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Bitcoin & the 8th Wonder of the World

Alternative Assets

Andy is joined by Mark Yusko. Mark is the Founder, CEO, and Chief Investment Officer of Morgan Creek Capital which has 2 billion in assets under management. Mark is one of the most brilliant and insightful investors on the planet and he was one of the first traditional hedge fund guys to publically embrace the potential of Bitcoin. Mark discusses the importance of alternative assets, blockchain, and artificial intelligence. Mark talks about the four pillars of blockchain technology and how they can unlock the next generation of the internet. He also touches on the importance of truth versus trust in the digital age and how blockchain can provide a technological solution. The conversation also covers the importance of exponential growth, fear, and the ability to overcome it, and the need to learn from successful people.

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Mark Yusko - Bitcoin & the 8th Wonder of the World 

Andy Pickering - Host

Welcome to the POD99 podcast, the podcast that helps the 99% take control of their financial future. We talk to experts from within Wealth99 and from across the alternative assets space. Experts who are here to share their insights on how to build new wealth, how to create new wealth, and, of course, how to keep it. Very excited today to be joined by my guest, Mark Yusko, the founder, CEO, and chief investment officer at Morgan Creek Capital. Mark is one of the most brilliant and insightful investors on the planet, in my view and he was also, of course, one of the first traditional hedge fund guys to really publicly embrace the promise and potential of Bitcoin and talk about it on the public stage, which he continues to do. Welcome to the show, Mark. 

Mark Yusko - Guest

Thanks, Andy. And I appreciate the really generous and kind intro and am excited to be talking to you. I'm always amazed when we get to do this, that we're on opposite sides of the world talking live. Technology is an amazing thing. 

Andy Pickering - Host

Technology is an amazing thing indeed, Mark. And I think in some respects, you could say that technology is kind of one of the themes behind your investment thesis. Let's start at the beginning. You have been known as being at the edge of institutional investing for decades. You're an early champion of alternative assets. Love just to understand your thinking on what alternative assets are and why they're so important. 

Mark Yusko - Guest

No, I love the question, because my life, Andy, is really interesting. It was a series of happy accidents. I didn't actually intend growing up to be an investment person. I thought I wanted to be an architect. Most people were too young to remember, but there's this show called The Brady Bunch here in the States, and the dad on that show was an architect. And I thought that was a really cool thing. So I went to school, studied architecture, but decided I didn't love it. Went to business school and then took a job with an insurance company because that was at a time when I just took a job that I could get. Long story short, the guy doing investments retired, and I kind of started doing bond investing, which was very boring. Who wants to invest in bonds? 

But it's a good fundamental baseline for understanding cash flows and corporations. And then I went to work for an equity firm, learned the equity business, and then I got the real lucky break that got me to the alternatives world, as we would say. I went back to the alma mater, so I went back to Notre Dame, worked in the endowment. And the endowments have for years focused on this area of alternative investments. Now, to be fair and transparent, I don't like the term alternatives because I always say alternative to what, right. There are only four things you can own in this world: stocks, bonds, currencies, and commodities. Everything else is some derivation or combination of those things, right? You think about real estate, I can own the equity of the deal, the debt of the deal, or the land, the commodity. 

Mutual funds own stocks, bonds, currencies, commodities. Hedge funds own stocks, bonds, currencies, commodities, private equity. I own common stock, preferred stock, or convertible bond. But we created these nuanced asset classes from venture capital to hedge funds to alternative strategies. And the traditional investors owned bonds. Equities were esoteric, they were alternative. And if you didn't have equities now you weren't being a good fiduciary. And then these endowments started to push into the world of other strategies. And my really big AHA moment Andy, was in 1995 working at the endowment. And we had spent a bunch of time out in California on Sandhill road. We met with a bunch of venture capitalists and we gave some money to this little firm, which at the time was not famous, called Sequoia. 

Today everybody knows Sequoia, and Michael Moritz is one of the greatest investors of all time. He hadn't actually made any investments yet. He had just joined the firm. And long story short, we gave him $5 million out of our couple of billion dollars. They put 10% of it in this little company called Google at the time, right? It's kind of a stupid name now, it's a verb. Why did we need another search engine? There were already 20 search engines. Why do you need 21? And little did we know that they weren't a search engine. They were redefining the way you actually interact with the internet. Long story short, is that 500K turned into $200 million and my head exploded. And I'm like, oh my gosh. And it hit me that investing in innovation as an asset class was really the best alternative investment that you could make. And so for the rest of my career now, coming up on 30 years since then, I've really focused on investing in innovation, primarily through venture capital, but in other forms. You can do it in the equity markets and other forms, but innovation as an asset class - that's ultimately what led me to digital assets and digital technology and cryptocurrencies and the like. But it was that technology, not as technology in and of itself, but the innovation to create new businesses that create jobs, create new equity, create bonds, and we get to invest in them. 

Andy Pickering - Host

Got it. Thank you, Mark. And you're exactly right. And you said it yourself right at the beginning of the show. You said, isn't it amazing that here we are talking to each other, looking at each other from across the different sides of the world, which, of course, is made possible through the wonders of human technology. It won't have escaped your attention, Mark, that the acceleration of technology, those S curves, which we'll get to, I'm sure, is starting to speed up. But let me just read this quote that you've got pinned on your Twitter. You've had it pinned on your Twitter, I think, since 2018, Mark, and it's just such a brilliant quote. It says:

The greatest wealth is created by being an early investor in innovation. And making that investment requires believing in something before the majority of people understand it. You will be mocked, ridiculed, and criticized for your non consensus action. It is absolutely worth it. 

So that's kind of your thesis in a nutshell, Mark. 

Mark Yusko - Guest

No, it really is. And look, there's so many sub points here. One is, if you do what everyone else is doing, you're never going to make a lot of return, right? Because you're going to get the average return that the averages are going to get because they're already there and it's already in the price, and that's fine. And if you think about the long-term average return for bonds, it's about 6%, about 2% above the inflation rate of 4%. Now, 2% real isn't a lot, not a lot to live on. You'll steal your wealth over time. That inflation kind of takes your purchasing power away, so you can buy equities. And if you get the average return in equities, you make 11%. 

It's not bad, but if you're willing to take risks and go places that other people won't go, one of the things about that is that believing in something before others understand is really hard. I mean, Will Durant says every custom begins with broken precedent. And you think of all the great thinkers of the world and all the great discoveries of the world, they were all ridiculed. Some of them were even put to death back in ancient times. Thankfully, we don't have to deal with that now. But if you go outside the majority or the consensus, you really are thought of as an iconoclast or a rule breaker or not a friend of the state. And yet, if you think about investing, all of the great fortunes came from people's belief in something new. 

There's a famous one about Henry Ford's lawyer who tried to talk him out of starting the horseless carriage company. He's like, Henry, people just want a faster horse. They don't want this fancy machine. And there's myriad examples over the years where automated data processing, ADP, it's not even a great company, but a solid good company. And the head of Apprentice Hall, the book company, said, I've traveled the length and breadth of this great country, and I've talked to all the greatest minds, and they assure me that data processing is a fad. That won't last the year. By the way, anytime something is labeled as a fad, you should buy as much as you possibly can, because eventually, it will be common knowledge and accepted. 

And the other one is, if something rots your brain, like video games, or if they tell you to rot your brain, you should probably investigate closer. But that's one piece, right? Having the courage to do something that's non consensus. Well, how do you get that courage? It comes from conviction. Well, where do you get the conviction? Hard work. Just doing the work and doing work isn't that hard, really. I mean, it's not rocket science in most cases. It's just time and diligence and sticking with it after setbacks and trying new things. One of the things is there's this thing, say, early sometimes is the euphemism for wrong. And I'll tell you an example. So we had this amazing client. He was a founder of a company that most people have heard of, J. Crew.

And he founded the business and sold it to a big private equity firm and retired. And at 83 years old, the guy was still investing his own capital. And he hired us to help him. And he called us up in 2006, and he was madder than a wet hen that day, and he was spewing fire. He was so angry, like, Arthur, what's going on? You're worth $300 million. You’ve got this nice life. You have a lot to be upset about. Just, I deserve to live here. What are you talking about? He lived in this place called Incline Village, Nevada, where people go from California so they can avoid taxes and says, the average home price in this community is $11 million. 

I sold my business, and the guys on either side of me, 35 years old, kids, there's no way they can afford these homes. This ends badly. Find me a way to get short. Okay, so we went out and we looked, and we met this guy, John Paulson and John Burbank and Phil Falcone and shoot, Kyle Bass. And we studied it, and we put money out in february 2006. And if you watch the movie The Big Short, this was right about the time when Goldman squeezed all the shorts and the prices ripped and were down 40% in the first two months that we put that trade on. And we're like, oh my god, I guess we blew it. No, the next twelve months we made 500%. Not us, but the guys that we had hired. 

And it turned out to be a great trade, one of the great trades of the decade. But man, it didn't feel good those first couple of months. So that just goes to show that we had to have the courage from doing a lot of work. We went out and did a lot of work and then we had to have conviction to trust these guys who were going to implement for us. We were mocked, ridiculed. Our clients said, you're idiots, because you just lost 40% of our money. And they didn't call us idiots when we made them a lot of money on the other side. But I don't know, that's a long piece on a little piece of that. And then the last part of the quote, which I think is important, it is absolutely worth it. 

You think most things in life that are worth it are hard, right? Whether it's working out, whether it's eating right, whether it's being a good person, it's not easy. So those things are worth it because if you put a lot into it, you get a lot out of it. And I think that's a really positive thing. So same thing here. If you put the work in, you get good outcomes and it's worth it. 

Andy Pickering - Host

Absolutely. Mark. And look, I want to slowly start moving towards bitcoin, which I think is the perfect example, because even though bitcoin has been around for 14 years or whatever it is, and we've had at least say, probably three boom and bust cycles. I think on the bigger, longer term time frame, it's clear that bitcoin is still early because the simple matter of the fact is only perhaps 2% of people on earth own any and the rest of the people are still happy to laugh at us, which is an indication of how early we are. So look, if that's the backstory, Mark maybe we can talk about this, a way in perhaps is through Morgan Creek Digital, which is, I guess the digital assets arm or the kind of the bleeding edge of technology part of Morgan Creek. 

And I was just looking at your core investment thesis at the moment, and I was fascinated that you've framed it around this idea of digital innovation, particularly four pillars, which you describe as essentially the building blocks of the next generation of the internet. So it's really the combination and intersections of artificial intelligence, AI, blockchain technology, computational infrastructure, and Big Data. So it's the interesting intersections of those pillars that unlock the next generation of the Internet. 

Mark Yusko - Guest

Oh, my gosh. Andy, you got to come on the road with me. That is a beautiful summary, and I don't want to over glamorize this kind of thesis we came up with, but it is exactly as you say it's about building blocks. And not to, again, make it overly simple, but like little kids building little kids blocks with the A-B-C-D that is the four pillars. AI, blockchain technology, which we'll talk about, computing infrastructure, which includes devices and hardware and then data. And data is the oil of this age. What's really interesting is look, I said my life's just a series of happy accidents. And, you know, my dad started the journey in the 50s. So in 1954, there was this big innovation out in Boston, out on Route 128 in Boston, and this thing called the mainframe computer was born. 

Companies like Wang and Unisys and Burrows and intel. I mean, IBM. And then 14 years later, there was an innovation out on the West Coast around this microchip. And suddenly you could make smaller computers. So my dad was a computer salesman or computer installer for IBM mainframe computers in hospitals. And we lived in Seattle. And so with that innovation around microcomputers, you started to see innovation around the West Coast. And these young people were creating these amazing companies. And we've heard of a few of them. Intel and AMD were started in 1968. And then 14 years later, where I lived in Seattle, there was this innovation around personal computing. And it's really funny. So a couple of things. One, it's always 14 years. Now, why is it always 14 years between these big innovations? Well, it's half a generation. 

It's the creative class. Within that generation, it's always young people. And why is it always young people? Well, us old guys, we're kind of set in our ways. We don't like to change our mind. We don't want to try new things. We like our life. Young people have nothing to lose, right? They're like, I wonder if I could do that. I might try that. And they don't fear failure. They just fail over and over. And like, as Thomas Edison said, I've never failed. I just found 10,000 ways not to make a light bulb. But in 1982, it's funny. Steve Ballmer's mom quoted the CEO of Deck Digital Equipment Corp. Which was one of the first mainframe companies out in Boston, and he had said no one would ever want a computer in their house. 

And so Steve's mom said, Honey, why'd you work for this company, Microsoft? No one wants a computer in their house. He has 18 billion reasons. He was right. Mom was wrong. Yeah, people want a computer in their house. 14 years later, it was the Internet. 1st, 1996, the Internet, and that was companies like Yahoo and Ebay and Google. And we set this series of protocols which you and I are using right now. TCP IP allows us to have voice over internet protocol for free. We're talking to each other live with video for free. Whereas 20 years ago, it would cost us $5 a minute to talk halfway around the world, no video. 

And then 14 years later the iPhone and the mobile net. And now 14 years later, which is next year, 2024, we have this thing called the Truth Net. What's the truth net? Well, the truth net is where we move from trust to truth. And we'll get into that, and that's where blockchain comes in. But to tie it kind of all together. So we have these four building blocks. Now everyone's talking about AI like it's some new thing. AI has been going on really since the mainframe started and we've had these mini booms and busts around AI. Remember we had Clippy back when Microsoft started, you had this little AI thing that was going to help you. It was horrible. 

And then we've had other AI over the years, but Chat GPT, these large language models, it's real, it's an innovation, but it's really not that big a leap over what we had before. And now we have better chips and we have better networks. We've made progress, but it's not done. It's still early in AI. Blockchain technology is a better database, right? Historically, we've had centralized databases. Visa today runs on a centralized database on a mainframe computer, believe it or not, running in Cobalt, a dead computer language, literally dead. They won't upgrade, it's too expensive. And it's kind of a moat because no one knows how to hack it. But that will eventually get replaced with blockchains. Blockchains are better, more efficient public databases. Computing. Computing moves in this exponential S curve cycle that you mentioned that's so important, exponential growth. 

It really is the 8th wonder of the world. I challenge people all the time. I said, take a piece of paper and try to fold it eight times. Try it. Can't do it. And if you could fold it 20 times, it'd be as high as your house. 30 is the sun, 30 is the moon. 50 is the sun, and 100 is the known universe. 

Andy Pickering - Host

Yeah, my favorite way of explaining exponential growth, Mark, and probably you can take this one, but it's the chessboard problem, right? You're familiar with how that works? 

Mark Yusko - Guest

Yeah, that was amazing, right? The guy wins this, I can't remember what it was, a contest of some sort. And he says to the king, well, what would you like as a reward? He says, well, like a grain of rice on the first square of the chessboard, and then double it every time. And if you did that, you'd have enough rice to cover the country of India three and a half meters deep. 

Andy Pickering - Host

Yeah, I actually have the number here because I have this in my notes, because I knew we would talk about exponential growth. So the number of grains that would be on that final chessboard is 18,446,744,073,709,551,000. That's how many grains of rice would be on the last piece of the chessboard. 

Mark Yusko - Guest

Incomprehensible. About that Andy, trillion was in the middle there, right? We had quintillion, quadrillion, and then trillion, just a single trillion. You and I would have to take a grain of rice and put one on the board every second for 31,710 years to get to a trillion. That's a lot of rice. Exponential growth is just this amazing thing. It is. And it is in everything. So I ended up a biology major, right? I dropped out of architecture, and I studied biology and chemistry. And really, biological systems, I think, are at the root of everything. They're at the root of innovation. They're at the root of investing. They're at the root of viral things that go viral, that become popular. Exponential growth, that's how things multiply. 


And so when you just think of these complex adaptive systems and how they interact with one another and that's why, if we take the power of a computing platform and we had tools like AI and Blockchain, which essentially is an operating system. Blockchain is the operating system for the Internet of everything. The way Mainframes ran on Cobalt, the way microcomputers ran on Spark, the way PCs run on Dos or Windows, the way these things run on iOS or Android. And now we're going to have blockchains that power everything. And they are a far superior way of storing and relating data. And they use cryptography for security. And then the last piece of it is the actual data, the amount of data that's created. 

And I don't have these numbers off the top of my head, but the amount of data that's created every hour is more than all the data, like the first 50 years of computing or some crazy thing like that. And so all of that data plus the tools and the computing power, allow us to solve harder problems, to do bigger things. But the thing that gets me so excited, and the reason I started Morgan Creek Digital, is I spent most of my career in traditional tech, hard tech, healthcare tech, biotech. That was great. Loved it. But in 2013, I got introduced to Blockchain and Bitcoin. 

And I joke, I wasn't running drugs on Silk Road and was not a cryptography student. I didn't get it. And so I'm not as wealthy as I could have been. Because I didn't get it, and I didn't do the work. But I got blockchain. As soon as my friend explained blockchain and how it was an operating system, like, yep, I made a lot of money in operating systems. I can invest in that. It took me three or four years to really understand what bitcoin as a use case of blockchain really is. It's just a superior form of money. It's a pretty big deal. Money is a pretty big deal, and essentially digital gold. But once I had the AHA moment, once I saw that's what it was, I could never go back. And so we formed Morgan Creek Digital. 

In 2018, we raised three, about to be four venture funds to invest in the infrastructure around the digital asset ecosystem. And we invest in all four of these pillars. And it's probably too much of a stretch to say that the combination of those pillars is kind of like the ATCG in DNA, right? Think about there's only four building blocks of all of life. Pretty crazy, but you can repeat them in many different ways. And different patterns create different species and different intelligence and all kinds of stuff, but there's really only four building blocks. And so the same thing happens in the digital age. 

As we move from the analog physical world to this digital world, where everything, every stock, every bond, every currency, every commodity, every piece of art, every collectible car, every private business, every identity card, every marriage license, every property title, everything will eventually be a digital entry on a blockchain public available. And the key point is truth versus trust. So for 800 years, we've had this monopoly. It's really more of an oligopoly of trust agents. 

And so for years, we've had auditors and tax accountants, and think about this number. All of the money spent globally for trust, right? To make sure that bank accounts are the right number and that our insurance titles match and that our licenses work. All of that trust costs $7 trillion per year, six to 8% of global GDP wasted because we can't trust anybody. Well, now we have a technology, a technological solution, a digital record database that says, andy writes down 100, Mark writes down 100, and this global supercomputer with all these nodes that are independent say, yep, we see that now. That is truth. We don't have to trust each other. We don't have to trust the Medici's. We have trust. We have truth. 

One, it'll free up $7 trillion to do good in the world. More creativity, more freedoms, less tyranny, less corruption. Imagine people won't be able to cheat. Can't cheat on your taxes anymore. It's kind of a cool world unless you're a cheater. But for the rest of us that aren't cheaters, it's a better world. 

Andy Pickering - Host

Yeah. So well said, mark. And this is why bitcoiners are bitcoiners, because bitcoin, from one angle, is certainly the only really truly decentralized, censorship resistant blockchain at a global scale, kind of nation state level, right? So I think if we're really wanting to take the fallibility of humans out of that trust equation, which is what a blockchain is supposed to do, then bitcoin does that very effectively. What's interesting, of course, about bitcoin, is we've seen these, let's say, three boom and bust cycles in crypto in bitcoin. We're kind of at the bottom of a bear market cycle at the moment when the traditional mainstream retail interest in bitcoin is nonexistent. The google search interest in bitcoin is back down, it dropped off a cliff. 

Of course, what is interesting is we're about ten months away from the next bitcoin halving, which could make well, it probably will be an interesting time for bitcoin. And it means that if you're a serious bitcoin investor or just a bitcoin accumulator, someone who has a little bit of bitcoin, now is potentially a good time to just keep chipping away at stacking those satoshis in the lead up to the halving. 

Mark Yusko - Guest

Mark, now look again, so well summarized. Bitcoin is a remarkable cryptographic achievement. I mean, it really is. The fact that we can have money, an asset that's not duplicable in the digital world, was a really tough problem to solve. Right? People were working on that problem for 40 plus years and couldn't solve it. And that is the genius of Satoshi Nakamoto. One is the fixed supply. So it's a deflationary currency as opposed to an inflationary currency. Unlike most paper currencies, right? There have been 775 paper currencies in the history of the world. Three quarters of them no longer exist. They're gone, gone to zero. 

The rest are on their way to zero. They're down 99, 98, 97%. And that's because governments have a predilection towards spending, right? We go from capitalist societies to croniest societies to dictatorships. And as this power gets centralized at the top, what do they do? They spend and give money to their friends and take it away from the masses through this thing called inflation. Well, Mark, they tell me inflation is good for me. How could something that over a 30 year period takes half your purchasing power be good for you? Just think about that, right? A 2% inflation rate. After 30 years, half your money is gone. That's not good. But they've convinced you that it's good. All it is currency devaluation. So Bitcoin comes along and says, you know what? We're going to have a fixed supply, 21 million forever. 

Now, there's 21 million Bitcoin, but each one is divisible to eight decimal points. So there's 2.1 quadrillion satoshis, which is why my Twitter handle is hashtag 2.1 quadrillion. And 2.1 quadrillion is plenty, right? Plenty of satoshis for the world. And what people miss this is the part, the reason that we have this volatility is there is volatility is an indication of disagreement about future outcomes. Amazon stock has the same volatility as Bitcoin, 80. They're the exact same number. Now, Amazon's been around for 27 years. Bitcoin has been around for 14 years. Amazon's compounded 40%, 40% for 27 years. But here's the funny thing. Every single year, including this year, it's had a double digit drawdown. The average. This is the crazy part. The average is 31%. 

So on average, every year you've been a holder of Amazon, you've lost a third of your money. Okay? Twice it went down more than 90%. Five times it went down more than 50%. But when was the right time to sell? Never. But who bought it in 1997 and held it today, there's only four, five people in the whole world. Jeff, his mom. Dad. Ex wife. Bill Miller. Bill Miller's cost is 7c a share, and he's never sold it. But why? Why are they willing to tolerate that volatility? Because they have confidence in the outcome. They don't doubt the outcome. They knew that the amount of ecommerce was going to rise over time as people became more comfortable with it. Same thing here is with better money. If you think about what Bitcoin is, it's a superior form of gold. Gold has been money. 

Money is an asset that exists in the absence of a liability. There's only one in the whole world, gold. Everything else is currency which is debt supported, gold has no liability associated with it. So all the central banks own gold as the base layer and then they create currency on top using debt. And that's fine and that's what we all use. But it can be devalued. Gold doesn't devalue that. Gold has been a perfect store value for 5000 years. A single ounce buys you a fine person's suit for 5000 years. Now what's the problem with gold? Well, it's really heavy, it's really dense. Like if I had a bar here I couldn't break it in half. Even if I could, if I were strong enough, couldn't stuff it in the computer and send you half of it. So it's not very portable or divisible. 

But if I have a bitcoin I can send you half like that instantaneously. And in the old days if I wanted to send you money, I had to have a bank account. You had to have a bank account. And when I sent you money they took a fee. And you'd get eighty cents on the dollar because Western Union has to take a fee. And then the BIS has to take a fee because it went across international borders because the Rothschilds have to get their cut. So crazy stuff. But with bitcoin I can send it to you instantaneously, no fee. Well then what's going to happen? More people are going to own that. So if you think about bitcoin, it started at zero, January 3, 2009. Today half a trillion dollars.

Total value goes up every year in year out, there's volatility, sure, but just like Amazon it just goes up. And the interesting thing is bitcoin has actually compounded at twice the rate of Amazon, so it's actually done better. But most people don't think of it that way. They're just afraid of the volatility. But volatility is not your enemy. In fact, I have a shirt that says embrace volatility. Volatility is your friend. What you want is to own lots of assets that are highly volatile, that are uncorrelated with one another in a portfolio. You said about how do you stay rich? Well, that's how you stay rich. You get rich from concentration, take single bets, get lucky, whatever, or work really hard at a business, I mean, lots of ways to get rich. But it's all about concentration. 

Staying rich is about diversification. Diversifying portfolios into volatile assets that are uncorrelated to each other and that have different return drivers. The thing that's awesome about bitcoin, when you add it to your portfolio, the risk of your portfolio goes down, not up, because it's uncorrelated. 0.0 correlated to bonds, 10 point 15 correlated to stocks. So every time you add it to a portfolio, your sharpe ratio, your return per unit of risk goes up. So if you're a fiduciary or just someone who wants to get wealthier over time, you should stack SATS every day and you shouldn't try to time it. Just stack. Buy it today, buy it tomorrow, buy it next week, buy it next month. Don't buy it all at once. Buy it over time and accumulate a position in your portfolio because it's the single asset that is resistant to devaluation. There are two, gold and bitcoin, and you should own a little bit of both. But the thing I love about bitcoin that is really misunderstood, one bitcoin is one bitcoin. One satoshi is one satoshi. But we don't price bitcoin in bitcoin. What do we price bitcoin in? We price it in dollars or New Zealand dollars, or Aussie dollars, or pesos or Turkish lira. 

Like, here's a funny thing. There's never been a bear market in bitcoin in Turkey, because the price in lira only goes up, or in Argentina, or in Venezuela, where the bolivar is down 99.99%. So it's not that bitcoin got better, it's just the other currencies got worse. And so, as an asset owner, I want to have a portion, not all, but I want a portion of my wealth in an asset that's a perfect store of value and that will hold its value relative to these other devaluing currencies. Now, there are certain things, real estate, stocks, and a few others that will benefit from currency devaluation because they rise in nominal value as the currencies devalue. If you're thinking about super rich people in every country, the 1% that we all talk about, what do they own? Lots of real estate, lots of stocks. 

And at the top of the pyramid, what goes up? Like in Venezuela, right? All the poor people got super poor because they lost all their life savings because it was in cash and they devalued the currency. What did all the rich people do? They owned all the assets that went up in nominal value, and then they sold for dollars. Great trade. So again, a long answer to a really important question, which is, why is this so important? Where are we heading with it? And where we're heading is what the internet did. It made information bi directional and it broke the monopoly that the state and state entities had on media and commerce. And if you go back even further, the first monopoly was information. The church had a monopoly on information. And people couldn't read, they couldn't write. 

They'd go to church, they'd be told what to think, how to think. And then the printing press came along, busted that monopoly wide open. Suddenly you could print, you could write, you could teach, you could transfer information in books. Well, what happened? The states took over and said, we're going to restrict what you can read and what you can't and what you can write and what you can't what you can post, and we're going to restrict the flow of information. Well, the Internet busted that wide open. Well, now, to change value, we have to use this oligopoly of banks. Not with blockchain, not with Bitcoin. I can send you a bitcoin right now. No one can stop me. The banks are closed, and don't have to be open. We can do it offline peer to peer. No one can say anything about it. 

And that is uncensorable, uncontrollable. Asset busts. The monopoly of value transfer is wide open. And when we can transfer value peer to peer in a world where it can't be devalued by states, what happens? Suddenly we unlock massive creative potential because our wealth isn't being devalued by the state. Pretty cool stuff. 

Andy Pickering - Host

Very cool stuff indeed, Mark. So much to think about there. Thank you so much for sharing your thoughts. I think what we'll do now is let's go to a very quick break and then we'll come back and we'll finish off the podcast by hitting Mark with some shorter form questions. We'll just get some shorter form actionable answers and insights. Question one for you, Mark. 

What is one piece of financial knowledge that should be taught at schools? 

Mark Yusko - Guest

I would say invest early. Right? Start investing early. The earlier you start, the more compounding works in your favor. And compound interest, other than exponential growth, is the other 8th wonder of the world. So if exponential growth is the 8th wonder of the world, then compounding is the 9th. Start to invest early. Take risks early. Right? Don't do the safe stuff. Early in your life, you have a form of fixed income in your future earnings, your future wages. That is a form of fixed income. So you should take all equity risk early on, diversified equity. I don't just mean stocks and I don't mean a single stock, but I mean stocks. I mean private equity, venture capital equity, real estate equity, commodity equity, all of those things. But getting started early and really understanding the difference between risk and volatility I think are things we should teach in school. Yeah. 

Andy Pickering - Host

And look, that is similar to something you often say on Twitter, Mark, which is fear equals edge. Why is fear a good thing? How can fear give you an edge? 

Mark Yusko - Guest

Look, fear isn't a bad thing. It's the paralysis from fear. This is the bad thing, right? If you have fear, it means you're intelligent enough to understand the risks of a certain situation, the probabilities of different outcomes and what the actual threats are, right? The worst thing in life is to walk into an ambush not realizing there are all the signs saying, don't go in there. You didn't even recognize the threats. And so the presence of fear is not a bad thing. In fact, it triggers an autonomic response in us to act. And so it's the control of that action, that fight or flight reflex and to be able to think through the rational decisions to address that fear and to conquer that fear and to continue to act. 

And the real edge is the ability to overcome and manage the fear and continue to act. Here's an interesting thing. The fear of loss or the fear of failure is what keeps people from doing well in life. And I say this all the time, that winners actually lose more than losers. Winners aren't afraid of losing, so they try lots of things and they lose, right? Losers are so afraid of losing that they never try anything and then they just lose. And so it's like a great basketball player. I just watched the Air movie, which is a great movie if you haven't watched it. Amazing. And Michael Jordan, right? Greatest basketball player ever lived. And he had this thing, he's like, look, I've taken 10,000 shots that I missed. I don't even remember taking them and it was funny. 

Think about it. You're watching basketball finals, bad player. The average player misses a shot, goes back and commits a stupid foul because he's thinking about missing the shot. The great player doesn't even remember taking the shot, gets back on defense, plays defense, steals the ball, makes a layup. 

And that ability to not fear losing, to learn from the loss, and to then focus on the next opportunity, the next play. That is the key. And the last piece is from Will Smith. I know it's not popular to talk about Will Smith anymore since he did the slap, but he's still a pretty smart guy. I've heard him talk a couple of times, and he says, fail fast, fail forward. 

And if you're constantly pushing to get better, to learn more, to take risks, to control that fear and to soldier through it, that's why fear is an edge. 

Andy Pickering - Host

I love it. Feel the fear and do it anyway. Mark, if you were 22 years old today what is one single thing or what action would you take? What's one single thing you could do to secure your financial future? 

Mark Yusko - Guest

It's a great question. Again, one so hard. I think the first thing, it goes back to what I said - start investing early, even with a little bit of money. And I think crypto really makes that easier. Right. You can buy fractions of a bitcoin. You don't have to buy a whole bitcoin. You can buy little teeny, tiny fractions of a bitcoin, dollar cost, average, in. And I would definitely start investing earlier. The other little thing that I would say is read about successful people. Yes. Right. Read about Steve Jobs and read about Julian Robertson and Stan Druckenmiller, and the great investors of our age. And read about John D. Rockefeller. Not a very nice man, but one of the best businessmen ever in history. Learning what made them great, I think inspires you toward greatness and can teach you a few tricks along the way. 

Andy Pickering - Host

I love it. All right, as we start to finish off in 30 seconds or less, Mark, what is the bull case for bitcoin? 

Mark Yusko - Guest

Simple. Bitcoin is digital gold. It is the future of money, right? It's a better form of money, and therefore people are going to continue to accumulate it over time. And more and more people are going to see the crypto light and migrate a portion of their wealth into bitcoin. And supply and demand, right? Limited supply, growing demand. That's a good outcome for long term success. 

Andy Pickering - Host

And with the having, say, roughly ten months away, the next bull market for bitcoin. When do we think it will start? 

Mark Yusko - Guest

June 15. June 15 is what I call the summer equinox for crypto. So crypto has four seasons: summer, spring, winter and fall. Spring, summer, winter and fall. It is over at this four year cycle, this four year having cycle. Now, what is the four year having cycle? There are two genius things about Bitcoin. One is the idea of consensus in all the miners that secure the network. You need 51% to have consensus and legitimize a block. And everybody says, well, what about a 51% attack? This is the genius. There will never be a 51% attack, because the moment someone spends the hundreds of millions of dollars in time to do a 51% attack, you have to change 10,000 computers within a ten minute window really hard. But let's say you could do it. The moment you do it, the value goes to zero because you've violated the trust. Genius. But the miners, what are the miners? Well, the miners are just data centers in the old fashioned world. You bought computers, you put them in a room, you plugged in the power and you went out and got Amazon or Microsoft to pay you money to use your computing power CPUs. Then new computers came along, GPUs and Asics. And now you can plug in these computers and you don't have to pay to find customers, you just get paid by an algorithm. What does the algorithm do? It pays you to secure the network. The Bitcoin blockchain is the most secure computing platform the world has ever seen. It's 1500 times more powerful than the CERN supercomputer, the next most powerful computer. It's 10,000 plus nodes, decentralized around the world. 

And these miners get a reward every 10 minutes, called a block reward, for securing the network. Here's the genius. Every four years, that block reward gets cut in half. Why is that genius? Well, here's the thing. The miners' costs are fixed, so if the rewards get cut in half, some of them will go out of business. Unless what? Unless the price rises. And as the price rises, what does that do? It draws attention and it brings more people into the network. And the way the network effect works, the more people that come into the network, the more valuable the asset. It is mind blowingly genius to have this event that crystallizes the attention. And so the reason you get this sequence of spring, summer, winter and fall is about ten months before the halving you start summer. Well, what's summer? 

Summer is nice, it is warm, people are anticipating the event, they're getting excited. Well, then the event happens, the price starts to move. And that's fall. That's right. Everything's happened and people are coming back to work and the price starts to move and it goes too far. And then you have a crash because it went too far, it went above fair value that's winter, and then when it gets too far down low, the value investors come in and that's spring. And so you keep going through this pattern every four years. But here's the thing, every four years you get an upcycle, a down cycle, but then the next recovery is higher and the next down is higher and the next recovery is higher and the next down is higher. 

So, yes, it's a cycle and yes, it's volatile, but the long term trend is upwards. Mad genius. 

Andy Pickering - Host

Wonderfully said, Mark. I could not have said that better myself. So much to think about there. And of course, listeners, it's as simple as that. The next halving is literally ten months away, and as global media attention starts to focus on that, Bitcoin will be in the news again and slowly but surely, I think that price will start to rise. Mark, just a wonderful pleasure to talk to you on the show today. Thank you so much for sharing some of your knowledge and wisdom. 

Mark Yusko - Guest

Thanks, Andy, for having me. I guess the final thought I would leave people with is you can judge the quality of an idea by the quality of its detractors, right? If nobody really important dislikes your idea, it's probably not a really good idea. If the most powerful people in the world hate something, you're probably onto something. That's what's cool about Bitcoin. The other thing is, bitcoin has been declared dead 437 times. There's like an R-I-P bitcoin website. 

It's not dead. It's not going to be dead. And the reason it's not going to be dead, there are zero cases, and I can actually say that definitively, there are zero cases of superior technology once it reaches critical mass going back. Zero cases. And Paul Roemer won the Nobel Prize for this. It's called the law of increasing returns. It's not the best technology that wins. It's the technology that gets critical mass first. Because once you have critical mass, and once people adopt it, there's no going back. And bitcoin is a superior technology. It is a superior way of storing data, it is a superior way of using money, it is a superior form of a store of value, like gold. And because of that, I think the next 5000 years, like the last 5000, were dominated by gold. 

The next 5000 be dominated by bitcoin. That doesn't mean there won't be lots of other stuff to do. There will. So I'm not saying put all your money in bitcoin, but you got to have some. 

Andy Pickering - Host

Thank you so much. Thank you so much, Mark. You got to have some. All the best, Mark, and bye for now. Thank you again. 

Mark Yusko - Guest

Thanks, Andy.  

Andy Pickering - Host

All right. Well, how good was that? That was, of course, Mark Yusko from Morgan Creek Capital Management. Always a pleasure to catch up with Mark. I just love the way he talks about bitcoin and investing. So I do hope you enjoyed listening to Mark. Please do remember to subscribe to POD99 in whatever podcast app you are using, so you know when each new episode drops. But that is today's show, brought to you, of course, by Wealth 99. 


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