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At

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lives. As the gateway to the

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future for every student, literacy

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change the path of students' lives

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forever. We believe literacy

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can and should be for all.

0:50

That's why Alexia, we're all for

0:53

literacy. I

0:54

think there's three things you need to do here:

0:56

Income, income, pays your bills,

0:59

Income can pay your mortgage. Income does

1:01

everything. Without income, you

1:03

got nothing. Optionality. You need to

1:05

have things that can pay off a startup

1:08

or a hobby business on the side. That will

1:10

never happen if you work for corporation, focus

1:12

on your income, work hard, Look

1:14

for other opportunities that can leverage

1:16

that. And then thirdly, if I've got

1:18

this income, look for investment opportunities that

1:20

can change my life. The financial system's

1:22

not as bad as it was, so they're not the bad

1:25

guys this time around. They got told off.

1:27

They got said, nope. Don't borrow as much

1:29

money.

1:30

The individuals

1:31

have not been great,

1:33

but not terrible.

1:35

The government borrowed a lot more. and

1:39

corporations borrowed lot more. So

1:41

to put it in perspective, the

1:43

US

1:45

is about twenty five percent

1:47

of the global economy.

1:50

Yet they have a hundred percent

1:52

equivalent of global GDP

1:54

and debt.

1:55

So

1:57

this is the most indebted

1:59

economy

1:59

in

2:01

the history of world economics

2:04

in

2:04

terms of

2:06

global debt because it's so big.

2:08

Now, the US is not the only one here.

2:11

Europe's got massive debts. Japan's

2:13

got massive debts. So lots

2:15

and China's got big Everyone's

2:17

got debts because we borrow

2:20

for our future selves. you

2:23

know, why why

2:25

get

2:25

enough tax income for the road system I

2:27

need to build? Why not just issue more bonds

2:29

and build it now? Because The

2:32

bet is I'll create more productivity in

2:34

the future and then GDP grows and

2:36

it's easiest to pay off. And that generally works

2:38

okay. like the bet that you took is,

2:40

will my income be able to cover this

2:42

debt in future? In most

2:44

circumstances, it is. But

2:47

what happens is when your debt becomes

2:50

so large

2:53

and something happens to your income, Then

2:56

you start to say, well, can I pay this debt? So

2:58

we talked about that part. The

3:01

other part is Well,

3:03

everything's backed by collateral as you

3:05

mentioned before. That's the thing that you pledge

3:08

when you take out debt. Now

3:10

if collateral falls too much

3:12

in value, somebody touched on

3:14

the shoulder and says, that stuff

3:16

you gave us in exchange for the money

3:19

doesn't cover the money anymore. And

3:22

then you get this liquidation that we talked about.

3:25

This can't happen. on

3:28

a economic level.

3:30

It can happen to you and I. It can happen to us

3:32

in our crypto accounts. It can happen to us in our financial

3:34

accounts, but we can't let it happen systemically.

3:37

because then everything goes. So we came very

3:40

close to the edge in

3:42

the US and Europe in two thousand

3:44

and eight. so much

3:46

so that the banking system seized up entirely

3:48

because the collateral, the house prices

3:51

went

3:51

down. And then

3:53

the banks were out of shit. We don't have enough money

3:55

against all of this and then people weren't paying because

3:57

we're going to recession. That big

3:59

doom lube

3:59

happens. In

4:01

Europe, it came, we got that,

4:03

but then it was another one in Europe, which was

4:05

the EU crisis. This time,

4:07

it wasn't the banks that were in trouble. It was

4:09

the governments. Italy, Spain,

4:12

France, Portugal, Greece

4:15

couldn't pay their debts. And

4:17

then that was the really holy

4:20

shit moment, is

4:22

if whole countries that are part

4:24

of Europe, these are big massive nations,

4:27

can't pay their debts, then we're all fucked. because

4:29

then that's the whole banking system gone. That's the

4:31

whole system of government gone. That's everything gone.

4:34

So they backstop the system by saying

4:36

we'll do whatever it takes. This is

4:38

Mario Draghi's favorite famous term.

4:40

So the basically, the EU got

4:42

together. and said we will buy these

4:44

bonds

4:45

to stop them falling

4:48

to price in bankruptcy because

4:50

against

4:51

government bonds, as we talked about, it's the risk

4:53

free rate. Well, if it's not risk

4:55

free, then all of the other debt

4:57

that's borrowed on top of it would have blown up too.

5:00

So how did they how did they buy that? Were

5:02

they printing more euros? Correct.

5:05

Correct. That's been the answer since two thousand

5:07

and eight. is to print currency

5:09

to buy bonds, which is known as

5:11

currency debasement. And there's

5:13

many purists in the financial markets

5:15

that doesn't work that way. The mechanism but

5:17

it's very clear that this is

5:19

basically monetary debasement. What

5:21

monetary debasement means for anybody doesn't

5:23

understand is is Let's

5:26

say your thirsty, Tom, I sell

5:28

your bottle of water. You wanna

5:30

buy it because you're thirsty so I can

5:32

charge you five dollars for it. Then

5:35

let's say, I say, well,

5:38

you can't buy one bottle of water. No,

5:40

there's only one bottle of water around. If I say,

5:42

look, I've got twenty bottles of water. Well,

5:44

it's it's not that panicky to get that one bottle.

5:47

So it might clear it three dollars

5:49

for that bottle of water. Now if I've

5:51

got a million bottles of water,

5:54

water is worthless. Right?

5:56

So the more you create of something, the

5:58

less value it has. So

6:00

if there's one Picasso, it's worth a fortune.

6:02

If Picasso

6:05

had made five

6:07

thousand of exactly the same painting. They're

6:09

worth less. So we see that with,

6:11

for example, one on one of warhol

6:13

versus wall holes factory

6:15

where he produced very similar pieces. They're

6:17

they're worth less than the others. We see it in the NFT

6:19

world as well. So scarcity versus

6:21

abundance. So What you

6:23

do when you print more money

6:25

means there's more money around. So it

6:27

lowers the value of the money. So

6:29

that's that's debasing currency.

6:32

So this is why they

6:34

can't let the system go bust because

6:36

now there's so much leverage. that

6:40

everything goes. And we saw this in

6:42

Argentina. The AIMA moment

6:44

in Argentina in two thousand one, I believe

6:46

it was. called El Corollito,

6:49

where the Argentinians couldn't

6:52

pay their bills. The

6:53

government So what

6:55

they did is they had this jewel economy, the Argentinian

6:58

peso, and a dollar based

7:00

peso. They just took all the

7:02

dollars and the bank accounts and convert them into

7:04

pesos. So they

7:06

got the dollars themselves to pay their debts,

7:08

but basically utterly

7:10

destroyed the peso and

7:13

destroyed the economy. So much so that Argentina

7:17

reverted to Barter. It

7:19

was an extraordinary moment in time.

7:23

So that's the risk. The

7:25

other time we saw something similar

7:27

in a more developed country with Cyprus, Cyprus

7:29

is a European country. Now

7:31

Cyprus, they

7:34

had a financial crisis.

7:36

There was too much debt. It was based

7:38

around property. And

7:40

so what happens is the banks were insolvent.

7:42

like they were in the US and like they were in Europe.

7:46

But the answer was the

7:48

ECB said we're not bailing you out.

7:50

So what they did is

7:53

took any deposit out of the banking

7:55

system over a hundred thousand euros

7:57

and

7:57

took it.

8:00

So it

8:00

wasn't your money.

8:03

Which

8:03

is this is what got me into crypto in the first place.

8:05

Once I realized it's not your

8:07

money, Even

8:08

if it's in a bank, it's not your

8:10

money. So these are

8:12

the

8:12

these are the laws of unintended

8:15

consequences that happen if you allow

8:17

the collateral to go under, if we were less

8:19

levered, like

8:19

in India, the

8:21

country's very unlevered. It's like,

8:23

call

8:24

it sixty percent of GDP and

8:26

debt, in

8:27

a fast growing economy, growing ten percent a

8:29

year. Right? That's that's

8:31

like you taking the mortgage out

8:34

and the mortgage isn't that big and you've got

8:36

great income. Right? The probability of you not

8:38

being able to pay that debt is very low.

8:40

So it doesn't matter if Indian

8:43

assets fall aloft and stuff like that

8:45

because there's no nothing systemic there. You're not gonna

8:47

destroy the population.

8:49

But when it's the US or Europe,

8:51

you can't allow it. You just simply can't.

8:54

Because also, part of this is you

8:56

got this huge old population of

8:58

retired people or people trying to retire.

9:00

If you allow the markets

9:03

to clear,

9:05

Then their savings pool disappears.

9:08

Now, it's alright for you and I. We've all gone

9:10

through parts of our career where we've lost a bunch

9:12

of money and we make it back. You know, you've

9:14

started creating a startup, doesn't work,

9:16

you work hard, but you can't do that when you're

9:18

seventy five years old. What's lost

9:20

is lost? And then you

9:22

have

9:22

to have your income or your

9:25

spending because you've just lost half your pool of money and

9:27

you don't know how long you're gonna live for. So

9:29

this is why there's so much complexity with old

9:31

populations, lots of deaths.

9:33

You just can't allow the system to

9:35

go under. Wow.

9:37

Yeah. That's a that

9:39

is really interesting

9:42

and unnerving at the same time

9:44

the interconnectedness of all of this

9:46

And then, of course, it begs the question, what

9:48

is India doing that we're

9:50

not doing? Is it just discipline? Is

9:52

it lack of opportunity? Like, how

9:55

are they at sixty percent were at three to

9:57

four? Because their banking system didn't

9:59

really function and they were more restrictive on

10:01

their lending policies.

10:03

which is a function of their economy

10:05

being more emerging

10:07

than developed. So people

10:09

don't want to lend them as much either because

10:12

they're more risky or like start up even though India is

10:14

obviously a very old thing, but, you

10:16

know, in in these terms. And

10:18

so and they ran a bit more

10:20

inflation than other countries.

10:23

So it's

10:24

really that and they have a culture of savings.

10:26

It's because when you're able

10:29

to borrow, because you're the richest dude in the

10:31

street when's the most money, which is the United

10:33

States. And humans

10:35

have a propensity to borrow

10:38

to create the image of this future self. The

10:40

future self was the

10:42

amazing United States of America, that

10:44

dream that we had in the fifties. That

10:47

dream died decades ago.

10:50

And to fund that

10:52

dream, the mismatch between the

10:54

dream and the reality is dead.

10:56

Sometimes debt is not all bad. Right?

10:58

Sometimes it can help accelerate some

11:00

of the things. But

11:02

if you're doing it to fund a dream

11:04

that's never gonna exist, That's the

11:07

danger. Alright. Let's

11:09

go back then to the so

11:12

what define the American dream

11:14

and

11:14

what killed it?

11:16

The

11:18

American dream that came

11:21

out in the fifties was about

11:23

the wonder

11:25

the of

11:25

economic growth, technology,

11:28

peace time,

11:30

and

11:32

abundant and opportunity for everybody.

11:34

Everybody could be the president, everybody could be

11:36

rich. That mentality is

11:39

terrifying. because it creates a

11:41

misalignment of present self and future

11:43

self. So everybody feels

11:45

like they

11:46

never got there. Yeah.

11:48

This is the whole book Fair and Loading in Las Vegas

11:51

by Hunterus Thompson was basically this.

11:53

Is that what Vegas is about?

11:55

We don't have gambling in the

11:57

same way in Europe. You can go

11:59

and gamble. It's just not a big deal. But

12:01

in America, it is about this future

12:04

expectation of yourself, I think driven by the American

12:06

dream. And obviously, a frontier style

12:08

economy in how the US, you

12:10

know, gave birth to itself

12:12

So the American dream was set

12:14

up and the

12:15

whole construct was

12:16

set

12:17

around it.

12:19

And then two bad

12:21

things happen. One bad

12:23

thing number one is everyone goes,

12:26

this is fucking amazing. I

12:28

have kids.

12:29

Right? Prosperity,

12:31

great time. So all

12:32

of the people have gone through

12:35

the war or maybe two wars

12:37

had kids. Those kids were the baby

12:39

boomers, and they had too many

12:41

kids. They had

12:43

too many kids. in in what way

12:45

for the planet? because

12:48

for

12:48

the children themselves.

12:52

So what happens is is

12:55

if two of us go for a job

12:57

interview, we have a fifty fifty

12:59

chance. If a thousand of you do,

13:01

you have a one in a thousand chance.

13:04

So what happens is if too

13:06

many people come into the workforce at the same time,

13:08

they compete with each other for

13:11

wages. And

13:12

if you look back at inflation adjust wages

13:15

for the

13:16

average median American or the average American,

13:18

particularly the median American, over

13:21

the last

13:21

forty five years. It's not

13:24

gone up at all.

13:26

So there's

13:26

been no productivity growth. The

13:29

miracle never happened. in

13:31

the meantime, the price of

13:34

assets went up. Why? because there's a whole bunch

13:36

of people at the same age who all want to

13:38

buy a house at the same time, all want to buy

13:40

into the stock market at the same time to stay for the

13:42

retirement, they pushed up prices.

13:46

So they got poorer because they couldn't

13:48

they didn't own it all. And so the

13:50

more they tried to buy over time, the more it went

13:52

up, and they got this massive

13:54

gap. And that gap between

13:56

their earnings and the costs of

13:59

of assets that you secure your

14:01

future income in kept going up

14:03

so they borrow money. And

14:05

when you when you basically adjust

14:07

by asset prices like house prices

14:09

versus wages, the

14:11

differences, the debt.

14:14

And then the government started doing the

14:16

same. So it was all driven by the baby

14:18

boomers, but the baby boomers had a second

14:20

shock and a third

14:22

shock. Second shock

14:24

came really in

14:26

the

14:26

late mid eighties, which was

14:28

computers. Computers

14:31

started competing for jobs with people.

14:34

slowly at first and

14:36

then

14:36

faster. And then

14:40

nineteen ninety six, the w nineteen ninety

14:42

nine two thousand. Well,

14:44

nineteen ninety six is w trade the World

14:46

Trade Organization, WT0

14:49

Agreed that what a great idea let's

14:51

all trade without tariffs with

14:53

each other. Free markets.

14:56

Yeah. Well, the free market

14:58

actually meant that when China

15:00

entered the

15:00

global workforce, they

15:02

would work for a fraction of what you and I would work

15:05

for. And so that

15:07

meant, labor costs never went

15:09

up. And the cost of goods got

15:11

cheaper because China can produce

15:13

them cheaply. So we're just gorghed on this

15:15

stuff because this cheap goods, we borrowed

15:17

more money, because we had this

15:19

future expectation of ourselves being

15:21

rich, the American dream and we gorge a little

15:23

more money and we borrow

15:25

money to see if we can make money from

15:27

asset prices. So this

15:29

whole thing was driven by demographics

15:31

and that came out of World War

15:33

two. So it's World War two that drove

15:35

all of the mess we're in now and that's the same

15:37

globally.

15:37

Was there a

15:39

baby boom all around the

15:41

world?

15:43

No. The US

15:44

yes. Sorry. There was a baby boom

15:47

everywhere. The difference

15:49

was Europeans didn't

15:51

have a second

15:53

baby boom, which is the millennials. The

15:57

US has the millennials, and that's

15:59

helped the US economy outperform

16:01

Europe over time. Japan didn't

16:03

have millennials

16:05

either. So they're all

16:07

older populations. The U. S. had the

16:09

millennial population. So the millennial

16:11

population it pops up into the

16:13

workforce. You know, the millennials, you

16:15

know, about four years ago started hitting

16:17

thirty years old. That that big thing. This is

16:19

a big bunch of people. problem is they

16:21

look into the world their parents are still in the workforce,

16:23

so they need to compete with jobs with their

16:25

parents. There's a whole bunch of them competing with

16:27

each other. They will try and to

16:29

university to see if they can get a better job, so they

16:31

drive up the cost of university. But

16:33

then come out of university, they try and buy

16:35

a house they drive up the cost of how I mean, it's

16:37

just a mess. When you have

16:39

these bulges of population, you

16:41

create all these distortions. So

16:43

these millennial population were

16:45

pretty screwed because

16:47

their parents have driven up the

16:49

price of assets so high. trying

16:51

to save enough to retire, which

16:54

has never really happened. But

16:56

they look they come out and say, I'm earning money now.

16:58

What do I buy? oh, the equity market at all

17:00

time high valuations, the bond market at all

17:02

time low yields, property prices

17:04

are too high to afford, and

17:06

fact, Again, all of these are why I

17:08

got to crypto because I knew that

17:10

I had a different expected future return because

17:12

their parents hadn't known this stuff. And

17:15

therefore, they themselves could help

17:17

drive the price up and the adoption as

17:19

long as they bought it and owned it.

17:23

Okay.

17:23

So demographics are destiny. That that's something

17:25

that you're here said a lot, which is

17:29

terrifying, I suppose. I don't like

17:31

anything to be destiny. I

17:33

the idea of the American dream, so going back to

17:35

what you were saying about Vegas,

17:38

that is a fascinating

17:40

take. So what

17:42

may have somewhat distorted

17:44

my view of all of this is that the

17:46

American dream worked for me perfectly.

17:49

Right. I I'm a Gen XR, but

17:51

I And why is everybody watching

17:53

your show? because they

17:54

wanted to work for them?

17:58

yeah Yeah.

17:59

So

17:59

here's here's where we get into

18:02

something really weird.

18:04

So what you and I were talking about last time is, hey, I see

18:06

this opportunity in Crypto, which by the

18:08

way, my thesis is still intact in terms

18:10

of that, and so I hope that people aren't

18:13

panicking. that they didn't

18:15

take leverage, that they were slow

18:17

and steady wins the race. I

18:19

haven't sold a single satoshi

18:23

to give me a sense of where my

18:25

head is at.

18:26

But, Raul,

18:29

the reason that things worked out

18:31

for me is really twofold.

18:33

One, I have an obscene

18:35

work ethic that makes

18:37

even myself sometimes uncomfortable

18:41

There's a a Jordan Peterson quote that I think

18:43

is really insightful, which is don't

18:45

ask why there aren't more women running Fortune

18:47

five hundred companies. Ask why there

18:49

are any men at all. And

18:51

what he meant by that is it is so

18:54

grueling that why does anybody

18:56

do it? And since I got

18:58

into tease. I've been

19:00

working for the last eight months at this point,

19:02

maybe nine. I've been working a hundred and

19:04

twenty hour weeks. And and

19:07

Even I'm like, what am I doing? Like, this is

19:09

crazy. So that's number one. My work ethic

19:11

is insane. Number two,

19:13

I believed it could happen.

19:16

Now, you put those two together. It

19:18

does not necessarily equal a good

19:20

outcome. I am hyper aware of the role

19:22

luck has played in my

19:24

life, but If you take either one

19:26

of those away, it is a guaranteed

19:28

failure. So if you don't

19:30

work hard, you are fucked.

19:32

If you don't believe you can achieve, you

19:34

won't do the things you need to do to be

19:36

successful. Because why would you? It doesn't make

19:38

sense if you don't think it's going to work

19:41

out. And so while

19:43

there can be no guarantee of success,

19:47

one thing I am really trying to get

19:49

people to do is believe

19:51

that it it can happen.

19:53

Now, I will define it differently

19:55

as in if you can make something

19:57

that people want more than they want their

19:59

money, then you can be successful.

20:02

So let's talk

20:03

about it in financial term,

20:05

financial market terms or macro terms.

20:08

I

20:08

think there's three things you need to do here.

20:11

One,

20:11

income. Income

20:13

rules

20:13

the world. Income pays your

20:16

bills,

20:16

your bills

20:18

income can pay your mortgage, income does

20:20

everything. Without income,

20:22

you got nothing. Income takes

20:25

hard work. It's hard to get up

20:27

the ladder and more income.

20:30

Secondly, is you need to have

20:32

optionality. You need

20:34

to have things that can pay off.

20:37

A

20:37

startup or a

20:38

hobby business on the side can

20:40

give you optionality.

20:42

because you can build a business and a

20:44

business has intrinsic value plus

20:47

it can increase your income. That

20:49

will never happen if you work for

20:51

a corporation yes, you can have a great career

20:53

and do fine. But you'll never

20:55

have that extra upside

20:57

that you and I have had by building

20:59

businesses. So that is another

21:01

thing is is focus

21:03

on your income, work hard,

21:05

look for other

21:06

opportunities that can leverage that

21:09

income and opportunity set that you've got

21:11

for you. And

21:13

then

21:13

thirdly, is if I've got

21:16

this income, look

21:17

for investment opportunities that can change my life.

21:19

And that doesn't mean being a degenerate

21:22

gambler. It's like

21:24

simply put, if there is a thesis, for example,

21:26

in cryptocurrency that you and I shared that this is

21:28

a long term network adoption

21:31

of this incredible technology that

21:33

is exponential in nature and

21:35

highly volatile, you

21:37

should be

21:38

looking at the moments of stream

21:41

weakness, the blood on the streets

21:43

moment, to be buying more,

21:45

not on leverage, but just putting

21:47

your money into

21:48

it. So if you'd have bought a house

21:50

after the two thousand and eight

21:52

crisis, you'd

21:52

have done very well. If

21:54

it had bought it at the

21:56

you'll have done less well. Right? So

21:57

timing matters.

21:59

And I looked at this to give you a

22:02

specific example. Just wrote in a whole article about

22:04

this, is I went back

22:06

a bit of honesty thinking,

22:09

I'm looking at my Eith price and I'm going,

22:11

why didn't I sell it three thousand?

22:13

I should have just, you know, I could have bought it

22:15

back cheaper. And I

22:16

know that that is a siren

22:19

song that goes

22:19

in your head. Right? Mental torture.

22:22

And been in a space since two thousand

22:25

thirteen, so I went back and looked

22:27

at my entries and exits and what

22:29

I did in the past. And what had happened

22:31

if I'd just bought and hold? And what had

22:33

happened if I bought and hold and

22:36

added when it was this far

22:38

oversold? It's very simple. I

22:40

figured out that if I'd

22:42

I so what I did

22:44

is I bought in two thousand and thirteen.

22:47

two hundred dollars per Bitcoin.

22:49

It went up to Well,

22:52

it it went up to a

22:54

thousand

22:55

Sorry. It went

22:57

up to a thousand

22:59

in

23:02

in

23:02

six weeks. I was

23:04

like, oh my gosh. But I had a long

23:06

term thesis. I wrote the first kind of macro

23:08

strategy paper about the valuation of Bitcoin. I

23:10

thought this could be worth a million dollars

23:13

And let's assume I'm an idiot by ninety

23:15

percent. It's still worth a hundred grand. So this is the best bet

23:17

I've ever seen. So

23:19

I held on and then

23:21

it fell eighty two percent. And I'm

23:23

like, wow. But I'd

23:24

taken the

23:25

bet and I put money in

23:27

was not levered and I could afford to

23:29

take the bet. So I just thought I'm just

23:31

gonna forget about this and just see because

23:33

this is a longer term thing and you

23:35

don't normally make money that fast and

23:37

doesn't normally fall this fast. Let's

23:40

just see. And then I kind of forgot about

23:42

it, two thousand fourteen, and then two

23:44

thousand fifteen starts going up again.

23:46

And then by two thousand seventeen, I'm

23:49

now mentally scarred from an eighty two percent drop,

23:51

coulda woulda shoulda. I

23:54

then see

23:54

confusion in the market about either

23:57

we gotta fork. Bitcoin is two different chains.

23:59

The price is two thousand. I'm

24:01

now at tenfold. I'm a

24:03

genius. My macro bet

24:05

has paid off sort

24:07

of. I sell

24:08

out. It goes up to twenty thousand

24:11

in three months later, and I go,

24:14

mind. I don't mind

24:14

because I've made tons of money. What I

24:16

did was deviate from my

24:19

thesis. My thesis was this was a

24:21

ten year bet. And

24:24

I took the money off the table within

24:26

five. And then I went

24:28

back and then I obviously had bought

24:30

back in June, May, something

24:32

like that, twenty twenty,

24:34

and had a good run and put more money into

24:36

it than I than I had originally in my

24:39

original bet. and I worked out

24:41

that I

24:42

had,

24:44

as opposed to just holding my

24:46

original

24:47

bet. I

24:49

used a theoretical number. So I

24:51

think it was if you put ten

24:53

grand into that first bet,

24:55

it would have been worth one

24:57

point four million. Wow. By doing

24:59

the

24:59

right thing, buying reasonably

25:01

low and selling reasonably high and,

25:03

you know, timing the market,

25:06

That was a

25:08

small fraction.

25:10

It was

25:11

in fact I

25:14

think I make twenty percent of what I would have meant

25:16

if I held

25:17

on. And then I

25:20

went back and looked at, okay. Well, what did

25:22

I actually do? Because I

25:24

massively increased my position in

25:26

in in

25:28

June. I

25:28

still underperformed by five

25:31

x. And then I'm like,

25:33

okay. What happens if I'd done the right thing? What

25:35

I should have done, which was my framework,

25:37

which was you buy it when people when it's on sale, when there's

25:39

blood in the streets. So I went back and

25:41

looked at the the the bottoms of the bear market.

25:43

It's assumed I'm an idiot and I can't catch the bottom

25:45

of bear market and miss it by thirty percent

25:47

and just put the

25:50

same amount in each time that I

25:52

started with. That

25:54

one point four million would've

25:56

been thirty. Wow. I'm

25:57

sorry. Not thirty. Sorry. Three. And

25:59

he

25:59

said Oh, lord.

26:02

Had I rolled my profits

26:04

in you know, how do just

26:07

double down

26:07

each time or whatever, the

26:09

numbers go exponentially larger?

26:12

And that really stopped

26:14

me in my tracks. It's like,

26:16

here's me doing the right

26:19

thing, you know,

26:20

buying when it's

26:20

in a bull market. I'm selling when

26:22

it's in a too stronger bull market, buying when

26:25

it's down a bit, and I still

26:27

didn't do as well. It's just holding

26:29

it. And

26:30

if I just

26:31

added to it, I would have done well. And

26:33

my framework is this is a long

26:35

term trend. Right? We've got at least

26:37

another decade in this. at

26:40

least probably

26:41

two or three decades.

26:43

But this part of it is gonna

26:45

continue to do very well. Sure. Bitcoin

26:47

over time as it gets more users,

26:49

more adopted, it won't go up as much

26:51

each cycle. But there'll be plenty of others

26:53

and plenty of opportunities. So

26:55

what we should be doing is using

26:58

this thinking of the money you've put

27:00

in as your retirement money

27:02

and writing it

27:04

off. And

27:05

then just adding, if

27:07

you've got money in a

27:09

bear market now, the problem is is most

27:11

of us don't in a recession.

27:14

But a friend of mine taught me very early on. He said,

27:16

well, there's a key thing I've learned is he

27:18

who has cash in a recession is

27:21

king. So that's that combination

27:23

of income and

27:26

opportunity. You've got

27:27

income, you've got some cash, and

27:29

now everything's on fire sale

27:31

prices. You're

27:32

the king.

27:33

So what what do we learn about the

27:36

psychology through all of this? because this

27:38

really feels like a a psychology

27:40

game. It's a I'm really glad that

27:42

this has happened quickly. So for

27:44

me, I've been in Crypto for less than

27:46

two years. And I

27:49

have seen now, even

27:51

in that time, sort of multiple,

27:53

like, oh, it's all over. No. We're back.

27:55

No. It's all over. And

27:57

so watching the whiplash

27:59

of how people feel, act,

28:02

talk, even like what where

28:04

I go from feeling like I

28:07

am so smart. Like, this is

28:09

insane to, oh,

28:11

like, is this really gonna play out, like,

28:13

the level of doubt

28:15

where to your point, I just have to turn off my

28:18

brain. I'm like, I'm not gonna think about

28:20

it. I was perfectly when it

28:22

was up, I was like, if it

28:24

went to zero, I would be fine. So Mike, if

28:26

that's really true, then

28:28

chill, you're

28:29

fine. Like, you know, just let it

28:31

do what it's gonna do. And if you

28:33

were lucky enough like you and I to

28:35

have

28:35

bought slightly earlier in

28:37

the cycle,

28:38

then for goodness sake, Don't

28:41

look at your loss of wealth from

28:43

peak. That's stupid. That's the

28:45

American dream fixating on something

28:47

that doesn't exist.

28:49

Think,

28:49

okay, fine. I'm still I'm still in.

28:51

I'm probably still up.

28:53

Don't think, oh my

28:55

network's down fifty percent. This is the end of the

28:57

what? No. That's not how it

28:59

works. How it works is you need

29:01

to be in it to win it.

29:03

And you can't be in it to win

29:05

it if you've got leverage. or

29:07

if

29:07

you're out of the market. And

29:09

so

29:09

if if you say to me, well, you know,

29:11

that's difficult for people. Sure,

29:14

then put

29:14

less in. It's as

29:17

simple as that. You get to the point where

29:19

you can sleep at night, then you've got the right sized

29:21

bed. And once

29:24

you have made money and it's compounded,

29:26

then don't look at it from the peaks to trough. So

29:28

one of the tricks I've learned with myself in

29:30

a slightly different thing is wine.

29:34

III

29:34

love wine and

29:36

wine, good wine is expensive, but

29:38

it's a lot cheaper

29:39

if you buy it.

29:41

early when

29:41

it comes out. So I bought

29:43

and

29:44

I've just taken a delivery of stuff I bought fifteen

29:47

years ago. Now what I do is this

29:49

little mental trick, which is I

29:51

write

29:51

off everything I pay for wine.

29:53

When I buy

29:54

it, because

29:55

I don't see the one for fifteen years. So why do I care? Whoa.

29:58

And so, mentally, it's

29:59

gone

29:59

to zero.

30:02

So now able to drink wine which

30:04

I would never open because

30:06

I haven't paid for it. I come in flight.

30:08

I wrote it off. And

30:10

it's really helpful to use mental

30:12

tricks on yourself, to

30:14

stop yourself doing things

30:17

you

30:17

shouldn't be doing. which selling

30:19

at the low, buying at the high or, you

30:21

know, buying a bunch of wine and then not being able to

30:23

drink it. And you actually buy it to drink at

30:25

it, sell wine. But if I

30:27

If I

30:28

did, I would have just sold all my wine. I've never

30:30

tasted amazing wines. It's

30:32

it's these mental tricks we have to play.

30:34

interesting. You

30:35

mentioned earlier the

30:38

siren song of, you know, looking

30:40

at, like, oh my god, if I had sold at that point,

30:42

like, I would be so much farther ahead than I

30:44

am now, interesting that you

30:46

use the siren song. So for people that

30:48

don't know the mythology, there

30:50

were these sirens supposedly would

30:52

call to men, they would sing this incredible

30:54

song, and the men would want to hear it more, so they would

30:56

sail the ship closer and they would crash. And

30:58

so the sirens were intentionally trying to get

31:00

you to ruin yourself,

31:02

basically. And in

31:04

the story, the solution

31:06

isn't to develop the

31:08

willpower in order to resist the

31:10

siren song. His whole thing

31:12

was, tie me to the mast

31:14

so that I can't move all

31:16

of you block out the sound,

31:18

so that no matter what I say, you don't listen

31:20

to me, and I can enjoy the

31:22

the sound of it without being able to

31:24

take action on it. So basically, you have

31:26

to find a mental trick in order to deal with

31:29

it. Your the lashing

31:31

you to the the rail is to ride

31:33

off the line so that

31:35

you can enjoy it when you get it. And then

31:37

writing off of the investments I've got in

31:39

in in crypto.

31:40

And then I observed the sentiment. I observed

31:43

the sirens. I hear the song, but they

31:45

don't affect me. But

31:47

they they'll just do affect you, but

31:49

you you you try

31:51

not to let it affect you as much. You

31:53

distance yourself from price

31:55

action.

31:55

Because your theory is that

31:58

it's gonna go from here to a

31:59

lot further over time. That

32:02

keyword is over time, and

32:04

we've all said All of us have said,

32:06

and we know it does this a lot on the

32:08

way. So then

32:10

if you know that, it's

32:12

a no known Why the

32:14

hell when it happens? Do people

32:16

forget it? It's so funny when when

32:18

Bitcoin and Eef crashed

32:20

last year. felt fifty

32:22

or fifty five percent from the high.

32:24

I spoke to my

32:25

wife and I'm like, God everybody's freaking

32:28

out, you know, And she's like, well, happened? said,

32:30

well, it's down fifty percent. She said,

32:32

but you said

32:32

that's normal. And her exact

32:35

words, so just shut the fuck

32:37

up. you should

32:37

be buying here, not freaking

32:40

out. I'm like, yeah. Sure. You have

32:42

to

32:42

remind yourself? Yeah. Like, this

32:44

is a two part process. If you want us

32:46

So going back to answering the fundamental question that we're here to answer,

32:48

how do you thrive in a time like this? So

32:50

one, you have to have the understanding of

32:52

the market, the macro trends, all

32:55

of that to know what to buy, and then

32:57

you have to have the psychological resilience

32:59

that even though you feel it, to your point,

33:01

like, I feel that were down

33:03

and it does not feel good, but it

33:06

hasn't changed my behavior.

33:08

And so because the thesis

33:10

is still intact, Yes.

33:12

And so let's look at other opportunities. So

33:15

maybe not everyone likes crypto. Another

33:17

thing that is painfully obvious is

33:19

technology is not going away.

33:21

Now it's not easy

33:23

to pick the right technology stocks, much

33:25

like it's difficult to pick the right

33:28

NFTs or tokens unless you really know what you're

33:30

doing and or you

33:32

yeah, you know that particular company or that project.

33:36

But if the thesis is that

33:38

technology is going to continue to

33:40

have whether it's AI, EV,

33:43

whether it's robotics, whether it's genetic sciences,

33:45

all of these things that are around the

33:48

space travel Well then if

33:50

it's being sold in

33:52

a fire

33:52

sale, because

33:54

everybody's panicking,

33:56

Well, surely that makes sense because technology

33:58

has outperformed the

33:59

market for the last forty

34:01

years.

34:02

So you always wanna be buying

34:05

technology. So if you're thinking of your 401K

34:07

you're a you know, you're in your thirties, you

34:09

look at your 401K

34:11

and you've still got your income because that's the most important thing of

34:13

everything. You've got your income. You should be going

34:15

okay. You should be buying

34:18

technology stocks. and I should be buying

34:20

crypto because these are long term mega

34:22

trends. The thing about running

34:23

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Alexia, we're all

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for literacy. Now is there so

36:51

we're living in a very particular moment,

36:53

but one thing I like about RIDELLio is

36:55

this idea of this is another

36:57

one of those. Is

37:00

this like another time?

37:02

Is there something that we can learn from historical

37:04

trends that we could be applying

37:06

to our investment thesis now?

37:08

So the

37:11

investment thesis, I don't

37:14

believe so necessarily. There's

37:16

a lot of macro similarities with

37:19

past past episodes

37:21

and everybody makes it

37:23

very dramatic. There tends to be a

37:25

lot of doomporn and I've been at proponents of that as well.

37:27

You know, everything looks like the nineteen twenty nine

37:30

crash. Everything looks like we're gonna get to World

37:32

War two. everything looks like,

37:34

you know, it's two thousand and one all over

37:36

again.

37:37

Yes.

37:38

Those

37:40

things happen. But

37:41

things go

37:43

on. And

37:44

if you bought tech stocks

37:45

after two thousand and

37:48

one crash,

37:49

You'd be very, very wealthy

37:52

indeed. If you think of

37:54

Jeff Bezos, he launched

37:56

Amazon, Brian Bushy tailed, has

37:58

his IPO, It

37:59

explodes in price. It was like,

38:02

amazing online book seller. It then

38:04

falls

38:04

ninety six

38:06

percent.

38:06

Right? So

38:07

this is exactly what

38:09

I

38:09

went through in crypto, exactly the

38:12

same. And then what

38:13

happened is, well, unlike most of his

38:15

investors, he held

38:17

on. And it went up

38:19

a lot again. Still didn't make up

38:21

the high. It fell another eighty percent. It

38:23

went up again. It then

38:25

fell sixty percent And then before you know that this

38:27

online book seller was suddenly worth more than all the book selling companies in the world

38:29

added together, and it was still trading at a

38:32

price earnings ratio of like eight hundred. Everyone's

38:34

like this crazy. This is a

38:36

bubble. But what we didn't realize

38:38

is he was building a

38:40

network. This network

38:41

for e commerce and

38:43

then the computing power that

38:45

drives it.

38:46

You know? And so

38:48

over time, Amazon just

38:51

did that. And these are the things you need to

38:53

think about in this is where are

38:55

we in the volatility and is this going to

38:57

survive? Those are the two questions. And if

38:59

the long term trend is

39:01

there, then you should

39:03

be buying into

39:04

all of this. What are

39:06

the smartest people buying right

39:08

now? anything? Are they sitting in cash? Are

39:11

they moving on something? Or There is a lot for

39:13

us. There's a lot of cash. So I have my

39:15

global macro investor roundtable. which is a bunch

39:17

of my institutional research service. A bunch of

39:19

the world's most famous hedge

39:21

funds, family offices, asset

39:23

management firms. And we all have this little enclave here in the

39:26

Cayman Islands with a lot of wine and a

39:28

lot of discussion and trade ideas and stuff like

39:30

that. And

39:31

the Generally, people are a

39:33

lot in cash. The real estate

39:36

developer guys, you know, the the kind of

39:38

wealthy guys who are in real estate is their

39:40

primary thing. lot of them had sold

39:42

quite a lot.

39:45

then Then the

39:48

hedge fund guys were

39:50

very concerned

39:52

about recession, but

39:54

were

39:54

looking and so they

39:56

were buying

39:58

were buying let's call

39:58

it cash, bonds cash, anything to kind

39:59

of just not be involved in risky

40:02

assets like stocks

40:04

and stuff. But they were looking

40:06

for the opportunity for the other side, which is

40:08

what what is that opportunity? And that opportunity

40:10

was

40:11

technology technology, crypto,

40:12

it so and

40:14

commodities.

40:15

Commodities has gone up

40:16

a lot recently, but we've got this

40:19

and it's this greening

40:20

thing that's going on. Right?

40:23

We're going

40:23

to green the world. We

40:25

have the political willpower to do

40:27

it, and it's gonna

40:27

happen faster than the market can

40:30

take. And

40:31

that means we underinvest

40:33

in in

40:34

mining

40:36

stuff. And we

40:36

over invest in

40:39

battery technology

40:41

wind farm solar farms. Right? And the idea is

40:44

eventually, you accelerate

40:46

this so much that it becomes the adopted

40:48

technology and electricity becomes cheaper

40:50

from doing it. The issue is there's

40:52

not enough copper for the electricity we

40:55

need to generate. So we're about

40:57

to go into this enormous copper shortage. You

40:59

don't notice it now because the

41:01

economy's weakening. And so less

41:04

people demanding copper. But once we come through the

41:06

other side of this, you're

41:08

gonna have this huge demand for copper and

41:10

it's

41:10

the problem a problem. but it's part of that

41:11

green energy transition. Green energy

41:14

transition also is gonna require a lot of other

41:16

stuff to build these wind farms, these solar

41:18

farms, the hydrogen power, the we

41:20

go to atomic energy or whatever it is. It's a

41:22

whole change in how the world works.

41:24

It's very similar to the nineteen fifties when we kind of

41:26

rebuilt America factories and all

41:28

of that kind of stuff. So

41:30

that

41:30

moment in time means

41:31

that these guys wanted both

41:33

commodities and

41:36

technology.

41:36

because they

41:37

know this one's probably kind of a a good five or ten

41:39

year cycle and the technology cycle

41:41

is limitless right

41:44

now. So that's,

41:45

I guess, where most people were thinking. But everyone was very nervous over

41:47

this next three month period about what happens

41:49

to the economy and what could

41:51

happen to markets. So what

41:53

signals are they looking for? I'm assuming everybody

41:56

going into cash is

41:58

thinking, okay, blood is in

41:59

the streets. but I'm not yet sure which way things are going, whether

42:02

I've got the timing right. But I

42:04

imagine there are certain signals that they're

42:06

looking for. So if it's copper and we're looking

42:08

for that, transitionary moment?

42:10

Or are they buying it now? Like, what

42:12

are the what are the

42:14

signs that they will look for to go in

42:16

on something? So we

42:18

talked about

42:18

about

42:20

income plus

42:20

opportunity. So they've got the

42:22

cash. So, you know, one of

42:24

the world's best technology investors

42:27

go to. I think they're seventy percent cash

42:29

-- Whoa. -- which

42:31

is extraordinary because these

42:33

guys

42:33

are, you know,

42:36

they're aggressive technology

42:37

investors seventy percent cash. There's a whole bunch of people

42:39

who are. So what they're saying

42:41

is the future opportunity is

42:45

gonna be big and it's gonna be cheaper than

42:47

it is today. Now, will they time

42:49

it properly?

42:50

Well, etcetera,

42:53

doesn't

42:53

really matter, but here's what the smartest people are saying

42:55

is the future opportunities better than

42:57

the present opportunity. So that's

42:59

a little scary though because that means prices are gonna

43:02

go down further. Well, we don't

43:04

know when they had

43:04

that bet. They might have done that four months

43:07

ago. In

43:07

which case, it's been a very good bet and

43:09

they'd be looking to deploy

43:12

if I read their investor letter, they say, they're

43:14

now starting to look to deploy

43:17

stuff into interesting opportunities where

43:19

things are really cheap. which

43:21

is the thing I said before. When the market throws out

43:24

the baby with the

43:26

bathwater, that's when

43:26

you start finding the things

43:29

you really like. In crypto world, things like Salana,

43:31

great project, down

43:32

eighty five percent. There's a

43:34

whole bunch of these big

43:37

layer ones with network

43:39

adoption effects already, that these are

43:41

not super speculative assets. They're obviously

43:44

speculative risky, but not

43:46

super risky. They're all down eighty, eighty eighty

43:48

seven percent. Okay.

43:49

That becomes

43:50

interesting. What is what

43:53

is it it? that makes Bitcoin

43:56

interesting enough that so

43:58

many smart people see this as

44:00

ultrasound money. And what does ultrasound

44:02

money

44:04

mean? The

44:04

world has a history of

44:06

money, whether it's backed by gold or not,

44:10

where government

44:10

government gets themselves

44:12

excessively into

44:13

debt, and

44:16

they devalue

44:18

the money. So the Romans used to clip the edge off the coins, so there less

44:20

gold than each coin. And eventually,

44:22

people would lose faith in the coins because they

44:24

blend them with silver and then blend them

44:27

with copper and you know, the

44:29

coins were worthless because that was supposed to be worth the value of the of the Donari

44:32

in Roman times. But

44:34

governments can't

44:35

help themselves. humans.

44:37

We're just humans. Right? Humans are fundamentally

44:40

flawed creatures and we always will

44:42

be. So then we

44:43

have the gold standards, you know, the US

44:46

and the UK run gold standards World

44:48

War one, World War two, we all have to leave it

44:50

because we've got too much in debt

44:52

again. We've overly financialized

44:54

yet again because Humans love

44:56

leverage above all things. It's kind

44:58

of sex and leverage are the two things that drive

45:00

humans for some

45:02

reason. Then

45:02

We adopt

45:03

a new system, which has been around before,

45:06

but it keeps getting a band called fiat

45:08

money. Fiat money is money not backed

45:10

by anything. It

45:11

backed by the promise of the central bank

45:13

paying it. So that's the dollar bill that we

45:15

all are familiar with them. Every country in the

45:17

world now adopted fiat

45:20

currency. But

45:20

as with everything,

45:22

if you're really thirsty

45:24

and I gave you a bottle of

45:26

water, or sold it to

45:28

you. You'd probably

45:29

pay me ten times too much for

45:31

that bottle of water. If I give you

45:33

a million bottles of water, they're worth

45:35

precisely zero to you. So scarcity has

45:37

value. That's art, that's

45:40

cars, that's almost anything.

45:43

Humans value scarcity.

45:46

for

45:46

whatever reason we do. And so

45:49

if you're

45:49

printing too much

45:51

money, you're

45:53

creating less scarcity. So yes,

45:55

there's money everywhere, but the

45:58

money

45:58

has less value.

46:00

So

46:01

once you understand that,

46:03

You

46:03

say, well, what does it mean the dollar hasn't

46:05

collapsed? It's kind of where it was versus the euro in

46:07

the last five years or whatever it

46:09

is. And say her

46:11

then you say, But my

46:12

fifty thousand dollar salary now

46:15

combined me

46:16

much less shares

46:19

in Apple. Amazon, Google,

46:20

Microsoft. In fact,

46:22

units

46:22

of the S and

46:23

P five hundred. Right? I've suddenly can't

46:25

buy

46:25

as much. Since two thousand and eight,

46:27

it's a fraction.

46:29

I can

46:29

buy like a third of what

46:31

I could. Same

46:33

with real

46:33

estate. Same with

46:35

gold. And

46:36

then you're like, assets have

46:38

suddenly got expensive. They haven't. The

46:41

value of your savings

46:42

has gone down or your money.

46:45

So

46:46

you can't afford to buy assets. What is an asset?

46:48

An asset is deferred consumption

46:51

from

46:52

the

46:53

future. I buy a house.

46:54

I sell

46:55

it in the

46:56

future. I get to retire. Whatever the

46:58

the things are. Right? We don't buy the S

47:00

and P because we want to hang it up in

47:03

our wall. We buy it because we want to sell it at a future

47:05

date to realize money. So

47:08

that means our future selves and our poorer.

47:10

That's essentially what this means. That's what currency debasement is.

47:13

So Bitcoin comes along. In two

47:15

thousand

47:15

and eight, in the middle

47:17

of the crisis, It's

47:19

kind of like it was perfectly prepared for

47:22

this and said,

47:24

satoshi

47:24

goes, hey, look at this.

47:26

I can

47:27

create an algorithm.

47:29

that

47:29

only creates so much of

47:31

this thing, the

47:34

Bitcoin,

47:34

and it can never

47:35

vary ever. So therefore,

47:37

this is scarcity that humans can't

47:39

fuck around

47:39

with. Now humans

47:41

have this

47:42

propensity to fuck around with scarcity,

47:45

because they're economically incentivized to do

47:47

so. Here they

47:48

can't. So then

47:50

they become economically incentivized

47:52

to own this asset. because

47:54

it's scarce and it cannot be changed because it has this consistent

47:56

supply curve and a limited number.

47:58

So Bitcoin becomes this

48:00

great store of value.

48:02

And it would look

48:03

like gold because gold is a good store of value. It's worked for thousands

48:05

of years, but Bitcoin has this other

48:07

thing to

48:07

it. It's a network

48:09

which gold isn't. and

48:11

it's

48:11

technology which calledism. So we have use

48:13

cases and the benefits of

48:15

building a network. So suddenly it goes

48:17

up exponentially in

48:20

price. Roll

48:20

onto two thousand and fifteen and suddenly

48:22

somebody's looking

48:23

at the blockchain and

48:25

they start

48:27

saying, Imagine if these bits

48:29

on

48:29

the blockchain which is where you record the

48:31

ownership of something in Bitcoin

48:33

it's Bitcoin

48:34

itself.

48:36

margins if we could put a contract in there.

48:38

Because humans live up contracts,

48:40

you know, everything is basically a contract

48:42

in in our legal terms.

48:45

and

48:46

that was the rise of

48:47

Ethereum. It became a platform where you

48:49

could programmably change the blockchain, not

48:51

the attributes of

48:54

the blockchain, you couldn't remove anything off that ledger, but you

48:56

could change

48:56

the little holding buckets. And so when it

48:58

can look like this, it

48:59

can look like that, it can

49:01

adopt to this, And those things

49:03

were verifiable as well, so they couldn't

49:05

change. So this created a theorem which

49:07

became a platform. So if

49:09

you think of Bitcoin as the Store of Value,

49:11

this very pristine beautiful thing,

49:14

then you think of Ethereum as also

49:16

a very beautiful thing. but

49:19

it's a much broader application because it's

49:21

like

49:21

programmable money. Yeah. There's one concept

49:23

that I wanna

49:23

nail down here. And if you think I'm crazy, let

49:26

me know.

49:28

But when I think about so I've worked in the intercity's

49:30

a lot, and you begin to realize,

49:32

wait a second, the generational

49:34

poverty is a mindset knowledge

49:38

problem far more than it's a money problem because they manage

49:40

to pass on a likelihood

49:43

of being poor. And so when

49:45

you think about, okay, well, right

49:48

now in the in the

49:50

US for sure, and I would imagine most of the

49:52

western world that your zip

49:54

code is the number one predictor of

49:56

your future success, more than your IQ, which I'm just

49:58

not willing to live in that world, but that's

49:59

a really fascinating

50:02

phenomena. And when you begin to ask a

50:04

question, How is that So

50:06

you have extraordinarily smart people that

50:08

regardless of their IQ were gonna be trapped in

50:10

a poverty cycle. Why is that?

50:13

And some of it has to do with what a guy named

50:15

Jeffrey Canada discovered in terms of the language centers of

50:17

your brain. And if you're not hearing enough words

50:20

when you're an in and just the language

50:22

centers don't develop well and you're gonna have a hard time

50:24

interviewing for jobs and climbing the

50:26

sort of traditional corporate ladder in

50:28

that way. and then they just also help you with communication. But the other

50:30

part is what is what I call your frame

50:32

of reference. What do you believe to be true

50:34

about yourself and about

50:36

the world? And one of the

50:38

ideas that fails to get passed

50:40

on in that poverty cycle is an idea of

50:42

ownership. And

50:43

once you understand ownership,

50:46

now you get into that cycle that you're talking about

50:48

where you can you can sell something in

50:50

the future because you own it today and you

50:52

hopefully buy low and then so high. And that

50:54

really is like just the dead simple

50:57

equation and I just a plan

50:59

to flag that we'll come back to and

51:01

hold all these ideas in my head.

51:03

you had

51:04

mentioned earlier as like a throwaway that

51:06

a lot of wealth was generated in the collapse

51:08

and of the economy. And so I want

51:10

people to understand that this a game, don't mean that

51:12

in any sort of derogatory way, but it

51:14

has rules. And if you understand those rules,

51:17

there's always an opportunity especially

51:19

in moments of disruption. and

51:21

we're living through this incredible technological

51:24

disruption right now. Okay. So back to this

51:26

idea of ownership. So when I

51:28

look

51:28

at Bitcoin, what I see is

51:30

something that I can own. Right? There will

51:32

only ever be twenty one million of these.

51:35

Now, like anything, as

51:36

Noah, you've you've all Noah Harare says, even money

51:39

is just a story. Right? It's a fiction that we

51:41

all tell. And it only has value when we

51:43

agree that it has

51:46

value. So Bitcoin has that same sort of

51:48

Achilles' heel that if tomorrow

51:49

everybody stop believing that owning that

51:52

has any value, then it would have

51:54

no value. But we

51:56

have this ultra scarce thing that the last

51:58

ten years have proven people believe has value,

52:00

and you can own a

52:03

piece of that. And as

52:04

we go, if it is true that more and more people will

52:06

pour into this digitization of

52:12

economic value essentially, then

52:14

that those twenty one million units

52:16

are gonna become hyperscares and

52:19

hypervaluable. Now the great news is that you can fractionalize it so you don't have to own one.

52:21

You can own some tiny, tiny, tiny fraction

52:23

of it. But now you

52:25

you have ownership So you're able to

52:27

buy something now that you can own as it

52:30

appreciates in value and then you can sell it later. And so

52:32

it becomes just this buy and

52:34

wait game that

52:36

real estate maybe still is, but that's why

52:38

real estate has worked over time. You

52:40

owned it. You could also live in it,

52:42

which is certainly advantageous.

52:44

And then the expectation was that it would

52:46

go up in value. When I

52:47

think about

52:49

Ethereum, At first, I

52:51

was like,

52:51

okay, I like how much, you

52:54

know, we haven't even talked we haven't named

52:56

Matt Kraft's Law. You've talked about it,

52:58

but this how you can value

53:00

something based on its network

53:02

adoption curve. And so I could see there

53:04

was something going there. And then when I got

53:06

into NFTs, I realized I just had to buy

53:08

a bunch of Ethereum to use

53:10

it. And so I

53:10

was like, okay. Well, wait a second. If I'm over

53:12

here like scrambling just to buy it to spend it,

53:15

I'm like, this is me being able

53:17

to buy into the dollar when it's like

53:19

new and nobody's sure if we're gonna use it. I

53:21

thought, whoa, I would take that opportunity. So

53:23

that's how I see the difference in the two.

53:25

One is just sort of straight ownership

53:26

of something. And then one is like, well, I know people use

53:29

this.

53:29

And because people use it and

53:31

there's controls around

53:34

the supply, that the odds are

53:36

that it will go up in value. Ethereum's kind of like owning a

53:37

part of the internet.

53:40

It's

53:41

As

53:42

you said, I mean, everybody has to

53:44

use Ethereum basically that uses this crypto rails

53:46

unless you're just in the bitcoin

53:48

world.

53:50

But everything that we've talked about and everybody will have even if you're not very familiar

53:52

with the space, will have heard the term Defy

53:55

or NFTs or tokens.

53:58

Basically, most of

53:58

that is still being built on

53:59

Ethereum. And as you said, the

54:02

network so what is this Metcalf's law

54:04

that you and I have

54:06

referred to? MetMetkowski's law

54:08

is it really

54:09

started to become understood

54:12

in the eighties

54:13

and then much more so

54:15

as mobile phone networks started these giant

54:17

connected networks. Right? Because digital technology allowed networks

54:19

to connect. Before it's humans, we couldn't connect

54:21

with each other in the

54:23

same way. So

54:25

networks connect with mobile

54:26

phones. Suddenly, they're exploding value.

54:28

You know, all these phone companies, huge companies.

54:30

And if you added them all

54:32

up around the world, they'd be

54:34

worth tens of trillions probably. We just don't even think of it in those terms because

54:36

they're fragmented networks. Then the

54:38

Internet comes along.

54:39

This free network

54:41

and everybody

54:41

builds on top of it and they create network effects

54:44

like the most classic example

54:46

is Facebook. Facebook

54:47

connects us with friends and

54:50

family and in exchange,

54:52

they get

54:52

your data, they sell you adverts,

54:55

and they so

54:56

you've got a bunch of people using it,

54:58

Bunch of businesses now building on it and advertising

55:01

monetization structure. Shareholders

55:03

get rich,

55:04

the

55:06

you

55:06

know, you and I get to unfortunately meet somebody from

55:08

university

55:08

that we don't wanna talk to that we met twenty years

55:11

ago and we're now connected with again.

55:13

You know, it's that

55:15

But the

55:16

network that Ethereum and

55:19

Bitcoin does is different. You're the owner

55:21

of the network and

55:23

the user. So as a user like you said, with

55:25

the NFT you're actually owning a share of the

55:28

network itself. So everybody

55:30

uses it, owns a part of it,

55:34

Therefore, if the network's gonna get used a

55:36

lot, you're all gonna get

55:37

rich and the value of the

55:38

network's gonna go up massively. And

55:40

the more

55:40

people built into connections, so metcast

55:43

lore is not only just the number of nodes, i. e.

55:45

the number of users, but how much they connect with each

55:48

other? Well, you're seeing it because there's n

55:50

f t's and there's d phi and there's all of these

55:52

applications or the Store of Money

55:54

aspect. These things all together

55:55

and and then there's the linking of all

55:57

of

55:57

these, like chain

56:00

link or you know, some of

56:02

these other protocols, Polcador, they're linking all these ecosystems together.

56:04

So I can send you a dollar instantaneously

56:08

and we have no idea whether it went on Bitcoin rails, XRP rails,

56:10

Ethereum rails, and guess what? We

56:13

don't

56:13

care. I promised you a dollar.

56:15

You wanna get the dollar instantaneously. That's

56:18

interoperability. That's all coming. So this is

56:20

what

56:20

Ethereum is about. It's the

56:23

magnitude of this network.

56:25

where

56:25

everybody's developing everything on top of

56:28

it and

56:28

its scarce supply. So it's

56:30

seeing an even faster adoption rate

56:33

than bitcoin now. for

56:34

for the reasons that seem pretty clear because it has more use

56:37

cases than currently the Bitcoin

56:39

blockchain does. Doesn't mean Bitcoin blockchain

56:41

can't

56:41

in due course?

56:43

But now,

56:44

there's a lot more use case in this era.

56:46

It's super exciting. Do

56:48

you think

56:49

that Bitcoin would need to do something

56:51

like that in order to retain its

56:53

value proposition? No. I think its

56:56

value proposition stands above all

56:58

things. It is pristine.

56:59

It's pure. It is

57:01

what it is. And,

57:04

yeah, the way it's so

57:06

impossible to change any of the

57:08

attributes of Bitcoin makes it

57:09

a bit clunky. And that

57:11

clunkiness is its

57:13

beauty. It it

57:14

is so secure. It's the most secure

57:17

of all protocols. So

57:19

let it be, what it wants to be. Now,

57:21

people are building things like the lightning layer,

57:23

which allows you to do lots of

57:25

fast payments over the top. Maybe that

57:27

scales. Maybe it doesn't. Doesn't really matter. That store of

57:30

value for every person to

57:31

think of

57:34

like it's

57:34

only a piece of Manhattan real estate at

57:37

low prices. That's

57:39

never going

57:40

away. not

57:41

in the conceivable future because humans

57:43

have now said it has value and it's

57:45

being adopted very fast.

57:47

So, no. Theorems are very different

57:50

thing. It doesn't compete. That's how I

57:51

like to think about it. And

57:54

unfortunately, when you go online, people will

57:56

tell you, well, it's competing and it's not

57:58

as good You

57:59

have to ignore all of that and look at the

57:59

space overall and say,

58:01

and just be honest saying, we don't know where

58:03

this is gonna be in ten

58:06

years time. And like

58:08

Queso, so therefore I can own three of these things.

58:10

And probability is I'm

58:12

gonna capture a large part of this

58:14

and maybe I'll adapt in

58:16

due course. And you

58:17

have one thing. Sorry. Go ahead. Yeah. So it's it's don't

58:19

over force the narrative. Just be

58:21

broad, be open.

58:24

and always be learning as you as you rightly said because we don't

58:26

know. This is all new and it's

58:29

happening at lightning speed.

58:31

Yeah. That's the thing that I I am certainly most

58:34

attracted to with you in the way that

58:36

you are and seems to be something that people echo a lot

58:38

about you is you're very

58:40

open minded.

58:41

Is your open mindedness the

58:44

reason you have been successful or is

58:46

it a response to

58:48

the struggles of getting to where you've

58:50

gotten in your

58:51

life? I, you know,

58:53

it's it's I think it's part of this, my

58:56

background. You know, my

58:57

father's a first generation immigrant from India,

58:59

my mother's a first generation immigrant from Holland.

59:01

They met on a blind date in Birmingham in

59:03

the UK. I've lived in India, I've lived

59:05

in Spain, I've

59:08

grew

59:08

up in the UK. I've lived in the Cayman Islands.

59:10

I've traveled the world.

59:12

So it forces you

59:15

to be because you've got different

59:17

religious backgrounds there, you've got massively different cultural

59:20

backgrounds, all of

59:22

this stuff. forces you to be

59:24

open minded. So I'm generally open minded by

59:26

nature just

59:26

because of that.

59:28

And macro

59:30

investing is all about being open minded to other possibilities.

59:34

So once you learn the

59:35

trick that it's okay to

59:37

say you don't know, but

59:39

I think this might be how it plays out. So you're

59:42

thinking what's known as probabilistic

59:44

terms. Then for that to

59:46

happen, for you to say you

59:48

know, there's a eighty percent chance that Bitcoin

59:50

over the next five years is going

59:52

to two hundred and fifty thousand dollars.

59:54

That's

59:55

a reasonable odds. What's the

59:57

twenty percent chance that it doesn't? Okay. So

59:59

you need to open up both of those

1:00:01

things in your mind at any one stage

1:00:03

and be assessing them.

1:00:06

I

1:00:06

learned that from the book.

1:00:08

I think

1:00:09

it was the

1:00:10

Alchemy of Finance by George

1:00:13

Soros, who was probably the most

1:00:15

famous of all of the macro investors. And he would talk about this a

1:00:18

lot that you have to have these kind of logic trees,

1:00:20

or think of

1:00:22

probability trees. And you

1:00:24

understand

1:00:24

that, you can even bet against yourself,

1:00:26

which is really hard

1:00:28

to do and I can't do it. But some

1:00:30

of the best traders can be

1:00:32

you know, long the and they and but then they think

1:00:34

the odds of it falling are getting high

1:00:37

and they start selling against themselves.

1:00:40

It's like it's it's very

1:00:42

hard to do. But

1:00:44

that

1:00:44

kind of investing teaches you to keep an

1:00:46

open mind because you're looking at the whole

1:00:48

world, and you

1:00:49

have to know that we don't know the outcome. And anybody who

1:00:51

tells

1:00:51

you that they

1:00:53

know

1:00:53

what's gonna happen.

1:00:55

It's just a fraud.

1:00:58

It's just a The

1:00:59

open mindset, I don't know, but I think and

1:01:01

this is why I think

1:01:03

That's all

1:01:03

you need to do. That's open minded in a

1:01:05

nutshell, admitting that you are

1:01:08

fallible. Yeah. I think

1:01:08

that that is extraordinarily smart. One

1:01:11

thing that I've noticed about entrepreneurs

1:01:14

is the most successful are the ones that are

1:01:16

able to hold competing ideas in their head at the

1:01:18

same time. And you

1:01:20

so when I'm teaching entrepreneurship, one thing

1:01:22

that I talk about is, okay, you have

1:01:24

to have this narrative. So you you have a

1:01:26

goal. You're trying to get there. You know where you are. There's

1:01:28

a chasm between where you are and your

1:01:30

goal your goal is probably, you know, skate

1:01:32

to where the puck is going to be. So it's

1:01:34

something where you're making a bet about how either

1:01:37

culture is moving or technology

1:01:39

is moving. and then you have to

1:01:41

create a narrative that says, this is how

1:01:43

I'm gonna go from where I'm at to there.

1:01:45

And what that narrative does

1:01:47

is it smooths out some of those, like, leaps of

1:01:49

faith that you're gonna have to make in order to get where

1:01:51

you wanna go. But then, you know, bringing

1:01:53

this back to somebody in the

1:01:55

finance world that I've learned a lot from Ray

1:01:58

Dalio, where he had

1:01:59

that just

1:01:59

catastrophic learning event where

1:02:02

he realized we had all this conviction about something that was happening in the

1:02:04

market, and he ended up being wrong, and it

1:02:06

just obliterated his

1:02:08

company. And

1:02:10

He

1:02:10

realized, okay, you can believe you're

1:02:12

right, but you have to hold open

1:02:14

in your mind. How do I know

1:02:18

I'm right? and constantly be looking for disconfirming evidence.

1:02:20

So it's like, I tell people you have to have all this

1:02:22

conviction. You have to be able to lead with

1:02:24

conviction. You have to be able to go into something believing

1:02:26

this is gonna work. my narrative is true.

1:02:28

That's how I'm gonna cross this chasm to get to

1:02:30

my goal. But motherfucker, you

1:02:32

better have opened in your head this

1:02:34

idea of I have to challenge

1:02:36

this narrative. I have to constantly look

1:02:38

for the the ideas and

1:02:40

reasons why I'm wrong. And if you

1:02:42

can't do both, race forward with conviction and constantly battle that

1:02:44

idea, you are in trouble. And that's

1:02:46

why being an ultramary so damned hard.

1:02:50

that

1:02:52

narrative of entrepreneurship

1:02:54

is start singing girls, borrow

1:02:56

money off parents, or start

1:02:58

it on your credit card, Three

1:03:00

years later, billionaire. Right? That's the narrative and

1:03:02

then you write your book on on how

1:03:04

I manage

1:03:04

my company. Right? That's actually

1:03:07

not true. The best book ever written on this is

1:03:09

Ben Horowitz. It's the hard thing about hard

1:03:12

things. What you

1:03:13

have to do is

1:03:15

battle both your assumption as

1:03:17

you say, and test

1:03:18

it endlessly. You have to be paranoid, excessively

1:03:22

paranoid, but still confident in

1:03:24

that you're right. and

1:03:25

you also have to

1:03:28

accept the risk of

1:03:30

failure because the moment

1:03:30

you accept the risk of failure, which

1:03:32

is very high in startups.

1:03:35

you'll stop hedging against it. Once you

1:03:37

stop worrying about failure as the

1:03:40

narrative, you tend to attract

1:03:42

it. It's a really

1:03:44

difficult thing. People who fear failure above all things tend to fail

1:03:46

more. People who

1:03:48

don't

1:03:48

look at failure

1:03:49

and just look at the moonshot tend

1:03:51

to fail too. It's the

1:03:53

people who can see failure as

1:03:56

a wolf behind them,

1:03:58

and the testing

1:03:59

of

1:03:59

the ideas, but still

1:04:02

having conviction and

1:04:03

maybe changing paths because the wolf is

1:04:05

catching up. They tend

1:04:06

to fail less. But it's hard,

1:04:07

makes you feel sick. You don't sleep at

1:04:10

night. And that's the beginning of Ben

1:04:12

Horwich's book. basically

1:04:14

is two pages of what that

1:04:16

feels like it's called the struggle.

1:04:18

And that the struggle is

1:04:20

probably

1:04:20

the most profound two pages in all of

1:04:23

entrepreneurship, and it's true, and it's

1:04:24

hard. That's

1:04:27

a great book. So

1:04:30

going back to

1:04:31

investing, I wanna lay out for

1:04:34

people that might be new to

1:04:36

this. They're not

1:04:38

seasoned investors. The idea of dollar cost averaging was

1:04:40

extraordinarily comforting to me.

1:04:42

And I'd love to go into what

1:04:46

it is why it's useful and whether you think that

1:04:48

applies to what's happening in crypto. So

1:04:50

there's a mythology of investing.

1:04:52

The

1:04:53

mythologies investing is Hedge

1:04:55

fund manager, George Soros, spots

1:04:56

the opportunity,

1:04:57

gets in at the right price, makes

1:04:59

a fortune.

1:05:03

The

1:05:03

reality is

1:05:06

most

1:05:06

people have no idea where the price is going

1:05:08

over a short term.

1:05:10

So

1:05:10

what happens is you buy something. You put all your

1:05:12

money in. You've saved up your five thousand bucks. You

1:05:14

put it all into Bitcoin. Bitcoin falls fifty

1:05:17

percent. You panic. You sell

1:05:20

it. you feel terrible. Bitcoin goes back up again. You felt feel

1:05:22

even worse now. You can scrape together. You

1:05:24

know, you've you've lost, you know, half

1:05:26

of your money now and then you've

1:05:29

you keep compounding

1:05:30

these errors. Right? It's called

1:05:32

market

1:05:33

timing. And market timing is extraordinary

1:05:35

difficult, you know. I I do

1:05:37

some market timing.

1:05:39

because that's

1:05:39

been my job. In thirty years, I've done

1:05:41

more than my ten thousand hours, a lot more

1:05:44

than my ten thousand hours, and that doesn't make

1:05:46

me very good at it either. I'm not bad

1:05:48

at it in long term investing. I'm

1:05:50

terrible at short term.

1:05:52

So what is

1:05:52

dollar cost averaging? dollar cost averaging is basically what

1:05:54

everybody does with their 401K The

1:05:57

problem is with four zero one's or retirement funds

1:05:59

is nobody cares about

1:05:59

them. You don't know what's in it.

1:06:01

You

1:06:02

you know what didn't have

1:06:03

no ownership. You just put some of your

1:06:06

salary away and it goes in this mythical

1:06:08

thing that you probably assume won't be

1:06:10

worth as much money as you hope it

1:06:12

is.

1:06:12

That's what that's become.

1:06:14

and you

1:06:14

put it in every month, why do

1:06:16

you do that? Well, because you're averaging all

1:06:18

of the highs and lows over

1:06:20

time because markets tend to do this.

1:06:24

So

1:06:24

you're kind of indifferent. In fact, you love it when it

1:06:26

falls because you're buying more units

1:06:28

at a lower

1:06:30

price. because

1:06:31

the old game is to own as much

1:06:33

as you can at the

1:06:34

lowest possible price.

1:06:36

But if you don't know

1:06:38

how to market time and ninety nine

1:06:40

point nine percent of people don't

1:06:42

in cards and shouldn't. They just

1:06:44

average in over time and magic

1:06:46

will happen. You

1:06:47

just average a beautiful price

1:06:49

over time and had you done that in the

1:06:51

S and P or anything else you'd

1:06:53

make money. Now, what's so

1:06:55

lovely about Bitcoin? is it's not a passive

1:06:58

investment like your your

1:06:59

retirement fund because there's a retirement fund

1:07:02

you

1:07:02

can't access until later.

1:07:04

So you kind of write it off and you, you know, everybody's heard that it's never gonna

1:07:07

be worth

1:07:07

as much as it should be anyway. So it's become a

1:07:09

bit of a pain as opposed to

1:07:11

something that this

1:07:14

you own, you live and breathe that volatility, and

1:07:16

you live and breathe those gains when

1:07:18

they happen. And you'll be like,

1:07:22

why died? I did it's my

1:07:24

sister-in-law, forced her to do this. I said,

1:07:26

listen, I'm gonna make it easy if you just gonna open a

1:07:28

PayPal account, start

1:07:30

that way. and she had some savings. She

1:07:32

could take out of another thing.

1:07:33

She had, like, five thousand bucks, ten

1:07:35

thousand bucks. And she put

1:07:37

it in and we got

1:07:39

the timing relatively right. So it

1:07:41

shot up a lot. I actually got in about

1:07:43

thirteen thousand in bitcoin. Wow. Sure.

1:07:46

Seventeen thousand. Yeah. And it it shot up

1:07:48

a lot. So she's like, well, and then it falls a lot, and she's

1:07:50

calling up saying, what do I do? Should I sell some? I'm like,

1:07:52

no. You keep putting

1:07:53

in part of

1:07:56

your paycheck. And after all

1:07:57

of these falls, these several

1:07:58

falls, she starts to

1:07:59

really understand. And when they start falling a

1:08:02

lot, she

1:08:04

starts doubling the

1:08:05

amount that she would have

1:08:07

normally invested. And now

1:08:08

she's taught herself to invest. Next

1:08:10

thing

1:08:10

I hear, oh, well, I

1:08:13

put some Ethereum. and this is how I'm dealing with that. So she's

1:08:15

now looking at two different things and she's now thinking

1:08:18

about the s allocation. What's gonna

1:08:20

outperform? The

1:08:22

theorem is big. She knew nothing about this stuff. This is a year

1:08:24

and a half and she now understands

1:08:26

because of that dollar cost averaging and

1:08:28

taking ownership that you exactly

1:08:31

as you said, Once you actually own something,

1:08:33

that 401 you don't actually really own. It's like some other guy does something with it,

1:08:36

and hopefully he

1:08:38

makes money. This is

1:08:40

you. you're taking responsibility

1:08:42

for your own finances. That's so empowering. One thing that

1:08:44

I think is really important

1:08:46

that

1:08:46

I haven't heard people talking

1:08:50

about and just because my mind is so simplistic when comes to investing is look at the market I've

1:08:52

got a money manager and like

1:08:54

all that and she's trying to

1:08:58

explain to me, puts and calls and all this time, like, god, this is so

1:09:01

fucking confusing. I don't wanna think about this. I want

1:09:03

to go run my business. And

1:09:05

so I yeah, I just never wanted to get

1:09:08

on the phone and talk about

1:09:10

it, which is too complicated. Part

1:09:12

of the glory of what's

1:09:14

happening right now in Bitcoin is if

1:09:16

you stay or crypto, if you stay sort of at the

1:09:18

top of the ones that have the most sort of crowd validation. because

1:09:20

you can get into the deep weeds

1:09:22

on what's going on in all coins.

1:09:25

But if you just stay at the

1:09:27

top, which has massive crowd validation and you go, okay,

1:09:29

I'm gonna buy a bit of Bitcoin. I'm gonna buy a

1:09:31

bit of Ethereum. and

1:09:34

then you learn like your sister did about the

1:09:36

volatility and like how to ride

1:09:38

that wave and to recognize and

1:09:41

and for anybody listening if you're

1:09:43

new to this idea. have

1:09:44

a thesis. You dollar cost average

1:09:46

based on your thesis. So here is Tom's overly

1:09:52

simplistic thesis. that

1:09:53

I believe that technology is a

1:09:55

one way street, that

1:09:56

very few

1:09:58

people are in cryptocurrency

1:10:02

right now. I believe that

1:10:04

over time, it will take

1:10:06

over some massive percentage of the

1:10:09

financial system. So let's say that it goes to, I don't know, become a

1:10:11

ten trillion

1:10:14

dollar asset.

1:10:16

So I can buy that. I don't It doesn't

1:10:18

take an extraordinary leap of faith. It's at just below, I think, one trillion as of the time that we're recording this.

1:10:20

So I'm like, whoa. Ten x is my

1:10:22

money. Like, that would be incredible. Okay.

1:10:26

Well, as long as I believe in that thesis, I

1:10:29

want the price to drop. So

1:10:31

when the price drops, I'm the

1:10:33

panicking. I'm like, yeah, buddy. because like

1:10:35

you said, now the mountain has gone down.

1:10:37

So when I first got into this,

1:10:39

it was the height

1:10:41

of the euphoria. Like, Bitcoin was just

1:10:44

going to the moon. It was just

1:10:46

insane. And so I was like, oh

1:10:48

my god, I have to buy

1:10:50

into this. And so I bought in, I started dollar cost averaging,

1:10:52

and the price is going up, up, up, up, up, up, up, and

1:10:54

I'm still dollar cost averaging. And I'm like, oh, man, should I

1:10:57

be going faster? Like, the price is going high? And I'm

1:10:59

like, No. No. cost average, you never know what's gonna happen.

1:11:00

And then, boom, whatever

1:11:02

happened, you

1:11:03

know, I guess it was like

1:11:05

a month ago, six weeks ago, something

1:11:07

like that. It just fucking went

1:11:09

down like thirty, forty percent. And I was

1:11:11

like, oh, thank god. I still have

1:11:12

one, my thesis

1:11:15

is still intact. Two,

1:11:18

the amount of money I was willing price,

1:11:20

so what I am training

1:11:22

myself to be obsessed over is

1:11:27

the the breakeven point. So if my original

1:11:29

breakeven point was, let's say, fifty two

1:11:31

thousand dollars for

1:11:34

Bitcoin, as I came down and I kept buying in and buying

1:11:36

in and buying in, now my breakeven point goes from

1:11:38

fifty two thousand, I got it down to like

1:11:41

thirty something. And so I'm like, this is

1:11:44

incredible. So now that we're riding that wave

1:11:46

back up and I'm telling my wife, like,

1:11:48

we're up this much in forty eight hours.

1:11:50

We're up this much in a week. We're

1:11:52

up this much in ten days. She's like, what? Like,

1:11:54

it's it's almost impossible to believe. And I'm

1:11:58

very careful to

1:11:59

check that, like, the, hey, the euphoria is dangerous.

1:12:02

You have to be careful. You have to constantly, like,

1:12:04

the wolf is right behind you. Like, you

1:12:06

really do have to be thoughtful, but dollar cost

1:12:08

averaging based on a thesis, that's the way

1:12:10

to go. There's another

1:12:11

thing I think it

1:12:13

needs to be said is you're now faced with something

1:12:15

that really offers people enormous opportunity. You

1:12:18

took a ten for one. I

1:12:20

think

1:12:21

the space over the

1:12:23

whole space. over the

1:12:23

next ten ten, twelve years

1:12:24

is probably a

1:12:26

hundred x. Right? That's

1:12:27

a whole asset

1:12:29

class. We've never seen that in

1:12:31

history in that

1:12:31

space of time. But humans are humans.

1:12:33

We

1:12:34

go back to that fundamental flaw

1:12:37

as

1:12:38

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believe literacy can and should be

1:15:01

for all. That's why

1:15:02

Alexia, we're all for literacy.

1:15:07

Tell people what leverage is for the the

1:15:10

leverage is when you don't borrow money to

1:15:12

buy something. So

1:15:13

let's say you had borrowed to buy

1:15:15

the original Bitcoin purchase and let's say you

1:15:17

put down half of

1:15:20

the money.

1:15:21

So basically, at twenty

1:15:23

seven

1:15:23

thousand

1:15:24

or twenty

1:15:28

six thousand, You've

1:15:29

lost all your money. Now Bitcoin

1:15:31

hit that. You'd have been wiped out. And

1:15:32

you'd have

1:15:33

had to pay somebody and you'd

1:15:35

have been liquidated.

1:15:37

the been liquidated And then

1:15:39

Bitcoin goes back up in price, and you'll have missed

1:15:41

it all. That's what

1:15:42

leverage does because it's okay

1:15:45

in

1:15:45

a house because house

1:15:47

prices aren't very volatile. So occasionally once in

1:15:49

a generation, you get a two thousand

1:15:51

and eight thing, where

1:15:52

the house prices start moving a lot.

1:15:54

And suddenly, the people's equity in their

1:15:57

house wasn't enough, and everybody gets liquidated. i. e. the

1:15:59

bank says, we want our money

1:15:59

back. That's okay to

1:16:01

take

1:16:02

that risk if you're cautious

1:16:05

in

1:16:05

housing, in crypto, this thing moves around like this.

1:16:07

Its predictability in

1:16:09

the short term

1:16:11

is extremely low. unlike

1:16:14

housing predictability. So just don't borrow money to do this.

1:16:16

That's the If

1:16:18

I can get that across,

1:16:20

if i get that across

1:16:22

then you

1:16:22

don't care if it falls to twenty six

1:16:25

thousand or ten thousand because you can buy

1:16:27

more units at the lower

1:16:29

price over time and you don't

1:16:31

care. And then it's trading at five

1:16:32

hundred thousand, you'll

1:16:34

have become extremely

1:16:35

wealthy. It's

1:16:38

as simple as that. So

1:16:40

if they raise your if

1:16:42

they put up your mortgage rates, you spend less in restaurants. If

1:16:47

you if you're finding your food bills at the supermarket are

1:16:49

thirty percent higher than they

1:16:52

were, you spend

1:16:54

less on something else. Right? Less

1:16:56

than ever good because it stops the

1:16:58

price of goods rising. So the price of goods moves

1:17:03

either because there's not enough supply, which is what

1:17:05

we've

1:17:05

had a problem with, or

1:17:07

it's

1:17:07

because there's too

1:17:10

much or not enough demand. So if you've got something with restricted

1:17:12

supply, so let's think of oil right

1:17:14

now because of the Russian situation, there

1:17:18

is not enough oil for the current demand out there. So the oil price

1:17:20

keeps going up. So you and I

1:17:22

pay more

1:17:22

to drive our cars or to

1:17:25

heat or cool

1:17:27

our houses. So The only

1:17:28

way of solving that one because you

1:17:30

can't get the Russian oil back into the market is to make us

1:17:33

to make us

1:17:35

buy useless oil.

1:17:36

So that may

1:17:37

if you the price does that automatically because it gets more expensive, we do it.

1:17:39

But if you can also then

1:17:42

just lower general demand

1:17:45

for things, we'll drive our cars

1:17:47

less, we'll catch less flights, all of that stuff, and that lowers demand and therefore prices because

1:17:51

prices rising inflation

1:17:55

is evil

1:17:55

for our savings because the dollar in your bank

1:17:57

account is worth less than a year's time. It's

1:17:59

currently worth

1:17:59

eight percent less,

1:18:02

which is quite a lot. And so it's it's that.

1:18:03

It's this weird situation where

1:18:06

we have to take the

1:18:08

pain. We're told we

1:18:09

can't buy as much and we're

1:18:11

forced into it by rising

1:18:13

our mortgage costs and our food costs and all of

1:18:15

this And eventually,

1:18:19

eventually things will slow

1:18:21

down. People will be put out of jobs a bit, that kind of stuff. And

1:18:23

then the overall demand in the economy comes

1:18:26

down and prices come

1:18:28

down. So

1:18:28

I, we're all collectively taking the pain for this inflation

1:18:30

that was created out of a whole bunch of different things from the pandemic.

1:18:35

through to supply chain issues, through to underinvestment in

1:18:37

commodities, through to the shift to

1:18:39

green energy. All of

1:18:41

these things have

1:18:44

created this moment in time which

1:18:46

is tricky. And, you know, if we

1:18:46

relate it to, for example, the crypto market,

1:18:48

if we related to for example

1:18:50

the crypto market So why did crypto

1:18:52

stop going up? Well,

1:18:54

it was macroeconomic factors

1:18:56

and people like, well, what that got

1:18:58

to do with crypto? Well, really simple.

1:19:01

is it's a

1:19:02

retail based market. And about sometime last year, prices started

1:19:05

to

1:19:08

rise. And

1:19:08

so people could afford to dollar cost

1:19:11

average less. So then there's less demand for crypto and the price of crypto falls. It's

1:19:14

as

1:19:15

simple as that. Okay. So

1:19:17

that all sounds very simple and direct. I

1:19:19

think that what I wouldn't have

1:19:21

understood a year

1:19:22

ago, obviously

1:19:23

now being into I

1:19:26

have a bit more of a frame of reference, but I

1:19:29

like to think that what

1:19:31

I'm able to help people with is

1:19:33

sort of the 101 of, like,

1:19:35

how all this stuff works. It

1:19:37

feels like the I always thought of the

1:19:39

economy as a thing external

1:19:43

to human forces in

1:19:46

terms of intentional human forces as I was growing up. Now I'm beginning to realize that

1:19:51

it it is either rightly

1:19:54

or foolishly, the subject of a lot of

1:19:56

subject of a lot

1:19:58

of human intervention human intervention And so

1:20:00

I would have thought perhaps naively that the

1:20:02

goal would be to let the market determine,

1:20:07

like, If people are willing to pay more for oil, gas, whatever, then the price

1:20:09

will rise to what people are willing to

1:20:11

pay and it just

1:20:13

is what it is. And so inflation is

1:20:16

gonna be a thing that happens

1:20:18

occasionally. It is if your wages

1:20:20

go up to match it. If

1:20:22

not, you're just getting poorer. because you can afford to buy less stuff

1:20:24

with the with your

1:20:26

with your monthly paycheck. But why

1:20:28

won't

1:20:29

the market balance

1:20:31

naturally? They're obviously you're getting poor, but theoretically it can't

1:20:33

just inflate forever because people can't

1:20:36

pay. So it'll inflate until the amount of

1:20:38

poor is like too much and then people

1:20:40

stop That's exactly

1:20:42

correct. rebalances. And that's called demand destruction. It's exactly the same process. So the

1:20:44

Fed can engineer it by

1:20:46

trying to raise interest rates and

1:20:50

filters through to our mortgages and other stuff. Or

1:20:52

the market kind of clears

1:20:54

of its own accord, where prices

1:20:56

get too much, people stop buying stock

1:20:58

prices fall back again. way to work, and

1:21:01

we're in this weird mess where

1:21:03

the

1:21:03

Federal Reserve are doing it,

1:21:04

the markets are doing

1:21:05

it, and we're having to take all the pain

1:21:07

in the meantime.

1:21:09

And is it

1:21:10

better to engineer this? It seems like we at some point crossed a

1:21:13

Rubicon and said, we're

1:21:15

gonna engineer the economy. We're

1:21:19

not just gonna let it run its course. Given how

1:21:21

well you understand the

1:21:24

macro landscape, do

1:21:26

you think that is wise, or would we be better

1:21:28

taking a lousy fairway, getting our hands off of

1:21:30

it, and just letting the market do

1:21:34

what

1:21:35

the market does? I generally

1:21:36

think that the market is better at doing

1:21:38

it. If you actually see it from my

1:21:43

perspective, somebody closely follows interest rate markets stuff like that.

1:21:45

They did all of

1:21:47

the tightening, anyway,

1:21:49

well, before the Fed. People like

1:21:51

you hear the expression the fed are behind the curve. What it means

1:21:53

is the

1:21:54

bond markets already priced it. Like

1:21:56

interest rates need to

1:21:58

go up to slow down

1:21:59

the economy there's too much inflation and the

1:22:02

Federal Reserve are trying to catch up. I actually think the markets do a pretty decent job in the

1:22:04

way that you suggest prices

1:22:06

rise, eventually it gets too expensive,

1:22:10

we stopped doing it. Now, there's different

1:22:12

equations that people fear is when

1:22:14

it becomes super entrenched in the economy.

1:22:17

and we all go to our bosses and

1:22:19

go, I wanna pay rise. And everybody does that at the same time, that pushes up prices further. You get more

1:22:21

wage rises and that's a, you know,

1:22:23

a wage price spiral. That

1:22:27

really

1:22:27

has only happened in the US

1:22:29

really once, which

1:22:31

was

1:22:33

in the late seventies,

1:22:34

early eighties when all of the

1:22:36

baby boomers hit kind of thirty years old at the

1:22:38

same time. So if you think when you

1:22:40

go back to thirty, you're kind of settling

1:22:42

down with somebody. You're probably thinking about buying a house. You're buying a car. You know, you've got a job. You

1:22:45

start to earn

1:22:48

some money.

1:22:49

all of we had the largest group of people in

1:22:51

all history turning thirty at the same time. And they all did the same thing

1:22:53

and bought the same stuff, and that really pushed

1:22:56

up prices. And

1:22:59

that was at the same there was issues with oil supply and

1:23:02

other things. So we have this double

1:23:04

whammy of a demand

1:23:06

shock and a supply shock,

1:23:08

which Med prices went

1:23:10

crazy, but that's really only happen once. Okay. So got

1:23:12

two mechanisms

1:23:13

that are working

1:23:15

to adjust the I

1:23:18

mean, you've got people with their hands in. Maybe it's better to

1:23:21

not do it. But nonetheless, we've

1:23:22

got the market and

1:23:25

we've got the Fed or human interventional and call

1:23:27

it? Yep. Right. So we're in a really weird

1:23:29

moment right now.

1:23:32

We've got war

1:23:34

happening in Europe. I put that in air

1:23:36

quotes, maybe I shouldn't. But, like, we we have war

1:23:38

happening in Europe or at least on the cusp

1:23:41

of Europe. And that's obviously there's

1:23:43

an economic fight going on

1:23:46

between Putin and Europe.

1:23:48

I've heard different things about

1:23:50

whether he's winning that economic war. But certainly

1:23:52

given their ability to export

1:23:54

natural gas, I think is

1:23:56

their primary export, they're

1:23:59

able

1:23:59

go ahead. natural

1:24:01

gas crude oil, but Europe relies on Russian

1:24:03

natural gas. Okay. So you've got them able to disrupt

1:24:05

the

1:24:05

market. That way, we're just

1:24:07

coming out of COVID We

1:24:10

had a ton of stimulus thrown at the economy. Certainly

1:24:13

here in the US, I imagine a lot of other

1:24:15

countries did that as well. So

1:24:18

you've got that was pushing the

1:24:20

inflation narrative. If I remember right though, you you'd

1:24:22

been saying for quite some time, I actually

1:24:24

don't think we're gonna have an inflation problem

1:24:26

at least not in the long term. What

1:24:28

is it that you saw

1:24:30

that led you to believe

1:24:33

that? And I think part of your answer

1:24:35

is gonna be around bond prices. And if you can explain what it means for

1:24:37

the bonds who have priced that in because

1:24:39

I don't understand what that means. Okay.

1:24:43

So

1:24:43

my view and it still remains even though

1:24:45

it seems pretty unfashionable right now with

1:24:47

inflation at eight and

1:24:49

a half percent. My view remains exactly what you

1:24:51

talked about is as prices

1:24:54

go up,

1:24:55

the economy slows down. with

1:24:58

the exact mechanism and therefore it becomes self regulating and it becomes that because people are quite in debt

1:25:00

and it's a very old population

1:25:02

in the US and Europe and elsewhere

1:25:07

So if you raise prices on retired parents, they can't