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Anthony Pompleano, welcome to the show, man. Absolutely thanks so much for having me. Dude, I'm really excited. So there's something my audience has heard me talk about this before.
I feel a moral obligation to get people to look at cryptocurrency Bitcoin specifically, and there's a famous thing I'm almost certain you've heard it before, which is poor people spend the middle class, save, and then the wealthy invest. And this is what's going on in cryptocurrency to me seems like the first time where the average person, whether you're poor, whether you're middle class, it doesn't matter. You can actually front-run the investor and use, whether it's Bitcoin or something else as that investment vehicle, talk to me about the breakdown here in the US of people that invest versus don't invest. Yeah, so one of the easiest ways I find to talk about Bitcoin is just talking about the legacy problems and kind of what the average person does, and both from those that are successful and those also that are not successful.
And so let's start with some statistics around just the United States, right? 45% of Americans hold no investable assets. That's so crazy. So it is an investable asset for people that don't know what that means.
Stock, a bond, cryptocurrency, real estate, all the things that are basically are not cash that you're buying because you think that they're going to appreciate in the future. And so really that 45% of folks are living paycheck to paycheck. They keep all of their wealth stored in dollars in a bank account. They tend to be obviously not very well financially off, but also on top of that, they tend to actually not be nearly as educated about how the system works.
So there's a wealth inequality gap, but there's also a very large education gap. And so do you think they're one and the same? I think that the education gap actually drives most of the wealth inequality. And really, it's because of the debasement of the currency.
I've made that interesting. So we'll get to debasement of currency in a second. I've made a statement that I expected to be more controversial than maybe it's become, which is so I worked in the inner cities a lot. So I have seen first-hand up close, intelligence be evenly distributed.
So they can process raw data very quickly. Like you're hanging out with them. You're like, okay, you're poor. You come from a long line of poverty.
And yet you're incredibly bright. Like, I am confused now as to why you haven't, you know, been able to achieve escape velocity and get out of here. And then you realize that their frame of reference, the way that they think about things is so detrimental, because your behaviors ultimately are all the matter, right? You can think that Bitcoin is the greatest thing since sliced bread.
But if you don't actually buy any Bitcoin, then you can't take advantage of the growth. And so I began to realize that or hypothesize, I should say that generational poverty is a frame of reference problem far more than it's a money problem. And that if you took that same person, so they're born on day one, they were born to parents that have lived in the inner cities forever. They've struggled for generation after generation.
And you bring them into a household where they're going to be educated around investing and what the game is that you're talking about, that it's a system. It works in some kind of way, that way it's predictable and it will reward some behaviors and it will punish other behaviors. And nothing else matters. And if you do that, they will come out just fine.
And so I was like, wow, this really is a knowledge gap problem. Yeah, I mean, think about it. I told you to go play a game and I said, I'm not going to tell you the rules, right? Be pretty hard to play the game at first, at least maybe figure it out.
Maybe you don't, but you're obviously going to be much better equipped to play the game if I explain to you how the game works and what the rules are. And so if you think of money or finances as a game, there's really one key rule that everyone has to understand, which is the dollars will be worth less than purchasing power terms over a long period of time. That's not a negative towards the dollar that's not a positive towards the dollar. It's just that is a fact and we call it inflation.
Yeah. And the system is built that way. And the economic argument for why it is built that way is because if I know that my dollars are going to lose purchasing power, meaning that today it costs me $2 to buy a loaf of bread in five years, it costs me $4 to buy a loaf of bread, I'm financially incentivized to either invest the money or to spend the money, but holding it is a losing proposition. Now, that economic theory is predicated on the fact that everyone knows the dollars are going to lose value because what ends up happening is those 45% of Americans end up not investing the money or really spending the money.
They're trying to save the money, but it is losing value. And I would go back and I think this generational idea is really can be extrapolated even further. It's not just folks on the inner city. If you think back, you know, I'm 33, you're in your 40s, if we go to our parents or our grandparents, for the most part, their financial advice was safe, right?
Spend less than you make. If you save, then you can make your way to financial security. That was actually true specifically around our grandparents generation, a little bit of our parents and then for us not so much. And so the advice that was passed down was actually predicated on a situation that no longer exists because before 1971, there was nowhere near the debasement of the currency that there is today because it was tied to gold.
That's a huge piece of it for sure, right? Which is basically the fact that when we handed over the power to print currencies, right? This is a 50 year experiment that we're in. And, you know, again, there are some very positive impacts of being able to print currency, right?
You essentially are able to devalue the currency. You can pay off future debt with kind of less valuable dollars. And there's all this economic theory that really fast. I want to ground this in something I've heard you say before, which I think it was so simple.
I was like, whoa, you said if I have $100 in my bank account and I need $150, I can't go in and edit the database and now I suddenly have $150, but the government can. Yes. And I was like, whoa, like when you say it like that. And it's like literally just somebody going into a spreadsheet.
I was like, oh my God. And I even do this as recent. So I am, I'm very good at making money and I have historically been very bad at investing money. Okay.
Now I've become obsessed with investing now that I'm sort of track, because I, I was just trying to get as close to my money buried in the backyard as humanly possible. Anybody thinking about me? I don't actually do that. So you will find $0 here at my house.
But that was my mental sophistication around finance. I didn't understand it. I didn't want to understand it quite frankly. I'd put a lot of energy into just getting good entrepreneurship so that I could generate whatever wealth that I wanted.
But I came very late to understanding this idea that one, that the governments can print more and that in printing more, you make it less scarce and in making it less scarce, you devalue it. And I actually, as of maybe eight months ago, thought that when they say print more money, that they were actually printing more money. And so I'm like, when they've got the bag of cash, who are they giving it to? I couldn't understand.
I was so, but like, if anybody puts any amount of credibility into whether they think I'm intelligent or not, to think that a guy that could build a billion dollar company as of eight months ago was imagining somebody from the government walking around with like a bag full of cash. Like, that's how ignorant I was to the system. And that's exactly how people end up getting held back. I think that what's fascinating about this is this is not an uncommon story, right?
There are plenty of people on Wall Street, etc, who don't understand economics, macro or micro, and also just simple personal finance, right? This stuff is hard. And it goes back to there's nobody teaching it in school. And so you basically have two ways to learn.
You can learn by dealing kind of trial by fire and some people figure out some people don't, or you're lucky enough to have a parent, a friend, a mentor, somebody else who sits you down and explains it to you. And I think that's why we're seeing such an explosion of interest. Yeah, sure, the meme stock cryptocurrency is it's easy to mock and make fun of the young people. But these young people are interested in understanding how does the market work?
How does finances work? How does investing work? And so, you know, if you go back to that data, right, we talked about 45% of people have no investable assets. The two stats that just blew me away when I started to look at this was 80% of millionaires in the United States inherited zero dollars.
So the narrative is everyone inherits wealth and it just passed down. Well, 80% of Americans inherited nothing. 20% inherited something, 8% nothing. The second one is that 33% of millionaires in America never made more than $100,000 in a single year.
So you start to ask yourself, well, how does it that somebody that doesn't make six figures a year become a millionaire? Well, they have to be disciplined and understand personal finance. And so it is possible to do it. It's not everyone.
It's hard, right? It's not the easiest thing to do, but it can be done. And so as you start to understand, like, okay, the education is a huge piece of this. You actually see that the people who are wealthy, some of them could explain to you why they're doing things.
They have a kind of a deep level and detailed knowledge of the actions they're taking and the reason for it. There's a whole other group of people who are wealthy who couldn't explain any of it to you. And they just know that their parents told them, hey, by real estate, real estate goes up, but they don't understand printing of money. They don't understand quantity of easing interest rate.
None of that matters. They just did the action. And so, there's a lot of paths to get to the desired area, if you will. But I do think that Bitcoin specifically, what's done for me and for other people is I have an economics degree, which is crazy, because I didn't learn anything.
It was only once I started to actually invest money that I started to really get the education. So I always say, Bitcoin taught me economics, taught me personal finance, taught me social psychology, all these different things. But there's an element of just understanding, hey, invest. Because at this point, given the inflation and the monetary debasement, it is impossible, literally impossible, in America to get a financial security position by saving it.
It's just they're debasing the currency. 38% of all dollars in circulation were printed in the last 18 months. That's insane. That's insane.
Like when you think that we're over 200 years old as a country, that's really bananas. 38% in the last 18 months. Whoa. So now, as I think about, so I'm trying, it's funny, if people go back and watch all my interviews, they see me from the time that this all kicked off with COVID.
They see me grasping at straws, trying to help the average person find a way through this, because I really started to panic in the right word. But it's like, I was deeply at unease, because I knew who was going to get pounded the hardest by what was happening. And it was like, look, I was going to be fine. But a lot of people that I know care about love, we're not going to make it through this thing.
And so I started bringing on, because of the reach of my show, I was getting on like the biggest macro investors in the world. But because I didn't understand finance, I didn't know that that was the wrong person to go and talk to, because they can influence countries and they can help huge hedge funds, but they don't know how to talk to the average everyday investor. And one of my employees kept hurrying me to look at cryptocurrency and Bitcoin. And I was like, David, I just don't have any interest in investing.
It's not my thing. Like, I know how to make money. And then NFTs came along and I realized that was going to be the future of my business. So I went all in and like, you started learning all this stuff from investing in crypto.
I had to learn about the blockchain by to understand NFTs to create content there that was interesting and compelling. And as I learned about that, I was able to get the first principles because now I understood how the blockchain worked, which led me to what's different about fiat currency to cryptocurrency. And then all of a sudden you're like, wait a minute. Are you fucking kidding?
This is what's going on? Like they can just print money at will. That's insane. That also when you start thinking about so one thing that's always enraged me and this sends me back to my days when I was young and broke.
And I would have let's say $19 in my bank account, not joking. And they won't let you take it out because there's a minimum that you have to have in your account or there's like $20 minimum at the ATM. And so I'm like, hold on, I'm not going to be able to go like get a meal right now because of banking rules. So I've developed this just like internal rage over banks acting like my money is their money.
And so now like seeing how it's hard to get your wallet set up admittedly. But once you like get on the rails of cryptocurrency of how easy it is. And so that's really been eye opening and game changing. Now I think we have to get to all right, you have to get to those first principles to form a thesis and then you can invest based on a thesis.
So I want to talk about the thesis around Bitcoin will stay specific to the do you call yourself a Bitcoin maxi? No, so I think there's a separation between there's monetary component of this and then there's a technology or like a corporate component of it. The monetary part, you have to be a maximalist, right? You're a fiat maximalist.
If you're a US citizen, you get paid in dollars, you save in dollars, you invest in dollar denominated assets, you pay your taxes in dollars. So you're a fiat US dollar maximalist. When it comes to monetary assets, everyone in the world is a maximalist because that is what you dominate your wealth, right? Very, very rarely to say, hey, 50% is in this currency, 50% is in this currency.
And so from a monetary standpoint, definitely a Bitcoin maximalist because I think Bitcoin is the only one that has an opportunity to actually kind of ascend to global reserve status and end up being the superior monetary form. But when it looks at the technology, I think that there's going to be massive competition on that. So if you look at the technology side of it where you're not talking about monetary assets, you're actually talking about a technology asset, it would be like saying you're an iOS maximalist or you're a, you know, I don't know, Python maximalist, right? Depending on the language or the platform or whatever.
So I think that you've got to be able to separate out and say, you know, Bitcoin is competing with fiat currencies for store value, medium of exchange, et cetera. And really fast fiat just means it's government backed just government backed and basically they control it. So the key definitions here are fiat currency versus let's call it sound money. All sound money is basically something outside of the system and something that people can't create more of.
So gold is a analog version of sound money. It's a physical form of sound money created by stars exploding. Just I mean, when I heard that, I was like, yeah, that really is an interesting way to think about why it's scarce. Yeah.
And Bitcoin is a digital form of sound money. And so you can compare the sound money to the fiat money. And you know, it becomes pretty clear pretty quickly to people is like, okay, one is completely abundant and can be created at will, 38% has been created last 18 months versus one that nobody can create more of. Well, I don't need to know much else other than that to know which one's gonna end up being more valuable.
And so we look over the last 12 years or so, Bitcoin's purchasing power and all purchasing power means is how much does it cost to buy, you know, a good, the purchasing power has appreciated, it's increased. So all of the expenses around all the physical items that you buy have gotten cheaper and cheaper. So it used to cost me one Bitcoin to buy a low for bread. Now it might cost me 0.01 Bitcoin to buy a bread.
Okay, that's pretty interesting. The dollar is the opposite, right? It cost me more dollars to buy the bread. So everything's getting more expensive around me.
And so ultimately, hold on, hold on. Like that's, that's so basic and so game changing to understand. So you've done a mental switch where you now denominate emotionally in Bitcoin, AKA satoshis. And I haven't yet.
So as I see the price fluctuate on Bitcoin or whatever, I get excited. Well, the funny thing is I get excited in either direction when it goes up, I'm like texting my wife, yo, in the last 24 hours we just made. And she's like, you have got to be kidding. I mean, it's crazy.
Yes. Now when it goes down, I'm texting her like, yo, we're going in hard, like we're buying this dip. So but it's really, really interesting. Do you mind saying again, the cost of low for bread compared to dollar versus big?
So if I denominate my life in dollars, and let's say I buy a loaf of bread today, it's two dollars, five or 10 years from now, that loaf of bread may cost me three, four or five dollars, depending on the rate of inflation. If I denominate my life in Bitcoin, and today, let's say that it cost me one Bitcoin for a loaf of bread, in the future, it will cost me less than one Bitcoin. So it'll actually become cheaper for me to buy because every asset when you think of price, it's denominated in a currency. So a stock, right?
When I asked you, what is Amazon stock price, you're telling me one Amazon share over how many us dollars, and that's how we get to the actual value. And so when you start to think about that, look at the stock market. The stock market from 1971 to today is up and to the right. So perfect 45 degree angle.
I got to know what you're about to say. When you're denominated in gold, it's down. It says 1971. If you denominated in Bitcoin, since 2009, 2010, it has crashed aggressively.
Bitcoin has been the best performing asset, but that's because it's denominated in dollars. And so ultimately, what we're watching is we're watching an entire generation of people wake up to this fiat currency kind of fiasco. And there's a famous Henry Ford quote where he said, you know, if people understood how money worked, there would be rides in the street before morning. And it simply gets back to that education.
Yeah. And so the 55% of people hold investor assets, whether they understand why or not, they're actually benefiting from this. And so it's important to remember that I don't think there are nefarious or malicious intentions or let's screw people at the bottom of the totem pole. In fact, sometimes actually the exact opposite, but the system is working as designed.
It's a feature, not a bug. And the reason why that's important to understand is because the system is not going to change, right? You and I are not going to be able to convince anybody to do anything different. They're going to do what they're going to do because that's the way the system is built.
But what you can do is you can change the way that you're positioned. So you have a choice. I can either suffer at the hands of the system or I can flip around the outside table and I can benefit from the system. Every single rich person understands how to benefit from the system.
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And one thing I want to go back to. So you said, all right, you're the cost of the loaf of bread is going to take less and less of the Bitcoin that you own. That's a prognostication, right? You're hoping that that is true.
But one thing I want to point out is the things that you're looking out in the future and saying that the bread will cost more dollars is back historically. So simply you looking backwards and then carrying that out forwards. And the same is true of Bitcoin is that you're looking at the historical performance and projecting it forward. It's not like you're just making that up and being hopeful.
And that is where I think this starts to be important is one to recognize everybody has to do their own research. You have to figure this out for yourself. You want to understand it to the point where you're not thinking an analogy. You're thinking from first principle.
So you understand how the game works. You're, you know, emotionally writing in the streets, it says Henry Ford predicted. But yeah, I think that that's an important thing for people to understand. This isn't Hopium.
This is looking at the historical performance. And in fact, one of my favorite statistics and strike me down if this is inaccurate. But that Bitcoin and this I got from Raoul Paul, that Bitcoin is the fastest adopted technology in all of human history. Yeah, it depends on how you count.
But for sure. And remember, price, right, is kind of the best indicator of adoption. If you have a fixed supply asset and demand for something or adoption for something goes up, the price has to continue to move upwards, right? Just more and more people want this scarce asset.
And so the price goes up. Bitcoin was the best performing asset over the last decade. So now all people talk about is the volatility. Well, volatility actually, and this is like where you get a little bit more in the weeds can be very good for portfolio.
So there's a this data because you have potential massive upside. Yes, there's two kind of ways to think about volatility. We think of volatility when it's talked about in the mainstream media as a negative thing. Raoul is volatile.
It's volatile. Well, if something goes up in value, it's volatile to the upside. If it goes down in price, then it's volatile to the downside. So volatility isn't good or bad.
It's just is it going in your direction or not? Right. If you're short, an asset, any asset goes up in price, you hate volatility, right? Because you want it to go the other way.
So volatility being not good or bad is important because you want it to actually be volatile if it's going in your direction. The second thing is, I think that this data may be I think it's 2015 to 2020. It don't quote me exactly on the dates, but there's a five year period where if you invested in a 60 40 global portfolio, 60% stocks, 40% bonds, you got a 7.2% annualized return for five years. It's about average where we've seen over the last few decades.
If you had taken half a percent from stocks and half a percent from bonds, so you had a 1% allocation of Bitcoin, 39.5% of bonds and 59.5% to stocks, you would have taken that 7.2% per year and increased it to 9.2. So a 200 basis point increase in your annualized return. If that 1% allocation of Bitcoin had gone to zero, you lost all the money. You would have only gone from 7.2% to 7%.
So it's about a 200 basis point or 2% upside for a 0.2 or 20 basis point downside. So 10 to 1 during that five year period. Now, the reason why I say that is 1% of a portfolio is not a lot of money. For those people, that's kind of a speculative type investment.
But because this is so volatile, because it has the ability to appreciate so aggressively, like you talked about when lots of people are getting excited, et cetera, is it can have a really profound positive impact on a portfolio. And still, you only have exposure of 1%. And so we just haven't seen that many asymmetric assets like this before available in the liquid market for people to go buy. And what I think ends up happening is people come in because of the price.
They're like, oh my god, I'm going to get rich. This is amazing. This is like the greatest thing ever. It goes up in price over time, whatever.
But then what happens is, as my friend Marty Ben always talks about, he's like, you come for the money, but you save for the money. And you came for profits, but you stay because you start to understand fiat currencies, economics, personal finance, et cetera. And you start to realize, wait a minute, I have to do something. I can't sit with cash.
And so it's just a very unique asset that we're all kind of living through global adoption, right? We've gone from the creation of an asset 12 years ago to now there's a nation state that has bought Bitcoin. I don't think anyone 10, 12 years ago thought that a nation state would buy Bitcoin this quickly. And so you're building all of this on top of the internet.
And so the internet adoption happened on top of the telephone lines and the connectivity we had. So it had a certain rate limiter to it. It could only grow as fast as we had kind of communication infrastructure. Now, when this gets built, it's being built on top of the internet.
So look at what is the total internet penetration globally? Well, that's the rate limiter for how fast this can grow. And I don't think we probably talk about it enough, but there was immense work done in places like South and Central America, countries in Africa, places like India, et cetera, China to really drive internet infrastructure over the last 15 years, right? Everyone from the Google's, Facebook, Amazon's of the world to kind of the traditional internet providers all spent billions and billions of dollars getting all that infrastructure installed.
And now here comes along with technology that is literally just going to ride the coattails of that internet infrastructure and get adoption. And so that's where you see countries like Nigeria and others that you wouldn't think of being super forward, kind of thinking on technology. There's actually some of the highest penetration in adoption that the macroeconomic problems of the currency. And they're watching their currencies get the value.
They're watching the dire financial position they're in, and they have the internet infrastructure now. And so they're not tied to a legacy infrastructure financially. So what do they do? They leap forward a developed country.
And I think El Salvador's got a shot to do that. I think Nigeria is going to do that. So we're just watching, you know, a tale is old as time. This has happened over and over again with technology trends.
It just so happens that now it's coming for finance and a lot of powerful and a bunch of people who don't like that. Yeah. All right. So I want to leave some breadcrumbs for people that maybe are in my position eight or nine months ago, they have no idea.
This is so dizzying to them. And if they've made it to this point, I'm very impressed because they're investing their future. But now just a few breadcrumbs. So going back to you, if you don't understand the first principles of something, what I'll often refer to as the physics of the situation.
So you're as low as you can go. There's you're at the sort of axiomatic state where you just, you at some point have to say, I believe these things to be true. Nobody knows sort of anything below that. So okay, we're not reasoning from analogy anymore.
We're getting to the point where we understand what fiat money is. It's pluses its minuses. We understand what cryptocurrency is Bitcoin specifically, it's pluses its minuses. And now we can begin to think for ourselves to solve novel problems because we're thinking from first principles.
From that, they're going to form a thesis and I'll lay out my thesis, be great for you to lay out yours. And I'll explain why I'm not afraid of price volatility, why in fact I get excited in either direction. When it's going up, I'm like, God, I'm getting richer. This is amazing.
When it's going down, I'm like, I can buy more. Now, the reason that I want to buy more is the following. I believe this is one of my axiomatic statements. So there's nothing below this one.
I believe it to be true that technology is a one way street that we will never go backwards. We will never unwind the internet. We will never be a less digital creature. We will only be more.
And things like Neuralink are going to become real. And I actually, and I don't want to lose people on this, I think in a very far distant future. So this is not in the next 20 or 30 years, you know, maybe this is 100 years, maybe it's 300. But there are people already that have cochlear implants that give them back hearing.
We're working on implants into the eye that give people back vision. So it'll start with correcting things, but we will ultimately, as ourselves, become really tied physically to technology. So I believe that everything will ultimately get digitized. So what we're living through right now is a really fascinating moment where art is now being digitized, money is being digitized, and those two, I live at the intersection of art collectibles and money and watching those go digitized and watching for anybody that wonders if this, if the human mind is just ever going to be into these things in the way that they are physical things, I would just say this, that in August of 2021, OpenSea did $3 billion in revenue on purely digital goods, digital art, digital collectibles, all of it.
And that blew them past Etsy at like day 16 of the month or something, they went past. I mean, just absolutely insane to see how much money is pouring into the system. I think this was only 200,000 wallets. So 200,000 people driving $3 billion worth of revenue, all on digital goods that have no physical tangible thing in out in the world.
Now, there's utility. It's beyond the scope of what we're saying now. So, okay, my thesis, the world's only going digital. I've all these kind of proof points around it.
Now, one of the things that's going digital is money. Bitcoin in particular has a really fascinating feature, which makes it what you call sound money. And that feature is programmatically, it can only ever produce 21 million of these units, unlike gold, which for me, and I don't know if you'll agree with this, my mind got wrapped around it immediately when it was like Bitcoin is digital gold, because I understood what gold was meant to be. I was never going to carry it around and shave some off the buy a loaf of red, like it's a thing that I store somewhere else that we all agree.
And yes, it only has value and that we agreed has value. It only can be created when stars explode and that rains down on the planet and gets embedded into, you know, the bedrock of, you know, the earth. And so we have to go and dig it out. But we dig it out at a rate roughly 2% a year as economic incentives go up, we dig out more.
And so there is some big question around, well, if there was enough incentive, could you devalue that more by discovering that there are actually harder to reach deposits of gold. Okay, so I get that it's capped. There's only 21 million units. Therefore, as long as we all agree that that thing has value, it becomes sound money, as you say, because there can never be any more of it.
So the more I can get now in this sort of early phase where it's sort of a secret in plain sight, and which is how I feel every time I buy it, I'm like, why are people selling me this? Like, this is crazy because I have sold exactly zero satoshis. So I keep having a number and I'm like, I can't wait till I have, you know, more than this and more than this. And because my thesis is technology is one way street, we will never go backwards.
Money as a value is going digital. The number one front runner is Bitcoin. When the price goes down, it's better for me because I can buy in. And there will come a day, I think, where the predominant trajectory, even in the relatively short term will just be up up.
So it doesn't make sense to even get excited as the price goes up because it's just almost sad that I can't buy in more at that, you know, the earlier rate. And so that's my thesis and why I wouldn't sell because it becomes like Michael Saylor says, it's like buying a plot of land in Manhattan because you're never going to make more Manhattan. And so that's only going to go up in value over time, which of course is exactly what happened to real estate in Manhattan. You can borrow against it, et cetera.
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That's i-n-c-o-g-n-i dot com slash impact and use code impact. It really just comes down to this idea of the purchasing power increases versus the purchasing power of the dollar decreasing. And ultimately, what I think ends up being really important for the conversation is there's a financial component, which we're talking about now, right? Is I want to store the value of my time, right?
I think this is like a really, really key component of the financial conversation is all money is at the end of the day is a unit of time. And this is kind of a crazy concept until you think about why do you receive money because you or somebody you employ or an asset you built or some thing is exchanging time for money. And so ultimately, if you have lots of money, you end up having leverage on your time. If you don't have lots of money, you have to spend time to get dollars.
And so money is just a unit of time. And so when I think about that, if I expend, let's say, an hour of work today and I get paid $10 an hour, and then you tell me that I took that unit of time I put in my bank account. And then in the future, I would have to work two hours to get that same $10. Well, that actually doesn't feel that great, right?
In terms of it, it feels like I can't keep up. I only have so much time in a day and I'm constantly falling behind. But if instead you said to me, hey, if you work an hour, you get $10 and then you put that money in a form of an asset that is only going to appreciate its purchasing power, then wait a minute. In the future, I actually don't have to go work for three or four hours because now I have that $10 that's saved from the time I recently spent.
And so this idea of a unit of time becomes really fascinating because whatever people understand, don't get in the game with trading your personal time directly for hours, right? They either employ other people or they own assets that deliver them some sort of financial return. And so when you look at Bitcoin specifically, it has a financial component that is unavailable in other assets. It is systematically built to continue to protect your purchasing power and protect could also just be going sideways, right?
Just it doesn't degrade. It happens to be going up a lot now because it's being repriced by the world. But at some point it'll reach some stable value and it'll kind of just go sideways and protect that purchasing power. Really important concept.
The second is this idea of sovereignty. So like you talked about putting that $19 in the bank and you couldn't get it out. Huge problem, right? A lot of people don't know.
I've got a friend Mark Yusko who talks all the time about it. When you put money into a bank account, it's not your money anymore. That's crazy. Right?
It's an IOU that's supposed to give it back to you. But we've seen in very kind of outlier events like in Cyprus in 2013, I think it was where they basically come into the government says, you know what? If you have $100 in the bank, we're taking $10. 10% tax across the board.
Well, how can I take my money? Because it's not your money, right? And so you end up not understanding some of that. And so it's the idea of sovereignty, the ability to hold your assets yourself, right?
You talked about you don't actually have money buried in the backyard, right? That would make you a sovereign individual. It also puts you at a lot of security risk, right? Somebody could come here and dig it up and harm you, et cetera.
With Bitcoin, what it allows for is this sovereignty. You can actually hold on to it. Nobody else is holding it for you. You get to custody the asset.
And so in the develops world, we don't think a lot about this, right? We decide I put money in the bank. I go to the ATM. I can take it out.
I can swipe a card, you know, no problem. In the developing world, this is a huge problem, right? If all of a sudden I need to get up and I need to flee Venezuela, for example, well, I have to get on a train, a plane, a boat, or walk. And at every single one of the ports, airports, train stations, or border crossings, what are they doing?
They're confiscating people's wealth. And so there's, you know, report after report after report over the last few years where somebody went to the airport and they had physical gold in their suitcase and the government or the military took it from them. You don't have sovereignty over the asset because you don't have the security of it. And so Bitcoin having this cryptographic kind of security to it ends up being really, really important on a global basis.
Maybe not so much in the United States today, but globally, really important. And the last thing is there's this censorship resistance with the payment network. And so one of the things that, again, in the developer world, we don't think a lot about is if I want to send you money, I basically have too many options, right? I can handle physical cash, I can Venmo you, I went to my youngest brother, how he sends money to his friends.
He said, Uber, how do you send money on Uber? And he said, well, I split rides with them at the end of the ride, right? So there's all these ways that we don't think that we send value back and forth to each other in the developed world. But what happens if the government said, you can't send Tom money?
And sometimes they do that, where they'll say, you know, Tom's a criminal, you're not allowed to do financial transactions with him. I think generally as a society, we say, there's got to be some rule of law. We agree bad people shouldn't be able to launder money or, you know, commit crimes with money, etc. But what happens if it goes from Tom's a criminal to Tom didn't work out today, and Tom's been a bad boy in our society.
And so now all of a sudden, Tom, you can't send Tom any money. Well, what do we do then? Because all of the technology that we use would be exposed to that threat. And so this idea of censorship resistance, while I don't think most people around the world today are worried about their government saying Tom can't receive money because he didn't work out today, what we are worried about is what happens when all of a sudden a dictatorship says to their citizens, you're not going to be able to get your capital out, right?
I'm actually a little more worried maybe than you are. So I am not a very controversial person by nature, but watching some of the controversial people get shut down where like stripe is like, we won't even process your payment account. There are ways to really fuck with people. Now here in America, like it gets a little scary.
I usually don't go too far down this rabbit hole only because you end up in this weird world where everyone becomes conspiracy theorists real quick. But, you know, in the last 18 months, a lot of the conspiracy theorists were just early, right? Pended up being right about a lot of things. And it's unfortunate.
It's not always that situation. But I do think that we are headed towards a world where we're understanding the more power that you give to governments, the more that they encroach on personal freedoms, individual liberties, et cetera. And the most extreme examples everyone can identify and I think generally in the developed world, we point our finger and shake it and say, you know, they shouldn't do that, right? But when you look here in the US, it's always that that could never happen here.
And I don't think that there's people who fundamentally believe that it's going to happen tomorrow, because it's usually this like slow degradation of freedom. But if all of a sudden they shut people down from stripe, okay, well, there was just a guy who was in politics who chase banks shut down his account for reputation risk. This isn't somebody who was, you know, out saying crazy conspiracy theories, definitely politically controversial, whatever. But I think if you and I had to sit down and make a list of all the people who get, you know, financially censored or sensor social media, it's usually kind of the fringes of society, right?
It's the people who, if I went home and I talked to my mom, she'd be like, you know, that person a little crazy, right? These are people who are just involved in politics. And so I think that at some point you have to start to ask yourself, do I want to risk even being exposed to a system where it could happen? It's not saying it's going to happen.
It's not saying I have some prediction as to when it happens. It's just why even subject yourself to that risk. And I think it goes back to this conversation around the best investors in the world. For the most part, are actually not very risk tolerant.
They don't want to go and take immense risk. Almost never what you see one of the best investors in the world say, I'm going to take 100% of all of my investable assets. And I'll put it on this one stock across my fingers and help it works. Right?
It just doesn't happen. Instead, they think a lot about risk mitigation. They try to figure out what are the ways that I can basically make investment decisions where there's lots of upside and there's very little downside. And so I think that as a society we're learning now, that's probably a pretty good way to think, right?
It's a pretty good way to kind of position your life. And so if you're a content creator, don't go all in on only one platform. Why? You have platform risk, right?
Build two or three different platforms. If you're a citizen with your financial life, don't go all in on one bank or don't go all in on one type of asset, have some sort of durability to it. And so in the US, I don't think we worry so much about censorship. But in some crazy way, what is a sanction?
The United States government runs around the world sanctioning countries. And they have reasons for doing it. In some cases, I think people would agree with them. In some cases, people won't agree with them.
I'm not here to debate, should we do it, should we not? But the word sanction ends up being a marketing term. Censorship would sound a lot worse. Hey, we're a sensor of this country.
There's a comedian, and I wish I could remember who it is. I want to say it's Chris Rock has a whole segment around the Iraq and Afghanistan war. And he said, the word insurgent was the greatest creation ever. I don't know any insurgents, do you?
No, I kill them all. But if we'd said, hey, we're fighting humans, also, well, hold on a second, what do they do? Are they good people? Are they bad?
You know, there'd be questions or you would think differently about it. When you use a terminology that is somewhat clinical in nature and isn't something that's part of the everyday vernacular, you just think differently about it. And it's just human nature. And so I think that sanctions is another one that kind of falls in that of, oh, we're sanctioning these bad people, sanction them, right?
Like, we're censoring people. Well, who are you censoring? Oh, we're cutting off an entire country's access to global financial system. All of them?
We're just the bad people, right? Everyday citizen, they get caught too? Oh, maybe they don't get caught, but maybe there's negative ramifications for a lot of nuance in the world, right? And so I think that ultimately, we're moving more towards a world where anybody can use this payment system, which at first sounds a little scary to people, because that means that the bad people will use it too.
But who's the good person? Who's the bad person? Well, who gets to decide? And I don't think anyone wants to encourage terrorist financing, money laundering, criminal behavior or any of that stuff.
But the one benefit that this payment system has on top of sovereignty and censorship resistant is that it's done on a public ledger. It would be like criminals basically saying, hey, you know what we're going to do? We're going to go and we're going to do crimes. And then we're going to literally write down every transaction we have and we're going to put it on a website on the internet.
And anyone can come look at it. What are criminals? I don't want to do that, right? I actually want to use that bag of cash that no one knows about and I'm going to use physical dollars to facilitate this.
Are there stats around how much sort of nefarious stuff is going on with Bitcoin versus US dollar? So the stats that I know off top of my head is over two trillion dollars of fiat currency are just money laundering every year or use for illicit purposes, which is about the size of the entire crypto industry, not just Bitcoin, but the entire crypto industry, right? So it's a very big number. Some of that is simple things like terrorist financing and then you're literally bringing a bag of cash or whatever.
But a lot of it also is major banks who end up being caught up in money laundering situations, etc. And I'm always careful. I think it's very easy to kind of point your finger at banks and say, you know, these are all bad people, whatever. I tend to think of it more as folks with good intentions.
They're trying to do the best that they can. Are there situations where they definitely know they're doing it? Of course. But if you had to monitor millions of transactions a day going through your bank, they do a better job than I would.
Right. So there's again, nuance there. So that's the fiat system. And then in the Bitcoin world, it's not all crypto, but Bitcoin specifically, the latest stats that I've seen is there's a report out that says 0.4%, so less than half a percent of all transactions are used for illicit or nefarious purposes.
And then there was also a former CIA director who came out and basically published a whole report. I don't remember what exact number he came up with, but it's pretty much in line, you know, definitely less than 1%. And so if you talk to law enforcement, they say all the time, like if somebody commits a crime, we want their fingers on a keyboard. Why?
There's a digital trail. It's much easier to track them. It's much easier to figure this stuff out. And so I think what we've seen is just criminals in the early days of 2009, 10, 11, 12, even May 13, 14.
Oh, there's a pseudonymous currency that no one knows about. Like I'm gonna go do all this crazy stuff with it. Well, now that we're in 2021, people are like, Oh, wait a minute, I just used this public, you know, ledger that probably wasn't the smartest idea. But I think that it's important, actually, that the criminals and bad actors adopted it first, because that is the adoption cycle that every great technology takes, whether it's mobile phones, beepers, the internet, etc.
There's a constant cat and mouse game between law enforcement and bad actors. And so what are bad actors constantly doing? They're looking for new, innovative ways to use technology to get away from or obscure law enforcement from catching them. And so criminals are actually usually the first adopters of new technology, which, again, doesn't make people feel good.
But if you go back and you look, it's a historical pattern. And so the fact that they were first, and then we got kind of the first adopters from a technology standpoint, and then we started to get some more of the mainstream. And now it's estimated that more than 100 million people globally use this stuff. It's kind of like, is that high already?
Oh, yeah, I mean, Coinbase alone, I think they report now that they've got, remember the number correctly, it's like 58 million registered users, just one company and they're not even the biggest exchange, right? In the month of July, 1.2 million new users came onto the Bitcoin blockchain. So not Coinbase, not any exchange or wallet, actual blockchain itself, you can see on chain new entities. And 1.2 million new entities came online, which is the fastest it's ever grown in a single month.
And so what you have is you have a fixed supply asset that now you've got the most number of entities ever joining in a month. Of course, the price goes up, right? The fixed supply asset demand goes up unless you think that supply domain economics are invalidated. The price has to move to accommodate everyone.
And so it's just a fascinating asset that I think ultimately, those that embrace it early will end up benefiting from. And a lot of times, as I kind of go down this path, talk about the criminal behavior and in general public ledger, you talk about the adoption, people get uneasy. They don't like change, right? Humans hate change.
But just like the internet, right? Imagine if we had sat here in the United States and we had said, this internet thing is kind of crazy. It's a decentralized, open thing. Anyone that has an internet connection can kind of join and participate and get emotionally and do all this stuff.
You know what? I don't think the US should participate. You know why? China.
China is going to benefit and North Korea is going to use the internet too. And Iran, those bad people are going to use the internet as well. So the US, we're going to set this one out. Well, people didn't do that.
North Korea did that. North Korea would suck to live it, right? It's just they cut their people off from a very important technology. And so when you think about that from an open payment system, right, the idea of an open payment system is so foreign to us because this isn't that we live in, but anyone in the world can plug into this open system and send value to anyone else without asking permission.
If we sit here and we say, you know what? We shouldn't participate because there's some other country, some other organization that's going to also benefit from it. We're going to actually get likely to be the ones that get hurt the most by the decisions. Instead, we should do what we do with the internet.
Internet's going to be a thing. The United States is going to be the leader in the internet. We're going to benefit more than anybody else. We're going to use this new technology to our benefit.
First, what would that look like? I think the easiest thing to start with is to use the payment rails. So Bitcoin has an asset. When people hear Bitcoin, there's a lot of confusion because the asset, the thing that you hold the one of the 21 million units, think of that as like a dollar bill in terms of its unit of currency.
Bitcoin, the network, is the payment rails itself. So more of like a visa. So I send dollars across visas network, right, in the legacy system. Here, what I do is I send Bitcoin across the Bitcoin network.
So it's a little confusing. The crypto community has never claimed to be great marketers, but great technologists. And so Bitcoin, the network, ends up allowing anyone to use it. So I'll give you a perfect example.
I invested in a company called Strike, and what Strike allows you to do is send any currency to anyone else in the world completely for free, instantaneously, and they do it without going through any banks. Now, that sounds like a utopia, right? How, how, how do you do that? What it allows you to do is let's say that I have dollars in my bank, or my account, and you want euros, you live in Europe.
I send $20 to you, and my $20 ends up arriving to you, a $20 equivalent in euros, but have an instantaneously and nearly for free. How? What they're actually doing is they're taking the dollars, they're converting it to Bitcoin, they're sending the Bitcoin across the lightning network, and then they convert it back into euros. Now, the reason why that's so fascinating is if I now can send any currency, whether it's dollars, euros, Bitcoin, name your currency, across rails that allow for instantaneous settlement and near zero, if not zero, fees, all of a sudden, I don't have to send large amounts.
Your bank wouldn't let you take $20 out of the bank, right? Or $19 because you needed $20. Well, I can't go wire somebody $5, right? If I was the bank, I said, I want to send a wire to Tom and Europe for $5.
I said, well, the minimum is whatever, you got to pay $25, $30 fee, all the stuff. Okay. If I went to Venmo, you, but you're not on Venmo, Venmo doesn't communicate with Revolut, or SoFi, or cash app, or name your payment system. It's a closed network.
So now what ends up happening is strike can say, Hey, anyone with an account can send money to anyone else plug into the system. Tom has Tom's lightning app, right? And you start signing up users, people from strike can send money to people on Tom's lightning app. Why?
Because it's an open payment system, it's an open standard. And so now all of a sudden, you can also not only send to anyone through that censorship resistance component, but you also don't have to send large amounts. So now what I can do is I can send you a penny, I can send 10 cents, send you five cents, I can do a dollar instantaneously and completely for free. And so when I do that, it unlocks all kinds of new use cases for payments on the internet, right?
What if I don't want to buy the easiest example is these like media subscriptions, I don't want to spend 30 bucks a month for a media subscription, but I really want to read this one article. I'll pay 10 cents for it. And what if I can just simply do that automatically, rather than have a $30 thing, they actually probably will make more money doing that than forcing people into the description. This is where the more you're in the NFT world, you begin to realize like the ultimate fantasy for anybody selling anything is to have you just connect your wallet.
And then it's especially if you still in your own mind sort of denominate dollars, it's like, oh, yeah, I've got these, you know, Ethereum coins, whatever they are. And I can click this and it's only point, oh, for, you know, whatever, it's like, oh, that doesn't sound so bad. And you just you end up buying way more than you would. It is so effortless.
The wanting to having is like so quick. And so to your point, the number of times I've gone to read an article and I'm like, you've got to be kidding. Like even the thought of having to open an account and put in my credit card, no way. So even if I could get that article for 10 cents, knowing the sort of traditional hoops I'd have to go through, I'm not typing my name or any of that bullshit.
But now with the MetaMask wallet, you go literally it prompts you connect, you hit connect and then it's like, you want to buy this yes, two clicks and now you're reading the article for 10 cents. I mean, that I never thought of that, but that would be it will increase spending 10 fold, 20 fold because we agreed that we were going to do this. I think it was going to be more of a conversation, but I'm going to pull you down the rabbit hole because I can tell you're intellectually interested in this stuff. I'll give you another use case that I think will have a profound economic impact globally.
Historically, an employee gets paid every two weeks in the four largest banks. This data comes from I think 2019. They made $8 billion in overdraft fees. So an overdraft means that they tried to debit your account and you didn't have any money in there.
So the four largest banks made $8 billion from people that didn't have any money. There's all kinds of ethical questions and whatever. Part of the problem is when you start to unlock this and look into it is the folks at a bridge and other company invested in, they did a whole deep dive. Why are these people?
Why don't they have money? What is it? It's usually not because they don't have money. It's because they get paid every two weeks.
So I get paid on the first and the 15th. On the 10th, I went grocery shopping. My car payments on the 11th. My Netflix sits on the 12th.
Oh, I made a purchase on the 13th overdraft. If you have no real time updates, by the way, so you don't even know where your account is, you think you're fine, like trying to track all the mental math or write it down, get out of here. So when I get paid on the 15th, what do I do? I pay for the things I need.
And then I just have budgeted in an overdraft fee. And my $35 overdraft fee every month adds up. And so does all the other millions of Americans and ends up being $8 billion in top four companies. Now, why can't we pay people at the end of every day?
Why when you leave work today? Don't you get paid? Why does it only once, you know, or twice a month? What's a technology problem, right?
And sure, there are economic reasons why the company must hold money rather than give it to you and they aren't interested or whatever, right? But it's mainly a technology problem because there's two components. One is how do I actually pay you every day? Am I on a wire man or payroll every day?
Like, that's pretty crazy. Right? That seems inefficient. And two, how do I keep track of it?
How do I do the accounting around? Well, did Tom get paid? Did he actually get it? Okay, got it?
Okay, got it. Who didn't get paid today? Who didn't come into work? Okay, we don't pay them on whatever.
So when you bring the cost of sending small amounts of money to zero, and you do it in a frictionless censorship resistant way, you get what you call streaming payments. So kind of the most economic prosperity is now I can pay everyone my employees at the end of every day. Well, if I do that, how much better financial position are they going to be in just that alone would drastically lift millions of people around the world into a better financial position, just pay people at the end of every day. And there's companies that are working on this, some of them are using crypto reals and trying to do other stuff, whatever.
But that, when you drop the technology cost of zero to send money is life changing. This is why I want people to understand what's going on in cryptocurrency, what's going on in the blockchain in general. It is a technology. Money happens to be one of the things riding on the back of the technology.