Cryptocurrency may be a good investment if you are willing to accept it is a high risk gamble which could pay off – but also that there is a strong chance you could lose all of your money. It is important before investing in bitcoin or other cryptocurrencies that you go in with your eyes open.
Getting to know Crypto Industry Experts - Brian Estes and Mark Yusko
Mark Yusko is the founder, CEO and CIO of Morgan Creek Capital Management and the managing partner of Morgan Creek Digital. Mark’s focus formed more traditional investing in infrastructure around the digital economy. His firm is raising their third venture capital fund today and had some nice success in the first two funds. Those funds invest 70% equity of the underlying businesses and 30% in liquid protocols. He also runs a risk managed Bitcoin fund that embraces volatility.
He personally loves volatility and he thinks that if you want to own volatile assets, you can use tools to manage that volatility. And also partnered with Bitwise on a digital asset index fund. Mark is spending most of his time these days around digital assets after spending most of his career in everything except digital history.
Brian is the CEO and CIO Off the Chain Capital. They are one of the only value funds in the blockchain space by providing a liquidity pool for early employees and seed investors at blockchain companies to sell equity into, about half of the company’s portfolio. And the other half of the portfolio, looking for mispriced digital assets. Off the Chain Capital is one of the largest buyers in the world of Mt. Gox, bankruptcy claims, which allows them to get into Bitcoin at significantly discounted prices. Like Mark, Brain comes from traditional finance and was in the traditional world for 20 years before he started helping to build blockchain companies back in 2014.
Blockchain and Cryptocurrency Market Insights
Mark Yusko: If you think about the financial services industry or ecosystem, it’s the largest economy in the world, our largest industry in the world crosses all economies globally. It is orders of magnitude larger than other industries. And it’s basically been slightly impacted by the internet and the mobile net. But it’s about to be completely disrupted. Blockchain technology and the evolution of solutions around financial services as we go from traditional finance to centralized finance. And the other things like play to earn and the metaverse and all of those other applications of blockchain technology, it is the greatest wealth creation opportunity I am going to see in my lifetime.
People think about markets in a weird way, they talk about stocks, eg. Gamestop or IBM, are a tiny little market. Bond, currency, derivatives markets are way bigger orders of magnitude. Why is all of that still run by humans and machines that still run on COBOL? Visa today, still runs on a mainframe computer running on COBOL. The emergence of technology that we are seeing and the migration of talent with the example of this conference, is like nothing I have seen right in the ‘90s. And companies like eBay, Yahoo and Google made us and our investors lots of money. This is again, orders of magnitude bigger than that. And the quality and quantity of people migrating into this space is incredible.
Brian Estes: What got me excited about blockchain technology was back in the early ‘80s. I was one of those computer whiz kids that used to code. I probably should have majored in computer science in college but I ended up getting an economics and finance degree. When I first read the Satoshi Nakamoto whitepaper, I understood as clear as day how the entire financial system could be rebuilt. Our legacy financial system is built on ancient computer language and that was piecemealed together over the past 60 years and blockchain technology completely disrupted that.
One of the things we all should be looking at is what’s called S-curve analysis. I’ve been using this through my entire career over the past 30 years to identify what are called Mega Trends.
You could use S-curve analysis to identify these new technologies, these disruptive technologies. And you could use this going back to the 1400s when shipping companies, where the new technology back then, railroads in the 1800s, automobiles in the 1940s, fax machines in the ‘70s. And it’s all the same S curve. Basically what the S-curve says is that the amount of time it takes that new technology to go from 10% then 90%. And so Bitcoin was invented in 2009, the first blockchain in 2019, 10% of US households owned Bitcoin. So it took 10 years to go from 0% adoption to 10% adoption and, in 2020 Brain Brooks, the controller of the US currency, was being interviewed on CNN. And he mentioned that 15% of US households owned Bitcoin last year. There was a study that came out in February of this year. It was 30,000 surveyed individuals in the US and that survey showed that 25% of US households own Bitcoin in 2021.
Backed, just came out with a survey about 3 weeks ago, Backed is owned by the Intercontinental Exchange, which owns the New York stock exchange. And their survey showed that 48% of their 2000 people surveyed own Bitcoin. So we’re on this massive adoption wave. And this shows that in the year 2029, 90% of US households will have some sort of exposure to digital currency. And we don;t know if it’s just Bitcoin only or DeFi projects, but you would think of a combination of a bunch of things. We’re in the Mega Trend now, in the fast adoption phase. So there is going to be a lot of wealth created over the next 5 to 10 years.
Mark Yusko: The Great Boom by Harry Dent is an easy weekend read. It explains how S-curves work. I read it early in my career and it changed me forever. I can’t live without this construct of S-curves because everything follows it. You get the innovators and they’re laughed at and ridiculed. And 2000 pets.com right? The epitome of the failure of the internet, chewy.com is a $30 billion company. It’s exactly the same company, we needed broadband and we needed distribution networks and we needed Jeff Bezos to come along and be successful at moving products off to online retail.
The greatest wealth is created by investing in something that you believe in. We went from the first time they ignored you, 2009 – 2015. Then they laugh at you, 2015 – 2021. And we all have to fight for the next 4-5 years. But on the other side of this trough is Nirvana. It is all of the applications that we built on these base layer protocols that we’re all installing. And it’s so big. It’s hard to even comprehend how important it is, or how strategic it is.
Brian Estes: Just to add, let’s look at long distance phone bills. There was a piece of software invented called Voice Over Internet Protocol (VOIP) that allowed the transmission of voice through the internet. And when that piece of software was invented, it basically caused the long distance companies business models to go to zero.
And if you look at how the world moves its money today, we spend $2 trillion a year in costs to move our money. These are visa card fee, MasterCard, bank, wire fees, Paypal fees. If you add all that up, it’s $2 trillion and you have to think that now we have money over internet protocol, those $2 trillion is probably going to go down 90% to 95%.
What is Tokenisation? In Future, Everything will be Tokenised
Mark Yusko: Tokens are like websites. Websites are the ability to make information flow freely, in two directions. We went from 1 billion in 1994 to 1.7 billion today. And Google owns half of them, which is kind of crazy. Because everytime you type something into Google, they create a new website. So you can find it fast. That’s what indexation is. But tokens, there will be more than 1.7 billion orders of magnitude. Everything will be tokenized and it will allow value to be exchanged. And again, the benefit of building on top of previous technology, there were no computers in the 1940s except in governments. In 1954, the mainframe came along. The center of the Universe was Boston, on route 1, 28 DEC, Wang and IBM. And then 14 years later, there’s an innovation out in Silicon Valley Nexus. The Universe shifted to Palo Alto. Don Valentine invested in this little company called Intel and the rest is history.
The chairman of DEC famously said, I can envision a day where someday a computer would weigh only one and a half tons, but there’d be no reason for anyone to ever have a computer in their house in 1977.
Then in 2010, we had this innovation called the mobile net, and this thing came out. The stock price of Apple went down 40% when they released it because people didn’t get it. Why do I need that? I got my flip phone, it works just fine. I don’t need a smartphone.
Mobile net will be bigger and the trust net which is 2024, still two years from now. 2-3 years now is bigger than that because we’re building on better technology and we take advantage of exponential math. Value over IP is the greatest invention of all time, but I don’t feel strong about it.
Brian Estes: It’s important to recognize how to make money in blockchain too. When the webs started, we couldn’t own stock and HTTP or SMTP, you cannot own the protocols. The only protocol you could really own are word domain names and those are created, accrued in value. But most of the value accrued to the companies that set on top of the protocols. Amazon, Netflix, Google, eBay, Uber are internet companies that sit on top of the protocol layer. When you look at blockchain and blockchain companies, it’s completely flipped upside down. If you add all the value of the protocol. These are like Bitcoin, Ethereum, Binance Solana and Cardano.
You add all those up and come up with close to $2 trillion worth of value. But if you add up all the value of the companies that sit on top of those protocols, like Coinbase, Kraken and digital currency group Blockfi, you come up with about $200 billion. Most of the values occurring in the protocol layer, it is not occurring into the company layer. And that’s an important factor to understand when you’re comparing, how do I invest in blockchain versus how did we create wealth on the internet.
Digital Transformation: Steps to Successfully Implementing New Technology
Mark Yusko: Attend events like this. Talk to the smartest people in the world all day, everyday. It’s awesome. This is more fun compared to what I have been doing for the past 35 years, not because I didn’t like my job but because we are dealing with a pace of innovation that we’ve never seen before and a scale and impact of innovation that is really incomprehensible.
Spend time going to loc.net and devour everything on his site. Read the whitepaper from Satoshi Nakamoto, read other whitepapers, go and listen to podcasts or gazillion great podcasts on the space. Action beats inaction. Most people are less well off because they failed to act. If you should make all of your mistakes when you’re young, when they’re not costly, you should make all of your portfolio investments as long as possible. It should actually be against the law to buy bonds in your twenties, thirties and forties.
That’s the worst investment you could ever make because inflation is going to chew up all your game. It should be mandated that you put all your money in venture capital in long-term projects because that’s where the wealth is created. And so if you think about being a young person today, what you want to do is leave the stage, a boring job and go find a startup entrepreneur. Go find a project that you’re passionate about. If you want to keep your day job, start investing, get a couple wallets, start to buy some protocols, start to play with an account, just to see how it works right before I wanted to invest lots of money into DeFi.
How to Start Investing in Cryptocurrency
Mark Yusko: I actually took a loan on eBay and I pledged some collateral. I staked some into a yield farm. And all of these things get you more comfortable with the innovation because not all of us can be great at everything. I’m not a techie by nature, I’m an investment guy. I get to partner with great techies but I couldn’t tell you how TCP, IP works but I know people who do and want to partner with them. So, just doing it would be my biggest piece of advice.
Brian Estes: And also be curious. That’s what got me. I just found it interesting. And I was curious, coming from traditional finance when I first learned about Bitcoin. I thought it was a total scam. Knowing this in 2014, all I could hear was this internet funny money. It seems to be used for nefarious activities and who wants to be involved with that.
But you know, I actually took the time to dive into it and figure it out. And it took me about six months because you can’t take a Bitcoin class back in 2014. Alot of the work just comes from being self-educated going out and being an independent thinker.
How to Overcome - Fear, Uncertainty, Doubt (FUD)
Mark Yusko: I’ve never met anybody who I respect who didn’t start skeptical. And that’s totally logical. Why? Because of FUD, right? Fear, uncertainty and doubt. And innovation will be met with FUD spread by the incumbents. When the horseless carriage came out at the turn of the century, the street sweepers passed out pamphlets saying that you would die. They didn’t want you to get in because they’d lose their jobs. When the airplane came out, my grandfather-in-law left a stable job with the train company to go work at American airlines, his parents were horrified, and the trains passed out.
Incumbents want to stay in charge. They don’t like being disrupted. It’s logical that you should fear the FUD. My clients said we’ll fire you after I wrote about Bitcoin in one paragraph in a 40 page letter. The next paragraph was about Saudi equities, which by all measures probably more controversial than Bitcoin at this point. They just said don’t do Bitcoin. That was when the price was $500.
When Jaime Diamond said it’s a fraud, don’t listen to him because Jaime Diamond is the bank. He’s the one being disrupted. When Warren Buffet calls it rat poison, don’t listen to him because 46% of what he owns are banks. So always consider the source of what you’re hearing and then do the work.
Brian Estes: Yeah, it’s not the first time Warren Buffet’s missed something either. We use a lot of Warren Buffet styles to find value, but you know, they miss things. Back in 1990, if you look at Berkshire Hathaway annual report in 1990, their top holdings were companies like Encyclopedia Britannica, ABC and the Washington post and newspaper companies constituted about 40% of the portfolio. When the internet was getting started, those companies were worth 90% less five years later because you didn;t need those anymore. You know, if you look at Berkshire Hathaway today, it’s heavily weighted in the banks, which are going to be disrupted by DeFi and blockchain technology.
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Show Transcript
Jeffrey Maganis: There was Mark Yusko & Brian Estes, every time I talked to these gentlemen, I literally am taking notes and a very, very great insights from two well-respected VCs and early investors. And thank you to both of you for joining us
Mark Yusko: Thanks for having us
Brian Estes: Thank you
Ivan Kan: So, so far today, we’ve had, you know, if you’ve been listening on this conference, we’ve had some amazing speakers and we had like Salata we had Casper and now we have mark and Brian super excited. So if you can quick give a quick introduction. I know the two of you probably need no introduction, but if you can just tell us a little bit about you, what you do and just to frame it out for everyone here.
Mark Yusko: All right. So reverse alphabetical. Usually I’m laugh way up in the upper, right with the use go last name. So Mark Yusko. I am the founder CEO and CIO of Morgan Creek capital management and the managing partner of Morgan Creek digital. So we formed more traditional four years ago to focus on investing in infrastructure around the digital economy. We’re raising our third venture capital fund today, had some nice success in our first two funds. Those funds invest 70% and the equity of underlying businesses and 30% in liquid protocols. We also run a risk managed Bitcoin fund. This is not an advertisement for it, but the embrace volatility, volatility scares everybody. I love volatility. I think you want to own volatile assets, but you can use tools to manage that volatility. And then we partnered with Bitwise on something called the digital asset index fund. So I’m been spending most of my time, these days around digital assets after spending most of my career in everything except digital history.
Brian Estes: And I’m Brian Estes the CEO and CIO at off the chain capital. We’re one of the only value funds in the blockchain space. Basically what we do is we provide a liquidity pool for early employees and seed investors at blockchain companies to sell equity into that’s about half of the portfolio, the other half of the portfolio, we’re looking for mispriced digital assets. So, you know, we’re one of the largest buyers in the world of Mt. Gox, bankruptcy claims, which allows us to get into Bitcoin at significantly discounted prices like mark. I come from traditional finance. I was in the traditional world for 20 years before I started helping to build blockchain companies back in 2014. So I was, you know, early in, you know, blessed, you know, understand this, you know, before a lot of people did
Jeffrey Maganis: Awesome. Well, mark, Brian, we just love the way that you think in your framework. So really this panel is about just the two of you in this discussion of your mindset. Well, you know what, you’re excited about, just everything that’s going on in the industry and what you’re working on.
Mark Yusko: All right. So reverse alphabetical. Usually I’m laugh way up in the upper, right with the use go last name. So Mark Yusko. I am the founder CEO and CIO of Morgan Creek capital management and the managing partner of Morgan Creek digital. So we formed more traditional four years ago to focus on investing in infrastructure around the digital economy. We’re raising our third venture capital fund today, had some nice success in our first two funds. Those funds invest 70% and the equity of underlying businesses and 30% in liquid protocols. We also run a risk managed Bitcoin fund. This is not an advertisement for it, but the embrace volatility, volatility scares everybody. I love volatility. I think you want to own volatile assets, but you can use tools to manage that volatility. And then we partnered with Bitwise on something called the digital asset index fund. So I’m been spending most of my time, these days around digital assets after spending most of my career in everything except digital history.
Brian Estes: Yeah, Mark’s a hundred percent, right. So what got me excited about blockchain technology was back in the early eighties. I was one of those computer whiz kids that used to code and Fortran COBOL, Pascal. And, you know, I should, I probably should majored in computer science in college, but I ended up getting an economics and finance degree. But when I first read the Satoshi Nakamoto white paper, I understood as clear as day, how were our rebuild our entire financial system? Exactly. Because what mark has pointed out that our legacy financial system is built on ancient computer language. And that was piecemealed together over the past 60 years and blockchain technology completely disrupts that. And one of the things that, you know, we should all look at is what’s called S curve analysis. I’ve been using this throughout my entire career over the past 30 years to identify what are called mega trends.
And he mentioned that 15% of us households own Bitcoin last year. And there was a study that came out in February of this year. It was with 30,000, you know, surveyed individuals in the U S and that survey showed that 25% of us households own Bitcoin in 2021. And then backed, just came out with a survey about three weeks ago, backed is owned by the Intercontinental exchange, which owns the New York stock exchange. And their survey showed that 48% of their 2000 people surveyed own Bitcoin. And so we’re on this massive adoption wave. And what this shows is that in year 2029, 90% of us households will have some sort of exposure to digital currency. And we don’t know if it’s just Bitcoin only or DVI projects, but you would think of a combination of a bunch of things. And so as mark mark mentioned that, you know, the best way to accumulate wealth is to identify these mega trends. And we’re in the mega trend now we’re, we’re in the fast adoption phase. So there’s going to be a lot of wealth created over the next, you know, five to 10 years.
Mark Yusko: Yeah, just, just to that point, if, if, if the people on the call here have not read the book, the great boom ahead by Harry dent, pick it up, read it to an easy weekend read. And it explains how S curves work. I read it early in my career and it changed me forever. And, and like, Brian, I can’t live without this construct of S-curves because everything follows it. Right? You get the innovators and they’re laughed at they’re ridiculed. Then you get the early adopters and then there’s the chasm. And the chasm is the hard part, right? That’s the trough of disillusionment. And that’s what everybody thinks is the bust. And that’s 2000 pets.com, right? The epitome of the failure of the internet, chewy.com is a $30 billion company. It’s the same damn company, exactly the same. It’s just, we needed broadband and we needed distribution networks and we needed Jeff Bezos to come along and be successful at moving product off of online retail or alpha of in-person retail to online.
And we’re still early in that trend. So all of these things, it’s like my pin tweet on Twitter, right at mark used to have people care. The greatest wealth is created by investing in something that you believe in before others even understand. You’ll be mocked, ridiculed, and criticized for your non-consensus action. It’s totally worth it. And look, we just went on Friday. We went from the first day, ignore you 2009 to 2015. Then they laugh at you 2015 to 21, then they fight. So the fight just started. China just laid down the law on Friday, made all cryptocurrency transactions illegal. Now they banned Bitcoin in 2013 lip service. They banned it again in 2017, a little bit of more lips are more than lip service. This time they’re actually serious and they are serious because our banking system is bust. If any more money flows out of the banking system, they end up in the great depression part too, so they can’t allow that to happen.
So there’s a fight and that fight is important. And we all have to fight for the next four or five years. But on the other side of this trough is Nirvana. It is all of the applications that we built on these base layer protocols that we’re all installing. And it it’s so big. It’s hard to even comprehend one how important it is to how strategic it is. And three, that it’s zero probability that is not going to happen. Right? Name a new technology that came along, that was put back in the bottle. I’ll wait, can’t do it
Brian Estes: Just to add onto that. Le let’s just look at like long distance, you know, 10 years ago, we paid long distance phone bills. You know, you, you know, when’s the last time you paid a long distance phone bill and you may ask the question, well, why don’t we pay long distance anymore? And the reason is because there was a piece of software invented called voice over internet protocol, BYP that allowed the transmission of voice through the internet. And when that piece of software was invented, it basically caused the long distance companies business models to go to zero. So, you know, MCI WorldCom went bankrupt and people say it was because of accounting fraud while the accounting fraud doesn’t, then it caused the bankruptcy. What caused the bankruptcy is that their business model went to zero because people can make free long distance phone calls. And if you look at how the world moves its money today, we spend $2 trillion a year in costs to move our money. These are visa card fee, visa, MasterCard, bank, wire fees, PayPal fees. And you know, if you add all that up, you know, if you have to over the world, you know, it’s $2 trillion, and you have to think that now that we have money over internet protocol, those that $2 trillion is probably going to go down 90 to 95%. If not down to zero over the next,
Mark Yusko: I don’t want to keep piling on each other. You know, it Brian’s again, 110%, right? Because voice over internet protocol changed the world. And the internet changed the world. And the internet was a big deal, right? Paul Kruger has said it would never be bigger than the fax machine, little bigger than the fax machine. And it all started from a single webpage, right? Tim Berners Lee, not a rich guy. He invented the internet, not Al gore. Tim Berners-Lee invented the internet. And he took this thing that we’re using right now called TCP IP, basically, or protocol of the internet. And he wrote a webpage, a single webpage, 9,500 lines of code use an invented www dot, okay. The rest is history. So now what the cool part is, he just turned that 9,500 lines of code into an NFT and Sotheby’s going to auction it.
So he is going to become a richer guy. So that’s pretty cool. I really want to buy it, but I don’t have enough to buy it. So somebody with a lot of ease is probably going to buy it like the guy that bought the people. Cause I don’t really get that one. Although I will say one thing about the people. I don’t really like the art, no, no accounting for taste. I do respect the fact that I’m certain that I have not brushed my teeth every day for the last 13 years. And when a couple of camping trips forgot my toothbrush, that dude made a piece of art every day for 13 years. That’s that’s, that’s valuable. That’s pretty cool. But the point here is that value over internet protocol is the biggest innovation of this century. There’s nothing close. And if you haven’t read the Chris Dixon thread on tokens and why tokens matter and why everything in the world, every stock, every bond, every currency, every commodity, every piece of real estate, every home, every business, every piece of art, every piece, every case of wine, every everything will be tokenized.
And why tokens like websites, websites are the ability to make information flow freely. Two directions. We went from one in 1994 to 1.7 billion today. And Google owns half of them, which is kind of crazy. Cause every time you type something into Google, they create a new website. So you can find it fast genius. That’s what indexation is. But tokens, there will be more than 1.7 billion orders of magnitude. More than 1.7 billion. Everything will be tokenized and it will allow value to be exchanged to directional. And again, the benefit of building on top of previous technology, there were no computers in the 1940s except in governments. 1954, the mainframe came along. The center of the universe was in Boston, on route 1, 28, DEC Wang and IBM. And then 14 years later, there’s an innovation out in Silicon valley nexus. The universe shifted to Palo Alto. Don Valentine invested in this little company called Intel.
The rest is history. Suddenly we had small computers, small businesses. The chairman of DEC famously said, I can envision a day where someday a computer would only weigh one and a half tons, but there’d be no reason for anyone to ever have a computer in their house in 1977. He said that. So in 1982, right? Personal computers invented no company called Microsoft. All my friends from childhood don’t work there. I grew up in Seattle. They went to work. I was too stupid. If you ever seen the picture of the original Microsoft 11, you forgive me. We all looked a little rough in the seventies. They looked rough for the most they’re billionaires. I’m not so that’s okay. They’re successful, but I didn’t go to work for Microsoft. Steve bomber’s mom said, honey, why would you work for that company? No one want a computer in their house.
He has 18 billion reasons. He was right. Mom was wrong. 14 years later. Why? It’s always 14 years? I don’t know. It’s because young people create everything new in this world. And it’s about half generation, the creative class. So 14 years later in 1996, I’m sitting in south bend. We invest in this little company called Sequoia. They invest in a little company called Google half a million dollars. Turns into 200 million. There should be a quad at Notre Dame called the Google quad. And that was great. But that was crappy technology. Client server technology was crappy. Then in 2010, we had this innovation called the mobile net. And this thing came out. Stock price of apple went down 40% when they released this went down 40% because people didn’t get that. Why do I need that? I got my flip phone. It works just fine. I don’t need a smartphone.
Ridiculous fad. No, it’s not a fad. This is the mobile net and everybody is connected. And I remember asking that Craig macaws, family office guy, do you think the mobile net will be as big as the internet? It’s like, mark, you kidding me? Has to be, if they’re on a computer, like yeah, whatever, ask them if they want a phone, they say, well, I already have two. I don’t need another one. Yeah. Mobile net will be bigger. And the trust net, which is 20, 24, still two years from now, okay. Two, three years now is bigger than that because we’re building on better technology. And we take advantage of exponential math. See people are bad at math. If I say what’s two times two, everyone on this call says four. If I say what’s 17 times 23, I’ll wait. That is the limit of human intelligence. The average person can not do that in their head. They need a calculator. So if I say, how are you at nonlinear regression? Probably not very good. If I take 20 linear steps across the office, I get to the other side. If I take 20 exponential steps, I go around the world twice exponential growth, growth of networks, growth of the ecosystem that we’re all working in, grows exponentially, not linearly. And it’s why voice, I’m sorry. Value over IP is the greatest invention of all time, but I don’t feel strongly about.
Brian Estes: Yeah. And mark and I come from the asset management side. So it’s important to recognize how to make money in blockchain too. So when the web started, you know, we couldn’t own stock and like HTTP or SMTP, you cannot own the protocols. The only protocol you could really own word domain names and you know, so domain names, you goodbye and hold onto those. And those are created, you know, accrued in value. But most of the value accrued to the companies that set on top of the protocols. So that’s like Amazon, Netflix, Google, eBay, Uber, you know, these are internet companies that sat on top of the protocol layer. When you look at blockchain and blockchain companies and it’s completely flipped upside down. If you add up all the value of the protocol. So these are like Bitcoin, Ethereum, Binance, Selena, CRA dyno. You add all those up. You come up with close to $2 trillion worth of value. But if you add up all the value of the companies that sit on top of those protocols, like Coinbase crack and digital currency group black fi you come up with about $200 billion. So most of the values accruing in the protocol layer, it’s not a crane into the company layer. And that’s an important factor to understand when you’re comparing, how do I invest in blockchain versus, you know, how did we create wealth in the internet,
Jeffrey Maganis: Brian and Mark, what are some tangible next steps that the community can take now to learn about these new technologies? And like, what specifically should we be paying attention to it and Following
Mark Yusko: well first just to, to attend events like this, and unless you guys curate the best and the brightest, maybe present company excluded all the crypto kids you’ve had on earlier that are doing amazing things. And they’re look, I, I love my job, right? I get paid, talk to the smartest people in the world all day, every day. It’s awesome. And I’ve never had more fun in, in my 35 years of doing this. And that’s not because I didn’t like my job for the first 30 plus years. I loved it. But this is more fun because we’re dealing with a pace of innovation that just we’ve never seen before and, and a scale of innovation and an impact of innovation that is, is really in comprehensible. I mean, some of the numbers that Brian was throwing around and so the next steps are one get educated, right?
Spend time, go to loc.net and devour everything on his site. Read the white paper from Satoshi Nakamoto, read other white papers, go and listen to podcasts or gazillion great podcasts on the space and just devour, devour, devour, and, and also just do it right. I mean, that, that phrase exists for a reason. Action, beats inaction. Most people are less well off because they failed to act. And particularly when they’re young, you’re afraid, oh, I don’t want to re I don’t want, if you should make all of your mistakes, when you’re young, when they’re not costly, you should make all of your portfolio investments long as long a term as possible. It should actually be against the law to buy bonds in your twenties and thirties and forties should just be against the law, right? That’s, that’s the worst investment you could ever make because inflation is going to chew up all your game.
It should be mandated that you put all your money in venture capital in long-term projects, because that’s where the wealth is created. And so if you think about being a young person today, what you want to do is leave the stage, boring job and go find a startup entrepreneur, go find a project that you’re passionate about. Anyways, you want to keep your, your day job, start investing, you know, get a cup of wallets, start to buy some protocols, start to play, you know, have an obvious account. Right? I did it just, just to see how it works right before I wanted to invest lots of money in defy. I actually took out a loan on eBay. I actually pledged some collateral. I actually staked some goings in a yield farm. And all of these things, get you more comfortable with the innovation because not all of us can be great at everything. I’m not a techie by nature. I’m an investment guy. I get to partner with great techies, but I couldn’t tell you how TCP IP works. I couldn’t actually tell you how, you know, all the details of this blockchain or that blockchain work, but I know people who do and want to partner with them. So just do it would be my, my biggest piece of advice.
Brian Estes: Yeah. I agree. Just do it. And also be curious, you know, you know, that, that’s what got me is I just found it interesting. And I was curious, and coming from traditional finance, when I first learned about Bitcoin, I thought it was a total scam. Know this is 2014. You know, all I could hear was, you know, it’s this internet funny money. It seems to be used for nefarious activities and who wants to be involved with that. But, you know, I, you know, actually took the time to dive into it and figure it out. And it took me about six months because you know, you can’t take a Bitcoin class back in 2014, but you know, you have to, you know, a lot of the work just comes from being self-educated going out and being an independent thinker and go on and finding, you know, you know, things that you were interested in and diving into them and trying things out.
Mark Yusko:Yeah. And to that point, do the work right now, just do it as one thing, but do the work and look, I’ve never met anybody who I respect, who didn’t start skeptical. And that’s totally logical. Why? Well, because of FID, right? Fear, uncertainty, and doubt. Any innovation will be met with FID spread by the incumbents, right? When the horseless carriage came out at the turn of the century, the street sweepers passed out pamphlets saying that you would die. If you got into horses carriage. Why? Because they didn’t want you to get in that because they’d lose their jobs, you know, sweeping up the horse poop. So when the airplane came out, my grandfather in law left a stable job with the train company to go work at American airlines, his parents were horrified horrified, and the trains passed out. Pamphlets saying, if you got it on an airplane, you would die because your body would cave in on itself from going too fast.
FID, fear, uncertainty, and doubt. Incumbents want to stay in charge. They don’t like being disrupted. So it’s logical that you should fear the FID. Like I was handed Bitcoin on a silver platter, the same almost the same day as the link of I they’re multi gazillionaires. And I’m not why. Cause I was too stupid. I was too skeptical and I wouldn’t do the work because my clients were like, don’t talk about that crazy stuff. Don’t talk about magic internet money, go back and do your job. I wrote one paragraph in the first quarter of 2014. So I got introduced to 2013 and I started talking about it and wrote one paragraph at a 40 page letter. My client said, we’ll fire you. Now. The next paragraph was about Saudi equities, which by all measures, probably more controversial than Bitcoin at this point. Talk about terrorist activity bad.
No one complained about that. They just said, don’t do Bitcoin. That was when the price was 500 bucks. And so it took me a while to do the work because I was incentivized not to do the work when your job, when your livelihood depends on you not understanding something, you will not understand it. And the last thing I’ll encourage everybody is consider the source. When Jamie diamond says it’s a fraud, don’t listen to him because Jamie diamond is the bank. He’s the one being disrupted. When Warren buffet calls it, rat poison squared, don’t listen to him because 46% of what he owns is banks. When his partner, Charlie Munger went up SIM and calls it buying Bitcoin is like trading newly harvested, newly harvested, dead baby brains. What the fuck, Charlie seriously. And who do you trust Charlie Noyes or Charlie Munger. Charlie Munger has spent 10 freaking minutes on Bitcoin.
Charlie Noyes has spent 10,000 hours. He was asked not possible. He’s only 21 years old. That’s impossible. Well, let’s talk about Charlie started coding at nine K. He built his first computer at 11. He won a white paper competition in 2000 when he was 14, beating out all the people from MIT on distributed ledger technology. He got a full ride to MIT at 16, went to his Dean after one semester and said, can I take a test? This is too easy. And the Dean is like, no, you can’t take a test. So he quit. And he goes to work at Penn now as a paradigm. And he spent way more than 10,000 hours. That Charlie is way more important than Charlie freaking Munger. And that’s not to criticize Charlie Margaret again, he’s richer than me, but they missed it and they’re going to miss it because they’re the incumbents and the incumbents will always spread FID. So always consider the source of what you’re hearing and then do the work like Brian said.
Brian Estes: Yeah. And it’s not the first time Warren Buffett’s missed something either. And w I, I love Warren buffet. I, I, you know, we’re a value investor. So we use a lot of Warren buffet type styles to find value, but, you know, they do miss things, you know, back in 1990, if you look at the Berkshire Hathaway annual report in 1990, their top holdings were companies like encyclopedia, Britannica, and ABC, you know, you know, you know, ABC, you know, cap city, ABC, and then the Washington post and newspaper companies, those constituted about 40% of the portfolio, right? When the internet was getting started. And, you know, three years later, they encyclopedia Britannica. And five years later, the newspaper companies were worth 90% less because you didn’t need those anymore. So, you know, like, like mark said, you know, weren’t, you know, if you look at Berkshire Hathaway Hathaway today, it’s heavily weighted in the banks, which are gonna be disrupted by the Phi and blockchain technology.
Yeah. And it’s not the first time Warren Buffett’s missed something either. And w I, I love Warren buffet. I, I, you know, we’re a value investor. So we use a lot of Warren buffet type styles to find value, but, you know, they do miss things, you know, back in 1990, if you look at the Berkshire Hathaway annual report in 1990, their top holdings were companies like encyclopedia, Britannica, and ABC, you know, you know, you know, ABC, you know, cap city, ABC, and then the Washington post and newspaper companies, those constituted about 40% of the portfolio, right? When the internet was getting started. And, you know, three years later, they encyclopedia Britannica. And five years later, the newspaper companies were worth 90% less because you didn’t need those anymore. So, you know, like, like mark said, you know, weren’t, you know, if you look at Berkshire Hathaway Hathaway today, it’s heavily weighted in the banks, which are gonna be disrupted by the Phi and blockchain technology.
Jeffrey Maganis: Brian and Mark, U2 are fan favorites, a seeing the comments, but truly the community just, couldn’t be more grateful for having you two on that.
Mark Yusko: Really nice. Thanks for having us great to be with you guys. I, I am, I am super grateful for, for you guys and your efforts to bring the community together, to reach out to us old guys, to let us be part of the, the emerging talent and really appreciate the time today.
Brian Estes: Yeah, I appreciate it too. You guys are doing great work. Keep it up.
