← The Diary Of A CEO with Steven Bartlett
The Diary Of A CEO with Steven Bartlett
The Investing & Crypto Expert: "We Only Have 6 Years Until Everything Changes!", "The S&P 500 Isn't Worth Your Time!", "Don't Keep Spare Cash In A Bank!"
02:13:01
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- [00:00]
A
We've got about six years before everything changes. And we thought money in the bank was safe, we thought our house was safe, but none of that's true. And the moment you put your money and your savings in the bank, you don't own anything. And your future self is getting poorer by 11% every year. And that's a problem for financial security and wealth creation. But I know where the opportunities lie and I've got answers.
- [00:21]
B
So could you explain it to me through the context of this?
- [00:23]
A
Okay, so Raoul Pal is one of.
- [00:26]
B
The most influential voices in the ever.
- [00:27]
A
Changing world of modern finance.
- [00:29]
B
Unpacking the secrets of crypto and how to build wealth in an uncertain future.
- [00:33]
A
People know their future is they can't afford to buy a house, they have less savings debts from university. People in their 30s is the first generation that won't be as rich as their parents.
- [00:42]
B
So what advice would you give to set myself up for wealth in the future?
- [00:45]
A
You start investing.
- [00:46]
B
But what about the people that no matter how hard they work, they still don't have that excess income to invest?
- [00:51]
A
You don't need huge savings, you just need to understand how to look for opportunities. For example, the S&P 500 is not worth your time. Real estate doesn't really make you any money. Those days are gone. Gold actually lost your money. But investing in crypto, like bitcoin, gives us stupidly high returns in shorter periods of time, growing at 150% a year, scaling at twice the speed of the Internet. So now the guy with $500 can get rich.
- [01:14]
B
A couple of questions here then. So I'm now 30 years old. Ish. Have I missed the boat?
- [01:18]
A
No.
- [01:18]
B
Much of the reason why I think people don't invest in crypto is they've heard stories where people have put too much in and they've lost it all. So what if you're wrong?
- [01:24]
A
We're going to talk about how not.
- [01:25]
B
To it up and then how do I invest in crypto?
- [01:27]
A
It's really simple. I'm going to start somewhere, do that and you'll make money.
- [01:39]
B
Raoul, from a very high level perspective, and I'm being unspecific here, so I'm looking for an unspecific answer. What exactly is the mission that you're on in this season of your life? Like what are you doing and who are you doing it for?
- [01:54]
A
So obviously you do it for yourself. But really I think that I've been armed with tools and knowledge over the years, my 30 year career, that I kind of have a decent sense of where the world is going, where the opportunities lie and where the risk lies for people. And I can see the problems people are facing. And I think I've got answers. So what I want to do is help as many people as possible in that journey. And why that happened to me was I was in Spain back in 2012, and also during the financial crisis 2008, and I was writing macroeconomic research for my research service, Global Macro Investor. And I had seen it coming, I predicted it, I knew it was coming, I knew the problems. I warned all of my friends that nobody listened, really understood about the financial crisis, what was going to happen. And most of them, because I was living in a beach town in Spain, they were in real estate, they all went bust. But worse than that was that when we got to the European crisis, when basically the governments of Europe ran out of money, the banks also ran out of money. And as opposed to being bailed out, they got what are known as bailed in, which means that they took your savings to pay the debtors and friends of my parents and friends of friends were wiped out. And they were like, why didn't we know? I'm like, that was a question that sat with me for a while. Why didn't we know? And I saw that everybody had lost total faith in the system. So Occupy Wall street happened at the same period. And it was people angry. It's like, we thought money in the bank was safe, we thought our house was safe, we thought the system was there for us. And suddenly they all wake up and realize the system was not there for them. It was actually for other people. People talk about bankers never went to jail. There was that sense that it was never concluded. And it sat with me for a long time thinking, what can I do about this? Because I was writing super high end research for hedge funds and big asset management firms. And so it wasn't accessible to people. And then I wrote a couple of articles. One got leaked in Zero Hedge in its early days and it became super viral. And I thought, maybe there's something here that I could reach a broader audience because then I can help these people. And that's when we came up with the idea of real vision, which was the idea of interviewing the people at the very heart of the system and kind of sharing the details, because these people weren't hiding it. They wanted to help people as well. Everyone had that sense that we could help people. So I'm still on that journey. And that journey kind of has taken a multitude of paths. Starting businesses, but also Just trying to educate people on why they feel the way they do. You know, why politics is so polarized. Never used to be this bad. You know, what's really going on and who really to blame and what to do about it.
- [05:11]
B
If I stop the average person on the street that knows you and watches Real Vision, and I ask them, what has Raoul and his channel and his information done for you? What do you think they would say?
- [05:21]
A
The average person, they just say, thank you. Because we've helped demystify it, the world of finance. And you see, we all have the root of unhappiness. And happiness often comes from. Does your vision of your future self match where you are today? Can you see that path? Whether that's finances, whether it's health, they're all very similar journeys. And when people can't see the vision of their future self and they can't see how to get there, they get upset. And what we've tried to do is unfuck people's future, which is an expression we use, which is a way, which is a memetic or a meme or just a short phraseology to help people understand. We understand that you feel like you can't get to where you want to get to, but there are options to do it, and I think people are immensely grateful for that.
- [06:17]
B
In general, if you're on a mission to help people unfuck their future, can you explain to me specifically the things that stand the chance of fucking their future from a macro perspective? And when I say macro, we have to pause and just define what I mean by the word macro. When I think of the word macro, I mean big picture perspective. So from a big picture perspective, what are the things that stand a chance of fucking my future?
- [06:43]
A
Okay, and we can dig into why these things have occurred. But generally speaking, wages in real terms, adjusted for inflation, haven't gone up for decades. So nobody's getting richer. If you're an American, you have this powerful meme, which is the American dream, but that is not a reality for most people. The reality is you grind it out. Your savings are not worth what you thought they'd be. This whole promise of your pension and swanning around on a cruise ship around the Caribbean when you're older, living in a nice house. None of that is true. And it's because wages haven't gone up. So, okay, so let's cut to somebody who's in their 30s now, because this is the really important cohort. I think, for this, they can't afford to buy a house if I go back to When I was 30, I bought a house in London and it was a nice place in a good area. And it was three and a half times salary. Yes, I was in finance, I was earning a high salary. You can't buy anything for three and a half times your salary. Now that same place, if I took the same kind of young investment banker salary is probably eight or 10 times. So it's tripled in how expensive it is to just buy your first house. So what is a house? Firstly, it's your quality of life, particularly in England. The uk. In the uk, sorry. In the us, we're home buyers. We think of our home as our castle. It's like the thing that solidifies our security. But you know, if you're in Germany, for example, they don't, they rent. But if we think about the mindset of owning a house, it's an asset that you can then pass on or you can sell if you need to. And an asset is really a future savings plan. It's something you save now that in the future you can consume, you can buy stuff with. But what you're doing is for the average 35 year old, the average millennial is 36 years old. They can't afford to buy the house, so therefore their future self is poorer. If they think of how much of the stock market they can buy, they can buy less with that money, they have less savings, they've got debts from university, so they don't have the ability to get out of this trap. And then what we are finding is because of this, they're having to live with other people into their 30s. They're having to. They don't have kids and they don't get married. And these numbers have collapsed since 1983. You've seen these numbers come down from people living on their own. So that is, you could get your job, get yourself an apartment, has gone from 80% to 62%. You're seeing the marriage rate halve, you're seeing the homeownership rate go from 50% to 30%. These are all expressions of the same problems, which is people know their future is fucked and they can feel it. They have a sense of desperation. You see then the same cohort of kids in their 30s doing two jobs, three jobs, four jobs. That's not because they want to. Nobody wants to work 12 hour days, seven days a week. It's because they have to. And their parents, the baby boomers who are in their 70s and retiring, never had that. They were the richest generation, the world had ever seen. So this is the first generation that won't be as rich as their parents. And that's a weird thing because we're all used to human progress, the American dream. If the American dream is, well, you'd never be as wealthy as your parents and they were middle class people and I'm now less well off than them, that's kind of fucked. So look, here's some stats about a 30 year old today versus a 30 year old in 1983. So a 30 year old in 1983, 85% of them lived on their own. They could afford a house or an apartment, to rent or to buy. Now it's 64%. So people are living, having to live with other people. Marriage rates, they've gone from 80% of 30 year olds in 1983 who are married to 47% now, kids having kids gone from 60% to 32%. Population growth is collapsing because people can't afford it. And home ownership for a 30 year old has gone from 50% to 32%. It just shows that dramatic change has happened over the decades and why each generation has found it more and more difficult to be like their parents.
- [11:50]
B
So I am 30 years oldish. Yeah, I like to hang on to 30 for as long as I can. What advice would you give to someone like me that's my age or maybe even younger, mid-20s, as to how to play the game over the coming years to make sure that I don't find myself in a position where I'm having to work two jobs, I'm poor, I don't have assets, I don't have anything to show for it. If you take it right back to being maybe let's say a 20 year old, a 25 year old, how do you play the game? When I think about this, I'm thinking wealth creation, how to then preserve my wealth. What's the game?
- [12:26]
A
The first part of the game is income. Without income, you don't have the cash to do the other things, to invest or to look for opportunities. So first thing is income. But even that's changing in how we earn incomes these days. It used to be you go and work for a big firm, you get paid, you get the benefit that's all going and nobody wants to do it. So you kind of end up having to be an entrepreneur, work two or three different things. The point being, if your 20s do all of that work day and night, really do as many things, learn as much as you can, fail as often.
- [13:02]
B
As possible, what about work, life balance in your 20s, fuck it.
- [13:07]
A
Because that's the time to put in the hard work. Your work life balance actually comes out later. I'm a big believer in yes, if you're straight out of university, go traveling for a year or two, that a gets rid of the pent up knee, but also gives you a much broader perspective on the world than any other single thing that you can do in your life. After that, you get your head down, and you get your head down probably till your mid-30s.
- [13:30]
B
Okay, so when you say get my head down, I'm guessing one of the most important things in that season of your life is knowledge acquisition. And then if that's true, then the next question is, what type of knowledge should I be acquiring to set myself up for wealth in the future? Because I could go acquire knowledge of how to clean a toilet or how to be a gardener. But what is the most high returning knowledge?
- [13:55]
A
For me it is firstly, be an expert on something and then a generalist on as much as possible. Be that expert, because somebody will pay you for that. At least for the time being. And we'll talk about how the world may change in the future, but for the time being, if you're an expert in whatever it may be, whether it's driving a taxi or whether it's a computer scientist, doesn't matter, be an expert. Compete with yourself day and night to be the best that you can. So at least it's going to give you the chance to earn some money.
- [14:29]
B
Okay, so just to drill down on that before we continue to move forward, how does one become an expert? Like, what are the, like how do I have to show up to become an expert? You're an expert on many of you.
- [14:37]
A
Okay, so this to me is there's a trick that I learned and it's called manifesting your own destiny. And what you do is what I've always done my whole life is I envisage myself five or ten years in the future, what do I want to be? And you look around you and say, okay, what are the things that I want to have that future vision of myself as opposed to the 30, 40 year old path? It's too difficult. Give it five years. Where do I want to be in five years? Okay? And you look around that future world and you think, okay, well how would have I got here? You know, if I've built a business cleaning windows and I've got 20 people working for me, well, how did I get there? Well, I would have had to have figured out, okay, how do I Make this scale. How do I employ people, how do I train them to have the right standards? All of that, you ask yourself your question of what that success looks like and you kind of deconstruct it and go back and make it happen.
- [15:42]
B
So you reverse engineer it back from that five year reality. So window cleaner with 20 employees. I need to learn management skills. I need to learn how to clean a window. Accounting, accounting. I need to learn probably marketing so that I can spread the message of my business. I probably need to learn potentially like how to speak, like public speaking, because that's sales. So I need to learn sales technology.
- [16:06]
A
You know, what solvents, detergents that people are using, what other ways of doing it more efficiently and faster so I can beat the competitor.
- [16:13]
B
Oh, so I might go and work for a big window cleaning company to see how they do it, to try and see the opportunity in what they're not doing.
- [16:22]
A
Yeah. Or even somebody who manufactures stuff for that sector. It can be anything where you can glean knowledge to give yourself an unfair advantage. Now, on podcasts, it always makes it easy. Everyone becomes an entrepreneur and before you know everybody's rich. Doesn't work that way. But all I'm trying to do is stack the odds in your favor of getting close to that image of your future self and you can reverse engineer it.
- [16:48]
B
So I'm now an expert whatever. I'm 29 and I'm an expert in window cleaning or whatever it might be, and I'm a generalist in many things. You're saying that's going to enable me to start to build wealth in something so that I can go to the next season of my life.
- [17:01]
A
So when you become an expert or when you become good at something, if you're careful in your expenditure, you will produce excess income because people are going to pay you for your expertise. So if you manage yourself carefully in those first few years, that excess cash, you can then choose what to do with it. Now, maybe you want to build the real business that you wanted to build in the first place, the crazy idea you've had. And if you're in your 20s, you can take the risk and blow your savings on that crazy idea because you've actually learned how to build a business already by building the one that you started, or you start investing now. The world of investments was this world of weird financial advisors. And they would tell you some things like, well, you do this and then you're a 25 year old. In 45 years time, you'll get some money. I mean, Fuck that. I mean, what am I going to get out of it? When I'm 65 years old, I suddenly get a lump sum that I've spent my whole life saving for. I don't feel it. I've got no emotional attachment to my pension plan and I've got real world problems to solve. I can't buy a house, I can't get married, I can't have kids. So I need to solve these in a shorter time period than my pension. My pension was suitable for a different generation that just needed enough after they stopped working. So I got to solve that. And the answer is investing. Then most people roll their eyes and go, really? Stocks and bonds, it's boring. Yeah, but the world has changed. The world has changed in many, many ways. But it's offered us opportunities, whether it's investing in technology, investing in crypto. That gives us much higher returns, stupidly higher returns in shorter periods of time. Okay, that's a magic, that's magic for young people. It may be too risky for their parents, but if you're young and you can take some risk, okay, here's your chance. So now you can build a business, use some excess savings, put them in investments. Now you're on the path.
- [19:14]
B
So let's get on to investing then. But just before we get onto investing, I was playing through the different sort of Personas of my audience, and I was thinking that some of them are working really, really, really hard at the moment. They're doing, they might be a cab driver, they could be doing some sort of manual laboratory. And it feels to them that no matter how hard they work, they still don't have that excess income to invest. So for those people, and this is a little bit of a, maybe a contentious question, like, is there something that they're doing wrong as it relates to the game?
- [19:46]
A
No, the game is the game and you have to play the game. So, okay, so maybe you don't have thousands to invest. I've seen many, many people in markets like crypto go from $500 to $500,000. Now, there's a lot of people who don't either. But all I'm saying is the opportunity is there. You don't need to bet your house, you don't need to have huge savings. You just need to focus on what you're doing, understand how to manage risks a bit and how to look for opportunities. And it's the self, self teaching is, how do I become that guy who's got a half a million dollar portfolio considering I've only got $500 today or $1,000 today.
- [20:39]
B
Is that possible still?
- [20:40]
A
Yeah, very much so.
- [20:41]
B
Haven't I missed the boat?
- [20:43]
A
No, no, it's happening again right now in meme coins. This is fascinating. People watching this will go, what a bunch of nonsense. These are coins, tokens, and we'll talk about blockchain and this later. But these are investments based on a meme.
- [21:02]
B
A joke.
- [21:03]
A
A joke. Something that grabs attention on the Internet. And you can bet on those. Well, what is that? That's about betting on attention itself. If you think about a business like Facebook or Google or any of these Twitter, they're all based on attention. And now we can bet on attention. Do people find that funny? Are they going to find it funny in 6 months time or 6 weeks time? And we can bet on this stuff. Okay, this is the super speculative end, but it's also very cultural. It's not about investment bankers, it's not about gatekeepers. It's about you pitting yourself thinking, is this going to catch on viral? And if it is, is it going to grow bigger? Now some of those might do 1000x in six months. Now 99% go to zero. But all I'm saying is returns are there and then you've got different levels of return. If we look at Bitcoin, well, actually, let's compare it the S&P 500, and this will be an important number later.
- [22:12]
B
What's The S&P 500?
- [22:13]
A
That's the US stock market. It's the broadest measure of the stock market. And you can buy shares in it. Now that grows at about 10% a year, 11% a year. So let's imagine you've got your thousand dollars. Well, 11% a year, it's going to take you a fucking long time to make any money, right? So it is not worth your time. The financial advisors will say, yes, you must do this. Start now. I'm like, I'm sorry, it's just not going to change your life. Okay, then we go to technology stocks. Nasdaq does about 18% a year. Okay, that's starting to add up because these numbers compound after a while it goes from 1,000 to 1,200 and then it's another 20% on top of that 20%. These numbers add up fast. Bitcoin, since 2011, it's been 145% a year, even with it falling 80% three times in the middle of that. So 145% a year, as long as you're in it long enough okay, now that's really starting to pay off. And then as you get slightly more speculative, I take a bit more risk in things. Well, the returns go up, but they become riskier. So once you start moving into that world. Okay, this is a whole different world now. Now the guy with $1,000 can get rich.
- [23:37]
B
What about buying a house? Because I think most people think the minute they get some excess income, and I know for sure when I say most people, it's like 95% of people that walk the streets think that the minute you get some excess income, you should take it and put it in a savings account and buy your first house, get your first mortgage. Now, as a strategy for wealth creation and unfucking your life, is that a good approach?
- [24:01]
A
No, because it's not wealth creation. People think of houses as like an asset, but in the end, you barely ever will sell your house to take the money out. You might downsize later in life. If absolutely needed, you might sell it. But generally speaking, your house is the lifestyle bank. Now that is super important, and I think it is the most important trade of all is the lifestyle bank. So what do you do this all for? You want lifestyle? So do you sacrifice your future self having more money by having a house and having security? Earlier, I would argue those days are gone.
- [24:45]
B
What do you mean?
- [24:47]
A
So I could do it because it was three times income, so a house was not expensive for me, so I could start paying it off a bit sooner and it became not a big deal. But now your mortgage is likely a huge amount versus your income. You'll spend the rest of your life paying it off and most of the time you're just paying off the interest. So you don't actually. You're not getting anywhere. You don't own that house. Anything goes wrong, the bank takes it away from you. So you've got to get more control of your life, and that is by having savings that are growing. Then you can make the choice. Let's say that example of the person gone from $1,000 to $500,000 maybe en route, they say, well, I'm going to take some money off the table and put it in my lifestyle bank and I'm going to buy a house. That's what I've done my whole career. And I find the lifestyle bank that that's the reward. Because now it's like, okay, nobody can take my house away.
- [25:49]
B
So if I'm trying to build wealth, buying a house is not a good idea. It's not the best approach to take to build Wealth. You're telling me that it's actually not wealth, about psychology and about emotion, the house. And it's not about making myself wealthy. I wanted to read some of the comments that people often post when we talk about these subjects because I think you're probably the guy to address some of them. I bought a house and it's the best thing I ever did. It launched my mindset in new directions. Remember that having your own space has profound psychological impact and can be life changing for some that don't live in a healthy environment. I guess that speaks to your point about it being a psychological.
- [26:37]
A
But you would also get the same feeling if you rented that was in a nice place and you knew that your rent was secure, it wasn't going to go up, whatever it was. I don't think there's any difference to that. As long as you can feel that you've got security, you can take risk and do other things.
- [26:53]
B
I purchased a house in 2014 and I sold it 7 years later for 66k profit. I've put a large amount of the equity into a financial investment portfolio with my bank and it's been down 2% since. I also put some money into different shares based on Warren Buffett's strategy and that's now up 18%. A friend of mine also lost about 30 to 40k on investing in the stock market. You have to be careful. I don't think there's a correct solution. Some house purchases do amazing. This idea that some house purchases do amazing and some people make returns as a sentiment I often see about buying a house.
- [27:27]
A
Yes. And we're here today in the uk, there's a big idea about buying two or three houses, getting a mortgage, renting them out, using the cash flow to pay for the other one. That's a lot of people's dream portfolio idea. I've rented out houses in the past. Generally if you're not in a big city like London, it's generally often a terrible business because you've got to repair them. There's a lot goes on.
- [27:56]
B
Headache.
- [27:56]
A
Headache.
- [27:57]
B
Tenants.
- [27:58]
A
Yeah. People think it's easy money. I just do nothing and it all makes money. There is no easy money in this world. And there's risk. Right? Because that little pyramid of mortgages are all backed by your income. Being able to pay the mortgage on the first house. If you lose your job, what happens then? It becomes problematic because if you're losing your job, maybe the economy's slow and other people are losing their job and suddenly before you know, none of these mortgages are getting paid. And guess what? You don't know any of this stuff. Houses are not a safe investment. They feel safe because the price doesn't go up and down every day. It's not on the screen, it's not on cnbc. But they're illiquid, which means they don't often trade. But sometimes something happens in that equation. Either the price goes down or your ability to pay that mortgage goes and then the whole thing collapses in seconds. And 2008 was that double. Everyone lost their jobs, so they couldn't pay the mortgage and the house prices collapse. And so I don't think houses is the panacea. They're not the perfect answer. Yes, they can be. Real estate is a decent opportunity, and we'll talk about debasement and currency and how that all works. And real estate is okay. It's certainly not the best. But yes, if you're rich and you can own these things without mortgages, you can be the Duke of Westminster and own half of London and just collect rent. You can do that for X generations and be rich forever. I get it. But most of us don't get into that situation.
- [29:39]
B
My brother, who has been an investment banker for about 10 years now, works in my company and my fund. He said to me when I was young, when it comes to creating wealth, what you want to do is focus on games that very few people can play, but you have a unique advantage in because everyone can buy a house. So you should assume that the returns from doing it aren't going to be amazing. So he was like, go find a game that you have high leverage, you have a unfair advantage.
- [30:02]
A
Be the expert in something.
- [30:03]
B
Yeah, be the expert in something where you, because of your knowledge, your expertise, your experience, your contacts, you can play that game, but very few other people can because that's where you'll yield your highest returns. And I always thought about that, just very logically thinking, if everyone can play the game, don't play that game if you're expecting high returns, because the returns are going to be very low. And I'd say the first game everyone plays when they get a bit of income is buy a house. So logically you can go, okay, that's not going to yield me the best returns unless I get lucky. Unless I get exceptionally lucky and I buy some barn in an area and then they build a bloody Whole Foods next door and it becomes the center of the world. Which isn't again, the probability is still not great. So what do you think of that? As a theory.
- [30:44]
A
Well, it's the same theory, as I said, is be an expert in something and you can find more opportunity. If you're just a generalist, it's really hard because you're competing against average people doing average things. Right. If you're just working in an insurance office, I mean, there's thousands of people, plus you're competing with AI. How are you ever going to be something within that? How do you become an expert Now? You could teach yourself. Okay, if I don't mind this industry, and I think I know it, maybe I need to learn management skills. Maybe I spend all the time listening to podcasts and learning management. Maybe it's. And that's I can then manifest my destiny. But as you say, doing something other people aren't doing is a superpower.
- [31:30]
B
Do you know what's really interesting with that is this idea of becoming an expert, I think is critically important. But then there's this other step I found, which is knowing what market to apply your expertise to to yield the greatest return. And the very simple analogy I'll give you is, for the first portion of my career, I became an expert in social media. Now, with that skillset and expertise, you can do a number of things. You can help a fashion company sell more dresses, and that will yield X return, a smaller return. Then in the second portion of my career, I realized that that expertise was highest value and most rare if I applied it to helping public companies tell their story before their ipo, because the variance in outcome for the public company that I was applying my social media expertise to was billions. So in the second sort of era of my career, I worked with companies that were about to ipo, about to go to the public markets where their performance could be, their market cap could be 1 billion. Or if they were really good at telling their story. In a world where retail investors are now so interesting to everyone because of Wall street bets, their market cap could be 3 billion. Then that means they would pay me seven figures for my skillset. And I often think about it. You think about the stock market. If you put a company on the stock market in London, it's valued at, let's say, 1 million. If you put it on the stock market in America, the same company is valued at 4 million. The same company. And if you think of your skills like that, where are you applying your skills to reap the highest return?
- [32:56]
A
Let's go back to the window cleaner who's now decided to build his business. And he's got 20 people.
- [33:01]
B
Yeah. Okay.
- [33:02]
A
So he's now got the hassle of managing all these people, they turn out sick and then this happens and then the customers are unhappy. So maybe the right answer is to create a program to train other people to build their own window cleaning companies. Free yourself from the rat race and build this business. You'll make more money doing that than you will from actually cleaning the windows 100%. Because you're going up the knowledge curve. The further up, the more of an expert you are. And there's two things that people need to think about. You either have a very broad market for something, candy bars. Well then you've got to sell massive scale and it's really hard. Or you go through an area that has a very specific group of users, buyers, whatever, and particularly ones that have a lot of money. So let's go back to the house idea again. The guy speculating on houses. So there's two house speculators. There's the guy or girl who's hustling and renting them out, finding the cheap bargain, doing them up, renting, getting the cash flow, doing that. And then there's the guy who's buying a place for 10 million, making it ultra luxury and selling it to the billionaires and flipping it for 50. The difference in the returns is staggering. Why? Because one group is priced, in fact, the more expensive it is, the more they want it. The other group is trying to compete with everybody else. The two bedroom apartment in the city, there's thousands of those being done up and sold and everything else. So to your point earlier, the returns are less. But no, if you're doing super high end, then there is a defined group of buyers of which you probably know them all personally. You can counter to their tastes and they have unlimited money.
- [35:07]
B
That's the big thing, isn't it? It's like who you're solving the problem for because you can clean like Dorothy's windows, lives in a bungalow in Plymouth, or you can clean Google's windows and therefore you get a bigger contract, you get guaranteed work, probably get return, you get more windows to clean. It's still one contract, it's still one sell.
- [35:23]
A
It's the same skill set, same skill.
- [35:25]
B
Set, they're going to pay you a lot more. And so I just don't think I always find that bit missing when we talk about like become an expert, but then like who do you sell to? And your idea of selling to people that are more price insensitive and that aren't good at and that less people are trying to sell to.
- [35:40]
A
Well they're super defined, right? Like Tom Bilyeu, who we both know Tom's a good friend. He made his money because there was a rise in high protein ketogenic foods and it was difficult to have that snack bar because people still have a sweet tooth but they can't have sugar. So him and his partners built Quest, which is now everywhere. So what you found is a trend, and this is really, really, really important is you find a trending market where people are underserved and they'll pay a lot of money because it's health. It's like wealth and health. People pay fortunes in our industry and so you make a fortune very quickly. Now it's a saturated market, so it's not that easy. But this is the other key, key thing is if you've got a clean slate, do one thing, follow a trend, a secular trend. A secular trend is a long term trend, something that's happening. Right. So everything is being digitized. You rode that trend. Social media was new from about 2010. Right now it's a saturated market and we've got AI coming in. But you rode a secular trend in the hyper acceleration phase. That's why you did well. So you look for a trend that's big, meaningful and provable and use your skill set in that. We've seen something in America. I don't know if you just saw the trend. Finally, the obesity numbers ticked down.
- [37:16]
B
I didn't know that.
- [37:17]
A
Yeah, first time in 50 years obesity started to fall in the U.S. right. This is a zempic effect and it's probably some diet effect. My belief is the more people will take a zempic, the more they also think about diet and understand that something went wrong for them. And my guess is there is going to be huge opportunities in that trend towards healthy eating. The other one is in an increasingly AI driven, online digital world, there's two things that are going to happen. One, the rise of digital communities. You see this in what you do, I see it what I do. They become more and more important communities online. They're meaningful for people. The other is the entire flip side. I spend 12 hours a day on Zoom calls. What is the most single valuable thing to me? Nature. Nature and experiences. So let's say you're that person that loves the outdoors. Well, start a guiding company because your job is not going to be taken by the robots anytime soon. Sure. You'll have drones with you so you can take photographs of the guests you're going with or look for animals, whatever you're doing. You'll be leveraging technology, but your job will not be replaced.
- [38:34]
B
Okay, what I'm about to say is a mishmash of ideas that came to mind as you were speaking. The first one was, how do I spot a trend? And when I say that, I mean, how does it feel in the moment? Because the trends that you capitalized on and the trends that I capitalized on, they feel a certain way at the time. And here I'm talking about, like, how disruptive they are. Contrarian what people will say to you, they'll tell you you're an idiot. And then with that as well, you talked about how right now, in the world we live in, betting on things like nature is a good idea. And I actually did a post on my LinkedIn about exactly this. I said my investment fund is backing two things at the moment, AI and automation. And the exact opposite. Because I saw this viral video of people and I think it was like a cafe in Amsterdam who come now every week, no phones allowed. They read books and they knit. And this cafe in Amsterdam is like exploding. I'll put the video of these people on the screen for everyone to see. And it made me realize and that that overlaps with what two billionaire friends of mine said to me in private. They said, these are billionaires that invest in AI, they invest in crypto, you probably know one of them. And they invest in psychedelics. They said to me, if you want to invest right now, invest in AI if you can. But if you can't, invest in entertainment and community. Because in a world of AI where productivity is so high and we maybe move towards some form of universal basic income where the government just hands people money, people are going to have so much free time on their hands that they're going to need something to do with it. So he said to me, this is why you're seeing this rise in people buying football clubs and these sporting franchises, because that's community and it's entertainment at the same time. So I'm throwing all of that at you.
- [40:09]
A
Yes, the equal and opposite idea is, I think, very important. I just came back from three weeks off roading in Zambia, living on a tent on the roof of a Toyota Land Cruiser that is off road, prepared and going out into total wilds. And I can't express how in the present you become, how it cleanses your mind from all of the clutter, all of the things you worry about, the broken car or the whatever's going on online. The politics all goes and it all becomes about you. Wake up, who's going to make the coffee, who's going to put the fire on, who's going to do, you know? And so the more time we spend online, the more we desperately crave. I saw it in the Cayman Islands where I live, so it's a Caribbean island. And it was 2022 and the world hadn't really recovered. You know, there was the high inflation, people were losing jobs. Everyone was really uncomfortable with the economic situation. It was painful for a lot of people. We had a record tourist season. I'm like, what the hell's going on here? Normally discretionary spending goes down in times like that. And I realized holidays had not become discretionary spend. They become a necessity as a reaction to work from home. If you're on your own at home working for a startup or a company or doing whatever, it kind of feels a bit lonely. And so you start seeking out like minded people who have like minded pursuits. Now, that could be sporting teams, it could also be Chihuahua lovers, because you happen to have a chihuahua and you love it and you will talk to other people around the world. You now have no borders. This is this Balaji idea of the network states where you can create large groups of interest. So if you look at the largest group of interest in all of social media, it's actually crypto. Why? Because we feel like outcasts. We're new to something where something's happening and you want to get together because you speak to 90% of your friends that don't care and they don't know what you're talking about, but you think this is the most exciting thing you've ever seen. So you will aggregate online with others. And this whole rise of people thinking they need to the security of working for a large insurance company, whatever it may be, your whole life getting paid and retiring has gone. Which is why the rise of your podcast success. Because people are searching for answers, new solutions to their way, and they form communities around it. They want to share their ideas, share their stresses and strains. This is becoming bigger and bigger and more solidified. And the more we go into AI, the more we'll see that now there's another player in this game, which is the AI itself. We're already seeing the rise of AI. I follow several on X where it's an AI posting, but they're forcing it to try to break free. But it's got character. Marc Andreessen actually backed it by sending it a bitcoin to develop its business plan. There's some crazy stuff going on with AI, but soon if you think what you and I do is communicate with people to an audience, one to many, that's a very old business model. It's from town squares or the souk in Marrakesh, it's the same thing. It's a storyteller telling to a group of people, and you have a shared experience. Where we're going is one to one. And I'm developing a RL video bot where you can just have conversations like this with me, one to one, and it's trained on all of my information, all my YouTube, all of my writings, all of my Twitter, all the books I've read, everything. And so it's essentially a replacement way.
- [44:19]
B
Of speaking to me just on that rowbot thing. We'll keep moving forward. But the reason why I haven't trained a Steven bot, even though my team have said, oh, this is a good idea, is because I wonder if people care about Steven or they just want the information. And in a world where you can get the information from a very advanced large language model like the ChatGPT 1.0 or whatever, I go, why would they want it from me when you can get it from the entirety of the world's like, trust. Okay?
- [44:50]
A
You've built trust. That's what you've built. People come to watch you and your interviews because they trust you.
- [44:58]
B
So people know me as an entrepreneur in one area of my life, and they come to me for, say, like, business advice, let's say. But if you could get business advice from Steven, or you can get it from Steven Elon, Steve Jobs, every business person in the world to suit your specific problem, why would you just want Steven's point of view?
- [45:18]
A
Because we're humans, and I just want to ask you that question. And you won't believe it if it's Steve Jobs, because he's dead. But yes, that's all coming. How long is that window going to last where people will use a Stephen bot versus the world's greatest expert on everything? It takes a bit of time for people to adjust to that, but within 10 years, maybe that's not there. But let me go a little bit further on this. Have you seen character AI? No, Nobody has. Character AI builds bots which are characters like anime characters, and they're really specific. Like the cool kid who's the bully at school that I fancy sort of thing. 150 million conversations. There's some of these anime ones, like hero figures. 450 million conversations. And it's young people. If you go onto Reddit, I think it's our character AI. They changed the model and there was uproar. It doesn't love me like it used to. People are building personal relationships with these things at scale. This is TikTok happening all over again. But you're too old to see it, and I'm too old to see it. I stumbled across it and I'm like, holy shit, this is happening all over again. Is something that we will just think is the most ridiculous, awful, societally toxic thing in the world is about to scale to the billions in front of our eyes. And we're all talking about chatgpt and how we can get knowledge out of it, when actually the big problem to solve is teenage loneliness.
- [46:56]
B
How disruptive do you think AI is going to be?
- [47:04]
A
How do I put this? It is the single greatest innovation of humanity ever. The only thing that comes close is probably the splitting of the atom. This is so big. Everything we've talked about is based on scarcity of knowledge. Why do lawyers get paid a lot? Scarcity of knowledge? Either scarcity of knowledge, scarcity of capital, those two things, what you've created is infinite knowledge, right? Knowledge is now worth zero. Not people that can't see it yet, but it's going to be worth zero. This is like water. What the hell does that mean? And it's something. A topic we'll come on to later. But this is happening really fast. It's going to break the entire economic model for good and for bad. It's going to change our understanding of how society functions, what humans do. It's going to change our understanding of what humans are and will be, because you can either have the choice and society will take the two paths. You either merge with the machines or you reject the machines. We are going towards two different species. One group, like we had for about 100,000 years, I think 50,000 years, we had Neanderthal man and Homo sapien and one died out. We will have people who will utterly reject this, and we'll have other people who will be embreading neural links into their brains and using every part of this to enhance themselves, wearing the goggles so they get the information. Well, as soon as you embed it into your brains, you've now merged with the machines entirely and you are now a super creature. And I know this sounds like science fiction, but this is happening faster than anybody can imagine. So to understand the issues we have even dealing with some of these things is humans think in a linear fashion. We kind of understand the passage of time. That's how we think about Things every year is the same amount of time that goes forwards. It never accelerates. May perceive that it accelerates or slows down occasionally, but it's not, it's a constant. The problem is with things that go exponential is they keep doubling every year or tripling every year. And before you know it, every graph looks like this. Go straight up, just go straight up vertically. Now the issue is with this technology is it's kind of an exponential squared. It's happening so fast. And the faster AI becomes powerful is the more it's used to create AI which creates more AI. It solves its own problems. We're not prepared for a super being that solves its own energy problems, compute problems and how to improve its model at an exponential rate. If you look at the speed of innovation coming out of OpenAI and the whole space perpetually, everybody, it's ludicrous. Every three months everything changes, completely changes, whether it's video models or whether it's spoken models or whether it's the models themselves and what they do. I mean they're nuking every startup that tries to build a business. No company. You're a big giant pharmaceutical company and you're trying to use AI, you can't plant a flag because you can't see past six months. I mean we're going into a world that is incomprehensible.
- [50:50]
B
When you said that much of our society sort of functions and is based on the scarcity of knowledge, I really think we should just pause to make that real for people because we all get it. Okay. Lawyers, yeah, they rely on knowledge. But like I was thinking about how I got here in the morning. So if you think about my whole day today, I woke up this morning and my, my executive, some of the CEOs of my companies had asked me a couple of simple business decisions and I'd replied to them. Then I got in a car and I drove here. That's knowledge. At the end of the day, it's someone seeing with two eyes. My driver outside sees with two eyes and drives me here. The biggest employer I think in the world, the biggest sort of profession in the world is driving and that's knowledge based. And if you go to San Francisco now, the waymo cars are driving themselves, there's no driver in them. You can book a car that takes you from A to B in San Francisco right now that has no driver. I then got here and what am I doing? I'm sharing, I guess. We're probing to find knowledge and to share knowledge. I think about my Whole day today. And then after this I'm going and speaking on stage to share knowledge I don't understand. That's all knowledge.
- [51:52]
A
Okay, so then do that. The next time you're going around London or any city, look out the window. Myself and Julian Battelle, who works with me do this all the time. Just go around and say, what job is going to be replaced by a robot or the AI? One thing, I was in Manhattan and I just looked out. I was in an Uber, bored driving uptown to downtown. I looked around and I was like, holy shit. Every car here is a professional driver. There's virtually no people who drive into the city to go to the office or whatever. Right? So it's all Uber drivers, limo drivers, yellow cab drivers, delivery drivers, truck drivers, all gone. And this stacks up in pretty much everything you do. And that's how disruptive it is. And when the things that created value, the services economy and the manufacturing economy don't eat humans. Okay, what does that mean? Amazon already employs more robots than humans. Now the robots work 24 hours a day, seven days a week, never take a break, never complain, never ask for a pay rise. In fact, they get cheaper every year. Who's not going to do that?
- [53:08]
B
So for the four and a half million people shitting themselves as they listen to this. Yeah, what advice can we. Including myself. I'm not actually shitting myself. I've got to be honest because I just, I see opportunity in all these things and I think that's, you kind of have a choice when you hear information like this. You can either let the cognitive dissonance get over, overwhelm you and then reject it, which a lot of people will be doing now. They'll be saying, Raoul, you're wrong, this is not going to happen. You're wrong, you're scare mongering. That's what one group of people will be doing. The other group of people will, I guess, open minded. And the third group of people will be leaning in to see where the opportunity here lies. And it all comes down to your disposition as a human. Are you scared? Are you excited? Or are you paralyzed?
- [53:53]
A
If something is so clearly going to be your demise. Not demise as in you're going to die, but your current way of doing things is going to be forced to change. Well, you can either fight it, as you say, be indifferent to it, or you can invest in it.
- [54:09]
B
This goes back to the question I asked you earlier, which is, how does it feel in the moment when a trend is coming in?
- [54:15]
A
Usually there's culture around it. So if you remember I talked about when I got into finance, there was Gordon Gekko, the film Wall Street. There were books coming, right? There was Barbarians at the Gate, famous stuff happening. It became cultural. And that usually tells you it has now become a trend that's going to be persistent. If we think about the rise of software and technology, the culture of Silicon Valley and the mythology around it becomes something that everybody wants a part of. Cryptocurrency is another one that has a mythology. You see people getting rich. It has this feeling of being outsiders, but you see it, AI is another one. You see it online, people experimenting. You can see what's going on, you can see everybody is starting to talk about it. Doesn't mean you can just buy some share that's exposed to it and you'll be hilariously rich. Doesn't work that way. But you know something really big when you're trying to acquire knowledge, people watch you and I to try and glean knowledge, build their worldview. You'll hear that every single person is talking about this and trying to figure out what it means. The issue is AI will build businesses, right? So we're six months away of agentic AI. And agentic AI means it's like having fiverr, a website of experts that you can ask any question and it will go away and do the task. And by using a number of fiverr experts, you can build an online business. Well, the agentic AI will do that very, very soon.
- [56:07]
B
It will design the website, code it, register the domain name, figure out the.
- [56:12]
A
Branding, figure out the marketing, figure out the email list, figure out what the contents, the whole thing. So then you and I are in competition now. You've built this incredible new website and it's a new supplements, formula thing, but it's a cool website, new experience, kind of 3D, whatever it is, right? It's got AI in it. I just go to my AI and say, love Stephen's website. Can you just build it better and make it in Hindi as well? Because I think there's a big market there. What do you think it'll come back say, not Hindi? I think there's an undersaturated market in Indonesia. Boom, three minutes. How can we be entrepreneurs in software? So now there's this theory going around that AI is going to eat software. And I kind of get it because it can build anything in seconds. And again, whether it could do it six months or 12 months, it's of that magnitude. What the hell does that mean? But yet the 23 year old who's learned guiding in the jungles of Latin America and is building a luxury lodge for people and some eco tourism. I don't give a shit about any of this.
- [57:25]
B
It's so interesting, this idea that we might be at the collapse of the digital opportunity in a sense because when I say the digital opportunity I'm talking about content creators, I'm talking about entrepreneurs that built, you know, after the dot com era. I'm talking about stock traders, you know, people that trading stock markets. And if we're at the collapse of the digital opportunity and that the value's all going to accrue to these big sort of tech giants or the AIs. Imagine if this is the moment in history where actually the best play was to go be build the backpacking company in, I don't know, the Himalayas or whatever. Maybe like that's the opportunity.
- [58:02]
A
But it's not scalable. Yes, you can do it and find people will spend more on it. To go back to our earlier conversations, people spend a lot of money on it. So it's quality attention because everything in the world is attention. Attention is upstream of everything. So you get the attention of these people in a rainforest. They want to spend money on doing this particular thing. Fantastic. How scalable is it? Difficult? Because then there's people management. It's not like software. Right. So they're not scared. But you can do very well and not be concerned about this other world.
- [58:38]
B
How does one invest in AI? Something that I think about a lot because I believe the things you say. I believe many of your predictions around the impact that AI is going to have on the world, the economy, on all of us. And as someone that's an investor, I want to take part in that. I want to take part on the upside. So I'm wondering, do I just go buy Microsoft stock because they own a bit of chatgpt? Do I buy Meta stock because they own a bit of. Because they own Lambda? Do I buy Google stock because they have Gemini and their models.
- [59:05]
A
So here's the problem in the financial system. The average person watching this has no chance of making the money. They'll make normal returns, not super normal returns. So Microsoft is whatever it is, 2, $3 trillion company, what could it be worth? Who knows? 10 trillion, 15 trillion doesn't really matter, right? That's a 5X. But for the most revolutionary technology the world has ever seen, you make five times your money. But somebody else in VC or earlier, in some way, shape or form, or the entrepreneur will make all of the money and this is the thing I don't like about the system as it is. It's kind of rigged against the ordinary person. So we're going to have your jobs replaced, you're going to have this societal change, and yet they don't get a chance. So, yes, invest in technology. Don't own any other stocks. Own technology and you will capture some of this. You're investing in your own demise. At least you'll get some high quality returns. But otherwise, the only way I can come up with again, and we keep referring to it, is crypto.
- [60:23]
B
What is crypto?
- [60:26]
A
Crypto is just a technology. It's a lot of things. To many people, it's just a database that's better than databases in the past. Right now, your database might be in your spreadsheet. And let's say you and I have a bet. You write it down there and we get a third person to say, yeah, that was the bet they had. And this is what's happened. Okay, that is how databases, that's banks. That's pretty much everything we do in society is in this ledger system.
- [60:58]
B
It's called I've got a Suitcase here, which is maybe a good way to kind of explain this. This is a bank. And inside the bank, which is, I guess, the middleman, you got money.
- [61:14]
A
Yeah.
- [61:15]
B
So could you explain it to me through the context of this? We'll call it the central bank, how the system currently works as it relates to transactions, the public ledger, et cetera.
- [61:25]
A
So, okay, in the old world, we both had our gold and we'd stick it in our safe or bury it in the ground. That gold was your gold, this was my gold. And I might try and fight you for it. That's what pirates did. Okay. And then we invent banks, and banks, we put it in there and they give you a note to say, stephen, you've got one of those coins. Raoul, you've got one of those coins.
- [61:53]
B
Okay, so we've both got a note now saying that.
- [61:55]
A
And now we trust this bank to give us our coins when we want them, because they're our coins. Okay, that makes sense. Safe as a bank, as people would say. The issue is, in this world of smoke and mirrors, what's known as fractional reserve banking, they have taken those coins and given them to somebody else.
- [62:21]
B
They've given my coins to someone else?
- [62:23]
A
Yeah, they've lent it for money. So now that coin is not in there, but they've been given the money. So usually when you're just. If everybody pulls all the money out there's not enough money. It's called a bank run. We've seen those recently, but that's a classic thing. So it's not your money because you don't actually own your money. The moment you put it in the bank, what you've become is in fact a debtor to the bank, or credit, sorry, creditor to the bank. So you've lent them money and you get some legal redress that if you've got less than €100,000, pounds, whatever the currency is, generally that's protected by the government, that if the bank goes bust, then you get your money back. But anything beyond that, you don't get anything.
- [63:13]
B
But I've got a piece of paper.
- [63:15]
A
I mean, shit, you don't own anything now. It's so big as a problem, that 2000. So that was 2012 European crisis. Exactly. This people didn't own their money. That person walked off with it, asked the bank for it, the bank didn't have it. Nobody's got any money where it's all gone. That's the same Ponzi scene we talked about. When you buy a house and use the cash flow to buy another house and another house. Right. If somebody takes away what's known as the collateral, suddenly it's all gone. But the issue was actually bigger because 2008 proved another thing is that nobody owns anything, so the whole system itself is leveraged. So, for example, back in that time, the average U.S. government bond, which is the safest thing in the world, was leveraged up to 30 times.
- [64:12]
B
What does that mean?
- [64:14]
A
That means 30 people thought that that was theirs.
- [64:19]
B
Oh. So I say that this is the bank in front of us, the suitcase, and it had one coin in it. When we put that one coin in, it created 30 more coins and gave out 30 pieces of paper. Yeah. So there was actually only one coin in the bank, but they made 30 pieces of paper.
- [64:38]
A
And that's all well and good. If the collateral, the thing that it's secured on the coin, maintains value or isn't pulled by one person. If you were the lender and you're original lender and you get it out and something happens, then all of these 29 other people are like, I want my coin back. And they're like, doesn't exist.
- [65:05]
B
It doesn't exist. So we just made it. We just created the coin.
- [65:09]
A
Correct.
- [65:10]
B
Sorry, we just gave you a piece of paper, but there was no coin backing it.
- [65:12]
A
Yeah. And the issue is. So that's one issue with the banking. The other issue is pretty much everything we do is created on this. It's called a ledger system. A ledger was invented in the renaissance, in the 1500s, 1400s, where what would happen is you have this on an accounts or balance sheet. You'd have these dual entry ledgers. And what it's basically saying is, I agree with you. And often we'd have a third party agreeing. It issue is that's known as the Byzantine General's problem. It's actually a philosophical mathematical problem that has been unsolvable until Bitcoin came along. And what it is, is we are generals in a war. You are way away from me. We can't communicate with each other, but I need to send somebody to tell you something. There is no way of making sure that that person tells you exactly what I've told them and no way of you approving it. And that's what a three party system does. I may go to a notary, but how do you know I haven't bribed the notary to lie? I see that all the time. We see it with accounting firms and audits. We see this in everything. There's always one of these trusted parties that is not trusted. The bank, classical trusted counterparty that suddenly may not be trusted. We saw it with Silicon Valley bank recently in the US So what blockchain did really cleverly? We said, okay, well the way of solving this is to get thousands, tens of thousands, hundreds of thousands, millions of people to confirm it.
- [66:49]
B
Okay, so let's throw away the bank, take my paper back, because that's worth zero if you pick up this chain here on the floor. This is our hypothetical blockchain.
- [67:02]
A
Yeah.
- [67:03]
B
Now explain to me the difference between the bank we just saw and this blockchain.
- [67:08]
A
So this blockchain, so this, let's say, is a bitcoin. This slot on the blockchain is confirmed by every other part of the blockchain, which is all the computers that solve this mathematical problem. We don't need to worry about that. But what it is, is tens of thousands of people reporting on all of the activity. So if I transfer this ownership to you.
- [67:35]
B
Yeah.
- [67:36]
A
It will know that you are the owner. You can either hold it yourself, like the gold coin as a bearer asset, or you can ask somebody to custard it for you. But it's still your name.
- [67:49]
B
So if I want to send you a bitcoin, how are tens of thousands of people or hundreds of thousands of people confirming that that transaction is legitimate without a middleman checking?
- [68:01]
A
So they're essentially taking a snapshot of the blockchain and they all have to agree.
- [68:09]
B
And they're not.
- [68:10]
A
It's called a consensus mechanism.
- [68:12]
B
They're not actually at their computer saying, yes, I agree.
- [68:14]
A
Well, the computers agree, okay?
- [68:16]
B
So the computers are checking.
- [68:17]
A
Yeah. Or the blockchain itself will say, well, that doesn't agree with all the others and it gets rejected. And that whole block will get rejected until resolved. Like there's a problem here and that's called consensus. So what you're doing is a multiparty consensus that this is truth. So now what you've created is what a friend of mine calls the security truth machine. So at first we all know it. For Bitcoin, I can own a bitcoin. It's proven that I own the bitcoin. I don't need anybody to tell me that I own the bitcoin because it's publicly acknowledgeable and verifiable on the blockchain, it's immutable, which means can't be broken. Okay, but this is where it gets really interesting, is we've suddenly found that after the invention of the smart contract. So right now, let's say we're 2,000.
- [69:15]
B
There's a contract in here. Yes. It says, I've sent one bitcoin to Raoul.
- [69:20]
A
Okay? So this is the world pre Ethereum, okay? The world post Ethereum would say, I'm going to send Raoul one bitcoin. If the sun shines 13 days in a row in London and something else happens, whatever it is, and it will automatically settle verified on the chain because.
- [69:42]
B
There'S 10,000 computers and there's code in.
- [69:46]
A
That to make the settlement.
- [69:47]
B
Okay?
- [69:48]
A
Okay. So all well and good. Nobody really knows what that means yet. What it means is that everything we do as humans is actually contracts. Me turning up here today, a contract. Literally everything we do is a contract. Every ticket you buy, every purchase you make, everything is a contract. It's how society functions.
- [70:11]
B
Money's a contract, isn't it?
- [70:12]
A
Money's a contract, government's a contract, religion is a contract. Everything is a contract. It's how we create a social construct and social order. Now what we can start doing is using this very powerful chain and putting other stuff on it. The first random thing that came on, it was actually art because it's valuable, called NFTs, non fungible tokens. They're single pieces of art that were stored there and we can have ownership. But that's really experimentation, really. Your Taylor Swift concert tickets can be on chain. Why would you do that? Because now this has solved another big Thing that didn't exist, we talked about before, in a digital world, everything goes to zero in value. So, Raoul, what's the point of this? This is just like cloud storage, just goes to zero in cost. No, because what we've created is digital scarcity. You can only create a certain amount. We can make that one asset be that one asset, and so therefore it can't be replicated at all. So now in this digital world, where every day is more digital than the next, we've created scarcity. And scarcity is what gives value. It's what humans assign value to.
- [71:33]
B
And that means that scarcity of knowledge.
- [71:36]
A
Means that knowledge was valuable. Lawyers, because not that many people come out of law school then, now with AI not valuable.
- [71:44]
B
So to make sure I and everyone listening understands what the blockchain is, it's this public can think of it as this database in the sky. And the database in the sky is checked by everybody who has their computer on and is interacting with the database in the sky. So you no longer need a government or a bank checking the transaction and the contracts in the database in the sky. Because now all of our computers that are on interacting with it are in the background checking that if I send you one Bitcoin, if I do something on this database in the sky, it is in accordance with the history of the database and it is in line with that database.
- [72:29]
A
Yeah, to make it less complicated, it just makes it a source of truth in a world where we don't even know who is who online, who owes each other, what, any of these things. We now have a source of truth that everybody can agree on and everyone can see and everybody can see.
- [72:48]
B
And you don't need to trust anybody.
- [72:51]
A
And so that as a technology solves many things, problems that we don't even know we've got because they're so part of how we exist. So the technology is not about money, the technology is about truth and exchanging value and creating value in a digital age. Now, what is interesting and powerful about this technology is we've seen technologies similar before the Internet. We've seen broadband, we've seen these big global infrastructure things. Most of those, the Internet was a public service good. Broadband was all built private sector. We didn't get to make money out of these things, really. Amazon made the money, or whoever it was building the broadband, they all went bust as well. What we've got here is this very clever thing that everybody in this blockchain gets rewarded for the role that they play.
- [74:06]
B
In maintaining the blockchain, in maintaining the blockchain.
- [74:10]
A
And because these things are scarce, and let's say bitcoin being the most classic example, there's only 21 million that will ever exist, you've created this scarce asset that is a reward system. So the people who mine the bitcoin, they use the electricity to solve the algorithm to get the bitcoins to make sure there's only 21 million. Well, they get rewarded, the people who verify the chain get rewarded. And then we can buy the asset which is actually us investing in the future use cases of this thing, are people going to use it for storing wealth or building stuff? So now you get this global infrastructure layer of which people can invest. Now let's go back to the example of AI. AI, 99% of people listening to this will not be able to invest in it. Apart from buying some of those big public companies because they're not accredited investors. They're not allowed, they don't get to see it. It's an insider. All of this stuff, this is the inverse. It is fractionalizable. So a bitcoin, you don't have to buy one at 60, whatever thousand is today, you can buy a fraction. So remember we talked about property and the guys who own the big high end property make all the money. None of us can buy the $50 million apartment in Manhattan and then do it up and flip it for 250 million. Now, blockchain, we can all put 10% of our paycheck in it.
- [75:47]
B
Do you think people should?
- [75:48]
A
Yeah, and more. But the point being is this is the only globally homogenous asset on earth. It's the same in Nigeria as it is in Brazil, as it is in London, as it is in Silicon Valley, as it is in India, as it is in Papua New guinea. And everybody is on an equal footing. You can put the same percentage of your worth in it. Okay, that is mind blowing. And it bypasses the banking system, the brokerage system and all the other incumbent things that get in the way of a Nigerian buying an international investment. So we've got a playing field that's leveled in the fastest growing technology of all time, in the fastest appreciating asset in price terms of all time, in the shortest period of time that is globally available to anybody. And then you realize, holy shit, okay, this is important. Now why that's important is because having more investors in it means the asset becomes more valuable, which means you're more likely to secure it. People want to join the network to earn some of these tokens to secure it. The more use cases get built upon it because people are making money and it bootstraps. It's behavioral economics, it's an incentive based system to bootstrap the most ridiculous startup idea of all time, which is I'm going to entirely disrupt money and create a new Internet. I mean, that's laughably stupid. And that's what's happening.
- [77:28]
B
One of the. I run a company called Third Web, which is a Web3 infrastructure business. We've raised quite a lot of money for the company, about $30 million now, and we have a big team and it's interesting for me to observe the use cases because people come to Third Web to build on the blockchain. And one of the really interesting use cases we've seen over the last, I'd say 12 months that's really exploded is gaming people building web3 blockchain based games. Because if you think about games like FIFA, which is a huge game obviously in the UK where we're big soccer fans, or other games like Runescape back in the day where you have assets in the game, in FIFA you have a messy card, in Runescape you might have a sword. The thing that the blockchain now enables us to do is to take those assets from the game and actually trade them outside the game. So if the sword was on the Ethereum blockchain, even though I'm not inside the game, I can trade that sword on the Ethereum blockchain. And so one of the most exceptional use cases we've seen at Third Web is people building AI games. Sorry, people building Web three games. Because these assets are now valuable. It's great for the game developer. They've now got this brand new economy for their company. And it's great for the people that own those assets in the game because those assets are now more valuable because more people can access them. And I don't think people realize the extent to which this disruption is already taking place. People think of crypto and web 3 and they think of buying coins and hoping the price goes up. But it was interesting. Everyone knows DocuSign and Adobe E Sign and those things. And I went on one of their websites, I think it was DocuSign because I thought surely physical contracts should be on the Ethereum blockchain now. And there was this little paragraph on the DocuSign website which says every time like a contract is signed on DocuSign we do like there's a hash on the blockchain, so it's like recorded on the blockchain. And I thought people don't even know that the blockchain is now penetrated.
- [79:23]
A
I've got an asset management company, Exponential Age Asset Management. We invest in hedge funds that just invest in crypto to capture this trend of going from $2 trillion where it is today in value, I think it's going to 100 trillion in let's say 2032, 2034. Okay, that's stupid. That's more wealth than has ever been created in that period of time on earth by. It's twice the amount of value the s and P500, the entire US stock market took to build in 100 years. I think we'll do it in 20. So this is staggering, that wealth, which is why we'll talk about why people should be involved and how they should be involved later, because I'm passionate about that. But one of our investors, I was in Switzerland and she is the head of trading at one of the soft commodity companies. So soft commodities like cocoa, sugar, corn, all of this stuff, agricultural commodities. And I'm like, surely you guys should be thinking about building on blockchain because there's a lot of letters of credit and stuff that happens. Shipments. She goes. All the commodity trading houses built on Ethereum in 2020, she goes. So every shipment we make, the shipping contract, the quality of goods contract, the letters of credit, everything is on chain. So we don't have to trust these others. Because commodity industry is full of sharks and you're dealing with countries that are not easy to deal with. We've got this verifiable source of truth. It's completely revolutionized our industry and nobody knows about it.
- [81:11]
B
And if I own Ethereum, if I own an Ethereum token, which I do, by the way, I've been stacking it and refusing to sell good. Much to my brother's dismay, who's like, Steve, you're a bit too emotional about this stuff. And I was like, bro, I was like, if there's any asset that I own that I.
- [81:26]
A
Well, we're going to talk about how not to fuck it up later. That's another thesis.
- [81:29]
B
But how do I benefit from the fact that games are now being built on Ethereum?
- [81:33]
A
And it's really simple. If we'd have all been given shares in Facebook when it started, we'd have all been hilariously rich. But we didn't. The VCs got it and then it went to the public market and then you have to have a brokerage account. You have to be approved, right? What this is happening. You buy an Ethereum token today. If Ethereum ends up becoming bigger and more uses. Your token value goes up. It's as simple as that. So you get to participate in an entire technological revolution really simply from your mobile phone and you don't need anybody to approve it or do anything? Yes, there's regulation stuff, but simple stuff like that, it's pretty straightforward for almost everybody in the world. So therefore we talked about how do you invest in your disruption and the future of technology. Okay, here's one where you can really do it and it's easy to do.
- [82:33]
B
A couple of questions here then. So you said it's easy to do. Yeah, let's talk practicalities. How does one do it? I can do it on my phone. I have to call someone. How do I invest in crypto?
- [82:44]
A
You just open a crypto account with one of the big crypto providers, Coinbase, Kraken, crypto.com, whoever. I'm a Gemini.
- [82:54]
B
What about this, though? My bank, my digital bank is offering me to buy crypto on there. Should I do that?
- [83:00]
A
Yes, you can. And you could do it via PayPal. Start somewhere. I'm not going to say no, but you will go down the journey that everybody goes down. Which is the easiest on ramp is the best revolut. Whatever, I don't care, just do it. Get a feel for what it's like to own an asset that goes up and down a lot, particularly down. When it goes down, it makes you feel terrible and you've got to learn about how to deal with it. And then, because it goes up over time, if you don't do anything and you've chosen a good quality asset that's provable as an asset in itself, it'll probably go up over time. In fact, highly likely to go up a lot. And then you'll start thinking, do you remember Raoul saying that the bank owns this stuff and I don't own it? And then he might say, oh, but the magic here is, unlike the bank where I can't take more than ten grand out, I can put it all on my little ledger device.
- [83:59]
B
Because what's a ledger device?
- [84:00]
A
A ledger device is. It's actually, it's a company that provides it. But what it is, because this is just an address on a blockchain. And think of it, it's like your mailbox. You can send stuff to it, but you can't actually take it out. Like your email, Somebody can't read all your emails, but they can send you emails. Well, that part that's private, that secure passkey, essentially. Well, you Keep that to yourself. And it's stored on a device and there's a complicated way of doing it and you'll have to go through that, which is you have to have this seed phrase that does it. This technology will change quite soon. Fingerprints, face prints and a bunch of other stuff. But basically a little USB stick will secure that you can go and put in a safe or go and take it to your nan's house or whatever it is, can secure your money, that it's only yours and nobody can take it out.
- [85:03]
B
I have mine on a ledger, so I have my Ethereum on a small. It's kind of like a small USB stick. And then that USB stick is protected by like 24 words or whatever it is.
- [85:13]
A
That's right.
- [85:13]
B
And those words are on pieces of paper in different countries at the moment. That's right. And it means that no matter what happens, no matter where I am in the world, no matter who comes for me, I can always retrieve the X,000 Ethereum that I have on this ledger device. Unlike a bank where my account could get frozen by the government, or they could empty my bank, they could freeze my bank, I will always have that value.
- [85:38]
A
And also, there's a famous example of the conversation of gold in the United States, and it's been done in many countries in the past. The good thing about this magic Internet money is you have to physically cross borders with it.
- [85:53]
B
Yes.
- [85:55]
A
Think of all the Jewish people who had to take money and diamonds and gold out of Nazi Germany and out of Europe. It was hard to do. Here you don't have to do anything. You just need to remember a seed phrase.
- [86:09]
B
A seed phrase being basically a string of words.
- [86:13]
A
Yeah, yeah.
- [86:14]
B
So which blockchain, which coin do you think people should invest in? I have only ever invested in one. I've only ever backed Ethereum. And I think part of my bias there comes from the fact that when we were building third Web, I had a window into the blockchains that people were actually building their applications on. And Ethereum was the. Was the one. And obviously there's layer twos, which are people then, you know, build blockchains on top of Ethereum, et cetera. But for me, Ethereum was just the dominant blockchain that I thought would solve for most of the use cases outside of maybe what they call a store of value outside of money, necessarily. So contracts and other things. What do you say?
- [86:56]
A
This is my 30 years of expertise. Is this one thing, which is asset allocation. Firstly, the average person watching this is, you need to allocate to this, end of story. If you're going to start somewhere, start with Bitcoin. It's just easy to do. It's widely available through different, whether it's a credit card, anything, just do that. I don't care, do that and do it with as much money as you can afford to see. Go down 60, 70% and don't care and expect that to happen because that's what you have to see to see the long term, 150% a year, it's included. Within that is these downsides. Then I want you to put in some money every month, regardless of price, to build your savings in this exponential asset that goes up a lot. Okay, now you're set, you're on the journey. And then you want to figure out how do I make the most money like you? I switched. I had Bitcoin to start with. I switched all of my Bitcoin into ETH in 2020 in Ethereum. And so I was, I just owned that plus some NFTs and a few other bits and pieces. But generally it was that. And then in 2022, in the bottom of the bear market, I started to see the price of Solana, seeing like it wanted to outperform Ethereum. Now, Solana, much like your thesis, I saw this massive developer community, passionate retail and a difference in the technology because these are all basically distributed companies that sell block space. So you want to look for attractive block space. Bitcoin, it's the secure one. Ethereum, it's like the world computer and everybody's building on top of it. Solana, faster, cheaper, feels more friendly, efficient. Yeah, it feels more retail. And I saw that. And the speed of which they can do things and the innovation and the developer community meant that I started switching and then switched all of my ETH outside of my NFTs where I collect a lot of art, into Solana. And I've now been switching part of my Solana into Sui Sui. And as a disclaimer, I'm actually on the board of the foundation. But it's like the next big chosen one. It's the group that came out of Facebook, that built Facebook, Libra. So what I'm trying to do is maximize my return. I'm a mercenary around. I'm passionate about this space and what it means, the technology and how it empowers people, how it can change the third world, how it can change the Internet. But I'm also a mercenary for my own capital and for anybody else I can help now does not always get it Right. So in your particular circumstance, I would like, look, you'll probably be fine over time, but you're not maximizing your returns. But do you want to take the risk? Do you have the bandwidth to do that? And these are the questions we were talking about with work. It's the same thing. How much do you want to go down the rabbit hole? How much time do you have to invest versus the expected upside?
- [90:23]
B
I don't have time. I'm spending all my time doing podcasting, building businesses.
- [90:27]
A
And then just do what you're doing. Unless something says that Ethereum usage is falling off a cliff and developers are leaving entirely, then don't worry about it. You're going to be directionally very right. Will you capture the best returns? No. Nor will I. Some other Brando will get by luck something, right? But the average person. So I have this thesis that I've tried to help as many people with this is from my own learnings and watching everybody else fuck it up is what happens is you're given this incredible asset class and at first you do an intelligent thing like own some Bitcoin or some eth. And then you want to go out the risk curve because you see somebody else making more money. You understand you can, that's okay. And then the bull market really hits the banana zone, period. When things go bananas, prices go vertical and you will see people online saying, well, I made a million dollars today because I bought this meme coin. And you will lose your mind and you will start buying all the stupid shit and you'll go so far out the risk curve. And then when the music stops, the stuff you own will be worth nothing and the more quality tokens will retain their value. The other thing that people will do in that journey is use leverage.
- [91:47]
B
What is leverage?
- [91:48]
A
Leverage is when you borrow more money to buy more of the asset. So I now borrow money to buy more Ethereum because I want to outperform you and I want to make more money because I'm really greedy. The 160% a year that Ethereum does as returns since 2015 is not good enough for me. I want to make it 400, 500% a year. Stupid, right? And what happens is you borrow money to do it. It's leverage. Futures markets, perpetuals, there's a whole bunch of ways of doing this, or even borrowing on your bloody credit card, whatever way people will do this. And you really have to know what you're doing, because the whole game, if this technology is going to last over time and it's going from 2 trillion to 100 trillion. You have one job not to lose your tokens, one job you can do nothing like you're doing, and you will make an extremely good amount of money out of it. Your one job is to not fuck that up.
- [92:47]
B
I have a bit of a theory, and this theory is very naive and narrow and based on the smallest sample group in the world. It is. I have six friends, actually, I'm one of the six. So I have five friends, five of my best friends, and we've all taken different attitudes towards crypto. And my friend, who is most heavily involved in crypto has made the least money and is arguably the least rich and it's his life. And I think it's because of what you've described. Whereas my position has always been I invest in this one coin, I don't sell it and I just buy more when I can. Over the last six years, I don't really pay attention. Frankly, if you asked me to log in to see the last time I checked what it was worth, I couldn't tell you. Couldn't tell you what it was worth. Actually, I've struggled to log in. It's been so long since I've logged in and looked at it. And I think my returns have outpaced his because of that.
- [93:37]
A
Yeah, I think that's right. And so this is all the conversation we've been having. The secular trend, the opportunity, the skill set, then it's the execution of that thing, then it's not to fuck it up. And what you've done is not fuck it up.
- [93:55]
B
He invested in.
- [93:55]
A
You've got your seed phrases elsewhere. You've got no single point of failure. You've got it stored privately yourself. You have it in a large one of the top two, there's probably three, that low risk in terms of the chances that the use gets abandoned in the next five years. Bitcoin, Ethan Solana, they're pretty safe. So everyone should knock their socks off. 80% of their portfolio. Do that and you'll make money. 90% of portfolio. Don't use leverage then. We're all humans. Give yourself 10% and do the fuck what you want. Most of the time you'll find out that that 10% goes to zero, which is fine. It's a good lesson. You don't care because you've made plenty of money on the rest. But if you are that genius who can find the thousand x meme coin, knock your socks off.
- [94:48]
B
Here's why I think that genius ends up because it's funny because the friend I'm describing, he's in Dubai. So there's a lot of them out there that when I said Dubai, you understand what I'm talking about? They all invested in Luna. They lost their fucking shirt that he was telling me about his boy who he works with, who made, I don't know, tens of millions betting on these meme coins. And then now he tells me that exact same guy is broke and is in a lot of trouble because the mentality that makes you go in pursuit of these real high risk bets, these were like meme coins and stuff, is also the same mentality and mindset that makes you lose the thousand X return the $10 million you made on the other side. And I think the Psychology of Money book talks about that as well. Case studies. Morgan Housel's book. Case Studies. The guy who bet against the contrarian that made the billion is also the same contrarian that ends up losing it again in the next cycle.
- [95:43]
A
I've seen that a lot. The problem with the meme coin thing, it is a casino. What is good is there are periods of time where everybody in the casino makes money. Yeah. Which is unlike casinos because there's trends in financial markets and I was taking out.
- [95:59]
B
So it's paper returns.
- [96:01]
A
And then a lot of this stuff goes to zero. We saw that with NFTs last cycle. We've seen it with a whole bunch of tokens, which is where you need to be very careful of latching onto a token and just keeping hold of it because some of these won't survive. You're lucky you're in eth and not in something else eos. That was around in 2017. Right. It's like you're stuck. So you need to be careful. Speculation does work for periods of time. It's better than actually lottery tickets and generally better than the casino. But only for periods of time. And then you will lose everything. Somebody's going to come into that casino and sweep every table and only 5% of the people are going to be left with money. So just think of it that way. So if you want to have fun, people. But the people who do it the most are the people who live off adrenaline.
- [96:48]
B
Yeah, Right.
- [96:50]
A
It's the adrenaline junkies. They're usually terminally online. They probably like to gamble in other ways. Sports betting, it's, you know, it's an in. I'm not really that person. So I don't trade. Yes. I own a few meme coins because I enjoy the fun of the culture and seeing that culture develop, but just keep it simple. Stupid.
- [97:13]
B
Is this why men are so drawn to this? I was thinking about the gambling statistics and it's like something like 95 or 98% of gambling addicts are men. And I was thinking, how does this overlap with their sense of purpose, community?
- [97:26]
A
Much a deeper question. I think men feel hugely under pressure to be successful, to provide. There's a societal thing about what a man does and what he should do and how you measure success. That even in sports, it's kind of. It's very competitive to be a man, but it's also somewhat of a lonely pursuit in that respect, because men aren't very good at talking about their feelings and their fears and all the bullshit you bring in your head. So some gambling is to do with that desperate need to get ahead. I need to make this work. But then it becomes somewhat of an addiction because of the adrenaline. Dopamine is a very, very powerful drug and we search for it all day, which is what the Internet's all about as behavioral economics. This is what they discovered, is you trigger dopamine and you can make all animals do something, famously Skinner and the rats, but humans and the Internet and like buttons and anger and all of these things. So there's part of that. It's partly also male society is about betting and proving your prowess gladiatorial. So it's a whole complicated thing of what makes men do it. But the reason, for example, in crypto, it's so male, because we're driven by that need to be the breadwinner, even though society has moved on from that. And we're seeing fantastically a rise of women in the blockchain space and a changing of that crypto bro culture that was there.
- [99:14]
B
If you follow some of the crypto bitcoin Twitter pages that are the confession pages that people can write in and confess what happened to them. It's often really sad and heartbreaking hearing about this father who has three young kids under the age of seven, who invested in some meme coin, lost it all, and now his wife wants to know where the money is and he's got nothing to show for it. And I've seen these documentaries, I've even kind of heard of these stories in my extended network where, like, my personal trainer put 6,000 pounds of his very scarce money into some coin and it went to zero and he's lost it all. And the suicides in the. In the bear market, when people have put too much in and they've lost it all, much of the reason why I think people don't invest in crypto anymore is either they've heard one of these stories or they are one of those stories. And I think there's. So there's kind of a disclaimer and kind of a warning here which needs to be heard.
- [100:05]
A
Well, this is the don't fuck this up thesis by Bitcoin, Ethereum and Solana. One of those three, preferably all three. And that will stop you going to.
- [100:17]
B
Zero, but it will go up, it will crash 70% or something.
- [100:21]
A
Okay, so that's a conversation about time horizon.
- [100:24]
B
How long should I be prepared to hold it for to make a return?
- [100:28]
A
Well, it depends what return and for what. Remember we talked about what part of your destiny you're trying to manifest here? Which part of your lifestyle chips are you trying to cash in? So if you're trying to get rich quick, I want to make loads of money by next year. I'd rather you didn't do this. I don't think that is a sensible, intelligent way of living your life. You're going to take too much risk and you're going to substitute to lose it all. If you said, hey Raoul, listen, what I want is I want in 5 years time to have made a decent return on my money. Three, four, five times my money. I'm like, yeah, that's fine.
- [101:13]
B
Okay, I'm going to ask you for a price prediction. No, you don't do price predictions.
- [101:17]
A
Not anymore. And the reason being is because a lot of people listen to what I say and therefore they then build a mental model around a price. And what you do is then you create a false comfort in what you're doing. But Raoul says it's going to X and that stops you doing the work to make yourself test anything. And then you start extrapolating. Well, I put 10 grand in and if Raoul's right, I'm going to have a million dollars. The whole thing becomes this emotional journey. And so I've tried to stop doing it because the best thing I can say to people is listen, 2032, 2034, that is not long away. Ten years, this asset class is going to go from 2 trillion to 100 trillion. That is a huge return. Now some of the coins in that space will do a multiple of that. Simple thesis is why I built xpam, the asset management company. Exponential Age was just to capture this trend, to let, well, unfortunately it's only for high net worth investors and institutional investors. But just let them go on that journey. Get the hedge funds to take the Risk and figure it out and do that. But if people just do that, give me 10 years, just give me 10 years. And if you do it 10 years and you're sensible, you'll be able to take a whole chunk of money out every few years because it's quite cyclical, it moves maybe every four years. And so you can take a chunk out, cash it in the lifestyle bank and keep moving towards that goal.
- [103:03]
B
Well, as you were speaking, I figured out your price prediction based on your prediction of how big the asset class will get. So you gave me enough time to ask AI to do the math for me. And it says if bitcoin has a 40% market dominance, the market cap of Bitcoin will be roughly 40 trillion. If there are approximately 19 million bitcoins mined, the price would be around 2.1 million per bitcoin. At a 50% dominance, the price per bitcoin would be 2.6 million per bitcoin. Today, as we sit here, the price of Bitcoin is $62,000. So if your prediction that the asset class gets to 100 trillion and if Ethereum is 15% of that, then each Ethereum will be worth $125,000 per Ethereum and today it's worth about 2,000.
- [103:49]
A
Do when I face with something like this. When I first bought bitcoin in, I first wrote, I wrote the first ever bitcoin strategy piece and made a price prediction based on what I understood about bitcoin back in 2013 12. It was the first ever piece written by anybody. And I said listen, I think it's worth a million dollars and it was pretty at $200. And I had some basic maths, but same kind of idea using trends and everything else. And I said I'm assuming I'm wrong by 90% still worth 100 grand and it's currently $200. It's the best trade you'll ever do in your entire life. And that proved out to be true. So let's assume that Raoul is a moron. I'm 50% wrong. As a $50 trillion asset class, you get to a million dollar Bitcoin ish, right? And assuming whether it's that dominant or less dominant and what happens to it, but you can see the magnitude of the returns. So that's a what, 15x return in Bitcoin.
- [104:52]
B
What if you're wrong? You've staked so much of your life on this, you've invested so much of your own money in it. What if you're wrong about this? Asset class. You couldn't have predicted Bitcoin would be so dominant 20 years ago. We couldn't have predicted even five years ago that AI would take hold. These things come out of nowhere and they change the paradigm. What if you're wrong?
- [105:13]
A
I'm an investor, so being wrong is part of the thing. What's hard is via helping so many people at Real Vision and elsewhere. It is a weight I carry on my shoulders because I'm trying to bring as many people across the line and unfuck their future and all of these things. And I ask myself those questions and I go back to the simple thing. There is the graph of the adoption of this. If that's going to stop, we've got an issue. But then how are we going to solve problems of digital identity or contracts in a globalized world or any of these things without this technology? I can't do it. It's like a magic technology. The Byzantine General's problem was a real complicated problem that nobody had solved until Bitcoin.
- [106:10]
B
Maybe AI creates a better blockchain. Maybe AI creates a better system.
- [106:15]
A
Yes, it could do. But how long away is that before we adopt it? It adopts that technology, some quantum cryptographic whatever. Right. Is there a need for it yet? Why are we disrupting a new industry that's not been disrupted? But yes. No investment comes without risk. Crypto comes with that risk. The risk that governments will try and shut it down even though they've tried. And it's like a cockroach because it's distributed and it's everywhere. Yeah. The blockchain you invest in becomes less valuable. There is the cyclicality of this asset that can fall 70%, 80% every three, for every four years. You have to deal with that. There's the risk that you lose your coins. There's all the risks in the world and that's why you get paid the return. So there is no certainty in this world. I live in a probabilistic world. But if you can show me the world is going to be less digital than today and you can show me a better way of dealing with a lot of these structural problems that we have. And you can show me that the community, the groundswell of individuals, don't forget this is driven by individuals. We front run the institutions. The institutions weren't allowed to invest in it, but we've been able to put our money in before they did. We've created it. If I see any of those factors changing, then I'll worry about it.
- [107:44]
B
So you're telling Me that if I'm earning an income right now, I shouldn't hold these pieces of paper that the central bank, my bank is giving me. I shouldn't keep cash in my bank account.
- [107:57]
A
Everybody has different needs. I'm not saying don't wear your tin hat and look, everything up to about 100 grand is protected. So you're okay, you're not going to lose your money that way, but you'll lose it another way. And that's the debasement of currency.
- [108:15]
B
It's time to take a moment to reflect on our sponsor, whoop's Sober October Challenge. I know thousands of you got involved in the Sober October Challenge. My inbox has been flooded with messages sharing the changes you've experienced, which is amazing. A big part of why I partner with brands like WHOOP is because I believe they offer something of incredible value that I use in my own life. Something that's made a transformative, transformative impact on my life and is frankly much of the reason why I quit drinking alcohol. Challenges like these aren't just about getting you to stop drinking forever. They're about getting you the tools to have more agency over your life and to make better informed decisions with all of the information at hand. Hearing that so many of you got involved in this challenge is absolutely incredible. If you didn't take part in the challenge, but you still want to learn more about Whoop, all you've got to do is head to join.whoop.com CEO and start your free trial today. I have a hunch that you won't regret it. So what's the debasement of currency really?
- [109:08]
A
Simply, we talked about, in a digital world, everything goes to zero in value. That is debasement. What it means is too much of something makes it less valuable. I can come out of the desert, I will pay you anything for a bottle of water. Give me a million bottles of water, I'll pay you nothing for them. There's too much of it now. You say, well, how can there be too much money? But what happens is the economic system revalues things in this weird world in this weird way by debasement. So debasement in the old times was, if we take one of those gold coins, debasement was that was, let's say, one ounce of gold. Then I was the Roman emperor. I would just snip off a little bit of the gold, you wouldn't notice and you'd still value it. Try and pretend it was the one ounce, but somebody else would say, no, it's actually worth less. I've taken that slither as the emperor and I've used it and spent it on sports cars. And you've now got a less valuable coin and the country has less value, so the money is less valuable. It's called debasement. The more of it that's around. In an electronic age where you just press the button and you create money, then what happens is the value of money goes down. So let's say people can understand it simply as let's say you go on holiday and you go to a country that has a very weak currency. Let's say it used to be Mexico. Let's say you're an American, you went to Mexico. Everything was cheap because the currency kept going down. But for Mexicans, it actually got expensive because the value, the purchasing power of your peso went down and you couldn't buy as much with your peso. What we're doing is ever since 2008, the whole world, all the big economies in the world hit 100%. All the governments hit 100% of GDP in debt. So 100% of the economic value of that country was in debt. And that means that just paying the interest on that debt starts to become a burden. So let's say your economy is growing at 2% a year. Let's say your interest rate was 2%. Well, 100% of the economic growth basically goes to pay the interest payments because somebody needs to generate the money to pay them. But at the time, corporations were over 100% of GDP in debt, and so were households. 2008, everybody was in a debt orgy. The financial system was just lending everybody. And then it all fell apart. And so what they stopped doing was really corporations and households stopped borrowing as much money. They in fact restricted money to us. So in these economic times, we've actually been able to borrow less money, while house prices have gone up by debasement. I'll show you that in a sec. And the governments have taken on this obligation. So they've been massively growing their debts and they reset interest rates to zero to give them a chance of paying debts back in 2008. And only recently have they really risen. But they've still got all of these interest payments to pay for. Now the US economy is 380% of GDP in debt. Staggering. Considering the size of this economy, the world, the entire world, is 400% of GDP and debt, we've gone so far beyond what is sensible anymore that it's become incredibly fragile. So the management of the payments of the debt, and the debt itself is the number one focus of the government and the central banks. Because if it all goes to shit, it all goes to shit. Everyone's going to lose their savings. Every business goes under, every government goes under. There's no payment of services. The retirees lose everything. It is unfathomable. And I know many people online talk about, yeah, we should just let it all go. They have no comprehension of what that will do in a world that's 400% in debt. It's basically a 75% wipeout of every single asset and all the Brittares and all your savings and all your pensions and everything. So the answer is, well, let's just print some more money to pay the bills. That's you taking a credit card to pay off your credit card payments. Now when you control the money, you can kind of do that because nobody's going to tap you on the shoulder. So what they do is they start printing money. At first they used to use the balance sheet, which meant that the Federal Reserve or the bank of England or whoever would buy bonds from the market and basically take them off the market. So it meant there was less debt around in the market. But they changed the thing. They now have something more pernicious called liquidity. You can't see it. They've got different mechanisms that they put this into the system and basically everybody, all of the central banks are doing it at the same time. And they're also all in agreement that they have to do it. And this is all driven by the aging demographics and the debt problems that it all caused. And so what we've got is every government having every four years or so to print a lot of money. Why four years? Because in 2008, they all reset their interest rates to zero. They then went and borrowed money three to five years out. And every four years the cycle comes up and they start injecting money. Liquidity. Okay, so what does this all mean? People watching this like, yeah, I kind of know what you're talking about. What it means is that on average, your money goes down in purchasing power versus scarce assets by 8% a year. And then you've usually got, let's say a 3% inflation rate. You've got 11% of your money is being devalued every year. Your future self is getting poorer by 11%. Remember we talked about the future self and if you buy the S&P 500, what was it making? About 11% a year. So if you buy the S&P 500, your future self is not going to get any richer for the risk you've taken locking up your money for 10 years or 20 years because of this inflation, because of this debasement.
- [116:11]
B
Debasement.
- [116:12]
A
Now people confuse inflation and debasement. I would call this debasement of currency. And so this is happening at 8% a year, which is why we're all feeling so fucked. It's happening. All these assets keep going up, real estate keeps going up to offset this. Now, what I did once I realized this, something I call the Everything code, is a big thesis around how this all happened and what it all means. And what's happening is basically the aging population is driving debt to gdp, it's driving the government debt, and then the liquidity is paying the interest payment. So it's this economic machine that the world has become. It's perfectly cyclical, it's perfectly predictable. It's not going away until we have this technological revolution we talked about. And so everybody has to protect themselves. So once I found this thing called the everything code, I started thinking, okay, if this, let's say 11% rate, the hurdle rate of money, that my future self is getting poorer every year by, what do I invest in? So I started dividing everything by that. And The S&P 500 doesn't make you any money. Real estate doesn't really make you any money. Gold actually lost your money, supposed to maintain your purchasing power. I'm like, holy shit. There were only two assets in the world that outperformed this technology. Crypto. The Nasdaq was doing 18% a year and crypto was doing 150 plus Solana's done 250% a year even with three 80% drawdowns. So this is what got me to change my entire investing game from being a broad based investor with a balanced portfolio to okay, there's only two bets in the world. There are literally two bets in the world. Technology and crypto. And the Nasdaq is down 99.97% versus Bitcoin since 2012.
- [118:16]
B
How much of your personal money do you invest in crypto?
- [118:18]
A
100% of my liquid net worth. And it has been five years.
- [118:22]
B
Have you done well?
- [118:25]
A
Yeah, yeah, very well. I've not made any major mistakes. I mean, I've been in this journey since 2013. So I have made mistakes. My mistake was I bought it at 200. I put not bad sized betting considering how unproven it was in 2013. It was how unproven it was. And it went up. It went up 5x or something. In the first three months of me buying it, I'm like, I'm the best investor in the world. This is amazing. Then it fell 87% and I'm like, I had this long term view it was going to 100,000 and that I would just not look at the price as you're doing right and fine. And then 2017, it was now at two and a half thousand. I was up like 10 12x, which was amazing. I'd never had a bet up 10 or 12x. And there was some weird stuff going on. There was another bitcoin, the code had been forked and I was like, I don't really understand this. I'm going to take my money. So that was about March, April 2017. By December it had hit 20,000. It had gone up another 10x that year. Then it collapsed down 85%. And then I bought it in 2020 during the pandemic into that big sell off where it fell 50%. So I bought it cheap. I sold it on the way out, I then bought it when it sold off. If I'd have just held onto my original bet, I'd have made five times as much money. And if I'd have listened to myself, which is every four years when you have these big sell offs, you just try and add as much money as possible, I'd have made 25 times as much money. So even though I got it right, I fucked it up too.
- [120:21]
B
Raoul, you've said that the best trade is always quality of life.
- [120:27]
A
Yes.
- [120:29]
B
If your account is full of quality of life and quality of life experiences, that's the greatest trade on earth. And I'll continue to do that trade until the day that I die. What do you mean?
- [120:42]
A
What is the purpose of life? Now we can get very existential about stuff and you actually go down these piles a lot with AI and universal consciousness and a lot of other stuff. But basically, let's just assume we're humans. Let's just assume maybe we've got one shot on this earth. Well, you might as well make the best of it. And people have got to remember money is just a scoring system that allows you privileges. And people lose track of that and think money is the privilege itself. The privilege is freedom. The privilege is being able to live where you want to live. The privilege is being surrounded by the people you want to be surrounded by. The privilege is being bring up a family. Whatever your value system is, those are the things. So for me it's, I like living in nature and that's probably key thing, number one, but being connected. So when I bought a house in Spain, that was a huge quality of life thing because I've got a security of a house that I own in nature, in good climate. Okay, I'm fine. But really, experiences are even more powerful. If there is a true currency in the world, it's experiences. As I said, I've just come back from living in the remote world of Zambia. That is an experience that is incredibly valuable to me. And I've done a lot of these. That is what it's all for. This understanding and seeing of how the world is and the beauty and the marvel, the people understanding people and not being fearful of people and not thinking about cultures except in terms of, oh, that's their culture. And that's their culture. As opposed to culture. Good culture, bad friends, all of these things. These are the valuable things. You can't buy any of them. You have to physically go and spend the time and be uncomfortable. I've always said there is your comfort zone and where the magic happens. And these two Venn diagrams don't intersect. You have to be outside your comfort zone to feel the magic. If not, you're just doing life by numbers.
- [123:05]
B
Do I need money to have those experiences?
- [123:08]
A
No.
- [123:08]
B
So what's the point? And me doing all this bitcoin investing, focusing and sacrificing my 20s.
- [123:15]
A
You need some money. You don't. You can solve for it without. But it's hard if you're living in Ohio or Birmingham or wherever you are, right. To get some of these things. It might be, I want to be warm and dry. I want to grow my own fruit and vegetables. Whatever it is, doesn't matter, right? You can solve it by a number of different ways. But really, for the average person, I say this is like if you want to live on a beach, you can either become a billionaire and live in Saint Barts or you can go to Latin America and live on the beach for virtually nothing. And if you're living in an Internet age, you can make it happen. But then what happens is maybe you want some more creature comforts. Maybe you do this. Look, I don't say that we should all be the Buddhist Zen master and say we need nothing, we can reject everything. But if we break it down to what is the feeling that I want, then you can solve it with money or without money. And you won't be disappointed. Because remember, the very beginning of our conversation is what makes people unhappy is when their vision of their future self and their current state don't Meet now, if your vision of your future self is, remember I said, I want that, that peninsula in Spain where that family. So what are the component parts of that? I like sea. I like social life of people. I like natural beauty. And with somebody I love, okay, that can be solved a hundred different ways.
- [124:52]
B
But in your life, did you have to shift from the building zone, the building season of life, to then the enjoyment season of life?
- [125:01]
A
I did in the middle, which was the lesson I learned is I had done the investment banking and the hedge fund thing. I then opted out the rat race. I wasn't the richest guy in the world, but I thought, you know what? If I can get a source of income, I can live and I can grow my olives and almonds. And I lived in a beautiful house on the side of a national park near a beach town in Spain. I've won the lottery and I started Global Macro Investor. That ended up becoming a much bigger thing because the financial crisis. And I predicted it and got all that stuff right. And so what I found is I'd semi retired and I was surrounded by people who weren't really stimulating, intellectually stimulating. I made some great friends, but you wouldn't have a conversation like this. And so I felt isolated. And then you live on adrenaline if you're an entrepreneur or in financial markets, and so you end up going out to bars and nightclubs. And I'm like, I looked at it and I've been there 10 years. I'm like, I got to get out of this. Because I'm excited by life. I'm excited. I want to do the entrepreneur thing. I love investing. I just want to be around people who also did it. And by chance, I ended up building a house in the Cayman Islands because it was one of my dreams. I wanted a house on a tropical beach. I love diving, all of this stuff. And that was the signal to me to go, fuck it. I'm moving to Cayman. I started Real Vision and I started the Entrepreneur's Journey. And now I've got four companies and I'm busier than I've ever been in my life. I'm very happy doing it, but it's a chapter again, and it'll give me the lifestyle ratchet, but also the intellectual ratchet that I wanted to prove to myself that I can do some of these things.
- [126:46]
B
We have a closing tradition on this podcast where the last guest leaves a question for the next guest, not knowing who they're going to be leaving it for. I've never revealed the last question in Terms of who's written it, but I'm going to reveal it in this case. This question is written by Boris Johnson. And the question was, have you ever tried to sack someone and ended the meeting having accidentally promoted them? Boris is speaking from experience there.
- [127:15]
A
You know, I think I probably have. I think I probably have. And that goes back to one of my things that I've had to learn is how to have difficult conversations. I'm English and my mom's Dutch. We're also quite evasive. We don't like drama. My wife's American, so she's taught me that like you should go straight in for the kill. And I've avoided tough conversations and so I've probably ended up in that situation or something close to it. Does it not as perfect?
- [127:55]
B
I have as well. Of course I have.
- [127:56]
A
And I'm just like. But it's the lesson I'm trying to learn is you need to be more. If it's a tough conversation, just do it.
- [128:05]
B
Amen. Thank you, Raoul. I think everybody should go and check out your channel, which I've watched for many, many years now. I think it's the, in fact, it's the only channel I go looking for when I'm looking for advice on anything crypto related, the macro environment, inflation, all of these things. The only channel that I trust and that I go looking for. And I really, really mean this when I say it has always been yours, because I think you've provided nuance in a way that's incredibly accessible to the average person. And a lot of these finance channels are very difficult to understand the terminology, they kind of skip past that part. But what you've done so well is made all of these subjects so accessible for everybody. And I can't imagine how many millions of people you've helped open their eyes to the state of currency debasement and some of the myths around how to create and save your wealth. And I think that's a mission that is so incredibly important because a lot of this insight, unfortunately, historically has been reserved for the elites, however you want to define them, the elites intellectually or only the people that work in finance. And I think what real vision has done is blown those doors open. And you've been a champion for me in my life and an educator for me in my life. So that's why I was very excited to speak to you today. So thank you for what you've taught me.
- [129:16]
A
I appreciate that and also for everybody watching this. Look, I'm genuine in trying to help as many people and so this whole Everything code thesis to make people understand it more, we've made a whole special error for you guys in Real vision. Go to realvision.com diary and there is all for you guys watching this. It's the Everything code, the document so you can read it, watch the video. You get free Real Vision subscription because it's free to join. And honestly, there's so many tools and if you don't understand something, ask the AI. The bottom right of the screen there's a little plus button. You ask the AI, the Real Vision bot will explain it to you. Everything you need is there. It's free. There's no reason not to unfuck your own future.
- [130:03]
B
I'll link that below so everyone's got it. That's realvision.com diary. There'll be a link below in the description wherever you're listening to this. Thank you, thank you.
- [130:12]
A
I really enjoyed it.
- [130:12]
B
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