Building and Overcoming the Hard Things

Transcript

so Brian it's been a crazy couple of weeks with uh FTX FTX collapses SBF for those of us who actually followed it is emerging as like a super Bernie Madoff type character um and you unusually for you because you're not a spotlight type of guy you're you're more of a behind the scenes type of guy's been on TV and taken a leadership role and trying to explain to the world what this means so what does this mean for the crypto industry yeah well I think we were all pretty shocked to see the scope of the fraud that happened at FTX and let's call it a fraud we have to call it what it actually is it's been pretty bizarre

that mainstream media hasn't really come out and sort of said this guy's a criminal maybe they want to wait till he's actually indicted or something like that and in custody um but it seems very clear at this point that that's the case and we have to kind of come to terms as an industry with the fact that I think our industry is kind of attracting our disproportionate share of fraudsters and and scammers and that's really unfortunate um it's it doesn't mean that that's the representative of the whole industry you know there's a bunch of people here in the audience as one example and coinbase is another example of the the hard work that's being done to legitimize this industry and build it we want to bring the potential of this technology to people all over the world and we're not going to cut any Corners we're not here

to make a quick Buck we're in it for bigger ideals you know freedom and decentralization and and you know the power that bringing Good Financial infrastructure can be for everybody around the world so that's been part of my job is to kind of get out there and I don't normally like doing TV very much I like building cool stuff with the team but in this moment it's important for me to get out there and say look there's a whole industry that's very different than what was happening with FTX coinbase is based right here in the US you know we're a public company you can go read our financial statements they're audited by a third party you don't have to trust us all the customer funds are segregated we don't invest any customer funds without their explicit Direction and we're not going to let one bad actor

take down this whole industry we're going to keep building for the future so I think it's important for someone to go out there and say that message in this moment and you know I'm trying to do my part to make that happen yeah and it must be really weird for you because he was kind of like right next to you well he was doing all this diabolical stuff did you ever suspect that he was like a criminal were you like there's something wrong with this guy or did you just were you shocked as as everybody was you know I was pretty shocked too he there was a weird thing that happened where um they kind of came out of nowhere and then some he was like at every conference that I was at um probably in a whole bunch of other ones yeah and there was a little part of

me that was like man this guy's just like speed running the whole thing and he's like you know getting all these intros and relationships that I I thought I was trying to work to get to and he seemed to have done it in two years and so I was I was like oh that's probably just my ego talking so ignore all that [ __ ] and like let's just get back to work and you know it I guess it turned out that he wasn't entirely being honest with people and he was you know obviously like there was a lot of money changing hands behind the scenes with with a lot of these people there was I think it the way I'm looking at it now is that basically there was reputation laundering happening and kind of this virtue signaling with all of these ideals which apparently he came out it

acknowledged that was just fake and he was making it up so I don't know I these people kind of come out of nowhere sometimes and these we've seen this with other companies in crypto if you look back you know uh bitfinex and mount gox and you know other bitmex and others where they kind of they incorporate somewhere in the world they're trying to kind of avoid the rules um they rock it up and then it's always a tell isn't it yeah yeah I'm gonna incorporate in the Bahamas yeah it's for no reason other than I love the Bahamas right I mean look we want crypto to be an international movement so there should be people building companies everywhere but if you're if you're jurisdiction hopping and trying to avoid the rules the thing tends to rock it up and then blow up usually in spectacular

fashion and so we just we can't take any shortcuts we've got to build this industry for the long term and what do you think about the because the rest of the ecosystem because he did steal consumers money and give it to other people and interestingly like if you go back to Enron um you know they took investors money not consumer's money but investors money and and clearly kind of had a a bit of a Ponzi idea going um with their Mark to Market accounting but all the politicians who received money from Enron gave it back because you know it felt like it was stolen money but in this case not a lot of people are giving the money back how do you think about

that I think they should yeah I mean it's it's it's customer money that was stolen at this point um I you know my hope is that as this becomes a little bit more clear like frankly it's baffling to me why he's not in custody already you know doj or somebody should be able to make just based on his public statements I think there's a very open and shut case of for fraud uh you know I'm not an expert on this but the people I talk to seem to agree with that and so it's unclear to me why he's not already in custody let's give benefit of the doubt and assume they're trying to piece the case together there's some extradition thing happening behind the scenes but the minute he actually gets indicted or maybe convicted I think that should be a moment where any sensible person who

took this money should think about giving it back some of it may have been already deployed in various ways and you know there's a bankruptcy process for that but if he just recently made a donation and the money's still there like people should do the right thing and give it back yeah definitely agree um so we had a great panel last night on uh the kind of regulatory environment and one of the things that they said Look for sure we're gonna have to come out with some regulation now because this is a too big a catalyst to ignore and if we ignore it then the regulators and these were kind of policy makers uh you know Congress people and senator then The Regulators are going to you know just kind of go outside of their scope and start regulating on you know

existing laws or or try and enforce things that shouldn't be enforced so how do you think about like what will be the impact of FTX on regulation you know what what should it be and what do you think it will be yeah well I think there's kind of like a level one two and three understanding that people have of this so like the level one is just a very simple narrative something bad happened in crypto Regulators should crack down right and we've seen some people come out and make that very simple narrative there's a level two understanding which is more nuanced which is that you know okay well you know regulator like the companies based in the US are already regulated kind of under Financial Services regulation what we don't have is clarity about the crypto piece of the regulation and there was a huge missed

Opportunity by The Regulators to come in and create that Clarity like what's a security what's not and you know because that Clarity wasn't there a lot of the business moved offshore and now we're seeing some of those things blow up so yes we should have more clear regulation here in the US but The Regulators kind of bear some of the responsibility for what happened it's not a you know just on these crypto companies and then I think the level three understanding is that great let's get regulatory Clarity for the centralized pieces of crypto and in a crypto specific regulation but actually the real solution here here is defy and self-custodial wallets and crypto has the opportunity to create something that's much better than the current system long term you know it's it's a little bit like

you know Uber had a star rating system instead of using the taxi medallions as your regulator right like you know in in defy we can have transparency with smart contracts we can have probably a decentralized reputation system baked into ens you know with self-custodial wallets you can trust yourself in math instead of you know some third party and so that's the future that we're really building too and so I think the level one two and three narratives just most people are somewhere along that spectrum and we need to help them get a little bit farther so those are those are my high level thoughts so here you are running one of the biggest centralized exchanges in the world arguing for decentralization so tell me about how you reckon why you're why you're doing

that how you reconcile that with the business that you're in yeah well coinbase is going to do both right so we have our centralized products our exchange custodian etc those are going to be regulated we're leaning into that we're trying to help Propel you know good regulation forward but we also are building the self-custodial wallet you know coinbase wallet I think is the is the most downloaded self-studio wallet in the US now um we've gotten that product to be a lot better over the last year or so people haven't tried it recently try it again and we're working on some decentralized protocols and you know sort of some of our apps are more like web 2.5 like our like our coinbase nft but we're getting some that are more like you know really truly web3 so I think we're going to do both the way I think of it is the

centralized pieces need to help people get a bunch of Fiat into crypto but once they have crypto they should really be playing in the decentralized crypto to crypto world that's where the really Innovative stuff the freedom for preserving stuff is going to be happening and my hope is that you know in five years actually most of our Revenue most of our users are using coinbase wallet and not just um you know our brokerage exchange product it's the more centralized piece today that would tell me that we're really on the right path to creating this decentralized open Financial system for the world yeah I know really interesting um let's kind of take a step back and say we're in a kind of rough time for crypto over the last year um you know it's been not easy for

coinbase either you've had layoffs the stock price has gone down a lot um but this isn't your first crypto winter and in fact it's not your first set of layoffs or your first kind of crisis in fact in some ways it's easier and that you have a lot more money now than you had then um so how is this crypto winter the same or different than the prior ones yeah well I think in terms of people's psychology it's similar you know there's despair there's some bad stuff happening people get a little disillusioned the people who are in it for a quick Buck kind of get distracted and go somewhere else the part that's different is this time the broader macro economy obviously went down along with it um and you know that's created an

environment that just it's not so much about is crypto going to be still be a thing that was like the question everybody asked me in Prior crypto Cycles you know I even had people come up to me at conferences and um they'd say like well what are you going to do now that Bitcoin is dead you know I'm like well that's clearly not the case but no one's really asking me at this point Bitcoins died a few times yeah it has um nobody's nobody is really asking that at this point it's just the broader macro environment is down and you know FTX kind of put a black eye on the industry but I don't think that it's going to change anything long term so the same thing that we have to do in past Cycles we're doing in this cycle which is be really rigorous about costs

you know it's basically make sure you don't die is like the number one thing if you're if you're leaving Brothers you're dead you don't get to play any of the next rounds of the game you know if you're Goldman or JP Morgan or whatever you know to use a 2008 financial crisis analogy you know manage your costs you know cut burn where you need to be really responsible and then if you survive through it you're going to be one of the you know you're going to thrive you're going to be one of the top companies because you made it through this down period any company that makes it through that is going to come out a lot stronger there may be some good deals for companies that preserve cash along that way too like if this lasts another one two years which you know we think it

probably will until we see some real signs of life I think though there will be some of these you know private valuations that come down or there'll be other opportunities to get really good talent and so every company I think should be thinking about how this is not just not just surviving but how do you turn it into an opportunity to actually pull out even stronger and when you think about that that kind of contrast is you know in your business between the okay like let's be really really careful with cash versus the opportunities because psychologically It's Tricky right in in the old world everybody's Psychology was we have to get market share we we have to go faster faster faster money is free let's just go and now it's gone all the way to the

opposite end and I think in retrospect people would have been like oh maybe we should have saved some of that cash and then how do you kind of get yourself to make an investment in an environment like this at the same time that you're doing a layoff for kind of yeah fattening down the hatches yeah well so I mean I think coinbase like we've probably I mean we did we over hired in 2021 right this was an example where you know I was probably got caught up in it as well a little bit and was like okay we have a huge line of customers out the door we can't even onboard them PX is coming at you yeah yeah there was you know a new competitor getting a billion dollar evaluation like every week yeah it was like okay we just gotta we gotta hire higher higher but of course anytime

you you do that you know a lot of efficiency just breaks down in the organization you have too many layers of management decision making gets broken uh communication channels get broken you have people who barely been there hiring the next people and so you know we we ran into a lot of this where I'm now in a place where I'm like trying to get the company to operate like a startup again right and okay let's if we have why do we have like four layers of management to get somebody who's actually writing the code you know like yeah we don't need that flatten flatten the organ like let's actually divide these these into different almost like startups and give them more autonomy and you know Corden them off to get rid of these coordination headwind so that you know I think everybody every company can do that in its own way to

sort of who in any company there's there's a there's a power law distribution of employees who are adding the most value right and if you're gonna say cut 30 of employees or something like that you're not you don't have to do 30 less stuff you may actually you know you may only go to five percent less stuff or you may even be 10 faster because there's less coordination headwind right right this is not a pleasant thing to think about but there are people adding disproportionately more value and if you can if you can go in there and do the talent assessments and figure out who's who's building the stuff that's actually making the product better yeah as opposed to you know making great internal presentations or whatever all the million other things that seem to somehow grow up in these companies if you cut all that out you'll

often have a better healthier company that's moving faster so that's what I'm doing right now and I think other companies in this down environment are using it as an opportunity to get healthier as a company and when you think about the process for that because it's a really uh you kind of face this Heisenberg uncertainty principle of management right where as soon as you go and look for okay who's not adding value Everything Changes people are aware that you're doing that right so how do you think about kind of overcoming the kind of the politics the gamesmanship the kind of things that go on on a company if you actually try and zoom in and go okay like what do we really need to be doing

who's really contributing yeah well I mean I think I should ask you this question too you're the you're the expert on this but hard you know I actually I don't think we're just talking about this backstage a little bit I don't think I've ever found a perfect solution to this there's kind of two schools of thought so one school of thought is get data and instrument it right and you know obviously we have this performance review process but people most employees will tend to rate each other really highly and for peer review they don't really want to do the tough thing even a lot of managers you know you have to really push them over and over again it's like they'll be I don't have anybody who's not great in my team right and it's like well there no matter how great your team is there's always

somebody who's better than someone else but you don't want to get into the stack ranking thing so I think there's an opportunity to actually build some HR software in this space that does pull in data and does things like the keeper test you know from Netflix um which tends to pull out better signals so that one school of thought is get more data yeah the other school of thought is there's no substitute you have to do it with humans and it's literally hand-to-hand combat like go in with each of your managers do a talent assessment force them to do it and almost in most companies until you get to be you know five ten thousand people you can take a small team of people of like three or four folks that you really trust and go in and almost just like meet with every single person for 10 15 minutes and

really get an understanding like what are you doing that's adding value to this company and show me the work like are you doing the actual work or are you somebody who's in the middle um you know relaying messages or managing or whatever so you can do it with people you can do it with humans whatever is keep your preference but you've got to find a way to go there and do it yeah yeah no it's interesting Elon one of the things Elon did at Twitter is he looked at the GitHub blogs and he's like if you haven't checked in code in the last 30 days that's a real problem right so that that may uh that that may Target you um speaking of data uh so one of the kind of fallouts of the big boom period was like companies employees decided that like the work wasn't necessarily

the thing that they should be about they should be about the larger society and these political issues and so forth and you kind of now famously took a stand and said well not here we're not going to do politics we've got a mission and that's the mission and if your mission is you know anything from whatever Roe v Wade to the environment or or what have you you're just not going to do that here um so now it's it's been it's been a year uh and um how is it gone are you happy with how the culture has come out um were there things that you would do differently what would you would what would you recommend for the the kind of

Founders here yeah so I think it was turned out to be one of the most important and positive things that I ever did in the company but obviously it really sucked to go through because at that time you know I think everybody was trying to create these kind of activist cultures inside companies there was actually a handful of employees a number of employees I think especially in certain areas like the Bay Area and Brooklyn it was really only in certain geographies where they were essentially trying to get hired at these companies not with the intention of really working towards the mission but actually to go in there and hold the company to account for some other broader societal issue that they were working on and so I didn't really have any concept of what why anybody would do that and it was this very odd thing and

I noticed this starting to happen inside the org and we were starting to get like demands from the employee resource groups and people kind of holding us hostage at the Q a like you know grandstanding with the mic yeah like putting us on the spot as the exec team was trying to answer questions and it wasn't questions about the product of the business or you know competitors or whatever it was like about these totally unrelated issues and so we eventually it felt so wrong to me and we eventually had this walkout which kind of catalyzed the whole thing yeah and I was like okay we got I got to do something here so I reluctantly put this out I knew it was going to be super controversial you have the New York Times hated it yeah it didn't align with their world view and their politics and

I it did it showed me that you know there are media organizations out there who are totally willing to publish like lies about a company if it doesn't if to attack them without if it doesn't fit their world view but I I guess I kind of realized at a certain point you know there's worse things in life than getting negative articles written about you or if you have an activist employee and you know people are a lot of CEOs at that time they were just so afraid to fire any employee who was causing trouble inside the organization because they're like oh they're going to write this tell-all blog post or you know they're going to claim that we were discriminating or whatever and like we'll have to pay some settlement to them it turns out there's worse things than getting a negative news article or

a blog post written about you and someone leaves the worst thing is to have a company you've just lost control of that's not actually moving towards the mission that you created the company for that come company that you created that you don't even want to work at right yeah yeah and I it really almost got to a place where I was like is this like the job of being a CEO in a tech company now where I just have get I have to like Square them on stage of like these awkward big societal questions like I don't know I had I don't know the answers to these things so I think a lot of that movement you know it started with some good premises and it got it got taken way too far I mean the good parts of it are basically you know let's

not discriminate against people in the hiring process like let's treat everybody with respect and there should actually be you know Merit in the organization I think this word meritocracy kind of got um it became a bad word somehow during that that whole time yeah yeah who will they forgot that the meritocracy like replaced the crazy weird hierarchy where Executives had special parking spots and giant offices and limos to take them to work and all right yeah yeah so I mean look I nobody wants to be hired because of or in spite of you know their race and their gender and all these things like that's not first of all it's illegal to hire somebody based on their race and gender and all these things but it's also just unethical and you're not

doing a favor to that person like you're kind of undermining them the minute they come into organization so you know there was all these things people were like well we should have quotas around this well okay we don't do quotas but we're going to have hiring Target sourcing targets those aren't quotas and I'm like that sounds like a quota to me right and so look I think all that stuff is like treat people fairly with respect hire the people who are most qualified for the job get rid of bias in your hiring process and then get rid of all that other stuff like you you shouldn't be hiring people with targets of diversity and things hire the people who are most qualified for the job that want to come in and do great work support their colleagues to to advance the mission and if they have really strong opinions

about other stuff in society that's great they just don't don't be distracting people in the workplace with it so I accidentally became sort of sort of like this um representative of that thing which I didn't really want to be but um I'm glad that it had somewhat of an impact and and I took a few arrows so that other people could then yeah go go do it yeah more than a few and was there is there anything that you would have done differently kind of in retrospect and how you made the change or how I mean obviously you like the company better now than you did before so and the culture is better and people like working there more so that all came out well but yeah um was there anything kind of procedurally that you had gone well maybe I would have made the blog post or

this or that um I mean the thing I think the thing that I messed up in hindsight was that I was not clear up front so I I was sort of walking on eggshells because I had never encountered this before so whenever somebody brought up something like this to me I was like um okay you know I just didn't know what to say and so what it did was it allowed a Schism to develop inside the organization by just my lack of leadership and lack of clarity so I think if I were to do it again I would just be more clear up front with people that you know we're not going to do like a we're not going to have a political company we're going to just focus on this Mission and so try to put that in the hiring letters you know put it on

the values of the company um even today with coinbase you know when people join we have them sign an offer letter it describes all of the values including this kind of mission first thing in there so nobody can say oh I didn't know when I joined right so I would have just done it up front and then there wouldn't have been this big drama when when I later tried to clarify it that we're all going to go in this direction yeah it's interesting because that also does like highlight though an important thing that you did which a lot of leaders are afraid to do which is look it's better to be right than consistent and you know you had to be inconsistent because you didn't say it up front but Having the courage to do that actually got you to where you needed to be which is uh you know a

great tribute to your leadership um kind of moving right along uh one of the things so one of the things that you and I discussed I think it was two crypto winners ago uh but you know we were kind of going through well like the ecosystem isn't there yet um and you're like who's gonna build storage and who's going to build naming and who's going to build this and so forth and one of the things we talked about a lot was well you're a coinbase you're going to have to fill in some of these gaps to move the whole industry forward as the leader of the industry as the leader of the industry what are you thinking about building next what does coinbase have to do next to move all of

crypto forward yeah well I mean I I go back and forth on this I don't think it's like our responsibility to build everything there's there's hundreds of companies in crypto now and frankly we can't even keep up with you know a tiny fraction of all the cool things being built and so you know I in some ways we're already a little bit like we we have a number of different products where we build for consumers institutions developers and so I would hate to sort of say that we need to make all the content as well but long way of saying that um I think within our products there's the core things we want to focus on right you know building building our retail app and building more functionality in there around um things like you know decentralized socializing is a really cool topic

that's coming up I know there's people various people working on it here right forecaster and and other protocols out there I think that's that's an interesting one I think you know defy gaming is is an interesting one I think Dows are going to have another Resurgence like new forms of governance and voting we would ideally all that stuff should be built natively right into the coinbases apps to make it easy for people to participate in this on-chain governance type situations um and I think there's a lot of just you know that they're sort of things that are non-financial service related with social and gaming and all that but there's even just a lot to be done with the financial services piece which is why don't we just make defy easier to use for the average person they don't know how to transfer their funds to a

Chrome extension and you know Bridge their assets to another chain and like all that stuff is just way too complicated and so we've got to get that just if you want to if you want to use something you can just click a button that somehow the coins and the assets all move and they work for you behind the scenes so that's where I think coinbase can probably add the most value with our Venture bets you know we're going to have a couple of things that we try to make like some of the next killer apps but I I hope the community builds a lot of that stuff and we can basically be people's primary Financial account to access all that stuff right right and then really enhance the ease of use and the safety aspects and these kinds of things right right so trusted later okay

final question before we go to q a um so crypto is all about transparency you took the kind of Step of becoming a public company which in some ways is the ultimate in transparency how has that gone uh would you recommend it for others um you know how do you feel about that there's a lot of lore you know particularly among private company CEOs about oh if we go public that's the end of us you know no more control of our destiny how do you feel how's it gone yeah so you know it's funny actually when I was initially in the early stages of the company I you know I hoped one day we might have the chance to do this but I always thought being a public company that's where you lose control

and you know I I was basically pretty skeptical of it and so as we got to be bigger I started to do some research I went and talked to a bunch of CEOs who had decided to stay private or they brought in a professional CEO to take it public or something had actually gone public right and look there's pros and cons to being public right the pros are there's a handful of things one it's a lot easier to raise money like actually in 2021 coinbase raised 3 billion million dollars of debt in um you know with very favorable terms I didn't do a single meeting our CFO did it it took a week and the money the money was in our account so somehow as a public company you just have access hey you can't do that as a private company just FYI yeah I mean imagine the CEOs

here in the room probably laugh imagine doing a three billion dollar fundraise you didn't do a single meeting right that's pretty cool um but you know what else I mean it was also it legitimized us as a company it was kind of a great marketing thing and then also other Fortune 500 companies suddenly started to take us seriously right so we we closed these deals with BlackRock like the biggest asset manager in the world and like meta and Google and so all these people are now kind of integrating with coinbase that you know we're a public company we somehow were in that league with them they wanted right you're blessed by the rabbi yeah yeah um and then you know there's some there's some serious drawbacks too right I mean one is that of course um you get marked to Market every day in in there and so as a private company you

know you can definitely raise money and you kind of go through Cycles but you're not it doesn't feel like you're getting marked down every day and so you know everybody can see our Revenue multiples and stuff and we're you know it's it's not great like our stock is is down quite a lot with any any kind of high growth Tech stock in this environment is down quite a lot um I was worried about this idea of I you know I was gonna have to spend like 20 30 40 of my time speaking with public market investors I don't that turned out to not really be the case I think um I basically you know I do the earnings calls we have a couple times a year and each each quarter where I go spend time with public market investors I've started to build good relationships

with them but it hasn't been a huge time sync for me and I actually don't really mind it I think um you know we just just like anything don't overdo it and leverage the people on your team who are even better at it like you know our CFO and our CEO and I and I basically had to focus on the five or ten key relationships like our largest uh shareholders the last thing I'll say is that um dual class stock is is something people should go learn about and everyone has their own opinion on that of you know I there you know you basically you can have a different class of shares that allow you to still maintain control so you're not dealing with kind of activist investors constantly which for me was a good factor that allowed me to sort of focus on the stuff I'm good at but um

that's that's a complex topic and I think one piece of advice someone gave me as I was thinking about that was you know pigs get fat Hogs get slaughtered so like don't go too crazy with the with the Dual votes uh stock and or the Dual class stock and you know do something reasonable but don't go crazy with it and I think yeah don't attach it to your grandchildren's grandchildren right yeah yeah right now great unless you're New York Times last year yeah true story okay well we'll take questions on that note from anybody have anything they want to know about anything yes sir um you talked about defy and

self-custody as like sort of like your next recommendations so how are you messaging sort of like to retail customers what self-custody means like long term specifically around security yeah well so I think everyone is a little divided right now they're thinking okay I can't trust the centralized exchanges let me do self-custody but people have lost a lot of money with self-custody too right it just it doesn't happen in a big blow up all at once but there's you know every week there's somebody losing some money out there that doesn't make headlines but you know as a percentage it may be similar I actually don't know I've never run the data on it so I think we as an industry and this is something coinbase is trying to help with we can try to make self-custody

um the ux around it and and the security architecture around it essentially make it harder and harder for people to do something accidentally to lose funds right so MPC or money multi-party computation is a big piece of this we've invested a lot in that at coinbase and we're trying to bring elements of that in where you know you can essentially have a quorum of keys right so if you lose one of one of those or two of those depending on how you architect it like maybe you lose your phone right or maybe you forget your password but there's a quorum of it that you can reassemble from various pieces you can do that with social recovery you know vitalik is kind of hot on that idea I think the ux around that is an opportunity for Innovation and then the question is once you've created that really great

architecture underneath how do you then Market it to the average person to help them understand that that it's actually better you know I think apple is actually an interesting example here you know I'm not super happy with Apple for other reasons just they've been blocking a bunch of features in the App Store but put that aside for a minute what they did with face ID I think that was a good example of taking some a really hard computer science problem you know it used like like lidar and all these liveness detection like that there was a lot of complicated Tech that went into that but it has a simple name you know face ID I kind of intuitively know what that is just from it just from what hearing it as an average person and it was simple to use where I just looked at it and it

was I was in and so I think there's an opportunity to do something like that multi-party computation is is not the right marketing term for you know what the average person might use and so I don't have a specific suggestion here I want to share like for the whole industry but I think that's the direction we need to go yes right there he's headed were there uh I'll start over looking back the other crypto Winters uh that you've been in um very you know uncertain times not really sure where the industry is going to be heading are there times or particular decisions you felt were like really good for coinbase or were there

any sort of traps or Temptations you might think Founders are easy to fall into at times like this in crypto Winters yes um by the way it's great to see coinbase alumni here actually there's a nice handful of coinbase alumni in the audience so hopefully you know coinbase Mafia going strong that was that's awesome to see um so traps that we've companies fall into in in down in crypto Cycles yeah I mean I think I don't know the most common one I see is that um you know we're just gonna basically they don't cut they don't cut costs soon enough right and it's it's harder if you wait you have to cut more and if you if you do it up front you can basically capture some of

the savings you know earlier on and so I think everybody should just be thinking very closely about burn rate and Runway and assume that you know base case is maybe this thing lasts like 2023 is pro you know gonna probably be a down year 2024 maybe we'll see Signs of Life by the end of it that's kind of what I'm hoping it could be sooner than that it could be much worse than that it could it could actually goes for 2026 or something right we could see a lost a lost decade or something right um but that's our base case so make sure that you're not in a really bad situation one or two years from now that's that's probably the most common one and then the other trick is basically flip your mentality from you know pessimism and fear and scarcity

to how is this actually an opportunity right and there actually always is an opportunity in every down Market um and that's the next mindset to get and so yeah I mean there's like these books like shackleton's way about in Ernest Shackleton and like you know there's this Despair and like one setback after another and like basically the leadership lesson is don't allow pessimism to like creep into your organization and and people to kind of recruit each other into this you know very negative mentality like the the history is very clear on this which is great companies have often gotten built in downed markets and so we're all going to look back on this in three to five years and say gosh that was the best time to

actually build this company because there was no distraction it was like we had nowhere to go we couldn't go too much lower so we had to all build back up from there and um don't die and you're gonna crush it coming out of this this down cycle so there have to retain the optimism yeah when we were in the great.com crash Andreessen used to always say to me one Ben don't worry one day we'll look back at this chuckle nervously and change the subject so yes sir over there yeah hey um all right so somebody who's built a very large company and probably gone through

all the people issues you can possibly have and scaling all of that like how do you go through the phase of all right you get to 50 people and you have these like early execs who built out the team with and then now you need to hire for a new function and you need to bring in new senior leaders Etc and like how do you balance needing that function and to do that thing better and like getting it right because we've had some of this where you know where it took us six months to hire because we want to make sure like this is something that was like very important to get right in the culture and just like still be in that pretty early phase but also we've spent six months like not doing it thankfully we've resolved that one but I'm curious for like future uh

just how you think about that problem as you scale from you know fifty to five thousand yeah so this is always a tough call because when you're a smaller company you're just getting started it's it's actually much harder to recruit right and I mean we couldn't we couldn't get good people to come in in the early days oftentimes that were more senior right we couldn't find like a CFO or ahead of Finance like our you know our early stuff was was kind of messy and we couldn't find anyone to come in and clean it up they were they were too risk-averse right or even like a really senior head of security or something like that so we had to kind of start with the junior people we had and as you start to find product Market fit you're increasingly thinking okay these people are over

they're over their skis I need to bring in more management or more people with more experience so I think the heart of your question is basically do we wait do we let the fires burn and hold out for someone that we're really excited about or do we kind of compromise just to get someone in the role and I guess I would say hold out and just wait um that's what we did I mean we basically let the fires burn and we tried to fill in the gaps where we could and we waited until we could find someone who we were really excited about now even with that um you know the failure rate of hiring Executives is is pretty staggering I think um you know I remember Jeff stump and the whole team like kind of came in to talk to us about this at one point when

coinbase was growing and I think you know he said the failure rate is like if you count success as the executive is still there 18 months later um something like 50 of executive hires fail and that was like roughly true in my experience as well and so even if you wait and you think okay this is the right person I'm gonna I'm gonna held out I'm going to find them you know 18 months later something it may not work out and that's fine just everyone's gonna freak out you know you need to part ways and they're going to want to wonder what's happening and some of their Columbia's alumni who are here they can tell you the war stories of it was chaos right at certain times and people got Battlefield promotions uh to things that they were probably totally you know out of their out of their

expertise so that's your startup life that's that's that's what it looks like so wait to find the right person even with that 50 of them won't work out 18 within 18 months part ways and do it again and you know some of our executive hires took 18 months or something like that where I was hoping they were going to take three months um but that's just what it looks like to build a company yeah and that's so true because look you don't know what you're doing when you're hiring Executives you know you you've not been CFO you've not been you know head of HR you don't know what that job should be so what I've seen is if you find yourself at a much better percentage than 50 failure you're probably not even firing people at the

right rate you've probably got people who are destroying your company and you're not recognizing it so it just is what it is yes in the last few months coinbase has been a lot more active with protocol contributions and development a lot more active in the process I think the last week vital gave you guys a shout out for helping with the 4844 development do you guys have any particular uh you know aspirations or goals with that effort um I know it's a new effort for you I'd love to hear more about it yeah well I just generally I would say that we want to start building more protocols at coinbase I mean it's pretty clear that that's an important way that web3 is going to get developed and there's a

handful of areas where I think um it's always our culture and our still the majority of our revenue is still coming from relatively centralized things and so it's been a big effort for me internally to kind of go create these groups that can really be crypto native focus on decentralized apps and sort of free them up to kind of not have a bunch of lawyers like around them too much that are you know shutting down every idea and it's in its infancy right we need we need the good feedback from from lawyers like in Key moments but we don't want it to destroy like The Innovation potential and so um thanks for noticing and I guess we're going to keep trying to do more and more of that as a truly a crypto forward company and I don't know people some people probably think of coinbase as as

somewhat tradify because you know we do have centralized products that are we're sort of known for but I think we also have a ton of really great crypto Ford talent and many of them are very entrepreneurial some of them are here in the room and they're gonna some of that's gonna get built inside coinbase some of it's going to go outside of coinbase we're happy to do both of those um and just help grow the whole ecosystem hopefully all right well um we are out of time so I'd like to thank Brian for joining us and sharing his assistant okay thanks everyone [Applause]