Everything You Need to Know About CRYPTO, & How to Gain WEALTH In the BITCOIN REVOLUTION | Raoul Pal

[Music] ralph paul welcome to the show man i am super excited to talk to you i'm really excited to be here it's going to be a lot of fun i think all right so for people that don't know who you are you're a globally recognized macro investor master investor as well uh co-founder of realvision but if you don't mind just walking people through uh a quick synopsis and for anybody um that isn't used to me talking about finance and cryptocurrency i am just on a mission to get people to understand what i think is happening now which is uh i've heard you use these words and you are a far better person to listen to than me uh but that there's a massive wealth transfer happening right now that gives people who have traditionally been disenfranchised a chance to get in so everybody even though um you know this is sort of beyond the scope of my traditional mindset conversations i think it's one of the most important conversations to be had right now so with that ralph if you don't mind giving us the background that'd be amazing yeah i'm going to give you a background about me and why i got into crypto as well as that's kind of where we're going with this conversation so my background was 30 i'm 31 or two years financial markets so i grew up in that world i grew up in the world of what is known as macro investing macro investing is when you look at all the asset classes everywhere around the world so bonds equities commodities currencies um credits all of these things and you try and look for what is the best return you can get maybe that's in india maybe it's in china maybe it's in the u.s so that's the mindset we have this 3d ever-evolving jigsaw puzzle in our heads of the world driven by the global economy hence why it's called macro because it's macroeconomics so it's driven by the business cycle trends of the global economy so i did that i was on the sales side for many years i ended up at goldman sachs where i started and ran the hedge fund sales business in equities and equity derivatives my whole career basically had been getting to know the world's most famous hedge fund managers from kind of 1990 to 2000 it was like being taught acting by robert de niro or you know lawrence olivier and he's ridiculous you know my my daily calls would be stan drucker mullet paul tudor jones you know the guys at soros et cetera et cetera et cetera so that was it plenty of crises and exciting stuff happened over that period very macro then i decided to make the switch in 2000 i saw the recession was coming and i wanted to invest and make money from it so i moved to one of my biggest clients which was the biggest hedge fund firm in europe at the time called glg partners and i started and ran the global macro hedge fund there so that was now me taking these bets on a global basis over that kind of very rocky period of 2000 2001 2002 2003 in 2004 then i decided i had enough and i moved to the mediterranean coast of spain um and started writing macroeconomic research i've been around the hedge fund business longer than most people at that point and i had a huge amount of experience both in knowing all of the players and also being a player myself so i started writing from that perspective macroeconomic research called the global macro investor which i still write 17 years later and that's read by most of the world's most famous hedge fund managers sovereign wealth funds asset managers that kind of stuff a really privileged position and it's that privileged position that got to me where i am today why i started real vision and why crypto because they're all part of the same thing so there i am 2007 and i'm thinking the world is about to fall apart and i'm writing about it and you know i'm one of the people that was you know on the right side of that and a lot of the people in the film the big short were clients of mine and we all kind of knew what was going on the world falls apart tons of people make tons of money out of it tons of people lose their entire livelihoods this is not good and it's not and so i started asking the question because people come up to me in the street and say why didn't we know and i'm thinking yeah why did i know well fine i've got a lot of experience and i managed to piece together the jigsaw puzzle but why does nobody else get to know this knowledge this was wrong and this was the rise of occupy wall street this is the rise of the anger of we're being screwed somewhere we don't know how we're being screwed and i re i believed in that too then i was in europe for 2012. we almost lost our entire banking system plus the eu itself i remember having to go buy a generator and dried food because i thought we were going to follow cyprus and we were going to lose the banks over one weekend we would have lost the banks on monday the imf forced spain into taking an 18 billion dollar bailout which rescued it in time then eventually we end up with this draggy i'll do anything you know that it takes to stop europe falling apart essentially and that stopped the tide but the same thing happened i was at the epicentre of it i knew it was coming we all made money out of it and everybody around me and i was yelling to everybody listen you've got to be careful you know friends of mine got destroyed in that in spain the property market imploded everybody's a real estate developer you know everybody got killed friends went bankrupt and they were like why didn't we know and first i'm like i have been telling you this endlessly but because i wasn't on television at the time they don't take you seriously i'm like it's bizarre you know i write stuff that the world's most famous investors read but if i'm not on television for an average guy i don't have credibility right i'm like okay i at that point started having two tangents which is realizing i need to do something about it that this this disparate information level that one group has everything everybody else has nothing and the other thing is i needed to make the world safer because we're kind of screwed because of this over financialization all the debt that we could lose the system at any point nothing had gone away the printing of money was just a way of wallpapering over the cracks that the the earthquake earthquake left behind so i'm like okay what can i do so the idea i had with a bunch of people was trying to set up the world's safest bank um and i tried to go and do that it was slightly arrogant or stupid probably to try to do because it's not easy and we got together quite an amazing group of people still we tried in singapore we tried in switzerland we tried in the us we tried it was just hard to do the system is not there for you to try and change and so in that process a friend of mine one of my uh clients tapped me on the shoulder and said you should take a look at bitcoin this was 2012. and i've been aware of bitcoin and i took a good look at it and he explained to me both the store value proposition and the blockchain element that anything could be trusted on the blockchain i looked at this and i'm like oh my god this is the future that we need because the problem we've got is when a firm like lehman brothers goes bust nobody knows who owns what and somebody's going to get screwed in that equation just one of the very issues at the center of the system nobody knows who owns anything so i started looking at that and i wrote i started writing articles and invested in it first time in 2013. 2014 i started real vision because i wanted to democratize the very best financial information nobody gets access for an hour to the world's most famous hedge fund managers unless you've invested 100 million dollars real vision changed that equation entirely and said listen forget all these sound bites on cnbc in three minutes it's worthless we're going to give you an hour of the world's most successful investors the best independent analysts and strategists and then you have a level playing field and that was a game changer i mean since real vision starts in 2014 there's probably been 200 podcasts that's copied that model so this is this movement there's two things there's the democratization of information and then there's crypto so crypto as it starts building out as an ecosystem you start to realize that okay this is now the fastest adoption of any technology in all recorded human history dude you have to say that again this is this is the idea that's gotten me obsessed with you with crypto is you talk about how there's something broken we're getting screwed and we don't understand where and now this new thing has come along but it's it's entering the system at a moment where it's sort of peak distrust and peak sort of throwing your hands up you're giving up you tried occupying wall street it didn't work uh you tried donald trump you've tried voting and joe biden you've tried everything and nothing changes so hit people with that quote again because this is something that and i'll i'll give my background for people that are hearing me talk about this stuff for the first time in a minute um but but that quote about this being the fastest adopted technology i think is important the internet from 1990 to 2000 grew at 63 a year that was the fastest adoption of any technology in all recorded history prior to that mobile phones was the other one but what happens is the internet technology and the mobile phone technology allows for these networks to be built and once that network's in place it's faster to build the net next network so in india for example they've just basically given out free data to every mobile phone in india so guess what uh data usage is the highest in the world and so their internet scaling becomes faster so this so the internet was huge as we all know and it remains huge so at 63 a year it then flattened out over time as more and more people got adopted so at 1997 it was growing at 63 a year and it was 140 million users of the internet in 2021 there are 140 million crypto users and it's growing at 113 a year double the speed now this is where humans struggle linear numbers and exponential numbers because it's exponential it means that growing at 113 a year we're going to go from 140 million people to a billion people by 2024 i mean so so so when you go back and what you how are you introduced all of this so if you know that something is being adopted at this speed and it's a networking of money at its core and you can buy an infinitesimal fraction of it so everybody can buy 10 of their net worth then everybody who takes this opportunity will probably have the biggest opportunity in history to make money hey guys hope you enjoyed the episode brought to you by our sponsors at blue blocks go to blue blocks dot com forward slash impact theory for 15 off your order or just use discount code impact theory at checkout all right enjoy the episode the other part that i want people to understand is that it's also coming at a moment where somebody like you no longer has to convince a gatekeeper to let you on tv that you can just spin something up because the other part of this equation is what i'll round to youtube so it isn't exactly youtube but it's that idea that you can put out this long form content that's video that allows people access to ideas and information that they never would have had before and getting people to see that you're now moving into a new phase where you and i i think share a similar sense of like okay entrepreneurship was very good to me it changed my life it made me fantastically wealthy and now i'm looking around going hey there's nothing that special about me the thing that made me successful is i'm a relentless learner so i'm just unafraid to embarrass myself to fall down to look stupid and because of that while other people are laughing at me i'm laughing on the inside because i'm like on a long enough timeline i'm gonna win because i'll learn and i'll figure this stuff out so now you get a group of people like me who succeed tremendously in a system where i'm looking around watching everybody else struggle and i'm like i will tell you everything i know like i'll just give it out as fast as i can because i want to live in a world where other people can rise up for whatever reason i i just am emotionally incentivized to also see other people succeed and so you're now in a position where someone like you who who essentially could have retired you know lives on this tropical beautiful island and like does not need to be doing all this reengages with the world and tries to give people that information and so you get this good i did a piece that's probably the most viewed piece i've ever done on youtube it's like i don't know two million two or three million views called the retirement crisis and it resonated because i i kind of showed how people people haven't seen it check it out on youtube it's well worth your time and it's a long time ago it predicts a lot of what's going on now and um the point being is that there's a bunch of retirees the baby boomers and they've kind of screwed it all up because they've got all the debt um they've got too much equity exposure it's really hard for them to retire this is why the federal reserve don't like equities going down because you've got this richest group on earth who are kind of stuck they never got enough money to retire on but i want to look through the eyes of the millennials so they are at 32 years old at the same age their parents at 32 the baby boomers had all-time cheap valuations of equities all-time cheap bonds all-time cheap credit all-time cheap property right so they couldn't help but make money they kind of screwed it up because they actually ended up going into debt as well but they couldn't help but make money so then the millennials had the opposite all-time record valuations equities all-time record valuation for bonds all-time record credit all-time record highs in property so i'm like these guys are screwed unless something else comes along and that thing is crypto because the future expected return of crypto it's been growing at 213 a year in returns i that's how much it makes even though it's very volatile sometimes it's down 70 percent over time you're making 213 a year it has grown as an asset it's gone up i think it's two million percent since inception no other asset in all recorded history has ever done this and we haven't even started i still think there's probably another hundred x from here not even the baby boomers got given that the s p didn't go up 100 x since 1980 so this is the magnitude of what's there so i'm screaming from the rooftop saying you might be cynical you might think you don't understand it you might think you can't afford to play in this but you have to listen because this is the opportunity you can't come back to me in 10 years time and say well we missed all of that all the rich people got richer no you i everybody else is saying now is your time don't be irresponsible you know dollar cost average do all the right things but here is your opportunity this is the biggest opportunity i've ever seen and i'm going to take advantage of it and so should everybody else this is not rich or poor this is an every person opportunity and we've never had this before ever dude you just gave me like sustained chills this is not rich or poor this is an opportunity for everybody but you really have to move on it so i'll tell my own story so for anybody that is uh pushing back feels late to the party whatever find some solace in my like willful ignorance so i have always seen myself as good at making money and terrible at investing money now you have to be very careful what story you repeat about yourself to yourself and i just kept saying that like i'm i didn't want to focus on learning about money math doesn't come easily to me i don't like whatever that ability is to conceptualize numbers i don't have it so it's like i really struggle with that stuff and one of my employees was like tom are you looking at crypto and i'm like david i'm just not interested in investing like it's not it doesn't speak to me at all and and he just kept coming back like tom you really need to look at this you need to look at this and i'm like david how many times do i have to say like i don't find this interesting i want to build a company and i'll make yeah i've already made myself wealthy i'll continue to generate wealth and help other people by building this company i'm not going to look at it and then i had been introduced to the idea of digital scarcity about six years ago and i thought oh that's going to change my business and then but the technology wasn't there and so or i should say the networks weren't there and i promptly ignored it and then when it popped back up at the beginning of 2021 i was like i'm all in because i i understood what it was going to be so i start researching nfts the technology behind it and that inevitably leads you to the blockchain of course which then leads you to crypto which then i was like wait a second what like this is literally somebody is essentially going hey you know all those things that make gold like this wonderful store of value we're now moving that on to computers and so i've been saying for years technology is a one-way street i'm a total like techno optimist there is no going backwards like this only moves forward so now it's like wait people are digitizing money and then the poor david who'd been telling me for god knows how like eight months that i needed to look at it i was like what the hell so i start researching hardcore about what it is and i'm like wow not only do i have a fiduciary responsibility to myself and my family to learn about this i now felt absolutely compelled to tell people one simple thing research it you may decide that it doesn't make sense because i don't think i'm smart enough for people to listen to me i i do think that you're smart enough for people to listen to you and you're certainly educated but even if they reject it like there there is this moment of you pull back the curtain and you see the wizard of oz and you're like oh my god this is going to change everything and it's it's like a dime drop on how it works and that's when i was like whoa i have to move on this and i have to tell everybody so like you i'm screaming from the rooftops i just don't know how to do it as intelligently and what's what gets worse about this is this affliction this crypto affliction we all get right the rabbit hole as it's known you start with understanding money which most of us don't think about then you kind of understand how we're getting screwed by central bank printing and that the debt-laden economy and what it means and then you start saying okay but that's bitcoin and then what's this ethereum business and then you start realizing decentralized finance you're like it's kind of a finance thing but that's kind of cool because i can get yields now you know i can get instead of getting zero on my bank account for my hard savings i can now get six percent a year wow that's a difference it's like going back 25 years in time and then suddenly nfts come and community tokens and suddenly your mind is completely blown that this is not just money it's the entire exchange transfer and storage of value for the internet whole business models are about to change massively because of what this technology unlocks and then once you get your head around that you're like oh god i can't even hold this in my mind any longer it's so big and that it's not just buy some bitcoin i'm gonna make some money over time you know it's actually an entirely parallel financial system and business structure for the world and it's being adopted faster than anything we can ever imagine so walk people through what is it and let's start with bitcoin because i want to take cares to differentiate between bitcoin and ethereum um and i guess full disclosure to anybody listening my uh i invest in essentially three things bitcoin ethereum and chain link i i'm a use case maximalist i guess uh and i understand those three i'm not saying they're the only three i'm saying they're the only three i understand well enough to invest in um what is it that makes bitcoin interesting enough that so many smart people see this as ultrasound money and what does ultrasound money mean the world has a history of money whether it's backed by gold or not where government gets themselves excessively into debt and they devalue the money so the romans used to clip the edge off the coins so there was less gold in each coin and eventually people would lose faith in the coins because they'd blend them with silver and then blend them with copper and you know the coins were worthless because that was supposed to be worth the value of the of the dinari in roman times but governments can't help themselves humans we're just humans right humans are fundamentally flawed creatures and we always will be so then we have the gold standards you know the us and the uk are on gold standards world war one world war ii we all have to leave it because we've got too much in debt again we've overly financialized yet again because humans love leverage above all things it's kind of sex and leverage are the two things that drive humans for some reason then we adopt a new system which has been around before but it keeps getting abandoned called fiat money fiat money's money not backed by anything it's backed by the promise of the central bank paying it so that's the dollar bill that we all are familiar with and every country in the world now adopted fiat currency but as with everything if you're really thirsty and i gave you a bottle of water or sold it to you you'd probably pay me 10 times too much for that bottle of water if i give you a million bottles of water they're worth precisely zero to you so scarcity has value that's arts that's cars that's almost anything humans value scarcity for whatever reason we do and so if you're printing too much money you're creating less scarcity so yes there's money everywhere but the money has less value so once you understand that you say well what does it mean the dollar hasn't collapsed it's kind of where it was versus the euro in the last five years or whatever it is and then you say huh but my fifty thousand dollar salary now can buy me much less shares in apple amazon google microsoft in fact units of the s p 500 i i suddenly can't buy as much since 2008 it's a fraction i can buy like a third of what i could same with real estate same with gold and then you're like huh assets have suddenly got expensive they haven't the value of your savings has gone down or your money so you can't afford to buy assets what is an asset an asset is deferred consumption from the future i buy a house i sell it in the future i get to retire whatever the the things are right we don't buy the s p because we want to hang it up in our wall we buy it because we want to sell it at a future date to realize money so that means our future selves are now poorer that's essentially what this means that's what currency debasement is so bitcoin comes along in 2008 in the middle of the crisis it's kind of like it was perfectly prepared for this and said satoshi goes hey look at this i can create an algorithm that only creates so much of this thing the bitcoin and it can never vary ever so therefore this is scarcity that humans can't around with now humans have this propensity to around with scarcity because they're economically incentivized to do so here they can't so then they become economically incentivized to own this asset because it's scarce and it cannot be changed because it has this consistent supply curve and a limited number so bitcoin becomes this great store of value and it would look like gold because gold's a good story value it's worked for thousands of years but bitcoin has this other thing to it it's a network which gold isn't and it's technology which gold isn't so we have use cases and the benefits of building a network so suddenly it goes up exponentially in price roll onto 2015 and suddenly somebody's looking at the blockchain and they start saying imagine if these bits on the blockchain which is where you record the ownership of something in bitcoin it's bitcoin itself what happens if we could put a contract in there because humans live off contracts you know everything is basically a contract in our legal terms and that was the rise of ethereum it became a platform where you could programmably change the blockchain not the attributes of the blockchain you couldn't remove anything off that ledger but you could change the little holding buckets and say well it can look like this could look like that i can adopt to this and those things were verifiable as well so they couldn't change so this created a theorem which became the platform so if you think of bitcoin as the store of value this very pristine beautiful thing then you think of ethereum as also a very beautiful thing but it's a much broader application because it's like programmable money yeah there's one concept that i want to nail down here and if you think i'm crazy let me know but when i think about so i've worked in the inner cities a lot and you begin to realize wait a second the generational poverty is a mindset knowledge problem far more than it's a money problem because they manage to pass on a likelihood of being poor and so when you think about okay well right now in the in the us for sure and i would imagine most of the western world that your zip code is the number one predictor of your future success more than your iq which i'm just not willing to live in that world but that's a really fascinating phenomena and when you begin to ask the question how is that possible so you have extraordinarily smart people that regardless of their iq are going to be trapped in a poverty cycle why is that and some of it has to do with what a guy named jeffrey canada discovered in terms of the language centers of your brain and if you're not hearing enough words when you're an infant just the language centers don't develop well and you can have a hard time interviewing for jobs and climbing the sort of traditional corporate ladder in that way and then they just also help you with communication but the other part is what is what i call your frame of reference what do you believe to be true about yourself and about the world and one of the ideas that fails to get passed on in that poverty cycle is an idea of ownership and once you understand ownership now you get into that cycle that you're talking about where you can you can sell something in the future because you own it today and you hopefully buy low and then sell high and that really is like just the dead simple equation and i just to plant a flag that we'll come back to hold all these ideas in my head you had mentioned earlier as like a throwaway that a lot of wealth was generated in the collapse and of the economy and so i want people to understand that this is a game and i don't mean that in any sort of derogatory way but it has rules and if you understand those rules there's always an opportunity especially in moments of disruption and we're living through this incredible technological disruption right now okay so back to this idea of ownership so when i look at bitcoin what i see is something that i can own right there will only ever be 21 million of these now like anything as noah you you've all know a harare says even money is just a story right it's a fiction that we all tell and it only has value when we agree that it has value so bitcoin has that same sort of achilles heel that if tomorrow everybody stop believing that owning that has any value then it would have no value but we have this ultra scarce thing that the last 10 years have proven people believe has value and you can own a piece of that and as we go if it is true that more and more people will pour into this digitization of economic value essentially then that those 21 million units are going to become hyper scarce and hyper valuable now the great news is that you can fractionalize it so you don't have to own one you can own some tiny tiny tiny uh fraction of it but now you you have ownership so you're able to buy something now that you can own as it appreciates in value and then you can sell it later and so it becomes just this buy and wait game that real estate maybe still is but that's why real estate has worked overtime you owned it you could also live in it which is certainly advantageous and then the expectation was that it would go up in value when i think about ethereum at first i was like okay i like how much you know we haven't even talked we haven't named metcalf's law you've talked about it but this how you can value something based on its network adoption curve and so i could see there was something going there and then when i got into nfts i realized i just had to buy a bunch of ethereum to use it and so i was like okay well wait a second if i'm over here like scrambling just to buy it to spend it i'm like this is me being able to buy into the dollar when it's like new and nobody's sure if we're gonna use it i thought whoa i would take that opportunity so that's how i see the difference in the two one is just sort of straight ownership of something and then one is like well i know people use this and because people use it and there's controls around the supply that the odds are that it will go up in value ethereum's kind of like owning a part of the internet it's as you said i mean everybody has to use ethereum basically that uses this crypto rails unless you're just in the bitcoin world but everything that we've talked about and everybody will have even if you're not very familiar with the space we'll have heard the term defy or nfts or tokens basically most of that is still being built on ethereum and as you said the network so what is this metcalfe's law that you and i have referred to metcalfe's law is it really started to become understood in the 80s and then much more so as mobile phone networks started these giant connected networks right because digital technology allowed networks to connect before it's humans we couldn't connect with each other in the same way so networks connect with mobile phones suddenly they explode in value you know all these phone companies huge companies and if you added them all up around the world they'd be worth tens of trillions probably we just don't even think of it in those terms because they're fragmented networks then the internet comes along this free network and everybody builds on top of it and they create network effects like the most classic example is facebook facebook connects us with friends and family and in exchange they get your data they sell you adverts and they so you've got a bunch of people using it a bunch of businesses now building on it and this advertising monetization structure shareholders get rich the uh you know you and i get to unfortunately meet somebody from university that we don't want to talk to that we met 20 years ago and we're now connected with again you know it's that but the network that ethereum and bitcoin does is different you're the owner of the network and the user so as a user like you said with the nft you're actually owning a share of the network itself so everybody uses it owns a part of it therefore if the network's going to get used a lot you're all going to get rich and the value of the network's going to go up massively and the more people built interconnection so metcalfe's law is not only just the number of nodes either number of users but how much they connect with each other well you're seeing it because there's nfts and there's defy and there's all of these applications or the store of money aspect these things all together and then there's the linking of all of these like chain link or you know some of these other protocols um polkadot they're linking all this ecosystems together so i can send you a dollar instantaneously and we have no idea whether it went on bitcoin rails xrp rails ethereum rails and guess what we don't care i promised you a dollar you want to get the dollar instantaneously that's interoperability that's all coming so this is what ethereum is about it's the magnitude of this network where everybody's developing everything on top of it and it's scarce supply so it's seeing an even faster adoption rate than bitcoin now um for for the reasons that seem pretty clear because it has more use cases than currently the bitcoin blockchain does doesn't mean bitcoin blockchain can't in due course but right now there's a lot more use cases in ethereum it's super exciting do you think that bitcoin would need to do something like that in order to retain its value proposition no i think its value proposition stands above all things it is pristine it's pure it is what it is um and you know the way it's so impossible to change any of the attributes of bitcoin makes it a bit clunky and that clunkiness is its beauty it is so secure it's the most secure of all protocols so let it be what it wants to be now people are building things like the lightning layer which allows you to do lots of fast payments over the top maybe that scales maybe it doesn't doesn't really matter that store of value for every person to think of like it's owning a piece of manhattan real estate at low prices that's never going away not in the conceivable future because humans have now said it has value and it's being adopted very fast so no ethereum's a very different thing it doesn't compete that's how i like to think about it and unfortunately when you go online people will tell you well it's competing and it's not as good you have to ignore all of that and look at the whole space overall and say and just be honest saying we don't know where this is going to be in 10 years time and like you say so therefore i can own three of these things and probability is i'm going to capture a large part of this and maybe i'll adapt in due course and so yeah one thing sorry go ahead yeah so it's it's don't over force the narrative just be broad be open and always be learning as you as you rightly said because we don't know this is all new and it's happening at lightning speed yeah that's the thing that i i am certainly most attracted to with you and the way that you are and seems to be something that people echo a lot about you is you're very open-minded is your open-mindedness the reason you have been successful or is it a response to the struggles of getting to where you've gotten in your life i you know it's i think it's part of it is my background you know my father's a first generation immigrant from india my mother's a first generation immigrant from holland they met on a blind date in birmingham in the uk i've lived in india i've lived in spain i've grew up in the uk i've lived in the cayman islands i've traveled the world so it forces you to be open because you've got different religious backgrounds there you've got different massively different cultural backgrounds um all of this stuff forces you to be open-minded so i'm generally open-minded by nature just because of that and macro investing is all about being open-minded to other possibilities so once you learn the trick that it's okay to say you don't know but i think this might be how it plays out so you think in what's known as probabilistic terms then for that to happen for you to say look i think there's a you know there's a 80 chance that bitcoin over the next five years is going to 250 000 that's a reasonable odds what's the 20 chance that it doesn't okay so you need to open have both of those things in your mind at any one stage and be assessing them i learned that from the book uh i think it was the alchemy of finance by george soros who was probably the most famous of all the macro investors and he would talk about this a lot that you have to have these kind of logic trees of think your probability trees and once you understand that you can even bet against yourself which is really hard to do and i can't do it but some of the best traders can be you know long the s p i think the s p is rising but then they think the odds of it falling are getting higher and they start selling against themselves it's like it's it's very hard to do but that kind of investing teaches you to keep an open mind because you're looking at the whole world and you have to know that we don't know the outcome anybody who tells you that they know what's going to happen it's just a fraud it's just the open mindset i don't know but i think and this is why i think that's all you need to do that's open-minded in a nutshell admitting that you are fallible yeah i think that that is extraordinarily smart um one thing that i've noticed about entrepreneurs is the most successful are the ones that are able to hold competing ideas in their head at the same time and you so when i'm teaching entrepreneurship one thing that i talk about is okay you have to have this narrative so you have a goal you're trying to get there you know where you are there's a chasm between where you are and your goal your goal is probably uh you know skate to where the puck is going to be so it's something where you're making a bet about how either culture is moving or technology is moving and then you have to create a narrative that says this is how i'm going to go from where i'm at to there and what that narrative does is it it smooths out some of those like leaps of faith that you're going to have to make in order to get where you want to go but then you know bringing this back to somebody in the finance world that i've learned a lot from ray dalio where he had that just catastrophic learning event where he realized you know we had all this conviction about something that was happening in the market and he ended up being wrong and it just obliterated his company and he realized okay you can believe you're right but you have to hold open in your mind how do i know i'm right and constantly be looking for disconfirming evidence so it's like i tell people you have to have all this conviction you have to be able to lead with conviction you have to be able to go into something believing this is going to work my narrative is true that's how i'm going to cross this chasm to get to my goal but you better have opened in your head this idea of i have to challenge this narrative i have to constantly look for the the ideas and reasons why i'm wrong and if you can't do both race forward with conviction and constantly battle test that idea you are in trouble and that's why being an entrepreneur is so damned hard the narrative of entrepreneurship is start thing in garage borrow money off parents or start on your credit card three years later billy there right that's the narrative and then you write your book on on how i manage my company right that's actually not true the best book ever written on this is ben horowitz is the hard thing about hard things what you have to do is battle both your assumption as you say and test it endlessly you have to be paranoid excessively paranoid but still confident in that you're right and you also have to accept the risk of failure because the moment you accept the risk of failure which is very high in startups you'll start hedging against it once you stop worrying about failure as the narrative you tend to attract it it's a really difficult thing people who fear failure above all things tend to fail more people who don't look at failure and just look at the moonshot tend to fail too it's the people who can see failure as a wolf behind them and the testing of the ideas but still having the conviction and maybe changing paths because the wolf is catching up they tend to fail less but it's hard makes you feel sick you don't sleep at night and that's you know the beginning of ben horowitz's book basically is two pages of what that feels like it's called the struggle and that the struggle is probably the most profound two pages in all of entrepreneurship and it's true and it's hard that's a great book um so going back to investing i want to lay out for people that might be new to this they're not seasoned investors the idea of dollar cost averaging was extraordinarily comforting to me um and i'd love to go into what it is why it's useful and whether you think that applies to what's happening in crypto so there's a mythology of investing the mythology is investing is hedge fund manager george soros spots the opportunity gets in at the right price makes a fortune the reality is most people have no idea where the price is going over a short term so what happens is you buy something you put all your money in you've saved up your 5 000 bucks you put it all into bitcoin bitcoin falls 50 you panic you sell it you feel terrible bitcoin goes back up again you feel even worse now you can scrape together you know you've you've lost you know half of your money now and then you've you you you keep compounding these errors right it's called market timing and market timing is extraordinarily difficult you know i i do some market timing because that's been my job and 30 years i've done more than my 10 000 hours a lot more than my 10 000 and that doesn't make me very good at it either i'm not bad at it in long term investing i'm terrible at short term so what is dollar cost averaging all the cost averaging is basically what everybody does with their 401k the problem is with 401ks or retirement funds is nobody cares about them you don't know what's in it you have no ownership you just put some of your salary away and it goes in this mythical thing that you probably assume won't be worth as much money as you hope it is that's what that's become and you put it in every month why do you do that well because you're averaging all of the highs and lows over time because markets tend to do this so you're kind of indifferent in fact you love it when it falls because you're buying more units at a lower price because your game is to own as much as you can at the lowest possible price but if you don't know how to market time and 99.9 percent of people don't and can't and shouldn't then you just average in overtime and magic will happen you just average a beautiful price over time and had you done that in the s p or anything else you make money now what's so lovely about bitcoin is it's not a passive investment like your your retirement fund because a retirement fund you can't access until later so you kind of write it off and you you know everybody's heard that it's never gonna be worth as much as it should be anyway so it's become a bit of a pain as opposed to something for this you own you live and breathe that volatility and you live and breathe those gains when they happen and you will be like wide-eyed i did it's my sister-in-law forced her to do this i said listen i'm gonna make it easy keep just gonna open a paypal account start that way and she had some savings um she could take out of another thing she had like 5 000 bucks 10 000 bucks and she put it in and we got the timing relatively right so it shot up a lot i think she got in about 13 000 in bitcoin yeah and it shot up a lot so she's like wow and then it falls a lot and she's calling me up saying what do i do should i sell some i'm like no you keep putting in part of your paycheck and after all of these falls there's several falls she starts to really understand and when they start falling a lot she starts doubling the amount that she would have normally invested and now she's taught herself to invest next thing i hear are well i thought some ethereum and this is how i'm dealing with that so she's now looking at two different things and she's now thinking about the asset allocation what's going to outperform ethereum she knew nothing about this stuff this is a year and a half and she now understands because of that dollar cost averaging and taking ownership that you exactly as you said once you actually own something that 401k you don't actually really own it's like some other guy does something with it and hopefully he makes money this is you you're taking responsibility for your own finances that's so empowering one thing that i think is really important that i haven't heard people talking about and just because my mind is so simplistic when it comes to investing is i look at the stock market and i've got a money manager and like all that and she's trying to explain to me puts and calls and all this i'm like oh this is so confusing i don't want to think about this i want to go run my business and so i yeah i just never wanted to get on the phone and talk about it was just too complicated part of the glory of what's happening right now in bitcoin is if you stay or crypto if you stay sort of at the top of the ones that have the most sort of crowd validation because you can get into the deep weeds on what's going on in all coins but if you just stay at the top which has massive crowd validation and you go okay i'm gonna buy a bit of bitcoin i'm gonna buy a bit of ethereum and then you learn like your sister did about the volatility and like how to ride that wave and to recognize and and for anybody listening if you're new to this idea have a thesis you dollar cost average based on your thesis so here is tom's overly simplistic thesis that i believe that technology is a one-way street that very few people are in cryptocurrency right now i believe that over time it will take over some massive percentage of uh the financial system so let's say that it goes to i don't know become a 10 trillion dollar asset so i can buy that i don't it doesn't take an extraordinary leap of faith it's at just below i think one trillion as of the time that we're recording this so i'm like whoa 10x my money like that would be incredible okay well as long as i believe in that thesis i want the price to drop so when the price drops i'm not panicking i'm like yeah buddy because like you said now the amount has gone down so when i first got into this it was the height of the euphoria like bitcoin was just going to the moon it was just insane and so i was like oh my god i have to buy into this and so i bought in i started dollar cost averaging and the price is going up up up up and i'm still dollar cost averaging and i'm like oh man should i be going faster like the price is going high and i'm like no no dollar cost average you never know what's going to happen and then boom whatever happened uh you know i guess it was like a month ago six weeks ago something like that it just went down like 30 40 and i was like oh thank god i still have one my thesis is still intact two the amount of money i was willing to invest i haven't hit yet so now at this much lower price so what i am training myself to be obsessed over is the the break-even point so if my original break-even point was let's say 52 000 for bitcoin as i came down and i kept buying in and buying in and buying in now my break-even point goes from 52 000. i got it down to like 30 something and so i'm like this is incredible so now that we're riding that wave back up and i'm telling my wife like we're up this much in 48 hours we're up this much in a week we're up this much in 10 days she's like what like it's it's almost impossible to believe and i'm very careful to check that like the hey the euphoria is dangerous you have to be careful you have to constantly like the wolf is right behind you like you really do have to be thoughtful but dollar cost averaging based on a thesis that's the way to go there's another thing i think it needs to be said is you're now faced with something that really offers people enormous opportunity you took a ten for one i think the space over the whole space over the next 10 10 12 years is probably 100x right that's a whole asset class we've never seen that in history in that space of time but humans are humans we go back to that fundamental flaw is we love leverage tell people what leverage is for the the beverages when you borrow money to buy something so let's say you had borrowed to buy the original bitcoin purchases and let's say you put down half of the money so basically at 27 000 or 26 000 you've lost all your money now bitcoin hit that you'd have been wiped out and you'd have had to pay somebody and you'll have been liquidated and then bitcoin goes back up in price and you'll have missed it all that's what leverage does because it's okay in a house because house prices aren't very volatile so occasionally once in a generation you get a 2008 thing where the house prices start moving a lot and suddenly the people's equity in their house wasn't enough and everybody gets liquidated i.e the bank says we want our money back that's okay to take that risk if you're cautious in housing in crypto this thing moves around like this it's predictability in the short term it's extremely low unlike housing predictability so just don't borrow money to do this that's the if i can get that across then you don't care if it falls to 26 000 or 10 000 because you can buy more units at the lower price over time and you don't care and then when it's trading at 500 000 you'll have become extremely wealthy it's as simple as that don't over complicate it don't think about derivatives futures options none of it just do stick with this simple plan don't use leverage dollar cost average think about as a five to ten year investment and your probability of success is going to be extremely high all right my friends let's talk about blue blocks blue blocker glasses have been a game changer in my life if you're someone like me who is sensitive to artificial lighting and extra sensitive to artificial blue 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my friends give these a shot i use them all the time take care and be legendary it's funny how when it's dropping there is you begin to question everything you thought you knew in the euphoria and i've never lived through this so for me i was fresh out of college when the internet was really booming and i was not focused on business i wanted to be a filmmaker that was it i was just entirely focused on that and so the sense of like when people talk about euphoria in the market i didn't really understand what that meant but like now especially with social media when bitcoin is going to the moon like you can just go on twitter and everybody is so happy and it's like it just feels there's so much energy and so much excitement and so much conviction and then boom it'll flip on a dime and people start panicking and i remember so one i don't buy on leverage just remember humans are ridiculous that's all you have to remember they're hilarious hilarious and by the way i'm in the middle of it like i don't think i'm above this by any way and when the price turned and so i was like i called my family i'm like guys you must get into crypto and they were all sort of paralyzed by a decision so i said look my wife and i are going to help you open the account and then we will give you money the only catch is you must spend it on crypto and so we did all of that and then watching everybody's like emotion flip when the price started dropping and for a minute i was like wait do i have like enough conviction in this and i was like okay technology is a one-way street i believe that this is gonna digitize as an asset class i will watch and pay attention if something new comes along but for right now yes it all holds and so i was like okay and so i just kept investing and then as i like i said i started focusing on that that breakeven number pulling down my cost of interaction there's a name what's the name of that like your the point at which your average buy-in cost of entry perfect so watching that come down became like my obsession and then so i start getting that low and i'm really excited and i keep buying in and then it flips again and it starts going back up and so now i'm like okay i've ridden a wave i know what it feels like when it drops i know how you still have to like check your thesis 100 dollar cost average 100 but now because i did that now i'm getting the gains as it swings back up and i'm still in a range that's what's crazy there's so much money to be made even just by taking advantage of that like momentary volatility now i'm not i am a macro guy in the making i think only long term i'm not going to sell as i keep telling my wife as fun as it is to watch it go up everything is noise sub five years so like just don't even think about it it's quite funny because i'm you know i've become pretty public in all of this space and i've got a very clear idea of what where everything is going and how it's going to go so i have my thesis and when everything starts falling apart like the market starts moving hey i look like how has it moved in the past and it's done similar things right and i've been telling everybody who's ever got into the space you need to expect a 50 correction in a bull market and you might see a 70 bear market and over five years you'll have still made more money than you could imagine so you have to accept those things so this thing starts tanking bitcoin starts first then then ethereum rolls over later and it also and it's all down 50 and i said i've got this weight on my shoulders i've got all of these people have been following me i have been telling them this but you know it's messes with your mind and i pick out the one chart that matters to me which is the adoption chart is anything that's going on with china and mining and this and that changing the adoption curve or not no so then as you said the relentless rise of technology continues so la la la i can't hear it so i turn around to my wife and i'm like you know you know it's fallen 50 everybody's freaking out and she just looks at me and goes you are all so ridiculous she said you said you should expect this now it's happening everybody's freaking out and she just walked off and said debbie's she just said so stupid and walked out of the room and i'm like yeah just you know twitter is somewhere sometimes or reddit or whatever whatever forum you're on is sometimes your enemy um and sometimes you just need to turn that off now it's been the same with investing in amazon right the reason bezos is so wealthy because he was probably one of the only people in the world who had amazon shares from the beginning and never sold them because it went down 95 percent oh in 2001 2. it's had several 60 falls and it still made him the richest man in the world this is what exponentiality looks like and for people who are a little more savvy there's a magic trick to everything to keep your sanity in this because this stuff goes like this then it does this and is you'll see this like free free charting almost on every platform now trading view something like that just change the scale to a log scale logarithmic scale and what you'll find is like you look at facebook it goes like this you look at amazon goes like this right and it always feels like i can't buy this this gone up too much you know that that fear that you had at 52 000 right but that's real you've changed it to a log chart and it's a beautiful trend and you realize it's all noise and yes those movements can be 50 60 but it's just moving in that lovely little trend facebook has done that since 2012 never deviated nor has apple nor has microsoft nor has google none of these have not even tesla and nor has bitcoin and noise ethereum they're all network effects and they're priced in the same way they're all exponential in nature which we can't get our heads around until you put it on a log chart and it makes you calm down what what does the log chart do i've heard the phrase but i i honestly don't know what that means the scale so normally a scale would go like a bitcoin chart well because it starts really low it might start at ten dollars and then it's got to go up to 65 000 so suddenly you're seeing a move a thousand dollar move um it looks small but before it was big so what happens is it squashes the charts because most of the price action has happened from let's say ten thousand dollars to sixty five thousand so you keep getting this looks like this all the time and so this is just by stretching out the timeline no so what a log chart does is change the scale where it doubles every measure so it goes ten dollars a hundred dollars or it goes 10x let's say ten dollars a hundred dollars a thousand dollars a million dollars what that little trick does is smooth out all of this issue um so you'll get comfortable when you look at it just to realize that and look at the scale look how it's changed versus the other scale and you'll see from that it basically compresses all of this it's the same as if you do use percentages because you know a 5 000 point move now in bitcoin is not the same as a 5 000 point move when it was at 5000 it would have been 100 and now it's not that's like whatever it is today 10 so it's it's it's changing that and that that really really really helps it's interesting so you're getting into the psychology of all this which i find utterly fascinating of it doesn't matter what you look at it matters what you see so you're looking at this chart you have to be very careful because if you they most of the charts at least i use uh coinbase pro so it defaults to like a really short time period and so it's just like oh my god like this is all over the place why do they do that because it makes you trade more yes yes yes no doubt you're like oh my god i need to sell i need to buy what do i need and then you zoom out and put the the five-year chart or 10-year chart i said oh this is noise that's exactly what it feels like and i've heard people talk about that i think it's very sage advice when you're feeling stressed zoom out like literally zoom out the timeline so that as you broaden out and it's like okay okay okay this all gets very smooth and easy to handle now the best way to look at somebody's conviction around their thesis is to see what their percentage allocation of their net worth they have in said uh thesis so when i started in crypto i was like okay one percent i'll i'll get to one percent i just don't want to be a fool it's sort of schmuck insurance then as i got to one percent i was like well this feels pretty good i'm gonna go to two percent and then that's where i was about when it started to fall and so i was like okay well here's my opportunity to buy in thesis is still intact why don't we go to five percent and so now i'm like well five percent feels pretty good i'm thinking about 10 so what is your allocation of course i know this punch line but it'll be interesting for people that don't know so i am this is going to sound weird when i tell you but i'm actually risk averse so i own a few properties myself and i live in them so i don't rent anything out you know these are this is my bank is lifestyle so and i and i like to live in nice places so that i don't consider consider money that i'm investing or doing anything with that's just buried in lifestyle my shares in real vision as an entrepreneur they could be worth nothing they could be worth gazillion that's not part of it so what really matters is your liquid net worth the money that you've got available to invest and i'm a hundred percent in crypto and i feel like i'm underexposed so maybe i didn't start with enough cash um that i should you know i should have had more in cash you know um as opposed to in real estate or whatever but it's a hundred percent and i feel massively underexposed now why can i do a hundred percent because i have income i have numerous sources of income so i've always got money coming in if i lost well you're never going to lose 100 because i've got no leverage so it could go down 80 and it'd be back to roughly where i bought it so i'm kind of safe in this crypto space now i can't really lose money but i've got cash flow coming in so even if i did lose it it's not gonna change my life and in fact cash flow coming in gives me an ability to buy at lower prices so i'm structurally set up to take up take advantage of the biggest opportunity i've ever seen um and i'm comfortable with that now i don't know what percentage of my total net worth it is because i don't think of total net worth as total net worth because those are things that are never going to change you know my my my beach house a little came and do i sell it and buy something else not invest in something else with it that is the answers lifestyle is the answer to everything right we don't do anything else for any other reason i don't think or you shouldn't to be rich is not is not a future state to have the lifestyle that you want is the future state and that can be anything you can live on a shack and a beach in nicaragua and be the happiest man in the world go for that so that's what i care about but liquid net worth yeah everything and i feel underinvested and desperate to you know waiting for the next quarter when more income comes in to put more in because i feel underinvested at all times that's how that's how much conviction i have i've and i've never done that before ever in my entire lifetime have i ever taken a bet like this i want people i want to make sure that they hear though that you've got the income coming in that this is not a leveraged trade i think that that's very very smart i don't have debt this is my pool of investable savings it's my entire life savings because i don't count the house and all the houses and stuff so i can't be forced out of it i can't lose everything and i've got an income that tops it up so i can buy more or if i get the bet wrong and it doesn't go anywhere for five years i can get i can buy other stuff i can cover my cost of living everything is fine so yes it sounds and i call it irresponsibly long but it's actually not very irresponsive it's actually quite responsible it's just a very high conviction better yeah this is such a fascinating time and i'm very aware and it sounds like you are as well i'm very aware of okay i'm a by internet standards i'm a somewhat public figure there are people that listen and i i feel this obligation to tell people you you just have to be aware of what's going on i don't trust my understanding of investment strategies enough to tell people hey go do exactly this but i like when i really think about the things that would mess with my head it would mess with my head if cryptocurrency ends up being what i think it's going to be and i didn't tell people to at least research it because what so my wife and i end up getting just fantastically wealthy and you have this moment where i know you've dealt with this where it's like do i buy an island and retire and just you know check out and sit my ties on the beach all day or do i recognize that what really matters is meaning and purpose and so i want to do i want lifestyle i'm with you on that but at the same time i want to matter and i want to help other people and so then you come into the game and you go okay who am i going to help and because of our background we had about a thousand employees that grew up in the inner cities and you just see what a devastating force it is you come to the realization i talked about earlier which this is a mindset problem and so we start thinking about okay how are we going to address this you get in you realize people's monies towards people's attitudes towards money and that becomes one of like the key areas where i want to help people so originally it was all about giving people an entrepreneurial mindset so they could control their life and i really believe in that and i think that when you think which to me is just taking ownership of your life and recognizing when you have a company the buck stops with me i have to figure this out there's no way to hide because i'm either going to be able to pay my employees or i'm not like there's there's just no in that and so you realize okay the market's always going to win i have to figure out how to run this company well so that i can pay everybody so super powerful mindset now crypto comes along and i'm like oh my god this really is this it is a moment where all the people who are angry frustrated disenfranchised this is your shot and i heard you say this this is so powerful thinking about the words you said or giving me the chills where you said this is the first time where the retail investors so the average everyday person gets to front run meaning go before the big institutions it's always been the other way around the big institutions take the like cream off the top for themselves and then all of us get the leftovers and this is the first time where it's flipped so if you think about rolling hood or any of these big ipos that have just happened what they're basically doing is there's a bunch of vcs who've made 1000x 100x whatever the number is and they've got obscenely rich investing in something that you're not allowed to invest in because of the law because you're not an accredited investor and in fact the system's so set up that you're never ever going to be shown this opportunity and then at the very end when the assets gone up so much they then list it on the new york stock exchange or the nasdaq and dump it on retail when the best gains have been had now within that there's always going to be an amazon and a microsoft and an apple but your chances are getting it at the higher price so you're the 52 000 guy and not the averaging at 30 000 your probability of success is always lower than those guys so the system is against you in this the institutions are being held back by regulation and can't do it but we're not and we know that they have a lot of money because it's actually our pensions and so we they're going to put our pensions in this in the end well we might as well make money from them coming into the market later and driving up prices ridiculously because that is what's going to happen once this etf is listed every raa in america is going to be advising their clients to buy the bitcoin etf and the ethereum etf and it will drive another half a trillion dollars of price appreciation you know this is all coming um and it is the opportunity and i've tried to set everybody up like you i've had that sense of responsibility real vision was about that but it's also a subscription model so i purposely give ridiculous amounts of information out on twitter that's free subscription models because i need to pay my staff and create a proper business that has value but i give a much out on free we give tons of stuff out on youtube and tons of stuff out in the podcast and then with crypto i just thought it we're going to give the whole thing away free so kind of real vision crypto is a free channel we said we're going to get sponsors from these big players because they're making tons of money the exchanges and others they can pay for everybody else to get access so i can pay the staff for the crypto stuff because it's that important to me it's like guys i'm giving you everything you need we do five interviews a week with everybody in the space and they're so good so there's no excuse not to educate yourself it's all there at first you go in there and go oh i don't know what this is all about that's okay you'll find the thing that interests you and you'll find your way in and then you'll go down the rabbit hole but yeah i passionately believe you know that the future of everything is based around community you have a community in what you do i have a community around what i do and part of community is the inherent or the the inherent agreement that you're all in this together i'm not going to be extractive of you and you're not going to be extracted from me but together we can all benefit from being part of this community crypto is a community in its own right and we're all benefiting for being part of that we're all part of that community but i think that that's why both you and i are very passionately passionate believers in bringing everybody along for the ride because everybody around us has enabled us to to build this amazing network and all of these things so they should everybody should share and this is something that you'll pick up from my interviews i've been talking about a lot all of this is going to get tokenized too culture is going to become an investment the probability of there being a tomcoin within five years is something like 100 yeah so i definitely want to talk about that because i think you've got some really fascinating ideas there um before we move on i haven't talked about this publicly but this idea of a credited investor so i don't understand why people aren't rioting in the streets it is the most obscene and it's masquerading and so i'll explain what it is people you tell me because you understand this a lot better than i do tell me if i go straight anywhere so the government is basically saying hey you're not savvy enough to invest your money wisely you're going to get taken advantage of so we're going to protect you just by making it impossible for you to do these early stage investments unless your net worth is a million dollars or more it's something sort of that basic and i remember when i crossed that and suddenly my net worth was over that and i was like but wait i'm not any savvier when it comes to investing i know how to build businesses and most of it might have been your house so it's not like you've got more money it just so happens your house has gone up because you bought it in a nice neighborhood it's ridiculous ridiculous and so i'm like how how are people not complaining about this like that's the one thing that i sort of look around and go wait like this is madness and you're allowed to bet so you can go to vegas lose all of your money and there's no regulation but if you want to invest in a group of startups or a single startup it's deemed too risky by somebody and a lot of that is a power grab by wall street because what does that mean it means you can't do it you have to give it to somebody else and they can pull the money so then you're not taking specific risks and what that means is somebody on wall street gets rich at your on your behalf because you're now paying them fees that you didn't have to pay that's the beauty of bitcoin you're basically a vc investor in the future of money not bitcoin ethereum even even better you've got you're a vc investor in the future platform of the internet of value and you're paying nobody any fees dude let that sink in like that's yeah it's really really crazy and man i just really hope good there's no bank saying well you have to do it through us if you want to do this you can buy it and store it on a hard wallet and there's nobody involved that is the power of what is happening here this is to to this is true kind of distributed power within wealth creation that people only dream of this is the system not being against you but working for you for once yep this is this is the the chance it's uh it's really exciting and the more you learn about it the more you just start freaking out like whoa this is really custom designed of course it was i haven't read the satoshi white paper which probably would benefit me i think it'd be make it easier to communicate to people but it is it's kind of like that ultra secure bank you were talking about starting it's like somebody who really sat down and thought how do we put the power back in people's hands and make sure that it's uncorruptable uh it's it's really pretty phenomenal all right getting into like this idea of tokenization first if you don't mind explain to people what tokenization is and then we'll get into like where this is all headed their heads are going to be melting by now yeah this is how it starts and in fact one sort of a quick primer if they made it this far they probably don't need it but uh here's how learning works you start not even knowing the terms and so you take the first step down the rabble hole you're like this is madness i don't even understand the words people are saying you start to get the vocabulary certain words will jump out at you go look those up now you begin to cobble like i kind of know what's going on then you can like you said you pick that path that you understand you go through so that sense of like overwhelming confusion a it's perfectly natural and b in the beginning just find the words once you understand the words that'll be the key to unlocking things okay so with that one of the words that we need to define is tokenization what does that mean so remember we talked about smart contracts smart contracts are this thing that you can attach to the blockchain and that contract can be any kind of contract so that brings up the word tokenization because you can therefore attach anything onto the blockchain because of this contract piece of art fractionalized real estate whatever whatever so bitcoin okay that's attached on the blockchain but now it can be other things because the contract will say well legally it has the rights of this so it starts off with people conceptualizing about real estate artwork other things why real estate this is a really powerful thing real estate none of us can afford the 50 million apartment in manhattan but that goes up 100 in two years unlike something in queens that goes up 20 in five years so the rich dudes getting richer while the poor are getting less well off the rich poor divide once you fractionalize it like you can with bitcoin that anybody can own 10 of their net worth in a 50 million apartment we're all making the same amount of returns the rich don't get richer we all get the same if it goes down in price we all go down in price that is what it should be that is what tokenizing real estate is going to do and you can do it with tokenizing artwork so you're allowing fractionalized ownership of all sorts of things that is recorded nobody can take it away from you it's written and recorded on the blockchain and on that ledger it's confirmed by lots of people to say tom owns this piece of this real estate and nobody else can take it okay that's genius but then what happened was this massive explosion this year in digital art or just happened last year digital art was where you start tokenizing the recorded ownership of something digital so people say digital art well it's just a jpeg well a jpeg has no scarcity now it's the same with photographic arts so photographic art has no real scarcity until it's signed or you have the negative then it's priceless that creates scarcity and i collect sign rock and roll photographs um a music artist signed by famous photographers now because it has scarcity and i like that um so that applies with digital art too because if you say there's only gonna be one of this and it's recorded on a blockchain and it's called a non-fungible token it's a token then i can sell it to you and you now have the rights to it we have scarcity there's one and this guy called beeple creates i don't know i can't remember how many pieces of art it's like 14 000 pieces of art those more so he did 15 000 pieces of art which was all into one jpeg which was 13 years worth of daily art and all incredible and then he sells it at christie's or sotheby's for 69 million dollars and everyone goes oh my god it's the same when damier when um banksy started selling graffiti and everyone's like this is ridiculous and now suddenly everybody wants a banksy and it's the same when jackson pollock started spraying paint and now everybody wants a jackson pot nobody believes in art until they do and it's that same human system you talked about once we perceive it's got value it's got value that's how it's going to be and we will trade it for whatever it is so we can put digital art we can tokenize it and own it but that also means we can tokenize things like ip writes so this video we could tokenize and only token holders can watch it or there's advertising that comes attached to it or whatever it is and anybody who owns part of the token or one of those tokens can get some of those rights so that means that music artists who are getting screwed by everybody they lose 80 percent of their economics by the ticket sellers the middlemen the um music publishers the record labels the talent management business i mean everybody including google facebook everybody's taking money they're bringing massive communities handing them over for free and getting back 20 of the economics it's terrible but imagine now you can tokenize the ip to a song so every time it's ever used it directly attributes to you so let's go back to that people um example he cleverly put into that contract that every time it changed hands he gets paid a commission twenty percent that never happened to us so damien hirst every time he sells stuff he gets the money at the beginning the gallery takes 50 percent and then every time it trades he never makes a penny again but this people will make money forever and so will his family every time that ever trades so it's like van gogh his family always having a share of that so super interesting ip writes to songs ip writes to all sorts of things video in the digital age it could be anything and then you think about okay well what is where's this all going well it's going to community because community is the new powerful business model where a group of like-minded people coalesce around an idea a person a set of ideas so if you go back you talked about harare's book the other great book is jared diamond's guns germs and steel very similar kind of book in that book he says he talks about complex adaptive societies human groups large human groups how do you how do you hold those people together how you do that is basically you have a leader you have a mission you have a set of rules and then you usually have a value or a money and that's trivial religions it's true of almost all groups but what was missing in most religions had the value part because it's like if you didn't follow the rules and follow the leader you went to heaven or hell or you didn't get reincarnated whatever religion you're part of in modern societies like us you have a leader you have kind of a mission you have a set of rules and then you have money and money is what binds them together that is your national accounting for your society but tokenization means we can all have a system of money right bitcoin is the system of money for the people on the bitcoin network but i can have a system of money based around real vision because we have hundreds of thousands of users who all want to gain value from the ecosystem and want to create value within the ecosystem but more obviously it's with musicians and sports stars you know if you're rihanna you have you're the third largest social media influence in the world after barack obama and i can't remember who the next one was so it's her and bieber she has 150 million followers well that's just on twitter so her reach is something like 400 million people on a daily basis they all want to be part of the community of rihanna we saw that with lady gaga and her little monsters if you give them a leader a mission a set of rules and then a system of money you've created an economy a country a digital country and that has value if you make your society successful it goes up in value and you create more gdp so this is now us getting rich from culture we coalesce around this idea we create the system of money in this rules and then we look after our society and if we look after it our network grows we bring more people into the rihanna network the value of our tokens go up rihanna gets wealthier and the fans get wealthier that is a whole change in the old world it would have been rihanna gets super rich all of these other people around her get even richer and the fans don't get anything except some experience that's the old facebook i did the shareholders got rich but the people who use facebook got nothing except abused really this tokenization changes everything we can all participate i don't think people understand how much has already been disrupted did you pay attention to what happened with the nouns dao and the noun nft no oh my god ralph this is insanity so it's an nft project they release one 8-bit looks like it was created by nintendo back in the 80s 8-bit graphic they release one a day every day forever so it'll take them 27 years to get to the 10 000 number which has sort of become the magic number so up until that point it'll be the most scarce of these kind of nfts and the way that the dao was structured so dao for anybody that doesn't know is a decentralized autonomous organization so you uh every day one of the noun cells the buyers of the nouns go into the nouns dao 100 of the proceeds from the sale of these little um 8-bit graphics go into the dao and then the members of the dao control what's done without money the first one sold for i might i might be off a little but it was like 1.8 million dollars as of that time in terms of the number of eth that it sold for and so i was like uh this is a company overnight like you literally sold essentially a flag and in selling the flag on day one raised almost two million dollars and on day two we'll raise you know however many because obviously the number will go down people are gonna pay the most for the first one but when you think about having to go the old model of having to go to sandhill road in san francisco to hawk your wares and convince somebody that you were worth investing in and to raise two million dollars of seed capital like was you had to put this massive prospectus together and like do all this crazy stuff and really have this vision and know how to pitch and know people and i mean just that would have taken a lot and now it's an 8-bit graphic and the the structure of the dow and that's it and i was like a a company just came into existence like that yeah i mean we did similar real vision but not as that's much more advanced we never raised money i don't know over the history of real estate we've probably raised 50 million in capital over time and we raised it only from our members whoa never not a single vc not a sink nothing no strategics nobody our members um so they're the owners of real vision along with us which is fabulous so that's this community idea i believe in it passionately because i live it with real vision because people are passionate about what we're doing but then when you say this i mean yeah i mean people are setting up downs which is basically a rules-based organization or an economy or country exactly what i talked about it's it's controlling a group of people in a way that they agree the rules they set the rules they do it they all economically benefit and it can happen like that and you sell a piece of digital nothing that has scarcity that the community buys into i mean where is this gonna go there'll be a bunch of copycats and they'll all and they'll fail because people don't believe in the scarcity whatever it is but this is a change of everything because in exchange for let's say starting up a company let's say that dow is actually going to become a publishing company but you can't raise money for a publishing company so you say we will sell these tokens that are super valuable because we're going to restrain the supply and they're kind of cool and we'll sell those and that's what you're buying into and that company will now be in existence to do whatever it wants that's groundbreaking that's the end of vcs and that's what people don't understand all of this is going away the bankers the vcs the private equity everybody in the middle of this equation the people like google and facebook who monetize your community in my community and make more money out of it than we will that goes away because we have direct relationships with our community because they're token holders and the community benefits because they make money out of that because you're stripping out middlemen and the money goes back into the value of the network so yeah i mean it's and this is i'm talking quite a lot about this right now and i get a lot of people going i don't get my head around it because people are still trying to get their head around the digital asset space but this is even bigger because you won't even know it's crypto in the end it's just like your membership points to communities that you're part of and you'll realize that you're part of these nations and it might be the nation of rihanna and you might be there for 20 years it is it is a sea change that is it's almost impossible to recognize how big it is and how foundational of a change this is going to be like i don't know how much you know about my story and why i'm doing all of this but i'm going to use this very principle to completely disrupt entertainment and so looking at so when we founded we found it about four and a half years ago and my message to the team was hey guys we're looking for two things we're looking for a platform moment so that we can capture a lot of the economics and then we're looking for a moment of tremendous disruption so that we can take advantage of that because i'm trying to build the next disney so when you look at disney 90-year head start they've got however many billions of dollars in revenue plus just the the catalog of ip they have is is daunting so if you're trying to build the next one and you're being intellectually honest you look at that and go okay i'm at a such a severe disadvantage for me to really make ground i'm going to need to move faster on a new idea than they do and leverage that to get some sort of early momentum and so i said our job because this is a creative endeavor we're going to fail 19 out of 20 times that's just sort of the rough math when you look at music film um all that stuff so our job is to stay in business long enough to find those two things and so we were you know hiring slowly and we had good revenue growth but you know i was really thought throttling the the growth of the company and then when we we found our platform which i'll i'll be disclosing in the probably about six months and then we are capitalizing on the the blockchain and so now all of a sudden we're in a frenzy and i'm hiring people as fast as i can find the right people so in you know whatever four and a half years we brought on 27 people in the next two months we'll bring on 10 more and so you know when you take that out over a year it's like we'll double the size of the company in you know 12 to 18 months and it's because of that thesis that you just walked us through of how tokenization is going to change everything how the economies of community are going to change everything because one of the main things that i look at is anime and so i started traveling to japan and talking to the biggest names over there and they're like oh there are some years where we don't make money and i'm like i'm sorry what and they're like it's becoming a global phenomenon at the same time as it's becoming impossible to make money on so it's this really weird thing where you're like okay there's all this pent up demand and enthusiasm and yet nobody understands how to deal with the economics and i think what we're going through right now with the blockchain tokenization bringing the community into the value structure of that like imagine that you can bet on whether it's the next rihanna whether it's the next anime phenomenon like there's for people that aren't familiar with that world there's one so normally anime starts as manga so there's this one manga called demon slayer which that one title outsells the entire western comic market and so spider-man superman wonder woman batman all of it outsold by demon slayer so you look at that and go okay what if i could have bet on that when like the first episode of the manga came out let alone the fact that during the pandemic that was like the highest grossing movie it may have been the highest grossing movie globally it certainly was the highest grossing movie in japan it was one of the highest in the u.s and if i could have made that bet when i read the first chapter of the manga and owned some of that ip oh my god like now all of a sudden you have like these what start is micro communities who are passionate about a creator a songwriter a singer whatever a photographer would you love the photography of these rock stars right just you see a photographer before somebody else right this just happened with um justin aversano i believe in twin flames um and when you own a piece of that like it's it is insane now they're very high risk and so you have to be super smart about it but whoa it's going to be life changing a manga or photographer is going to change somebody's life and also you know i've been taking i'm also doing something on the side building a whole studio business based around communities and working with the world's largest communities and this is all very below the radar screen still so i can't talk about too much but building token economics and token communities for the world's largest communities and then you start realizing stuff like okay an up-and-coming music artist right to to go into the recording studio cost money they'd have to pay their pet back to the record label blah blah blah but what happens if they've got 50 000 fans and the fans can hear 10 pieces of music and can back the ip to own a token of the ip for the first year so now they're betting on which song's going to be successful so let's say they're super fans they then go on to tick tock and they start creating videos with the soundtrack and they make it viral right this is the network effects the recording artist now doesn't have to borrow money to pay because their fans want to invest in it and the recording artist will probably be still better off because of how the economics work so yeah all of this is coming it's interesting to see you know gary vaynerchuk is going down the same route i had a long chat with him the other day um we're seeing the um the um aston kushner thing coming up as well the stoner cats and again people have got similar ideas of creating large entertainment brands starting from the scarcity of the nft and building out from that who knows what the business model is going to be that will prevail but i think you're dead right but also disney's going to tokenize too without question it is because the value of that community is worth more than the value of disney itself no doubt no doubt yeah it is uh it is a mad scramble to you know be first and to do it better the only good news in the area that i'm in and and this is now so anybody watching that's in the nft community i will just tell you you have to switch the mentality from what's new which like there was so much there is so much enthusiasm in nfts right now that it was just all too easy to just buy things they were new they were new they were new and most of them you know stagnate or drop and over the long run though it's not going to be enough to launch another new project like you've really got to say as as a buyer as a collector even as an investor you have to say okay there's only a few projects that i can really understand well enough to be an intelligent investor especially if i'm trying to time the market and so now it's going to switch to well wait a second i'm invested in this these seven projects let's say i need to go and be a part of that community that breathes life into this and gets this moving if for no other reason than to protect my investment so now you start thinking okay wait like i want to be deep on certain niches so that a i can be a meaningful community member i can be a voice in the community and that i can make sure that these projects have real legs because ultimately especially when you're dealing with art if there's no emotional resonance with the community you don't have anything so it was just a quick flip and then people moved on to the next thing and so i am really going to be interested in one watching the energy change in that space and two trying to be a part of the vanguard of people that change the energy in that space and then see what comes out of it the next five to ten years would be utterly fascinating you know i can't be more excited about where nft's communities and all of this is going what i do know is i don't know where it's going you and i might think we have an idea but it's probably going to be bigger and the use case is more extraordinary that we can get our heads around now we're all struggling to get our heads around dowels but this is just the start so it's an amazing opportunity both from a business perspective you and i as entrepreneurs are seeing this going oh my god as investors we're getting really excited about the opportunity to create returns from investments and then you know i think we both share this mission that we can also bring everybody else along with us and help change people's lives get them into this mindset that they can own assets and they can make money and not everything's against them the system's not stacked against them here's the opportunity everybody's waiting for so i mean what an amazing point in time no doubt so one thing that i really want to get your take on is when i look at some of these projects they do look a bit like they would fail the how we test so when we think about securities and the sec how do you think about nfts and dows and that stuff through that framework i've been thinking a lot about this i think the howie test pisses me off to start with this whole securities what is a security you know it's why because therefore you will put it if it's a security then it has to go back through wall street you're putting it back into those people with power if it's not a security it's not it's distributed and there's something wrong with that there's something wrong with using a 1930s law there's something wrong with saying what people can and can't do in terms of investment so allowing those with more money to do more i that's something fundamentally wrong and i think that the power of 86 million millennials coming in the voting population um and further into power will force that change because if not they're voting against themselves so it is coming i believe change will come you know there's a great book called the fourth turning by um neil how and william strauss cannot recommend it enough um it's about this demographic change and what it does and the changes that are coming this is all part of that so yes there will be prosecutions yes people will get it wrong it will hold back the space but over time the regulators and the authorities will have to agree that the world has changed that what we thought of as security is not security now should we try and protect people against scams yes how to do that that's probably a different set of regulations and i don't really know if that's what you want to do is to stop fraud and people getting money extracted from them then focus on that don't focus on what you can invest in what you can't and hope that somebody's got a million dollars is more able to choose what's a good project than a student straight out of mit with three master's degrees and a phd who happens to be age 22 and doesn't have a million dollars it's ridiculous it's just simply ridiculous so it will change and it's going to be frustrating and we have to be careful so many of these projects will start on smaller scale than we'd want them to be just because we need to get through this regulated regulatory issue regulators are so far behind they're still trying to figure out how to deal with bitcoin etfs that haven't even got to defy and they haven't looked at nfts and then when we get to the social stuff i mean they haven't even started so they're going to struggle really to figure this out yes well thank you so much for being such a voice in the space and for coming on the show today i mean really really incredible where can people spend more time with you yeah so i'm on twitter reasonable amounts um so at raul r-a-o-u-l-g-m-i i just urge everybody to go to the real vision crypto realvisioncrypto.com or realvision.com forward slash crypto wherever you want to find it it's free you just give an email and there's tons of information everything you want to learn go off the deep end and you'll come out the other side with a part of this space that resonates with you and that little seed will change your life so and i did it on purpose that it's free so make use of it there's no excuse not to i love it dude thank you again so much guys trust me this is somebody that uh if you're going to invest in your future this is exactly where you want to start i've spent an obscene amount of time taking in his content it is wildly informative and speaking of things that are wildly informative if you haven't already be sure to subscribe and until next time my friends be legendary take care peace so [Music] you

Channel: Tom Bilyeu

Views: 654,733

Rating: 4.8860431 out of 5

Keywords: Tom Bilyeu, Impact Theory, ImpactTheory, TomBilyeu, Inside Quest, InsideQuest, Tom Bilyou, Theory Impact, talk show, interview, Raoul Pal, crypto, money, finance, nft, nfts, bitcoin, ethereum, investing, savings, Real Vision, Quest, Conversations with Tom, interview show, blockchain, cryptocurrency, tokens, non fungible token, chainlink, building wealth, investors, investments, stocks, cryptocurrency revolution, decentralization, log chart, smart contracts, fractionalized ownership

Id: RennZ2vwY74

Length: 104min 0sec (6240 seconds)

Published: Thu Sep 02 2021