← The Pomp Podcast
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- [00:01]
A
This episode is brought to you by Google Chrome. You think you know a browser, but Gemini and Chrome, that's new. It can help you with practically anything on the web like restoring a vintage motorcycle from a 50 page restoration block. Or finally break down that long article you've had open for weeks. Gemini and Chrome is here for it, ready to make anything online make sense. There's no place like Chrome. Check responses set up required compatibility and availability various 18 plus the number one
- [00:27]
B
threat to investors portfolios over the next 20 years is socialism. And there's two types of socialism. There's explicit socialism and there's implicit. What's going on guys? I have a very special treat for you. Polina Pompliano, my beautiful wife, she is back. For the last year she has been like a ghost. You haven't seen her, she's been gone. It's because we had two beautiful little boys and now she is back from the maternity leave and we're ready to get into it. There's a lot we got to cover. You know me, if my wife's here, I got a hot take about something. And so we get into everything from why socialism is a big threat to investors portfolios, what's going on in the economy, why inflation is higher, why so many people actually are feeling pain in their everyday lives, but the stock market's at all time highs. And of course we talk about some of my life advice. Let me, you know, just talk about what are some of the things you should take away from this conversation? Here it is with Polina Pompliano. All right, what's the first topic?
- [01:20]
C
All right, we're talking interest rates. Citadel.
- [01:23]
B
Boring.
- [01:24]
C
You sound like our two year old Citadel surprised investors on Monday with a report that they expect the Federal Reserve to raise interest rates this week. Do you think the market is underestimating what could happen?
- [01:37]
B
I do not think that interest rates are going to be raised. I think that they're probably just going to kick the can down the road by getting the inflation report where it showed that inflation was cooling. That means that the Fed is going to have a much harder time going and raising interest rates. On top of that, if you look at all of the market probabilities, every single data point is showing that the Fed is less likely than they were previously to raise interest rates. And so will they cut? Probably not either. I think they're just going to keep kicking the can down the road. It's what the Fed does best is they'll say let us just wait for some more data. The Fed 100% wants to cut rates if they could, but the data's not there yet. And so I understand everyone wants to be contrarian, everyone wants to be a genius and say, oh, they're going to raise rates. That's the cool thing to say, but I just don't see that happening.
- [02:20]
C
But do you think that. So Trump said that he wants the Fed to lower rates. Do you think there's some political pressure there?
- [02:26]
B
Well, it's definitely political pressure and they should lower rates over time. The problem is that when the Iran war kicked off, you had this short term energy spike in prices. And so at one point, 60% of the increase in inflation month over month was all due to energy. And so if all of a sudden energy prices started to come back down, which they have, and then they've resurged again, then they've come back down, then they resurged again. You get this like volatility in energy prices that make it really hard to predict is inflation going to be. So actually one of the worst things you could do is you could start to tighten or increase interest rates. And when you do that, all of a sudden you're doing it in the middle of the AI slowdown over the summer, headed into August and September and at the same time you get a spike in energy prices. Like you could really start to mess with this. So we got a good thing going. Let the US economy keep doing its thing. You're seeing the earnings per share, you're seeing all of the future. EPS is all growing at this incredible rate. Companies are more profitable today than they've ever been before. And so just let the economy do what it's supposed to be doing. Either leave rates where they are or cut them. But if you raise rates, you gotta be a first class moron and I don't think they're gonna do that.
- [03:38]
C
What assets do you think are mispriced if interest rates stay high for long?
- [03:45]
B
Well, I think that almost every asset price in the world right now is misunderstood because one of two scenarios is gonna play out. Either we're gonna get sky high inflation like all the doomers are predicting, and in that case then every asset price is gonna expl going forward. Or two is we're going to get the deflationary or disinflationary forces that maybe an Elon Musk is predicting. Where you're going to get this massive force that swallows the US economy from AI robotics deportations and tariffs. And that means that actually asset prices are going to have a very hard time Going forward. Now, what I think is the most likely scenario here is we do see some of the deflation from AI robotics, etc. At the same time, the government is not going to stop printing money. Like, these people have lost their minds. Republicans, Democrats, Biden, saw that chart you tweeted. Bush, Obama, I don't care who you talk about, these people have lost their freaking minds. They are printing so much money. And some of it is structural. Like, I think that the Doge effort was a very valiant effort. They wanted to get costs down. One thing is for sure is there is massive fraud going on in this country in terms of we're funding schools with no kids, we're funding adult daycares. I mean, you just go through this stuff. It's billions and billions of dollars in every single one of these cities that they continue to go to. At the same time, though, is they're also printing money to do all kinds of other crazy stuff as well. It's not just fraud. And so if you look at, well, how do you actually get the federal deficit to shrink? A huge reason why you have trouble doing that is because the national interest payments is so high. So if you have increasing size of the debt and interest rates stay high, then your national debt payments end up staying high, which causes you to take out more debt and just becomes this recursive, you know, situation. So the reason I explain that is like, it does not matter who the President of the United States, they're going to print money. We now, it's structural. There's no changing that. The most valiant effort in American history to get costs under control failed.
- [05:38]
C
Yeah, but it was also like six months of that.
- [05:42]
B
People forget. Like, it's like the American people in the mainstream conversation, they have amnesia. We had Doge inside of buildings trying to go figure out where to save money. And the politicians, people forget they were outside of the building banging on the door like idiots, being like, get out of the building. You shouldn't be able to cut cost. Like, that's how big the grift in Washington D.C. is. The second they said, we're not gonna let you spend money without knowing where it's going or making sure that it's actually being used effectively. The politicians were protesting, they showed up and were banging on the door like little kids.
- [06:19]
C
But I think that that was less about Doge and more that it was spearheaded by Elon Musk. I think if it was Mom Donnie in those buildings, they'd be fine with
- [06:28]
B
it, of course, because Mom Donnie would never be able to Cut the grift. And so therefore they don't got anything to worry about. They'd be like, yeah, go play the theater, kid. But instead, Elon Musk shows up and everyone's like, wait a minute, this dude actually can get shit done. He's serious. He's actually going to be able to stop this spending. And so that's why they show up and they protest. But it's just if you go and you look at all of this, I recently wrote this piece. This is probably the most important thing that I've written. No one will think that, but in my mind it is. The number one threat to investors portfolios over the next 20 years is socialism. And there's two types of socialism. There's explicit socialism and there's implicit. Explicit socialism is like what we're seeing with Mamdani in New York City. We're going to have five city run grocery stores and the rule is going to be you have to sell all of the goods for 30% less than the market rate. Well, the number one thing that is going to happen is that he is going to have to ration food because what do you do if you sell everything for 30% less? There's gonna be a line around the corner. So there's only so much food you can put in the grocery store. How do you decide who gets it? By sex, by race, by creed, by some other socialist construct that they come up with that's completely untethered from reality. They're gonna have to figure out how to ration the food. That's gonna be a absolute cinema when they have to decide who gets the food and who doesn't. The second thing is there's gonna be a bunch of people. I've already seen them tweeting about it. They're like, when this grocery store opens, I'm gonna be there on opening day. I'm gonna buy as much food as I can and I'm gonna go sell it at the market rate. Are they going to outlaw people from buying the food? Are they going to outlaw them from reselling the food? Where does it stop? So what you have is you have explicit socialism, which we know doesn't work. Ask all of the Venezuelan immigrants, the Russian immigrants, et cetera, have come here who literally left countries where there was no food on the shelves. Come to America.
- [08:07]
C
We should have my dad call in.
- [08:08]
B
Your dad calling in would be absolute circus.
- [08:12]
C
He was in breadlines when I was born.
- [08:14]
B
It's crazy. It's crazy. These people are idiots. They don't study history. And all they're doing is they're saying what sounds good. But the only way to sell something for 30% less than what its actually market rate is, is that the government takes the loss.
- [08:25]
C
I'm sure that they will have some sort of like here's who you have to be in order to even go to the grocery. I don't know.
- [08:32]
B
Okay, so they're going to discriminate, of course. No, no, but this is, this goes back to like in order to fulfill the socialist promise, you have to discriminate. And what they will do is they will make a moral case as to why the discrimination is. Okay, but if you're saying that grocery prices are too high, then why can't all New Yorkers go to the grocery store? That would make sense.
- [08:52]
C
But wouldn't those grocery stores put the regular grocery stores out of business?
- [08:57]
B
Well, first of all, these grocery stores are gonna be disaster. If you've ever been to anything that the government runs, there's no way they're gonna run it efficiently. And so the lines are gonna be through, you know, all the way around the corner. People are not gonna wanna go do this. But it's kinda like Yogi Berra says, nobody ever goes there anymore cause it's too busy. Right? So the whole thing is that yes, there's gonna be a ton of people who go there, but it's not gonna be able to service enough people to put the other ones completely out of business. What it is going to do though is gonna distort market prices and they're gonna come under pressure. And so that's basically this guy's whole plan is we're gonna distort market prices and what it's gonna do is gonna make food everywhere else go up more in price. The second thing is he's doing it with the rent freeze. In what world do you say to landlords your costs are increasing but you can't raise your revenue? Right. Guess what's going to happen? People are going to say, okay, well I can't invest in the building, I can't upgrade it, I can't make the changes that I need to make because I'm literally going to start losing money, which is all part of the plan because guess what? Then they have to basically vomit those buildings up, they have to turn them over to lenders, they have to do all this stuff and it ends up in the hands of the people who aren't trying to run economic kind of profitable buildings. Instead these people will just turn them into these socialist dream. So that's explicit socialism. There's also implicit socialism. So everyone who just heard all that and got upset, don't worry, I got something coming for you. Now let's slip around to the other side. Implicit socialism is the government printing money and basically handing it out like candy on Halloween. These people are literally saying, where can we stuff it? They are persistent bid in the financial markets, which means that that's helping investors, not the average person. It is also all the social programs where they're handing out all this money to daycares and, you know, all this other kind of fraudulent type stuff. The third thing is that they are then giving all kinds of pork to various politicians, like kind of side quest. And so if you go and you read these different bills, it's crazy what's in there. I will Never forget in 2020 when they passed that bill and they literally were paying people to smoke weed and then drive to see what the effects are. And the reason I will never forget that is because we had thousands of people in the audience who are willing to do it for free. And so it comes back to this idea. The government's really good at wasting money. And socialism can show up in multiple forms. The explicit form is the thing that everyone fears and talks about and understands from history. The implicit form we have in this country as well, there is socialism for rich people as much as there is socialism for people who don't have a lot of money. Now, the socialism for rich people comes in a different form, in a different factor. How do I know? I got a ton of friends who they all or beneficiaries of it. They ain't complaining about that. They're not calling it socialism, but it's a different form of socialism. And so ultimately, where I believe that we should end up is we should end up with a very small government. The government should be focused on very specific things. They should be focused on helping the United States citizen. And I think that everything else, the private sector, for the most part, can go and they can handle. And if you go and you look at these charts that show when the government gets involved, health care, food, transportation, et cetera, prices go up. When private sector gets involved, they go down. And so ultimately, I think that is going to be the thing that we are not going to see in this country. Today's episode is brought to you by Bitcoin Ira. Are you a crypto investor with a retirement account, but don't have any crypto in that retirement account? Then listen up. This message is for you. Bitcoin Ira. Is revolutionizing the way Americans save for retirement. They're helping smart investors diversify their savings. With access to over 80 cryptocurrencies. With World class customer service, military grade encryption, and a vertically integrated licensed trust company, it's no Wonder more than 200,000Americans trust Bitcoin IRA to secure their financial future. Getting started is quick and easy. It takes just three minutes to open an account. Once you're set up, their team of IRA specialists will reach out to guide you through every step of the process. 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- [13:13]
C
I will say, though, on an optimistic, optimistic note, I think this situation is going to allow for a lot of innovators to come into the market and maybe.
- [13:25]
B
Which situation? The mom Donnie thing? Yeah, I mean, maybe just to think for a second, let's, let's take two different futures and compare them. We have mom Donnie, which is saying a government run grocery store, which is going to sell things below the market value. The government's going to fund it and lose money. $70 million, whatever. He's saying it's gonna take $30 million to build one grocery store. What's he gonna do, take $27 million, put it in his pocket and the other 3 million? Build a grocery store. You couldn't spend $30 million to build a grocery store if you tried. So even with the unions and all the craziness in New York City, $30 million is insane. The average grocery store costs like 2 to 3 million dollars to build. So you're saying you're going to more than 10x the cost to build the grocery store? There's fraud somewhere in there. Has to be. The second thing is compare that to the vision that Travis Kalanick, the Uber founder, has. He recently came out of stealth with a company called Adams. And what he's talking about is using robotics to be able to make a healthy meal that is faster, cheaper and better quality than what you can make at home. So if he can make a meal that is better and cheaper than what you could actually do by going to the grocery store, buying the food and making it yourself, that is deflationary. The cost of the food is going to come down. I have way more confidence in Adams and Travis getting the cost of food down than I do in Mayor Momdani, who's never managed people, never had a real job, can't do anything, and just continues to regurgitate Nicolas Maduro's talking points and somehow thinks that he's going to end up with a different example or a different outcome of that experiment. So that's a perfect example. You have public sector and private sector all latched on. Food is expensive. Who are you going to bet on? I'll put my money on the private sector all day long compared to the public sector. And I can't wait. Let go build the grocery stores. I cannot wait. You know why? Because this is going to be a disaster. And every single grocery store, they should plaster his face right on the front door, make sure everyone knows this is his idea. Because when they fail, when they go up in the theoretical flames, like, you know the meme where the guy's sitting there, he's like, everything's fine and everything's burning around him.
- [15:33]
C
Maud.
- [15:33]
B
Donnie's face should just be right on the front door.
- [15:35]
C
This will be a Hallmark thing of his platform.
- [15:39]
B
If he believed in it, he'd call him Mom Donnie Martz. That's what he should call him. Mom. Donnie Martz. Call him Mom Donny Martz. Put your name on it, and let's see how it goes.
- [15:48]
C
Evie. Okay, Ready?
- [15:50]
B
You like that one?
- [15:51]
C
Yeah, yeah, yeah. Bitcoin's price. On the top of my head, I can tell. Bitcoin's price fell to 63,000 as of this recording. It seems that most attention is on the lo clarity act vote in D.C. tell us what the Clarity act vote is. Why is it important? What's going to happen?
- [16:10]
B
People gonna get mad. Bitcoin doesn't need the Clarity act because bitcoin's already got clarity. Bitcoin doesn't need the Clarity Act. This has nothing to do with bitcoin. Bitcoin is not a security. Bitcoin is held by tens of millions of people, hundreds of millions of people around the world. Bitcoin's good, okay, but you don't care about the politicians.
- [16:28]
C
Your friend Jordy Visser said that bitcoin does need the Clarity act to pass, to get positive momentum back to the crypto market.
- [16:34]
B
And Retail traders, Bitcoin, if the Clarity act never passes, will go back to all time highs. Will the Clarity act passing help Bitcoin go back faster? Sure, because there will be a bunch of enthusiasm from people who don't understand Bitcoin, like the politicians and the Wall Streeters, et cetera. But Bitcoin itself is going to be just fine without the Clarity act. Because Bitcoin is the thing in the crypto industry that has the most clarity. Everyone agrees. There is no debate. It is not a security, it is there as a store of value. It is being used by hundreds of millions of people around the world to protect purchasing power. Now if you go and you look at all these other areas, what is the Clarity act really about? Stablecoins, yield and all these different aspects of the industry. But it's not even so much over. Should there be yield or should there not? What it's really about is who gets to participate in the upside. Because one of the big debates is let's take stablecoin yield. Should crypto companies be able to give yield or should that only be available to banks? They both agree it's better for the consumer for them to get yield. Obviously what they're disagreeing on, who gets to do it, who gets to profit off of it. And so what you have is stablecoins. And yield is going to be a thing regardless of clarity or not. It's just who gets to be the boss, who gets to be the extractor of value in that scenario. And so again, that's why I say I personally, I don't care about the Clarity Act. I know a lot of people who do. Good for them. I'm glad that the crypto industry has representation in Washington D.C. that is fighting for the rights of the users and the companies and all this stuff. But for me personally, I hold bitcoin. Bitcoin's fine. Bitcoin doesn't need to.
- [18:12]
C
What happens if it doesn't pass?
- [18:15]
B
Well, it's already happened multiple times.
- [18:16]
C
Yeah.
- [18:17]
B
Guess what happened? Everyone woke up the next day, they ate their breakfast, they put on their pants, one leg at a time, they drank some water and they went to work.
- [18:23]
C
So you don't think, you think that regulatory clarity is not super important.
- [18:31]
B
We have regulatory clarity. That's the whole, that's my whole point. We have regulatory clarity. We know what are the different securities and not securities. All this stuff. What we are arguing over is who gets, who gets to profit. And guess what? The banks are digging their heels in and saying if you want to act Like a bank. You got to be a bank. And then you've got the people in the crypto industry that are saying, you suck. You guys suck at serving these consumers. You're boxing them out. You are just debanking people. You are kicking them out of your institutions. And it is better for the consumer to be able to get yield. And so we should be able to offer that, just like you should be able to offer that. By the way, they're both right, is if you go and you look at the banking rules, they're very specific rules that the banks are saying, hey, everyone should have to adhere to these. If you want to be a bank, then you got to get to the regulatory clarity as a bank. Okay, well, vice versa. The crypto people, like, we've been trying to be a bank, but you won't let us be a bank. So the consumer is suffering because you guys are playing this insider game. You're pulling up the ladder behind you. Both sides are right. But again, it goes back to. My guess is the people's voice will always be heard and the people don't give a shit about the banks.
- [19:35]
C
Scaramucci said that if it doesn't pass, he fears that people like Brian Armstrong of Coinbase will start building businesses offshore. Do you agree with that?
- [19:44]
B
Of course. That's the whole story of crypto is these people.
- [19:48]
C
So it does really matter. I mean that.
- [19:50]
B
No, doesn't matter. They're going to go build it offshore. It's still going to get built. Like, the only thing the Clarity act can do is shoot the United States in the.
- [19:59]
C
Right. That's what I mean.
- [20:00]
B
Yeah, well, matters for the United States, of course.
- [20:02]
C
But in terms of Bitcoin, specifically for
- [20:05]
B
Bitcoin or for users around the world, like, people are going to get served. Whether it is done by a US regulated financial institution, or it is done by an international regulated financial institution, or it is done by an unregulated financial institution, the voice of the people will be heard. We have the Internet now. It is completely open and people are going to end up getting this. And by the way, guess where all the, almost all of the innovation in finance lately has come from? From the crypto industry. Perps from the crypto industry. Stablecoins from the crypto industry. Tokenized securities from the crypto industry. Bitcoin from the crypto industry. We can go through this all day long. We play this game all day. The legacy banks and the legacy players in the traditional financial system, they ain't build nothing new.
- [20:51]
C
Nothing, of course, but this is the next new thing. And they got a profit, by the way.
- [20:55]
B
That should be their business model. They have the luxury of not having to take the risk of innovating. They can wait for somebody else to do it, make sure that it works, and then they've got so much money and the distribution and the compliance departments and all the lawyers and stuff and then they could say, that's a cute little idea you have. Let's take it and let's roll it out to our user base. So both sides are doing what they should do. The innovators and the upstarts, they're the ones who have to pioneer, they're the ones who have to go and innovate. They're the ones who have to go and create this new stuff because if they don't innovate, they don't get a competitive advantage. But the big banks or the big institutions, they don't need to take that risk. Their whole game is risk mitigation and just be good at distribution. So they let the innovators innovate and then they just play copycat. Great. Let the market play out how it's supposed to play out. But this idea that some piece of legislation is ultimately going to kill the entire industry or make it, you know, the utopia that everyone wants it to be, it's just not that black and white. It's much more in the gray.
- [21:52]
C
I'm going to start a government owned crypto exchange.
- [21:55]
B
That's fine. You could do that. And guess what will happen. The same thing that everything else happens with the government is it'll fail.
- [22:01]
C
All right, you are on one today, okay?
- [22:04]
B
Because there's a bunch of people who all of a sudden are. They tend to. And by the way, it's left, right? Even independents, somehow the government, everyone wants to go cry to the government. Look at the AI industry. We have American companies that have created these large language models. Modern day miracle that they were able to create these things the way they did it. Nobody is confused. They took a bunch of information that was created by other people, they trained their models on it, and now they're offering it. It's one of the best business models in the world for some period of time. They're selling intelligence. Who doesn't want to pay them for that? But the second that someone says, that's a cute little business you got over there, that's a high margin business. Jeff Bezos said, your margin is my opportunity. And these Chinese models and these Chinese companies said, well, wouldn't it be crazy if we let you be the pioneers, go spend all that time, energy, money and compute to train those models. And then we were able to just distill them and basically come up with a much cheaper, much faster, better performance model that didn't require us to spend all that time, money, energy and compute. Of course the market's interested in that. So what do these companies do? Rather than compete in the market and say we can build a better model, we can go and learn from what they did to us, we can go and win this, we can out innovate them. They run to the US government, they start crying they stole our model. By the way, if they stole code like actual IP theft, that is a different story than if they distilled the model in terms of they basically just drafted off of them because the way that OpenAI anthropic other companies, they distilled off of original IP. So you can't do something and then get mad when somebody does it to you. But that's very different if there's actual IP theft in terms of somebody lifted the code. If somebody went and actually stole that, we don't yet know. I have heard rumors that that is actually part of the involvement as well. I would completely change my tune if we get evidence that that's what's happened. But so far the only thing that has been accused publicly is oh, they distilled our model. And we don't like that because it's causing too much competition for us. My guess is the US government is going to not be cool with the IP theft or the specific kind of like lifting of code or stealing of trade secrets. But they're not going to get involved if it's just distillation and kind of global competition.
- [24:23]
C
Speaking of AI, Google reportedly lost 5.9 billion in Q2, driven by massive capital expenditures on AI infrastructure. This marks the first time in the company's public history that its quarterly free cash flow turned negative.
- [24:39]
B
I got a lot of thoughts.
- [24:40]
C
What are your thoughts?
- [24:41]
B
On one hand they're betting the farm. On the other hand they got a big farm, right? So you think if they're betting the farm, this is very intentional, that they are making these very large capex bets. The reason why they're doing that is because they believe it's going to pay off in an roi. I think that Sergey Brin, if I remember correctly, said some version of I would rather go broke than lose the AI race.
- [25:03]
C
Right?
- [25:04]
B
I mean, so they are trying to invest as much as possible, including being free cash flow negative. On the other hand, I Forget the exact number on their balance sheet, but they could do this for a long time. They could lose $5 billion per month or per quarter and they could probably do that for years before they ran out of money. So are they betting the farm? Yes, it's just a really big farm.
- [25:30]
C
How do you distinguish between necessary capital investment and spending versus reckless capital production?
- [25:39]
B
Nobody knows.
- [25:40]
C
Do you think, do you think that the stock is down because the market can't really value these businesses five years from now?
- [25:45]
B
Stock is down because every boomer is running around yelling and screaming about how AI is a bubble and you know, they don't see the value of it. Capex ROI is never going to be there, blah, blah, blah, blah, blah, blah, blah, whatever, right? It's the same reason why they were yelling that Amazon's never going to be valuable or name, name, whatever theme. What we know is that when there's a technology innovation that leads to a massive boom, you need companies to invest in it. Historically, there are some cycles where it has been a bad bet. Remember clean energy in the 2000s? Right. That was bad. People lost a lot of money, but for the most part, because sometimes when
- [26:17]
C
you bet the whole farm.
- [26:19]
B
Yeah again, they just got a really big farm.
- [26:22]
C
Right.
- [26:22]
B
And so they could do years and years and years of this. The reason why I believe that they are making such a big capex bet is because they are seeing growth in so many of their other businesses based on the use of AI. And so Jordi Visser walked me through this and I thought he had a pretty good way of explaining it of just like if you're growing YouTube or some of your other business lines, double digit percentages, you're like, hey, this stuff's really valuable. What was valuable for us is going to be valuable for everybody else. We should go invest in being the infrastructure provider of this. Right. And so I just think that there may be, I don't know, two to four quarters where everyone's all worried about, oh, it's, you know, are they going to get the ROI or not, blah blah, blah, whatever. What's going to end up happening is they're going to get the roi. My guess is they may even get a bigger ROI than people are expecting. And these companies that are making these investments are going to look like geniuses in hindsight. Today's episode is brought to you by blowfin. If you're actively trading crypto, then you already know the platform matters, execution, speed matters, liquidity matters, and reliability during volatile markets. That definitely matters. That's why more Traders are starting to use Blowfit. They built a trading platform focused on fast execution, deep liquidity, advanced futures products and a really, really clean user experience. They don't over complicate things. You can trade hundreds of spot and perpetual pairs. They integrate directly with TradingView and they've built a platform for both active traders and people who are just getting started. Security is a major focus. Obviously assets are custody with fireblocks, they provide proof of reserves and they've built a strong reputation for platform stability during those high volatility environments. And the celebrate the partnership with us. Blowfin is now giving away $100,000. That's right, Blowfin is going to give away $100,000 in deposit and trading rewards. So if you're looking for a better place to trade crypto, go check them out today using our link in the description. Again, that's blowfin, the trading platform built for serious crypto traders. Go sign up, pay attention because you're giving away $100,000 in deposit and trading rewards.
- [28:18]
C
If I'm an independent investor watching this, why do I care?
- [28:22]
B
Well, you should ask CFO Sylvia first, obviously. C Plug. But you care because if you're an investor in Google, the share price is going down, right? So you're like, hey, wait a minute, I make a mistake. Especially if you bought it recently. You're like, am I catching a falling knife? Is Google a zero?
- [28:39]
C
Wow.
- [28:39]
B
Now I don't think Google's zero. I don't think many people think it's a zero. But people do want to understand, okay, if the stock price is compressing, should I be buying more? Should I be worried? Should I be selling? What should I do? And this is the hard part about investing is people think that if a company, let's say, compounds at, I don't know, 15 or 20% a year, year after year after year, they just think it's like this straight line up into the right. That's not how it works. Company goes up 30, 40%, it draws down 20, 30%. It goes up, it comes down, right? There's all this volatility to it. We're in a drawdown. So there's some people who are panicking. There's 100% people who, they bought Google, it went down, they panicked and they sold. There's a bunch of people, I think Bill Ackman, in the last two years he bought, put on a Google position, stock drew down, he gets more interested, he's like, this is a good company, but now it is more fairly valued than it was Just, you know, three or four months ago. And so then he goes and he buys some. And so it just comes back to like, how disciplined are you? How much work have you done on the individual business? What is your perspective on that business? What is your time frame? Are you trying to, you know, put on a trade for a week or are you trying to hold the business for the next 10 years? Very different, you know, kind of optimizations. But anyone who thinks that Google's going out of business makes no sense. But I do think that they're betting the farm on, on AI and they're making obviously huge multi billion dollar investments.
- [30:03]
C
Another good thing to ask CFO Sylvia, which I will ask you instead.
- [30:09]
A
Damn.
- [30:10]
C
But what milestones or trends or investors look for when they are making these AI investments to make sure it's paying off?
- [30:21]
B
Well, the single most important thing in my opinion is where do you want to play in the stack? And what I think has basically happened is there's been a separation into a couple of different groups of people. The first is you get some folks who believe in something called the FAT AI model thesis. I came up with that term.
- [30:40]
C
Why fat P H A T, no
- [30:42]
B
F A T. Because in crypto there used to be something called the FAT protocol thesis. And the FAT protocol thesis, which I was very loud about, is probably not gonna be true. The FAT model FAT protocol thesis basically was the idea that the protocol is where all the value is going to occur.
- [30:59]
C
This is like the theorem, not even picks and shovels.
- [31:03]
B
This is like the actual protocol itself, right? Is that's where all value is going to accrue, that you weren't going to get value at the application layer or the various infrastructure punches, all going to be at the protocol layer, as you already pointed out in 30 seconds of thinking about this. Well, what about all these other businesses that are in the stack? Obviously they're going to have value too. So the FAT protocol thesis is wrong. It ended up being wrong. The AI investors are about to learn the same lesson that the crypto investors already learned, which is that the fat AI model thesis is wrong as well. FAT AI model thesis is basically the idea that all value accrues to the model providers. But instead what we're already seeing is that you're going to get an application layer, you're going to get a compute layer, you're going to get a model layer, you're going to get this kind of like fragmentation and there's going to be a value that accrues to each layer of that stack and so the fat AI model thesis is wrong as well.
- [31:54]
C
Is what's happening in AI right now reminding you of the earlier days of bitcoin? Yeah.
- [32:00]
B
And for maybe reasons people don't realize, but I think the people who are into AI, they're right. Which is probably the single most important part of the entire analysis is AI is going to be a thing. If you believe that, you're going to do better than the people who don't. Bitcoin, same thing. Didn't matter when you bought how much you bought. If you bought one time, dollar cost average. If you believed in bitcoin and you bought bitcoin, regardless of how you did it, up until now, you pretty much have done very, very well. And so being right about the macro trend is the single most important thing. The second thing is, what is the greatest threat to bitcoin? Ten years ago, PR people hated it. It had to be resilient enough to weather the storm. From all the people who said it was for criminals and drug dealers and the government should ban it and put people, you know, all this stuff. Bitcoiners are the worst communication specialist in the world.
- [32:51]
C
Those were the wild, wild west days.
- [32:53]
B
We are amazing at memes. We are horrible at mainstream communication. And so the AI industry is going through the same thing. The AI. If you listen to some of these people in the AI industry talk, you're like, there is. I don't trust that person to watch my kid for five minutes. Like, that person just seems off their rocker. They're out there saying all kinds of insane things and the way they communicate and their message and all this stuff is horrible. They have a communication problem now. You know who does not have a communication problem, interestingly, is Meta or Facebook. If you go look at some of the recent ads they've started to publish, they basically have an entire ad campaign saying they're betting on humans.
- [33:36]
C
Is it because they have so much data and they know what works and.
- [33:39]
B
Well, I have insight into why they're probably doing this, but their campaign is all about, we're betting on humans. And that's why they're augmenting the humans with AI, whereas their competitors, like, we'll wipe out all of humanity's jobs and blah, blah, blah, you know?
- [33:55]
C
Yeah.
- [33:55]
B
And then they're doing. They're like tweaking while they're saying it. Right. So if you think about that, that's like two very different things. When you hear a company say, I'm betting on humans. I'm a human. I'm on Team Human I like that idea. Versus we're going to take over the world. We have a nuclear weapon. You know, like dad to you guys.
- [34:12]
C
I mean, yeah, it is a reservation. It is very. I remember some of the early bitcoin conferences you and I used to go to. I mean, it was all over the place. And I was like, how is this person intelligent and building a business? And you'd be like, oh, that's crypto. Panda whale on Twitter. He knows what he's doing. And I'm like, it's crazy. It was crazy too.
- [34:31]
B
There was a lot of characters.
- [34:33]
C
Where did the characters go? They're still out there.
- [34:36]
B
They're still being characters.
- [34:38]
C
Okay, our final topic for today is market sentiment remains negative despite the market doing really well and being near all time highs. Why do you think that people are so pessimistic?
- [34:53]
B
Both are true.
- [34:54]
C
Why?
- [34:54]
B
The market's doing well, but everything's too expensive. The market's doing well and the government keeps destroying purchasing power. The market's doing well. People live in certain cities and they're scared to walk down the street because they don't know if they're going to be safe or not. The market's doing well. And then you get online and you see that there's fraud going on everywhere. The market's doing well. And then the mayor of New York City saying that he's going to run government grocery stores. So you look at this and you say to yourself, both things are true. The market is going up and the market is doing well. At the same time. People go to the gas pump and they're like, yo, the war in Iran is causing energy prices to go up. I try to fill up my truck and it's 100 bucks. What the hell? I don't care what the stock market's doing. The fact that Walmart stock went up ain't helping me pay for gas. My grocery bill is not coming down. And so people are pessimistic because their lived experience on a day to day basis is the total aggregate increase in price over the last five years. They can remember I got a paycheck. I could pay my rent and buy food for two weeks. And then the other paycheck I would go and I'd buy food for two weeks and store the rest away in my savings. And now they're like, wait a minute, where's all my money going? I'm buying the same stuff, but I don't have as much money left over to put in my savings. What is happening here? Or then you start looking at things like child care. I did a whole video about it. It's crazy. The average child care in America now, if I remember the data correctly, it's like $30,000.
- [36:25]
C
That's like my college tuition at a state school.
- [36:29]
B
That is insane. And I walk through the math. If you get paid $60,000 a year and you pay taxes, let's just say you pay 20k in taxes. Ballpark, it means you have $40,000 left. You pay child care for one child, that's $30,000. You have $10,000 left. How is somebody supposed to make that work? Oh, by the way, that $10,000 that you have left over, let's say that you have no other income, no other help, et cetera. How do you live on $10,000? Impossible. But let's just say that you do have other help. At the same time that your wages are not growing substantially, you're getting exploding costs. And again, I go back, both sides of the aisle are to blame for this stuff. And I was very excited about Doge's ability to cut government spending. What I realized is that nobody in Washington, D.C. outside that very small group that went in there and tried to do it, nobody's incentivized for the gravy train to stop. There ain't nobody who's going to be able to get it under control. Republicans, Democrats, the system is rigged in a way where they are going to print money. And because they're going to print money, the living expenses of the everyday American is going to explode higher. And so the only thing that the average American can do is to try to use their investment portfolio to outperform that inflation. And that is incredibly difficult to do. That is why you have gambling culture. That is why you have people who are going and buying all kinds of crazy meme stocks, doing all, you know, betting on what color someone's top high is going to be or how long their press conference is going to be. All this stuff is because we are destroying the purchasing power of the US dollar and it is leading to the degradation of society. And when you get the degradation of society and the loss of hope, you end up in a situation where you've got people who say, why don't I put it all on black?
- [38:12]
C
I did just read this article that said risk of gambling addiction reaches all time high. The rise in sports betting apps and online casinos has also led to an increase.
- [38:21]
B
I ain't saying that I could see the future, but nothing's off the table. Podcast. Y' all should go listen to it.
- [38:26]
C
See how I like teed you.
- [38:27]
B
Nothing Off. Nothing's off the Table Podcast I plus our team, we are minority shareholders in a brand new media platform called Nothing's off the Table. It's a guy, his name is lj. LJ got a wild story. If you go and you look at LJ's story, he around 18 years old, his best friend murdered someone, murdered like with a capital M. And confessed to him. He had to testify at the trial. Then LJ went, you know, he had a little party bender, if you will. Bender being like five years, alcohol, drugs, etc, and then he started gambling and he lost a ton of money. If I remember correctly the numbers, I think he lost like $10 million personally that he was making in a business and he was taking it and basically going and gambling it all away. And now he's sober. He is helping people recover from alcohol and drug addiction. But more importantly, his content is very focused on helping young men try to overcome the gambling addiction. And I personally believe that gambling is going to become a massive, massive crisis in America. It may already be there, but it's only going to get worse. You can't watch sports without them shoving gambling down your throat. You can't turn on the TV without them talking about the odds really started,
- [39:37]
C
I mean, 10 years ago when like DraftKings and FanDuel, like before when it
- [39:42]
B
was like, oh, it's a little bit of entertainment, okay. But when they started to legalize this stuff in the way that they have, and now the leagues are incentivized, the players are incentivized.
- [39:51]
C
It's you versus the machine, of course.
- [39:53]
B
And unfortunately, you cannot rely on the individual discipline of a young man whose brain is not even fully developed yet to resist these companies that are full of data scientists and engineers that are trying to engineer dopamine in these apps and ads, et cetera. And so they're just got the deck stacked against them. And so what they need is they need a better vision. You can complain all you want about these companies. These companies are doing what they're supposed to be doing. They're private market actors that are pursuing economic profits. That's how capitalism works. And if you don't like it, don't complain. Go compete. And what I think LJ is doing that's very interesting is he's trying to provide a different vision of the future. And he's saying, listen, that's awesome. You do not want to live your life as a degenerate gambler. You can change your life. You can go in this Other direction. How does he know he did it? Yeah, here's this other direction. And he has these conversations that are incredibly emotional, incredibly entertaining with people who have done all kinds of crazy stuff. I mean, the stories on.
- [40:53]
C
My favorite part of the stories that he shares on his podcast is always like, the. The low. And then the. The relearning of. Wait, why am I doing this? Like, that sort of come to Jesus moment that people have.
- [41:08]
B
This guy has had on people who've been into drugs, alcoholics, people. He had on. One of the most popular clips that's ever happened is he had a woman. Come on. Who was in sales in the technology industry. Tech sales. And she's like, I was a functioning alcoholic. Because every single thing in that industry was just, drink, party, drink, party, drink.
- [41:27]
C
You gotta entertain the client.
- [41:28]
B
Correct. And she's like, and I became an alcoholic. And then guess what the reason why I went viral is. Cause a bunch of salespeople are like, that's basically me.
- [41:35]
C
Yeah. I do wonder, like, you know, how there's been that trend of Gen Z not drinking. I wonder if that's shifted to possibly gambling.
- [41:45]
B
We're.
- [41:46]
C
We're not Gen Z. I hate to break it to you.
- [41:48]
B
No, I don't want to be Gen Z. I'm Gen Pop.
- [41:53]
A
I am.
- [41:54]
B
I've been sober for five years.
- [41:57]
C
Yes, but you were never five and a half years.
- [41:59]
B
No, I didn't have a problem, but, like, I just. I haven't drank in five and a half years, so I'm proud of that. All right, I have one last message for everybody today. I hope that you guys all enjoyed this conversation. I'm very happy to have Polina back. She is here. She's gonna be on the podcast every week. But my message to all of you, be nice. Be nice to those around you. Be nice to your loved ones. Be nice to your friends. Be nice to the strangers. Be nice to the gamblers. Be nice to the socialists. Be nice to everybody. But tell a socialist they're wrong because history's not on their side. That's it. See you guys next time.