Investor Psychology & Trading on the Future With Raoul Pal

0:00so i sat down and thought about it and did a lot of reading and i'm i had this moment where i started not being able to sleep because i realized with the nexus of the fastest pace of adoption of an enormous numbers of groundbreaking technologies at the same time so this is not early stage stuff that we hear about this is stuff actually happening right now that's going to go from you know 100 million people to 4 billion people in the next decade and a half and that i was like okay what are these and simply obviously cryptocurrencies one blockchain technology um artificial intelligence robotics space

0:38um ev um internet of things genetic sciences you know none of these are new until you realize they are all metcalfe's law models and when you add metcalfe's law on top of metcalfe's law you get reed's law which is even more truly exponential so then i realized okay humanity is going to go through the biggest change of technology and technological change because of exponent exponentiality we've ever gone through and it's already breaking the fabric of society [Music] what's going on it's been one of those days and it's only just started oh no i hate i think i was at my desk at 5 00 a.m this morning

1:31trying to clear why what's going on just busy just busy lots going on yeah we're gonna have to we're gonna have to get into that i'm uh i'm excited to see you man i feel like it's been a long time since we've uh when since we've caught up so if this is even just an excuse to get to chat and see your face yeah excited and see your lovely background yeah i will take that as a win so great too uh great to have you on the show man and um so much we were excited to dig into but uh very very thankful for your time i know i'm really excited this is

1:59gonna be fun so just for the listeners because i think this is funny background and greg i don't even know if you know this story um raoul and i uh go i i'm gonna say way back it's not technically way back but it feels like it's been ages and ages since this but you know i'm like sitting in my house in california stuck at home during lockdowns this is like call it july 2020. and i just started on twitter and i'm like you know writing a few threads and doing some like really like finance explainer stuff and i had a few thousand followers and i thought i was famous i had like i don't

2:31know 5 000 followers and i really thought i was famous and someone likes my thing that like has you know 150 or 200 000 followers and i was like holy [ __ ] who is that and i look and it's like this guy rao paul and i've been following him for a while and seeing you know he's putting up all this great finance content real vision i was a subscriber and i had um you know religiously read especially during all of the turbulence of covid was like just learning a lot from that environment and you know trading on some of it like it was just really fun and i was learning a

3:00ton and out of the blue uh rau reaches out to me we connect for a quick chat and he tweets out something like that sahil bloom is putting out some of the best educational content on finn twit you should follow him and my twitter i think i went from like 5 000 to 25 000 overnight from morale just recommending me and i still to this day credit him with like he was the jump off man like i needed that one kick uh because then i like i feel like i've taken that and uh and rode that wave for a while now so thank you sir uh for all that you've

3:32done for my life that's all about doing good for each other right we are a community after all if we treat each other well life is much easier yeah you put sahel on the map yeah exactly i'm sorry that's all i can apologize to everybody that's true we have to get these drunken whiskey tweets on a sunday and stuff that's true man there's probably some people like the thread haters out there are probably pissed man they're gonna be coming after you now we're all gonna have the the anonymous before we get into anything kyle i saw your last thread you got like what 70 plus thousand likes like a

4:04hundred hundred thousand man i've never seen that before in my life wow yeah and i didn't even do a single chrome extension or excel tip in it bro what was it which one was it um razors you wrote it i tweeted yeah yeah yeah why did it go so viral um i don't know man i mean like honestly it's kind of funny right like 75 of that was repurposed content that i'd written in the past so it wasn't like it was brand new um i don't know kind of a good hook and sometimes things catch on i don't i noticed recently that there are just things that i see on twitter that are

4:39way more viral than i've ever remembered things going like i saw someone that did an excel thread recently that had like 300 000 likes and i remember like back in the day on twitter if you got like a few thousand likes on something that was bananas like that was super viral but now i think i don't know whether the algorithms change or like what's getting prioritized but man it's um it feels different well i've never had 70 000 likes yeah you'll be all right i'm not worried about you um can we just start there's there's so much that i want to get into and a bunch

5:12of rabbit holes around the exponential age and your thesis there and web3 some of the cool you know new business stuff you're building there but can we start with just like your path because you have a really interesting story you know coming from not dissimilar to me like a traditional finance background you were at goldman sachs which is like as traditional as traditional finance comes um what led you to deciding to leave and sort of going down this path as an entrepreneur um you know at the time that you did so my first step of leaving goldman was realizing i didn't want to be at goldman

5:45is that you know i it's not me i love goldman sachs for many things probably the world's greatest network to be truthful and you're around some of the smartest people in the world but you're confined you're confined in how you are what you do in a way that you know i just knew that wasn't me i've always been quite individual i like to do things differently um and so i saw the recession coming in 2000 and i wanted to trade it you know i've been lucky i've been it's been like being taught acting by robert de niro and al pacino and whatever because i got to

6:21speak to the world's most famous hedge fund managers all day you know paul tudor jones and louis bacon and stan drucker miller and yeah you name it so i thought you know i want to give this a go and so i went to luckily you know one of my my biggest client in fact hired me which is glg partners which was a giant hedge fund firm in london time ended up turning into man group um and i started a macro book there and after about three months of doing well three six months doing well they said well listen why don't we start a macro fund um so i co-fou co-ran it with

6:49another guy called ben gill and we started that fund and and built that one up but over that period of time it was much more entrepreneurial glg was a great place i was losing my mojo with macro a i didn't have a great year in my last year there wasn't disaster it wasn't great but it's it's how the industry had changed it had gone from being this gunslingers high volatility long-term conviction world to asset gathering low volatility lower returns and that was the rise of the pension funds in insurance companies piling huge amounts of money in the space and they said we don't want 15 20 volatility

7:30and we're prepared to not have 30 plus returns in great years or or more what we actually want is to look more like a bond plus we want six percent volatility and we want eight percent returns and i'm like that's not my game it's just i don't enjoy that and i could see that was the death of the industry because it was forcing people to be sure to determine their time horizons so macro paul trudeau jones told me a great thing was what makes a great investor in his mind is somebody whose idea horizon matches his trade time horizon right a lot of people think oh

8:07the dollar's going up over the next six months or two years and they trade in and out of it or the opposite is true is they they're short-term traders by nature because they have to be at this monthly p l and every position basically gets reset every month because your investors go why did you screw up last month they don't look at where you bought something and where you sold it in the industry unlike vc in the hedge fund industry it's where you were marked last month yeah it's mark to market so it's crazy so what it means that everybody's time horizon is this two week to two month time horizon

8:44yet your idea horizon because it's macro is is in economic terms which is 18 months or so you know to go from peak economic cycle to trough recession that's a two and a half year thing and it gets interesting to trading for macro for about an 18 month period but you can't do it so i'm like this is useless so i kind of defiantly left and decided to opt out of the rat race and move to spain because quality of life was something that always mattered to me a lot because you were in london you were invited before okay yeah and i thought what's the whole game for if

9:18it's not for quality of life i mean money's just an output but the the real the real thing that you're actually working your balls off for is quality of life so um so i moved to spain and i realized that i've had a lot of experience in macro versus most and i had also learned how to write i was writing at goldman we had this group chat that was very early group chat days like an aol group chat thing that i used to run for the whole firm and became very well known for it so from the chairman down everybody read my stuff and then i wrote an article

9:56um after a business trip to china when i was at the hedge fund called the something wrong in paradise when i turned up to china to expect to see all this you know all the amazing stories i was reading and getting from analysts and turned up and there was just empty buildings after empty buildings and i'm like you and you and carson black and i'm like oh my god this is a disaster so i wrote it all up and i think stan drucker got seven copies and so i realized that if something like that could go viral and i knew how these guys spoke and i knew how they thought

10:29i should write research so i can stay in the markets myself and invest but also have my hand and so just by word of mouth global macro investor grew from goldman sachs and glg backing me saying yeah we'll definitely sign up to the world's most famous hedge fund managers family offices sovereign wealth funds and everybody else so that was the first stab at being entrepreneurial and do you think just to pause you there for a second i mean do you think um that insight that you had a unique ability to sort of abstract all of the complexity around these things that were happening um was that just was that um sort of

11:07practice like was that you know bruce lee like you know 10 000 practice kicks on a single kick or was it something you just had you feel like innately i'm a very visual person so i distill everything into imagery so which is why macro so appeal to me because macros is massive 3d always changing map of the world of all the asset classes how they're interrelated the economies and the news flow and i found i can hold it my head and i can kind of spin it around and look at it and take different component parts aside and and therefore you can simplify if you can if you can

11:46make a picture of it and so i just create that mental picture for others because most others struggle to see the connections to see how this could be people can think one step ahead but people don't think two and three and two and three is where i'm pretty good at which is longer term knock-on effects how this is going to play out that doesn't mean i get all of them right but i've been consistently pretty good at that over time and i can explain it to people in a way that they understand it and can grasp it whether they disagree or agree i mean again that's the

12:19beautiful thing about global macro investors i've had people who barely ever agree with me and they've been subscribers for 18 years do you think that the hedge fund industry i mean you mentioned a little bit of like the structural shift that you saw happening with people becoming asset aggregators rather than you know real investors or traders and um you know that coming from the pension funds or the insurance companies piling money and their preferences around volatility and time horizons etc um do you think that it is i mean super difficult to be truly long-term oriented as as a hedge fund today as a result of that change like do

12:55you think that most of the hedge funds out there today are just focused on the really short term and they have to have really short idea horizons for that reason i'll probably give you an exact number zero um i lie there's probably chris benodi there's there's like two or three basically that's why they turn into family offices because you can't play that game the best investors i ever saw the best investor i ever solved bar none was nick roditi who used to work for george soros and he was the you won't find much on the internet i can see you guys he is super secretive and i he came

13:34across my time horizon but in 1991 he was the highest paid man in england and everyone was like who the hell is this guy and he lives above a shop in hampstead high street which is a suburb of london and became legendary um and i got to meet him but he was legendary at goldman and other investment banks for how he traded i mean he was a polymath so he knew in depth about more things than you and i even know exist um and incredible and nick was an older gentleman from zimbabwe or rhodesia at the time he didn't have a bloomberg screen he used to read the ft there would be

14:13grandfather clock ticking when you go to his office he would throw out analysts who turned up who weren't prepared who didn't know their stuff in depth but when he took risk he took obscene risk obscene long-term positions um you know if you read anything by stan drucker miller um and george soros they're like no no nick's the guy because nick could see the world in ways that others couldn't see and have the conviction to have enormous leverage so nick was the guy who'd have the 300 up here but nick would be the guy who'd have the 40 down year but he was astonishing i never forget him

15:02calling up the the futures guys at goldman and said he bought a ridiculous position german bund futures super leveraged and he called up like four weeks later after putting the trade on he goes those bund things i bought where are they now and the guy goes well nick let me just check well they've kind of gone quite a lot against you he goes oh that's unfortunate i didn't realize that i tell you what let's just double up shall we puts the phone down i mean astonishing but the depth of his knowledge i went into talk i launched a hedge fund an agricultural hedge fund i went talking about agriculture and nick

15:42was is so amazing is firstly he's listening to my thesis and he goes oh that's interesting well because that reminds me of a paper that was sent to me i think in 66 let me just get i haven't seen it since then he remembers this paper he like takes it out dusts it off it's somebody's phd tape paper on crop yields i'm like wow and i said how are you interested he goes you know i'm not really interested in your fundraise because i've got these positions on myself he said you know it's really interesting because i took my wife and we we hired a plane and we flew

16:15across ukraine and all of the soviet breadbasket just to see what the fields look like the wheat fields where the borders lie he said i all then took my wife in a car and drove across the midwest because i wanted to see what the cornfields were like and the wheat fields and how it felt in the sky i'm like so so he would do this kind of work yeah how are you going to compete against that guy you come no chance it actually lends into a into a conversation that greg and i were having recently just around like really like investor psychology and really like psychology of trading

16:49and and investing and especially recently i mean greg it came up because one of our good good friends who i won't name who's very smart objectively um told us that he had sold all of his equities um like a couple weeks ago like the market had like it was literally the bottom like the local bottom well he you know he texted us on one day and was like i just sold everything um and kind of like played out his rationale which like you could convince yourself the logic was smart um but when i was looking at it i was like that's super dumb you know like you're

17:22outsmarting yourself on something so can you just talk a little bit about like what your observations have been from a career in this of investor psychology where people screw up you know avoiding fomo um how you've been handling the recent you know volatility in markets et cetera i wrote a whole piece on this this is the best instruction i gave firstly i advise everybody if you're trying to trade longer term which is where i think the alpha is the real outperformance is because everybody's time horizon is short you should be long and i i set up gmi to prove that and i've proven it over 17 and a half years

17:58i got a registered you know public track record for gmi members over 17 years that's basically proven that exact point so here's my example oh yeah so write it down and every time you're going to try and sell something or change your position ask yourself has something changed versus your thesis so a lot of people their thesis change they hold on to the position because they're emotionally attached we've all done that or the other one is you get spooked out of something and you forget your thesis in the first place and then you're like then it goes back and you're like sure i've missed it so let me tell you my crypto investments

18:33my bitcoin investment story because it highlights it the best because i just recently went through the maths of this and i kind of shocked myself so i first invested i first heard about bitcoin during the european crisis in 2012. i realized that this is solutions a lot of the global financial system and i wrote the first macro strategy piece on bitcoin probably ever published in global macro investor in

18:592013. and it was driven by a friend of mine emil woods who's um is very well known in space and chad cascarello who were global macro investor subscribers saying listen you need to look at bitcoin so i looked at it they happened to have started an exchange called it bit which is now paxos and i ended up um buying bitcoin and i stuck a decent size in because my analysis was it's at 200 now if i back out the analysis versus the stock to flow of gold this is worth a million dollars with the gold at these current prices therefore it's underpriced i hadn't figured out anything else about

19:40network effects but i kind of understood that this was potentially important and i assumed that it would go to zero so my downside was 200 my upside was 999 000. um you know blah blah blah and then i said i assume that i am a total idiot which i try and assume most of the time and therefore i'm 90 wrong so if the upside is a hundred thousand and it's 200 it's the best risk award any of us will ever come across in our entire lives and maybe one of the best wrist rewards of all time so i took that bet right macro thesis did the work

20:18said this is probably a 10-year play and i'm gonna hold it so first thing that happens i put the position on it goes up a hundred percent i'm sorry it goes up 100 a month and 500 in the next four months i'm like holy [ __ ] um i don't sell any because i've got a long-term thesis and it's fresh in my mind it then falls 85 but luckily back to my entry level so it

20:44gets back to 200. i don't do anything because i had a long-term thesis and then i kind of forgot about it and then 2017 it starts coming to life again and it's starting to scream higher and now it's at 2000 or 2200 and i'm like okay i'm up 10x which is good my thesis obviously was a lot more but i've forgotten that because now the forking wars had started and i suddenly thought is this existential is this the s curve moment uh where it fails so i sold it um it went up another 10x

21:26to 20 000. i didn't worry about that because i'd made 10x and it was okay it was a good trade and i was worried that it wasn't going to be able to play out my thesis because of these forking walls and then it fell 85 i wasn't in it and eventually i got in in april 2020 and i can't remember my average was call it 6800 or something and then i'm still long and then you know rotated into eath and i did other stuff but anyway so great trade the best trade of my life i went back and looked at if i just kept my initial investment at

22:06200 bucks i would have done i can't remember that i'm five times better even though the size that i added in march 2020 was massively larger than the first size interesting still didn't work i'm like huh and then i thought okay if i'd actually followed my thesis which is when it gets very oversold and it gets to that kind of logarithmic the bottom the two standard deviations oversold of a logarithmic channel or whatever if i don't actually just doubled my position every time but not doubled it sorry just added the same amount as my initial seed investment i'd have done like 25x i'm like okay so what i thought was a

22:48great trade was actually a terrible trade because i didn't trade my plan and i didn't think about what i was trying to achieve so that's leading the question about okay the market sell off now i'm immensely comfortable because i see the network adoption i've got even more models to understand how this space works i see how broad and deep the talent the adoption the kind of conversations that greg and i have with people all the time you know it's like seeing the future so therefore the volatility now i've been adding as fast as i can scraping the sofa for coins anything to put more money in

23:28what's the optical effect that's actually quite hard is once you've had a big gain then it's you even though it's come off a lot it's still a reasonable amount of money and you don't have that much capital available to double it up and it doesn't feel like your position is getting much bigger and i'm struggling with this right now because you know i'm increasing like like 10 or 20 because i don't have the cash to to do that but if you're the benefit of having income by the way like you you and i've talked about this real is like having income and having a source of

24:00income around this is a big driver of allowing you know greg you and i have talked about this like it's great because your positions can be down but i can go dollar cost average into things at lower prices because i have income every month and if you don't if you're just a trader um and that's what you're doing day to day that's really hard to double up but what advice what advice do you have for for staying sober basically and what i mean by sober is yeah because i don't say sober a lot but you know what i mean not like getting you know doing substances but you know for

24:32example when everything starts you know when there's a drawdown there's a massive drawdown even if i have a you know this thesis that let's just say you know a very strong thesis it it feels like you know it's a sunny day and it's starting to get rainy and then if you think about it too much i find it's easy to have narratives in your head which is you know what you know this you know open c volume is down maybe you know ethereum isn't the play maybe i should move it to here like how do you how do you maintain your because i've got a big picture framework

25:10that is robust and tested and is deep i've done a lot of work on it so i feel comfortable with the probabilities now i love markets like anybody else so i've got on my screen the real time chart of eth daily weekly monthly and hourly i don't even trade eve i just buy it but i like the market and i look at the price action and what i do what i did the whole period was just didn't look at my p l so i have learned and this is a new thing for me how to disassociate myself with my p l because if not you're always thinking

25:52peak to draw down or look how much it's worth now as opposed to how far are we along in my thesis let the numbers take care of themselves over time it's i'm learning that because you know this is a hard one to learn on because the volatility is so high but you know i've done it similarly i mean i had a very strong view in 2012 about the us dollar and the euro i was living in europe's billing in euros you know gmi was based in euros i was living in spain and i thought based on a bunch of work that i'd done that the dollar was the euro was going

26:26to fall over a long period of time and it was going to fall to 85 cents 82 cents was my target and has been my target since then so i took all of my savings which was a reasonable amount at the time and stuck it all into dollars then to force myself not to trade it i bought a um i bought a couple of properties one in cayman and a small place in miami um in dollars so i couldn't therefore and i was now in the trade properly and i changed the billing of global macro investor in dollars and that was a phenomenal bet because that was at 148 and a half in

26:59the euro still hasn't got to my target but it was there you know so i've done it once but that was easier this one uh bitcoin's harder otherwise i don't tend to have run so many really long term massively volatile positions my positions are normally six months to two years do you think being where you are be it in the caymans being in spain basically not being in london in new york helps you massively everybody's got too much of an opinion the only opinion you need to listen to is yours you just you hear other people's opinions you test your thesis but so many people just flip flop around

27:44because somebody who sounds smart came with a opposing thesis and it scares them or makes them bullish we're all subjects that we're all humans but yeah getting out of london in new york is immensely useful that's a great point because i i have often felt this and i you know it's not as much a geography thing for me as it is like a circles of contact or friends thing where like like greg we have a group chat of a bunch of quote unquote smart you know tech oriented people um who are all generally invested in you know crypto tech growth stuff etc and the dumbest trades i've ever made the

28:22dumbest investments i have ever made objectively are things that i ended up getting like uh you know uh pressured into from that like smart group chat collectively we've lost millions collectively yeah i mean like yeah we've destroyed so much alpha in that group chat like it's sort of an ongoing joke in the group chat that like one of the qualifications for being in it is that you have to destroy alpha um you know like there was a time i actually didn't get into this one but there was like a whole long period in 2021 where everyone was like apping into zillow and every time it was down 10 someone would be

28:53like oh man this is the future of real estate i'm doubling up and then everyone would double up on it and then it would go down another 20 percent people are like i mean i think there are people in the group chat down 80 on zillow stuff and now here's the worst thing maybe their thesis is right yeah but most people will have got out of the trade or got bored because their hundred grand is now worth ten grand they'll [ __ ] care anymore it's so hard to trade your way out of that man i mean really really hard if you're gonna like then sell it and try to work your way

29:21back it's just not gonna happen but it is it's a great point on like i think of it of um i call it like the tragedy of expertise or something like that where um you almost outsmart yourself like the i actually looked recently at my portfolio um and like my five-year returns and the the um like smart investments i made like things where i thought i had edge or some sort of insight that was going to make it you know beat the market have underperformed the dumb dollar cost averaging i did into uh s p 500 bitcoin and eth um like dramatically underperformed all the smart things i

29:57did it was like me buying every monday into the like three you know a couple of things that i just know are gonna go up over the long term dramatically outperformed um and that is just like if if that's not a sign to me then i need to stop doing the smart things and just like be dumb and just enjoy it embrace it i don't know what else is yeah you know all you need there's a hack to all of this is all you need is a secular trend try not to be the smartest person in the room try to be dumb where is the obvious direction over time

30:34because the obvious direction over time is where you'll make the most money you can get smart around the bets there but the obvious direction of the adoption of crypto assets is that it's going higher now that adoption rate slows and speeds up over various periods of time so you've got a tailwind which is amazing right why does the s p 500 outperform um value in stock picking well because 86 million millennials a dollar cost averaging into a 401k so you don't need to start if you look at the global economy which is the most obvious global economy in the world that you want to be long or for the next 15

31:10years 20 years it is without question india why because they've got 1.3 billion people an average age of 28. you haven't even hit the demographic sweet spot which is that 30 to 50 range right so all of these things are around everywhere i mean you know the bond market has been an amazing trade for me my entire career because it's been bloody obvious it's in one trend and i still don't think it's broken i know everyone's arguing but i've argued this for the last 12 15 years when people say yeah it's going to break and everything's changed i don't think it has because of debt and demographics

31:44these are secular trends trade the second trend is much easier than something else it's like you know is tesla the best car company in the world doesn't really matter but ev is where money is corralling and the rate of innovation and adoption of what he's doing is still high so you know esg that's going to be a mega trend it doesn't don't care if anybody agrees in the trend and the mandating of it but everybody's mandated to do it in europe so all of the money goes into to esg so there's another tailwind for you and that's going to go on until we get change the energy equation and the war

32:21with russia accelerates it i think it's it's in its trade it's trade secular trends and it's also built in secular trends correct um so for example i'm happy you brought up india i heard recently from biology actually on the tim ferriss podcast that he said that the majority of the english-speaking internet will be indian exactly that is on my evernote in front of me because we've just started real vision india um and it just struck me as something immensely powerful based exactly on the same demographic consequence of having what 300 300 million people are english-speaking of the middle classes in india that changes that changes the

33:04fabric of the internet fundamentally and once i i haven't been able to sleep since i've heard that basically because i was like this changes this changes everything i don't think enough people realize it and there's for me greg it struck me i'm not you know as you know i'm half indian i mean i i'm a huge india bull and i had not got that simple so this is somebody who's clarified a whole complexity i could speak for hours about india and what they're doing and the everything else he's distilled it into one point that is so prescient that it kept you up at night say it one more time just for clarity

33:41soon the majority of the english-speaking internet will be indian yeah so and he explains in apparent in a little bit after that is that the conversations you have online the highest probability is that they will be indians they will not be americans they'll not be english they'll be europeans they'll be indians and i'm like wow what he's saying is the future of the internet is indian and that's the indian diaspora both at home so sahil you're part of that as well uh the indian diaspora um at home and abroad and with india i think we can include um pakistan and bangladesh the indian subcontinent so i mean the diaspora in the us is taking

34:27over the bloody world and everyone's like wow why is there so many indians i mean virtually everybody wahara real vision is a bloody indian now it becomes a joke why because there's enormous numbers of indians i'm dwarfs everybody else you so this all reminds me like when you talk about secular trends you talk about these big picture things i think a lot about josh wolf who i think is a mutual friend of ours rowell as well and you know his whole thesis around directional arrows of progress and that's always really resonated with with me is like you don't need to pick the exact thing but just figure out what the directional

35:02arrow of progress is and trade invest in build in that um you wrote a piece recently for gmi about what you call the exponent exponential age um can you just talk about that like what does that mean to you what are those big secular trends that you're seeing that people should should be paying attention to yeah it's i mean after writing it i realized it wasn't quite so revolutionary because obviously people like kathy wood have been doing it and people like um the guys at scottish mortgage um trust that most people don't know of that probably the best heck managers in the world um have been doing

35:37and basically i i just stepped back and i was like okay i'd seen that if i divided various assets by the central bank balance sheet over the period we're having big monetary printing in 2021 um or 2020 i realized that there's only two things that outperform the fed balance sheet over the last since 2008 only two asset classes one was technology stocks and the other was crypto and that stopped in my tracks i'm like why technology stocks and then i i realized that these were also network adoption models so that got me thinking about okay here's a secular trend i i'm not i'm missing right because i was

36:17one of those people who think that all vcs are idiots this is a stupid over-hyped ridiculous thing and obviously clearly wrong but macro frameworks don't work very well because they tend to be mean reverting often some people got it stan dracula got it a while ago and a few people did so i sat down and thought about it and did a lot of reading and i'm i had this moment where i started not being able to sleep because i realized with the nexus of the fastest pace of adoption of an enormous numbers of groundbreaking technology at the same time so this is not early stage stuff that we hear about

36:52this is stuff actually happening right now that's going to go from you know 100 million people to four billion people in the next decade and a half and that i was like okay what are these and simply obviously cryptocurrencies one blockchain technology um artificial intelligence robotics space um ev um internet of things genetic sciences you know none of these are new until you realize they are all metcalfe's law models and when you add metcalfe's law on top of metcalfe's law you get reid's law which is even more truly exponential so then i realized okay humanity is going to go through the biggest change of technology and

37:42technological change because of exponent exponentiality we've ever gone through and it's already breaking the fabric of society right that's clear and just to make sure every listener understands um the point you just made there metcalfe's law is basically like the under uh uh the underpinning of network effects which just says um you know a network's value is uh i guess what it technically says is that a network's value is equal to the square of the number of users in the network but more simply more users equal more value more users and more interconnection between the users right because more users is not is not a network it's a pre

38:23it's a it's a potential network yeah yeah once you start building on top of the network you know what is the value that the mobile phone networks have actually created if you think about that not making phone calls but what got built on top of it you know this kind of stuff right and when you you know and mobile phones and that technology has been a reid's law example because you you have the in the uh mobile phone technology then the computing technology goes on top the software technology goes on top of that and before you know it the whole thing goes like ridiculous um so we're about to go to the largest

38:57change humanities ever gone through we're not dealing with the change already you can see it all over twitter there's people so distrusting of change and fear of change and you know moving away from good old my mustang and moving to a tesla that just seems like it's a political opinion now you know the whole thing is is is all about the fear of change so i thought about this and so i can say i know it's tearing society apart and it will continue to do so because humans don't deal with change at this speed that's all most species don't so i thought what do you do about that

39:30how do you change the mindset of this the obvious thing is to embrace it because then it goes from being something you fear to something you'd be excited about and if you understand network adoption models it means it should be incredibly lucrative to embrace it financially by investing in it so i started building a broad basket of stuff um that basically captures the direction yet directionality of these mega trends you know gaming metaverse they're all part of the same ludicrous change that none of us if we come back to this conversation in 15 years time well a we won't be doing overzoo you know i mean i i i can't even get my

40:14head around the changes much like none of us got the head around the changes when we first saw the internet and like yeah once you first saw something in about 96 no way we thought we'd be doing this 20 years later what do you think we're uh could you paint a vision of what internet metaverse might look like in 15 years look everything is converging it is converging on the singularity once you see all of this stuff there is no other outcome now whether that's man enhances machine or machine enhances man is going to be the big debate of 20 30 years time but everything is going to be digitized

40:57we're seeing it it's the mega trend right if you step back what is the megatrend everything and i explain this to people they don't get it but electricity is about to be digitized that is what this whole revolution is about the whole esg revolution is going from using these physical fossil fuels to using atoms or energy that exists and basically digitizing it so once you do that the cost of anything that gets digitized goes to zero it's one of the most powerful forces the world has ever seen so what does the world look like with near free electricity oh okay that means something different that we're not constrained by cost of

41:43energy so what possibilities does that allow for computing power what possibilities does it allow for travel what possibilities allow for technology i have no idea but it's coming whether that's 15 years time or 30 years time it is definitely coming so all i know that we will be living in a more and more digital world and the metaverse is just the expression of that like this i always explain on these calls this is a metaverse experience right this these are digital renditions of ourselves with digital renditions of our voices yeah all of this stuff this is basically the start of of what a metaverse is and

42:23it'll all come together but also on the flip side means that nature probably trades at a premium if you're living all over your life you know how difficult it's been for us all how incredibly productive and useful it's been to be able to operate on zoom and how it gives you a headache you're exhausted by the end of the day and all of that stuff because you're not interacting with nature the outside people and stuff like that so i think nature probably trades at a premium which is an interesting concept that um i've been kind of getting through my mind with this so the answer is i don't

42:54know what the world's gonna look like but i know that all of these things they're all going to one point like i used to say that crypto macro with these two tracks that we're going to meet at the next recession then it happened these tracks obviously meet at the singularity which is a horrifying terrifying concept you know and this is going to sound batshit crazy but i think you are the right people to float it with is and i'm not a elon musk you know fanboy although i'm incredibly amazed at what he's done he's going to mars if he can and everything he's doing is for that

43:38if you step back i've not i've not even written about this yet if you step back and look at all of the things he's doing they're all for the same thing i i actually think the boring company is not about digging tunnels under los angeles i don't think gives a [ __ ] i think it's because the only way of inhabiting mars is underground this is why we bring you onto the pod this thing you know spacex doge right people just don't understand his fascination with doge do you understand what he's doing and again this is not me elon musk the greatest man in the world

44:16he tells you this but nobody listens what is doge doge is likely to be his currency what does that mean it's still decentralizing some method not hugely so but yes he's a large stakeholder in it but i'm guessing he'll use it as streaming payments for his cars why would he not and i interviewed somebody from nasa a guy called leon alkali incredible guy he's now got a vc in space stuff i got him on real vision he blew me apart i had no idea how advanced space was he's like oh yeah well we're setting up server farms in space because we don't want to beam down the because it's

44:52too expensive to send down the data and back up again and we need a streaming payment system we need a streaming payment system in space now there's no sovereignty in space get your heads around that there is no sovereignty so you can have your own system of currency in space so then if you think about okay why the robots that he's building well somebody needs to go and do the work in mars to build why even and this is maybe wildly off track but look at the cyber truck if you can generate solar power from mars which i believe you can why would that so why would that cyber

45:36truck not be a perfect vehicle for moving around mars now i don't know about the uh the uh gravitational components but i think it's decent enough but i don't know but there's a lot of these things that i've looked at and then if you've seen the the the whatever the mind thing that you know that's singularity stuff the idea is maybe as humans you can't colonize miles on your own and you have to do it with the robots but and even if um even if i'm wrong on this the point being that you made before sahil i'm not directionally wrong ask josh wolfe ask the people at nasa ask anybody in

46:15the space industry i'm not directionally wrong it is um and it's coming faster than anybody thinks yeah it's uh it's one of those things um i forget dorne bush's law which is like it um you know it takes longer than you ever expect but then it happens faster than you ever thought it could have happened um once it starts and i feel like we're at the point now where it has started so um so here's the thing i didn't know again everyone should go to that real vision interview i think it's on my exponential age interview series with a guy called leon alkali it will completely blow your mind

46:47so he's like well do you understand that we're all fighting over who's gonna get the dark side of the moon and we're worried that the chinese have got there why do i care about the dark side of the moon he goes oh you don't get it do you i said no he said the gravitational pull of earth is massively reduced so we can launch rocket ships further into space i'm like oh and he goes oh we're also already sending up refueling stations into outer space so we can send rockets further i'm like really he's like oh yeah he goes i've got an app that i've invested

47:21in which is for a million bucks you can send a satellite up yourself from a phone from a phone app to like universities or anybody and he says and the costs are going to collapse it'll be 10 000 bucks for you know to send your own satellite up they're 10 square centimeters i'm not really and he's like oh also you know there is a race to build a base station on the moon i'm like why does anybody look at the moon it's uninhabitable he goes no it's because we can put um 3d printing on the moon to print rocket chip parts and again we lower the gravitational

47:54pull it's much more energy efficient i'm like oh wow okay i said how far are we away from having this he goes oh probably next 10 years we'll have a base on the moon and probably a private sector base he said we could think artemis we can then mine asteroids and we will be you know we're already looking at doing that and we're looking at i'm like you know we are so far behind in our narratives that we're arguing whether you know ev should be adopted meanwhile this shit's going on it's it's this is how fast it's happening i mean it goes to you said this earlier rallies

48:25um you know like when the constraints change or dramatically reduced it unlocks a massive field of potential and that's sort of what you're talking about with space which is like oh my god there's this entirely uh different set of constraints in space and if you can all of a sudden be in that environment lower gravitational pull whatever it might be what does that enable from a manufacturing standpoint from a you know cost reduction standpoint like all the things that that all of a sudden unlocks what is it what do you also mean about sovereignty again people haven't got their heads around this so let's say elon musk had bought

48:58twitter and that the servers were put in space there is no census by any government it cannot be prosecuted because it doesn't exist as a company you know and again whether that's legally doable or not it's possible the point being is what's going to come from space is very different than what comes from these confines of our nation-states that we live in which kind of plays in a bit to the bellagi thesis about the network the the network state which is something i've been speaking about for under six seven years that we're going to digital sovereign states and we'll live in multiple ones i think belarge is wrong that we will we will

49:44leave we necessarily leave the state we live in i think we live in multiple states we already do right we live in finn twin you know greg you live in florida until you live outside new york and i live in the cayman islands but we live in a community together which is intuit and crypto twit and you know stuff like that and you know it can be very deep and it can be very broad we've all met on there and yet we got to know each other and it's you know it's cool so anyway space changes the again it's space changes the possible in ways that we don't yet understand

50:17it's a lot to get people's heads around right with all these a lot to get your head around and it's it's completely insane when you think about i think it was tim urban had a tweet recently saying you know there have basically been four three or four kind of like giant leaps uh as a planet and one was like you know the first single cell organism the next one was like you know the single cell to multi-cell organism jump then the next one was like you know uh ocean to land or something like that and the next big giant leap is from single planet to multi-planetary species and the fact

50:54that we might be alive like the chances that we are alive during that one of the four or five giant leaps as a planet is pretty remarkable just on a cosmic time scale and like something to feel really uh amazed by i think yeah and you know elon musk would say it's because we need a plan b essentially for humanity on earth because we either destroy it or we destroy ourselves i don't think any of us really want to live on mars you know living underground or however it's it's not a great environment but as you say it's just like a virus you know humans we're all the same right we're

51:36biological creatures we're like a virus and what we try and do is survive and procreate and if the conditions are not good for us in one place to do it we'll find conditions for other places which is the history of humanity itself and the history of all biology yeah it's what it's also the challenge of our lifespans um it's very easy when you have your own survival mechanism to survive yourself but when you're talking about journeying out into space on time horizons that are going to be you know maybe you go do something that your great great great great grandchildren will benefit from it becomes a much more

52:11challenging calculus i think so i mean maybe part of the whole singularity and like digitizing our bodies is that our lifespans will be increased and it will it will it you know it won't have to be altruistic to go and venture and do those things no that's right um you know humans struggle with altruism generally because it's a matter of self-survival um but overall humans again i i've been i used to be more cynical with humans but i think i believe in that helical structure which is yes we are cyclical yes we make those mistakes but yes incrementally things change so before we wrap up um

52:50i want to get the download on what you guys are working on in web3 um and this new business venture that you've recently talked about and written about that was kind of actually the impetus for me reaching out saying hey we should come on and chat we've gotten into a super fascinating discussion on a bunch of different things but i do want to make sure we we chat about this so i know you guys are also collaborating in some way around it um what is the big opportunity here within web3 that you feel like you've identified and you want to go i've this is the biggest bet i've ever taken

53:19my life this whole web 3 bet and to me again when i visualize it i see it's pretty clear that all business models go that way so we're pivoting real vision around web three okay that makes total sense we've got amazing community to have utility token nfts to have all sorts of web three interactivity and also stuff great that's happening but the other two bets that i've got is a the entire financial system is going to pile capital into this space over time because of this the supermassive black hole that it is when you've got all these network effects going on and the fact that financial industry itself is

53:58going to pivot to blockchain technology so all the securities industry all the system of money everything right so that's almost everything we know so i set up an asset management business called exponential age asset management um and it's a fund of hedge funds that people can basically get broad exposure to space fire hedge funds why hedge funds are not vc vc space is crowded with 57 billion going in in the last 15 months hedge fund space the entire size of the hedge fund space four billion there is the secondary market in crypto's entirely staffed of capital so it's retail only plus a few trading firms of which one of them has just

54:35blown up um there's so that the amount of capital in the space is super small but i know it's coming because i don't have this rule but it's the secular trend so here's the second trend do that so that's one business i've set up and we'll be launching a whole bunch of initiatives around that the second one was obviously if i believe that community is the most powerful force of business models going forwards that um blockchain technology enables this in ways that we can't yet imagine and that i saw originally it all came to me down from a moment when i met rac the music artist

55:18and he explained to me because what he'd done with nfts and social tokens and this was three in a bit years ago and i just heard him sought in my head immediately is oh my god everybody's going this way and so i'd kick that around in the head and then just um was speaking to a friend i grew up with david pemsel he used to be the ceo of the guardian media group um he'd he'd um start a new business which was based around community kind of marketing around um putting together community technology and brands and that nexus and i said well you're missing tokens and so i got him down the rabbit hole

56:02over lockdown introduced him to kevin kelly from delphi and we decided to co-found a business called science magic studios uh so it's sciencemagicstudios.xyz and our basic theory is everybody is trying to tokenize from the ground up we're seeing in nfts you know you guys doing probably the best job of doing that um and they've gone from nfts into the social tokens which is my big thesis which is how this plays out because your digital sovereign state can have its own system of money and that's what the or system of value transfer and that's what the social tokens are and people haven't seen this yet but it's going to come at scale ftx

56:39was another one which has been immensely successful that's how it's still four and a half billion dollar value of a utility token or social token and apecoin being the other one um and so the idea is to tokenize the world's largest cultural communities so culture is the new asset class and cultures based around communities are generally speaking music fashion sports um sports movie tv and book franchises those are the big culture icons if you leave out religion that almost everybody plays a part in and those are going to become tokenized why because they're all intangibles on balance sheets and this i saw the number i can't remember who

57:34where it came from mckinsey or somebody that there was 63 trillion dollars of intangibles on global balance sheets how they get to that number i've known it but let's assume it's directionally right well probably 20 of that is going to get tokenized via what you're doing is essentially tokenizing the intangible of brand culture and community what is the value of disney their community and the culture of disney well it ain't the three hundred dollars this million dollars this billion dollars the stocks worth it's probably a couple of trillion it's probably one of the single most valuable communities on earth and once you start to see the world in

58:18this terms and how you share that network with the users as opposed to exploit the network so facebook is shareholders got rich we got utility and then got monetized but tokenization changes the equation because we all participate in the network you know bitcoin is essentially a digital sovereign state of which you can participate by owning a token and if the sovereign state succeeds over time then you will benefit from that in your society so it's this nexus between nft's metaverse social tokens that is going to take the entire corporate world the cultural world by storm and this is when brands are going to learn they've got no

59:00community and they've got no culture and others will learn they've got unbelievable amounts of community in culture they didn't realize and everybody's going to change what they're doing so that's what science magic studios does we're already speaking some of the biggest people in the music industry biggest people tv i mean we've been introduced to so many people because everybody is looking at this and meanwhile you know everyone's looking at what's the next fnft community that's going to take off i'm like guys there's space over there you know it's like there's [ __ ] mars let's go there two categories you you brought up religion as one and i

59:38that's that's just fascinating but two categories that i'm curious about um politics and religion do they ever tokenize yeah you know politics you're dead right i hadn't even thought about it but obviously and now that's the you know if you look at the us it's basically two sovereign states right now which is again a point balaji raises and everybody's living with and um why would you not you can tokenize i think you're tokenized municipalities as well we're also seeing like like there's some things that people don't realize how big they are and when was the constitution down yeah it didn't work but you coalesced what 40 something

1:00:16million in capital in about a day and a half in a dow around an idea i mean holy [ __ ] that changed politics forever people just don't know it yet um andrew yang is starting to see this already so he's i think got a doubt structure to do stuff but um yes politics could be tokenized because if you're a badge-wearing republican or a badge-wearing democrat or a progressive it's a self-identification of a community and those communities yes somewhat geographically separated but not always so there is a way of having your own system and then you become as ever missionaries for the network um but yeah i mean the us is struggling with

1:01:01that already what i actually like about crypto as an aside on politics um i think the largest right and wrong but um i think that what's so interesting about it is i can hang out and finance twitter and it's very political you know the people who who want to be long oil tend to be on the right and the people who want to buy tesla tend to be on the left why it's a political thing but it is right as opposed to an investment right we should be just thinking of everything neutral as an investment crypto is really interesting there's very little politics in crypto it's one thing we can fight over

1:01:37everything else but we don't fight about this and what it is is i think it's a purely capitalist system with extremely progressive values because it's a community so you kind of got both ends of the spectrum blended together if you're uh if your government listening reach out to rao and his team they're interested i mean at the very least government should be exploring what it could look like you know at the very least yes yeah i mean it seems like a way to get people more involved in the political process and invested in it more broadly it's also i mean the other reaction i had to everything you guys

1:02:15said there is um if you're a builder today and you're looking to start something um what better way to start something than starting with culture and community yeah uh at the at the heart of it and i know greg you've been you know screaming that from the rooftops for a number of years now but just listening to ral speak about what the opportunities look like there and like how you know the biggest brands who haven't built fervent communities are going to be disrupted and they're going to be torn down in the coming years by this if you're going to go try to disrupt what better way to do it than

1:02:45with a fervent culture and community think about what also what's so exciting about this is brands have been extractive but they've been extracted from by facebook and the advertising industry all sorts of middlemen the music industry is really obscene with it the book and tv industries really have seen in the end there's going to be this lovely sharing of the spoils of building a great network between the brand and the customer and there'll be a removal of middlemen and the power of changing that business model is enormous i mean trust me mark zuckerberg is not stupid he completely understands what is going on in web 3 and why they have to change

1:03:26as a business you know knowing many people at um at meta they get it because they won't exist otherwise totally yeah he's a wartime general man yeah people that hate on duck i'm like it's fine to hate on him it's like your point on elon musk it's like people hate on these guys i get it hate on them but zuck is a wartime general i don't i would not bet against that guy no no way and he's not jaded yet i mean i don't know how he's managed that but he's not jaded you know he he's gone and pivoted one of the world's biggest firms pivoted like that

1:04:04on a concept as a yeah as a founder you know and principal owner it's like he's in a cool position because he's not because he's not exposed to you know quarter to quarter marks etc can't be booted out you know he can think in it's like xi jinping and why i'm so scared of china frankly uh they have a 50-year plan and they can think on 50-year time scales while the us is sitting here bickering over you know two-year midterm elections well who's going to win that battle i would say you're long-term versus short-term it's scary as hell meeting with government here uh the other day

1:04:36with one of the ministers about crypto stuff um and what cayman islands is doing and stuff and he's like well he said it very clearly it was interesting he goes well you've got to understand i'm just a temp in my job he said you have you know at best four years at worst two years before i get booted out that's how i mean that's not a good system to establish long-term strategic goals with i mean it goes back to what you said at the very beginning i think it's actually it's a great place to close too i you said in the context i wrote it down here

1:05:08in the context of trading and investing um the alpha is long term everyone is short-term so you need to go long-term if you want to generate alpha and it's the exact same thing in politics and in strategy as a business owner or as a politician if you are ultra long-term oriented and you can think on 50 plus year time horizons and you're thinking about these secular trends and you're investing behind them building behind them etc you are going to generate so much more alpha than the person that's just going with the wins on a daily basis yeah or copying what somebody else is doing just it is again it's the

1:05:39directionality where's the secular trend live in the future imagine the future build that love that that's a great place to close um man what a conversation took me to places that i did not expect i was going to go uh today especially around the space stuff man um leo alkali yeah yeah we're looking forward to it and everyone they can find you you know on twitter um everyone should check out realvision i've been a very happy subscriber for a long time now and always learn a lot whether or not i agree with everything is a different story as you said perfectly happy to have disagreement but absolutely love the content you guys

1:06:16are consistently putting out so thank you so much for the time man this was awesome yeah thank you been waiting to do this it's fun thanks so much for listening to today's episode if you have any questions that you want featured in a future episode email us at hi trwih.com leave us a review at apple or spotify to help us grow the reach of this podcast until next time we will see you soon [Music]