Full transcript: Dan Tapiero on London Real
2:48 This is London Real, I am Brian Rose. My guest today is Dan Tapiero, the global macro investor, entrepreneur, and business leader. You are the CEO of 10T Holdings, a growth equity firm with $1.2 billion under management that has built a diversified portfolio of private companies which are enabling the digital asset ecosystem. You have 30 years of experience in macro investing, trading, research and economics, and have worked as a portfolio manager with the world’s most respected investors, including Stan Druckenmiller, Steven Cohen, and Lord Rothschild.
3:21 You previously described Bitcoin and blockchain technology as historic inventions akin to the birth of the combustion engine that will transform our world. Recently, you’ve said that your initial estimation of a $10 trillion market cap for crypto was conservative and that it could be double that, or $20 trillion in the next decade. You’re now in the process of raising an additional $1 billion for your new fund, One Roundtable Partners, in order to invest in mid to late stage digital asset ecosystem companies.
3:53 Dan, welcome back to London Real. Hi Brian, great to see you. Again, it was nice seeing you also in Paris, that was fun. Yeah, it was great to catch up. And look, I can’t wait to dive into this.
4:06 Super excited to talk to you. Before we get started, just wanna say if anyone’s interested in learning more about your new fund, One Roundtable Partners, they can go to londonreal.tv forward slash Dan for more information. Here at London Real, we will be investing in One Roundtable Partners via London Real Ventures and you can learn more about us at londonreal.ventures. Dan, we caught up in Paris, and I gotta say, you were glowing in Paris. Like, you were on your game, you told me you just deployed over $100 million of capital in Q4 into seven different businesses, you know, while everybody else was pretty much licking their wounds.
4:42 And I just wanna say, like, how were you able to do this when everyone else was, you know, doing the opposite in Q4 of last year? Well, I don’t know that everyone else was doing the opposite, but there was a lot of panic, as you know, after the FTX fraud and, you know, I was talking yesterday with one of our LPs, an old-time commodities trader, and he noted the same thing I did, which was that, again, on the announcement of that fraud, the Ethereum price wouldn’t go down to make a new low, the Bitcoin price went down, made it a little bit, then sort of popped right back up. And you’ve been trading in the markets a long time like we have. Those are telltale signs for a market that’s sold out. And what that just means is if a market can’t go down and make a new low on what is probably the worst news that you could possibly imagine, It just tells you the selling in the bear phase. It’s either petering out or it’s completely done.
5:54 And he took the same signal as I did, watching the market very carefully. It held in very well. And again, we make 10-year investments. It’s a 10-year light fund. I’m not trying to market time our purchases, but I can’t take that macro hat off completely.
6:17 And when I think there’s a little in the space, I want to deploy a lot. And when I think that there’s too much froth, what we tend to do is we just back off and pass. And last year, we passed on over 100 deals. And that was largely because the valuations were so crazy, 50, 80 times revenue for some of these businesses in our space. But so, I wouldn’t say I was the only one, but that signal was pretty clear. And I thought, okay, everyone is panicking. And there are a lot of businesses that we really like. Of the seven, we bought forward in the secondary. And so, you have people, you know, whether they’re seed investors who just want liquidity or funds that invested in the space that are pulling out a little bit, we were able to buy in the second area at a 50% to 80% discount for previous rounds.
7:14 Now, just to be fair, some of those previous rounds were hugely overextended. But still, good valuations. And I still see them, that the market is still there for a lot of those ex-high flyers. And in the three deals that we led, there really wasn’t that much competition. so we could set the price. Last year, you had some of the very large private equity funds that came into the space, 2122, deployed big capital. And I think they’re just used to buying sort of SaaS tech businesses, which you can put a very high multiple on. And I kept saying to my guys, but to some of them as well, the underlying asset in the crypto blockchain space is Bitcoin and Ethereum, and they have 100% volatility measurement. You can’t value these like traditional tech companies. You’re going to have three pretty massive bear phases over a 10-year period where the underlying asset goes down 80%. You have to have a bit of a defensive premium baked in there. And so, we didn’t really pay on the 26 businesses we’ve invested in, the $1.2 billion we’ve deployed over the last two and a half years, we haven’t paid more than really 10 to 12 times revenue when we entered them. And so, that metric is just a metric that we use and really rightfully saved us from making lots of mistakes last year. So, I would just say that in the In the beginning part of the year, there were quite a few signs of, you know, it’s just over-evaluation euphoria and we pulled back and then when I saw the markets were holding
9:07 In well like that, I just thought, let’s deploy the remainder of our fund tree. So it was a little bit of old-time macro feel, a little bit of like, let’s stick to our evaluation metrics and process. So, yeah, we were quite forced in that regard. Yeah, I love it. And I still remember the conversation we had 17 months ago where you said, look, Brian, I’m not the guy that’s going to get you 100X. I’m going to get you 10X.
9:38 And I’m going to invest in companies with revenue. And you started listing the companies, you know, Deribit, Ledger, YugaLabs, Animoca, Kraken, Gemini, NovaLabs, formerly Helium, and it goes on and on. I mean, these are the best of the best in this space and real infrastructure plays. And it was not what people wanted to hear when Bitcoin hit its high in November, but then fast forward 18 months and you’re looking like one of the savviest investors out there and it’s just really interesting because I still remember you saying that to me, like I’m the one that’s going for the 10X returns.
10:13 Well, five to 10X, five to 10X, on the portfolio over a 10-year period. But it’s definitely not a venture strategy, which I always say is make 10 investments, nine go to zero, when one ends up being Google. But no, we certainly do. We are investing at the growth stage. We’re looking to invest in companies that have you know, minimum sort of 30 to 50 million in revenue. Businesses that, you know, are going to be able to withstand the bear phase. And, you know, we had one last year.
10:54 Of the 26 investments, we only had one that was impaired. And, you know, it was only 2.5% of total assets. So, it didn’t really impair us. And that was partially, you why I had that sort of wherewithal and comfort to be allocating in Q4 because we didn’t really feel all that pain that was in the rest of the space and serving many of those liquid hedge funds that have to mark the market every month. I mean, I was in that business in the macro world for a long time and I lived through tremendous periods of pain and I think the skill really is to get again, exposure to the space, to the growth and the overall value of the digital asset ecosystem, but without the volatility or, you know, that other people are experiencing.
11:47 And so, you know, some people have said it’s a sleep well at night strategy. Yeah. I mean, I do think the portfolio is going to make us 5 to 10X over that 10-year period. And we’re not going to be the best performer in the space. You know what’s a bit strange, I still feel? We’re the only fund that I’m aware of that focuses, the old growth equity fund, that focuses exclusively on blockchain and crypto businesses.
12:14 So, it gives us a little bit of an edge. We’ve sort of built our own ecosystem now. The companies that we’re looking at for the fourth fund that I’m doing are going to be plugged into that ecosystem. And you can see what all the companies are on my website. I mean, they’re all right there. You’re right. I mean, I feel like those are core companies to the ecosystem. We’re going to come back five years.
12:39 They’re all going to be, you know, still around and thriving. It’s wild because completely independently of our relationship inside my crypto and DeFi Academy, like literally, I just kicked off my class, my four-week class, and they’re buying nano Ledger X’s to set up their hot wallets. By module four, they’ll be buying a call option on Ethereum, on Deribit, and it’s just wild. I mean, we’ve had Yahtzee from Anamoka Brands on here. It’s just wild how your investments are, yeah, they literally are key infrastructure in this entire ecosystem.
13:18 And that’s just me choosing the right things for my students to use and it happened to be your investments. So I don’t think there’s a coincidence there. I think you looked at those things and chose, and like you said, you’re the only one doing that in this space. Well, I was, you know, it’s like a blue chip strategy in a way. I mean, the difference really is that, I don’t know, I seem to be the only guy out there thinks that there are blue chips in the digital asset ecosystem.
13:47 I mean, I, you know, these are companies in some cases making hundreds of millions of dollars of revenue. company like Adam Oka made more revenue in 22 than in 21. If you can think about that for a second, you had a massive bear phase in the cryptocurrency markets. And here’s a company that actually did better during the bear phase. And we have actually five or six companies that did better in 22 to 21. So, that really helps the portfolio. Obviously, the exchanges were all marked down 30% to 40% and in some cases, more. But when you have a portfolio, you know, I think that in a portfolio that’s seeking to get exposure to the entire space, not the whole space is dictated by the price of Bitcoin and Ethereum. And I think if there’s one important thing, and you noted before we were chatting that, yeah, I was just on another podcast. And, you know, if there’s one thing that I am trying to do now is a little bit has changed the narrative with people. In the US, the regulatory rhetoric has gotten very negative. But then all of a sudden, in the UK, in Hong Kong, Singapore, Dubai, Abu Dhabi, the interest has picked up. And that Paris meet that we did was the end of a one month long trip that I’d done. And changing the narrative really to let people know There are a lot of things going on in this space.
15:22 I call them sub-sector activity. And that sub-sector activity did not exist at the end of the previous bear in 18, early 19. And what am I talking about? I’m talking about there was no DeFi two and a half, three or two years ago. Today, you’ve got $50 billion TBL or whatever the number is.
15:45 Last year, you had $8 trillion of stablecoin settled. Okay, that’s in a bare faith. That needed an all-time high. Three years ago, there were no stablecoins. You’ve got a massive NFT market that, despite the ups and downs, I think is thriving, did not exist three years ago.
16:03 And so, when I say, when you mentioned earlier that podcast, the $10 trillion and the $20 trillion number. $10 trillion is what I call would be the value of the digital asset ecosystem, which is the value of all the cryptocurrencies and all the equity in the space. When I had the idea for my first three funds, 10T, that was about $300 billion. Today, we’re at $1.7 trillion. the high was $3.2 trillion. But just think, I mean, we’re still up over, you know, five frames in three years. Like, how many people have assets in their portfolio certainly that big that go from $300 billion to $1.7 trillion? And I think it’s bottomed out during the next bold phase, which I think to really pick up momentum in the second half of 24, 25, I think we’re going to be punching up certainly over $5 trillion in terms of the total value. That idea for 10T was that we were going to hit $10 trillion in 10 years.
17:10 And I just simply wanted to have that marked somewhere. So, I put it in the name of my fund so that people wouldn’t think that me calling for 30X in the value of this ecosystem in 10 years is a bit nutty. I don’t recall ever doing that myself in any other acid or acid class, but it just seemed sort of reasonable. But now as we get there, there are all these new areas that are growing up that I had not, I couldn’t even imagine three years ago. I mean, look, you have a DeFi Academy that could never have existed, didn’t exist three, four years ago.
17:51 And so, you know, that’s the difficult thing in this space is to try to see beyond the outer perimeter. And we look to invest in CEOs that have the ability to pivot to that unknown. I think it’s a very difficult thing. But some of you mentioned Annamoka. I think someone like Yat has that ability. Pascal Ledger, I think, has shown that ability. The twins at Gemini also, I mean, and I think their purchase of empty gateway was very impression.
18:23 I see that they’re going to be doing some innovative things in the future as well. So, we try to pick established companies that are making big chunks of revenue because they have the flexibility to take that risk and add that business line, buy that small company that could be building the future. And it’s a future that we’re not even really sure about. So, it’s a little bit tricky. You know, we have a pretty big venture, I would say, venture component embedded within these more established companies. And so, we get a little bit of that extra venture kick, but I don’t feel like we have the risk, you know, that having just straight out venture bets. You know, that you have.
19:14 And I think it’s important that we change that narrative because like you said, up until 1819, The only thing to talk about in crypto was probably the price of crypto. I mean, even back in 14, 15, 16 when I was interviewing people like Andreas Antonopoulos, the only thing that mattered was the price of Bitcoin. And everybody got conditioned to that. And I feel like a lot of the public is just like, oh, where’s the price? And I feel like these days that is missing the point. Because you said, I think you had a term where you said, under the hood, there’s a lot going on. And I was having this conversation with one of my my students the other day, I said, look, the price of Bitcoin can stay the same for two years.
19:50 And the companies that we’re investing in are gonna do incredible things. And again, we’ve just invested in a company called Vatum that’s building metaverses for Fortune 100 companies where a customer can go into a metaverse like Frito-Lay did for the FIFA World Cup. And they don’t even know they’re in a metaverse. They don’t know they’re connecting to a digital wallet. They’re just having an amazing experience where they own things and they’re in a social atmosphere.
20:11 And they’re building these things, Same with Orange Comet, it’s building metaverses for things like The Walking Dead and Scottie Pippen and The Bulls, and all these things are growing and building, and the price of Ethereum can stay the same, and they’re still gonna create hundreds of millions of dollars of value. And so, but you have to communicate that narrative, because I think the public, which maybe means your congressman, is still thinking it’s about the price of a crypto asset. Yeah, and trading, and it’s not just about trading, And they’re like, oh, 32-year-old bros dumping and dumping tokens.
20:49 And unfortunately, there aren’t bad actors in the space. We saw that with FTX. The ICO, boom and bust, there are many bad actors, people pushing those kinds of tokens on unsuspecting people. I mean, it’s unfortunate that they’re with creativity and entrepreneurial activity sort of an open playing field, you’re always going to get some bad actors. But what’s incredible is that some of the regulators in the US are just hyper focused on those handful of incidents rather than what’s going on in this broader ecosystem. You know, some of the things you mentioned are spot on. I mean, Starbucks and Polygon relationship, I mean, that’s incredible, right? Like the thing that, you know, I think we talked about a little bit the California DMV, but, you know, using the Cheezos block chain.
21:45 Yeah, talk about that. Talk about that. You told me about this in Paris and I was like, yeah, yeah. I know. We did a little more digging. Look, it was an announcement. We think it’s happening. Someone said to me, oh, Dan, that’s fake news. And I’m like, no, no. My analyst and I, we dug into some fake news. You know, they have, you know, partnered with a company that is going to put, you know, California state licenses and title deeds to your car on this Tezos blockchain. And, you know, we’ve dug a little more, not exactly sure specifically why Tezos, but there’s a specific reason that that chain has, you know, there’s a specific use case. I mean, as you know, all these different chains are trying to optimize for different things.
22:35 And I do think it’s important to highlight the people listening that, look, Bitcoin and Ethereum are different in my mind than the other chains at this stage. They reach network effect. Bitcoin is pure collateral, is unpenetrable, it is a security apparatus. I do think it is a store of value. It’s been the greatest performing asset over the last, you know, 10, 12 years.
23:05 Again, with a lot of volatility, I don’t see that changing. And Ethereum, you know, has been built for a little more flexibility and programmability. And, you know, there’s a huge programmer community now that’s, in the last three years, committed Ethereum ecosystem. And so, you know, I think that there are many use cases there. Many of the NFTs are on top of the interior. And so, I think those are proven use cases. And the other chains, you know, it’s a doggy dog world out there. And the guys that can prove, you know, they’re usefulness will survive. And five, ten years from now, we’ll have an established niches.
23:44 I don’t think we need to use Bitcoin for absolutely every single thing. You don’t need, you know, that being said, I mean, you have lightning on top of Bitcoin, which is great for payments, and they are adapting a little bit. But I kind of like the fact that Bitcoin is a sort of pure proof-of-work-back cryptocurrency, that the security of it is impenetrable, etc. But again, just to focus on that and to ignore all of these other developments, and I would say what people are calling the Web2 movement into Web3, Right? I mean, a lot of these traditional tech companies, corporations, they are trying to incorporate blockchain into their business models one way or another. You know, you have even car companies, you know, Fiat, for instance, or, you know, what was the other Chinese company that is putting all of their car carts on a blockchain. Maybe it was Alpha, I think it was Alpha Romeo.
24:53 But anyway, the point is that three years ago, you had none of this, right? And so, I’m this macro guy looking at things from, you know, 20,000 feet. That’s just my background. I just see so much improvement, like so much innovation. And then every single day, the traditional press is hammering the space. Today, Brian Armstrong said he would consider moving Coinbase out of the US. I mean, we only have three exchanges, right? We’ve got Kraken, Gemini, and Coinbase, and Coinbase is the only real crypto, you know, blockchain business that’s public. I mean, aside from Galaxy, which is a little smaller, but to think that we are going to push sort of the preeminent exchange, especially for retail, outside of the US. I mean, it’s just, I mean, it’s almost a horrifying thought. I don’t know what, you know, I know you’ve been, I’m sure, involved in many of these discussions of all the people you speak with, but, you know, I just, that could really set the US back, I think.
26:05 Yeah, well, let’s talk a bit about that because, I mean, for the past 60, 70, 80 years, I mean, The U.S. slash Silicon Valley has led pretty much every major technology adoption, not only led it but dominated it. And you might have actually brought this up, maybe the last time you were here, and I’ve heard you quoted on another show and say that now 85% of crypto trades happen outside the U.S. Obviously, you’ve got regulation coming in, obviously, Gens so at the SEC doing his thing, Congress doing other things, Coinbase talking about leaving, and then you just went on this trip around the world.
26:39 You went to Abu Dhabi, you went to Dubai, you went down to Australia, and you came back with some really interesting observations, Stan, and I’d love it if you could share it with us. One of the ones that really struck me was that you said down in Australia, they understand two things that maybe in America people don’t, and it’s crypto and currency. And I thought that was interesting because in America, you don’t think about currency much because you’re surrounded by dollars and nothing else matters.
27:04 I think it was Terrence McKenna that said, I don’t know who discovered water, but it certainly wasn’t a fish. And so you go to these other places and they get it. They’re like, oh, I see the need for that. I see the need for this, especially Dubai, which is the city of the future and they’re building everything potentially to be on the blockchain. I think everything they do is digital in Dubai.
27:24 Just maybe we’d love to see your reflections on what you’ve seen globally. And I know you’re getting investors from a lot of these areas as well. Yeah, yeah, yeah, our largest investor place is in Australia and there are a bunch of reasons for that. But I mean, you can, you know, you can walk down the street in Sydney and ask somebody where the Aussie dollar exchange rate is and they pretty much know. And the same thing for New Zealanders. But I, you know, in Australia, you know, it’s an entrepreneurial culture. It’s a, you think about it, a giant island.
27:57 They’re always looking out for new opportunities. There’s a lot of wealth there. there. And also, they really get gold. There’s a lot of gold in Australia. And if you understand how currency works, and you also understand why gold is an important asset, it’s really just a little step to understanding Bitcoin. It’s just a little bit of junk. But if you get technology, I mean, a lot of the guys, they’re like, well, okay, the internet, yeah, that was for information. And okay, the Bitcoin network in the digital asset ecosystem, that’s for value and money. Okay, I got it. I mean, I literally have had conversations like that.
28:42 Okay, I got it. And you’re investing in companies that are building and growing up in that world. I’m like, yeah, and they’re more established. Yeah. And so, the conversation, there’s no, you know, there aren’t so many, you know, loops to jump through. So many, you know, the U.S., you get all of this talk, well, what if it goes to zero? And what if it gets regulated away? And it’s a threat to the dollar. I mean, it couldn’t be further away as a threat to the dollar. And why do I say that? I mean, the opportunity really is these stablecoins out there, they’re dollar-based. The dollar could become the digital asset, the key, core, you have Bitcoin, that’s an alternative, but the dollar stablecoins, a trillion settled, you could have hundreds and hundreds of trillions settled in dollar stablecoins.
29:40 The US should be pushing forward to make sure that the dollar is the stablecoin of choice. right? But, you know, the markets developed slowly. Well, I mean, slowly. I mean, it was zero three years ago, and now it’s much bigger. But if the US ever laid out a friendly framework, I mean, it would just explode. And I think some of the foreigners just don’t understand, you know, like, so damn, what’s really going on there? And I’m like, I have no idea. I mean, I don’t know. I don’t understand what all the hesitation is about. I’ve been saying this for three years. I mean, the first interview I did on this whole topic in the summer of 19, there’s a big part of that that was on Real Vision with Raul was, I just don’t understand why we’d all, I don’t want to say, I don’t want to say weaponize this, but why don’t we take advantage of this and make sure that the dollar is in the middle of the digital value world.
30:46 It just, it’s that, you know what, it’s kind of happening on its own a little bit, but there is a possibility that it doesn’t, that some other countries, a group of countries take advantage of, you know, if they do, then so be it. The U.S., I’ve always believed in free markets. I’ve always believed in competition. And if people are falling behind right now, it doesn’t mean it’s going to be behind five years from now. We have an election coming up. I think having 80-year-olds running the country, I’ve said this a bunch of times, it’s just not really optimal for us.
31:31 I think the foreigners, they’re wondering what they get that the U.S. doesn’t, because as you said before, the U.S. is led in technological financial innovation, and now they’re you know, referingly at the back. Emerging market countries understand this concept even better. I mean, Bitcoin has a finite amount. You know, many of these currencies, emerging currencies have, I guess, I don’t want to call them supply schedules, but are being devalued dramatically by the fiscal monetary authorities. I mean, you look at Argentina and, you know, some of the other mergers where, you know, you have tremendous debauched Turkey. Those populations are already bought in. You know, they already understand it, get it. So, I just think it’s a matter of time, really, for the U.S. And so, it’s not really, I don’t answer that question, and oh, yes, this is a threat, right?
32:37 The Financial Times still has a very backwards-looking perspective on this, as does, of course, The New York Times, The Journal, all these things. I mean, I don’t really read the newspapers anymore, and people in our space, I mean, sort of don’t. I mean, I don’t, my kids haven’t maybe ever read a newspaper. That crazy, you don’t read The Wall Street Journal anymore. You don’t read The Wall Street Journal and The Financial Times?
33:00 No, I did for, look, I read the FT every single morning was required reading for all my analysts every day probably for about 20 years and 25 years and then it’s just they’re talking about old macro stuff. Yeah. Some central bank tweaking of array, the traditional macro cycle, traditional companies, it’s all in the past, you know? So, it’s very… Yeah, they feel like it’s…
33:30 No, for me, I don’t know. They feel like these lagging indicators and when they do dive on anything into the blockchain or web It always seems like they don’t really know what they’re talking about. You know, that’s it’s it’s just way off I read an article in The Times or these and I’m just like That’s not what’s going on. That’s what people thought was going on a year ago, and that was wrong, too So yeah So they’re not even a source for that information So yeah I don’t read those anymore Just while you mentioned it speak briefly on the age thing because you said something interesting recently that your daughter she’s 18 I think she’s at NYU and she had to go to the bank to get an apartment or something and they needed some I don’t know registered check and she was just like I don’t think there’s banks here Like she didn’t have a relationship with the bank, you know at the same time you got you know Like HBS and Saudi who was like 38 years old and you got this group in the UAA That’s a little bit younger that are looking forward and then you got our 80 year olds running this country. That’s obviously have a completely different relationship with tech, with all those things.
34:32 Just speak on that, that wide range. You know, you’ve kind of described it. I mean, I’m just relaying what I’m observing. I mean, I don’t have any bias necessarily against old people. I just see that, you know, I go to Saudi Arabia, to Riyadh, and you can really feel the energy there.
34:53 Yeah, MBS is 38 years old. and, you know, there are a lot of, you know, super futuristic projects like Neil and people, you know, think potentially those are nutty. But whatever it is, is, look, they’re taking rest. They’re evolving. I know they’re, you know, women are now actively involved in running the government. Whereas, you know, five years ago, there were probably none.
35:18 There’s a lot of cultural change. Part of that is also thinking about future and future currency and future payment systems. They’re just embedded. When you’re 38, you can have a 20, 30-year appeal. When you’re 80, you kind of don’t. And you’re sort of stuck looking back. I don’t think they really understand. They certainly don’t understand the Satoshi white paper. I don’t think they even the concept of digital value, like, what does that mean? Right.
35:50 It’s so esoteric. And look, it’s not completely their fault. I mean, if I were 80 today, I’d have a hard time with it. Right. I mean, I get it.
36:00 That being said, there’s a time where you just step aside, where you realize, look, I’m sort of out of the flow. I’m not, you know, my leadership skills, you know, are not really great for taking us, you know, to where we need to be over the next 20 years. But there’s an entrenched group there of, you know, I guess boomer or whatever it is, a little older. And they’re really stubborn and I think, you know, not really working at the best interests of the country.
36:34 And you know what? It frankly doesn’t matter. These other places will take the bull by the horn and, you know, eventually the U.S. I guess will just come along. It’s not really so much about all these different nationalist things.
36:47 We’ve talked a lot about the US and non-US, but you mentioned 85% of the total world trading volume is out by the US. This is really, and I’ve said this many times, the first truly global macro financial phenomenon. There’s nothing that, you know, there’s a person in every single country who has a digital wallet who owns a currency across the socioeconomic strata. It really is sort of the most wide-ranging, I think, financial development, really since the uptake and usage, et cetera, goal.
37:30 I think someone, I think goal is the only other thing that if you go to any country around the world and they know what gold is, no matter how wealthy or how much of a worker, whenever it is. I think that everyone knows about gold, but there hasn’t been anything. Even the dollar is, I don’t think, is owned certainly as much as Bitcoin even today. So that’s maybe a little difficult for us as Americans to handle, right? don’t really, we’re not really an outward-looking country. And look, there are a lot of great things happening in the US, so I get it, but this is a global development. And I also saw, just in the news too, that the UK is moving towards, this was today, more of a proper framework for cryptocurrency. So, one part of the back of the mind to have is, I mean, you know, the 1970s, the euro dollar market developed in London, not in the US.
38:33 So, you know, this regulatory arbitrage, as some people call it, you know, that London, you know, has been, you know, fighting to maintain relevance in the financial front for, you know, you know, I think always, I mean, it hasn’t been sort of a global leader for a long time. But they do stake out like ground at the periphery like this at times. So, wouldn’t it be interesting if the UK, you know, I started having some of my companies go public in the UK.
39:08 Yeah. And then the US is all of a sudden, well, why are these American blockchain crypto companies going public in the UK? Like, shouldn’t we be doing this on NASDAQ? And then the next thing you know it, you know, the rules change. So, that’s what I mean when I say don’t count the US out and that competition is healthy.
39:31 You know, let these other places lead her now. It’s happened before, right? It’s happened before. Yeah, I can only hope that happens. I still remember on my first day on the swap book at Bankers Trust in 1993 when they were explaining to me what it worked, the euro dollar and the LIBOR, LIBOR stands for what?
39:50 London Interbank Offering, right? Why is that in London? Exactly, like this whole market evolved kind of under the nose of America and it became the standard. So yeah, it’s a great example of how something can be developed overseas. You know, there’s a lot of talk over here about crypto, but I don’t see much action, to be honest.
40:08 I just don’t. And I think a lot of times our Western governments are caught up with so much nonsense in the politics system that they can’t take action. And, you know, when I go to visit a place like Dubai, I was at the Future Blockchain Summit in Dubai last October. I’m going back this October and I was blown away by that place. I was just so impressed.
40:29 Yeah, me too. Me too. Me too. That’s incredible. And I actually had been there about 15 years earlier and I was like, meh.
40:36 And then you hear all the things about Dubai. Oh, it’s just a bunch of buildings and that and that. And you get there and you realize, like, that’s not true. There’s a culture there. I mean, I’ll be honest, and more people stop me in the Dubai Mall to say, hey, Brian from London Real than they do in London, you know?
40:52 No. Yeah, it was crazy. Left and right, the first day I got there, some guys stopped me from- Were you wearing that suit? Yeah, well, I wasn’t even wearing the suit. No, I think I was, actually.
41:00 But like, the first day I was there, some guys stopped me from Kuwait. They’re like, we’ve been watching you in Kuwait, and I was like, whoa, this is getting weird. But like, super educated population. One thing I said about Dubai is that, you know, you don’t see a lot of people, like when you’re walking around that mall in that city, Like people are there with a purpose. Nobody’s phoning it in in Dubai.
41:20 Whereas if you go to a city like London, people are here that are phoning it in. There, if you’re there, you’re there for a reason. Whether you’re a cab driver or you’re there in the service sector, you’re there as an entrepreneur. Everybody’s there, everybody wants to be there because this is a place of opportunity. It’s the city of the future.
41:37 I sat down with Dr. Marwan al-Zarouni who was working at Digital Dubai. Now he’s working on this outwardly facing to the world digital Dubai plan, where they wanna basically encourage any company to do business there, physically or virtually. I mean, they’re thinking way ahead of the game. You know, everything is completely digital there, legit.
41:56 The police department’s off issuing NFTs, and you’re in this place. And I pulled out my phone, Dan, and I was walking through the mall, and I recorded a vlog, and I say, I recorded the vlog, and this title came to me. Dubai is what America used to be. And I thought about- Yeah, I mean, there is some feeling about that. Something like that.
42:13 I thought about my grandpa who- From Hong Kong in the 90s. Yeah, maybe that. I just thought about my grandpa who just, he could go West in America, he could get lands, he could build a business that wasn’t gonna be the taxations and he could just go do things that would grow the country. And I’m just curious what your thoughts are on Dubai and the vibe of the UAE and all that over there. Yeah, I mean, Dubai is on fire.
42:37 I mean, you feel that it’s a business culture. people move super quickly, you know, I think Abu Dhabi is also very forward-thinking. Yeah, I really, I mean, I have the exact same shots that you do. I, in fact, I’m going to be working with Henson Orser, who is the CEO of VARA, which is the Virtual Assets Regulatory Authority Dubai, we’re going to host, they’re going to host, and I’m going to be involved with I guess we call it a symposium, a little bit of a teach-in. We’re going to be bringing a few of the CEOs of our quality larger companies to Dubai, and we’re going to have a fireside chat type of of a Sine 44 framework and really, the point is, just to show people there that the space is large, it is growing.
43:43 There are super legitimate large revenue producing businesses, you know, in the space. And I think they’ve been, they are the city in the future. I mean, the Museum of the Future, I’m sure you’ve been to as well there, that very cool building, but, you know, along with that there, I think that especially in crypto, there are people there, you know, who sometimes are peddling, and I do mean peddling a message that is not quite the right one or not quite, let’s just say, as legitimate a one as they should.
44:20 And so, I think we’re really gonna, you know, hopefully, you know, put, you know, showcase the quality of some of the businesses in the space and just highlight that by having some of the CEOs come and really explain what their businesses are, et cetera. But you’re absolutely right. I mean, you feel the energy, anybody you meet, they have the same feeling. And I would say it’s Abu Dhabi and Riyadh as well now. I know that’s a bit strange. Some people think, well, that’s not what they think of Saudi Riyadh, but it also is really moving. Again, not quite in the same way as Dubai and certainly not yet, but look, I think in that kind of environment, right? I like being in a place where people are forward-thinking. It’s positive, right? Anything is possible in Dubai. I mean, honestly, it is. I mean, it sort of feels that way to me. Yeah, all you have to do is look up and you can and see anything’s possible.
45:26 I mean, you know, in London, we probably have one of those buildings in Dubai. There’s like 200 of them. So yeah, and like you said, Riyadh as well, I talked to some people that just came from a conference there and they were like, wow, super educated, you know, young, but like really on point, you know, 10,000 people there, all on point asking great questions. And yeah, that whole area is really exciting. I’m glad you’re going over there because they could use a real dose of what you guys are doing.
45:55 And yeah, look, there’s still a Wild West component there for sure, and so, look, this is all to be continued, but I’ll be spending more time there. I’ll probably spend a couple months a year out there is my plan. I wanna ask you a couple more things. Just wanna let people know if they wanna learn more about your fun, one round table partners, then go to LondonReal.tv4 slash Dan. Like I said, we plan to invest in your fun via London Real Ventures.
46:16 People can learn more about that at LondonReal.ventures. Gotta ask you about AI, Dan. It’s kind of what everyone’s talking about right now. I think I read somewhere that you actually appointed someone inside your fund manager to kind of be the chat GPT person to find out how to integrate it into what you do. But I guess you could answer this on so many levels.
46:37 I mean, like you said, you’ve been a macro guy for 30 plus years. What do you see here happening in AI? Well, I mean, it’s like infinite. And that’s the problem is it’s so much all at once. right? Like it was nothing four months ago and you see that adoption curve and the chat TPT adoption curve is basically completely vertical and blows away like every other adoption rate of any other technology ever. And I think that was out on Twitter And maybe I’ve been, you know, retweeted that I think it really is so much to digest and handle.
47:22 We actually have, you know, some of the, one of our companies, Futurverse, which is a New Zealand-based company, they’ve integrated their own AI into some of the NFTs that they have. And it’s sort of interesting. They have a game and it’s like a soccer game and you have your player and your player, and this is if I have this right, you can take him to the gym and work him out and the more you work him out, the better that he will become on the playing field.
47:57 So there’s some algorithm in there that connects the amount you work out with, with how good a player it becomes. It’s kind of like a neat concept and it’s altered states machine is one of the Was you know is now rolled into future verse? They’re quite a few very smart developers in the space who can easily make the jump I’m talking about in the you know, blockchain crypto space And so we’re seeing that a little bit now But it’s so super hot I I, you know, my bias always is just to sit back a little bit and wait.
48:39 You know, I’m not really a venture guy. As I say, I like to see, you know, let them do get out and let me start to see who some of the winners are. In terms of application of AI to, let’s say, building infrastructure in our space, you know, there are going to be a few winners. who’s going to pivot the best into that space. I just, you know, we’ll let Andresen and Polychain and those guys, you know, pick the early, you know, the early winners and we’ll wait for them to get a little bigger. But yeah, so from an investment perspective, I’m waiting a little bit, but I mean, clearly, I think it’s so obvious. I mean, the impact that it’s going to have, It’s just, what do you do with it? It’s so much, right?
49:32 Yeah, it’s hard to get your head around. I got a bunch. It reminds me a little bit. I mean, it’s much more than this, but you remember in 95 when Netscape came out and I remember using Netscape and just thinking, oh my goodness, this is the greatest thing of all time. I’ve been more of an academic and I remember spending two weeks in the library looking for a ball. And here I could just punch it in the Netscape and oh, there it was. For me, I mean, that was, to me, I always think about my Netscape moments.
50:11 I mean, obviously, it’s having its Netscape moment. But that being said, Netscape isn’t So, he and I, the light bulb moment we’re having, but I do think one thing, I think the blockchain can act as, and there’s been some spread on this on Twitter, can act as a verifier, like we’re going to have trouble, you know, with so many copies, so many, you know, yeah, many different, I mean, AI can replicate almost anything, right? So maybe certain versions of things that are replicated end up going onto a blockchain, right, as the as the verify verifier.
51:00 Yeah, there’s actually a lot more crossover with AI and Web3 and blockchain and Metaverse than you would then you would initially see when you first look at it. And the more I look at it, the more I realize there’s a ton of crossover. And I would say you already have some good AI exposure with even animoca because they’re going to be creating these massive metaverses and AI from what I hear is already giving that a kick start. It’s already helping them create these massive metaverses that could take humans years. Now these can be created much quicker.
51:31 So in a weird way you probably have some exposure but I agree the blocking chain can be used for a lot of things. It can be used potentially to decentralize some of the tech if that’s possible to verify could be used even for humans to train it in a blockchain sense. I mean, there’s a lot of different things that we could do there. I’ve been going through my Rolodex and bringing in all my AI people to talk here and go deep. And I got more coming, people from MIT coming, Dr. Ben Gertzel from Singularity Net has already, he was here in 19. He was here in January. He’s back here in two weeks. And we’re looking at something than they’re doing as well as far as a new startup in AI.
52:07 So trying to keep my head around it. But yeah, I mean, zero to a million users in four days, zero to a hundred million users in two months. Man, it’s hard not to pay attention to that. And I play with chat GPT and it’s pretty eerie. And then I’ve been watching Terminator 2 lately as well.
52:24 And you know, it all means some sleepless nights, Dan. Couple of sleepless nights. Look, I can’t let you go without asking a couple of macro perspectives. So again, markets the last year, maybe finish up on this. I got to say, I harken back to my early days at Banker’s Trust.
52:40 I know you used to do a lot of business with the derivative guys over there, but I joined Banker’s Trust in September 93. Then four or five months later, I was 22 years old on the swap book, all right? So again, I was learning what LIBOR was. I had direct lines down to the Mercantile Exchange where I trade my Euro dollar futures to hedge out my swaps and to the Treasury desk. And then I think it was February 4th, 94, the Fed raised rates, and the whole four freaked out.
53:06 And I didn’t know what everybody was freaking out about, but we saw then rates have, you know, the biggest increase up until recently, where they went up a couple hundred basis points, as I remember, and freaked the markets out. You know, you’ve been through things like that, and so much more. How does that compare to what you’ve seen the last year, when we’ve seen rates go up 500 basis points, SVB, failure, and then deposits made hold? What are your thoughts on that, Dan?
53:32 Yeah, I mean, look, every every hiking cycle and with a blow up somewhere in 94 was Orange County. And then Mexico in early 95, right? The two year went from 3% to 8% in 94. Wow. And it was the worst year for bonds since 1929. 94 was. So I mean, I really did live that one. I think in some ways, we have it. And yet, I mean, this is a weird side go because I think the Fed, they made so many mistakes.
54:08 I wouldn’t say that was really the case in 93, 94. Greenspan, I think, navigated that pretty geniously. I think this Fed, again, it’s just looking backwards. They should have started probably hiking a little earlier. But they really overdid it.
54:29 And at the peak CPI reading is when they turn super aggressive. So I’ve said this a bunch of times, I’ve never seen a Fed that was making policy based on the two most lagging indicators we have, which is the unemployment rate and the headline CPI or you’d call it. I think they way overdid it and every quarter this year will have lower growth and lower inflation. But I don’t think that’s negative for the market state. liquidity that was unleashed with the failure of Silicon Valley is, I would say, potential liquidity is just enormous. I mean, they basically said, the 30% that you’ve lost in your bond portfolio, if you want to lend against that, well, that’s as if it were 100% collateral, that’s fine. So, they just potentially injected a few trillion dollars into the the US banking system just overnight. So, I see that liquidity is going into, you know, risk assets and the sort of slower boring assets, I would even say, that are more cyclical. I think just are slow. All those things that are interest rate dependent in the traditional economy, they will be slow and exert a deflationary force on the overall economy. So, I see in CPI certainly below 4 at the end of the year. I’ve been saying for a while, 10 years below 2.5. I think, you know, 2 years will certainly be below 4. It’s just a matter of how, I’m sorry, below, right? I think even below 3. I know we’re 4.20 to there, whatever it is.
56:13 When does the Fed actually relent and cut? It’s probably the second half, is my sense. But it’s disappointing, really, unfortunately, on a negative note like this. But I think the composition of the Fed is just wrong. They don’t really have any market guys. And so, we are biased, but they don’t really have any market players or active market participants.
56:47 It’s very hard as an academic or whatever it is to having not lived some of these market experiences to have a sense of what is the right thing to do. The leading indicators have never been, I think, is obviously pointed in one direction as we’ve had over the last three, four, five months. almost no question that the economy and growth will slow. Usually, it’s harder than that.
57:22 But I think it sets the table for actually a nice year in stocks in NASDAQ, a good year for Bitcoin, Ethereum, gold. And the dollar is definitely, I think, an entrenched fair face, not at a dollar collapse fair face, but in a, you know, gradual, you know, healthy sort of fair face. I could see certainly euro up another 10, 20%. So, I think out of their eras, I think we could, you know, still model our way through it, which is not a, you know, that’s not a happy message, but I think for asset markets, it’ll be fine.
58:03 Yeah. It’s not bad actually. Last thing is what’s it like raising another billion dollar fund? I mean, that’s something you did recently and now you get to do it again. Yeah. Has this time been different? Are the markets now helpful for that?
58:17 Yeah. What’s that whole experience like? Well, there’s a lot of opportunity now. When I first raised the first fund, I spent most of the time trying to convince people that there was a digital asset ecosystem and that there were companies with market value over $400 million and only 20 or so in 2019 and many people were saying to me, well, I don’t really see where they’re going to invest. The space doesn’t even exist.
58:48 I said, well, it’s going to. This is a 10-year life bond and over the next few years, it’s really going to exist and we want to invest in those companies. And so, now, there are probably over 150 companies with a value of over, you know, 400 million and that’s haircutted from the highs from last year. And so, you know, our focus has sort of changed pretty dramatically because the issue really now is getting those companies that want to be some of the CEOs that are really interested in going public, getting them into the public arena.
59:24 Again, I’ve been saying this recently, I know one thing for sure, and I don’t know a lot of things for sure, but I know for sure that five years from now, Coinbase is not going to be the only public crypto blockchain business in the world. It’s just not going to be that way, I mean, there’s a large business. And so we are going to be very focused on helping bring some of our companies to the public markets. And some of them, you know, need a little bit of help as well. I think, you know, on governance and basic corporate, you know, type functions, audit and finance, et cetera.
1:00:03 There, a lot of the companies are, you know, run by younger guys and tremendous growth. And now, we’re starting to have sort of what I would call big company problems. And so, hopefully, we’re going to be able to help shepherd them through the, and then two exits eventually. And so, as well as building, you know, a new portfolio of companies that we don’t have exposure in, as you mentioned, you mentioned some of them, but, you know, these are sort of the next blue chips, right? The companies that we’re going to be investing in.
1:00:40 And not the companies we’ve already invested in, but the next level for this fourth fund. So, look, the valuations are, you know, very much in our, I think we have, you know, excellent pricing power and, you know, I find that certainly outside of the U.S., the receptivity has been fantastic. You know, I don’t think it’s where our first close will be in July, I don’t think that will be a billion dollars, but hopefully by the end of the year. That’s fantastic.
1:01:15 An exciting time and it’s amazing how the ecosystem moves so fast and Dan you’re one-of-a-kind so I’m just it’s been incredible. It’s nice to be inside. But it’s true and it’s been incredible getting to know you throughout this wild market ride and just to see you pushing forward with another billion dollar fund and it’s super exciting and I know you plan on just introducing synergies between all of those companies and even if you only introduce small amounts of synergies you can create a ton of value for your portfolio companies it’s because it really is this key infrastructure so yeah it really is exciting what you’re doing and again nobody in this in this space is doing it and yeah super pumped for that so yeah really great to hear from you again people can learn more about one roundtable partners London Real that TV forward slash Dan like I said we’re in and really excited here at London Real ventures and yeah we just got to get you to London next time so we can sit down here and I have a cup of tea afterwards and yeah just wishing you the best and maybe we can hook up in Dubai sometime as well. And that’s it. So thanks so much Dan and we’ll see everybody else next time on London Real. Take care.
