Bitcoin, Silicon Valley, & The Future of Money (w/ Tim Draper & Mike Green)


MIKE GREEN: Tim, you’re the closest thing
to a scion of venture capital in Silicon Valley
that exists.
Third generation, and now you’ve brought your
son Adam into the business, as well, I guess,
your daughter.
TIM DRAPER: My daughter, Jessie, runs the
Halogen Ventures.
She only backs women.
MG: She only backs women.
Interesting.
And now I want to talk about what you’re doing
with your children and venture capital.
But let’s talk very briefly about your background.
So your grandfather– TD: Yeah, my grandfather
was the first venture capitalist in the Silicon
Valley, ever.
And my dad was a great pioneer of venture
capital.
He drove Silicon Valley forward in venture
capital.
And then I started a venture capital of 30
something years ago.
And my mission is really to spread venture
capital and entrepreneurship around the world
because I’ve seen what amazing things it did
for the Silicon Valley.
MG: So that’s actually an interesting idea.
So I’m a Silicon Valley native as well.
I’ve actually have seen firsthand how that
changed the environment.
But one of the arguments behind the success
of Silicon Valley is actually the concentration,
and networking effect of people being face
to face in Silicon Valley along Sandhill Road,
et cetera.
When your father and grandfather were doing
it, it was far less concentrated.
But it was much more military in nature, right?
It was tied to– TD: Well, my grandfather
was a general, but my father was again, military.
He fought in Korea for a little while.
But it wasn’t military.
I know a little bit about it because when
I got started in venture capital, I would
look for developments, new real estate developments.
Where I’d go in, and if one of the people
leasing it was called something software,
or something technology, or whatever, I’d
knock on the door and see if they were interested
in taking venture money.
So it was a whole different world back then,
and now it’s just the opposite.
We get deal flow from all sorts of people
from all over the world.
And we have to filter it to just those companies
that are extraordinary, or going after industries
that really need transformation.
And the best companies have this new technology
that can be applied to a marketplace, where
that market is currently served by bad service,
high cost, unhappy customers.
But you have to deal with them because they’re
a monopoly.
Or oligopolies.
MG: So that’s actually a fascinating insight,
right?
I mean, you come from an environment or background
where the capital was available, and needed
to seek out the ideas to one today, where
there’s pitches flowing in the door, right?
How does that change the industry and the
dynamic?
How does it change your role?
How do you think about that?
TD: Well, I think supply and demand constantly
are in flux in the venture capital business.
There are times when there’s a lot of money
available, and not that many entrepreneurs,
people willing to take the risk.
And then there are times when there are a
lot of entrepreneurs, like a new technology
comes along like Bitcoin, and suddenly, there
are thousands and thousands of entrepreneurs
who all say, hey, now I’ve got an idea, and
I want to go get you some money.
And it’s interesting how the dynamic swings
back and forth, either in favor of the entrepreneur
or favor of the venture capitalist.
But overall, we just tend to want to do deals
that are fair.
Where both parties are happy, because it isn’t
like it’s a quick hit, and you go.
It’s more like when we make an investment,
we’re with them until the end, whatever the
end may be.
And so we want to align ourselves with the
entrepreneur.
MG: So when you think about that, and you
think about there being thousands of entrepreneurs
that have opened up in the Bitcoin universe,
for example, how do you go through the process
of vetting an idea?
Or what are you looking for in an idea in
a nascent space that hasn’t traded its commercial
potential in the same way as say, social networks
did post Facebook, or even Myspace?
How do you think about what you’re actually
looking for in a venture capital investment?
TD: So we’re always looking for an entrepreneur
who is looking to transform one of those industries,
but has a new technology, or new way of looking
at it.
And it’s something that entrepreneur was specifically
put on the earth for.
It has to feel like this was meant to be.
Another way to look at it is, is this unique
enough to build a great, not just a business,
but an industry around?
And that is rare to come by.
And so we filter through a lot of entrepreneurs
who are doing things that are MeToo or something
it a little twist.
Where we’re looking for a complete overhaul
of an industry.
So we look for new ways of doing things.
So like this chair might have been– people
might come to me and say, hey, I got a new
kind of chair.
That is what I’m looking for.
I’m looking for somebody who says the idea
of putting someone at rest and comfortable
in a certain space.
Maybe it’s not a chair, maybe it’s a floating
device.
Maybe it’s something like you see in the Dune
movie or something.
So we’re really looking for those sort of
transformative ideas.
And that’s why when we invest, half of them
don’t work.
But we’re encouraging people to go ahead and
take those chances because for society as
society just moves forward much faster if
people take risks.
MG: You highlight this idea of taking risks,
right?
And ultimately, that’s what strikes me as
unique about the US model in venture capital,
right?
I mean, we take it for granted that people
are allowed to go bankrupt or people are allowed
to reinvent themselves.
People are allowed to start all over again.
In the history of the world, it’s a relatively
recent invention.
Limited liability corporations, and the idea
of consumers and entrepreneurs being able
to clear themselves of debt late 19th century,
right?
Does the unique aspect of Silicon Valley,
where so many people are capable of failing–
do you think that’s replicable in other areas
of the world or in other regions?
TD: Yeah, absolutely.
I’ve made it a point in my whole life to go
around and spread the gospel of an entrepreneurial
environment, a place where people are willing
to try things, and fail, and try again, and
fail, and fail quickly, and move on.
And I think that that ends up creating a much
more dynamic and exciting atmosphere.
China, until the new dictator showed up, China
was very much a free and open society, where
people were we’re creating on a regular basis
new ways of doing things, new operations.
And it’s happening all over the world now
we have the Draper Venture Network.
We have something like 30 relationships with
venture capitalists around the globe.
And they are all using our model to create
an ecosystem in their area.
And many of those have become quite successful.
And some of my biggest successes came because
I was willing to look outside Silicon Valley.
We backed Baidu and Skype, and they were in
entirely different continents.
MG: Right.
China and Scandinavia respectively.
So you see that culture of entrepreneurship
as spreading outside of Silicon Valley.
You reference China, and the change in the
political climate there.
Do you spend much time in China?
TD: Well, I did.
But then as soon as they were making it so
money can’t get out of China, I froze my investments
in China.
Because I’m not going to put money into a
country where I can’t get the money out.
It’s like the black hole of investment.
You know, I’m a fiduciary, I’ve got to take
care of the money.
I can’t just put money in and hope that someday
we get a new Chinese President who kind of
opens up.
Or we can’t hope that this guy has a change
of heart, and decides to either leave office,
or open up China.
You know, it turns out that throughout history,
I always thought it was freedom and free markets
that created the great countries of the world,
the great economic booms of the world.
And it is.
But it’s also honesty and transparency of
government.
If you have both, you have magic.
You have the United States over the last 200
years.
You have a lot of other countries that have
tried to do that and built Japan or South
Korea.
If you have one or the other, it’s usually
OK.
Singapore had a dictatorship, but they were
also very benevolent and somewhat transparent,
and people felt that they weren’t being treated
fairly.
And so if they feel like they’re being treated
fairly and they have a free market, then the
country booms.
But if you have free markets, but you also
have a corrupt government, more like what
India used to be before Modi came in, I think
you get poverty.
So the countries have to trust their leadership.
And they have to have free markets.
And then it’s boom, and then it’s huge economic
growth.
And everybody benefits.
MG: So I actually agree with that.
And it’s fascinating it does come from a venture
capitalist, someone who I don’t typically
think about as approach in the world from
a macro or a theoretical perspective.
I think of it as the founding principles behind
the United States.
We’re a nation of laws, not men, right?
Rule of law, not man.
And that’s the transparency.
You can look at the books, and you can say,
no, this is the law, this is what I’m doing.
Silicon Valley actually has played a role
in breaking some of that though, in the past
decade.
In particular, if I look at companies like
Uber, or look for companies like Airbnb, they
have made a point– Bird in the scooter space.
They’ve made a point to actually flouting
the regulations and the laws with the expectation
that if they make the product popular enough,
that it’s ultimately going to result in the
laws changing rather than their business practices.
Does that create risks to the environment?
Is there backlash?
TD: I think when the entrepreneur starts the
business– in Uber’s case, whatever– there
wasn’t a clear law.
Nobody had anticipated that we could push
a button, and have a car come to us, and then
we could go.
They were not really thinking that it would
be that easy.
And I think that’s true of most entrepreneurs.
When they start a business, there isn’t a
law.
There hasn’t been laid down a law.
And if they become enormously successful,
yes, then the people will decide on a law
that favors their service.
Because I mean, definitely, we’re all better
off with Uber.
It’s been how I’ve been getting around here,
around all the travels I do, and it’s an amazing
service.
And we’re all better off because of it, with
the possible exception of the taxi people.
But as a society, we’re way better off.
And the idea that now countries or states
or whatever are saying, no, Uber is not allowed
here, and allowed there, I think they’re making
a huge mistake by trying to create a weird
regulation on top of something that is an
amazing free market.
It’s not hurting anyone.
It’s actually benefiting society and encouraging
more growth in the economy.
MG: So just to push back on that for a second,
I agree with you that Uber is a phenomenal
service.
But I do wonder if that philosophy of move
fast, and break things, and presume that if
you create a wonderful service, that it’s
going to result in the laws being written
to favor that service or to respect the rights
of the consumer to experience a superior outcome.
TD: Well, people need to be able to experiment.
I mean, otherwise you’re stuck with laws that
are forcing people into the dark ages.
You don’t want to have a bunch of laws that
are all tied– we don’t want to be rigidly
tied to laws that were put on the books 150
years ago that make no sense today.
And it’s very rare for politicians to be up
on all the technology.
You saw Zuckerberg being interviewed by all
of these senators.
That’s a total disconnect.
They’re in two different worlds.
There is no way those senators would be able
to move the law fast enough to catch up with
where Zuckerberg is moving.
So you gotta let that happen.
You’ve got to let great things happen.
And a lot of those companies will go out of
business.
A lot of companies will get started, and it
won’t work out.
And you kind of go, well, you know, they were
going to potentially drive a new society,
and build some future world for us, but it
didn’t work out.
A lot of things have to come together to get
a Facebook or an Uber or Tesla or whatever.
A lot of things have to go right.
And when they do go right, then we’re all
better off.
I mean, the US has done this well.
They’ve allowed the Silicon Valley is to thrive.
There were lots of movements to try to put
laws down on the internet, and try to control
the internet, and have the government total
control over the internet, and tax the internet,
and all.
The US was brilliant in letting it go for
a while and seeing if, hey, is this hurting
anybody, and what’s actually happening here,
and what does the future look like here.
They were brilliant in keeping their hands
off, and maybe put a light touch here and
there.
That actually works very, very well.
When a country like China comes in and says,
Bitcoin is illegal, they lose all the entrepreneurs.
They go to Japan, where Japan says bitcoin
is the national currency, come on in.
Basically, when China clamped down, Japan
said, come here, we want you.
This is a dynamic.
It is a global dynamic.
And people are mobile.
They can move.
And entrepreneurs can move, money can move.
And I think countries have to recognize that
they’re in competition for the great minds,
and the entrepreneurs, and the capital businesses.
Just the citizens of the world, they’re in
competition now.
And they have to think about, hey, how do
we attract them.
And I think the Chinese government is just
thinking, well, I like what we’ve got, let’s
control it.
And that actually is a big mistake.
And I hope that they change their mind there.
But if they don’t, we’re not putting any more
money in there.
MG: So I deeply agree with you in terms of
the idea that we are in competition.
I’m thinking to the next dynamic of that.
Because you made a lot of very true statements
that described the way the world should work,
and the way the world has worked, give or
take, for the last 70 years.
And within the United States, for longer than
that.
Mobility of capital, mobility of labor, mobility
of entrepreneurs.
The unique feature of the United States that
I would suggest relative to many other regions
around the world was that it represented an
exit voice.
You didn’t like the way your government was
treating you, you could go to the United States.
And the streets, while not literally paved
with gold, we’re certainly paved with the
opportunity to behave in a manner that you
individually desire.
The opening up of the Western frontier expanded
that.
Silicon Valley itself thrived off the idea
that there was this crude tremendous amount
of talent and resources that came in through
the defense sector, and that was then liberated
in a variety of ways.
But doesn’t that create its own blowback feature?
You’ve gone on the record with being surprised
how states, sovereign entities have reacted
to Bitcoin for the most part.
That they have been fairly aggressive in terms
of the US increasingly.
So China, most notably, have become increasingly
concerned about the potential threat that
a bitcoin represents.
TD: Well, they may be calling it a threat
because they’re thinking, I’m losing my power.
Oh, I’m losing my power, so how do I get my
power back.
And that’s what China’s doing.
But I think the great countries of the world
are recognizing that this is a major opportunity.
By opening up, I mean, sure, they’re going
to lose– nobody’s going to want political
currency anymore.
They’re going to want Bitcoin, they’re going
to want other cryptocurrencies.
Down the road, when we can easily spend, or
invest, or do whatever we want with cryptocurrencies,
they’re frictionless.
They cost you less.
Just by that alone, just that they cost you
less, it’s going to be better for people.
And so they’re going to move to crypto, and
they’re going to go away from the political
currency.
They call it Fiat.
That’s the way it’s going to move.
And so the countries that are forward thinking
are saying, this is the way it’s going to
be.
So we’re going to make a huge mistake by trying
to cling to our old currency.
And that’s why you’re seeing the smaller countries
all say, yeah, we want Bitcoin, we want ICOs
here, we want blockchain.
We want all of these things in our country.
How do we attract those people.
Malta.
The guy who created by Binance, he was in
China.
And then China made it illegal for what he
did.
And it was a $10 billion business by then.
And so he said, well, OK, well, I’m going
to leave.
He went to Singapore, and Singapore got kind
of heavy handed with their regulation.
And so he went to Malta.
The great entrepreneurs, the new technologies,
the things that we’re all going to live by
in the future are all going to be attracted
by the countries who recognize that they want
these technologies.
And it’s worth it to make the sacrifice of
that control that they’ve always had over
their people.
And what’s really interesting is that political
currencies, these Fiat currencies, they swing
with the tide.
And I have a friend from Argentina who said,
my family’s fortune has disappeared three
times in my life, and I’m only 30 years old.
And so for every decade in effect, they’ve
had some currency manipulation, or government
disaster, or overinflation, or whatever that
has forced their currency to go into a downward
spiral, and his family lost their fortune.
Well, he looks at Bitcoin, and he thinks,
oh, volatility is nothing.
It’s generally volatile up, whereas all these
other currencies, the peso, is always volatile
down.
So I think that countries are going to recognize
this is going to happen.
It’s going to be a big part of our lives.
And I believe you $86 trillion is about how
much political currency is out in the world.
And in cryptocurrency, it’s like, $200 billion.
And I believe that that will swing almost
completely the other way eventually.
Because if you’ve got these two currencies,
you’re definitely going to want the one that
is global, decentralized, cheaper to operate,
frictionless.
You’re going to want that one.
MG: So it’s interesting.
Even in that description though, you’re describing
it in measures of Fiat currency, right?
So it’s 86 trillion US dollars is the global
stock of Fiat currency.
And $200 billion is the US dollar value of
cryptocurrencies.
TD: Right.
And if I were to describe it in cryptocurrency,
I would say there are 21 million Bitcoin,
and that’s it.
And that 21 million Bitcoin will take a bigger
and bigger share of the $86 trillion.
So there may still be $86 trillion out there,
but two thirds of the value of the currency
on the planet will probably be in Bitcoin
and other cryptos.
MG: So it’s interesting though, because if
I look at the complaint of the day– and I
think this is actually part of what’s driving
the underlying theme– TD: By the way, I like
that expression, the complaint of the day.
Because that’s kind of right.
When you see the news, it’s usually, the day.
They aren’t looking forward as much as they’re
saying, here’s what’s happened today.
And that is sort of what I hear, is the complaint
of the day.
Anyway, what’s the complaint of the day?
What’s today’s complaint.
MG: Well, my back is hurting me.
But the much bigger complaint of the day,
I would actually argue, is one of inequality,
right?
So there’s tremendous concerns about the level
of inequality, and that distribution of Fiat
currencies.
But if I look at Bitcoin, or cryptocurrencies,
the Ginnie coefficients, the measure of quality,
are far more expensive.
TD: Well, that’s only because it’s just getting
started.
But what it has done is it is improved inequality,
because all of those people who are unbanked
by Fiat– because governments and banks have
gotten together and created these regulations.
Where if you wanted to go set up a bank account,
you had $30.22, they would push you away because
they know that that bank account costs them
about $200 a year.
$200 a year just to comply with the regulations
on it.
So they keep moving the ladder up.
As they regulate more, they move the ladder
up, and they keep poor people down.
So suddenly, there’s a currency, those poor
people, all they need is a smartphone, and
they can be in the world economy.
And so it’s opened it up.
So all those people in Africa are now a part
of the world economy, because they can get
Bitcoin.
All those people in Indonesia can get Bitcoin
now.
Whereas the banks had given up on them.
Those island nations, all the banks pulled
out of those island nations in 2011.
And so they have no way to build their economy
if they don’t have a banking system.
So now they do.
They have this virtual banking system with
Coinbase, and ledger, and using Bitcoin.
So you are actually bringing the bottom up
much faster with cryptocurrency than your
idea that some people are richer than others
in one because they have a lot of this or
a lot of that.
That, I think, is what you really want.
You want poverty to go away.
Where you can get rid of the banking regulations,
and the relationship between the countries
and the banks, because what they’ve done is
they’ve moved that ladder up.
And all those big unbanked people are destined
to be poor if they didn’t have something like
Bitcoin to come and save the day.
MG: So the statistics on Bitcoin, as I understand
it, there’s 32 million theoretical bitcoins
that can be in existence.
TD: 21.
MG: Is it 21?
TD: 21 million.
MG: There’s 21 million, I thought, that are
currently in existence.
TD: No, they’re about 17.
MG: It’s about 17.
TD: And about three are lost.
So probably 14.
MG: So that leaves give or take one trillion
bitcoins or 1 million bitcoins left to be
distributed to the rest of the world, because
14 are accounted for.
Three of them lost.
21, I’m sorry.
So 4 million bitcoins to be distributed to
the entire rest of the world’s population.
How does that– TD: Because a million times
10– everybody is thinking Bitcoin, oh, that’s
such a big thing.
A Bitcoin is 10,000– what is it– eight decimals
of Satoshis.
10 million Satoshis.
So it’s like 10 million times a million.
So 10 trillion Satoshis are available for
the rest of the world.
But that isn’t really the way it’s going to
work.
MG: Explain how you think it will work.
TD: Because this is a free market for all
currency today.
I mean, I tend to move my dollars into Bitcoin,
because I think, well, why would I want this
currency that’s tied to some political force,
when I have a currency that is going to be
frictionless and global.
I would much rather have a global currency
than one that is sort of tied to a political
force.
We’re forced to only use our dollars where
the US has friends, and that would preclude
me from using it in certain other places.
And if I’m in another country, I’m in Japan,
all I’ve got is yen.
And the yen isn’t really taken anywhere else.
And if I’m in Europe, it’s all euros, and
it’s really not taken anywhere else.
So this is global and open.
It’s just a better currency.
And there is a disconnect in the amount of
dollars that people have, and there’s a disconnect
in how much Ethereum people have.
And different people have different amounts
of different currencies.
It’s just that all those currencies are going
to be used for spending, buying things, doing
whatever they do– investing.
Big part of it goes to into investing.
And the way I’m looking at it is, yeah, I’d
rather own Bitcoin now, because my belief
is that Bitcoin is going to be one of the
great currencies of the world.
Maybe not the biggest, but it may be the biggest.
And so I’d rather own that, because I know
there are only 21 million of them, than something
where it’s tied to some government, and they
can print as much as they want.
MG: So ultimately, the reason why the government
prints though– or that we have governments
with the taxation and redistribution function,
which is what government spending is, is that
it provides a mechanism for the distribution
of that, right?
If you have 14 million bitcoins that are held
by those who have no obligation.
TD: That can be done much more efficiently
now.
Because with bitcoin– You know, the government
has to operate all of these welfare, and health
care systems, health care insurance, and social
security, pensions, the whole thing.
The government is trying to manage all of
those.
Well, they would be much more fairly, and
honestly, and straightforwardly managed if
it was all done with Bitcoin on the blockchain.
The blockchain is a perfect ledger.
Keeps perfect track of everything.
And you build in smart contracts with people,
and that could be the insurance programs,
and suddenly, you have all of those things
completely fairly, honestly, and straightforwardly
taken care of for people.
So what you’re saying the government does
can be much better done with Bitcoin and all
the associated technologies around it.
You know, the Star Wars guys, a Lucasfilm,
they have to pay 15,000 people for a Star
Wars movie.
And they give them each– the median check
is something like $3.82 for the lighting,
the assistant to the assistant of the lighting
guy.
And that’s like a median check.
It costs Lucas Lucasfilm $7 to send out each
one of those checks.
But with Bitcoin, all they have to do is give
everybody a wallet and just drop it right
into the wallet.
They say, hey, we did a billion in the first
week.
Here’s the billion, where does it go, where’s
the waterfall.
You know, I was trying to do this with my
venture fund.
Turns out it’s still very complicated to do
because we would have to change it from Bitcoin
to dollar and dollar to Bitcoin and all that.
But eventually, I want to be able to raise
a fund that is all Bitcoin, invest it all
in Bitcoin into a bunch of different companies,
and have them pay their employees and suppliers
all in Bitcoin.
And then no accounting fees.
And it’s done automatically.
And it’s all built into a smart contract,
so that if one of those companies gets sold,
I push a button, it just shoots and all of
their Bitcoin wallets.
And it just turned out that it was going to
cost me millions in accounting fees because
what the accountants now have to do, which
I’m hoping that the government wakes up and
change, is every time there’s any kind of
a transaction, they have to calculate the
calf of a gain on that Bitcoin or loss on
each transaction.
And so I think that once people understand
that it is a currency, and it is much more–
it has to become more stable for the governments
to feel like that’s an OK thing to do.
But it’ll happen.
It’ll be there.
MG: It’s interesting though, because what
you describe is a situation that requires
everything to switch basically at the same
time, right?
Because imagine I’m one of your employees
at this company, and you’re paying me in Bitcoin.
Well, what you’ve done is you’ve pushed the
cost of doing business in two separate currencies,
where 95% of my consumption basket is in US
dollars if that happened.
TD: So far.
I mean long term– MG: My local geography
is going to consume it is going to create
95% of my consumption basket for almost any
country.
Those unique island countries that you talk
about, their most interesting feature is the
fraction of their economy that is conducted
in foreign currencies already.
So if I’m Malta, the important currency for
me is actually the euro, which I have no control
over in terms of monetary policy, etc.
TD: So I think for today, for right now, you’re
absolutely right.
But it’s going to be just as easy to spend
your Bitcoin as it is to spend your dollars
once all the engineers that I’ve run into
display to the world all the great things
that they’re going to be able to do with Bitcoin.
And so it’s going to be very easy to spend
Bitcoin in one place or another, or go to
Starbucks, and just use your phone.
You won’t even have to hold around a credit
card anymore.
So I think that we’re headed toward a time–
it’s an easy thing to say that right now,
yes, it’s like 99% of the things you buy really
have to take Fiat currency.
But it’s not going to be long before you know
it becomes 50-50, 70-30.
Eventually, it will be a lot.
Actually, eventually, it will be easier to
spend and invest investor Bitcoin than it
is to spend and invest your dollars.
That’s not true today.
MG: I think its going to be–and so this is
maybe a major point of disagreement.
I think it’s going to be a lot harder than
you are perhaps thinking.
Because the technology– and this is where
I was going with the earlier line of questioning–
the technology or the idea that this can be
done without acknowledging the regulatory
cost burden– the reason a checking account
costs $200 to maintain, as you pointed out,
is the regulation of the financial system.
The regulation of the financial system is
in place because of the perception of the
need to actually protect those who are banking,
whether it’s FDIC insurance fees, the actual
cost of record keeping, et cetera.
We can lower all those costs without leaving
a Fiat system.
TD: You do know that your bank is being hacked
all the time.
And Bitcoin, the blockchain of Bitcoin, has
never been hacked.
MG: Yeah, the exchanges.
TD: People around it have been hacked.
But no one has hacked the Bitcoin blockchain,
knock on wood.
But no one has hacked that.
And so when I look at my Bitcoin versus my
dollars, my Bitcoin is more secure than my
dollars are.
My dollars are in a bank that is constantly
being hacked.
And so we’re looking and saying, you really
think that’s safe?
You really think all that government and regulation
is really helping you become safer?
It’s not.
You’re safer on the Bitcoin blockchain.
So it isn’t safe.
That money is no longer safe.
And actually, Bitcoin came at the perfect
time, because now, the banks are playing whack-a-mole
trying to keep these hackers away.
And suddenly, there’s something that the hackers
can’t get into.
MG: It’s interesting.
I think there’s going to be a much greater
pushback in general– I think you’re starting
to see this– against the Silicon Valley approach
of move fast and break things, precisely for
as you pointed.
The countries, particularly larger countries
like the United States, value the power and
control that they have.
TD: Yeah, I think they do it at their own
peril, though.
And I think there’s a really interesting test
you should run.
Go around and ask 30-year-olds if they’d rather
have Bitcoin or dollars, and they’ll all say
Bitcoin.
Ask 50-year-olds if they’d rather have Bitcoin
or dollars, they all say dollars.
So I think we’re seeing– and as the 30-year-olds
age, they’re all going to be moving toward
crypto.
So technology eventually becomes a part of
our society, because it’s better.
It’s just a better way to operate.
And eventually, that’s going to happen.
And so the question is, if you’re a politician,
or a government official, are you going to
get in front of that, or are you going to
try to protect against it.
And if you’re going to try to protect against
it, it’s at your own peril.
Your constituency is getting older, and will
die off, while the other guy’s constituency
is thriving, is going to grow and thrive.
So the crypto constituency is going to continue
to thrive.
MG: I think that’s going to be interesting
to watch.
I think we’ll have to revisit that.
TD: I wouldn’t watch.
I would participate, because this is a much
better world.
The world where crypto is everywhere, we’re
all a part of this world, that is a much better
world than the fight the world, the tribal
world that we’ve had.
And I would say participate.
The best way to participate is just go get
a coin based wallet, or get a ledger.
And get that feeling of like, putting it in,
getting your Bitcoin downloaded onto the ledger,
and then going, oh my gosh.
And compare this, the ledger, to that big
huge building with all those people with their
fancy clothes coming out of the building that
you’re paying to build that bank.
Here, it’s just like, that’s my money.
And it’s a whole new way.
You do it once, and you go, oh my gosh, I’m
looking at the future of money.
MG: So I think you just told me a variant
of, you can’t win if you don’t play, which
is the lottery model.
TD: It’s not just win.
It’s just, this is a new society.
And you want to get out in front of this new
society.
You want to be a part of this new society.
Or do you want to be a Luddite?
The Luddites died off, didn’t they?
I think they died off.
MG: There were victories and there were losses
for Luddites, right?
So I actually advocate the same thing.
I argue for people in Bitcoin to what I call
get yourself to neutral.
Which means at minimum, having some participation.
And some ability to approach it from a somewhat
objective standpoint.
If I’m sitting fully on the sidelines, then
I’m rooting for it to fail.
And if I’m overly invested in it, then I’ve
perhaps allocated too much of my capital to
it.
I don’t find myself — TD: Interesting.
But there is also the chance that I’m right,
and we do become a Bitcoin or a cryptocurrency
world.
In which case, your concern was that there
would be people who got super rich on Bitcoin.
Well, I think they will.
And so if you do a Monte Carlo simulation
here, you would be very heavy in Bitcoin,
because even if 50-50 that I’m right, it’s
huge for the future.
MG: So I think that’s actually part of the
challenge.
Is you need to evaluate what you think your
underlying assumptions are.
If you think it’s 50-50, then 100% you’re
correct, right?
There is also an issue of, if Monte Carlo
analysis the right way to think about this.
And it’s important to understand the Monte
Carlo analysis assumes that you have the ability
to replicate the trade over and over and over
again.
There is no sunk cost in a Monte Carlo analysis.
That’s not the way the world works.
The world is linear in time.
And so a Monte Carlo analysis– TD: Linear
in time, but it’s geometric in technology.
And I think that’s why a lot of people miss.
That you get a geometric expansion of technology.
It gets better, and better, and better, at
a faster, and faster rate.
And that was where Marx was so wrong.
Karl Marx was so wrong where he said, we’re
all going to run out of food, because the
population is growing geometrically, and the
food is just growing linearly.
Well, he was just so wrong because he didn’t
take into account that there are all of these
interesting people who figure out how to make
better food with less effort.
In fact, we use less and less of our land
and our human resources to produce our food.
So he was so wrong.
He was wrong on everything.
And somehow, still, people follow him, and
thinks socialism works.
It just doesn’t.
It hasn’t and it doesn’t.
MG: So that was actually Malthus, not Marx.
Marx described the fact that the cost effect–
TD: It’s Marx.
MG: No, it’s Malthus.
TD: I studied this stuff.
MG: I did too.
Marx’s issue was that the cost to capital
was going to continue to rise, the factors
of production would become increasingly–
TD: Well, it was one of his.
MG: He was not worried about the loss of food.
TD: No, it was Marx.
Anyway, look it up.
MG: If we actually take that analogy though,
and push forward, what percentage do you put
on the idea that Bitcoin in a useful period
will replace Fiat currencies?
TD: I made one prediction and that was by
2022, one bitcoin will be worth $250,000.
And I did that because I think a lot of these
technologies are coming to the fore, and it’ll
take maybe a little while for people to adopt
them, and to start using them.
And it might be like 2023, but it’s in that
range, where people start to easily spend
it, easily invest it, easily put to use as
easily as they do dollars now.
And as soon as that happens, there’s going
to be a huge shift, because who’s going to
want to hold onto political money when you
can hold on to real crypto money.
MG: When I think about a forecast like that–
I mean, effectively, you’re describing a scenario
in which the total value of Bitcoin rises
to something like 4 trillion US dollars.
TD: So $4 trillion, that’s like, 5% of all
the currency in the world.
I think that’s pretty reasonable.
MG: Interesting.
From that type of point, and when you think
about that type of wealth, and the concentration
that that creates, how do you engage in the
process of redistribution?
How do you make sure that somebody in Africa,
who can’t afford an ASIC, and who can’t afford
the electricity- – they barely have solar
into their facility– they certainly can’t
run something at 2,500 watts, which is what’s
required for running a bit mine or an Antminer,
I guess it is, actually.
How do they get their hands on a Bitcoin or
a Satoshi?
TD: Or a bunch of Satoshis, yeah.
Well, there are lots of ways.
But they will trade their currency– they’re
doing it now.
Because they don’t trust their own governments.
Their governments manipulate their currency
the time.
So if you’ve got a Nigerian naira, and you
need to trade it for South African rand, right
now, it’s almost impossible.
You probably lose 40% of your value when you
do it.
But we have a company called BitPesa.
And they turn it into Bitcoin over here, they
move it over here, they turn it back into
rand over here.
So they are already in the process of starting
to use Bitcoin there.
And they will.
It’ll spread throughout Africa, it’ll spread
throughout Indonesia, South America– all
the places where governments have kept their
people down.
All of a sudden, you’re going to see this
whole new economy.
MG: And who brings the force to the system?
TD: And by the way, I think that’s the way
it happens, is their economies rise.
It isn’t up to the wealthy to pass their money
to the impoverished.
It’s up to the impoverished to have an opportunity
to grow an economy, and build it.
And the wealthy can invest in that economy,
and make that more of a wealthy economy.
And I think that’s a better way of looking
at it.
There is give them a fish, teach them to fish,
and then invest in their future.
And I think that’s the most important thing.
MG: So if I stick with that example, the role
of the Nigerian government, or the role of
the South African government is in part to
provide a rule of law that is paid for by
issuing their own currency.
Who pays for the force system?
Who pays for the contract enforcement?
It’s great to know that it shows up on a ledger
that is invaluable.
TD: Sure.
MG: Wrong word choice, but it cannot be hacked.
But who enforces the rules?
TD: Well, that’s going to be an interesting
thing.
Over time, it probably won’t necessarily have
to be some dictator with a bunch of guns.
It might instead be some software engineer
who’s created a new form of governance of
their currency.
You’re starting to see it happen.
Ethereum was created as a focus on smart contracts,
and they’re trying to open it up that way.
So it was sort of a Bitcoin with some smart
contract.
Well, then Thasos came up with another form
of government that was not tied to the miners,
but is tied to proof of stake.
And others will start coming up with other
ways of governing that kind of thing, how
the rule of law will work.
In a smart contract, it’s going to be a fixed
law.
Because if you and I make a deal, and it’s
in a smart contract, and you win the bet,
it’s going to show up in your account, and
I have nothing to say about it.
And that will be a form of government.
The great thing about it is it’s going to
be transparent, it’s going to keep perfect
records.
It’s going to create enormous value in civilization.
Some of the very poorest countries are going
to rise, because they’re actually going to
be the first ones to use it.
It’s like China didn’t have to have landlines,
they just jumped straight to a smartphone.
Because they were, what’s the point.
We don’t need that.
We can communicate through the cells.
So it will be very big rises in other parts
of the world.
And I think that’s going to be awesome.
And then the borders, and the fiefdoms, and
the ways that we’ve run our governments, it’s
like, who’s going to make those rules.
Humanity is going to make those rules.
And imagine this.
Instead of the way we elect our officials
now.
It’s just sort of money, union money, or the
corporate money that elects these officials.
Well, it turns out with this new form of currency
and the blockchain, you can start thinking
about things like a liquid democracy.
Where I say, look, I believe what he believes
for whatever– marijuana.
And I believe what he believes for gay marriage.
And I believe what she believes in lowering
taxes.
And I believe what he believes in putting
more infrastructure in.
And so I give my vote for each of those to
you, and then you pass them off to other people.
And then they all consolidate around some
leader, who is just really into an issue.
And I think that turns out to be a better
way of long term organizing the planet.
And we don’t have to organize it.
It can be just slow and open.
And I think the fiefdoms are going to be very
instrumental in having this happen because.
They’re going to compete for us.
More and more of governance is going to be
virtual.
It’s not going to be tied to a landmass, it’s
going to be virtual.
And so there’s no reason that your health
care insurance has to be done in one piece
of landmass.
No reason why your pension has to be managed
just in one landmass.
Ideally, you have multiple governments all
competing to provide you various services.
MG: So if I inhabited a virtual world, I would
agree with that.
But I have a corporal existence.
My body occupies the vast majority of my caloric
expenditures.
And the structure of the inputs into my body–
my fingertips, my eyes, my nose, et cetera–
exist in a physical landmass space.
That physical land mass space has to be governed
in one form or another.
And putting it on a global basis, or putting
it into a virtual world, there’s no real enforcement.
TD: This is how that part may work in the
future, which is, let’s say your corporeal
mass is– right now, it’s in Las Vegas.
But where do you live?
You live in– MG: San Francisco.
TD: San Francisco.
But you’re here for a couple of days.
So a couple of days worth of your landmass
taxes would probably be paid here, and the
rest of it would be in San Francisco.
Or if you travel a lot, you would pick up
based on different places that you’ve been,
and you’d pay those taxes.
And those would be only the taxes you potentially
would pay for– the landmass.
You could potentially have the virtual services–
the ones that could be done virtually don’t
have to be corporeal.
They don’t have to be here.
They can be anywhere.
I mean, I’m sure you manage your money in
different places around the world.
Or I do, anyway.
And they don’t have to be tied to– they don’t
have to be like living on top of me or in
my little tribe.
They can be outside my tribe.
MG: So the challenge, I guess, would come
back to this general observation, though.
That if that’s true, which is effectively,
a very libertarian philosophy.
TD: It’s not really.
It’s a new way of looking at governance.
I believe in governance, and we’re better
people because we have governance.
But living in California, you know, our government
is sort of gone off the rails.
If our education has gone from first to 47th
in 50 years.
Our business climate has gone from first to
50th.
Our quality of life– we have the best weather,
and the world quality of life has gone from
first to 50th.
We used to spend 28% on infrastructure, now
we spend 3% on infrastructure.
It’s gone off the rails.
But they know.
They’ve got great weather, and they have a
monopoly, and they can do whatever they want.
And that’s kind of what we’ve let them do.
And I would say that there’s no reason that
they shouldn’t have to compete for you, for
me, for all of the people not of just the
state, but of the world.
MG: Inherently, I completely agree with you.
Actually, I’ve said this many times.
The unique feature of the United States, and
what it changed about the world was that it
actually gave people an exit voice.
If you did not like the way the government
was treating you, you could get up, and go,
and you could go to the United States.
TD: And if you don’t like one state, you can
get up, and go to another state.
There’s some value to that, too.
And as more of that part of governance becomes
more local– like the landmass part, build
out physical infrastructure.
Get good water, get good maybe electricity,
all of that could be privatized, too.
Then that’s fine.
But that’s going to be a very much smaller
part of government spending, of our taxes.
And the rest of it, I believe, will be handled
virtually.
Things can be handled virtually, a lot of
it.
For a pension, I don’t have to use somebody
who happens to live in my hometown, or even
my state, or even my government, my federal
government.
I could use somebody else to manage my pension.
Well, why not?
Why don’t we let that happen?
That should be open.
And that isn’t libertarian.
I’m still saying, hey, I have a pension, and
I’m paying into like a social security or
a pension.
That doesn’t have to be in one place.
Humans, they used to be a little more corporeal.
Now they’re mobile.
They can cross borders.
MG: Yeah.
So the data unfortunately, points in the opposite
direction.
TD: We’re more mobile.
MG: The data says the exact opposite.
That we are significantly less geographically
mobile today than we were 50 years ago.
TD: What?
MG: Yeah.
TD: No.
MG: Yeah.
TD: No, people travel a lot more.
And they travel virtually a lot.
MG: They do travel virtually a lot more.
But the data is actually extraordinarily clear
on this.
People are physically far less geographically
mobile than they were.
Look at the state of California.
The state of California’s population.
TD: You mean they don’t move as much?
They don’t move their– they go.
They travel a lot more.
They may be more like, I don’t know, maybe
more loyal to their country.
MG: It’s not necessarily more loyal.
TD: I know there’s a lot more travel there
is now than there was 50 years ago.
MG: The sheer quantity of travel miles is
absolutely higher.
But it’s not the same thing.
TD: And communications is much higher.
Across border communications is much higher.
I’m trying to figure out what you’re saying
we’re less mobile at.
Meaning we take one residence and keep it
longer?
MG: Meaning that you actually are more likely
to live in the city, state, county that you
were born in today than you were 50 years
ago.
TD: Oh, that’s interesting.
MG: Dramatically higher.
TD: That’s interesting.
But you are also able to travel more.
And you will move if like, you get stuck in
California, and you realize, hey, we got to
get out of here.
MG: Out of California.
So as we think about that dynamic of geographic
mobility, and it’s reduced in some ways.
And as you point out, travel has opened up
regions and experiences that other people
can have, where do you think the world looks
a differently for your children and ultimately,
your grandchildren?
We started with a discussion about the fact
that your son, Adam, and your daughter are
involved in venture capital as well.
How does their world look different from the
one that you started by knocking on the doors
of software companies?
TD: So I think that they are going to be more
mobile.
But as you say, they might actually just stay
in California.
But they are the most itchy to get out of
California because they do realize how bad
it’s become.
But their future is very bright.
As I believe is the future of most of the
people around the world.
I think their world is much more integrated,
it’s a much bigger melting pot than my world
was.
Their best friends can be from anywhere in
the world, and they are.
And that was different from– my best friends
were all pretty much very close to me.
I grew up with them, and it was a pretty tight
group.
Their best friends have are coming from all
over the planet, and that is a new dynamic.
It’s one of the things one of the reasons
that I believe that the planet goes away from
the way we’ve run for so many centuries.
And us against them, the fiefdoms.
The tribalism.
The fight between Giants and the Dodgers,
whatever it is.
There is a new way of looking at the world,
and it’s much more inclusive.
Also, the problems they look to solve are
more global.
And the opportunities they see are more global.
So it’s going to be, I think, a very bright,
bright future for them.
And I think for all the people around the
world, we’re going to generally have a much
brighter future.
And people don’t really believe that, because
they watch the news, and they think everything’s
going wrong.
But all you have to do is look back 50 years,
and think, well, most of the world didn’t
even have indoor plumbing, or electricity,
or whatever back 50 years.
Or cars or planes– there were very few of
those things that were available.
Certainly not smartphones.
And so go forward 50 years, you’re going to
see some amazing things.
They’ll probably be flying from place to place,
and just they might even only have to think,
hey, I want to go to Vegas.
And boom, they’re here.
Anyway, great to be on your show.
Thanks so much.
MG: I appreciate your taking the time to be
with us.
TD: The most unique interview I think I’ve
ever had, except for one that I had with a
high school kid.
MG: That compares favorably.
TD: Yeah, absolutely.

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