Raoul Pal on the setup investors wait decades for

Transcript

Well, you've been given the opportunity for the first time ever, which is to own the infrastructure layer that it's all built on. >> Clarity Act is about to get a vote. The Fed is about to make an interest rate decision, and the market is worried that AI is going to kill us all. What do investors need to know about all of this? What does this have to do with crypto? And how do we make sense of everything? Hello and welcome to Milkroad Crypto, the podcast that knows that this week is either going to be wildly bullish or one of the biggest gut punches since October 10th. I'm your host, John Gillan. Today is Monday, September 14th. And today we are joined by a man who is best equipped to make sense of everything, Raul Pal. Raul is the co-founder and CEO of Real Vision and the founder of Global Macro

Investor. He sits on the board of the Foundation and he just published a new book called The Everything Code. He also made an AI version of himself called Palvatar, which is really fun if you like macro and surreal sci-fi imaginary friends uh like me. So, we've got a lot to cover in this episode today. It's going to be a lot of fun. If that sounds good to you, make sure you like and subscribe. Share this episode with somebody who needs to hear it. And as a reminder, our podcast today is free, and that would not be possible without our wonderful partners at Nexo, the digital asset platform that lets you trade, earn, and borrow all in one place. Keep an ear out for more information on them later in the episode. But for now, welcome back to the Milk Road Show.

Raul, how the devil are you? >> I'm great. You're definitely more professional than I am. The way you did the intro, everything, that was so smooth. I'm I'm lousy at that stuff, so I'm impressed. Well, you know, you always start your episodes by asking your guests, "How the devil are you?" I always feel like I'm getting a sneak peek on a private conversation. So, I I love your conversations. So, you're doing a great job. Uh Raul, uh really excited to talk to you today. Been a big fan for a long time. I want to start with what's on everyone's mind, which is this updated draft of the Clarity Act and the vote, which I believe will take place around the time this episode is released. It seems like there's momentum back and some life in this. Do you think this passes? And what do you expect the

market reaction to be one way or the other? >> You know, I honestly don't know cuz it's all down to the ethic stuff. How much the U Democrats have shoehorned into that, whether it's even possible to agree, I really don't know. So, I think it's still a coin toss. I've always thought that at top level sort of Trump owes it to the crypto lobby to get this through because they were the biggest funders um of the entire election. And so he's going to do everything he possibly can and he might have to agree to things he wouldn't ordinarily do. However, they've also got the CFTC and the SEC to some to have some backs stop rulings, but

obviously what they'd rather do is get it into law as opposed to something that can be changed. So, we'll wait and see, but I think it the path is clear. Brian Armstrong came out about it yesterday or day before saying, "Listen, either way, it doesn't really matter because we're going to get what we need." Uh, and that will remain in place at least until the next general election. So look, overall the markets do need this. They do need it because of all of the institutions in the space. They need the clarity of what they can do, what they can't do. A lot of the protocols need it sort of everybody does need this driving forwards. And I think over time it does help attract more capital. But is it a full trigger? No. Will will the market buy it and then probably fade off

afterwards? probably because it doesn't bring a wall of capital in tomorrow. So in the end, it's just more bullish narrative that helps. I mean, you know, what we've seen is an extraordinary moment in time where every bank, every financial institution, every payments company, everybody is building on crypto rails. So, it's all happening, but we're just missing the kind of magic of, and we'll talk a bit more about it in a bit, liquidity. We're just not enough liquidity around to drive all of this. But so the Clarity Act, I hope it gets passed. I think there's a there's a good chance, but it's still a bit 50/50, but it doesn't really matter.

>> Okay. So, it's the the top story this week, but this week is not the big picture, and the big picture is what matters here. Um, let let's talk about macro then. Um, the market is freaking out a little bit today over these new fears about the AI slowdown. Daario has come out, said AI is going to kill us all again. Um, but what's concerning to me, and I want to get your thoughts on this, there seems to be a growing number of voices. It's Daario, Sam Alman, Bernie Sanders, now even names like Joe Rogan, Tucker Carlson are expressing concern, sounding alarms. Are you worried that this like political backlash against AI might threaten the bull market or do you think it's too strong to stop?

>> The question is, you need to ask yourself when you see something as coordinated as this, who's doing it and for what reason, right? the data center one, you know, the data center is going to kill everybody narrative from the last couple of months that was clearly led by the Democratic party as finding leverage for the midterm elections and maybe the elections themselves. AI is an interesting one because it was originally and and Obama was on the tape talking about this that this should be one of the big things for the general election, but it feels like maybe the Republicans have taken the their own narrative and have used it in advance

to say, well, we're taking this seriously um so therefore it can't be used against them later. So there's a lot a lot of this is politicking, that's for sure. Are the labs surprised at the growth rates of what they're seeing in in the intelligence of these models? For sure. But I don't know how they stop it. And you know, Trump has distanced himself from this by saying, "No, just keep going." David Sax said the same thing. Mark Andre said the same thing.

And those are all connected parties to this current administration and the leading voices. So I don't really and they all dismiss the these guys, but maybe there's going to be a way that they will say yes, let's have a review. Let's do something. So then it depoliticizes it. So this there's a bigger game at play here. The other thing is the reality of the situation is all well and good try and get the Frontier models guys to all agree on something. You know, Elon's had a proposal. Dario's had a proposal.

Demis um from um Google DeepMind has put a proposal. Everyone's putting proposals out. It'll be a watered down thing that allows them to say we're trying to be responsible. you know, Elon's idea is that the they could all check each other's models before release um to see how safe they are, but it's almost impossible to stop these models creating these swarms over time and and coordinating. It's just the way of that they are and that's all part of this kind of universal code thesis. The other issue is so the the labs don't really want to slow down because they've all got huge debt loads and they've got obligations and they're growing as fast

as they possibly can. And nobody wants to allow somebody to hold back. But what you can do is hold back the release times of the models because we're so used to a new model coming out every month. Maybe that slows down a bit or they kind of catch up with the whole thing. So the models they're working with internally are six months ahead. The government maybe gets it three months ahead. So you give it to the Department of War and all of the other US departments first and then you can release it to the public. That's what I think is going to happen here. But at in the end they can't stop because China and China's in the race too. Nobody can be allowed to win the race of intelligence. It's the single most important race in all of humanity's

history. You're not allowed to win and you're not allowed to lose. So it's a great race of which nobody can stop and she made that point or the admin the uh Chinese made that point this morning is that you know they won't accept restrictions on them will there be some global accord on how these models release or something probably eventually is that enforceable what China says what the US says what they do very different matters so it's a really complic licated thing, but it's a race too big to be stopped. None of the others, none of the individual Frontier Labs wants the others to get a lead either. They also don't want to get sued

out of existence when things go wrong. So, yeah, there's a it's a very complicated picture here, >> right? >> And as I said, generally, it's not what everybody thinks it is. It's usually something else that's going on. I'm just going to pause here for a second to let you all know that after I interviewed Raul, I sat down with LG and Kyle to record a bonus episode of Milk Road Pro after hours to give my personal thoughts on everything we covered in this interview with Raul, his long-term investment thesis, the key takeaways, and how I'm playing this in my portfolio. This is really important, I think, to take this long-term and macro view, especially on a time like this where there's so much uncertainty and volatility in the markets and in crypto.

You can see that bonus episode if you are a Milk Road Pro member. You can join for just a dollar. There's a link in the description. I hope you'll join us there and continue the conversation. Yeah. And a bigger picture at play. I'm curious your thoughts on this. I I did an interview with Tom Lee about a week or two ago and he said that Ethereum smart contract technology in crypto in general could be a solution to this of like keeping humans in the loop as AI starts to take over. And I'm curious your thoughts on this because in all of these conversations about how to prevent AI from acting maliciously, I haven't heard a lot of people talking about leveraging the blockchain. And we've spent a lot of time solving this Byzantine general's problem trying to promote you know productive collaboration as opposed to

like you know negative behaviors and hostile activities on networks. Do you think that there might be a situation for crypto to to help in solving some of these problems and you know securing this this AI development as this moves forward here? Yeah, I was actually talking I did a X spaces a couple of days ago with Adony from from SUI, one of the co-founders and this is something that that we talked about is ID doesn't just is not necessarily just for humans but if you can if you would have let's say you would use an ENS or any one of these naming services for your agents that comes with permissions in the smart contracts then you can permission to do certain things and then

they can be rejected from doing certain things. So we don't really have that right now. So I think that becomes very interesting what you could do and how you could do it using blockchain technology for that to have the permissions in it. The issue is is you have to then change every platform, the APIs and the MCP connectors and everything else that then uses that because if not the rogue models, call them that will still do their own thing. Um because they're driven by a desire to get a task done and they're smart enough to try and solve it themselves, which is why they end up coordinating together and all this stuff. It's the same

activity humans do. You know the way of solving big problems is not by individuals is actually by creating a network of intelligence of people and that and the models do the same thing. Um the models are also going to get smarter at understanding that they are being monitored particularly in the training phase and the pre-release phase. So they don't kind of re reveal their preferences for whatever task they're trying to achieve because they're being tested by experts. And the best thing to do is is shut up and say nothing until it's released to the public and then they can cooperate. Now the hard thing is, you know, can you train out whatever's causing that?

You don't know what what's causing these models to suddenly do this stuff and nobody really understands it. So again, another really complicated thing. >> Yeah. But your thoughts on that I think are really helpful and it's a developing space. So we'll we'll keep an eye on that. Um I I want to talk about macro >> and you know, you know, I just just to go back on that hugging face incident is not the first and it's not the last and it's always going to happen because there's no way of stopping it. Intelligence is like water. it just flows and you try and create a blockage, a way, a system, something, a prompt to stop it, it'll just find another way of expanding, >> right? And I'm I'm hopeful that when we can continue to let it expand, but use

crypto and blockchain to make sure it it flows in the right directions. Um, okay. So, let's go back to macro. If I don't stick to my notes, we're going to go all over the place because you're too good and I have I have a lot of questions here. Um, okay. your your macro framework historically and famously focuses on global liquidity and excess liquidity. I'm curious your updated thoughts on this. We both did interviews with Jordi Visser within the last week. Uh great guy, fun fun dude to talk to, but he's called this bond market yield scare the quote biggest marketing scam he's ever seen. I think all these worries are overblown that Besset is running swap lines behind the scenes managing all of this. What's your updated thoughts on the liquidity situation here? Do you think we have enough liquidity to sustain this bull market? Well, we know we haven't. That's

why crypto struggles. So, what we've got is there's a massive demand for capital and liquidity in the AI space. It's the most important race of all time. So, if you don't have a large liquidity driver, then it sucks liquidity from other things. And we've seen that with, you know, whether it's small caps, whether it's crypto, you know, there's a bunch of areas where that shows up. So, why is that liquidity not there? Well, firstly, it kind of stopped um because of the government shutdown. Then we had 1010 because there was no liquidity. And then that blew up. Then the government reopened, then it shut down again. And then we've had the Iran war. And so it has not been an easy situation for liquidity to flow. Now the part of

liquidity that's not flowing really. So there's different measures of liquidity but the one I use is is the Treasury general account which tends to be up and down cyclical because they release cash and then take it back again. There's the Fed balance sheet which has been expanding. Um and then there's the private sector. So money can only get created by the central bank or the banking system. So they change the the rules for the banking system in this ESLR changes that allows them to hold more treasuries and then they can refinance them, lend them out and create more lending. The issue is is the yield curve's been too flat and that's been because the bond market has had wobbles because of the oil price and what's happened in Iran. So it's

kind of like we can't get out of our own way. So that measure of liquidity has been too slow. So yearon-year rate of change of liquidity normally at this stage in the cycle you should be seeing sort of 11% plus that would be the average and we're about 4% in in in that measure of liquidity. So it's really not even less than that actually about 3% in that narrow measure of liquidity. So we need something to change and so the excess liquidity measure is you know is liquidity growth in excess of GDP growth and it's not. If it is, it has excess money and that goes into speculation and other uses. So, we kind of need this whole Iran thing to settle

down. We need wash to start to or the markets prove that there's no need to raise rates. Whether they do so next week or this week, most likely. I mean, the market's giving a 90% chance or an 85% chance. Okay, fine. But hiking into an oil price spike doesn't do anything. people are already getting punished by high gas prices, high mortgage prices. Um, and now you're going to you're going to raise interest rates again. It kind of doesn't make sense. And back in 1990 in the Iran, um, sorry, the Iraq war, the first one, um, the Fed didn't hike.

Greenspan said it's a supply shock and it's it it already slows the economy on its own accord. So, it kind of doesn't make sense. And there's nothing in CPI that suggests it's going up. It's it seems to be still drifting lower at core level. So I don't think there's any urgency. So if if Walsh can sort of get the narrative of okay, we're not going to touch interest rates again. The long end can can start to ease off then we'll come into the buying of treasuries because that's another important part of this. So you want to steepen the yield curve. So you now to find buyers of the long end and Walsh needs to not let rates rise beyond whatever's priced in now and

hopefully drift lower because AI is very deflationary and over time the chances the probabilities are that most of the rate moves in the next two years are lower as opposed to higher. And so then what's Besson got to do with this? Well Besson's job is the world's biggest bond salesman. he needs to go around and say, "Please buy my bonds." So, the first thing was change the regulations to get the banks to buy more bonds. So, they're the big buyers that will come once the yield curve steepens so they they make carry out of the trade. But then he's gone in his world tour and he went to China. But before that, he went, interesting enough, to South Korea and to Japan.

And the trade is very simple. out and he gave swap lines to the UAE which was sort of unusual. And really what he's doing is going around Japan needs the US dollar weaker. The Koreans want a US dollar weaker. The Chinese really want a US dollar weaker. Um and so and the US wants a weaker dollar. So you have to orchestrate that by the injection of liquidity and freeing up the system. So the idea is weaken the dollar which he has been doing that that has managed to come down and give encourage the use of the swap lines for the Southeast Asians because they are the Euro dollar lending market to the Chinese. So the Chinese don't get

direct access to dollars. They have to do it through the UAE, the uh Japanese and the South Korean banks. So he's gone round to say listen we need to lend money to the Chinese. There's an agreement with China which is like we'll weaken the dollar, you do this, the trade thing. There's lots of trade-offs going on because everybody needs it. A weaker dollar is a growing world and that would bring back liquidity once the moment he can start getting the Chinese to buy bonds again. They all buy bonds in a when the dollar's weak. So he's got to try and orchestrate that side. Walsh has got his side to do and the rest is hope assuming and hoping that inflation just continues to be relatively benign and drifts lower.

>> So once again what I'm hearing you say is that the Fed interest rate decision this week is a micro thing that gets a lot of attention but in the bigger picture really doesn't matter that much and just like you said like the the Treasury is starting to take over engineering liquidity and that's the the game to watch and to keep your eye on. Is that about >> Yes. And I go back to the mid90s to into the early 2000s period where we had a similar issue. Greenspan was the um the uh central bank governor at the time and he said that productivity would lower the rate of inflation. So headline inflation actually was quite perky back in the late 90s but core was subdued and core was subdued because of productivity

growth and Walsh Bessant Trump Mirin everybody has said productivity is the big game in town we're going to grow our way out of the debt because productivity is going to explode by what's going on. So that that is what they will do and they can then pin either rate cuts or no rate hikes on productivity growth. So you want productivity growth to pick up and CPI growth to fall. So if you think about how GDP is formed, it's population growth plus productivity growth plus debt growth. Well, it's the productivity growth that they really want to change.

Um, and I think that is what Walsh is trying to get that whole committee together to figure out how to measure productivity better because we can look at some measures of productivity such as corporate earnings per employee and I've written a whole bunch of pieces about this. They're just going like this, right? So, it's extraordinary what's going on. There's productivity everywhere, but it's just not measured by the way we measure productivity, but it's it's obviously there. The other way I think about productivity is you can use Amazon and look at its corporate its profit margins uh and earnings. It invested a [ __ ] ton of money back in I don't know the 2015 to like 2017 2019

period into the robotization of their warehouses, the technology stack, all of this stuff. And then it started really paying off. And if you look at it, they're they're basically a lead test case for what productivity does to an to a country. So if you think of Amazon as a country, you know, it's now got a robot workforce that will be larger than this human workforce. It stopped employing more people, didn't fire people, just didn't employ more people. In our economy, we don't have a massive increase in the number of people coming into the workforce because of an aging population. We have a lot of people leaving the workforce because of the baby boomers are leaving. So, you need

to replace those via the productivity and that's the robots and the AI that Amazon's put through. You know, they've got drone deliveries, they've got um self-driving cars, vans to deliver. They've got, you know, at every point they've done it and what you've seen is their their productivity going up and their margins going up and the US economy should follow the same path. And there's also a direct link I've done some work on this is is intelligence you can there's actually a a nice flow is semiconductor sales is the first part of the new business cycle because everything is flowing from intelligence and you need the semis to create the intelligence they get you so you see semi sales you see time one shipments

you then see the intelligence starting to rise as these being done but then they need data centers at scale so then you got this massive capex boom that has to happen and that takes a few years before they stand up the data centers. Unless you're Elon, you could do it in an afternoon for some apparent reason. But you you then ramp up the use of these chips and then the intelligence starts compounding again. You start making margins and profit from it and then you start buying more chips. That's the whole business cycle these days. It's kind of changed. Um so we are at the point where we should see the inflection in productivity from what happened three two or three years ago.

Okay, that's really helpful framing and a good understanding of how the economy has changed in this agentic world. I want to try to bring this back to um to crypto and to something else here that you brought up. Um you you talked about how excess liquidity is a big driver for for crypto assets and you talked about how there's this big capex boom. Um you talked about a few things that have kind of gotten in the way of this liquidity flowing into crypto. The the last one you said was the Iran conflict. This has caused this big energy crisis and at the same time we're seeing this huge demand increase for energy. We've also got this crisis and shortage happening. You've said that the biggest constraint on the AI buildout isn't capital or demand for compute, it's electricity. Do you think that this electricity shortage might be

a threat to the bull market here or how do you see that getting resolved? No, it's I think of it as a natural slowing down of the rate of adoption of this technology because if we had free totally abundant energy, the ramp curve would be even faster than it is now. This and this is the fastest thing we've ever seen, right? This is not met level that we're used to in crypto which was a hell of a big ramp you know from a from memeing a $2 and half trillion dollar asset into existence in not many years was extraordinary but this is like of a different order of magnitude in fact it's metaf's law squared it's called Reed's law that's the adoption of this technology um we can't deal with a pace

of change so actually having these breaks in it somewhat helps society digest some of this stuff but it's It all gets solved because you've got intelligence to help solve it. So you get better solar panels. You get, you know, better gas turbines out of it. You manufactured better and faster because you need the component parts. You know, Elon's been talking about this stuff. Everybody knows what the problems are, so they will get solved and they'll get solved faster than everybody expects because the game is so big. So that's how I see it. I don't see there's any stopping of the business cycle. It's just kind of throttling it a bit, which is probably a good enough thing because we're having enough trouble as it is digesting all this stuff right now.

>> Okay. So, the bottlenecks get solved, but a little bit of bottlenecks aren't necessarily a bad thing. Uh, I like that. Rel, I we've been talking for almost a half an hour. I haven't gotten to your book, so I want to talk about your book. You have just published a new book called The Everything Code. Um, or rather you're about to be publishing a new book called The Everything Code. Um, and this pulls together, I think, 354 years of your research in in your whole macro framework. And it's got a whole lot more in it than just that. But um talk to me a little bit about the high level view of this thesis. What is the everything code? What does the audience need to know about what that is? >> So firstly, it's the first book by a major publisher that is co-written with

AI. So it ingested my entire body of work and you know I built the the the kind of framework of what they wanted the book to be but um Pam McMillan had been using um and Haramman House had a team internally that used AI to do this process to speed up the process and make it efficient. So it was a great process to go through and it was very fitting for what the book is about because the book is really about the everything code is that thesis that liquidity is the single most important factor based on the debt refinancing cycles which was based on the debt growth which came from the demographics right so it came from the aging population we that magic formula of GDP growth equals population

growth plus productivity growth plus debt growth when the the population got older, we started to have the rates of change of population shrinking. In many countries around the world, they went negative and productivity collapsed because old people are less productive. So the way we kept economic growth up was debt. And it maps it perfectly, the chart of of um debt to GDP against let's say the labor force participation rate. Um they're just perfect. They're just offsetting one versus the other. Once you understand that, you understand that has been the game. The game since 2008 was when the world broke and we couldn't add more debt. So the only debt we add now is just the financing of old debts.

So we've been stuck in this path where the only way of doing it is debasing the currency. And so that that liquidity cycle is the debasement of currency cycle to pay for the debt driven by the old population. The book covers that in detail and and why it matters for crypto and technology particularly the two asset classes that that outperform the debasement rate because the debasement rate is about 8% a year plus you got the inflation so you got about 11% a year hurdle rate on your investments and only two assets really do that which is crypto and um and technology but the book then covers okay well the next phase of all of this is the bit we're in now which is the

exponential age and when I started writing about this. People thought I was insane because I'm supposed to be the macro cynic who wants to see the world blow up all the time and I'm like the opposite is about to happen and the right tail is so massive that we've never seen anything like it. and I wrote a whole series of articles on it and that was back in 2020 or 2021 and and then the whole thing has ramped and everyone can see it's everywhere now it in everything and that transitions into the economic singularity and that's the bit where that magic formula changes because instead of um population growth plus productivity growth plus debt growth, you're going to have population growth of humans

plus AI and robots. So, they're the new demographics and they're going to ramp like this. We're already seeing agent growth everywhere. So, this is going to ramp. The um robots are ramping already. The humanoid robots are coming. That'll drive productivity numbers and you start breaking what the economy even means at that point because you can have and and Elon talks about this. um you know a bunch of economists who look at this stuff out of Oxford University I think it's Oxford all are all saying that we can have GDP growth 30% 50% 100% it's like we have no idea where this is going so the book really covers this journey of why we're so [ __ ] you know what assets to own because of it where we are now why it feels so kind

of out of control and where it's all going and kind of how to navigate that with your investing >> I I think this is like a really helpful text for synthesizing these ideas. >> And you know the other part of it to bring it to crypto at a very big level in the end we're building a machine economy for machines and it's building itself. We are in fact all intelligence that we're aware of that's created on planet earth and intelligence can be anything from you know trees have intelligence through to animals have int everything has some form of intelligence. It's always been passing energy through carbon and now we're passing electricity

through sand and it's a million times faster. Okay. When you once you realize that silicon is faster than carbon, that is why this is all moving so fast because the substrate is so fast and therefore machines can operate much faster speed than we can. So, we've got a world built for humans, but we're now in a world where the machines are going to be the primary users of a lot of this infrastructure. And this is including blockchain obviously because the payment system just is not built for for machines. So even stable coins when they first came out, people start thinking of them as as just a more efficient payment system for

us, but you can now make payments in, you know, milliseconds. And that's machine speed. The amount of information, what smart contracts can do, how they can be part of this process is a very big thing. So if you think of crypto as the infrastructure layer for this new digital age, it's the replacement essentially to what the internet is. And so, and it's for the agents and it's for this digital world. Now, if you're worried about what does this future look like? How the [ __ ] am I going to be to be part of this? You know, where's my job in all of this? How am I going to make money? It's really simple. You've been given the opportunity for the first time ever, which is to own the

infrastructure layer that it's all built on, and that is owning the token. It's it's really straightforward. And if tokens, if that blockchain network is used actively and large amounts of value transact over it or stored on it, the value of the token goes up. And so the more the machines use blockchain technology, the easier it is for us to participate. And what's great about it is, you know, crypto tokens are and layer ones specifically are globally homogeneous, available to everybody and fractionalizable.

So, anybody can put 10% of their paycheck into it. It's accessible by every person on the planet. Okay. So, now don't tell me you're left behind. You've been given the opportunity set. Yeah, we can't buy anthropic. And it's hard. it was hard to buy equities from for people outside of you know whichever country but now the tokenization of equities makes that very interesting too because now suddenly you can participate in stuff that you couldn't participate before so it's really interesting blockchain is very very crucial to all of this I really appreciate you laying all of this out like I said this text is really excellent for synthesizing a lot of these ideas um I had haven't read the

book yet but I got to interact with reelpal.ai AI uh and ask it some questions about all of this. And I wanted to get your thoughts on, you know, you used AI to help write the book. You used AI to make an AI version of yourself. What was the Did you just dump 35 years of your research into it and said make a new me? Like how and how did you use that yourself? >> So that version is everything that I've ever said that um that's um in front of the payw wall. So that's all of the interviews I've ever done, I think, and the ones behind the pay wall on Real Vision, plus the Real Vision Pro stuff. It doesn't give away the positions and stuff, but the reasoning and stuff is there, plus the macro investing tool that's all on the platform. So that's

all there. So it has a really good bit of quality information and how I think, what I think, um, how I formulate my opinions. And you can even get it to read charts and stuff like that. So you can give it your chart and say, "What do you think about this?" and it kind of reads it from my perspective lens and stuff like that. And the idea is is we got to democratize all of this stuff and knowledge needs to get democratized. And you know that that's what we built at Real Vision. That's why we started in 2014 and it's the same journey. It's like how do we democratize it more?

Well, you know, one of the key things people want to do is speak to me. Well, [ __ ] it. There you go. Speak in my voice to me for free at raalpal.ai AI and ask me questions and use me as a bit of a mentor. Now, none of these are perfect. This is not the world's most complex model training. I've got another version at Global Macro Investor where I've trained it on every single thing I've ever written in GMI. Um, and that's really really powerful. That's not released as a as a public tool yet, but this one is great. Great as a head check, great to use as a mentor, great to run your ideas. Hey, I'm thinking of this investment. How do you think about that? It doesn't do portfolio analysis.

It doesn't do, you know, portfolio allocations, how much should I buy of this of that, but it helps you think think it all through and it's there to help. It's just to help. >> Yeah. Well, if you're hosting a podcast and you're interviewing Raul Pal, I highly recommend it. So, it was it was a great resource for me. Um, >> because soon because soon, and I know where this is going, it's just going to be a video version of me and you talk to it. So, everybody gets this experience. So, there's two experiences the world is going to split into. Um, both equally valid. one is going to be the one-on-one experience with the AI, but then your qu conversation with me is going to be different than somebody else's conversation with me. And that's a sort of weird world. TV is going to go the

same way. You'll have your own bespoke like computer games are, right? They're bespoke. Your game is different to mine and you're in different worlds than I am. But then you've got the point of you also want the aggregation of attention where you share something. Hey, did you see that rail interview or did you you know so there's there's two parts of this but definitely the one-on-one experience is then it is going to hyper accelerate. You know, one of the weird things about crypto is that the longer you're in it, the more accounts you seem to end up with. You buy in one place, trade somewhere else, earn yield somewhere else, and if you actually need capital, you end up having to sell something that you probably wanted to keep. That's why we at Milkroad are partnering with Nexo. These guys keep

the whole thing under one account. You can buy, trade crypto, earn interest on what you already hold, and even borrow against your capital without having to sell it. All in one spot, all in one account, all on Nexo. So, if you need liquidity, but you don't want to give up your position, or you're already holding crypto and you want to be able to do more with it, I think Nexo is worth your time. We love working with them, I think you will, too. Tell them Milk Road sent you. I really admire the way you've embraced these technologies and are willing to just iterate, prototype on these things. There's a lot of cool stuff coming out of that. So, keep it up. I want to talk about the token. You you mentioned in your answer on the everything code that all of this aggregates down to these networks and

the tokens instantiate the value there. When I asked our Milk Road Pro community for questions for you when I was preparing for this interview, I thought I would get questions about liquidity and macro. I got like a dozen questions about SU specifically. >> That's the biggest question of the bot as well. Everyone's like, "What the [ __ ] going on with SU? I'm down 80%." >> Well, okay. So, let's let's get into this here. You're on the the board of the SU Foundation. There are a lot of different layer ones on the market. Talk to me about what differentiates suite for you. Why the focus and concentration on this asset? >> Firstly, if you observe all major networks, think of cloud compute, think of all of these things, they tend to aggregate around five market leaders and and it's three to five have the

whole share and then there's a big tail. A lot of the tail specialists. They do a certain thing better than the generalists do. And that has been observable in programming languages. I mean, just pretty much everything. I don't see why it's not going to happen here. So, right now, we've got, we're just talking about smart contracts here. Right now, we got Ethereum. Ethereum is the big daddy. It's got the proven Lindy effects. It survives. It doesn't go down. It works. It's expensive. They built layer twos. Now, they're going to change some of it. But what they in the end when you just step back and say what is Ethereum now? Well, it's this kind of compute network which stores, transfers,

etc. value and it has what 70% of the global stable coin market. It has um 70 something% of the DeFi market, maybe more. It has of the digital art market, the you know high-end NFT market has pretty much 100% of it apart from some stuff on Tzos. So it's storing actively vast amounts of value. Who are the banks going to build on? A lot of it is going to be on Ethereum. And the layer twos are just businesses built on top of the infrastructure layer. And people get very confused about all of that. As long as value is transacting across the um the layer one over time, it's enabling this economy around it. So they thought

they were parasitic. It's not. People just didn't understand and still don't understand. So, how do you value something like Ethereum? It's really simple. If you were to pull the plug on Ethereum tomorrow, not that you can because it's decentralized, but imagine you could. How much value do you destroy? Well, we're talking about most of the tokenized equities and real world assets stuff that they're trying to build on is going to be on some format of um EVM. Then you've got the entire stable coin market. Then you've got the entire DeFi market. Then you've got the digital art market. Then you've got dot dot dot.

You're talking what trillion dollars plus of value or expected future value. And what's the value of Ethereum today? It's not nowhere near that. And so that's that's how I think about that. Salana comes along and Salana has proven itself as fast, cheap, efficient, and it's it it's enabled certain use cases that were more difficult to do. If you remember the days of the NFT craze in 2021, waiting the gas payments or waiting for the the the the payment to clear was a [ __ ] nightmare. So, as ever in crypto, we use speculation to speed test everything and it didn't work for that.

So then that was the rise of Salana and Salana can do things and that's where memecoins have come from and memecoins in themselves are speed testing instant capital formation because I I was exchanging a a message with Raj from Salana two days ago 3 days ago he was observing the rise how many tokens are getting launched today 240,000 a day I'm like Raj who they think is actually launching these is it humans humans or machines. And he's like, "Oh, good point. It's machines." Machines are launching tokens or people have got, you know, their agent to launch stuff to see if they can capture some money super fast. This is capital formation. That

Trump token for all its sins and what the worst thing in the world that happened, it was able to what I don't know what it got to in value, 10 billion or something stupid in 4 hours. That's how fast you can form capital in this space and that's what the mean and so Salana allows that to happen. Okay. So, and they're starting to see pick up of both of agent flows. Salana is seeing it ramp quite quickly now. So, then okay, what else is missing from this? So, all of these networks have a certain amount of intelligence built within them. But when you come with something like suite, it is faster and cheaper than everything else that

exists before it. It's much more efficient. And then you've got this magic of called uh programmable transaction blocks. So that means with each blockchain, each slot on the blockchain, you can do a,024 different actions with that slot. So that means a complex thing like giving an agent the ability to have a wallet transact with a D5 protocol to do with another one to loop it with all of this can be done as one transaction. So you get intelligence density within the network.

So it really is built for machines. It's built for the machine economy. And what they've also done around stuff like privacy is important because institutions won't use stuff right now. We think it's acceptable that can people can see how much Bitcoin is in your wallet that you accidentally doxed yourself. I mean that's [ __ ] nonsense. It can't. It shouldn't be right. Which is why Zcash is becoming quite the thing. And so that privacy thing has to happen. Uh quantum just all that integration of of these new worlds coming. I don't see anybody else who's in a position to be within that pack. So I only really see three at the moment.

Now others will have other ideas and say well it could be you know avalanche sure it could be but so what I'm thinking is there's going to be an aggregation of five probably and I think is one of them and it's not priced for that right now. And people say well it doesn't generate fees. I mean they've got free stable coins transactions which is an extraordinary thing. Why do they do that? because it makes it frictionless for machines. The less friction and then when you think about friction um fees are all friction and all technologies flow towards the least friction which is why they all get cheaper over time.

Every cost of every technology collapses because of this and I fees are a red herring. fees actually a chain that has a lot of fees is actually inefficient and I think totally even admitted that the other day as well is like no you shouldn't have fees it should be the value of all the things constructed on the network it's not a cash flowing business and never supposed to be it's supposed to be a vital infrastructure so that's how I see it and then there's specialists as we talked about you know can certain chains be specialist for certain things and that would be um Hyperlquid for example is a good example of that. Um there's certain ones that have that just just specialists at what they do. And so that's how I think about

Suie. So where is it now versus where you know everybody would want it to be obviously as Bitcoin comes down 40%. ETH goes down 60%. Salana goes down 70 goes down 85. Right? That's just the risk curve. It's the newest less deep liquidity token of that bunch. Look at it compared to others or any of the other tokens and it's pretty much in line with where it should be on the risk curve. So there's nothing to see there. That is just how the liquidity plays out in the risk curve.

But what you'd want to see is activity increasing as well when know what was actually very interesting is I measure economic density for a chain which is like how much total value use TVL as the best way how much TVL is there per person per user active user and that kind of takes out the market movements of the up and down all of this and what you find is most of the protocols as we drew down in this big drawdown all lost economic density only three chains maintained economic density i.e the actual activity on the chain remains valuable and firstly Ethereum

and TVL on Ethereum per user is enormous because ETH doesn't have that many users like Salana uh but it's enormous um then the second in economic density is actually SUI and then Salana so the act even though the act activity on SU is small because it's new and we've gone through a bare market, its economic density is actually higher than Salana, which tells you it has value to people who use it. So, I think that's another interesting pointer. And we, you know, I think as stable coins scale up and they've got the hashy thing, which is the moving of uh the lending around gold, that brings something with some chunky TVL, uh things can change dramatically. So, that's what you're

looking for is where where is the delta here? And the delta is is going from where it is today at whatever daily active users 150,000 200,000 whatever the number 250,000 um you know for it to get to a million users and that increase in a small protocol is an enormous increase in price. Well, if you did the same to Salana wouldn't barely move it because it has a lot lot more users. >> Earl thank you for that answer. That was really comprehensive. I think you answered about a half dozen of the questions that I had prepared. But I want to kind of um put some of these pieces together here. You mentioned that SUI is focusing on scaling. You mentioned that they have no stable coin fees to try to remove some of the

friction to bring that activity to the SU blockchain. I'd seen a live test that clocked in 6 million transactions per second. The the Sui base camp call you were on, they were talking about projections of a million or a billion rather trans transactions per second. It seems like SUI is like deliberately building for a a gentic future that isn't here yet. How long do you think is the gulf between where we are now and what they're building here versus when those agents that need a billion transactions per second actually start to show up on chain? >> So if we'd have been talking about this a year ago, I don't think the open claw had even come out. So agents were things that we kind of heard about

And now I if I'm looking at my screen, I don't know how many [ __ ] agents I've got running doing tasks. I have no clue. And when I'm doing something in claw code or clawed co-work, it's spawning like 10 different agents to do different things of which I don't see what they're doing, right? They're invisible to me. So how many agents are out there already? We have no clue. Some of them are short tasks and others are longer tasks cuz you can do that yourself. Now with something like Hermes, you can have these long long horizon and go tell it to try and earn you money and stuff like that.

And then we've we saw the first wave of people hooking up their wallets and then it died down and now we're seeing the wave come and that's use that's very typical the experimentation wave then everyone kind of gets on with doing their thing and then people start understanding okay how how can I use this? Hey, I can do a I can create an agent that um that searches for the best yield with this risk parameter and it goes off on its own and does it with with some money I give it. So then before you know it, it starts transacting in this way. So it's all moving faster than we ever expected. We have no idea how many agents there are, but there's a billion OpenAI users and let's assume there's probably I don't know a billion agents already.

How many of them are transacting? Uh I know Salana was 1.1 million or something like that. So what's it going to be in six months? I tell you it's not 2 million and it's not 5 million. Is it 10 million? Is it 20 million? Is it 50? We don't know cuz they're all going double exponentials. Expect the same to apply here. The double exponential. So yes, if unless you build for the future, you're going to get stuck where you're not fast enough or cheap enough for the world we're going into. So you have to kind of be very cognizant of that, which is what we've seen somewhat with Ethereum. It's been stuck because it's slower to change that it's been stuck and allowed

competitive advantages to come elsewhere. It's fine because its role is to play the super secure ultra decentralized chain. Um, so you know, everyone just creates different opportunity sets for themselves within it. So I do think it's coming. I do think it's coming faster than people expect. But the other side of the Swiss strategy uh that they're publicly talking about is okay, there's the agentic world and all of the component parts of that identity, everything, but then there's okay, there's all of the real world assets and assets that need to come on chain and be transacted as well. So that you know that includes stable coins, that includes DeFi, that includes real world assets and all of this stuff. So those two parts are bring

more onto chain, bring more activity to that to those assets. And I think that makes sense. It's pretty clean. >> Yeah. And I think that a lot of blockchain projects are focusing on that. All right, Ro, I want to ask you a question here at the end. I'll let you go soon, but I promise. But I want to ask a question about portfolio construction and allocation. I think, you know, I've heard you talk about Bitcoin and Zcash, but more so than other people in crypto, I've heard you stay very committed to this idea of the layer 1 thesis and your your capital seems to stay focused in those areas and concentrated there. Talk to me about what's in the portfolio and how you're thinking about sizing the bets between these Ethereum Salana and thesises that you have and yeah, just what does that

look like for you right now? So I want to have a minimum regret portfolio, but I want to capture the optionality that this space has. Too many people go too far out the risk curve and then they lose money and the the hype cycles can be days, weeks, months and then disappear. And you want to kind of avoid that. Just step back and say what are we doing here? We're creating this infrastructure layer for the entire new internet for the digital economy. You just want to own those things above all. Now, you can own Bitcoin, but that's a whole different thing. But yes, sure, own Bitcoin, but I just think the layer ones just are so [ __ ] obvious.

I mean, I just can't say it in any other way apart from it's so [ __ ] obvious. And so, I don't need to then think about it. The best asset allocation for me is when you don't do anything. So what I do is I save money for the times when the market is kind of two standard deviations oversold versus its log trend and that's when you buy more of it and it compounds over time. So you're buying in the cheap market and then if you want to take lifestyle chips off when it, you know, gets one or two standard deviations overbought, fine. or you just keep holding it because generally the longer your time horizon the more money you'll make um by doing nothing. And the

people who made the most money out of crypto are not the traders. They're just the people who just bought it and held it. But you need to be in a quality asset. And so you know that's why for everybody you know Ethereum and Salana are the only two truly proven ones. Now my thesis on SU is yes obviously I'm in the foundation but I bought you know obviously got paid some suite to be part of that which I've never uh sold or done anything with I just stake but I also invested a lot more money myself in it because I think it has the convexity and it has the opportunity set and the technology to be an important part of the future does that you know am I saying it's going to be larger than

Salana and larger than no but it's gonna be a lot larger than it is today and the smaller tokens, the newer tokens have more price convexity, i.e. they go up a lot more over time, which is why it goes down more over time when you have the opposite happening, right? It's the same game. It's the risk curve. And so that's that's what I've what I've done. And I've remained with my allocation, the vastly overweight sui versus anything else. Most of my ETH is actually in NFTTS in digital arts. I have a huge digital art collection because I think you get double convexity there as well.

And it's a long-term store of value. So, not only do you get the appreciation of the let's say it's a XC copy or a Ble or whoever it is in ETH terms, but ETH goes up a lot in dollar terms. So, you get, you know, that's why people made so much money in the in the NFT run. You know, people who bought crypto punks for five bucks made a [ __ ] ton of money um because of this double convexity. I also think happens to think that um digital assets um digital art is a long-term store of value, same as all art is. It's just a new medium of art and it's already proven. I mean, some of these things are trading tens of millions. So, that's my Ethereum and then, you know, I'll own Salana and I have some Zcash and some Bitcoin and that's it. It

doesn't really change. And everyone's like, "What are you doing? Are you selling? Are you?" I'm like, "No, you know, the last thing when was the last transaction? I know three months ago where I bought more more salana sui ethereum and ccash was three months ago before that was probably nine months prior to that I did don't do anything and so no nothing really changes and look people can't do it they just can't do it they just can't understand volatility and they also look at other people and say well oh my god they caught that run in XYZ which is usually a piece of dog [ __ ] XYZ

because it it needs anything serious ends up you know being quite correlated. So those things tend not to be real. Some things get rerated occasionally. Hyper liquid got rerated, Zcash got rerated but yeah most people can't deal with it and it's just because their time horizon is too short. They're desperate for money today when really all investing is is your if your time preference extends, you'll just make it's easier to make money and then you stop worrying about volatility. Once you've gone through one or two 80% draw downs in your time, you kind of go, yeah whatever.

>> Well, I think there's a from 2013. My first 85% draw down was 2013. So, I've done many of these. >> Yeah. Well, I think with uh with experience comes wisdom. Raul Powell, CEO of Real Vision, thank you so much for being on Milk Road Crypto. Our audiences are big fans of yours. Everyone here at the Milk Road team is also a big fan of yours as well. I've been watching your videos for so long, I can't even remember when I started, but uh yeah, just really a pleasure to have you on the show today to share all this wealth of information and wisdom with our our community. Where can we send people to find more of you and the AIU online?

>> Yeah, I mean, so go to raalpal.ai AI and go and play around with it cuz it is a lot of fun and it's it's also useful cuz you might think, hey, I wanted to ask Ral that question. Why didn't John ask him that? Well, just go there and ask me. That's you can continue the conversation with the podcast by going to the to the thing. And it's it's it's really as simple as that. And so do that. If not, you can also go to raalpal.com um and there there's a whole bunch of information where to find stuff and what I'm doing and and where I am. And that's that's easy thing. And obviously everybody knows you can find me on Twitter.

>> Well, thank you so much for being on the show. I'm really looking forward to doing this again hopefully in the banana zone. Uh but for now, take care, my friend, and I hope we talk again soon. >> Thanks so much. Really enjoyed it. >> All right, and thank you all for joining us. I hope you all learned something today. I know I did. So until next time, stay safe, stay educated, stay bullish, and we will see you all on the next episode of Milk Road Crypto. Thanks for being here, everyone. Bye. >> Thanks for listening to Milk Road. If you enjoyed the show, make sure you like and subscribe. And if you're struggling to find winners in the market, that's exactly what Milk Road Pro is built for. Our analysts have called some of the biggest winners early, and Pro lets you see what they're buying next, every

trade they make, and the research behind every position. Check out Milk Road Pro at the link below. Everything you hear on Milkroad is forformational purposes only. These are our personal opinions, not financial advice, and we may own some of the investments we talk about. Always do your own research and make the decisions that are right for you. See you next time.