Arthur Breitman - How To Build A Transparent DeFi System That Will Bring Freedom & Opportunities

Full transcript: Arthur Breitman on London Real

2:57 This is London Real. I am Brian Rose. My guest today is Arthur Breitman, the former research engineer, analyst and Wall Street trader turned cryptocurrency entrepreneur. You founded the open source blockchain protocol Tezos with your wife Kathleen and in 2018 completed an initial coin offering that raised $232 million and became one of the first projects to incorporate a proof of stake mechanism. You previously were a researcher engineer at Google X and worked as a trader for Goldman Sachs and Morgan Stanley.

3:25 At Tezos, your focus from the outset has been on incorporating a governance model that enables users to decide how the protocol should evolve and leave the future in the hands of your global community. Over the past year, you’ve experienced massive growth in DeFi and NFTs, announcing collaborations with big brands like Gap and McLaren. Arthur, welcome to London Real. Thank you. Thanks, Brian.

3:47 Hey, it’s great having you here. I think I want to start perhaps with maybe something that happened to you that also happened to me. in New York City, studying, I think, applied math and probably coding. And your next stop was to Wall Street. And I was at MIT studying mechanical engineering, and my next stop was Wall Street.

4:09 We did it at slightly different times, and it sounds like we’ve both been fascinated with money since our early childhood. But I’m curious what maybe that experience was like. I know you’re originally from France and you went there, but what was that transition like, and maybe you can bring us up to speed with how that happened, because it’ll also shape your journey, I think, to Tezos as well. Yeah, so, I mean, it wasn’t accidental. I’ve been wanting to work in finance for a very long time.

4:37 They were, it was not the only thing I was interested in, so there’s been two areas I’ve been really drawn to. One has been computer science and AI, specifically machine learning, and the other one being finance, financial mathematics, statistics. They’re both very quantitative, at least, especially the way I approach finance is very, very quantitative. So I was interested in these two things, and even prior to doing my master’s when I was still in France, it was easier, go to the West Coast, go to Stanford, and go do some AI or tech related thing, or go to New York and try to work in a hedge fund or even start a hedge fund or something like this.

5:14 And I was really torn, and at the end of the day, it’s probably not the best reason in the world, right? But I had spent a few years on the campus France and the campus was far from the city and I was like screw that I don’t want to be on a campus I want to be smack in the middle of a city so I went to I went to New York and I went to NYU because I really liked the density of a city that’s where I wanted to be. And that’s right in the middle of it I mean that’s in the West Village right next to Washington Square Park it’s it’s crazy I mean there isn’t almost isn’t a campus right it’s just the city and there’s some buildings everywhere but you wanted that you didn’t yeah because my brother went to Stanford and I visited him as well and I was like man this is It’s really snoozy out here.

5:54 There’s a bunch of trees and it’s really pretty, but there’s no city vibe. Exactly, I didn’t want to be around students or in academic environments, I just wanted to be in a working environment. Okay, now you told me a story of something that happened when you were seven years old that kind of set this fate. I was wondering if you could just tell everybody’s story. Yeah, yeah, so I visited New York when I was seven, so that’s 1989, I visited the Stock Exchange, you can actually visit it, and there’s some notes from a journal that I’m keeping, And I say, like, I am really interested in stocks and bonds and gold and bank notes.

6:28 And I like visiting the stock exchange and I want to work there. And that’s, you know, seven-year-old art there. So I was, I kind of knew what I wanted to do. Wow. Isn’t it crazy how something sometimes pulls you to where you want to go and, you know, there’s like that dream, you know?

6:41 Yeah, it was, it was, it was just fascinating. Wow. I spent a summer at Ford Motor Company as a mechanical engineer in Dearborn, Michigan, you know, working on an assembly line. And even though I had a Ford Mustang as a kid, it was a dream. I realized, man, this wasn’t where I wanted to be when I was, you know, 40, 50.

6:58 And then I took a finance course, started getting the Wall Street Journal, watched the movie Wall Street, and after that… I watched the movie Wall Street too when I was a kid. I know this is the last thing that Oliver Stone wanted, but I think that movie has inspired so many people to work on Wall Street. Oh, yeah. It’s like, I think it’s one of the greatest movies ever.

7:18 I think it’s actually almost like a story from the Bible. so many lessons it’s it’s a beautiful movie of it but I saw an interview with Michael Douglas where who played Gordon Gekko yeah and he said people come up to me on the streets and they say thank you you’re the reason I got into finance and he says no I’m the bad guy I’m the villain you’re supposed to hate me and not do this yeah it’s like no you’re inspiring me and that’s that’s the way it was for me too yeah yeah Bud Fox and Gordon Gekko I still watch that movie To this day good movie. So you’re at NYU. You kind of know you want to move into finance at some point You’re finishing your master’s degree again, you know, it’s not just finance You’re you’re into AI and machine learning a lot of these other things that next decision as a job How did you make it and then what did you do because you had some serious?

8:06 Statistical ARB and trading experience on Wall Street. Yeah, so I wasn’t you know I wasn’t like never like trading on on Wall Street. I was a I was a quant And so I built trading algorithms. But there’s always a trader that’s monitoring the trading algorithm or making risk-based decisions on the algorithms. But I wasn’t in front of the screen directly.

8:27 Although, I manage a portfolio at one point. But I wouldn’t call myself a trader for it. The thing that the relationship that I saw, I was like, OK, so I have all these ideas in AI. Can we use all of this AI in this machine learning in finance? And the answer is largely no.

8:47 And this is a long and interesting discussion. Because a lot of, to make it short, a lot of the research, like a lot of the cutting edge, super interesting research that has come up in AI, is about structure. You have an image of a bird. Is there a bird in the image? Yes, obviously there’s a bird.

9:04 So there’s not a lot of noise. You know there’s a bird, but the relationship between the presence of the bird and the pixel of the image is extremely complicated. So you need to entangle that. That’s what deep learning does. In finance, we’re in a completely different mode.

9:17 There’s very little information, because all the information is consumed by the traders and is incorporated into the prices. So you have very little structure and lots of noise. So you are in the realm of statistics. So, you know, it’s also super interesting. So I got more into Bayesian statistics because that’s how you live with like large amounts of noise.

9:39 But I also was interested in this structure thing. So the structure thing is good for AI, vision, all of that, it doesn’t mix very well with finance, as I found. Interesting. But there was also, yeah, there was two categories of people going into finance. A lot of my peers were doing, were derivative quants, so they were pricing derivatives.

9:59 And you’re doing stochastic calculus and partial differential equations, lots of very, very heavy math. But I was a stats person, I was into probabilities. And so that led me more to stat orb and market making. and your instruments of choice were typically futures. Just something liquid with a price history.

10:16 I’ve done a bunch of everything. So when I started out, the first product I was searching was the Eurodollar future. But I’ve done also commodities feature, natural gas and oil, and a lot of ETFs. Okay, okay, I used to trade all the Eurodollar futures. But with a swap book and the fixed floating exchange and all that stuff.

10:37 And again, I was the trader, and behind every great trader is a great quant. And sometimes it’s not obvious who’s actually making the decisions. Sometimes the- Depends on the strategy. The trader always likes to think that they’re making decisions, but oftentimes it’s based on what the quants are doing. And if we didn’t have our research team, we couldn’t price all of our complicated options, even though we probably took credit for the P&L more than we should.

10:59 What did you learn, big takeaway lesson from your time on Wall Street? How long were you there? And as you look back on it now, did you learn some important things that even helped on the Tezos journey? Yeah, I mean, you know, like, first of all, just like a good understanding of finance, you know, like how does it work? How does financial instruments work?

11:17 Just like, you know, the basics. And sometimes you think some stuff is just undergrad, basic financial theory, but there’s a very big difference between having studied this stuff and maybe like taking an exam and living and breezing it and just, you know, like having it as a second nature, like just understanding it deeply enough that when you’re presented with a product or a pattern, you can say, oh, that’s not going to work, and here’s why. And under pressure with P&L and positions.

11:45 So there’s this type of reflexes. So yeah, I learned a lot about finance, about derivatives, products, microstructure, just, I would say, in general, financial economics. A lot of the things that I like about finance, especially if you look at the high frequency, that it’s very, very much no bullshit, Because you know immediately, especially with high frequency, you know immediately if you’re wrong. Now, if you’re someone and you say, I’m a macro trader, and here’s what oil is going to do over the next 20 years, how many times are going to be proven right or wrong?

12:17 Whereas if you have a view and it’s going to be validated in the next day, you’re going to know who’s right, you’re going to know who’s wrong. So a lot of the economics that you find in financial papers is very, very viable. There’s a lot of concrete evidence for it. It’s very, very solid. And then as you move to microeconomics, it becomes a little less solid, but it’s still very, very principled.

12:40 And then you go to a macro and it’s kind of free-floating because it doesn’t have this contact with reality. Yeah, the contact reality is what Wall Street’s very good at. I took a bunch of classes at the Sloan School of Management in Futures and Options. And then I remember I tried to get a summer job at Bankers Trust and I called one of the traders up on the phone who was an MIT grad. And I could hear people yell in the background And I said, hi, my name is Brian.

13:02 I’d love to get a job. And she just barked down the phone. She said, what’s the delta of an at the money call option? Okay, now I’m 21 years old and I’m at MIT. And I just studied maybe a one options course.

13:14 And I was like, and she literally was like, answer me. Like I talked to her like a minute, like a trader. And I said, one, which is completely wrong. It’s one half. And any idiot would know that.

13:26 But the thing is, is it, it’s one thing to study finance as loan, But on a trading floor, you’ll learn that real quick or someone will slap you or the P&L will hit you. And so, like you said, Wall Street is where the rubber hits the road and you get to find out what’s in theory and what’s in practice. The other thing I’ve learned, and I’m reluctant to share that because if you’re looking at it on the other side, it just, what I’m gonna say, I make it sound so obvious when you say like, well, you’re an idiot, you should have known that from the get-go.

13:53 But a lot of people make that mistake is just how competitive markets are. Everyone, everyone and their mothers think that, oh, you know, markets are not efficient, you know, you can beat the markets very easily, yada yada yada yada. And over the years, you know, I’ve had people saying like, oh, look, I have, you know, the strategies that I back tested, look, it works and so on and so forth. And there’s just so much work between the strategy that kind of looks good on paper.

14:18 And you’re actually trying to run it and then you find that there’s transaction costs and then you find all of this and so on and so forth. And if you’ve not really tried it, it’s very easy to convince yourself of like, oh, you know, if I use this new technique or new statistical technique and so on and so forth, it’s gonna, and it doesn’t, and it doesn’t work. And what you realize is that there’s a lot of very, very high tech in finance, but because it’s so competitive, it’s a lot more secretive than tech.

14:45 People don’t publish. So you have a lot of very advanced stuff that’s being done. You have some of the smartest people in the world who are being hired and no one talks about it because it’s a competitive advantage. So just from the outside, it’s very easy to not realize how incredibly competitive it is and how incredibly efficient the markets are, especially on the short run. That’s a great observation.

15:07 And again, you grew up also with the high-frequency trading and much more algorithms than I grew up with. But that’s a brilliant observation. It reminds me of something that I was taught on Wall Street and the city of London, which is everything’s a secret. You don’t post your derivative trades, between counterparties. This is one of the reasons that the crisis happened because nobody knew where the risk was.

15:29 I used to get uncomfortable ordering my Starbucks order in front of other people because everything was quiet, it was not posted about, because you knew, if you told someone, they would argue, they would argue, maybe not the next week or the next month or the next year, but if word gets out on how you’re making money on Wall Street in London back in the day, it was only a matter of time. So there’s a culture of secrecy, isn’t there? Absolutely, and if you look at tech and startups, Everyone will tell you, oh, if your ID is any good, no one’s going to be interested.

15:57 People who don’t want to talk about their startup IDs or require NDAs or losers because it’s all about execution and so on and so forth. And I’m not making fun of it. I think it might be true for a lot of sex startups. But it is absolutely not true in finance, where secrecy is actually very important. Yeah, which makes the blockchain even more mind-blowing for finance, not to mention the incredible technology and the peer-to-peer sharing the web 3.0 just the transparency alone is a massive revolution for finance and yeah that’s one thing I think I’m still trying to get my head around is that you know everything’s transparent and it’s on this blockchain whereas in the Wall Street world everything possible is kept secret okay a futures trade is public and every anything else around it you’re right this is secret and that makes this market very interesting all right you made a conscious choice though to leave Wall Street, and I appreciate your observation that it can’t be cracked with AI, and I think you might be right.

16:57 And you decided to go Google X, Mountain View, driverless cars, maybe pursue that itch you had for the AI and machine learning that you weren’t using on Wall Street. Am I correct in that assumption, or why make that? Yeah, no, exactly, exactly right. So, I had this, you know, first of all, I did it for 10 years, and it was super interesting, I learned a lot of things. At one point, I felt like I wasn’t learning as much as I wanted to learn, I wanted to do something different.

17:21 The other thing is, I really wanted to do AI, and I wanted to use AI where it would work. The other thing is that it’s a very adversarial environment in finance, and it not only means it in an unpleasant way, but I mean that the universe is conspiring against your learning algorithm to work. People are taking away all the signal, like I mentioned, whereas if you’re doing self-driving cars, the other cars on the road are not conspiring to drive you off the road, Which is not to say that everyone is a very nice driver, but more or less it’s co-operative.

17:52 People aren’t trying to trick your car into driving up the road. So it changes the problem considerably, and it makes it a very, very different problem to not be in an industrial environment. Unfortunately, now that I’m back into blockchains, again, you’re dealing with security. Security is very much like market making, in a sense, it’s like you’re playing defense. You have to cover every possible, and also it’s very versatile.

18:15 But at least with a self-driving car, it’s not as adversarial. So that was super interesting and I wanted to do something very different, see a different part of the US as well. Right. I can see what you mean. And also, from a personal perspective, I mean, every other trading firm is trying to eat your lunch.

18:28 Even the individuals on Wall Street, it’s, you know, I don’t know what it’s still like, but it’s still quite, quite aggressive. And after 10 years, that energy is, you know, it’s hard to deal with. The other thing, it wasn’t as competitive in a sense that, you know, of course, you You know, it’s competitive to get a job there, of course, but there weren’t that many companies competing with Google and self-driving cars. You know, you had basically Uber and Tesla.

18:56 And, you know, I’m sure there’s, and even then I would say that, you know, like Google was miles ahead of the competition. You’re not like dealing with trying to scrape little bits. Right. So it’s a very different environment. It was super interesting.

19:10 Right, you have a real competitive advantage. You have a lot of capital. You got a lot of things you can do. You’re not fighting over that one one hundredth of a basis point. No, absolutely. You know, all right So you go to California you have an experience with with Google X self-driving cars all that How do you summarize that experience? You know, what did you get from it because I know at that time You started learning about probably blockchain crypto, right? No, I got in way before that To California in 2016 16. Okay. Yeah, and you were in this looking at this early. Oh, yeah Yeah, I mean, you know, I heard of because pretty much when the paper came out, but I didn’t pay any attention to it Unfortunately, I started really getting interested to sell it in seven eleven eleven But not to engage but like interested. I’m following 2013 I started saying like I need to do something here. Okay, which is very early still It’s still early. Yeah, I only buy all accounts but 2013. I was like, okay, there’s there’s really something here My experience in California. I have an anecdote for this which is I think telling, I’m really bad at recognizing faces.

20:16 So that’s, you know, like some people don’t recognize them at all. They have prosopagnosia. I don’t have that, I can’t, but I’m just like really, really bad at it. It’s very hard for me. And for a while, when I was in the office in Mountain View working on self-driving cars, there was this guy hanging around, you know, the office and talking to, talking to, talking to his engineers and some forgers hanging out.

20:39 And it was like, it’s so funny we have an engineer that looks a lot like Sergey Brin and, you know, maybe like four months or like five months and it hits means. Oh my god And the revelation I had at the time is that okay So he’s basically spending his days in the same place as I am Talking about talking to the same people I am about the same problem. He’s eating the same food. He’s wearing slightly worse clothes So, you know apart from the odd private, you know Jets trip to an island or something like that. We basically have the same lifestyle Even though the guys were untold tens of billions of dollars, so I was like, this is a pretty good life.

21:17 This is like I’m working on a super interesting project with massive world impact, good environment. And so that take away was that’s a good use of your time. Yeah. And clearly, if the founder and CEO is spending most of his time there. Yeah.

21:31 I mean, you know, this guy can do anything he wants in the world and he chooses to spend his time here working on that problem. Right. Okay. weren’t continuing your blockchain dreams, it was probably a great use of your time and a great place to be and you’re collaborating with some of the best people in the world. Yeah, and you have to, you know, we haven’t talked about it because I like the puzzle, right? I’m a puzzle person. I like solving hard problems and that really drove me to the celery and carpets. There’s another angle which is the impact. And mind you, I do think that finance, you know, some people look at it and say, oh it’s a zero-sum game. I don’t look at it like this. I think having liquid secondary markets is super important for growth, for the economy for, you know, for prosperity.

22:12 So I do believe that, you know, including high frequency trading, you’re making the world a better place. And some people might think I’m being sarcastic here, but no, I generally mean it. But the impact I would say of selling a driving car is a lot more tangible. There’s just so many people dying in road accidents for, you know, if you’re not, if you’re an adult, if you’re not elderly, it’s probably, you know, your main cause of death. Isn’t it? Yeah, it’s it’s it’s incredibly it’s like alcohol smoking car accidents I think suicide as well is gonna be very high, but Yeah, so car accident is just incredibly high and then that can go away That can go away with self-driving cars. So the impacts just in terms of a human lives is in a is insanely high Yeah, I agree with your we said about finance, but I’ll come to that to wrap up self-driving cars Where where is that industry? Where do you think it’s going?

23:03 It’s quite, it’s complicated, isn’t it? Self-driving cars, more complicated than people realize. It’s very complicated, and like many things, it’s one of these things where you get to 99%, and it feels like you’re 99% there, and then the last 1% is harder than the first 99%. And that’s everything, right? It’s just getting to the smallest corner and the smallest details, because if you want to compete with the average driver, it’s not too bad.

23:31 You look at how many times, you know, how many miles an average driver has an accident. And I think the number could be completely off-hand. I think I remember it’s like every million miles you have a fatal accident. But it could be off my orders of magnitude that’s just like out of memory. But that’s the average driver.

23:48 You don’t want to be like the average driver because the average driver includes a bunch of drunkards. So you want to be like the average diligent driver. And the average diligent driver who, you know, is paying attention to the road, is it’s not texting, it’s not drunk, it’s actually quite good. So getting to that level is really, really hard. You’re getting into very, very rare situations.

24:09 So even as you’ve covered most things, it’s really hard. And you’ll see sometimes there’s a startup that come out and they have this video of a car driving on a road and so on and so forth and they’re like, oh my god, they’re already here. But getting to that baseline is actually quite easy, especially with the AI tool that exists nowadays. Getting to the point where you’re gonna need, You’re going to deal with, there’s an early TED Talk, I think, by one of the lead engineers, actually, I think now the CEO for Waymo, who’s talking about a situation where you have this lady on a wheelchair chasing a goose or a duck with a broom in the middle of an intersection.

24:44 So you have to deal with this type of scenario. And actually, the car handles it. You’d be surprised, but most of the time, just stopping is a pretty good policy. You just stop, you wait. You can’t do that all the time, of course, where your car is going to be stuck, but it works.

25:00 So just dealing with all of these hedge kisses, it’s just a massive endeavor. And I think it’s growing, and clearly it hasn’t come at the pace that people were expecting. Yeah, same as you, not the pace you expected, or did you know? No, no, I was more hopeful that he would go faster. And there are CDs where you find those services, and I’m still 100% convinced that it’s going to come, but it’s definitely going to be a longer journey that I would say what people imagine five years ago or 10 years ago.

25:29 Okay, has Tesla solved the self-driving problem or do they just have the best marketing because it works to a certain degree on cars that are on the road, whereas maybe Google X doesn’t have those use cases? Yeah, so I’m skeptical of their approach but first of all, the fact that they limit themselves to using sensors, to using cameras as opposed to using LiDARs is just, Your life is so much better with a lighter. If you can see everyone around at 150 meters, why would you just rely on cameras?

26:01 And the lighters are not even that expensive. And I feel like a lot of it for Tesla is because they’ve made this promise that they’ll be able to retrofit the older cars. But I feel like it’s hindering them to be relying on this. I think using end-to-end AI, as opposed to, and I don’t know that they’re using internet, but it feels at least from their communication as what you’re talking about, as opposed to having a more structured approach, And I think make it harder to verify and to get comfortable with the safety of the software.

26:28 Now as that being said, there’s a quote I think by Peter Thiel, which is like, I don’t understand why people would take any bet against Elon Musk. And so I don’t want to bet against a guy. So even if I look at Tesla, the stock, and I say, this is overvalued, I am not going to short it. I’m just going to stay out of it. And I feel like intellectually, I also don’t want to take a position.

26:52 I’m kind of skeptical, but I’m not gonna bet against it. I’m just gonna stay out of it because I don’t know. Yeah, as they say on Wall Street, the trend is your friend, right? Yeah, yeah. If it’s going that way, even if your model tells you different and something tells you different, it’s smarter to go with the trend.

27:08 I would need a lot of conviction to, I would need a lot of conviction to take a strong bet against his doing. You know, the guy, look, the guy managed to make like a profitable rocket launching company and revolutionize rocket launching, just like as a rule of thumb, It doesn’t matter how he behaves on Twitter or whatever just and you know, we’ll say oh, well, it was just engineers at SpaceX Just like look at the other side take a little bit of distance and say like, okay Just not gonna bet against that guy. Yeah, I actually quite like Peter Thiel. He’s got some great quotes Competitions for losers, you know, he’s got some great IP. Well, that’s part of my journey here by the way You know, it’s just like figuring out on Wall Street that you know He describes a pattern of people who are like, you know, they’re good in school they get very very competitive because call makes you want to be competitive and And they get into this game because they like winning and they like hard competition so you go into finance because it’s like all the smart people are here and You get this great feeling of competition. It’s like oh, I’m gonna beat them and so on so forth But at the end of the day It’s a lot more productive to go into a field where you don’t have as much competition where it’s like actually a lot easier You may not feel as good about yourself because you know, you’re saying like well, you know Like I’m not it’s this is not difficult

28:14 But what are you trying to do or you’re trying to prove to yourself? That’s you know, you’re good at winning a game. Are you trying to build something? Yeah, and then this is a great point and this is all probably covered in Peter’s book zero to one But in order to not be competing all the time, then you have to create something new which takes a lot of risk and chances Which like you said we’re not conditioned to in our education system we’re conditioned to get the test right and to win by a little bit and That’s not always where the greatest advancements are. Yeah in technology and humanity. Absolutely Yeah, Peter has some great points not betting against Elon is a smart thing I saw a recent New York Times article that wasn’t talking about electric cars, it was talking about the fact that Tesla produced double the volume of cars year on year and how just its car production, inventory management, able to change even the technology of their cars and their production system was smoking the traditional car makers.

29:07 And so it was just an interesting note, forget about the electric car innovation, just their innovation as a manufacturer was making everybody look potentially bad and I spent some time at Ford Motor Company and I can see how that could happen so I think that’s smart maybe let’s not bet against Elon but also I don’t believe all the stories I hear about the driverless car mechanisms and I haven’t been in a Tesla but I probably wouldn’t put driverless on when I was in there. The thing also is that one of the early intuition that that Waymo had, which I think is quite good, is they started their system for highway systems. And so they got some Googlers, and they said, do you want to test drive something?

29:49 And they made them some papers saying you need to keep your hands on the wheel at all time, and you’re going to be recorded, and some so forth. And then they do that, and then they find out that the people who say, yeah, yes, sign all these documents, they started saying, just laying down, completely reclining in a car, applying makeup, all this sort of thing and what they realize is if you have a system that’s like 99% safe it’s really hard to get people to pay attention why would you pay attention when you know the car never had never has a problem and so in some sense you can make it less safe because you never have to do anything it’s hard to get pay attention because one in ten thousand time we’re gonna need you to do something that doesn’t work so you either have something that’s very basic like you know lane assistance or like cruise control or you go all the other away, but there’s a valley where automation can actually make it more dangerous. And the way that Tesla handles this is by trying to monitor you, but I would feel it almost, I worry that I would feel it almost more tiring to like have to pay attention without actually driving. Right, that’s interesting, so it’s monitoring you and the road, potentially at the same time. Wow, so many question marks, but like you said, when this technology gets mastered it will change the world in a massive way, won’t it? Just to back to finance, and I

31:05 Want to jump into your journey with Tezos and the blockchain. I agree with you. I say that even high-frequency trading, and I know people think we’re joking, does help humanity. I think all finance helps humanity. You know when I started Wall Street we had a fixed floating swap book. It was an innovation on Wall Street. It just had done five years earlier where you could actually borrow or lend at a fixed rate versus a floating rate for however maturity you want and we created that derivative instrument and I I know on the back of it, you know, projects were built, dams were built, student loans were made.

31:38 I mean, this depth of finance empowered so many things in the world to be done. And I think it’s maybe something we don’t talk about enough in the blockchain industry, but pure finance has almost always marked the upsurge of humanity, whether it’s the Industrial Revolution or everything. And again, the best stuff typically came from, what, New York, London, Hong Kong, the major financial centers, but now it’s happening on the blockchain. So it’s an important point to make.

32:03 Tell me about your journey then of this puzzle that you started off looking at. But then you also took some action. You tried to go from zero to one early when a lot of people would just admire the tech in the background, have a nice job at Google, hang out with Sergey. You didn’t have to go down this route that ended up taking you on quite a ride. Yeah, so it was, you know, like for me, started with Bitcoin, of course, and Bitcoin was at a confluence of a lot of things that I was interested into. So first it was, you know, the theory of money and banking, what makes money money? And a lot of things that tripped people about Bitcoin at first is that it was, you know, say, oh it’s backed by nothing that can’t possibly work. And I had done a lot of thinking, you know, before that, before Bitcoin, I had a lot of thinking about why does money have value?

32:50 Understanding, you know, what is a convenience yield, like how does like fiat currency work, I was interested in the Swiss Dinar, that wonderful story about fiat currency not backed by any government and having value in Kurdistan. So I was really into that and I had come to the conclusion that the best money is backed by absolutely nothing. It just has a scarce supply and it’s backed by nothing. So that was not an intellectual obstacle for me, on the opposite.

33:17 And in fact, early on, people told me, oh, Bitcoin is backed by energy. And I was like, oh, I’m not interested, because energy production is going to go up a lot. And so as a result, of course, it’s not backed by energy. But I think people were trying to say that to make people interested in it. And I was more interested when I found out it was not backed by anything.

33:34 That made it a lot more interesting. The other thing that I, so theory of money in banking, how does money work, why does money have value, exchange, and so on and so forth. The other thing that I was interested in was cryptography. I had been interested in cryptography since basically high school, when I started looking at number theory and like encryption and you know I was in high school learning about number theory at the same time that’s internet was really picking up and we’re talking about encryption on the internet so I had this interest as well. Yeah and there’s massive amounts of cryptography just on basic Internet that people don’t even understand and after talking with Silvio Macauley who you know created a lot of these things. Yeah he was like he’s like Brian you know you need security for anything you do and it’s not always because of bad actors it’s just because in a long enough timeline you know every system has randomness and we’ll break. So I don’t think people realize how much cryptography is in their daily lives before even cryptocurrency came along.

34:24 Absolutely. So you’re fascinated with that, okay? So I was fascinated with that. Computer science, you know, one of the things I like to do in high school, I competed in the informatics Olympiads, so just like algorithms and computer science, so I was interested in that. What was your programming language of choice?

34:41 It depends on the task, but for for competing I was using C. C, okay, or C C++ or C? Just C. Just C. No time for C++.

34:50 You have a problem, you need to solve it in like a couple hours. C++ is when you might want to write maintainable code, it’s going to be shared by many people. In this circumstances, the code quality doesn’t matter, you just need to get to the answer as fast as possible. Right, okay. I was taught BASIC first, then FORTRAN, I did C, I took in a course in assembly language at UCSD.

35:10 I have no idea why, I never really used it. But at least I understand some of the building blocks. But all the smart kids at MIT studied computer science. I studied mechanical engineering because I knew, I knew. But the smart people were at computer science, and so you love that as well.

35:25 And finally, there’s a political project around cryptocurrency around Bitcoin. And I was also on board with that, which was empowering people, giving people sovereignty over their financial transactions. So for me, it’s just like the intersection of so many things. I was interested in decentralized currencies before Bitcoin came out. So when Bitcoin comes out, at first I’m skeptical because I hear it’s back by energy and so I don’t like that.

35:49 But then I look into it and it was like, oh my God, this is fantastic. So I caught the bug early on and I started thinking about it. I started thinking about it. And my first thought was, you know, what can we do with Bitcoin? What can be built on top of Bitcoin?

36:03 And then I started thinking like, okay, how can Bitcoin evolve? What else can be done? Because it was the first iteration of a system but they were, I could see some issues. So the privacy, the lack of privacy, was an important problem. Everything was public.

36:20 You can’t really have financial sovereignty if you’re going to force every transaction to be public. The other one was the scalability. If you can only do a few transactions per second, that’s a problem. Although at the time what I envisioned was that you would have some international network of financial intermediaries who would basically scale. the idea was that you just need like something basic that where you have like few clearing transfers between financial actors. But now I’ve come to see that it’s it’s actually it’s actually important to be able to for people do this without without intermediaries. I think that’s that’s that’s really part of the value prop. It’s not enough for intermediaries to be able to enter the markets costlessly. It’s also important to have the desired access. And the third one was the the cost. You need to spend a ton of energy in order to to secure Bitcoin and that creates inflation. So in Bitcoin, inflation is supposed to go away, but if the inflation is supposed to go away, there’s a good chance security goes away. So how can we avoid all this inflation and spending it on energy and at the same time like keep a good security budget. So that’s a proof of stake angle. Right and you saw this 2013-14 you’re starting to formulate these ideas. And about the same time, Ethereum’s coming out too. So Ethereum’s not even coming out, but Ethereum’s like a project. They started to talk about Ethereum and smart contracts.

37:49 You kind of see if Bitcoin was version one, is Ethereum version two to some extent? I mean, it’s obviously maybe the next big iteration. It’s a big iteration. And I would say at the time, I wasn’t convinced of the, I wasn’t convinced that smart contracts were going to be that big. I mean, I was convinced enough that I thought that Desos should have smart contracts, right? So I was like, okay, yeah, smart contracts are cool. Smart contracts are important. But I thought that they would be secondary to things like privacy, for example, because I still think the main use cases for this platform is to be a form of money store value. And it’s nice to have smart contracts are nice to have, but it’s important. But you know, the way it’s turned out, smart contracts have turned out to be even more important than all of that.

38:32 And it’s important to have a system that can also be flexible going forward, and a system of governance can be flexible going forward. And I think we’ll get into some of that governance IP. So you’re watching Bitcoin, you’re watching Ethereum evolve, and you’re formulating Tezos in your mind. Was this always something you were going to do? Did it become clear?

38:51 And then when did you finally formulate it? So I started thinking about evolution, you know, one of the first person I met, I was traveling to London and I go to this hackerspace and I start, you know, like working on something and there was a guy who comes around and when he started talking about Bitcoin, and I think I’m not sure, I’ve never been able to confirm, I think it was Amir Taki, but I’m not sure. I’ve talked to Amir and he was like, yeah, maybe it was me, but so I’m not sure.

39:18 But anyways, I talked to someone and this is around maybe 2000, maybe 2011 in London about Bitcoin and I say, look, you know, it’s like it’s great, but what if something better comes along? You know, what if there’s, like, how do we, what if something with privacy comes along? What do we do? And the person says to me, look, Bitcoin is not a technology. Bitcoin is a ledger. Bitcoin is just a ledger of who owns what, and the technology can be replaced.

39:42 You can just keep the same ledger and replace. And I find it, at the time, I find the sensor completely satisfactory. Like, all right, yeah, we can swap out the technology, that’s great. And then you start thinking about it and you say, well, okay, but who does it and how do we agree to do it? And the logic at the time was around forking.

40:01 So you know, like, well, you’ll have two versions and then people can choose whatever version they want. That doesn’t work when you have network effect. You can’t just tell people now, well, now there’s two Bitcoin and you can use which one you prefer. No, you can’t really use which one you prefer. You have to use the one that’s going to win because the other one’s not going to get really much value.

40:17 And so which one is it going to, is going to win? Is it the one with the better technology? Or is it the one that people expect to win? And it’s the one that people expect to win, you know? It’s a beauty contest.

40:25 In some sense, if I expect this one to win, then it has network effect, because I expect that other people are gonna expect the same thing. And it becomes like this weird game based on legitimacy, perception, and so on and so forth. And I think that can still progress. Yeah, yeah. And this was kind of the essence of the TED Talk you gave, which I recommend people to watch.

40:44 I’m sure we’ll have links below. but there’s a whole psychology, game theory, you know, humanity piece in here that you just quickly talked about and sometimes gets glossed over in this space. I had Stanley Kulachev here and he said, Brian, the reason I like this is because anytime anybody can hard fork and take it another direction and that makes sure that I give the best code every day. And everyone says, okay, great. But when you think about it, you’re like, well, wait a second, it’s not that simple, is it?

41:10 And when you look at the hard forks in the past and I’ve had Roger Veron here Literally giving out free Bitcoin cash to everybody if you want to email Roger He’ll literally give you free Bitcoin cash because that is an evidence of a hard fork With you know that with with damaging consequences and just having the option of hard fork Like you said actually stops innovation sometimes and stops progress and it’s something that needs to be talked about, right? Yeah, I mean it’s mostly that you can’t count on it You know you can’t count on hard for giving you progress because if a random person comes up with a hard fork It doesn’t matter how good the ID is. They’re not, you know, like, it’s not just about having the IDs, it’s about having the exchangers on board.

41:50 It’s about having all the actors who are using, you know, it’s an entire ecosystem that you can’t move. Right. And so… And let’s define hard fork for anybody who doesn’t necessarily know what that is. Let’s, maybe you can explain it, move with an example, or just in theory, because…

42:02 Without going into the difference between a hard fork and a sub fork, the idea of the fork is that you have one piece of code, and everyone runs the same code, to access the blockchain. We’re all running the same software. And someone comes and says, we should have different rules for validating the blocks. Maybe we have a new kind of transactions, or maybe we do transactions in a slightly different way because we want such and such features. So they come up with a new piece of code.

42:27 But the minute that someone comes up with a new piece of code and people will run that code, the chain is going to split into two chains. One chain is going to have blocks who run the old code, and one chain is going to have blocks that run the new code. And they’re going to be compatible with each other. And that’s a fork. You can visualize a fork.

42:49 But even though those two chains can coexist on the internets, you can see both. In economic space, only one really is going to exist. Only one is going to capture the economic value. And what the term in that is everything. So the place where more people go will, by definition, be the winner.

43:06 And that’s based on social expectations. It’s not based on tech or anything. Or anything and that’s the fascinating component about governance like I said that when we were talking giving you a tour of the studio I mean, I always see crypto as a combination of technology marketing and and And politics somehow and maybe psychology because you said it’s not as simple and look at Bitcoin Bitcoin cash Ethereum Ethereum classic and there’s other For some dynamics and you and you can see I would goes wrong I was talking to my students the other day and tell me if I’m wrong here I’m really curious on your thoughts Arthur, but I called the Boston Tea Party the start of a hard fork Whereas like the American Constitution started and you had to choose are you gonna stay on team Breitman and the king of England?

43:48 Are you gonna go this new way and there’s real consequences and you don’t know who’s gonna win But if you guess what your life is at stake your futures take and you have to pick Yeah, you don’t know who the winner is, but you know that something’s not right and it really bothers you, right? So yeah, maybe that was a hard fork. I don’t know You can look at it like this. Yeah, it’s like secession. Yeah like succession. Yeah, like a little the movie, right?

44:09 No, no, no, sorry. It’s my exception session. Oh, it’s a session. Okay, right. Yeah. Yeah, like you see seed. Yeah, exactly so like yeah, like, you know, you are succeeding from from England and then all of a sudden it’s like and So and you can see the consequences and you know The market share and all that and so it’s not something that you can Casually do and and again, you know, Stan. He and I love what Stan he’s done And I appreciate the point of view, but he’s like the threat of a hard fork keeps everything honest and good But I’d like I’d like to go deeper on that because you see lots of other Helps it helps I would say it cuts it cuts the low end of the worst of the worst You know what I mean?

44:48 It’s like if things get so bad that someone you know does a hard fork that prevent the system from like having a horrible fate Then sure, you know what that is going to that fork is going to win But how much you need to improve over the baseline to move people over from the default is extremely high. So hard fork might save you out of catastrophic scenarios, but I don’t think it’s going to keep you on your toes in a sense of it might prevent people from completely destroying the system, but it’s not going to say, oh, this version is 5% better, therefore this hard fork is going to win. Absolutely not.

45:29 Not right and so that whole governance concept is baked in to tesos from the start and you’re trying to answer a bunch of these questions Which are deeply linked somehow to a proof-of-state concept as opposed to a proof-of-work concept That’s right. It kind of is interwoven in this model. And when you looked at the ethereum, I’m guessing the early days you saw Potential flaws in the system that would play themselves out I think a lot of the ethereum co-founders saw those flaws and ended up going to try to create their own proof-of-state projects with varying degrees of success or not, Cardano and Polkadot, and the rest were running out of Ethereum co-founders at this point.

46:05 The supply of the Ethereum co-founder is unlimited. I do get emailed every now and then for the new Ethereum co-founder I’ve never heard of before to be offered in commercial, so you have a good point. But you’re thinking of this in the early days as well, and you’re thinking how can we try to solve these issues? Yeah, yeah, yeah. And so the reason for proof of stake, you know, aside from the fact that it’s less costly, you know, doesn’t like spend as much energy, is also because there is a natural governance conflict in moving from proof of work to proof of stake.

46:37 Right, and should we define it real quick, proof of work, proof of stake? Yeah, so proof of, so, you know, both are ways of securing your ledger. In proof of work, let me step back one second, because I think this is an interesting topic. You want to have open systems where everyone can participate. But in order to get consensus in order to secure the system, You need to have honest majority assumptions.

46:58 So how do you reconcile a system where you need an honest majority and anyone can participate on the internets where I can come in and I pretend to be a million different people, right? So if it’s completely open and it’s anonymous, it’s really hard to prevent the bad guys from pretending that they are the majority. So you need to close it a bit, but not too much. So the way that proof of work does it is say, OK, anyone who consumes energy can participate.

47:26 If you burn a bunch of energy and you prove it to us, you get to participate in the consensus. And the idea being, because it’s costly, it’s hard for the bad guy to outspend the good guys in energy consumption. That’s proof of work. In proof of stake, we say, OK, we have a mechanism on a chain, which is token ownership. So if most of the tokens are held by the good guys, we’ll have an honest majority in the consensus.

47:51 The difficulty with proof-of-stake and opposed to proof-of-work is that in order to know who owns what, you need a secure consensus algorithm. But in order to have a secure consensus algorithm, you need to know who owns what. There’s something circular about it. You can work it out. There’s technical difficulties in doing it.

48:09 It’s workable. But that circular dependency is what makes proof-of-stake more complicated than proof-of-work to develop. Right. And currently, obviously, Bitcoin is proof of work, Ethereum, and Ethereum, for as far as we know, for the next 12 to 24 months, will continue to be proof of work. And then we have other proof-of-stake protocols like Tezos that are out there.

48:32 And we’re seeing if they’re going to work, how they’re going to work. Proof-of-stake has won. Ethereum wants to move to proof-of-stake. And once they do, Bitcoin will remain proof-of-work, probably forever. And you have some smaller proof of work chains, but by and large, every new protocol that’s launching today is proof of stake.

48:50 So by market cap, once you exclude Bitcoin in this area, it’s all proof of stake. Right. OK. So this is the future. People agree.

49:01 It just now comes down to tech, consensus protocol, all the governance, and then obviously network effect and if people use it. And that’s maybe what I’m calling the layer one wars right now. I mean, I’ve had the privilege of sitting down with people like you that have been working hard for years and years, creating these new proof of stake mechanisms that can speed things up dramatically. And it’s gonna be interesting to see how it plays out. You think there will be a handful of winners for market share?

49:32 Yeah, I think it’s going to consolidate a lot. I don’t think it’s going to be a big multi-chain world Multi-chain world where you know, there’s a chain for everything and sometimes I can say like, oh, you know Can your chain be better for X or Y? The technology for making a good chain is kind of the same regardless of what vertical we’re trying to go after You know the technology if you want to make a chain that focuses on I don’t know NFTs about movies Or if you want to make a chain that focuses on DeFi or what have you It’s roughly the technical choices you’re gonna have to make are gonna be very similar So I don’t think there’s going to be differentiation.

50:12 Like, I don’t think that differentiation in terms of technology necessarily enable difference use cases. Okay. By and large, a little bit. I think governance, for example, helps with longevity, and longevity helps with certain use cases like collectibles. And I also think different applications may be on different, may care about different points on the decentralization and speed trade-off, for example.

50:36 But by and large, I don’t think that’s very, very strong. It doesn’t mean that you don’t get network effects. So you can still get network effects in some verticals just by preferential attachments. So just because there’s more finance in New York and there’s more tech in San Francisco, and that has nothing to do with the weather being more appropriate for tech and being better to be on an island for doing finance. It’s just like a bunch of people started doing it there and it stayed there because it was convenient to be there.

51:07 And one thing which doesn’t work very well is bridges between blockchains. Sure, there’s some solutions, but it’s difficult to make them work. And there’s fundamental reasons why you lose security when you try to create bridges between chains. But that in itself makes it interesting. Because it’s so difficult to move those bridges, you can actually have this preferential attachment happening.

51:32 You can actually have not geographic network effect a sense of like earth geography but in a sense of like blockchain geography you know you’re like every blockchain is a little bit like an island and so on these islands you can build you can build its effects so I don’t think it’s going to be winner take 100% but definitely there’s going to be a lot of a lot of consolidation amongst the different L1s. And there’s not going to be some beautiful world in the future where everything goes cross-chain you know seamlessly and costlessly it just you don’t think that’s practical so it it means less than 10, maybe less than five blockchains do 90 plus percent of the volume. Yeah, absolutely.

52:11 And I mean, that might be the case today. Yeah. The thing that I don’t get is that people either fall into two camps, mostly. They either think that, you know what, it’s going to be winner-take-all and my chain is going to take everything and everyone else is a scammer and a horrible person and they should all go to hell. And there’s another position, which is Kumbaya is going to be a multi-chain world.

52:35 You know, no one is competing against anyone. You know, we’re all, we’re all friends and we’re all going to all work together. And I don’t believe either of this position is right. I think it’s going to be, get very, very competitive. But you don’t have to be mean about it.

52:49 You don’t have to be an asshole about it. You know, just because you think we’re competing with someone doesn’t mean you need to, like, be relentlessly shitting on them. And it, it, it, it seems like a natural position to me, but but it’s only rare. And I’m glad you bring this up, because I talk all the time about the transition from Web 2.0 to 3.0, and it’s the future, and everyone’s gonna cooperate, and everything’s gonna be open source. Whereas Web 2.0, there was big dominant companies grabbing huge chunks of market share, leaders with big personalities that would take us in directions, and then Web 3.0, all of a sudden, everything shared, and I don’t, I think we’re gonna be somewhere in between for a little while.

53:28 I don’t know if everything’s gonna be, like you said, open source and non-competitive and all these DAOs, I don’t know. I think we’re gonna get some bumpy transition or some future that isn’t the kumbaya we think it will be. But hopefully not the Web 2.0 version that we know. Yeah, yeah, yeah, absolutely, absolutely. I mean, you know, like, there’s a lot, I’m friendly with a lot of founders from other ones.

53:51 I really enjoy talking to them. And, you know, I do think we’re competing. I think we’re competing for the same audience, through the same applications for all of that. It doesn’t mean we can’t share IDs or work together. I guess it’s a little unlike finance where somehow secrecy is so important because all the work is done in the open and in open source.

54:14 I would say secrecy is less important, especially in terms of design and development so people are much more willing to share. Yeah, it’s slightly different. Like you said, you wouldn’t see the hedge fund heads in the back of the day having probably conversations or lunch, but you do see the L ones a little bit more, but again, at the end of the day, you’re still competing. But it’s pragmatic because, you know, first of all, they have these very large teams, they have this very, and then, you know, the code is going to be run by all these computers.

54:39 It has to be open source otherwise, it’s not going to be decentralized. So you know, because it’s going to be out there anyway, you might, you know, you might as well try to trade ideas. Yeah. And that, let’s make this whole space fascinating. Probably why it’s growing so fast, not to mention the peer-to-peer.

54:55 Look, I want to get your thoughts on the last 12 months what Tesla’s has done and where it’s going But yeah, you’ve had such an interesting five-year journey that I would love for you to tell us things You learned and also maybe even to educate some people that are new to crypto in the last year or two and don’t really know the Bumpy ride this whole space had in you know, yeah 15 16 17 18 19 and And you went on all the rides you had the you had the front seat I think a bunch of those rides and you guys did I think was it the biggest ICO at the time? At two hundred and thirty two million dollars. I think actually that the the funds raised by by Falcoin were around like 250 Okay at the time. All right, so right behind them, but the thing is like no one wants to be the biggest

55:46 Can you tell us about that period of time some say 15 to 19 and walk us through through, I don’t know, things that you remember or learning points or maybe important points in history for people to know because, you know, Tezos, you know, you didn’t spin up a layer one last year. I mean, you guys have been there for a long time and I think it’s why people are using your tech. So I started working on it in 2014 and at first it was a hobby project and I was like, this is interesting and I wanna do something and some people get a golf membership and I was like, you know what, I have this I sing And I’ve had side projects forever.

56:21 I’ve always had something I was working on, on the side. And the problem is I never really had time for it because I had a full-time job. And I was thinking, this project is going to be different. I wanted to see the light of day. So I went through my savings, and I said, I’m going to pay a small team of developers to actually work on it.

56:37 And at this point, it’s just a fun idea. And I would say, you know what? Maybe it’ll be something. Worst case scenario, it’ll be a nice calling card. It’s like, it will be one cool thing that I did, And I can talk to people about that.

56:51 So it started being built. And then circa 2015, there’s a lot of Wall Street interests in blockchain technology, not actually decentralized blockchain, but blockchain technology. And I think I have something really cool here. We have good prototypes, especially comparing to where Ethereum is. I think we’re actually advancing pretty quickly.

57:14 But I don’t have all that much money. And I’m thinking, man, we could do something with this. And at the time, I start seeing startups who have nothing, raised millions and millions of dollars to do like vague things with banks. And it’s literally people who have a fork of Bitcoin. They fork Bitcoin, they add a small front end to say like, oh, and here we clear the swap.

57:38 And they are going to these banks, and the banks who say, oh, we must do something in blockchains are giving them like this, and it’s going to be sound ridiculous now, but they give them this five million rounds, which today is nothing in crypto, right? But at the time, it’s a lot of money. It’s like, wow, my God, this person raised a million dollar after like forking Bitcoin. And there I have, you know, with a protocol written from scratch that is proof of stake that has smart contracts, all of that.

58:04 And, you know, I’m scraping through my savings. So I’m thinking like, well, maybe I should do, maybe I should, you know, I should do something like this. So, you know, I, you know, I read a business plan and I floated it with a few people. I was talking to R3 as it was being formed. And R3 is this firm who got the consortium of 60 banks.

58:28 It was 20 banks with $60 million. So they got all the big banks into the consortium. And I started talking to them in February of 2015. And at the time, they talked to me what I wanted to do. And they said, well, we’re going to get this consortium and then we’re gonna advise banks on what to do.

58:47 And they had this brilliant guy, David Rutter, who had put together consortiums of banks together. And I’m like, you have something absolutely beautiful if you can get all these banks because a lot of people were pitching blockchain internal to a company, which doesn’t really make a whole lot of sense. You need to share with other people and say if you can get the banks together at the same table, you can do like people did with trade web, for example, like you get this consortium and then you build a product.

59:12 And at the time, they didn’t even want to build a product. They were just going to do consulting for banks. And so I start talking to them and say, come back with a business plan. I present a business plan, and so on and so forth. And they’re like, oh, interesting, interesting.

59:23 And I think they did move their roadmap a lot. So I talked to them for the most part of 2015. And they had hired this guy who had written a book on the topic of blockchain called Tim Swanson. And basically, he asked me for information. And I just feed him a ton of talking points.

59:37 And I was sending him emails, and he was just copy-pacing them and just plagiarizing them inside the company. And I think at this point, OK, they’re going to raise money. Surely, maybe I’m going to go and work with them. They raise a bunch of money, and they say, guys, can we do something? And they’re like, eh, you know, I don’t know.

59:58 You’re a keyboard wire. I’m like, I’m a keyboard wire? I built this freaking thing out of a keyboard wire. And you’re still on the West Coast this time? No, I’m still on the East Coast.

1:00:06 OK, and you quit Google. This is like 2015. Right, so you’re full time. You’re living on savings. I’m gonna do this full-time.

1:00:12 Yeah, yeah, so no, I’m not, yeah, I’m thinking, no, I’m putting my savings in, I’m still working at a bank, but I’m stuck, I’m putting my savings into this bad project, and I’m talking to this firm because I’m thinking, look, I’m getting a little tired of what I’m doing in quant finance, maybe I can get a job in this new thing, and it just completely turned me down, and it hires this guy instead. And you struggled to get anyone to pay attention. I struggled to get anyone to pay attention.

1:00:39 I tried to even sell the code people were just like, you know, I talked to a firm like about buying the code and they were like Oh, well, you know, we just bought you for the press release But you know, we don’t really care about the code just like people would not pay attention at all And I’m talking to this this firm who was like no we have her like blockchain in pyson and with like a gold product And we’re pretty you know, like focus on that How do you not quit at that point? Well, you know, I had just bought a house, I had expenses, you know, it was like it was stuff financially for me to do this. And then, you know, I decide, okay, I’m, you know, I’m just going to, I’m done with like being in quant finance, I want to do something different.

1:01:25 But I don’t know about crypto. And then I moved to the west coast and I started working a self-driving car. But I said, like, look, I’m still going to have my pet project. It’s 2016, and several things happen. The DAO hack.

1:01:40 So the DAO raises $150 million on Ethereum, and a few weeks after, they get hacked. And people point to problems with smart contract verification and risk in smart contracts. Ethereum are hard forks. People start talking about governance. And at this point, people unearth a paper that’s almost two-year-old.

1:02:03 The Tezos paper, which talks about smart contract security, which talks about governance, which talks about politics around core development teams, which are like happening in Bitcoin and everyone is like, oh my God, this is super prescient. Like people’s thoughts. A lot of people think that the Tezos paper was written in reaction to the DAO event and the DAO report, but no, it was written way before it. So all of a sudden there’s a flurry of interest into Tezos, people are interested in it.

1:02:30 But I’m loving my job, I’m loving what I’m doing on the other cars. And this is still a pet project. And so I was like, OK, I wanted to seize the light of day. I wanted to launch. I don’t have time to do it.

1:02:42 So what I saw was, look, Isirium launched with a Swiss foundation. They had a Swiss foundation. Swiss foundation raised some money, launched a chain, and then they’ve been funding development. They’ve been funding, like, continuing development and this type of things. Let’s just do the same model, except I’m not going to move to Switzerland.

1:02:57 I don’t have time to do this. Again, I want to put it out there. So I meet with lawyers in Switzerland. I meet with business people in Zugin. It’s like, yeah, OK, you know what?

1:03:07 We’ll create a foundation. We enter into commercial agreements. We’re going to raise some money. We’ll buy out your IP, and then it can run. Now, that’s perfect for me.

1:03:15 It’s like, OK, maybe I’ll make a bit of money. I’ll have a nice calling card. This happened, and I keep working on what I’m working out. And that’s mid-2016. 2016, yeah.

1:03:27 OK. Then the market starts heating up, and hyper-antistos starts really, really rising. People are really, very, very excited about it. And one thing that’s important, unlike a lot of projects at the time who were just like, they would just write a white paper and say, this is what we plan to do. We’re gonna raise a bunch of money to do it.

1:03:47 The fundraiser for tistos was not about building the product, because the product was there. We had testnets running, I think, back in February of 2017. So we had a working product, we had a sync there, But it was proof of stake. And in proof of stake, you cannot bootstrap your network in the same way you can with proof of work. So in proof of work, you can just launch with nothing, and then the coins are just going to be created by the miners and go to the miners.

1:04:13 But you can’t do that with proof of stake. You need to have a decentralized base of ownership from day one. So how do you do that? And you could do an airdrop. You could say like, well, everyone who owns Bitcoin now owns this thing.

1:04:26 Problem is that people don’t necessarily care. You just send them this, are they going to claim it? Are they not going to claim it? And it’s also like, why? You have a surplus, so you might as well do something with it.

1:04:40 And so this idea was like, look, it all contributes to this Swiss foundation who is going to do nice things like it can hold a trademark, it can do software development, it can do research, all type of activities. And then when the chain launches, the first block will have basically a reward for everyone who contributed to this project. Right. That’s a model. And that’s why you moved forward then with that ICO.

1:05:05 It wasn’t like you said, like a lot of companies that were doing it to raise money to launch the tech. You had the tech and you thought proof of stake is based on more people having a stake. So it ticked a bunch of boxes for you. Well, the raising money is a side effect, is basically a side effect of launching with a proof of stake block, which is nice. I’m not trying I’m not trying to say like oh, you know like the money doesn’t matter at all. Of course It’s fantastic if you have like a you know There’s a windfall out of this and you can pay for development and you can pay for all those things But it’s it comes second in the story And I’m wondering when you realized that you were gonna do the ICO and it was gonna potentially be that big You know, what were those moments like for you? I guess we’re creeping into 17 now Yeah, and then 18 when you did yours, I guess the ICO markets heating up in general Yeah, in a crazy way and the numbers that we think this foundation is gonna raise go from like maybe 5 million 10 20 and then you know comes July and they raised 232 July 18 Right, you know July July 1st of July. Well, you’re like 2017 2017. Okay. Yeah and July 1st of July 13th I was for you you guys raised and so the foundation right this thing is like I was not part of this foundation at all I had a commercial relationship with them, but and it might seem like a detail now, but it’s gonna come very important in 2018

1:06:26 Yes, so they went and did that raise and again, like you said, it started off small and pretty soon Yeah, it became apparent how big it was gonna be because everything was warming up and heating up the ICO market people were looking and When you can raise you raise. Yeah, and so the Interesting thing the governance system for this foundation was perfectly appropriate for five million dollars It was absolutely not appropriate for 232 million dollars. Explain that.

1:06:55 Well, the tricky part with a nonprofit like this is nonprofits in Switzerland do not have shareholders. Right? And nonprofits in most of the places have shareholders, you know, they’re owned by people. Foundations in Switzerland are not owned by anyone. They have a council and they’re accountable to the foundation authority in Switzerland.

1:07:15 But that’s the only party that they’re accountable to. So it creates basically a governance problem because Foundation Authority in Switzerland is not going to go and intervene into every foundation and verify that they’re fulfilling the purpose on a daily basis. They pay attention to it, right? But they’re not going to be diligently everyday checking at the foundation of their job. And so the character and the motivations of the people who are on the board becomes extremely important to do the right thing. Now, if you have five million dollar and you have three people who reasonably want the product to be successful, maybe they make the right decision, it’s fine. If you have 232 million dollars, it gets to people’s head and then you can get very, very different results and you need different type of people. And this is what you experienced in 2018. Yeah, not enough, there were not enough procedures on the board for, around the governance of the board. The board only He had three people, and he didn’t have experienced enough members for the council.

1:08:26 So it was a real governance challenge. You’re the governance expert. No, I’m not a governance expert. Well, you built the blog. I know enough to know you need governance on a blockchain.

1:08:38 And I think the governance model on Tezos has worked beautifully since then. I think it’s really proved itself. It’s fairly simple, but it got a lot of things right. And I’m not an expert. I know enough to know that we should have the different board for a larger amount of money, but that’s something that really came clear in the last few weeks and months of leading up to July of 2017.

1:09:08 Right. All right, so the big raise happens. It’s probably a major media event. You obviously have a lot of stakeholders. You have a big chunk of money that beyond your wildest dreams, I mean, a couple years earlier couldn’t raise five million dollars for Wall Street, wouldn’t raise one okay this is so crazy this is you know this is you know this is something and the weird thing is that some people tried to portray this it’s like oh he couldn’t raise one and now he raised you know and now they’ve raised like 232 which shows that there’s something wrong with this you know with ICOs and no there was just something wrong with the people who didn’t want to give me one million dollars it was clearly a really good project, that’s what was wrong.

1:09:48 If I was my mind that, yeah, if you can’t raise 2 million, it’s a bad idea, but if you can raise 200 million, then it’s a scam. It’s like, what do you mean? There’s more people involved, there’s more capital. It’s obviously showing you these two different marketplaces, right? I mean, what it shows you is that a lot of people are just trend followers.

1:10:06 No one cared about Tezos until, basically, it became trendy to talk about governance in blockchain and proof of stake. a good layout to people, the arguments for proof of stake. I would talk to some VCs and they were like, oh, isn’t proof of stake impossible? They don’t want a thing through this hard technical problem for themselves, they just follow each other. And it’s still true today.

1:10:27 So people just follow each other and if you’re French and it’s like, oh, it’s a weird idea, a lot of VCs prides themselves on being interarians but it’s one of the most, it’s one of the least contrarian crowd I’ve seen. It’s incredible. Yeah, and it’s fascinating for me to watch because it’s massive on technology and transparency and financial innovation. But I mean, Arthur, it’s just as much on marketing and politics, I spent six months in politics. It’s crazy what politicians do to get people’s attention and get their vote.

1:10:57 It very rarely has anything to do with policy, the right decisions, you know, it’s a show. I mean, look what’s happening in London, right? It’s just, it’s a crazy, you know, I had a member of parliament on my show many years ago And he said, Brian, politics is show business for ugly people. That’s what he said. And I had to laugh out loud.

1:11:15 And he was in parliament, right? And it was an interesting comment. I mean, there’s these weird factors going on when you’re trying to get the attention of a public and giving them to do things. So you’re feeling that now in the blockchain where all of a sudden governance is trendy. You’re getting eyeballs.

1:11:28 You do this big raise. But here’s the thing that’s weird. I understand why in politics you need to do a whole lot of things because there’s nothing in it for the voter. You know, if the voter gets it wrong, it’s not, or right, it’s not going to make a difference because a single vote is not really going to make a difference. So your incentive as a voter to get it right are very small.

1:11:47 Yeah, I spent seven months campaigning to be mayor. The last two days is when anybody cared about it. Then they voted and they already forgot who they voted about. Even though I could see, this is your future, this is knife crime on the streets, your transportation, airport housing, businesses suspended in London, this affects you. But most people woke up 48 hours before the election if they voted at all, then they went back to their daily lives.

1:12:09 So like you said, how do you convince them it’s worth it? But like, what’s, it’s crazy that VCs would do that. They’re actually paid to pay attention to this stuff. And they’re just copying what other VCs do. It’s extremely, I started out, I would say like, 10 years ago, being like a fan of VCs in general and a fan boy.

1:12:29 And I have been extremely disillusioned by the space, which, you know, it doesn’t mean everyone is like this, but I would say a vast majority of VCs are, they’re afraid of departing from consensus, extremely afraid. Yeah, well it’s kind of somehow based in that Web 2.0 mentality, and VC has been around for 100 years, it’s a very old school model, and then this is the new school model Web 3, and look into the stany, or someone like you, who’s actually raised from stakeholders, token holders, he’ll never look back. Yeah, no, I don’t.

1:12:59 He doesn’t want anything to do with VC, he’s so lucky they never replied to his emails back in 2018 when he did an ETH, whatever it was called. I mean, imagine if they were working for R3 now. Right, yeah, if they were, right? It wouldn’t even, it wouldn’t be what it is today, right? I mean, it wouldn’t be.

1:13:11 And so you see that in today’s blockchain still, and then you experience this. So let’s get through 17. But even blockchain VCs are extremely conformist, it’s incredible. Right, right, that’s a great observation. Let’s get through 17, 18.

1:13:26 What are some of these other points? You do the big raise, you realize your structure isn’t accountable to anybody except somebody in Switzerland who knows nothing about blockchain. And you’re like, okay, we have this person here who’s not making the right decisions. How do we fix this? And this becomes a major public media struggle.

1:13:44 Yeah, so he’s not making any decision at the time. And we’re talking about simple stuff. So my company was working with a French firm and their contract was up and needed to be renewed. And we basically, and you know, a contractual agreement with the foundation, they were supposed to take over that contract. And I’m like, okay, okay, what you need to do, this is a contract, this is a person, you got to talk to them and take over the contract, that’s what we agreed upon.

1:14:14 And you know, no reply, nothing happens, nothing happens, nothing happens. And at the same time, the guy and friends I was contracting with, so I was contracting with this company and they had this guy who I basically barely heard from for years and all of a sudden, you know, and before, before, you know, the, the raise, I talked to this guy and said, you need to hire more people, you know, there’s money coming, you need to hire more people, hire more people, hire more people, he’s like, oh yeah, maybe, maybe, maybe. And then the raise happened and he’s like, oh, I didn’t realize there would be money in this.

1:14:44 And so these guys start saying like, well, you know what’s, if I’m going to continue the work, I need one million, no, I need five, no, I need a hundred. So and I, I first like, okay, I’ll, I’ll fly to meet you, no, I’m going on vacation, this is August. So the situation is blowing up in France, and the kind of foundation is just doing nothing. It’s not even making a bad decision. He’s just like, no decision, nothing.

1:15:08 And we just need them to do the bare minimum. You know, it’s like, you need to, like, take over the contractors from the team, and you need to launch the agencies block through the chain. This is, like, the very, very minimal contractual requirements you have, but you’re not doing them. And this is going to cause problems. And this guy keeps doing nothing, nothing, nothing, nothing.

1:15:26 Until at some point it becomes clear that he’s actually just trying to put himself money on the board. I meet with the lawyers on the board, I explain what’s up. And basically he decides to go on the offensive and there was this group of people from murders who had been spinning around because they’re very lazy and so they saw that this was big numbers and they’re like, okay, this is a scammer. Perfect story. And they had been talking to this guy from R3, the guy who was plagiarizing my email I’m like, no, he tried to raise money back in the days and he couldn’t and like, ah, we have this big story of crap products and I couldn’t raise money and that’s what happened.

1:16:03 So they’re spinning around and they have basically no story. The only stories they have is like when I was working at the bank at one point, I wrote a businessman and I showed it to a VC. Like that’s their story. That is literally the content of their story. But they’ve been spinning around and so the guy from the foundation, he goes to them and say, oh, big scandal.

1:16:25 The braidsmen are trying to control the foundation. And when we were basically trying to get it to do its minimal contractual requirements, so they created this huge scandal in the press. Lawyers smell blood. So we get plenty of lawyers that started going after us. It was a horrible time, because at that time, we’re being sued for stuff that the foundation is doing.

1:16:52 They have all the money. They refuse to pay the lawyers. So I’m starting to pay all the lawyer bills and all the developers. And I have basically like Bitcoin was on a big tear, so I had like some money, but I basically have like four or five months before I go bankrupt. And I was like, well, you know, might as well go down with the ship.

1:17:11 So I’m just gonna pay the lawyers, I’m gonna pay the developers, just keep going. While in the foundation, they just basically like feed everything to the press. We had the nindenification agreement. We’re like, look, you’re raising all this money. If we’re being sued for the money that you raised, you have to pay our legal fees.

1:17:27 We send a letter to the lawyers at the foundation saying, look, you need to nindify us. This is an agreement. They don’t reply to us, but the next day, there’s an article in Reuters saying like, oh, they’re asking for a bailout. It was insane, but the thing that was insane is like, look, this guy was a crazy psychopath. And I know that people throw the word psychopath around like, oh, my ex is such a psychopath.

1:17:48 But this is in the most clinical sense of the term, a psychopath. I haven’t made any others, but this one is. And hundreds of millions of dollars make it worse. Yeah, no, because the Bitcoin market is on the tear, so now they have about a billion at this point. Right, and this is Johan basically suing you and Kathleen.

1:18:07 No, he’s not suing us. No, he’s giving you a bad name in the press. He’s basically giving you a bad name in the press. And not responding to your request, to just try to keep this going. We’re footing the bills for the foundation.

1:18:18 We’re footing the bills for the foundation, I’m personally footing the bills for the foundation at this point. Meanwhile, the big raise is just sitting over here. Well, because what he’s hoping is he’s hoping I’m going to go bankrupt. And then basically once I’m bankrupt, I’m out of the picture and he can just stick with the foundation, like do a settlement with the lawsuits and just stay in power. That’s what he’s hoping.

1:18:34 And all this is playing out via Reuters, which is basically a mainstream media source that’s selling this story. That’s the thing that’s crazy because the crazy narcissistic psychopath who wants to to stay on top of a billion dollar in a foundation doing this crazy stuff, I understand. The fact that a major press organization was complicit in that and published a single source story, completely one-sided story, and you know, it was like six articles’ relentlessly on this, that is insane.

1:19:02 That is a part that, and I got radicalized against the press after this. Well look, you just spent, you know, you’re talking to a guy who spent six months running to be the next mayor of London, and you saw the articles on the wall back there, So the Evening Standard, the Times of London, you should have heard what they were talking about me. I was the American former banker, former heroin addict, which is true, I made a whole movie about it, right? They would dig up anything they could find in the past, max at 20x because it’s a cool sounding headline and I had to go through that whole thing and my family had to read all the nonsense.

1:19:36 It’s actually, it was easier for me than them and so I actually just experienced what you experienced in mainstream media. They need an article that sizzles and yours did, right? 232 million, former guy who couldn’t do a business plan, blah, blah, blah, blah, ding. That’s gold from mainstream media because it’s quick bait and they’ll go with it. But the other thing is like, when you look at the press, the press was saying like, oh, they’re being sued by angry investors.

1:19:59 Are we? So it was a class action lawsuit. So in a class action lawsuit, you need a lead plaintiff. The first lead plaintiff, the guy, was a guy who was on a web forum. He was a lawyer on a web forum.

1:20:11 Arguing, you know, like talking about having read the terms and conditions and and not giving a shit, even though he said on the roads that he hadn’t read them. Calling me a kike and my wife a kike. Jesus. Like trying to buy more tehs while suing at the same time for having to, like, so they had to kick this guy out after we found him out and they replaced him the next best, you know, like the best plaintiffs, the best foot forward that the plaintiff lawyers could come with.

1:20:40 Is a firm in Australia led by a guy who leads a cult who is now in jail for raping a 12-year-old girl. This is the best plaintiffs they could find, you know, just a learner. And so, you know, this, you have a cult leader who’s a child rapist in Australia suing a Swiss foundation. And of course it’s happening in the U.S. and I’m involved, you know, because of course it’s the U.S. matter.

1:21:08 That was that was that was freaking insane. But the fact that the press would say like, oh, yes angry investors are suing them No, no, it’s no it’s sorry, but it’s just ambulance chaser with a child rapist You know helping them trying to get a payday That’s a very very different take and you wouldn’t and you didn’t see that in the press All right class action lawyers trying to make money you that that was considered a security So they got on board and they went in well does it try to argue that right? Try to argue that right just pause in the story How do you and Kathleen maintain your sanity at this point because your recesses are being drained you’re being defamed Yeah, there’s I mean everything you see is probably driving you crazy on top of that This is your baby your vision Yeah You think tesla’s is actually gonna change the world and you might miss the chance Because of this one situation that no one has right and it might bankrupt you like how do you guys make it through that?

1:22:02 I think you relativize everything. You know, at some point it was like, you know, like what I’m living through is extremely, like it’s very uncommon, it just doesn’t happen. Right, you know, it’s like this billion in the foundation and all of that, you know, it’s a gigantic fluke, right. But you know what does happen to people very often? Cancer.

1:22:25 And you know what, if I had cancer, this would be, this somehow, you know, which is very much more common, this would be worse than all of this. They’re like, you know what? I don’t have cancer. That’s pretty good. I mean, good health.

1:22:37 So I relativize everything, and I say, look, even worst-case scenario, the facts that have lived through all of this, even if I go bankrupt, even if all this goes to shit, it’s like, I have a lot of experience, and I think people will be able to see that. And the next thing I’ll do, surely people will think I’m infamous, but I think some people will see the guts and the grits that went into it. So it’s like, they say that experience is what you get when you didn’t get what you wanted.

1:23:04 So, at least I’ll have experience out of it. And so I might as well try to take some distance from it and just try to play it this I can. Yeah, that’s a great mindset to have at the time. And again, I’ve been through a few bouts with infamy here with us, broadcasting through freedom of speech, going head to head against YouTube, running for mayor of London. And at the time, it feels like, thanks to the mainstream media, Everyone’s against you, and the narrative is all slanderous.

1:23:34 And you think if you walked outside, someone would say, oh yeah, you’re the, but what happens is, is that dissipates over time. I don’t know if you’ve found this. I’ve found real support in the streets of people saying, I know what happened. I saw the way you handled this, and I will be a fan for life. I feel like the real people become lifelong fans, and I had celebrities all around the world contacting me and saying, I support you, I support you.

1:23:58 So that, for me, was the ray of light, the silver lining in the cloud. But it only exposes over time. No, I definitely, I got a few death threats, but mostly I got a lot of very, very strong support messages. I got death threats, my wife got the death threat, then we called the police. So, all right, so you’re keeping, trying to stay focused, maintaining.

1:24:18 How does this play out? Because I’m actually surprised it played out the way it did, because this looks like a circumstance that could never get resolved with this structure. The thing that people didn’t really understand about Keyverse is that they always were wondering like what’s in it for him. Right. This is the guy that was on the- Why would he launch the network?

1:24:37 Why wouldn’t he pay the development team? It would just be so much easier for it. If you wanted to run a grift, why not just like pay himself, just stick in, pay himself or just throw enough above bone that these problems don’t happen. And the problem is not so much that this guy was dishonest. the problem, it was insane.

1:24:58 But this was also the solution. Because someone who was playing this dishonestly would never have done the crazy thing of going to the press and doing all of that. It’s not the smart move, it’s the crazy move. It’s the crazy move. But the fact that he was crazy meant that it was also possible to maneuver him.

1:25:14 So one of the board members left, and they had to replace him with a board member. And I remember telling to my wife, he is crazy enough to pick someone honest. All he had to do was, you know, like, he could have just put a stooge. He didn’t, he didn’t take someone who was going to be like very opinionated or fighting against him either, but the person came in, brought in some lawyers, and at some point the lawyers realized, okay, we have a problem with this guy.

1:25:42 The funny thing is that we went to the financial authority, and the first reaction of the financial authority says, we’re going to intervene, we’re going to do something, you know, to this because this is a problem. But then he hired some lawyers to go and lobby them and then they were like, no, no, no We now have full confidence in caregivers to handle this matter So you’d see a little bit about financial authorities, right and govern it how that’s also, you know, yeah manageable I mean, you know, this thing is like to be honest like I love I like talking about this because it’s just really interesting story It’s also probably one of the rare times you can tell your story. Oh, no, I mean I I’ve told it.

1:26:18 I think there’s just so much that happened. I worry sometimes, if I’m candid, that I don’t want to be defined by this user. There’s been so many things that have been happening in the ecosystem sense, and I know it’s easy for me to just like comfortably lean into the storytelling mode because it’s just so far. I mean, it wasn’t fun at the time, definitely, but reminiscing about it, I would say is now. Now that the pain is mostly gone, it’s just like thinking about the absurdity of it all.

1:26:44 Yeah, well, I think the last few years have shown you have something new to talk about. Yeah. Which is good. But how do we wrap this up so you finally were able to remove him from that foundation? No, I didn’t remove him.

1:26:55 Basically, another foundation sprung up into the lens. So a bunch of people said, like, you know what? We’re going to create a foundation and we’re going to launch a network ourselves. And that’s a beauty because it’s open source code. Anyone can launch a network.

1:27:08 And if they launch the network, then the other foundation is in really, really bad states because they cannot fulfill their purpose. And if a foundation cannot fulfill its purpose in Switzerland, it can be dissolved, and the money goes to a foundation that can. So we have some leverage here with this other foundation. And basically the other foundation managed to leverage him into leaving the board. And that happened in 18?

1:27:31 Finally? That happened in February. I forgot the day, but Freedom Day is somewhere around February 2018. But then, you know, the aftermath of the mess that he created took until late 2020 to clean up. Okay.

1:27:46 All right. And while we’re on this topic, should we talk about this fact that they were trying to classify the token as a security? Do you have thoughts on this? This is the big buzz question. I usually don’t talk about like the regulatory matter or the legal matter.

1:27:59 I mean, you know, that was, you know, like that was the argument that they were trying to pull force in the lawsuits, but all the lawsuits were settled at the end of 2020. Okay. All right. So no comment on that. No.

1:28:12 It’s probably smart. And again, I… Interesting topic, but no. Yeah. I actually…

1:28:17 Gary Gensler, the head of the SSE, and we won’t comment on this, taught a course at MIT Sloan School of Management in 18. He mentioned it regularly. It’s 24 hours long. I went through the whole thing, and he’s surprisingly intelligent, very knowledgeable about crypto. Not the kind of guy you would expect to say stablecoins or the poker chips of the wild west.

1:28:36 But Gary’s also politically adept, he could run for president one day, he obviously spent time on the Hillary campaign. And I feel like his role as part politician, part blunt instrument, he’s also fairly underfunded as the SEC. And so I don’t know why he’s doing what he’s doing, but the problem I had is that I got to really like Gary when I took that course on, it’s on YouTube by the way, anybody can take it. And I learned a lot and he’s really he’s quite intelligent and understands his blockchains And by the way at the time I think he had left the CFTC So he wasn’t in an institution He’s worth over a hundred million dollars. We’ve got Coleman Sachs and so suppose, you know, clearly he’s a smart guy Yeah He’s made a lot of money on Wall Street smart guy and he was quite objective at the time because he didn’t belong to An organization and it was interesting to watch it now because again, he’s a very objective guy I just hope he does the right thing. Let’s just say that I think that’s That’s why he hopes he does the right thing. I think everyone else does the right thing. Yeah, that’s a very universal statement I appreciate your lack of comment anything we need to say to wrap up What happened with Johan and that that whole saga or even you know the ICO or even the press stuff?

1:29:42 Is there anything more that needs to be said? Oh Your wife didn’t leave you no, no, we stuck together. Okay No, the press thing I think was the most, because again, I can understand the craziness, but see, it’s almost like a rabbit dog or something like that, it’s just like, if you blame the dog, you don’t get it. But the press, and we’re specifically, and our Steve Steklow, and the fact that I don’t know if they were just like complicit or just gobbled everything that a guy was saying, But it was just, it was just so, you know, it got so personal, like they were, they were basically hammering us in the press and just for no good, no good reason.

1:30:27 It was, it was intensely personal, intensely aggressive, extremely, extremely not professional. There’s ethical guidelines, you know, like Reuters has rules and, you know, they, Reuters had investments in Assyrian projects, they never disclosed that. They never disclosed any of the conflicts, they never went after these other things. It was completely single sourced, it’s, it’s insane. And I think that people just assume that because it’s crypto, it’s a scam, and because it’s a scam, then anything goes.

1:30:55 Anything is justified. Yeah. And it was a message that got traction. It got clickbait. It was timely, because at the time, it was in the mania.

1:31:05 The problem is that they pick on one project, which was actually real, which had actually like a working code base, a real community, real principles, they could have gone after all of it. But they were lazy. is like we really pushed very, very strongly in disclosures, we pushed on being transparent about what was happening, and we paid a transparency tax, like we paid a massive transparency tax. If we had been like a lot more secretive about this, or if we had been scoundrels about it, we would have gotten into a lot less trouble.

1:31:35 Right, so you got a big education in mainstream media, and if I hadn’t of just got one, I wouldn’t know what you were talking about, but I got it. You’re lucky you weren’t based in London because they’re even worse here with some of the tabloids and the history. Yeah, but you expect that from the tabloids. That’s a saying, it’s like you see this in the sun and you’re like, okay. But like you see it in Reuters, it’s like, okay, that must be real.

1:31:55 Yeah, I know, but the sun isn’t that far from the Times, which is owned by the same gentleman. And that’s not that far from the Evening Standard. So I know what you mean, they all start acting the same. And then how far is that from the New York Times or the Wall Street Journal? You know, again.

1:32:09 The New York Times got a lot, the New York Times got quite bad. I mean, you know, I say good quite bad, but that’s not true. I mean, you know, they defended they defended selling this Russia for the longest time So they have a pretty, you know, peaceful track record. Yeah, they have gotten bad It I mean you live in New York for a long time and New York Times used to be something that you could really trust And in the last five or ten years, they’re off on way off on some narratives. So Alright, you put that thing to bed Surprisingly, you had a bad media footprint, but you just kept pushing you kept developing and in the last 12 to 18 months I mean, you know Tuzos’s top 50 market cap you guys are you know Well, the top 60 market guy, we knew we were top 10 in 2020.

1:32:47 Oh, back then, right, after the raise. So, no, no, no, no, not in the raise, just as it is 2020. So, the story of 2021 is very weird, because in terms of market cap, you know, we went from like the top 10 in 2020 to top 50. How was 2020 for you, by the way? So again, you know, pandemic happens, lots of things.

1:33:05 What was it like? DeFi Summer is 2020. We saw a lot of advancement in DeFi protocols. What was 2020 like for Tezos, and then let’s get into it. It was the worst year.

1:33:13 Really? It’s funny because in terms of market cap, it was the best year. In terms of ranking, we went into the top 10. By ranking, you could have seen this was the big position comparatively to other protocols. But I would say in terms of the underlines, this was, I mean, worst years, not comparing to 2017 before launch or anything like that.

1:33:37 We basically had little traction. The people who had been building on the chains weren’t launching their projects or had moved on. We were losing a lot of talented folks. The protocol was stagnating. The wallets were stagnating.

1:33:53 A lot of things had come to a standstill. And so, 2020 was really good in terms of market cap, really bad in terms of everything else, I would say. It was a very tough, it was a very, very tough time. And this is, in 2020 is a board. So the board that had replaced the old board had the benefit of not being full of crazy dishonest people.

1:34:17 But it was a bunch of people who came into the situation, that was a weird situation, and for a lot of them, being on the board of the Salesforce Foundation was the best job they ever had in their lives. And they didn’t want it to go away. So they didn’t go to the press or anything like that, but what they did do is that they didn’t want to try to attract talent because they felt like, well, you know, I have this good thing going, if I try to hire talent then it’s harder for me to justify why I’m here.

1:34:42 And so we got stuck into the situation where a lot of things, you know, needed to happen and weren’t happening. Right. So you’re stagnating when the rest of the market is building and getting traction. Exactly. Exactly.

1:34:54 And, you know, we had an evolvable protocol but the protocol wasn’t evolving. Of course, you know, Covid threw a wrench in all this because now everyone, you know, is starting to work from home. I actually moved to Singapore at the beginning of the COVID crisis. Intentionally? Yeah.

1:35:09 So early March, look, I’m looking at the numbers in China and I see an exponential curve. I say this is growing, this could be like SARS, this could be nothing, or this could be the movie pandemic. I watched that in March too. Not the best movie to watch in March, by the way. No, no, no, no, no.

1:35:29 We went to the Paltrow’s on the kitchen floor dying. It’s not the best movie to watch in March 20th. I don’t know what it’s going to be. And you look at the initial estimates for the fertility rate at the time. It’s around 3%.

1:35:39 And that’s huge. We don’t even know who it affects or anything like that. I’m like, you know what? You know who has their shit together? Singapore.

1:35:46 First of all, it’s warm. So if it’s seasonal, if it’s like a cold, being in the equator is a good saying. Two, they’ve actually lived through SARS. And so they have the experience. If they are hygiene measure, they have, I would say, the civil culture of like being respectful of them. In Asian countries in general, they’re much better about… You’ve seen Japan people wearing masks when they’re sick in a subway. You would think it’s common courtesy, but you do this in New York, at least a few years ago when people think you’re not. So I was like, you know what? They have the shit togethers are going to do this. Well, I don’t know what it’s going to be. Now, I would say after like maybe six months in Singapore, I look at it and say like, okay, it seems to be, you know, calming down. It seems, you know, mostly that it’s mostly affecting the elderly. I’m probably not that, you know, I’m probably not that concerned it seems the vaccines are coming quite quickly. I should, you know, I’m going to move back to London. The thing that drives me crazy is that, you know, it’s like, I’ve seen people basically saying like, you know, garden should do nothing, garden should do nothing, government should do nothing, or like government should like clock down and so on and so forth.

1:36:58 And I mean, neither can I think that governments under reacted initially, there was a, you know, when there was a lot of uncertainty, I think they should have reacted much more quickly. There was also a lot of lying, you know, they lied about masks, they lied about a lot of things. And so it’s like, they started reacting way too late, and then they keep reacting even after, you know, we have, even after basically, a lot is known, they are vaccines, they are better treatments. So a lot of this has happened and they’re still, you know, they’re still at it as if it’s like March of 2000. Yeah, look in Europe, they’re still reacting.

1:37:30 I mean, you know, like I say, I say like mostly like right now, the UK has been fairly sane, but you look at France and it’s just like… Yeah, or Austria. Yeah, well France, that’s your home country. You’re like, wow. Yeah, no, it’s it’s weird.

1:37:42 It’s weird, you know, they’re saying like, oh, you know, you can’t come from the UK because of a micron. And I’m like, you just have the same thing in France. It’s the same statistic. I think it’s about fishing rights and all that stuff. Yeah, you’re right. Other things involved.

1:37:55 You know, the word kind of lost its mind around this. But anyways… For 2020 challenging, from a leadership perspective, what do you do? And obviously, you know, there’s a foundation and there’s layers of control. What do you do as a leader? How do you get through your life?

1:38:08 It was tough because, you know, when I was in London, I used to go to France, hang out with a lot of the engineers working on Tezos who are based in Paris. And now I’m in a different time zone. people are working remotely we have to adapt to this and at the same time we are you know coming into a deep period of stagnation so that was that was very very very tough as a turnaround and now if you look at the year 2021 so top 15 instead of top 10 but everything else fantastic so we went from having maybe a hundred thousand smart contract calls per month on the chain to having over 6 million now. People in 2020 were calling us a ghost chain thing like you know it’s like a ghost town you know they have built this blockchain but no one’s using it and then now we have very strong usage one-third of the volume of transaction in Ethereum on Tezos. Wow. Right so it’s we do get a lot of traction a lot of organic traction as well and a lot of this has come from NFT marketplaces so digital arts being minted on the Tezos chain. Some of it from DeFi as well.

1:39:12 I think we still haven’t cracked DeFi and Tezos. There’s some protocols, but we’re not seeing the levels of activity you see in other protocols. So that’s yet to come. But definitely NFT, we’ve had tons of attractions here. Is that what changed in 2021?

1:39:26 Did the NFT marketplace empower you, or did you also? It’s everything, it’s everything. We started having, the wallets started becoming mature. So we had working wallets, we had working libraries for interacting with smart contracts on websites. We had working toolings, better languages.

1:39:42 We had better training courses. So a lot of the things started coming together to actually produce some things. So we got a lot of adoption. Like we went very, very far in terms of adoption this year. Social volume is great.

1:40:00 Social sentiments is also very high. Less so on Reddit, but on Twitter, for example, in terms of the size of the community and engagement, it’s very, very high. So a lot of these adoption metrics and so on so forth have actually improved dramatically this year. We went from a protocol which was very cool, technologically innovative for its time, but stagnating. We’ve had tons of upgrades, improved dramatically as a performance of smart contracts.

1:40:29 We have a credible scaling roadmap, so it’s been a completely transformative year for the project. Wow, well congratulations on that. I think you’re also seeing some of that fan base that I talked about that, you know, made it through those tricky Reuters years and that now, you know, know that you’ve proven yourself and you’re not just, you know, the next layer one on the block. I think that has a lot of power that maybe it’s hard to even quantify for you. In addition to all the tech advances.

1:40:57 I mean, you know, it’s- But I’ve mentioned Tezos to my Academy members and they’re like, yep, we know them. And they kind of give us the nod, the Fight Club nod. Like they’ve been around, they put in the work And it’s, you know. We’ve been through many situations, we’ve been through many markets, we’ve been through a lot. So I think, especially if you care about longevity, there’s something to be said about like, how long have you been around?

1:41:18 Yeah, yeah. Because it’s a proxy to how resilient you can be. Talk to me about NFTs. What do you see that happened in the last 12 to 18 months? You know, did you see it coming?

1:41:33 How do you try to understand it even personally or explain it to others. And this is probably gonna be a huge chunk of your market share going forward in your volume. So I’m sure you’ve had many conversations with yourself. Your background isn’t necessarily in art or collectibles. Neither is mine.

1:41:52 So I’m always trying to get my head around a phenomenon that’s clearly working. As a last final aside, let me just say that when I gave my 17-year-old daughter an NFT, I was the coolest dad in town. I mean, to be honest, Arthur, I could have given her a Porsche, not that I ever would spoil my children, and I wouldn’t have got the same reaction. And so, even as a first order of principles, I’m saying, wow, there’s something here that didn’t happen when I got her.

1:42:15 I met a mask wallet and gave her some ETH. So there’s clearly an emotional component here that we don’t understand. What do you see? So first of all, I’ve been interested in collectibles before the blockchain. Okay, so you do know.

1:42:28 Yeah, yeah, yeah, I’ve been collecting stuff. Not very well, I’m not a great collector, but I’ve always been interested in collecting. I’ve collected some bank notes and I’ve collected some coins, but not a whole lot of things. Your wife too? No.

1:42:41 No, she’s not a collector, and that’s your thing? No, that’s my thing. And I think like, if people have been collectors, they tend to immediately get NFTs, and people who are not, they say like, oh, why would anyone want that, and so on and so forth. So, I think you either get it or you don’t, but if you have these habits, my dad was collecting stamps. Okay, so you do know, okay.

1:43:00 But I remember I had a classmate in a university in France who was trying to build a collectible card games. And he was saying, look, it’s a collectible card game similar to Magic the Gathering that you play online. But here’s what interesting. Those cards, people collect them. So you could actually sell those digital items.

1:43:18 They could actually have quite a bit of value. And I was like, yes, this is brilliant. We need to do this. Didn’t do it at the time. And so back in 2018, after the network launch, Now I started a company called Coase, and one of the first products that they started working on was the collectible card games with NFT.

1:43:34 So NFT game in 2018 could not raise money. Like we raised a bit of money early on, but like going beyond the seed was extremely, extremely hard. I think part of it was because we were going through the lawsuits, which of course, you know, like impeded that, but we were very early. There was a strategy session with many members of the thesis ecosystem in January of 2020. And the conclusion was that we should go forward with NFTs, push for NFTs, that they were going to be like a big use case for Tezos.

1:44:04 Which was still early for NFTs. Yeah, yeah. And gaming. Yeah, I know, absolutely. I mean, I think Yatsu was saying when they invested in XE in Jan 2020, it was still a hard sell, you know?

1:44:14 I mean, you know, we emailed the Tezos Foundation, they think like around this time, saying, look at what people are building, you know, this thing called OpenSea, we should either like invest in them or build the same thing. And this is, you know, way, way before they hit it big. And the tragedy of the past few years is that it’s a tragedy of being a few years ahead and not being able to execute. Right, being too early. I say sometimes that I’m going to write a business book and it will be short, but it will be called Pushing Rope.

1:44:41 Because a lot of what I was doing for years was trying to push rope. I would talk to the foundation and say, you guys need to finance some wallets. The wallets are bad, we need better wallets, and so on and so forth. And I would say, okay, we’ll think of wallets. and then just went into a puff of smoke.

1:44:57 So these things just wouldn’t happen. And it was extremely frustrating. So, you know, like again, trying to push us ready for NFTs, early 2020, and nothing happened for the whole of 2020 around NFTs. That was very, that was very frustrating. And you’re pushing that rope and then later it gets pulled.

1:45:12 You’re pushing that pull, yeah, you’re pushing that rope and it just like, it just bends so it doesn’t work. But you made a conscious process to invest in the NFTs as a platform, Jan 2020, or you spoke and you said, look, we’re gonna try to make a push towards this. No, yeah, I kept pushing it because I thought it was going to be quite big. We got into a deal with OpenSea to integrate Tizos back in November of 2020, which they never did because a lot of people in this industry treat everything as a one-time game, and they don’t think that they already mean anything.

1:45:48 And I think it’s a mistake, But we’ll see. It’s a small world, isn’t it? Yeah, you know, it’s like prisoner’s dilemma. Do you betray or do you cooperate? And it depends if you think it’s a one-off or if it’s a repeated game.

1:46:06 And I think there are a lot more repeated game in this industry that people assume. Yeah. But so we push a lot of things like integration in wallets, support, standards, software for minting. And then there were a few hit projects that happened in the space. And I didn’t push these products, but when they flourish, they flourish in an environment where a lot of things were ready for it.

1:46:29 So one of these was Hekkenunk. Hekkenunk is a product created by a guy called Rafael Lima in Brazil, and it became its marketplace for artists. One of the things that drew a lot of artists is that they didn’t want to meet on the CRM because it was expensive. They had to spend hundreds of dollars. So if you’re gonna sell a piece for thousands of dollars, it makes sense, but you can’t experiment very freely.

1:46:51 You can’t just like, okay, I’ll just do a fun piece and it’s gonna be like a few bucks. You can’t do that when the fee is $100. And also there was concern in a lot of the artistic community for the energy consumption of Ethereum. They’re like, you know what’s energy consumption that can mean a lot of carbon emissions, we don’t wanna be a part of that. So being a platform which was proof of stake and had very low fees was very attractive.

1:47:13 And so a lot of artists flocked to this platform and also the platform was had this very minimalist ethos. And one of the thing that was quite different from Tizzos compared to other platforms, is a lot of those platforms have tried to appeal to traders. And so a lot of these NFT projects have been marketed as, look how much money you’re gonna make by buying this NFT and selling it. You know, if you look, for example, at, you know, top shots, it’s like not, oh, collect this beautiful moment from the NBA, it’s like, oh, look, you know, look at these crazy prices and what people are saying it for.

1:47:42 And we never really, I would say, push this as a message or as a brand. And when I say we, it’s a vague we, because it’s a whole ecosystem, but I would say there’s still a certain ethos in our ecosystem, and it’s never really been our ethos, and I think that appealed to a lot of creative types. The governance of the platform, the fact that the platform is open, I think that they’ve built a lot. So this plus, I would say, a unique space, and unique, minimalistic style that Raphael created, you know, it’s kind of like, it’s preferential attachment.

1:48:13 A lot of cool artists came in, and then brought more cool artists, and it became a place to be. And that led to a lot of flourishment of the NFT ecosystem on a Tizos chain. Yeah, I think you can’t overstate that subtlety. I had a guest here called Simon Sinek. He has a book called Start With Why. And if people understand your why is when they usually follow you. And even though you said it’s nuanced and subtle, when your ethos as a community creates something maybe for the artist, for the longevity, for the art itself, for the ownership, and doesn’t, like you said, push maybe the quick buck, and you can make this argument about exchanges and all sorts of other things, then you get a very different type of customer.

1:48:54 And if you’re playing a long game, the right decision is probably the longer one. And that’s a saying that I find weird. So if you look at the PFPs, the personal profile pictures. So we’ve seen the punks, and the apes, and the degenerate apes, and the board apes, a lot of people will point at this project and point at like look how much it’s sold for, look at the volume and so on and so forth and so people say oh my god this is the greatest of the future and other people look at it and say no the future is not people paying a million dollar for a monkey feature. And I don’t know if 10 years from now people are gonna pay a million dollar per monkey feature. I don’t think that’s likely. I don’t want to rule it out, but I think that’s unlikely.

1:49:41 What I do know is that there’s going to be digital art on a blockchain 10 years from now. Because people have always collected art. And because a lot of new art now is purely digital, and the only meaningful way to have numbered edition of digital art today is on a blockchain. And so my conviction that there’s going to be digital NFTs of art on a blockchain 10 years from now is extremely high. So I’d rather bet on that and try to get these very high-volume numbers.

1:50:12 What I find odd is that you’re talking to exchanges, you’re talking to integrators who are building NFT marketplaces and so on and so forth. And the way the basic decision is, it’s extremely high up. It’s like, oh, but look at how much volume there is in the monkeys. I’m like, OK, sure. You’re going to get more commissions.

1:50:29 If you take a commission of that volume, that’s immediate revenue. But like, how are your customers going to react if they trade this thing? You know, you sell them these things and then they kind of like, go, wait, what brand image does this create? And it’s just like this very, very short term thinking as opposed to trying to think where the space is going to be in five, 10 years, just people following each other. Yeah, are you talking about Coinbase?

1:50:54 No, I’m just talking in general, it’s just very. Yeah, it’s interesting because you see some of these big centralized exchanges getting into NFTs. And again, I do appreciate everything Brian Armstrong has done. They’re going to launch their NFT marketplace soon. Obviously, Binance is pushing theirs.

1:51:08 But you can see they’re looking at this as a great way to make money, the way all great exchanges on Wall Street have made money through volume. And they love volatility. And ultimately, that’s what they want. They want volume, as opposed to customers with great asset appreciation, et cetera. And that’s in there subtly, isn’t it?

1:51:28 But that’s a weird thing. because there’s a lot of aggregation. If you look at traditional finance, you have a separation between a brokerage, for example, a financial advisor, a wealth manager, or an exchange. The exchange is going to make its volume. It’s going to make its money on the volume.

1:51:47 Brokerage may have, it’s probably going to try to get commissions, but it has a more long-term relationship with its customers. And a lot of that is basically aggregated in a crypto world. Yeah, it’s all one. Whereas you’re at traditional Wall Street, there’s sometimes different rules and laws and regulation even though sometimes they blend but at least you know in principle one is as a Different role and a slightly different conflict of interest to you Like yeah an asset manager versus broker versus whatever in the crypto world Like you said everything’s in the middle and most of the public isn’t educated on All the I guess I say games that can be played in any type of a transaction environment that Wall Street knows how to play and played for many years and now you have the public on there that doesn’t understand all the nuances, you know, of all the things that happen behind the scenes.

1:52:37 A lot of the industry acts as if it’s a one-off game and repetition doesn’t matter. And that’s basically assuming that none of this is going to be there in a couple years. If you think all of this is going to be there in a couple of years, you should pay a lot more attention to reputation and building relationships with people and you should be paying a lot more attention to where things are going to be going and have a strategic vision for the future.

1:53:08 But right now, I would say that that’s kind of absent from a lot of the industry. Not everywhere, right? Especially people who are building, people building layer ones and generalizing have this vision. But a lot of the people at the periphery really do not. I think they’re seduced by the cash flow, and they make poor short-term decisions.

1:53:27 I think they’re not actually myopic, because if you really talk to them, most of them would probably say, no, of course we’re gonna be here for the long term. But I feel like sometimes they get co-opted into bad decisions. Maybe because of investors, maybe because of the way Web 2.0 is set up. I don’t know, but it’s a good observation. What is the future of NFTs?

1:53:44 I agree with you, 10 years from now, we’re gonna find some way to appreciate digital art on the web, but I know it’s gonna have evolved, It already is evolving from a JPEG. You know, what do you see? I mean, even with the board apes, we see the membership, we see the future drops, we see access. I mean, honestly, it sounds like a board ape is worth it just to go to those parties. I mean, you know, and it sounds like a joke, but you’re in a room with people who have invested their money into this NFT.

1:54:12 I mean, it probably is an incredible space to be. Probably the best party you’ll go to, better than a birthday party, better than this. People pay a ton of money to have fancy golf memberships and enjoy playing the golf. Right, and those people maybe would never invest the way they do or think the way they do. No, absolutely.

1:54:29 If you go to a board eight party, you have a lot of commonality and probably a massively diverse crowd who would never show up at your golf club, right? Never come to your birthday party. No, no, no, of course, of course. So I would say that NFC itself is a technology, right? You can do many different things with it.

1:54:47 But specifically around collectibles, art is here to stay. Definitely digital art is going to be there. Social component is also access, like you mentioned, like clubs are going to stick around. I don’t know that the enterprise is going to be as high, but I think it’s going to be online communities are going to be there. Gaming is going to be very big.

1:55:10 So the ability to use items inside game, to own items in game, to maybe use them across different games is going to be valuable. And a lot of people don’t necessarily understand that. So the users say, why would someone pay for this? And they’re like, well, people are paying for it. Before NFTs and before blockchain, already in gaming, buying virtual items is a huge business.

1:55:34 Right. People were selling accounts on eBay to get access to certain games. So the question will be, well, why would game studios need to do NFTs? If they can already have these in-game items? This two reason is that one, it’s a better deal for the player because the player has a guarantee that this is something that they own, and it is not controlled by this fuel, so it cannot be taken away.

1:55:54 So that already gives it more value to the player. If it gives more value to the player, there’s less dead weight loss, so you can sell it for more. First thing, but the second thing as well, which is important, is that it connects to an entire ecosystem that the game studio does not want to run. The game studio does not want to be in the business of running a marketplace for all of this item. It does not want to be in the business of running lending mechanism against all of that.

1:56:20 It doesn’t want to be in this entire DeFi ecosystem that can pop up around it. So it’s a way basically for these items to live outside of the servers of the game and interact with this entire open environment. So yeah, I think gaming is going to be quite big. Yeah, those previous gaming companies and empires, They’re the worst of walled gardens, right? They’ve even started to ban certain, you know, other metaverse plays and NFTs and I mean, you know, they’re really keeping it because we were talking earlier, I mean, the gaming industry, it’s more massive than anyone imagines, right?

1:56:56 It’s bigger than Hollywood music combined. Yes, yes, it’s insanely big. And I think that we’re gonna see some skepticism from gamers around NFTs because there’s been a lot of predatory practices from gaming companies. And they might say, oh, they’re just finding a new way to nickel and dimas. They’re going to sell us something, and now we’re going to have to pay more money.

1:57:23 But I think they will fade away, because ultimately, if they want to charge you for something, they can. So by giving you an NFT, in some sense, they’re actually giving more power to the player. It’s like, you’re not worse off with an NFT than you would be with a few in-game items. So I think that’s, I think people will come to see that and it’s in fact a very good step that the industry is taking in this direction. Like right now, you buy items in a game, free to play games or you buy these items and you can’t, you can’t ever resell them or you can’t even borrow them from another player.

1:57:55 You can’t do any of that, it’s just like pay money. So if at least I can borrow it from my friend or if I can sell it back if I don’t need it, sell it back if I don’t need it. That’s so much better. It’s kind of the, I would say it’s like the music industry moving away from DRM platforms and saying, you know what, do whatever you want. We’re not gonna try to track your devices and prevent you from playing, it’s fine.

1:58:21 And it’s great and I think that’s wonderful that gaming series is starting to open in this direction. Yeah, and it’s where the volume is in the future. On that same note, Metaverse in future. I mean, right now, the options to play games on the blockchain. They’re not the best, they’re not exactly the, and probably part of it’s because of speed, which layer ones like your are gonna help address.

1:58:43 But what do you see as the future of the open metaverse from a gaming perspective? I’m not a gamer, but I understand that you need a game that’s super fun to play. And again, I forced myself to play Axi, I bought my three Axis, I had to pay the ETH, I paid the gas, they all fought the other Axis, one of them died, I thought I lost my money, but he came back. And I get it and it’s obviously people are making money and there’s DeFi options and there’s NFTs and it’s a great piece, but I hope that the metaverse of the future is gonna evolve more than that.

1:59:15 And I say that in a nice way and I’m having the Anamoka guys on and I appreciate what they do, but is there some more in the future that’s coming here? Yeah, I think there’s two ways to look at NFTs in games. And if you do something like F, you know, like actually I don’t find the game particularly fun and a lot of people play the game because they said, oh, I can sell my Etsy for more. And that’s not sustainable, right? You’re not gonna, I mean, you have some form of gambling, where basically you’re gonna have these gambling games, but it is a gambling game, right?

1:59:43 I would say it’s in a different category. If you want to build actual fun games, where the NFCs are actually bringing some experience, I think that’s a lot more interesting. And they are earning opportunities here as well, but instead of the earning opportunity saying, I farmed the game and I played a lot and now I can sell it, I think it’s gonna be more subtle than this. So take, for example, a trading card game. This is one of my favorite examples for this.

2:00:06 You play the trading card games, and you discover a new strategy. You discover that one card, when combined with another card, is actually very powerful. So you’ve invented something new in the game. So in doing so, you’ve contributed something to the game. You haven’t just made some clicks.

2:00:21 You have actually done creative work, which is generally useful for the game and just generally going to make it a better game. You can buy the card ahead of time. you can buy a bunch of cards, then you can play your strategy, and everyone says like, oh my god, they’ve actually done, this is a great strategy, I need to have this card, but now you bought up the supply of the card. So people being able to trade on knowledge of strategies that they’re creating for playing the game, that to me is a lot more interesting, a lot more sustainable, than saying like, oh, you know, like I played early, and then the game had some success.

2:00:53 Right, right. So almost the game within the game, or the strategy in that game, And now there’s financial implications and real-world money at stake that can fund people’s lives. And then there’s a whole DeFi ecosystem, too, which… Or even playing for an NT, for example. I think that it’s simple, but that, to me, is more interesting than just saying, oh, I played this game and I speculated on the game having some success and attracting more people.

2:01:23 And one is basically, give me find MLM, and the other one is an actual game which has component with valuable items. Yeah, I guess it needs to be fun at the end of the day. It’s gonna be a sustainable game, right? Yeah. Everything needs to be fun these days as well, right? Everything needs a component of gaming. Yeah, I mean, I mean, everything tries for sure. I don’t think it needs to, but I think the world’s been over-gamed. A little, yeah, you know, a little bit. I like, I like serious things sometimes. I guess we don’t all want to walk into every Starbucks and market and be forced to play a game all the time.

2:01:58 But I must say I’m seen from the gaming people the fact that the humans by definition interact with some type of game and it’s important to know that whenever you put a value prop in front of them because there is that component. I mean Axie Infinity also like completely struggled to raise money for a long time. Yeah. Yeah. And again like Yasu was one of the investors strictly told me that he’s like as recently as two years ago, it was very hard to get anyone to write a check for that company.

2:02:26 People did not want to touch gaming and NFCs at the same time, because the crypto people said, why do you bother with a game? Just do a token and sell it, you know? And then the gaming people said like, oh, why don’t you just do a game? Why do you have to have a crypto confidence? And now that we’ve seen XE Infinity, now everyone wants to do it, which is why I say, you know, this is our followers.

2:02:47 Like maybe there’s a few that funded it without really believing in it, but like, There are, and it was knowable, there was a pitch for it, it made sense to incorporate gaming in NFTs, it completely made sense. And where was the VC seeing that? It’s fascinating how it’s evolved. And now, even from my seat in eight months, I see this whole world is like the gaming coming in with the DeFi people, coming in with the layer one people, and it’s all all this weird mix and match and like in the NFT people and everyone brings like almost a different point of view and yet everyone is now transacting bringing volume. Yeah. It’s pretty exciting time. I want to finish on some thoughts on you just as a person but I feel like we haven’t talked much about your better half Kathleen who was a big part of this journey. Of course. So maybe talk to me a little bit about her how she’s been a part of this whole journey as you’ve gone through Tezos?

2:03:45 Well, Cassie is from New York, so we met when I lived there back in 2010. I started talking to her and then I never stopped. So at some point, we were like, well, I keep talking, so we might as well get married, which we did in 2013. So we’ve been together for a while now. We know each other fairly well.

2:04:06 And yes, she’s been a big part of this journey, obviously, as my co-founder. And she’s also starting companies as well. She’s like, you know, with the blockchain the whole time. She likes to describe herself as a yenta of the network, trying to make connections, you know, like matchmaking and making connections between people. It’s like, you’re interested in doing this, that person is interested in doing this, let’s connect them.

2:04:29 But yes, she’s done a few projects in this space as well. Okay, and she made it through you, through those challenging times. Yes, she did. It does, and is now here for what hope to be really good times. Yeah.

2:04:40 As far as this year. What about you going forward? What are the big things you’re trying to think about for the next five or 10 years? What do you have to do every day as a leader? Yeah.

2:04:55 What is that like? Because it’s decentralized. Yes, that’s why I don’t like to think of myself as a leader. But I try to do whatever I can. So mostly, not maybe five, 10 years, but my focus over the next couple of years It’s like, first, Tezos was the most advanced smartphone platform, technologically advanced blockchain, that there was when it launched.

2:05:19 And there’s been a lot of competition. You know, it’s like, we talked about like competition. When I entered the space, it was, the competition was not there. It was very amateurish. And then now you have, you know, you had Siswe Micali, so you have like people with actual training medals competing against you.

2:05:34 So it’s gotten a lot more competitive. And, you know, Tezos, I think, still really holds its own technologically. but I want to go back to the front or the back in terms of technology. And that happens with scaling. So this is for me a year that’s really, really focused on scaling the protocol.

2:05:48 Going from, I think we’re doing about like 200 transactions per second now, going from that to 10,000 and a million. And there was- Per second. Per second, yeah. Which doesn’t mean you actually have a million transactions per second, but it means you could if you wanted to. So that’s a difficult journey, but it’s also fascinating, it’s interesting, it’s a cool puzzle and solves a real problem.

2:06:09 So going back to the front of the pack in terms of technology, not just being good, but being best in class. So that’s a big focus. Continuing adoption, so I think that we have great traction in NFTs, especially in the NFT and in our marketplace. Really doubling down on that and becoming a clear category winner is I think important. But also, I would say bolstering what happens in DeFi and Tezos.

2:06:36 And it’s important for me because My background is in finance. I’ve actually invented a bunch of stuff in DeFi that people are starting to understand and are starting to deploy. Like a few months ago, for example, I invented a new type of constant formula curves. So Uniswap is a famous one, right? And then curve.io has another one.

2:07:00 So I invented a really cool one that a bunch of people have copied now. So I have a lot of ideas in DeFi, And I’m hoping that they’re going to find their way on Tezos. So because it’s a category that’s dear to me, I don’t want us to be just about NFTs and arts. I think it’s very important for blockchain. So I hope that we see a lot of growth in this area as well over the next year.

2:07:22 So that’s for the next year. I want to put basically, I think that we have a very, very solid governance business. We have a very solid technological business. I don’t think it’s completely recognized. It’s recognized by OGs.

2:07:38 So you talk to people who have founded blockchains, very technical people. You ask them about Tezos, and it’s heavily respected. But for a lot of the newer crowds, whoever thinks like, oh, yeah, Tezos, and they know nothing about it. Maybe they know that there was a lawsuit. And that’s basically what they know about it.

2:07:57 So changing that, I think, is quite important. Understanding that we have something that’s very very cool out there. This is where this becomes almost politics because in politics it’s the message. You’ve got one line and if you can’t get the voters attention they go back to their everyday lives. In a weird way it’s like Tezos. Do I have something I can lead to and grab onto? It’s either if it’s the lawsuit or something then you got to go back to the message because you can have the greatest technology. You have the greatest policies but you learn that from politics. If you can’t get your messaging right, simple and to grab yeah then you then you might lose no no of course of course and we had a few messages resonated over the past year you know like the facts that’s clean NFTs for example that’s if you’re concerned about NFTs and global warming it doesn’t have to be they are platforms which don’t consume energy and I think it’s been quite helpful in avoiding a bunch of people who would who are skeptical of NFTs otherwise and who got into it because they’re like okay you know what I don’t have to use proof of work so there’s been a lot of things that have resonated, but we need more. Over the next five, ten years, you know, I think that Tezos needs to basically flourish and we have a very very good kernel and we have a lot of grassroots and organic adoption, but it needs to flourish in different geographies. We’re very big in

2:09:21 Europe, for example. I think it needs to grow in other areas. It needs to grow in other verticals. And it also needs to find a place in an environment that has become more and more competitive. There’s another thing that I’m interested in.

2:09:34 Of course, I’m interested in helping get to that place. I’m also interested in doing things in AI. That’s still one of my, might be passion and something to watch. People do not understand yet how big of a deal GPT-3 is. So GPT-3 is neural networks that came out of OpenAI in the middle of 2020, and it’s been followed by other networks like CLIP.

2:10:03 There’s been a major step up in what AI can do over the past two years. And most people have not really realized that, including AI researchers, because AI researchers, they look at their benchmark and so on and so forth, and I think there just hasn’t been this realization. people have, some people certainly have, right? But by and large, people have not clicked as to how big and how important this is. And this is AI relating to the blockchain or AI relating to everything? AI related to everything. And so I’m interested in, I’m interested in AI, I’m interested in semiconductors as well. Because if AI gets this big, you know, The demand for semiconductors is already high. It’s just going to keep becoming bigger.

2:10:56 And when you talk about AI, there’s a seriousness that comes over you. You see danger and empowerment, more danger. Both. I do generally see a lot of danger with it, but I’m not going to stop it. There’s nothing that this person can do.

2:11:15 Maybe the real danger is not recognizing it as becoming a factor. And maybe that’s why you’re saying that now. Yeah, yeah, yeah, yeah. I mean, the AI risk is very, I think, is very real. Probably the biggest risk.

2:11:28 You know, we’re still at a time where a lot of people laugh about it, about AI risk. I think that will change. We’ve already seen the change. People say, oh, the real AI risk is surveillance, or the real AI risk is discrimination. And people will name a lot of things which sounds like more mainstream, reasonable, you know, questions to have about AI. But they don’t want to take seriously, you know, AI explosion type of scenario where you end up with like an extremely powerful tool, which all of a sudden can have disastrous consequences. You know, the global catastrophic risk associated with it. So Elon Musk takes it seriously, talks about it. I don’t know how seriously though, because, you know, he’s very focused on colonizing Mars. And if you really He really thinks there’s AI risk, and I think Mars is not going to help you, you know, it’s like the distance between two planets is not going to help.

2:12:22 So I don’t know how seriously he actually takes it, but it’s starting to grow a little bit awareness for it, but it’s still, you know, it’s still hardly socially acceptable as a concern, but I think it’s real. And what do these dangerous scenarios look like? We can’t control technology that ends up controlling us or hurting us as humans Yeah, essentially, you know think of it as you know When they when they first tested the the atomic bomb they weren’t exactly sure if we wouldn’t create a chain reaction That you know would blow the entire earth like maybe this nutrient reaction, you know It happens with every atom and you know everything I don’t know. Maybe everything turns into iron It seemed unlikely They’re mostly saying it wouldn’t happen, but they weren’t surely they weren’t certainly sure And so, yes, think of it as a giant chin reaction.

2:13:16 And that’s the danger of a reaction you can’t even predict. You can’t even control. It just goes so fast. And you also probably see certain verticals that are dangerous for certain reasons. So even if you don’t buy into the AI, become self-aware and just basically goes into a loop.

2:13:35 Self-improves very rapidly and destroys everything. Right, and grows exponentially to where that happens in days. Yeah, exactly, even if you don’t buy it all into that, I would say at the very least, one analogy that I like is, you know, we know AI is coming, and most people don’t, you know, most people like working on AI don’t deny that it’s coming. The question is, you know, is it in a year, is it in 10 years, 50 years? But if tomorrow you knew that, you know what, there’s an alien civilization that’s coming to us, and they’re going to be here in 50 years.

2:14:06 Would you just wait for 50 years and say like, oh, we’ll see when we get there? No, you’d prepare. And basically, there’s nothing that’s being done, almost nothing at least at the global scale to prepare for it. The budget research for AI safety risk compared to the budget of AI as a whole is almost nothing. So even if you don’t necessarily think that it’s like, and this is not a Pascal wager, it’s like, oh, it’s a tiny probability.

2:14:34 But even if you say, look, there’s like a 1%, 5% probability, which is not a tiny number. It’s worth doing something, it’s worth like taking it a bit more seriously and looking into it. And you don’t really see that happening all that much. Which is kind of typical human behavior, whereas we don’t realize something until it’s really obvious. There’s a movie that came out recently on Netflix called Don’t Look Up, where basically there’s the asteroid coming.

2:15:00 It’s like, oh well. Yeah, I watched that movie and it’s very funny because there’s a new media component, which is what I do. There’s a political component and I spent some time there. Then there’s a science component and you see these human reactions of first of all nobody wanting to even take it seriously and then all the crazy stuff. It’s hard and people you know when they think about it they don’t just think of like is it a serious problem or is it not a serious problem and think of like well you know if I take this seriously what will other people think of me?

2:15:28 You get into these weird things which is why you know someone like Elon Musk can do it because you know he has enough money that he doesn’t care about what people think of him so he can just go like yep. But the world is becoming a little bit more maybe too self-aware in that same point. Yeah. And even if you don’t think of problems like self-aware AI is a self-improving base, just even the military implication of this type of thing, put that into the hands of a military superpower.

2:15:56 And it’s just like in the past decades, we went very, very close to full-scale nuclear war. very close, just like one small human error could have caused it. And so, you know, add software in the loop. Yeah, and it’s almost an assured problem in a long enough timeline. Yeah.

2:16:20 There’s a great movie called Fog of War about Robert McNamara, who was the Secretary of Defense under Kennedy, who did the Cuban Missile Crisis. And honestly, obviously, they almost, you know, either fired nuclear missiles into Cuba or got nuclear missiles fired from Cuba into America. Like they were days away from that. And like 30 years after he had lunch with Castro or something or he met him somewhere and he said he said were you gonna fire those missiles knowing that you would kill 50, 30, 100 million people knowing it would cause all this knowing were you really gonna push the button and they said yeah we were gonna push the button. And he warned at the end of this movie this was the one of the biggest risks we face that no one thinks about or talks about enough is that we were this close away from such a catastrophic event with a few egos and emotions on the line that could do it.

2:17:12 Yeah. Now, fast forward to AI, where it’s probably the single biggest risk we face in the next 10 years, right? I mean, we’ve been through COVID, we’ve been through this, we’re seeing financial innovation, but that one has exponential consequences. The thing with COVID is like going into this, you know, I’m a very strong libertarian from my political leanings, but going into this, I said, yes, we’re much better off in a very arbitrary society. You can think of extreme events, like pandemics and so on and so forth, where it’s very hard to deal with them with only market forces and government intervention can help and so on and so forth.

2:17:49 After going through this, it’s like, nope, governments are not even capable of handling the one type of extreme risk that they’re supposed to ensure society against. can’t even do that, right? And in some sense, I would say we were almost lucky that we had a pandemic that was, you know, sufficiently lethal that people paid attention. But, you know, replay COVID with a 10% casualty rate, or with a 20% casualty rate, the reaction would be stepped up, certainly, but like, would we do much better? And it’s rolling a die, you know, it’s just a fluke that it wasn’t more deadly.

2:18:31 And I don’t see a whole lot of changes. I haven’t seen a reaction where somehow people think of the next pandemic or anything like that. The great thing we got out of it, I think, is RNA vaccines, which are fantastic. I mean, we have now a technology where if a virus, the thing that blows my mind is the virus happened in China. Two days after, they send the RNA of the virus over the internet, and they had a vaccine in two days.

2:19:01 Now, the problem is then you have like six months or more of red tape, and this was with accelerated procedures to even get to anywhere. But hopefully, in the future, if we can have something where we can have a very fast and decentralized reaction system where something happens in one place, and all of a sudden, it’s sequenced, and it’s available everywhere in the world. That’s a fantastic innovation. So that’s, I think, one of the best tools we’ll have in the arsenal against future pandemics.

2:19:31 But it was a shit show. The governments have done a terrible job. They tried locking down, which can work at the beginning. If you lock down at the very beginning of the pandemic, it’s like, maybe it’s confined to China. So everyone locks down.

2:19:46 It’s going to stay in China. It’s good that can work but like once it’s endemic everywhere in the world What’s once it’s just like spreading? It’s not going to be dude you any good to try to close your borders and to try to do that You know you try like Australia and then you just like you’re just delaying The infection is not really gonna it’s not really gonna help you So you’ve had all these like horrible decision and then now you have to say like, okay So what good is government for again?

2:20:09 You ensuring against the worst, you know the tell case scenario and they’ve done a terrible job at that Yeah, and you see all this as an engineer scientist mathematician but you know the government’s don’t see that and then on top of that there was you know a Media war on top of that and this was probably potentially a simple problem compared to what AI might spin up Yeah, and also the lack and slower moving slower moving, right? Probably maybe lower consequences at that maybe at the 1% rate But then also think about what the AI applications are for the information space like will we even be communicating with each other? effectively. You could argue we weren’t for the last 18 months either, but the AI could take it to another level, potentially, and make it more dangerous. I appreciate you saying that. I hope people take that, but I don’t know what they’re gonna do with it. Be aware. Fund it. It’s okay, I’m already in crypto, so you know, there’s some people already thinking, you know, it’s not intuitive in crypto, so you know, I might as well. Yeah, Elon’s good because he talks about this stuff. I don’t know why he’s fascinated with Mars. I I personally think there’s other problems to solve, but who knows, maybe it’ll bring other innovations.

2:21:17 I don’t get Mars either. I don’t see the point of human colonizing Mars. It doesn’t help with global catastrophic risk. It’s just like generally not, colonizing space, for example, like colonizing the Lagrange point around Earth, like building space stations, makes way more sense than colonizing Mars. And most people who’ve looked at the problem, clearly will say the same thing.

2:21:38 Now again, I’m not gonna take an intellectual bet, but this one, the fact that there’s very little point in human colonization of Mars, is one bet I will take against Elon Musk. I won’t bet against him being able to pull off self-driving cars, and I won’t bet against the Tesla stock, but I will bet against the worthiness of human colonization of Mars. Yeah, I’m with you on that, but it’s also a great message that people get and they lock onto, so you gotta give them the messaging component.

2:22:08 Yeah. But like you said, there’s a lot of other places that would be more habitable on Earth that you could colonize first. A dirty girl. Yeah, exactly. Or, you know, the middle of some desert.

2:22:17 Yeah, Australia. Terraform Australia. It’s true. Yeah, but like I said, don’t bet against Elon and at least I appreciate him having the conversation about AI. Yeah.

2:22:26 Final thoughts from you. I always ask someone a question at the end. I’m gonna finish with this, Arthur. If you could call up the 20 year old, Arthur, and give that young man a bit of advice. I guess you’re studying in Paris probably at this point.

2:22:37 No training advice, of course. No training advice, of course. Yeah, nothing like Back to the Future. But if you could, based on maybe your human growth, why don’t you tell the 20-year-old if you could call him up and say, this is important, or do this one thing, after everything you learned, what would you tell him? Take more risk when you’re young.

2:22:56 I saw that he immediately had to get a career, and he immediately had to earn money, and the rising to do was get a career, earn some money, save some money, and then be an entrepreneur. And I think I should have started that early on. I work better as an entrepreneur than I work as an employee. And so I think I should have just like jumped his gun like way earlier. So that’s what I would say is like look, if you spent the first five years of your 20s trying to be an entrepreneur and so on and so forth and then you wanna have a career, no one is going to hold it against you that you spent like a few years trying to do something on your own and it’s going to be a much harder decision once you’re like used to a knife style or like once you have like a certain money it’s very easy to get into a lull.

2:23:39 You basically have no, you know, you have no assets, no liabilities. You’re basically, I can say this is the perfect time to do this. It’s not necessarily, you know, it’s not necessarily when you’re best at it, I think, like in general, people have more experience, are better at like creating and running successful companies. It’s not like 20 year olds are better at running companies than 30 year old or 40 year old. You know, they have a bunch of energies They don’t have, I would say, the experience, but they generally have a lot less to lose and, you know, as an economy calculation, it makes a lot more sense to do it very early on in your career, because you’re gonna earn less anyway, so, you know, because your opportunity cost is much lower.

2:24:24 So that would be the advice. Take more risk, yeah. Same for me, actually. I was a little too risk averse, I think, in those younger years, from a business perspective, not from a personal perspective. On that same note, best advice you ever received?

2:24:36 Is there something that comes to mind? Yes. I don’t know, parent, professor? Yeah, something, what is that? So when I was at Goldman Sachs, at one point, I wanted to more like, strike a little more on my own.

2:24:49 And so, which means basically like working for a prop shop. So, for people- It’s a proprietary trading shop, one with capital, a little more of the way. It’s almost like being an entrepreneur. It’s like, if you want to be an entrepreneur as a trader, a second of an incubator for trader entrepreneurs. It’s a model that exists in finance.

2:25:08 Right, less rules, more upside. Yeah, yeah, yeah, it makes sense because if you try to really be on your own, you’re gonna have to do your own compliance filing and risk management and exchange access and so on so forth. That’s not where you wanna be. So Prop Shop is a great position if you wanna run a portfolio. So I was looking at different Prop Shops and thinking through different options.

2:25:30 And I talked to one of those and he was like, And you know, he basically, I don’t know how it’s phrased, but he says like, hey, don’t sell yourself short. Like bettering yourself. So that was good advice. So go for it, is what he was saying, or be sure of yourself that you could. No, no, no, go for it.

2:25:49 Go for it. Go for it, you know, it’s like. Even though he worked at Goldman and he’d. No, he didn’t work at Goldman. He was a guy in a prop shop.

2:25:57 He was a guy in a prop shop. And he said, go for it. Yeah. Right. And you took the advice?

2:26:02 He was a bit of a shitty character. character in some respects. But it was good advice. But it was good advice, yeah. And while we’re on the fact, what was Goldman Sachs like? And everyone always hears it’s XYZ. I actually had a lot of people on the show recently from Goldman.

2:26:15 Yeah. I didn’t work at Goldman, I knew a lot of people. They were my clients when I was here in London. So I don’t know for sure because I only worked, you know, in one group at Goldman Sachs and it’s hard for me to know what was, you know, what was the culture of this group as opposed to, you know, the culture of like say the equities division or securities division or Goldman Sachs as as a bank as a whole. It could be quite different, right?

2:26:36 The people doing, I don’t know, the people doing investment banking deals in Hong Kong may have a very different culture than the people doing high frequency trading in New York. And likewise, I work in one group at Morgan Stanley and very different culture. That’s one of the things I learned. Being into school and hearing about company culture, I saw this was all bullshit, right? And I know it’s true, it’s a real thing.

2:26:54 And even between two large banks, very, very different from Morgan Stanley and Goldman Sachs. I really liked it because everyone was very good. So everyone I talked to was very, very good at what they were doing. They had very high standards for recruiting and being able to work around very, very competent people, very smart people, extremely pleasant. So I really enjoyed that.

2:27:18 I saw that it had a very flat structure, which I thought was very interesting. So of course you have the vice presidents and the messaging directors and the partners, But basically, in a partner, it’s very flat. You still have your reports, but people are doing their sayings. It’s very meritocratic. I got the feelings that way above me, it could be quite political.

2:27:44 But it didn’t really affect me directly at the level that I was. So very, very pleasant environment. It’s a small thing, but the office that they have on 200th West Street is very nice, very pleasant. And I lost weight at Goldman Sachs and I gained weight at Google and the reason why I tell you is that at Goldman Sachs, I would go and they would have, you know, roast chicken and green beans and it was great. And then they had some curies at Waymo and I figured out why.

2:28:13 It’s because Lloyd Blankfein was on the low carb diets and there was a ton of really good low carb options in Goldman Sachs and so I ate a very low carb diets. Whereas at Google, you know, I was eating in the same restaurant as Sergey Brin who’s the vegetarians, there was a lot of vegetarian options, a lot more vegetarian options, which were like more carb heavy and so on and so forth. So my diets and my weight has been affected by the powerful men that I worked for.

2:28:38 Talk about leadership from the top, right? It really changes the culture. And Morgan Stanley versus Goldman Sachs, how would that feel differently? You know, it’s so hard because it could just be a small thing. It could just be that the office that I was at Goldman Sachs had lots of light and I I had a small commute whereas the other one was darker and was in the middle of Times Square, which is not pleasant to go through at any time of day.

2:29:01 But yeah, in general, I preferred Goldman. I found it a little more open, but it could just have been the specific people I worked to, where I was in my life, the type of projects. It’s so hard, you would have to sample a large pool of people to actually get this thing. But in my personal experience, I found Goldman a little more dynamic and more exciting. That confers with what I know.

2:29:33 I mean, they are known for hiring the best of the best and having great people. I rarely have met someone at Goldman that I wasn’t very impressed with. Maybe once or twice in Blue Moon, I’d be like, how do they get to what most of all they’re usually impressive people doing good things. And again, that flat minimum structure is very endemic of a great P&L situation in a bank that’s run really well where it’s nice and flat. And that’s one of the benefits.

2:29:57 Yeah. I found Goldman very innovative as well, really going after new markets, trying to stick outside of the box and all those things. Right. You know, Dan Morehead at Pantera Capital, who does, I think they run $3 billion now, he was at Goldman and then he moved to Bankers Trust where I was. And one thing he noticed about Bankers Trust is that they were real scrappy.

2:30:16 Bankers they didn’t have a whole history but they had a balance sheet and smart people and they would just give you a lot of leeway to hang yourself whereas he said Goldman was innovative but it wasn’t like I mean I was a 22 year old kid and they gave me like the swap book and lines to the exchanges and said go and I was just like are you serious so again company cultures everything right everyone brings like every company has something slightly different last question to that 20 year old is listening to us now advice to them you know they’ve They’ve grown up, first of all, with the internet. They’ve grown up maybe with even crypto or blockchain in their teenage years. What do they need to be aware of going forward in their lives, in financial assets, et cetera?

2:31:01 Well, I mean, specifically for the people in crypto, what I would say is, try to think from first principles. They are principles underpinning this. When you’re looking at consensus algorithms, for example, has been studied. And just because something is new and innovative doesn’t mean that you should ignore the work that is being built on. I think there’s a tendency of people to go into crypto and DeFi and say, I’m going to ignore finance because, oh, that’s the old paradigm, you know, in crypto everything is new. No, no, no, no. It’s not new. It’s building on an existing body of knowledge.

2:31:32 I don’t think you need to, you shouldn’t have this body of knowledge limit you, right? And say like, that’s all that can be to it. But it definitely empowers you. And I see a lot of of DeFi protocol, which are, you know, the best DeFi protocols that I see today are built by Xquants. You have people who went in traditional finance who know this stuff very, very well, and who are inventing the best primitives that are out there.

2:31:54 And you see a lot of people who don’t have this background, don’t understand it at all, trying to come up with new things. And it’s like, oh, well, you know, it’s innovative, there’s no bad ideas, no, no, no, no. Learn your fundamentals, you know, like, yes, be innovative, transcend it, but like, learn the basics. are very, very useful, like the basis of financial economics, the basis of microeconomics, the basis of cryptography. Learn all that so that when you see an idea, you can evaluate it from first principles.

2:32:22 You can say, does that make sense or does it not make sense, which is exactly what the VCs don’t do. The VCs do not do technical due diligence ever. They look at something and they say, oh, well, that makes sense. There was a VC who reached out to me back in 2017, And he says, there’s this young guy from Princeton. They have come up with this new protocol.

2:32:42 And so, of course, he looks really interesting. And so I read what it is, and I come up with a criticism of it. And that was a thing called basis. And they’ll say, this doesn’t make sense. Here’s the economic reasons why it’s not going to work.

2:32:56 The problem is the VCs has heard the same economic reasons from someone who has explained to them why Bitcoin isn’t going to work or why proof of stake isn’t going to work. So it’s like, well, how do I know? And they don’t have the background to basically be able to say, this argument is not going to work, is incorrect, and this argument is correct. Today, you see a lot of stablecoins which don’t make any sense, because they’re not built on sound principles.

2:33:17 And some of them do make sense. And you see a lot of people struggle to tell the difference, because they don’t have those basis. So having understand mainstream finance, economics, understand it well, so that you can improve upon that, that you can like push the state of the art, but know the state of the art. Yeah, super good advice. I’m teaching this stuff now in our TFI Academy, and Arthur, I forget how much I actually learned about finance and economics that I just don’t honestly realize sometimes.

2:33:53 So I’m trying to explain to someone for the first time, you know, what liquidity is, or what these things are, and people are looking at me like I’m, you know, talking about a Halloween costume, and I forget, okay, I did go through the economics and the finance and I did the trading and so liquidity is something that might take you 20 years to understand properly. You gotta get burned a few times. So, I agree. Like, there’s a lot of real knowledge bases here that you need to have depth in, in order to probably innovate on a big scale.

2:34:23 So educate yourself. Yeah, yeah. Probably last question I’ll ask is, Markets can be rocky. Who knows when someone’s gonna watch this episode in the future I think someone’s gonna watch this in a thousand years So who knows what a Bitcoin price will be but I guarantee between now doesn’t kill us before then. Yeah, it’ll go Oh, yeah, exactly before AI kills us. Yeah, exactly. Maybe someone’s worthy. I will watch it Yeah, maybe you want to watch this episode on Mars alone. I don’t know. So Price markets they’re up they’re down, you know people panic. They don’t know what to do. You’ve been through most of the market moves What do you tell people when they’re panicking and freaking out and they’re this is down And what do you tend generally tend to tell people to think about or focus on? I don’t really like Talk too much about markets. But you know when I see people panicking what I’m thinking is like you have too much exposure to this The thing is like you can people either think that somehow you have to be bullish in crypto and you have all your assets in crypto Because you’re trying to basically like I’m gonna triple my money in the next year or they’re gonna say like no, it’s all crap It’s right poison don’t touch it But I I don’t think that anyone who’s put you know Five percent of their savings or ten percent of their savings into the currency is having panic attacks on the network So if you’re panicking over this

2:35:35 Yeah, you’re you’re sorry, but you’re you’re overexposed. You shouldn’t be in a position where somehow this is going to make or break your rent Don’t don’t don’t do it because if you’re doing this and you know, you know, you’re not you’re not like You’re not a good asset alligator. You’re not thinking about a risk management. You’re not thinking about you know your liquidity needs, you’re not thinking about all of that. And it’s important, you’re just trying to take a gamble.

2:35:57 Like if you said, I’m going to triple my money over the next year, you’re gambling. And it’s not a good idea. It will not end well. A lot of people have been lucky and you see those people because they’re in this space, you don’t see all the people who have not had this luck. So that’s what I would say.

2:36:17 Yeah, you see survivorship bias, don’t you, in this space? Yeah, absolutely. It’s terrible because there’s a lot of people in the space who confuse their luck for skill and who thinks that you know There’s a nice George Soros because they bought, you know, a serial more Bitcoin at the right time See that a lot Yeah, but I agree and if you’re trying to triple your money by Christmas in any asset It’s always gonna end in tears and if you take any finance course in the first month They’ll tell you about portfolio allocations and that’s just smart That’s that’s all it is. And I was talking to Anthony Scaramucci from Skybridge Capital I think they have 10 billion and he said Brian I’ve been sure about many things in my life as on Wall Street But I’ve also learned that I’m wrong sometimes Yeah, so what I do is I never allocate, you know A greater percentage of X to that because I know I will be wrong Yeah And that’s a great way for maybe a new investor to start thinking about their portfolio And like you said if it’s keeping you up at night and panicking you you’re probably over allocated Yeah, so rethink that and again just because you believe in this and you want it to be true It doesn’t mean you have to put all your assets in it And and so remember that yeah, it’s part of the investment The other thing yeah, there’s a thing that don’t do with that You know a lot of people I mean, you know, I’ve made a lot of trading mistakes when I was you know

2:37:35 When I was younger I I traded and so I went through these mistakes Unfortunately, I went with I went through them with a small amount of money as opposed to a large amount of money But I would say a lot of tendency that people say is like, you know They have losses they will try to cover their losses by like doubling down their positions And again, it’s not a good idea because if you feel you have already too much risk, increasing your risk exposure is not a good idea. So think about risk management, think about your worst-case scenario, as opposed to say like, oh, this might triple. Now, that being said, there’s refinements to that.

2:38:04 When I was at NYU, one of my professors was Nassim Taleb. Nice, holistic thinker. There was a course taught by him and Jim Gazerel. Jim Geyserold doesn’t get as much fame, but fantastic teacher. Love his book on derivatives.

2:38:21 Extremely fun and engaging teacher. And the same was also super interesting. And he’s good at thinking about the limitations of diversification. First of all, diversification is not going to remove as much risk as you think it will, because in crashes, everything is correlated. So you might think, oh, my portfolio is pretty diversified.

2:38:42 And then when the market takes, everything takes at the same time. So the benefits are overstated. And the other thing is that people who’ve been successful at trading, most of their profitable trades have been a few trades. They’ve been a few trades that have been extremely profitable. So if you think about it this way, try to make asymmetric bets.

2:39:06 Bets which if they go wrong, you’re not losing a whole lot. It’s not gonna keep you at night. It can completely crash, it’s not gonna keep you at night. but you know something, like you have some specific insights, you understand something, it’s like you’re saying, you know it, it’s not public knowledge, right? Because you’ve understood something that no one else has understood, it’s your secret.

2:39:28 And then if you can do that, and have a lot of upside in this, this is actually, this will be trying to just physically like fire again in, trying to like fire shots in many direction and diversification. So there’s like refinement to diversification, but like first order of business is just, you know, limit your risk. All right. Yeah. Great points.

2:39:48 First, first fight. Second realize in black swan events, everything is correlated, right? Yeah. The other point that I make is like, and it’s a small distinction, but I don’t think of like buying cryptocurrencies as investing, as it’s trading, it’s speculating. But for me, to invest in, it needs to be a productive asset class, you know, you invest in, you know, invest in a bond, you invest in a stock because there’s an underlying business that produces something and you get rewarded for taking this risk.

2:40:16 But no one is rewarding you for taking the risk of holding a cryptocurrency. You’re making a bet that, you know, people might buy it for more in the future. You’re not being rewarded for taking, you know, for taking like risk, which is what investing is. Are you not helping build the infrastructure? No.

2:40:36 No. You’re buying a token. Yeah. It’s already funded, you can govern a little bit, but you’re saying it doesn’t give you a yield. It doesn’t give you a yield.

2:40:47 It doesn’t give you a yield. So know that going in. For me, that’s the definition, and it’s a small distinction. I don’t think, like people say, investing gold, right, and it’s the same thing. I don’t want to be the semantic police, but I think it’s an important distinction to make.

2:41:02 You are, you’re taking one side of a bet and other people are taking the other side of that bit. Whereas investing I think is quite different. And it’s fine. As part of a portfolio, you can manage. Saving is another thing as well. I would say like if you’re buying stores of value is a lot more like savings than it is like investing. So you can be saving, you can be trading, but productive asset classes are important and they’re here to stay. And there’s like in a culture of crypto because it has such a fantastic rise over the past few years.

2:41:41 People imagine that just because it happened is going to keep happening. They just try to interpolate the trend and everyone’s a trend follower. That’s a crazy thing. It’s like everyone in this industry seems to be like, oh, well, this is trending. Why do you like it? Because it’s trending. And that doesn’t end well. So I would caution people to try to to to take a risk into consideration. Product of assets think things for the details don’t just think because like this thing has like caught up a bunch in the past few years somehow it’s going to necessarily continue. It could, although it’s super high it’s quite possible but it could also like do the opposite. Yeah and this is your knowledge of financial markets coming into play.

2:42:32 It’s knowledge experience that’s having been burned you know like I made a bet There’s two bets, my two worst bets in finance have been the following. One is that in early 2017, I bet that they would not loosen interest rates because loosening interest rates would increase inflationary pressure, which would cause China to sell its US Treasuries. I didn’t want that. No, crisis happened, the rates went to zero. So I was betting that the rates would stay high and they didn’t.

2:43:12 And then after the financial crisis, I saw that we would immediately see inflation. And so I went, I bought some puts on 30 year futures, 30 years treasuries. And of course, you know, the Fed did Operation Tilt where they started, at some point I saw there was a massive risk in the balance, you know, in the liabilities of the government because the government was mostly in short term bonds. they had like massive financing risk. And then they kind of like all shifted into these treasuries, into the 30-year treasuries, and of course the 30-year is completely collapsed.

2:43:42 So I got that wrong. This is like my two most wrong, I mean, I didn’t lose a whole lot of money in like all inconsiderate across these two bets, maybe I lost like 30K. So it’s not, you know, in the grand scheme of the state, it’s not a lot of money. At least, you know, compared to like the investment that I had over time, but it’s like, I would say like in terms of like sinking, I was very, very convinced this would be true and it was not true at all. Right, so good examples for you that you can be completely wrong sometimes.

2:44:10 Yes. And luckily you had your down sign limited. And again, if you’re buying options, put options and by definition you’re limited too as well, so. My best bet had been, you know, like Bitcoin early and Ethereum early. Xero, which is an accounting software company in New Zealand, I was like looking at this thing and it’s like, wait a second, this thing is publicly traded in New Zealand.

2:44:31 Like brokers can’t even really access it. People don’t know about it. They have a 200 million market cap. This is like venture capital stuff. Why is it publicly traded?

2:44:40 And Peter Thiel was investing in it. This is weird, all right, I’m just gonna buy this thing. And then that worked quite well. It’s funny, I’ll finish. You mentioned about people worrying about trading at a loss.

2:44:54 People worried about closing out a trade at a loss. And I had someone in that chair about five years ago. His name was Nick Leeson of Barings Bank. Oh yeah. Now you know who he is.

2:45:03 Yep, oh yeah. I tell my students about Nick Leeson and most of them never heard of him because that was quite a time. They go now 15 years ago. Yeah. 20 years ago.

2:45:11 It was a Queens bank. Yeah, what’s that? It was a Queens bank. Yeah, it was the Queens bank. And I’ll tell a little bit of the story.

2:45:16 Maybe you can finish. But Nick Leeson, they made a movie about him. I think Ewan McGregor played him in the movie. But he was a futures trader in Singapore for Barings Bank, which was the Queens bank. The Royal Family did Bunny there.

2:45:26 One of the big UK banks probably at the time, top ten maybe. And he had a trading loss on his futures account in Singapore that I think started off as like something like $25,000, something small. And he wanted to hide it and he didn’t want to take the loss and close the trade out. And it got bigger and it got bigger and it got bigger and it went to $100,000 to million to millions of dollars. And I think he spent 15 months hiding this loss of a trade until one day it came out and it broke the whole bank, I think almost broke the Bank of England who might have had to write a check that day and it was very close, and he had to spend five years in a prison in Singapore.

2:46:08 Now he has a great career as a public speaker, but it’s a great example of even a seasoned trader in a futures pit in Singapore who should know better, we all should know better, who just for emotional reasons didn’t close out a trade at a loss and wrote it all the way down. Good book as well, I’m sure you’ve seen this one. It’s Reminiscence of a Stock Operator. Yeah, that’s old school. And it’s almost like reading a random walk.

2:46:33 It’s like, well, you know, he’s making a bunch of money and then loses a bunch of money and then makes a bunch of money. That’s a great book. Yeah. Great reading book. It’s from like the 20s or something.

2:46:42 Yeah, I mean, there’s a bunch of railroad stocks. Yeah, it’s old. Yeah, I remember reading it, yeah. These are good lessons for people to remember that sometimes emotions, you know, it’s that one trade you take to the toilet It’s going to ruin you, probably. And you want to close those out early and try not to take those emotionally down.

2:47:02 A little folk knowledge as well that may be useful. People don’t like to talk about their losing trades. So when you talk about someone, talk to someone and they only mention their winning trades. They’re not telling you about their losing trades, but they exist. Yeah, that’s my biggest problem with crypto space is that everyone always talks about their latest winning trade, and they don’t actually calculate their daily or monthly P&Ls and they don’t realize what’s going on.

2:47:25 So all my students, they have to post their P&Ls and you soon realize that that Shiba trade that you thought you got right, first of all, wasn’t as right as you thought and it ended up being the small percentage of your P&L. You’re actually down every month because you’re trading too often and again, that transparency. So I try to force people into that Wall Street mentality of daily P&Ls. I mean, when I was a Bankers Trust, my P&L, the guys in Tokyo knew about it before I got in.

2:47:48 The MD knew about it and I went to the cafeteria. people knew if I was up or down and I would get told to liquidate risk, justify my risk. That culture was actually really healthy now that I look back and I think it’s missing sometimes in crypto trading. No, it definitely is. Like I said, there’s a bunch of people who think that just because it’s new and innovative doesn’t mean you have to ignore everything else that came before it.

2:48:13 It’s like, well, you know, it’s a new paradigm. In this new paradigm, you know, like lots of supply and demands don’t apply anymore or laws of risk management don’t apply. But the reason for this is, and my theory for this, is because it’s like the masking epidemic. Early on, a bunch of people wanted masks, and the governments wanted masks for healthcare workers, and there was shortage. So they lied, and they said, no, no, no, masks don’t do anything.

2:48:46 You don’t need masks. And then after that, they turned like, no, you absolutely need masks. And you need to wear them all the time at all times. And because they lied, and because they got it so wrong, they lost credibility. People were like, okay, you know what?

2:48:58 No, I’m not going to trust it. When people talk about the problem of fake news, for example, what often doesn’t get brought up is that the existing news organization shot their own credibility because they lied, because they manipulated the truth. And so people were like, well, you know, okay, now I don’t know, like it doesn’t matter if it’s shared on Facebook or if it’s like the New York Times, I don’t trust them anymore. So in the same vein, there was a lot of mainstream finance who looked at the script of currencies and they applied the wrong framework.

2:49:31 They thought that they knew and they didn’t because they thought of these as productive assets. They were like, well, you know, Bitcoin doesn’t yield and you’re saying the floor doesn’t have any value, there’s no interesting value. They were trying to price them in securities, right? They were trying to price it as the stuff of instruments. That’s not how they work.

2:49:46 That is not the dynamic of their prices. They work like stores of value. They work like commodities. And they are economic frameworks to think about this. They exist in the economic literature, but they were not familiar with it because they’ve never traded this stuff.

2:49:59 They’ve never thought about theory of money, why money has value, all of that. So because mainstream finance rejected these things, a lot of people think that’s, well, because they got it wrong, they’re gonna get everything else wrong. And so when they’re telling us about

2:50:18 How interest rate works or how risk management works and so on and so forth, they’re gonna get it wrong anyway and we can ignore it. So that’s my theory for why it’s being dismissed. It’s also because learning this stuff is hard work and people don’t like to do it. Yeah, it’s a good call though. I mean, the mainstream media put out their initial narrative, started a lot of the banks as well about crypto and you know they’re paying for it with credibility a little bit now yeah and I think again over time real people know that and this is a long game and they’ll remember that Arthur I really appreciate the time this is easily your best media appearance by far well thank you and I appreciate you going deep I appreciate the work you guys all did especially in the hard times and the future looks super right for Tezos. How can people develop on this or learn more about it or even if someone’s wants to start getting involved as a consumer what’s best way?

2:51:19 Yeah Tezos.com is a good place to start. You will find information about like how to use it, where to get wallets, resources for developers, how to develop upon it. There’s also a big community on Reddit, there’s a big community on Twitter but But again, all of that is linked on the Tizzos.com website. I’m at RCRB on Twitter. Most of what I talk about is Tizzos, but not all of it, which sometimes annoys people.

2:51:45 Sometimes I tweet about music or AI, and people are like, what does this mean for Tizzos? I’m like, not everything has to be about Tizzos. And yeah, that’s a great way to get in touch with all the social media community. And yeah, check it out. That’s fantastic.

2:52:05 Thank you. I’m really enjoying my conversations with you layer one folks. It’s definitely a certain type of person. And yeah, I really enjoyed this. It reminds me of Sylvia McCally and then Guinier.

2:52:17 I think it’s really exciting what all of you are doing. And the biggest complaint I get from all of my academy students is the gas fees and the latency. And so everything you guys and women are doing I know to yeah provide solutions. So I always tell my students don’t worry It’s coming the layer one guys and gals are working on it So appreciate what you guys are doing and the future looks really exciting. So thank you Thanks Arthur and also appreciate you representing London as well So yeah, fantastic stuff all the best and come see us again in another year. So I’m gonna start how it’s going Thanks, Brian. All right, cool. Thanks so much, man