WEBVTT - Stability Risks Have Moved From Banks to Asset Managers: Algebris' Gallo 0:00:05.800 --> 0:00:08.720 Welcome to the Bloomberg P and L Podcast. I'm Pim Fox. 0:00:08.760 --> 0:00:11.520 Along with my co host Lisa Bramowitz. Each day we 0:00:11.640 --> 0:00:15.120 bring you the most important, noteworthy, and useful interviews for 0:00:15.200 --> 0:00:17.840 you and your money, whether you're at the grocery store 0:00:17.960 --> 0:00:20.720 or the trading floor. Find the Bloomberg P M L 0:00:20.840 --> 0:00:34.160 Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. Humana 0:00:34.400 --> 0:00:37.519 has joined together with TPG and Welsh Carson and a 0:00:37.600 --> 0:00:42.199 four point one billion dollar bid for Kindred. It is 0:00:42.320 --> 0:00:47.040 a healthcare and hospice and various medical service provider. Here 0:00:47.080 --> 0:00:50.040 to explain more and better than I could is Max Neeson, 0:00:50.120 --> 0:00:53.760 who covers the biotech, farma and healthcare industries for us 0:00:53.760 --> 0:00:56.720 here at Bloomberg gad Fly and always has fantastic insights 0:00:57.360 --> 0:01:02.480 into these worlds. So give us your take on this transaction. Sure, 0:01:02.560 --> 0:01:05.920 So it's some kind of pretty interesting and complex transaction. 0:01:05.920 --> 0:01:08.319 They're gonna take this business, which is, you know, the 0:01:08.319 --> 0:01:11.280 combination of those home care and hospice assets and then 0:01:11.400 --> 0:01:14.360 specialty hospitals and kind of splitting them in half. So 0:01:14.440 --> 0:01:17.120 those those private equity companies will run a new special 0:01:17.360 --> 0:01:20.959 specialty hospital company, and human Uh is gonna enter into 0:01:21.080 --> 0:01:23.679 joint venture with them on the home care stuff. And 0:01:23.920 --> 0:01:26.119 the reason that Human had got involved is, um, they're 0:01:26.120 --> 0:01:30.120 really big into Medicare, Medicare advantage, and um, you know 0:01:30.160 --> 0:01:33.640 they want these kind of home care assets in order 0:01:33.640 --> 0:01:37.000 to basically care for more people at home, prevent them 0:01:37.040 --> 0:01:40.199 from getting to the hospital, and generally find ways to 0:01:40.200 --> 0:01:43.200 to bring costs down because once you get into the hospital, 0:01:43.440 --> 0:01:45.720 as anyone who's ever made it their nos, it gets 0:01:45.760 --> 0:01:49.400 really really expensive. Quickly, can you comment on this idea 0:01:49.480 --> 0:01:53.360 that Medicare which obviously available to people over the age 0:01:53.360 --> 0:01:57.040 of sixty and in some cases younger than sixty, But 0:01:58.040 --> 0:02:03.640 if Medicare is going to cover certain kinds of hospitalization 0:02:03.800 --> 0:02:07.800 but not certain types of home care, is that going 0:02:07.840 --> 0:02:09.919 to have to change in order to make this merger 0:02:10.000 --> 0:02:13.880 make any sense? This combination. Yeah, so so reimbursement with 0:02:13.880 --> 0:02:17.280 with Medicare is always pretty tricky, but I imagined Human 0:02:17.639 --> 0:02:21.240 had that in mind. You know, certain things that at 0:02:21.240 --> 0:02:22.720 the end of the day, even if they have to 0:02:22.760 --> 0:02:25.600 cover more of the costs themselves, the cost of paying 0:02:25.639 --> 0:02:28.560 for some of the home care relative to being built 0:02:28.560 --> 0:02:31.280 at the hospital is probably so vast that they'll they'll 0:02:31.280 --> 0:02:34.600 take that any day, I want to ask you about 0:02:34.639 --> 0:02:38.720 this concept that Humanna as an insurance provider, is getting 0:02:38.840 --> 0:02:42.720 into the healthcare business directly. I mean, we kind of 0:02:42.760 --> 0:02:48.080 saw that, um with the CVS merger, but this is 0:02:48.120 --> 0:02:50.840 a whole new ball game, right, I mean, what's the 0:02:50.880 --> 0:02:54.160 what's the logic here? Um, So this is the logic 0:02:54.240 --> 0:02:56.640 that that particularly United Health has been following for a 0:02:56.680 --> 0:02:59.960 long time. Basically, when you have kind of this integrat 0:03:00.000 --> 0:03:03.240 aided model where you're both to insure and the provider, UM, 0:03:03.280 --> 0:03:05.920 you can direct people to to your kind of in 0:03:06.040 --> 0:03:09.639 house providers, which you know, it's it's a lower cost option. 0:03:09.919 --> 0:03:12.280 They're not taking, you know, an extra bit of profit. 0:03:12.360 --> 0:03:15.680 It's all the same company, and UM, they're gonna basically 0:03:15.720 --> 0:03:19.200 do the the procedures that you want in the order 0:03:19.240 --> 0:03:21.240 you want them, for the people you want. I also 0:03:21.320 --> 0:03:24.880 provide you a lot of data about your enrollees and um, 0:03:24.919 --> 0:03:27.600 you know, the marketplace in general, so you can provide 0:03:27.639 --> 0:03:30.720 care at a lower cost and price your insurance products better. 0:03:31.480 --> 0:03:34.040 Are there any big insurance companies that haven't made a 0:03:34.080 --> 0:03:36.960 move like this that you expect to at some point 0:03:36.960 --> 0:03:39.280 in the near future. I mean, I I've been expecting 0:03:39.440 --> 0:03:41.920 that this from human or from another company for for 0:03:42.080 --> 0:03:45.280 some time, basically because you just look at how successful 0:03:45.440 --> 0:03:47.840 United Health has been. UM. I think I have a 0:03:47.920 --> 0:03:51.480 chart in my latest column. Their optim unit alone books 0:03:51.520 --> 0:03:54.920 more revenue than UM or just about as much as 0:03:54.960 --> 0:03:57.560 one bit more than most of the other large insurance 0:03:57.560 --> 0:04:00.080 companies in the United States. And also they've written the 0:04:00.160 --> 0:04:02.880 kind of cost savings and analytic benefits of that to 0:04:03.360 --> 0:04:06.360 becoming the largest health insurer in the United States. It's 0:04:06.360 --> 0:04:08.480 worked incredibly well for them. I'm a little surprised to 0:04:08.560 --> 0:04:11.440 taken other insurers so long to emulate them, and now 0:04:11.480 --> 0:04:14.280 you finally have you know, the big and a CVS deal, 0:04:14.360 --> 0:04:16.960 which which is an interesting step, and and then HUMANO 0:04:17.040 --> 0:04:20.039 were just taking kind of a narrower targeted approach aimed 0:04:20.080 --> 0:04:22.800 at a particular market medicare in this case. Is this 0:04:22.880 --> 0:04:27.920 good or bad for hospitals? Uh, this is bad for hospitals. UM. 0:04:28.000 --> 0:04:32.280 You know they're not going to say, I need to 0:04:32.279 --> 0:04:35.279 think this is terrific for them. So you know, any 0:04:35.360 --> 0:04:39.840 time when insure, you know, has UM more leverage, is 0:04:39.920 --> 0:04:42.960 doing more of the hospital's job themselves, that that's not good. 0:04:43.320 --> 0:04:44.520 I mean, part of the reason that you had such 0:04:44.560 --> 0:04:48.680 aggressive hospital consolidation. You know two reasons. One to kind 0:04:48.680 --> 0:04:51.360 of fight back about against insures that are ever larger 0:04:51.360 --> 0:04:53.760 and more powerful and have you know, can push back 0:04:53.760 --> 0:04:57.799 on reimbursement. And also to kind of prevent patient leakage, 0:04:58.000 --> 0:05:00.800 so patients from leaving your health her system to go 0:05:00.920 --> 0:05:04.000 somewhere else. Um. You know, if if you own everything 0:05:04.040 --> 0:05:06.120 in area, they can't go anywhere else. That's why you 0:05:06.120 --> 0:05:08.880 have this consultation. But now if ensures own you know, 0:05:08.920 --> 0:05:12.080 their own providers and are actively pushing people there that 0:05:12.080 --> 0:05:15.760 that's pretty bad for prospitals. And just quickly, what about 0:05:15.800 --> 0:05:20.480 for people that are not necessarily in these insurance plans? Um, 0:05:20.520 --> 0:05:23.159 you know, that gets a little trickier for them. You 0:05:23.160 --> 0:05:26.240 you don't get the same kind of discount or or 0:05:26.279 --> 0:05:28.400 synergy when you're when you're trying to, you know, use 0:05:28.440 --> 0:05:31.920 a human owned product and you're on another company's insurance, 0:05:32.640 --> 0:05:35.320 probably gonna be a little more expensive. All right, Thanks 0:05:35.400 --> 0:05:38.520 very much. Max Neeson are Bloomberg gadfly when it comes 0:05:38.520 --> 0:05:41.719 to all things related to healthcare. I encourage you to 0:05:42.160 --> 0:05:46.160 read his columns on Bloomberg dot com. Max Neison, thanks 0:05:46.200 --> 0:05:50.200 very much for being here. It's really fascinating combination, and 0:05:50.279 --> 0:05:52.800 Humana is known as the number two seller of private 0:05:52.800 --> 0:05:55.040 health coverage plans for the elder lace. This is a 0:05:55.120 --> 0:05:58.719 Medicare advantage program, so it sort of explains their focus 0:05:58.720 --> 0:06:17.000 here him, I have been struck by the degree of 0:06:17.200 --> 0:06:20.880 consensus when it comes to US stocks next year and 0:06:20.920 --> 0:06:25.839 frankly stocks globally in eighteen. Everyone seems to think it 0:06:25.880 --> 0:06:29.560 will be a great year, another banner year for equities. 0:06:29.600 --> 0:06:32.159 Here to tell us what he thinks is Alberto Gallo, 0:06:32.279 --> 0:06:36.560 portfolio manager and head of macro strategies at Algebra Algebra Investments, 0:06:36.760 --> 0:06:39.640 and he joins us now. Alberto, thank you so much 0:06:39.680 --> 0:06:42.640 for being with us. Good morning. So are you as 0:06:42.680 --> 0:06:45.880 bullish as everybody else in the world is. I think 0:06:45.920 --> 0:06:48.599 there is a lot of consensus both for equities to 0:06:48.640 --> 0:06:51.440 go higher in the US and also non US equities, 0:06:51.520 --> 0:06:54.400 as well as for interest rates to gradually move up 0:06:54.440 --> 0:06:56.919 in an orderly path. There's a lot of things that 0:06:56.960 --> 0:06:59.800 can go wrong. We are coming from nine years of 0:07:00.120 --> 0:07:03.479 QUEI with central banks holding the hands of markets, and 0:07:03.680 --> 0:07:06.600 I'm not sure the transition to a world with less 0:07:06.640 --> 0:07:08.760 QUEI is going to be so orderly. So we could 0:07:08.839 --> 0:07:11.679 have basically we have three risks. One is a sharper 0:07:11.680 --> 0:07:14.600 return of inflation rock in the market. A second one 0:07:14.640 --> 0:07:17.120 is central bankers are getting a bit more hawkish and 0:07:17.160 --> 0:07:20.480 worried about financial stability across the world. And then the 0:07:20.480 --> 0:07:24.800 third one is geopolitics with North Korea, with Iran and 0:07:25.080 --> 0:07:27.960 Saudi Arabia and a lot of other hotspots in the world. 0:07:28.720 --> 0:07:32.360 And we feel the market is underprising all the risks 0:07:32.440 --> 0:07:35.240 and still living in a goldilocks world. And that's a 0:07:35.280 --> 0:07:39.800 little bit. It's a red it's a red flag for us. 0:07:39.800 --> 0:07:42.680 One of the title of one of your most recent reports, 0:07:42.880 --> 0:07:46.680 The Silver Bullet, is irrational complacency. Then how do you 0:07:46.760 --> 0:07:52.040 invest for irrational complacency? It is It is a conundrum 0:07:52.080 --> 0:07:54.960 for a portfolio manager to construct a portfolio in an 0:07:55.080 --> 0:07:58.800 environment where there is a lot of assets which are overvalued. 0:07:58.880 --> 0:08:02.120 You have to try to distinguish assets that are overvalued 0:08:02.280 --> 0:08:06.160 versus bubbles. And I think the behavior of investors is 0:08:06.240 --> 0:08:10.800 very important. Where you see assets where you have flipping, 0:08:10.840 --> 0:08:13.640 where you have financial engineering, where you have investors have 0:08:13.720 --> 0:08:17.720 never invested in their lives going in, then you're looking 0:08:17.760 --> 0:08:22.080 at the bubble. Other assets are simply a little bit overvalued, 0:08:22.120 --> 0:08:25.600 but may have more room to run. So we are UM. 0:08:25.720 --> 0:08:29.240 We don't know when the crisis, when the next correction 0:08:29.320 --> 0:08:33.520 will will strike, but we're trying to construct our portfolios 0:08:33.600 --> 0:08:40.840 with less exposure to UM downside and buying upside exposure 0:08:40.960 --> 0:08:44.559 through options by limiting potential downside by investing a limited 0:08:44.640 --> 0:08:50.000 premium in UH upside optionality, but having a limited loss 0:08:50.040 --> 0:08:53.080 if things go south. Because we have we've come from 0:08:53.120 --> 0:08:56.920 an environment of very, very low volatility. Let's let's remember 0:08:56.960 --> 0:08:59.320 q not only moved us the prices higher, but also 0:08:59.320 --> 0:09:03.840 pushed investors to sell volatility. Alberto, you said that you 0:09:03.920 --> 0:09:08.240 are concerned about financial stability and at the risk of 0:09:08.320 --> 0:09:11.040 some kind of threat to it next year could be 0:09:11.240 --> 0:09:14.360 more significant than the markets are currently pricing in. What 0:09:14.559 --> 0:09:19.760 asset class is particularly vulnerable in some sort of disruption 0:09:19.760 --> 0:09:23.240 to financial stability right now? I would say there is 0:09:23.240 --> 0:09:27.480 a pyramid of asset classes that have been distorted by QUEI. 0:09:27.640 --> 0:09:31.600 At the bottom you have rates markets bonds, so you've 0:09:31.640 --> 0:09:34.880 got eleven trillion of bonds globally that have negative interest 0:09:35.000 --> 0:09:38.960 rates as central bankers normalized interest rates. These are are vulnerable. 0:09:39.040 --> 0:09:41.360 Then there is a middle section of the pyramid, which 0:09:41.640 --> 0:09:44.400 is the assets that people bought because they couldn't find 0:09:44.440 --> 0:09:47.400 yield in government bonds. So these are high yield bonds 0:09:47.480 --> 0:09:50.719 or investment greate debt. There's eight trillion of them, and 0:09:50.760 --> 0:09:53.559 they are not a negative interest rates, but they are 0:09:53.720 --> 0:09:56.840 very very low credit spreads. Then the tip of the 0:09:56.880 --> 0:10:02.080 pyramid is strategies that are designed to sell volatility. Basically, 0:10:02.080 --> 0:10:05.240 they bet that tomorrow the market that will be as 0:10:05.360 --> 0:10:09.040 quiet as good as today, and this is something that 0:10:09.080 --> 0:10:12.560 we estimate to be around two point one trillion dollars. Now, 0:10:12.640 --> 0:10:15.840 to put this into context, subprime was two point four 0:10:16.000 --> 0:10:20.200 trillion dollars when the credit crisis struck in two dozen 0:10:20.280 --> 0:10:23.240 and eight. So two point one trillion dollars in short 0:10:23.320 --> 0:10:27.720 volatility strategies is a substantial amount um and it could 0:10:27.800 --> 0:10:31.520 cause a risk to financial stability. So if investors tomorrow 0:10:32.280 --> 0:10:35.320 um realized that the future is not going to be 0:10:35.360 --> 0:10:37.760 as calm as it has been for the last nine years, 0:10:38.040 --> 0:10:41.440 then these strategies may be unwound more quickly than the 0:10:41.440 --> 0:10:44.760 market is expecting today. So we are we are worried 0:10:44.760 --> 0:10:47.680 about this, this pyramid of trades, at the bottom of 0:10:47.679 --> 0:10:50.480 which there is kewy. Okay, So this these two point 0:10:50.520 --> 0:10:55.559 one trillion dollars of short volatility funds? Are these hedge funds, 0:10:55.559 --> 0:10:58.120 are these mutual funds? What are the forms that you 0:10:58.160 --> 0:11:01.000 see them in and who are the biggest asset managers involved? 0:11:02.000 --> 0:11:06.640 But there's a variety of strategies. Some directly sell volatility, 0:11:06.800 --> 0:11:10.200 so shorting futures, and we are talking about a small 0:11:10.240 --> 0:11:13.880 amount in the range of a billion. But there's also 0:11:13.920 --> 0:11:18.760 strategies that are more institutional and larger and UM routinely 0:11:18.840 --> 0:11:23.199 sell volatility for yield or strategies that reliab alatility to 0:11:23.320 --> 0:11:28.280 stay low UH to perform. So there's a variety of 0:11:28.559 --> 0:11:32.360 UM of strategies we we we UH don't have an 0:11:32.360 --> 0:11:36.480 exact estimate, but it is an amount large enough to 0:11:36.520 --> 0:11:40.200 create a problem for financial stability. Generally, I wouldn't go 0:11:40.280 --> 0:11:43.000 into specifics on on the asset managers, but I would 0:11:43.000 --> 0:11:45.560 say that regulators in two thousands and eight and following 0:11:45.559 --> 0:11:48.880 the crisis have been focusing on banks, have been regulating banks, 0:11:48.920 --> 0:11:52.880 increasing capital requirements. But in the meantime, asset managers have 0:11:52.920 --> 0:11:55.600 been taken more and more risk to justify their fees 0:11:56.200 --> 0:11:59.240 as yields have gone lower. And we think that today 0:11:59.320 --> 0:12:03.240 the asset management industry has and also, both passive and 0:12:03.280 --> 0:12:07.520 active has more risks than UM UH than the banks. 0:12:07.640 --> 0:12:11.320 Bank risks have moved from banks to to UH, to 0:12:11.440 --> 0:12:14.480 the by side, to the asset management industry. And another 0:12:14.520 --> 0:12:17.480 phenomenon that comes with this is there's been a an 0:12:17.520 --> 0:12:20.920 increase in passive investing and hurting, so everyone going for 0:12:21.080 --> 0:12:24.760 the same trade. Alberto, I'm gonna put you on the 0:12:24.840 --> 0:12:28.240 spot here because in November I read an article in 0:12:28.280 --> 0:12:32.640 the Financial Times about your boss, Davide Sarah, the head 0:12:32.640 --> 0:12:35.760 of Algebras, and he's quoted as saying, I have an 0:12:35.840 --> 0:12:40.760 Italian heart but a British brain. What what does that mean, 0:12:40.840 --> 0:12:46.760 at least to you? Well, I think the team. I 0:12:46.760 --> 0:12:50.679 think what we try to do is to have a 0:12:50.800 --> 0:12:56.200 very organized UM risk management UH culture here. While you know, 0:12:56.280 --> 0:13:01.440 investing in very risky sectors UM are DNA comes from 0:13:01.480 --> 0:13:05.440 investing in risky bonds, like how your debt, you have 0:13:05.559 --> 0:13:09.320 to have very strong I think the Italian UM part 0:13:09.400 --> 0:13:12.520 comes in having strong views on the market, but you 0:13:12.600 --> 0:13:15.880 have to also combine them with UH, you know, with 0:13:16.040 --> 0:13:19.720 numbers and risk management. And it's a bit of a stereotype, 0:13:19.720 --> 0:13:22.240 but that's what we're trying to do here. We're going 0:13:22.240 --> 0:13:24.760 in a very sky market, we have to have strong 0:13:24.840 --> 0:13:29.040 views to outperform on Um countries and names that have 0:13:29.200 --> 0:13:31.480 done well. We've you know, we've done very well this year, 0:13:31.559 --> 0:13:35.240 like Greece or Portugal, or Ecuador or Argentina. But going 0:13:35.280 --> 0:13:38.240 into next year, we have to couple that with some 0:13:38.440 --> 0:13:41.720 risk management. Thanks very much for being with us. Alberto 0:13:41.800 --> 0:13:47.400 Gallo is portfolio manager ahead of macro Strategies at Algebra's Investments. 0:13:47.600 --> 0:14:05.480 Joining us from London, I am so excited for this 0:14:05.559 --> 0:14:08.840 next segment. Joining us as Ethereum co founder Joseph Lubin. 0:14:08.960 --> 0:14:12.720 He is uh one of the founders of the Global 0:14:13.000 --> 0:14:16.599 Blockchain of Ethereum, but also he is a founder of 0:14:16.640 --> 0:14:19.360 global blockchain Specialist Consensus, and he joins us here in 0:14:19.400 --> 0:14:22.080 our eleven three studios. Joseph, thank you so much for 0:14:22.160 --> 0:14:24.840 being here. Thanks for having me. I want to start 0:14:25.000 --> 0:14:28.360 with energy consumption because there have been a number of 0:14:28.400 --> 0:14:33.200 articles talking about how bitcoin consumes so much energy that 0:14:33.240 --> 0:14:37.720 it's equal to the entire output of Denmark currently and 0:14:37.760 --> 0:14:40.880 that it will just surge continually. I know Ethereum consumes 0:14:41.000 --> 0:14:42.640 less energy, but what do you say to people who 0:14:42.680 --> 0:14:46.120 say bitcoin is killing our earth? So I'm not sure 0:14:46.160 --> 0:14:48.760 that statistic is true. UM. There are lots of people 0:14:48.800 --> 0:14:54.480 who who are a little hyperbolic about that issue. UM, 0:14:54.520 --> 0:14:59.880 but U Bitcoin and our network ethereum do indeed burn 0:15:00.000 --> 0:15:02.400 a lot of electricity. They do that in order to 0:15:02.560 --> 0:15:09.360 establish trust in these infrastructures. UM. The traditional financial industry 0:15:09.480 --> 0:15:12.720 also burns a lot of electricity and occupies a lot 0:15:12.760 --> 0:15:16.880 of real estate. And uh um it uh I would 0:15:16.960 --> 0:15:20.600 argue as many orders of magnitude less efficient than UM 0:15:20.640 --> 0:15:25.320 these systems. The theorem itself is actually aware of this issue, 0:15:25.360 --> 0:15:27.760 has been aware right from the start. We intended to 0:15:27.840 --> 0:15:31.680 move from the inefficient proof of work system, which burns 0:15:31.720 --> 0:15:34.120 a lot of electricity. Hold on, let's back up proof 0:15:34.160 --> 0:15:37.520 of work. You mean basically this idea that any change 0:15:37.680 --> 0:15:40.760 in the blockchain is uploaded at the same time to 0:15:41.040 --> 0:15:45.040 every system, uh, every network that is kind of in 0:15:45.240 --> 0:15:49.080 the in the sphere. So trust is achieved by having 0:15:49.160 --> 0:15:53.080 massive redundancy among a lot of nodes on this peer 0:15:53.080 --> 0:15:56.200 to peer network UM. In order to keep them in sync, 0:15:56.400 --> 0:16:00.280 you need some sort of consensus formation mechanism. And in 0:16:00.320 --> 0:16:02.800 these consensus mechanisms, you have to elect a leader, and 0:16:02.840 --> 0:16:04.760 you have to have people follow on behind the leader. 0:16:04.840 --> 0:16:07.040 So a proof of work system which burns a lot 0:16:07.040 --> 0:16:11.000 of electricity is what enables the election of that leader 0:16:11.120 --> 0:16:14.520 or the the winning of the leading position. That's true 0:16:14.520 --> 0:16:17.320 in bitcoin, that's true and Ethereum currently the theorem is 0:16:17.360 --> 0:16:22.480 moving away from expensive hardware, burning of electricity, a lot 0:16:22.480 --> 0:16:25.720 of wasteful computation to a system called proof of steak 0:16:25.800 --> 0:16:30.080 which replaces all of that waste with a system that 0:16:30.720 --> 0:16:34.360 is facilitated by an economic bond basically money that you 0:16:34.400 --> 0:16:37.320 place in a smart contract on the blockchain in order 0:16:37.760 --> 0:16:42.320 to enable um YouTube probabilistically be selected to be a 0:16:42.440 --> 0:16:46.840 leader for a next round. Joseph Luban, I'm gonna just 0:16:47.480 --> 0:16:50.440 sort of take a off ramp for just a second 0:16:50.520 --> 0:16:53.560 because I need and just to mention as the founder 0:16:53.640 --> 0:16:57.760 of consensus, Uh, you're working in a variety of different 0:16:57.880 --> 0:17:01.680 kind of areas of related to block chain. What how 0:17:01.720 --> 0:17:04.240 would you describe or is there a good analogy that 0:17:04.320 --> 0:17:06.679 you can offer so we can understand what is a 0:17:06.840 --> 0:17:13.560 distributed application platform and why is that relevant to understanding 0:17:13.720 --> 0:17:18.920 all of this conversation about bitcoin or blockchain technology. So 0:17:18.960 --> 0:17:24.440 Ethereum is a platform that enables decentralized applications. UM we 0:17:24.600 --> 0:17:26.920 like to think of it as one element of becoming 0:17:27.000 --> 0:17:30.000 decentralized Worldwide Web or the Web three point oh. It 0:17:30.040 --> 0:17:34.399 will be the infrastructure for trusted transactions, for automated agreements. 0:17:34.400 --> 0:17:38.320 There are other elements of decentralizing technology like decentralized storage, 0:17:38.320 --> 0:17:44.200 decentralized bandwidth, decentralized high throughput compute, UM and UH. These 0:17:44.240 --> 0:17:46.960 sort of elements will enable us to move away from 0:17:47.000 --> 0:17:51.600 a business versus consumer kind of infrastructure for delivering services 0:17:52.400 --> 0:17:57.880 to infrastructures on protocol driven open platforms that have lots 0:17:57.880 --> 0:18:01.280 of different actors in different roles in insided markets and 0:18:01.359 --> 0:18:06.840 basically emerging ecosystems that offer sets of services to consumers. 0:18:06.920 --> 0:18:10.600 So none of those will there be um an actor 0:18:10.640 --> 0:18:14.320 that's overly controlling or overly monetizing. So, for example, let's 0:18:14.320 --> 0:18:18.680 say you wanted to make a purchase of a product overseas. 0:18:19.440 --> 0:18:23.520 The bank or banking institutions, whether they be with the 0:18:23.560 --> 0:18:28.280 buyer and the seller, they currently are in between the 0:18:28.440 --> 0:18:33.600 two intermediaries to intermediaries, right, So you what you're saying 0:18:33.720 --> 0:18:37.119 is that this new platform is a step in the 0:18:37.160 --> 0:18:42.120 direction of getting rid of those banks in between, so 0:18:42.160 --> 0:18:46.560 that now you can in a trusted way transact business 0:18:46.920 --> 0:18:51.000 financial business directly between the buyer and seller with knowing 0:18:51.080 --> 0:18:54.359 to me absolutely. So we've stood up a bunch of 0:18:54.400 --> 0:18:57.000 different platforms. They're in different states of maturities. Some of 0:18:57.040 --> 0:19:00.640 them are launched on the Ethereum blockchain already. Um they 0:19:00.800 --> 0:19:04.200 enable certain intermediaries to be squeezed out of the situation, 0:19:04.400 --> 0:19:08.480 or certain amounts of value that intermediaries pull from the 0:19:08.520 --> 0:19:12.440 infrastructure to be right sized because there's less friction less, 0:19:12.520 --> 0:19:16.240 less rent seeking possible. So we built platforms for prediction 0:19:16.280 --> 0:19:20.800 markets or wisdom markets. We built an adjacent music industry platform. 0:19:20.840 --> 0:19:24.200 We've built a supply chain platform. We've built a fixed 0:19:24.240 --> 0:19:26.880 income reference data platform. So we're kind of all over 0:19:26.920 --> 0:19:29.399 the map. We've got about twenty five different projects along 0:19:29.440 --> 0:19:32.080 those lines. You're gonna have to spend more time with us, 0:19:32.160 --> 0:19:37.160 because I'm just slightly beginning to understand and that's dangerous, 0:19:37.200 --> 0:19:39.720 as I'm sure you know. Thank you very much for 0:19:39.800 --> 0:19:42.960 being here. Joseph Luban is the founder of a Consensus 0:19:43.320 --> 0:19:46.520 and he can be followed on Twitter at Ethereum Joseph, 0:19:46.680 --> 0:19:51.080 or at Ethereum project or at Consensus. Thank you welcome 0:20:04.320 --> 0:20:07.639 a burger that doesn't have any meat in it that 0:20:07.680 --> 0:20:10.199 doesn't require killing an animal that tastes as good as 0:20:10.280 --> 0:20:14.400 one that does. Impossible or perhaps the impossible Burger? Would 0:20:14.400 --> 0:20:17.199 you would you think of that him? He's really his eyes. No, 0:20:17.359 --> 0:20:22.119 I'm smiling. I like the Impossible Food enjoining us to 0:20:22.200 --> 0:20:26.840 talk about the impossible foods. The Impossible Burger is David Lee, 0:20:27.080 --> 0:20:32.480 chief operating officer and chief financial officer of Impossible Food. So, David, 0:20:32.600 --> 0:20:37.199 what is the impossible Burger? Well, the impossible Burger is 0:20:37.240 --> 0:20:40.800 the only plant based burger that half the time hardcore 0:20:40.920 --> 0:20:44.359 meat eaters prefer blind versus a burger from a cow. 0:20:44.440 --> 0:20:48.919 It's it's this miracle burger that uses less land and 0:20:49.080 --> 0:20:52.000 only a quarter of the water and releases a fraction 0:20:52.040 --> 0:20:54.399 of the greenhouse gases. What's it made out of? So 0:20:54.480 --> 0:20:57.400 this burger is entirely made out of plants. And what's 0:20:57.440 --> 0:21:00.560 interesting about it is it's four major ingredients are designed 0:21:00.560 --> 0:21:03.760 to be affordable and accessible at scale, and they're natural. 0:21:04.200 --> 0:21:06.960 So there's nothing synthetic or strange about this burger. It's 0:21:06.960 --> 0:21:09.040 it just makes for a craveable burger for a meat 0:21:09.080 --> 0:21:11.879 eater entirely made out of plants. Okay, let's let's just 0:21:11.960 --> 0:21:14.840 talk a little bit about the science if we can. Uh. 0:21:14.880 --> 0:21:20.199 This was founded in by Patrick Brown right at the 0:21:20.359 --> 0:21:26.560 Stanford Okay. And what is the process by which you 0:21:26.720 --> 0:21:31.800 create the impossible uh burger? I want to get to 0:21:31.880 --> 0:21:35.800 this idea of using hem as a term. And it 0:21:35.920 --> 0:21:39.720 is an iron compound and iron based compound that hemoglobin 0:21:39.960 --> 0:21:42.480 is the way I understand right. So so Pat Brown 0:21:42.760 --> 0:21:45.720 to your point. Six years ago, working very hard over 0:21:45.760 --> 0:21:49.640 a period of four years, with a number of great scientists, discovered, 0:21:49.680 --> 0:21:52.639 among other things, what makes me taste and feel and 0:21:52.760 --> 0:21:56.080 smell like meat. And it turns out this magic molecule 0:21:56.240 --> 0:21:59.160 hem h E m E is the only thing that 0:21:59.200 --> 0:22:02.800 can make eat seem meaty to a meat eater. Um. 0:22:02.840 --> 0:22:05.760 And then not only did he discover this, he discovered that, 0:22:05.800 --> 0:22:07.520 you know, he is a building block of life. It's 0:22:07.520 --> 0:22:10.040 in my globe, boom and animals, it's in hem global 0:22:10.119 --> 0:22:14.119 in us, but it's also in plants. Um. Lastly, he 0:22:14.200 --> 0:22:18.520 figured out a way, using a great industrial process, fermentation, 0:22:18.960 --> 0:22:22.960 to make this magic molecule originally found in a plant, 0:22:23.400 --> 0:22:27.160 scalable and affordable and at high quality. And that's how 0:22:27.200 --> 0:22:30.399 that's how this burger is delicious for meat eaters. So 0:22:30.560 --> 0:22:35.679 Impossible Foods is still currently just selling it's uh me 0:22:35.840 --> 0:22:38.680 to put in quotes h two restaurants, Is that correct, 0:22:38.720 --> 0:22:40.679 It's not sort of in the grocery storage. Yeah. For 0:22:40.760 --> 0:22:43.160 now we are serving that half of the US ground 0:22:43.160 --> 0:22:46.440 beef market, which is sold through food service and restaurants. 0:22:46.480 --> 0:22:48.600 So I just want to talk about the vision here 0:22:48.640 --> 0:22:51.520 because I know that Bill Gates is an investor in 0:22:51.720 --> 0:22:55.879 the company. Of course, Bill Gates known from founding Microsoft. Um, 0:22:55.960 --> 0:22:58.679 what's the sort of ambition, what's the sort of longer 0:22:58.800 --> 0:23:02.320 term plan here for hospital fits? Well, our investors are 0:23:02.320 --> 0:23:05.800 aligned to the very large ambition we have. We want 0:23:05.840 --> 0:23:08.240 our impact to be seen from outer space. We want 0:23:08.280 --> 0:23:12.119 every meat eater on the planet to happily choose an 0:23:12.119 --> 0:23:15.840 impossible version of meat made entirely out of plants. Because 0:23:15.840 --> 0:23:17.840 if we can do that, then we can use a 0:23:17.840 --> 0:23:21.920 fraction of the world's resources while providing that delicious, cravable 0:23:21.920 --> 0:23:23.879 taste that we all know meat eaters are not going 0:23:23.920 --> 0:23:26.960 to forego. That's the ambition of the company, and I 0:23:26.960 --> 0:23:29.200 would imagine the ambition is also to make some money, 0:23:29.200 --> 0:23:31.800 because you've raised more than a quarter billions so far 0:23:31.880 --> 0:23:34.600 in venture capital. I believe, like two hundred and fifty 0:23:34.760 --> 0:23:38.600 seven millions that well, our investor base goes beyond venture capital. 0:23:38.720 --> 0:23:41.840 It certainly does include great vcs like CoA, STLA, but 0:23:41.840 --> 0:23:46.520 it now includes sovereign wealth funds Singapore. Right, that's right, 0:23:46.560 --> 0:23:49.000 and on our investor base to your point, they're terribly 0:23:49.080 --> 0:23:52.040 interested in the size of business we're building, and we 0:23:52.080 --> 0:23:55.320 believe this financial engine that we're creating, to your point, 0:23:55.720 --> 0:23:58.440 is what's required to fund the mission. So absolutely we're 0:23:58.440 --> 0:24:03.119 interested in business in return. What's the cost of impossible 0:24:03.480 --> 0:24:08.439 meat in quotes relative to uh similar grade of beef. 0:24:08.880 --> 0:24:11.600 So we like to point out that since our burger 0:24:11.720 --> 0:24:15.600 uses you know, less land and only a quarter of 0:24:15.600 --> 0:24:19.520 the water, that small amount of resources translates into a 0:24:19.840 --> 0:24:23.120 burger that can be extremely cost competitive. Um. So, while 0:24:23.160 --> 0:24:26.560 we aren't releasing actual figures, the reality is we wouldn't 0:24:26.600 --> 0:24:29.720 be successful as a business or for our mission if 0:24:29.760 --> 0:24:33.679 we can't serve the globe extremely cost efficiently as or 0:24:33.720 --> 0:24:37.040 below the cost of commodity ground beef at scale. David, 0:24:37.640 --> 0:24:40.919 you're you've got a production facility that's being constructed, I 0:24:40.960 --> 0:24:43.520 believe in Oakland right now. It's actually for the last 0:24:43.520 --> 0:24:46.200 two months pump and running. Okay, if we went there, 0:24:46.280 --> 0:24:49.199