Dead Cat with Jeff John Roberts and Teddy Schleifer
8:26PM Jul 5, 2022
Speakers:
Eric Newcomer
Tom Dotan
Teddy Schleifer
Jeff John Roberts
Keywords:
crypto
people
spf
sam
regulation
big
regulators
coinbase
industry
jeff
money
coins
dollars
company
andreessen
teddy
peter thiel
robin hood
banks
donated
Welcome everybody welcome to dead cat is newcomer my co host Tom diaton is here we're going to talk about crypto. We've got two guests who I will introduce in one second to set the stakes bitcoin is down 60%. This year Aetherium is down 72% comparisons to the.com Bubble are ubiquitous and like any financial crisis, you have the central government trying to pick up the pieces. But in this case, the central government is seemingly one man Sam Venkman freed the CEO of crypto exchange FTX. You know, FTX gave this company block phi A $250 million credit facility and is now trying to scoop them up in sort of a fire sale SBF as he's known kick the tires on Celsius before walking away is reportedly looking at Robin Hood. So there are all sorts of roll up plays going on right now to help us understand that. We've got Jeff John Roberts, the crypto editor of Fortune Magazine and author of Kings of crypto here. And we've also got returning podcast guests, Teddy Schleifer, or reporter Apoc, who is a bit of a SPF whisperer, I think. Yeah. Thanks, guys. Thanks both for coming
on. And great to be here.
Thank you. I believe the term was obsessive,
obsessive. That's not.
That's what you were saying.
You got to mention obliquely Teddy in a Bloomberg profile about SBF I believe when they said during his daily routines, he's emailing with reporters from Fortune and that was it fortune. I know, I know. PUC was one and I was like, I don't believe there's anyone else at PUC that was you? SBF. Right.
I do not know. I mean, he got he also knows my colleague. Okay. But, but sure,
this sort of SPF roll up, I gave some of the headlines. But what stands out to you here? What are the key things happening right now in crypto world? And why? Why is he is he doing this? Because it's you know, it's a money making thing? Or it's to save the crypto world from collapse sort of strategy, or what's your sense of what's going on here?
Is it altruism or capital?
Yeah, I think he'd probably like to say it's altruism. But I mean, I think at the end of the day, you know, I don't think you do stuff like this out of the good of your heart, it is in his interest to sort of stop the bleeding. And, you know, the question is can he backstop at all it was some wondering because there's, you know, just for back background, you know, this all started with terrorist collapse and has been this horrible downward spiral with like Celsius, you know, being exposed, as you know, over leveraged and then, you know, block fives mean, trouble, you know, remember, these are like the darlings, these are some like the, you know, the blue chip names of the crypto sector. So this is not good. Can
I just quickly button for a definition here, so, Tara, that it's collapsed, that was one of the stable coins, which was supposed to be stable, which it clearly was not, Celsius was a crypto lender, right? That was
like go park your money, get 18% return, you know, which obviously, in a 1% macro economic environment was not going to hold up and they just kind of like, overextended themselves, and then, you know, block phi, they were slightly more respectable, you know, borrowing at 8% returns, and, you know, they've just caught you know, they put out a lot of positions, their internal lending their stuff, but they put a lot of their funds into something called stake to eath which is basically like a locked up term deposit and but locked in a way that you can't call the bank manager. So there's this massive liquidity crises and you know, people are angry, you know, this calls for the Celsius CEO to go to jail. It's ugly out there. But you know, so far, SPF just seems to kind of, you know, be able to walk above it all and somehow stay solvent. So did as
we do anything with Luna, the Terra Luna collapse or he said that
this is another stable coin. No, I
think he avoided it you know, recall, you know, terror was the with is this idiotic mechanism to try to peg a currency but just with it was kind of a Ponzi scheme backing it up as long as was going up at work.
Can I ask, can I ask this question? Because I'm, I'm certainly not an expert in kind of the mechanics of crypto here. I mean, I mean, Jeff, I mean, is that or when when we say SPF, there's a distinction right between FTX right. And Sam, Sam is doing some of this stuff personally. Right. Like, like the Robin Hood steak. That's not the corporate that's that's like Sam banquet. Oh, yeah. He
has like a personal way is a fun that's doing it right.
I'm not totally clear. There's like LME to research, which I understand to be his fund. And there's FTX but I mean, he's the majority owner of it, so I'm not sure but he's kind of like the hand behind it all. But that's my question. But that's, you know, a better
it's just fascinating that you can have like, you know, you can have the kind of a leader in crypto who kind of is able to use their personal balance sheet to make, you know, investments in other crypto companies or other I mean, I wonder what the conflict of interest rules here are and it's a usual, right? It's not as if like, Jeff Bezos is personally investing in various Amazon competitors or things like that.
Well, I Bloomberg reported that I think it's they peg SPF swell at like 8 billion right now. I mean, who knows? Well,
yeah, I'm very curious, obviously, with every crypto gazillionaire, like how liquid these people are, right? I mean, what is that? Is that based on the last FTX valuation? Is that based on, you know, where Sam's money actually is parked? I mean, obviously, he's spending an extraordinary amount on a ton of the things. I'm covering politics and philanthropy and stuff like that. And I've been very curious about how the precipitous fall in his net worth, at least in theory would affect these sorts of ventures. But I don't know. I mean, I mean, it's interesting, you look like the Bloomberg Billionaires Index, how they, they have these interesting kind of confidence ratings for how confident they are. Eric, you may remember these from from being there just about, like, how confident someone is and you know, what, Jeff Bezos is worth what Elon Musk is worth. And the crypto people I feel like the confidence ratings are always all over the place.
They have a two star on this on.
What a great system. I didn't realize they did that. I should do that. Yeah. Oh, that's good. It's good.
Ratings are much better. I
think it's new. I think that's relatively
smart. I mean, this is gonna go off on a tangent, I don't think we should go down. But just for our listeners out there, billionaire wealth assessment,
if it's not based on majority, public company owned, is a huge amount of bullshit. And people sort of people really should know that, like the the Peter Thiel net worth calculation, like, definitely had to be adjusted by when, like the tax returns came out that showed about his Roth IRA, which I don't think was, was anywhere accounted for. I generally assumed that like, like, I think Jeff Bezos is probably worth around whatever they have met $200 billion. That's based on his stake in Amazon. And that's publicly disclosed, like, I'm sure it's ballpark. Right. But lots of other people. I wouldn't be surprised if how do you really know how much John Doerr is really worth? Like? I mean, it depends on how right we'll do a whole separate episode, because I have a
lot of thoughts. But,
but But going back to SPF for sec, Reg, Kryptos, even more of a black box, because, you know, we know how much a rough idea of how much trading profits FTX the platform might have, but how much that goes into SPF pocket. And also in the case of crypto and treasury management. It's like one day he's like, has X amount of Aetherium and Bitcoin, which was at 60, you know, 67,000. Now it's at 27. How, like, you know, did he How much did he sell and maybe flip into stable coins? Or even dollars? And when did he do it? And that's totally opaque. Like, we know, like, Amazon shares are down basis as well, it's gonna go down, and we have a rough idea how much but you know, any we know when he sells them, but in the case of like, the crypto cap
file if you sell a public company, right, but you don't if you own a crypto,
and for a luminary like SPF for him to sell, you know, a significant stake in any cryptocurrency is probably going to have an effect on the market because it would show some sort of lack of confidence in it. So it's extremely relevant and important to know how often and at what level he's holding any of these coins, right? Yeah,
well, I mean, this current catastrophe is bringing, as always calls for more transparency to like, what the hell's under the hood? How leveraged are these companies and, you know, I'm just hoping in the next crypto growth cycle, there'll be new rules in place or best practices because now it's like, you know, cowboys and black boxes and who knows what's what's going on.
So I want to circle back to this idea of sandbag been freed as kind of the de facto whatever backstop or almost FDIC of the of the exchange world and maybe broader crypto world. You know, we kind of asked this question of is that altruism or is it you know, him just kind of swooping in for what could be savvy investments or acquisitions? I mean, what have you seen so far in these moves? Let's look dive into the block phi one, because that one is fairly controversial. What do you see is, you know, the state of affairs with block phi and you know, FTX is and bank and free its decision to want to acquire this thing.
There's also that $250 loan, which factors into it somehow, I assume that secured by by block fires, you know, non liquid assets. But in terms of the amount of meta structure, what he's up to, I mean, yeah, obviously, this could help stabilize the current chaotic conditions. But you know, I would say interesting to me, I'd love to know Teddy's thoughts on this is, of course, my expertise is Coinbase, who's just basically dominated the crypto market since day one and the US coin base is in trouble. I don't think they're going bankrupt or anything, but they're certainly not acquiring anything. They're they're cutting staff. And what my theory for what FTX or what Sam is up to is, especially with Robin Hood, look at all those customer lists you could acquire on the cheap and Robin Hood to gives them a path to you know, selling equities on the blockchain and Ditto with like Celsius and block phi. I mean, what a great way to acquire a whole bunch of customer accounts. Once things stabilize. And then I think, you know, he could be the new top dog in crypto in the US, you know, I mean, you can see he's made his fortune Shawn, like global derivatives trading, but you know, I think there's a big play for, you know, retail, you know, retail participants in the US market and what a good cheap way to acquire like millions and millions of customers on the cheap. That's, that's one theory I have. But I think 10 is better than me. So I'd love to know your thoughts.
Yeah. Is it fair to think I mean, do you think have to pose the question back to you? Mmm, do you? Do you think of FTX is like a coin base competitor, like, now?
That's exactly what I was gonna, like, FTX Coinbase binance? I don't wanna put you on the spot. But yeah, how much do those companies all overlap and their services
are the big difference is Coinbase is in reality, the only big retail player in the US Robin Hood tried. And they had some luck, you know what their Dogecoin run, but then they're a basket case now, but I don't think it's a coincidence that FTX is putting their their logo on every umpire in Major League Baseball, you know, I mean, and you know, Sam is not full, I think the long term game is to muscle into the US retail market by Nance is never going to happen. Like you know, the reporting of like by Nance us, which is like basically a Potemkin village to like blow smoke up the regulator's ass and like they're radioactive, from a regular regulatory point of view. Whereas amazingly, SPF has also kept very clean notes throughout all this. And like, even Maxine Waters likes him. So, you know, I just think he's very poised to be the first major challenger to Coinbase. And us
to use it, you see, basically buying these distressed assets as sort of a like, it's a way to buy by customer growth, right? You know, that these are people who, you know, alternate alternative universe might buy and might have my trade, you know, Bitcoin through Coinbase. And now, they're in the FTX, funnel, and then boom,
yeah, or whatever you want to do with them. I mean, you get the sort of customer lists, and if indeed, long term, you know, all of us are gonna be like, you know, staking and, you know, equities are gonna be moving on to blockchain and stuff like that, if you're playing the long game. You know, I think it's, you know, I think it's a very smart idea, if he has the capital to do it. And this is hardly unique to crypto to whenever there's, you know, massive distress in the industry, if the top players got the capital in the pockets to go pick up the pieces and incorporate them into the Empire. I mean, yeah, that's what big Tex is done for years. You know, I don't think it's purely, you know, to to stabilize the industry. I think he's, he's got a long term vision and was trying to see him execute on it.
How do you kind of countenance Teddy, SBS political donations in his being one of the most active, you know, billionaires in democratic politics, with his, you know, business interests? I mean, Jeff was mentioning that Maxine Waters seems to be a big fan of his I don't know, that's the first I've heard of that, although it makes sense. Has he donated specifically to like the D, Triple C? or? I mean, do you see this as like a very savvy move on his part to shore up good relations with, you know, what might be a more sympathetic party?
Sam is doing lots of things in politics that aren't necessarily all interrelated. So the two buckets, there's like, the straight up crypto work that Sam is doing, which I think you know, you can be as cynical as you want about, you know, his desire to capture the regulators and politicians who, you know, may have an interest in regulating crypto, Sam, you know, it has donated a couple million bucks to a crypto super PAC. That is awesome. And backed by Andreessen Horowitz. It's called GMI as MGM as in the, you know, crypto speak
the Good morning Institute,
basically. So, Sam, I mean, that's not any different than like, you know, your your standard, you know, Facebook CEO or not Facebook, but like, you know, just big tech leader, you know, tries to do Hoffman, it's the Reid Hoffman playbook. You on musk, like donating to, you know, the committees that regulate Tesla, right, stuff like that. And Sam is, you know, spending a lot of time, as Jeff is kind of knows, is spending a lot of time in Washington, trying to, you know, get crypto regulators to, you know, have a light touch. He's called for more crypto regulation. And he's testified a bunch of times before Congress, like that's the standard, you know, CEO of big company, basic Washington lobbying. That's bucket one. Bucket two, which I think Sam, critics don't really believe is a separate bucket is efforts that Sam is taking to basically promote effective altruism or the belief that sort of, to dumb it to dumb it down, simplify it, basically, utilitarianism that there should be more money spent on preventing things that cause harm to mass numbers of people such as nuclear disasters, future pandemics, the killing of animals, Effective Altruism is very in vogue among the Silicon Valley set and Sam, who you know, as we know, is only 30 years old and you know, this company is still private Sam is spending 10s of millions of dollars, if not hundreds of millions of dollars on effective altruists causes, in part through politics. Sam is now is funding right up a ballot measure in California, he spent $12 million on a house primary race for this guy named Carrick, Flynn and Oregon, who lost like 30 points. Pretty big disaster. Well, yeah,
I know, Effective Altruism is actually very smart PR framing because you're like, Well, I failed, but it was a long shot. And if you do the math, the return on the investment was great. So it was smart in a modeled version of reality, but not based on sort of political conventional wisdom, which honestly, right, good, good on you to escape the framing of political reporters and how they try to trap people to only betting on things that can be successes, yes.
But those are sort of two, those are two buckets, right? I mean, there's the there's I mean, and there's the work he's doing on crypto, which is more straightforward. And there's the work he's doing like, in his personal capacity, that is not as the FTX CEO, just as someone who has a lot of money and thinks a lot about ways to make an impact in the world and like, now, to the recipients or to Washington at large is it's so easy to separate those two things. Like, at the end of the day, you know, keeping Sam on your good side, whether that's through supporting kind of pandemic prevention, or whether it's supporting, you know, a light regulation on crypto, like Sam is clearly an important person,
right? And there's no way Democrats want more than this sort of true believer, you know, that's like, Oh, um, I have a bunch of crusades and put me on your team because I, I really believe it, which is gonna get much more effective than that. I mean, in a way that, you know, Elon represents sort of behaving like the actual sort of Trump style Republicans in a way that draws their attention. SPF, I think behaves like Democrats would actually like, sort of a democratic billionaire to do it. It's like I have these strong principles. I have my little crusades, and I believe in policy, like, he
seems like he's an institutionalist, which is very interesting coming from the crypto world, right? I mean, how does he fit into the broader libertarian crypto mindset of believing that this is part of a movement that's going to burn it all down? And take the institutions that have, you know, withheld capital from the people who deserve it and all of the kind of anti establishment leanings that these guys have? You know, one of the richest, most prominent people seems to be like, buddies with Maxine Waters and donating to House races. I mean,
institutionalist, you say that you say that just because he's engaging in pot, like engage? politically? Yes,
yeah. And partisan politics, too.
Yeah, I'm talking to him. And for a sec, though, I just think the thing we have to know about Sam, which makes it so different from the other crypto founders is his parents his pedigree. His mom's a Stanford Law professor who I've heard works closely with a group called Mind the Gap, which is sort of a bank, kind of, like fundraising operation for the Democratic Party. And his father reportedly, like advises Elizabeth Warren. So you know, he's out of kind of that milieu, which is very different than the others. And that's also to, I think, adding to his white knight ability, because the other, you know, crypto founders are really alienating people. CZ is like, you know, like, a lot of people are whispering it's a criminal operation. I'm not saying that's true. And then like, he got the CEO of cracking Jesse Powell other tweeting, like stuff about, you know, abortion, and like, you know, people accusing him of flirting with like, Neo Nazism. And then Bryan Armstrong do like it get out of my company. Pretty much. Yeah. And then Bryan Armstrong, who is like, you know, forever, like picking culture war flights with the New York Times and the coin was CEO. Yeah, whether he's right or not, I mean, it's just like, it's not gonna help the industry, it's not gonna help your company, you know, the New York Times is not gonna stop doing what they do, you know, might be frustrating to you, but he just seems to kind of like keep walking into these like political hand grenades, be it black lives matter or what, you know, whatever it is. And whereas SPF has done a very good job of, you know, step at staying above that, however, I'll turn it back over to you guys. But what I'm curious about is come November, when the Republicans are almost certainly going to take Congress again. And you know, do they really want Joe Biden's biggest, you know, because the Republicans are more friendly to crypto right now, you know, libertarianism, blah, blah, blah. What happens when the most prominent guy in crypto is Joe Biden's biggest donor?
Is he going to be the biggest we know that? It was last time around? I
believe, I mean, touching on that, but I he lot
is the biggest like active CEO. There's there's a bunch of qualifications on that. I mean, he's way up there. Yeah, sure. I mean, I mean, like, you know, I know Eric has made fun of me privately for like, being a SAM obsessive. I mean, the reality is, he's like, you know, I think at this point, he's probably the second or third biggest donor in the midterms right now. I mean, like, he's up he's up there with Peter TEALS. Like people are obsessed with Peter Thiel. Peter Thiel is important. Like Sam is spending a tremendous amount of money like it's not people obsessing over like a $500,000 a year donor like Sam is now in a 20 or $30 million range and if include his lobbying efforts. Like, he's up, he's up there. And part of this is that, like, he's just genuinely interesting. Like, what he's funding is stuff that is, you know, unconventional off the walls. Like he obviously, I think part of the obsession with him. Part of it is like Sam has, like, cultivated this image that Jeff is kind of referring to right where he wear shorts all the time. His hair's kind of crazy. He obviously is like, very media friendly, right, in a way that like, you know, it's like, it's like Pete Buttigieg. Like, you get lots of coverage, because like, he engages with reporters a lot, right? And like, and, you know, I see him, like, take interview interviews from like, random fucking newsletters, right. And like, there was some story I remember the times did about, like, the billionaires tax proposal. And like, Sam, like, was very willing to be like, the spokesman for billionaires, I was like, he's very, he's very much clearly enamored with the media, and like, you know, he's young, and maybe he'll get tired of it when he like, suffers his first headpiece or something like that. But like, part part of it is Sam cultivating an image. But part of it, I think, is genuine in the fact that he is a massively significant donor with, you know, obviously very substantive issues before Congress, and is like, I think part of it is him leaning into it and making it like, you know, having fun as like a political media mocker. And part of it is just like the fact that he's actually doing real shit, when most people most people aren't right, to be clear, and most, most people are not actually that interesting.
But to Jeff's question, I mean, he's also built up this, you know, public persona and media presence during mostly during Biden's presidency where he is sort of been on the side of power. And so what does the world look like for, for SBF? When, you know, Biden is on his back foot, and he's suddenly getting, you know, even the Republican the specifics of Jeff question, I mean, what do you see happening? Post midterms?
Sure. I mean, look, I mean, he is a he's not actually that. Like, he is a center left, you know, politician. I mean, he has donated two tries to set it up donor. I mean, he's donated to Democrats, but you know, he I don't think he's that liberal conventionally. And yeah, I mean, to be fair, like, that's true of every, every kind of donor right now, or every corporate leader who's kind of made inroads during the Biden
FTX, Coinbase. Buy in, I mean, these these companies interests are, like fairly aligned in the deregulation. So it seems smart to me that you would have you have true believer, like Democrats, and then you have sort of Coinbase, or Brian's meeting, posting pictures with, you know, Paul Ryan, and then you have sort of even sort of more right people and crack in. And, like having that sort of as an industry. I'm not saying they all got together and sort of assign their roles, it's almost better, that they all play sort of a cheerleader for each side, so that they have friends, then if they all sort of half cocked,
is that right? By the way, I posed that to both Jeff and Teddy, I mean, that they, you know, the three exchanges are necessarily anti regulation, because it would seem like with the market and environment as it is, right now, there's gotta be some sort of a push for an FDIC, like organization, that's like, you know, Facebook is always like, you know, we
support modern Internet regulations, right. I mean, part part of this is like, any company, you can get entrenched like that, I mean, regulations for the biggest players. Right, right. Right. So I mean, like, I don't know, there's like an element of bullshit that like everyone, you know, believes I mean, I mean, the key thing happening is regulation level right now is there's a spill from Cynthia and Loomis, and Chris and Joe brand, to try to basically have lots of crypto regulated by the CFTC, rather than by the SEC, this small
weak regulator rather than this thing, right regulator.
And we're obviously like over generalizing here, but like, generally, the crypto industry is, you know, in favor of the bill. And, you know, and is that because, Tom, to answer your question, is that because, like, they are pro regulation or anti regulation, like I think, obviously, they sort of know that there's going to be some regulation of this industry. And you might as well, you know, handicap it, or kneecap it from from the start.
Right. But Pete Fair, like in the regulatory climate, like the chairman of the SEC, Gary Gensler is implacably, in my opinion, stupidly hostile to crypto, he's tried to seize on an issue to ingratiate himself with a very powerful Democrat, namely Elizabeth Warren. And so he has been just ferociously attacking at all terms and not being remotely constructive. You know, I mean, obviously, you know, it needs some regulation, but, you know, and the rumors of him aspiring to be triggered treasury secretary are true talking about Gensler here. So he's willing to throw the crypto industry under the bus to advance his own career. And in that climate, I understand what the crypto industry is like, you know, understandably frustrated and pissed off, but you know, yeah, of course, you're right. They're simply trying to get the regulation that's best for them and get big and Then came the regulatory structure to favor themselves and send comments that says every industry does. But crypto is that a bit of a special juncture. Given that you know the implacable hostility the SEC,
I'm clearly more pro regulation than you, I think. I mean, I guess I'm very cynical of the SEC, because it's like, much easier to crack down after everything collapses. It's like, he hasn't done that much. Right. I mean, maybe now that everybody's lost money. He's gonna make everybody's life miserable. Which Yeah, seems unfair. This
is Eric's favorite. This is Eric's favorite argument on the show your favorite anti regulation are
just that the SEC acts that they act after bad things. Government shutdown, it's like, oh, yeah, I guess it was bad. People lost money. It's like, weren't you supposed to enforce rules so that people didn't lose money in the first place, rather than just say, pointing to the money losing and saying, Ah, they're the bad guys. I mean, that drives me crazy. Well, what he
could have done is given her a roadmap for what do you do, you know, the industry complaints that rightly that he's in regulation by enforcement, he's like, Well just follow the rules, which are extremely vague and haven't been very articulate since 2014. And if he gets wrong, we're gonna see you, you know, and that's, I think, frustrating. And then I think Coinbase tried to offer very modest like, 4% like, you know, interest earning thing on stable coins. It's a very, like, an ambitious thing. And, you know, freaked out said, like, no, no, well, while the wild, crazy stuff was like popping out all around him, and like, he totally missed the tariff stablecoin collapse. So it just seems he's out to, you know, kind of stimulate everything, without providing a constructive roadmap forward, because he's just, you know, in my opinion of, you know, an entirely immoral, ambitious person.
I mean, it's classic, that the, you know, biggest sort of company, you know, Coinbase big public company that wants to be in good favor of the regulators, ends up being the one punished the most, even though like you're saying, yeah, it's trying to behave fairly, relatively responsibly compared to the rest of the industry. And yeah, I mean,
yeah. Eric, as the Andreessen whisperer here on the on the sand whisperer. I mean, what do you make of just their kind of lobbying on this issue in general, just the fact that, like, I was struck the other day, when there was that mark, and Ben, donated a million dollars each to this crypto super PAC. I mentioned earlier, Jesus,
Marc Andreessen and Ben Horowitz. Yeah, founders of? Yeah,
I think it was, you know, it's their only political contributions of size that have been disclosed, like in the last five or 10 years. And I know, there's been a lot of reporting just on the ways in which Andreessen is engaging in Washington. But what do you just what do you make of just their kind of political, you know, it's to some extent, you know, they are pro crypto writ large, right, and they have tons of investments, I
take it as more sort of conventional corporate influence, we will hire the experts, we will hire former people from the agencies so that you will trust them. And I do think Andreessen has been able to build build up sort of a reputation for being some of the adults in the room and crypto. So if you're going to regulate it, and you want to turn you know, it's like, okay, we'll have our own draft legislation. I think what's interesting that is that instead of being inside of a Facebook, Microsoft, Apple, some big company, you know, forming the Internet Association, Andreessen is saying, Okay, we're making startup investments. And before these companies are huge, we need to sort of be the lobbying organization, on behalf of all of them, or I guess they probably don't use the word lobbying they, they give policy policy advice. I mean, Katie Hahn sort of played playing, trying to play a similar role where it's, we're gonna, we're gonna be the advocates for an industry that if it's regulated properly, we'll make a bunch of money. I think Andreessen has such great coverage of crypto, that it's obvious why it's good for them, I think, Katie Han, you know, it's still to be seen whether she can show that she's gonna win deals based on doing sort of influence peddling this probably good for the whole industry, and not necessarily any one portfolio company. And
she hired Chris Layne, who we all know is, you know, a political guy who knows his way around Washington and, you know, former head of communications and policy sorry, at Airbnb, and yeah, as well. Yeah. And he was, you know, one of our first hires and like, what does that what does that signify about kind of, you know, to some extent, right, it's just, like, just smart business, right to hire hire experts who, you know, can help you craft regulations in ways that are helpful to your portfolio companies. That's just like, right, it's pretty simple. But it's also you know, it's not as if, like, part of this is because the industry is so new, right? It's not as if like Sequoia is like lobbying on like E commerce before Congress, right? Because it's like The there's, there's not that much space for them to, you know, throw their elbows around, but Andreessen like could easily become like the most important player in Washington on this issue, because there's a vacuum.
It also, I mean, that's an interesting comparison you make to you know, Sequoia during the rise of E commerce. And I guess what makes crypto so interesting here is that there's so much more individual, you know, money at stake that, you know, the regular person can get involved with, that you would sort of look towards regulation to protect, there's just really hasn't been in other industries, right, I mean, e commerce, you wouldn't see regular people investing in these companies on their way up and getting fleeced, you know, as whatever, ie toys falls apart, I mean, maybe as a public company, but it wasn't the same thing as crypto, which is such a widespread, you know, individualized investment that, you know, it's just an interesting state of affairs when it comes to the expectations of regulators. For other kind of rising tech industry.
Also, the stakes are higher with crypto because it touches the financial rails and like, you know, the banks, or you're fighting the banks, I mean, who did like, you know, pets.com have to fight really, you know, retailers, oh, my God, but like, the banks have a lot more muscle in DC. And then also, the other thing is, like, you know, the great game in terms of like, you know, you're messing with the national currency system, like the two most important prerogative, sustainable power are the military, followed by the US dollar, which keeps Americans borrowing low. So there's a lot of like, kind of hawks in the Defense Department and in Treasury who are like, we gotta like, smother this thing in his crib? Because and it's the reality is China and Russia have also been encouraging crypto stuff as a way to, like, dislodge the US Dollar as the world's reserve currency. I'm sorry, someone can go into like some weird rabbit hole. But
But China's China's crackdown, right? But I'm saying
they're fanning like competitors to the dollar in the form of cryptocurrencies. I mean, if crypto really takes off, and people don't need the US dollar anymore, that's a sort of a geopolitical catastrophe for Uncle Sam. So you know, that it's not like a binary thing. But there, I'm just saying, that's a worry. Like, if you're sitting there trying to like sell, you know, pet food online, is different than trying to like, you know, challenge the national currency
to frame up like the regular, I totally agree with what you're saying, I mean, to frame this up, you know, the Uber strategy, which I think is representative of the broader tech strategy is get penetration fast enough, before regulators can do anything, then there's adaption consumers are attached to it, including politicians, and then no one's really going to ban it. And then you have the leverage rather than asking for permission before things start crypto as obviously succeeded in that playbook. In that it's sort of deployed and out there before. There's any real action. I think the question mark for me is, how does that strategy play out in a huge downturn? Right? It's one thing like if you Uber is still roaring, people love it. But in the crypto world where people are losing a lot of money, and a lot of consumers feel screwed? Sure, you have the political penetration, you know, with like SPF, like we've been talking about, but if you have all these regular people who've lost a lot of money on it, does that sort of deploy and then lobby strategy work? I don't know, like, Jeff, how much do you think it's possible? Like, are you open to the idea that like core features of the crypto world get sort of banned out of existence in the United States? Or how much existential regulatory risks do you think we still face?
I think we're past that. And also, because the, it's just too big and too, you know, there's just too many people working in it. But also, I think the banks are moving and right now, my read is the next era is going to be stable coins, which is just a superior way to move money around and watching the Goldman Sachs and JP Morgan's and fidelity, you know, get a piece of that. So, you know, it's in terms of what it means for retail investors TBD. But, you know, I don't, I don't think it's going to be crushed out of existence. You know, I think the next, you know, half years gonna be really rocky, but it's just even now, after all the carnage, it's much bigger than it was two years ago, you know, even after all the disasters, and it's just, you know, this university classes, graduating all these like blockchain, Native people, you just knock on stuff that's back in the bottle again, but the shape it takes is a jump ball between the banks and the traditional financial system. And you know, the whole lot of other things and how it's going to shake out I'm not sure the
crypto nightmare would be sure it's not getting regulated out of existence, but it's regulated such a way that only like JP Morgan, Citibank can comply or something and then, then that's, yeah, tough.
Well, that also seems to be one of the major risks that the crypto companies have right now, when it comes to regulation is that they're not coming at it from a place of strength. Like if this discussion were happening, while crypto was, you know, on the up and gaining more and more value and people weren't, you know, losing billions of dollars, then maybe they would have a better kind of leverage in the negotiations. But where is it is now, you know, they're basically like Eric has said multiple times because you know, regulators are coming at As they're on their way down, so it's going to be completely in the power center of all the institutions to say that we're going to write the rules in favor of our interests, because what are you going to do? If we don't? You have absolutely no.
I mean, they're, the crypto industry is playing a long game here. They've gotten more sophisticated in DC and like, there's that, you know, Lummus Gillibrand bill that, you know, they'll know it's not going to pass this year, but they're on a kind of three, four year timeline is what they're doing. And, you know, there's, there's, they're building allies. And I think in the long term, they're going to, you know, and in the short term, they're simply going to write it out wait for the Republicans to take Congress and you know, just lay groundwork to to get the legislation through I think this you know, the the prospect of them being crushed entirely has diminished a lot. Although, you know, the next couple months, who knows,
but Teddy, where did the the Peter Thiel acolyte sit on on all of these issues? You know, I guess I'm thinking of masters and, yeah, and JD Vance.
Well, I was I was gonna I was gonna bring this up to just kind of run out the political discussion. I mean, like, the write more broadly is like very pro Bitcoin, like Bitcoin Maxy. You know, that's there. The Conservatives are
Peter Thiel promised us it would be bigger than the entire value of the US, s&p 500. I think,
okay. equities market.
i Oh, no. Yeah. So huge.
Yeah, but but like, the politics issue. I mean, like, Yeah, I mean, there's the two acolytes who are, you know, very pro Bitcoin and like, you know, for instance, Blake masters has like, done NF T's of zero to one, which is his book, you know, sold a tremendous number of copies with Peter Thiel. He's done like NF T's to do campaign fundraising, which is like a new frontier, and certainly an innovative way to raise money for a campaign innovative way to use your megadonor benefactor to your benefit. But, you know, there also are like far left people who are, you know, somewhat crypto curious. Right. And, to some extent, this is generational, right. Like, you know, Jeff brought up Warren earlier. I mean, there's sort of the old guard of people who are anti crypto, and then there's like the, the younger generation. I mean, I don't think it's surprised that you see the people who are more you know, the millennials are pro crypto and whether they're pro Bitcoin or pro crypto more generally, which I think is the more position on the on the far left, you know, you see some lefties kind of talk about crypto as empowering people of color or you know, taking power away from Wall Street, there is like a lefty, Kumbaya, skeptical fro
piling, whatever played by via crypto people. I
want to I definitely want to table that for another episode. I
think there is a strong pro leftist crypto element I call BS all
the crypto people I talked to you are devastated by the fact that they view the left as inherently against crypto. So
nice things dreaming. Hey, Jeff, do you disagree? You think there's a strong leftist crypto world here?
I don't know. I think you're being a little cynical. You simply begin with the crypto crowd, we might call you a no coiner. But that's fine. I own coins
just so they can call me that. I don't know what you call it that willing to lose money despite, you know, just to spite people, I guess is what I am. But yes.
All right. I don't think it's totally Kumbaya. I mean, like you look at the finance committee hearings, you're seeing like even AOC sounds moderately interested. Congressman Richie Taurus in the Bronx is very intuitive, you know, just says there's like food deserts. There's banking deserts. And I think a lot of poor people in this country have a right to hate the banks. And they like the idea of crypto alternatives to use of crypto by like, you know, you know, black and Hispanic communities in this country is higher than whites. So I think there is something there. And I do think there's tension in the Democratic Party in that like Elizabeth Warren friggin hates it. And people crypto and people take their marching orders from her. And I think a lot of young Dems are frustrated and part because you're being shut out of fundraising opportunities, and the risks seeding like the, you know, the crypto thing to Republicans, it's gonna be like ceding the Internet to, you know, to Republicans or Democrats. But, you know, who knows? It's early days, you might be right at the end, Eric, we'll see. Here's my
last question. I mean, you know, a key part of this conversation has just been the centrality of Sam Venkman. Fried and you know, some of these other exchanges. You know, isn't that doesn't that just cut against the core of crypto like that it's supposed to be decentralized. I mean, the idea that there's there could be sort of a bailout in any sense, even if it's sort of a total, you know, free market thing. I mean, clearly, SPF is worried about contagion risk here, and thinks that he needs to make some cheap buys along with maybe getting a deal, but I don't know. Is there? Is there anything about this, that cuts against the core of what crypto is supposed to be about if you're having sort of a bailout in some way because wealth is so consolidated that someone someone can afford to do it?
Doesn't every industry have winners and losers, just to the extent that like there's always gonna be some centralization, right? I mean, the fact you're starting a company at all, and you know, raising outside money and and accumulating customers like, I understand that as like a theoretical concern, but like, at the end of the day, just like
so much of the heart of what excites people about crypto is sort of the Dow or yeah, just that a lot of people can get involved. And but the solutions we're seeing are sort of big, rich entity, who has a lot of control over the market has probably made a lot of money from their visibility into the market further consolidates the market. To me what's happening wouldn't speak to sort of most of the virtues that people talk about when they talk about crypto.
Yeah, no, I mean, Eric, that the difference? I think Teddy between other industries and crypto is other industries don't have like, their central theology is not decentralization, and you know, like, you know, devolution of power to the common man, you know, you don't see like, you know, Bezos running around saying that, but that tension has been part of Kryptos since the beginning it's never been as decentralized as it professes to be it's always like an ideal that's just over horizon just let's get a little more decentralized and you know, that's, it's that sort of has been there since day one.
Great. Well, Jeff, Teddy, thanks for coming on. I really appreciate it. Fun, fun to mix it up on on crypto.
