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Success Story with Scott D. Clary
Lessons - Breaking Away From Institutional Financial Systems | Miko Matsumura - $500M Crypto VC Fund Partner
00:14:30
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- [00:00]
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In this Lessons episode, explore how blockchain challenges traditional institutions by creating financial choice and accountability. Discover how decentralized systems compete for consent and keep structures honest. Understand why responsible risk taking and diversification matter in crypto, and uncover how curiosity and caution enable smarter participation in the digital economy. But even blockchain is an attempt at freedom from ingrained, entrenched institutional systems, right? That's what it is.
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Bingo. And the thing that's fascinating is that the existing systems aren't able to offer freedom. They're not able to. And the reason why I assert they're not able to is even if you like it, there's. You still don't have a choice. You don't have an alternative financial system where you can basically choose to go, but now you do, right? So what has emerged out of blockchain technologies is this alternative financial system. And the thing that it does is it does two things, right? The first thing it does is it competes for consent. So what that means is that it's trying to serve you the best, and if you don't like it, you shouldn't come over. So in essence, the other thing that it's doing, other than providing an alternative, is it does what all alternatives do, which is it keeps the competition honest. It actually now says, I'm going to compete for your consent. So the existing system must also compete for your consent, right? And if you like me better, then you'll come over here. And if you don't like it, then you'll stay, right? Which is like, what a nice thing, right? So it helps everyone. And what I mean by it helps everyone is, you know, let's say there's a safe place where you can escape. Like, let's say it's a safe home, right? And let's say it's in a neighborhood that's a lot like where you live, right? So, like, the existence of that is great for people that need a safe place to go, right? They need to go somewhere, so they're going to go, and that gives them freedom, right? If you like where you are, then you should stay, right? So what I'm suggesting to you is it gives you freedom too. Even if you don't go over there, the existence of that gives you the ability to withdraw consent. So if suddenly you find yourself in a situation where you're like, oh, okay, the system was working beautifully for me, and now it's not, so now I have a place to go, right? And even if you don't ever go there, it's still going to keep the system you're in, Honest, right? Because, you know, because of that competition. So, you know, that's. That's really kind of the mindset that, you know, I'm excited about because, you know, when we talk about this kind of blockchain tech, like, Satoshi Nakamoto created this entire paradigm around fork it and go, right? That's what he created. And so, in a sense, like, you know, that means, you know, I'm not like a bitcoin maximalist because, like, the whole point of it is anyone can fork it at any time, and if they don't like anything, they can just change it, right? And so a lot of people are like, oh, I don't like this feature. I don't like that feature. Like, great, fork it and go. Like, you know, if it's better, everyone will go with your version. Everyone will leave if it's better.
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So the issue with the evolution of this environment is that you have these highly technical individuals that adopt and subscribe to that mindset. But for the rest of the world, that is just trying to keep up and understand because of the ability to fork it and go and to just create new and to create business and to create alternative blockchains and to create different applications and whatnot, it's very hard to keep up and to figure out what's good and what's not, which is really. Right. That's the issue. You're in it, you see what's good. You can, besides being a venture capitalist, you understand the actual technology, but then you also work with these founders and these developers day in, day out. So the people behind certain other projects, obviously not bitcoin, but other projects, like some of the ones that you've invested in, some of the ones that I'm sure that you work with every single day, you have an idea of what works and what doesn't and why it would work or why it doesn't make any sense. But you're. You're deep. Like, you're. You're in the weeds. So that's the issue that everybody's running into, right?
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B
I think that is very, very legitimate, right? Which is that it is like this Revenge of the nerds type of a universe. And the thing that I think is so important is this, right? Which is, I think, to me, if I were to give any single advice to people who are new in this area is, I would say, like, don't be in a big hurry, right? Like. Like, just go in. Don't invest, like, a huge amount. Like, just. Just see what happens. Right. Because the point is, is like, there's some games where you consent, and I call them games, right? I'm talking about a system of rules that you consent to operate under, right? So this could include a country where there are laws, or it can include a monetary system, like a Bitcoin, or it can include open source software. It can include a literal kind of a video game, right? Like, of these systems have rules that you consent to agree to. So the thing is that oftentimes the rule sets are complex. It could even be like a cult that you want to join. It's like, oh, I want to join this cult. So there's all these weird rules, and you're kind of like, okay, I consent to these rules until I don't. And so there's this process that's called mechanism discovery. So mechanism discovery is you play, right? You play around and you're like, you know, it's just like going to a new country or a new place. You just, you're. At first, you're a little bit like, I don't know what the deal is here, you know? And, you know, you can immediately be like, I don't like the way people are acting. You know, but maybe if you have curiosity and maybe if you're like, these seem like, okay people, like, you know, then maybe you kind of are like, well, why do they keep doing that? Or why do they keep saying that? After a while, you might discover that there's some pretty cool stuff behind that, right? You might discover like, oh, wow, like, I get why they're acting like that. That's so different, right? And then you kind of grow as a human, right? So or, or. Or it's a cult. After a little while, you're like, wow, like, this whole freaking deal is rigged against me. Like, they're. They're trying to, like, mess with me and, like, take over and, you know, steal my house. I don't know what they're doing. But, like, my point is, is that that's why the ability to withdraw consent is so important for any reason at any time, or for no reason at all, right? Like, if you just are like, I'm done here, like, boom, you should be able to get out Now. The thing that's a little unfortunate is that there are systems in blockchain and in the bitcoin area where you can't leave, right? Like, like, for example, in. In some cases where there's like a scam, like you deposit a bunch of money and then you go over to the withdrawal section, like, okay, I'm ready to withdraw. I'm this, I'm kind of sick of this place. And you click withdraw and then it just, there's some. Oh, it's, it's a software bug. Like, you know, you can't get your things out ever, right?
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So like, and how many times have you, you see that in the news every month, right? I think there was just one in South Africa. It was like 3 billion to just, just like last week. But it happens all the time.
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It's a little unclear. One of the really funny things about that is there was reporting about it that had their website and a past version of their website, fairly recent actually was bragging about how they have like 100 million in assets. Right. And so like it's unclear that it's as big as 3.6 billion. That is definitely what was reported. You know, if so it's the largest so called hack in bitcoin history. But you know, I think that, but you're absolutely right. Like that, that's an example, right? That's an example where it's like, oh, you can deposit but you can't withdraw. That's a problem. Right. Like so, so, you know, and obviously that's, you know, that's the opposite of freedom, right, because you can't leave, right. Your assets can't leave. Right.
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And so part of, part of. I love this by the way. I actually love the philosophical the way that you, you first went into this. I appreciate that a lot because that really helps frame it for somebody who is trying to understand the nuance of what bitcoin, blockchain, crypto, defi is. So one, one thing that I would also point out is, and I just, I was watching one of your pizzas, you did like the surviving the Wild west of Defi. And I think there's a lot of great lessons in that for people that are seeing defi and trying to figure out what the hell it is. And even people that understood blockchain and bitcoin before and then what's. So one thing that is important though is sometimes it's not the system. That's like you said, it's not always a system. Of course, the system. If they scam you, they scam you and the system doesn't let you leave. But also it's your own personality. It's your own perhaps over indexing on a system and over trusting on a system before you fully understand it, which has led to issues. And you spoke about that a lot.
- [09:48]
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That is absolutely core. Right, which is I think to Me, people don't have a really good sense of risk management. If you watch professional asset managers like venture capital, one of the key principles is diversification. Because the thing that's really important to ask yourself is, do I know what I'm doing? By the way, the definition. So if you read the book Zero to One by Peter Thiel, right, He effectively defines an investor as someone who doesn't know what to do, right? And the reason he defines it that way is an entrepreneur is someone who is basically, quote unquote, knows what to do because they're just doing the thing, right? So for example, if you take his most famous investment, Facebook, right? Like if you're Mark Zuckerberg, you're not diversifying, you're just going to go 1000 million percent into Facebook. Because that's the thing, right? And so the thing that. So by investing, you're immediately someone who doesn't know what to do, right? Because you're diversifying. And so the diversification is a very fundamental pattern of dealing with risk, right? So in a sense, if you think about it like, you know, one approach is play, right? So when I describe play, right, the idea becomes that, you know, play has to be based on a losable amount, right? So I kind of call this like Grand Canyon money. Imagine you're at the lip of the Grand Canyon and you're throwing an amount of money into the Grand Canyon, right? Like, so whatever that amount is for you, like that's probably your first kind of bitcoin purchase amount, you know, so if it's $5 or if that's too much, maybe it's like a buck 50 or whatever you can imagine throwing into the Grand Canyon, right? Because you know, and obviously like, you know, if you're picturing throwing your life savings into the Grand Canyon, like, you know, like, good luck. But you know, I think broadly speaking, like that's, that's, that's the first thing, right? Play. And then I think as you start to kind of get your feet wet, then diversification, right, where you basically take the number of Grand Canyon units and you maybe multiply that by like three or four and then you try three or four different things, you know, and each time you're kind of learning more and more about these games. And as you learn more, you have a better and better chance of deriving your own opinion. Because that's the thing that I think is unfortunate is the existence of influencers in crypto is just human weakness. It's been a toxic effect because most of the so called influencers are they're self interested parties, right? They're basically predatory. So you know that that's so just just blindly following what other people tell you to buy on the Internet is just provably bad.
- [12:41]
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Thanks for tuning in. If you found this valuable, don't forget to hit that subscribe button so you never miss an episode. And if you want to dive deeper into this conversation, check out the links in the description to watch the full episode. See you in the next one.