Raoul Pal: Former Goldman Sachs Exec.: Bitcoin could hit 1m this cycle (German Subtitles)

rao hey such a pleasure thanks for taking time for the german community um many many people big fan of yours yeah very much looking forward to the next hour and uh discussing a couple of really exciting things with you oh thanks for asking me great to be here you are in uh cayman right now i think yeah i'm back in little cayman i keep moving between grand cayman little games my backdrop keeps moving but i'm a house in little cayman right now cool uh many people ask me you don't feel lonely on there or uh yeah i've got a wife my mother's here over my dutch mother's over from spain where she lives she's here right now got two dogs as well so and there's a bunch of we got a bunch of friends here on ireland but i mainly live living grand cayman but i popped over because i wanted to bring my mum over to little cayman and i do some writing over the weekend here it's nice and peaceful a good mentor of mine john ross actually also lives on grand cayman i don't know if you've ever come across big kite surfer yeah i don't know yeah i i've not but you need to introduce me i'll definitely do it he cool guy uh yeah he's really awesome so yeah cool hey um i want to dive right in um first question bitcoin cryptocurrency or crypto asset for you currently a crypto asset um and the highest quality of all so you know i've i kind of pioneered the pristine collateral you know because it's got no claims against it how it operates it's a store a value clearly right now but it has these other attributes as well because it hasn't got to full moneyness yet so we're seeing the adoption curve take place so that means it's pretty useless as a currency per se because it moves too much in value um so as a store value it's great because the skew of that value accumulation is to the upside but um really as money not useful as a transmission mechanism we're seeing things like bottle pay and strike showing that it can be the blockchain can be used as a transmission mechanism on the lightning layer but as yet as money you know elon musk has been talking about you know selling teslas for for bitcoin he just launched today yeah he just launched today yeah why on earth would you park with your bitcoin in the middle of a bull cycle to buy a car it literally is the most stupid thing in the world you're better off to get one you know a six-month bank loan in entire in the meantime buy the car then pay off the loan do you think actually a deflationary asset as bitcoin i mean at the moment it's still a little bit inflationary but at some point there will be more bitcoins lost than created do you actually think a deflationary asset like bitcoin can never be a currency i've been thinking a lot through this actually i'm trying to think like 10 or 20 years ahead okay so let's say the bitcoin maximalists are right and bitcoin is the kind of the predominant store value and currency well in that world it becomes the denominator against which we judge all assets now if it's so deflationary that it goes up in price all the time it means that everybody else will only put the money in bitcoin and not other assets unless you get short-term cyclical moves in other assets that would tend to make bitcoin outperform all assets which stops all productive use of capital it drives m2 you know money supply bitcoin money supply to zero so i don't think it's healthy over the long run for it to be a deflationary asset we kind of are stuck in this inflation deflation world that we live in right now um that there's a huge bunch of debtors so people don't want deflation and then savers want deflation but not inflation but if we go into a world where the denominator keeps going up against everything i everything else deflates against it that's a problem because as a business you earn less and less money every year so i you know i'm not entirely convinced that this is a good thing and for this reason one of the reasons i don't believe that it is the only asset i think it is a pristine asset it has attributes but it won't be everything um i've seen your fair share on twitter uh fighting against some of the uh bitcoin maxi trolls um i myself i also hold altcoins uh yeah how do you where do you see value in altcoins how do you see the value how do you see the the notion from a lot of bitcoin maximalists that the only thing valuable in the world right now it seems to be bitcoin yeah i just don't buy into that argument i understand there's a probability of it so you know i'm not saying it's a zero percent chance there is a probability this whole idea that anything that is a utility trades at the cost of electricity i just think is false i think it's false because of metcalfe's law adoption effects um and we've seen that time and time again now when john feffer wrote the paper that everybody refers to every bitcoin maximus holds as like here is the prophet of truth he basically wrote off network effects so i went and proved it that network effects operate perfectly in ethereum in fact it operates in every one of these in fact all new technologies are network effect driven so i don't believe that utilities have zero functions some that are badly designed may do but most i don't believe will the hard question is which ones are going to succeed and which ones aren't i don't know the answer to that so there is a maximalist school of thought is we all got caught out in 2017 because we bought these tokens and they went to zero guess what they were all early stage projects and if you understand how the vc world works eighty percent of what you invest in is going to go to zero or go nowhere and it's really the twenty percent ten percent five percent you make the money in so what was the one out of two thousand that did well out of 2017 ethereum now ethereum is around today it hasn't taken out its peak versus bitcoin yet but it's taken out its all-time high will it outperform bitcoin over time who knows i think for a period of time certainly and i think over a longer period of time probably so how i look about look at this is bitcoin is currently a trillion dollars ish and the rest of the spaces call it seven or eight hundred million dollars if i look at the equity space or the fixed income space or the credit space globally they're all about 300 to 500 trillion so if this is truly as disruptive as we think it is which is the internet of value then it's going to be worth something like that if not more so the whole space looks like it can go to up 200x from here at least okay that's you know we've never had this before whole asset class is going up 200x but that's what adoption effects do and that's what this whole parallel system that's being built we know we've got this broken system that we live in now you know whether you're european japanese american we all know that we've got this debt burden system where the banking system doesn't function there's a terrible disparity between the rich and the poor um you know wages aren't increasing all of the problems that we've got then over here there's a bunch of really smart people in the thousands or tens of thousands who are building an alternative system and people are slowly migrating across and that is not just a system of money and that's where a lot of the bitcoin people get confused between money and value assets have value they don't have to be money a picasso is not money it is value so i think those two things are different and i think once the the whole space builds interoperability you and i won't care what platform we're buying and selling or streaming on you know you'll be streaming for money in real time payments and you don't care whether it's on tron you know whatever i mean it's irrelevant to you as long as you get paid whatever source of money you want bit bitcoin or or euros or dollars or whatever you choose you know that's it's it's that early stage that people are fighting over the wrong thing and in what other cryptocurrencies do you see value at the moment the answer is i don't know i see value in the space i'm not smart enough i don't have enough bandwidth to go through all of these because they all sound super interesting right everything's like oh my god that's incredible oh wow that sounds amazing the problem is is what's going to get network effects and what's not what's going to find the use cases what's going to find the developers i don't know ethereum for sure i mean that's a surefire you know major platform that is going to play a major part in the future but the others i really i honestly don't know you know so i just bought a basket of 10 alts i did it in a very unscientific way if my thesis is network effects i went onto twitter and said show me your your your best oh you counted which one got killed the most i kind of looked at it and i could figure it out right and it basically breaks down to d5 decentralized exchanges some alternative protocols and the interoperability layer and amongst those you pretty much cover everything so i just kind of did an allocation equally weighted amongst those and took kind of what seemed to be the largest market cap that had the most number of smart people interested in it that wasn't based on just kind of the hype cycle but had some really interesting people involved whether it was investors in you know if you look at polkadot i mean there's serious people behind polkadot so you have to take it seriously whether it works or not who knows um but you can take it seriously and so then i precise it you have to size it accordingly as well because you're going to have to realize a bunch of these just aren't going to work out um but a few of them you have to be willing to lose yeah that's right um i personally treat bitcoin as d5 so for me the entire blockchain investment space has at least to me only seen one large sector so far which was defy and now i mean in 2017 for the first time it kind of bubbled up but especially end of 2020 and now beginning of 2021 we see the second new thing which is nfts and to me that's just very different than the d5 space so far have you looked into this is this something where you're like this is just a bit of a temporary thing collectible this is not yours do you see this a bit different do you see value on those but the four things that i see right now two are already kind of known and two are yet un misunderstood or not known about so i think d5 is real and some of those projects will fail and some of them will become huge huge multi-hundred billion dollar operations non-fungible tokens i think are real and meaningful um and i think that anybody who's younger understands that digital assets have the same value you know you and i might buy a t-shirt from a designer because we kind of want to affiliate with that designer it's a two dollar piece of cotton and we'll pay two euro piece of cotton we'll pay a hundred euros because you know it's [ __ ] right we all know it but we can't want it there's no difference in the digital world so an art is basically a painting is a piece of canvas with some paint on it total value 20 euros but it could be worth 200 million euros there's no difference in the digital world when people argue about that people piece that's over 69 million firstly it was 5 000 pieces of art so each individual piece of art actually wasn't that expensive if you consider the man house put in to create that um and just because it's on a different medium people like well it's worth nothing it's digital well basically canvas and paint is worth nothing as well it's all in the art and all in whether a collector wants it or not what perceived value they have so i have no issue with nfts and i think they're going to develop into all sorts of ways that we don't yet understand the other thing that's coming is is community tokens you and i if we're having this chat in five years time we'll both have our own community tokens whether it's a real vision token or your own token and that will be come with member benefits we are going to disrupt content creators are going to disrupt google and facebook where they accumulate a large part of the revenue streams that we can generate that's going to go can you walk me through how how those community tokens thought you'd be interested in that um basically let's say you are a cristiano ronaldo you have probably a community of 300 million people something like that so right now to reach his community and to monetize from it he uses google and facebook whether it's instagram facebook um etc and maybe uses tik tock and so the community runs via that and usually it's advertising and brands so he will be paid to advertise for adidas or whoever he advertises for and they he will then get the images out etc and that's how he makes extra money on top of his salary in the tokenized community world he has a direct relationship with his community so he can create cristiano ronaldo boots himself and sell them to his community directly to an audience of 300 million people he can also have give community holders that token that allows them discounts into his games or membership to any club that he chooses to become a player in um they can also maybe have value in terms of the number of goals because they're all programmable you can have however many goals in the season it reduces the supply of the tokens let's say so the value of the token together who knows anything can be done it can be maybe that he wants to corral people into a charity project so he puts that as part of the programmable coins because he believes in tiger conservation in india you know whatever it may be we can do anything and that is very disruptive because right now it's brand platform and they take a large part of economics and the person in the middle it's most extreme in music where 80 of the economics is taken out by middlemen so this is all changing very fast the other world that is changing very quickly is probably ahead of all of this but nobody realized it because none of us are 16 years old is gaming i mean there are yield curves on swords in games and a 12 year old kid will understand if he lends his sword out he's going to get played x tokens right where are like look at d5 isn't amazing they're already doing it they're already got interoperability between games you can go between meta verses you can earn money entirely within an ecosystem and cash out interferes so they're so far ahead and half of this stuff is being built on the blockchain didn't all start on the blockchain but it's now all coming with ethereum-based tokens and a whole lot so that is moving at a lightning pace and the other one that's coming is the tokenization of assets so why that is important is i live in the cayman islands and and this is the true everywhere in the world is we've got a bunch of real estate happens to be seven mile beach which is much more expensive than everything else it's the prime real estate so the average person can't afford to participate so the rich people build apartment blocks all make a fortune and they keep getting richer the poor people are renting expensive places out away from the beach and they can't participate in that so it's hard to generate more wealth but imagine if you can tokenize that real estate and allow the local pension plans to own parts of it or even the individuals themselves so now they can invest like a billionaire so they can make money from picasso going up or the ferrari going up or the or the real estate going up so then there's no difference between rich and poor in terms of the opportunity set to invest okay that's fascinating that solves a lot of problems too so i think those i said four things it's those five things that i see as the really big things and i think they're all gonna emerge can i push back on the tokenization part um because for me that part has been discussed for so long and the major hurdle has always been regulation how do you see that on the on the tokenization part regulation is so far behind what is going on again go to the gaming world where there is gambling there is earning money there is all of this stuff right it's non-regulated the gambling side is slightly regulated depending where it is it's all non-regulated so it's moving really fast regulation is so far behind they still are calling things securities versus non-securities which is rules that came out in the 1930s right the whole regulated rule book is going to get ripped up and thrown out and redefined it has to happen this is not a marginal thing that's coming at the peripheral of the financial system this is most likely in my view to be the future of the entire system so you have to rewrite the rules and that's okay but there are a long way behind that but they will get it once you know the ecb uh the fed and everybody else introducing uh digital currencies they're going to realize that that whole world is gone and everything has changed so you know the whole regulatory rule book is going to get rewritten over the next five to ten years um so yes it's slow to get stuff like real estate tokenization off the ground certain jurisdictions could do it certain people can't um that's okay it'll come you know i think there's too much happening already to keep our eye on than having to think about all of this as well um to change and just one i want to switch to something you are very contrarian at least to what i always see and um how do you see bonds right now government bonds i'm a contrarian i i think everybody thinks that there is a reflation that is going to be meaningful i think and i've seen this my entire career and most of the time no never in my entire career has there been any sticky inflation the last time we had sticky inflation in the western world was in the uh late 70s why because we had a record number of people who were all the same age coming into the workforce buying their first house car suit blah blah blah getting married all at the same time right that demographic the baby boomers are now retiring so in germany they're older than they are in the u.s but they're all in the retirement phase we chucked in a load of millennials particularly in the us um but they came into the jobs market in debt so they didn't have the same inflationary dynamics so we don't have it driven by inflation if you look at wages over the last 50 years 40 years wages have basically in inflation-adjusted terms been flat-ish they've gone up a bit now inflation itself has not gone up a lot cpi inflation because of technology globalization etc and wages but then there's a bunch of assets that have gone to the moon so you if you look at a 30 year old in 1979 1980 which was the baby boomer they had really cheap property prices all-time record low valuations and equities and all-time record low high interest rates and high credit spreads it was a gift of an opportunity the 32 year old now millennial is seeing all time record valuations and equities all-time record valuations in bonds the lowest ever interest rate in credit and the highest ever property prices so i mean that's a problem and that's to do with this wage deflation issue because you've now got the baby boomers and the millennials in the workforce at the same time same time technology is destroying jobs same time that the chinese and the indians and the turks and the and the vietnamese and everybody else are taking jobs away um it's all happening so i don't think you can generate inflation so this reflation what is it it's driven by a bunch of commodities that have supply restrictions so they've gone up the stimulus so that tends to goose economic growth for a bit but i think it just fades as it always does i think there's a lot of people across europe the uk the us who are basically in a holding pattern where they've been forgiven payment of their debts for the time being temporary payment of their debts and those debts are going to come to you so either the government's write them off and the central banks print more money or those people are going to have to forego expenditure at some point which is one of the reasons the saving rates went up so much with all the government handouts so i think there's a lot of consumption brought forward i know because i renovated my house both in little cayman and grand cayman while i was in lockdown uh we weren't really in lockdown here but um um the islands were closed and i've forgotten all my future consumption you know i spent all my money whether everything i could put into put into bitcoin and ethereum and all the work i did in my house and that's it you know i'm not going to do the same next year but everyone's kind of done the same right everyone's kind of redone something um so i think there's a lot of consumption brought forward so i think growth the second half of the year is going to be weaker i think bond yields don't go much further but anyway what's amazing is the central bank are not going to let them go much further either so the ecb the boj and and the reserve bank of australia have all been stopping yields rising and i think if the yields rose any further the fed would stop them too um so i i kind of think bonds feel a slightly one-sided bet but not a great bet that i want to put it on yet so you're not long bond i'm not long bone oh i've got a small amount but not really not significant amounts um how do you see the current bitcoin cycle sorry i was just curious because like i i yeah so one is the the bitcoin kind of focus which is so bullish and so bonds are like yeah yeah total different i'm opposite um walk me through how do you see the cycle um obviously a lot of people talk about 2021 being the super hype year and then 2022 being the minus 70 crash and then a couple of myself uh peop of my friends and i include myself here i believe that the first crash of bitcoin in 2013 2014 was because of mount cox and 2017 was because icos just bubbled this entire thing up and then it just had to come down so my thesis is if in 2021 we don't see this major hype driver we're gonna see maybe minus 30 minus 35 setbacks but not this minus 70 minus 80 setback how do you see this are what i've been thinking i've been thinking through the same thing what's interesting is the seasonal cycle of bitcoin is pretty clear so it kind of it's it goes up early jan then corrects then goes up in feb corrects in march april we're kind of seeing that exactly play out now and then it explodes into june i think it gets 100 000 and then it corrects sideways you know sideways in bitcoin terms it's like down 35 down 30 percent but for the extended period of time until let's say september october maybe a little bit earlier and then explosion to the end of the year what's interesting is this cycle also looks pretty much like the 2013 cycle it's pretty close it's actually pretty close it's diverging a bit from the 2017 cycle because it's actually ahead of it in terms of movement so so that's how i see the rest of this year playing out next year i'm kind of with you i'm kind of thinking that we won't have a big collapse because of the new participants so what happened last time around it was all retail and resale had made a lot of money and so they wanted to convert back to fiat to buy things and the more it went down the more they thought oh [ __ ] i want to buy that car i was going to buy and stuff like that um but with more institutional adoption i think the volatility comes down over time and maybe just sideways correct like gold did for the last few years where it traded down 30 but over 18 months so it's just boring um and you bore people out of the trade and some people accumulate over that period i think that's probably the most likely i think there's also a outside chance that you know we all look at plan b stop to flow and i use a a number of different ways of getting a price projection i use a regression analysis on the log chart that gives me you know for it to get to kind of one standard deviation overbought it's about four hundred thousand but if it gets to two standard deviations where it got to the last two times it's a million i think there is a risk that we all think and i see plan b asking this question a lot on twitter where do you think it tops out the skew is to the low side the skew is around 150 000 to 200 000 200 yeah it's 288 000 number people are really not sure on yeah and anything higher they're like no chance the lowest probability of all and i'm like i kind of like those odds i kind of feel that we could have that shocking moment where it a lot of people sell out at between 150 and 250 for these reasons we've all got kind of seen that we all think that could be the case and we could overshoot we we could see it elongated cycle for the reasons that you said because the institutions continue so i don't know it's hard to play i think you i will probably take some off the table somewhere in that and probably hold some um so something like that it's it's difficult to know what to do you can just hold it it depends what age and what you want to do with the money you either want to keep it in bitcoin because you want to be just participate in the net cycle so you just think of it as just a savings vehicle or you want to cash in for lifestyle chips and you know buy yourself a house or a car or do whatever you want to do and you need to time that if you want to take some money off the table to use for other purposes what's your anti-thesis to to to bitcoin at the moment like why wouldn't it work out i think the anti-thesis that i've got that people is not on people's radar screens is i've discussed this a couple of times and a lot of people still don't understand it is bitcoin's real value proposition is this stora valley with limited supply that's kind of understandable so we've heard the bis and the imf talk about the need for digital currencies they've also talked about a new bretton woods moment and what they've been talking about with that is the ability basically for everybody to print money at the same time in a unified agreement why because then you don't get one currency out of whack with the other so you create less economic disturbance now it's obviously that would be very powerful for bitcoin and gold and some assets probably equities but what happens after that what happens if they said okay we're going to create a global basket of currencies and to be a member of this new world currency your money supply can only increase by two percent a year or less and it's rules defined that makes that currency pretty interesting right because it has some of the attributes of what cryptocurrencies introduced it could be tokenized too and anybody who fails to meet the criteria gets ejected from the basket so then you have less of a need to protect yourself against the largest governments because you have a globalized currency that would change the equation it wouldn't change the other side of the equation which is the new digital world that i'm talking about that's that will explode in that environment but bitcoin would still be perceived to be a harder asset but it'd be kind of like gold versus the us dollar where some people would choose it and others would be happy to choose the existing system now we all know that governments can't hold themselves to not printing money over time but you know how long do monetary regimes work last 50 years so i i don't know that would be the risk that nobody's thinking about that bitcoin loses attraction not because they ban it not because they do anything else but because they copy it in some way shape or form that's an interesting one i i i kind of had had like i thought about this a little bit not as detailed as you have just now i think that's an interesting one i'll definitely do a bit of pondering on there how do you see taxation um especially a wealth tax taxing unrealized gains on crypto um how do you see governments making it really hard for institutions to have bitcoin on their balance sheet kind of uh yeah just putting a lot of hoops to jump through with tesla microstrategy and so on want to keep it on that balance sheet i i'm not sure how fearful central banks and governments are of it i think they want their share of it right they run countries their job is to collect revenues and provide services to the populace if they can't collect their revenue they can't provide the services so of course they need to tax it and they should tax it in line with other assets and it should be pretty straightforward process um and that's okay i mean taxes are going to go up globally without question it's one of the benefits of living in the cayman islands um singapore or wherever but but taxes are going up globally because we've got these largest deficits since world war ii so that's going to happen um i i don't think that they need to ban it i think actually to have a good functioning ecosystem financial ecosystem you need alternatives you know it's like you know in the marine life outside here you need sharks and you need the small fish and you need the middle fish you need all the different things for for for a system to function and i think they understand that so they are trying to slow the brakes they'll try to put the brakes on to slow it down it's very clear that the energy story bitcoin is a waste of energy okay yeah actually the ecb yeah i found the ecb you think from the ecb without question why because they want a slow adoption of the institutions and the institutions all now have a legal esg mandate so if you can say well guys because they've got around all the other stuff it's for money launderers blah blah they've kind of stopped using that they use it a little bit but it's kind of proven no one's buying it anymore so the the esg this is not your esg mandate i'd think about if i were you guys boom every single media outlet and it's also not true um you know it's actually probably driving a green revolution more than anything else as you know hydro power start becoming the best way of doing this we're seeing you know places like iceland or gas flare-offs in texas and and uh in canada and all sorts of interesting uses of driving down the cost of electricity because the more you drive down the cost of electricity the more you capture in value in your bitcoin i mean it's the purest thing right there's nothing else that creates value out of electricity in the way that bitcoin does so everybody's incentivized to lower the costs and lower the cost means greening so um you know and in in the eu for example because of the new carbon system the european eu ets system it means that the price of carbon keeps going up so you can't use coal or oil to to mine for bitcoin because you're getting penalized by the carbon that you have to pay for so i i think it's a very good thing overall i think it's going to drive a revolution there so that narrative is the other narrative that's out there to slow things down and you see these narratives pick up from time to time and it's to do that i mean the regulators are so far behind they don't know what to do yet somebody has to take the lead asia is much further advanced in a lot of this you know singapore's done a pretty good job malaysia has done a great job they're much further advanced in all of this you know but then there's nations like india struggling to get their heads around you know can we allow this the us is a halfway house europe's a halfway house it's a it's a bit of a mess still um do you see globally a bit of uh like a bit of an uprise of socialism and uh do you see this i mean that's a bit of my concern in this do you see this as a concern do you think i'm wrong on this um yeah it depends what you call by socialism the european social democratic model um i think is still pretty robust and has proven itself well the only real issue has been um the cost of welfare states with aging populations um but that's not any different than what's happened in the us where they didn't have that so the cost has been borne by the people themselves which has probably created a larger rich poor divide so the european social democratic model which you know singapore kind of has some hybrid of as well the uk obviously is very similar with its welfare state i don't have an issue with i do think that we will see what would be traditionally deemed to be more left-wing we've seen more right-wing too you've seen in germany in the u.s in the uk all over the world right it's the polarization the left-wing progressive policies to things like universal basis of income income are going to happen and the reason being is if anybody can find me a solution to this problem of wages never going up again in real terms with machines or algorithms eating jobs software eating the world is real it's not going away you know it's not going away when you've got 30 um you've got half the world's population two-thirds of the world's half the world's population under the age of 30 and you want to compete with them in wage growth in wages you've got no chance so sure you can bring industries home and protect your back borders but to protect your population you're gonna have to make some wholesale changes one is allow them to participate which is what i was talking about with the tokenization and this new economic system to make it a bit fairer on people but you're also going to have to give people an ability to offset what is going on in the world which is technology now it doesn't have to be a handout it could be that you get paid to watch you pay for your attention i think tokenization will do that too so we're seeing it with brave browser with their basic attention tokens so right now the economics of an advert that gets served on your youtube channel goes across a bit to you a ton to youtube and um but none to the viewer yeah in fact there's a net deletion for the depletion from the viewer but i should if i'm gonna watch that advert i could get paid for it too and google could lower their share um and then i could create my own universal basic income by participating by actually pricing my attention correctly because we live in an attention economy whether we like it or not so there's different ways coming and you know mnt that's the other big one you know the big socialist yeah governments can print okay let's assume that you were a tight monetarist government and you've been given a pandemic and you're like well we're not going to print money and we're not going to give handouts we're just going to let the whole thing implode in the largest ever gdp contraction outside of world war ii or 1930 nobody's going to do that nobody just nobody's going to do it so whether people like it or not the other choices were worse what makes me very interested is look the we are pushing everything to the extreme the mmt the fiscal policy the monetary policy you know all of this is going to extreme but we are building this alternative alongside that is a safer monetary system for all of us to live in you know already right now if you if you're happy to keep your money outside of the system you can get paid six percent on your us dollars i don't know what the euro um stable coin yields are but probably similar um you can get paid six percent percent to own your actual currency but in digital form and you can switch in and out of all the other digital assets that as you wish and never come back to the banking system okay that's how far we've come that's extraordinary i can borrow money as well i can get leverage i can invest all entirely outside of the traditional system the hard part is as we talked about before is bringing money back because i've now made some money i want to buy a house because in the end all that matters is your lifestyle that's all we live for we're humans you know we've got one life we need to enjoy it and having a bunch of money you know on a blockchain somewhere means nothing until you can use it for something true um so then we're gonna get taxed and that's okay what are the things for in your lifestyle that you like spending money on if you don't if you if you don't mind sharing because because everyone has a fable like where they're like really kind of okay there i i don't spend much and then there's things uh whatever happens happens yeah for me it's where you live it's where you wake up every day it's where you have lunch it's where you entertain your friends it's where your family comes together so this is why i have a nice house here on the beach here in little cayman and i have a house in grand cayman do i need two houses on two different islands no i'm lucky enough to be able to afford it you know and i've got some other properties as well but the reason being is i find that very a it makes you feel secure you've got a home you've got a base you've got a place you know humans like a sense of place yeah you've got a place to get together and feel safe and all of those things so i enjoy that i enjoy life and so to be able to share that with people is great the other one for me the other big expenditure is probably travel you know i love traveling i spend my whole life traveling around the world diving with sharks doing crazy stuff and so you know i enjoy that outside of that yeah i like to go out and eat a nice meal and drink some expensive wine but can i live without expensive wine sure i can i can i can easily get by on the you know eight euro bottle of rioja from the supermarket i'm fine when was the last time you walked the island like off grant off cayman islands and as a whole february last year really you were an entire year i was nine months in this house on an island of 140 people because covid hit i saw what was coming i was in new york i was like i need to get out of here um and i flew home to grand cayman i came my wife said okay most important get you to little cayman first being the the major income earner she's like you get a little cayman i built little cayman knowing that if anything goes to [ __ ] in the world it's actually a great place to be yeah as long as your food supply doesn't disappear entirely so she got stuck in grand cayman i think she got covered and i came over here and eventually she recovered had a test was allowed to travel between islands they closed all the borders here so then we got rid of kovid we had a hard lockdown we didn't do what the stupid europeans did which was like after a hard lockdown they said you know what i'll go to spain on holiday yeah it's summer let's go crazy oh god yeah so we didn't do that we just kept our borders closed and we got rid of all covid and we've never had covert since so we have quarantines with tracking and tracing devices if anybody comes two-week quarantines so it's been amazing but i was here for nine months because i was doing up the house in grand cayman as well um and i've enjoyed not traveling i've enjoyed yeah enjoy being here you know last week i managed to get onto a liverboard dive boat that goes between all three islands so i spent a week on a boat uh with a bunch of friends and people i didn't know all from grand cayman uh diving all the islands you know fantastic so i've not missed traveling i traveled way too much before looking back over the last 12 months what what was the i don't know the big learning for you or the thing that stuck out or the thing that you're like you know going into this i would have not thought that this was gonna be the the i don't know the the good stuff sticks like what is it never thought that that an event like this would really rebalance my life i've thoroughly enjoyed as i said not traveling spending time with my wife and the dogs and being in a small island and not always endless social life but you know every week or two you go have a nice dinner with friends you know there's not a lot to do on this island you get together you have a great time the simplicity of nature just all the things that you forget when you're just you know balls to the wall busy all day i'm still i'm still working and still do 14 15 hour days but but it it it's that whole sense and also none of my friends were traveling so in the cayman islands everybody's kind of an international job so they're always on a plane it's like i'll sing in another month and then you're away from the month everybody who's here so we've got grand cayman and it's lovely because you get to spend quality time and i think that's the key thing is it reminded many of us those of us who were lucky um what quality time was all about i agree i i yeah i mean for us i live in singapore i don't know if you know so i've been obviously stuck on that island here for yeah the last 14 months and and i yeah and normally i was traveling almost on a monthly basis and yeah now it's it's really here so yeah and singapore did a good job as well and so you know i felt very similar similar approach as uh as the cayman islands yeah yeah and i felt very privileged to live here and it made me feel the cayman islands is a place i like home because one of the things that happened here and it will have happened in singapore but it was very prevalent here because we have hurricanes okay society knows it's a very independent place people do whatever they want but when the [ __ ] hits the fan everybody pulls together mm-hmm so yes there was a bit of grumbling you know oh my god you've stopped the tourist but basically everybody said sure let's do this and it was because of that that we managed to have such a good pandemic because everybody just accepted for the sake of society um you know and i found one of the reasons europe generally did pretty well in the early stages without that stupid mess in the summer um was because europeans know what it's like to pull together as a society because of you know what what happened in the past and people kind of know what it is to be collectively part of society so countries that had less societal infrastructure didn't do as well obviously hindsight 2020.

Like looking back what do you think decision makers be it fiscal be it political beat whatever rules regulation what like i said 2020 i get it but what do you feel should have like could we have done better could we have done differently um look it's it's really difficult because politics gets in the way of doing the right decision um i don't think the central bank or the government's put a foot wrong really i mean i've sat back and thought what would i have done really i've done pretty much the same thing you know because this was an external shock not driven by a credit cycle that you can't say well it's your fault and millions of small businesses were basically put on hold so do you let them all go bust and restructure well certainly not immediately i think retail has gone forever you know in the in the size of employment that it had in the high street around the world it's gone and that's okay but we need to manage that process so i don't have a problem with that um and again not everybody could be the cayman islands or singapore or new zealand or australia where we closed our borders but i think and and i know it's really contentious but if people i asked the head of the uh healthcare here i said what did we do right because we just followed the who guidelines he said was that it yes yeah we didn't do anything different i said why didn't everybody else he said politics you know it's all of the discussion about freedom and stuff like that i get it but in the end you know how do you how do you see this i mean many many right many of my bitcoin maxi friends and again i'm libertarian but i'm i'm not a bitcoin maximalist but and i'm also libertarian but then i see a lot of people like criticizing the like the infringements of freedom and people say you know let everyone decide on their own if people want to die from covert it's their decision like where where do those like and now at the moment like uk putting penalties on traveling like going out of the country right how do you how do you see that is that um yeah where's that border the problem is we don't know i mean the argument and it is right is that governments should and could be given a mandate in times of crisis the problem is you don't get to take it back so the mandates that were put in place after 9 11 never went away you know guantanamo bay is still there they're still torturing people outside of american boundaries in a international water i mean and that's true of all countries right they all never take this stuff back because you know power corrupts over time i get that but i also i'm less concerned by it i just think live your life there's a whole world out there stop worrying about somebody can see what's in your wallet or they saw what you saw on the internet frankly i don't care you know it doesn't matter are we going to an authoritarian state i very much doubt it are we going into a more nanny state probably is that the end of the world i doubt it is the sun gonna come up every morning can i walk on the beach can i get on a plane go to new york go out for dinner with friends yeah so why do i care and i know people will hate that and they'll just think i'm just being abhorrent and can't you see the next thing the next twitter story is yeah but i just i i just don't value that as much and part of that being a european you know you know i grew up in england my mother's dutch i lived in spain you know i like europe i understand that it's flawed but i think the european system in terms of quality of life and how it treats its citizens and the life that you get is is very high quality you want to be rich in america you want to be middle class or working class in europe it's fact how are we going to get out of all this like what's going to be the path over the next i don't know and and how long like what's the path is the past 10 years is the past 2021 so again i i'm going to write something on this and this you'll hear this first here i think it is happening and i could talk about this migration there is a new world this we've just found america and people are moving and all the frontier guys you and i we're already spending time there so it's going to rebalance the power of the world with this new digital world because this is a new financial system that has a better chance of working and it may continue to work for another 50 or 100 years who knows so i think it ends with a whimper and not a bang if it was going to implode i had a serious sit down with myself because i thought the next recession so a few years ago the next recession sure the crypto world and the macro world would collide because of debt but what happened was we had the biggest recession any of us will ever live through and nothing happened i'm like wow but what did happen was asset prices accelerated because denominated in the g4 central bank balance sheets they outperformed yeah they were just offsetting it so if you look at the s p or the euro stocks or whatever you want to do divide it by let's say the s p divided by the fed balance sheet is exactly what we have in our heads which is after 2008 it just traded sideways but on the chart it did that it's because the denominator is wrong people were like oh it's going to debase the dollar yesterday based the dollar and the euro and the yen and the rmb and the aussie dollar and the south african ran at the same time that's what people don't understand so that is going on the governments have three choices in central banks which is taxation increases which is going to happen there is um inflation so yield curve control trying to get the economy to run hot i don't think they'll ever gonna get the economy to run hot not for a while uh while meaning maybe a decade or longer and secondly and then thirdly it's to try and monetize debts in different ways by debasing your currency okay so all of those three things are going to force us to migrate every one of those forces to migrate so we all migrate across but we're now backwards looking and we're all looking at this world behind us that's crumbling and i'm looking forwards and i'm a big believer in the the the um neil strauss's fourth turning the book which i think you know nobody if people here haven't read it they must read this book it's exceptional and it's prophetic it's you know it's like it's incredible and he talks about yeah neil's a good guy and he he talks about that a new institutions new regulations new frameworks new ways of doing things come out so if you think the last time this happened it was after world war ii everything from the imf to the world bank to the who to um the united nations i mean you name it the entire rules based global order system came out of world war ii so now if we look ahead i'm gonna i've been putting a list because i'm writing global macro investor this weekend so what we've got coming in the next 10 years is probably the biggest thing we will ever see in terms of change we've got after this um the vaccines we've now got the breakthrough in genetics really we saw how fast this came like two weeks they solved this so we've got a biotech revolution that is now fully underway and is going to absorb huge amounts of capital we've got a parallel financial system being built which is this whole digital world we talked about we've got the digital worlds where people are living in which is esports gaming vr right we haven't merged all of those fully yet that's all coming in the next 10 10 years people are going to live like you and i grew up with television we're going to be living we won't be doing it like this we'll be sitting together with vr headsets talking to each other and it'll all be different right we will live interoperably between the two worlds we've also got a green revolution underway europe is driving that by 2030 europe will have reduced all emissions by 65 percent when i walk down the road in the caymans i've got an electric car here in little cayman and also a big diesel land rover but i was walking around cayman islands thinking in 10 years time nobody's going to manufacture any petrol of diesel cars again anymore ever yeah right we can't get your heads around that this is not going to be there anymore autonomous driving in 10 years it's going to be pretty standard for delivery vehicles taxis we've got blockchain itself for personal identification how we might get paid for our attention supply chains that's all coming in the next 10 years we've got the sharing economy of uber and all of this stuff you know that's just only going to grow world population is going to start peaking over time as well we've seen it in europe we've seen the us we've seen it in most of developed asia it'll start peaking around the world so population pressures that have been the big issue of the world for food and resources they're going to start dissipating over time the rate of change is going down universal basic income 3d printing artificial intelligence robotics things like gpt3 which is the uh the natural language text that comes out of artificial intelligence the rise of behavioral economics 5g 6g global wi-fi that people like tesla are building elon musk is building out from spacex gigantic deflationary pressures of having this digital financial system that creates deflation and the rise of technology and bringing all of the baby boomers out of the workforce everything is going to be driven by network effects so everything looks exponential and not linear we've got distributed computing coming and then all of that is going to get applied to emerging markets because they're going to go from here to here in one step change this is all happening in 10 years right and it's that sped up by covet as well exactly it's all come because of what's just happened and it's all going at a ridiculous rate and all of these printed dollars are going to get sucked in to investing in all of this because i mean literally everything is about to change so i'm actually getting very optimistic that i think we end with a whimper and not a bang i we don't blow up we just transition and we transition to something it's gonna be a different world um it's gonna be hard to get our heads around it's gonna have social issues you know if you're getting paid an income for not working your propensity to feel a worthless is pretty high you have to change structures of society so i think a lot is changing here um so i'm pretty excited and i think this whole digital asset space is just one part of the size of it and it kind of all blends together cool that's exciting uh any other books uh besides the fourth uh turning that uh you say jeff booth's book the price of tomorrow that's about the depletion of technology i think that's definitely well worth reading um because it kind of it captures the big picture i think both sapiens and ex deus the uh the two books are definitely worth reading to just get your heads around where this is is really going um because as humans we tend to be backward looking and if we want to be go backward looking go back to the renaissance i think that's what's coming but we're going to be operating this weird world of these two systems a broken system and a new system and that sounds like there's some opportunity to invest in that um you know there's exponential upsides here like my macro world where we all make the money in macro is the blow ups because all of the returns come in a six to 12 month period yeah everybody in macro had a fantastic six months or three months beginning of last year right march yeah feb march april people made 100 returns it was extraordinary because that's what we do we're not very good at secular trend change particularly things that have exponential or logarithmic trends because we tend to be mean reversionists oh no it's going back to the mean so most macro people never got amazon right or facebook right or any of them because they tried to value it in the old world but it's not valued like this which is why i also think these other tokens are not valued like utilities they're valued like networks and that means that as a macro player i can either wait around for the blow ups and i still can and make okay money in the good times because that's how it works but maybe what we're saying is the skew of returns is now to the upside much like we're all understanding in the crypto space but if that's the same across all of this technology and the rise of new businesses okay that's that's a really interesting shift in all our mentalities because even the crypto space is still based on negativity it's so screwed therefore we'll make money here but maybe no no there's a new world being built that's where we'll make the money cool well that's uh actually quite uh nice and inspiring that uh you see this as a positive touch uh i like that um final question for me um if only one of your tweets would stay and all the others would get removed which one is the tweet that uh yeah you feel i can't remember them really but i think pertinent to your audience i think the ones about network effects um i think are the most important for people to understand because they don't um people don't really understand what it means how it works and what it does to prices uh in one of them i explained that for example in linear assets so silver great example the silver bubble of 1980 you know anybody's ever studied markets knows about the hunt brothers cornering silver yeah so what happens is macro guys know that there's a bubble they may play the bubble to the upside yeah it's a classical soros thing you look for the reflexive loop but then when it bursts it usually reverts back to the mean jeremy grantham talks about this all the time but then technology changed that and these technology speculative phases revert to the exponential moving averages and usually the long term ones and they don't revert to the mean so i they don't go up and come all the way back down again they go up and down then they go up again and they go down that most of us can't get our heads around just to understand that in simpler terms if i take 20 linear paces i'm going to get over to my kitchen over there if i take 20 exponential paces i'd probably go around the world two or three times mm-hmm yeah yeah it's those crazy examples when you fold uh like a piece of paper and like i think it's the moon 30 times or something yeah you're like at the sun or whatever out or across the galaxy yeah it's like insane yeah yeah and that's and that's what we need to get our heads around this whole world that i read out that list of that is all pretty much operates within this mechanism so that i mean that's that's kind of mind-blowing so that whole tweet thread about network effects have a read we'll look it up and then uh we'll link it up down below for people to read i really i think there's a couple there's two or three that refer to it but there's one that i try to flesh out as much as possible i will find it cool raul hey i really appreciate your time thanks so much uh yeah that was really really fantastic i yeah i uh so many value nuggets in there um people are gonna love it um that's really really cool yeah really enjoyed the conversation

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