RAOUL PAL: Pomp– the man who needs no
introduction. Finally, I'll get you on Real Vision. ANTHONY POMPLIANO: Thank you
so much for having me. We've been planning on this for a while. RAOUL PAL: I know. It's
just before we had to do things in camera and in person. It was a fucking nightmare. And now we
just do Zoom. You're in Miami. I'm in the Cayman Islands. It's easy. ANTHONY POMPLIANO: Absolutely.
I'm excited to do it. RAOUL PAL: So listen, I want to do something a bit different with you,
because you get a lot of sound-bites, you're all over the place.
I want to hear the Pomp story. I
want to know who you are, where you've come from, how did you get here, all of that stuff. So
let's start at the beginning. Where did you– go for it. ANTHONY POMPLIANO: So I have a mother
and at one point she decided to have a child. No. RAOUL PAL: She probably regrets that by now.
ANTHONY POMPLIANO: Oh she definitely does. No, I was born in Hollywood, Florida. We lived in
Lakeland and Cooper City, and then we moved to Raleigh, North Carolina when I was young, seven,
eight-years-old, whatever it was. And I'm the oldest of five brothers in my family. And,
you know, all of the good and the bad that came with that from my parents. I probably gave
them nightmares at night, but also they loved every second of it. I ended up going and playing
football at Bucknell University, studied economics and sociology there, and then was in the
military, did six and 1/2 years in the military. Did an deployment overseas, came back.
RAOUL PAL: What age did you come back from the military? ANTHONY POMPLIANO: So I signed up when I
I needed my parent's signature to sign up. And I basically signed up with the National Guard.
And I knew that I was going to go to college. I was going to go play football. And then basically
I would just owe some time, like after school. But what ended up happening is, I got deployed
when I was a junior in college. Literally like two weeks into the school year I got a phone call,
and they said, hey, you're going to Iraq with this unit. And I was like, no, I'm not. I'm going to
go play the football game on Saturday. And they were like, that's not how this works. So I ended
up doing that. I was 20-years-0ld when I got deployed in 2008 and was there, kind of total
deployment, 13 months. RAOUL PAL: Where did you end up? ANTHONY POMPLIANO: I went to Taji, Iraq,
which is about like 12 miles north of Baghdad.
And we did, basically night route clearance. So we
drove along the roads, super slow, like five, seven miles an hour and looked for roadside
bombs and ambushes. We basically would go out in front of the resupply runs or other soldiers
and try to sniff out, kind of all of the danger. So we're driving in the middle of the night with
out lights on and kind of slow. And then they'd come behind us and they'd get to go 60, 70 miles
an hour with all their lights off and just try to beat people with speeds. So it was– RAOUL PAL:
Was that a little terrifying You're a kid and you get sent there.
You think you're going to be
playing football. The next minute you're trying not to be blown up on the side of the road.
ANTHONY POMPLIANO: When you're 20, you think you're invincible. Right. So there's an element
of, hey, this is fun. And the best part about the experience honestly was– I got deployed. I
was– by far I think I was like the youngest guy, at least five years if not more.
Most of the guys
I was there with, I'm pretty sure were kind of late 20s into their early 30s. And these guys had
families. You know, they were married. They had kids. They had mortgages. I was basically just a
young idiot kid who had been in college and was worried about the football game on Saturday or
the party on Friday night. And so to kind of get thrown into this environment where, not only are
you around a bunch of pretty mature men who are in the middle of, like, living an adult life, but
also in a situation of danger. And in many cases I was in charge of some of those guys. It just
was a situation where you got to grow up really fast. Right. You kind of learn very quickly,
like, you can be the big smart-ass all you want, you can be the funny guy, but at the end of
the day, like,– RAOUL PAL: Hi, I’m Raoul Pal. Sorry to interrupt your video – I know it’s a
pain in the ass, but look, I want to tell you something important because I can tell that
you really want to learn about what’s going in financial markets and understand the global
economy in these complicated times.
That’s what we do at Real Vision. So this YouTube channel
is a small fraction of what we actually do. You should really come over to realvision.com and
see the 20 or so videos a week that we produce of this kind of quality of content, the deep
analysis and understanding of the world around us. So, if you click on the link below or
go to realvision.com, it costs you $1. I don’t think you can afford to be without it.
ANTHONY POMPLIANO: It just was a situation where you got to grow up really fast.
Right. You kind of learn very quickly, like, you can be the big smart-ass all you want, you
can be the funny guy, but at the end of the day, like, you got to be an adult. Right. And so
it was probably a really positive experience in hindsight. But at the time, you're just
a 20-year-old kid running around with a gun in the desert, and you frankly are too stupid
to realize how dangerous it is.
RAOUL PAL: So what made you leave? ANTHONY POMPLIANO: I mean,
once you do like six and 1/2 years, basically– so that was one contract. If you sign a second
contract, you're probably going to end up doing, you know, over 10 years. And everyone always talks
about 20 years is when you get to retire. And so, like, if you've already halfway over then, pretty
much like, why would you not just finish it out? And so I knew that if I signed a second contract
I probably would stay. And I just didn't really have the desire, really, frankly, to kind
of do it for 20 years. And on top of that, when I came back from Iraq I was on a soldier's
salary, which basically is not that great, except for when you're overseas it's tax-free.
And I came back and on the way transitioning back in Kuwait they have all the defense contractors.
And they basically sit there and they say, hey, if you go right back for six months, we'll pay you
And if you stay the whole six months and don't go home at all, we'll pay you a 10k bonus.
You get 100k. Or if you do it for 12 months, we'll pay you $180k with a $20k bonus. You get
$200,000. Pretty much guys were sitting there saying, wait a minute, you're going to pay me a
lot more for doing exactly what I just did and maybe I might actually be safer and there might
be better food and better accommodations? Like, it's pretty compelling. But my father had a very
clear conversation with me that was like, you're not going back.
You're going to go back to finish
school, and so that's what I did. RAOUL PAL: So you finished school. Your experience is
now over in the military. What do you decide to do? ANTHONY POMPLIANO: A weird experience
was when I went back. I had basically missed three semesters. And so I went back to school,
basically my class that I went into college with, they were graduating. So I went back, kind of the
second semester senior year. They're all basically checked out ready to leave, and I'm staring at
four more semesters of school.
I frankly don't know anybody other than my friends who were
leaving. And so I had to kind of reestablish friendships. I kept playing football, which
was great, and really kind of helped with the transition back from the military. And in the last
semester that I was there– I ended up doing the full four semesters of work in three semesters.
But in that third semester my dad called me again. He was just like, look, you got to either go get
a job or you can make a job. And I was like, well, getting the job sounds dumb. I don't want to do
that. So, like, let's make a job. He was like, well, you could start a business. And I was like,
OK. How do I do that? And like, you know, I mean, just like, in hindsight, so dumb. And he just
walked me through it. He was like, look, basically you can go work for somebody or you can create a
company and people work for you. RAOUL PAL: What did he do? How did know how to do this? ANTHONY
POMPLIANO: So he basically lived two lives.
So his first life was, he worked for 25 years
at MCI and then AT&T, you know, rose up, literally the classic story of like, him, his
father, his brothers, his whole family worked in a single company and kind of did the corporate thing
for decades. And then as he got older, he ended up basically becoming like a technology executive,
working for companies other people had started and then he started his own companies.
And so he
really got bit by the entrepreneurial bug. And he never really pushed it on my brothers or I, but
he definitely, I think, wasn't there to discourage us, if that's what we wanted to pursue. So it
was kind of the perfect way, I think, to say, hey, look, if you're interested in this, I'll
only encourage it, but I'm not going to tell you to go do this. And so that's what I did. I
basically– me and three buddies from high school, we created a company. It was literally every
mistake you could possibly make in the book, but it was in the online advertising space. And
then there was a second company. RAOUL PAL: But why did you start in the online advertising
space? I mean, you knew fuck about fuck, if I put it correctly. ANTHONY POMPLIANO:
Literally, if I started to explain how these things come together, like, we knew that in the
local community around the university, basically all of the local businesses wanted to advertise
inside the school. So basically there was three main employers in this little town
in Pennsylvania, in central Pennsylvania. It was the local school district, the public
There was a local hospital, or the university. And those were basically the three
main employers. And small businesses, if you're a local pizza shop or whatever, you basically want
to advertise in those three places because that's where you're going to get the most eyeballs. But
the school districts had a very antiquated kind of advertising system where literally there
was pamphlets on a table. And in order to get approved, there was like an archaic process. Like,
you had to send in your pamphlet and this stuff. These guys were like, look, man, I'm trying to
figure out what the special is on Friday, let alone trying to plan six weeks in advance.
we just got the idea of, like, why don't we just create an online directory? And so as we kind of
learned more about these public school districts. Still to this day, one of the most popular, most
visited websites in the world are the portals where parents sign in to check their student's
grades, their assignments, their conduct, all that kind of stuff. But the schools don't monetize
it. Right. The schools aren't in the business of monetizing it. So rarely on the internet do you
find a high traffic website that's not monetized. But literally every school district in America has
sometimes hundreds of thousands, if not millions of page views on these sites where parents sign
in. And so we started going around the country, going to these school districts saying, hey,
look, put this hyperlink on that page. It looks very professional, and it'll link to a local
business directory, kind of like what a Yelp is. And we'll go sign up the schools, or the local
businesses. And if they pay us– I think was like $15 bucks a month, we'll basically split it
We'll give you $10 and we'll keep $5 for ourselves. And so we got free traffic from the
school. They got a free check of money, right, for just putting a link on their website. And then
the small businesses got to advertise in front of the parents and students in the school district.
And so probably a pretty decent idea– horrible execution. Literally every single possible
thing we could do wrong, we did. And we ended up learning a lot from it, which was probably the
most valuable part of it. But that's really what kind of kicked me off down the road of technology
and company and investing.
RAOUL PAL: So what did you do after that? What did you do with that
business? You shut it down? Did you sell it? ANTHONY POMPLIANO: We basically– we "sold" it,
and I put that in air quotes because I think that we basically got back just enough cash to, like,
cover what we had invested. So definitely didn't get rich off of it. But, again, just kind of like
literally went through the entire lifecycle of a business on a very small scale, and just learned
And from there I then start a second business. That business did a little bit better.
That was online data. And so if you think about back in– this is in like 2012, maybe. All the
APIs for these social media companies were wide open. So you could literally ping Twitter and say,
hey, give me all the tweets within a three-mile radius of this GPS coordinate. Right. And they
would literally just dump all the tweets to you. And so what we did was we basically came up with a
piece of technology called identity stitching.
So one of the problems back then was, there wasn't
a lot of context. So if Raoul goes and he tweets, "I love ice cream," that's not very helpful for an
advertiser, for a sports team, for the military, for law enforcement, for anybody. But if instead
we know that you just checked in on Foursquare three minutes ago at an ice cream store, then
you say, "I love ice cream," then we can kind of stitch that together. Now all of a sudden
that tweet's much more valuable because either a competitor wants to know that or that business
or whatever. And so what we started to do was just figure out all these little things. How do you
stitch together various social profiles? And so you may sign up with the same email address on
multiple accounts. Well now we can match 'em. You may use the same profile. You may use the
same name. You may use the same URL in the profile. And so we just started trying to figure
out how to stitch together, and we were basically selling into sports and entertainment venues.
really wanted to know, like, who's in our stadium? Right. If you've got somebody– this was before,
kind of, influencers and all this stuff. But if you've got somebody with a big following and
they're talking about your team, you might want to give them a special experience, bring 'em in
the locker room, give 'em a discount or whatever. And then also law enforcement and military.
And so if you kind of think of a police use case, they called it digital canvasing.
So if a shooting happens on the street corner, when they show up, pretty much everybody ran.
There was a shooting, so everyone took off. And so historically they had just gone to local
shop owners or residents and said, you know, did you see anything? But now what they could do is
they could basically say, hey, show us all of the social media content that have been created
in a two-blocks radius in the last three hours. And if you had created content they could see
And so that whole business led me to– eventually I met some people at Facebook and I
ended up actually working at Facebook, kind of after that business. But it was just a really
interesting time, I mean, kind of in the early 2010s, just seeing social media, how fast the
stuff was growing, how important it was going to be for society. And frankly it was a lot of fun.
RAOUL PAL: And what did you do at Facebook? That must have been a big shock, because you didn't
want to work for anybody, and now you're back into a monster. I guess it was a bit smaller then.
ANTHONY POMPLIANO: Yeah. I joined, I think it was like 4,000 employees, just under 4,000
employees. And the two stories I always tell about Facebook– so one is, when you use these products,
especially when you're younger, before, kind of, technology entrepreneurship got so celebritized,
you forget that there's employees and there's buildings and there's like a company behind it.
You're just kind of using this faceless, nameless product. And so I remember when I went
out to California. It was the first time as a kind of teenager or older that I'd gone to California.
I went to San Francisco. I knew nobody. And I went on the campus. And I remember just being blown
away by, kind of how exciting and fast paced and how smart everyone was, how ambitious they were.
And so pretty much on the spot I was like, yeah, I would love to work here. Like, this is amazing.
And so I ended up running the growth team for Facebook pages. When you think of Facebook pages,
basically the top of the advertising funnel or the top of the funnel for their business product,
you have to have a Facebook page to become an advertiser. And so in 2014, I basically
stepped into a job as a product manager. Nobody had really worked on growing that product.
And I think I started out with a team of like six or eight people. And over about a 12-month
period we grew to over 30 people, two offices, and ended up driving quite a bit of revenue to
the bottom line.
The stock price takes off and as with everything in life, you probably get too
much credit when things go right and you get too much blame when things go wrong. But I then had a
couple of other opportunities that Facebook after that. But that's where I started. RAOUL PAL:
And then, so after Facebook, where did you go? ANTHONY POMPLIANO: I went to Snapchat. I was there
for a very short period of time. And then in 2016, I started to invest full-time. And that was
probably– the big decision was like, hey, do I want to keep building companies, whether I'm
the founder or helping other people build them, or do I want to invest? And for whatever reason
in 2016 decided I think I want to spend a lot of time investing.
RAOUL PAL: So here's
the most connecting themes– you go into the military knowing nothing about being in the
military. You then start an advertising business, knowing nothing about the advertising industry.
And now you're about to walk in investing. What makes you think you have any idea what to do
there? ANTHONY POMPLIANO: I think that it's two things. Right. So one is just like, I'll bet
on myself all day long.
And some people see that as arrogant. Some people will see that as a level
of selfconfidence. I actually look at it the exact opposite, which is, when you bet on yourself,
what you're really betting on is your ability to learn. Right? I mean, that's all betting on
yourself is, is, hey, I'm going into this knowing that I don't very much about it, but I'm willing
to bet that I can get up to speed very quickly. And not only will I be above average at it, but
I think I can be good at it. Right. And so that's just having the intellectual honesty to one,
recognize you don't know anything about it, two, understanding that there's a lot of people who do
know what they're doing, and you probably should go find those people and learn from them.
three is also having the patience and discipline to realize, like, it's just going to take reps.
Right. And so, like, how do you basically get the reps in a low risk situation first before you kind
of move on to bigger and bigger things? Because that's literally how I started was myself and a
gentleman by the name of Jason Williams, who had previously sold a pretty large health care company
for about half a billion dollars.
We started, essentially angel investing is really what it
was, kind of $50-$100,000 checks of technology companies. And we said, look, let's see if we
can figure this out. Like, let's see if we can do it. Let's see if we can enjoy it. RAOUL PAL:
So you start with a blank P&L, no portfolio, not really sure what to look for. How do you
start? ANTHONY POMPLIANO: Yeah. So there are three things we did. One, I had the benefit of, I had
worked in Silicon Valley for a couple of years, and so I knew some people.
I didn't have a great
network but I knew enough people where I could basically call them up and say, hey, have you seen
any interesting deals? And they would say, yeah, there's this, like, great deal. And so unbeknownst
to me at the time, like, there was some, like, really good deals that we ended up getting into,
just because a friend of a friend or a friend was investing. And so in that first portfolio
it was only like a $3 and 1/2 million fund, right, which, like, compared to most people
they're just like, why would you even do that? But we didn't know how much money we could
raise. We didn't know anything. Right. And so we were literally seed investing in these deals.
And today, two of those companies are now worth over a billion dollars where we're seed investors.
We've got a couple that are worth hundreds of millions of dollars. And in hindsight, we started
off fast. Right. At the time it doesn't it feel like that because you're like, I have no
clue if this is something we're good at, if we're going to join– and also the feedback
loop takes a long time in venture investing. Right.
It's not like you would make a decision
today and tomorrow the price moves up or down and you know whether you were right or not. Right.
It's not like kind of trading. Instead it was, we're going to invest today and we're going to
invest a ton of time working with these founders, and then we'll find out in three, four or five
years whether these decisions actually worked out or not. So now we're starting to see
some of those data points and it's really, really compelling. But there was a good number
of years there where you just kind of have blind faith that, hey, you know, I made sound decisions
based on the information I had at the time. And as long as I continue to help the founders,
I'm going to work out.
RAOUL PAL: So what's the maths behind, you think, of VC portfolios? It's
kind of 80% zeros? My guess it's about 80% zeros, 18% kind of OKs and 2% knock it out the park
winners. [INAUDIBLE] How do you think it played out over time? ANTHONY POMPLIANO: Yeah, so it's I
think a little difficult, or a little different, depending on the stage that you invest in.
Right. So if you're a really, really early stage investor, you're more likely to have more losses
than, let's say, if you're a growth stage investor and kind of everywhere in between.
The one thing
that I will say is, I think that the losses are probably overblown. So it's probably not 80%,
90% type loss. Like everyone always says 1 in 10. It's probably something more like maybe the top
10% or even 5%, they drive 90% of the returns. And then there's a big, big middle gap. Right. So
you might talk about out of every 10 investments, maybe one is the outlier, then you've got six
or seven that are kind of singles or doubles. So maybe you either get your money back or maybe
you kind of two or three asset.
And then there's the ones that go out of business as well. And so
I think that the fallacy of, like, 80% go to zero, directionally it's correct or philosophically
it's correct, but the numbers are actually a little bit kinder to venture investors. And as I
started doing it, again, going into it completely uneducated was actually a huge blessing.
There's a lot of people that I've met over the years where they were a young person.
know, I had started doing this when I was 26, 27-years-old, like 27-years-old maybe. And they
had spent three or four years working for, like, a legacy venture firm. And so they had learned a
certain process. They had learned, really, kind of a risk mitigation strategy. Right. If you think
about, kind of a traditional venture diligence process, it actually is somewhat pessimistic in
its execution. Because what you're constantly looking for is you're looking for all the reasons
why a deal potentially couldn't work. Right. You're trying to find that red flag.
an optimist, and so I went into it saying, well, like, convince the possibility and that's good
enough. I don't want to do the diligence on all the ways it can go wrong. I want to do all
the diligence on the ways it could go right. And so, again, I didn't know that that
like a good thing. Now in hindsight, like, I understand that's actually a really,
really important component of what we did. And then we started to deploy capital. And you quickly
realize, like, nothing the founder tells you at the preceding C level matters other than who
they are. Like, literally nothing. Right. And so if you look at everything from Lyft, Uber,
Airbnb, all kinds of big winners, all the way down to the companies in our portfolio, like, if
you bet on the right founder, they'll win.
And now I've invested in a number of unicorns at
the seed stage, and it's the one thing that I constantly go back to is just, find the right
founder going after a massive market. I'll bet all day long. And people underestimate how asymmetric
these investments are. We're not talking about, oh, the investment could go up 5x, 10x, 15x, we're
talking about investments that have 100-plus-x type potential if you end up investing in
what become multibillion dollar companies. And so I think that the technology background I
had in growth at Facebook really allowed me to understand, kind of the exponential nature,
or kind of the parabolic nature of some of these types of investments. We we get to Bitcoin,
that definitely is an advantage I have. And so it was just like, look, go find the best founders.
Who cares what the valuation is.
RAOUL PAL: What defines the best founder? What is– for you. I
mean, different people have different criteria. What's like one founder versus another
for you? ANTHONY POMPLIANO: It's a problem-solver. That's all it is. Right. Like
if you really think about building a business, yeah, vision's important, recruiting's important,
the ability to fund-raise is important. The idea is actually somewhat important in terms of, like,
you've got to make the right decisions about what markets to go after, all that kind of stuff. But
if you're a problem-solver and you have critical thinking skills, you can think from first
principles, you're an independent thinker, you are going to get all those other decisions
right. Right. And so, like, a good founder rarely goes after a bad market.
Right. Now they may make
mistakes, they may do these things, but, like, the decision-making framework that they use will
normally get them into the right markets. It'll get them good people around them. It'll get them
capital, and then it'll get, kind of out in front of customers. And so things can go wrong, but
really what you're trying to figure out is just, can this person make decisions with a lack
of information in an uncertain environment, and do they have a propensity to solve problems?
And so the way I always talk about it is like, when something comes up, there's two types of
people. If all of a sudden you get an email and that email has an issue, there's
people who read the email, don't answer it, and then they wait two days and then they try to
go answer it later, and, like, they're very much in the defensive mode.
And then there's people
who, they get an email and there's a problem and they immediately pick up the phone and they call
the person and say, hey, how do we solve this? Those two people are very, very different. And I
think you always want that first– or, I'm sorry, the second person, the person who will call and
kind of be offensive in nature. Because what it does is, it really allows you to take something
that is, frankly, valueless in the beginning– it's usually an idea with one or two people–
and create something that's massive because they just solve every problem along the way, so
that they kind of earn the right to continue the journey. RAOUL PAL: OK. You're now in the
VC world. You're learning how to do stuff. Where does crypto come into this? How does
this discovery happen for you? ANTHONY POMPLIANO: Yeah.
[INAUDIBLE] my wife, wishes
that it never came along, because then I wouldn't be thinking about it all the time. So
in 2014, I think it was, or either end of '14 or the beginning of '15, working at Facebook
we hired David Marcus. He was the president of PayPal. He comes over and he's going to run our
Messenger product, kind of the messaging app that got spun out of Facebook proper.
And it's first
time I ever hear about Bitcoin, so relatively late compared to most people, even hearing about it.
And David kept talking about it from a remittance standpoint. You know, could we put this into the
application? Hey, this is really interesting. Now, I didn't know it at the time, but have since come
to find out, David and a couple of other guys had bought a bunch of Bitcoin. And so there's a book,
Digital Gold, you can go read about, kind of their journey. But they really understood it and
were really excited about it very early on. And so I heard him talking about it. He wasn't like
telling me personally about it. He was more just talking about it in the office. And so I turned
to an engineer and I was like, what is this? And as one of the great mistakes in life, the engineer
said, "It's stupid." And so I said, OK, and I just went about my day.
[LAUGHING] I didn't Google it.
I just, like, did nothing, right. And so, like, lesson number one, when smart people are really
excited about something, like, pay attention, but just didn't do anything. And so the next
time I kind of came in contact with it was, in 2016 when I started investing there was a
kid, JP Bareck I met him when was in high school. And he was now a freshman in college. And he
said, you know, can we meet for some coffee? We sat down and he said, you've got to pay
attention to this.
And I was like, what is this? And he wasn't so much pitching me on Bitcoin
and Ether from, like, an asset perspective. He was really interested in the mining business.
And so I understood data centers. My father, that's what he did at MCI, AT&T and all that.
And so I understood that business. And when I saw crypto-mining or Bitcoin mining, immediately
it was like, this is a data center on steroids. Right. I have persistent customer demand. So I
always know that 100% of my computing power will be monetized, because there's always demand. Two
is, I don't need a sales force. I don't need a lot of the administrative staff, and all the things
that change the cost structure in those data center businesses. That's all removed because it's
an automatic, persistent demand for the computing power. And then three is the starting cost for
something like this is very low.
Right. In most data center businesses you're talking about
SOC-2 qualified tier three data centers, very expensive square footage. You've got to have
certain cages and you've got to have all sorts of licenses and approvals, and just, there's
a big cost of either building that or going into some of those, kind of approved tier three
spaces. With this, in Bitcoin and Ether mining, literally people were doing it in their basement.
Right. They were doing it what we used to call, like, chicken coop mining facilities.
they literally just found an outlet where they could plug into, that had internet and they would
start mining. And so the entire cost structure of what used to be a data center was now getting
flipped on its head, and people were making a lot of money. And so I took a little bit of
personal money– actually I've never even told this story before. I sold my Facebook stock
at the time and said, OK, I'm going to take half of it and I'm going to put in my bank account. The
other half I'm going to take and I'm going to go put it into this crypto-mining stuff. And I
bought a couple of miners. We put it in a, kind of hosted facility. And there was a
dashboard. And you could essentially look at that dashboard at any point to see how much
computing power you had.
You could see how much Ether was coming in. And you could see, kind of,
the price fluctuations. So what that meant was, kind of what your balance sheet was equal to.
And so by the time I actually buy the equipment, I get it set up– again, you know, I know nothing
going into this– it's like beginning of 2017. And I have no historical context to halvings or
market cycles or anything. And we start mining. And all of a sudden Ethereum goes from like $8 to
$10, then from $10 to $30, and then $30 to $100. And the entire time– like every day, like I'm
mining Ether, and I'm sitting there saying, like, in April it was like $10 bucks. By May– or
maybe it was March it was like $10 to $30, and then from $30 to $100, by, like, May.
RAOUL PAL: Were you mining costs the same? They hadn't gone up? Or they'd gone up a bit? ANTHONY
Exactly the same. So not only am I mining profitably, and it's like a cash flow
machine, I'm getting paid every day, but then also my balance sheet is expanding. So if I had–
you know, it's easy to do the numbers. If I had 10 Ether and there were $10 each, and the
next thing you know, three weeks later, it's 10 Ether are worth $30 each, like, you're
essentially making money on your balance sheet, plus you're also getting more and more cash flow.
And so I just became fascinated.
I was like, holy shit. Like, what is this? And so I just started
spending way more time looking at this. And what I started to realize by kind of educating
myself was like, this is exactly what Facebook was. This is exactly what Twitter was. This
is exactly what Airbnb and Uber, and all these things– RAOUL PAL: [INAUDIBLE] essentially.
ANTHONY POMPLIANO: I didn't know how to articulate that, but I could see– because I ran these growth
teams, I understood the analytics that went into, kind of viral products.
Right. So when I saw
Facebook and I started to think about it, and I had some context from, like, Venmo, kind of
watching them grow. I had read a lot about PayPal, and kind of PayPal mafia, and so kind of the
virality of money and how quickly it can kind of really drive adoption. And so the more and more
I looked and focused and kind of educated myself on this stuff, I just said, oh my God. Like,
the entire world is underestimating this thing, because they don't understand, they don't think
in these exponential terms. And so I always say, like, Wall Street thinks linearly.
always constantly saying, like, what's month over month growth? What's year over year growth? And
for a business to do more than, I don't know, 20, 30, 50, maybe 100% year over year growth is
pretty rare. In this case, we were talking about, especially in 2017, 20x. Right. And so it was just
like, oh, here we go. And I'd seen enough viral products to realize, like, this thing is going
to be something that is much bigger than people expect. And so by the end of 2017, I had
pretty much decided, I don't want to do venture investing across all of these sectors,
because I can't focus enough on just crypto.
I need to go spend all my time on this. And so once
I deployed, kind of that first fund with Jason, we started trying to figure out, OK, how do we go
and basically invest just in this one industry, and eventually kind of did a couple of things to
be able to position ourselves to do it. RAOUL PAL: And so crypto-winter happens. I guess it's
the right time for you because you're actually deploying capital into that period. It's obviously
slightly terrifying because you don't know whether your hypothesis is completely false or not. How
does that work? ANTHONY POMPLIANO: Yeah.
So in the technology world, one of the things that was
fascinating to me, and frankly it was fascinating because I didn't have enough capital invested
to really feel the pain, but it broke every, kind of preconceived notion I had. So when
a network effect business really takes off, it's nearly impossible to break the network
effect. Right. A true network effect business, once it gets going, it just doesn't break.
And so when Bitcoin sort of take off in 2017, it's a network effect. Right. It's going to
keep going. Like there's no way that it can basically break out of that. And so when '18
kind of happened and the market turned over, it completely changed the way that I looked
at network effects and virality and a lot of this stuff. And so I was able take some of the
lessons I'd learned, but now realize that price is different than the true value of the network.
And so by separating those two things, the network effect and the value of the network can continue
the way that you would expect technology adoption to occur, but this price component is a completely
separate yet related thing.
And so in 2018, Jason I partnered up with Mark Yusko, who you know
very well. And Mark's got Morgan Cree, Capital Management. And Jason I basically had learned
two lessons in venture investing. We said, one, we had no follow on capital. So we had made great
investments. Right. Two companies ended up being unicorns in that first portfolio, but we had no
follow on. So we were basically taking dilution on the chin. And so we said, we got to get
follow on capital. And two was, in 2017, everyone and their mom was running ICOs. They
were raising money from family offices and retail, and it was absolute bonkers, free for all. And for
whatever reason, from day one we said, these ICOs are all garbage. We think people are going to get
in trouble. We don't think that's the right group to go raise money from because they're going to
have really, really emotional reactions, whether it works or it doesn't work.
And so institutional
capital is going to kind of be the Holy Grail here. And so when I met Mark, I basically sat down
with him and I said, look I understand this stuff pretty well. I think that I've got a pretty good
deal flow and I can get us into a lot of great deals. You have the institutional relationships.
You can provide a lot of legitimacy to this. And so if we team up in some way, I think we can,
one, raise institutional capital, and then two is, I think we can go make a lot of money for
those LPs by deploying it into this space. And so in 2018 we went out we raised the first
Publicly it's known– it's about a $40 million fund. But the key to the whole thing was,
the first two US public pensions in the United States invested in dedicated blockchain or crypto
fund. And so these two public pension funds end up investing. And then they were joined by a
hospital system and an insurance company, a private foundation, you know, all of the kind
of traditional institutional LPs. Small fund, but really important that those were the types
of limited partners that we had in the fund. And so we went out and we basically did two
things. We put– I think in that fund it's like 15% of it in Bitcoin.
And then we went and
we started investing in the infrastructure of the industry. And so in that fund there's investments
in Coinbase, Figure technologies, Blockfi, eToro, a whole bunch of different companies. And
so what we of got a front row seat to was, like, oh, these guys really, really
want exposure to this industry. They may not come in and just buy Bitcoin directly
from day one. They're going to want a holistic exposure. They're going to want stocks, bonds,
currency, and commodity exposure to, kind of this digital asset space. And so our pitch basically
evolved into, look, every stock, bond, currency, and commodity will be digitized in the future, and
your entire portfolio as an institution will be digital in the future. So you'll have digital
stocks, digital bonds, digital currencies, digital commodities.
And you're likely to buy the
exact same asset from the same counterparty, it's just in a new technology form factor. And so the
framework that we used was, go back to kind of, pre-1970s, 1980s, and what you find is, everything
was analog. So literally people would open outcry method on the Stock Exchange floor. You would get
the physical mortgage or deed to a home. You would have physical currencies, all of this stuff.
But there was a transition to what I called the electronic age of securities. Right. So we got
electronic CUSIPs. There was electronic CUSIPs. Same asset, it's the same deed, it's the same
stock certificate, it's the same currency, now it's just in a new technology form factor.
And that unlocked immense global value. And so the institutions that were early to recognizing
this, and also had the courage and conviction to act, had a massive advantage for a number of
years. Right. They were able to generate alpha, still buying the same assets, still buying from
the same counterparty, new technology form factor. And then over time it got commoditized down.
So literally the best example is like, the guy who was picking up his phone and calling
his stock broker to run over on the Stock Exchange floor and open outcry buy or sell stock had a
disadvantage compared to the first couple of institutions that figured out, I can execute the
same trade on my computer. Right. And so we said that to institutions. Like, hey, we're going to
move from an electronic world to a digital world. And when that happens, if you're early to
understanding that and capitalizing on it, you'll be able to generate out-sized returns
because you're going to basically get in before it gets commoditized.
Right. Now eventually everyone
will do this, but being early will be important. And so we had a couple of, frankly courageous,
and just very forward-thinking courageous CIOs who said, yeah, I buy into that. I agree with it
and I want to be a part of this. And so we started investing capital on behalf of them in 2018. RAOUL
PAL: Are you still part of Morgan Creek or not any longer? ANTHONY POMPLIANO: Yeah. So basically
the first two funds that we raised, about $110 million, give or take across fund one in fund two.
So I'm still a general partner there. And then for the next fund I've gone out to do it under my own
name. And we can talk about, kind of, some of the advantages of doing it under your own name versus
under an institution as well. RAOUL PAL: Yeah. I'd love to hear what you're up to now, in that
We'll go into a bunch of other stuff. But how do you think about this whole space
now, in terms of the VC investing side and what are you up to? ANTHONY POMPLIANO: Yeah.
So I think that one of the key differences, or kind of evolutions that the world's gone through
recently is the barrier to entry and the friction for individuals building audiences and building
brands has drastically been reduced.
And so I've been fortunate over the last three or four years
to build some pretty large audiences, and it's kind of grown into a pretty attractive business
in itself. But what I started to understand and was lucky enough to have a number of people way
smarter than me kind of talk me through was, look, there's going to be a point, and starting
now but it'll get more popular over time, where founders, they're not going to
want to take money from the institutions. They want individuals. Right. The individual
actually can bring more value and can bring a greater brand awareness than an institution.
Now that doesn't mean that all the institutions go away. Right. In venture capital, for
example, Benchmark, Sequoia, Andreessen, those guys are absolute tier one, best of
the best, world class investors, and those institutions will persist. But what happens to
all of the tier two and tier three investors is, if a founder is faced at a pre-seeder seed level
with taking money from an individual with a very large audience that can bring awareness, signal,
and value, versus take it from an institution, more and more of these founders are deciding, I
want to take it from the individual rather than the institution.
RAOUL PAL: What made you think
this? What made you realize that this was a new path that could happen? ANTHONY POMPLIANO: I
started to realize it, I think, when– just talking to founders in general. Like, founders
would introduce me to other investors after I had invested in the company. And they would reference
me, rather than the institution. And for me that was always weird. Like, why would you do that?
Start asking them. You know. And as part of that, I got enough data points where it was like, oh,
the individual partner at an institution is more important than the institution, is basically what
the feedback was.
And then I got a phone call from an individual who– very well known in Silicon
Valley. And he basically said, look, you know, you should go do this for yourself, and you should
do it under your own name, and that's a really, really valuable, defendable thing. And I think
there would be significant advantages for you to go do that.
And so I, frankly just kind of
got thrown down this rabbit hole and started thinking more and more about it. I started
calling a number of people I knew and just asking them what they thought about it. And
I pretty much called, I would say either the three smartest or the three richest people
I knew. Right. I just kept calling. I was, like, hey, you're smart and rich, like, what do
you think? And two of the three conversations literally had the same response, which
was, why haven't you done this already? It was like, it wasn't even a debate. It was just
like, of course you should go do this. And so I just took it to heart. And I said, look, let's
go try it. And I think it's less about, like, me specifically, and it's just more of like, this is
going to be the trend. Right. You're going to see a ton of these solo capitalists who say, look,
in the past you either had to have a big exit as an entrepreneur, you had to have been a partner
somewhere so that had a big windfall, then you had a capital base and you would just invest your own
But now what's going to happen is, there are going to be LPs, whether they're institutional
or not, that want to back individual managers, and they want them to invest under their own
name. So on a cap table it's no longer the institution's name, it's just, Pomp. Right. And
the value that can come from that over time is, people seek out the individual. Right. They
want that individual. And if you look in Silicon Valley, there's a ton of people who have done a
very, very good job of this, in kind of the angel or pre-seed stage.
RAOUL PAL: Tim Ferriss parlayed
a lot of this as well. ANTHONY POMPLIANO: Tim Ferriss, Naval Ravikant, right. A bunch of
these guys have done a fantastic job of this. And they've been very, very successful in doing
it. But I think that now what we're realizing is, whether you're an investment manager, you're a
corporation, or you're an individual, you got to have your own distribution, you got to have your
own audience, and you've got to do things under your own name. You've got to own the success or
failure under your own name. And if you're good, you'll be rewarded. Right. And so I had
already kind of accidentally backed into– I had massive distribution.
I had a big
audience. And I was willing to take the personal risk of doing it under my own name. And
so I ended up using an AngelList rolling fund, which is kind of a nuanced fund structure. RAOUL
PAL: How does it work? ANTHONY POMPLIANO: So basically if you think of a traditional fund, a
GP goes out, they spend six months fundraising, and let's say they raise $10 million. Right.
And they say, OK, I have a $10 million fund, and now I want to call the capital. But I'm
going to do the capital calls infrequently, and I'm going to do them at variable amounts.
So if Raoul is an LP in my fund, I may say, OK, two months after I've closed the fund, will you
please send me 10% of the capital? And then I wait six months.
And then I call 7% of the capital.
Then I wait another three months and I call 20% of the capital. Right. And it's kind of an infrequent
variable amount and time every time. And so when that occurs, it's really hard for LPs to do
cash management. Right now a good GP will just– they'll explain to the LP what's going to happen
in a couple of months, and they're good, but not everyone does that. So that was kind of problem
number one. Problem number two was, the GP raises money for six months, and they may not go out
to fundraise again for two years. And so during that two-year period, if the LP and the GP meet,
there's no ability for the LP to invest in the GP.
There's no ability for the GP to take money.
And so what the rolling fund structure basically said was, we're going to go find individuals–
take myself– we're going to use software as the back-end, and then we're going to create this
rolling like structure, which means that, Pomp can take in money every quarter, regardless of how
much he's raised in the past or what he wants to do in the future. LPs can persistently commit to
his fund. And rather than commit a set amount and then not know when the capital call's coming
and for how much, Pomp is just going to call an equal amount of their commitment every
So if you commit and say, hey, I'm going to do $100,000 a year, every quarter you're
going to get $25,000 capital call. RAOUL PAL: But isn't that complicated, because different people
are going to get in at different prices and to different assets and different investments? And
do you not have to keep a huge spreadsheet of everybody and what they've got? ANTHONY POMPLIANO:
You are an absolute pro, because that is one of the complexities of this. Now AngelList has done
a great job. They've built a bunch of software for this. And the way that they protect the LP is they
say, each quarter is essentially a separate fund, but they're crosscollateralized.
And what that
basically means is, if you invest, and let's say in the second quarter there's an absolute home
run. Well what you don't want as LP is to have invested, let's say, a million dollars over eight
quarters, in quarter two, home run, you get back the money you put into that Q2 fund, and then
all of a sudden the GP gets a huge windfall and they're disincentivized and you haven't even made
all your money back you've invested with that GP. So by cross-collateralizing it, basically the
GP doesn't get carried until they pay you back the capital you've invested across all of the
So if you put a million dollars across eight quarters, they've basically got to give you
a million dollars back before they take carry. And so, think of it as a kind of a blank
slate. You can customize a rolling fund to look identical to a traditional fund, 2
and 20 structure, two-year investment period, eight-year fund with an extension. Or you can
make it look something much, much different in a subscription model that's persistent forever, and
kind of looks nothing like a traditional venture fund. So by compartmentalizing every component of
the fund structure and putting it into software, it basically has digitized this and added
optionality. And so the reason why I like it is, as a GP and an LP, we double opt in every quarter.
So I go and I make the capital call in quarter one. When quarter two comes along and I make the
capital call, LPs don't have to fund the capital call. Right. And I don't have to call the capital
in quarter two. So if I'm not doing my job, the LPs aren't going to fund it.
And if I think
I don't have deals, I'm not going to make the capital call. Right. And so it's a double opt
in every quarter. And so what I think it does is, it strips away some of the things that venture
capitalists have used for a long time to basically get rich. Right. Then it's, hey, once you
commit, it's basically an annuity for 10 years. And so, by taking that away and saying there's
this double opt in mechanism, it holds the GP honest, and it also gives the LP lots and lots
of optionality. And so the conversations I've had with the LPs who have invested in the fund, they
are incredibly excited about that optionality. And then the icing on the cake is, this is
all done via the fund structure that allows me to talk about it publicly. Because normally a
manager can't go out and talk about the fund. Take somebody like me with a large online audience,
great distribution, I can literally just say, hey, I have a fund.
If you'd like to invest and
you're an accredited investor, here's the link. And so it completely changes the game
for fundraising for individuals with that distribution. RAOUL PAL: How is that different
for this? How come you're allowed to market the fund in this way, but a traditional fund you
wouldn't be able to? What's the red change here? ANTHONY POMPLIANO: When you set up a venture
fund, there's basically three separate types of regulatory structures you can use. One of
them basically allows you tons of flexibility, in terms of the number of investors and the amount
of capital, but you can't say anything about it publicly. And then there's another structure that
says, hey, you can talk about it publicly but you only get 99 accredited investors, and then you get
2,000 qualified purchasers. Right.
It's kind of the structure. And so the rolling fund structure
goes after that second bucket. And so far, you know, look, I've been able to raise,
basically the equivalent of almost a $20 million venture fund, a seed fund in a matter of literally
weeks it was raised. And I did one Zoom recording. Right. I basically had a very light deck. And
then I answered a bunch of questions for LPs over email.
Right. It was kind of the perfect
type of experience for both the LP and the GP, where everyone felt like they had the information
they needed. They also had access to get questions answered. But I didn't have to go do the
traditional roadshow where– quarantine would have prevented it, but, like, go to everyone's office,
sit down, do an hour-long pitch, follow up, do six different calls. RAOUL PAL: So much more
efficient. I mean, we essentially raise all of the capital we have ever used for Real Vision in the
same way, from our subscriber base, using the same regulatory change. So does that mean that for you
to get the next round of investors in, you just launch a second rolling fund, so therefore you can
keep talking about them, as opposed to once you hit the number, the restriction number? ANTHONY
POMPLIANO: So I don't even have to launch another rolling fund.
I can just– like right now I have
it shut. I'm not taking any new capital. When I'm ready to take on new capital I can just open it
up and say, hey, if you'd like to invest, you can go here. Once I fill out the full slots– I save
some of the accredited investor slots, because I didn't want to kind of sell them all out, if you
will. And then from an institutional perspective, I basically have 2,000 slots. So it's almost
unlimited. Right. It's so many of them. And so at some point I'll turn it back on and say, hey,
I'm taking more capital. And institutions come in. They can invest. And the beauty for them is,
if they say, hey, look, I was going to invest $10 million in an early stage venture fund.
was going to have a two-year investment period they just on day one, OK, I'm basically going to
invest all that capital– instead of two years I'm going to do it in one year. And that means that
I get a two and 1/2 million dollar capital call every quarter, and at the end of that I'll have
deployed my $10 million. And Pomp will go out. He'll find deals. He'll deploy the capital, and
I can go into the AngelList portal at any time. I can see NAV, I can see the investments, I can kind
of see all the information.
And so what it does is it just drastically reduces the bureaucracy
of, kind of, the world that venture capital had become. Because basically GPs have two separate
things they have to choose. You can choose to have a small team, but lots of, kind of, pain,
right, in terms of reporting and access and LP communication. Or you can choose to have a really
big team and the GP does very little of that. And so naturally if you have a big fund, you have the
cash flow to build a big team.
But what ended up happening was a lot of these micro-VCs, or kind of
smaller sub $100 million funds, they didn't have the cash flow to go hire a 10-person team. And so
what they ended up doing is, the GP does all the work. The GP sources the deals. The GP underwrites
the deals. The GP negotiates. They consummate the deals. They do all the reporting. They do all
the LP calls. They do all the fundraising. Like, it's a real big job. Right. Now what AngelList
has done, and they've done a fantastic job of it, is they basically have used software to
solve a lot of these problems. RAOUL PAL: So what are you investing in, in the fund?
ANTHONY POMPLIANO: As I tell all the founders, hopefully they're all going to build
a billion businesses. [LAUGHING] RAOUL PAL: Yeah, but what kind of areas, right?
It's a big area, this whole [INAUDIBLE] space. What are you doing? ANTHONY POMPLIANO: Yeah. So
I'm basically spending, I'd say 3/4 of the time on Bitcoin and infrastructure related to it,
and then I'm spending about 25% of my time in other early stage opportunities.
And so, again,
at the earliest stages, I just look for people who are super, super talented. And I
frankly don't care what they go build, I just want them to be going after a big market.
And what I've realized over time is, like, the founders are smarter than the investors.
That's why they're going and betting their career. They're making a bigger investment than
the investor is. The investor is investing money and a little bit of their time. The founder is
choosing to invest majority of their time and maybe a little bit of capital. And so when
you look at that in terms of a conviction bet, the founder actually is making a bigger
conviction bet than the investor. And so whenever I see somebody who has a deep level of conviction
around something, and I think that they're smart, they're a problem-solver, they can recruit, they
can raise capital, they can tell a story, like, you almost are arrogant if you don't invest in
them. Right. Because what you're saying is, this person who has such deep conviction to go spend
their time on something, they're wrong.
And that, when you frame it that way, all of a sudden you
say, wait a second, like, that doesn't feel right. And then the other piece of what I've learned over
time is, there's a lot of investors who optimize for batting average. I want to optimize for
slugging percentage. I want to strike out a lot, right, but I also want to hit a lot of grand
slams. And so you've got to get up to bat when the bases are loaded, and you've got to take home run
And so if you do those two things then you got a shot. And so I'm more likely to invest in a
lot of companies than a little bit of companies. And what I'm willing to do is, say to the founder,
your vision is what we're betting on here, because you're the person who's investing the
time. You're the one who's got the conviction. And so in some weird way, what you're really
doing is, you're just helping somebody or facilitating them to go build their dream, right,
is kind of how I look at it. And so you just go to pick the right people. And if you pick the
right people, they take care of the rest. Yeah, you can be helpful, maybe you can introduce 'em
to somebody, give 'em a little bit of advice, be a good sounding board or whatever, but any investor
who thinks they built the company is just full of shit.
Right. Like, the founders built the company.
They're the ones who did all the hard work. And frankly, the only credit that the investor gets
is being not stupid enough to write the check in the beginning and then not sell because it's
illiquid. Right. RAOUL PAL: So let's talk about the super narrative, the whole kind of space. What
is it in your head? Where do you think it's going? Because you're building businesses
around it, right? I know what that means. That means you're looking for positive
funding ways of playing a super trend, make as much money out if as you can, a number
of ways. You've got a media business. You've got an investment business. I get it. Where is this
space going? ANTHONY POMPLIANO: Do you want the institutional fix or do you want
what I really believe? RAOUL PAL: What the fuck do you think? [LAUGHING] ANTHONY
POMPLIANO: I think Bitcoin's going to be next global reserve currency, and I think that
every single person that's listening to this, every single person in the industry is
completely underestimating this thing. I believe that Bitcoin is not only the hardest,
soundest money we've ever seen in the world, but I think that it is the absolute
apex predator in financial markets. And the reason why I think that is because there
is one key trend that most people in finance don't understand, and it is the superiority of digital
assets or digital products over analog products and assets.
And so the technology industry is
better suited to understand this component, which is, if you look at store value and medium
of exchange assets, historically those have been analog, and then they basically became these
electronic CUSIP assets, which was just a kind of slight improvement on the analog version.
So there was still middlemen, there was still a lot of bureaucracy, there was a lot of, kind of,
human interaction, right. When you send a wire, in many cases, there's humans involved in that
process. So it's not a truly digital process. The digital product is not only superior to the
analog or electronic products, but it is also never– I literally cannot think of a single
example where a digital asset is smaller than the analog equivalent. And so I always go to– let's
go to Bitcoin and gold.
We'll start there. Gold has served as the store of value for 5,000 years.
It's done a fantastic job of what it's supposed to do. It is not scarce. And the reason why I say
that is, because people claim gold is scarce, but it's a narrative. Gold has a scarce narrative.
And we used to live in a narrative-driven world. That narrative-driven world would be, somebody
told you a story, and that story was believed because somebody else told them that.
people started saying it that they all started to believe it. But just because a narrative exists
does not mean that it is true. And the reason why you cannot say that gold is scarce is because you
cannot prove it. You may think it could be scarce, you may have data that suggests that it is not as
easy to find as other assets, but you cannot prove how much gold is available. What you can show is,
here's how much we've dug out in a certain time frame. But even to the point where I say, tell
me how much gold is in the circulating supply? Nobody can prove it. People can guess. They can
get close, but nobody can prove it. And so that narrative-driven world we used to live in got
disrupted by the internet. The internet said, we are going to drastically increase your access
to information, and we are going to switch from a narrative-driven world to a provable world. You
have to prove things now, you can't just rely on the narrative.
RAOUL PAL: Yeah, that doesn't work.
That's not true, right? Just seeing what's going on in social media, we're still narrative-driven.
ANTHONY POMPLIANO: But that's why social media is breaking is because the internet is able to show
the narrative that we're told on social media from the existing institutions, politicians, et
cetera is a narrative. It's not true. I can prove that you are wrong. I can prove that– RAOUL
PAL: But everybody will tell you you're wrong. You know, the weird thing is, like, when it
comes to politics and who's right, who's wrong, everybody will prove something different. So
I'm not sure yet– ANTHONY POMPLIANO: But you can't prove two separate things.
make a single statement, gold is scarce, and I say, prove it, you can't. If I say
to you, Bitcoin is scarce. And you say, prove it, I can show you, there are 21 million
Bitcoin. I can show you the exact number in the circulating supply. I can show you the exact
daily incoming supply. And if I say, great, this is Bitcoin. Show me gold's equivalent,
nobody can do it. You have to put an asterisk next to every number and say it's estimated. Now
this is important. And this really, really upsets, kind of the legacy finance folks, and it upsets
the gold bug community. But the reason why it's so important is, gold is a narrative and Bitcoin
And the difference between those two things has nothing to do with the legacy
world. The players of the legacy world, they think that the narrative has value. Their
entire careers have been built on this. The next generation doesn't believe the narrative. The next
generation says, prove it, and you can't with the legacy assets. RAOUL PAL: Obviously I agree about
bitcoins. We're not going to argue about that. Bitcoin is a narrative too. Right?
All of these things are based on trust. And it's not the trust of the network and
the scarcity, because we understand that that's provable. The trust is whether you'll accept it
And that's a narrative. Digital gold, or whatever narrative we've all chosen right now,
and because it is a behavioral incentive-driven network, that the more people come into
the network, the higher the value goes, we're all incentivized to build on that
trust layer by saying, oh, trust me, this is– they're all narratives. I mean, every
exchange of value is a narrative, because we have to believe there's value. ANTHONY POMPLIANO: But
I think the difference here is, you're believing a narrative in the legacy world. Because when
I say to you, what is the dollar backed by? You believe it– literally the dollar says, "In
God we Trust." It is a belief system, right. It's backed by the government. RAOUL PAL: By god.
ANTHONY POMPLIANO: Yeah. And so the new thing is, everyone wants to say, Bitcoin's a religion. And
I'm like, thank you. You are literally validating Bitcoin as a currency, because every currency
is a religion, right, whether it's fiat, whether it's gold, whether it's whatever.
difference is not so much the belief or the narrative that you're talking about in terms of
why somebody accepts it or why somebody doesn't. I'm talking about the actual asset itself.
When you go and you look at the asset, you cannot prove, right, how many dollars exist in the
world? Nobody knows. RAOUL PAL: So if you take the assumption that people are looking for a scarce
asset, one is clearly superior than the other. On a relative basis, they're better than other
assets because they have a more relative scarcity, and one is better than the other.
think about this a lot, because there's a lot of this space I don't like. The religion part, I get
it why, because it's an incentive-based system. It's behavioral incentives. It's behavioral
economics writ large here. So I get it. You need to defend your own network, because that's where
the value comes. But last time I checked there was quite a lot of world religions, and a multitude
of gods. I'm still confused why people think there can only be one god in this particular space,
as opposed to certain gods of different scales, the old kind of Greek or Roman stuff. You might
have Zeus. He might be the king. How do you think about that whole thing? Because I know it's a
hot potato right now. How do you think about it? ANTHONY POMPLIANO: Yeah, so I have a very, I
think, nuanced view of kind of where we are today, what's important, what's not, and then where we
Right. And it's important to understand gold's, kind of rise to prominence in the modern
world. So gold served as kind of money and an exchange of value for a very, very long
time. It's hard to carry around, hard to divide. It's hard to just eyeball, you know, how
much gold is that? And so eventually we said, hey, look, instead of carrying this gold around, why
don't we just leave it in a vault or in the bank and we'll carry around paper claims on the gold.
And I'll say, hey, if you sell me that horse, I'll give you my paper claims on the gold and you
can go to the bank and you can turn in the paper claim and they'll give you the actual gold. And so
that made commerce easier. Right. The technology of the claim on the gold actually increased
the velocity of money and the ease of use, or the exchange of value.
After we did that, we
eventually then created this electronic CUSIP system. We created credit. Like, we built all
these layers on top of gold as that kind of layer one technology. Now, in 1971 we decided we're
going to unpeg gold from the paper claims and kind of all this stuff went to the wayside.
But that structure of layer one, layer two, layer three's is really important. Because that's
what's happening in Bitcoin today is, layer one is optimizing for security and store of value. It's
exactly what gold did. It didn't optimize for the fastest transactions or the easiest of use. In
optimized for security and store of value. If you held the asset, you knew it was secure
and you knew it would store value because of that scarcity narrative.
The same thing here
is, if you look at Bitcoin, it is secure and it will store of value over long periods of time. Now
what we're starting to see is layer two be built, right. So lightening network and a few others,
liquid, all these things. You'll eventually get layer three, layer four, et cetera. Now
most people put me in the camp of, oh, you're a Bitcoin maximalist. It's not really true.
I believe Bitcoin is by far the winner, the king when it comes to the digital currency. I believe
it will be the next global reserve currency. I think that's a foregone conclusion at this point.
And so from a US Dollar value standpoint, again, it is going to be worth multiples of where
it is today over a long period of time. But I actually think that all this other nonsense
that's going on has a purpose.
There's a lot of experimentation going on. There's a lot of
innovation going on. Right. And what ends up occurring is, that experimentation is going to
eventually flow to be built on top of the hardest, soundest money. And so I used to draw this diagram
of, let's say, decentralized finance. Right. People don't like when I say it, but Bitcoin was
the original decentralized finance. It is the most decentralized product in the space. So literally,
decentralized finance was born out of Bitcoin. Now what we're seeing though is, Bitcoin, because it
optimized for the security and the store of value, the development on top of Bitcoin is going to take
a long period of time. And so what people did is, they got impatient. They said, oh, we
can't do this. We've got to go and we got to build this stuff now. So they wanted
to do experimentation and innovation. So went, they built Ethereum and they're building on
top of that.
We use that one as an example. Well, you have sound money in Bitcoin, but all
of the infrastructure around Bitcoin for the most part is centralized. So whether it's exchanges
like Coinbase, whether it's custody providers, whether it's data providers, it's all centralized
infrastructure around sound money of Bitcoin. In the Ethereum world, you have decentralized
infrastructure. Right. So everyone's decentralized infrastructure, decentralized infrastructure. But
it's built on top of something that is not sound money. Ether is no different than fiat currency.
There's no cap. There is a variable monetary policy decision that is made on a periodic
basis by individuals. Now, to their credit, they have made the right decision every time
in that they continue to reduce the supply, but they have the potential to increase it if they
wanted to when they make that decision. RAOUL PAL: Why does it need to be funny? I don't get that.
I don't know understand that they should be competitive. ANTHONY POMPLIANO: This is my point
is, I believe that they shouldn't be competitive. But this narrative in the decentralized
financial outcome, the Ethereum DeFi world that Ethe is money.
Right. They say it all the time.
RAOUL PAL: No. ANTHONY POMPLIANO: It's not money. Right? It's something completely different. And so
what I ultimately believe will happen is, you'll take Bitcoin, the asset, right, the sound money,
and you'll take that decentralized infrastructure and you'll combine them. So you won't have the
centralized infrastructure that's currently around Bitcoin and you won't have, kind of the unsound
money of Ethe.
What you'll do is you'll take Bitcoin, you'll take decentralized finance, and
you'll put those two things together. And what we will get is we will get a fully decentralized kind
of financial system that uses Bitcoin as the core currency. RAOUL PAL: This has been my point all
along is the collateral of the system will be Bitcoin. ANTHONY POMPLIANO: Yeah, exactly. And
by the way, that's not bad. RAOUL PAL: No. And everything around it could be built around
it, and the space for lots of innovation and a lot of different technologies, and there
will be interoperability built across it, but the foundation stone is Bitcoin because
nothing's going to challenge that now as that collateral layer. ANTHONY POMPLIANO:
Yeah. And I think that the key piece– and this is always like my olive branch to the Ethereum
community. And I'll get to it in a second. Your viewers will love for me to talk about why
I disagree with a lot that's going on there. But the olive branch that I always extend is, I
say, listen, you guys have the right idea.
And by the way, you've made a very rational decision
to go build decentralized applications in the area that has the lowest friction to build them, right,
in terms of from a development standpoint. It is easier to build a decentralized application today
on Ethereum than it is on Bitcoin. But that does not mean that that is the ultimate final state.
What we are already seeing– smart contracts are a great example. The smart contracts are
starting to come over to Bitcoin. Right. And you're starting to see all sorts of innovation
around that. Now, smart contracts– Metallic saw into the future and said, hey, I want to have
the ability to create smart contracts.
And so he created a place to go do that. There's been lots
of innovation around that. But ultimately what happens is, people are going to continue to bring
those innovations back to build on top of the hard money of that sound money. And so the reason why
I think that the kind of Ethereum experimentation, while it is valuable, and it is really important
for the overall development of the space, the reason why I do not think it's sustainable–
if you look at Bitcoin and its decentralization, it followed one key principle. It didn't take
a single shortcut. It didn't do a single thing other than allow for natural adoption to occur.
And it took a decade to reach any level of real prominence.
And so when it started, and Satoshi
said, hey, I've created this thing. I'm going to put it out in the world, it was centralized. There
was one person or one group that had Bitcoin. And then they sent it to the Cypherpunk
mailing list, and now all of a sudden there was four or five people, then 10 people, then
20 people, then 100 people, then 1,000 people, then 10,000 people, 100,000, a million, 10
million. Right. And so it kind of naturally grew. We live in a world where we want to accelerate
everything. We want to get everything now. We need to do everything right now. Bitcoin never
took a shortcut. And so what it did was it got that natural adoption cycle of a technology. And
today it's the strongest computer network in the world.
It's completely decentralized. There's no
one that controls it. And basically, no one can screw with it. Right? What's happening in the
DeFi world is, people know that they need the actual incentive for people to come in and adopt
it. That's how they get decentralization. That's how they get utility from liquidity, all this kind
of stuff. But rather than allow for time to expire in that natural technology adoption, what they're
doing is they're taking a shortcut.
They're using a financial incentive. And this is where you get
into yield farming and all this kind of stuff. They're basically saying, hey, I want you to
come use my product. So what I'm going to do is, I'm going to create a bunch more of these tokens.
And if you come use it, or you sign up, or you deposit, or you do whatever action I want, I'll
actually give you a financial incentive to do it. That works in the short term, because people come
in, they want to profit, they're capitalists. But over a period of time, they just move on to
the next thing that provides a better return. And so how many of these DeFi
applications have we see explode in popularity and then people move on to the next
one? It explodes, they move on to the next one. And so what I think the resounding message– and
it's not like I had this idea. Like, I'm looking at this after the fact in having watched Bitcoin's
adoption is, if you want to build something that sustains, not for six months or 12, I'm talking
about something that sustains for decades, you can't take a shortcut in the adoption cycle,
because the bigger the shortcut you take, the more unsustainable it is that people will stay.
And so if you use that financial incentive to get people to on-board really quickly, that just means
they're less likely to stay longer, because you're actually bringing the wrong people in. Right? When
you bring in people who are coming for a financial return, the second that something else comes
along that provides a better financial return, they go there. And that's what we seen over
and over and over again. And so what I think is happening in some weird way is, Bitcoin's
adoption is continuing. Right. We went from individuals on the fringes of society to kind of
more of a mainstream audience to now an investor or a retail audience, to then an institution
audience. I think eventually we're going to get corporations and then central banks. But as that
adoption is occurring for the underlying asset, we now we're seeing people who actually are
creating decentralized infrastructure, still in early innings, but there's no tokens.
no yield farming. There's no sort of financial incentive that is trying to circumvent or shortcut
adoption. And so what ends up happening is, DeFi has exploded in popularity, and people
have run there, but there are no applications– decentralized exchanges are different. But there's
no actual applications using Ethe as money to have any sort of sustainability to them. Those assets
are actually– or those applications are actually going to be built on the asset Bitcoin. And so
it's going to take a really long time. But I have no doubt there will be decentralized lending.
There will be decentralized banking. There will be decentralized, name your product from the legacy
financial system. It's all going to get there. It's all going to be decentralized. The DeFi
community has it right.
They're just simply trying to shortcut adoption, and what they're doing is
actually shooting themselves in the foot. And so now what you're starting to see is people build it
for Bitcoin. RAOUL PAL: Yes and no, right? Because we've seen PayPal scale their business this way.
Right? Many people have. Now it's a very risky business, because most of them fail. If you try
and financially incentivize your customer base, most businesses run out of cash. Or, you know,
the other problem is, with a lot of this early stage token stuff is, VC opportunities were
never supposed to be mark-to-market and liquid. And what happens is, there's too much retail
in the space.
There's not enough regulation in my view. What happens is, these tokens go up too
fast. Even the founders of the projects just sell them, flip for cash, and then you have to wait a
five-year cycle. Does this project survive or not? I mean, imagine if half these businesses, or even
the businesses you set up, were mark-to-market real time. They'd have gone to zero about six
times, right? It's a stupid idea to allow that to happen because you're attracting exactly
the wrong sort of capital. You know as a VC, what you need is long term capital as a VC.
If you have short term capital, it's going to destroy the businesses and the capital provider.
ANTHONY POMPLIANO: Yeah. And I think here's the other piece of this that is fascinating to me,
is, again, I think the people who are creating these projects and these experiments, they're
actually being rational actors.
Right. So I tell them all the time, I say listen, by the way, if
you want to accelerate adoption of your project, your product, whatever it is, you should
use the financial incentive. Just understand that by short circuiting the natural adoption
of a product and technology, it makes it less likely that that person is going to stay over a
long period of time. Right. And so you mentioned PayPal, for example. The difference between, let's
say, a lending protocol and PayPal is that PayPal actually is a true network effect business.
Right. The more people that are using it, the more value that you actually get out of it,
virality of money. And so you want to have as many nodes on the network as possible, because
that gives you the most optionality as possible. These lending protocols or whatever the different
products are don't necessarily fall into the network effect business.
And so I always, like,
kind of try to really walk a fine line between saying, hey, all this stuff is not valuable at all
and there's no place for it, people wasting their time. I don't think that's the case. What I think
you're going to start to see is, over the next, let's say, five years or so, you're going
to see many of the people who have built, actually really interesting, innovative, super
disruptive things just start to tweak them, whether it's through interoperability, whether
it's, they try to wrap Bitcoin and bring it on to Ether, Ethereum so that they can use it there. Or
they just say, hey, rather than build this in the Ethereum world, let's build it in the Bitcoin
world. But I think ultimately where we end up, you know, 10, 15, 20 years from now is, there's
decentralized infrastructure. So DeFi is right in that sense, but Bitcoin is the asset.
It's not Ether.
And some people think that's controversial. There's a lot of people, frankly,
especially some of the people who I find to be the most intelligent, most critical kind of first
principles thinkers, they all tend to agree that, like, that's probably where we end up here.
Because it, again, just optimizes for the biggest value advantage or change, which is, we go
from using fiat money with an uncapped supply to an asset that is an artificially capped supply and
has a completely programmatic monetary policy. And that is the biggest, most important innovation in
this entire thing. RAOUL PAL: How are you thinking through the rise of the derivative market? Because
derivatives– it's leverage, right? One of the great benefits we've ever seen was the invention
of the derivative market.
One of the worst thing ever to happen was the invention of the derivative
market. Right. We're thinking in Utopian terms about, can we construct a new financial system.
But we're kind of humans. We're going to over leverage it again and fuck the whole thing up.
What do you think? ANTHONY POMPLIANO: Yeah. So, thankfully for me, I am somewhat self-aware in
terms of my circle of competence and where it is not. Derivatives, I have no interest in. I have
no knowledge or expertise there. RAOUL PAL: Call it leverage then. [LAUGHING] ANTHONY POMPLIANO:
Yeah. RAOUL PAL: Let's just call it leverage. ANTHONY POMPLIANO: The things that I see
going on, especially outside of Bitcoin, right, is pretty crazy. But there's even some of
it happening in Bitcoin specifically as well. And again, it ultimately comes down to– I
try to tell founders or builders, look, I have a really open mind, and I think that
you should go to experiment and try to build everything you possibly can. Like, there
should be no sacred cows. You should just go, build whatever you possibly can, experiment.
You want to try a bunch of stuff with leverage? Knock yourself out.
You want to try a bunch
of stuff on some weird chain, you know, whatever? Go knock yourself out. But that doesn't
mean that I think it's all going to work. But who am I to say? Right? My opinion doesn't actually
matter. It's what the market decides. And so when you start to realize that if everyone wants to
use leverage in whatever derivative product it is, then the market is deciding that this has value
to it. Right. If everyone says, no, I'm not going to do that, then they're going to go and they're
going to use something else.
And so when it comes to things that I just, I don't have an interest
in, I don't have, kind of any deep expertise or knowledge on, I just say, well what is the market
doing? And this is where you get into, like, maybe into the derivatives like, you could look at like
a decentralized exchange. It's hard to argue that Uniswap is not being used. Right. Like, Uniswap
is being used by a lot of people.
But is there a difference between Uniswap as a decentralized
exchange, and kind of all of the speculation and value transfer that crypto has kind of been
built on over the last couple of years, versus all of the different protocols, lending, and other
decentralized products? Right. I put those in two very, very different categories. The same way that
you or I would say, Coinbase is very different than other types of financial products.
so when it comes to derivatives or some of these other products, that stuff to me is going to fall
way more in the camp of the financial community, and also the trading community. For me, I don't
trade. I just– I really have zero interest in doing any of that. What I'm more interested in is,
for example, using the Bitcoin network, not the asset, but the network as a payment rail. And so,
can we go in and can we disrupt all of the banks? Probably. Like, we're an investor in a company
called Zap, this kid Jack Mallers, who literally today, he can– RAOUL PAL: The strike– this is
the strike thing. Yeah. ANTHONY POMPLIANO: He can sit down next to any other company in the
world and he can look them dead square in the face and he say, I can send dollar faster for free
around the world than you can.
RAOUL PAL: Yeah, that for free thing is a lie. Right. You
understand that? ANTHONY POMPLIANO: Why is it a lie? RAOUL PAL: Because you've got
two big off a spread you need to cross. One is your currency, dollar, Bitcoin bid offer
spread, Bitcoin bid offer spread, British pound bid offer spread. What he's doing, he's taking the
money from the market makers. It's not free. It's like Robinhood is not free. You are the customer.
You're paying that fee, so it's not free. And you don't know what the foreign
exchange rate is. But it's very quick, very efficient, super cool technology. ANTHONY
POMPLIANO: If I send you $20 US dollars and you receive $20 US dollars, is that not free?
RAOUL PAL: If you're sending dollars to dollars, send dollars to pounds, there's an exchange that
has to be paid. ANTHONY POMPLIANO: Yeah. But, well now, here's my whole thing right, is, if you send
$20 on strike right now. If I go in the app and I say, hey– RAOUL PAL: Which I can do with tether.
I could do with tether to you. I mean, it's no different, right? That's pretty standard.
ANTHONY POMPLIANO: Well if you did that though, you would have to go on to a crypto exchange.
You would have to actually convert your fiat into a digital asset. You would then have to
send the digital asset. The other person would have to have a digital asset wallet. They then
would have to convert from that digital asset into dollars and then pull it into their bank
account. With strike, I say $20, I don't have to even know what crypto is. I don't have to know
what a digital asset is. I don't have to know anything.
It debits my $20 out of my account and
it deposits $20 US in your account. You don't have to have a wallet. You don't have to have a digital
asset knowledge. You don't have to have anything. I send $20, you receive $20. Now what is he doing
in the background? He's absolutely taking dollars, turning it into Bitcoin. He's hedging it.
He's moving it along the Lightning network. He's switching it back. He's hedging again. Right.
So there's a whole bunch of complexity that he's basically kind of melted into the background.
But I think the key to that whole thing is, he literally could send you one penny.
PAL: Yeah. And the key thing to this one, I think, it's the first true consumer app. We
always said apps where you don't even know you're using digital infrastructure
or Bitcoin infrastructure or anything is what needs to happen. And this is the
start of all of that, when we don't even talk about protocols and I don't even care.
If it comes across via Ethereum through– nobody gives a shit, because I'm sending
you something. Whatever the value is, I'm giving you.
ANTHONY POMPLIANO: I think this
is dead on. Right. When you really understand it– and the internet's the quintessential example
of, there's a lot of protocols that are all talking to each other. There was a very serious
protocol war, right, of who was going to win, and ultimately five or six of them won out. They're
the most popular ones. Everyone uses them and we're off to the races. I couldn't name them.
Right. And 99.9% of internet users couldn't name 'em either. All they know is that they go in their
Right. Most people don't even know what the browser name is. Do they use Google Chrome or
do they use something else? They just know, I go on the internet, I type in Google.com and this
thing comes up. RAOUL PAL: Yeah. Even though I speak on Zoom now, right, we're using different
microphones that are using different standards. We are using– I'm on an Apple Mac. You might
be on something else.
All of this stuff, we didn't think about it. It's like, I just
turned my computer on to speak to you. Right. There's a load of connections, interoperability,
layers, it's seamless. ANTHONY POMPLIANO: Yeah. And I think that that's ultimately the world that
we go to. And if you kind of zoom out just from, kind of the Bitcoin world for a second and you
just say, let's just look at decentralization in general. Right. I've said for a long
time, I continuously get picked these, like, decentralized social networks and decentralized,
name your product, decentralized media company, decentralized this, whatever. I say, look,
nobody is going to say, I'm on Twitter. Oh you built a decentralized Twitter. Let me leave
Twitter and go to decentralized Twitter. They're not going to do it. What you have to do is, you
have to build a better product than Twitter. And oh by the way, it happens to be decentralized.
Right. The decentralization is the responsibility of the developer.
It is not the sales pitch to the
consumer. And I think that understanding that is going to be imperative for people as they begin
to build technologies in this new world. Because decentralization is going to be the default, but
the consumer, and Jack's a perfect example of it with the Strike product, is, the consumer doesn't
give a shit about what asset, what protocol, anything. All they know is, if I go to Western
Union it costs 14% for me to send money back home. And if I use this thing, it gets there and they
don't take any of my money. Like, that sounds like a pretty easy decision for a consumer to
do. Right? And so if you can get to that world, now what it does is it offloads the responsibility
from the user making decisions as to, do I want financial privacy, do I want decentralization, do
I want all these different components, and it says to developers, you're going to have to build
products that do it for the user without them realizing you're helping them.
Right. And you're
going to have to be able to be forward-thinking enough and confident enough that you can build
a business with a product that maybe you don't monetize the user information, or you don't look
into their financial information. You actually do things the right way and have that 30-plus year
view of building your company. RAOUL PAL: Or there's an applications layer over the top like
VPNs and stuff like that, that we can select our own level of whatever basket of stuff is important
to us– decentralized, not decentralized, beta sold, non-beta sold, private, non-private, you
And there's trade-offs. And individuals can have their trade-offs, I guess. ANTHONY POMPLIANO:
Absolutely. So, look, I think if you said to me, like, paint the picture of where are we going,
you know, 20 years from now? I think that we are going to have a completely decentralized financial
system. Bitcoin will be at the core of it. It will be the core unit of account. It will be the global
reserve currency. And that key piece to this world that doesn't get talked about enough, but I think
is very important is, it will be an automated financial system. And that automated financial
system is today, you can't have automation because there's too many human processes
involved. Right. If I don't want to go and– I'll give you another example. If I want to
go and I want to get a mortgage, for example, I can't get a mortgage in the United States
without actually interacting with somebody, until a company called Figure came along.
And what Mike
Cagney, the former founder of SoFi, where we're an investor, what he created was, you could go
online, you could fill out an online application, and within five minutes they would tell you
whether you're going to get the mortgage or not, and they would fund it within five days.
Now how did they do that? They say, OK, go on. You start filling out the application.
And rather than you say, I swear on my life I am employed at X company, I make Y dollars, and
I'll get you that information. And then you go and you get your employment letter, you go and you get
your pay stubs, you get your bank to give you a customer letter or whatever and then you send
it all in. No. What they do is they say, hey, you should be [INAUDIBLE]. Just sign into
your bank account. Just put your username and password in. And when you do that, we just signed
in too. You're definitely a customer of the bank. Right.
Two is, they then quickly scale all
your data and they say, what corporation is direct depositing every two weeks? Oh, well that
must be where you work. Right. A high degree of confidence on that. And then, by the way, I don't
need an employment letter and I don't need to know your pay stubs because I can just look right here.
This is the exact amount that's hitting your bank account. So that's a perfect example where, like,
they automated that process from a paper process and a human review kind of confirmation process
And that has nothing to do with blockchain. That has nothing to do with crypto.
Like, that is just pure technology versus bureaucratic type processes. I think that is going
to be pervasive across the financial industry. And so this automated system that we have, now we can
actually get a world where, if there wasn't some regulation– there's a regulation where there's
a cooling off period in that mortgage process, where I think it's like a three day cooling off
period– if that regulation wasn't there from a technology perspective, Mike and the Figure
team could literally say, apply. We'll tell you within five minutes whether you're going to get
it or not, and we will fund it in five minutes. So literally you can go in, you can apply. We'll
tell you within five minutes and we will fund it in five minutes.
RAOUL PAL: And you'll be
able to pay for the house instantaneously too. ANTHONY POMPLIANO: Yes. Yes. Exactly. So,
again, we are very far away from this world. Right. Like, there is a lot, a lot of work to
do. But it is not just a technology build that needs to happen. It's also, we've got to get the
incumbents out of the way. Because there's a lot of incumbents who have a financial interest in not
seeing that world come to fruition. They actually make a lot of money by not allowing that type of
innovation and progress to happen. And so I think that what we're going to see here is we're going
to see two competing forces. We are going to see Silicon Valley versus Wall Street. And that's
a very big over-generalization, but just the technologist versus kind of the old school banker
who, they actually have a business model where inserting themselves in the process, creating
bureaucracy allows them to kind of take a tax or a transaction fee on all this stuff. And so, again,
I can't predict the future, but what I can tell you is, based on historical context and precedent,
the technologists always win.
And so you can hold on for a while. And I don't know, maybe the
kind of banker world can hold on for five years, 10. Maybe they can hold on for 20 years. RAOUL
PAL: Or maybe they adapt. ANTHONY POMPLIANO: So when you get to, let's say, Goldman Sachs,
Goldman Sachs has been around a long time. Goldman Sachs was around before the internet.
[LAUGHING] Right. Goldman Sachs was around before fiber.
Goldman Sachs was around before telephones
and kind of the telephones we know today. Right. Like, they were around before mobile phones. They
have adapted to every single piece of technology. But what they also did was they adapted their
business model as well. Right. And so I think what we're going to see is a haves and have-nots in the
financial world. The people who hold on forever to the old model will get disrupted and the people
who are forward thinking, many that you can already– Fidelity is a great example. They're,
like, all in on this stuff. They say, hey, of course this is going to be a thing. Let's be
ahead of the curve. Let's embrace it. Let's figure out how we can build a business around it, and
let's go kind to be a leader in this space.
And so that split between haves and have-nots will open
the opportunity for new challengers to eventually become incumbents by building super valuable
things that replace the have-nots. And it ends up creating, kind of this decentralized financial
system that I'm talking about. RAOUL PAL: Yeah. I mean, if I look at that world and I see the
adaptive [INAUDIBLE] of the investment banks, because they tend to be more adaptive, and I look
at the central bank digital currencies, I'm like, so where's the normal money center bank? Because
literally they're not going to exist.
I cannot see a role for them. And I kind of think the
Europeans know that and they're working to do it, to get rid of it. ANTHONY POMPLIANO: So one of the
most interesting frameworks for me to talk with, kind of legacy finance folks about is, if you're
over the age of, I don't know, maybe 40, 45, your entire world you grew up in, there was a
very high friction to switching currencies. So if you were a macro trader or a foreign
currency trader, you had the technology, the systems, you spent a lot of money in R&D to
be able to do this somewhat seamlessly because you were trading it.
But for the average person,
the only two ways to switch from, let's say, US dollars to another currency was either to
physically go into the bank and actually say, hey, I would like take my US dollars and get
euros. I'm going on a trip. And they would say, how much do you need and they would change it
out. Or you could go get ripped off at the airport by a currency exchanger. Right. Like those were
basically your two options.
So very high friction, very expensive. Well when we move to a world
where all of these currencies are digitized, so there's a digital dollar, a digital euro,
all the private currencies, Libra and all the other ones that are going to come, and then
you have decentralized currencies like Bitcoin, the technology layer is basically going
to be feature parity, to some degree. Right. Maybe there's some nuance here or there or
whatever. But everything ends up being digitized. Now the switching cost between assets
is drastically lowered, if not removed. And so what that changes is, we've lived in
a world, I call it a single currency world, for pretty much everyone's life that's
alive right now. If you get paid in dollars, you hold your money in dollars, you pay other
people in dollars, and you denominate all of your assets in dollars. If you maybe are on the fringe
and you live in a world where your nation state currency hits hyperinflation or gets devalued
away, you then switch out.
Right. But again, you don't go to, hey, I'm going to take my one
currency and swap it for six currencies. You say, I'm going to take my one currency and switch it
for another one currency, and now I live in a single currency world again. When you reduce the
friction of switching between these currencies, there is going to be a world where likely I get
paid in dollars, but just because of that digital currency, it doesn't mean that it changes the
monetary policy. It's a technology change, it's not a policy change.
So they're still devaluing
it, they're still printing it. In some ways they may be able to print even more of it because
it's easier to do and all this kind of stuff. But when I get paid in dollars, I'm not just
going to simply save my dollars and leave it in the bank. I'm likely, with the click of a button,
to switch it into a better store of value digital asset. So let's say Bitcoin is that asset. Right.
So I go from digital dollar to Bitcoin. It's a one click thing and now I'm using the store of value
or the purchasing power protection of Bitcoin, while I'm not using my dollars. The government
says, but you know what, when you pay me in taxes, you've got to pay me in dollars. And so when
I go to pay my taxes at the end of the year, I then switch back with the click of a button
from Bitcoin into dollars and I pay my taxes. And so I'm actually living in a multicurrency
world now where I'm able to switch in and out.
Now most people are not going to be currency traders.
They're not going to be super sophisticated about this stuff. And so my prediction is that actually
we're going to see a bunch of technologists build things that just auto do this for folks.
Right. They say, hey, when you get paid, it's going to go sit in this savings account. That
savings account is going to happen to have better purchasing power protection than if you just
sat with dollars.
And then when you say, hey, I want to pay something, they'll just auto-convert
you back into a currency. You won't the difference and it'll kind of just automagically for you.
The key to it though is, we are underestimating what this provides for central banks. Central
banks are about to have the ability to create personalized monetary policies. And this is going
to screw up a lot of people, because we've always lived in a single monetary policy world as well.
So the individual lives in a single currency world and the central bank lives in a single policy
Well, when all of a sudden you now get individuals who can live in a multi-currency world
and central bankers who can actually have multiple monetary policies– and for those who don't
know what that means, it basically means, I can treat, let's say, rich people one way with
monetary policy and I can treat poor people in a different way and the middle class with something
I can say, if you are of a certain age, of a certain demographic, of a certain income
level, of a certain geographic location, of a certain occupation, right, all these
different things, of a certain spending habit, I can give you a different monetary policy than
somebody else– RAOUL PAL: And a different fiscal policy too, probably. ANTHONY POMPLIANO:
Absolutely. Now we enter into a world where there is much, much more competition.
And when we have much more competition, you also get much more optionality. And so
the saving grace of this could be that all the central banks say, oh, wow, I have to compete
with everybody else. I should probably, like, behave myself.
But as we know, the incentive
is too strong. They say, I can abuse my power. Oh, there's– people won't go over here or people
will go over there. I'm going to abuse my power because there is a financial incentive for me to
do it. And so I think that you're right in that the central banks, by digitizing their currencies,
are actually accelerating the inevitable, which is that ultimately these currencies are
all going to be interchangeable with each other. And not only are they going to try to use this
multiple kind of monetary policy world to their advantage, it's actually going to force people
to go find a single currency world like Bitcoin that has that purchasing power protection.
And as you get more and more adoption, you get more liquidity. As you get more liquidity,
you get more utility.
As you get more liquidity and utility, you get more stability as well. And
I think that that key piece is, today we have up to maybe 100 million people using Bitcoin. When we
have a billion, five billion, six billion people who are all holding this asset, it's not going
to have 30% drawdowns. Right. It's just simply, you're going to literally have a switch. RAOUL
PAL: Yeah, it's going to be a three or four bowl asset. It's going to be very nonvolatile. ANTHONY
POMPLIANO: Yeah. And you're also– you know, again, nobody talks about the dollar crashed. I've
never heard a normal person, outside of finance say that.
No one's ever said, oh, the dollar
crashed today. Right. No. What they say is, hey, I used to spend $3 to buy that loaf of bread. Now
I spend $4. Right. It got more expensive. That's about the only thing that they'll say anything
to do with purchasing power. Well, we still price assets today in dollars. And it is coming. It
is absolutely coming. As soon as we start seeing corporations reporting Bitcoin on their balance
sheet as part of their reserves, you're going to start seeing corporations pricing goods in
Bitcoin. And they'll start with super-fringe weird things, almost like gimmicks. Right. They'll say
at the baseball stadium, ah, come buy the Bitcoin hot dog. Right. And 100 Satoshis gets you the hot
dog. And people will laugh and they'll buy it. And then all of a sudden it's the soda as well. And
then it's the fries. And then it's the peanuts. And then it's just the ticket to the game.
Right. And then it's the salary for the player, and it's literally the revenue of the team. And so
that may take 10 or 15 years to happen, but when we start pricing things in Satoshis, what you're
going to see is all of a sudden that volatility basically gets masked.
Right? Bitcoin only
dropped recently 20% in US dollar terms. In Bitcoin terms it didn't drop. One Bitcoin
equals one Bitcoin. It's just like dollars. $1 equals $1. It's not about, did the dollar drop?
It's, did the dollar become less valuable compared to goods that it wants to buy or services it wants
to buy? And so that's the big leap. Right. That's the one that scares everybody around, like, wait
a minute, I denominate every asset in my life in dollars. When I have to start switching and I
denominate everything in Satoshis, what happens? And I did this about two years ago. I started to
think of everything in Satoshis. RAOUL PAL: Yeah, I mean, look, it's way too early for that.
We're no where near it on the network effect. So yes. ANTHONY POMPLIANO: Agreed. Agreed. RAOUL
PAL: But as a European I've gone through this. We've had currencies and then they changed to
other currencies. It didn't take long before we went from pesetas to euros. The old people,
they kept calculating everything in pesetas. Pretty much within a year or two, everyone got
used to the euro and forgot about francs.
So it actually doesn't take that long. What
it took was a concerted change, which was the ECB. Not to say that may not happen. As you
alluded to earlier, some central bank somewhere, according to game theory, is going to take this
on its balance sheet and then someone's going to peg themselves to it, not with a 69 bowl
asset, not right now. But at some point it will certainly go onto the balance sheet. And
then at one day somebody will just say, oh, we've decided to adopt the Bitcoin standard. And
there you go. And that's the start of the great game. ANTHONY POMPLIANO: So we're recording this
in January of 2021. I think by the end of January, 2022, so basically two years, give or take, there
will be a material percentage. Probably not 50%, but somewhere between let's say, 10% to maybe
25% of Fortune 500 companies will have Bitcoin on the balance sheet, in some form or fashion.
And when you think about the importance of that, you're now talking about every shareholder
is seeing Bitcoin on the balance sheet, every executive, every financial show is talking
Right. All these different things. And so when you start to think about the adoption
that is still in front of us– right, people see Bitcoin– it went up to $40,000. Oh my god. It's
a bubble, it's over. You know, this is going to be the all time high. We haven't even started yet.
Right. Like, when you really think about it, we have not even started yet. RAOUL PAL: But
there's something interesting, and I was thinking about this from something you were saying
before. It's interesting because most network effects remain exponential. But Bitcoin has
this kind of S-curve price. And the reason being is because we all still work in our fiat currency
home base. So at some point it creates enough value for us that we go or and buy a house
or a car or a Lamborghini or whatever it is. But at some point you won't see that drawdown.
And that's the point when people say, I don't need to capture value in dollars. My value remains
in Bitcoin. I know some people are there now. But that's– you'll see that from when the
sell-off after the halves and the usual kind of cycle goes.
When that's gone, it's going to
tell you something. ANTHONY POMPLIANO: One of the key pieces that is happening now, but not being
discussed, but I think it is being under valued is, we, being you, I, and most of the people
listening to this, we think in terms of markets, the finance world, or the technology
world. So we think very much corporations, what are venture capitalists, what are hedge
fund managers doing, how our asset prices moving markets and this stuff. One of the blind spots for
the tech industry and for the finance industry is what many people refer to as kind of the culture.
So this is music, this is athletes, this is kind of all of the things outside of technology
companies and outside of finance companies. The culture, right, it's usually like
hip hop community, professional athletes, all that kind of stuff. They are obsessed with
this, and they're starting to talk about it, and they're starting to use it. Right.
Cash App is a great example.
Cash App's demographics look very, very different than
pretty much any other financial community. Literally they are songs about it. Right. There's
people who say, I want– like, pay me on Cash App, all this kind of stuff. And so when you start
to see culture shifting towards something, that's when you really get the flywheel going.
Because it's one thing if, you know, Mass Mutual says, hey, I'm going to go put $100 million
on my balance sheet.
RAOUL PAL: French people don't care. ANTHONY POMPLIANO: If a tree falls
in the forest, did it really fall, right, is kind of the thing. If all of a sudden
Drake says, pay me in Bitcoin in a song, people start paying attention. Right. RAOUL
PAL: Although most of us in financial markets are slightly nervous of that one, because
when Giselle asked to be paid in euro, I remember I changed my entire billing of my
business into dollars. I was living in Spain. I changed my entire life savings. It was at 148
and a half. It was a home run of a trade.
So it worries me when these guys want to get paid
in Bitcoin still. ANTHONY POMPLIANO: But it's going to happen. Right. RAOUL PAL: But that was
true. I get the point. It's a real point. ANTHONY POMPLIANO: Absolutely. And so I think that like, I
have enough data points now, enough conversations, whether it's a musician, it's a professional
athletes are kind of– the YouTube world, the TikTok world, all of these people are starting
to say, wait a second, what is this thing? Why is it important? And to their credit, many of them
aren't just buying it. They're not just seeing it and saying, hey, I'm going to buy this. Right.
They're actually doing the opposite, which is, they're saying, hey, this is interesting to me.
I don't understand it. Can you teach me? Can you educate me? Right. Can you get me up to speed? And
so if they were just running out and buying it, looking for it to double, that would scare
me. Right. That would basically tell me, hey, they're just speculating and it's no different
But when they say, explain this to me. Why is this important? Oh, I didn't understand
that the dollar gets devalued. If it just sits in a bank account I lose purchasing power. And they
really start to understand it, you then begin to realize, wait a second, that's more likely to be
a sustainable user over a long period of time. And if they have influence, if they have audience,
and they're able to, one, get over the hurdles and kind of understand and educate themselves,
and then they begin educating other people, this flywheel can really start to run. And I think
that it really only takes two or three big people. Right.
Again, I used Drake as kind of an example
of a lot of people paying attention, pretty forward thinking, likes to be seen as kind of on
the cutting edge of innovation. You take somebody like that, he literally he comes out with a song,
"pay me in Bitcoin." All of a sudden you're like, whoa, wait a second. People say that's impossible.
That's not going to happen anytime soon. Well Russell Okung, an NFL player, you know,
tweets almost every day, pay me in Bitcoin. Right. And he's on national television saying,
hey, I'm taking half my salary in Bitcoin. And so I've already seen multiple players tweet
at him saying, what's this Bitcoin thing? And so even if only 10% of them actually take
time to get educated and start adopting it, you again, you're going to watch this generational
shift where people grow up with this being a part, maybe not a majority, but a part of their life.
RAOUL PAL: So just to play devil's advocate, I mean, I kind of agree and the tides
will shift that way.
The problem is, Bitcoin goes down 90%. Let's say it doesn't.
Let's say next time around it goes down 60% and stays down for three years. If you're an
NFL player, you're going to feel really stupid, because you've halved your salary. Right? Because
your base currency that you spend is dollars. So it's hard until that volatility
goes– and for that volatility to go, you need more adoption. It's kind of– it's a bit
of a tail wagging the dog, but it's going to take a bit of time. ANTHONY POMPLIANO: But I disagree
with that for one purpose, right, which is, if you had bought Bitcoin at $20,000 in July 17 or
December 17, and you had continued to buy Bitcoin, the same amount, every week, all the way down
through the bear market, you would have been up like 40%.
RAOUL PAL: Yeah. You're an NFL player.
You're spraying it on champagne in nightclubs. You spend all of your cash every month.
And then every month your salary goes down because bitcoin's in a bear market. Right? ANTHONY
POMPLIANO: The people getting paid a Bitcoin, they're not the ones spraying the champagne.
There's a lot of those guys, but the ones who are saying, pay me in Bitcoin, they're the ones
who are a little bit more financially responsible as what we could say. But your point is well taken
that, yes, absolutely. There are some people who, with the volatility, that will be a negative.
Right. And then there's some people who basically say, you know– Russell's a great example. And
I don't want to speak for him, but I think that his perspective of like, hey, every time I get a
paycheck, it's going to be basically split 50-50 is my understanding of what he's doing. And he's
essentially just dollar cost averaging into the asset over however many years that contract is.
And so while there is volatility and it can be a negative, if you take that approach, historically
it's proven to work out.
RAOUL PAL: That's for a 401(k) but just 50% of your salary. So, you
know, why not. It makes total sense. Listen, my friend, I've kept me for two hours, and it's
been a fantastic conversation. We talked about all sorts of stuff, lots for people to dig in to.
And look, I really, as ever, appreciate your time, and I've thoroughly enjoyed. It's been super
interesting. ANTHONY POMPLIANO: Listen, thank you for doing this. I was excited to see you and Real
Vision start to cover Bitcoin and crypto because there's a certain type of audience
that I think you guys have that, they're not going to go on Reddit. They're not
going to go on Twitter. They're not going to go, kind of, to the corners of the internet and find
Right. What they want to see is they want to see you and a whole bunch of your
colleagues or the kind of guest hosts you have talk about this stuff. So just keep it up and
I appreciate you taking all the time to learn yourself and also educate others. RAOUL PAL: Yeah.
Thanks. We're all building the network effects in our own way. Right? We're all building our little
corners of the universe to spread the word. ANTHONY POMPLIANO: I couldn't end it any other
way than, long Bitcoin and short the bankers. [LAUGHING] RAOUL PAL: Take my friend. That was
great. See you soon. NICK CORREA: Thank you for watching this interview. This is just a taste of
what we do at Real Vision. To learn more about the complex world of finance, business, and the global
economy, click on the membership link in the description.
Give us 7 days to change your life.
This will be the best dollar you'd ever invest..