Leading a 2 Billion Dollar Hedge Fund Into The Digital Age: Web 3.0 and Blockchain - Mark Yusko

what's up guys jay martin here and my guest today is mark yusko the founder ceo and cio of morgan creek capital management in addition to the co-founder and partner at morgan creek digital now via these two firms mark oversees the management of about two billion dollars and we hit it off today it was a super fun conversation we started talking about mindset this is where we began talking about the investor mindset and leadership mindset and i did my best to pull from mark any of the habits or rituals or skills that he's implemented throughout his career in his life that have contributed to the success of morgan creek now as always we talked about macro finance i tried to pull any of the biggest themes that mark is paying the most attention to right now and the top one was blockchain and mark is spending the majority of his days these days looking at a few blockchain investment opportunities that very few people are paying attention to so it was a learning experience for me i hope you enjoy this here is mark yusuko three last things first if you enjoy my interviews and would like a bit more you can subscribe to my friday newsletter it's free and the comment to subscribe is right beneath this video in that pinned comment in this newsletter i share my key lessons learned takeaways and any actions that i might be taking in the market as a consequence of what i've learned on the show second when i started a youtube channel i never anticipated generating any advertising revenue but with coincidentally i do now which is awesome and so what i've decided to do is donate this to an organization that is very close to my heart called zero ceiling their mission is to end youth homelessness the way they do this is by providing young people experiencing homelessness with supportive housing employment professional support life skills and outdoor adventure because often young people in urban centers with no resources will never get the opportunity to experience wild places nature that can be so transformational and absolutely was for me third if you prefer to listen to my content you can now find us wherever you listen to podcasts just search for the j martin show what i love to do is introduce the right people to the right people assemble the smartest people i can think of or reach out to to carry that conversation and that's exactly what i've done today please give my panel a round of applause welcome okay guys jay martin here and i'm joined right now by mark yusuko the founder ceo and cio of morgan creek capital management and the co-founder and partner of morgan creek digital mark thanks so much for coming on and making the time oh no great to be here and looking forward to this conversation a lot me too me too and i've got a web of directions i'd love to go with you um before we jump in because you haven't been on my show before for anybody who's not familiar with yourself or with morgan creek can you give us like the elevator pitch uh who is mark cusco how do you spend your time yeah but jay you know i i don't do short well as we're gonna find out uh as we get to know each other but i'll try so you know i um interestingly i grew up uh not too far from you in the pacific northwest uh outside of seattle uh made my way to the midwest for school i went to business school in chicago uh ended up working for an insurance company an asset manager and then got into my chapter one which was working for not-for-profits i worked back at miami moderate notre dame and then down here at university of north carolina in chapel hill running the endowments and chapter two was forming morgan creek in 2004 and that was a advisory business so registered investment advisor outsourced cio and fund the funds so we did uh all things alternative so hedge funds private investments venture capital real estate commodities you name it we we played there and our tagline was alternative thinking about investments right i would say there are no alternative investments there are stocks bonds currencies and commodities and how we combine those things into hedge funds or private partnerships or whatever defines what's alternative and then really four years ago set down this path for chapter three which was forming morgan creek digital and now i spend the bulk of my time actually in the blockchain and crypto spaces and i'm just having a blast so you know i loved my chapter one i love my chapter two enjoying chapter three and then my chapter four i'll teach uh at some point maybe a couple decades from now any ideas what you'd want to teach you know i i have my eyes set on on leadership actually uh i i i got involved in a leadership development program scholarship program back at notre dame and and i love that and i just and i love the whole concept of i don't think you can teach leadership but i think you can teach characteristics and then put people in a place where they develop into leaders and so i got some some thoughts about that but maybe maybe that's a path that's interesting you know i got in this debate uh relatively recently with a good friend of mine fellow entrepreneur and we were arguing over whether or not a non-leader can become a leader in your business he was saying no and i was saying yes and you know he had a candidate who he had tapped for leadership it wasn't working out so he decided this person just wasn't a leader and it was binary and that was it and my counterpoint was if you're either a leader or you're not then there's no spectrum you know if you if you can't go from non-leader to leader that means you can't go from good leader to great leader right uh what do you think about that look i think that's it's a great um debate and we'll spend the whole conversation but we won't and look i probably i fall a little bit more in his camp in that great leaders are born not made okay but i but i wouldn't go completely that way and that i do think you can coach uh characteristics that we all have right curiosity um passion and drive uh grit and resilience but i i do think the levels of those things particularly resilience and and courage to me leadership is just about courage having the courage to step outside your comfort zone to pursue new ideas to be willing to fail and i think we have a societal problem let's get too deep into this but we have a societal problem today the participation trophy world in which we live in we don't let people fail we don't encourage failure and it's like edison said i've never failed i just found 10 000 ways not to make a light bulb and so you need to step out and and so i do think you can help coach people in that regard but at the end my experience is the best of the best the the people you want to follow right people like i would throw down my stuff what i'm doing right now and i would go follow them and i've had that handful of times in my life i think they're born not made it's just my view what do you think it is about somebody that makes you want to throw throw it throw everything down and follow this person blindly passion charisma uh vision and and uh and just a i said a grit and a resilience that that ability to get up right have faced failure and to get back up and to face adversity and get back up but but for me what i want to follow is people who who have big hairy audacious goals right the be hag thing yeah i want to be around people who think big act big dream big uh and and for me it's kind of interesting it's back to the career i spent my whole career i said hanging out with the bad people right hanging out with the people on the fringe because i think about technology it always starts at the fringe yeah and you know you think about junk bonds right oh michael milk and he's a bad guy and not even bowski i'm like they those people may have done bad things but junk bonds were an amazing innovation and created capital efficiency and access to capital for small businesses that changed the world or you think about you know the internet oh that's you know for pornographers well no the internet's for everybody and it is unfortunately you know contrary to paul krugman bigger than the fax machine and now we're at this new cusp of technology around blockchain technology and you know the original oh it's only for terrorists and drug dealers seriously more drug dealers use sacko money than blockchain or bitcoin full stop right every day the number one thing to you do terrorism and drug deals is money green pieces of paper yes you know of course and so anyway so it's just i think having that that ability to uh embrace things that are new and to develop a courage in your own conviction from doing the work and then having that passion that you can um funny somebody told me once mark you're such a good salesman like i'm not a salesman i'm an investment person i i take i take great offense at that he said no mark you're just looking at it the wrong way sales is simply transferring your enthusiasm to another damn i can do that so anyone who can transfer their enthusiasm to another i think has the potential to lead and that enthusiasm comes either from doing the work having conviction or just having a a vision and a drive to to achieve something that that is you know extraordinarily uncommon i agree so much with uh with so much of what you said and that charisma you know refer to it as sales acumen or whatever but it goes a long way when it comes to getting buy-in from whether that's investors shareholders employees community support the ability to communicate is so underrated it's funny i was chatting with david rubinstein yesterday you know one of the best in the business at doing you know hosting interviews among dozens of other things but when i asked him for the key skill that had helped him succeed in politics and business and now media he's like i learned how to talk i learned how to communicate ideas in a way that people could understand them right and and that also translated for him to the written word he's like that's why i got my break when he uh was 27 working for jimmy carter in the oval office all this stuff so fascinating that is such an important point and like i'm a huge fan uh of david and and i actually got to spend an hour with him in uh one of the the big libraries in dc once just just uh by happenstance and and learned a lot in in that one hour but but that point about communicating ideas in simple terms is so critical so many people try to impress with jargon or big fancy words and and the key is anecdote and experience that people can relate to and keeping things simple and i look i joke all the time that you know i got the gift of gab from my mom i said earlier i don't do short well and my mom would call her yak yak face she could talk to anyone anywhere anytime about anything and that is an amazing skill and that ability to bond with people and to engender trust and ultimately followership is about trust people won't follow people they don't trust and you can be the smartest person in the world you can be the most talented person in the world if people don't trust you they will not follow you and i actually learned something interesting uh the hard way right by failing um about this in that uh people don't care what you know until they know that you care and so when you're trying to motivate followers get to know them right know their needs their their desires their fears their ambitions because no matter how smart you are if you just come in with all the answers you don't ask any questions you're not going to get any followers and so that ability to communicate on anyone's level not above their level not to try to impress but to try to to embrace and engage uh i'm big on the e-words actually i actually have 70 words that i try to live my life by about you know how do you how do you explore new opportunities how do you evaluate new ideas how do you engage with things at all times how do you how do you embrace opportunity and emulate uh the things that you believe in the the ideals and the the values that you you really believe in interesting i definitely want to follow up on on that and just that concept of what that does for you what utility it serves and dive into that you know a couple things what you shared for sure trust in leadership is so critical and reminded me of like an early lesson i learned when i you know started working in finance and there's a lot of bravado and and you know peacocking if you want to call it that and um you know the the theory is trust me because i always get it right right and when in theory it's like trust me because i'll be honest when i get it wrong and those are two very different things and i'm like oh man i'm stealing that that is that is gold you know that is gold then look i i believe in in the picasso line right good artists borrow grated art of steel so i am stealing that in fact you probably see it on twitter later today that is so good yeah awesome and then just just one final thing i wanted to pull on you talked about encouraging failure and it resonated with me right now because i shared with you i think prior to hitting record i have three young boys all under five it's chaos but you know when my wife and i are our scripting what are the values we like if we succeed as parents what did we do correctly right what values did we instill in our boys and number one for us is like the utility and doing hard things the reason you should do hard things you know not suffering for the sake of suffering but suffering for with purpose right how do you teach that to a four-year-old we're wrapping our minds around that right now like here's why you should do a hard thing here's why it's worth it and building the relationship between work and reward or patience and reward or suffering and reward or whatever that is now look i i couldn't agree more and and i was very lucky in the sense that i got a second chance you know we had we had two kids and they were great and awesome and then we didn't have any more and i remember going to the doctor when we were trying to you know figure out why and he said you know you're just not gonna have any more kids and we wanted four and and uh i said why and he said well that's funny you know you you're you check out fine your wife checks out fine you're just you know one of the five percent we can't explain i said doc that is unacceptable because that means mathematically in 20 years something could happen 19 years later something happened i was off by one year so now i have a little 10 year old in addition to my 32 and 30 year old and i used to do it all again and i'm a way better dad this time we're way better parents not that we are bad parents but we're just better because now we've had that experience of and i love your point which is i have a hashtag right hashtag live outside the comfort zone and that is so important that look i'm a i'm a science guy biology and chemistry guy you know i thought it was gonna be a doctor ended up in investing jackson science is the best training for investing whole another topic and there's only two states in biology growth and death i like one don't like the other and so you're either growing or you're dying and you can't grow without pain i mean think about working out your muscles if you don't ache afterwards you're not you're not growing you're not pushing yourself and doing those hard things and being willing to fail uh and putting your kids in places where they have to learn to be resilient and to be self-sufficient and and to do all those things is absolutely the right answer but again we live in this participation trophy world where we try to shelter everybody and nobody should fail and everybody should get a trophy and uh no in fact my wife got me to watch ted lasso right this this thing on on apple tv uh about this uh football coach from the u.s who goes over to coach football in in the uk and there's this great older player who's kind of going through the end of his career and he's coaching little girls and nine-year-old girls and it was exactly my experience so my son was on a soccer team and they went over and lost 10 games and they got a a medal and i took it and i threw it in the trash and everybody was horrified and like no even my four-year-old son knows they didn't deserve a medal for going over and this guy in ted lasso last night was was chastising these young girls for losing and they're all like yeah we don't get a trophy for losing but they passed out trophies anyway so right yeah fascinating i love that i love that okay i want to uh i want to talk about uh morgan creek digital a little bit now you just mentioned you know maybe you thought you were going to go into science and you ended up in finance but what a great background to analyze companies and um you know quote your your pinned tweet right now in your twitter feed it says the greatest wealth is created by being an early investor in innovation and making that investment requires behave believing in something before the majority of people understand it you will be mocked ridiculed and criticized for your non-consensus action and it is absolutely worth it so to talk to you about how you action that at morgan creek digital yeah look it it it it is so true if you just go back in in history and you look at at all the great breakthroughs and all the great innovations they they started as will durant you know the historians said every custom begins with broken precedent and so you must break precedent in order to to do something great and everybody will tell you no no those rules are made not to be broken and you can't do that and the world is flat or you know gravity doesn't work or or you know we can't have wireless communications because it'll cause your brain to to fire you can't get in that airplane because if you go faster than certain miles per hour your body will cave in on itself all fud fear uncertainty and doubt spread by incumbents who enjoy incumbency incumbents like being incumbents because they get wealthy that way and so any disruptive innovation that comes along they're going to tell you that it's bad and tell you that it's wrong and so like i said i've spent my my whole career kind of hanging out with these people on the fringe that are constantly pushing these boundaries and it hit me you know this this epiphany one day that it really was this idea that that all great wealth right has come from these innovations and in order to to invest in them you have to have courage back to what what makes great leaders you have to have courage to be willing to step outside your comfort zone to go beyond the customary and to embrace a new idea that has the potential to become big but you don't know at the time and when you do it right let's take digital right so eight years ago uh you know i was introduced to digital asset world so not at the very beginning not in 2008 2009 when satoshi whoever he she they are was was creating bitcoin but uh in 2013 this this friend of mine dan moorhead and dan and i have known each other 30 years and we've come up in the ranks together and and he called me up and said hey i'm shutting down my hedge fund come to san francisco i'll buy a dinner and you know we were his original institutional investor when he launched when he spun out a tiger and i'm like yeah tell me more about he says look i'm gonna set up two funds one in bitcoin and and one in in blockchain infrastructure and look i mean the first of my many bad decisions and i've made so many bad decisions in in crypto uh which is kind of funny um but you know i was not running drugs on silk road i was not a cryptography student in 2013 i didn't get it and hadn't done any work and i was typical skeptical mark oh no this is different this is rogue you know i'm focused on private investments and real estate and commodities and stocks nope no time for this right and he said no this can be really big i'm gonna spend the rest of my career focused on this okay i trust this guy i like this guy all right picks and shovels i'm in we had invested in google and ebay and yahoo crazy silly names back in the 90s when i was at notre dame made tons of money and we invested in in in other infrastructure over the years and so okay infrastructure works for me um so did that now that funds up on 11 or 12x no one's complaining but i should have put the money in the bitcoin fund it's up you know 350x but i didn't and so about nine months later i write this long back to david rubinstein you know for me one of the things that that improved my abilities as an investor was becoming a writer and communicating to others and it was funny i write these long letters they'd be 30 40 50. i got one i got 79 pages and everybody from my wife to all my partners here would say what are you doing nobody's going to read that i said it's not for them it's for me it's how i think and there's the great quote and i can't remember the right the writer who said this but if i can't read what i wrote how do i know what i think and so that process of writing something down and and putting it in a form that can communicate to others in a simple clear way makes you a better investor so so i wrote this letter and in this 40 page letter in 2014 i wrote one paragraph saying that bitcoin at 500 was an interesting special situation not something you should put all your wealth in but an interesting special situation deserved a one percent allocation in your portfolio now what's what's funny is i got hate i mean hate forget ridicule i got hate from my clients saying we'll fire you right don't talk about this stupid stuff go back and talk about stocks and bonds and hedge funds now i joke the next paragraph was about saudi equity which arguably is more objectionable at this point than bitcoin depending on who you talk to right no one criticized that they just criticized bitcoin because it was unknown it was outside the comfort zone yeah and so uh had people invested which some did um they've done okay and and now the funny thing is you know the winklevoss twins and i were introduced to bitcoin at the same time there's a book called bitcoin billionaires about them and not about me so they got it more than i did now technically i didn't have 500 million dollars to buy it like they did but i had some and i and i didn't so uh i reacted to that negative feedback the wrong way i didn't have the courage to step through it and to make that investment because i didn't have the conviction yet because i hadn't done the work so over the next year i did the work and actually had so much conviction at the time i told my son who was graduating from notre dame said go to san francisco and meet with dan he wanted to live in san francisco meet with dan good work at coinbase and uh you know he's like whatever and he went out and he talked to him and he's like i don't know dad maybe it's gonna be a big deal but you know what uh i'm gonna go with kpmg it's safe gets me to san francisco that's where i want to be now when when coinbase went public we got a little chuckle he's like all right dad you're right but you're not as smart as you think you are okay well you tell i told you to go to work at coinbase yeah but you didn't lever up the house and put on bitcoin like oh you okay so fast forward to uh 2016-17 i finally convinced some clients to get involved i'd finally done enough work where i had conviction that this was going to be my chapter three so we formed morgan creek digital uh in the fourth quarter 2017 went out to launch a venture capital fund now the funny thing about that is i had never been a venture capitalist i had been an allocator i'd been a chief investment officer and it was a little bit audacious probably even a little bit cocky to say we're going to become one of the you know brand names in venture capital in in the the blockchain and crypto space but there weren't any right there was pantera who was kind of the best and there's blockchain capital it was right behind him and polychain was just getting started there was no a16z crypto there was no paradigm there just weren't that many competitors yet and so we went out to raise a small fund we got lucky we met a visionary talk about vision met a visionary cio at fairfax county uh retirement system they gave us some capital and kind of the rest is history so we've now raised we're raising our third venture fund our first two funds have done pretty nicely by being early investors in in that innovation now talk to me about what it's like raising money for a a cryptocentric fund and maybe like relate your your first venture fund to your third and what how those processes and applications differ hey this this is this is classic right so picture this first quarter 2018 and uh if you remember that time period bitcoin was crashing yeah that's right crashing that's right now for the 2017 20 000. and on december 18th 2017 fell to 10 000 was crashing again and we're out there saying hey don't you wanna don't you wanna invest with us in in this space and people are like are you kidding me and we would call 100 people and 90 wouldn't call us back yeah like don't even call it don't don't talk to us of the 10 that actually let us talk to them nine out of those said no not not even close now we did meet these two visionary cios at fairfax and four other institutions that kind of knew us and trusted us from our older relationships and so those six institutions and about 30 individuals were intrepid enough to give us our first 41 million dollars and we put that 41 million dollars to work and yeah i said it's up about eight x uh it's doing nicely and we invested in things like coinbase and figure and etoro and a bunch of other businesses so went out to raise fund two uh a year and a half later and we started raising we have to raise 250 million because now we're going to be real venture capitalists and we got 75 and covet hits and nobody wanted to talk right the world locked down that yeah you know what an incumbent you couldn't get now the interesting thing though is we'd send out you know 100 emails or do calls and now 70 said don't call us back instead of 90. sure but of that 30 still 90 said no this is stupid don't get it but that tripled the number of clients so we went from 30 plus investors to 80 plus investors and that was great that was fun too and we ended up uh raising a hundred million for that second fund we we basically cut it short why well we closed on the 75 covid hits a bunch of our companies like blockfi and figure and coinbase start to do well so we got these big write-ups and you know how venture works when you come in late in a fund you come in at cost and you pay interest but you get the write-up so the people that came into our our second closing got a 3.3 x right up on day one so we didn't want to dilute those early investors too much so we just capped that fund at 100 million and started fund three so we're now raising fund three we've done our first close on about 80 million on a 400 million dollar target and now becca just got off the phone with a very large global pension fund uh that wouldn't even talk to us two years ago now they're talking to us we've just done our second call set up our third call and i would say it's about now 50 50. about 50 still say don't call us back not interested and still 90 percent are still saying no but at least we're we're going to increase the number of investors okay now i'm curious what you just got off the phone with a pension fund what the pension funds need to see mark to start putting skin in the game i mean it's going to be just very different from what a retail investor needs to see to put skin in the game right we just you see hype sometimes just sentiment sometimes right yeah right but it's so important and you know there's this great line about investing that an investment committee should be an odd number and three is too many and and it's so true and it's why individuals and and families tend to to be more able to to innovate and to invest in innovative areas because single decision maker whereas committees tend to be slower and so right four years ago ninety percent no way two years ago seventy percent no waste today still fifty percent so this this pension fund has gotten over the hurdle of no absolutely not but you know your question what do they need to see what they need to see is evidence that that this is a a technological trend that they should embrace the same way they've embraced other technological trends whether it was you know client server computing way back in the 80s whether it was the internet in the 90s whether it was the mobilenet in the 2010s and now this idea of the trust net and so we start pitching them on this technological evolution from the mainframe computer to microcomputers to the personal computer to the internet to the mobilenet handheld super computers to the trust net which is this global computer that we're creating on blockchains and and what they need to see is is evidence that that's real and i think we have evidence of that right we have evidence now that the blockchains are an innovation in data storage and management that is superior right the old days i lent you money i wrote down a single entry in my ledger and you had to trust me that i wrote down the right number so then the medicis came along and said no dual entry is better you keep a ledger i keep a ledger but what if i write down 200 and you write down 100. medisa hey we'll fix that so we'll charge you a fee you'll have accounts with us we'll keep the records and dual entry accounting awesome it's been a good run for banks 700 plus years now we have code which can take that role as the arbiter of value so we can have triple entry accounting using a blockchain it's public it's immutable it's transparent and the beautiful thing about that is it allows us to spend our efforts not on validating transactions and validating ownership of assets but on creating value and that is a massive value unlocking mechanism so what this pension is looking at and it's what the fairfax county pensions cios saw four years ago being true visionaries is they're like look this is very similar to the unlocking the value of the internet right the average person looked at the internet it's a fad it'll never be bigger than the fax machine it'll never be important it'll never be this liberator of ideas because i don't have to spend time going to the encyclopedia and looking stuff up i've got the world of information my fingertips so now i can unlock the creative potential of myself and my team to do other things and i think what blockchain does and and what ultimately cryptocurrencies and nfts and and the metaverse all do is they move us into a more vibrant more monetizable society and one of my favorite stories in the last year although i totally missed it so again i make lots of mistakes is you know a year ago in lockdown my ten-year-old got me involved in pokemon go and so he and i walk around playing pokemon go and i'm probably more addicted to it than he is uh and i think it's this very cool game and what i love about it is you can actually create value from your effort right these things have value now there was no way to really monetize that value until blockchain technology comes along so now you've got this game axia infinity that was just created a year ago think about this a year ago well i guess the game was created four years ago but it really exploded about a year ago and in the past year it generated more revenue than fortnight that's unfathomable but it's not generated for epic games right down the street here in north carolina it's generated for the owners of the decentralized application and so there is this incredible uh liberation of creativity and idea flow and and those and the benefits don't just go to the zuckerbergs of the world or the the centralized owners of these assets and the big tech companies it can go to everybody and that is uh something that that one i get really excited about and i talk all day about two i think people once they have that aha moment that eureka moment that this is technological evolution not revolution it's just the internet of everything as opposed to the internet of you know connected smartphones right then again i told you i don't do short well but that that's what a pension needs to see it needs to see that this is real tech not a fad they need to see that real people are involved why did that first pension fund invest with us we were an upstart firm never been venture capitalists before if you ask them which people have they're like we trusted mark and morgan creek they've been around a long time they're from our world if they're embracing this if mark's going for better none of his time to at that point half his time to today all my time maybe there's something there there and they didn't put all their money in right yeah start with a small amount doubled up tripled up and it's it's added a lot of value and think about that thing i wrote in 14 if you had taken that one percent which is one percent out of a stock bond for twilio half percent from stocks half percent from bonds over the past seven years instead of compounding at 7.2 you would have compounded at 9.2 that's better right now the cool part is had it gone to zero which some would argue could have happened i'll say it couldn't have happened because we're too far along but let's say it could have you still would have made seven that's a ten to one upside down side ratio and all the while that you owned it it was uncorrelated with your other assets so it added value to a diversified portfolio in fact i've been around a long time i got white here to prove it and here's the thing i've never seen an asset in all the time been doing this that delivers on its promise of low correlation the way bitcoin and crypto does sure and it's because if you think about all the other assets we invest in all of their returns are driven from the same things economic growth interest rates profit margins liquidity crypto is driven by technology by regulatory changes by millennial adoption mm-hmm right i i do the same thing all the time like ask anyone over 35 who's your broker i know merrill lynch ubs okay how much gold do you have i don't know three four percent how much bitcoin you have oh are you kidding me it's a ponzi scheme zero ask anyone under 35 who's your broker sure what what's a broker yeah robin you mean my robin hood account yeah i got that how much gold do you have are you kidding me boomer rocks zero yeah how much bitcoin you have i don't want to talk about it why not well because it's a big part of my liquid net worth i don't want to talk about so that digital divide is what's driving adoption of digital strategies in the digital age and as we go from the analog age where you and i used to meet under the buttonwood tree you had a stock certificate i had a piece of paper currency we need exchange to electronic age where now we exchange q-sips over an electronic network to the digital age where we have pure digital ownership of unique assets and ultimately every asset in the world will be digital and we can exchange in real time we can fractionally own we don't have borders we don't have hours where it's open and closed we trade when we want all of that frees us up as a society to take our collective intelligence and and do great things yeah i love that and it's you know when you when you pulled the parallels to like internet adoption right and then and then relating that to today and talking about what pen what pensions fund what pension funds need to see it struck me as like i think we're or maybe now i'd love to know your thoughts on this moving past the period of people explaining what blockchain technology is into why it matters and that's the transition that has to occur right like i don't need to understand internet protocol to understand why i want to communicate share and store information right virtually so well said again i'm stealing that one too because right now we are using tcpip full stop we're using tcpip and there's this show and it'd be better if i could remember the name of the show that i watched with my wife and the whole show is basically a retrospective through the eyes of a family thinking back to the 70s and there's this great scene where this this husband comes home and his wife's yelling at him like you miss dinner again your son's missing you and you're never home he's like honey i have this algorithm and pretty soon i'm going to be able to send a picture using a computer now here we are communicating live video not just a picture but all because of those algorithms to your point i don't understand how those algorithms work i have no idea how i can talk into a metal and glass box it can go through the airwaves into land lines come up and you hear in real time on the other side of the country or their side of the continent right in real time i have no idea how that works but i don't care no because as you said it's about sharing storing manipulating and using data information relationships and to that point all great technology becomes invisible so when we stop talking about it and that's why we changed our name our first fund was blockchain opportunity fund two our second phone was blockchain opportunity fund two our third fund is more creek digital we don't talk about blockchain because we're not investing in blockchain we're investing in the opportunity set created by this liberating operating system that will be full stop will be the operating system for the internet of everything or the internet of value or as i like to call it the trust net where trust is determined by the technology not by the relationship you have with your banker right yes okay now i i'd love to get your thoughts on digital currencies mark and you know this is coming from a place of like authentic curiosity because i don't quite know where i land on digital currencies and typically when i when i hold something in my portfolio i know why i bought it because i believe i know what it is because i i believe i know what it is therefore i know why i bought it i also know when and why i'm gonna sell it what the trigger point may be um when it comes to my my digital currency holdings at this point in my life and i would challenge anybody who says they know you know uh because i think 13 years isn't really enough of a track record to know with certainty about what something will become but if i've if i purchase a speculation if i purchased a future currency or if i purchased a store of wealth and i don't know which one but i do know i want a horse in the race and so i dollar cost average in to a few cryptocurrencies the way i see the broader landscape is maybe you've got your cryptocurrencies like bitcoin ethereum that we all know and then now you've got your central bank issued digital currencies which are coming soon and then maybe your silicon valley issued digital currencies like facebook's libra probably amazon will come out with one uh but does that compartmentalization make sense to you and do any of those three boxes catch more of your attention it does with with even some more other other nuance in that look the interesting thing about how this this started is you know satoshi nakamoto whoever he she they are uh created this this concept this idea of of digital money and and what was novel about it is a lot of people had tried for years to create e-cash and e-gold and all these other things and they all suffered from the same problem of double spending in that there was no way to authenticate true unique assets in the digital world and so if you think about you know analog right i have a physical piece of paper i hand it to you and you see that it's real now it could be a counterfeit one and there's a marker that you draw on it to find out if it's a real hundred dollar bill or not but but you know i couldn't create another one unless i had a printing press in the back in the back room so then electronic came along and you know electronic i could make copy i could hit copy paste all day the problem is that's why they don't let me control it right that's why we had banks and we had to trust the banks weren't doing that the problem is the central banks do do that they hit copy paste all the time and that's why the value of our currency continues to diminish right when i was growing up in seattle down the road from you in in the 70s right gasoline was 31 cents i bought a you know gallon of gas the other day for 4.31 cents it's the same gallon of gas it does the exact same thing produce the same amount of heat in the engine but why did i pay for it not because the gas is better because the dollar is worse the currency has been devalued and so money is different than currency so money the only money in the world is gold right money is something that exists in the absence of a liability and for 5 000 years that has been gold now there's been a lot of other things that have been tried to be used as money but they they didn't work out gold for whatever reason uh has endured and so currencies come and go right there been 775 paper currencies in the history of the world three quarters of them no longer exist the rest will eventually go to zero as well and they're well on their way down 98 99 since inception whereas the pound sterling or the dollar and and ultimately the reason is because governments will spend and when governments spend and can then create money by fiat hence fiat currencies they will devalue right if i have a pile of a million dollars i print another million and just devalue the currency very simple concept so if you think about what satoshi nakamoto did he said all right i can create a digital asset that is unique and that first application was bitcoin which is money so it is digital gold now we said oh no he meant it to be digital cash well it could be used as digital cash but here's the problem in computing you can choose to be fast or secure never both right so you can either be secure or fast sure and it's like in investing you can you know get richer or wiser never both right that's it okay so in computing you can be secure or fast and visa very very fast not very secure bitcoin not very fast very very secure right been up for 12 years never been hacked no fraudulent transactions not one how many times have people had to get a new visa number more than zero so the key is that it is the perfect money there is no liability associated there's no government debt against it like all other fiat currencies and it functions as digital money so i believe that bitcoin everyone should own some percentage one two three four whatever the number is as that opt-out insurance against fiat right i'm not leaving the united states anytime soon although they're trying to make me actually with all the taxes and the regulations on lockdowns and stuff but for now i'm here and i'm going to spend in fiat currency so i'm going to need some fiat currency but i'm going to have a portion of my wealth outside that system in an asset that stores value and bitcoin's perfect for that ethereum's pretty good for that but ethereum has some other use case in terms of if you think about the protocol stack for the internet you got tcpip you got ftp uh you got smtp ftp for files smtp for email http for websites and then www dot that links it all together and in the web 3 or the internet of value i think bitcoin probably is the base layer i think maybe filecoin sits on top of that for files maybe we get solana or cardano or you know polka dot or cosmos to be in in the smtp http layer and then ethereum's kind of like the www dot that holds it all together so some portion of assets in true cryptocurrencies stores of value or medium exchange there's only about a dozen of them then there's thousands of utility tokens most of which are going to zero right utility tokens are just crowdsourced venture capital without the benefit of owning equity debt or claim on cash flows most utility tokens the whole ico craze most of it was scams most of it was bad but not all of it and there are certain projects the graph for example is a good example we invested in it's been great it now powers most of defy really interesting technology not a cryptocurrency per se but has more elements of crypto than the old utility tokens then you go to uh the the next iteration of of applications and and the things you want to own digital assets whether it be you know nfts or digital art or collectibles or digital real estate or digital stock certificates or bonds and then you've got the whole movement to d5 where you can have protocols that you can own liquid protocols where you can share in cash flow right take off a right instead of of going to a lending club or prosper or a rocket mortgage to get a loan i can use this staking protocol to borrow and lend uh or i can deposit in compound and earn interest on my assets or i can go to block fi and deposit my digital assets and use digital financial services so all of traditional finance will migrate through centralized finance to ultimately decentralized finance and what blockchain tech will do to financial services is what the internet did to media and communications so in my portfolio i want to have some cryptocurrency to be that store back particularly bitcoin and ethereum to me is is more like building blocks it's it's it's a tool to power lots of development whether it be play to earn in gaming whether it be digital identity whether it be um you know defy all these things i think we'll get built on that could we build defy on bitcoin sure lightning network is interesting there'll be opportunities there and so i want to avoid the scams as any of us would want to um but that's actually not that hard uh if if you don't own equity debt or claim on cash flows then you own a speculative asset speculative assets maybe so well that's bitcoin right yes but bitcoin is functioning as digital gold gold is a speculative asset commodity but it's also a monetary asset it's a form of money in the absence of a liability so i believe bitcoin has won that battle and it will be digital gold and a store of value and money for forever on top of that i think i want to own things that help us build out the ecosystem that transition us from the analog world to the digital world and that could be things like solana that could be things like ethereum could be things like the graph and anything else that powers the building of these applications going forward uh polka dot is good another good example you know some or cosmos tendermint so lots of things out there that that are are developing avalanche is another one where you're iterating on technology and people say but but what about you know the the ethereum killers and someone's going to put ethereum out of business eos thought they were you know it didn't have the technological superiority and so it didn't work uh there will be others like that ultimately in an open source world but what i kind of like about this environment in which we live is the best technology doesn't have to be the technology that wins the technology that wins the technology that gets critical mass first it's called the law of increasing returns yeah and the network effect is is how you declare victory and the network effect is enhanced by an open source world so bitcoin became superior and the forks you know bitcoin cash and satoshi's vision went off but they didn't get enough network effect and so as people saw things like segwit or or taproot that they want to add on to bitcoin and it's not going to change very often it doesn't need to change very often because it does what it does really really well and it will never be what you and i used i don't think to buy things i think it would be more of a store of value and then we'll use second layer or third layer solutions to do transactions the same way visa sits on top of the monetary number i use my visa card every day but i don't settle up with visa every day i settle up once a month and so it batches my transactions on a i learned this yesterday so i was you know one day old on a mainframe computer and the funny joke the guy said is said when we have a problem with our system we turn on the red light at the sunnyvale retirement community because only people know cobalt are in their 80s which is true like my dad and uh he was kidding but but not that far um so technology advances technology improves it builds upon the shoulders of giants and that's why every iteration in this technological evolution gets better and better and it's why the network effect creates this exponential opportunity for wealth creation and i kind of leave you with this idea if we think about an exponential curve x y axis parabola the left-hand side is is web one that's microsoft intel cisco area under the curve parallel to x-axis it's a lot of that's a lot of wealth let me get to the knee of the curve near the curve that's web 2. that's alibaba and netflix and amazon more wealth now we're going parabolic to the y-axis that's web 3. so the untold right opportunity this is the biggest wealth creation opportunity i'll see in my lifetime i'm trying to be here a long time because i got that 10 year old but this is the opportunity and you want to own cryptocurrency you want to own the building blocks or the tools that will help bring this trust net and this internet of value and this migration from analog to digital to reality okay now following that last thought that this web 3 is the largest wealth creation opportunity that's ever existed what's the play going to be for companies like i mean we know libra a little bit but you know what's the play with libra what's the play with with amazon what's the play with apple you know what do you project you know we actually are are an application to try to be one of the validator nodes and you know nodes is what makes uh these networks so secure right bitcoin i think has 10 400 nodes and ethereum's up to almost 5 000. the more nodes the better the more secure and and the thing about libra that that i think is is why you know the us government is so afraid of it is you ask the question about central bank digital currencies central digital currencies are not cryptocurrencies they are digital forms of fiat currency and they have all the defects of fiat currency meaning they can be created at the whim by fiat of the government do you think that on top of it they're worse because now you got surveillance and programmability i'm sure you've seen the video the guy from the bis saying of course we want central bank digital currencies so then we can program how you spend your money my god my head exploded are you kidding me you could say you because your social credit score you can't buy these things you can only buy these things or you can't travel to this country you can only travel here or worse if you don't spend your money by a certain date it expires are you kidding me yeah central bank digital currencies have so many defects but they will happen they will happen yeah everything's gonna run on chain everything right just like everything runs on tcpip it didn't 50 years ago and no nobody had computers 100 years ago and just to be clear that's what a central bank digital currency really is it's a surveillance tool that also functions as a currency is that how you see it absolutely it's it's just a a digital form of the current fiat which suffers all the defects of monopoly issued assets any time a monopoly issues an asset it's it's inferior to decentralized solutions it's fault you know it's not fault resistant meaning you know you could literally you could hack uh a central bank if if somebody were that advanced and really cause cause havoc uh a decentralized system is much harder to to infiltrate but most importantly it just it's controlled by a small minority of people who probably have a different agenda than you and i and the people listening on this on this call so ultimately central bank digital currencies will exist i think china will be first they already are and and then russia probably would be second and then the u.s will probably be a distant third because for whatever reason we're fighting it for some unknown reason to me um i think more and more capital will flow into cryptocurrencies as well as crypto assets digital assets non-fungible tokens etc security tokens etc and and ultimately we'll live in a digital world where digital ownership functions in the same way that electronic ownership functions but we won't have to trust banks as third parties will have code it's like think about getting lost do you stop and ask directions heck no especially not in the south where i live right because the person will say well you go to where the oak tree was you make it right you go to where the general store was and make a left like i don't know what you're talking about because i wasn't here 50 years ago so that oak tree's not there and the general store is gone right there's a walmart but no general store so uh this idea that that we will not migrate in this way crazy uh we will you know new technology it's like gresham's law good money pushes out bad and we have good money being created in form of bitcoin and and other uh cryptocurrency it will eventually crowd out the really bad stuff and you've seen that in venezuela and argentina and zimbabwe um but eventually it'll happen in all the other western nations that are getting overly indebted and devaluing their currencies okay so best option on the future if you uh you only have one one play to make is that straight holding big man that's a tough one that's a good that's a good question um i you know i i would say the infrastructure around digital assets and so i'll give you a two with a hyphen so exchanges for digital currencies like coinbase and and kraken and others but also exchanges for nfts non-fungible tokens because ultimately every asset whether it's a movie ticket or a piece of art or a stock certificate is ultimately going to be a token and they're going to exchange across these networks you know we have an investment in this company called figure and and they've created something called the provenance blockchain and their goal is to uh displace dtcc now just for perspective dtcc processes 1.8 quadrillion dollars a year i don't even know how many zeros that is like 12 i think it means big and it's valuable and so if we think about a new platform processing that volume in the digital age and it becomes provenance that asset becomes very very valuable so owning those infrastructure related assets is important now second place to those assets would just be the the cryptocurrencies themselves i think i think bitcoin has a bright future but i think the upside is not as great as it was obviously you know in in the earlier days the way we think about crypto currencies is you know bitcoin today is like a series e venture investment it's still a growing network it still has a lot of potential i still think it could go up 10 or 20 or even 100x from here but it's not gonna go up ten thousand times or twenty thousand times or a hundred thousand times uh like it was when if you bought it at cents that's that's over ethereum more like a series c series d a little bit earlier bigger upside one order magnitude bigger but then there's a whole bunch of stuff right at that next layer down that are like more like series a series b and that's the you know the uniswaps and the sushi swaps and the aves and the compounds and the synthetics and you know this thing bond that okay bond works barnbridge works it could displace all of you know the structured product structured finance group at goldman sachs and jpmorgan i'm not saying it's going to happen but it could and there will be other iterations of these defy related play to earn nft all of those currencies that allow you to transact on those those networks are going to be very very valuable so as a there's a long way of saying i can't give you a one yeah because that's not the way i think about the world i think about portfolio management and i want to own a little bit of this and a little bit of this and a little bit of this because i know there's gonna be a normal distribution some of the things i believe are going to go to zero and that's good we want zeros right we want zeros because if you don't have zeros then you can't get the right tail of the 10 x's and the 20 x's and the 50 x's in the middle you know things happen you get good outcomes and you make a little bit of money but what you're playing for is the tails you're playing for that power law and we're in this technological evolution evolution wave where the power law is where all the big money is going to be created got it okay now if we were to exit blockchain technology from the conversation and pick one other growth-oriented long-term focus what strikes you as a second favorite yeah i i still think there's a lot to go in in cloud uh i think the migration to cloud is is really just getting started in places like china and india so i think there's massive massive opportunity there um and then i i would say healthcare is another one interesting that integration of science right the pure science like real science not the pseudoscience and fake science we read on the internet but real science and and data and that power for drug development uh curative disease management all of these things are are extraordinary and i would say those two areas so pure tech related to the management and storage and manipulation of data and then the last part of it would be ai and in fact for us one of our big things is something we call blockchain intelligence which is the merger of ai predictive analytics and blockchain because blockchain is great for storage ai is good for manipulation and management and prediction and so when you put those two together you get blockchain intelligence which but ai cloud and healthcare if you didn't have we didn't talk about the blockchain stuff yeah and well those three work together uh with a lot of complimentary um options as well it's funny you know i look at health science as what i hope to be and what i believe will be the biggest bull market of my lifetime yeah you know the whole world's your market who doesn't want to live longer think faster feel better all that stuff no look and and the amount of wealth that has been created uh by the boomer generation is going to pass to the echo boomers like from me to my kids is trillions right 67 to 70 trillion depending on who you talk to most of that is going to end up not in the traditional investments it's going to end up more in venture capital in crypto in digital assets in innovative health care technologies because to your point you know we all want to to take advantage of these advances in health science in material science in you know pure technology and it's it's hard to imagine the unimaginable right but that's that's one of my hashtags right imagine the unimaginable but it's hard and it's hard to sit around and get time to actually sit and think about the really big ideas in fact again i'll leave you at this thing there's this essay written by this guy william jerizowitz and it's called uh solitude and leadership back to leadership and it basically talks about uh which sounds like an oxymoron solitude and leadership right how can a leader be alone but the whole key to leadership is having the ability to step away from time to time and to truly think right to turn off the distractions to turn off the the the the constant wave of information and look it's it's so hard in the world we live in i say this all the time we're we're drowning in information and thirsting for knowledge and you know i tweeted it this morning right knowing what to ignore is a superpower absolute superpower if you can just take turn off the noise focus on the signal spend time out in nature away from the masses and actually think right truly think it's like my favorite uh line is is the ibm that was their thing it was on everybody's door the word think um because if you're not thinking then you're not uh growing and again back to the uh it's gonna push you outside your your comfort zone to to contemplate this this realm of the unimaginable and the things that don't seem possible and if you can spend some time there not all your time you don't want to be fanciful but if you can spend some of your time there i think you you you will be a better investor you'll be a better father mother husband or wife or a friend um because you'll you'll be more uh at ease and at peace um yeah than just being constantly bombarded with all the nonsense i love that and uh yeah that's a great that's a great circle to wrap this chat up back to mindset right and yeah raydalio credits meditation as the best tool that he ever discovered in all of his success uh as a consequence of that um and you're right like taking that time to exit yourself from the conversations exit yourself from the noise because thinking like a contrarian or critical thought it's a muscle right that needs to be exercised and um and independent thought is no different so uh mark this is a fascinating discussion i really enjoyed it so no me too i i really appreciate uh the opportunity to come on on the show and and to share big ideas and look i say this all the time that um there's nothing better than uh talking with someone who who was really prepared uh thought up a bunch of really interesting thought-provoking questions but then more importantly listens to the answers and then asks even better follow-up questions and so i really enjoyed our time together and hope we'll get to do it again okay guys three last things first if you enjoy my interviews and would like a bit more you can subscribe to my friday newsletter it's free and the comment to subscribe is right beneath this video in that pinned comment in this newsletter i share my key lessons learned takeaways and any actions that i might be taking in the market as a consequence of what i've learned on the show second when i started a youtube channel i never anticipated generating any advertising revenue but coincidentally i do now which is awesome and so what i've decided to do is donate this to an organization that is very close to my heart called zero ceiling their mission is to end youth homelessness the way they do this is by providing young people experiencing homelessness with supportive housing employment professional support life skills and outdoor adventure because often young people in urban centers with no resources will never get the opportunity to experience wild places nature that can be so transformational and absolutely was for me third if you prefer to listen to my content you can now find us wherever you listen to podcasts just search for the j martin show

Channel: The Jay Martin Show

Views: 14,609

Keywords: stock market, Mark Yusko, Morgan Creek Digital, Bitcoin Investing, NFTs, What are NFTs, Bitcoin Price, Investor Mindset, hedge fund, digital age, bitcoin investor, anthony pompliano, pomp, ETH, Crypto Investing, SHould I Buy Bitcoin, Facebook Libra, Central Bank Digital Currencies, CBDCs, blockchain, web 3.0, 2 Billion, blockchain technology, mark yusko ceo, mark yusko, morgan creek capital management, bitcoin, bitcoin today, bitcoin news, mr. yusko

Id: VSRT9Izi4NU

Length: 69min 13sec (4153 seconds)

Published: Sun Sep 05 2021