Patrick O'Meara, CEO of Inveniam Capital Partners: The Automated Future of Finance

Patrick O'Meara is the Chairman and CEO of Inveniam Capital Partners. In this conversation, Patrick and Anthony Pompliano discuss the issues with traditional financial asset structures, what it means to model financial assets for data and not code, how tokenized assets are currently being selected, and what an automated future of finance could look like. -----If you enjoyed this conversation, share it with your colleagues & friends, rate, review, and subscribe. This podcast is presented by BlockWorks Group. For exclusive content and events that provide insights into the crypto and blockchain space, visit them at: https://www.blockworksgroup.io

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

• 0:01Anthony Pompliano?

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

• 0:12Anthony Pompliano?

  Patrick O'Meara is the chairman and CEO of Inveniam Capital Partners. In this conversation, we discuss the issues with traditional financial asset structures, what it means to model financial assets for data and not code, how tokenized assets are currently being selected, and what an automated future of finance could look like. I really enjoyed this conversation, and I hope you do as well.

• 0:36Speaker 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.

• 1:03Anthony Pompliano?

  Alright guys, bang, bang, bang. I've got Pat here with me. Thank you so much for taking the time to do this.

• 1:09Speaker 02

  Hey, it's my pleasure. Thanks for having me on your podcast. It's fantastic.

• 1:16Anthony Pompliano?

  Absolutely. Let's start with your background. What did you do before crypto and tokenized assets?

• 1:22Speaker 02

  Sure, yeah. I worked for Raymond James, then I worked for Bear Stearns. I started on derivatives desk. I ended up managing some technology portfolios at the interface of PCS or the private client part of Bear and the derivatives desk. And then I ended up leaving and starting my own firm. I ran that firm for about 14 years. It was called O'Meara, Ferguson, Whelan and Conway. And in a part of the market, a very specific part of the market, faith-based, donation-driven nonprofits, we became kind of the global leader in that. So as an example, we were the largest lender to the Catholic Church in the world.

• 2:07Speaker 02

  We had about 42 dioceses in the United States and So whether it's a Hasidic Jews or Catholics or Mormons or an Amy Zion nursery church planting, we helped the markets understand the credit and what are the true cash flows and the margins of those people. And we had a, an asset management business and a, a debt business and a consulting business and a fundraising business. So that was a fun business for about 14 years. I sold that. I became chief investment officer for a university, one of my clients. And that was less fun than it sounded. So I ended up leaving after about a year.

• 2:44Speaker 02

  And I started managing the private equity for the third generation of a Forbes 400 family. And while I was doing that, we really started looking at how can we facilitate the coalescence of physical settlement debt or non-bank lending, coalescing around a series of technologies as we believed that banks were dying, right? And so as we did that, that's in, I think, 15, we began looking around the world. We discovered blockchain. The family did not want to put the money into that, into these deals like I did and with the same focus.

• 3:28Speaker 02

  So I ended up buying the vehicle that we'd done the diligence in and I started Inveniam. And so Inveniam, we, we built our MVP. By May of 17, we did some tokenization. We did about eight transactions in 2018. We think we were the first people to do commercialized debt, commercial debt on the blockchain. That was February of 18. We did about 50 million in total in, in 18. And then now we're, now we're in the market hoping to do some, some larger amounts. Hopefully, you know, somewhere around 500 million to 700 million in face amount paper this year.

• 4:06Speaker 03

  Got it. Absolutely. Let, let's start with the problem, kind of the structural problems in the legacy financial market. Maybe, maybe describe like why you think this is a, you know, a problem worth going after and, and kind of what those problems that you identified were.

• 4:21Speaker 02

  Yeah, absolutely. So, you know, the You know, the banking market has gone through an enormous amount of changes. And there's been enormous consolidation, not just in banking, but in in the banks when Glass-Steagall came about. We're literally, starting in 99, all of the big banks, on average, the top four, who have about 53% of the deposits, they, on average, bought 75 banks, right? And so, you know, big institutions, Bear Stearns, where I worked, right? First Chicago, you name it, Montgomery Securities.

• 5:01Speaker 02

  These are just fantastic institutions that were innovators and served markets really, really well. They were bought up. And what happens is that the bigger these banks got, there was a race to serve bigger and bigger clients. And the middle market was not served well at all. So not only was investment banking, the shops all over middle America, whether Robertson Stevens, all of these great shops all over middle America, got bought up. And they either, the really good capital markets talent moved to the coasts or they got turned into annuity salesmen. And so what happened is the super regionals kind of started to fill that void.

• 5:44Speaker 02

  And what happened is, following the financial crisis, they were no longer able to serve that market. And so the middle market has not been served well at all. And so you have enormous amounts of money being raised in funds to serve middle market lending. And everybody from BlackRock has gotten into this and KKR has gotten into this. And you have these big business development

• 6:11Speaker 02

  organizations like Alrock that have raised 18 million that are lending. But the reality is, they don't have the coverage across middle America. And what we wanted to do was say, how can we empower all of these smaller borrowers having more appropriately priced access to capital that, on a risk-adjusted basis, is Uh, is more appropriately priced. And so the idea was, A, we wanted to decentralize the construction of financial instruments and and then the ability to embed enormous amounts of data of the underlying assets associated with those financial instruments

• 6:55Speaker 02

  that are being created, uh, so that they can be, they can be compared to transactions uh, on an apples-to-apples basis. And you can have an effective digital global marketplace. And to do that, you need it, you need good data that's validated. And you need to be able to then compare that data to empirical price points as transactions are happening. And we're, we were doing that with, and we are doing that with private debt and real estate equity. So this is income-producing, data-rich, low-frequency-trading assets. And if we can do that, we think we can significantly compress the illiquidity premium on those types of assets.

• 7:40Speaker 02

  Um, and, and, and we can do a number of other things to move the needle, but that's where we're focused, uh, right now. Was that, was that a little bit too long of an answer?

• 7:49Speaker 03

  No, makes, uh, ma- ma- makes sense. So let, let's talk a little bit about this, uh, this difference between tokenized assets, uh, and security tokens. Like, how, how do you delineate between?

• 8:00Speaker 02

  Yeah, so a, a, a security token is something where, right, that, that, that digital instrument ensures that it is a security. And what is inside that might in fact be a airline miles program, or an email program, or, uh, utilization of cloud storage, or all sorts of different things. But based on the mechanism for monetization of services and utilities, you need to comply with securities laws, right? Well, that's, that's its own thing, right? And there's lots of people who are doing it. And there's reg tech and identity tech needed to facilitate that. But

• 8:42Speaker 02

  we're focused really on something on the other side where we're talking about the tokenization of...

• 8:49Speaker 02

  Securities, meaning these are already financial instruments that we are turning them into digital instruments. And so they're a security whether they exist on paper or they exist digitally. And what we're trying to do is use the tokenization function in order to facilitate higher functioning of the existing financial instruments. And so it is a financial instrument and it is a security whether or not it exists digitally or on paper, but the digital form of it is higher functioning that we think can be socialized in a more efficient manner. It can be connected, digital ownership can be connected with the digital identity of the assets.

• 9:33Speaker 02

  On commercial real estate, they talk about the digital twin of that asset. And right, all of that data is being validated real time utilizing the blockchain. So think all the IOT data, all that kind of stuff. And that is a data-rich, high-functioning instrument that makes the financial instrument perform more efficiently, but underneath it, it actually has a financial, a series of assets. A security token may or may not have assets underneath it. It may or may not be a security other than that's the form in which you want to distribute it. And that really is something else.

• 10:16Speaker 02

  What we're focused on with the identity tech and reg tech is not something that's going to make this thing dummy-proof because we don't have 2,000 or 5,000 or 10,000 investors. We might have seven or 10 investors where you have financial institutions who are putting in bids for 5 million to 40 million to buy pieces of these assets. And if you're doing that, you don't need somebody holding up their passport and wiggling it in front of their phone to validate their identity, right? So we can use what we call sneakerware, right? To do that basic functionality because you're not solving a problem that actually exists in the market, you're just making something more complex.

• 11:00Speaker 02

  But if we can actually solve a problem in the marketplace, meaning all of this data associated with that instrument is not validated and you constantly keep having to call in third-party oracles to validate it, well, that's what the blockchain is built to serve. And so if we can use the blockchain to validate all that IOT data and connect it with the digital ownership, people who use our software, whether they're big property management companies or somebody like that, can have far more efficient pricing on the assets that they manage on behalf of their clients.

• 11:36Speaker 03

  Got it. And so what does that mean in practice, right, for the individual or the organization that's looking to be on the other side of the asset, the investor? Like, how does that change?

• 11:48Speaker 02

  So, so that's really interesting because we've evolved on this point over the last 24 months pretty dramatically, right? Because we were first building digital instruments that had this financial capability, this capability for all this data where we're able to see the environmental data. So talk about equity in the real estate, right? So what we're tokenizing is the interest in a limited partnership and people are buying that limited partnership interest. And what they can see, their token is their access point where they can see all of the data on a real-time basis that's being generated from that building. And so literally, it is your pass key to gain access to see data that's been verified,

• 12:31Speaker 02

  timestamped, kind of this hypernotary function, and then indexed by the blockchain. And you can see all that data in what's called an S3 or kind of like a data bucket, right? The storage of all that data. And so your token gains you access to that. But what we do is literally, we can see the environmental data, the atmospheric data, the power utilization, the foot traffic, the security fobs, how many people are actually coming in and out of the various different floors, the relationships with vendors, the relationship of that asset to what's below it, meaning to the municipality, whether you're talking about certificates for construction or occupancy or utilities, or above it, the relationship to the tenants.

• 13:15Speaker 02

  And all of that data is coming in and the smart contract, which also governs ownership.

• 13:23Speaker 02

  Is uniquely writing that data as a timestamp, just like when you come in to the floor of a factory, right? You you put your time card in and it puts the timestamp on that. Literally, this is timestamping, but then also in kind of a librarian function, we index this data, make sure that the data format is in ISO 8601 compliance, so that it's clean data and it's indexed and you're able to find it. And the advantage of that is code, as you know, is brittle and short-lived, right? So solidity right now is a new thing. It doesn't even have a real debugging tool. And, you know, soon there's going to be solidity plus and solidity plus plus and solidity sharp.

• 14:07Speaker 02

  And if you model transactions as code and the code is evolving, you're going to have to reprogram that. But data is robust and it lives. And if all we're doing is using the code to make the data more functioning, high functioning, you can replace it less frequently and it's easier to do so. And so what we're doing is making sure the data that comes out of these assets, right? So I can tell that sensor number eight from the 42nd floor of this building is driving this information that's coming in. And so I don't have to hire somebody like a CBRE or a Cushman and Wakefield. Every time I want to reprice my data, I'm going to be able to validate

• 14:50Speaker 02

  that this information actually is coming from this place, is indexed, it's time stamped, and it's structured in a way that it works on a global digital marketplace.

• 15:04Speaker 03

  Got it. And then let's talk a little bit about this idea that, you know, these financial instruments that you're creating. You said before that they are modeled as data, not necessarily as code.

• 15:19Speaker 02

  Like elaborate on that a little. Sure, you know, when something's modeled as code, literally, somebody is writing code. And the way we think about it is, um, it's like a blank stock certificate where you've got four places where you can write some information in, right? Or, you know, when you go to the car dealership and you lease or buy a car and there's that long piece of paper that has, you know, 20 places that data gets written into it, right? But it's the only place that the printer can print. That's what modeling a transaction as code is. You build code to support data coming in, in various different places.

• 15:58Speaker 02

  And if you don't have data that fits into those fields, um, you can't really use that, that highly structured, um, asset. And meaning that the parameters of that really are written in code by a programmer in solidity. When you model it as data, you're taking all of the data points from these physical settlement transactions, right? Private credit and real estate. Where when you go to a settlement of a piece of real estate deal, you've got 400 pages of contracts and you take your copy of the executed agreements, that's literally you

• 16:41Speaker 02

  taking those documents home is the form of settlement. Literally, what we're doing is all of those documents are notarized on the blockchain with the hash and the cipher and a time and the, and the data associated with it in an, in an ISO 8601 standard fashion. But also it's indexed, so you know where it exists. So all of that data exists, but then you can put code on top of that data to make that data higher functioning. Meaning in the legal documents, it says you need a compliance certificate every quarter or every six months. And what happens is you can use callouts to seek that data.

• 17:25Speaker 02

  Or you might have an API being driven where you're collecting all this information in. But when you, when you structure something as code, where the code is the law. That makes sense for high-volume, low-variable things like consumer loans or auto loans or something like that where there's very little variability other than the person's name and the amount and the interest rate. But when you're talking about capital markets, you have to structure those loans because each deal is unique. And let me tell you, the lawyers and the structuring agent, the investment banker, the credit specialist,

• 18:07Speaker 02

  the accountants, as they put those deals together, each one of those deals is unique. And what we're doing is saying, hey, let's put this let's put this out there in a way that's going to be robust and last for 30 years. So I'll give an example, right? What do you think about in 1993 when data was put on the internet, right? Excite could read that data. When two years later Netscape could read that data, right? Three years after that, Google could read that data. But, you know, over time, all of the different browsers could read the data because the data was put out there in a format that was robust. And what we're doing is we're saying, we want to preserve the data,

• 18:49Speaker 02

  meaning the legal contracts, the actors, the actions, everything that induced you to make the investment, but then also the performance of the instrument and the performance of the asset underneath that instrument to evaluate that security continuing to not only perform, but to price correctly in relationship to other assets around the world. That was a really long answer. Does that make sense?

• 19:15Speaker 03

  No, no, it does make sense. And I guess part of this is, you know, the structure of these assets, I think, is important. But for the detractors, right? If I play devil's advocate for a minute, I think the detractors would say, you don't need tokens. You don't need a blockchain to do this. What would your rebuttal to that?

• 19:37Speaker 02

  Well, I mean, you have to say, what's the point of a distributed ledger, right? It's to do away with third-party oracles, right? And if we can use the distributed ledger as a mechanism to validate data. Right, that is coming out of I O T. Uh, devices from buildings. You're using the trust function of the distributed ledger uh to your benefit. In addition, the ownership and the ability to clear and settle uh quickly is enormously valuable. But as you know, clearing and settling an asset has no value. Uh, and it doesn't make something liquid unless you have bids.

• 20:22Speaker 02

  So how do you generate bids? You have to have data that exists in a fashion that you can socialize in order to generate bids. So you have to have it through the validation, right? And so we do believe that a tokenized instrument that you can physically settle, or you can accept it as a digital instrument. Um, that relies upon the blockchain where you don't need third-party oracles is what is going to democratize and you're going to do away with the bottlenecks, not only with the creation of financial instruments, but doing away with the bottlenecks as it relates to distribution, credit function and validation. And what's going to happen is we're going to create an economy

• 21:04Speaker 02

  where the on-ramps for the creation of financial instruments, the validation of those instruments, and the pricing of those instruments can become democratized. And right now, if I'm selling a piece of real estate in Miami, if if I know a guy who knows a guy who might be a buyer, I can reach out to him and maybe sell to him. But if I can, if I can model that as data and I can find all the global buyers of assets who like that particular type of building or private credit, and the right buyer might be in Scandinavia in a global digital environment. That can be connected up, right?

• 21:46Speaker 02

  Where matching algorithms and search algorithms and machine learning can do this. Because we can see the data. We can structure the data. It's been validated utilizing the blockchain. You create PPIs and then you allow people to use that data to match up. And what we're doing is, we don't think the world in the future will be broken down between public and private, or listed or not listed. It's going to be data-rich and data-poor assets and data-verified and data-ambiguous assets, right? So the asset that's data-rich, where the data is verifiable and you're using the blockchain to do that, will trade appropriately priced.

• 22:30Speaker 03

  Got it. And so what does that do in terms of the impact on what I'll call infrastructure, right? So like, when you start to change the way that things are priced and the way that investors actually interact with it, does that change the exchange business? Does that potentially cause a lot of problems for like, people at the New York Stock Exchange? Like, how do you see the ramifications or the tertiary effects?

• 22:57Speaker 02

  Sure, yeah. And so let's talk about that, you know, kind of in two or three steps, right? The reason we went here, which is the physical settlement market, is because it is the easiest market to be an early adopter of this new technology, right? Because we're not interfacing with an enormous number of existing systems that we have to integrate to, like legacy systems. Because literally, you're physically settling these assets, right? So we're skipping over landlines, going directly to cellular, right? And so that's one of the things that we're doing and one of the reasons we went here is because, A, we think that this is a

• 23:41Speaker 02

  Great place where we might have early adoption. But also, the spreads are pretty significant for private credit, right? We think we can move the illiquidity premium on these things pretty dramatically. And the way we do that is we have good data that we're going to be able to compare in a highly sophisticated and efficient model that has empirical evidence coming into it, which will allow us to move from an illiquid asset in an accounting and under FASB 157. It would be called that moving to a type 2 asset from an illiquid asset. And there's three types, you know, one end for real estate as an example. You know, a liquid real estate asset is a REIT, which is expensive to get and maintain.

• 24:24Speaker 02

  And at the other end, the illiquid is just a limited partnership, which is easy to set up, but is illiquid and there's no comps for pricing. Well, if you use our technology, literally, you can have this data that's verified, that's in a model that you can compare with empirical data points happening when other buildings are trading around the world. We think we can get those to become what are called marketable alternatives or type 2 assets on FASB 157, which is going to dramatically open the door on who can own these assets, right? So 40 act funds are going to be able to do that to own these. Pension funds are going to be able to own these, et cetera. Well, then there's a pricing functionality where there needs to be pricing that is posted

• 25:09Speaker 02

  informed by these models. And we think technical listings on exchanges, global exchanges, is where you're going to see these private illiquid assets get listed, whether it's in Bermuda, the Deutsche Börse, Singapore Hang Seng, people like that, that will be listing and serving as a data feed, which is what exchanges are doing more and more these days. And you get the halo effect of saying, I'm complying with all the registration requirements of being listed on one of these entities. And what happens is you're going to see these data-rich private assets that where you see the pricing on an exchange, but we believe the future of the world is not on these ATSs or these smaller exchanges.

• 25:53Speaker 02

  It's going to be on an, it's going to be an OTC world. With enormous number of nodes that are trading back and forth across each other, but where there's pricing that is verified pricing on certain exchanges that serve as data feed services, which in fact is what these guys are doing. And these exchanges are very excited because the idea that suddenly you're going to have private debt and real estate listed on the exchanges, there's going to be a bunch of listings and once you have a certain number of listings, then you can start creating indices. And once you create indices, you can create derivatives and other financial products. So these exchanges are very excited about that. And those are the guys we're talking to about listing of private assets. And this is called a technical listing, but where it's going to be traded away from

• 26:38Speaker 02

  there. So it's a non-exclusive listing. And we think the future is an OTC world. But where there's enormous data, because there's going to be lots of nodes, whether you're talking OTC desks, et cetera. But where you have engines that are gathering information on pricing and seeing where there's opportunities for arbitrage and mismatch, et cetera. Because in the future, when you want to buy debt, private debt, public debt, whatever it is, instead of an Asian pension fund who wants to own some of that middle American debt that it doesn't originate, right now it's buying it, you know, a CDO or CLO. In the future, they're going to be writing an algorithm that is going to be reading

• 27:21Speaker 02

  data on loans as they're created and literally hoovering up those loans as they're being created. And the question is, who's going to have the best data, that's going to have the right structure? And, you know, people, these big pension plans or serial buyers are going to be hiring investment banks to write the algorithms to find the assets that hedge the risk for their macroeconomic views, that they want to be represented financially in the form of an economic thesis that they think is going to drive the greatest return. I was, I'm sorry for the really long answers.

• 27:56Speaker 03

  No, it's important to understand it. We talked a lot about kind of the data of the assets, but I want to have you elaborate a little bit on like, where do you think, or what types of assets are the first types of assets to kind of get put through this process? And then how do you, either you guys or others, go about selecting the right assets?

• 28:17Speaker 02

  Yeah, fantastic. Yep. So our first eight were kind of right down the fairway. You know, multifamily housing. We did asset-backed stuff that's throwing off a steady coupon. Right? And we are trying to get things that where people are getting used to a new structure. We don't also want them having to get over a hump as it relates to, you know, a real tough credit to understand or get behind. So we were trying to be, you know, right down the center of the fairway. Whether we're talking multifamily housing, whether we're talking about student housing, whether we're talking about like commercial real estate for offices, you know, in urban, in the urban core, right? I mean, that's what we wanted to do because we want to get assets

• 29:02Speaker 02

  that are the getting over the credit function and buying the asset is going to be less difficult. So that the difficult part of the adoption of a new structure is going to be easier for them to do. So that's what we've been focused on, right? Trying to get kind of real meat and potatoes. And it's, you know, we're, so we've got a student housing deal for 78 million, but a single financial institution, one of the top 10 municipal underwriters in the US is just taking that whole deal down. We've got a $55 million financing for a water pipeline and we've got two term sheets for that that are going to be our kind of our anchor investor. And then from that we'll raise on top of that the additional, but that'll be about 55 million.

• 29:47Speaker 02

  You know, and you know, that's throwing off kind of a 12% coupon, but you know, it's real assets with several hundred miles of pipeline that water's flowing through, right? And so these are, these are core assets that we're doing that are income-producing, data-rich, low-frequency trading assets. That's what we're focused on. And we are then going to, we're going to be in the business of helping people who have existing portfolios of assets, tokenizing their existing portfolio. And so while there will be some primary issuance, we think that that's really going to, the primary issuance for new things is going to take off in a year or two.

• 30:28Speaker 02

  But where we're going to see the real growth is where we have current owners. Digitizing their existing holdings so that they can begin to harness that data with all sorts of data tools that are actually already out in the marketplace. So our first user of our technology, third-party user, is a portfolio lender who's gonna be tokenizing 425 of their existing loans. And then the following quarter, they're gonna start, 100% of all their new loans that they originate are gonna be digital. They're gonna be tokenized assets that they can hold in a crypto wallet, or they can,

• 31:11Speaker 02

  you know, hold as a paper asset, and the token is gonna be unauthorized but unissued token. So that's kind of where we're focused. Anthony, does that answer the question about kind of where we think the beginning of this really starts to take off?

• 31:28Speaker 03

  Absolutely. And I guess as part of that, right, how much of this is pulled versus pushed to these investors, right? If they're the ones who are writing algorithms, they're out looking for the assets, they're looking at this data, how much of it is the assets are kind of being presented and then people are coming in and getting them versus, let's say, you know, in the legacy world, assets are being put into certain types of vehicles or funds, and then really being marketed to investors? Do you think that marketing kind of goes away after you go through this like site or asset selection process and actually get the data? Or do you think that maybe that stuff actually becomes even more important?

• 32:12Speaker 02

  So, yeah, we actually think it becomes more important, right? There's an old saying on Wall Street, right? Securities are never bought, they're only sold. And we believe that you're gonna have to sell these things, and you're gonna have to do that in an efficient manner, writing towards algorithms that you think you want to buy. So as an example, I'm in Topeka, Kansas, and I want to start a cupcake shop, and I'm gonna start my own website. I can do search engine optimization towards what I think the Google algorithm is, and literally, I can get my cupcake shop on the first page of Google for great new cupcakes within a week, right? Because there's an algorithm that I'm managing towards.

• 32:55Speaker 02

  Right now, the only way I know what MetLife and Prue are buying from fixed income instruments is I literally have to have a guy on a fixed income desk who's picking up the phone and saying, "Hey, Tony, what are you buying this week?" Do you know what I mean? And tell me about what you're looking for, etc. We think that MetLife and Prue and all of these other big buyers are gonna publish the algorithms of what they wanna buy. And people are gonna build financial instruments with the end buyer in mind that is data-driven. And now, of course, there're gonna be qualitative aspects to this that need to be drilled down, and you're gonna have to get brand names of people who are gonna do credit assessments of the management teams and whatever, or subject matter experts who are gonna look

• 33:40Speaker 02

  at the, you know, the quality of the, of the construction, or the quality of the deposits, or whatever it is, right, you know, if you're looking at mining. And, and there's gonna be qualitative validations, you know, with rating agencies and other people like that, but really, we believe that this, it's gonna be both a push and a pull, but people are gonna be able to literally design financial instruments with the takeout in mind, and what that does is, it takes away the power of, of the Morgan Stanley fixed income guy who knows how to build the financial instrument, because he's got, uh, somebody covering the financial buyers, whereas the smaller security shop in Kansas City, or

• 34:21Speaker 02

  Des Moines, or Kampala, or, you know, you know, wherever it is, right? Who, who wants to put a business into the global economy and get correctly priced, and efficiently priced capital. In fact, um, he's gonna be able to know what the benchmark that he's trying to hit is, because those algorithms are gonna be published. So we think it'll be push and pull, and people are gonna build things, they're gonna have to push it there, but they're still gonna have to pitch. Uh, you know, sales will never go away, it's just gonna become more efficient and more targeted to the right, the right types of buyers, and there'll be less, you know, spraying of, of, uh, marketing.

• 35:06Speaker 02

  Does that make sense? It, it, it does. What do you think the biggest challenge is for you guys moving forward? So...

• 35:15Speaker 02

  There's a lot of challenges. One of the biggest challenges is where we were building them first as digital only. And we kind of spent an enormous amount of time where we have the ability, we have the ability now to either physically settle or deliver as a digital instrument. That took us a long time to get to that place, both in a form of documentation and technology. And so that allows people to dip their toe into the digital world a little bit more. And the way we talk about it is literally there are 10,000 asset managers of size in the US. And in the next five years, every single one of them is going to buy a first digital financial instrument. And we want their first to be with us, you know, and that's data rich and they can, they're happy that they own it.

• 36:01Speaker 02

  Because it's got more functionality than just buying it in paper. And so that, that's A, it's going to take time. We've got to build an ecosystem that around us. Where people work together well, right now, the, you know, the blockchain ecosystem is, is a, is not working well together. There's a winner take all attitude. And people are not helping one another and they're not trying to build an ecosystem that's supportive. And so A, that's a challenge. B, I think that there was a lot of hype without a lot of delivery of real financial transactions. People were more focused on delivering a digital instrument.

• 36:44Speaker 02

  Than delivering a digital instrument that represented a, a really good investment. Right? And so getting, getting over some of the past ICO headaches and

• 37:01Speaker 02

  associations and which is one of the reasons we say we're in the tokenization of securities and we're in the digital instrument business. It is because of that. But so I think those associations and facilitating and working with other people in the ecosystem. Those are our big challenges right now. But I have to tell you, people in the private debt space and people in the commercial real estate market are They're really, really, really interested in seeing a working, functioning model. Now, the other thing is, everybody wants to be the second buyer, right? There's very few people who want to be the first buyer. And so, you know, finding, being on the bleeding edge of this, right? We've got to find some of these first buyers for these, you know, real,

• 37:45Speaker 02

  you know, sizable institutional assets. And so, um, I think, I think I, I've probably over answered that question.

• 37:53Speaker 03

  I think, I think it makes a lot of sense. And part of the, uh, you know, the evolution here to me is you're really going from a world where, um, data is, uh, those who hold the data are seen as the powerful people. Um, and it, it is, uh, up to the job of the investors to go find the data as the first step, um, and kind of put together very, uh, various data sets, um, to make a decision. So you see, you know, hedge funds, for example, they're doing everything from, uh, looking at parking lots, satellite shots of cars, uh, in the parking lot, number of cars and changes over time, um, to buying credit card data, et cetera.

• 38:36Speaker 03

  And so they're trying to find all this dispersed data and bring it together. And I think when you have a world where everyone knows where to find data, uh, you probably get much more efficient markets. Um, and on top of that, uh, I also think that, uh, you get a much more automated market. Um, and so what that means is you get more accuracy of the analysis, um, because everyone's operating off of the same, uh, same information, uh, which is, uh, you know, it's something that today seems a little bit like a pipe dream, but, uh, but I actually have a high level of confidence it's something that can happen in the future.

• 39:10Speaker 02

  It, it really is. And, and we are going to see, um, we think that there's a convergence of a number of different, so A, it's data, right? Data-driven creation of financial instruments, right? And the blockchain really makes that possible. And in, in some pretty core ways where these digital instruments exist. And where we're going to see real transformation of the financial services market is when you see markets. Where people are not banked right now, or the financial services markets don't serve them well, you're going to see people creating financial instruments in those other areas.

• 39:49Speaker 02

  And you're going to start to see crypto acting as the capital that's financing those, right? And so this non-bank lending exploding. An example I always use is that I think is going to be one of the early ones, you know, knock on wood in 2020, 2021, where we're going to be able to go into a place like Spain or Italy. And literally, we're going to be able to, where they don't have a home mortgage market that is banked, right? And it's why homeownership is so low there. And lots of people live in apartments forever, and there's owner financing and those types of things. I think the creation of digital financial home mortgages,

• 40:30Speaker 02

  where Bitcoin and other crypto serves as the tier-one capital for several hundred million-dollar portfolio that's denominated in a stablecoin, you're going to start seeing these underserved people becoming digital natives to the crypto reality. And when that happens, literally, you're going to explode financial services. Because the ability for people to utilize crypto as a form of tier-one capital, because financial instruments are being created in markets where financial services do not serve people well, you're going to see people moving to a currency that they trust more than the currency that they live in, because they believe it's being manipulated.

• 41:12Speaker 02

  And when that happens, financial services are going to be remade completely. And so that's, I think, the future of where we go over time. And I actually don't remember the question that you asked me as I kind of went off into my future prophetic view of how the integration of crypto with digital financial instruments is going to really remake and be a catalyst for, you know, the massive remaking and re-envisioning of this. Because I do believe that people's dissatisfaction with, who were being underserved, is going to cause them to go to alternative structures, meaning digital instruments and cryptocurrency.

• 41:55Speaker 02

  And when we can serve at the nexus of capital markets, data...

• 42:04Speaker 02

  Validated on the blockchain and crypto, that is the position that Inveniam stands in. And if we can do that, the movement between the new economy and the old economy, where we're solving old economy problems in new economy ways, that's the mechanism for some pretty meaningful global growth and change.

• 42:29Speaker 03

  Absolutely. Before I finish up, I always do rapid fire questions. What do you think the most important company in crypto is other than Nvidia?

• 42:37Speaker 02

  Can I not do a company, but BTC is. BTC and Bitcoin Foundation. Bitcoin is the most important thing in blockchain and in crypto. And I can give you a couple of others if you want, but I'm going to just go with Bitcoin and Bitcoin adoption is the most important thing as it relates to that. Sorry, maybe that was not a good answer.

• 42:59Speaker 03

  No, look, I tend to agree that Bitcoin is by and far the king and will remain the king for a long time. So I think that's a good answer. What regulation would you change or improve if you could?

• 43:12Speaker 02

  So I think that there's a 704.2 in the Treasury and how that's viewed by the service as it relates to allocation of capital gains. As it relates to crypto, I don't hear a lot of people talking about it, but it's actually a meaningful impediment to crypto being used as a form of investment into pooled products, specifically around real estate. And we need Treasury to talk to people specifically about how the allocation of capital gain in a highly appreciated asset, whether that will be counted towards good income or bad income. That is actually a real issue that is affecting crypto and the ability for us to take that in.

• 43:55Speaker 02

  And so I think Treasury and SEC getting on the same page as it relates to crypto is enormously important and they're actually going to follow the legislature. And so we need our legislature to really talk to us about, or weigh in and come up with some good laws as it relates to how cryptocurrency is perceived.

• 44:22Speaker 02

  As a for, anyway, sorry, that's my quick answer.

• 44:26Speaker 03

  What do you think is your most controversial thought in crypto?

• 44:30Speaker 02

  The code will never, ever be the law, ever, ever, ever, ever. The code serves the law and when these deals break and they get adjudicated, in fact, which is gonna happen, no judge is ever gonna say, what did this coder intend when he wrote this? He's gonna say, what did the parties believe they were agreeing to? And he's gonna look for a natural, you know, language document, which is, should be a contract. And that is the law. The code serves the law and the law is the master, full stop. The other thing is code is brittle, data is vibrant and long lasting.

• 45:14Speaker 03

  There. What most important book that you've ever read?

• 45:18Speaker 02

  I'm gonna go with the Bible. How's that? Is that okay? Am I allowed to give that one?

• 45:21Speaker 03

  Of course. It's probably, I would say that is the most repeated answer, right? In terms of, of frequency, so.

• 45:32Speaker 02

  Let me give you, let me give you quick four answers on other ones, right? I think the Federal Reserve, America's bank, is a really instrumental book in understanding the cycles of what was happening in banking that led to the Federal Reserve, that really is analogous to where we are with all these crazy cryptocurrencies and what's gonna happen here. And I would say that that's an, that's an important book right now. Scrum, you know, I, I think that from Snow Crash, as a book of understanding how the, the, the young millennials view the world of the hardware, software, vision of who they are themselves

• 46:18Speaker 02

  and the future of the world, that was kind of a prophetic book, Snow Crash was, even though it's a hard book to read for the fun time. I mean, they, there's, you know.

• 46:31Speaker 02

  What's another, you know, the legal concept of money is, uh, which just came out, you know, that's a pretty fantastic book. And then, um, and then I'm gonna, oh, gosh, I would probably,

• 46:47Speaker 02

  I'm gonna stop there. I'm gonna stop there. Everything by Mises. Can I say everything? The anti-capitalist mentality should be read by every person who supports cryptocurrency in the world.

• 47:02Speaker 03

  What, um, what about aliens? Believer, non-believer? Are they real?

• 47:09Speaker 02

  Uh, my brother-in-law is a legal resident alien from Canada.

• 47:14Speaker 03

  Yeah, no, like actual, uh, aliens from outside of Earth.

• 47:18Speaker 02

  Uh, I haven't seen one yet.

• 47:21Speaker 03

  Okay, so non-believer.

• 47:23Speaker 02

  Agnostic.

• 47:24Speaker 03

  All right, that's a politically correct answer. That means that, uh, you don't believe, but you don't want to say you don't believe.

• 47:33Speaker 02

  Yeah, I don't, the, I don't, I don't yet care. Is that, is that a fair statement?

• 47:41Speaker 03

  I end each one, uh, letting you ask me one question. What, uh, what question you have for me?

• 47:46Speaker 02

  How do you think Harbaugh is gonna do this year with Michigan football? And you think we're gonna beat Ohio State?

• 47:50Speaker 03

  I'm a big Urban Meyer fan, actually, from his days in, at Florida. And, uh, when he, he was at Ohio State, uh, although I do like Harbaugh, uh, I, I would always go with, uh, Mr. Meyer there. But now that he's gone, um, I think that, uh, Jim Harbaugh is, uh, he's one of a kind for sure. And, uh, one of my favorite, uh, stories about him is him going to recruits' houses and sleeping in their living rooms, um, which is, uh, pretty ridiculous. But, uh, anyone who's willing to do that, you know, a little crazy and uh, has probably got a shot at success.

• 48:26Speaker 02

  You know, Anthony, when we started this, you said this was, uh, not gonna be a contentious interview. I'm sad that this went so downhill so fast.

• 48:37Speaker 03

  Yeah, look, it is, uh, if it makes you feel any better, I'm a Florida Gators fan. And ever since Urban Meyer left, he, he took, uh, everything good with the program with them, uh, we've pretty much, yeah, not done a single thing in the world. So let me ask you, yeah, let me ask you one other question.

• 48:53Speaker 02

  Who do you see as the biggest innovators in the blockchain space who are going to move the needle as it relates to capital markets, other than Inveniam, of course?

• 49:08Speaker 03

  Satoshi?

• 49:09Speaker 02

  I'll go with that answer. That's a good answer, actually. That's a great answer.

• 49:14Speaker 03

  Yeah, it's just the invention of a blockchain, which is simply triple entry accounting, and really lays the groundwork for accounting system that can operate in the automated world, I think is probably one of the greatest inventions of our time. It is highly underappreciated right now. I think over time, we will look back and, you know, kind of increase the allure that people have, or kind of the importance that they put on it. And, you know, it's one of these things where it just takes time, right? People got to see it actually put into action in order for them to be able to understand what the importance is.

• 49:58Speaker 02

  Yeah, yeah. Great, great, great answer. Great answer. Hey, thanks for having me on your podcast. This has been great fun for me.

• 50:08Speaker 03

  Absolutely. No, look, I appreciate you taking the time to do it. I'll do it again in the future.

• 50:12Anthony Pompliano?

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