Speaker 1: So the big question is this, how do investors like
Speaker 1: us get access to the ideas, information, and most importantly,
Speaker 1: the right people that give us the tools and information
Speaker 1: we need to make informed and educated decisions to have success.
Speaker 1: That is the question, and this podcast will give us
Speaker 1: the answers. This is Mark Moss, your host. Let's get
Speaker 1: this started. Hello, and welcome to another episode of the
Speaker 1: Market Disruptors podcast. Today I am sitting down with Mark
Speaker 1: Usko from Morgan Creek and his experience working with institutions
Speaker 1: and endowments through what he calls alternative investments, as well
Speaker 1: as his amazing view of the macro the global economic
Speaker 1: view leed do some very interesting conversations. We talked about
Speaker 1: the evolution of bitcoin growing to mascual adoption. We talked
Speaker 1: about the current state of the global economy, what's going
Speaker 1: on with that. We talked about what he's what he
Speaker 1: calls China playing go, and then we talk about big point,
Speaker 1: where does it fit into all of this? UM, how
Speaker 1: people should be approaching it, risk levels, etcetera. UM. Some
Speaker 1: really good conversations I really enjoyed. Let's go ahead and
Speaker 1: just jump right into it. Hey, everyone, welcome to another
Speaker 1: episode of the Market Disruptors podcast. Today, I am sitting
Speaker 1: down with Mark Usko from Morgan Creek Capital and I
Speaker 1: am super honored to be with him. He's one of
Speaker 1: the hardest working guys in the space and so welcome Mark. Well,
Speaker 1: thanks for having me and great to be with you.
Speaker 1: And uh, I'll try to live up to the hardest
Speaker 1: working title. Uh, it's a big shoes to fill, but
Speaker 1: I appreciate that. Well, you're you're definitely doing your part.
Speaker 1: So Mark, Um, for those that aren't aware, I want
Speaker 1: you to just tell us a little bit about like
Speaker 1: what you've been doing and how you got here and
Speaker 1: what you're doing right now. Yeah. So the short version
Speaker 1: obviously I don't do short well, but the short version is, uh,
Speaker 1: you know, I came out of the investment world that
Speaker 1: we're an insurance company and asset management firm, got into
Speaker 1: endowment management back at my alma moderate Notre Dame, spent
Speaker 1: five years there's the number two. Then it took over
Speaker 1: as the head of University of North Carolina. This is
Speaker 1: a long time ago, back twenty one years ago, but
Speaker 1: fifteen years ago, spun out on my own and form
Speaker 1: Morgan Creek and the whole idea about morgan Creek was
Speaker 1: to bring alternative investments to lots of investors, so, you know,
Speaker 1: build products and services that would allow people to integrate
Speaker 1: this idea of alternative investments into their portfolios. And how
Speaker 1: little did I know that it would come full circle
Speaker 1: here today? Uh, you know, back from hedge funds twenty
Speaker 1: years ago in private equity and venture capital and and
Speaker 1: now we're talking about crypto assets and cryptocurrency so pretty
Speaker 1: exciting stuff. Yeah, yeah, really alternative now. Yeah, And you know, look,
Speaker 1: morgan Creek today is a resure investment advisor. We've got
Speaker 1: just under a couple of billion dollars of assets, a
Speaker 1: lot of that in private investments, and then a year
Speaker 1: ago we launched a new subsidiary called morgan Creek Digital
Speaker 1: and we've raised a venture fund around that to invest
Speaker 1: in infrastructure and crypto it self. And just excited about this,
Speaker 1: this new set of opportunities and how it all fits
Speaker 1: together in the big world in which we all have
Speaker 1: to deploy capital into today. Yeah. So I'm super interested
Speaker 1: to hear your viewpoint on this because of where you sit,
Speaker 1: having previously worked with endowments and now today kind of
Speaker 1: with more incre digital, working with institutions and whatnot. So um,
Speaker 1: I think uh, bitcoin's emergence has been a little bit
Speaker 1: different in a sense where it started retail, but really
Speaker 1: to kind of get to mainstream at some point, if
Speaker 1: we believe it's going to be this store of value,
Speaker 1: there's probably gonna be this this evolution um that it
Speaker 1: has to go from maybe a collectible where it's at today,
Speaker 1: speculative asset into a store of value. And I think
Speaker 1: that it has to probably go through the institution's first
Speaker 1: before it hits mainstream. Would you agree with that? Yeah, look,
Speaker 1: I totally agree it, and I think evolution used exactly
Speaker 1: the right word. I wrote a letter about this a
Speaker 1: few quarters ago on on kind of financial natural selection
Speaker 1: or the evolution of of technology revolutionary. I mean, there's
Speaker 1: nothing really revolutionary about the ideas of distributed ledger technology,
Speaker 1: and in triplentiary accounting. There is some revolution in in
Speaker 1: solving the double spend problem UH and getting getting a
Speaker 1: new technological application a use case for d LT. But
Speaker 1: I do think that the evolution is is more appropriate
Speaker 1: and and to your point, the big money is controlled
Speaker 1: by institutions and the institutions of God. To get comfortable
Speaker 1: with anything for it to become really part of of
Speaker 1: the fabric of of the investment landscape. I mean, go
Speaker 1: back fifty sixty years. Most endowments, institutions, foundations, pensions were
Speaker 1: prohibited by charter in many cases from investing in stocks.
Speaker 1: I mean think about that. They were mostly in fixed
Speaker 1: incomes securities. And then stocks were the new news. There
Speaker 1: were the alternative investment. And then it was international stocks
Speaker 1: with Arissa back in the seventies. Oh my gosh, you're
Speaker 1: gonna invest outside the borders of the United States. How risky?
Speaker 1: Not risk you at all. But uh. And then it
Speaker 1: was you know, twenty plus years ago, when I was
Speaker 1: back at Notre Dame, it was hedge funds and and
Speaker 1: junk bonds. You know, first time we brought distress securities
Speaker 1: to the board. There you can't invest in junk bonds.
Speaker 1: I'm like, wait a second, fifty five per cent of
Speaker 1: the fund is in equity, which is junior to even
Speaker 1: the worst debt. So think about it that way in
Speaker 1: terms of unsecured claims. And then when we tried hedge funds, like,
Speaker 1: oh no, you can't invest in hedge funds because that's
Speaker 1: where all the bad people are. Like what are you
Speaker 1: talking about the right, Well, they charge these high fees, like, well,
Speaker 1: in what business do you know, does the best person
Speaker 1: not charge the highest feet right? Dr lawyer, football coach,
Speaker 1: basketball player. That's the way the world works. So and
Speaker 1: then it was private equity and venture capital and all
Speaker 1: these assets of actually become mainstream because, as you point out,
Speaker 1: the institutions finally become comfortable, and it's not until that
Speaker 1: time when the rest of the investment landscape and particularly
Speaker 1: the firms. Right here's the crazy thing. There are asset
Speaker 1: management firms. I was just having a conversation with my
Speaker 1: wife last night. She's got a little bit of capital
Speaker 1: she's investing, and uh, you know, I was talking about, hey,
Speaker 1: maybe we should put some exposure to to bitcoin in there.
Speaker 1: Let's just buy GBTC because it's easy. Oh yeah, you know,
Speaker 1: the brokerage firm that that we work with for her account,
Speaker 1: they prohibit ownership of GBTC. That's just silly. And it
Speaker 1: goes further. There's one firm out there. Won't name names,
Speaker 1: but it's the biggest one broken jus from not only
Speaker 1: do they not let your own g BTC, they won't
Speaker 1: let a financial advisor take a new client if their
Speaker 1: wealth was created by crypto. Wow, that is absolutely insane
Speaker 1: on every level. Yeah, that's insane. So, uh you've seen this.
Speaker 1: I guess you've seen this where you had to kind
Speaker 1: of go back to these um funds or these endowments
Speaker 1: and tell them over and over, hey you should look
Speaker 1: at this, or so you kind out this history of
Speaker 1: breaking new assets or risk your assets in So I
Speaker 1: guess you've seen this this playout before, and so today
Speaker 1: you're they're kind of pitching these guys now saying, hey,
Speaker 1: this is the new thing that you need to consider. Yeah, Okay,
Speaker 1: I'm a big movie buff, seen this movie before. Uh,
Speaker 1: this is not the first time, it won't be the
Speaker 1: last time. Look, innovation is scary, you know for the
Speaker 1: ok the name of your your pod, right, you know
Speaker 1: market disruptors. Uh, it's all about disruption and disruptive innovation.
Speaker 1: And every incumbent fears disruption, as they should. And you know,
Speaker 1: the street sweepers passed out pamphlets saying that if you've
Speaker 1: got an automobile, you die. And you know, the candle
Speaker 1: makers passed out stuff saying, you know, you go blind
Speaker 1: if you look at that. You know, lowing or that
Speaker 1: Mr Edison created or my, my, my, uh my grandfather
Speaker 1: in laws parents, you know, chastised him from leaving the
Speaker 1: safe job at the railroad to take the risky job
Speaker 1: at that American airlines company. And uh, you know, because
Speaker 1: people really believed that if you got in an airplane
Speaker 1: and you went faster than a certain miles per hour,
Speaker 1: that your body would cave in on itself. So there's
Speaker 1: all this fear, uncertainty, and doubt around disruption, and it
Speaker 1: occurs in every disruptive phase, whether it's technology, whether it's innovation,
Speaker 1: whether it's custom and thinking about Galileo, poor Galileo, right,
Speaker 1: it's like, you know, guys, my data says that the
Speaker 1: earth um actually revolves around the Sun, not vice versa.
Speaker 1: And they labeled on a heretic and you wanted to
Speaker 1: burn him at the State. But it is dangerous to
Speaker 1: have a view different from the masses. But that's where
Speaker 1: all the great wealth is created. That's my pin and
Speaker 1: tweet on Twitter, right, is great wealth is created by
Speaker 1: investing in something that you believe in before everyone else
Speaker 1: even understands. So having seen this movie before, um, if
Speaker 1: you have a perspective there, but you're also on the
Speaker 1: front lines talking to them about it. Where are we
Speaker 1: I mean, I'm guessing over the last year you've seen
Speaker 1: a lot of people are starting to warm up to
Speaker 1: this idea. I mean we've seen, you know, maybe the
Speaker 1: Yell and Diamond Fund dip their toe in the water
Speaker 1: a little bit like so where are we with that? Yeah? Look,
Speaker 1: I mean Yale got a lot of pressed, but they
Speaker 1: barely dip the tip of their toe nail. I mean,
Speaker 1: the amount of assets they put in the fun relative
Speaker 1: of their total access was was teeny tiny. The guys
Speaker 1: actually get credit is Harvard. Harvard put in some real money.
Speaker 1: They went big into the fund, about ten times as
Speaker 1: much as Yale put in, and then they went into
Speaker 1: to a direct deal. Um. So that that's pretty exciting. Uh.
Speaker 1: And ARV is a great ceio over there at Harvard.
Speaker 1: So if you think about what's going on, we're still
Speaker 1: in that you know, early early adopter phase. You know,
Speaker 1: we haven't even gotten into the early majority. And I'll
Speaker 1: say in the individual world, the retail world, we're probably
Speaker 1: in the early majority, but we're just at the very
Speaker 1: knee of the S curve. You know, we're probably going
Speaker 1: from like eight percent to eleven or twelve in terms
Speaker 1: of adoption, and we've got a long way to go
Speaker 1: before we've got got full adoption. And and there's the
Speaker 1: couple of things at work here. One, there's the fear. Right.
Speaker 1: You know, you've got you got people of influence like
Speaker 1: Jamie Diamond or Warren Buffett or Charlie Munger you know,
Speaker 1: calling it bad names, a fraud or you know, Warren
Speaker 1: calls it rat poise and I always say, well, how
Speaker 1: do you know what rap poise? And taste like um?
Speaker 1: And then you got Charlie saying it's like trading, you know,
Speaker 1: harvested baby brains. And my really w t f Charlie
Speaker 1: seriously brains. So why do those guys want you to
Speaker 1: fear it? Well, Fort of Berkshire Hathaway as in financial services.
Speaker 1: Financial services are at risk of being disrupted by this
Speaker 1: new technology and so they're they're gonna say bad things
Speaker 1: about it. And one of the things that's important for
Speaker 1: institutions is to consider the source, right. Don't listen to
Speaker 1: people who are shilling projects that have no you know,
Speaker 1: foundation or basis in in the future. You know, you
Speaker 1: look at I don't I don't like the term, but
Speaker 1: you know, people call them shiit coins, right, and they're
Speaker 1: not even coins right there, their utility tokens. They are.
Speaker 1: They're basically precede and seed stage venture capital projects which
Speaker 1: have a loss ratio, which should not be surprising to anybody.
Speaker 1: Most companies fail. And there's only about a dozen or
Speaker 1: so cryptocurrencies that actually should be called cryptocurrencies. Everything else
Speaker 1: should be called utility token and call it what it is,
Speaker 1: preseed stage venture. So focusing on the differences and not
Speaker 1: conflating terms and getting information right is is going to
Speaker 1: help this thing is. Don't listen to the fomo either.
Speaker 1: You know, you've got the people who are, oh, we're
Speaker 1: gonna miss it, We're gonna miss you gotta get it. No, no, right,
Speaker 1: there's plenty of time, plenty of time to you know,
Speaker 1: have a plan, find good people to work with, find
Speaker 1: a logical step wise progression. You know, you don't have
Speaker 1: to just invest in cryptocurrency. You can invest in venture
Speaker 1: capital and infrastructure. You can invest in lending, you can
Speaker 1: invest in in uh certain forms of cryptocurrency or even
Speaker 1: derivatives related to cryptocurrency. There's lots of things that are
Speaker 1: evolving for institution to look at and the smart ones,
Speaker 1: and we've fortunately found a handful of the smart ones
Speaker 1: are doing just that. So you're talking about and not
Speaker 1: just buying coins, but buying in like infrastructure place so
Speaker 1: like for example Microsoft is has been and probably will
Speaker 1: be a big benefitiary you could look at like in
Speaker 1: video making video cards for mining to stuff like that. Yeah, look,
Speaker 1: there's there's all the way to that extreme that you're
Speaker 1: talking about. Which are the existing companies that support the
Speaker 1: the ongoing development, and you know, the challenges is finding
Speaker 1: the right ones. It's like like IBM, IBM, what they're
Speaker 1: doing in blockchain is really interesting, but it's such a
Speaker 1: tiny piece of their overall dying business that it probably
Speaker 1: wouldn't buy that stock. Microsoft a little bit different, a
Speaker 1: little bit better, something like a m D or in video,
Speaker 1: you know, a m D in particular, where you've got
Speaker 1: so much of the exposure of their business to this
Speaker 1: this evolving technology. I like it a lot. Now it's
Speaker 1: gone up a lot, and I think it's it's a
Speaker 1: little richly priced today. Um, but that's just you know,
Speaker 1: how you do it. You buy the dips and you
Speaker 1: hold for for long periods of time on those those
Speaker 1: companies that are helping to build out the instruction. But
Speaker 1: when I talk about infrastructure, I mean the private investments
Speaker 1: in the private businesses that truly are building out you know, exchanges,
Speaker 1: software tools, um, you know, education and resources. You know,
Speaker 1: somebody is going to create the bloomberg of peptoe. We
Speaker 1: think we've tested in that that firm digital asset data,
Speaker 1: but we'll see yeah great, so um, we're we're in
Speaker 1: that evolution stage. It's happening. Um, But it seems like
Speaker 1: there's stuff going on globally that's seeming like it wants
Speaker 1: to accelerate that. Right. It's like almost like all these
Speaker 1: like global macro policies are like just wanting people to
Speaker 1: buy a bitcoin or adopted alternative system. And I know
Speaker 1: you've talked a lot about You've tweeted a lot about
Speaker 1: like quee um, zombie companies, negative interest rates, right, and
Speaker 1: so these are all things that possibly could be these
Speaker 1: black swan events or really push this is that what
Speaker 1: you think? Look, you know absolutely, you know the macro
Speaker 1: is lining up and has been lining up for a
Speaker 1: decade now. It's not a coincidence that bitcoin in particular
Speaker 1: as a use case for blockchain technology and specifically about
Speaker 1: monetization of value or money or stores of value. Uh
Speaker 1: came a out in two thousand nine. Right, that that's
Speaker 1: not a surprise, A trough of the goal financial crisis,
Speaker 1: you know, the genesis block refers to the chancellor second
Speaker 1: bail out of the banks. Uh. And and everything that's
Speaker 1: gone on in the last decade from central banks becoming
Speaker 1: very very kind of omniscient godlike uh people. You know,
Speaker 1: a friend of mine says the best, Right, I remember
Speaker 1: a time. I'm old enough, I remember a time when
Speaker 1: I didn't know the names of central bankers. I long
Speaker 1: for those days to to return, and you know they aren't.
Speaker 1: The The idea that if if it was easy to
Speaker 1: create wealth by printing money literally by pushing a button
Speaker 1: and printing money literally physically printing printing press kind of
Speaker 1: physical notes and coins or you know, ones and zeros
Speaker 1: in a bank account, if it were that easy, then
Speaker 1: wouldn't everybody do it? Wouldn't every country just print as
Speaker 1: much currency as they possibly could. They'll try, and they
Speaker 1: do try, right, and we've seen the outcome. Right, We've
Speaker 1: seen in the hyper inflationary outcome in places like Zimbabwe
Speaker 1: or Venezuela. You know, a cup of coffee a year
Speaker 1: ago cost you know, nine cents. Today it costs you
Speaker 1: know what is the fourteen thousand dollars or something um
Speaker 1: four thousand percent um monthly inflation. So now that's the
Speaker 1: hyper inflation side. The thing that I'm more worried about
Speaker 1: is the deflationary side, which is you've got bad demographics. Right,
Speaker 1: You've got too many old people, meaning sixty day five
Speaker 1: and sixty five year old people don't spend as much
Speaker 1: as five year old people. They're not as productive. Then
Speaker 1: you've got too much debt. You've got all the developed world, Japan, US, Europe,
Speaker 1: you know, most developed world drowning in debt and overspending.
Speaker 1: And we were a trillion dollar deaths in the United
Speaker 1: States because of the silly Tax to Formact that we
Speaker 1: passed a year and a half ago. And then on
Speaker 1: top of that, you've got deflation. So deflation is essentially
Speaker 1: put us in this place where we feel compelled as
Speaker 1: governments to print more currency and devalue our currency in
Speaker 1: a race to the bottom to try to inflate our
Speaker 1: way out of the debt. But it's not working. And
Speaker 1: so what the problem is that we have is you
Speaker 1: have this you said, the perfect storm for a fixed
Speaker 1: supply hard currency or sound money like bitcoin to come
Speaker 1: in and say, wait a second, if I want to
Speaker 1: opt out of the fiat currency system, or the Fiat
Speaker 1: fiasco as I like to call it, uh, if you
Speaker 1: want to opt out of that and have a little
Speaker 1: bit of chaos heads or a little you know, schmuck
Speaker 1: insurance as somebody called it, I should be in kredit.
Speaker 1: I can't remember who said it, but the schmuck insurance.
Speaker 1: You know, we got scho leaders all around the world
Speaker 1: doing stupid stuff. Whether it's bad policies like trade wars,
Speaker 1: whether it's bad decisions like you know, trade dept or
Speaker 1: budget deficits spending, whether it's bad things like que all
Speaker 1: of that is leading to this devavaluation and this depreciation
Speaker 1: of the value of these assets. And look, if I
Speaker 1: were them, and I were the dictator, I would do
Speaker 1: the same thing. Well, actually I wouldn't because I have conscience.
Speaker 1: But dictators go by the dictator playbook, right. They amass
Speaker 1: the assets, then they devalue the currency. That's the way
Speaker 1: it works, and that's exactly what's happening today. And the
Speaker 1: problem is the average person, right everage person in America
Speaker 1: doesn't hold a stock. People in this country have no stock,
Speaker 1: not one not They're four when Caplin, they're a pension fund.
Speaker 1: They don't own stock directly. They are not benefiting by
Speaker 1: the increase of real assets, financial assets. They would benefit
Speaker 1: from holding a sound monetary um aggregate like like yeah,
Speaker 1: and that's why we have this growing divide between the
Speaker 1: rich and the poor. The richer inflating their assets. The
Speaker 1: poor don't have assets. And because there because their money
Speaker 1: is becoming less value, it's there. Their wages have gone down,
Speaker 1: their producing power has gone down at the same time.
Speaker 1: So it's like this this growing gap. Well, it's the
Speaker 1: worst since the nineteen thirties. It's the worst income and
Speaker 1: wealth inequality in the history of the United States. We
Speaker 1: were doing better from kind of nineteen thirty through the
Speaker 1: late sixties, and really since nineteen seventy one when we
Speaker 1: did you know, the Fiat fiasco. We went off the
Speaker 1: gold standard, and and some would say, well, you know,
Speaker 1: all of this isn't working. You know, the QUEI is
Speaker 1: not working, the change of the goals. No, it's working
Speaker 1: exactly as they planned. If if you actually stopped for
Speaker 1: a second and say, wait, the haves like being haves
Speaker 1: and they would like to have a greater percentage of
Speaker 1: what they have, then it makes perfect sense. And they
Speaker 1: have not don't seem to. But I don't understand is
Speaker 1: they have not seemingly vote for the policies that are
Speaker 1: making them less rich. Well, I think it's not. We're
Speaker 1: an election cycle, so it's not. Uh, I don't think
Speaker 1: it's it's hard to understand why. And if you look
Speaker 1: at the debates that are going on, someone's promising freeification,
Speaker 1: someone's been promising free reparations, promising free thousand dollars a month.
Speaker 1: Someone's promising I mean and so q E pays for that, right, Like,
Speaker 1: that's that that pays for that. So it's it's not
Speaker 1: a big it's not a big stretch to see how
Speaker 1: that gets in. But we don't want to jump into
Speaker 1: politics because we could go crazy there. But um, we
Speaker 1: do have these narratives in bitcoin, right, and so we're
Speaker 1: always talking about uh it seems like it drives this.
Speaker 1: And so one narrative I see is like and people
Speaker 1: have last onto this is we talked about the economy
Speaker 1: is good. The economy is good. The economy is good
Speaker 1: because the stock market is high. But the stock market
Speaker 1: being high doesn't mean the economy is good, especially for
Speaker 1: the little guy, right, that's what you're saying, not at all. Now.
Speaker 1: In fact, you bring up one of the most important
Speaker 1: points is the economy is not the stock market. The
Speaker 1: stock market is not the economy, and there are lots
Speaker 1: of examples. Right. The fastest growing economies in the world
Speaker 1: over the last two decades have not had the best
Speaker 1: performing stock markets. Right. The best performing stock market in
Speaker 1: the world the last two years is Venezuela. Their economy
Speaker 1: is in the hitner. I mean, I hate to use
Speaker 1: that word, but that that's where it is. But it's
Speaker 1: the best performing stock market because on a nominal value, uh,
Speaker 1: you know, the price of of things goes up and
Speaker 1: the dictators takes all the assets because they own all
Speaker 1: the assets. So to your to your point, everyone points to, oh,
Speaker 1: the economy is great, Well, the economy is actually not good.
Speaker 1: The economy is good on some measures. You can say, well,
Speaker 1: a lot of people are working. Well how are they working?
Speaker 1: Are they underemployed or they fully employed? You know, if
Speaker 1: you lose your job as a manager at a T
Speaker 1: and T and you take a job as a barista,
Speaker 1: you still show up as employed. Now, I would argue
Speaker 1: your life is less good unless maybe you want more
Speaker 1: free time. But then the other problem you have is
Speaker 1: every day someone turns sixty five, they get taken out
Speaker 1: of the workforce or workforce participation rate drops. Then you
Speaker 1: got this other crazy thing called the birth death ratio
Speaker 1: that occur is when the BLS, the Bureau of Labor
Speaker 1: and Statistics, makes up data based on where we are
Speaker 1: in the length of the economics cycle, and they said
Speaker 1: this many companies should be born, this many should die,
Speaker 1: so we have this many new jobs. Well did you
Speaker 1: actually count the jobs? Oh? Well no, Well you do
Speaker 1: realize that this risk recovery is half as strong as
Speaker 1: previous recovery. Sure you're justing for that, right, Well no, okay,
Speaker 1: So all of that, you know, indications of oh, people
Speaker 1: point to um, you know, uh, consumer confidence. Well, of
Speaker 1: course people have consumer confidence because they read the headlines
Speaker 1: every day at the stock market is great. Wow, a
Speaker 1: president tweets about the tweeter in chief every day, woks up.
Speaker 1: When the market goes down like today, he won't be
Speaker 1: tweeting today about the market. But said, like you said,
Speaker 1: the people own no stock so what do they even care?
Speaker 1: What makes sense the economy. We just had the worst
Speaker 1: ten years of economic growth the United States in history.
Speaker 1: Now part of that as figures lie in the liar's figure,
Speaker 1: in the sense that it is the law of large
Speaker 1: non verse and it is harder to grow a very
Speaker 1: large economy at a high rate, although China is doing
Speaker 1: a pretty good job of doing that. It was so
Speaker 1: it's made up. Well, I love about that is people say, well,
Speaker 1: the Chinese data is made up, You mean more made
Speaker 1: up than our data. It's actually the same amount of
Speaker 1: made up. And in fact, Bloomberg tried to show how
Speaker 1: much the data was made up in China. So they
Speaker 1: created a thing called the Lee Kua Kong Index, which is,
Speaker 1: you know, using electricity and employment and money flows, and
Speaker 1: they calculated what they thought the GDP growth was, and
Speaker 1: it turned out that number was actually saying that China
Speaker 1: was understating because they don't want to freak people out.
Speaker 1: So it is possible to grow quickly, you have to
Speaker 1: have a different type of of command economy as opposed
Speaker 1: to appear democracy. Uh. And some people would argue against that,
Speaker 1: but the bottom line is, you know, our growth United
Speaker 1: States is not high. Growth in Europe is not high.
Speaker 1: Growth in Japan is not high. It's demographic problem. It's
Speaker 1: a debt problem. And all that comes together back to
Speaker 1: your original point, it creates this perfect storm where the
Speaker 1: macro suddenly has there's a there's a role as a
Speaker 1: macro hedge or a safe haven. And I've gotten great debate.
Speaker 1: It can't be a safe haven, it's too volatible. Well,
Speaker 1: if you define safe haven simply as volatility of an asset,
Speaker 1: you're missing the point. The point of a safe haven
Speaker 1: is what do I feel comfortable and secure in holding
Speaker 1: a portion of my assets if there's chaos someplace else.
Speaker 1: And one of the best things about cryptocurrency and bitcoin
Speaker 1: in particular, it's not seizable right in some ways it
Speaker 1: can actually be um not um recordable, meaning people don't
Speaker 1: know where you have it or where you're storing it.
Speaker 1: It can be moved globally instantaneously. You know, all the
Speaker 1: things that we think about to say here, like gold
Speaker 1: is really hard to to move around. It's heavy, you know,
Speaker 1: it's hard to divide. You've got to pay someone to
Speaker 1: ensure it or store it. Um you crypto has some
Speaker 1: huge advantages, and that's why I think bitcoin has digital
Speaker 1: gold as its first use case is really quite interesting. Yeah,
Speaker 1: so let's talk about that for a minute. Um, so
Speaker 1: you know, we have this perfect storm. You you kind
Speaker 1: of frame that up for us really really well. Um,
Speaker 1: demographics and you know, inflation, deflation, these things, and we
Speaker 1: have this case set. So traditionally gold has been that.
Speaker 1: Um when when when currencies inflate, people can go to
Speaker 1: gold because it's not inflatable, can't be inflated. Um, potentially
Speaker 1: right with gold is called digital gold or I'm sorry
Speaker 1: bitcoin is being called digital gold. But uh, in an
Speaker 1: inflationary environment, gold should work really well. But we saw
Speaker 1: in two thousand and eight that gold actually got hammered
Speaker 1: at the same time as the financial crash. However, it
Speaker 1: did bounce back right away. So it almost seems that, um,
Speaker 1: you have this deflationary move that happens first, right, this
Speaker 1: debt de leveraging, which pushes gold down, but then all
Speaker 1: of a sudden they're gonna start printing to try to
Speaker 1: reinflate it, which pushes it back up. So is that
Speaker 1: kind of what you see? Absolutely? Well, the thing about gold,
Speaker 1: it's the only asset in the world until bitcoin was
Speaker 1: created that acts both as a currency and a commodity,
Speaker 1: and so you think about there are lots of commodities,
Speaker 1: and commodities can do, you know, very poorly in an
Speaker 1: economic downturn. Global financial crisis was certainly an economic downturn,
Speaker 1: and a lot of people thought of gold in its
Speaker 1: commodity form first and they sold. Then it turns to
Speaker 1: currency or store of value, and then people are, oh, geez,
Speaker 1: you know, there's gonna be this fed reaction or this
Speaker 1: this central bank reaction, and I'm gonna need uh an
Speaker 1: inflation heads. The problem is we haven't had any inflation.
Speaker 1: We've had deflation. And so gold does have this really
Speaker 1: interesting history, and you know, people say, well, has it
Speaker 1: has uh you know, people have faith in it. We'll
Speaker 1: know what they have is its custom, right, It's been
Speaker 1: a custom for five thousand years. It's a long time
Speaker 1: that one ounce of gold has bought a fine man's suit.
Speaker 1: And so despite all the ups and downs of currency
Speaker 1: and other than seven or seventy five paper currencies in
Speaker 1: the history of the world, three quarters of them no
Speaker 1: longer exist, and the rest of them will go away
Speaker 1: over time too, because paper currency will always go away
Speaker 1: because not backed by anything it's FIA, and so ultimately
Speaker 1: gold does act as that store. But the reason that
Speaker 1: it has is custom Now, what's interesting is in the
Speaker 1: last ten years there's been this new customary asset Bitcoin,
Speaker 1: where people, particularly young people, say, huh, it's more portable,
Speaker 1: it's more easily stored, it's more easily divided. It may
Speaker 1: actually have another use case as a method of payment
Speaker 1: at some point, although it's pretty slow to do that.
Speaker 1: I'll probably a second layer like lightning. But the bottom
Speaker 1: line is, if you ask the average thirty five year
Speaker 1: older younger how much gold you are, well, none. Why
Speaker 1: would I have your own gold? If you ask him
Speaker 1: how much bitcoin they have, the answers might surprise you some.
Speaker 1: And that is a a difference in other assets. And
Speaker 1: one of the things I really really love about bitcoin,
Speaker 1: and one of the things that reasons I think institutions
Speaker 1: will adopt it sooner rather than later, is Look, I've
Speaker 1: been doing this a long time. I got white hair
Speaker 1: to prove it. Although my son said, you know, this weekend, Dad,
Speaker 1: you're your hair still black in the back. I'm like, well, yeah, okay,
Speaker 1: but um, I've been around long enough to see all
Speaker 1: of these promises of alternative investments that are going to
Speaker 1: give you a better return or lower correlation or diversify
Speaker 1: diversification benefit. And you know in national stock correlated hedge
Speaker 1: funds correlate, even bonds correlated, so they don't give you
Speaker 1: this perfect correlation. Hedge Bitcoin, interestingly, through the ups, through
Speaker 1: the downs, good bad, is only fifteen point one five correlated,
Speaker 1: and in some cases, like May and today, it actually
Speaker 1: has negative correlation. So I'm not saying it's gonna be
Speaker 1: negatively correlated all the time. It's not gonna be a
Speaker 1: perfect head, but that point one five correlation is really important.
Speaker 1: And where does it come from. It comes from the
Speaker 1: fact that stocks, bonds, commodities, traditional assets all derive their
Speaker 1: value from the same thing economic growth, interest rates, and
Speaker 1: central bank policies. Bitcoin derives its value from very different
Speaker 1: things technology, regulatory changes, millennial usage, and this this need
Speaker 1: for an alternative store of value, so it moves differently
Speaker 1: and independently, which is a huge advantage when you build
Speaker 1: it into a portfolio. So when you're building that into
Speaker 1: a portfolio, you want to take you want to take
Speaker 1: into consideration the volatilely that it has, which is kind
Speaker 1: of the risk that it has um. So with bitcoin,
Speaker 1: we have this huge asymmetric upside with you know, a
Speaker 1: smaller downside, but it's also way more volatiles, which you
Speaker 1: know has a risk adjusted basis. So then when you're
Speaker 1: putting it into whatever portfolio, whether that's being institute portfolio
Speaker 1: or retail portfolio, you should try to consider that. And
Speaker 1: how does someone look at that? We definitely have to
Speaker 1: consider it. But here's the problem with volatility. Volatility is
Speaker 1: not risk, right, risk is risk of absolute loss or
Speaker 1: permanent impairment of capital. The intersestant thing is Harry Markuts.
Speaker 1: I'm a big Harry Marquts fan. Of fact, I got
Speaker 1: to have dinner with him once, and you know, I
Speaker 1: got to ask him this question, and I had heard
Speaker 1: that he said once that he wouldn't have used volatility
Speaker 1: for the capital asset pricing model. What do you semi variants?
Speaker 1: Because you should only penalize an asset for downside volatility.
Speaker 1: We all want upside volatilly, that's what we crave. In fact,
Speaker 1: we should want as much upside volatility as we can
Speaker 1: possibly get, of course, and I said, would you is
Speaker 1: it true that you said I would use semi variants?
Speaker 1: But the math was too hard, and he said, well,
Speaker 1: of course, and I wouldn't have won the Nobel price.
Speaker 1: I really want to win the Nobel prize. So when
Speaker 1: you penalize an asset for upside volatility, that's a perversion
Speaker 1: of the whole idea of assets. What we want our
Speaker 1: asset that have asymmetric upside, and we're willing to accept
Speaker 1: some downside risk, but we can hedge most of that
Speaker 1: downside risk away with other assets or with position sizing.
Speaker 1: You know, I use this example over the last five years,
Speaker 1: so five years of reasonable time, because at that point
Speaker 1: you could have put one percent of endowment assets into bitcoin.
Speaker 1: So our last five years, if you had taken one
Speaker 1: percent and put it in bitcoin, half percent from stocks,
Speaker 1: half percent from bonds, and endowments over the last five
Speaker 1: years made seven point two percent, that one person allocation
Speaker 1: of bitcoin would have taken it to nine point two
Speaker 1: Had that one percent gone to zero, you would have
Speaker 1: only gone to nine to seven percent. So point two
Speaker 1: percent downside two bases points of upside. That's a ten
Speaker 1: to one asymmetry. So we should embrace that upside volatility
Speaker 1: and be mindful of downside volatility and risk. But the
Speaker 1: interesting thing about it is the risk of total loss
Speaker 1: is very low at this point because of lots of
Speaker 1: things related to Metcalfe's law and the Linda effect. The
Speaker 1: longer something survived, the longer it's likely to survive. And
Speaker 1: the way Satoshi San, whoever Sotoshi San is, or the
Speaker 1: people or they or them or whatever, whoever designed it
Speaker 1: was genius in the sense that there are these embedded
Speaker 1: advantages for its longevity. Right, because as the price declines,
Speaker 1: more people are gonna want to own it. As the
Speaker 1: price declines, the difficulty adjust in the mining algorithms, and
Speaker 1: so more people are uh are incented to mine. And
Speaker 1: so there's this beautiful uh ying and yang about the asset.
Speaker 1: And I would say the miracle was it went from
Speaker 1: zero to ten dollars ten to a hundred to a thousand,
Speaker 1: thousand to ten thousand, ten thousand a million. That's not
Speaker 1: a miracle, that's just increased usage and increase adoption. The
Speaker 1: miracle was that it survived getting usage at all all
Speaker 1: and became a custom where we could exchange it for value.
Speaker 1: And I survived that that first really bad bear, that
Speaker 1: bear crash, that bear market, So whant to survive that
Speaker 1: one it was like, Wow, this thing is resilient. Now
Speaker 1: it survived a couple of them, which makes it even
Speaker 1: more resilient. So the investors should look at it as
Speaker 1: a total loss and not just the downside or the
Speaker 1: temporary downside. I guess if you're looking out over a
Speaker 1: long enough time timeframe as well, right, well, look at it.
Speaker 1: What is it? Ninety seven percent of all days that
Speaker 1: it's been in existence, you've made money. So if you
Speaker 1: bought it other than like one or two percent of days,
Speaker 1: you've made money. So yeah, if you chased it on
Speaker 1: December eight, two thousand seventeen, you pay twenty year down.
Speaker 1: But other than a handful of days, it's a it's
Speaker 1: been a positive basset. And the thing that people focus
Speaker 1: on that I think is improper is they focus on
Speaker 1: the peak price. Price is a liar, right. The value
Speaker 1: of any asset is the value the price is just
Speaker 1: with two both decided to exchange some unit uh in
Speaker 1: the current period. And so when assets get above their
Speaker 1: fair value, they tend to fall back to fair value,
Speaker 1: and they get blow fair value to tend to go
Speaker 1: back up to fair value. And so when we look
Speaker 1: at it, we look and say, mmm, well, making meaning
Speaker 1: attractive or unattractive. But what we should really look at
Speaker 1: as a diversifying asset is each year over the ten
Speaker 1: years the low has been higher. That's incredible. That means fundamentally,
Speaker 1: more people are using it, more people are holding it,
Speaker 1: more people are looking for additional use cases. And if
Speaker 1: that trend continues and every year we get higher lows,
Speaker 1: that's very positive for the future. Yeah. Yeah, and uh,
Speaker 1: I mean, like you said, the price is a liar.
Speaker 1: Really we have valuations which is difficult to price because
Speaker 1: we don't really know exactly what it is. I've been
Speaker 1: I've been having fun watching these macro guys like Raoul
Speaker 1: Paul uh and Dan Tapirero is starting to talk about
Speaker 1: this and um, they have a different perspective that makes
Speaker 1: it seems so much bigger than it is. And there
Speaker 1: was another article that I saw you talk about that
Speaker 1: was like, uh, something about he was talking about the
Speaker 1: volatility um something and then nothing at all or whatever,
Speaker 1: and he just said, Hey, we have this global transfer
Speaker 1: system of transferring value peer to peer, Like, what's that worth?
Speaker 1: Is that worth two billion? I guess we're a lot
Speaker 1: more than two billions. We're a lot more than two
Speaker 1: and look what people aren't capable of of understanding yet.
Speaker 1: And it's not a criticism of anybody, it's it's just
Speaker 1: this is how big technological evolutions happen. Right when the
Speaker 1: Internet was founded, there were very very few people, right
Speaker 1: myself included, who saw the incredible upside potential. Now, we
Speaker 1: made some good investments, you know, we invested in Google
Speaker 1: and we made you know, two hundred times our money,
Speaker 1: and we invested in Sycamore and and Sienna and a
Speaker 1: whole bunch of other things. We made a bunch of money,
Speaker 1: but I didn't buy you know, Amazon on the I
Speaker 1: p O and hold it to today, and you know,
Speaker 1: I wouldn't even have to work so because it was
Speaker 1: hard to see the upside potential because when when Netflix
Speaker 1: came out, it was a crappy little company. Those discs
Speaker 1: got broken, they got lost, they were hard. And then
Speaker 1: it was gonna be video on demand. Well you couldn't
Speaker 1: do video on demand motives, and so that business was
Speaker 1: gonna die. And then Blockbuster was going to put him
Speaker 1: out of business. And and then suddenly what happened, Well,
Speaker 1: South Korea gave us broadband. Now, when broadband came like
Speaker 1: whoa whoa, Now we can do streaming. We don't call
Speaker 1: video on demanding, We're called streaming. And what people weren't
Speaker 1: capable of understanding is just how many people would cut
Speaker 1: the cord and transfer to streaming instead of cable. And
Speaker 1: the same thing is true with the mobile net. Right
Speaker 1: when I remember two thousand ten being in Craig McCaw's
Speaker 1: house up in Seattle for a party, and you know,
Speaker 1: talking to the head of his family off was Reginal
Speaker 1: investors in in mobile telephony, And I asked this guy, so,
Speaker 1: what you know, do you think the mobile net will
Speaker 1: be as big as the Internet? He's like, Mark, you
Speaker 1: kidding me? Yes, people fifteen years ago if they want
Speaker 1: a computer, like what do I want a computer in
Speaker 1: my house for? Yes, people today if they want a
Speaker 1: cell phone, like, well, already got to probably don't need
Speaker 1: another one, butter and do more to be awesome. And
Speaker 1: then ten years ago the iPhone, or eleven years ago
Speaker 1: the iPhone comes out, and suddenly our world has changed.
Speaker 1: And now we all got sore thumbs and crooked nits
Speaker 1: and these bolts on the back of our head from
Speaker 1: leaning over too much. But you know, we can't comphend
Speaker 1: the change. That's gonna occur. And when you take money
Speaker 1: and value and all the assets in the world and
Speaker 1: you think about what will be done to them, the
Speaker 1: same thing that the Internet did too, or what email
Speaker 1: did to information, or what the internet did to commerce.
Speaker 1: It's it's really incomprehensible. And I think that's why people
Speaker 1: struggle with getting exposure and make an investment because they
Speaker 1: can't see the future because the future has been tomorrow.
Speaker 1: It's gonna happen over a decade or fifteen or twenty years.
Speaker 1: But think about this. Forget digital gold, right, that's a
Speaker 1: seven seven a half trillion dollar market. What about money
Speaker 1: marketing accounts? What about just instead of having a bank
Speaker 1: money where the bank could take assets like they did
Speaker 1: in Cyprus, what if I had an unseizable asset like
Speaker 1: bitcoin and I could have that being my money market.
Speaker 1: Oh that's pretty interesting. That's why the government and Libra
Speaker 1: is not even a cryptocurrency, right, it's a centralized corporate
Speaker 1: digital asset. But it's still could be the largest money
Speaker 1: market in the world by a factor of ten if
Speaker 1: they instantly distributed it to all their their clients. So yeah,
Speaker 1: governments don't like that. Drains asked in the banking system.
Speaker 1: Think about this. Ali Baba created a money market account
Speaker 1: back five ago, maybe seven years ago, and in nine
Speaker 1: months there'd eighty bi billion dollars, became the third largest
Speaker 1: money market in the in the world in nine months.
Speaker 1: Took forty years for Van Garden Fidelity to get up
Speaker 1: to a hundred billion dollars, And the p BOC said,
Speaker 1: whoa time out, we're changing the banking laws. You can't
Speaker 1: do this because you're siphoning assets out of our banking system. Today,
Speaker 1: that account without any new app for two hundred billion
Speaker 1: dollars by far the largest money market in the world.
Speaker 1: And that's what can happen with new technology. And so
Speaker 1: then we go from there too, Well, what about currencies.
Speaker 1: Do we really need all the different currencies around the world.
Speaker 1: What about a borderless currency It's possible, that's eighty six
Speaker 1: trillion dollar market. Well what about real estate that's three
Speaker 1: times as big. How about that two billion dollars I'm sorry,
Speaker 1: trillion dollars, six trillion, a billion um on. So so
Speaker 1: then then you go to total private businesses and total
Speaker 1: total assets. We're talking seven hundred billion dollars of assets
Speaker 1: that will be digitized. That will be traded free. Seven
Speaker 1: they will be owned in a fractional basis. I mean
Speaker 1: the few is so big it's almost too big to comprehend.
Speaker 1: And that's why people just don't do anything. Yeah, boy,
Speaker 1: it is too big to comprehend. The big risk that
Speaker 1: we have those, as you said, these disruptive technologies. Companies
Speaker 1: don't like that. Blockbuster obviously didn't like getting taken out
Speaker 1: by Netflix. But now we have sovereigns Now we have government,
Speaker 1: So the p BOC says, hey, no, Ali baba, you
Speaker 1: can't do that. So now we don't really have this
Speaker 1: free market anymore. A nowly of a sudden, we have
Speaker 1: like governments that maybe we'll shut it down. I think
Speaker 1: that adds an element of risk in addition to just
Speaker 1: like new technology risk. I mean, we have government regulation risk. Now.
Speaker 1: It's a really really important point. And uh and that's
Speaker 1: not new in the sense that you know, the government
Speaker 1: tried to regulate the Internet, and you know they tried
Speaker 1: to regulate cell phones and you know, look, we got all.
Speaker 1: All of these things occur when interested parties feel their
Speaker 1: dominance slipping right. Financial service institutions don't like the idea
Speaker 1: that you and I can exchange value today directly, and
Speaker 1: we don't need a bank. You don't need a bank account.
Speaker 1: I don't need an account. I get in transfer value instantaneously,
Speaker 1: and let's do that across borders. Well, that's the problem
Speaker 1: is today Western Union charges twelve if I want to
Speaker 1: send money to my mother in law and Brazil, I
Speaker 1: don't have the mother in lawn present I did, and
Speaker 1: I want to send her money. It costs me twelve.
Speaker 1: But my mother in law's in Tulsa, Oklahoma, doesn't cost
Speaker 1: money to send money there. But the key is that
Speaker 1: if I cont across borders, you know, the Rothchild's like
Speaker 1: the fact that their two banks get paid and they
Speaker 1: don't want that to go away. So over time, disruptive
Speaker 1: innovation is going to dominate and and there's no putting
Speaker 1: the genie back in the bottle here. We're going to
Speaker 1: see increasing and increase you stage, We're gonna see different
Speaker 1: use cases. We're going to see government push back, we're
Speaker 1: going to see regulatory But the key is in a
Speaker 1: borderless world, in a decentralized world, or de central land,
Speaker 1: which one of the terms I like in de central land,
Speaker 1: if the US makes it really hard to open businesses
Speaker 1: around this new technology. What will happen. They'll open up
Speaker 1: in Russia, They'll open up in China, open up in Argentina,
Speaker 1: they'll open up in the Bahamas or Cayman, and the
Speaker 1: will have question is going to happen? And then, well,
Speaker 1: can people then make it criminal to own the asset?
Speaker 1: People forget it was against the law to own gold
Speaker 1: from nineteen thirty three to ninetevent literally against the law
Speaker 1: in the United States to own. Plenty of people on gold,
Speaker 1: so it's got to be enforced, it's got to be monitored.
Speaker 1: So all these things become tougher in a decentralized world
Speaker 1: where you know, you literally can store your bitcoin in
Speaker 1: your head. It right, You don't have to have it
Speaker 1: on your computer and have it on your phone. You
Speaker 1: can have your seed phrase in your head and and
Speaker 1: just be happy. Now, will they start carrying gating you? Absolutely,
Speaker 1: But people will figure out a way around that. I
Speaker 1: heard one guy say, well, I just wipe my computer
Speaker 1: before I go through plank computer. You're more suspect than
Speaker 1: the guy who has, you know, a coin based account
Speaker 1: on his computer. So we'll all figure it out. Yeah, yeah,
Speaker 1: all right, Well, um, such such good information that I
Speaker 1: really appreciate taking the time well ahead and try and
Speaker 1: wrap this up. I'm just curious. Um. Now we've talked about, uh,
Speaker 1: this global stage that's setting up to to um create
Speaker 1: this perfect storm to push this uh lots of risk
Speaker 1: in the world where uh, you know, all these accounts
Speaker 1: are overvalued and potentially you know, Marcus could come crashing
Speaker 1: down at any point. But at the same time we
Speaker 1: have this new asset class. How how do people uh
Speaker 1: look at this? I mean, where where are the safe
Speaker 1: places for people to go by bitcoin and buy gold? Keep? Okay,
Speaker 1: I love it. It's the it's the ultimate softball question
Speaker 1: for my favorite hashtag, which is hashtag get off zero.
Speaker 1: Ten years from now, we're gonna look back and it
Speaker 1: will be fiduciarily irresponsible for anyone individual institution, For investor
Speaker 1: to have zero exposure to crypto assets and particularly bitcoin
Speaker 1: will be irresponsible. And why is that? It's because when
Speaker 1: you look around in the world is did you just
Speaker 1: summarize perfectly, Uh, just about every asset class is in
Speaker 1: a bubble. Real estates in a bubble. Stocks are in
Speaker 1: a bubble. Government bonds are in the greatest bubble in
Speaker 1: the history of bubbles. I mean the fact that the
Speaker 1: Greek tenure trades below treasuries absolute insanity. The fact that
Speaker 1: Italian interest rates or single digits insanity. So with a
Speaker 1: buyer of last resort is a government entity that can
Speaker 1: print money at a whim to buy assets, and they
Speaker 1: economic reasons to own. Yeah, we get bubbles. And it
Speaker 1: is irresponsible to own debt of corporations that wildly over levered.
Speaker 1: It's irresponsible to own equity of companies like Tesla where
Speaker 1: they don't have enough money to pay back their debt holders,
Speaker 1: let alone the equity holders. So I think what's gonna
Speaker 1: happen over time is people are gonna wake up. They're
Speaker 1: gonna say, oh, there are these diversifying assets, and they're
Speaker 1: gonna start with one per cent, then two, then five,
Speaker 1: then eight and ten, then fifteen, then twenty. And the
Speaker 1: younger you are, the more you should have because you've
Speaker 1: got this wonderful thing like a pseudo fixed income instrument,
Speaker 1: which is your future earnings potential. Right, a young person
Speaker 1: should have zero bonds, none, Right, Their bond is their
Speaker 1: future earnings from jobs they're gonna have in in over
Speaker 1: the years. And so you should have as much private
Speaker 1: investments take advantage aliquidity. Premium should have as much Diversifying
Speaker 1: assets are asymmetric assets like bitcoin in your portfolio when
Speaker 1: you're young, because you've got more time to make up
Speaker 1: for your mistakes. And so you know, Michael Steinhard had
Speaker 1: a great lines, and make all your mistakes when you're young, Okay.
Speaker 1: And that's how we should think about investing, is we
Speaker 1: should be pushing. And so I went on vacation last
Speaker 1: week and I sent out a post a picture on
Speaker 1: Twitter of me water skiing and someone said, uh, falls
Speaker 1: question mark, And I said, if you're not falling, you're
Speaker 1: not skiing. So if you're not falling down occasionally, if
Speaker 1: you're not having a loss occasionally, if you're not having
Speaker 1: a setback occasionally investing, that you're not investing. You're not
Speaker 1: taking enough risk. And one of the things that people
Speaker 1: don't like to be wrong, so they don't put their
Speaker 1: their opinion out there. They don't put positions on where
Speaker 1: they could be wrong or lose money. Well, the whole
Speaker 1: purpose of this business is sometimes being wrong, because you're
Speaker 1: only gonna be right mathematically about half the time. And
Speaker 1: it's not whether you're right or wrong, it's how much
Speaker 1: money you make when you're right, now much money you
Speaker 1: lose when you're wrong. And Sorrow says it best. I'm
Speaker 1: only rich because I admit my mistakes faster than other people,
Speaker 1: and I cut my losses. And so good investors, great investors,
Speaker 1: are wrong way more than bad investors, because bad investors
Speaker 1: are paralyzed by fear of being wrong, and so they
Speaker 1: sit in cash or bonds and don't do anything. And
Speaker 1: great investors make investments, take views, make you know, wild
Speaker 1: assertions like I do all the time, saying, Hey, I
Speaker 1: actually think there's gonna be a value here. I think
Speaker 1: this asset is going to take off. He said, well,
Speaker 1: what if you're wrong. I'm wrong all the time. So
Speaker 1: I make a mistake, I change it, fix it, go
Speaker 1: on to the next idea. So the key to all
Speaker 1: of this is adopt a portion of your assets in
Speaker 1: these diversifying assets, particularly crypto assets, reduce your exposure to
Speaker 1: the overvalued assets around the world, and prepare for an
Speaker 1: environment at which stuff is gonna go on sale. So
Speaker 1: there's a reason the very best investors in the world
Speaker 1: to day have the highest cash positions they've ever had.
Speaker 1: Like one of my mentors Julian Robertson, guys always invested.
Speaker 1: He's basically fully in cash. He's got a lot of longs,
Speaker 1: a lot of shorts, but net he's basically neutral because
Speaker 1: he knows that assets are overvalued. He's shortly overvalued assets.
Speaker 1: He's long with a few things that he thinks are
Speaker 1: are undervalued, and he's waiting with a lot of cash
Speaker 1: to buy the assets when they get cheap. Just timing
Speaker 1: it is the problem, all right, A Japan's kept it
Speaker 1: going for twenty thirty years? How long can this game
Speaker 1: go on? Right? Absolutely? And the markets can behavior rationally
Speaker 1: longer than the rational investor can remain solve it only though,
Speaker 1: that only applies if you lever If you don't lever up.
Speaker 1: Cash is like valium. It keeps you calm and it
Speaker 1: lets you wait out. But if you put a lot
Speaker 1: of leverage on your assets, yeah you're gonna get stopped
Speaker 1: out at precisely the wrong time. Leverage can never make
Speaker 1: a bad investment good, but it can make a good
Speaker 1: investment bad. And so today you want to have max
Speaker 1: some flexibility, You want to have a focus on constantly rebalancing,
Speaker 1: and yeah, could this game go on longer than I
Speaker 1: think it can. Of course, well, central banks do everything
Speaker 1: they can to keep it going. Of course, Well the
Speaker 1: elites do everything they can, including passing stupid laws. Of course.
Speaker 1: But at the end, I believe gravity rules right, Newton
Speaker 1: was right, and assets returned to their fair value and
Speaker 1: even go below. And if you wait long enough, um,
Speaker 1: you get to buy him it with a margin of safety,
Speaker 1: which is the key to life. Yeah, awesome, So that's
Speaker 1: good stuff. You're definitely a wealth of knowledge. I appreciate
Speaker 1: you sharing that with me in the audience conversation. Um,
Speaker 1: so anybody listening told definitely be following you on Twitter
Speaker 1: because you put out a lot of good information, a
Speaker 1: lot of retweets. I don't know how you get any
Speaker 1: work done. My wife asked me the same thing. She
Speaker 1: she thinks I'm a Twitter holic. But Twitter is awesome
Speaker 1: because one, it's an engaged community, and I've made some
Speaker 1: incredible relationships around the world, been introduced to some some
Speaker 1: really cool opportunities. Uh. The second thing I love is
Speaker 1: I get instant feedback, right, And when I put out
Speaker 1: an idea and everybody hates on it, and like, oh,
Speaker 1: that's a pretty good idea. If I put it out
Speaker 1: an idea and everybody loves it. I'm like, oh, maybe
Speaker 1: that's already in the price, So great instant feedback. Um.
Speaker 1: But the thing I really like about it is it's
Speaker 1: it's a way to to build and grow a community
Speaker 1: of like minded people in different areas, whether it be
Speaker 1: crypto or finance or China. Um. So we didn't even
Speaker 1: get talking about China. May will do that next time,
Speaker 1: But there's so much going on in the world today. Uh.
Speaker 1: And one thing I really like about about twitters it's instantaneous.
Speaker 1: I don't have to wait for a producer to review
Speaker 1: a journalist article and eight hours later I get, you know,
Speaker 1: somebody's view of what happened. I can watch a periscope
Speaker 1: live of people standing in the polling place in Argentina
Speaker 1: and get a sense that mockery is gonna win and
Speaker 1: good things are gonna happen. So very cool stuff. Is
Speaker 1: there anywhere else that anyone should follow you to you write?
Speaker 1: You write like blogs or do you have anything else?
Speaker 1: And just follow you on Twitter? Our our website is
Speaker 1: Morgan Creek cap c ap dot com and we've got
Speaker 1: a lot of quarterly letters that I've written over the years. Uh,
Speaker 1: a number of them on on bitcoin and crypto of
Speaker 1: the last of the last couple of years, kind of
Speaker 1: on the origins. And then we've also got a YouTube
Speaker 1: channel called Around the World with us Go, and I've
Speaker 1: got a lot of presentations about forty five minutes each
Speaker 1: with audio that we do on this on a monthly basis.
Speaker 1: We post those, and I've got a number on on
Speaker 1: crypto and China and energy and stocks and you name
Speaker 1: a topic, it's out there. Cool all right, Well, thanks
Speaker 1: so much for taking the time to share the information
Speaker 1: with you. Appreciate it, all right, Thanks, take care. Hey,
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Speaker 1: Market Instructors Podcast.