#526: Raj Lala on Innovative Technology ETFs

Raj Lala is President and Chief Executive Officer of Evolve ETFs. He previously served as head of WisdomTree Canada. In this conversation, we discuss disruptive technology, bitcoin, cyber security, cloud computing, electric vehicles, and eSports. ======================= Exodus is an absolute game changer in the crypto wallet space, and we’ve teamed up to offer an exclusive discount for you, as listeners of the podcast. Sign up for Exodus today using my promo code Exodus.com/pomp. This is a no brainer for both newcomers and crypto heavyweights - go sign up today. ======================= Remote makes it easy for companies of all sizes to employ global full-time employees and contractors. We take care of international payroll, benefits, taxes and local compliance, so you can focus on growing your business. Learn more about Remote and their new Remote for Startups program at remote.com. ======================= Pomp writes a daily letter to over 150,000 investors about business, technology, and finance. He breaks down complex topics into easy to understand language, while sharing opinions on various aspects of each industry. You can subscribe at https://www.pompletter.com

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

• 0:00Anthony Pompliano?

  What's up everyone, this is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Let's kick this thing off. Raj Lala is President and CEO of Evolve ETFs. He previously served as Head of Wisdom Tree Canada. In this conversation, we discuss disruptive technology, Bitcoin, cybersecurity, cloud computing, electric vehicles, and esports. I really enjoyed my conversation with Raj, and I hope you do as well. Before we get into this episode, though, I want to quickly talk about our sponsors. First up is Exodus. Exodus is leading the world out of the traditional financial system by building beautiful and user-friendly blockchain products. With its

• 0:41Anthony Pompliano?

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• 1:24Anthony Pompliano?

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• 2:10Anthony Pompliano?

  Of other top tier investors. Learn more about Remote and their new Remote for Startups program at remote.com. If you've got a remote team, you better be using remote.com. It's that much of a no brainer. Go to remote.com today. Lastly, don't forget that I write a daily letter to over 150,000 investors about business, technology and finance. I break down complex topics into easy to understand language while sharing my personal opinion on various aspects of each industry. You can subscribe at pompletter.com. Again, pompletter.com. All right, let's get into this episode with Raj. I hope you enjoy this one.

• 2:47Speaker 01

  Anthony Pompliano is a partner at Morgan Creek Digital. All opinions expressed by Pomp or his guests on this podcast are solely their opinions and do not reflect the opinions of Morgan Creek Digital or Morgan Creek Capital Management. You should not treat any opinion expressed by Pomp as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. This podcast is for informational purposes only.

• 3:13Anthony Pompliano?

  All right, guys. Bang, bang. I've got Raj here with me. Thank you so much for doing this, sir.

• 3:17Speaker 02

  Thanks for having me.

• 3:19Anthony Pompliano?

  Absolutely. Let's just jump right into your background. Where'd you grow up and how did you get into finance?

• 3:23Speaker 02

  Sure. I was born in England, came here when I was four, here as in Canada, when I was four, grew up in the suburbs and finished university, decided I was going to backpack for a year across the world. And I took my Canadian securities course textbook, which is kind of your first foray into the investment world in Canada. Finally read it, came back, couldn't find a job in the investment industry. So became a telemarketer for investment advisors to find people to come to financial planning seminars, fell in love with the industry, got an opportunity to run some money, decided I wanted to get into the asset management side

• 4:06Speaker 02

  and started building companies. I built my first company, which was a hedge fund of funds company that I later sold. And then I built, I went to work for that large company and then I built another company and I sold it to one of the largest asset managers. Managers in Canada, then I ended up working for one of the largest ETF providers in the world, Wisdom Tree, running Canada for them. And when I left in 2016, I decided I wanted to build my own and started putting Evolve ETFs together. Absolutely. And so you're doing all of this. It seems like you've constantly had this obsession with innovative technology or disruptive technology. Where does that obsession come from?

• 4:46Speaker 02

  When we were starting to put Evolve together back in 2016, we really wanted to be different from the other ETF issuers out there in Canada. The world doesn't need another Dow 30 ETF. Canada doesn't need another TSX 30 ETF or TSX 60 ETF. Where we really focused in on is in disruptive technology, and there was a few reasons for it. Number one, we saw a lot of growth potential in this side of the market. Number two, we wanted to bring products to Canadian investors that they could relate to. For an investment professional to sit across from their client and talk about the yield curve, or talk about dividend strategy is one thing, but being able to sit across the

• 5:30Speaker 02

  table from them and talk to them about cyber breaches, or cybercrime, or talk about e-gaming, talk about Bitcoin, it's relatable topics that most investors are reading about and are interested and can clearly see a path from an investment perspective as well. And that was really important to us in terms of building these types of products. And we're huge believers that the world right now is going through its biggest transformation in history, especially from a technological perspective. So we wanted to participate in that. We wanted investors to be able to participate. And so, as you know, we launched a lot of firsts in Canada, first cybersecurity

• 6:11Speaker 02

  ETF, first e-gaming ETF, first cloud computing ETF. We were close to launching the first Bitcoin ETF, but we were second by a day. But we've taken a lot of pride in being very innovative and being very fast to bring these products to market. For sure. Because you've focused on some of these kind of core niche industries, I want to go over a couple of those.

• 6:33Anthony Pompliano?

  But first, let's talk about the the main one, the the kind of granddaddy of them all, if you will, which is Bitcoin. And not so much because that's the ETF sector that's got the most flows and the most volume. Uh, but really, because I think that the audience, that's the one that they care about the most and they're spending the most time thinking about. So walk us through what is the fascination with Bitcoin? How is the ETF structured? Uh, and then kind of how you've seen adoption uh for that product so far.

• 7:00Speaker 02

  Yeah, Bitcoin, as you know, has come a long way in the last 10 years. Um, when when people started to first look at it, we would often hear these these comical stories that are that were true, but still comical. Like, the first Bitcoin transaction was 10,000 Bitcoins used to buy a pizza. And if you put that into today's term, that pizza is worth over $500 million. Uh, very expensive pizza. I'm not sure who the guy was that actually used the 10,000 Bitcoins for it, but I hope it was great. Um, for the more you hear heard stories about people losing their security key uh for their Bitcoin and rummaging through a garbage dump, trying to find their hard drive or their USB stick to recover uh the Bitcoin. Still today, 20%

• 7:44Speaker 02

  of the Bitcoin outstanding is sitting with people that don't have security keys to access it. But if you fast forward to the last few years, we've started to see a lot more uses for Bitcoin. We've started to see wider adoption. We've seen retail investors continue to use it. We've seen institutional investors starting to adopt it. We've seen companies starting to use it as a store of value uh for a component of their cash positions in their portfolios. We've seen it being used for transactions uh as well. So we've seen a lot more usage of Bitcoin out there in the market today. And that's what's created all of this value. So, you know, you also have over the last year, a lot of people looking at Bitcoin

• 8:30Speaker 02

  as a bit of a hedge against all of this quantitative easing uh that's taking place in across the world right now. We're printing money uh left, right and center, and we're potentially entering into an inflationary period. And so Bitcoin can act as a bit of a hedge uh against that inflation. So there's a lot we use it. So back in 2017. We actually filed for the first Bitcoin ETF in North America, but the regulators here in Canada just weren't ready for it. And I understand why. There wasn't enough infrastructure. There wasn't widespread enough adoption as well. We revisited it a few months ago with our regulators here in Canada. They seemed a lot more open to it. We now have a futures market tied to Bitcoin that

• 9:13Speaker 02

  provides better liquidity and stability. And as I mentioned before, you have a lot more adoption. So we were finally able to get the regulators comfortable to let us launch it. And the great part about it is, as you know, for a lot of people that want to buy Bitcoin, it's a bit of a daunting task to go and set up that digital wallet and access the security key. So our ETF is actually buying physical Bitcoin. If you invest $25 into our fund, you are getting $25 worth of Bitcoin. It's not tied to futures. It's actually physical. So you can put it inside your brokerage account. And so in Canada, we have these things called RSPs. We have RIFs. We have RESPs. We have

• 9:58Speaker 02

  TFSAs, all these registered accounts that enable people to actually invest in Bitcoin the same way that they would buy any other equity ETF. So it becomes a very efficient way for individuals to access physical Bitcoin.

• 10:15Anthony Pompliano?

  And so when you think about the ETF structure versus, let's say, some of the trust structures or the ETFs or ETFs, describe why the ETF is so important and how you do things around, let's say, the premium or discount and how that'll differ versus some of the other products that people have seen.

• 10:32Speaker 02

  So we will always be tracking the price of Bitcoin with an ETF, which you have. So you have market makers. And the market makers will always be creating, redeeming, making markets based on that reference rate of Bitcoin. So with a fund like ours, you would never have a significant discount or a significant premium above the price. One of the challenges with a lot of the closed-end funds that exist out there, prior to the ETFs in Canada getting launched, many of them were trading at anywhere from 10% to 30% premiums above the price or value of Bitcoin. Once the ETFs came out in Canada, all of those premiums disappeared, and now many of them are trading at significant discounts.

• 11:15Speaker 02

  To their actual value, anywhere from five to 10%. So an ETF provides you with clear pricing mechanism, great market making, and most importantly, intraday liquidity. You can be, you can invest in our fund and then an hour later, if you change your mind about Bitcoin, you can redeem out of it too. You don't necessarily have that option within closed NFTs.

• 11:37Anthony Pompliano?

  Got it. And so when you start to think through how this will impact kind of capital flows to Bitcoin, the asset in the market cap, what's the thought process there? Just tons of people show up and they all want to, to buy the Bitcoin ETF and therefore the market cap drastically expands. What are you seeing and how do you think about it?

• 11:54Speaker 02

  Well, when you think about Bitcoin, as you know, there's a limited supply of 21 million coin. Right now, we've mined about 18 and a half, 18.4 million of it. So we've still got a couple million to go. So you have a finite supply, which is one of the reasons why people like it as, as a store of value and also as a hedge against inflation. So really what's been driving the growth of the price of Bitcoin has been the growing adoption from the institutions and from the corporates. When you see Elon Musk tweeting out that he's bought 1.5 billion of Bitcoin within Tesla, when you see companies like MicroStrategy saying that they're moving all of their cash reserves to Bitcoin, when you see PayPal doing the same and starting to facilitate

• 12:39Speaker 02

  transactions, this just all furthers the confidence that people have in the cryptocurrency and it furthers demand as well. So we're pretty excited over the next couple of years to see how Bitcoin starts to become more and more adopted. A lot of people, I think what, what they're saying is that I don't know whether I believe in Bitcoin or I don't believe in Bitcoin. I don't have the time to research it, but the FOMO kicks in for some people and that FOMO says, well, why wouldn't I put a couple of percent into this asset class? Because if this continues to compound 200% return per year, which is what it's done over the last 10 years, then that couple of percent can be worth a lot.

• 13:23Speaker 02

  If I'm wrong and Bitcoin's down 75% in a year from now or two years from now, well, it wasn't that big a portion of my portfolio, so it's not going to sting me that much. And that's what we're seeing a lot of from investors, from professional advisors and even from institutions as well.

• 13:41Anthony Pompliano?

  For sure. And so when you think about kind of the development in Canada of these ETF approvals, or I think there's a couple of them now, do you think that puts pressure on US regulators to go ahead and approve it in the United States? If that does get approved, does that essentially kind of take the wind out of the sails in Canada? Or what's the thought process in terms of US versus Canada on the ETF?

• 14:03Speaker 02

  I've talked to a lot of people in the US over the course of the last couple of months, and I get mixed opinions on this. Some people think that the SEC will approve Bitcoin ETF in the US in the next few months. Some other people think it's going to be at least a couple of years. I really, you know, I'm not a fly on the wall at the SEC, so I don't, I can't really comment as to how close or how far they are. It's interesting that the incoming chairman of the SEC has got a crypto background, and he's got deep knowledge, Gensler, has got deep knowledge of cryptocurrency. So that's why some people think that a Bitcoin ETF is around the corner. It'll be interesting to see. But you're quite right in that one of

• 14:45Speaker 02

  the challenges that we have in Canada is it's very difficult to sell our funds. In fact, it's prohibited for us to sell our ETFs or solicit our ETFs into the US market. It's also very difficult for US investors to get access to Canadian listed ETFs. Whereas if you go northbound, meaning from where you are right now, it's quite different. It's very easy for Canadian investors to buy US listed ETFs, which has been a big challenge for us in the ETF market in Canada, because oftentimes what happens is an investor will say, well, geez, there's a cybersecurity ETF listed in the US that's got $3 billion

• 15:29Speaker 02

  in assets, trading, you know, $100 million a day of volume. And then you've got a Canadian listed cybersecurity ETF that's only trading $2 million a day of volume. I'm going to buy that US listed one. So the great thing is for Canadian investors, they've got a lot of choices. The challenge that it creates for Canadian issuers like ourselves is we are actually competing with US ETFs, but we can't participate in the, in the northbound to southbound flow.

• 16:00Anthony Pompliano?

  For sure. And so when you start to think about kind of where we'll be in five years, is there multiple ETFs? They have billions, if not hundreds of billions, trillions of dollars in market cap and it kind of follows like a gold type situation where maybe there's one or two that are the winners in a major way and there's a couple of others that are smaller scale that maybe have some bells and whistles to it. Just size, how many? How do you think about that?

• 16:28Speaker 02

  Yeah, I think that you're going to see, I think there's going to be a ton of growth in Bitcoin. It's going to look, the growth of the ETFs is going to be highly correlated to the growth of the price of Bitcoin, right? Ultimately, if Bitcoin goes down to $10,000 per coin in a year from now, you're probably not going to see a lot of asset flow into the ETF. But if Bitcoin's at $200,000 in a year or two years from now, you probably have a lot of flow. So it's definitely going to be highly correlated to the performance of it. But I think what a lot of investors are seeing now is, and to my point earlier, is it's way easier to participate in Bitcoin through your brokerage account via an ETF than it is to go and open up that digital wallet and go through that daunting process

• 17:09Speaker 02

  of having to set it up and buy the Bitcoin in there and keep the security key and remember the password. And so you don't need to do any of that with an ETF. I definitely think you're going to see more crypto ETFs coming to the market. There's already been a few, including ours, that have filed a preliminary prospectus around Ether to try and bring that to the Canadian market. So you'll see more and more of these. I would say that it may stop at Ether because once you start to take a look at some of the other cryptocurrencies, and I would say stop for now. Once you start to take a look at the other cryptocurrencies, they are missing part of that adoption. They're also missing a futures market tied to it. And the futures market's really important for a lot of the market makers to hedge out

• 17:53Speaker 02

  some of that risk that they're wearing by having physical Bitcoin as well. So an Ether futures market just started a few weeks ago. So it's still very early days, but those are really the only cryptocurrencies that have a fluid futures market. So there will be more, it will be tied to the price. Uh, where the performance of Bitcoin. What we're seeing a lot of right now, though, is some of the biggest institutions in Canada taking this really seriously and considering uh replacing a portion of their gold allocation to the digital gold or uh Bitcoin. And that has really encouraged me because

• 18:32Speaker 02

  when, you know, we're very confident that, you know, we've, we've put together the best structure uh in the Bitcoin ETF space. And when, and when people start to look under the hood at our structure, like for example, our index is the same pricing reference that's used for the futures market with CME. So when people look at our transparency and they look at um our regulation and they look at our reference rate, we're very confident that they will look at our fund as being kind of the gold standard.

• 19:03Anthony Pompliano?

  For sure. I want to talk about some of the other um areas that you guys play in with Evolve ETFs. Uh, the first being cybersecurity. Uh, Bitcoin, I think most people are like, yes, that's super um kind of innovative, forward-thinking and disruptive technology. Cybersecurity, what was the original impetus for uh for going into that space?

• 19:22Speaker 02

  I was, it was just, it was a no-brainer. I mean, every time we think about a product or a theme, what we think about is is there a long-term investment thesis attached to this? Or could this be a fad? Now, we've had a really great track record of being uh on the long-term investment thesis and not on the fad side. And when you think about cybersecurity, you realize the long-term investment thesis for it. Number one, we all know cybercrime is going to continue to increase. There's no doubt about it. How many more emails are you getting or viewers getting uh from a bank that they don't bank with? Asking to click on this link to verify their account details or something that looks like Microsoft, but it's not.

• 20:05Speaker 02

  We're encountering more and more cybercrime or attempted cybercrime on a daily basis. In fact, um, in the next few years, cybercrime is going to cost the global economy $10 trillion, $10 trillion. That's more than the GDP of Germany and Japan combined. Okay, so that's huge. So check the box that we're going to be facing a lot more cybercrime over the next 10 years. The other thing that I love about cybersecurity is that it has become a non-discretionary spend for every organization out there. And let me explain what I mean by that.

• 20:43Speaker 02

  If you're a US bank, a Canadian bank, a Fortune 500 company, if you have a terrible financial quarter, it's not as though you're going to stand up in front of your shareholders or your board and say, "Due to our poor financial results, we've decided to reduce our spending on cybersecurity," right? Never going to happen. They might say, "We're going to reduce headcount. We're going to close some offices, branches, defer initiatives." But cybersecurity is one of those areas that companies cannot afford to reduce their spending on. So, great from a recession resilience perspective, not necessarily depending on the economy. The last point on cybersecurity that most people are not aware of is it is one of the

• 21:25Speaker 02

  very few industries today that has negative unemployment. And what I mean by that, more specifically, there are three and a half million job vacancies in the cybersecurity industry today. So if any of you have a kid, trying to figure out a future path for themselves, you may want to nudge them towards a career in cybersecurity because there's virtual guaranteed employment. But the reason why that's important to investing in cybersecurity is because of that massive shortage of human capital, 75% of all the cybersecurity work that is performed for all of our Fortune 500 companies, for our government agencies, for our banks

• 22:08Speaker 02

  and so on, 75% of it is outsourced because companies can't staff up enough people to take care and manage their entire cybersecurity needs. So the case that we make for our fund when we're talking to investors is, by the way, our fund, all these companies in the fund, these are the ones that are getting all the contracts, the outsourcing contracts to protect all of the government agencies and Fortune 500 companies. So the investment case is great. And the last point that I would make, kind of going back to macro on cybersecurity, one of the reasons why it's become so important today is because we're so connected. I mean, look at your desk right now. How many devices do you have connected online? Three, four? I know that, like many people, I was bored during the Christmas holidays and I walked around my

• 22:53Speaker 02

  house to count how many devices I have online. I have sixty-two online because you've got your smart plugs, your thermostat. So it's great because we're more productive, we're more efficient, we're more happier because we're more connected. But the downside of it is that we're also creating more gateways for cyber criminals to access our data. And 2020 was a blockbuster year for cyber criminals. They made out with about twenty-five to thirty billion dollars, cyber criminals. So guess what? Lucrative year means you end up getting more cyber criminals entering the fray. So this is a great long-term sector and it's effectively become like the utilities section of the technology industry.

• 23:36Anthony Pompliano?

  Makes sense to me. Cloud computing is another sector you guys have gone pretty heavy into. Explain that one.

• 23:43Speaker 02

  Yeah, you know, whenever I explain areas of the market, I always think it's helpful to think of your life ten years ago and what it was like. If you worked in an office, probably there was this room on your floor or in your building that had these file servers. The bigger your office or company, the bigger the room, the more rows of file servers there were. That's where the data was being stored. Highly inefficient, right? Because companies would have to make these big one-time investments to store all of that data, not knowing whether they were going to need twenty percent of the server's capacity or a hundred and twenty percent of the server's capacity. If they only needed twenty percent, well, then they way overpaid for their infrastructure. If they needed a hundred and twenty percent, well, remember when people used to come to

• 24:28Speaker 02

  you and say, "Sorry, Anthony, my server crashed"? You don't hear people saying to you that their server crashed anymore, right? Well, part of the reason is because much of our data has moved to the cloud. Major advantages to companies because what it does for them is it gives them full pricing flexibility because you pay for what you use, not for what you don't use. So it's like your light switch, come into your room, you turn on your light and start Paying for the electricity, you leave the room, you turn it off and stop paying. It's the exact same thing with cloud computing. The other massive advantage and the reason why cloud computing has become front and center uh over the last year is because it enables users to access their data anywhere in the world. It also enables them to access software

• 25:12Speaker 02

  anywhere in the world. And I often say to people that uh thank God, if there was one silver lining of going through this pandemic is the fact that we're going through it now, not 10 years ago. Because if we went through this 10 years ago, we wouldn't be able to use Zoom. We wouldn't be able to use uh cloud-based video conferencing. We would have a tough time streaming movies off of Netflix. We would have a tough time streaming games uh as well. We would have been much more isolated and it would have been much darker period to go through. So thankfully, we've gotten the kind of technological advancements over the last 10 years that has made going through this pandemic uh a little bit bearable. But cloud computing today is going through this process

• 25:57Speaker 02

  where any new company that has set up in the last five years has gone straight to cloud. But any of those older companies, 30, 40, 50 years, they have these legacy systems. And so it takes a while to migrate to the cloud. So that saying that you often hear that everything is in the cloud, it's actually not true. Only about 40% of our data uh is in the cloud. So we still have a long way to go, which is why I think that this is a great area to be investing in because it's actually still uh early days.

• 26:27Anthony Pompliano?

  For sure. And so when you start to think through um kind of other areas in cloud computing, what are some of the like more niche aspects, right? The ETF itself kind of tracks uh the the macro, but are there micro uh areas that you're interested in?

• 26:44Speaker 02

  Yeah, we so so what we focus on is kind of the three pillars of of cloud computing. Platform as a service, infrastructure as a service, and software as a service or SaaS. Most people have heard the term SaaS very, very often. On the infrastructure as a service side, that's where you have Amazon, Microsoft Azure, and Google. Those three companies control about 55% of the cloud computing market. So remember a few weeks ago, the announcement came out that the announcement came out that it's funny, I mentioned Google and of course, my phone started speaking to me. The announcement came out that said that that Jeff Bezos was stepping down as CEO of

• 27:29Speaker 02

  Amazon and he was appointing Andy Jassy. Well, guess what Andy Jassy used to do? He was the head of AWS, which is Amazon's cloud computing business. Why did he appoint Andy Jassy? Well, I guess you can read between the lines, which tells you that cloud computing is a very, very important pillar of Amazon's future growth. So it tells you how how big it is. So that's on that side. And then and then where I really like the industry is on all the SaaS side, the software as a service. What we're doing right now on Zoom is SaaS based. Salesforce was one of the pioneers of SaaS or software as a service. I mean, when was the last time you went to a store to buy software, to buy the latest edition of Microsoft?

• 28:12Speaker 02

  And I often say to people, when was the last time you plugged anything into your computer other than power? I don't even know where my disk drive is at my computer because you just download all of your programs and everything that you need from the cloud. So to me, that's where there's huge growth opportunities on the SaaS side.

• 28:28Anthony Pompliano?

  For sure. Electric vehicles is another area that I always joke and say, ask a young person, and they say, of course, all vehicles are going to be electric. Ask an older person and they think it's like, you know, the charlatans of of tech have showed up in the electric vehicle space. So how do you think of that one?

• 28:46Speaker 02

  So if you think back like a hundred and ten years ago with the horse and buggy. Uh, and Ford came out with the first car and everybody said, this is a joke. It's a fad. Never going to replace the horses and buggies. It took about twenty years to eventually phase out horse and buggies. And I think that's the period that we're going through right now with the electrification of the cars. It's not an overnight thing, but there you're seeing these big, bold statements being made by countries and by and by the the auto manufacturers. Um, Norway and Netherlands, both. No more combustible engine cars will be sold in their countries from two thousand and twenty-five onwards. Norway is already fifty-four percent

• 29:31Speaker 02

  electric. So within five to six years after two two thousand twenty-five, so call it two thousand thirty, early two thousand and thirties, you won't even see a combustible engine vehicle on the roads in those countries. But the big behemoth countries, China, India, with massive populations are saying, two thousand and thirty, no more uh combustible engine vehicles on the road. You're seeing it with the Biden administration, making huge initiatives in the EV market. He just made an announcement a few weeks ago that the entire government fleet of cars is going to move to electric. He's talking about all these charging stations uh that are going to be put up throughout the US uh as well.

• 30:12Speaker 02

  Then you start to see cut companies like GM and Volkswagen both saying now, two thousand and thirty, Anthony, which is only nine years away from now, two thousand and thirty, they will not be making any more combustible engine vehicles. They will be full electric. So when you think about countries making the statement, companies, the auto manufacturers making those statements, you can clearly see a path to the electrification. I got an electric car a couple of months ago, three months ago now. I love it, but here's the big challenge, range anxiety. I don't know if you know what I mean by that term, but range anxiety, I get it.

• 30:50Anthony Pompliano?

  Can you make it?

• 30:51Speaker 02

  Yeah, every time I go to my cottage, can I, can I make it to the cottage and come back on one, on one charge? I can't. Um, and so I've got two options. Okay. Coming back from my cottage. One option is turn the heating or air conditioning off completely, turn the radio off and I'm white knuckle driving the entire uh way. So that I can squeeze as much juice as possible, or I've got to go 20 minutes out of my way to a supercharging station. To get a, to get a charge enough to get back and sit there if I want to charge the full uh car, sit there for about 45 minutes. Uh to charge it as well. Highly, highly inefficient.

• 31:31Speaker 02

  So this is the issue that I think we've got with the electrification is the overall infrastructure. Which is why I applaud, you know, the Biden administration for saying that, no, they're gonna, they're gonna be putting in 150,000 new charging stations. In the U S. I think that that's great. I mean, we need to do more of that in Canada. Our Trudeau government has made some commitments, but nowhere near enough. But that is the impediment for uh the adoption of the, that is one of the impediments of the adoption of electric vehicles. The other one in the past has been cost and because electric vehicles are too expensive, but that cost of the battery. It's come down about 75% in the last five years. So you're going to see greater and uh and greater uh adoption of it.

• 32:14Anthony Pompliano?

  Makes uh, makes a lot of sense. And uh, to me, it's always one of these things where these problems people will laugh at one day in the future, right? They'll say, what do you guys mean? You didn't know if you were gonna make it, but uh, but it's a problem today. Uh, last one I want to talk about.

• 32:25Speaker 02

  On that, on, on, on that point, you know, what's interesting is there, there's this company called Neo. And what Neo does, it's a Chinese based uh EV manufacturer. And what Neo does is you actually, you actually drive into a service bay and they swap the battery out. So you're in and out. So you're not sitting there waiting to charge your vehicle. Uh, that, I love that type of innovative thinking as it relates to the infrastructure. Until we get to the point where, you know, we can charge our vehicles faster, maybe even use. Solar energy to charge the batteries as well, but it's a really interesting time. And I would say to you that the car is going through the biggest transformation in history right now, not just on the electrification, but in the next few years, we'll have self-driving cars on the road, we'll have autonomous taxis.

• 33:10Speaker 02

  It'll be strange at first to sit in the backseat and nobody's at the driver's seat, but you'll get used to it and it'll be a great way, because think about it, how many people dread having to have those conversations with their Uber driver?

• 33:22Anthony Pompliano?

  Absolutely.

• 33:23Speaker 02

  So when I have to.

• 33:24Anthony Pompliano?

  E-gaming and esports is the fifth area that I want to talk about. What's going on there and why the interest in being the first ETF to give investors exposure?

• 33:34Speaker 02

  Yeah, well, you go back again, think about, think about your world 10 years ago. You got interested in a game, you went to the store, you bought the disc or the cartridge, brought it back home, plugged it into your console and away you went. That's where the revenue stream would stop for the e-gaming company, for the video game publisher, I should say. Today's world is so different. And so I had two aha moments in terms of wanting to create the first e-gaming ETF in Canada. The first aha moment was taking a look at how developed and intricate revenue lines these gaming publishers had set up.

• 34:16Speaker 02

  So you know, you download a game offered for free online and then you have something that's called a freemium model where you pay for to unlock levels or you pay for boosters or in the case of Fortnite, you pay for skins. And in North America, the average millennial today is spending $110 a month on e-gaming because of that freemium model. So that's a huge revenue line for the gaming publisher. But then they also. Because there's so many eyeballs playing the games and watching the games, now you have companies like Coca-Cola, T-Mobile, Red Bull, that want their logos in the game embedded because it gives them brand value.

• 34:59Speaker 02

  And so they're paying the game publisher oftentimes to have their logos. Like I, once in a while, will play a game called NHL 2K. And NHL 2K, the boards around the ice rink used to have these logos, but it was of fake companies. They didn't even exist. Today, they have the logos of real companies as well. And then you've got the tournaments and sponsorships, advertising, media rights. So these companies have come up with these intricate business models with multiple sources of revenue. So that was a big one. The next aha moment for me was the viewership. Before the pandemic, you had stadiums all over the world being filled with people watching other people compete in an e-game.

• 35:45Speaker 02

  I would have never thought, I never understood it. It never made any sense to me. In fact, I did a podcast where I was interviewing a professional e-gamer and I made that comment to him and he's like, you know, with all due respect Raj, my generation doesn't understand why your generation watches cooking shows or home improvement shows. And that put it into perspective for me because it made me realize, geez, well, what I sometimes think is strange and what I'm doing is probably strange to other people, let's not judge and let's just take a look at the business side and say, okay, well, if there's all these people going to stadiums to watch other people compete, if there's millions of people watching online, other people compete, this is a real source of entertainment for individuals.

• 36:28Speaker 02

  And so the viewership and the multiple revenue lines was what really caught my attention. And then, of course, the adoption. I mean, we have 3 billion gamers in the world today. That's anybody that spends six hours or more per week. And I think on gaming, I think it's really important to not get too caught up in the stereotype of those teenage kids in their basement with a bag of Doritos gaming. Because, yes, the teenagers are a segment of the population. But I know a lot of forty something year old professionals that go and hop online and compete in an esport with their friends.

• 37:07Speaker 02

  I know people like my mom, seventy five year old plus, that are playing games like Candy Crush and games like word search games. So it has transcended multiple demographics and has become so widely spread. And then you can see how it gets fed from there because our smartphone technology is getting better. We're eventually going to have a full rollout of 5G, which means your overall e-gaming experience is going to become that much better. Because the key to the growth of e-gaming isn't in the consoles. Because there's only 200 million consoles in the world, consoles meaning the PS5s and Xbox in the world. There's only 200 million of those, but there's four billion smartphones.

• 37:48Speaker 02

  So if you're a game publisher and you're building your game for the smartphone market with all of the improvements in the hardware and technology and faster transmission, you've got a real business.

• 37:59Anthony Pompliano?

  I, I feel like the five sectors that you guys have chosen that we talked about today to young people, no brainers, to hopefully more and more investors every day becoming no brainers. I want to close out before we get into the rapid fire questions with a return back to the Bitcoin ETF. As you think through that, what is kind of your pitch to people as to why they should take a look at that and put it in their portfolio?

• 38:26Speaker 02

  Store of value and uncorrelated asset class. You know, for example, over the last couple of years, the relationship between Bitcoin and North American equities and North American fixed income has been zero to negative, that relationship. So it actually can really help diversifying an overall portfolio. Those to me are really the keys, the diversification aspect, the store of value and the greater adoption, which is just going to fuel the price of Bitcoin, which is why I think it should be in people's brokerage accounts.

• 39:03Anthony Pompliano?

  You know, I agree. You don't have to, don't have to pitch it to me. I want to get into rapid fire questions and you get to ask me one question to, to finish this up. What is the most important book that you've ever read?

• 39:17Speaker 02

  Poo, the most important book that I've ever read.

• 39:25Speaker 02

  Probably Catcher in the Rye.

• 39:28Anthony Pompliano?

  Why?

• 39:29Speaker 02

  I just, it really resonated with me. I mean, I, it was, it was, you know, I, I was undiagnosed ADHD growing up, like a lot of people. I mean, it's easy to diagnose today, but I, you know, I was not one of those kids that could read, that could sit down and read a book. That was the only book in my childhood that I sat down and read cover to cover within a day. And, and, and, and the reason I was able to do that is because it was just so interesting to me. So I know most people would say like a, a, a business related book, but that was a book that when you asked me that question, it's the first one that comes to my mind that marked me the most. Uh, because I was pretty proud of myself as well,

• 40:12Speaker 02

  uh, for being able to, I always heard about, heard about these people saying, oh, I finished this book in like two hours. I was not that kid. Uh, so being able to finish a book in a day was a, was a, was an accomplishment.

• 40:24Anthony Pompliano?

  That's a, that's a great reason. Uh, second question is about your sleep schedule comes from our friends over at Eight Sleep. Uh, I used to sleep like five or six hours and, uh, then I got an Eight Sleep thermoregulated bed. It's basically turn it really hot, really cold. I sleep literally on an ice cube and sleep like a little baby now and I'm a full on convert to the sleep religion. What's your sleep schedule and how has that changed over the years?

• 40:46Speaker 02

  Uh, well, when you get older, you start to go to sleep earlier. So when I, sometimes when I talk to people like you and, uh, some people say, I'll give you a call around nine o'clock and I'm like, PM? And they say, yeah. And I'm like, uh, that's when I'm really getting, getting ready for bed. I am, uh, I'm a early sleeper and an early riser. I'm, I'm, I'm very good at getting seven hours. Uh, I, I'm usually asleep by 10 and awake by five, uh, in the morning. And then what I'll usually do these days during this pandemic is I'll work for about an hour and then I'll go and hop on my Peloton, uh, for a bit and then come back up and work and get ready and, and work and, you know, driving my, these days because my daughters are back in school, I'll drive them to school as well

• 41:31Speaker 02

  because it gives them that, gives me that time. I've tried so many different things though. Like I actually got one of those weighted blankets, um, um, a couple of months ago. I found it too restricting for me. I didn't enjoy it. So I stopped using it.

• 41:46Anthony Pompliano?

  I love the experimentation and the open mindedness. I think that's always key. Third question is more fun. He gets asked me one is aliens. Are you a believer or a non believer?

• 41:57Speaker 02

  I am a believer and I'll tell you why.

• 42:01Speaker 02

  Chris Hadfield, very famous astronaut, is my neighbor. And had a conversation with him one time and I asked him that question. Do you believe that there's life in the solar system? And he said, no comment. I don't know. If he believed that there wasn't, then he probably would have said, no, there isn't. But the fact that there was no comment tells me that, and he would probably know better than me because he's been there a few times. So it tells me that there probably is. But it's a great debate because I debate this also with my kids. I mean, I find that this generation of kids today are far more interested in space

• 42:46Speaker 02

  than probably the generation before them. And maybe Elon Musk has something to do with that. SpaceX has something to do with that, probably. But my daughters are very fascinated in watching space shows. So I was very skeptical. I'm a very linear thinker, black and white. But in that case, when I heard that comment, I could see that there probably is. What about you?

• 43:11Anthony Pompliano?

  I'm definitely a believer. Come on. It's just math, right? Just the minute possibility that there is not intelligent life is just too small. So I'm a probability believer in that case. You get to ask me one question to finish up. What you got for me?

• 43:26Speaker 02

  What's the, what's your favorite podcast besides yours?

• 43:31Anthony Pompliano?

  Oh, that I listen to? I don't have a favorite. I don't have a favorite necessarily. I'll throw some out there that I find myself listening to the most. So Joe Rogan, Tim Ferriss, Patrick O'Shaughnessy's Invest Like the Best. I would say those three, I probably find myself listening to more than most. But I also enjoy kind of just when I see, you know, people tweeting about a specific. Episode and there's like, hey, this one's really good going kind of listening to podcasts I haven't listened to before. I've never listened, not one time. He's a horrible host, Pete, Peter McCormick from what Bitcoin did. Horrible guy, like literally anyone who listens to that is crazy. I've never listened to a single episode, but other than that,

• 44:16Anthony Pompliano?

  every other podcast episode that that people do, I really enjoy compared to his.

• 44:22Speaker 02

  Can I ask you a second question?

• 44:25Anthony Pompliano?

  Sure.

• 44:26Speaker 02

  Clubhouse. A year from now, people still using it or is dead?

• 44:33Anthony Pompliano?

  I think that there's two ways to answer this. Drop in audio experience, game changer here forever. Clubhouse likely winner. Could mess it up at some point, some way, could be copied like Twitter spaces or something like that as well. But I think that the conviction I have in terms of drop in audio for sure, like that is here to stay. I think people would just want the experiences of wow, this is amazing. The big question is can clubhouse continue to kind of, you know, distance themselves from all the competition that's coming? My guess is, yeah, they probably can, but we'll, we're going to find out for sure.

• 45:10Speaker 02

  Yeah, interesting.

• 45:12Anthony Pompliano?

  What, what do you think?

• 45:15Speaker 02

  I, I'm still getting my head around it. Like I'm still getting my head around NFTs. Non-fungible tokens as well. And I've been asked this question about NFTs a few times this week alone and never been asked about it prior to this week. So obviously the big art sale and, and, and the LeBron videos are making headlines. As it relates to clubhouse, I, I think the concept of live makes a ton of sense.

• 45:46Speaker 02

  I can tell you two things. Number one, I never PVR sports because if I don't watch it live, then I'm not going to watch it. Recorded because I just feel like you've missed the entire experience of watching something that's already happened versus live. So I, I'm a, I'm a big fan of the, the live. Medium and I I see it in our business too. I mean, we do these webinars all the time. And I find that, you know, we could have 500 people RSVP saying that they're going to be coming on to our webinar. And 300 people participated in it in the end. And then we'll send the replay around and maybe two people will watch the replay. Uh, because for them as well, it's already happened. So I think that the concept of live.

• 46:31Speaker 02

  Uh, is is a really good one, which is why I think Clubhouse works. I have not used Clubhouse yet, so I'm just a student of the of of it. I I'm I'm planning to use it in the next couple of weeks. Part of the reason why I'm I don't use it is because I use a Google phone. And you have to have Apple uh to uh to use it. So if Clubhouse is listening. Uh, try and make it friendly for the uh for the Android users uh as well. But I anyways, I think it's I think it's a very interesting concept. And um, I I think I think it could, I think it could really take off. And I agree with you. The drop in concept is is great.

• 47:08Anthony Pompliano?

  For sure. Where can I send people to find you on the internet or find out more about Evolve ETFs?

• 47:14Speaker 02

  Yeah, we have a, we we have a great website at evolve ETFs dot com. Lots of stuff in there, infographics, different media. Uh, a newsletter as well. If people want to sign up for it, we send out a newsletter on Sundays. With a lot of different articles about disruptive technology. Um, so any information that you could possibly need about our funds, uh, it's there on our website.

• 47:38Anthony Pompliano?

  All right, man. Listen, I really appreciated uh this conversation. I learned a ton. I think that your focus on disruptive technology and innovation is probably going to pay off uh pretty well here for uh for you and for folks who choose to get exposure through your ETFs. So I appreciate the time. I'll do it again in the future.

• 47:55Speaker 02

  Thanks, Anthony. I loved the experience.