Finding Alpha In Crypto, Mamdani Wins & The AI Gold Rush | Weekly Roundup

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I I went to the liquid fund dinner thing last night and it was like I have never seen a more distraught group. I shouldn't say this because good good people and I'm sure some some of them listen to this. People are have no clue what is going on in this market. Guy to my right dumped everything. He's out. The whole market he's out. Guy to my left just levered long. Market's down 25% levered long. Guy across from me is raising for a DAT. guy, the other guy across from me closed all of his debt, isn't allocating 10. Like, I've never seen more dispersion between investors in the cycle, which is great. It means a lot of money will be made. Um, >> yeah, >> but it's like there's there's really no

consensus trade right now. This episode is brought to you by Zcash. You'll hear more about them later in today's episode. Nothing said on Empire is a recommendation to buy or sell any investments or products. This podcast is forformational purposes only and the views expressed by anyone on the show are solely their opinions, not financial advice or necessarily the views of Block Works. Our hosts, guests, and the Block Works team may hold positions in the company's funds or projects discussed. All right, everyone. Welcome back to the roundup. We are uh we booted Rob for the day. So, we we got Rob out of here after, you know, a lot of Rob's been talking about how people really like him. We're hearing different things on

the show. We We hear that people don't like Rob actually. So, we've replaced him today with Prrennav from Van. So, Prrenav, welcome to the roundup. >> Very high chance people like me less. So, still try it though. >> Oh, I don't know about that. It >> It all depends on what you're going to say because everything we're going to talk about for the next 45 to an hour is uh state of the markets. If you're bullish or bearish and whether you get invited back or not will strictly depend on your answer here. >> Yeah. Exactly. Or Oh, maybe Santiago just gets booted after this haircut.

What What do we have going on here, Santi? >> Oh, man. You ruined it. You ruined it. >> Yeah. I was I was going to say my favorite movie in the past 10 years, one of my favorite movies is The Big Short. And there's a scene where Michael Bur is meeting someone and he is uh Did I like your I like your haircut. Did you cut it yourself? [Laughter] >> The whole episode. I like that. >> Guys, listen. The good thing is next week my hair grows fast enough. So this will not be an issue next week. But I was in New York and um you know you know the haircut's bad when people notice and I've had now three people that have told me that I've got a haircut. It was terrible.

>> This is really just a big way to get more people to watch us on YouTube. Drive the listeners into YouTube, you know. So >> self-deprecating is always a good strategy, you know. So yeah. So Prennov, how you been, man? It's been a while since you were on Empire. good. Um I was actually meeting someone who's in town for I guess the Ripple conference and this person was like I haven't seen you at a lot of the crypto conferences this year and I'm like you know uh in our in our fund especially our strategy we're kind of like evolving our thesis a little bit and trying to see where the world is going and I just don't think you're going to find it at the crypto conferences. I know you run a great conference but I don't think at least in my opinion you're not going to

find Alpha those conferences anymore so try to do something else. So, so, so where do you find Alpha? Just out of curiosity. >> Yeah. So, so, um, we've been thinking about this a lot. It really started with maybe post election, which was, you know, we said, okay, the first thing that was going to happen in the world in the world in the world of crypto was legislation around stable coins. And everyone is obviously going to gravitate towards the most obvious winners, which are the stable coin issuers. But we kind of said, okay, well, the real winners economically are likely going to be the ones that use stable coins the most. and um where you know if you look at their cost structure they have a great underlying business and then interchange is like a big part of the cost structure and to the extent they can really push

stables through that cost structure uh these things will see margin expansion and grow. So um our our fund can do a lot of things in public equities as well as tokens. We're kind of agnostic to the underlying instrument. So we made some sort of bets around that which are winners of stablecoin adoption and and that has more or less started to play out pretty well for us in some of the bets we made. And so then the question be then asked is okay what's next right so the next thing is obviously clarity act and um and even without clarity act you might get this innovation exemption hopefully from the SEC and all that really means to me is that you know kind of the web 2 fintech world can start to really engage with crypto or things are on blockchains and you know obviously everyone's excited about tokenization

and all these things but the big unlock in my opinion is really going to be when great businesses can start to tokenize their stock especially if they're kind B TOC uh and they can then um use that tokenized equity instrument to really grow that underlying business in ways they couldn't have. So I look at it as like a quasi new customer acquisition lever for people. So >> wait, can you can you explain that actually? Can you go one level deeper there? So by tokenizing your equity, you can do things that you couldn't have otherwise done. Maybe go one layer deeper there. What does that mean?

>> Yeah. So so I'll give like a really kind of dumb example of what's possible, right? And then we can kind of look at every company and say why what could these companies do? Um so we've all probably gone to Starbucks. I go to Starbucks every day. Um I get a coffee and my coffee prices have gone up. Uh Starbucks has a ton of competition. Just pull up a chart of Starbucks equity and you'll see that companies are doing really well. Everyone's now saying Luck and Coffee might be disrupting Starbucks because I guess you get a bunch of Luck and Coffees opening up in New York. So long story short, Starbucks is like an interesting business. A lot of mobile app users which is kind of like a mobile wallet. um but maybe losing market share uh maybe stagnating as a business and one of the things I think could be

interesting for them is you know whenever I buy coffee I get stars and rewards and then I have to then get a free coffee eventually with those stars and rewards and then I I essentially ask okay one way to maybe revive that business model is by starting is is by essentially um instead of giving people stock instead of giving people stars and rewards maybe you can start giving people stock well in the current way stocks are traded It's very hard to do something like that where you programmatically based on a set of rules give people equity customers equity for being a customer, a loyal user, referring users, all these types of things. So your typical business, you know, especially that's B2C, you know, generates revenue a certain way and then does sales and marketing a very specific way, which you know, could be mostly

digital, right? taking Facebook, Google, whatever ads um and then has like some weird loyalty program that kind of is baked into that um >> marketing and sales and marketing kind of business model. >> I essentially think if companies are able to tokenize their equity and if the regulatory framework is there such that these companies can programmatically give people ownership in the underlying thing for being loyal users that might be a better closed loop mechanism to drive a business. Um, again I'm just giving you one through like this kind of Starbucks come to mind there. There's actually a um a podcast I reference all the time which was a very formative podcast for me thinking about the world which is um or at least crypto which was Marco Santory if you remember Marco Santo's lawyer

>> him and um uh this other woman I think it was Josh Clayman uh who was a yeah also also a lawyer in she's also a lawyer in crypto it was she was they did did an episode with Laura Shinn back in like 2017 and they were talking about this idea of hey imagine they use Nike instead of Starbucks imagine Nike drop shoes But instead of, hey, the first 50 people to get on the wait list get the shoes, it's shareholders of Nike. Well, right now those are two totally disconnected worlds. Um, yeah, but one day you can connect them. So, >> yeah, totally. I think there's many other angles to kind of look at too, right? Which is if you talk to most public company CEOs who who kind of, you know, understand markets and things like that, the smart ones will say, I wish I

can really have a big retail audience that follows me, right? Everyone's seen what Elon has successfully done and everyone wants to sort of build a retail following. Why? Because you know historically uh money made its way into equity markets through um set of intermediaries. You had a financial advisor channel or you had a hedge fund you'd allocate to or you'd buy some mutual fund ETF whatever and you would make your way into the markets through those sort of venues. >> Increasingly the younger generations, you know, millennials, Gen Z, they like to directly allocate to companies they like. So they kind of load up a brokerage account and they buy the stocks they like, right? So the the holy grail for most public companies in my opinion is to get a retail following because that means a lower cost of capital. What's a great way to get a

retail following especially for a B2C company? Well, make them owners of your thing like for being users of your product. >> Totally. Totally. I'm I'm actually reading and uh Andrew Ross Workins book 1929 right now. Have you have I don't know if you guys have seen this, but >> I started I'm like three chapters in or something and it they just started talking about this guy Charles Mitchell who was um he was like an American banker. He ran um first national uh first national city bank whatever it's called which became city >> and um he's widely regarded as like his securities policies or basically like uh very risky securities policies led to this the speculation which caused the crash of 1929 in the great depression.

And one of the things that he did is he made it he he he basically privatized shares of the the the bank and made it so that the only way to buy and sell the shares were if you talk to salespeople at his bank, right? So instead of trading publicly, it was so his sales guys would go around to their customers and be like, "Hey, you should take a loan out. You should get a mortgage with us. All the normal things and you should buy our stock." Um yeah. And so it'll be interesting to see what happens if like Yeah. I don't know your sale imagine Salesforce had to like >> I don't know. Salesforce sales people were selling the CRM and selling the Salesforce stock. So >> yeah, I think it's going to be harder for B2B because it's less of a relevant factor, right? B TOC is kind of like

where I think the unlock could be. So anyways, like back to like where I think things are kind of going where where it's interesting spend some time. Um, you know, we laid the case that um, you know, half of all US companies, public companies are tech companies and a third of the S&P is tech. A lot of them are B TOC. most things happening around AI today is also B2C and um and then to the extent you know you're these companies are able to tokenize their stock perhaps they can grow differently or grow faster and I would rather sort of you know focus on those companies to maybe look to invest in those things than you know token number 25 to 30 or whatever.

>> Yeah. Um let's shift gears a little bit. I want to We're Sant I don't know if you're still in New York but we're we're either all in New York or you you were at one point in New York um semi-reently >> west coast west coast >> west coast nice um what's going on in the west coast >> I avoid a lot uh elections are uh not as dicey as in New York >> sounds like not any winds I'm never stepping foot in New York again I'm I'm moving to Palm Beach >> you not a bad area but you could have seen poly market last week and you would have been right so again it was great great tweet by Shane. I think it was Josh Yosh Wolf who has been on this podcast. Much respect for Josh who's a great investor, but he was bit being a

bit critical of of polyarket and prediction markets. Um but again, you know, poly market called the election I think it was right across all five counts. Uh particularly in New York, >> which is we should talk about though. Are you guys are you guys move over to the West Coast or >> just so so were the polls. The polls were right too. It was just that Josh said that there were big foreign buyers like you know tipping the SK which is >> right Josh seemed to insinuate that there was market manipulation and like foreign like Russia and China interfere with market and it's like >> let's if you guys are game let's talk >> dude >> just for a second on that like >> in either prediction market platform you know for these election markets if you tried to buy more than a certain amount

you would meaningfully move the price because the order books aren't that liquid you know cuz like most market makers like traditional market makers like to provide deep liquidity when you can hedge that risk away and in let's say non-sports markets and these things you can't actually hedge that risk away right >> no that's what he was saying happened he was saying you >> a small amount on mumani made it so that monni was sitting at 95% which then dissuades people to vote for Cuomo >> I would take the other side which is if like the momi market was completely completely mispriced for some reason because someone was messing around with it like someone else like they're rational enough actors out they will take advantage of that because you know so my point is like yeah either way that's why he was wrong. Yeah. Um all

right so mom Donnie won obviously um he got he got a million votes about 50% of the votes Cuomo got 42% of the votes 850k and then uh uh Curtis Siwa uh the Republican got 150,000 votes 7%. I love that there's 150,000 New Yorkers voting for Curtis Leewa. Um what are you guys doing? Um, uh, anyways, Prrenov, I would love to just as a as a person who lives in New York, like, you know, you don't have to say like who you voted for or anything like that, but just would love to get your general take on mom Donnie winning if if you're comfortable to go there.

>> Yeah. No, I won't make any political kind of statements. I um just I observe and I kind of like let's just say from what I see from the observations. So, there was a Atlas poll out over the weekend that I think was like on social. I was going through it and the one of the questions that kind of was interesting was, you know, what are the issues that people are most people most care about in New York City and the top three were like inflation, cost of living, crime, and housing affordability, right? And I know we were just talking about this, you know, before the pod started, but we're talking about that old Peter Teal email that's that's being circulated now in social media that the Peter Teal email to Zuck, which basically explained why.

Um, yeah, there we go. That one, right? Um >> may maybe let me read it for for people who who are listening on um like Apple and Spotify and stuff like that and can't see it on YouTube. So Peter Teal, there's a Peter Teal email to uh Zuckerberg, Nick Kle, Antonio Lucio, Cheryl Sandberg, and Mark Andre January 2020. Subject line is millennials. Um says, "Nick, I certainly would not suggest that our policy should be to embrace millennial attitudes unreflectively. I would be the last person to advocate for socialism. But when 70% of millennials say they are pro-so socialist, we need to do better than simply dismiss them by saying they are stupid or entitled or brainwashed, we should try and understand why. And from the perspective of a broken generational compact, there seems to be

a pretty straightforward answer to me, namely that when one has too much student debt or if housing is too unaffordable, then one will have negative capital for a long time and or find it hard to start accumulating capital in the form of real estate. And if no and if one has no stake in the capitalist system, then one may well turn against it. So >> yeah, and I think my my sort of common thread between the election and this email was sort of this observation that um the younger folks who have a lot of student debt and you know can't afford to pay for a nice apartment and and kind of living paycheck to paycheck and whatnot um have like maybe two outlets. one is go vote a certain way and the other

outlet is gamble your way out of there out of your situation right and that gambling can take take form in the form of you know prediction markets could be used to be tokens used to be memecoins now it seems to be potentially in AI equities right so there's always sort of this gambling energy that's coming from you know the younger people and so my kind of market observation is when I think about sort of like where are the best trades when I look you know into the future it's about it's really around finding situations and narratives that potentially have good fundamentals but are about to get that sort of retail attention and that's what's going to drive flows because there is that really high level of sort of leverage energy that wants to get into these types of situations.

There's um there's a similar tweet that Naval um posted yesterday I believe and he said um it's not the politicians it's voters and says importer importing voters is a loophole in democracy and the last one just tied to this says I fear the day when the majority of voters don't have children. Um, you know, I think about that a lot. Uh, I think you could have diagnosed this phenomenon.

Pav, you and I privately have spoken about like, okay, if you're an investor and you look at this rise of socialism, how do you translate that into expressing an investment thesis? I think that's perhaps a more relevant discussion for this podcast because we're not a political podcast. I don't want to get into the politics of why he got elected. It's more of what do you do with that? How do you express a thesis? Um, that's sort of what I was thinking about. Okay. It's like what are the sectors that are going to do well if this if this microcosm of New York is a pretty big hub. If that is true for the rest of the country or in the world, what are the sectors that do well under this regime? What are the sectors that

definitely don't do well? There's another tweet that said, gosh, I think it was a Rex Capital, which is a bit unhinged account. I said, uh, I can't believe they elected a terrorist communist in New York and Bitcoin's not at like a million dollars. Interesting take a bit taken to the extreme, but you know, again, maybe the first question is, >> does this make you incrementally more bullish or bearish on an asset like Bitcoin? And then what about stocks and other sectors of the econom of the market? Yeah, I think uh there have always been these geopolitical events that happen and people are like this is bullish crypto, right? And I think, you know, I don't know if that's like always like the knee-jerk reaction. It's like CO's happening. This this is bullish crypto.

Like, you know, >> um so and it was >> Yeah, I guess it's just all about time, right? Like February of 2020, nobody wants to go buy crypto when there's like a lockdown coming. But um >> but I think one knee-jerk reaction might be this is potentially bullish things around privacy and crypto cuz you know um there might be a cohort of people that think that they want to have assets in self-custody that um they can also have privacy with. Oh, I don't know.

Yeah, my case would be that uh people are very disillusioned with the system and that they there's people are really losing faith in capitalism and part of the uh the backbone of capitalism is uh slow and it's kind of like slow and steady like the S&P, you know, goes up 7 to 8% a year. If you just put your money in both in two things, real estate and the S&P then you'll you'll be fine. And clearly there's a a people can't access the money to get into real estate and b yeah uh you don't have the people don't feel like the seven to eight percent gains a year in the S&P are enough money. So the things that I think like to answer Santi's question in my opinion it's uh like fa fast money like clearly society wants fast money per gambling

uh like I I don't actually think this like financialization is of everything is good for society necessarily but I do think it's going to play out because people just people want the 100x they'd rather they'd rather have the one in 200 shot of getting a 100x which is bad odds but they'd still rather go for that than just put their money in the market and get 7%. >> So, so let me let me maybe say I think we're all kind of maybe saying the same thing. So, so um Howard Linden, who's I think pretty good, you know, VC has a thesis which is he kind of wants to invest at two tales of the market. One is what he calls the luxury economy, the one that's like the Djen economy, right?

So, you can take the same framework here, which is okay, this election happens. What does the luxury economy do? the people that live, you know, live well, that have wealth, you know, they look at this and say, "What could come in 2028? Could you get a socialist president?" You get a socialist president, you get, I don't know, a Bernie Sanders equivalent who wants to do a billionaire wealth tax, those types of things. >> Then that market might want assets that are privacy preserving. So that's one angle. And you're kind of pointing to the DGEN economy, which is that's been there. it's going to continue to persist which is people want to express their disolute like you know dissatisfaction with the system by gambling out of their kind of situation.

>> Yeah. Yeah. Um speaking of uh I mean anything else on Mandani or this kind of stuff? So, so just in summary, Paviano, you both are saying, look, this this with the Peter Theo commentary is markets on everything. That's bullish because people will always want to gamble um to get out of their situation because this this is uh this election highlights the dissatisfaction with the establishment. Whatever the current regime is, you hate it because your has not improved over the last 3, four years. So you're going to vote for something that is represents the opposite whether without thinking much of is this person actually going to help. It's just I am so dissatisfied

because over the last four years my wage hasn't gone up. Inflation's gone up. My situation's not improving. I see all this wealth inequality and like engineers that are making a billion dollars and I am actually can't go to Whole Foods or whatever like the supermarket and like I'm feeling the pinch. And so that naturally translate into deep dissatisfaction with whoever the current uh elected official is. But you're always going to go and gamble and take the 100x 50x per because get all just roll the dice and hopefully get out of this rut, >> right? And I think maybe to add to that, AI is going to make this problem potentially way worse because this is the young people problem today, right?

the 20 20 year olds and 30-year-olds especially um feel like they are worse off as a generation versus their parents. So, and if you Yeah. But emphasis on feel worse off >> but not is is that more of a social phenomenon of social media and your perception because the comparison is like so much in your face but the reality is like I think there's a great book the better like better part of a which I forget the name of the book but it talks about like objectively the world is is a safer place um you know like technology's been disinflationary it's abundant like our condition is actually way better than our prior generation. So, you shouldn't

actually feel dissatisfied, but because you're comparing yourself constantly with people, you just feel miserable and you feel like you're actually worse off. >> I think it could be both. I mean, there's like sort of like I've seen some data around, you know, home ownership as an example, right? Because home ownership is used to be viewed as sort of the, you know, the thing that you should aspire for and like the prior generation probably bought homes at a younger age than the current generation is. And maybe that's like shifts in behavior. People would rather rent and go to Coachella than, you know, um, buy a home. But yeah, it could be both, right? Social media making you feel like you're always kind of behind and but also that people don't feel the upward mobility because that's what people want. They don't want to stagnate in

some ways. Do you guys you guys are American, but maybe just round out this discussion, do you feel like the American dream is alive and well today, or has that been not as alive as it was 50 years ago? >> What do you think, Anna? You're younger. >> I I mean, I don't think it is. I mean, isn't what's the American dream? American dream is a white pick a fence, a home, and you know, two two kids and a and a and a nice family, right? And you you can't you can't get that anymore for for most people in America. You can't get that anymore. It's very it's very hard, right? Like it's very hard to have to I mean you you definitely cannot buy a home. Like then the the data shows

that and even having kids like I mean I don't know if Prenav sees this but like at least my friend group in New York like I'm you know I'm around the age when people are starting to have kids. I think when when my parents were our age it was very normal for people to have three or four kids. Now, like if you if you have three or four kids, like if definitely if you have four kids, that is like you are rich. Like that is a luxury. Like it is a luxury to have four kids. It is like a status symbol. And it didn't used to be that way. Now it's like I have a lot of friends who are like, I'm just going to have one kid or maybe I'll just I'll stop at two and and that that's a money thing. So, >> but you most of your friends cluster in

the in New York area. Yeah, that's the that's the counter is that uh I'm we're I'm in New York and San Francisco where which are which are such money focused areas that people obsess over money so much that it actually inhibits them from like whereas you know I I have friends in like uh middle middle of the country too um like I I have a I have a friend in um in uh kind of outskirts of Ohio and that dude's going to pump out like six kids and he's wealthy.

>> And so I think um there's a couple of theories I have. One is like um home ownership and like the willingness to have a family is alive and well. You actually can. Um I think the American dream is very alive. I I personally was a benefactor of the American dream. I went to college in the US. >> Um I got a scholarship from JP Morgan. I worked my tail off there and then I ended up doing other things after that and that to me is alive and well. You can talk about immigration, you talk about visas that on the margin are a bit more difficult, but I I think America continues to be the best place in the

world because you have upward mobility like no other place in the world and you have this um cultural willingness to take risk without being totally detrimental if you fail. That is not true in Japan. That is not true in Europe that has not innovated over the last h 100red years. That is not true where I grew up in Mexico. So that willingness to take risk is why people immigrate to the United States and and decide to build their companies there. And I do think like this this um I mean JD Vance your your current vice president has a great book. Go read it and talks about this idea. It's just I think people just have now this sense of entitlement which is social media for

better or for worse is people are willing to they feel that they deserve to have the vacation in Europe and they feel that they deserve uh luxuries that it's like no dude going work hard and maybe maybe you know you know and it's not just working hard like there is luck in a lot of these things right I'm not trying to be harsh or anything but I do think that there's this prior generation The biggest problem with our generation is this lack of committal. Like we're not we're non-committal. We're always trying to optimize, but we're not willing to commit. You know, you're not willing to commit on a partner. You're not willing to commit to have a family.

You're not willing to commit to settle down because there's always the elusive can it be better on the other side. So I think that is a >> phenomenon has been pretty detrimental to our current generation versus our parents. So, let me ask you guys a different question because I guess people are hoping we talk hear about crypto, but um you ask about the American dream. >> No, guys, not not passing the bar so far. >> All right. You asked about the American dream. You guys have been in crypto for a long time. Is the crypto dream still alive? And I'll frame it this way. So, you know, I've more or less kind of been in the spaceish since 2017. And it always felt like crypto had this great call option like a lot of promise that was underpriced and and a variety of

catalysts in the horizon that could price it appropriately if everything starts to deliver and until you know last election the thing that was the catalyst was like regulatory clarity right that so we're like call option on something great and clarity equals everything's going to be great as we sitting here today is that dream alive or is the was the option always mispriced >> for the first time In crypto's history, there are now two factions there. There there have always been two factions and for the first time in history, those factions have completely switched on how they'd answer that question, Prav. So 2009 until 2025, uh you had institutional traditional people and crypto cipher punks and

things like that. And we we know how they would answer that, right? 2025 happens, we get regulation, this year happens. I think if you ask most people in crypto Twitter is the dream still alive they would say say no. And I think if you ask the Collison brothers at Stripe and you ask the AI, you know, executives and you ask policy makers, is the crypto dream alive? They would say absolutely. It's actually never looked brighter for crypto. And that's why this is such an interesting year. And I that's why I'm actually extremely excited about next year and I mean the next decade for cryptos because >> uh if you can just close down crypto Twitter it's it's ne there's never been a more exciting time for crypto and I know it doesn't feel that way. Prices

are down. It's a shitty week. >> I think I I was I was going to agree with this kind of goes back to what I was saying with where our fund is focused which is perhaps the dream of the live but it's not on coin market cap stop 100. >> It's somewhere else. Right. It's on block >> for uh I mean Bernov you and I share this and we've had this conversation. I think the more value is going to be created in crypto, not necessarily in tokens, not necessarily in your infra play, but more so on companies that are using this. And you've spent a lot of time in the public markets, companies like Maral Li, companies like Newang, companies like Robin Hood and Black Rockck and JP Morgans, companies that have distribution.

In the same way that people are excited about AI, uh again question you have would you rather invest $100 million in a AI startup >> in a basket of startups or would you rather invest in maybe uh a Google or a Tesla or companies that are going to utilize AI? >> And I appreciate like the names the public names have all have different components, right? you have been a very big bull on Tesla and your private book, but like I'm curious, you know what I'm trying to say is like do you think >> pick today? Would you rather invest in the top five crypto coins of your flavor or a public basket of companies that are going to utilize and become crypto

enabled? >> I'm definitely in that latter camp, right? um of of find great businesses that um have a great CEO founder that's you know very focused on continually optimizing their business and then who can naturally use this technology to accelerate what they're doing. So like there's a wrong way to do it is the right way to do it if I keep it simple right the the the luxury brands in the last cycle that were like okay how do I do an NFT thing because it seems like you know everyone's doing NFTs like that was the wrong way to do this stuff and then the right way to do it is you know exactly what Yano said which is you know what the Collison brothers are doing which is they understand this technology and understand their business and where that's going and they understand how

they can leverage pieces of the stack to just accelerate their thing >> and so I'm very much in the camp of let's find those things Um, you know, I think so we've been up and running now for three and a half years and I think, you know, the fund's done pretty well and, you know, I'm not allowed to talk about returns and whatnot, but I look at sort of our annualized return uh, since we launched and I've set that as our hurdle, which is any idea that I put in our book, I have to believe it's going to compound at least at that pace, if not better. Um, and when you look at tokens through that lens, when you look at these big companies through that lens, I think the world gets smaller and smaller. So you'll end up with like a more concentrated book of what you think

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>> Let's let me ask you a couple series of questions. You tell me what you prefer, yes or no. Ethereum 500 billion asset. Uh PayPal 65 billion. Which one? Uh you can you can only by the way you can only hold for the next 5 years. One >> my compliance people will tell me I can't com comment on individual assets that way but I would just say um most layer 1 blockchain tokens have valuations that make no sense to me like relative to what they're going to earn in economics in the future. >> Um you know especially looking at what people with distribution like a stripe are doing like it just makes no sense why these assets are valued where they are. Now you ask like a crypto person why they think it's valued there.

They'll be like well there's a store of value element. I'm like dude nobody thinks about this thing as store values. >> So so again do you think again the question Yanu and I you you would have heard us say five years ago saying hey the top 10 in crypto is going to totally change but we're in a state of the world Ripple just made raised at a $40 billion valuation equity. Uh XRP trades at 150 billion. Ethereum trades at 500 billion. Salon is 100 billion. Um do you think that people are doing the fundamental analysis? Do you think that that will continue to be these things are going to trade on some sort of cash flowing basis or are people just going to buy these things because they are going back to why people elect express their political views because for them it's like a lever

NASDAQ. I'm like I'm going to roll the dice on this token. >> It's an interesting question, right? So let's ask the question differently. So, since I don't know, pick a time frame, um, since 2022, um, pick a basket of your 10 favorite tech companies and then pick a basket of your top 10 L1s. My guess is those 10 tech companies equities have just massively outperformed your basket of 10 L1s. again in like the last couple years >> subjective highly subjective on on like quite literally the month that you right you know >> hey if you pick from the bottom of December 22 maybe not right >> on a riskadjusted basis 100%.

>> Yeah. So, so I asked the I I I'm not I'm less focused on whether people will own an L1 token for a variety of reasons, yolo, gamble, whatever. And I'm more focused on are there what's the best asset to own from a compounding or capital perspective. >> And it's in my opinion not the L1 tokens. >> No, I mean I is any crypto tokens though, Prof? cuz we're you're just specifically talking about like if you say tech stocks are going to do well, are there is is there a basket of crypto tokens that you think will outperform?

>> Um, yeah, I think you know when I look at the space today, I can probably name two or three. Again, I'm not going to name it here because like it's not worth it, but like I could always find two or three that I think will perform better than most of my equities in my book, >> but it's very very few. >> Absolute or risk adjusted? Absolutely. So risk adjusted is a very different conversation. Yeah. Yeah. If you're an allocator, you're going to end you're going in a year end. You're going to make a decision of how to express a view on crypto.

These allocators make decisions on a yearly basis, maybe multi-year time frame. They are still catching up to, hey, last November Trump got elected. You got all this policy this year. You got Stripe doing acquisitions. Black Rockck and Larry guess, you know, really getting behind tokenization. What is your outlook for the next year, couple of years? Does that make you incrementally more bullish in a next year? Like do you think the market's cooked now? Like >> Yeah.

your thesis. >> Yeah. So, so as I mentioned kind of throughout this conversation, I think the number one focus for us is let's look at the public tech companies that are, you know, doing their thing but could leverage stacks, pieces of the blockchain stack to, you know, enhance their core business and as a result use that as an accelerate, right? So, that's kind of like where our focus is going to be probably for the next 24 plus months. But while that is happening, I also have a thesis that there are cryptonative projects that have tokens or are likely going to have tokens that are just potentially really good projects that are just mispriced completely. And I have a belief that those things will just asmtote down to a point where the cash flows they'll generate will be

relative to their market caps will be at a reasonable enough entry point where it will make sense to step step in and buy those. I don't know when that will happen, but I think it's going to happen in the next 24 months. So, are you buying like all of DeFi >> and only DeFi, >> right? >> No, no, no, no, no. I mean, I think I think there are things in Deepend that actually will get to a valuation relative to that because there's a catch-up that's happening in both directions, right? I pull up any deepend token. It's, you know, down only, right, since the last cycle >> and some of those are actually starting to generate cash. And there's going to be this inflection point where the market cap will get low enough and the cash they're generating will get high enough and there's going to be a moat

hopefully that you can say, "Okay, this is a pretty wellpriced um asymmetric trade I can step into." >> We're just not there yet. But I think yeah, >> as a fund, >> do you use Bitcoin as your primary hurdle rate or your historical returns? How do you think about >> Yeah. >> like Bitcoin in your portfolio and outperforming that? because the reality is nine out of 10 funds don't ever outperform Bitcoin. >> Yeah. So, so we essentially have um two kind of benchmarks we look at, right?

One is uh a market cap weighted top 100 which kind of ends up with like primarily Bitcoin, ETH and a couple other things like that's cuz that's if you look at by market cap that's the composition of it and the other one is um altcoins essentially which is you know top to top 100 tokens equal weight and um we look at both I mean the one when we the benchmark we kind of looked at when we started the fund was the altcoin mark altcoin benchmark because you know um it was I thought at the time it was going to be the harder one to kind of compete because in a in a bull market we always think you know also outperform Bitcoin again this was a different sort of cycle if you want to call it that um so so those two are my benchmarks but as we are starting to

kind of look at the public equity universe more and more we are asking is there a benchmark right and and I think the short answer is there isn't necessarily a benchmark at this point I can only really compete with myself which is I look at our returns the last three years what's the compounded annual rate of those returns and can I continue just compounding that because That's, you know, that's really what I think the greatest investors did. You know, >> they they just wanted to compound the mark, the care capital faster than >> um most of their available instruments um on a risk adjusted basis.

We've had a couple of investors come into the spot and say, "Hey, listen. Uh I just put on a big position in Ethereum or Bitcoin and was patient over five, six year time horizon, took money out um and you know, called it a day." Then you have other very sophisticated intellectual fund managers that have, you know, done a lot of asset selection and haven't necessarily outperformed Bitcoin, maybe have traded in and out. Um, what what is I mean what we can talk about what has been successful historically, but the more interesting question in my mind is what are the next three five years as an allocator mean for the for this space?

Like, you know, you could overintellectualize Deep In and DeFi and some other sectors, but the reality is if you look at the correlation between Bitcoin and M2 and all the other crypto assets, it's it's this is just a lever NASDAQ play. So, don't overthink it. Like, if you're going to invest in this asset class, it is just going to be very volatile and it is just going to in the best times outperform technology in the worst time meaningfully underperform it. So make sure that your fund is structured in a way where you don't get people calling for capital in the worst of times and you can hold on and not have to sell the bag. Don't use leverage. Have a 5 10 year horizon and honestly just chill.

>> Yeah. But it is so hard to do that. I think you can manage risk around the margins and that has a meaningful compounding effect. Right. So again we've kept everything very simple which is my job is to own basically 15 great assets and and position them right in the book. like my highest conviction ones I think will drive all my returns position them bigger. One of the things we always do is like you know in any given year we'll have 15 plus bets and at any given time two or three will really start to work for the right reasons and what we then try to do is reallocate from the losers in the book to the winner double down those winners and again that has like an interesting return effect in the book but I think the the part we do alongside that is ask

how much units of risk do I want to have in this market and you know Santi and I you know you and I have talked about this um when everything feels asymmetric to the downside side, you want to have more cash than usual. You want to have hedges on, but you don't want to constantly keep hedging, constantly keep raising cash. So, you try to do it, you know, a couple of times a year when things feel asymmetric to the downside. Um, and hopefully you get them right. If you don't get them right, you make sure you have your risk back on. So, >> it's not about like the extremes of like no risk, all risk. It's about like reducing, you know, if you're $100 long, maybe getting that down to like $70 long, having 30 of cash. If you're wrong on raising the cash, redeploying it very

quickly, acknowledging you were wrong about it. And then if you were right, that's great because now you have $30 of cash to double down on the assets you believe in. And if you do that over time and if the market just grows and you pick the right assets, that should have a compounding effect. But trading the market shouldn't be like the place where you I mean, at least for me, it's not where I generate my alpha. It's asset selection. The trading is an accelerant. >> Yeah. Um historically liquid funds have done very well because tokens have allowed you to have a venture-like um asymmetric return with liquidity in a two to three four year time frame.

However, now you're seeing companies like Poly Market and Ripple uh really get much more interest from institutional money willing to express a thesis. In my seat as an allocator, I could tell you a lot of LPs, potential LPs, institutional folks have expressed hesitation towards tokens. And so now you have an incredible amount of interest in poly market secondary from everyone under the sun at a $15 billion valuation 9 to 15. Do you think that going forward venture-like strategies that are investing in equity? So now equity is more interesting for crypto

um and you could see more companies go public as you're seeing this cycle. I know your fund is structured more on you have a very flexible mandate. You also have van venture funds which I'm an investor in full disclosure but I'm curious like >> does this warrant like a shift in thesis. You're looking at poly market and ripple raised these mega rounds. Does it make you incrementally more inclined to take the liquidity risk and you know invest in venture equity structures without the token? >> Um short answer is there's only a limited amount of that I can do right because we are supposed to run a liquid book. So if we do illquid investments you know that we have to do that as a side pocket essentially. Um so >> but you could do but you could do a growth round. You could invest in poly

market right now 15 billion. It's like the Mark Row and Apollo commentary says illquid markets are no longer that illquid because there's a lot of interest in secondary. Right. >> Right. But I think more from a fund structure perspective this we we don't try to do too many of the illquid investments for you know variety of reasons. But one of the things we we we look at them and we've done a bunch in the past. Um, you're right. Like I think I almost when I look at some of these um equity investments in what I would say blockchain adjacent businesses that are private today, I kind of look at them as like I think these companies, if my thesis is right, will actually exit as tokenized equities. So, call it an equity, call it a token, I don't really

care, but I think it'll be a programmable asset that is their equity. >> Um, I know Yano and I talked about it. Um, what do you think about the Yano? I'm just waiting for you to tell us if the market has topped or not. I'm kind of uh I just want to hear am I buying the coins or selling the coins for now? Come on, get to the point. >> Um okay, so I so I I sent you this tweet that Hunter kind of put out there, right? Which was >> I went to liquid fund dinner thing last night.

>> Like I have never seen a more distraught group. I shouldn't say this cuz good good people and I'm sure some some of some some of them listen to this people are have no clue what is going on in this market. Guy to my right dumped everything. He's out. The whole market he's out. Guy to my left just levered long. Market's down 25%. Levered long. Guy across from me he's raising for a debt. Guy the other guy across from me closed all of his debt. Isn't allocating 10. Like I've never seen more dispersion between investors in the cycle which is great. It means a lot of money will be made. Um, >> yeah, >> but it's like there's there's really no consensus trade right now. And so that I I was joking before about but I do want to hear your take about just how you

think about this market. >> Yeah. So so we in our strategy have more cash than usual. Again, I don't believe in sort of being those extremes of like levered long versus all like you know dris and like that. That's like too crazy, right? I think um I think we're in a market so so there are markets where you'll have your 10 out of 10 ideas and there markets and then also you'll have your seven out of 10 ideas and you're kind of fully invested and you know your seven out of 10 ideas are seven out of 10 for a set of reasons and but but then ultimately adds a little bit diversification and might have a different return profile so you have it on right since September we've taken the stance that we only want to have our 10 out of 10 ideas and our seven out of 10

ideas are worse we're going to would rather just be in cash for that piece. So, we've been in that position. That served as well. I continue to believe that. Uh part of it, >> but why would you why would you ever want to own a 7 out of 10? >> Cuz part of it is like how if all you all you're in is, you know, 10 out of 10 ideas and that's 100% of your book, then you might end up with like five concentrated positions for your entire book right? >> Um >> and is that an issue >> for certain investors? It might be, right? Um again like P PA like your personal account people might have a completely dis different risk appetite right. Um but but you know people have different like I think people want some limitations on how

concentrated each individual holding can be cuz like you know you have a tail vent and then you don't want to get wiped on a mass amount of your book right so point is like again like the way I think about my seven out of 10 ideas is that um I have less conviction in them but that less conviction is made up for an a higher amount of upside. So >> yeah, but but portfolio sizing comes into >> allowing for >> that seven out of 10. >> Yeah. >> Um >> yeah. Do you think that that factors into how markets >> and how things get catch a bid like you talk about units of risk?

>> You are maybe in an environment where when there's abundance of liquidity i.e. M2 rates go low, there's an excess of cash, um like QE uh kicks off or whatever. >> Yeah, you're you're you're people want to go farther out on the risk spectrum and so they're more inclined to bid that seven out of 10. So again, if you think if you think we're going into a bull like prolonged and bullish environment macro wise, which is kind of impossible, but say in the next six months, you know, rates continue to go down, people are going to want to go chase opportunities farther out on the risk spectrum, >> the seven out of 10 from a return standpoint may offer more asymmetry. So,

you're going to be very compensated to put that position on and size it pretty aggressively. >> If you think that's going to be the case, >> yeah, but again, unless you think there's going to be continued volatility and you say, gosh, I'm taking way too much risk right now to put on a seven out of 10 because I don't know how this market's going to go up or down. We're a tweet away from the market puking 15% or going up 15%. I just don't know. I don't want that volatility in my book. So I I generally agree with your framing around the macro which is rate cuts, more liquidity. Um you know economy seems to be getting weaker which means again great forces if we we expect you know central banks to react the same way as they always have. Trump's going to appoint a Fed

chair a new Fed chair at some point. All that like that looks interesting right? I guess what I would say is the risky capital is not in crypto. like that seven out of 10 idea you want to express that in is somewhere in AI or AI adjacent. It's just not in crypto. So like >> because I just think the story isn't that great in crypto anymore, right? For some of these for most of these alts like what's the most exciting story in crypto >> like narrative wise, right? >> Well, it's a good point because I guess I guess uh prior cycle AI wasn't as much in the narrative. So crypto became that asset where people went to the casino to get out of the their current

financial situation. Right now, people would rather punt Nvidia and options around Nvidia and your incremental AI company versus go to the casino crypto casino, >> right? Or even I'll take it out the risker for you, right? I think uh you know Sam Alman's on every podcast, you know, Sai Nadell is in every podcast talking about the bottleneck in AI being energy and power and now you're as a result you're seeing a lot of speculative money go into energy and power trades, right? You know, Bitcoin miners is one example of it. It's the same theme. People are looking at, you know, >> I mean, Galaxy.

>> Yeah. Renewables, whatever. Like, just look at anything in energy and power. Like, that's where people can use their imagination and speculate even though it might ever might never come to be real. Some of these things might never come to be real. Like some of these nuclear stocks like I mean like you know zero dollars of revenue and obviously like tens of billions of market cap that whole thing. So that that so you might be right on the macro. It's just that if you're trying to express that view in altcoins, you're you're you're expressing it in the wrong place. >> Yeah. M >> I mean could could you then just be so >> distill the thesis for crypto as it is a place where historically people wanted to express a long gambling view and now maybe that's no

longer going to be the case because people are disillusioned because because the infrastructure sucks and pukes at least when you're you don't have to deal with the security nonsense you don't have to deal with all on the margin it's it's just hard So is it that historically I think a lot of the demand for crypto came outside the US where you didn't have the opportunity to invest in the US stock market and and and all the technology kind of wealth creation there or in the private markets. So two phenomenons as people have more opportunity to invest in in in secondary markets does that diminish the demand for crypto tokens and more importantly as kind of the rest of the world has more access or as the UIUX

or the opportunity to invest in technology X crypto for the rest of the world improves like does the demand for crypto just go down in a way where it's no longer the venue where people express a long technology view levered view like you just sort of lose like 20 30% of the demand that would always been there. Now people like you know what >> this shit's too complicated I'd rather >> express it somewhere else. >> I mean feels like it right. I think if I were to put it simply, you know, objects in motion stay in motion, which is, you know, what whatever area of the market is making people outsized returns, especially this call it retail capital that wants to gamble like whatever area

that market is giving them those returns. They're going to keep speculating in that area until they drive it into a bubble and that bubble inevitably will pop at some point. >> So, Prof, let me ask you what to do. Uh let me use actually my scenario as a real scenario which I think is the scenario of a lot of Empire listeners. Um so you have things that you don't want to hold longterm and that you do want to hold longterm and maybe the things that you don't want to hold long term or some of the riskier crypto assets and let's say you're out of those already or or you're not out of them and you just want to hold it. So we'll put those aside. But then you have assets that are really good um or that you consider to be really good. I I'll use

Coinbase and Robin Hood as as two of those. Like for me, those are I consider those I want to hold those assets for the next 20 years, right? So I love Coinbase. I love Robin Hood. I want to hold both those stocks for the next 20 years. I think they're going to be huge companies. I also think the the equities market is really frothy right now. >> Yeah. >> And it feels like a good time to get into some cash, but I don't want to. But everything I've read says trying to time the markets is a fool's game. So maybe it's better to just close my eyes, be okay with what could be a 50% draw down, and just hold what I think is a generational asset. How do you you're a professional trader and investor? If you're not a professional trader and investor, how should someone like me

play play that uh scenario? >> So, so I should I guess disclaim not financial advice, like don't listen to me. Um but um how I think about it is is I have my 10 out of 10 ideas that I think are generational assets that will just keep compounding. Believe in the founder, believe what they're building, all that stuff. What's interesting about that is whatever those might be for you, whatever those might be, ignore that. But at least for me, those 10 out of 10 ideas have performed extremely well this year. Like, so they're not the assets that are down 60%. So, you know, so the world is rewarding good assets in some ways. Um, so so in my opinion, I I have my 10 out of 10 ideas and and I I I'm going to let it be as is. I've cut all

my seven out of 10 ideas. I have a fair bit of cash and interestingly, those are the ideas that I've actually not done well. So, I feel generally okay about how things are going. And if my 10 out of 10 ideas go down 50%, well, thank God I have all this cash. Hopefully, I get to double down on my best ideas at a >> um at a hopefully a better entry point. >> So, if it doesn't get the cash, get the cash with the with the seven out of 10 ideas, even if they're already even if they're down 20% already or something because they could if you don't have conviction in them, why are you holding them in the first place? And then if you got 10 out of 10 conviction in something >> Yeah.

>> Yeah. don't probably don't get out. >> Yeah. And and like and then like you know I'm not going to say you know where are we in like the risk asset cycle right because I think the entire market seems more or less held up by AI. Um, so everything outside of AI just seems to be performing very poorly, right? I don't know. Like I was listening to the Cava and Chipotle earnings calls and like it see like the way the CEOs are talking about what's happening with the consumer is like oh my god like the world's falling apart, right? So it seems like the market more or less is held up by people's excitement around AI and at some point you know whatever set of catalyst can change that it doesn't seem like it's you know anywhere near current timeline. So so it's more that

you know okay so that's the way the market is you know I want to have a lot of dry powder for if and when that thing changes but it's all about how much of the upside you want to continue to participate in. H >> I um I listened to a great podcast uh by Shane Parish on Farman Street Farnum Street and he he interviews this guy called Anthony um Skiplot Skippley um and he he was a guy who exposed the Enron fraud um and he draws a lot of parallels on like where we are in the market. Um his whole point is that there's just a lot of nonsense happening on in AI where like Nvidia like invests

in open AI and open AAI like Microsoft invests in open AI and they're all kind of like you know it's a it's a huge loop he he draws parallels on he has a great line which talks about like Alcatel Lucent some of these companies that were all the rage when like fiber is being deployed like these companies no longer exist um yeah >> I'll give you So, I've thought about this sort of, you know, criticism a fair bit because when everything's kind of like so frothy, it's always good to sort of think about what are the red flags and, you know, all those types of things. Um, the two counters I'll make to this is that the people that are sort of, let's say, involved in these related party like transactions are founders and

CEOs that have been great allocators of capital and great managers and great builders of business for decades and decades. like it wouldn't make logical sense for me to all to see all of them sort of engage in you know let's just say irrational behavior. I could be wrong like you know these great CEOs all of a sudden all like get deluded into believing in something some great trade and they all do something stupid right could happen but I just don't think it's likely um the other part I would say is I I just start top down right what is driving this entire thing it's clearly open AAI how many how many users does open AAI have how much does each how much time does each user spend on open AAI and how much they spend how much they pay for their service I just think

open AI chat GPT is massively undermonetized so I think the The better question to ask is if uh the revenue per user in OpenAI and Chat GPT was appropriately monetized, what is that number and how much revenue does OpenAI generate and what does that mean for the ROI for everything else in the stack and is that unreasonable or reasonable? This episode is brought to you by Zcash, the decentralized digital cash that is encrypted to ensure agency and safety with a fixed supply of 21 million and proofof work consensus. Zcash is encrypted Bitcoin. buy, store, and spend encrypted Bitcoin using the Zcashpowered mobile wallet, Zashi. To find out more, visit their website or click the link in the show notes. Thanks

to Zcash for making today's episode possible. Shout out to today's sponsor, Katana. Katana is a DeFi first chain built for deep liquidity and high yield. No empty emissions, just real yield and sequencer fees routed back to DeFi users. Incubated by Polygon Labs and GSR, Katana is launching with notable ecosystem of primitives, assets, and partners like Morpho, Chain Link, and more. Katana's 1 billion CAT campaign is live. Bridge and deposit directly into vaults in one simple click and start earning immediately on your Ether, Bitcoin, USDC, and more. Follow the link in today's show notes to get started. As always, investments in blockchain

technology involve risk terms and conditions apply. >> Yeah. I mean, look, just to put it in perspective, back to crypto, OpenAI potentially, there's rumors of it going public at a trillion dollar valuation. It has 800 million active users. Crypto has 40 million active users for three and a half trillion dollar asset class. Yano, I can see him. He's gonna say, "Wait a minute. active users not respons. That's a fair. >> There's way more users in exchanges. I said it's different cash flow generation blockchain like stream of cash flow into apps and protocols. You got to look at the activives because if you're on an exchange, the exchange is just using

their omnibus accounts because it's not actually driving fees back to the blockchain and the infra. So I sometimes I look at that stat and I say gosh we does that just make you want to close your entire bulk in crypto and say look maybe I'm going to sit this one out because things have just gotten wildly overvalued like okay if you buy Bitcoin maybe Bitcoin exclude Bitcoin because Bitcoin is like a weird asset commodity sovereign store value but all the other [ __ ] like Ethereum's the current like you could buy secondary in open AI I and SpaceX and Stripe and Revolute >> or would you rather go buy Ethereum?

Like I I guess like the number one construct for tokens has been it's liquid so I can punch in and out. I'm going say yeah but liquidity can drive really fast. Maybe not for Ethereum but for your Ethereum X10 market cap. Good luck. Good luck trying to offload that in a bare market. Like yeah you're not going to. So you could definitely offload secondary shares like you could transact SpaceX and Revolute and and maybe not Stripe because they'll they'll roer but like pretty much everything else it's super liquid more so than your illquid checkcoin. I mean S to maybe your other question or at least the way you framed it right like I started this fund in June of 2022 there were probably 10 million active

users on chain then you said the number is 40 now. Um, Chat GPT went viral probably October 22 and it's now sitting at 800. Isn't the answer there which is the world told you what it thinks is a killer app? Like if we were if DeFi if someone downloading a self-custody wallet and flipping tokens around on a DEX was a killer app, it wouldn't be sitting at 40 million. There's so many people that can uh gamble paycheck to paycheck, >> right? Like there's just so much churn. It's definitely more than 40. You're you're just churning through that high base constantly because you got pretty much now every other at least once a month you have these high V days where

people get liquidated and they got to get another paycheck or a stimulus check and then come back to the casino. It is very it's a constant reset. I mean, I've always I don't need to express why, but I'm deeply bearish on just that use case. That is never going to get us to 200 million, 400 million, 500 million activives. Like, no matter how much you tokenize, no matter how much is there, I mean, and maybe someone a critic like Kyle or someone might say, "Dude, you're looking at it all wrong because the users that are in crypto are higher like are higher value. They're younger. They have more disposable income. Uh it's a different demographic. you don't have to let's put aside the active users let's

look at the TVL or some other metric but I don't think you can ignore that metric I I think in I'm deeply bearish if in five years time we can't grow that number to at least two 300 million activives like that's that that would have meant that we the app layer doesn't acrew value meaning deep in applications don't do well DeFi may or may not do well if you tokenize a lot of [ __ ] and maybe you have 10 institutions doing massive amount of volume the question there is is that value actually going to translate to public infrastructure or is it going to translate into tempos of the world that you know may or may not you know maybe better off they are buying stripe equity.

So this is the point like I I'm like I'm really struggling I'm I'm every year you every month you want to rewrite your thesis. >> Yeah. Um, go listen to, we're jumping ahead to your content of the week, but there's a great Cheeky Pint podcast with uh the founder, used to be the ex CIO of Viking, who now has, I think it's D1, >> you might know him. Phenomenal, phenomenal interview. Go listen to that, reundererite your thesis. In the light of the A16 report, I get all these favorable trends for crypto and whatnot, but it's kind of hard. It's kind of hard.

Well, I I think I I you know, I used to kind of mentally have this debate, which is blockchain, crypto touches a billion users one day, maybe two different ways. One is like the VC backed founders, uh, pick your favorite VC in crypto. They backed a bunch of founders. Those projects, you know, build something so great that it gets to a billion users. That's kind of bucket one. Bucket two is the rest of the world that has built a great business gets to adopt this technology and get it to a billion users in, you know, some indirect way. Um, I'm in the camp, firmly in the camp that it's that second way crypto makes its way into the user. It's going to be somewhere in that path rather than the cryptonative founder route.

>> Yeah, Santi, let me just to play devil's advocate here because I the I think crypto markets just go the way of traditional markets. Like if you look at traditional markets right now, mo a lot of the things are actually going down. It feels like a bull market. It feels like a big bull market for equities right now, but that's being driven by like I don't know 20 stocks like Prenav, you mentioned the earnings call of uh who was it? Chipotle. Like Chipotle. >> Yeah. Chipotle too. >> Yeah. Chip Chipotle stock is down like 50% in a year, right? So it doesn't and a lot of the market is down. And so I actually think like you know people who've grown up in crypto the last decade are used to all of crypto just going up at a certain point. It's not going to be that way because that's not

how markets work. It's it's going to be the Yeah. I don't know, 20 or 30 things drive the whole market and you got to be in those 20 or 30 things and that's probably why buying the there's going to be a cues of, you know, an S&P of crypto and you just probably buy that instead of buying, you know. >> Well, I sort of and maybe it's because I've been spending a lot of time just looking at like public equities that have like traded down or overlooked. PayPal, you missed the last episode where Santo is longing Western Union. So that's >> listen Western Union trades at four times P ratio. I mean, I'm sorry. It doesn't take much to believe that that thing goes to 10 times P ratio. They start doing stuff right. If you replace a CEO, if you if it's some some

substance on like margin growth because of stable coin adoption, like I think ultimately what is your margin of safety? There is none with crypto. That's why you have so much ball in this goddamn thing. People don't know how to value it. But also, a lot of these things just depend on a series of stacked assumptions. You got to believe that macro is intact. You got to believe that, you know, there's going to be more Larry Finins of the world. You got to believe that sovereigns rally around this [ __ ] You also got to believe that AI doesn't nuke. Like you can go down. You got to believe 10 things for your thesis to be intact. Like I want to invest in stuff that I don't have to believe 10 things that all are deeply correlated and maybe I'm missing out on stuff that you know intricacies of the

world. I want to believe in an asset that I say okay here's a value creation story. I'm going to monitor and focus and I can compound that. But yeah, I mean Chipotle at 25 times earning. Maybe Bill Aman has a different view. He's always been super bullish. I mean, I like the Chipotle bulls. I grew up in Mexico. The salsa is good. Whatever. The average P of the market is still inflated. The S&P trades at like 18, 19 times, right? So, it's also like a reversion of the mean, right? anything to your point around if your historical hurdle has been compounding at X and you're investing in something that has historically outperformed that you could look at it both two ways one is hey maybe I should be allocating this

because clearly I missed it this thing has compounded at a better rate like Nvidia the other part of your brain might say well wait a minute is there going to be a reversion of the mean because things can't keep compounding at the rate that they do in perpetuity so I've now in this market environment because I think that we're closer to the like the end of the cycle than the beginning. I want to be focusing on like mean reversion and things that are either wildly outperformed or underperformed. In the case of Western Union, four times P ratio, the market trades at 20. Anything above 20, I'm cautious. I really need to point our units of risk. I really need to believe that that [ __ ] is going to defy gravitational pull to come back to 20

cuz most of the money that you'll make is on multiple expansion or multiple contraction. like you either lose or make a ton of money on the deviation from the mean because it is so hard to to kind of like to to grab to move away from that. That that's kind of the point Dan Sundine was making in that D1 podcast which is, you know, a lot of the best returners are not like predicting, you know, what revenue growth is going to be for some company relative to market expectations. Very hard to do that. But what's easier to find is a repricing the multiple. And I would put that as it's actually easier like there are parts of that podcast I kind of disagreed with him on which is kind of how he characterizes like retail investing and what retail has done to

the markets and those types of things. I would actually layer that in here and say like multiple like multiple expansion is easier to predict if you think retail is that marginal dollars that will come in because that's what's going to drive a change in narrative and that's going to drive um a change in multiple. >> Um now the the best part of all this we haven't talked about like news is that crypto assets don't have a multiple because there's no way of valuing and the market doesn't know how to value them. So it's great don't ever show traction. Don't ever show this the Silicon Valley kind of meme, right? is like don't ever show revenue. Sell the dream.

>> Right now Ripple is in an interesting point now which has just raised 500 million at a $40 billion valuation. XRP trades at 150 billion. You survey 100 people in the street, they'll know what Ripple is. They can't even pronounce Salana. Very interesting. >> So it's a social phenomenon. It's a meme. It's an attention economy. I get it. So yeah, it's kind of a very weird market. >> Yeah. I'll leave with one thing down. I know you want to wrap which is which is prices in general for alts and all these things are down and we're all collectively talking about why they are and why we continue to sort of think the space is not at least this altcoin space is not maybe not going to do extremely well in the next several months. I'm of

the opinion that if certain alts start to perform extremely well for a reasonable amount of time, I always want to jump in and ask why and what am I missing and always just reevaluate, right? because like you don't want to be the guy that's obvious obviously bearish at the lows kind of thing. Um, so at this moment that's what I'm very hyper aware of which is I am bearish as things in altcoins as things drift lower. But if something starts to perform well for let's just say the right reasons that seem sustainable then you got to change your thesis. You're like George Soros famously there's a guy says he he would have there's a what is the book his book called like ref talks about reflexivity and he said he would have called George at like 8 9:30 in the morning. He would said I'm bearish the market. He called

him before he's like what are you talking about? I flipped bullish at 937 and the guy famously made investment decisions because he had back pain. That's how he knew when to sell or buy. I will say PNAV, I I have an immense respect for you because I' i've looked at your letters. I've in conversations with you, especially in days, you can flip bullish and bearish very quickly and you're not afraid to change your mind. And even though you talk about compounding and long-term, I think capital preservation is top of mind for you because you want to have that ability to express and and step in with conviction. And I think that's like having those two skill sets is is very hard, right? Because typically you hear hold, forget or trade constantly. But yeah, you're one that I think has not

been afraid to like flip bullish or bearish in a very meaningful way in your portfolio and reunderite. like it's the true embodiment of reunderwite your thesis and re and change your book putting aside all other stuff that might you know so that that I think that's a rare skill to have >> thanks man appreciate it >> of the week >> yeah content of the week we always do content of the week to wrap this up mine is uh I mentioned it earlier but Andrew Russin I'm I'm yeah reading I'm like uh three or four chapters in I think probably forget I don't know I'm audiobooking it so I don't know exactly how many chapters but uh yeah listening to it on uh on Audible. It's good. It's um Andrew actually reads it. It's like I don't know. I I like these deep dives

into financial history. He does a really good job of like personalizing it, I would say, where you know I read a lot of history books. Sometimes they can be a little dry. He does a very good job of getting into like the people behind the Great Depression and and yeah, 1929 and the big crash and all that kind of stuff. So, I would recommend it. >> Definitely read it. >> Yeah. >> Have any content? I actually I was going to say I've been listening to the Cheeky Pine podcast. They have incredible guests like every I'm like they have like I think the what the bridge guys on last episode this week so I'm excited to go listen.

>> Zack and the Henry I think from Privy they're on. I have >> Yeah. Yeah. >> Well, I said mine earlier so I'll Shane >> Par I'll give you one more actually. Um I don't know this person but the guy from the big shorts Steve Eisman I think is his name. Um the guy who plays like Steve Carell in the movie. He's got a podcast too, but he's obviously like a Trafy guy and like during earning seasons, he does like a great earnings like recap and like 40 minutes of different companies and why they're relevant to the markets. >> Oh, interesting. >> Great way to get a feel. Yeah, I would recommend that. >> What's the show? What's it called? >> I just look up Steve Eisman. I listen to it on like YouTube. Um >> nice. That's a great great movie to watch in a day like today or yesterday.

Fun fact so that we I know we've been talking about bearish and skewing bearish in China. When stocks go down, they are green. Um when stocks go up, they are red. This is because red is prosperity in China. But I think we should uh be like China, ladies and gentlemen. When you see something falling and it's a greater than seven out of 10, you should like that asset more, not less. But very few people actually think like that. So again, flip flip flip the color on your screen. Exactly. Santi, good to see you. Prenav, thanks for coming on, man.

>> Thank you. >> All right. Thanks, guys. Thank you guys. [Music]