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Valet in store and online. Ralph Hall, welcome to the show, and I am super excited to talk to you. I'm really excited to be here. It's going to be a lot of fun, I think.
All right, so for people that don't know who you are, you're a globally recognized macro investor, master investor as well. Co-founder of Real Vision. But if you don't mind just walking people through a quicks and ops and for anybody that isn't used to me talking about finance and cryptocurrency, I am just on a mission to get people to understand what I think is happening now, which is, I've heard you use these words and you are a far better person than listening to me, but that there's a massive well transfer happening right now that gives people who have traditionally been disenfranchised a chance to get in. So everybody, even though this is sort of beyond the scope of my traditional mindset conversations, I think it's one of the most important conversations to be had right now.
So with that, Ralph, you don't mind giving us the background, that'd be amazing. Yeah, I'm leaving background about me and why I got into crypto as well as that's kind of where we're going with this conversation. So my background was 30, I'm 31 or two years financial markets. So I grew up in that world, I grew up in the world of what is known as macro investing.
Macro investing is when you look at all the asset classes everywhere around the world. So bonds, equities, commodities, currencies, credits, all of these things and you try and look for what is the best return you can get. Maybe that's in India, maybe it's in China, maybe it's in the US. So that's the mindset, we have this 3D, ever evolving jigsaw puzzle in our heads of the world driven by the global economy, hence why it's called macro because it's macroeconomics.
So it's driven by the business cycle trends of the global economy. So I did that, I was on the sales side for many years, I ended up at Golden Sax where I started and ran the hedge fund sales business in equities and equities and equities derivatives. My whole career basically had been getting to know the world's most famous hedge fund managers from kind of 1990 to 2000. It was like being taught acting by Robert De Niro or Lawrence Olivier, I mean it's ridiculous.
My daily calls would be Stan Druckenmall, Paul Tudor Jones, the guys at Soros, et cetera, et cetera, et cetera. So that was it, plenty of crises and exciting stuff happened over that period, very macro. Then I decided to make the switch in 2000. So the recession was coming and I wanted to invest and make money from it.
So I moved to one of my biggest clients, which was the biggest hedge fund firm in Europe at the time called GLC Partners. And I started around the global macro hedge fund there. That was now me taking these bets on a global basis over that kind of very rocky period of 2000, 2001, 2000, 2003 in 2004. Then I started out enough and I moved to the Mediterranean Coaster's Spain and started writing macroeconomic research.
I'd been around the hedge fund business longer than most people at that point and I had a huge amount of experience both in knowing all of the players and also being a player myself. So I started writing from that perspective macroeconomic research called the Global Macro Investor, which I still write 17 years later. And that's read by most of the world's most famous hedge fund managers, sovereign wealth funds, asset managers, that kind of stuff. Really privileged position.
And it's that privileged position that got to me where I am today, why I started real vision and why crypto is all part of the same thing. So there I am, 2007, and I'm thinking the world is about to fall apart and I'm writing about it. And I'm one of the people that was on the right side of that. And a lot of people in the film, the big shorts, what clients of mine, and we all kind of knew what was going on.
The world falls apart. Tons of people make tons of money out of it. Tons of people lose their entire livelihoods. This is not good.
And it's not. And so I started asking the question because people come up to me in the street and say, why don't we know? And I'm thinking, why did I know? Well, fine.
I've got a lot of experience and I managed to get the jigsaw puzzle. But why does nobody else get to know this knowledge? This was wrong. And this was the rise of Occupy Wall Street.
This is the rise of the anger of whipping screwed somewhere. We don't know how it ends through. And I believed in that too. Then I was in Europe for 2012.
We almost lost our entire banking system plus the EU itself. I remember having to go by a generator and drive food because I thought we were going to follow Cyprus and we will lose the banks. Over one weekend, we would have lost the banks on Monday. The IMF forced Spain into taking an $18 billion bailout, which rescued at a time.
Then eventually we end up with this draggy. I'll do anything that it takes to stop your flooring apart, essentially. And that stopped the tide. But the same thing happened.
I was at the epicenter of it. I knew it was coming. We all made money out of it. And everybody around me and I was yelling to everybody, listen, you've got to be careful.
Friends of mine got destroyed in that insane. The property market imploded. Everybody's a real estate developer. Everybody got killed.
Friends of mine bankrupt. And they were like, why didn't we know? First, I'm like, I have been telling you this endlessly. But because I was not on television at the time, they didn't take you seriously.
I'm like, if bizarre, I write stuff that the world's most famous investors read. But if I'm not on television, for an average guy, I don't have credibility. I'm like, OK. At that point, I started having two tangents, which is realizing I need to do something about it, that this disparate information level, that one group has everything, everybody else has nothing.
And the other thing is I needed to make the world safer because we're kind of screwed. Because of this over-financialization, all the debt, that we could lose the system at any point. Nothing had gone away. The printing of money was just a way of wall papering over the cracks that the earthquake left behind.
So I'm like, OK, what can I do? So the idea I had with a bunch of people was to try and set up the world's safest bank. And I tried to go and do that. It was slightly arrogant or stupid, probably.
I tried to do it because it's not easy. And we got together quite an amazing group of people. Still, we tried in Singapore, we tried in Switzerland, we tried in the US, we tried. It was just hard to do.
The system is not there for you to try and change. And so in that process, a friend of mine, one of my clients, tapped me on the shoulder and said, you should take a look at Bitcoin. This was 2012. And I've been aware of Bitcoin.
And I took a good look at it and explained to me both the store of value proposition and the blockchain element. Anything could be trusted on the blockchain. I looked at this and I'm like, oh my god, this is the future that we need. Because the problem we've got is when a firm like Lehman Brothers goes fast, nobody knows who owns what.
And somebody's going to get screwed in that equation. It's just one of the very issues at the central. The system nobody knows who owns anything. So I started looking at that and I wrote, I started writing ourselves and invested in it first time in 2013.
2014, I started Real Vision because I wanted to democratize the very best financial information. Nobody gets access for an hour to the world's most famous hedge fund managers unless you invested $100 million. Real Vision changed that equation entirely and said, listen, forget all these sound bites on CNBC in three minutes, it's worthless. We're going to give you an hour of the world's most successful investors, the best independent analysts and strategies.
And then you have a level playing field. And that was a game changer. I mean, since Real Vision starts in 2014, there's probably been 200 podcasts that's copied that model. So this is this movement, there's two things.
There's the democratization of information and then there's crypto. So crypto, as it starts building out this ecosystem, you start to realize that, okay, this is now the fastest adoption of any technology in all recorded human history. You have to say that again, this is the idea that's gotten me obsessed with you with crypto is, you talk about how there's something broken, we're getting screwed and we don't understand where. And now this new thing has come along, but it's entering the system at a moment where it's sort of peak distrust.
And peak sort of throwing your hands up, you're giving up, you tried occupying Wall Street, it didn't work. You tried Donald Trump, you tried voting in Joe Biden, you tried everything and nothing changes. So hit people with that quote again, because this is something that, and I'll give my background for people that are hearing me talk about this stuff for the first time in a minute, but that quote about this being the fastest adopted technology, I think is important. The internet from 1990 to 2000 grew at 63% a year.
That was the fastest adoption of any technology in all recorded history. Prior to that, mobile phones was the other one. But what happens is the internet technology and the mobile phone technology allows for these networks to be built. And once that network's in place, it's faster to build the next network.
So in India, for example, they've just basically given up free data to every mobile phone in India. So guess what? Data usage is the highest in the world. And so their internet scaling becomes faster.
So the internet was huge as we all know, and it remains huge. So 63% a year, it then flattened out over time as more and more people got adopted. So at 1997, it was growing 63% a year, and it was 140 million users of the internet. In 2021, there were 140 million crypto users, and it's growing at 113% a year, double the speed.
Now this is where humans struggle, linear numbers and exponential numbers. Because it's exponential, it means that growing at 113% a year, we're gonna go from 140 million people to a billion people by 2024. I mean, so when you go back, and how are you introduced all of this? So if you know that something is being adopted at this speed, and it's a network of money at its core, and you can buy an infotessional fraction of it, so everybody can buy 10% of their net worth, then everybody who takes this opportunity will probably have the biggest opportunity in history to make money.
The other part that I want people to understand is that it's also coming at a moment where somebody like you no longer has to convince a gatekeeper to let you on TV, that you can just spin something up, because the other part of this equation is what I'll round to YouTube. So it doesn't exactly YouTube, but it's that idea that you can put out this long form content, that's video, that allows people access to ideas and information that they never would have had before. And getting people to see that you're now moving into a new phase where you and I I think share a similar sense of like, okay, entrepreneurship was very good to me, it changed my life, it made me fantastically wealthy. And now I'm looking around going, hey, there's nothing that special about me, the thing that made me successful is I'm a relentless learner, so I'm just unafraid to embarrass myself, to fall down, to look stupid, and because of that, while other people are laughing at me, I'm laughing on the inside, because I'm like motherfucker on a long enough timeline, I'm gonna win, because I'll learn, and I'll figure this stuff out.
So now you get a group of people like me who succeed tremendously in a system where I'm looking around watching everybody else struggle, and I'm like, I will tell you everything I know. Like I'll just get it out as fast as I fucking can, because I wanna live in a world where other people can rise up. For whatever reason I just am emotionally incentivized to also see other people succeed. And so you're now in a position where someone like you who essentially could have retired, lives on this tropical beautiful island and like does not need to be doing all this, re-engages with the world and tries to get people that information, and so you get this.
Go ahead. I did a piece that's probably the most viewed piece I've ever done on YouTube, it was like, I don't know, 2 million, 2 or 3 million views, called the retirement crisis. And it resonated, because I kind of showed how people, people hadn't seen it, it's checking out on YouTube, it's well worth your time, and it's a long time ago, it predicts a lot of what's going on now. And the point being is that there's a bunch of retirees, the baby boomers, and they kind of screwed it all up because they got all the debt, they got too much equity exposure, it's really hard for them to retire, this is why the Federal Reserve don't like equities going down because they got this richest group on earth who are kind of stuck, they never got enough money to retire on.
But I want to look through the eyes of the millennials. So they are 32 years old, at the same age their parents at 32, the baby boomers had all time cheap valuations of equities, all time cheap bonds, all time cheap credit, all time cheap property, right? So they couldn't help but make money. They kind of screwed it up actually ended up going into debt as well.
But they couldn't help but make money. So then the millennials had the opposite, all time record valuation, all time record valuation for bonds, all time record credit, all time record applies in property. So unlike these are screwed, unless something else comes along. And that thing is crypto, because the future expected return of crypto, it's been growing at 213% a year in returns, that's how much it makes, even though it's very volatile, sometimes it's down 70%.
Over time, you're making 213% a year. It has grown as an asset, it's gone up, I think it's 2 million percent since inception, no other asset in all recorded histories ever done this. Now we haven't even started. I still think there's probably another 100x from here, not even the baby boomers got given that.
The S&P didn't go up 100x since 1980. So this is the magnitude of what's there. So I'm screaming from the rooftops saying, you might be cynical, you might think you don't understand it, you might think you can't afford to play in this, but you have to listen, because this is the opportunity, you can't come back to me in 10 years time and say, well, we missed all of that, all the rich people got richer. No, you, everybody else is saying, now is your time, don't be irresponsible, you know, dollar cost average, do all the right things, here is your opportunity.
This is the biggest opportunity I've ever seen, and I'm gonna take advantage of it, and so should everybody else. This is not rich or poor, this isn't every person opportunity, and we've never had this before, ever. Dude, you just gave me like sustained chills. This is not rich or poor, this is an opportunity for everybody, but you really have to move on it.
So I'll tell my own story, so for anybody that is pushing back feels late to the party, whatever, find some solace in my like willful ignorance. So I have always seen myself as good at making money and terrible at investing money. Now you have to be very careful about what story you repeat about yourself to yourself, and I just kept saying that. Like I'm, I didn't want to focus on learning about money, math doesn't come easily to me, I don't like whatever that ability is to conceptualize numbers, I don't have it.
So it's like I really struggle with that stuff. And one of my employees was like, Tom, are you looking at crypto? And I'm like, David, I'm just not interested in investing, like it's not, it doesn't speak to me at all. And he just kept coming back, like Tom, you really need to look at this, you need to look at this.
And I'm like, David, how many times do I have to say it? Like I don't find this interesting, I want to build a company, and I'll make, I've already made myself wealthy, I'll continue to generate wealth and help other people by building this company, I'm not gonna look at it. And then I had been introduced to the idea of digital scarcity about six years ago. And I thought, ooh, that's gonna change my business.
And then, but the technology wasn't there. And so, I should say the networks weren't there. And I promptly ignored it. And then when it popped back up, at the beginning of 2021, I was like, I'm all in.
Cause I understood what it was gonna be. So I start researching NFTs, the technology behind it. And that inevitably leads you to the blockchain of course, which then leads you to crypto, which then I was like, wait a second. What?
Like this is literally somebody is essentially going, hey, you know all those things that make gold like this wonderful store of value, we're now moving that onto computers. And so I've been saying for years, technology is a one way street. I'm a total like techno optimist. There is no going backwards.
Like this only moves forward. So now it's like, wait, people are digitizing money? And then the poor David who'd been telling me for God knows how like eight months that I needed to look at it. I was like, what the hell?
So I start researching hardcore about what it is. And I'm like, wow, not only do I have a fiduciary responsibility to myself and my family to learn about this, I now felt absolutely compelled to tell people one simple thing, research it. You may decide that it doesn't make sense cause I don't think I'm smart enough for people to listen to me. I do think you're smart enough for people who listen to you and you're certainly educated.
But even if they reject it, like there is this moment of, you pull back the curtain and you see the wizard of Oz and you're like, oh my God, this is going to change everything. And it's like a dime drop on how it works. And that's what I was like, whoa, I have to move on this. And I have to tell everybody.
So like you know, I'm screaming from rooftops. I just don't know how to do it as intelligently. Let's talk about the most powerful force in wealth building. Compounding, there's a reason that people have talked about this forever.
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It takes just a couple of minutes. TrueMed is for qualified customers only. HSA FSA tax savings vary. And what gets worse about this is this affliction, this crypto-fliction we all get, right?
The rabbit hole as it's known. You start with understanding money, which most of us don't think about. Then you kind of understand how we're getting screwed by central bank printing and the debt-laden economy and what it means. And then you start saying, okay, but that's Bitcoin.
And then what's this Ethereum business? And then you start realizing decentralized finance. And you're like, it's kind of a financing, but that's kind of cool because I can get yields now. Instead of getting zero on my bank account for my hard savings, I can now get 6% a year.
Wow, that's a difference. It's like going back 25 years in time. And then suddenly NFTs come and community tokens. And suddenly your mind is completely blown that this is not just money.
It's the entire exchange, transfer and storage of value for the internet. Whole business models are about to change massively because of what this technology unlocks. And then once you get back your head around that, you're like, oh God, I can't even hold this in my mind any longer, it's so big. And that it's not just buy some Bitcoin, I'm gonna make some money over time.
It's actually an entirely parallel financial system and business structure for the world. And it's being adopted faster than anything we can ever imagine. So what people through, what is it? And let's start with Bitcoin because I wanna take care of this to differentiate between Bitcoin and Ethereum.
And I guess full disclosure to anybody listening, my I invest in essentially three things, Bitcoin, Ethereum and Chainlink. I'm a use case maximalist, I guess. And I understand those three. I'm not saying no to the only three, I'm saying no to the only three, I understand well enough to invest in.
What is it that makes Bitcoin interesting enough that so many smart people see this as ultrasound money? And what does ultrasound mean? The world has a history of money. Whether it's backed by gold or not, where government gets themselves excessively into debt and they devalue the money.
So the Romans used to clip the edge off the coins. So there was less gold in each coin. And eventually people would lose faith in the coins because they blend them with silver and then blend them with copper. And the coins were worthless because that was supposed to be worth the value of the denari in Roman times.
But governments can't help themselves. Humans, we're just humans, right? Humans are fundamentally flawed creatures and we always will be. So then we have these gold standards, the US and the UK are on gold standards, World War I, World War II, World War II.
Because we've got too much debt again. We've overly financialized yet again because humans love leverage above all things. It's kind of sex and leverage are the two things that drive humans for some reason. Then we adopt a new system, which has been around before, but keeps getting a band called Fiat Money.
Fiat Money not backed by anything. It's backed by the promise of the central bank paying it. So that's the dollar bill that we all are familiar with and every country in the world now adopted fiat currency. But as with everything, if you're really thirsty and I gave you a bottle of water or sold it to you, you probably pay me 10 times too much for that bottle of water.
If I give you a million bottles of water, they're worth precisely zero to you. So scarcity has value. That's arts, that's cars, that's almost anything. Humans value scarcity for whatever reason we do.
And so if you're printing too much money, you're creating less scarcity. So yes, there's money everywhere, but the money has less value. So once you understand that, you should say, what does it mean? The dollar hasn't collapsed.
It's kind of where it was versus the euro in the last five years or whatever it is. And then you say, huh, but my $50,000 salary now can buy me much less shares in Apple, Amazon, Google, Microsoft. In fact, units of the S&P 500, I suddenly can't buy as much. Since 2008, it's a fraction.
I can buy like a third of what I could. Same with real estate, same with goals. And then you're like, huh, assets have suddenly got expensive. They haven't.
The value of your savings has gone down, or your money. So you can't afford to buy assets. What is an asset? An asset is deferred consumption from the future.
I buy a house, I sell it in the future, I get to retire, whatever the things are. I don't buy the S&P because we wanna hang it up in our wall, we buy it because we wanna sell it at the future date to realize money. So that means our future sales in our poor, that's essentially what this means. That's what currency debasement is.
So Bitcoin comes along in 2008, in the middle of the crisis. It's kind of like it was perfectly prepared for this and said, Satoshi goes, hey, look at this. I can create an algorithm that only creates so much of this thing, the Bitcoin, and it can never vary, ever. So therefore, this is scarcity that humans can't fuck around with.
Now humans have this propensity to fuck around with scarcity because they're economically incentivized to do so. Here they can't. So then they become economically incentivized to own this asset because it's scarce and it cannot be changed because it has this consistent supply curve and a limited number. So Bitcoin becomes this great store of value.
And it would look like gold, because gold's a good store of value, it's worked for thousands of years. But Bitcoin has this other thing to it. It's a network which gold isn't, and it's technology which gold isn't. So we have use cases and the benefits of building a network.
So suddenly it goes up exponentially in price. Roll on to 2015, and suddenly somebody's looking at the blockchain and they start saying, imagine if these bits on the blockchain, which is where you record the ownership of something, in Bitcoin it's Bitcoin itself. What happens if we could put a contract in there? Because humans live contracts, everything is basically a contract in our legal terms.
And that was the rise of Ethereum. It became a platform where you could programably change the blockchain, not the attributes of the blockchain. You couldn't remove anything of that ledger, but you could change the little holding buckets and say, what it can look like this? It can look like that, it can adopt to this.
And those things were verifiable as well. So they couldn't change. So this created a theorem which became the platform. So if you think of Bitcoin as the store of value, this very pristine, beautiful thing, then you think of Ethereum as also a very beautiful thing, but it's a much broader application because it's like programmable money.
Yeah, there's one concept that I wanna nail down here. And if you think I'm crazy, let me know. But when I think about, so I've worked in the inner cities a lot and you begin to realize, wait a second, the generational poverty is a mindset knowledge problem far more than it's a money problem because they manage to pass on a likelihood of being poor. And so when you think about, okay, well, right now in the US for sure, and I would imagine most of the Western world that your zip code is the number one predictor of your future success, more than your IQ, which I'm just not willing to live in that world, but that's a really fascinating phenomenon.
And when you begin to ask the question, how is that possible? So you have an extraordinarily smart people that regardless of their IQ are gonna be trapped in a poverty cycle. Why is that? And some of it has to do with what a guy named Jeffrey Canada discovered in terms of the language centers of your brain.
And if you're not hearing enough words, when you're an infant, just the language centers don't develop well and you can have a hard time interviewing for jobs and climbing the sort of traditional corporate ladder in that way. And then they just also help you with communication. But the other part is what I call your frame of reference. What do you believe to be true about yourself and about the world?
And one of the ideas that fails to get passed on in that poverty cycle is an idea of ownership. And once you understand ownership, now you get into that cycle that you're talking about where you can sell something in the future because you own it today and you hopefully buy low and then sell high. And that really is like just the dead simple equation. And I just a plan to flag that we'll come back to hold all these ideas in my head.
You had mentioned earlier is like a throwaway that a lot of wealth was generated in the collapse and of the economy. And so I want people to understand that this is a game and I don't mean that in any sort of derogatory way, but it has rules. And if you understand those rules, there's always an opportunity, especially in moments of disruption. And we're living through this incredible technological disruption right now.
Okay, so back to this idea of ownership. So when I look at Bitcoin, what I see is something that I can own, right? There will only ever be 21 million of these. Now, like anything, as Noah, you all know what Harari says, even money is just a story, right?
It's a fiction that we all tell. And it only has value when we agree that it has value. So Bitcoin has that same sort of Achilles heel that if tomorrow everybody's not believing that owning that has any value, then it would have no value. But we have this ultra scarce thing that the last 10 years of proven people believe has value and you can own a piece of that.
And as we go, if it is true that more and more people pour into this digitization of economic value, essentially, then those 21 million units are gonna become hyper-scares and hyper-valuable. Now, the great news is that you can fractionalize it, so you don't have to own one. You can own some tiny, tiny, tiny fraction of it. But now you have ownership.
So you're able to buy something now that you can own as it appreciates in value, and then you can sell it later. And so it becomes just this buy and wait game that real estate maybe still is, but that's why real estate has worked over time. You owned it. You could also live in it, which is certainly advantageous.
And then the expectation was that it would go up in value. When I think about Ethereum, at first I was like, OK, I like how much, we haven't even talked to, we haven't named Metcalf's Law, you've talked about it, but this, how you can value something based on its network adoption curve. And so I could see there was something going there. And then when I got into NFTs, I realized, I just had to buy a bunch of Ethereum to use it.
And so I was like, OK, well, wait a second. If I'm over here scrambling just to buy it to spend it, I'm like, this is me being able to buy into the dollar when it's new, and nobody's sure if we're gonna use it. I thought, whoa, I would take that opportunity. So that's how I see the difference in the two.
One is just sort of straight ownership of something. And then one is like, well, I know people use this. And because people use it and there's controls around the supply, that the odds are that it will go up in value. Ethereum's kind of like owning a part of the internet.
It's, as you said, I mean, everybody has to use Ethereum, basically, that uses the scriptor rails, unless you're just in the Bitcoin world. But everything that we talked about, and everybody will, even if you're not very familiar with the space, will have heard the term DeFi or NFTs or tokens. Basically, most of that is still being built on Ethereum. And as you said, the network, so what is this Metcalf's Law that you and I have preferred to?
Metcalf's Law is it really started to become understood in the 80s, and then much more so as mobile phone networks started, these giant connected networks, right? Because digital technology allowed networks to connect, before it's humans, we couldn't connect with each other in the same way. So networks connect with mobile phones, suddenly they explode in value, you know, all these phone companies, huge companies. And if you add them all up around the world, they'd be worth tens of trillions, probably, which they don't even think of it in those terms, because they're fragmented networks.
Then the internet comes along, there's free network, and everybody builds on top of it, and they create network effects, like the most classic is on this Facebook. Facebook connects us with friends and family, and in exchange, they get your data, they sell you adverts, so you've got a bunch of people using it, a bunch of businesses now building on it, and this advertising monetization structure. Shell does get rich, the, you and I get to, unfortunately meet somebody from university that we don't want to talk to, that we met 20 years ago, and we're now connected with again, you know, it's that. But the network that Ethereum and Bitcoin does is different.
You're the owner of the network and the user. So as a user, like you said, with the NFT, you're actually owning a share of the network itself. So everybody uses it, owns a part of it, therefore the networks are gonna get used a lot, you're gonna get rich, and the value of the network's gonna go up massively. And the more people build interconnection.
So a Metcust law is not only just the number of nodes, either number of users, but how much they connect with each other. Well, you're seeing it because there's NFTs, and there's DFI, and there's all of these applications, or the sort of money aspect, these things all together, and then there's the linking all of these, like Chainlink or, you know, some of these other protocols, Polkadot, they're linking all this ecosystems together. So I can send you a dollar instantaneously, and we have no idea whether it went on Bitcoin rails, XRP rails, Ethereum rails, and guess what? We don't care.
I promise you a dollar, you wanna get the dollar instantaneously. That's interoperability, that's all coming. So this is what Ethereum is about, it's the magnitude of this network, where everybody's developing everything on top of it, and it's scarce supply. So it's significantly faster adoption rate than Bitcoin now, for the reasons that seem pretty clear, because it has more use cases than currently the Bitcoin blockchain does.
Doesn't mean Bitcoin blockchain can't, since you course, but right now, there's a lot more use case in Ethereum. It's super exciting. Do you think that Bitcoin would need to do something like that in order to retain its value proposition? No, I think its value proposition stands above all things.
It is pristine, it's pure, it is what it is. And the way it's so impossible to change any of the attributes of Bitcoin makes it a bit clunky, and that clunkiness is its beauty. It is so secure, it's the most secure of all protocols. So let it be, what it wants to be.
Now, people are building things like the lightning layer, which allows you to do lots of fast payments over the top. Maybe that scales, maybe it doesn't. Doesn't really matter. That store of value for every person to think of, like it's only a piece of Manhattan real estate at low prices.
That's never going away. Not in the conceivable future, because humans have now said it has value, and it's being adopted very fast. So no, Ethereum is a very different thing. It doesn't compete.
That's how I like to think about it. And unfortunately, when you go online, people will tell you when it's competing and it's not as good, you have to ignore all of that, and look at the whole space overall, and say, and just be honest, saying we don't know where this is going to be in 10 years time. And like you say, so therefore, I can own three of these things, and probability is I'm going to capture a large part of this, and maybe I'll adapt in two parts. And so one thing, sorry, guys.
Yeah, so it's don't overforce the narrative. Just be broad, be open, and always be learning, as you rightly said, because we don't know. This is all new, and it's happening at lightning speed. Yeah, that's the thing that I am certainly most attracted to with you and the way that you are, and seems to be something that people echo a lot about you, is you're very open minded.
Is your open-mindedness the reason you have been successful, or is it a response to the struggles of getting to where you've gotten in your life? Yes, I think it's part of my background. You know, my father's a first-generation immigrant from India, my mother's a first-generation immigrant from Holland. They met on a blind date in Birmingham in the UK.
I've lived in India, I've lived in Spain, grew up in the UK, I've lived in the Cayman Islands, I've traveled the world. So it forces you to be open. Because you've got different religious backgrounds there, you've got different massively different cultural backgrounds. All of this stuff forces you to be open minded.
So I'm generally open minded by nature, just because of that. And macro investing is all about being open minded to other possibilities. So once you learn the trick, that it's OK to say you don't know, but I think this might be how it plays out. So you think in what's known as probabilistic terms.
Then for that to happen, for you to say, look, I think there's a 80% chance that Bitcoin over the next five years is going to $250,000. That's a reasonable answer. What's the 20% chance that it doesn't? OK, so you need to open both of those things in your mind at any one stage and be assessing them.
I learned that from the book. I think it was the Alchemy of Finance by George Soros, who was probably the most famous of all the macro investors. And he would talk about this a lot, that you have to have these kind of logic trees, think of probability trees. And once you understand that, you can even bet against yourself, which is really hard to do and I can't do it.
But some of the best traders can be long as the S&P, the S&P is rising, but then they think the odds of it falling are getting higher and they start selling against themselves. It's like, it's very hard to do. But that kind of investing teaches you to keep an open mind, because you look at the whole world and you have to know that we don't know the outcome. And anybody who tells you that they know what's going to happen, it's just a fraud.
It's just the open mind. I don't know, but I think, and this is why I think, that's all you need to do. That's open mind in a nutshell, admitting that you are fallible. Yeah, I think that is extraordinarily smart.
One thing that I've noticed about entrepreneurs is the most successful are the ones that are able to hold competing ideas in their head at the same time. And you, so when I'm teaching entrepreneurship, one thing that I talk about is, OK, you have to have this narrative. So you have a goal, you're trying to get there. You know where you are.
The chasm between where you are and your goal, your goal is probably, you know, skate to where the puck is going to be. So it's something where you're making a bet about how either culture is moving or technology is moving. And then you have to create a narrative that says, this is how I'm going to go from where I'm at to there. And what that narrative does is it smooths out some of those like leaps of faith that you're going to have to make in order to get where you want to go.
But then, you know, bringing this back to somebody in the finance world that I've learned a lot from, Ray Dalio, where he had that just catastrophic learning event where he realized, you know, we had all this conviction about something that was happening in the market and he ended up being wrong. And it just obliterated his company. And he realized, okay, you can believe you're right, but you have to hold open in your mind how I know I'm right and constantly be looking for disconfirming evidence. So it's like, I tell people you have to have all this conviction.
You have to be able to leave with conviction. You have to be able to go into something believing this is going to work. My narrative is true. That's how I'm going to cross this chasm to get to my goal.
But motherfucker, you better have open in your head. This idea of I have to challenge this narrative. I have to constantly look for the ideas and reasons why I'm wrong. And if you can't do both, race forward with conviction and constantly battle test that idea, you are in trouble.
And that's why being an entrepreneur is so damned hard that narrative of entrepreneurship is start thinking garage, borrow money off parents or start on your credit card, three years later, billionaire. Right, that's the narrative and then you write your book on how I manage my company. That's actually not true. The best book ever written on this is Ben Horowitz's The Hard Thing About Hard Things.
What you have to do is battle both your assumption, as you say, and test it endlessly. You have to be paranoid, excessively paranoid, but still confident in that you're right. And you also have to accept the risk of failure because the moment you accept the risk of failure, which is very high in startups, you're not hedging against it. Once you stop worrying about failure as the narrative, you tend to attract it.
It's a really difficult thing. People who fear failure about all things tend to fail more. People who don't look at failure and just look at the moonshot tend to fail too. It's the people who can see failure as a wolf behind them and the testing of the ideas, but still having conviction and maybe changing paths because the wolf is catching up, they tend to fail less.
But it's hard, makes you feel sick, you don't sleep at night. And that's the beginning of Ben Horowitz's book. Basically, it's two pages of what that feels like, it's called The Struggle. And that The Struggle is probably the most profound two pages in all of entrepreneurship and it's true and it's hard.
That's a great book. So going back to investing, I wanna lay out for people that might be new to this, they're not seasoned investors. The idea of dollar cost averaging was extraordinarily comforting to me. And I'd love to go into what it is, why it's useful, and whether you think that applies to what's happening in crypto.
So there's a mythology of investing. The mythology's investing is hedge fund manager, George Soros, spots the opportunity, gets in at the right price, makes a fortune. The reality is, most people have no idea where the price is going over a short term. So what happens is you buy something, you put all your money in, you've saved up your $5,000, you put it all into Bitcoin, Bitcoin falls 50%, you panic, you sell it, you feel terrible, Bitcoin goes back up again, you feel even worse now, you can scrape together, you've lost half of your money now, and then you keep compounding these errors, right?
It's called market timing. And market timing is extraordinary difficult. I do some market timing, because that's been my job. And 30 years, I've done more than my 10,000 hours, a lot more than my 10,000 hours.
And that doesn't make me very good at it either. I'm not bad at it in long-term investing, I'm terrible at short term. So what is dollar cost averaging? Dollar cost averaging is basically what everybody does with their 401k.
The problem is with 401k's or retirement funders, maybe cares about them. You don't know what's in it, you have no ownership, you just put some of your salary away, and it goes in this mythical thing that you probably assume won't be worth as much money as you hope it is. That's what that's become. And you put it in every month.
Why do you do that? Well, because you're averaging all of the highs and lows over time, because markets tend to do this. So you're kind of indifferent. In fact, you love it when it falls, because you're buying more units at a lower price, because your gain is to own as much as you can at the lowest possible price.
But if you don't know how to market time at 99.9% of people don't and cars shouldn't, then you're just averaging over time. And magic will happen. You just average a beautiful price over time. And had you done that in the S&P or anything else, you make money.
Now, what's so lovely about Bitcoin is it's not a passive investment like your retirement fund, because you can't access until later. So you kind of write it off and you, you know, everybody's heard that it's never going to be worth as much as it should be anyway. So it's become a bit of a pain, as opposed to something like this, you own, you live and breathe that volatility, and you live and breathe those gains when they happen. And you will be like, why died?
I did it's my sister-in-law, forced her to do this. I said, listen, I'm going to make it easy. She's got to open a PayPal account and start that way. And she had some savings.
She could take out another thing. She had like $5,000, $10,000. And she put it in and we got the timing relatively right. So it shot up a lot and she got in about 13,000 Bitcoin.
Wow. Yeah, and it shot up a lot. So she's like, well, and then it falls a lot. And she's calling up saying, what do I do?
So I'm like, no, you keep putting in partly paycheck. And after all of these falls, these several falls, she starts to really understand. And when they start falling a lot, she starts doubling the amount that she would have normally invested. And now she's taught herself to invest.
Next thing I hear, oh, well, I thought it's Ethereum. And this is how I'm dealing with that. So she's now looking at two different things. And she's now thinking about the ass allocation.
What's an Apple form, Ethereum is big. She knew nothing about this stuff. This is a year and a half. And she now understands because of that dollar cost averaging and taking ownership that you, exactly as you said, once you actually own something that, 401k, you don't actually really own.
It's like some other guy does something with it. And hopefully he makes money. This is you. You're taking responsibility for your own finances.
That's so empowering. One thing that I think is really important that I haven't heard people talking about, and just because my mind is so simplistic when it comes to investing, is I look at the stock market and I've got a money manager and all that. And she's trying to explain to me, he puts and calls and all this. I'm like, oh, this is so fucking confusing.
I don't want to think about this. I want to go run my business. And so I just never wanted to get on the phone and talk about it, which is too complicated. Part of the glory of what's happening right now in Bitcoin is if you stay crypto, if you stay sort of at the top of the ones that have the most sort of crowd validation.
Because you can get into the deep weeds on what's going on in altcoins. But if you just stay at the top, which has massive crowd validation, and you go, OK, I'm going to buy a bit of Bitcoin. I'm going to buy a bit of Ethereum. And then you learn, like your sister did, about the volatility and how to ride that wave and to recognize and for anybody listening, if you're new to this idea, have a thesis.
You dollar cost average based on your thesis. So here is Tom's overly simplistic thesis that I believe that technology is a one-way street that very few people are in cryptocurrency right now. I believe that over time, it will take over some massive percentage of the financial system. So let's say that it goes to, I don't know, become a $10 trillion asset.
So I can buy that. It doesn't take an extraordinary leap of faith. It's at just below, I think, $1 trillion as of the time that we're recording this. So I'm like, whoa, 10x my money.
Like that would be incredible. OK, well, as long as I believe in that thesis, I'd want the price to drop. So when the price drops, I'm the panicking. I'm like, yeah, buddy, because like you said, now the amount has gone down.
So when I first got into this, it was the height of the euphoria. Like Bitcoin was just going to the moon. It was just insane. And so I was like, oh my god, I have to buy into this.
And so I bought in. I started all the cost averaging. And the price is going up, up, up, up, up. And I'm still dollar cost averaging.
And I'm like, oh man, should I be going faster? Like the price is going high. And I'm like, no, no, no, dollar cost averaging. You never know what's going to happen.
And then boom, whatever happened, I guess it was like a month ago, six weeks ago, so I'm like, it just went down like 30%, 40%. And I was like, oh, thank god. I still have one, my thesis is still intact. Two, the amount of money I was willing to invest, I haven't hit yet.
So now at this much lower price. So what I am training myself to be obsessed over is the break even point. So if my original break even point was, let's say, $52,000 for Bitcoin, as I came down and I kept buying in and buying in, and buying in, now my break even point goes from $52,000, I got it down to like 30 something. And so I'm like, this is incredible.
So now that we're riding that wave back up, and I'm telling my wife, like we're up this much in 48 hours. We're up this much in a week. We're up this much in 10 days. She's like, what?
Like, it's almost impossible to believe. And I'm very careful to check that like the, hey, the euphoria is dangerous. You have to be careful. You have to constantly, like the wolf is right behind you.
Like you really do have to be thoughtful, but dollar cost averaging based on a thesis, that's the way to go. There's nothing I think it needs to be said is, you're now faced with something that really offers people enormous opportunity. It took a 10 for one. I think the space over the whole space over the next 10, 10, 12 years is probably a 100 X, right?
That's a whole asset class. We've never seen that in history in that space of time. But humans are humans. We go back to that fundamental flaw is we love leverage.
Tell people what leverage is for the- The leverage is when you borrow money to buy something. So let's say you had borrowed to buy the original Bitcoin purchase, and let's say you put down half of the money. So basically at 27,000 or 26,000, you've lost all your money. Now Bitcoin hit that.
You'd have been wiped out. And you'd have to pay somebody and you'd have been liquidated. And then Bitcoin goes back up in price and you'll have missed it all. That's what leverage does because it's okay in a house because house prices aren't very volatile.
So occasionally once in a generation, you get a 2008 thing where the house prices start moving a lot and suddenly the people's equity in the house wasn't enough. And everybody gets liquidated. I either bank says we want our money back. That's okay to take that risk if you're cautious in housing in crypto.
This thing moves around like this. It's predictability in the short term is extremely low, unlike housing predictability. So just don't borrow money to do this. That's the- If I can get that across, then you don't care if it falls to 26,000 or 10,000 because you can buy more units at the lower price over time and you don't care.
And then when it's trading at 500,000, you'll become extremely wealthy. It's as simple as that. Don't overcomplicate it. Don't think about derivatives, futures, options, none of it.
Just do, stick with a simple plan. Don't use leverage. Don't cost average. Think about it as a five to 10 year investment.
And your probability of success is going to be extremely high. It's funny how when it's dropping, there is- You begin to question everything you thought you knew in the euphoria. And I've never lived through this. So for me, I was fresh out of college when the internet was really booming and I was not focused on business.
I wanted to be a filmmaker. That was it. I was just entirely focused on that. And so the sense of like when people talk about euphoria in the market, they didn't really understand what that meant.
But like now, especially with social media, when Bitcoin is going to the moon, like you can just go on Twitter and everybody is so happy. And it's like, it just feels, there's so much energy and so much excitement and so much conviction. And then boom, it'll flip on a dime and people start panicking. And I remember, so one, I don't buy on leverage.
Just remember, humans are ridiculous. That's all you have to remember. They're hilarious. Hilarious.
And by the way, I'm in the middle of it. Like I don't think I'm above this by anybody. And when the price turned, and so I was like, I called my family, I'm like, guys, you must get into crypto. And they were all sort of paralyzed by indecision.
So I said, look, my wife and I are going to help you open the account. And then we will give you money. The only catch is you must spend it on crypto. And so we did all of that.
And then watching everybody's like emotion flip when the price started dropping. And for a minute, I was like, wait, do I have like enough conviction in this? And I was like, OK, technology is a one way street. I believe that this is going to digitize as a NASA class.
I will watch and pay attention if something new comes along. But for right now, yes, it all holds. And so I was like, OK, and so I just kept investing. And then as I started focusing on that break even number, pulling down my cost adventure.
There's a name. What's the name of that? Like you're the point at which your average buy-in cost venture. Perfect.
So watching that come down became like my obsession. And then so I start getting that low and I'm really excited. And I keep buying in and then it flips again. And it starts going back up.
And so now I'm like, OK, I've ridden the wave. I know what it feels like when it drops. I know how you still have to like check your thesis 100% dollar cost average 100%. But now because I did that, now I'm getting the gains as it swings back up.
And I'm still in a range. That's so crazy. There's so much money to be made, even just by taking advantage of that like momentary volatility. Now, I'm not I am a macro guy in the making.
I think only long term. I'm not going to sell as I keep telling my wife as fun as it is to watch it go up. Everything is noise sub five years. So like just don't even think about it.
It's quite funny because I've become pretty public in all of this space. And I've got a very clear idea of where I think going and how it's going to go. So I have my thesis and when everything starts falling apart, when the market starts moving, I look like it's done similar things. Right.
And I've been telling everybody who's ever gone to the space, you need to expect a 50% correction in a bull market. And you might see a 70% bear market and over five years, you'll have still made more money than you can imagine. So you have to accept those things. So this thing starts tanking Bitcoin starts first, then then Ethereum rolls over later.
And it's all down 50%. And I said, I've got this weight on my shoulders. I've got all of these people that have been following me. I have been telling them this message of mine.
And I pick out the one chart that matters to me, which is the adoption chart. Is anything that's going on with China and mining and this and that, changing the adoption curve or not? No. So then as you said, the relentless rise of technology continues.
So la la la, I can't hear it. So I turn around to my wife and I'm like, you know, you know, it's fallen 50% every freaking out. She just looked at me and goes, you are all so ridiculous. She said, you said, you should expect this.
Now it's happening. Everybody's freaking out. And she just walked on said, don't be stupid and walked out of the room. And I'm like, yeah, just Twitter is somewhere sometimes or Reddit or whatever.
Whatever form you're on is sometimes your enemy. And sometimes you just need to turn that off. Now, it's been the same with investing in Amazon. But the reason these are so wealthy is because he was probably one of the only people in the world who had Amazon shares from the beginning, never sold them.
Because he went down 95% in 2001 too. It's had several 60% falls. And it's still making the richest man in the world. This is what exponentiality looks like.
And for people who are little more savvy, there's a magic trick to everything to keep your sanity in this. Because this stuff goes like this and it does this. And you'll see there's like free charting almost on every platform now, trading view, something like that. Just change the scale to a log scale, logarithmic scale.
And what you'll find is like, you look at Facebook, it's like this, Amazon goes like this, right? And it always feels like, I can't buy this. It's gone up too much. You know, that fear that you had at 52,000, right?
But that's real. You change it to a log chart and it's a beautiful trend. And you realize it's all noise. And yes, those movements can be 50%, 60%.
But it's just moving in that lovely little trend. Facebook has done that since 2012, never deviated. Nor has Apple, nor has Microsoft, nor has Google, none of these have. Not even Tesla, and nor is Bitcoin, and nor is Ethereum.
They're all network effects and they're priced in the same way. They're all exponentially in nature, which we can't get our heads around until you put it on the log chart and it makes you calm down. What does the log chart do? I've heard the phrase, but I honestly don't know what that means.
It's the scale. So normally a scale would go like a Bitcoin chart. Well, because it starts really low, it might start at $10. And then it's got to go up to $65,000.
So suddenly you're seeing a move, a $1,000 move. It looks small, but before it was big. So what happens is it squashes the chart because most of the price action has happened from, let's say, $10,000 to $65,000. So you keep getting this.
It looks like this all the time. And so this is just by stretching out the timeline? No. So what a log chart does is change the scale where it doubles every measure.
So it goes $10, $100, or it goes 10X, let's say. $100, $1,000, $1,000, $1,000, $1,000, $1,000. What that little trick does is smooth out all of this issue. So you'll get comfortable when you look at it just to realize it.
And look at the scale. Look how it's changed versus the other scale. And you'll see from that, it basically compresses all of this. It's the same as if you use percentages.
Because a 5,000 point move now in Bitcoin is not the same as a 5,000 point move when it was at 5,000. It would have been 100%. And now it's not. That's whatever it is today, 10%.
So it's changing that. That really, really, really helps. It's interesting. So you're getting into the psychology of all this, which I find utterly fascinating, of it doesn't matter what you look at.
It matters what you see. So you're looking at this chart. You have to be very careful. Because most of the charts, at least I use Coinbase Pro.
So it defaults to a really short time period. And so it's just like, oh my god, this is all over the place. Why do they do that? Because it makes you trade more.
Yes. Yes. No doubt. And you're like, oh my god, I need to sell.
I need to buy what I need. And then you zoom out and put the 5-year chart or 10-year chart. Oh, this is noise. That's exactly what it feels like.
And I've heard people talk about that. I think it's very sage advice when you're feeling stressed. Zoom out. Literally zoom out the timeline so that as you broaden out and it's like, oh, okay, okay, this all gets very smooth and easy to handle.
Now the best way to look at somebody's conviction around their thesis is to see what their percentage allocation of their net worth they have in said thesis. So when I started in crypto, I was like, okay, 1%. I'll get to 1%. I just don't want to be a fool.