WEBVTT - Matt Hougan Discusses Cryptocurrency and ETF Indexes (Podcast) 0:00:02.240 --> 0:00:06.800 This is Masters in Business with Barry Ridholts on Bloomberg Radio. 0:00:10.640 --> 0:00:13.160 This week on the podcast, I have a special guest. 0:00:13.720 --> 0:00:16.400 Matt Hogan is a friend who I know through his 0:00:16.440 --> 0:00:19.599 work at inside e t F S as well as 0:00:19.640 --> 0:00:23.720 the inside et F H Big Conference. I also know 0:00:23.880 --> 0:00:26.920 him from his days running e t F dot com 0:00:26.960 --> 0:00:31.240 and he more recently joined a crypto fund where they 0:00:31.240 --> 0:00:35.200 are producing the very first index of crypto coins, which 0:00:35.240 --> 0:00:40.440 is quite fascinating. If you're at all interested in anything 0:00:40.680 --> 0:00:44.040 from the gamut of e t f S to Bitcoin 0:00:44.520 --> 0:00:48.199 and quite bluntly bitcoins held in e t f S 0:00:48.200 --> 0:00:51.400 and everything in between, then this is the conversation that's 0:00:51.400 --> 0:00:54.400 gonna be for you. There are few people who are 0:00:54.440 --> 0:00:59.840 more knowledgeable about the entire process of creating, managing, mark 0:01:00.200 --> 0:01:04.480 ing UH, and administrating e t fs UH than Matt. 0:01:04.959 --> 0:01:07.840 And taking that skill set and bringing it to a 0:01:07.920 --> 0:01:11.760 crypto firm where he's basically going to try and do 0:01:11.920 --> 0:01:16.760 for various crypto coins and crypto assets what he helped 0:01:16.840 --> 0:01:19.920 do with E t F S UH is really quite 0:01:19.920 --> 0:01:23.280 a fascinating conversation. I think those folks who are interested 0:01:23.280 --> 0:01:27.319 in this space will find it endlessly informative and entertaining, 0:01:28.000 --> 0:01:31.720 So with no further ado, my conversation with Matt Hogan. 0:01:35.840 --> 0:01:39.399 My special guest this week is Matt Hogan. He is 0:01:39.480 --> 0:01:43.080 the global head of research at bit Wise Asset Management. 0:01:43.520 --> 0:01:46.760 Prior to that, he was the chairman and pretty much 0:01:46.840 --> 0:01:49.840 chief cook and bottle washer at u e t F 0:01:50.000 --> 0:01:54.760 dot Com that was purchased by Informa and the Inside 0:01:54.760 --> 0:01:59.160 et F conference is the biggest ETF conference in the world. 0:01:59.240 --> 0:02:01.800 You're you're still chairman of that event. I'm still chairman 0:02:01.800 --> 0:02:03.920 of that event. Yeah, I love it very much. Bit 0:02:03.960 --> 0:02:07.760 Wise Asset Management is the creator of the world's first 0:02:08.320 --> 0:02:13.680 cryptocurrency index fund. Matt Hogan, Welcome to Bloomberg. Thanks for 0:02:13.680 --> 0:02:15.880 having me, Barry. I've been looking forward to this. I 0:02:16.280 --> 0:02:20.080 am a little bit of a bitcoin skeptic, but I'm 0:02:20.080 --> 0:02:24.840 open minded because I'm somewhat fascinated by the underlying blockchain technology, 0:02:24.960 --> 0:02:27.880 and you know, I'm interested in anything related to either 0:02:28.680 --> 0:02:32.480 E t F or indexes. So let's let's jump right 0:02:32.520 --> 0:02:34.960 into this. And why don't we start with your work 0:02:34.960 --> 0:02:37.960 at et F dot com right? What did you do there? So? 0:02:38.080 --> 0:02:42.400 I I started as a freelance reporter for its predecessor, 0:02:42.440 --> 0:02:46.640 which was index universe and over that we left the 0:02:46.680 --> 0:02:49.000 worst u r O in the world with Index Universe 0:02:49.080 --> 0:02:51.239 and not a winner. No. E t F dot Com 0:02:51.320 --> 0:02:53.880 is just marginally better. Oh really, I would think that's 0:02:53.880 --> 0:02:56.000 a no brainer. I think it was a no brain. 0:02:56.480 --> 0:02:58.720 So we switched to et F dot Com. I eventually 0:02:59.080 --> 0:03:01.840 became the CEO of the business. Some of the things 0:03:01.960 --> 0:03:05.560 I'm most proud of that we did there. We built 0:03:05.600 --> 0:03:07.760 the largest et F conference in the world. Inside e 0:03:07.840 --> 0:03:09.760 t F s we built the first e t F 0:03:09.880 --> 0:03:13.320 classification and ratings system. It's hard to imagine an e 0:03:13.440 --> 0:03:16.560 t F land that eight or nine years ago, things 0:03:16.600 --> 0:03:21.360 like tracking error were not available to most. That's just 0:03:21.560 --> 0:03:24.760 that's just entry level stuff. Is entry level stuff, but 0:03:24.760 --> 0:03:27.440 it didn't exist. No one had even gone through the 0:03:27.440 --> 0:03:29.680 perspectus is to make sure that they were actually tracking 0:03:29.720 --> 0:03:32.440 total return indexes. Uh. It was a mess. So we 0:03:32.520 --> 0:03:36.480 built the first classification and rating system, which we subsequently sold. 0:03:36.480 --> 0:03:39.720 The fact sets now powers And that's how our mutual 0:03:39.800 --> 0:03:43.960 friend David Neated previously ended up at a fact set 0:03:44.080 --> 0:03:47.200 and then didn't they get bought by was it c Bolt? 0:03:47.280 --> 0:03:49.840 So so we sold our business in three separate sales. 0:03:49.880 --> 0:03:54.280 We sold our data business to fact Set, our events 0:03:54.320 --> 0:03:57.200 business to inform A, and our media business. E t 0:03:57.360 --> 0:04:00.720 F dot Com the property to CBOE which is now 0:04:00.760 --> 0:04:02.960 BATS where we sold it to BATS which is now 0:04:02.960 --> 0:04:07.320 cbo E. To confuse matters more, we sold Dave with 0:04:07.400 --> 0:04:10.080 the data business to facts Set, and then he left 0:04:10.160 --> 0:04:13.000 facts Set to go to e t F dot Com 0:04:13.040 --> 0:04:16.600 at cbo E BATS. So it's it's virtually impossible to 0:04:16.680 --> 0:04:20.240 keep straight here. Now, Well, that explains my my lack 0:04:20.279 --> 0:04:23.680 of understanding. So so your CEO of e t F 0:04:23.800 --> 0:04:29.039 dot Com at the start of the I guess, for 0:04:29.120 --> 0:04:31.520 lack of a better word, the e t F era, 0:04:32.200 --> 0:04:34.839 what was the industry like you mentioned some of the 0:04:34.880 --> 0:04:38.760 real basic metrics that everybody takes for granted with mutual 0:04:38.760 --> 0:04:42.000 funds that didn't exist. For people have to remember that 0:04:42.120 --> 0:04:44.200 early in the days of e TF no one believed 0:04:44.200 --> 0:04:47.039 in them, no one trusted them, and no one understood them. 0:04:47.240 --> 0:04:49.960 There were huge myths about e t F liquidity. People 0:04:49.960 --> 0:04:53.039 didn't know what a creation redemption was, and people have 0:04:53.200 --> 0:04:56.320 no way to even answer basic questions like what are 0:04:56.360 --> 0:05:00.240 all the emerging market ETFs that didn't exist? Uh, no 0:05:00.279 --> 0:05:02.280 way to answer how well does this et F track 0:05:02.320 --> 0:05:04.800 it's index. So we spend a huge amount of time. 0:05:04.800 --> 0:05:07.479 I must have explained creation redemption. That's the thing that 0:05:07.560 --> 0:05:12.600 I think most of the investing public understands. The least Yes, 0:05:13.279 --> 0:05:16.600 give us a thirty second version. What is creation and 0:05:16.680 --> 0:05:20.320 redemption of the underlying in an et sure? So let 0:05:20.320 --> 0:05:23.200 me start with mutual funds, because people understand them better. 0:05:23.520 --> 0:05:25.839 When you invest money in a mutual fund, you send 0:05:25.839 --> 0:05:28.880 them cash, and then the mutual fund managers sits on 0:05:28.920 --> 0:05:31.280 that cash overnight. Then they come into work and they 0:05:31.320 --> 0:05:34.240 pick which stocks to buy, and they buy stocks with 0:05:34.320 --> 0:05:38.719 that cash, and usually they're buying their existing model. Here's 0:05:38.760 --> 0:05:41.760 what our core holdings look like. Oh we've gotten this 0:05:41.880 --> 0:05:46.000 much inflow. Great, go out and buy pro rata everything 0:05:46.040 --> 0:05:49.320 we already own in proportion. And then when you want 0:05:49.360 --> 0:05:52.320 your money back, the exact same thing happens in reverse. 0:05:52.720 --> 0:05:55.800 You say I want my hundred thousand dollars back, They 0:05:55.800 --> 0:05:58.240 sell a hundred thousand dollars of whatever stocks are out 0:05:58.240 --> 0:06:00.799 of favor, and they send you your ash. And that's 0:06:00.839 --> 0:06:03.200 that's a creation and a redemption in the mutual fund. 0:06:03.200 --> 0:06:05.360 But you're doing it in an e t F. When 0:06:05.400 --> 0:06:07.240 you buy an e t F, you just buy it 0:06:07.320 --> 0:06:09.559 like you buy shares of IBM. I buy my shares 0:06:09.640 --> 0:06:12.480 like a closed funds, just on the exchange, right. I 0:06:12.760 --> 0:06:14.720 might buy a hundred shares of SPY and you might 0:06:14.760 --> 0:06:17.200 be selling it, and we'll get matched at the exchange level. 0:06:17.839 --> 0:06:20.440 What happens with an e t F is instead of 0:06:20.480 --> 0:06:23.120 the e t F going out and buying the securities, 0:06:23.160 --> 0:06:26.160 it publishes a list of what securities it wants to buy, 0:06:26.240 --> 0:06:29.760 and a big institutional investor called an authorized participant goes 0:06:29.800 --> 0:06:32.440 out and acquires that list of securities. Say it's the 0:06:32.520 --> 0:06:35.919 SMP five hundred. They buy all five hundred securities, and 0:06:35.960 --> 0:06:38.359 then they send all five hundred securities to the e 0:06:38.440 --> 0:06:41.520 t F company in exchange for the same value of 0:06:41.560 --> 0:06:43.479 shares in the e t F, which they can just 0:06:43.600 --> 0:06:46.200 send sell on the broke on the on the markets. 0:06:46.400 --> 0:06:48.479 Same thing happens in reverse. When these aps want to 0:06:48.480 --> 0:06:51.080 redeem shares, they say, we want to we have fifty 0:06:51.080 --> 0:06:53.159 thousand shares of the e t F. They send the 0:06:53.160 --> 0:06:55.080 fifty thou shares to the e t F company, and 0:06:55.120 --> 0:06:57.679 the e t F company sends them the equivalent dollar 0:06:57.800 --> 0:07:00.839 amount in stocks, which they can then out that You 0:07:00.880 --> 0:07:03.839 may wonder why does that matter? And it matters for 0:07:03.880 --> 0:07:07.200 a bunch of different reasons. I'll give you two. So first, 0:07:07.279 --> 0:07:10.240 think about when you send money to a mutual fund company. 0:07:10.400 --> 0:07:12.520 They have to hire people who go into the market, 0:07:12.600 --> 0:07:15.600 decide what to buy, trade. It costs money that raises 0:07:15.640 --> 0:07:18.080 the fees. Uh. The other reason it matters is when 0:07:18.120 --> 0:07:20.960 you redeem from a mutual fund, they have to sell 0:07:21.080 --> 0:07:24.400 actual stocks. If those stocks have appreciated in value, they 0:07:24.480 --> 0:07:27.520 realize capital gains and the fund. The horrible thing about 0:07:27.520 --> 0:07:29.720 the mutual fund industry is at the end of the year, 0:07:30.040 --> 0:07:33.480 everyone who still owns those funds has to pay taxes 0:07:33.560 --> 0:07:36.520 based on the fact that you left. Someone else sold 0:07:37.240 --> 0:07:41.040 generated a capital gain tax event, and the people who 0:07:41.080 --> 0:07:43.480 didn't sell are on the hook are left holding the bag. 0:07:43.920 --> 0:07:46.720 So I always look at ETFs as having to really 0:07:47.600 --> 0:07:52.680 um attractive qualities. One is there if you decide to 0:07:52.720 --> 0:07:55.680 sell your ETF and I don't, I don't get stuck 0:07:55.720 --> 0:07:59.880 with your capital gains. And second that whole um create 0:08:00.000 --> 0:08:05.080 and redemption process means as long as the underlying holdings 0:08:05.520 --> 0:08:10.360 have liquidly there's never a liquidly problem with the broader 0:08:11.040 --> 0:08:13.360 SMP like E t F or Am I wrong? No, 0:08:13.560 --> 0:08:15.840 you are absolutely right. I actually think if the e 0:08:15.920 --> 0:08:19.000 t F came first, the SEC would never approved a 0:08:19.080 --> 0:08:22.040 mutual fund structure. Right, you're gonna make people share in 0:08:22.080 --> 0:08:26.520 the tax event. That's insane socialism for the tax for investors. Yeah, 0:08:26.560 --> 0:08:28.600 it's totally It's totally right. And you're absolutely right about 0:08:28.600 --> 0:08:31.520 the liquidity as long as the underlying as liquid. The 0:08:31.560 --> 0:08:33.760 e t F is liquid, which is why and people 0:08:33.800 --> 0:08:38.200 get this wrong. Uh, the only bond funds that have 0:08:38.360 --> 0:08:41.880 blown up have been bond mutual funds because they have 0:08:41.960 --> 0:08:46.720 to redeem out and so liquid. Very often it's only 0:08:46.800 --> 0:08:49.280 the top third or top half of the bonds, and 0:08:49.320 --> 0:08:52.800 a lot of big indexes trade regularly. Are are deep 0:08:52.840 --> 0:08:55.079 and wide and have a lot, but by the time 0:08:55.120 --> 0:08:58.040 you get to the thousandth holding, it trades every Tuesday 0:08:58.120 --> 0:09:01.000 by appointment. Not a lot of liquid. Good luck. People 0:09:01.080 --> 0:09:03.560 worry about bond e t f s blowing up. What 0:09:03.600 --> 0:09:06.640 they should be worried about is in a bond market crisis, 0:09:06.720 --> 0:09:09.360 corporate bond mutual funds blowing up and having real issues. 0:09:09.400 --> 0:09:11.640 I think that that could happen. So I have to 0:09:11.679 --> 0:09:14.880 ask the obvious question. E t f s were the 0:09:14.920 --> 0:09:18.920 hottest area in the markets what made you decide to 0:09:18.960 --> 0:09:22.839 say I'm gonna I'm gonna leave this behind and make 0:09:22.880 --> 0:09:26.760 a leap into the craziness that is crypto because you 0:09:26.880 --> 0:09:30.200 jumped into it right in the middle of the Mayhem. Yeah. Yeah, 0:09:30.360 --> 0:09:32.760 although although it was the plan to jump into it 0:09:33.200 --> 0:09:36.160 started earlier than that, But that's absolutely true. I would 0:09:36.160 --> 0:09:38.480 say there are three things, Um, you know, when I 0:09:38.480 --> 0:09:40.920 got into E t F s UH, they weren't well 0:09:41.000 --> 0:09:44.320 understood UH. And they weren't widely adopted, and they were 0:09:44.360 --> 0:09:47.360 still a new and emerging industry. And the only skill 0:09:47.440 --> 0:09:49.640 I have, to the extent I have a skill, is 0:09:49.679 --> 0:09:53.880 the ability to explain complex things in a simple way. UH. 0:09:53.880 --> 0:09:55.439 And I felt like a lot of what I wanted 0:09:55.440 --> 0:09:57.600 to do in E t F S had been accomplished. Right, 0:09:57.640 --> 0:10:00.400 I had helped create the first e t F rating system, 0:10:00.440 --> 0:10:03.640 I'd have to create the first et F classification system. UH. 0:10:04.040 --> 0:10:06.559 I had done some small part to move ETFs into 0:10:06.600 --> 0:10:10.240 the mainstream, and now they are the dominant UH way 0:10:10.400 --> 0:10:13.120 people get exposure to the markets. So I felt most 0:10:13.200 --> 0:10:15.439 of what I had done, what I wanted to do, 0:10:15.600 --> 0:10:18.319 had been achieved, and I went looking for the next 0:10:18.559 --> 0:10:23.320 area of UH disruptive opportunity where I thought the quality 0:10:23.360 --> 0:10:26.160 of information was poor, I actually ended up with two. 0:10:26.400 --> 0:10:29.760 I ended up with with crypto and with options strategies, 0:10:30.120 --> 0:10:32.920 both of which I think are potentially very important, and 0:10:33.000 --> 0:10:35.840 both of which are really poorly understood by most investors. 0:10:36.440 --> 0:10:39.040 But this unique crypto opportunity to be involved in the 0:10:39.480 --> 0:10:43.440 first crypto index fund appealed to my inner indexing nerd. 0:10:43.800 --> 0:10:46.520 So is there are there are you seeing parallels between 0:10:47.120 --> 0:10:50.120 how crypto is being perceived by the investing public and 0:10:50.240 --> 0:10:52.520 e T F And said, do you remember when people 0:10:52.559 --> 0:10:55.240 talked about e t f s as weapons of mass destruction? Sure? 0:10:55.640 --> 0:10:59.160 Do you remember when people uh wouldn't didn't think e 0:10:59.240 --> 0:11:00.720 t s would ever? I'm out too much. I think 0:11:00.800 --> 0:11:04.199 they were the I Shares franchise was sold for a 0:11:04.280 --> 0:11:07.040 dollar from Morgan Stanley to b G. I right, it's 0:11:07.160 --> 0:11:12.880 it's um Uh, it's nice, Yeah exactly. I think someone 0:11:13.280 --> 0:11:15.600 called the Louisiana purchase of Yeah. I hope someone still 0:11:15.600 --> 0:11:18.880 has that dollar the wall somewhere. And but these were 0:11:18.960 --> 0:11:22.080 not uh people didn't think e t s would amount 0:11:22.080 --> 0:11:24.760 too much? Right, They were a last ditch effort to 0:11:24.920 --> 0:11:27.920 save the AMMAX and create trading volume. There people didn't 0:11:27.960 --> 0:11:29.920 realize how good they were. And the same thing as 0:11:29.960 --> 0:11:34.160 crypto people are reflexively dismissive of crypto. H most people 0:11:34.240 --> 0:11:36.360 have given it about two and a half minutes of thought. 0:11:36.800 --> 0:11:38.360 If you give it two and a half minutes of thought, 0:11:38.440 --> 0:11:41.360 you think it's fairy unicorn money on the internet. And 0:11:41.440 --> 0:11:45.559 it takes it takes hours and days of really analyzing 0:11:45.600 --> 0:11:48.000 it to see where it might and may have value. 0:11:48.040 --> 0:11:51.079 So I see a lot of parallels so to me, 0:11:51.640 --> 0:11:53.840 and I know this is almost a cliche at this point. 0:11:55.200 --> 0:11:58.880 Blockchain is so obviously useful in so many applications that 0:11:58.960 --> 0:12:04.480 we've only begun to think about. It's that the bitcoins 0:12:04.679 --> 0:12:07.720 and the ethereums and go down. There's hundreds of coins. 0:12:08.400 --> 0:12:11.599 It seems to be that there's a lot of speculative 0:12:11.720 --> 0:12:14.559 excess in the space. And I think that's what makes 0:12:14.600 --> 0:12:19.720 it so easy for people to you know, just yeah, okay, bitcoin, bitcoin, 0:12:20.080 --> 0:12:23.520 Bitcoin is the next you know, dot com. Uh, And 0:12:23.679 --> 0:12:26.560 it's the parallels of they're also I think those parallels 0:12:26.600 --> 0:12:29.480 are accurate. Uh. I think it is the next dot com. 0:12:29.600 --> 0:12:33.520 But remember, um, the dot com bubble created uh pets 0:12:33.559 --> 0:12:37.400 dot com. But it also created Amazon. So I think 0:12:37.440 --> 0:12:40.960 there are two thousand cryptocurrencies out there of them are 0:12:41.040 --> 0:12:43.880 useless and we'll die a painful death. The sooner that happens, 0:12:43.920 --> 0:12:46.959 the better. There's also a lot of bad activity, bubble 0:12:47.040 --> 0:12:50.680 related activity that's getting cleared up. But from those ashes, 0:12:50.920 --> 0:12:54.480 if you call them ashes, I mean cryptos up over 0:12:54.520 --> 0:12:57.760 the last two years, that's ashes. They're nice ashes. But 0:12:57.960 --> 0:13:00.319 from those ashes, I think will emerge import and things, 0:13:00.400 --> 0:13:03.920 just like from the dot com ashes emerge Amazon, Google, Facebook, 0:13:03.960 --> 0:13:06.760 et cetera. No no doubt about that. I'm gonna throw 0:13:06.760 --> 0:13:09.640 a quote at you, and I want you to explain it. 0:13:09.800 --> 0:13:13.760 You you said, you think, um, we need crypto to 0:13:13.920 --> 0:13:20.079 cut out the rent seeking middleman that creates attacks on society. 0:13:20.559 --> 0:13:22.839 Now we're all familiar with rentiers, or at least we 0:13:22.880 --> 0:13:27.080 should be, but give us a little a little details. 0:13:27.120 --> 0:13:29.199 So crypto is the first time we've been able to 0:13:29.320 --> 0:13:32.640 engage in financial transactions between people who don't know each 0:13:32.679 --> 0:13:35.920 other without someone in the middle to verify those transactions. 0:13:36.320 --> 0:13:39.679 That's all that blockchain technology does. It allows you to 0:13:39.760 --> 0:13:44.040 replace someone in the middle verifying transactions like visa or 0:13:44.160 --> 0:13:47.319 like your bank and your friends bank with software that 0:13:47.440 --> 0:13:51.280 does it automatically. And for free UH and so so 0:13:51.559 --> 0:13:55.439 much of the financial industry UH is at some level 0:13:55.679 --> 0:13:59.559 a middleman, like an escrow agent that verifies trust acrosses 0:13:59.600 --> 0:14:03.120 transact and crypto has shown that you don't need that, 0:14:03.880 --> 0:14:06.200 and that's a big deal. There's a huge deal. There's 0:14:06.200 --> 0:14:09.439 a huge deal. Now we're miles away, we're years away. 0:14:09.520 --> 0:14:12.720 It's an early stage technology. We're years away. But already 0:14:12.800 --> 0:14:15.360 you can go to IBM and you can wire money 0:14:15.480 --> 0:14:18.559 using a crypto asset internationally for much cheaper than you 0:14:18.600 --> 0:14:21.160 can send it through a traditional banking system. So it 0:14:21.320 --> 0:14:23.760 is going to get here, but it is early, quite 0:14:23.840 --> 0:14:26.800 quite fascinating. So let's talk about some real world applications 0:14:27.480 --> 0:14:31.720 for UM. I think we want to separate the coins 0:14:31.840 --> 0:14:35.360 from the underlying software from blockchain and that technology. But 0:14:35.440 --> 0:14:39.200 you're focusing on the entire value chain from start to finish. 0:14:39.680 --> 0:14:42.680 So so let's start with blockchain a little bit. Sure, UM, 0:14:42.960 --> 0:14:46.400 what are some of the near future, not fifty years 0:14:46.560 --> 0:14:50.040 future applications of blockchains? Yeah, for what's worth, I'm way 0:14:50.080 --> 0:14:53.240 more bullish on crypto assets than I am on blockchain. Really, 0:14:53.400 --> 0:14:55.520 that's the opposite of what so many people. It's almost 0:14:55.560 --> 0:14:58.840 a cliche to say, yeah, I'm skeptical about bitcoin, but 0:14:59.000 --> 0:15:02.040 this blockchain is is if you remember the early days 0:15:02.080 --> 0:15:04.320 of the Internet, the really early days when there were 0:15:04.400 --> 0:15:06.480 books and you look up a website and type it in, 0:15:07.320 --> 0:15:11.000 everyone was really excited about corporate intranets. They're like, oh, 0:15:11.280 --> 0:15:13.120 it would be great to send files to Joe and 0:15:13.160 --> 0:15:18.600 accounting without having to walk over people thought exactly no, 0:15:18.720 --> 0:15:21.160 but people thought corporate internets were the thing, the thing. 0:15:21.320 --> 0:15:25.640 The The analogy between an open internet, which people are like, 0:15:26.120 --> 0:15:29.320 no one will trust that. Uh, it's the same between 0:15:29.560 --> 0:15:33.480 private block chains and public blockchains. Public block chains that 0:15:33.560 --> 0:15:37.000 are open and accessible by anyone need a crypto asset 0:15:37.080 --> 0:15:40.320 to function, and I think over the long term, public, open, 0:15:40.480 --> 0:15:45.280 accessible UH technologies tend to win. Now, private block chains 0:15:45.320 --> 0:15:49.480 are important. I think they could revolutionized settlement. One of 0:15:49.480 --> 0:15:52.520 the things black chain does really well is settled transactions 0:15:52.640 --> 0:15:56.000 much faster. I think they could. Uh. They can memorials, 0:15:56.240 --> 0:15:59.280 morales data. I think they let you trace back transactions. 0:15:59.480 --> 0:16:02.360 But I think they are actually modest improvements uh. And 0:16:02.440 --> 0:16:06.240 I think the massive improvement is this displacement of a 0:16:06.280 --> 0:16:10.240 trusted mentalman that public box chains allow. Huh. So one 0:16:10.280 --> 0:16:13.160 of one of my favorite examples is during the financial crisis, 0:16:13.680 --> 0:16:18.280 when we were securitizing mortgages by the millions, slicing and 0:16:18.360 --> 0:16:21.120 dicing them and then resecuritizing them and then selling them. 0:16:21.760 --> 0:16:26.840 That undoing that Gordian not became almost impossible, and banks 0:16:26.960 --> 0:16:30.920 ended up losing track of which bank owned which mortgage 0:16:31.040 --> 0:16:35.400 that went to which house. And there were actual stories 0:16:35.480 --> 0:16:39.680 of something that should be illegal impossibility, people without a 0:16:40.240 --> 0:16:43.280 mortgage going on vacation and coming home to find that 0:16:43.360 --> 0:16:45.640 they were foreclosed on. All their stuff is out in 0:16:45.680 --> 0:16:49.480 the street, there's an armed sign on their door. How 0:16:49.560 --> 0:16:51.720 has I foreclosed on? I bought this house for cash 0:16:51.840 --> 0:16:55.200 that that should be impossible, and then banks foreclosing that 0:16:55.320 --> 0:16:59.880 didn't own the mortgage, foreclosing on somebody. And the example 0:17:00.000 --> 0:17:02.840 I like to use is if blockchain was used as 0:17:02.880 --> 0:17:07.000 a methodology to track where each of those mortgages went, 0:17:07.640 --> 0:17:11.440 it wouldn't have been that same impossible to untangle mess. 0:17:11.880 --> 0:17:15.520 You could have traced exactly who owned which laggage and 0:17:15.520 --> 0:17:18.840 who own which property. As a fail safe, there would 0:17:18.880 --> 0:17:21.960 be no headaches at all. It's it's it's it's amazing, 0:17:22.119 --> 0:17:25.000 and it's amazing that it exists. We all buy something 0:17:25.080 --> 0:17:28.639 called title insurance UH to guard against the risk that somehow, 0:17:28.720 --> 0:17:31.320 this this most important asset we've ever bought, it is 0:17:31.400 --> 0:17:34.760 not actually ours. UM. It is incredible that that still 0:17:34.800 --> 0:17:37.119 exists in today's society. I think that example is a 0:17:37.160 --> 0:17:39.600 great one UH, and there are many like that. So 0:17:39.800 --> 0:17:44.720 let's talk about you're still chairman of inside ETFs. Why 0:17:44.800 --> 0:17:48.679 did you decide to keep that role. I still love ETFs, 0:17:48.760 --> 0:17:50.560 and I still think the E t F industry is 0:17:50.600 --> 0:17:53.479 evolving rapidly, and I still think there are a lot 0:17:53.600 --> 0:17:55.920 of things that people need to learn, particularly as we 0:17:56.760 --> 0:17:59.479 enter a different cycle in the market. So the ability 0:17:59.560 --> 0:18:01.960 to still influence that conference was really appealing. I like 0:18:02.040 --> 0:18:04.119 to keep my hand in. I'm also on the board 0:18:04.160 --> 0:18:06.399 of a small et F issuer UM, so I like 0:18:06.600 --> 0:18:08.800 to stay involved in the E t F space because 0:18:09.160 --> 0:18:11.399 I still think we have miles to go there. So 0:18:11.800 --> 0:18:14.320 I speak at a lot of events and conferences, and 0:18:14.480 --> 0:18:16.800 every now and then there's a couple of you know, 0:18:16.880 --> 0:18:20.359 there's a good name or two that speak your conference 0:18:20.560 --> 0:18:25.320 held in Florida in February year. It's mind blowing the 0:18:25.440 --> 0:18:29.200 list of names that show up. So last year I 0:18:29.280 --> 0:18:32.639 got to interview Serena Williams as a as a favor 0:18:32.760 --> 0:18:35.840 to you, so I'll call I'll be calling back, uh 0:18:36.359 --> 0:18:39.720 that favor. But before I interviewed Serena Williams, I'm in 0:18:39.760 --> 0:18:44.080 the audience watching Quincy Jones. And then after I'm done 0:18:44.119 --> 0:18:46.320 with that interview, I went back into the audience and 0:18:46.400 --> 0:18:50.040 watched was it a General McCrystal. So, I mean it 0:18:50.200 --> 0:18:53.720 was just like, and this year you have Michael Lewis, 0:18:53.760 --> 0:18:58.639 while'll be interviewing in February, Paul Tutor, Jones, Joe Montana. 0:18:59.160 --> 0:19:01.439 I mean you got s. Don't mess around, Bob Schiller. 0:19:02.040 --> 0:19:04.280 Uh yeah, we don't mess around. Well we you know, 0:19:04.359 --> 0:19:06.639 one of the great things about running a conference company 0:19:06.760 --> 0:19:09.760 is that you get to indulge all your intellectual interests. 0:19:10.119 --> 0:19:12.080 So I love Michael Lewis, So why don't we want 0:19:12.119 --> 0:19:15.199 to have him there? Right? We love I love sports, 0:19:15.280 --> 0:19:17.919 so you can get football giants there. You had Alex 0:19:18.040 --> 0:19:21.320 Rodriguez the year I was one of the keynote presenters, 0:19:21.400 --> 0:19:23.440 and I wish I would have hung around. He was great, 0:19:23.520 --> 0:19:26.800 like I heard and I and how you find him? 0:19:26.800 --> 0:19:29.120 I read a great article where he reflected on sort 0:19:29.119 --> 0:19:30.920 of the challenges that he had faced. I thought he 0:19:30.960 --> 0:19:34.560 would be an interesting person to listen to. It's four days, 0:19:34.840 --> 0:19:37.640 and so you can't do four days of creation, redemption 0:19:37.760 --> 0:19:40.520 and emerging market debt. You need to give people a 0:19:40.720 --> 0:19:44.120 chance to to reflect and think about other things. And Uh, yeah, 0:19:44.160 --> 0:19:46.480 we're really excited. I think having Schiller there this year, 0:19:46.840 --> 0:19:50.399 at this time in the market is really timely. Uh 0:19:50.480 --> 0:19:53.520 and looking forward to that. Yeah, he's terrific. The anybody 0:19:53.600 --> 0:19:56.920 wants to look up the agenda, you just google inside 0:19:56.960 --> 0:20:00.880 et F Conference Florida and feb worry and it will 0:20:00.920 --> 0:20:04.240 show up. Um. It's always a great time. So the 0:20:04.359 --> 0:20:06.159 next question I have to ask is what do you 0:20:06.240 --> 0:20:10.399 hope to accomplish with this giant event? And and I 0:20:10.440 --> 0:20:13.439 don't know if I've I've tied this up correctly for people. 0:20:14.000 --> 0:20:17.120 I'm not just promoting an event. I don't want people 0:20:17.119 --> 0:20:19.520 to think that I go to a ton of events. 0:20:20.240 --> 0:20:24.000 This and SALT. I mean, these are the two biggest 0:20:24.119 --> 0:20:27.400 conferences of the year. These are giant, two thousand, three 0:20:27.480 --> 0:20:31.200 thousand people events. So SALT in Vegas, the last time 0:20:31.200 --> 0:20:35.960 I went there was an amazing that had hedge fund 0:20:36.000 --> 0:20:38.480 managers there and I got to run around and say 0:20:38.680 --> 0:20:42.160 under perform I got around, I wasn't the most popular 0:20:42.200 --> 0:20:46.240 there guy there, although that was yeah, that's true and 0:20:46.440 --> 0:20:50.359 um And then the first time I I went to 0:20:50.560 --> 0:20:53.440 this event, I was kind of blown away by how 0:20:54.000 --> 0:20:57.080 giant it actually was, and not just big for the 0:20:57.119 --> 0:21:00.400 sake of big big with really big names and really 0:21:00.440 --> 0:21:05.720 interesting things. What do you hope to accomplish with this event? Yeah? So, 0:21:05.960 --> 0:21:08.760 so the event is focused primarily on financial advisors. Into 0:21:08.880 --> 0:21:11.200 my mind, it's a success if the people who come 0:21:11.280 --> 0:21:13.280 and take three days out of their lives to attend 0:21:13.320 --> 0:21:16.200 that away from their families, find a way to sustain 0:21:16.320 --> 0:21:19.000 or grow their business. And so to do that, I 0:21:19.119 --> 0:21:21.440 want them to learn at this particular year's event a 0:21:21.560 --> 0:21:24.480 few things. I want them to think deeply about where 0:21:24.560 --> 0:21:26.960 we are in the economic cycle and what that means 0:21:27.040 --> 0:21:29.920 for clients and what that means for their bond holdings, etcetera. 0:21:30.800 --> 0:21:35.440 I want them to uh to think deeply about these 0:21:35.600 --> 0:21:38.080 new areas of the market that are opening up, not 0:21:38.200 --> 0:21:40.760 just crypto, which we talked about UM, but some of 0:21:40.840 --> 0:21:43.840 the thematic ETFs and whether those are performance chasing or 0:21:43.920 --> 0:21:46.320 valuable and interesting. And then one thing we try to 0:21:46.400 --> 0:21:49.160 do a little bit is asked them to think five 0:21:49.280 --> 0:21:52.359 years ahead. I think the financial advisory business is going 0:21:52.440 --> 0:21:56.200 to be fundamentally transformed in the next five years. I 0:21:56.280 --> 0:21:58.800 think we're on the cusp of an era of mass 0:21:59.119 --> 0:22:03.320 customization for client exposures. Uh. And just like we talked 0:22:03.320 --> 0:22:06.040 about robo advisors five years ago when no one cared, 0:22:06.640 --> 0:22:11.159 I think getting people to think about mass customization, personalized indexing, 0:22:11.800 --> 0:22:14.200 E s G overlays now will be helpful to their 0:22:14.240 --> 0:22:17.600 business in the years ahead. So uh, that's those are 0:22:17.680 --> 0:22:19.160