Raoul Pal Explains Why He Went All In On Crypto

but my big discovery and why i really started loading up on ethereum was another chart which was a understanding that metcalfe's law was the primary driver of all crypto markets and in fact almost all of the tech stocks that we've known today and once you realize that these are basically networks and once you realize that crypto are networks where you actually own the network so facebook is a great network stock and it works perfectly on a log chart and it's an exponential does all the things as you imagine you can value it in metcalf's law terms but the fundamental difference is shareholders and network users are not aligned the shareholders make the money the network users get the utility along comes crypto you marry the the network user with the owner okay now you've got networker pet effects upon network effects this is like behavioral economics right manifest religion meets michael's law right it's like now i'm trying about the thing it's religion meets capitalism it's basically what it is right so that is incredibly powerful [Music] so for those who don't know you basically you were at goldman you started your own hedge fund and then it seemed like you you retired correct you retired pretty young you retired at 36. but i mean now you're you have a company now so you're not you know fully retired and kicked back but no i've got four jobs i'm doing right now so right but you did have a break in between correct so like i think it was 2004 when you when you sort of retired from the hedge fund and it was like 2014 or something when you launched you know real vision so what was going on in between were you doing nothing or you were doing other projects i was writing global macro investor but that is a monthly publication so i don't know why all of you guys do weekly newsletters or daily newsletters that's hard work so i yeah i wrote monthly it's big it's like well it starts off at about 35 pages a month and then due to uh inflation it gets to um about 130 pages a month now but i write it in a weekend so wow in i was living in spain wrote one weekend a month sure i need to monitor markets and talk to people but it was a part-time job um so really what i've done is kind of opted out of the rat race moved to the mediterranean coast of spain i was growing fruit and vegetables in my garden and almonds and olives and all of that stuff living the beach life in spain um in the middle of a on the side of a mountain in the middle of national park having a great life in the end you might start missing intellectual capital p the people around you because most of the people most of the year round in a beach town in spain work in a bar restaurant or they um or they're in real estate which is fine but you feel very isolated when your world is global macro totally so so describe the moment because i think a lot of people listen to this so just so i don't know how much you know about the podcast but basically the podcast is usually me and sam who he's not here because he's traveling he's actually in portugal right now um we just sort of usually spit we're both founders both recently sold our companies in the last two years we started the podcast after we sold because that's when you have a bunch of time on your hands and um and it's usually just spitballing different kind of like business opportunities market opportunities and so just stuff that we see that we think could work or is interesting but we're not gonna go do it ourselves so this became our outlet to do that and um and so you get like we have like i don't know like over a million downloads a month and those people what the people who listen what they're doing is um they typically are either like they want to start a business but they don't they have like a good paying job they're looking at making the leap or they have their own business and this is like they're doing this while they're you know doing their chores and it's like i get to hang out with my buddies who are shooting the [ __ ] about business because like you know we talk about stuff that they want to talk about they just don't maybe have the friends around them that want to talk nerd out about business all the time and so we kind of had that same uh thing where you needed that intellectual sparring to uh to feel good but the thing you mentioned which was like you know you sort of won one game you're doing well in one game but you decided to exit the rat race what was that what did you have like a kind of come to jesus moment what did you have like was that a long time coming how did that happen my meta narrative is the game is life itself the game is not money the game is quality of life and how you live it so that was always my objective so when i was on the tube in london at 5 15 in the morning to get my get to my desk at goldman before six the reason i did it is because i knew that the next thing i wanted to do was go and live in the mediterranean and wanted to have that quality of life you know for me a lot of people think of money as the primary objective i actually like houses as you can tell from the house behind me right because this is where i live this is the quality of life this is my bank this is everything um and so i like where i live and how i live that's why i live in the cayman islands that's why i lived in spain they're beautiful places and i live a quality of life so that has always been my journey but what i want to do is i always take steps towards the endgame i kind of live in the future always in everything that i do so i always have a vision of my future self or whether that's future state of financial markets where i think it's going whatever it may be i'm always well ahead and so i then can look it's much easier to live in the future and look back and say how do i get here then stand here today and go i want to go forward it's kind of weird it's a psychology thing and so i had realized that the mediterranean was this life and i was my ex-girlfriend when i was at university um her mother lived in majorca in spain and i was there in mallorca one point and we were on this small beach eating grilled sardines that was this perfect mediterranean scene right grill sardines somebody's making a big oil drum on the beach you've got a cold beer some grilled sardines and on this little mini peninsula there's a bunch of pine trees and palm trees and there's this long table of like 30 people 25 people of different age groups parents kids grandparents eating paella the spanish national dish on this sunday drinking wine laughing i'm like that is quality of life and so i kept that in my mind and so i kind of facilitated it to happen that i would move to spain right um and i did it in steps as well so i did it in the step that i was speaking to my father i was having dinner with him and he's like and i i was just chatting a few glasses of wine i was like you know i'd love to buy a house in spain at some point and he said you know i've got a friend selling a house in spain a random thing so i said sure well let me know so he sent he he this is in the day of faxes this is like 1998 or something he sends me a fax of this six-bedroom house on a hillside in spain i'm not that's great dad how the hell am i supposed to afford it he's like i was 30 years old i was working at goldman he's like well i don't know how much it is so he came back and said it was 150 000 pounds which at the time was like 250 000 us 200 000 us and i just had a bonus and i thought well i can actually buy that in cash and i did right and it was game changing i had a mortgage in london and everything else was game-changing because now i'd won the entire game i've got a six bedroom house on a hillside in spain overlooking orange groves 10 minutes to the beach and i could lose my job i could still have anything and i could work in a bar and i could live there i'm done right my gaming life was one so that that was the marker stone to allow me to take more risk to do the next thing and so that's how i've always done these things and how do you get that vision so i'm the same way but what i've noticed about myself is like every i call them like these chapters so it's like every sort of like five years is like a new chapter and what i've noticed if i go look back at the kind of last three chapters so i'm i'm 30 about to be 34 so basically you know three chapters i i've done three chapters now and each time it was sort of this like fortuitous bounce where i get in touch with somebody and they show me a glimpse into this lifestyle or this kind of like mode that they're in and then i just can't unsee it i'm like why the hell am i not doing that right it's your version of seeing people eating paella drinking wine at a 30 table just enjoying life on the by the water and you're like that's the glance that that's the glimpse i needed to do it so is that how you also got your vision for the next for the next kind of like chapter yeah so the next thing was not so i'd been in spain and i realized the thing i was missing was intellectual capital even though my clients were the world's most famous hedge fund managers you know all of these super smart guys but they weren't around me they're all around the world and it was not as easy to get in touch twitter wasn't really around you know there was less ways to be social online podcast didn't really exist right so and then i think i probably discovered tim ferriss and another friend of mine mark hart had gone down this journey of looking at silicon valley and entrepreneurship and that was the thing that i thought okay this is the next thing for me how can i how can i take the entrepreneurial journey outside of you know setting up my own research business which was a one-man band essentially i wanted to take that entrepreneur's journey and push myself i wanted to see what i was capable of um so that was the next that was the next thing and give people a sense so you're at goldman that's a good job uh what are you making back then uh you know basically like what what was your kind of like because i think for a lot of people they're like okay some people feel trapped when they're when they're making a high salary at a nice company they feel trapped they don't they don't take those leaps and other people they'll look at this and say well it's easy for you you probably are making a bunch of money at the time uh you know so yeah you could take these leaps of faith because you had kind of a safety net so but wait why in the clock back we were talking almost 20 years ago or something like that um you know how are you doing financially then versus you know at those two steps kind of research i've been really lucky you know i worked in the banking industry selling derivatives to hedge funds right so these are the mega trend of finance the mega trend of derivative and the mega trend of hedge funds so i you know i was doing pretty well you know at 30 years old i was only earning more than a million dollars a year um so but you managed to walk away from that which is pretty impressive yeah and i first went to a hedge fund don't forget so i left goldman went to hedge fund so i took a risk but i used to argue with my boss every time he used to give me share options and uh restricted stock i'm like thank you it's worthless i'd rather have cash because how dare you you should be proud to have equity in goldman and that's why we can give you so much more compensation i said it's worthless he said why do you say that because it's not money i can spend so he got really pissed off with me and then when i finally quit to go to my biggest customer and the biggest customer of goldman's equity derivative equity desk um entire equity floor in europe uh glg partners he then called me into his office and goes well you were dead right it was worthless he said so i lost all um i managed to cash in some of it but i lost millions of dollars to make that move but i wanted to make that move because i wanted to see whether i could if i could run money myself and be a macro investor because it was another chapter that i wanted to pursue for my own goals and then let's kind of fast forward till today so you came on my radar i think i had seen real vision a few times but i hadn't i'm not from the finance world from the silicon valley tech world and you know so we all kind of have our like media sources that we learn from based on whatever industry you care about right and so i had seen it but i hadn't really paid too much attention uh but i saw you start talking about crypto and this was um you i didn't realize that you had actually started talking about crypto back in i don't know 2013 2014 and i went back and i read your old kind of like memos and stuff that you know put up screenshots about so you know like you said ahead of the curve you have the receipts to prove it um but i think it was 2019 or 2020 where you started becoming very vocal and then you made the big splash where you were like i've moved some ridiculous part of your liquid net worth i think it was i think you might have said fifty percent at one point i thought you third you say ninety percent into crypto yeah 100 into crypto and um so that caught my attention and the attention of a bunch of other people and so you know i know you've talked about this before but there's a new audience so give give kind of the origin story of how the mind virus of crypto kind of like what were the steps where you went from like curious to convinced what what was that journey like for you where you put in percent or hundred percent because my job is to live in the future so i had got i had lived through the financial crisis and predicted it i had also lived through the european crisis and predicted it and had been in europe and had to buy a generator and food and get cash out of the bank and keep it at home right that's how close we were in spain to losing our entire banking system and as a macro guy i knew the issue was leverage and leverage had meant that we had a unique problem which was there's a layer of collateral and all of this debt is against the collateral and usually you've got like 30 claims on the same piece of collateral in fact the average u.s treasury has 32 claims on it or it did then may have more now so therefore who owns what in an unraveling you know who's going to get screwed and the the leverage was uh you're talking about government or corporate or where where did you see this stock pile of funds i look at total leverage financial system leverage government leverage um household leverage and private sector leverage right so we're at 480 percent of gdp now whatever the stupid number is right it's ridiculous but the problem is is that's a lot of claims on the collateral so because not everything is collateral in the system only something's used as collateral anyway so when lehman went bust right everyone's scrambling to find who owns what and you know that happens all the time so i started trying to start the world's safest bank with a bunch of family offices um i thought you know we could stay a bank that doesn't use leverage so then people can put assets there their savings there and realized they're safe because it wasn't safe people in cyprus had all of their money taken out by the government so i'm like okay i need to do something about this and i can do something about it so i started that journey and a friend of mine called emil woods who was a subscriber to global macro investor um who was running a hedge fund at the time an ex-goldman guy he said you need to look at bitcoin and i read a bit about bitcoin it's probably 2012 and i wrote the first macro piece on bitcoin which is i think the thing you referred to yeah which is 2013. it's like i saw it and thought okay so we've got two things here one is this asset bitcoin and that's a scarce asset in the digital world so that's probably interesting and secondly we've got blockchain which is a recorded ownership of everything okay well that solves the entire financial system and this could be something useful for the financial system in itself as a new version of gold so i backed out that the fair value of bitcoin with gold at 1300 using the kind of supply you know stock to flow ratio done badly you know i'm no you know statistician or econometrics expert but i kind of backed it out so it's probably worth a million bucks and then how i like to look at things is okay what's the price now 200 let's assume probably rightly that raoul is a total idiot so let's assume he's wrong by 90 so it's worth a hundred thousand dollars and it's at 200 that is the best single bet i've ever seen in my entire life so i bought it and i wrote about it and i held it all the way through till and when you say you bought it that's like a like the first time i bought bitcoin i bought like i don't know a thousand dollars a bitcoin right so i bought it means what like you bought a tiny bit you bought a medium amount or you went like you put a significant stake for yourself into it a decent a decent enough amount um and i sold it after a 10x so i'd done well from it sadly i got divorced in the process so i halved that so there was my tax that i don't pay and i came in i chose a voluntary 50 tax um so you know it wasn't a life-changing bet but it was a it was a good bet now had i held it on to 20 000 when it peaked yeah it would have been life-changing so okay so i've been in it i got out i was nervous about all of these four king wars and everything going on and i don't understand this let's wait and see and then i had talked about it a lot analyzed it been involved in it but hadn't been investing it again until 2019 started sticking my toes in again because the market had been selling off i was starting to get comfortable that yes that we got a recession coming this is going to be a useful tool and then 2020 comes along um and i was already positioned for a recession but you know this opportunity was like okay if the central banks are going to print like crazy then that's the opportunity so i bought a lot of bitcoin at that point i was long bonds gold dollars bitcoin and then over time i started charting bitcoin versus other assets and i realized its dominance in performance was so extreme that it made no sense to own other assets even with the fact that bitcoin can be very volatile and have periods like now or it's down 50 it's like it makes no sense to own anything else now i probably will take other bets here and there but i think my core strategic so i was bitcoin first then i started doing the work i was on twitter a lot um and people if i were to ask anything about ethereum people would pile on to me that makes me want to know more so i start digging in has the opposite reaction i knew what about ethereum and you know but i started properly digging in and i thought you know this is really bloody interesting the chart looks incredible the chop versus bitcoin looks incredible um this makes sense to me so um i started switching um into ethereum and when you say the chart looks incredible so tell me what that means so i've uh like i said come from the tech world we look at charts all the time but they're always like users revenue uh things that sort of like are not uh based on specular you know any kind of like uh speculation or human whims human emotion exactly um so you know charts don't lie or you know they they do if you but unless unless you know what you're looking at so when you talk about charts i've seen you know i see people like do this all the time on twitter where they're like you know it's voodoo magic they see a chart then they draw this like crazy shape oh clearly this is doing a reverse cyclone pattern and it's going to go all the way up and so are you one of those guys where you actually do the technical analysis and you say no the price chart is what i'm looking at or were you looking at other charts um both so um and i'll come on to that so price chart i think is the best guide of what the asset is doing what its trend is how it how people are perceiving it and where it is versus what you might perceive as fair value so okay you know you you notice certain characteristics like crypto tends to be exponential in price so you put on the logarithmic chart it starts to make sense you know you look at things like copper and lumber they tend to be mean reverting assets because you they get met by excess supply with high prices lead to excess supply so right now with oil at 100 bucks everybody wants to make as much oil as possible so the price comes down over time it doesn't happen with crypto because you can't right so you need to understand the structure of markets where the sentiment is is it overly bearish like a day like today it got overly bearish and so suddenly you start to see a reversal so these kind of things are interesting but my big discovery and why i really started loading up on ethereum was another chart which was a understanding that metcalfe's law was the primary driver of all crypto markets and in fact almost all of the tech stocks that we've known today and once you realize that these are basically networks and once you realize that crypto are networks where you actually own the network so facebook is a great network stock and it works perfectly on a log chart and it's an exponential does all the things as you imagine you can value it in metcalf's law terms but the fundamental difference is shareholders and network users are not aligned the shareholders make the money the network users get the utility along comes crypto you marry the the network user with the owner okay now you've got network of effects upon network effects this is like behavioral economics right manufacturing religion meets matt mccaff's law right it's like it's religion meets capitalism it's basically what it is right so that is incredibly powerful so i start looking at the fact that bitcoin and ethereum charts just at different points when they at the same point in adoptions like were remarkably similar and then it dawned on me as they're all the bloody same thing they're all about adoption so then so so if you look at it and if you're honest with yourself ethereum if you think about metcalfe's law it's about the number of users and then the kind of connections between the users and the applications built to create those connections well bitcoin's kind of a one-sided one which is a bunch of people own it as a store of value like gold nothing wrong with that but there's not many applications built in when you look at ethereum it's like holy [ __ ] i mean this is like the internet right that moment is like okay this is far superior a bet um and so that's why i took that bet and then i eventually shifted majority into ethereum and then took other bets in the space to express macro views yeah uh it's funny i i have uh one tenth of the intelligence of you but i did the exact same pattern so you know i heard about it in 2013 bought a little bit dabbled sold during when you know i when i went to a wedding and my aunt was telling me about how great bitcoin ethereum was i was like oh it's probably a bubble 2017 2018. sold for a nice profit was patting myself on the back uh you know in retrospect worst trade i ever made should have just held everything um you know bought started buying back in uh in 20 20 uh 2019 or 2020 i kind of announced that i've uh i had moved 25 of all my liquid net worth into the thing but that was right before you know another another run-up and so that became quickly 50-60 and um and you know piers and some people are telling you you're crazy i'm sure you had the same and same thing you know why are you betting on this are you just kind of speculating and i said no like basically i spent my whole career studying the power of network effects right i'm trying to build marketplaces and social networks in silicon valley because i know that a network effect is the most powerful force imaginable and uh and then i see this chart this adoption chart of this new money network it's like well if this if the if the social network was worth x and the information network was worthwhile and then the you know the merchant network which is like you know basically amazon um it was worth you know z then then this thing is going to be the money network's going to be worth a lot i can tell you that and so i was i didn't know much more than that but i just knew if you can bet early in a network effect that's still going through it's kind of like you know adoption curve um you know you'll do pretty well and so that was kind of my my my bet um coming from a comp you know sort of a different different take but ended up at sort of the same conclusion and i remember being impressed that you were talking about network effects because i didn't really see a lot of people in kind of traditional finance talking about that at all and i was like they're missing the point you know really one of the first people to really start saying unless you understand network effects you understand what this is at all because everyone's not defined on weird things because people people listening maybe don't know network connect so so to define it network effects just describes this phenomenon where uh let's just take you know a language if i'm the only person who speaks english english is not very useful same thing with a telephone system if i'm the only person with a telephone it's not that useful but now another person gets a telephone or learns english well english just got more valuable and then the more people that learn english the more valuable english is as a language and so it's describes a phenomenon that every participant that joins the network makes the whole network more valuable so it's like the opposite of like a popular nightclub where everybody who joins makes the thing sort of you know diminishes the popularity over time network effects typically describe that and they it gets more valuable at it square basically as an exponential not linear and then if you think about it in other terms is let's say let's say let's look at web 3 as a network and a network of engineers engineering talent right this is where it gets really interesting why is it exponential it's because there are parts when everybody's trying to hire web 3 talent right we are every single person i know is right and the actual pool of people who are capable of doing it is probably like a thousand right and there are so multi-millionaires who don't want jobs that's the point is their salaries and the demand for them is exponential the demand for the network of those guys becomes exponential over time there'll be millions of trained people and it becomes the network effects the overall space is very valuable but the opportunity that ramp that's the single most important interesting part of network effects right and the fact that you can own a share of the network so even when the network flattens out and is now worth i think 200 trillion dollars for the digital asset space it's currently 2 trillion that's 100x in market cap that's huge we've never had anything like this before right like when the when the first when the information network was getting built out which is just the internet and it was pretty clear like slowly but surely people were adopting they were getting online and then stuff was getting built stuff to do and then everybody who was online made made being online better because you could communicate with them or they might write a blog or whatever the whole internet was getting better the more people that joined right that was a network effect but you couldn't invest in the internet like you couldn't just invest in generically the internet and so you had to pick you know certain platforms and even then how how do you become an let's say you believed in amazon or ebay or whatever you're only getting a slice of the total internet and even then they don't want you know the average person could not invest and that to me it feels like nfts right now we want to all get involved in nfts you have no idea what's going to win i mean i mean you don't have the ability to go on every discord so it's bandwidth constrained we all are in this space we know it's huge we all know it's huge we also know it's a bubble we also know tons of this is going to zero um that's fit what's interesting about you only gives you that gives you the uh action of nft the kind of you know that that kind of makes sense like owning oracle did a pretty good job of capturing the internet right and so you've been now kind of following this and so what what what is the viewpoint you had about crypto that you've changed your mind on or you've what you believe before now you realize it's sort of wrong and you think about it a different way is there any has it been anything is this kind of you know it's kind of like this rapidly evolving thing you're sort of like defogging this like brand new world you know so you know maybe some mental picture some mental framework you had before hasn't really held up and maybe something different has happened can you think of an example of that well my views on bitcoin changed um significantly i don't think no less of it as an asset but i thought about it in network terms and the community and i thought the community is not attracting new people and the job of a network is to attract new participants and if the network was actively rejecting people i thought it's going to underperform um which was surprising to me because i was very bullish on bitcoin first because i thought look it's going to have a larger place and what's happened is almost immediately and it made me change my mind is the institution started going well i actually don't like this space and they started buying eth and that was so that's that's new i haven't really heard that so tell me about because you're connected to all these folks right like you know hedge fund guys cios whatever you know a bunch of different people in that world they don't want to own an asset where everyone's shouting have fun stay poor at each other and putting laser eyes right makes them look [ __ ] stupid and irresponsible with their money well eth feels like it's a technology play yes it's amusing because everyone's saying gm to each other and all of this stuff but it's not at war while bitcoin was at war with every other network because you know that's what networks do you know religions go to war with each other for the same reason right they're exactly the same principles um so you know it's the same reason russia and nato it's they're all the same they're all networks fighting each other for the robustness of their own network i get it so that that that whole process of seeing institutions getting turned off by it was a was a big deal to me i just thought yeah i don't like this either so that was one thing um i'm trying to think well you've seen a lot of news about institutions buying bitcoin whether it's tesla or microstrategy or square or you know some like you know a random insurance company buys 100 million dollars worth of bitcoin so we've kind of heard those we hear less of that with eth is it just going on under the radar is it coming what's your sense of that because i haven't i'm in this space i haven't heard a ton it's happening um below the radar because people keep coming to me saying when's this wall of money i'm like it doesn't come as a tidal wave it comes as a flow right you don't see it until you look back and go wow so i mean i literally every other day i'm speaking to the world's largest financial institutions who put me in front of their investment committees and taught them through crypto and how to invest and the narrative change really surprised me it was always bitcoin you know can we put bitcoin on our balance sheet how should we invest in bitcoin what's the diversification move very quick to look ethereum feels like it's a technology play that makes sense with the applications we can't we're interested in d5 etcetera then it very quickly became oh [ __ ] how do we get involved in web3 um so it moved very fast which is why in the end vc got most of the money um because they saw the broader opportunity they all came through the the 2020 lens of bitcoin is the asset and you know the michael saylor route and even me you know in the earlier part of 2020 a lot of people came in that and then like all of us they kind of go oh wow okay this is much bigger so you know i've started a fund of hedge funds um which is investing in crypto hedge funds to allow institutions another way into the market because they don't really want to buy just eth or bitcoin they want exposure to this two trillion dollar asset class is going to go to 200 trillion over the next 10 12 15 years whatever the number is so hedge funds are pretty good for that because their job is to manage the exposure and and to capture the to capture this big move so you know that's another way that it's coming in that people don't see um you know people it's not all about the bitcoin etf i don't think that's going to move the needle as much it'll be positive only in a positive market yeah yeah the the way you describe it's like it's not one giant wall of money and like most things it's not you know a single moment in time or it just goes from from not here to here it's like a it's more like a cascade of dominoes and every day you hear something it's a that's another domino that's tipping the next domino each one influences the next one and then you sort of once you tip it off it which has already happened it just takes a matter of time until the whole domino set runs through and it's all it's all yeah and i i'm seeing institutions using this weakness and not being frightened by it so that look this is fantastic opportunity i need to use this i get it the volatile space they they understand the people who are trying to put capital work understand but once the price starts going up again then you'll see the stampede um right you know you know if bitcoins at sixty five thousand or seventy thousand um then people say okay we've had a year-long correction it's now going up next phase is going to go to 106 right and they'll be in and they'll be in and they'll be a mad panic because they've all been doing the work over the last year and a half so they'll be like we've got to get in now got to get in there because if they don't they miss the out performance of their peers who've got it and what do you do with your east do you uh like let put it into defy or you're earning interest or your yields for you you put it in a you block it away you don't touch it do you remember that story of the house in spain once you win something you don't let somebody else take it away from you it's as simple as that because if i was staking i get what five percent yield or if i'm really clever and i mess around in deep defy i'm getting like a 15 yield and then i get rugged or something goes wrong or it's on an exchange gets hacked i just that's not the risk i want to take it's not worth it if my expected future return is you know 10x why take why get a 5 percent yield it's nonsensical so i just don't do it why yeah exactly basically why take a even if it's a small chance of multiplying the whole thing by zero uh you know that's that's not really the bet to make what i do is i take a very small percentage and i say this is my learning budget like because i you know basically if i had done that with bitcoin i would have just sort of sat on my bitcoin never touched anything else and i said well no actually it was quite useful to start playing in ethereum fairly early on and similarly now playing in d5 or nfts you take a learning budget and you say look this isn't the principle this isn't the one that's going to make all the money um but this is also where i get to you know continue to play the game and understand how this whole thing unfolds yeah and i've i've never been interested in yield even in financial markets all the old stuff is boring to me i'm i'm a i'm a guy who likes the capital game room yeah um and different people right there's a whole bunch of people who love yield it's called carry in financial markets they want to get carrie and others want to go for performance and they're two different equations and the carry guys do really really well until they blow up and the the guys like me tend to do mediocre mediocre and then make huge things they're just different ways of skinning the cat right so i spent my time because we don't have enough mental ability to focus on all the things in the space so i started going down a different rabbit hole i saw nfts i understood it mainly not all of it i understood that you know that the the macro view of what these things are and how big this is i wasn't really that interested in these communities give the uh here's my understanding of nfts because i think like you know the third most googled question is like what is an nft so so you know even people who like hear about it maybe even own a couple but they don't have a great frame um and i think you're very good at framing things and so give us your current frame of nfts so ethereum introduced a piece of magic in a smart contract a smart contract attached to a blockchain means that any contract in existence can now be attached to a blockchain and smart contracts allowed an algorithm or a calculation to be made automatically and verified on the chain so that could be your insurance contract for your house it could be any of the contracts i mean if you look around you almost everything that we have in life is a contract whether it's a spoken contract written me appearing on this together with you is a form of contract right so all of these things are contractual relationships that are everywhere what this was saying is we can record all of them and verify all of them okay so that's a really big concept beyond which most people understand and you can understand that okay if that's the case then a house can go on a blockchain yes because the deeds and then you don't need a notary and then you don't need lawyers there's all of this stuff most legal stuff can actually go on this and then the breakthrough is that okay we've got another thing that's going on in digital world which needs solving so this contract thing is a big deal we don't even know what this means yet right when we talk in 10 years time we'll go oh my god we didn't see that coming right so that's all happening and defy is that there's contractual obligations between borrowers and lenders it's all happening on chain but what the the average person is seeing is a different breakthrough that came out of this whole concept is in digital world everything that gets digitized goes to zero in value or cost everything right the price of data the price of everything is zero over time so that's a big problem if you're living in an increasingly digital world so how do you cement digital value is you have to introduce a system of scarcity and an nft allows a digital asset to have scarcity okay breakthrough now it could have come from the music industry it could have come from a number of different places it ended up being the art market okay and where you can say this stuff that was now was basically worthless online i mean getty had bought a bunch of image rights but to police it is really bloody hard as well so okay now we can create a one of one of value or a number and do that so that becomes the value of an nft the next part of an nft that you say okay well if we give a bunch of people these we can now identify a community and then these people can be like-minded communities because they coalesce around an idea which is this piece of art and this community which is bulldape yacht club or crypto punks so that becomes an incredibly value it's a membership to a club and it's your identification it's showing your rolex and you know it's all of that stupid identifying tribal stuff that humans do endlessly and always have and always will so that's going on and it allows us don't forget the internet had taken us from our towns villages families which is our social structure and thrown us into a big shouting room from people all around the world with different views right it's quite exhausting and we all wanted a place and what this is giving us is these little digital communities sovereign states villages towns cities where we can now operate with civically minded people within that and these tokens are the identifiers social tokens are the big thing they're they're not com they've only just started that's much bigger i think than even nfts are but let's start with this because this is a way of coalescing humans because humans like these kind of identification system of shared values that kind of stuff so nfts are a lot of things that's why they're so big and again that's just scratching the surface of what this is it it can also and will also be your digital identity online right you said something about music and i saw you tweeting about music and kind of the future of music royalties or like how anybody can become an a r you know uh person now describe what you kind of what you're thinking there because i think that'll be fascinating to a lot of people because music is one of the music like art is a great entry point for a lot of people whereas you know macro investing is deeper in correct so what is the world's most vibrant communities it's sports and it's culture that's fashion brands fashion brands more than any others it's music it's art it's these things right culture the big unlock here is if you can tokenize communities which is now the network owner is the same as the network user remember that facebook example right so now we've got pop star and token holder they're all now joined in the same network so now every incentivized to grow the value of that network you've now made culture and investment this was not possible you could take a cultural marker like an adidas sneaker but you weren't making money from adolescents you had to buy the shares and there was no connection between the consumers there was no network of adidas users now you're about to create networks amongst these people so what is the value of lvmh the fashion company right with all of its kind of mega brands that people are passionate about that are status symbols that humans like we've just talked about love these things so the same with music right we're all tribal in music we love different music we like different bands so to be part of that network i could now be a 16 year old kid and never have to have a job because i happen to get involved in the right i'm good at finding the next pop star well if i buy their social tokens or i invest in their song ip on nfts right i'm in business so what this is creating is a system i think is universal basic equity where culture is the investment they're not living in your world where they're building businesses and having to sell them and go through the entrepreneurs miserable journey um they don't have to do that they do a different way which is by using their human instincts about the communities they want to be part of and which networks are going to thrive and music is so powerful because it's human emotion um and people and it's it's a place in time i remember i'm a huge music fan and you know i identify music by its year what i was doing what it smelled like what i heard who i was hanging out with i mean everything right music is is one of those anchoring things so just the ability for musicians to now sell directly and have a direct relationship with their fans via social tokens and nfts is literally a game changer i mean there is no way on earth snoop dogg would have been able to sell something in small numbers and make 50 million dollars it's just not that big a star because record labels um because 80 of all the economics of selling music gets taken by middlemen so he'd have to sell a huge sum to do that or he'd have to go on tour and to make 50 million dollars that's a big exhausting tour you know he's no spring chicken anymore these things are you know it the music industry economics got destroyed by middlemen and it made the artist have to work harder take more risk with capital which is like have to go to massive tour i have to rent arenas and take these trucks this changes all of that dynamic and the metaverse changed it one stage further yeah like the artist had to create uh scarcity uh which was basically come to my concert there's only x tickets and that's how you can see me and then they also created status which was take photos of yourself at this concert post that online and that's a big part of the value that you're gonna get out of uh out of coming to this thing and then now we have a digital version of that which is and and so when all these people spoke to each other the fans they'd have to go on a facebook group and facebook monetizes them right right and if they want to go on tour they need to go on facebook and google and pay everybody but when you've got millions of token holders you've sold out 50 of your tour you've de-risked everything in minutes it's just it it stops you having to use middlemen all the time and uh you talked about two different things there's like the sort of like almost like the thousand true fans uh you know concept where basically an artist can drop something that's rare and exclusive or access to them or their commit their fan club and the it gives the whales you know something to go by that they would you know that they're they're actually willing to buy more than just a t-shirt uh now you give them something worth buying and so that's that's one thing that you could do with it but the other one is what's talking about buying a stream a part of the royalty right the part of the royalty stream and so that's where you know i remember i don't know i i remember finding macklemore the the artist when he had like you know whatever 2000 fans and i was like this guy's great and like if i had actually been able to bet that this guy's great and therefore be a part of his community he views me as a backer and true believer and i did i remember i kind of did a kickstarter with him or whatever he he pre-sold his album and i just gave him you know 30 bucks because yeah go use this to help make your album pay for some studio time but he didn't know me i didn't have a relationship but i had nothing to show for being right and and so now in this in a world like this where the 16 year old kid can say i think these guys are going to be great their price is cheap right now and i could buy you know some of their future um there's even more magic because that 16 year old kid because he's now financially incentivized to grow the network and make that song a success it doesn't make sense like 100 tick tock videos yeah exactly right and if you multiply that by all of the token holders of those ip rights they're all marketing free for you because they get paid in the upside it's genius i mean think about it like uh you know if you doubt what you just said just think about who's bitcoin's cmo who's who's the chief marketing officer there what's their ad budget and then how much publicity do they get who's their pr person how much publicity do they get how much chatter how much you know the ticker that's sitting on cnbc all day showing the bitcoin price right like all of this happened because you had a network of people incentivized to go shout to the world how great this thing is um you know and and people hate that about crypto oh there's just people shilling their thing yes and that does get annoying and you know you have to filter you know signal from noise but at the same time you have to appreciate what that does it turns everything every believer into uh every society is the same so if we think of everything is the same so let's assume bitcoin is a social token ethereum's a social token let's assume the us dollar's a social token and let's assume that religion is a social status token essentially so everybody goes the same way to increase the value of that thing so the us is like we've got military might and we're the greatest nation this is the free place and everybody can become a president right that's their narrative right every country has a different narrative to drive its value system for its network because they all require incoming capital to support the network including the church which couldn't have survived without incoming capital so they get all these people out to go and tell the word of god they then spread the dish around take money in it builds the church it grows the network they're all the same that's humorous the book sapiens kind of goes through this a lot about how humans need to self-organize yes well said i think that's that's a perfect zoom out uh we can kind of even even pause or stop there so uh where should people so follow you on twitter your role gmi uh you also have real vision and people should go sign up for that i mean look if people are interested in crypto really easy i've set up an entire free crypto um channel which is realvisioncrypto.com it's all the great and the good of the entire industry everybody every week i interview like who i think are the people i really want to pick the brains of and i go down all these journeys of social tokens and music and macro and all of this stuff so there's so much there and it's free real visioncrypto.com awesome all right thank you for coming on i appreciate it i really enjoyed it thank you [Music] you

Channel: My First Million

Views: 93,705

Keywords: my first million, my first million podcast, my first million podcast episodes, the hustle, the hustle daily, the hustle trends, shaan puri, sam parr, sam parr the hustle, the hustle podcast, the hustle podcast my first million, startup podcast, entrepreneurship podcast, business entrepreneurship podcast, business, podcast, entrepreneurship

Id: H1FYJlaxlOg

Length: 48min 27sec (2907 seconds)

Published: Wed Mar 02 2022