better. It's easier to learn. It lowers the, it makes it less scary. There's like less of a hurdle.

• 10:13Lex Fridman?

  And certainly none of them use PHP. I love PHP and I feel like it's a dirty secret. I have to keep private to myself, like it's somebody I'm seeing on the side or something like that. Because uh, it's just not a respected programming language because I think there's so many ways you can write poor code with PHP.

• 10:30Speaker 01

  Yeah.

• 10:30Lex Fridman?

  Which is why it's not respected.

• 10:32Speaker 01

  Yeah, it's a scripting language more so, although of course Facebook built like a huge stack on top of it and valuable company. But I still love Ruby to this day. Ruby is probably my favorite language. Python's great too, but I, I just love the idea behind Ruby that it's like, let's make it easier for the human, harder for the computer and make it a joy to be expressive and all these things. So I was never the best computer scientist, but I was a good, I was a good hacker. I could rapidly prototype products and using languages like Ruby. Do a lot of computer science programs still use like Lisp and Scheme and things like that?

• 11:05Lex Fridman?

  No, no, they do for, that's like. That's if you're hardcore. If you're legit, you're gonna do some of the functional languages.

• 11:11Speaker 01

  Yeah.

• 11:12Lex Fridman?

  I think there's a, there's a few others that popped up, but Lisp is a distant memory for a lot of people. That's like, somebody has to like, you go to library, you dust off the book.

• 11:22Speaker 01

  Yeah.

• 11:23Lex Fridman?

  But scheme a little bit. I think if you're studying, I mean, there's courses about languages themselves, like programming languages.

• 11:31Speaker 01

  Yeah.

• 11:31Lex Fridman?

  Lisp might be one of those, you know how there's languages that nobody uses anymore, like ancient languages?

• 11:36Speaker 01

  Yeah.

• 11:37Lex Fridman?

  You might have to go to school in that same way for programming languages.

• 11:40Speaker 01

  Yeah.

• 11:40Lex Fridman?

  Back in the day, we used to use parentheses. I, of course, still use Emacs as the editor for most things that I do. And Emacs is, is, um, you know, a lot of the customization you could do is in Lisp.

• 11:53Speaker 01

  Yeah.

• 11:53Lex Fridman?

  And that's the language probably when I first really fell in love with programming is Lisp. Because for a long time throughout the earlier history of artificial intelligence, Lisp was the primary language. But it still had a life in the nineties and the aughts where some people would use it.

• 12:13Speaker 01

  Yeah.

• 12:13Lex Fridman?

  Such a beautiful, functional language, uh, but it just somehow didn't pick up.

• 12:21Lex Fridman?

  That said, I should say sort of pushback PHP. I feel like it's still true that most of the web runs on PHP. Most of the backend is still, is still PHP. So if you look at, you know, it's like the stuff that people don't talk about. It's like what, what runs most systems in the world, what runs the most backend, what runs most front end?

• 12:42Speaker 01

  Yeah.

• 12:42Lex Fridman?

  JavaScript, you know, HTML.

• 12:45Speaker 01

  I think the Stack Exchange surveys showed JavaScript is the most popular language in the world, I think, right?

• 12:50Lex Fridman?

  Oh, yeah. In terms of programmers and numbers of, I wonder.

• 12:55Speaker 01

  By survey of number of programmers on stack, stack over.

• 12:58Lex Fridman?

  Oh, yeah. But that's also the cutting edge, right? Those are the people that are just like excitedly writing code.

• 13:04Speaker 01

  That's true.

• 13:04Lex Fridman?

  I wonder if there's, there's people that are just like maintaining gigantic code bases.

• 13:10Speaker 01

  Yeah. I feel like the amount of Java out there just running industrial systems has got to be enormous. And then, of course, in the banking industry, finance, it's like even older stuff, Cobalt and whatnot, but.

• 13:22Lex Fridman?

  I've been actually looking for somebody to interview who represents Cobalt, Fortran, like, who's the figure still, still there that holds the flag. I did, you know, with Java, founder of Java, creator of Java, creator of Python, creator of C++, but nobody wants to hold the flag for Cobalt. Unfortunately, even though some of the most important systems in the world still run on those, like power systems and infrastructure systems, which is fascinating, which and ATMs and stuff like that. Like a lot of stuff that we rely on that just works. And the reason we don't change it because it works well. It's written and we just, the people don't use anymore.

• 14:06Speaker 01

  Yeah, that'd be a cool series of interviews. Get, get the stuff that's like tech that was invented 40, 50 years ago, but still is being used widely. I mean, Emacs is an example of that.

• 14:17Lex Fridman?

  Let me ask the big question of what are cryptocurrency exchanges and what's Coinbase? How does it work? Before, I'll, I'll ask even bigger questions, but it's just a nice kind of palate cleansing question of what is Coinbase?

• 14:32Speaker 01

  Coinbase is a cryptocurrency exchange brokerage custodian. Basically, we're the primary financial account for people in the crypto economy. How they buy crypto, how they store it, how they use it increasingly in different ways. We can talk about that.

• 14:48Speaker 01

  So yeah, we want to be the way that a billion people hopefully access the open financial system globally.

• 14:53Lex Fridman?

  How does it work? What, uh, what's cryptocurrency? You know, there's, uh, there's Bitcoin, there's Ethereum.

• 15:03Lex Fridman?

  What does it mean to be an exchange? What does it mean to store? What does it mean to transact? How does it? What does Coinbase actually do?

• 15:13Speaker 01

  Okay, so, you know, basically, in any given market, there's some people who want to buy, some people who want to sell, and there's, you keep an order book of all those prices. And then, you know, if someone's willing to buy for more than the lowest price someone is willing to sell, then, you know, you get a trade to execute. That's kind of how an exchange works underneath. And a brokerage is kind of simpler than that even. You don't have to know, look at the whole order book and everything. But you just go in there and you say, I want to buy a hundred dollars of Bitcoin or whatever cryptocurrency. You get a quote, and if you like it, you can hit accept. And, you know, the core things that we do to make all that kind of just work, make it seamless, it sounds simple on the surface, is we got to, we have to do payment integrations, you know,

• 15:56Speaker 01

  in a variety of places around the world to make it easy for people to get fiat currency into this ecosystem. We have to work on cybersecurity a lot. There's lots of hackers out there trying to break into our systems and steal crypto or to put stolen credit cards and bank accounts and things like that into these systems. We have to integrate with the blockchains themselves, right? Which are periodically getting updated and having various airdrops and all kinds of things. So we're integrated with lots of different blockchains. And then we have to store the crypto that people buy securely as well. So crypto is kind of like storing, you store the private keys essentially. And we've invented a lot of cool technology about how to do that securely that helps me sleep at night as one of the largest crypto custodians out there.

• 16:40Speaker 01

  So those are some of the pieces that had to come together to get that early, simple buy-sell experience to work. And, yeah, I mean Coinbase actually has a lot of different products now. So we have like an institutional product. We have Coinbase Commerce, which is like merchant payments, like Stripe for crypto. We've got a self-custodial wallet, which we can talk about. There's all kinds of cool applications people are building with Web3, and they can access it through that. We just, just launched an NFT product.

• 17:06Speaker 01

  Going down the list, we have, so we're sort of like a portfolio of crypto products now. We're big enough where we can do multiple things. But yeah, the core thing we got started with and still the majority of our revenue today is people just want to come in and buy and sell some crypto and we help them do that and make it simple and easy to use.

• 17:20Lex Fridman?

  And I'll ask you about wallet and NFTs, about what is it called, the Stripe type?

• 17:25Speaker 01

  Oh yeah, Coinbase Commerce.

• 17:26Lex Fridman?

  Coinbase Commerce.

• 17:27Speaker 01

  Yeah.

• 17:27Lex Fridman?

  I'll ask you about all that, but order books and exchange, what's the difference between that and stocks, for example, which there's also order books?

• 17:36Speaker 01

  Yes, I mean, stocks trade through order books too, so do commodities.

• 17:39Lex Fridman?

  It's all a similar type of situation. So when I want to buy one Bitcoin and I see Coinbase say the price of that Bitcoin is say $40,000 and I press buy, what happens?

• 17:54Speaker 01

  Um, yeah, okay. So you've gotten a lot like, you know, when you press the button on your keyboard, like an electrical signal goes up the wire on your keyboard. No, we don't.

• 18:04Lex Fridman?

  Well, that's also important, the timing, right? Cause isn't that price fixed?

• 18:08Speaker 01

  Yeah, that's true. It's giving you a quote, right? That's, that's, um, you know, some, there's a whole concept of like slippage and like by the time the quote is executed, um, if the price has moved too much, like we may reject it and you know, there's, there's various things like that. But how do, I mean, and what's the simple version I can give you? So we, you know, we'll, we'll basically check the order book, give you a quote. The, it's good for some period of time or for some amount of slippage. And then what's happening is we're initiating a debit to your payment method, whether that's a credit card or a bank account, or you know, you're storing dollars or euros or something on our platform. There's various payment methods. So we're basically debiting that and then we're crediting you the crypto and we're taking a fee for it too.

• 18:49Speaker 01

  So, um, that's fundamentally what's happening underneath.

• 18:54Lex Fridman?

  And then there's some interesting slippage. How do you, how do you calculate the, uh, how much slippage is allowed? Like, how do you, how do you know these things? You know, cause order books are fascinating. You know, the dynamics of that is pretty interesting.

• 19:08Speaker 01

  Yeah.

• 19:09Lex Fridman?

  From the little I know about it.

• 19:10Speaker 01

  Yeah. So there's a lot of people like traders who get super into this and like high frequency traders and arbitrage and all, all kinds of interesting topics. Flash Boys was like an interesting book on this whole thing. You want like access to information the fastest, sometimes even putting your, you know, your thing in the data center right next to the thing. We don't, we don't allow that colo stuff because we want it to be more democratized.

• 19:33Speaker 01

  But you know, basically, you give a, let's say, we wanted to just keep it math simple. We want to charge a 1% fee. So if you're buying $100 of Bitcoin and we'll charge you $101, you know, we've presented you the amount of Bitcoin you're going to get for the $100. Now, let's say 10 seconds later, you hit accept. We go to, we go to fill the order. So it's going to be some error bound around that 1% fee, right? And if we think we're actually losing money on the trade, I think we'll often reject it.

• 19:59Lex Fridman?

  So some part of the fee, the slippage is incorporated into that averaged over a large number of people. I mean, just, just, it's fascinating because like even just like that little detail probably requires a lot of experimentation.

• 20:14Speaker 01

  Yeah, and it's kind of like a giant bug bounty out there because if you get it wrong, there's people who are going to arbitrage that. And we, we've had people sort of pen test our systems in, in a really creative ways where like, um, they'll just fire, like programmatically with APIs, they'll, they'll fire off like a million different quotes and look for one of them that's out of bounds and then actually take that money right there. And, you know, we get people doing all kinds of crazy stuff, but.

• 20:40Lex Fridman?

  So how do you protect against that? How do you protect? So we'll talk about cybersecurity in interesting ways, but there's a lot of clever people trying to do clever things to earn, not even just to break into the system, but to earn an edge of some kind in the system. How do you, uh, how do you stay one step ahead?

• 20:58Speaker 01

  There's no silver bullet, it's a bunch of lead bullets, right? So it's, it's like, you know, one thing we do is we just have good test suites, right? So you're, you're testing every piece of code that goes out. That's like just common, good best practice, but it's particularly important in financial services. Um, another thing we do is we hire third party firms to try to audit this stuff and break in. Another one we do is we have a bug bounty program. So we basically pay white hat hackers to find this stuff before the black hats do. And, um, we've paid out lots of good bug bounties. So, you know, try all the above and occasionally you don't get it right and you lose some money and then you fix it and you keep going. So, yeah.

• 21:37Lex Fridman?

  Let's talk about cybersecurity a little bit more.

• 21:39Speaker 01

  Yeah.

• 21:40Lex Fridman?

  You mentioned using stolen bank accounts.

• 21:42Speaker 01

  Yeah.

• 21:43Lex Fridman?

  So that's another one. That's another interesting one. How do you protect against that?

• 21:47Speaker 01

  Okay, so fraud prevention, yeah, is a big topic. So one of the, uh, there's a lot of things people do, but one of the things they do is that.

• 21:57Speaker 01

  Use machine learning, right? So you look at hundreds-

• 21:59Lex Fridman?

  To protect or to attack?

• 22:00Speaker 01

  To protect against it. So what you want to do is kind of build up a labeled data set of all the different people who have turned out to be fraudulent and good actors and hopefully collect as much data as you can. And then you'll, you know, you might feed hundreds or thousands of these factors into your machine learning model and it'll come back with a risk score. So, you know, an example of like the kinds of factors people create or put in there, you know, obviously I don't want to disclose too many of them because it's, it's, it's a cat and mouse game, but just kind of, I don't know, relatively well-known stuff might be, um, you know, you have device fingerprints, right? So like, what kind of device are you on and what fonts do you have installed? A lot of people who are farming lots of these accounts, they're using emulators and like virtual machines and stuff.

• 22:45Speaker 01

  They're not like, you know, an average person on that device. And then you'll see sometimes like, one of my favorite metrics we track for, for this was called like improbable travel velocity. So we would, we're tracking people's IPs, right? And you might see someone who was one day in Austin, Texas, and then like an hour later they were in London or something. It's like, well, that's very improbable. I mean, sometimes people are using VPNs, so you gotta be careful with that because like there's legitimate people who use VPNs too. But if it's not possible for them to have gotten on a plane and gotten there that quickly, then that's usually they're like spoofing a device or IP. Sometimes those are interesting factors. But yeah, if you feed enough of these in, um, you will, oh, another fun one is like,

• 23:28Speaker 01

  you know, real users will type their credit card like one number at a time.

• 23:33Lex Fridman?

  Yeah.

• 23:33Speaker 01

  Scammers have a list of them and they'll just paste in a whole, a whole number. So you can look at like the, the number of milliseconds between keystrokes. Like there's all kinds of stuff people have come up with.

• 23:43Lex Fridman?

  And even for travel velocity, you could probably incorporate VPNs too, because there's probably a travel velocity for VPN switching too. That's human-like. Like if you're using legitimately VPN for something else.

• 23:57Speaker 01

  Yep.

• 23:57Lex Fridman?

  Um, that, that might be, there's like legitimate uses to, actually, you know, I feel embarrassed that I don't know this, probably should, but the, I'm not a robot.

• 24:07Speaker 01

  Capture thing?

• 24:08Lex Fridman?

  Capture thing?

• 24:09Speaker 01

  Yeah.

• 24:09Lex Fridman?

  So that probably works in the same way.

• 24:12Speaker 01

  Yeah.

• 24:12Lex Fridman?

  Like, how do you move your mouse, maybe? Or how the dynamics of the clicking?

• 24:18Speaker 01

  Totally.

• 24:19Lex Fridman?

  But how does that even work that well, then? And why can't it be fake? I need to look into this, because it's such a trivial capture. It feels like it should be very crackable. And yet, a lot of high-security places use that.

• 24:32Speaker 01

  Yeah.

• 24:32Lex Fridman?

  It's really interesting.

• 24:33Speaker 01

  It's another cat and mouse game. So I think they've, yeah, but it's using a lot of similar signals, like mouse movements, keystrokes. And then, obviously, all the stuff that comes over the wire with your browser. So like, what operating system? What fonts? You know, what headers are being sent over? And there's actually, there's an old website. I can't remember what it was called. It was kind of like Panoptic Click or Panopticon or something. But it basically was like a proof-of-concept site that they would just show you all the data that was kind of getting sent over with your request. And like, you say that there's only one person in the world who has this exact set of data. It's you. And so it's almost like a workaround, a clever workaround to track somebody. Make, identify a unique person, even if like, there wasn't a cookie involved or something.

• 25:18Lex Fridman?

  Yeah, this is a fascinating world. Where you can't see anybody. You're in the dark. And yet, you have a lot of signal. And you have to figure out who's a real person, who's not? Who's a robot, who's not?

• 25:27Speaker 01

  Yeah.

• 25:28Lex Fridman?

  Let me step back. We're going to jump around all over the place.

• 25:30Speaker 01

  Great.

• 25:30Lex Fridman?

  Let me step back.

• 25:31Speaker 01

  That's why I like your interviews. You get into like, technical topics.

• 25:35Lex Fridman?

  So just let's use Bitcoin as a measure of time. You started Coinbase when Bitcoin was $10.

• 25:43Speaker 01

  Yeah.

• 25:44Lex Fridman?

  And you just mentioned an incredible system with security, with transactions. Everything is thought through. There's a lot going on. But what was version one? Back in those early days, the first prototype of Coinbase? What did that look like?

• 25:57Speaker 01

  Yeah.

• 25:58Lex Fridman?

  Like, what did it take to write it? To think through it and make it work enough to at least make you believe that it's gonna work.

• 26:08Speaker 01

  Well, I definitely didn't know if it was gonna work. I mean, it was kind of, I felt like I was just following my gut. So, I mean, I was working at Airbnb. I was a software engineer there, project manager. I was working on some fraud prevention stuff, for instance. And I read the Bitcoin white paper in kind of December of 2010. I started going to some Bitcoin meetups in the Bay Area, met lots of interesting people there, like crazy people, anarchists, you know, like really brilliant people, all the above. And so I started nights and weekends trying to hack, put together a prototype. And my initial thought was, well, you know, SMTP is a protocol that runs email. And, you know, Git is a protocol for version control that, but people made like Gmail and GitHub.

• 26:52Speaker 01

  They don't, most people don't want to run their own email server or even their own Git server. They just want to like use a hosted thing that, you know, will do all the security and backups for them. So the thought in my head at that time was Bitcoins is this new protocol. There's probably going to be somebody who makes a hosted service that does all the security and backups for you, makes Bitcoin as a protocol easy to use. So maybe I should, maybe I should make like a hosted Bitcoin wallet or something. That was, that was my, it was gonna make Gmail for Bitcoin or something. And a bunch of people told me that was a bad idea, like a bunch, most of my smart friends who I told about it, they were like, "Well, first of all, I don't really get what you're doing at all. Like Bitcoin sounds like a scam or something you got, you've gotten involved in."

• 27:34Speaker 01

  But then other people who understood what Bitcoin was told me they thought it was a dumb idea because they're like, "Dude, if you store all this Bitcoin, you're just gonna get hacked." Like, nobody, you know, why would you, why would you do that? And so I, I, I kind of had this thought like, you know what? I'm not gonna go all in and like make a, store everyone's Bitcoin. That would be too much right now. I have a job. I have a day job, you know? But let me just make a prototype and I'll tell people this is like a beta thing. Like, don't put any real money in it and just see if there's interest. And if I feel like I'm on to something, maybe I'll go do this as a company. Because I did, I really wanted to be an entrepreneur at that time. I was like, I was 29, I was almost turning 30 and I was, I always wanted to like start a company, but I was, I was, you know, I wasn't yet. I was an employee at a company that was great, but.

• 28:15Speaker 01

  So anyway, I had this prototype I was hacking together nights and weekends. I actually wrote a whole Bitcoin node in Ruby, which turned out to be a, maybe a weird decision in hindsight because Ruby wasn't the most performant language. We've subsequently had to rebuild that many times, but.

• 28:31Speaker 01

  Yeah, I had this hosted Bitcoin wallet and the thing that, I didn't have any users for it, by the way. I applied to Y Combinator because I was like, maybe if somebody there writes me a check, this will like make it feel like a real company. And I was trying to find, I was trying to find a co-founder at that time unsuccessfully. So I was basically just wandering in the desert. I had a lot of self doubt about this because I, I was like, I don't know, all my friends don't think this is kind of dumb and maybe Bitcoin is just going to get shut down and like this will all be some stupid thing. So there was definitely a feeling of just wandering lost in the desert, lots of self doubt. Paul Graham and the Y Combinator group kind of wrote me the first check after I went and interviewed and stuff and they, they wrote me a check for like 150K.

• 29:12Speaker 01

  And that was the first time somebody who I really looked up to kind of said, this is, this is worth pursuing. Like maybe, maybe you're onto something, maybe you're not, but like, let's at least try it. And so I, that was kind of what gave me the confidence to quit my job and try it. And

• 29:27Speaker 01

  I'll wrap the story here by saying that like we, you know, I found the right co-founder after Y Combinator. We still didn't have any customers. The thing that, you know, I basically launched the hosted Bitcoin wallet. There were people signing up. I just posted on Reddit and places like that. And, you know, maybe like a hundred people would sign up and then nobody would come back. And so I was like, I just, in, in Y Combinator, they often tell you like, you know, talk to your customers and improve your product. Talk to your customers and prove your product. That's all you're supposed to be doing. Try to find product market fit. So I emailed like five of the users that had signed up. And I was like, hey, I worked on this app. I saw you signed up. Can I get on the phone with you? I get on the phone with like five of these folks. And I was like, you know, why didn't you come back? And the guy was like, well, the app was okay for a for a beta, but like, I don't have any Bitcoins.

• 30:11Speaker 01

  So I didn't really know what to do with it. And I remember this light bulb kind of went off in my head. I was like, well, if I put a buy Bitcoin button in there, uh, would you have used it? And he was like, yeah, maybe. So then I had this, we went about the process. My co-founder at that time, we like got basically had to get like a bank partnership, payment rails, you know, an exchange, basic exchange functionality, all that stuff I was mentioning earlier in place. And the minute we launched that feature where you could just click buy, put in your bank account or credit card, buy it, buy Bitcoin that showed up in your account. From that day forward, like the number of users started to go up like this. And so we finally had found product market fit after two years of wandering in the desert.

• 30:47Lex Fridman?

  So you weren't even thinking about to buy the on ramps. You would think it would be just a wallet, a place to store Bitcoin that you've already gotten.

• 30:56Speaker 01

  Yeah.

• 30:56Lex Fridman?

  Okay. This is, I mean, uh, cause that's such a pain to do, to have to work with others to convert dollars of any fiat currency into into Bitcoin.

• 31:07Speaker 01

  Yeah.

• 31:08Lex Fridman?

  So did you, I mean, were you, um, overwhelmed by the immensity of the task here? Or were you just, um,

• 31:20Lex Fridman?

  sort of not allowing yourself to think too deeply through this whole thing and just letting the optimism take over here?

• 31:28Speaker 01

  You know, I was really looking forward to like doing something crazy and like a big challenge. And, um, I wanted to, I, I love kind of crisis moments like that where, you know, I'm very determined, right? Especially when I get like very set on something and I'm just like, you know what? I'm going to figure out a way to make this fucking thing work like no matter what. And so I reveled in that. I was sort of, I had, I had read all these books about startups and like every startup has these like, you know, major setbacks and just like nothing works. And so.

• 32:01Lex Fridman?

  So that was a sign that you're doing something right.

• 32:03Speaker 01

  I had no idea if I was doing anything right at all, but I was like, I was kind of loving the experience of it in a weird way. It felt, it felt stressful at the time, like, you know, nothing was working and, but I was just, I felt like I was on the right path somehow. And so I just kept going. I don't know.

• 32:20Lex Fridman?

  What was the darkest moment that you've gone to in your mind during that time? What was, what were some of the tougher moments? You said self doubt.

• 32:30Speaker 01

  Yeah.

• 32:31Lex Fridman?

  Have you, uh, yeah, where'd you go? Where'd you go in your mind?

• 32:37Lex Fridman?

  Is there a moment where you're just like laying there? This is, this is hopeless.

• 32:43Speaker 01

  Well, there was a couple of moments I'm remembering. I mean, so for whatever reason, I had this like big chip on my shoulder at that time. And I was like, I really want to do something important in the world. Like, you know, I could have a good life and like work for some good companies and write some software. And I'm, for some reason, I never wanted that for myself. That probably would have been healthier, honestly, just to like, as an expected value outcome. That's probably a better thing in life. But I was like, I was like, man, I really want to do something important and have a bigger impact. And I was like, I was willing to sacrifice a lot for that. I was like, sleep and not going out with friends and stuff. I remember one of the, just for like years, working on this stuff.

• 33:22Speaker 01

  I remember one of the darker moments was, um, we probably had like maybe five employees at that time. And I remember like a bunch of bad things happened like all at once. And it was, so first of all, you have to remember at this time, we were all very sleep deprived, which kind of exacerbates everything. If you look at like the Exxon Valdez spill and all these like natural disasters, like sleep deprivation is often involved. So, because the reason why we were so sleep deprived is not just because we were working so much, but like the site would go offline in the middle of the night and we'd get, I'd get paged. I was like on pager duty. So I'd get woken up sometimes like two or three times a night, like have to try to fix something, go back to sleep. So in that environment, you can kind of get, you can get discouraged.

• 34:06Speaker 01

  So one bad thing that happened was we had a bug on the website and there was thousands of people on Reddit and Twitter who were all like pissed at Coinbase because like the balances were showing wrong. And they were just like, you know, fuck this company. It's over. Like, I hate these guys. And so that was, I'd never had this feeling of a thousand people mad at me at the same time. You know, I feel like I'm a pretty chill guy. Like, most of the time, people don't get mad at me. So that was one. Another one was that, um,

• 34:33Lex Fridman?

  Can we pause on that? That's so interesting. So you were saying like, here's a dream. I'm trying to create something and now forever the reputation of this dream is ruined. It will never, it's irrecoverable. It's over. That kind of feeling.

• 34:47Speaker 01

  Yeah. Well, I didn't, you're right. I didn't know at that time, I was like, is this, is this the end? Like, everybody, we're so, we're so tiny. Now everybody hates us. So is it over?

• 34:56Lex Fridman?

  Yeah.

• 34:58Speaker 01

  Yeah, nobody told me this before starting a company that like you're a bunch of people will hate you for this, which is like a very counterintuitive thing because you know, most companies I think are doing good things in the world, at least you're trying, right? And so even if someone's like trying, but they're not, they're failing, I'm generally rooting for them, at least you're trying, right?

• 35:14Lex Fridman?

  Yeah.

• 35:15Speaker 01

  But that's not the case at all. And most founders I've known have gone through this too, where they're very surprised at the amount of hate that they get. And if it's, I think it's actually like a muscle you can build, your tolerance to it, like, because you know, you go talk to somebody who's like, for you, it feels terrible because you're at the center of this storm and like, but if you go, then you go talk to like, you know, your, your family or some other person like, dude, I didn't even hear about that. Like my, they're just busy in their own life. And so they, they have no idea that you had all this negative press or like whatever it was.

• 35:46Lex Fridman?

  Can I, once again, linger on that?

• 35:48Speaker 01

  Yeah.

• 35:50Lex Fridman?

  There's an interesting person I'd like to bring up, just as an example, Bill Gates.

• 35:56Speaker 01

  Yeah.

• 35:57Lex Fridman?

  So he gets a very large amount of hate on the internet.

• 36:01Speaker 01

  Yeah.

• 36:02Lex Fridman?

  And there's something about him, this is me talking, not you, that, that he seems out of touch about that hate. I, I believe, at least in my understanding, that with, with the resources he has, he's trying and is actually doing a lot of good. And yet there's a gigantic amount of hate, conspiracy theories and stuff like that.

• 36:24Speaker 01

  Right.

• 36:24Lex Fridman?

  And it feels like that's the case because he's somehow out of touch with, with people. So I wonder how you stay in touch with the voice of the people without being destroyed by the outrage? Is there, is there any wisdom you have to that?

• 36:40Speaker 01

  I don't know about wisdom, but I've thought about this too, because yeah, you want to always be open to feedback, especially from people who have like your best interests at heart, right? And if you can become isolated from it and just like, you know, surrounded by yes people and, I mean, who knows, maybe, maybe like Xi and Putin and people like that are in situations, I have no idea. But if you listen to too much of it and you just try to please everyone, you'll never get anything done. And I mean, most of the best leaders are people who they can act when they believe that they, they're doing something net positive for the world and humanity. And they actually don't really care if they piss off some proportion of the people.

• 37:25Speaker 01

  Almost anything you're gonna do of significance in the world today is gonna piss off 5% of people, maybe, maybe 49% of people or whatever, maybe 60%, I don't know. So you never want to become so surrounded by people who just work for you and will say yes. And then you think like, well, I'm a genius and I'm like, I'm a, that's how you become a dictator or whatever.

• 37:45Speaker 01

  But you also can't care so much about what people think because then you'll never do anything that's truly authentic to yourself. One other thought on that, by the way, I think it's a really good question.

• 37:55Speaker 01

  So I've thought about this a lot, like, why, you know, people generally kind of hate on Zuck and they hate on Bill Gates and they hate on, they don't really hate on Elon. Actually, Elon has a lot of haters too, but it's a different thing.

• 38:07Lex Fridman?

  This is measured. This is measured. I was looking at some surveys. So I think Zuck is the most, so loved and hated, right?

• 38:15Speaker 01

  Yeah.

• 38:16Lex Fridman?

  Zuckerberg is the most both loved and hated. He's the most hated. And then I think it's Bill Gates and Elon is down there. I think it's like 40% hate Zuck, people asked. And then Elon is in the double digits, but low double digits. It's interesting. You just look at this, ask yourself why?

• 38:38Speaker 01

  Right. So I ask myself this sometimes too, because I don't claim to know any of these people well, but like I've, I've met them briefly. And I, my impression is that they're actually all smart people trying to do good things in the world. So there's not too much difference there despite public perception. So why is it that some are really hated and some aren't? I mean, it's a complicated question. Obviously, you know, Zuck and his Facebook got blamed for the whole election thing and all that didn't help. Social media has gotten a lot of pressure just from like, you know, hey, why aren't you solving all of society's tough problems? It's like, well, they're just one company. But one thing I've noticed is that, you know, a lot of these people, they're a little, they have like Asperger's, right?

• 39:19Speaker 01

  A little bit. And sometimes, you know, people with Asperger's don't really emote in the same way. And so I think it's almost a form of like,

• 39:29Speaker 01

  like bias against their cognitive.

• 39:34Speaker 01

  Type or something, which is like that person doesn't emote right. I don't trust their intentions. And the other thing I've thought about too, is that sometimes I think some leaders, you know, like maybe Zuck or Bill Gates, they can come across as like a little bit PR rehearsed. Like they're basically, they're giving the PR approved answers as where Elon just says whatever he thinks like to a fault. So even if people hate what he says, they're like, at least I believe it's authentic. So I've always thought about that too for myself. I'm like, how do I, because you can, you can fuck it up on both sides, right? Like if you just come out and you're like saying whatever's stream of consciousness, you'll often end up like pissing off people on your team or like saying, tripping over some like regulation that you, you know,

• 40:19Speaker 01

  there's all kinds of things about running a public company, you know, you can't say certain stuff. But if you're too PR approved and your answer is like, nobody trusts you what you're saying. And so anyway, this is something I think about a lot. I don't think I have the right answer, but I'm trying to, I'm trying to find that.

• 40:32Lex Fridman?

  And more and more with the internet, there's a premium on authenticity, just like you're saying. People really, really appreciate that. So for leaders, it's a, it's a challenge to be, how do I make sure I'm authentic, but also don't say stupid shit. And so that's an interesting thing. I've noticed that just having interacted with, with a bunch of leaders, that you have to be careful how much you surround yourself with PR folks. Cause the best, I would say, let me just say a nice thing about marketing and PR folks. The best marketing folks are extremely good.

• 41:09Speaker 01

  Yeah.

• 41:10Lex Fridman?

  So they understand exactly what great marketing is and great PR. It's authenticity. It's showing, reviewing the beauty as opposed to PR and marketing out of fear. Oh, don't say that. Don't say this, don't that. Because then you, you start living in this kind of, that pushes you towards a bubble where you can't express the, your, your beautiful quirks and weirdness and all that kind of stuff. And also the cool, the beautiful things about what you're doing. I find like, especially with the tech thing, like even like Coinbase, the way to reveal the beauty of it. Is not only by showing all the things you could do with it, but showing that there's great engineering going on underneath. So letting the nerds shine too.

• 41:53Lex Fridman?

  It doesn't have to be like uh these kind of commercials where it's like a happy family using Coinbase to send a transaction about of flowers for mom or something like that. Like it could be also like gritty stuff and real stuff. So um that's a general just observation I made. But you said you were talking about dark moments and that there's people on the internet. They were pissed off that the site was down and you said there might be something else.

• 42:23Speaker 01

  Yeah, so sleep deprived, like a bunch of people on the internet were pissed at me. The balances were fucked up, like people were tweeting the company's over, just give the money back, whatever. And then um, oh yeah, somebody posted. So we had all this, we didn't, we had started to get all these customer support inquiries and like we only had like a few people at the company. And so we were backed up maybe like 20, 20,000 support requests. So people couldn't get a hold of us. So somebody posted my cell phone number on Reddit and they were like, they're like, if you need to get a hold of the CEO, whatever, because everyone's upset about where their money is. So I remember we're in the office. It's like, it's like late at night. We've been working like 12 hours. We're all sleep deprived. I'm trying to, I'm trying to hack and like get this bug fixed. And we all need like food at the office.

• 43:08Speaker 01

  And so my phone, my phone has been blowing up all day because someone posted my phone number on the internet. And there's like a guy, um, there was a guy like trying to deliver food and I needed to answer my phone to like get the food from downstairs. So I was like, shit, I gotta just see who, if that's him. So I started answering the call and it's, and it's like, is this Brian? I'm like, nope, wrong number, click, you know? And I, you know, I, the next, I pick up the next call. It's like every, every, when I finished the call, another call is like coming in. So I was like, this, I'm a reporter from Japan, like asking about a security. Nope, wrong number, click. And then I like, finally I get the delivery guy downstairs, bring the food up. We're all like, you know, surviving to like fix this bug. I remember there was just basically a point that night where I was like, fuck, I need to just,

• 43:50Speaker 01

  I basically just curled up on a, on like a ball on the floor and I, I just like cried for a little bit. I think I let myself just kind of wallow in self pity, kind of took a nap for about five minutes. And I was like, let's fucking solve this. And I like, you know, stopped being like a little whatever and like got back up.

• 44:09Lex Fridman?

  Sleep deprivation combined with just the stress and the pressure of the site going down and everybody wants you, the site to be up, just the pressure from people and the number of users is growing and growing and growing. So that pressure is just mentally, mentally tough.

• 44:23Speaker 01

  Yeah.

• 44:24Lex Fridman?

  What was your source of strength during that time? Like what, like, uh, somebody that patted you on the back and said, we got this.

• 44:34Speaker 01

  Yeah. Well, it definitely helped to have a co-founder. So, you know, there's like that old saying about it's better to be in a great relationship than to be single, but it's better to be single than in a bad relationship. So co-founders actually blow up a lot of companies too. But when you find the right co-founder, which I was lucky to find with, with Fred Ursom, that was very important. There was definitely moments where, you know, I was like, kind of, you know, at, at the wits end or whatever. And he was like, it's like, dude, let's rally. Like, and he, he basically carried the team, you know, a couple of times, like in really key moments.

• 45:05Lex Fridman?

  What advice would you give to startup founders about this particular stage? About surviving it to the five and through the five employee stage where you.

• 45:16Speaker 01

  Yeah. Well, if you're pre-product market fit, the best advice that I have from that period is, action produces information. So just, just like, keep doing stuff, you know? I remember like, um, Paul, Paul Graham.

• 45:32Lex Fridman?

  It's a good line.

• 45:32Speaker 01

  Yeah. Paul Graham had this great line like that. I think that's his line. And he, he was like, startups are like sharks. If they stop swimming, swimming, they die, you know? So even if you're like, not sure what to do, like just do anything, because when you do it, it'll like, it'll produce some information. Like people liked it, they didn't. This was very true for me. There was times where I just did something. Instead of debating it endlessly and like, just try it, you know, like, all right, so we shipped it. And like, there was a couple of times where like, the minute I shipped it, I was like, I knew, I know we, we built this wrong, but now I have an idea of what to do next. And it wasn't, I only would have had that idea if we'd actually gone through the exercise of going to build it. It's like, my, my other favorite analogy for this is that. You're like at the base of a mountain that's shrouded in fog.

• 46:15Speaker 01

  And you're looking up at the mountain and you're trying to think like, okay, how do I get up there? But you can only see like three or four steps ahead because the fog is so thick. So you have to just take steps into the unknown. And when you take three steps, another three steps will be revealed ahead of you. And sometimes you'll end up on some local maximum, you'll have to retrace your steps or whatever, but or come up to a cliff, you know? But um, most people in life don't take the steps into the fog, into the unknown, because it's scary. Or they're like, I don't know, what if I fail? Or like, I don't know how that's going to work, or I might run out of money, or I won't be able to get a job after, or I don't know, whatever reason. But that that is like, one of the things that separates, I think, entrepreneurial people with that kind of inclination is that

• 46:58Speaker 01

  they have sort of a comfort with this risk tolerance. But it's actually not really risky, if you think about it, it's not like, you know, in at least in most places like, you know, if you go to, if you go do a startup and it fails, like you're gonna, you're even more valuable to your next employer, right? Or you can go raise a seed round, pay yourself a salary. Try it for like two years or three years, if it doesn't work, go get another job. It's not like you're, you weren't paying yourself a salary during that time. So I think, I think people overestimate the risk of doing a startup and they just never, they never start because it seems crazy and all your friends think it's silly. Like, that's sort of the default nature of every big startup idea.

• 47:35Lex Fridman?

  It's just basic fear. It's the same kind of fear that if you see, if you're a guy, see a cute girl at a bar. It's the fear associated with coming up to her. You like her, asking her, it's like, what's the actual risk exactly?

• 47:48Speaker 01

  Right. She'll say, I'm no thanks, I'm not interested.

• 47:50Lex Fridman?

  No thanks. And I guess the risk is like, that's going to be mentally difficult to deal with rejection. So just like it's mentally difficult to deal with failure. If you, if you had a bunch of ideas and you were excited about them and you implement them and you realize they're not good. That could be difficult to keep pushing through that. But I suppose that's life, you're supposed to, you know, perseverance through the failures.

• 48:15Speaker 01

  Yeah.

• 48:16Lex Fridman?

  And then the risk is low. So that's, and then the whole time through the fog up the mountain, you're looking for product market fit.

• 48:22Speaker 01

  Yeah, that's right. So you know you have it when the usage of your product keeps growing without any marketing dollars or anything like that. It's just like more people keep coming back every week or month. So you're kind of keep, you're basically watching your stats. Nothing is working. You see these little wiggles of false hope in your metrics. And you basically just keep talking to customers, fixing the, improving the product, talk to customers, improve the product, talk to customers, improve product. You know, and try not to run out of money. So be really scrappy.

• 48:49Speaker 01

  And then if you're lucky, you hit some kind of threshold where like, okay, the thing is good enough now, or we hit on some use case and then it'll organically start to grow a bit. And then, then you have a whole different set of problems. Once you hit product market fit, which is how do we scale this thing? How do we hire people? How do we, you know, hire an executive team or raise more money? And like, so the problems totally change, but.

• 49:12Lex Fridman?

  Well, you were there through the whole thing. So that's the other question that's fascinating. Again, back to the girl at the bar, how do you hire people? It's like, how do you find good friends? How do you find good relationships? And in this specific case, how do you hire good people? Engineers, executive, all of it.

• 49:34Speaker 01

  One thing is I've done a lot of reps on hiring at this point. So Coinbase has about 5,000 people. Probably the first 500 people or something, maybe in that range. You know, I, I interviewed every single one of those, but you have to remember there's probably like, I don't know, on average, maybe 10 people that we went, went in the process for every one we hired or something. So it was like,

• 49:57Speaker 01

  by the time that we had 500 employees, I had done like 5,000 interviews or something. I was like very burned out on interviews. I had been doing, I had some days I did like seven interviews in a day or maybe, you know, you've done, you would do lots of interviews. Maybe you wouldn't get burned out, but different kind of interviews.

• 50:12Lex Fridman?

  Very different, very different.

• 50:14Speaker 01

  Yeah.

• 50:14Lex Fridman?

  Very different because you're.

• 50:18Lex Fridman?

  So first of all, most of your interviews lead to rejection.

• 50:21Speaker 01

  Yeah.

• 50:22Lex Fridman?

  Which is also exhausting.

• 50:24Speaker 01

  Yeah, and there's a whole, there's a whole part of the interview which is about candidate experience, right? Sometimes you know it's not the right person, but you want to make sure they have a good experience.

• 50:32Lex Fridman?

  Yes.

• 50:32Speaker 01

  If you're just exhausted and you're on your sixth interview and you're like, well, thanks for coming in and you wrap and you just, and then like, you're gonna create a detractor, someone who's out there like, fuck that company, or Brian was rude to me, or whatever. So, I had to, honestly, I had to work on that a little bit in the early days, because I was doing so many interviews, like, I needed to make sure that, um, when people came in, I was like, you know, made them feel comfortable, um, asked them a couple of like, warm-up questions, just like, oh, how, how was it getting in the office? Like, did you find it okay? And like, what have you been up to this week? And not just like, you know, like a factory assembly line, like, boom, boom, boom, like, yeah.

• 51:04Lex Fridman?

  But also there's a moment, because I've interviewed a bunch of people for like, teams and stuff.

• 51:08Speaker 01

  Yeah.

• 51:08Lex Fridman?

  There's also a moment when you, early on, know this is not gonna be a good fit.

• 51:12Speaker 01

  Yeah.

• 51:12Lex Fridman?

  And you still have to land that plane and

• 51:15Speaker 01

  Yeah.

• 51:15Lex Fridman?

  and all that kind of stuff. And that could get really, really, really exhausting. So yeah, anyway, sorry. So.

• 51:21Speaker 01

  Yeah, so basically, we tried, we've tried so many things over the years to make interviews more efficient, because it's a huge time sink for, um, the team. So, you know, we, we basically, we'll usually get them down to like, 25 minutes. Um, I've seen, if you're trying to hire like, a big team, let's say, um, you know, of people who are like contractors or something, not necessarily full-time employees, I've seen people actually do 10-minute interviews. Um, you can even interview like, a thousand people, almost like, in a week or something. I'm not sure if that quite works out, but, let me listen to that. But, you can basically get six, and six done in an hour, if you're just, I need to get a team of 30 contractors for whatever purpose. But if you're talking about full-time employees, I usually do like, 25-minute, you know, you're, you're oftentimes like, one, one thing we've done is we'll put

• 52:04Speaker 01

  like, a, um, like a Google form online, and it's like, put some basic hurdles in there, like, you know, ask them, um, to put in an answer, which you can check in a spreadsheet if it was correct or not. And like, there were some funny examples in the early days of Coinbase, where we put in like, brain teasers and stuff, but we don't do that anymore. We do like, normal interviews, we do references. The, the kinds of things I ask in interviews,

• 52:26Speaker 01

  You know, it's usually like, I like to think about what, what do we need this person to accomplish in this role, right? And get really specific about that. It's like usually something pretty hard. And then I'll ask them a question. It's like, tell me about a time you did X. And or tell me about the hardest, the hardest kind of problem you've had to solve in Y. And what did you do specifically to overcome it? Right? So I'm asking to see if they can actually do the stuff we need to get done. But then I'm also kind of asking like culture questions if I'm interviewing for that. And so I'm trying to see like, are they concise communicators? Can they just give me a clear answer and stop talking? Some people like ramble on for like five, 10 minutes if you ask the first question.

• 53:08Speaker 01

  Some people are, you know, they're interrupters, like church of interruptions. So like, they won't stop talking until you interrupt them, which for me, I'm, I'm always patient and I wait. So that's weird. I'm looking to see for humility to like, you know, I'll tell, ask people, tell me about a time something went really wrong, like you had conflict with someone on a team or. And what I'm kind of looking for is, were they part of the solution? Or are they still holding on to like blame and criticism about that? And be like, well, I told them they shouldn't do that way, but they didn't listen to me. You know, these are all like bad signs. So I'm looking for, yeah, can they get the job done? Will they work together on a team? Can they communicate effectively? Do they fit into our cultural values? And, you know, those kinds of things.

• 53:48Lex Fridman?

  Yeah, I mean, there's a, cause I've even, even for help with this, this podcast here, but also at MIT. And so I've done a bunch of hiring and I was always looking for, you said, brain teasers, all kinds of simple questions that can, that can reveal a lot of information. And it's always been challenging. I used to, I still ask this question, but do you think it's better to work hard or work smart? And, you know, I had this idea that I've.

• 54:22Lex Fridman?

  That I think I've matured about, which is, I kind of believe that people who say, "Work smart" on that question, don't actually work smart. So, the right textbook answer is, "It's better to work smart." But the reality is, it's, it's people that haven't actually ever done anything that say, "Work smart." They're like, they haven't really struggled. Because my general belief at the time was in order to discover what it means to work smart, to be efficient, to, you have to work your ass off. So you have to really fail a lot, and failure feels like hard work. And so, I was always suspicious of people that would say, "Work smart."

• 55:07Lex Fridman?

  I would want to interrogate that question. But then, I also, you know, have, have learned that there is people that are just exceptionally, exceptionally efficient. They really do know what it means to work smart, even at a young age. And so, like, you can't just disqualify based on that. You have to dig in deeper. But some of the most interesting people I've ever worked with would say, "Work hard," unapologetically. And they're usually the ones that know how to be efficient. Which is, it's just an interesting thing like that. And I, and I've always searched for questions of that nature to see, can I, can I get,

• 55:48Lex Fridman?

  can I get a person to reveal something profound about them in as brief of a question as possible? And I, you know, and then, of course, there's basic attention to detail and brain teasers and stuff like that, depending on the role, programming and so on, to see, can they, can they solve a tricky puzzle? And do so, like, one that doesn't require a lot of effort, but requires a certain nonlinear way of thinking. Is there, is there some, I mean, maybe you don't want to reveal, but is there some questions that you sometimes find yourself leaning on? You said like, how did you solve a hard problem in your past? And have them talk through it? That's one.

• 56:32Speaker 01

  You know, we started with brain teasers periodically at Coinbase and I, we got, we got away from that relatively quickly. And I think one, it's a tough one because I actually think it does show how somebody kind of performs under pressure. But it's, I don't think it's a super reliable indicator because there's some people who are really good in what the typical work situation. But that's not a typical work situation where somebody puts you on the spot, like in a live interview. And sometimes people get nervous and they can't think clearly and like they don't have their computer in front of them or whatever they normally use. So, yeah, I, I'm a little skeptical now of the, of the brain teaser thing.

• 57:12Speaker 01

  There is a whole, yeah, there is a whole question about like, a lot of universities are getting rid of, you know, entrance exams. So if you're hiring right out of universities, sometimes it's becoming a less reliable indicator of like, are they in that university? And I've heard some companies, we haven't done this yet, but I've heard some companies are actually creating their own like for college grads, like their own, um, basically exams, like standardized testing, almost to get people in the door. Because the degree almost like doesn't mean what it used to, which is the whole topic, but.

• 57:42Lex Fridman?

  Yeah, that's fascinating because, um, it's fascinating both for that because it's not just about you trying to hire a great team. It's also to help them find the right place to work at.

• 57:53Speaker 01

  Yeah.

• 57:54Lex Fridman?

  It's like, it's like a two way street.

• 57:58Lex Fridman?

  All right. So once you found the, the product market fit, how did Coinbase become what it is today?

• 58:08Speaker 01

  Ooh.

• 58:08Lex Fridman?

  So let me ask kind of an engineering question, actually. Sort of, uh, from the, the Ruby wallet days, what are some of the interesting challenges there? Or is, are they not engineering? Just the, the, the things that had to be solved, uh, what were they? Engineering, regulation?

• 58:32Lex Fridman?

  Financial hiring lawyers. What was it?

• 58:37Speaker 01

  So post product market fit, yeah, a lot of it's scaling and you got to build out, build out an actual company. So I remember I was still writing a lot of code there for a while and we were, we were hiring in, we had like maybe 25 people or something. I remember one of our investors came by one day and he was like, Brian, how much of your time are you spending writing code? And I was like, maybe, maybe 50% or something. He was like, how much time are you, are you spending hiring people? I was like, probably 20%. And he was like, I think you need to flip those numbers. Like this company is not going to scale. You're the CEO. You don't need to be writing code every day. You're going to have to transition that stuff. Like even if people can't, all that stuff's locked in your head. So maybe they're not going to do it as well as you for the first six months or something. But like, if you don't start to transition it, you're never going to build a real company. It's just going to be, you're going to be the bottleneck.

• 59:22Speaker 01

  So, you know, like a lot of founders, that took me a while to like really internalize that lesson. I'd always heard people say that and, you know, but I still was holding on too much to, to decision making. And I probably still am, by the way, like even to this day at Coinbase, where we continually have to push down decision making in the org, like even with 5,000 people, like who are the owners of each of these things? And so the temptation is people to push it up and you become a bottleneck. And anyway, um, so yeah, you want, you basically need to make sure you have enough money where you don't die. If there's in some, some kind of a downturn or hit break even profitability. We, we were in a position where we were periodically profitable during up periods, but then crypto would go down and we were unprofitable. And so we had to kind of manage our own psychology and the balance sheet to make sure we didn't like die in the downturn,

• 1:00:06Speaker 01

  which a lot of crypto companies did. Um, we had to basically professionalize a whole bunch of services that had been just very quickly thrown together by like 20 year olds, right? Whether that was cybersecurity, it's like, okay, how do you go get like a really senior experienced cybersecurity person, but not someone who's so senior that they can't get their hands dirty and they can come into a company with 25, 50 people? How do you get a finance person to come and do that? Our finances were a mess. Like we didn't even really know how much money we had at certain times and stuff. I mean, this was, it's embarrassing to say, but it was true. Like, I remember there was a point where, um, we, we had raised, I think like a, our series C or something like that. And I think we had our bank accounts. I just put like $25 million like in a different bank account that none of the stuff was touched to the actual operation of the business because I was like,

• 1:00:51Speaker 01

  you know, our operations were so messy and we needed to hire a new finance person. And I was like, this, I had heard horror stories of actually startups where they thought they had X amount of money. And then it turned out they had way less. And then the whole thing was insolvent in like three weeks.

• 1:01:05Lex Fridman?

  So you wanted to have some padding to at least like, all right, I can at least count on this to save us if we go to like super negative.

• 1:01:11Speaker 01

  Right. I mean, it was like a cheap hack, but that was like the only I could come up with and, you know, until we could hire like a real CFO and financial team who like, okay, now we know we got our arms around how much cash we have. It sounds silly, but we had such high volume of money coming in and out. Anyway.

• 1:01:27Lex Fridman?

  What was the ordering of hiring, by the way, like, uh, how many engineers was it early on? You said CFO was not, did you even have a CFO for a bit?

• 1:01:36Speaker 01

  Yeah.

• 1:01:36Lex Fridman?

  Like, what was the, the landscape of hiring as you're building up this company? Was it engineering focused?

• 1:01:45Speaker 01

  Well, let's see. I mean, so the first person we hired was just like, we need, we need to solve customer support. So we brought someone to do that because we were all staying up till midnight every night trying to do customer support. And then we got more engineers. And then I think maybe the sixth hire or something like that was a recruiter because that, that turned out to be, you know, you need to build, hire the person who can hire more people.

• 1:02:03Lex Fridman?

  Yeah.

• 1:02:04Speaker 01

  That turned out to be a great force multiplier. And then manage, you go on down the list. Eventually you want to hire some more senior people. We needed legal and compliance. We needed that really badly because we, you know, there's all kinds of questions about what the legality of it was.

• 1:02:20Lex Fridman?

  Was it hard to find legal people that work with crypto, like serious adults? Because it's such a cutting edge new world.

• 1:02:27Speaker 01

  Yeah. I mean, there was nobody who had like more than, nobody had three years of experience with it because it had only been around a few years. So yeah, we were finding people from adjacent fields. There's a certain personality type of people who are willing to join early companies because they, they have no structure. You can't really commit to them about you're going to have this team or this boss or whatever, like everything's in chaos and flux. So it takes, yeah, hiring is one of the hardest things in the early stage for sure. You got to find people crazy enough to join you in this journey.

• 1:02:56Lex Fridman?

  So one of the interesting things about Coinbase, and you've written, we've talked, we'll talk about it a bit, you're very focused on the mission.

• 1:03:03Speaker 01

  Yeah.

• 1:03:04Lex Fridman?

  You're very kind of, I think that simplifies things, that makes, that makes hiring easier, that makes working at Coinbase easier, that makes, I mean, it's similar, sort of Elon has the same thing, it's pretty clear, it's pretty clear what we're here to do.

• 1:03:20Speaker 01

  Yeah.

• 1:03:20Lex Fridman?

  So I suppose what's the mission of Coinbase?

• 1:03:25Speaker 01

  Well, it's to increase economic freedom in the world.

• 1:03:27Lex Fridman?

  And what is economic freedom?

• 1:03:29Speaker 01

  Yeah, so economic freedom is this term, kind of like GDP, that economists use, and it's basically a measure of different countries around the world. It looks at things like, are there property rights enforced, is there free trade, is the currency stable, can you start companies that you want to start, and can you join the ones you want to join, and, you know, is there corruption and bribery prevalent, or is it relatively free of that? And so this, there's several different organizations that basically score countries by economic freedom. And the really cool thing about economic freedom is that, basically, it positively correlates with things that we all want in society, like, not only higher growth of the economy, but also things like higher self-reported happiness of citizens, better treatment of the environment, better income for the poorest 10% of people.

• 1:04:14Speaker 01

  And it negatively correlates with things we don't want in society, like corruption and bribery and war even, and things like that. And so it's this pretty, pretty crazy provocative idea, which is that if you give people good property rights and rule of law and allow them to trade, it basically encourages them to do more good stuff and the whole society benefits. Like, one of the things, you know, you may have noticed this, growing up in various places you did, or, you know, I spent a year living in Buenos Aires, Argentina, that went through hyperinflation, and there's a certain pessimism that can creep into countries when they don't have economic freedom, which, it's basically like, everyone has this bit of this vibe, which is like, don't stick your head up, you know, don't try too hard,

• 1:04:57Speaker 01

  because it could all be gone tomorrow. Like, the things that really are valuable in life are just family and friends, and the past was better than the future will be. And, and so you don't really, people don't try as many, they don't try hard, because you're not really sure you can actually keep the upside of your labor if you, if you try hard, so you just don't try as hard. Whereas, in America, historically, you know, or high economic freedom countries, You know, people, basically, like, they just try more stuff because they're like, if I do good for other people, I'll get to keep part of it for myself and I can improve my lot in life and for my children, my community, whatever. So I realized when I read the Bitcoin White Paper a long time ago, that at least I had a hunch at the time, I was like, this might be

• 1:05:38Speaker 01

  a really powerful piece of technology that can inject good financial infrastructure into all these countries around the world that don't have it. Basically, good economic freedom principles in like, you know, property rights and things like that into these countries all over the world with just, as long as you had a smartphone and now crypto got invented, we could, everybody could have economic freedom. And it's crypto is kind of really well-suited for economic freedom because if you want property rights, it's basically crypto is if you can remember a 12-word phrase or, you know, have an app on your phone, you can store as much wealth as you want and it can't be taken away from you. You can even, you know, there's like refugees who need to flee and they want to take their wealth with them and they can't do it often in the traditional financial system. And so crypto lets them do that, right? Crypto is inherently global, so it allows free trade and cross-border

• 1:06:23Speaker 01

  payments. It makes it easy to accept payments from people globally, you know, it's, it provides a stable currency to everyone, not only with Bitcoin, which is kind of like this new reserve currency, but also with stable coins, right, which are, you know, new, new inventions there. So, yeah, I basically feel like crypto is, is this secret hiding in plain sight that can create economic freedom for people all over the world and a more fair and free and global economy.

• 1:06:48Lex Fridman?

  Well, so the limit, and by the way, I didn't know about Argentina. Why'd you end up in Argentina?

• 1:06:55Speaker 01

  Okay, so I was basically, you know, I was living in Houston, Texas after college, where I went to school, and I had never studied abroad. I kind of like, I don't know, I felt like I needed some adventure or something in my life. And I was like, I was running this other startup that I was trying at the time, a tutoring company, and I could, I could work from anywhere. So my plan was, you know what, I'm just gonna go do like a month in every city around South America, just like, almost like to force myself out of my comfort zone because I, I had never traveled by myself to a foreign country or whatever, and where I didn't really speak the language and. Anyway, I landed in Buenos Aires thinking I'd go all around South America where I had I'd never been there. But I basically, once I was set up in Buenos Aires with an apartment and a cellphone and stuff, then I was like, I don't want to do that all again next month.

• 1:07:40Speaker 01

  So I just stayed there for most of the time and took some day trips. But, but yeah, it was kind of a formative experience in that regard.

• 1:07:45Lex Fridman?

  You got a chance sort of unexpectedly to experience the, the social effects of hyperinflation, which is interesting. But also, I've never been, I really, really want to go as a person who likes Tango, as a person who likes the Argentinean national team in soccer.

• 1:08:00Speaker 01

  Yeah.

• 1:08:01Lex Fridman?

  And, and steak. All right. And all the other things that Argentina is known for. Okay, so economic freedom, one of the limits on economic freedom comes from government and government regulations and all those kinds of things.

• 1:08:17Speaker 01

  Yeah.

• 1:08:17Lex Fridman?

  Throughout the world. So how does cryptocurrency help resist that? So can you sort of elaborate a little bit further? What are the things that limit economic freedom and how does crypto help ease that?

• 1:08:32Speaker 01

  You know, today, the world, like traditional financial system is basically every country of the world, for the most part, has their own currency. And so there's a group of people or institutions in each of those countries that's controlling that economic policy or that money supply. And, you know, it can be, it can be manipulated, right? So it's not like many of these currencies are not linked to gold standard. You know, the US kind of famously came off that in 1970s, for instance. But if you read Ray Dalio and all this stuff, like he talks about, there's thousands of fiat currencies that have been in existence over time. And basically, all of them eventually get disconnected from backing of like hard

• 1:09:12Speaker 01

  commodities. And then they get overinflated and printed. And so in times of stress, you know, with Nixon, I guess it was like, in the US, it was the Vietnam War or something like that. It kind of drove government spending. And so under times of stress, they say, hey, it's a temporary measure. We need to break the peg. Temporary was like, you know, famous words that he used. And And they go, they go like, they go print. And so the, the bad thing about that, of course, is that it sort of erodes people's like wealth if they can only hold their assets in cash, which basically like, poor people tend to do that. You know, if you're wealthy, you can hold stocks or like real estate and things like that. But it's really a tax on the poorest

• 1:09:52Speaker 01

  people in society, inflation. So anyway, crypto in a way is a little bit of like a return to the gold standard in this digital era, right? Bitcoin, there's guaranteed scarcity of it, it's deflationary, there's never going to be more than 21 million Bitcoin. And so that's, that's a really important principle. I also think, you know, not just Bitcoin, but like cryptocurrency generally, it's really important in terms of this, you asked about regulation, right? So think about like, if you wanted to make a global borrowing and lending marketplace, or a global exchange, you would have to go to all 200 countries in the world, sometimes

• 1:10:32Speaker 01

  like maybe 50 states in the US and get lending licenses or an operating exchange or whatever. And, you know, they're not gonna, that's just an incredible amount of work and you can't even do business in many of these countries because like, you know, you have to bribe somebody or it's corrupt or whatever. And so, but with DeFi, with decentralized finance, people have published, you know, like Uniswap is a decentralized exchange. Everybody in the world, no matter what country you're in, what jurisdiction can, can interface with that decentralized exchange because it, and there's no central company operating it. It's, it's a, it's a, it's a smart contract on the Ethereum blockchain, which is globally decentralized. So there's no throat to choke. There's no one person you can, or a company you can go to to like, hey,

• 1:11:14Speaker 01

  shut this thing down. Even if everybody who's working on Uniswap today stopped, the Uniswap smart contract would continue to operate on the Ethereum blockchain. Similarly, for like a borrowing and lending marketplace, you know, like, it's, you know, if you want, if somebody in India wants to borrow from somebody in the US or whatever, like, there's very difficult to do that in the traditional financial world. But in a smart contract that's decentralized, you can enable anybody to access it. So it's, it's really kind of this great democratizing force that is creating a new financial system that is more fair and more free. Yeah. And in some ways, it is.

• 1:11:52Speaker 01

  It's a clever, it's a clever way that's not, you know, it's enabling people to do that in a novel way.

• 1:11:58Lex Fridman?

  So is Uniswap in some sense a competitor Coinbase? In which way is it? In which way is it not? So because for people who don't know Coinbase is centralized. So let me ask, doesn't that go against the spirit of crypto? Since crypto is decentralized, what are the pros and cons of being centralized as an exchange?

• 1:12:23Speaker 01

  So I don't think Coinbase is fully centralized. We have many different products. And the way that I think about it is that our exchange or our brokerage is a centralized, regulated financial service business. And it's actually important for the crypto ecosystem to have that because you want to allow a lot of the fiat money in the world to flow into the crypto economy. So we, you know, we're very proud of that. And I think we've helped a lot of that money flow in. Now, once people have money in crypto, they can choose to hold it in a variety of ways. And they can choose to hold it in a self custodial wallet, which is more decentralized. They can choose to use decentralized exchanges, which we love. And Uniswap is not really, I don't think of them as like a direct competitor to us. We basically have integrated Uniswap into a number of our products.

• 1:13:08Speaker 01

  We love DeFi, decentralized exchanges, the whole thing. So Coinbase Wallet, which is a self custodial wallet, is more decentralized. And it allows people to hold their own crypto. They don't have to trust us.

• 1:13:22Lex Fridman?

  Can you explain what a self custodial wallet is? What is a wallet and what is a self custodial wallet?

• 1:13:28Speaker 01

  Yeah, so it's confusing. So a custodial wallet means you're trusting Coinbase to store your crypto, the private keys themselves. And, you know, for some people and institutions and everything, just meeting them where they are today, that's nice because it's simpler. You know, they're not afraid of losing their crypto if they make some accidental mistake. Or so, you know, a custodial crypto products are important to help get a bunch of people into the ecosystem.

• 1:13:58Speaker 01

  I'm very supportive of self custodial wallets and I think in some ways that they are the future because more and more people are going to want to store their own crypto, not trust a third-party institution to do it. And in some ways, that is much more authentic to the ethos of crypto. So Coinbase will help you convert the fiat into crypto. And frankly, that's a more centralized thing. But once you have crypto, you can then go into the self custodial world, store it yourself. To get into the technical details just for a second, it's basically saying you're going to store the keys on your own device. And so even if Coinbase,

• 1:14:31Speaker 01

  gets some court order to seize it, we actually can't. Like, from an architecture point of view, we can't do it. Or if Coinbase gets hacked or something, we can't lose your funds. Now, the thing is, you have to take the responsibility because we're not taking it. So the individual person could get hacked, right? And there's a whole bunch of really cool research happening to make self custodial wallets more resilient to accidental loss, hacks, and just user error. Like, you know, I don't know how much you've looked at like various cryptography things, but there's like, basically, you can have multi-sig, multiple signatures from different keys on different devices, where you need like two of the three or three of the five. There's a whole technology called multi-party computation or threshold signing signatures, which is really cool.

• 1:15:16Lex Fridman?

  But those are the things you would run locally?

• 1:15:18Speaker 01

  Yeah.

• 1:15:19Lex Fridman?

  Like, what, these are all security measures, like cryptography measures to protect you without a centralized component?

• 1:15:26Speaker 01

  Right. So like, a simple example would be, let's say you had a two of three key signature, and, you know, one key might be stored at Coinbase, but that's not a quorum. So we couldn't unilaterally move your funds. But another key is on your device, on your phone, let's say.

• 1:15:40Lex Fridman?

  Oh, cool.

• 1:15:41Speaker 01

  So that, so in a normal situation, you have a key on your phone, we have one. But you, and so two out of three, now, just, you know, it can all get signed very quickly for day-to-day use. But let's say you lose your phone or something. Now, there has to be a third key, and that's where, you know, you could store it in a backup somewhere, like in Google Drive or iCloud. You could trust a third-party that's not Coinbase to also have that one key, and they can't do anything unilaterally with that one key. So that's a simple example. You can get, you can get way more complicated.

• 1:16:12Lex Fridman?

  Yeah, that's an awesome idea. And so like, if your funds get seized, Coinbase can't. Can't do anything.

• 1:16:19Speaker 01

  Right.

• 1:16:19Lex Fridman?

  Uh, but you better not lose your phone, maybe in that case.

• 1:16:22Speaker 01

  Yeah.

• 1:16:23Lex Fridman?

  So that's.

• 1:16:23Speaker 01

  Well, then it, but it provides a, there is, so even if you lose your phone, then there is a recovery mechanism. Cause you can get the one key from Coinbase, the one from your backup provider and recover a, a new one back on your phone.

• 1:16:33Lex Fridman?

  I know, yeah. But, but what if Coinbase is no longer, but because of government, because of, say it's in, in North Korea. Government says you're no longer like Coinbase is shut down in that country or something like that.

• 1:16:45Speaker 01

  Right.

• 1:16:45Lex Fridman?

  Then you can get it even if you have access to those two.

• 1:16:48Speaker 01

  Right.

• 1:16:49Lex Fridman?

  So, uh, again, perhaps a silly question, but isn't a self custodial wallet a competitor as a notion to Coinbase?

• 1:16:59Speaker 01

  No, I mean, we, so we offer a self custodial wallet. We've built one and it's like.

• 1:17:04Lex Fridman?

  But doesn't it bleed the, like, I guess I'm asking a sort of a financial question. Is, uh, like, how does Coinbase make money on transactions? So does this not, does, it does not decrease the number or does not significantly negatively affect transactions? Or are you more focused on growing the number of the pie of the number of people that are using cryptocurrency?

• 1:17:26Speaker 01

  Yeah, like a traditional financial service firm would probably say, well, we should be storing, let's keep more of the custody with us. Because that's how we prove to the world that we're valuable or whatever. I don't really believe that, like, I think that actually we kind of want to encourage our users to move to self custody over time. For those who are ready and willing, and that technology needs to mature. I'm not trying to like force anybody to do it who doesn't want to do it. But to me, that's like the future of how we get billions of people using crypto.

• 1:17:53Lex Fridman?

  But doesn't that mean they can go somewhere else easier?

• 1:17:57Speaker 01

  Yeah, that's sort of the point is like, we're all using the same protocol. So there's low switching costs, which keeps all the companies accountable, right? Like, if you, if you want to access the Visa network, there's only one company in the world you can go through to do that, like Visa. But if you want to access the Bitcoin network, there's dozens or hundreds of companies out there who can do that. So it's, you know, it's arguably, you could argue it's worse for us as a company, but I think it's better for, it's what makes Bitcoin interesting. And cryptocurrency interesting is that nobody controls it. There is low switching cost for customers. It's better for customers. And that means that all the companies in the space are going to be held to a high standard. Cause the minute you lose someone's trust, they're just going to move their Bitcoin to some other service. And that's good for the world.

• 1:18:40Lex Fridman?

  Do you think of Coinbase as, so there's these ideas of layer one, layer two, layer three technologies?

• 1:18:46Speaker 01

  Yeah.

• 1:18:47Lex Fridman?

  Do you think of Coinbase as layer one, layer two, layer three? Now that, that said, there's so many

• 1:18:56Lex Fridman?

  products that are under the Coinbase umbrella that's hard to answer that question. But what do you think?

• 1:19:01Speaker 01

  Yeah.

• 1:19:01Lex Fridman?

  Do you acknowledge the existence of layer three?

• 1:19:05Speaker 01

  So, so, you know, usually when people are using those terms, layer one, layer two, so they're referring to like, layer one would be the blockchain, layer one blockchain itself, like, like a Bitcoin or Ethereum or something. Not like a centralized service like Coinbase, or even our decentralized self custodial wallet. So, um,

• 1:19:24Speaker 01

  yeah, I wouldn't consider us to be like a layer one. These are, these are the decentralized protocols that we're integrating, but we are, Coinbase itself is not those.

• 1:19:31Lex Fridman?

  Yes, but layer, layer two is the thing that was basically doing transactions without the settlement on the blockchain. And so you, you get to have some of the benefits of faster transactions without

• 1:19:44Lex Fridman?

  the, the security associated with the blockchain. And layer three is, I suppose, sort of apps built on top of that. So, you know, at least I think talking to Michael Saylor, he considers Coinbase a layer three technology.

• 1:19:59Speaker 01

  Interesting, okay.

• 1:20:01Lex Fridman?

  I don't even, I'm not really particularly familiar with this kind of distinction of layer three and two. I don't see them as fundamentally different. But some of the, okay, I mean, one way of asking that, is there some layer two like of magic happening in order to make transactions associated with blockchain happen? Instant, so that they're quick? So that

• 1:20:26Speaker 01

  Coinbase?

• 1:20:26Lex Fridman?

  On Coinbase, yeah. Is there some magic going on? Cause you're, okay, we should say, how many cryptocurrencies are currently on Coinbase? So it's more than two?

• 1:20:36Speaker 01

  Yeah.

• 1:20:37Lex Fridman?

  It's a lot more than two.

• 1:20:38Speaker 01

  Yeah.

• 1:20:38Lex Fridman?

  So you have to understand, they have to incorporate all these technologies.

• 1:20:42Speaker 01

  Yeah.

• 1:20:43Lex Fridman?

  So how do you make that magic of sort of universal transactions happen across all of these different cryptocurrencies?

• 1:20:53Speaker 01

  There's our centralized products and decentralized products, right? The centralized products, we are storing that crypto for you. And so if you're moving from one of your accounts to another account, like ETH one account to ETH two account, or from my ETH Coinbase centralized account to your ETH centralized account. So we can do that transaction off chain to make it faster. And it saves the customer fees and it just confirms instantly. But it's not truly using the decentralized blockchain, right? So you can also send any Bitcoin address or Ethereum address, for instance. And that is putting the transaction on chain. Now, our decentralized products like Coinbase Wallet, the self custodial wallet, every transaction is happening on chain with that. And so basically, it just shows a little bit of the evolution of Coinbase and the blockchains themselves.

• 1:21:37Speaker 01

  Like in the early days, these networks were not scalable. And so there were no L2 solutions, for instance. And so we had to do sort of these hacks, like moving the crypto off chain, if you were moving between your own accounts and stuff like that. Otherwise, the minor fees would have just eaten us alive as a company, right? Yeah. But now that like, the blockchains are starting to scale. There's a whole bunch more work that needs to be done on that. And we're getting L2 solutions. So I think more and more of the transactions are going on chain, whether it's L2, L1. And, you know, we shouldn't be like, ideally, we shouldn't be doing that many transactions, you know, off chain, just internal Coinbase ledger or something. That's not really in the spirit of crypto.

• 1:22:18Lex Fridman?

  So when you say on-chain, that includes like a Lightning Network? That includes layer two technology that the blockchain proposes?

• 1:22:26Speaker 01

  Yeah.

• 1:22:27Lex Fridman?

  So you're, when you, yeah, okay. So I guess I was asking how much fun magic is happening off-chain within Coinbase? And you're saying in the early days, you had to, but you're trying to do less and less.

• 1:22:39Speaker 01

  So look, there's a bunch of like high-frequency traders that use the centralized products. And even just regular retail people, like they don't want to pay the gas fees and stuff. And they're trying to, it actually, we back of the envelope, you know, calculated this out at one point. And just like, it would be completely infeasible for like high-frequency traders to put everything on chain at this point. That's basically what DEXs are doing. And so Both are important. I think more and more is going to move decentralized over time, which is great. And we're

• 1:23:07Lex Fridman?

  Dex is our decentralized exchanges, by the way.

• 1:23:10Speaker 01

  Yeah.

• 1:23:12Speaker 01

  So anyway, we want to, we want to encourage more and more of it to move decentralized over time, but I don't, the centralized things aren't going away for like a long time. It's a decade from now, there's going to be some big institution or pension fund or central bank that's like, all right, we got to hold crypto. Let's set up the account in a centralized way. So that's, that's fine. Both, both are important.

• 1:23:33Lex Fridman?

  Do you know the number of cryptocurrencies currently on Coinbase? Do you know that number?

• 1:23:38Speaker 01

  It's over 100, but it depends, it depends what jurisdiction you're in and, you know, are you an institution versus retail? There's so many different categories now.

• 1:23:48Lex Fridman?

  But over 100?

• 1:23:50Speaker 01

  Yeah.

• 1:23:51Lex Fridman?

  So what does it take to become, to, to, to become an asset, to become a cryptocurrency on Coinbase, to add your technology to Coinbase?

• 1:24:03Speaker 01

  Okay. Well, so we're trying to get away from this idea of being listed on Coinbase as being seen as like an endorsement or something, because I actually think it's very important that we are not considered judge and jury about, you know, like imagine it was the early days of the internet and you were like, what's a good webpage and what's a bad webpage? Like you would have been totally wrong. Or anytime big tech companies try to make these review, review boards of like, you know, Apple famously gets in trouble for this a lot with their app store review process, right? And so something that you think, like a committee of people somewhere thinks looks silly may turn out to be the next big thing, right? And so it's very difficult. So what do we do? I mean, we basically have

• 1:24:43Speaker 01

  a test of legality, right? We, we check, you know, do we, do we believe this is a security? If so, it can't be listed on Coinbase and there's a very rigorous process we go through for that. Just currently the way the laws are in the US, you can't, you can't do that. And we've been, we acquired a broker deal license from the SEC. We're trying to work with them to get that operational and hopefully someday we can trade real crypto securities. But today that's not possible in the US at least. Then we look at sort of the cybersecurity of the, the crypto asset. Does it, do we think there's some flaw in the smart contract? You know, a way that somebody could manipulate it without the customer's permission. We look at some compliance pieces to it as well, like the actors behind it and like, you know,

• 1:25:27Speaker 01

  there any kind of criminal history, anything like that. But if we believe it meets our listing standards, basically the this test of legality and everything for for customer protection, then we want to list it because we want the market to at that point decide. And it's kind of like, it's kind of like Amazon or something like that, where, you know, it a product might have three stars or it might have five stars, but if it starts to get one star consistently, like it's probably fraudulent or it's defective or something like maybe Amazon will remove it. But otherwise, you want to let the market decide what these things are.

• 1:26:01Speaker 01

  So that's generally how we do it. And by the way, more and more of these assets, I think, especially like low market cap assets are going to be traded on DEXs through Coinbase. It's not that we we don't need to list every asset on a centralized exchange. I think DEXs are really good for the long tail. And then it becomes an even it's even more clear to people like this is not some endorsement by Coinbase of like, this asset's good and this one's bad. Like, you know, my my belief is there's going to be millions of these assets over time. And so I hope it doesn't like make news every time we add one in the future.

• 1:26:33Lex Fridman?

  Yeah, I wonder how you get there because I even I look to Coinbase. For for example, you know, people, as you could imagine, sort of tag me on Twitter or something like that and all that like, you should interview our sort of this, the founder of this particular coin, right?

• 1:26:53Speaker 01

  Yeah.

• 1:26:53Lex Fridman?

  And I it's so hard for me to know what's first of all, what's interesting technology? What's who's a scammer or not? Who's actually legitimately representing ambitious new thing versus?

• 1:27:11Lex Fridman?

  A scam and I, you know, there's very few sources of like verification signal. And unfortunately Coinbase in part has become a little bit of that too. And you're trying to get away from that because you're trying to get as many sort of let, let the people decide. So you're thinking of like Amazon star type system where the people could rate.

• 1:27:35Speaker 01

  Yeah. So I think we'll actually probably add like user ratings and reviews. So, um, and, and we're, we'll be very cautious about like, you know, these are real people.

• 1:27:45Speaker 01

  There's a bunch of stuff we have to do for that already. So I think wisdom of the crowds is good in terms of getting feedback on items. But we also, we're going to do our own review, which I mentioned earlier, right? Which is like, okay, it meets this minimum bar to be listed on our site.

• 1:27:58Lex Fridman?

  Yeah.

• 1:28:00Speaker 01

  So I think, yeah, both are important.

• 1:28:02Lex Fridman?

  How do you know if, if a coin is a scam or not?

• 1:28:06Speaker 01

  Well, you can, you can see a few things. So, you know, I hate to use the word scam because a lot of these, these are judgment calls. You gotta, I kind of, a court may, may, or a jury may land either way. But things that would be red flags to look at would be, um, you know, is a bunch of the asset owned by an insider or insiders, um, with short vesting periods.

• 1:28:28Speaker 01

  You know, are, does the background of the founders, like they may have criminal records or if they've perpetrated other frauds in the past, right? There's a difference between something which is just a me too product. It's like, doesn't have anything interesting about it and something that's an actual fraud or outright scam. And, um, you have to, a lot of this data, what's cool about it is that it's now available on chain. You can look at like the tokenomics behind it and see who owns it.

• 1:28:56Lex Fridman?

  Tokenomics, I love that term.

• 1:28:57Speaker 01

  Yeah. And are they selling it, you know, in like inappropriately? Or are they pumping it on like YouTube and Twitter and making promises about, hey, the value of this thing may be a higher in the future. And like, all those are just big, big no nos that we would, um, you know, we just don't want to go there. So our, our whole thing is like, we want, we want to enable innovation in this space, but not allow anybody to curtail the advancement of this industry by like doing some kind of fraudulent thing or get rich quick thing. So.

• 1:29:28Lex Fridman?

  It's a tricky industry because I'm, I'm trying to figure out who to, you know. What's interesting to understand, to research?

• 1:29:37Speaker 01

  Yeah.

• 1:29:37Lex Fridman?

  And it's hard to know. Let me ask you about a tricky one to add to a centralized exchange, which is privacy preserving cryptocurrency. So like Monero.

• 1:29:47Speaker 01

  Yeah.

• 1:29:48Lex Fridman?

  Is that technically difficult? Or is that why? Why is like Monero, for example, forget that specific one, but like privacy preserving cryptocurrency blockchains? Why is that? Is that ever possible to add?

• 1:30:03Speaker 01

  So that's a great question. So the answer is maybe. So here's the reason why. So because we're regulated financial service business, we have various licenses to do that. We are regulated by various regulators. Part of those licenses requires us to have a, quote, reasonable program to monitor for suspicious activity.

• 1:30:27Speaker 01

  You know, an AML program, anti-money laundering, right? And so if a coin is 100% anonymous and we can't really do blockchain analytics to track source of funds and where these things might be going, it makes it harder to have a reasonable program around that that's defensible. Now, there are privacy preserving coins like Zcash, which have something called a view key. And a view key is basically another key which allows you to de-anonymize the transactions in specific situations where you want that. So for instance, you know, we do support Zcash. And one of the ways we got comfortable with that is that when you're buying it on Coinbase,

• 1:31:06Speaker 01

  you know, you can basically have a view key. The transactions are not anonymous while you're buying it and we can see where it goes afterwards and do our whole standard program. Now, if it gets a few hops away down the road, I mean, people could eventually turn on privacy preserving aspects. So, you know, these are tough judgment calls, but at least in terms of our interaction with the customer and everything, we feel comfortable at that. I think there's a broader point here, which is that I actually think privacy coins are a good thing for the world and they should be allowed. And more like, you know, despite we've made this judgment call to operate in a regulated and safe and compliant way. But Just taking my Coinbase hat off for a minute, I think the world would be a better place if there were more privacy coins, because it's kind of like the internet when it first

• 1:31:51Speaker 01

  came online, like, there was no HTTPS, everything was HTTP, and there was, you know, so people were afraid to put their credit cards on the internet, and your messages could be intercepted and all this stuff. And now, the whole internet has basically moved to HTTPS with a little lock icon in your browser, which is better. And financial information is like the most important information to keep private, right? So, there's times where, like, let's say you're running a charity or something, and you want to have total auditability transparency for the whole world, who donated and where did the money go? That's great, you want it to be public. But if it's like your personal money or something like that, you don't want to be broadcasting that to the whole world. And in some ways, that's what blockchains are doing, you know, pseudonymously, because like, but it is a public ledger. And so if you can know who owns each

• 1:32:35Speaker 01

  address, you can basically de-anonymize it. I, you know, I think, basically, the people should fight for privacy and freedoms of all kind, but privacy of money is a good thing. So, I would like to see more of that in the future.

• 1:32:47Lex Fridman?

  You've chosen Coinbase to have a seat at the table with the regulators?

• 1:32:54Speaker 01

  Yeah.

• 1:32:55Lex Fridman?

  So what kind of, what kind of conversations are there at that table? What are the regulations like? What is the level of understanding with regulators? What are they worried about? What are they thinking about? What are the positive and what are the negative regulations that you're facing, that you're educating, struggling with, pushing back on, supporting, all that kind of stuff?

• 1:33:19Speaker 01

  Yeah. Oh, man, there's so many, because we're, I mean, we're live in, like, you know, maybe 100 countries or more at this point. So the conversations are all over the map. I'm trying to think what broad strokes I could paint for you. So, I'd say one trend that's, that's positive is that, basically, regulators around the world are more and more, over the last five years, I would say, it's more and more common to find a regulator today, asking, "How can we preserve the innovation potential of this technology while keeping the bad actors out?" than it was five years ago, where they were saying, "This is all bad activity, how do we prevent it?" And so, maybe this is-

• 1:33:58Lex Fridman?

  When you say "more and more," what fraction?

• 1:34:03Speaker 01

  Okay, so just, I'll give you like a US specific example, although we operate in many countries. So when I go to DC now, I would say, you know, 50, 60% of the people who I meet with are basically, you know, they're in the camp of crypto has a lot of potential. We should regulate it to make sure the bad people don't do something bad with it. But this is here to stay and it has a lot of upside. We should basically create thoughtful regulation and celebrate it and actually encourage this innovation to happen in the US. That's a huge change from just three years ago where it was probably 30% of people saying that. Now it's like 60, it's like almost double. It's getting harder to find like true crypto skeptics in DC.

• 1:34:45Speaker 01

  I'd say that, you know, maybe, maybe only like 20 or 30% of people are like willing to say something negative. Like they actually think it's net negative. It's like, it's really hard to defend that position at this point because almost like one in five Americans have used or tried crypto at this point. So you're, you're kind of condemning 20% of your fellow citizens if you say that at this point.

• 1:35:05Speaker 01

  You know, especially with NFTs and all these things, like a huge segment of people who don't even care about investing or whatever came into the space. So, and then basically that's, that same conversation is happening, but you know, delayed by a few years in, in like India and Europe and in, in some Asian countries. And some countries have really embraced crypto and they're like trying to really, they're, they're ahead of where the US is because they're trying to actually attract the best startups and entrepreneurs like, you know, like Dubai and the UK and Australia and all are kind of pushing good regulation.

• 1:35:40Speaker 01

  El Salvador actually, I guess, adopted it as like Bitcoin as a legal tender. There was another country, Central African Republic, I think, that is supposedly did that as well. But, you know, there's countries like China that are more autocratic that are saying, hey, this is a threat to our power. And like, we're going to try to really curtail it.

• 1:35:56Lex Fridman?

  So what kind of regulations are there that you feel the most that are limiting or that are empowering? Like, is there specific examples?

• 1:36:05Speaker 01

  Yeah, okay, so, um, I mean, basically, I think the securities laws in the US need to be clarified about what, there's crypto is many different things. That's what people don't realize. So like, some crypto like Bitcoin, Ethereum, and many others are probably more like commodities. They're not controlled by any one person, you know, like, anyway, there's people who want to raise money for a company. That's sounds more like a security. That should be regulated by the SEC. Commodities regulated by the CFTC. Then there's some cryptocurrencies which are more like currencies, like stable coins and central bank digital currencies. And those are probably, you know, should be regulated by the Treasury or someone like that. And then there's a whole another category of cryptocurrencies which are none of those things. They're they're NFTs like artwork,

• 1:36:49Speaker 01

  or they're metaverse items, or decentralized identity and voting. And so I I think that there's a very unhelpful point of view out there by some folks, which is, hey, this is all, most of this is like bad activity. We need to shut it down. So we're just going to pursue enforcement actions or something like that. Most people in DC don't feel that way anymore. And I think the people of the US don't feel that way anymore. Because a lot of them are using this stuff and their their general view is there's a lot of upside potential here. We can all agree. Let's get rid of the fraud and the scams. We all want to get rid of that. So let's create a relatively simple test, which says,

• 1:37:28Speaker 01

  you know, if it's like, nobody controls more than 20% of it or some threshold, it probably is more like a commodity. If someone's raising money for they're selling this thing for a business, then it's probably a security. And then, you know, if it's more like a medium of exchange, it's a currency. And if it's none of those things, maybe it's artwork or whatever. A legal test like that would help clarify who which regulator is regulating what. And then, um, you know, we also want to have probably like a sandbox for innovation where if you're a startup and you're doing less than, I don't know, some number,

• 1:38:03Speaker 01

  less than some amount of payment volume or customer funds you're storing. It's like, just let those things get off the ground without a soul crushing amount of legal bills, you know, and uncertainty. So. If the US can get there, that would be great. I think a bunch of other countries now are rushing around the world to sort of create that regulation that does attract innovation. And so in the international bodies like IMF and G20 and stuff, they're starting to look at proposed regulation. I hope that Coinbase and a bunch of other crypto companies can help in that conversation, too. We have a whole policy effort. I think actually crypto policy efforts are like probably one of the biggest things in DC right now. So it moves, it moves slow at the speed of government, but

• 1:38:45Speaker 01

  yeah. And in the meantime, we're just trying to help more and more people use crypto because ultimately that's what in the democracies, that's what they care about. Like they'll do what the people of the country want.

• 1:38:54Lex Fridman?

  So you want governments to start understanding differences between in the crypto space, commodities, securities, currencies, NFTs. I still don't understand. What are they supposed to make sense of NFTs? What is NFTs exactly from a perspective of a regulator?

• 1:39:11Speaker 01

  Yeah. So

• 1:39:12Lex Fridman?

  Is it the other category?

• 1:39:14Speaker 01

  Yeah. You know, most NFTs you could think of as like artwork, although it's, it's, who knows where it's going to go. It could be

• 1:39:19Lex Fridman?

  Well, you mentioned Metaverse, right? You mentioned some kind of unique identity of a thing.

• 1:39:24Speaker 01

  Yeah, like

• 1:39:25Lex Fridman?

  Isn't everything art, man?

• 1:39:27Speaker 01

  People selling virtual land in

• 1:39:28Lex Fridman?

  Yeah, right.

• 1:39:28Speaker 01

  NFTs. I actually, I bought this NFT that's like, it's like citizenship in this like city DAO in Wyoming. Like I've never been there, but it's almost like a, like a, like a badge or attestation, like to get access to this location. There's like people doing like tickets to events, like, you know, they're called a POOPS, like proof of attendance and things like that. So it'll be very interesting to see where NFTs go over time. It could get and that's the danger. You don't want to try to like define the regulation if you don't even know where this thing's going to go. So

• 1:40:03Lex Fridman?

  And so your efforts in the policy arm is, is education?

• 1:40:07Speaker 01

  Yeah, education, advocacy. We're just trying to be like a helpful educational resource essentially. And then if they give us feedback and like, hey, don't do this or don't, or do this, like, we're more than happy to do anything that's requested. We generally go get licenses and we've just tried to do the right thing in the absence of clarity because If it's not clear what the law says, then you should just basically do good things that you think may be required in the future to show good faith effort towards the right thing. And that's part of innovating in a regulated field, which is a whole topic in itself.

• 1:40:41Lex Fridman?

  So if you are at the table, I mean, this is less the case in the United States, but can government agencies seize a person's cryptocurrency by forcing Coinbase to hand it over? So when you're centralized, they have a phone number to call.

• 1:40:58Speaker 01

  Okay, so this is a complicated topic. Like, if you really want to be sure that, this is why people want to store their own crypto, right? Like with self custodial wallets, like with Coinbase Wallet, embracing decentralization, they want to avoid that. Now, in the US, there is rule of law, right? So we have reasonable protections in place around like search and seizure and things like that. Coinbase, we publish transparency reports on this. We get subpoenas, court orders, things like that from various countries around the world. And there are situations where we have been ordered to freeze accounts, things like that. You know, we have to follow the law, is another way to put it. We're a regulated financial service business, and so...

• 1:41:43Lex Fridman?

  If the money is used as part of breaking the law, that's what that, in a particular jurisdiction, in a particular...

• 1:41:52Speaker 01

  Right. And then the other thing, sometimes we will actually get court orders or subpoenas that are overly broad. We've seen, so they need to follow due process, right? And so we've seen some in the past that were like, "Well, we need you to freeze this huge number of accounts." And it's like, well, we'll actually have gone to court and like pushed back on some of these and said, like, "What is the probable cause? And has the threshold been met?" And like, we've won some of those cases on behalf of our customers. So, yeah, it's actually really, it's kind of unfortunate and frustrating. As a, you know, as a large business, you spend a lot of resources basically interacting with inbound requests by all kinds of lawyers and people and...

• 1:42:32Speaker 01

  Requesting things and some of them are silly and ridiculous and you have to push back and say no. And so it's kind of a tax on every company at a certain size, which ultimately gets passed on to the customer in higher fees. So you have to employ armies of lawyers to deal with this stuff.

• 1:42:48Lex Fridman?

  Can you educate me on something? How much innovation is there in the legal space? So for lawyers working with Coinbase, because it's such a new, cutting edge thing. So you're, there's a lot of gray area you're supposed to be operating under. Like, how hard is it being a lawyer at Coinbase?

• 1:43:11Lex Fridman?

  Like, how much precedence is there, I guess, is what I'm asking. I mean, just like you said, three years. It's kind of a new space.

• 1:43:19Speaker 01

  Yeah. Well, it's probably very hard to be a lawyer at Coinbase and very fun because, you know, whenever you're in a new field that's growing fast, there isn't a lot of case law and just precedent set. So that's also an opportunity for you to go create that stuff. And that's what a lot of legal careers are made out of is like, take a complex situation where you have to balance difficult things like, how do we prevent bad activity but still enable innovation? It's a hard question. And there's, you can go draft legislation and circulate it to policymakers or come up with these policies and, you know, how do you operate a business in an environment where the law is just unclear, right? It's like, try to do the right thing, but like, you know, strike the right balance.

• 1:44:03Speaker 01

  So, yeah, a lot of our lawyers have to come up with that. Very creative stuff.

• 1:44:07Lex Fridman?

  You mentioned one of the things you're focused on is expanding the number of people, maybe a billion people on Coinbase or using cryptocurrency. Where are we at now? How do we get to a billion?

• 1:44:18Speaker 01

  As of Q4 last year, we had 89 million verified accounts on Coinbase. But in any given quarter, only, you know, maybe like 10 or a little more million of those are like really active. So, and then if you look at globally, I think some of the estimates I've seen is maybe there's like 200 million people or something like that who have ever used or tried crypto. So.

• 1:44:43Speaker 01

  We're along, you know, we're ways from a billion, but it's not like that far off.

• 1:44:48Lex Fridman?

  How do you get there?

• 1:44:49Speaker 01

  Yeah, okay. So a few things. One is the blockchains have got to become way more scalable.

• 1:44:56Speaker 01

  It's kind of like we're all running dial-up modems and we need broadband. And so it's just like too expensive, too slow to do all these transactions. And I think if we just get L2s working and scalability, you know, we'll see another order of magnitude kind of come out just from that. I think the second one would be more clear regulation. That would help a lot. I do talk to, you know, pension funds and, you know, various asset managers, sovereign wealth funds and stuff. And a lot of them tell me, we've, we've got 1% of our portfolio in crypto today, but we really would rather have like 20% in there. But what we're waiting for is more clear regulation, coming out and saying that clear test that I was saying, these assets

• 1:45:39Speaker 01

  are commodities regulated by SEC, these are by SEC, these are by Treasury, whatever. So that would be a big unlock.

• 1:45:45Lex Fridman?

  Do transactions. So one of the things that you mentioned, payments, sorry.

• 1:45:50Speaker 01

  Yeah.

• 1:45:51Lex Fridman?

  Well, does that unlock a lot of users?

• 1:45:55Speaker 01

  Yeah, it does. I mean, remittance is like a huge thing. People sending more money home to their families in other countries where the fees are super high. So, yeah, if we get blockchains to be more scalable and there's more global adoption, like I think we'll see remittance quarters move over to crypto a lot. There's also just, the other thing that's driving a lot of crypto adoption is basically the creation of more and more third-party apps. So, or DAPs, they're sometimes called decentralized apps. So a lot of startups now, you know how like used to, in the early 2000s, they called them dot com startups, but now you don't need to say dot com because everybody's using the internet. And so now there's like hundreds of thousands of these crypto startups. But I think in the future, you won't need to call them crypto startups because they'll just be

• 1:46:38Speaker 01

  called startups because everyone's using the internet and crypto and whatever. So, anyway, the, the use cases, the utility of crypto is, is getting better and better with like all these third-party apps getting funded and created and.

• 1:46:50Lex Fridman?

  Do you think there's going to be a killer or a set of killer DAPs? Like a thing where nobody can live without. Are we still waiting for that?

• 1:46:59Speaker 01

  There's gonna be a bunch of them. It's just like, it's like the internet, like what were the killer web companies? You know, like Uber and Wikipedia and Airbnb and Google and like, so there's gonna be some big winners, but there'll be thousands of, this is basically the new, it's like what, what happened with the dot com startups in the early 2000s. It's like every, a lot of the best entrepreneurs are building crypto startups now. So tons of venture money flowing into the space. A lot of smart young people. So.

• 1:47:25Lex Fridman?

  Do you think Bitcoin or some other cryptocurrency will become the reserve currency of the world at some point?

• 1:47:31Speaker 01

  Cause this is kind of a controversial idea, but I actually think yes. Um, I do think Bitcoin could end up becoming a reserve currency of the world. There's, so, you know, I've been reading Ray Dalio recently, um, with his new book, like the changing world order. And I, I, I thought it was a really well researched book. Um, he talks in there, he looks back at history, right? He looks at like empires and, um, you know, going back to various Chinese empires, the Dutch and Ottomans and everybody. And how did they rise and they, they were able to have the reserve currency as they, as they rose? And what produced that? Like it came from, you know, good education and innovation and better trade. And anyway, so

• 1:48:10Speaker 01

  the US by some measures is, is kind of, looks like it's maybe it's had a really good run and it's coming down a little bit. And China's kind of, kind of coming up. Who knows how that'll play out, by the way, like the world is very complicated. It could, that could switch. Um, but I guess if the US dollar is going to be seeing more inflation in the future, the Chinese yuan is not like necessarily better, right? I mean, they have a ton of debt as well. And, um, you know, it's not like you could really, that, that the yuan could be inflated as well, right? It probably will be. And so I do think that there's this group of people today, which probably most traditional, um,

• 1:48:53Speaker 01

  I don't know, like the people, uh, who run big banks and like governments and stuff that they're not, this is not really on their radar today. But I think there's, there's a basically a group of younger people in that kind of, you know, 25, 35 year old range who are tech savvy. They're starting to think of crypto as like the primary thing in their financial life. It's like, I basically hold my wealth in crypto and I use. Dollars or euros or whatever, if I if I happen to need something, I convert it to that at the last minute. It's like if I if I go on, if I'm traveling, I might convert some local currency in the moment, but that's not where I hold my most of my wealth. So this segment of the population is not like massive yet from a GDP point of view, but I think it's a leading indicator of where things could be going. And this is

• 1:49:36Speaker 01

  actually good for the world. It's kind of like, especially if China does continue to rise and it has a more authoritarian view, it'll be kind of this very centralized East versus a decentralized West, where people are in the West, in the free world, really kind of embracing crypto and a more open, fair, free, global financial system, which I think will be enormously beneficial for humanity. And I do think basically Bitcoin is the reserve currency, the gold standard of the crypto economy. So that's pretty crazy.

• 1:50:08Lex Fridman?

  Yeah, the gold standard. I mean, it's also with like with Ray Dalio. I feel like China will drive a lot of this, either in response or directly. I mean, I think the ruble, I'm not paying as close attention to the financial systems, but I think they're trying to tie it to gold once again. So that's an interesting, maybe it'll be one of the more authoritarian regime that will switch to Bitcoin standard first. And then it's the the West that will, out of that pressure will catch up versus versus the other way around. It's fascinating to think of what is the the forcing function? What kind of

• 1:50:53Lex Fridman?

  perturbation is required to switch to change anything, honestly, about the financial system? But it could be, as you're saying, just waiting for the people that are young now that are embracing crypto to enter the positions of power, essentially. But I hope that's not the case, because that's a, if for any innovation, we have to wait, sorry to say, for the older folk to pass away.

• 1:51:20Speaker 01

  Yeah.

• 1:51:21Lex Fridman?

  That's not an efficient way to to make change.

• 1:51:24Speaker 01

  Yeah, that is, that's a super interesting topic of how people's minds become less plastic as they age. Yeah.

• 1:51:32Lex Fridman?

  I guess it's a feature. It's called wisdom, but then we also need the wild ones to explore. Exploration versus exploitation.

• 1:51:42Lex Fridman?

  You wrote a blog post that's really interesting in September 2020 titled Coinbase is a mission focused company, like what we're talking about. So one interesting thing you said in that blog post is that we're not going to be distracted by sort of activism within the company that's not related to the mission of the company. Now, that's a rare thing for a company to state, for a company CEO to state, especially in this climate.

• 1:52:14Lex Fridman?

  Can you, first of all, describe in a little more detail what you meant? Did you receive blowback for this?

• 1:52:22Speaker 01

  I definitely received some blowback, but yeah, I'll describe what I meant. And if you want to talk about how it came to that too, we can talk about that. But what I meant is that

• 1:52:32Speaker 01

  there's a lot of companies right now, including tech companies, but not exclusively where

• 1:52:39Speaker 01

  you know, I think like great companies, they have an important mission. They're trying to do something really good for the world. And unfortunately, they're getting a little distracted from that at times because of employee activism that is causing the company to basically jump into whatever the current thing is and try to help is like the positive interpretation, you know, the negative interpretation would be to virtue signal. And my view is that this is actually kind of destructive to, this is largely an American company phenomenon, by the way. I do worry that this is making America less competitive, even though I think of myself as kind of internationally minded, but I, you know, I'm a US citizen and had a lot of my whole life here.

• 1:53:20Speaker 01

  So when we put out this statement, we had employees that were not in the US who were confused by it. They were like, why did Brian need to say that? We're just saying you're going to work, focus on work at work. That's what we were doing already.

• 1:53:33Lex Fridman?

  Yeah.

• 1:53:33Speaker 01

  You know, and there was certain pockets of the US, certain cities, you know, in particular, where we had employees that a very peculiar cultural phenomenon had evolved where I think people really wanted the company they worked at to be You know, almost acting like the government or something and like trying to solve the hardest societal issues and at least have an opinion on it, if not contribute to the solution on almost everything.

• 1:54:05Speaker 01

  And for me, I kind of, you know, I was, it was a very uncomfortable situation for me as a CEO. I'd never quite been in this situation where most of the time when employees in the past were kind of asking me questions, they would be asking about like, you know, how do we make this product better? Like, what do we do with this competitor? What about this regulator? And it got to a place around that time where most of the questions we were receiving were, I think, even about things not related to the company. They were about broader societal issues like, Brian, what's your stance on XYZ controversial thing? And, you know, it was, I often like, didn't have an opinion on these. These are really hard questions, right? And I didn't really, I felt like it was distracting the company. People internally were getting

• 1:54:46Speaker 01

  into fights a lot to like disagreeing with each other. There was, there was a thing where like the social Slack internally was turning into social media almost with people putting in flame wars. So, and this culminated, by the way, with a walkout that happened in the company. We, we, we received like some demands from employee groups about various things. And there was like basically an antagonistic thing with management and employee. And I was like, we're all on the same team here. If you want to be antagonistic, let's do it with somebody else outside the company, you know, that we're trying to improve the world in that dimension. So, yeah, eventually I was like, okay, the company is not aligned on this. I just don't feel, I don't like the job as CEO, frankly. Like, if the job is to come in here every

• 1:55:28Speaker 01

  day and like have to squirm in front of like these, the most difficult societal questions,

• 1:55:34Speaker 01

  I don't think I want to do that job. So like, either they're gonna have to go or I'm gonna have to go. And I founded this company and I really believe in the mission, so they're gonna have to go. And what I realized was that, so I basically, I made an exit package available to anybody who wasn't on board with this direction. 5% of employees took it. I got the company realigned towards this, this mission. We're all here to do work. By the way, people can, they can go do anything like political or social activism outside of work. It's totally fine. Like, we all, everybody has stuff like that in their personal life. But while at work, we can also disagree at work, by the way, on the work. You know, this is not like a no disagreement culture, like we should, let's try to get the truth. But don't bring stuff into work that's just gonna create division. Make, make the workplace a refuge from division about all these crazy things and like,

• 1:56:20Speaker 01

  We're all aligned here to work on the mission. Let's do that.

• 1:56:22Lex Fridman?

  Yeah, that was really, really, really refreshing to hear. So this is me speaking, but there's a sense when companies take on these issues publicly from a CEO position or anywhere else, that it does seem to optimize for virtue signaling versus solving a particular problem. Because to solve a particular problem, you really have to really put in a huge, you have to hire a huge number. You basically have to create a company within a company to take on a particular thing.

• 1:56:54Speaker 01

  Right.

• 1:56:55Lex Fridman?

  But if you allow yourself to internally care about a particular issue, you're basically pacifying some number of employee, like making sure Slack doesn't get out of hand. And then you're doing this kind of, from my perspective, especially on issues I care about, fake virtue signaling, basically trying to understand what will make me look the best, what will make the company look the best in this particular aspect. And it just seems very shallow and it's optimizing for the wrong thing, not for the solving of the problems.

• 1:57:26Speaker 01

  Yeah.

• 1:57:26Lex Fridman?

  But for the making yourself look like the good guy and trying to then leverage that to say, I'm the good guy in all situations. And it just, it's, it's the wrong thing. And perhaps from your perspective as a CEO, as a leader, it's also creating division, unnecessary division within people. Like they get, yeah, there's something about us who gets extremely argumentative about certain topics. They really bring out the emotion.

• 1:57:57Speaker 01

  Yeah.

• 1:57:58Lex Fridman?

  And I think that probably, as you were saying, that emotion is even probably okay, maybe productive when that emotion has to do with the mission of the company. Like you really care about those disagreements versus like something that has nothing to, nothing to do with a particular, with, uh, with increasing economic freedom, uh, using crypto. Yeah, it's fascinating, but it was so refreshing because it's rare. Why do you think that's a rare? So the city you're mentioning, I mean, there's a bunch of cities, but you know, San Francisco is one such city when, when, when that culture. And it's sad because San Francisco is also, the Bay Area is also the hub.

• 1:58:45Lex Fridman?

  Historically of some of the greatest innovation in human history.

• 1:58:50Speaker 01

  Yeah.

• 1:58:50Lex Fridman?

  So that there's that tension. How did that culture emerge there? Where like the innovation was done by people that are very mission driven. You get a bunch of smart people together to solve a difficult problem. They get maybe sometimes too much blinders on, but they try to balance that. And because it requires that focus to solve an actual problem. And yet that's also the place where this culture emerged. It's a fascinating human dynamic. I don't know. Somebody will one day tell the history of Silicon Valley. Not just the innovation, but the social dynamics that occurred there. Anyway, why do you think that's so rare?

• 1:59:29Speaker 01

  Well, because people don't want to get attacked. It's like super, you don't want to get canceled, right? It's super uncomfortable, you know? Nobody wants to be called a racist or whatever, whatever, you know, people want to say on Twitter. So.

• 1:59:43Lex Fridman?

  Get attacked?

• 1:59:44Speaker 01

  Yeah, yeah, I definitely got attacked. I mean, and I knew it. I knew it would be controversial. The only reason I did it frankly was that I was kind of at my wit's end. I was like, well, like I said earlier, like the job, the CEO job sucks. Like either I don't want to do it or they have to go. And I'm going to make the company into something that I want. And, you know, I spent, I'd spent eight or nine years of my life at that point, kind of building this thing. I was like, well, I could go start another company, but it takes a long time to get momentum with these things. And, you know, Coinbase is a very rare thing that happened in the world. I feel very passionate about it. So, um, yeah, I'm not going to go like, I need to make this the company that I want to work at. And what was really interesting was that there was such a huge outpouring of support. So I knew that it would be controversial and I would get attacked.

• 2:00:28Speaker 01

  And predictably, you know, there was some, um, some journalists and, you know, New York Times and all these people who kind of like went and started writing hit pieces on, on the company after, shortly thereafter. And they basically just call people who've left the company and like, you know, can get quotes on whatever they want. And then they'll write a story. So mainstream media, I lost a lot of trust in mainstream media, frankly, after that. And of course, it's kind of become obvious since then that, um, most mainstream media is like hyper politicized at this point. It's basically either super left or super right. And it's not really that focused on. Truth. So that's, that's kind of unfortunate because I think journalism is actually like really important in society.

• 2:01:07Speaker 01

  So that, that whole thing got eroded in the US. Luckily, there's sort of new media, people like you and a whole bunch of people.

• 2:01:14Lex Fridman?

  Did that blog post help that statement? The, the 95 people that remained? Is this still something you struggle with? Because there, it's also culture, the broader tech space.

• 2:01:26Speaker 01

  Okay. So that was an interesting thing, which was that, so the 95% of people stayed. I got a huge outpouring of support from people who said, thank God, you finally spoke up and said something because frankly, it was making it not a very fun place to work either. And I realized that there is, I think there was a, I think is it, Nassim Taleb has this blog post about the tyranny of the, the 1% or something like that. But there's basically a relatively small group, 1% and 5% or something like that, that is really upset about something. It's not the majority of the company. It's like 5%. There's another 15% or something that are sympathetic to the cause. They're, they're actually somewhat suggestible. They, they will go along with whatever, because it sounds reasonable. You know, these are like real issues they're talking about. It's not, not to say that it's not real.

• 2:02:12Speaker 01

  And they'll kind of get swept up in it. But there's an 80% of the company that basically doesn't agree or just wants to get their work done without all this drama and, or distraction. And they're afraid to speak up because if they speak up, they're afraid of being, again, called a racist, like fired, you know, ostracized amongst their peers. And so it did require it to get to a bad enough place for me to finally say, you know what? I, I just, I feel like I have to do this. Live through the short-term attacks of the press, which ultimately was very freeing for me because now I don't really care. And now I can actually just build the company that I want to build without like caring about that. So. And then what was cool was a lot of really great people reached out to the Coinbase too, after that and were like,

• 2:02:57Speaker 01

  I, you know, I'm an early engineer at Google or wherever and like this culture has gotten kind of messed up and like I want to work at a company that's willing to stand for that. And so we've gotten a lot of good people come over. Basically, what I realized, and by the way, our diversity numbers and all that stuff, like people told me when I was drafting this post, they're like, "Don't post this. You're like, people, underrepresented groups will never want to work at this company again." And I was like, "I don't think that's true." Like, I talked to like our ERG groups, and they're not telling me they care about this stuff that much. They're telling me they just want to like be respected at work and do good work and contribute. So my gut was telling me that that advice was wrong. And like, I can tell you a year, a year after doing it, like our diversity numbers are basically either the same or better in every category. So that turned out to be

• 2:03:39Speaker 01

  false. Look, I hate to be like, I'm, like, you know, polarizing on either dimension here. Like, I just want to get good work done and build good stuff with technology. So, you know, I think companies should just have like reasonable policies. Like, you want to get rid of bias in hiring. You want to attract great people from all different backgrounds. Like, you know, we have pledge 1%. We put 1% of the company equity into a foundation. Like, I hope we're able to do good stuff with that. That's, you know, give back in some way. But like, the main, the main message, I guess, for me is like, the core, the core mission, the core work that we're doing on economic freedom and just all of our products, that is like the main value that we're contributing in

• 2:04:21Speaker 01

  the world. Like, let's just do that more. And hopefully, we can get from 89 million verified users to a billion or whatever. And then I just think that's how we'll have the biggest impact.

• 2:04:32Lex Fridman?

  It's tempting, though. It's so interesting how companies get tempted to help.

• 2:04:36Speaker 01

  Yeah.

• 2:04:37Lex Fridman?

  It's like, and you step in, and it's almost like a drug. And then you can't, you forget, I mean, like all of us in life, it doesn't have to be companies, you get distracted.

• 2:04:46Speaker 01

  Yeah.

• 2:04:46Lex Fridman?

  And maintaining focus, like, you're absolutely right. The way for Coinbase to add value to the world is to maximize the mission that it's on, not, not other, not other stuff. And when you get wealthier, more successful, this becomes more and more tempting to just help out in some other shallow ways. Fascinating. And you just kind of brought that to light. So it was very refreshing. And it shouldn't be controversial to sort of. Focus on just getting stuff done.

• 2:05:13Speaker 01

  Well, let me ask you, I mean, do you think that this it's all these things tie together? There's like a general trend of like more censorship, you know, there's like more cancel culture. There's some of these like freedom values are kind of, you know, even like freezing people's accounts, like the trucker thing that happened. And it seems like there's a general trend of more authoritarian, you know, policies there. But do you think that, do you feel like the tide is turning on that? Like there's counter examples to it we've seen recently.

• 2:05:46Lex Fridman?

  Yeah, I think it's the last gasp of old way of doing things. And so there's desperation and so on. Cause to be fair, it's kind of the internet, which is where's the source of a lot of this, where people have a voice is making the power centers of the world really nervous. And so that's where that's coming from, I think. And, and the internet is tricky. It's weird. It's full of bots.

• 2:06:11Speaker 01

  Yeah.

• 2:06:11Lex Fridman?

  It's full of like misinformation of all kinds.

• 2:06:15Speaker 01

  Yeah.

• 2:06:15Lex Fridman?

  Full of large groups with conspiracy theories and so on. And I mean misinformation broadly, people are misusing the word misinformation. They're just, governments are just labeling random things with misinformation just to censor them. But I just think it's just like a new world where the internet is really finally taking hold, where there's billions of devices and everybody has a voice. It's, it's almost, basically governments and powerful people are slightly losing hold of power and they're starting to freak out a little bit. That's it. And so, and then once you have young people that are coming up now, gain power, I think will, will rebalance everything.

• 2:06:58Lex Fridman?

  And, and then there's, yeah, like you said, promising signs.

• 2:07:03Lex Fridman?

  That it's obvious that the majority of people want freedom. And that means a lot of things. That means economic freedom, that means freedom to have a voice, freedom to move around, freedom to act in the way they, you know, without, without reasonable sort of.

• 2:07:22Lex Fridman?

  Limitations by people that don't have their best interests. And I gain more hope from just regular people that are fighting and like demanding the being able to have freedom of speech, or more specifically, sort of resisting crude overreach of government in the acts of censorship, at least in the United States. And hopefully that percolates out to the rest of the world that's struggling on a much more basic level, where people are being put in prison for the words they say, not just banned from Twitter.

• 2:07:59Speaker 01

  Right, it could be worse.

• 2:08:01Lex Fridman?

  What are some lessons from your failures and your successes about what it takes to run a company?

• 2:08:10Speaker 01

  I think one of the things that I've learned about leadership is that, you know, I never really thought of myself as a very natural leader, to be honest. I don't think I was a natural leader. But so I always envisioned, you know, good leaders as like these military generals, like they seem so like confident and they're just like bark orders, you know, like charge that hill and do this. And I was, I was actually like more introverted and kind of, I wasn't really confident in the way I communicated and, you know. And so what I realized is that there's lots of different kinds of leaders. You can be any kind of CEO you want, right? I was kind of more of like a product, technical focused CEO, and I preferred to sort of hear everyone's opinion. And I wasn't just gonna like render a decision in the room in some like kind of heated moment

• 2:08:54Speaker 01

  and like piss off half the people. I would be like, all right, I'm gonna go think about it and I'll send you my decision later today or tomorrow, whatever. And so I would, I found ways to kind of make it work for me where I could basically, I always tried to avoid like, you know, when people getting like super emotional about something and like, I think they're, they're thinking, their judgment goes down, right? And it's like, never make a decision when you're angry, right? And so if I would always sort of try to get a sense of, are these people like trying to be right or are they trying to seek the truth, you know? And you can do these little tricks like, you know, okay, you argue that person's position and you argue the other one and like, see if you can genuinely represent it. Now I know you're listening and, you know, these kinds of things. But I guess, sorry, getting back to your question about leadership, I think.

• 2:09:40Speaker 01

  I basically just kept doing things that were a little outside my comfort zone. And then my comfort zone kept getting bigger and bigger, you know? And so that's, I think that's how you build confidence is you do the thing that's scary. And it's like a little outside and like when I first started Coinbase, I had never managed anybody. I would have, I would have never, I would have been scared to death to have put out like a very controversial opinion like that. And sort of, all right, 5% of people will go, you know, we didn't know what percent it was going to be. By the way, it could have been 1%, it could have been 50% like, but we went into it scary because I, it was a scary thing. I was like, I don't know, I think this is right. I'm just going to do it. So if you do, if you do enough scary things, like you'll build the confidence.

• 2:10:22Speaker 01

  And I feel like I'm still on that journey every, every year or two at Coinbase. There's some big thing that comes out as like, oh my God, like I didn't sleep well for a week. And like, this is the next level, right? But that's how, that's how you learn and grow.

• 2:10:35Lex Fridman?

  So you're still going up that mountain through the fog, one step at a time.

• 2:10:39Speaker 01

  Yeah.

• 2:10:40Lex Fridman?

  Can I just quickly ask you about a couple of other efforts that are super interesting that you're involved with? So first of all, a little bit more old school fascinating effort of Research Hub.

• 2:10:52Lex Fridman?

  So what, what's that about? The GitHub for Open Science.

• 2:10:56Speaker 01

  Yeah. Okay. So basically I've had a chance to try to help a couple of other companies get off the ground too. Cause I want to see various efforts out there succeed. And one of them, I've always thought about like, why is scientific research not more like open source software? Or why couldn't it be much faster, right? And there's, you've probably have seen this like in an academic setting, right? But there's all kinds of things that feel very antiquated to me about scientific research. Everything from the funding process and grants to how peer review works, to how you submit to journals, all the costs associated with journals. You know, the, the people, you'd think like you'd get paid for this or something. And it would then be available to all the taxpayers for free. But no, they're like, they're all paywalled and there's like these big companies that have sort of, in my view, kind of held back innovation here.

• 2:11:41Speaker 01

  So, and the pre-print servers like Bio Archive and archive.org have really helped this, but those websites are, they look like they're kind of from like 15 years ago or something.

• 2:11:50Lex Fridman?

  It's like Craigslist or something.

• 2:11:51Speaker 01

  Yeah. So anyway, I, one of the things I, once Coinbase went public last year, I had a little bit of liquidity and I was like, all right, let me fund a small team. And let's see if we can, if they can like go off and make something better here. So we have a, we have a prototype out there. It's at researchhub.com. People can check it out and it's basically. You know, the first version is kind of like Reddit for science. There's like various hubs, which are like journals. But you know, you can publish papers there. You can use an electronic lab notebook to sort of have a modern day paper, which is not just a PDF that's static, but it's a living document. Ideally, in the future, you know, you can get comments and feedback from people on there. You can update it over time. We want people to be able to share the code and the data sets associated with their paper, research papers, not just

• 2:12:33Speaker 01

  a PDF. In the future, we want to make it even where like, you know, people can get funding for science through that site and even license out innovations that they've made. Because the other thing I've noticed in life is that there's kind of like, there's a bunch of people working on science and there's a bunch of people building companies. And they very rarely intersect. But when they do, you get the best things like SpaceX and Genentech and even Google and like even Coinbase was based on a research paper, the Bitcoin White Paper. And so, most business people are like creating companies that don't have any scientific innovation. They're just like, marketing based on, you know, whatever. And then, a lot of scientists are making things which never actually benefit humanity

• 2:13:14Speaker 01

  because they're not commercialized and turned into products. And so, if we can somehow create a translation layer between those two groups and help them, you know, helps align the market forces, align scientific research to market forces so that they're more incentivized. Like, if you discover CRISPR or something like that, like, you should be a billionaire, you know, and like, all the downstream implications of that. Not going through some antiquated tech transfer office or whatever. And if you, and if you're an entrepreneur, you should be looking to commercialize the latest scientific innovations. And so, that's kind of like the long-term vision for that site. I think it's just an early step today, but we've got like a really passionate community on there that are jumping into like, you know,

• 2:13:54Speaker 01

  computer science or longevity or various bio hubs or whatever and like, beginning to source the best innovations, but also discuss them, improve them and publish through the site.

• 2:14:06Lex Fridman?

  So, I have a question about incentives. But first, let me say, for people listening who are outside of academia, might not be familiar with an absurd situation. So, there's journals, like you mentioned, and scientists publishing those journals.

• 2:14:21Lex Fridman?

  And the journals provide very little value except matching you with reviewers that are unpaid. And so in the digital world, they're providing basically almost no value except hosting your paper.

• 2:14:40Lex Fridman?

  And they put up a paywall and charge people to access that. And that charge is not like even Netflix fees. You're talking about a lot of money. So they're basically blocking your research that should be wide open from the world and creating a paywall. It's a fascinating scam that's actually holding back. I don't, it's a shitty scam because you're not making that much money.

• 2:15:07Lex Fridman?

  I feel like a definition of a scam, you should at least be making money, like significant amount of money. You're basically making shady money and holding back all of human knowledge. Okay, so that put aside, and people get a little confused because the journals aren't the ones paying the scientists. People think like the journals are somehow funding the scientists. Therefore, they have the right to put up a paywall. No, no, no, the funding is coming from elsewhere. Journals are the middleman that nobody asks for, especially in the digital world. Anyway, that said, there is an interesting kind of incentives for scientists, which is prestige and so on.

• 2:15:46Lex Fridman?

  So there's a thing with journals, if there's a prestigious journal and you pass the review process, you get into that journal or a prestigious conference in computer science, then that's seen as a good thing in your resume. And not just your resume, within your community, that's a respective thing. Is there some way to achieve that same kind of incentive in the open, in the open setting of Research Hub? So like where I could say, I got. X, Y, and Z. Like, look, I'm impressive because this happened on Research Hub.

• 2:16:22Speaker 01

  I think you're right. Like, the whole academia, like, progress track is about like where you got published and how many citations. And it's kind of like a false economy of reputation because like there's not real money backing it. And so I think we've thought about this a little bit.

• 2:16:40Speaker 01

  And I think the Research Hub team has an opportunity to do something here that basically says like, okay, I had the top paper for 2022 in, you know, biology on in here. And you basically publish a list, a leaderboards of these, like, top, you know, for the month, the year, in all these different categories. Then actually, you know, we should probably give out grants and awards in addition to that. Fund those people, almost like fellows, or even give out like, you know, how like the Nobel Prize, there should be like a Research Hub Prize or something and like ship people, maybe, maybe even ship like a print version of a journal that is the top papers in each category in each month or whatever. And then like, people want to put that in their wall in

• 2:17:23Speaker 01

  the lab. And like, so I do think we need to sort of change, I don't know, like, the traditional folks in academia or science would probably think this is like crazy, a crazy idea. But I think we need to change the culture to not celebrate getting published in paywall journals, almost like friends don't let friends publish in like paywall journals, like, because that's, it's just not helping humanity. So like, you know, it should be more prestigious to publish in an open science way and get the top spot. That should be celebrated above being published in whatever, I don't even want to name one of them, you know?

• 2:17:57Lex Fridman?

  Well, there's currently, it's, the culture has already shifted to where almost everybody publishes an archive and bi archive and so on.

• 2:18:04Speaker 01

  Yeah.

• 2:18:05Lex Fridman?

  But, so that the culture is there on that, that that scene, friends don't let friends not publish open. But then the prestige thing is missing, which is like, anyone can publish an archive. So how do you know it's actually a strong paper? Now, funny enough, even with the crappy systems we have now, word of mouth is powerful. Like, you have a, like, citation system is pretty powerful. So like you say, okay, this is a strong paper. We don't need reviewers. Our human eyes are the reviewers, like the, the community is the reviewers. So it's already, it's like, that part is there, but it, it would be nice to have like, Uh, you know, nature level like this is respect. This is a respectful accomplishment.

• 2:18:50Speaker 01

  Yeah.

• 2:18:51Lex Fridman?

  Uh, and something like a leaderboard, but a stable kind of system.

• 2:18:55Speaker 01

  Yeah, I should mention to this. So there's a crypto angle to this too, which is, um, so Research Hub has a coin associated with Research Coin. And it's basically if, if people, you know, upvote your paper or like support it, you'll accumulate more Research Coin, which is basically like rep or like a reward token. And so that is a way to, um, I guess, measure the, the community's collective view of that paper. A form of peer review, um, and it can even be weighted by like the reputation of the people voting on it and that sort of thing over time. Yeah, I think the, the last thing I'll just say is that, so I think from, from a rep, like a prestige point of view, it won't start off that way. It'll probably start off like being a little more quirky, like, you know, like, remember when YouTube first started?

• 2:19:40Speaker 01

  It was like people posting weird cat videos and stuff. And, but now like, you know, if you have a million subscribers on YouTube, that's probably better than getting like a TV show on NBC or whoever the traditional gatekeeper was. So my hope, it might take 10 years, 20 years, whatever, but I'm hoping that this can sort of be the new prestigious way that, that young people publish in science and it'll be come to be viewed as more prestigious. The journals, the traditional journals will be viewed as old fashioned.

• 2:20:05Lex Fridman?

  Well, uh, it's definitely a, a system that could do a lot better. And there's a lot of incredible, brilliant people doing science. They deserve better, the better platforms.

• 2:20:16Speaker 01

  Yeah.

• 2:20:17Lex Fridman?

  Uh, so another thing you're taking on and helping out with is this new limit, which is looking longevity.

• 2:20:23Speaker 01

  Yeah.

• 2:20:23Lex Fridman?

  What's, what's the idea there?

• 2:20:25Speaker 01

  Yeah, okay. So I, as you can see, I'm excited about science. Like I, I think, you know, science is sort of the, basically if you get scientific innovation, then you get, um, better products and you get better economic growth and then you get all kinds of like surplus in society that can go to arts and philosophy and like all kinds of stuff. But, um, with new limits, so yeah, I, I kind of got it. I started hosting some dinners with scientists, um, last year and I was learning about all kinds of the latest stuff happen. And bio and there's a lot of really cool stuff happening with like CAR T cells and CRISPR and all these things. And anyway, one of the topics I started to learn more about was something called cell reprogramming. And, you know, people maybe have heard of this induced pluripotent

• 2:21:09Speaker 01

  stem cells where you could take like a skin cell and turn it back into a stem cell. And Shinya Yamanaka won the Nobel Prize for this work that was done in 2006. And, you know, it's kind of a crazy thing. You can turn one cell into another, another type of cell. Well, people recently have been experimenting with different types of transcription factors that would either not, you don't want the cell to go all the way back to being a stem cell. You can end up getting like cancerous cells and things like that. But you want it basically to the cell to revert a little bit earlier in its, you know, it would call it the Waddington landscape, but it's basically like go become act start to act like a bit of a younger cell, but not to to differentiate and

• 2:21:51Speaker 01

  become more like a stem cell. And so I decided this might be an interesting area to go fund. I think that that team has come together. There's like some really talented people who've come together to help get that off the ground. And they're basically building a platform that can test a lot of different transcription factors on different cell types and hopefully find ways to rejuvenate different types of cells and tissues to extend human health span. I mean, the moonshot goal here, you know, the get to Mars is that there could be some therapy here that in, I don't know, 10 or 20 years that you take and from a whole body point of view is sort of rejuvenating tissue, not just one type of tissue like your immune system, but eventually your whole body, maybe even your brain, so that, you know, we don't have that issue where people

• 2:22:35Speaker 01

  who are older have trouble learning or they're more ossified in their thinking. To me, this is just, I always think about, you know, it's actually a little inspired by Elon, right? Is like, what are some of the biggest things in the world like that are probably high technology risk, but if they did work, maybe they're they're kind of low chance of working, but if they did work would have enormous impact. I like the idea of trying hard tech problems, especially for people like founders like me who've made some money in software, which I think we're in kind of like a golden age of software. So there's like fortunes to be made. But if you if you do make some money in that, my hope is people will like Do atoms, not bits, you know, and try some of the harder things like in biotech or,

• 2:23:16Speaker 01

  you know, I guess he's doing cars and rockets and stuff. But anyway, I think we should try hard, hard tech or, you know, physical science problems as well and see if that can advance for Team Human.

• 2:23:28Lex Fridman?

  Yeah. So he's also doing bio with Neuralink.

• 2:23:32Speaker 01

  Yeah.

• 2:23:32Lex Fridman?

  And I feel like bio is tough.

• 2:23:35Speaker 01

  Yeah.

• 2:23:36Lex Fridman?

  Cause it's messy.

• 2:23:37Speaker 01

  We don't understand it as well.

• 2:23:38Lex Fridman?

  We don't understand it. The risk is higher in terms of, not the risk is higher, but like you have to deal with the actual sort of, to get to human, to get to, to stuff where it could be therapies for actual human bodies is tricky.

• 2:23:58Speaker 01

  Yeah.

• 2:23:58Lex Fridman?

  Cause you have to prove that it's safe, it's effective, all those kinds of things with, with FDA. I mean, it's just, it's tricky. It's very difficult.

• 2:24:06Speaker 01

  Yeah.

• 2:24:06Lex Fridman?

  It's a long, it's a long journey. I mean.

• 2:24:09Speaker 01

  If I can give a quick plug. So I, yeah, I'm on the board at New Limit. We're hiring talented scientists that are interested in the cellular programming space. They don't necessarily have to be coming from like an aging background or anything like that. There's sort of a small group of people doing even.

• 2:24:23Lex Fridman?

  So is it a new thing? This is, is New Limit relatively new?

• 2:24:26Speaker 01

  Yeah, it's very new. There's a, there's a small team today, just a handful of people. And so we're, we're hiring more there. If people are excited about that space, reach out and same thing for Research Hub. There's a small team there that's really awesome. That's doing more like software engineering, design, product, that kind of stuff.

• 2:24:44Lex Fridman?

  What advice would you give? If you put on your old wise sage hat, what advice would you give to young people today? High school, maybe undergrad and college about life. So like career, having a career that can be proud of, or maybe a life that can be proud of.

• 2:25:07Speaker 01

  So people can do whatever they want to be happy, right? So there's not one way to do it. I do think that some people, a particular type of people out there, a lot of people actually, they want to have an impact on the world. That's how they get a sense of fulfillment, right? So, I mean, you need to have like health, physical health, you need to have good relationships. Like there's lots of things, but most people want to do something important. They want to have fulfilling work, a way that they can feel like they're contributing.

• 2:25:32Speaker 01

  I think a lot of people, young people today are thinking like,

• 2:25:37Speaker 01

  you know, I should be an activist or something like that. And there's people in the world who have power and I, and I don't, a lot of people who don't, I don't have power. And so the way to change the world is to, you know, speak truth to power or like criticize power and

• 2:25:52Speaker 01

  try to pressure them to change.

• 2:25:55Speaker 01

  To me, I don't think that's the right way to actually have an impact on the world because,

• 2:26:01Speaker 01

  you know, everybody has probably, I think people have more power than they, than they realize. And by the way, it's easy to be a critic. It's hard to actually change these things and fix it. And so you'll get a lot of accolades from friends and things like that. If you kind of go around criticizing, you know, it's easy to do like everything is broken and could be better. Including, you know, stuff I'm working on, I find like so frustrating. It's a million things I want to be better about, like what we're doing in Coinbase.

• 2:26:31Speaker 01

  So be, be the person in the arena, you know, like that Theodore Roosevelt quote, I think he said it, right? Like go chew glass and stare into the abyss. Like if, if you really want to have an impact, either join a company that has a mission that is trying to fix the thing you're passionate about, or start, start that company if it doesn't exist, or start a charity if, if it's not suitable to be a company or whatever it is, but go try to be a part of the solution. Don't just, you know, criticize or be a part of the problem. My hope is that more people can, you know,

• 2:27:07Speaker 01

  realize that they, they actually can have a meaningful impact that way. And I think that to me, technology is actually one of the most important ways to improve the world. Like if, if you look at

• 2:27:18Speaker 01

  climate change, like a lot of the best ideas like carbon sequestration, all these things, it's a technology thing, right? If you want to try to fix education, it's like, look at like Khan Academy and all the stuff going online, right? If you want to, if you want to fix, um, you know, whatever, transportation and like the financial system and global freedom and like equality of all these things, like there's typically the way to get something changed in the world today is with technology. And so I do think people, it's very bizarre to me that there's this kind of like anti-tech thing going on. Look, no, nothing is perfect. Like if you create something new and like tens of millions of people use it or billions of people use it. It's like, there's going to be some bad people who use it too. Okay. And there's, you know, society is complicated, but like, I think.

• 2:28:01Speaker 01

  Most of these things have been net positive because most people in the world are good, is at least my view. So yes, we can mitigate like the 1% of bad people trying to abuse something. But 99% of people in the world are good. And the way you can improve the world is with technology, joining companies, starting companies that are working on the right stuff. So I hope, I hope more young people do that. And just if you're not sure what to do, like just get started with anything. That's how you learn.

• 2:28:25Lex Fridman?

  And basically have the optimism that you have the power to do the change. So it's easy to distract yourself by being the critic.

• 2:28:36Lex Fridman?

  That's almost like acknowledging to yourself that that's all you can be. But basically, everybody has the power to be the fixer. I like chew glass and look into the abyss.

• 2:28:51Lex Fridman?

  That's much more fun than it sounds.

• 2:28:55Lex Fridman?

  What do you think is the meaning of this whole thing? Why are we here?

• 2:28:58Speaker 01

  Life.

• 2:28:59Lex Fridman?

  Yep. What's the meaning of life? What's this existence we got? You're trying to increase the amount of economic freedom on this planet Earth, trying to alleviate some of the suffering.

• 2:29:09Speaker 01

  Yeah.

• 2:29:09Lex Fridman?

  But why?

• 2:29:11Speaker 01

  I don't really think there is any point to life. You know, somebody once told me,

• 2:29:20Speaker 01

  you know, if you go into these like kind of really big existential questions, it can get a little scary because like you stare off the cliff and there's like, there's nothing there, you know?

• 2:29:31Speaker 01

  This one person told me one time, they were like, you know, Brian, you should, you should probably snorkel, don't scuba. I guess, and I think they were trying to say like, some of my friends have done this, right? They'll go to like, you know, epic meditation retreats and like, they'll kind of come back with all this existential dread of like, what's the meaning of it all? And then like, as far as I can tell, we are just some organic molecules in the ocean started like dividing and replicating. And the selfish gene and all this stuff like basically ended up here. And our only, it's some kind of like really naive algorithm that's just kind of trying to get us to survive and replicate. And we have DNA, just like every other animal. And so we, and we happen to develop these like really cool neocortexes.

• 2:30:16Speaker 01

  And so now we're sort of self-aware and we have all these big questions. And maybe, maybe we'll create another, you know, as computers get better, we'll create the simulation inside our thing. And I think it's cool. Like, we should basically, I just want to keep watching the movie, you know, unfold. That's part of why I want to work on, like, New Limit is really cool, because it's help, if people can live longer, whether that's uploading their brain to the cloud, or, you know, basically through, we get biology to work, or the strong AI to work, or whatever, one of those two hopefully works out. And then we get to, we get to keep watching the movie and see how it all unfolds. I think that's fun. And so, I don't know if that's like an answer, but I guess, I don't think there's any real purpose, so just try to have fun.

• 2:30:58Lex Fridman?

  Well, the cool thing is that we get to write the movie as it, as we watch it.

• 2:31:04Speaker 01

  Yeah. That's exactly right. I mean, that's like the Steve Jobs quote and all that, where he's like, everything around you was invented by some, somebody who just was like, that, this is a crazy idea they thought up. So, once you realize you can kind of do anything you want, then that's what you start to go, you start to go try crazier stuff. I mean, what, this is another one of those areas where, not to get too out there, but like, you know, when you're, when I was, I think you can build your comfort zone around like people being upset with you. You can also build your, your range of what you think is possible, right? Like, when I was a, when I was in my twenties, I was like, reading all these books about like self-improvement and goal, right, how to write down your goals

• 2:31:44Speaker 01

  and stuff. And my goals were like, someday, I want to make a hundred thousand dollars a year, or something like, and that was, and, you know, and it seemed like a little outlandish, or what, and I wrote down these goals, like, I want to own rental property, or something, anyway. And I, and then I slowly started to get, get some of these things done over a couple of years. And so I started to think a little bigger. I remember one time I wrote down this goal where I was like, what's, what's the craziest thing I could think of? And I was like, what if I, I want to write, I want to start a billion dollar tech company. That's crazy. And I had, I had never started like, a million dollar tech company, or any, any tech company, really. So what business did I have writing that goal down? And I remember, I wrote that on a piece of paper, like, like probably every

• 2:32:29Speaker 01

  day for a year or something, almost, right? I don't know if it was every day, but like, I wrote it down a lot. And And so little things started to happen. I was like, all right, well, maybe I should move back to the Bay Area from Buenos Aires. Maybe I should try to apply to Y Combinator or whatever like, and I started thinking about these ideas. And so whatever gets you fired up, it doesn't have to be like some company goal or startup thing. It could be anything, right? Maybe you want to publish a book or like do something creatively or whatever. Anyway, you, you know, I think like within seven years, uh, no, it's probably more like 10 years of me writing that goal down.

• 2:33:06Speaker 01

  Coinbase had a valuation over a billion dollars. So it, it was out of my realm of what was even possible. And then within 10 years, you can, you can accomplish more in 10 years than you think, less than in a year than you think. So now I started, now I'm like, okay, what's the next goal? What's the cra- okay, maybe I want to get a billion people accessing the open financial system through our products every day. You know, that would be cool for, for humanity. And that's a pretty crazy goal, like it's only eight billion people or something, right? So one out of eight.

• 2:33:37Speaker 01

  Or maybe I can radically, like if I make some like the right investments or on whatever, I can like help radically extend human health, uh, human health span or whatever. Right? So try crazier stuff. I don't know, even if it doesn't work, like hopefully you'll, um, you'll advance the state of affairs, like something interesting will happen. And so most people today, they look at, they look at people trying this stuff and they're like, oh my God, they're so, they're a genius. So they're whatever. And it's like, or they're an idiot, like one of, one of the two, neither, neither one are true. It's just like, um, anybody can start by thinking about what they want and then like, go for it. And then, and once you get that, like go for something a little bigger and like, you just have fun with it.

• 2:34:18Lex Fridman?

  And the universe is a way of smiling and helping you out if you just write it down and, and you dream big. Yeah. There's something about just karma, about the energy you put into this world. Other people will help you out, doors will open, you'll notice that the doors opened and you'll, you could actually have a shot at making it happen. It's a funny world.

• 2:34:42Speaker 01

  Yeah, I mean, I don't, I don't really subscribe to all like the woo woo interpretations of this, but my, my very rational brain interpretation of it is that if you just wake up every day and write down like what you want to get done and towards your longer goals, your larger goals, it's just, it's just on your mind that day. So you start to notice opportunities and you think about it more.

• 2:34:59Lex Fridman?

  So Brian, thank you for dreaming big. Thank you for doing what you're doing, doing incredible engineering at scale, trying to help people from all over the world and actually helping me personally get more into crypto, just because it's so easy. So thank you so much. And thank you so much for giving your extremely valuable time today to this awesome conversation.

• 2:35:23Speaker 01

  Thanks for your awesome podcast. I, I love it and I listen to it often.

• 2:35:27Lex Fridman?

  Thanks for listening to this conversation with Brian Armstrong. To support this podcast, please check out our sponsors in the description. And now let me leave you with some words from Benjamin Franklin. An investment in knowledge pays the best interest. Thank you for listening and hope to see you next time.