Mark Yusko on AI, Data Security, and the Future of Fintech

Can Bitcoin truly be a better form of money than gold? Join us as we sit down with Mark Yusko, founder of Morgan Creek Capital Management, to unravel his transformative journey from traditional asset management to becoming a leading venture capitalist in the digital asset space. Mark opens up about his initial skepticism of Bitcoin, what led to his change of heart, and why he now sees it as a superior store of value. He also breaks down the distinctions between cryptocurrencies, utility tokens, and digital collectibles, offering a rich insight into the future of blockchain technology, which he intriguingly calls the "truth net."

Is the stock market rational or driven by unpredictable forces? In our next segment, we explore the pivotal role of data in today's tech landscape and the evolution of AI. Mark shares his thoughts on the explosion of data creation over the last decade, the critical challenges around data security, and the innovative investments in encrypted data chips. We also dissect the erratic valuations of tech giants like Intel and Nvidia, comparing them to past phenomena such as MicroStrategy's dramatic rise and fall. Mark cautions against shorting momentum stocks, reminding us that the market often behaves irrationally.

What does the future hold for global currencies? We delve into the complex world of cryptocurrency regulation and market dynamics, analyzing the SEC's approach to classifying cryptocurrencies like Cardano, Ethereum, and Solana. Mark discusses the SEC's enforcement tactics, their funding mechanisms, and the potential ramifications for investors. Wrapping up the episode, we turn our attention to Japan’s weakening yen and the broader economic implications. From the yen carry trade to demographic trends, Mark offers a compelling analysis of how Japan’s current economic situation could signal future challenges for the US and Europe. This episode is packed with thought-provoking insights and expert perspectives you won't want to miss!

The content in this program is for informational purposes only. You should not construe any information or other material as investment, financial, tax, or other advice. The views expressed by the participants are solely their own. A participant may have taken or recommended any investment position discussed, but may close such position or alter its recommendation at any time without notice. Nothing contained in this program constitutes a solicitation, recommendation, endorsement, or offer to buy or sell any securities or other financial instruments in any jurisdiction. Please consult your own investment or financial advisor for advice related to all investment decisions.

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Transcript

Speaker 1: 0:08

my name is michael dyad, publisher of the lead lag report, and joining me for the rough hour is mr mark yusko, who never quite has his face on his x profile. It's always something else on his profile. But uh, mark, I know a lot of people have seen you over the years but for those who don't know your background, just do a overview of who you are, what you've done throughout your career, what you're doing currently.

Speaker 2: 0:28

Yeah, so the quick version although, mike, as you know, I don't do short very well. But the quickest version is chapter one. I worked for not-for-profits. I worked up at my Island Moderate, notre Dame back there and now I sit in Chapel Hill, north Carolina. So I worked at University of North Carolina and then, 20 years ago which is hard to believe I launched Morgan Creek Capital Management and spent 15 plus years building a traditional asset management firm outsource CIO business fund to funds across all traditional assets. But the last five years chapter three I have spent most of my time in the digital asset space, becoming a late in life venture capitalist, and now I scoured the globe looking for startup funds or startup firms in the digital asset ecosystem across what we call the ABCDs AI, blockchain, chips and data. We've made about 80 investments across four funds, raising our fourth fund right now, and that's what I do for my day job.

Speaker 1: 1:40

What was the aha moment that made you pivot towards the digital space?

Speaker 2: 1:46

Yeah, so 11 years ago which is hard to say out loud, but I joke I was introduced to Bitcoin the same month as the Winklevoss twins. They're multi-billionaires and I'm not why. Well, they were in Ibiza with Charlie and they immediately had the aha moment. I had traditional clients, and when I wrote in a letter that I thought this Bitcoin thing was kind of interesting, I mean I got hate. There are people like I will fire you. You're an idiot, don't talk about this stuff. And the price fell from about 500 bucks to about 186 bucks from March to September of 14. And I'm like, yeah, oh, they're right. And then eight weeks later, it was a thousand bucks. I'm like no, there's something here.

Speaker 2: 2:39

And so I did a relatively deep dive, but I didn't have the aha moment really for another two years. I kind of got blockchain technology as an operating system for computing. It's the next computing platform. We had mainframes in 54, the microchip in 68, personal computer in 86, the internet in 90, I'm sorry, the internet in 96, the mobile net in 2010, and now the truth net or blockchains, in 2024. So I kind of got that, but I didn't get Bitcoin really until 2017. And I was actually in an RV in Eureka, california. I couldn't make that part up and I had the aha moment that Bitcoin was a application of blockchain technology, it was a better form of money, and so since then I've kind of gone all in, so to speak.

Speaker 2: 3:48

Since then I've kind of gone all in, so to speak, in what I do, but it really was that aha moment that and I wrote a paper about this called Digital Gold Rush that money, an asset that exists in the absence of a liability, gold has been that for 5,000 years. But gold suffers from two problems. One, it's not very divisible. If I had a bar of gold here, I couldn't break it in half. I'm not strong enough to break it in half and even if I could, I couldn't stuff it in the phone and send it to you. I can send you Bitcoin with a couple of taps of the finger and I can send you down to one 100 millionth of a unit, one Satoshi. So more divisible, more portable, equally scarce and just a better form of money.

Speaker 1: 4:29

But obviously it went beyond Bitcoin for you, right? Because you started looking at other cryptocurrencies. I want you to talk about that experience, because the I don't know how many cryptocurrencies there are now. What 10,000, 20,000? I can't keep count.

Speaker 2: 4:41

Well no, there's only a dozen cryptocurrencies, right? A cryptocurrency is a unit as a medium of exchange or a store of value. There are lots and lots, thousands and thousands of utility tokens A utility token. Most of them are not very useful at all. They don't have much utility. They don't give you a share of equity, they don't give you a share of cash flows. They're not a form of debt. They're essentially a digital collectible and that's fine. But they're definitely not cryptocurrencies. They're definitely not even, for the most part, utility tokens. But they are tokens, meaning they are an entry on a ledger, on a blockchain, but other than trading back and forth and trying to use them as currency for certain areas I just didn't say currency as like a script, right, something you can trade back and forth. That's what they are. But Bitcoin, know, bitcoin, ethereum, maybe Ethereum. I really don't like Ethereum much as money. I like it as a global computer. But things like Dash or Monero or things like that do have some cryptocurrency aspects to them.

Speaker 1: 5:57

So I guess that's the question how do you differentiate between the tokens and the nonsense side of it from the more real things, the tokens and the nonsense side of it from the more real things?

Speaker 2: 6:05

Well, look, an NFT, a non-fungible token. Now, it's not a monkey JPEG, right, which is what everyone associates. But I don't even like the term NFT or non-fungible token, because it is accurate, right. Non-fungible means unique, token means an entry on a ledger. It's not like a little coin or something, it's an entry on a ledger, which is all a blockchain really is a series of entries on a ledger. But the difference is blockchains are permanent and immutable. They're not centralized like a COBOL database that we all use every day with our Visa or MasterCard. If they want to turn it off, they can. Or if we want to store all our data on the cloud, they could keep it if they want. Or we put our money in the bank it's on a ledger, but it's the bank's money, right? So it's not our money anymore, and what blockchains do is they fix that. They let us own things. So web one was read. Web two was read-write putting stuff on the internet. Web three is read-write-own. Blockchains allow us to own things, and so non-fungible token really I think should be called a digital property, right.

Speaker 2: 7:22

All an entry on a ledger is is a record of someone's ownership of some property. It could be a JPEG, it could be a title, it could be a stock certificate, it could be a bond, it could be any asset, it could be the Mona Lisa not the physical Mona Lisa, but the right to own the Mona Lisa. But that's ultimately what blockchains are good for, and Eric Schmidt from Google said it best. So Satoshi Nakamoto did what gave us Bitcoin but, more importantly, gave us the technology to create unique assets in the digital sphere. And what does that even mean? Well, think about it. Think about stocks. Right In the olden days, you and I would meet in New York at the Buttonwood Tree literally Big Tree, where the stock exchange is today and we would bring our analog stuff stock certificates and pieces of paper banknotes and we would meet and we would exchange, and we had to be physically proximate.

Speaker 2: 8:26

And the real problem was, if you've seen gangs in New York on the way to the Buttonwood tree, those guys with the top hats would steal our stuff. So the Stock Exchange built a building and said come inside and you'll be safe, but you still had to get there. So they came up with an idea, with the advent of computing, the electronic age, to say you know what, put the bank notes in the bank and let them be ones and zeros. Electronic database. Put your stock certificates in Dallas, texas, in DTCC, and have these Q-CIPs, these alphanumeric codes, and you guys can change.

Speaker 2: 9:00

In the old days, physical people would go and do the bartering on the floor of the stock exchange. Now it's just computers. There's no people there Not no people, but almost no people. Well, that's fine, but those stock certificates still have to exist in Dallas, texas. Well, why? Why not create unique digital assets entries on a blockchain ledger? And that's the digital age. So we went from the analog age to electronic age, to the digital age, and everything in the world every stock, every bond, every currency, every commodity, every piece of art, every collectible car, every case of wine, every private business, all $700 trillion of assets will eventually be entries on a blockchain. Blockchains will be the computing platform in which all of us work and will buy and sell assets in the digital realm instead of the electronic realm.

Speaker 1: 9:55

I'm going to show a question from YouTube, from Kevin. His question is why doesn't Bitcoin Cash get more attention and credibility than Bitcoin? It's faster and more scalable than Bitcoin. You know this far better than I do. I've seen some things around Bitcoin Cash and some of the clashes that happen among it.

Speaker 2: 10:13

It's Paul Romer, famous prof from Stanford and then NYU and hence retired, won the Nobel Prize, I think, six years ago something like that, for something called the law of increasing returns, and what he said is it's not the best technology that wins, it's the technology that gets critical mass first. And so if you think about the most valuable assets in the world today, they're not companies the way we think about companies In the old days, you were a big, strong company if you had property, plant and equipment, you had people and stuff, and that was the biggest companies in the world oil companies and manufacturing companies. Today, what does Amazon make? They don't make anything. They're just a search engine that matches buyers and sellers and they take a fee, a big fee 45% of revenues. But networks are really important. So the question Bitcoin versus Bitcoin Cash is Bitcoin was created and it's a blockchain, and the thing about blockchains is you can fork them, you can create a copy and go down a different path with a different community. The problem with Bitcoin Cash is the community is small and, in essence, in blockchains, the longest chain, the most continuous chain, has historically been the most valuable chain. It has the largest number of users, has historically been the most valuable chain. It has the largest number of users, and so it's not to say that Bitcoin Cash doesn't have positives.

Speaker 2: 11:53

This idea that it's faster and cheaper. Well, that assumes that fast and cheap are a feature, not a bug. And what do I mean by that? Are a feature, not a bug. And what do I mean by that? Well, in computing, you can be secure or you can be fast. Pick one. It's like when you're building a house good, fast and cheap, pick two. You can have good and fast. It won't be cheap. You can have good and cheap and it won't be fast. And you can have fast and cheap and it won't be good.

Speaker 2: 12:21

So Bitcoin has chosen to be secure. It's the most secure blockchain in the world. So I've been down for like 21 minutes and 15 years. Never had a hack, never had a problem, not one fraudulent transaction. How many fraudulent transactions are there at Visa or MasterCard? Thousands and thousands, probably millions, probably millions. And ultimately, it's not about speed for Bitcoin, it's about permanence and safety and security. Now, that's at the base layer. We can have other layers that do other things, like Solana super fast and super cheap. It's not up all the time. It has some problem with vaporizing transactions. So there are trade-offs in the world of blockchains that are important, but ultimately Bitcoin Cash. There's nothing wrong with it, it's just it has all the benefits of the original Bitcoin blockchain, but a smaller community and fewer users, so it's not as valuable.

Speaker 1: 13:28

I'm smiling at another comment here from Randy Hunt on YouTube. Can I use Bitcoin Cash to buy NVIDIA on sale today as a joke? I want to tease a little bit more on the secure versus fast dynamic you just mentioned, because I think it's an interesting way to frame things that makes me think that AI is not going to be secure at all.

Speaker 2: 13:48

Oh yes, look, such a great point. Look, we have a problem. And actually it's interesting. Segue into the thing I'm most excited about in the ABCDs, in which we invest AI is a tool, right, it's an 80-year overnight success story and we're like oh, ai. So I'm old enough, michael, to remember 1980 was the year of AI by Time Magazine 1980. Okay, 2000,. Intel stock went up up 20 fold in 12 months because their chip was going to revolutionize AI. Today, intel's down 60, 6-0% from 24 years ago and Nvidia's up a lot.

Speaker 2: 14:38

For now We'll see how that ends, but at the end of the day, what matters in the ABCDs? Data. Everything's about data, right, eric Schmidt. Back to Eric Schmidt In 2010,. He had this great quote he said from the beginning of time, which is a little bit of hyperbole. So really, since the 50s, 2010, there were five exabytes of data created. 2010, there were five exabytes of data created every two days. Today, as you and I were creating part of it, we'll create 329 exabytes of data. So data is king.

Speaker 2: 15:20

The problem with data is you have to store it and capture it. That's what blockchains do. You have to analyze it that's what chips do, computing platforms and then you have to make decisions with it. That's what AIs do. But the problem with AI is the data isn't secure. So all the data I have on my phone is secure it's encrypted. If I send you a WhatsApp or a telegram, it's encrypted. If I send you an iMessage, not so much.

Speaker 2: 15:52

All the data at Morgan Creek that we put into the cloud okay, at Microsoft Azure is encrypted. It's secure as long as I'm not working on it. The moment I work on it, it has to be decrypted and that's where all the hacks happen. That's where all the data leaks happen and that's why, if you look at your phone, you've had you've had multiple data leaks across all your passwords, as because data at rest is secure, but data that's active is not.

Speaker 2: 16:22

So we've actually invested in two companies that are have invented a chip and it boggles my mind. I don't really understand how it works that will allow you to work on encrypted data, and so AI models that actually use data sets could not be open to the world to be polluted or hacked while they're doing the operation. Now, those chips don't exist yet, but, fingers crossed, in about three weeks we'll get the first prototype back. But AI, it's a tool and it's not a computing platform. It's not some thing that's going to change the world. And NVIDIA 36 times sales, is overpriced. But now I would have said that at 23 times sales and it went up more. But we'll see what happens.

Speaker 1: 17:15

My favorite stock in the world, nvidia, which I always joke about. Of all the stocks I had to pick on right. With the Persona which I've largely killed off on X, I had to pick on that one. With the persona which I've largely killed off on X, I had to pick on that one. But now it does seem like it's starting to break. I was obviously very wrong and very early.

Speaker 2: 17:31

But, michael, we're always wrong, and early and early is the euphemism for wrong right. So here's the problem. Go back to 2000,. Microstrategy, michael Saylor the darling. His stock was three bucks and it went to a hundred and everybody was short and they got carried out and they came back and it went to 200 and they carried out the shorts. And this shorts came back because they're like this is stupid, there's no there there, there's no company there. This guy's a fraud. It was just three hundred and thirty something dollars. They carried out all the shorts and then it went to three and he did get fined by the SEC and all kinds of good stuff. But the bottom line is there was no there there. But the market can be irrational longer than the rational investor can remain solvent.

Speaker 2: 18:28

Because back then, in 2000, most of the money was actively managed. It wasn't dumb. And I don't mean dumb on intelligent, I mean dumb, meaning rule-based. Now more than 50% of assets are rule-based. They're indexed, capitalization weighted, and a capitalization weighted index has no choice but to buy more NVIDIA as it goes up. It doesn't get to say this is stupid, I won't pay 36 times sales. It has to do it. And because people never changed their 401k. They put the money in the 401k every two weeks and it goes into the index and it's a self-perpetuating momentum strategy until it breaks. Now, when it breaks and goes the other way, glory hallelujah. We will go down 70, 80, 90. I don't know what that number is, but there is no number, there's no math, there's nothing on the planet that can rationalize any multiple over 10 times sales. Even at 10 times sales, right?

Speaker 2: 19:35

The head of Scott McNally, the head of Sun Microsystems in 2000, said it best To make a 10% return. If you pay me 10 times sales for my company, I would have to give you all of my revenue for the next 10 years, which is a problem because I would go to jail because I have to pay taxes, I have to pay my suppliers, I have to pay my people. So you're not going to get a 10% return. Stock went down 98%. Company still exists, still a perfectly fine company, and I'm not saying is going down 98%. I'm saying it's going to go down a lot at some point, but you don't know when. So the problem with trying to short these momentum stories is the 315 train problem. You're standing on the train track at 310 and you look up and the train's about to run you over. You're like no, no, no, no, you're not supposed to be here till 315. The problem is, you're right but you're dead. So step off the track, let the train come in. Stop, then get on the train.

Speaker 1: 21:16

I don't know if people really understand just how pervasive NVIDIA is in almost every single portfolio and ETF. I mean, I do tons of writings on Steeping Alpha, covering different ETFs and analyzing them and even the funds that in the name have low volatility, high quality dividends. Nvidia is like the number three position and this is what Wall Street does. It comes out with products that sound good, like they're supposed to do something specific, and then they put momentum names. So I say that because people will criticize me for that negativity on NVIDIA right that I've had, because I've just been skeptical of the narrative and they say oh, you know, you missed out on one of the greatest moves in history. It's like, oh, wait a minute, Everyone owns NVIDIA. If you have any kind of exposure to a supposedly broad, diversified benchmark, and probably more than you realize, Right.

Speaker 2: 22:07

Oh, that's exactly right. So I've criticized I mean I, I criticized Tesla when it was going parabolic and the Tesla lemmings came at me and they don't come at me anymore because Tesla's broken that momentum. And look, every bubble chart in the world looks the same, right, it has a false breakout and then a correction and then it goes parabolic. There are no charts, michael, none, zero. I mean literally zero. That go up parabolic and then go flatline. There are zero, right, they all look like the Eiffel Tower, every single one. And after the original break there's a one last hookup, the return to normal, where everybody's like see, I told you. And then you go to the bottom and Tesla's past that point and they're headed down to gravity and ultimately NVIDIA will too. Because it's just math One of my favorite hashtags, hashtag just math.

Speaker 2: 23:10

Stocks are not like organic growing things. They are simply a record of people's expectations of the future cash flow of a business. And ultimately, the problem is the price is a liar, right. John Burbank's great line the price doesn't mean the value. The price is just what two people agree to exchange a small amount. And here's the big problem.

Speaker 2: 23:39

If you want to trade 100 shares that price on Nasdaq, that is the price. But if you have 1,000 shares, that ain't the price. If you have a million shares, it's definitely not the price, and if you have 10 million shares it's not the price. It's going to be different. So how long can markets remain irrational? A long time? How long can people like you and me sound stupid Because we are value guys at our core and we like to buy things below fair value and sell them above fair value a novel concept? You can be wrong a long time. But to your point, I own NVIDIA in my 401k and all my others, but I would never own it in an actively managed portfolio because that doesn't make sense Right now. Right now, right now.

Speaker 1: 24:29

Right, there's a price for everything, I think is the point. It's just not necessarily the price right now. I want to bring in another Switching Gears, youtube questionnaire or comments from ER Berg. We'd love to hear both your opinions, really. Mark's opinion on the SEC rescinding its security designation for Solana Cardano, et cetera regarding the finance case, maybe provide a little context on this first.

Speaker 2: 24:52

Yeah, look, I mean the SEC under Mr Gensler's leadership. And, by the way, it's not in my best interest to criticize the organization that oversees my firm. So full disclosure we are a regulated entity, we're a registered SEC, registered advisor, so I'm probably not going to lambaste that organization. I think they do a good job. With limited resources. They try to do the best. However, I do believe that the current administration chose a tact that I probably would not have taken enforcement by punishment as opposed to enforcement by rule setting. And so one of the challenges it's like raising a child If you don't have rules, the child flounders. They don't know what to do or what not to do, so you need rules and they may push up against them, they may even cross the line, but at least they know there are consequences for their actions and they know where the boundaries are. The problem with the current form of legislation was they kind of said well, we're not going to rule per se on different cryptocurrencies, uh, or different utility tokens. We're not going to tell you whether we think they're a security or not a security, and sometimes, even if we say they're one thing, we're going to change. That, arguably, is partly because one of the unknown little wrinkles.

Speaker 2: 26:32

The SEC is not funded by the government. They're self-funding. They fund themselves through their fines, regulatory actions from time to time to pay the bills. So when people do bad stuff, they fine them and if they do really bad stuff, like spoofing the price of gold, they fine them a lot. The problem is those spoofers make so much more. If you pay a billion dollar fine, but you made 20 billion, it's just the cost of doing business. So that's a long way of saying.

Speaker 2: 27:06

There are tokens that many feel near and dear to people's heart, like Cardano. I don't really understand it. I don't see any technical activity being built on Cardano. A lot of people own it and trade it, but I don't really understand the use case. Understand the use case. There are other things like Ethereum that I think have lots of use cases and lots of applications and lots of development activity. There are things like Solana that we own a lot of and actually sold a lot of and made probably more money than I've ever made in my career on that project. But today I kind of struggle that struggle that yes, it's cheap and fast, but it's not very many people building stuff on it and other than meme coins and and nfts. I I really can't find many use cases for it. So, uh, you know what's going to happen with xrp? Yeah, don't know.

Speaker 2: 28:03

And and ultimately, the sec's stance lately has been shoot first, ask questions later, so they fine people for violations of rules that didn't even exist, which is kind of a weird paradigm.

Speaker 2: 28:17

That happened at the Winklevoss twins and it happened to DCG and it happened to a bunch of people who were victimized by the real bad actor, ftx, which seemed to be very buddy-buddy with the SEC for some reason. So lots of things to unpack there. But ultimately I think they put themselves in a place where they decreed certain things securities, certain things not securities. My view on that is there was a logic to why Bitcoin and Ethereum were ruled commodities as opposed to securities, and that's because when you deem something a commodity, you can then have futures contracts against it, which then allow you, as Leo Melamed from the CME said, to tame the price. Because what's happening right now is the reason that Bitcoin hasn't reacted the way people thought post-halving is you have massive arbitrage going on between the big dogs who are shorting the futures and buying the underlying ETF, so most of the inflows to those ETFs are not really retail flows and actual purchases. They're just arbitrage to capture the spread between the future and the spot.

Speaker 1: 29:41

Another good, interesting question to kind of expand on here from Zane on LinkedIn Is Solana decentralized enough to be considered a cryptocurrency or is it a centralized D2B? Interesting question to kind of expand on here from Zane on LinkedIn Is Solana decentralized enough to be considered a cryptocurrency or is it a centralized database?

Speaker 2: 29:54

disguised as a decentralized ledger? Wow, that's such a great question, and I would look at the risk of pissing off more of the Solana bros.

Speaker 1: 30:04

You're on Leadlag Live. A lot of people get pissed watching.

Speaker 2: 30:07

I know no, no, but yes, it is exactly the latter. It's not decentralized enough. But most of the problem with many utility tokens is they are not truly decentralized at all. Right, are not truly decentralized at all. Right. They are pointers to AWS or Azure servers. To me, on-chain means on-chain. If I want to own an asset on-chain, I want it physically on the chain and to me, proof of work is the best way to do that. So ultimately, I think Bitcoin has a huge advantage, kind of the Lord of the Rings one chain to rule all chains. Now, does that mean that virtual machines are useless? No, does it mean that? I think there are weaknesses in proof of stake and proof of history? Yes, does it mean that they are more centralized than they should be? Absolutely. What will fix that? More development activity, more nodes, more decentralization. But in the short run, yeah, they are overly centralized comparatively.

Speaker 1: 31:30

By the way, I love your pinned post on X. The greatest wealth is created by being an early investor in innovation. Making an investment requires believing in something before the majority of people understand it. You will be mocked, ridiculed and criticized for your non-consensus action. It's absolutely worth it. You will be mocked, ridiculed and criticized for your non-consensus action. It's absolutely worth it. On that point, obviously easier said than done to identify that stuff.

Speaker 2: 31:55

Well, yes and no. So here's the thing I've been really lucky. I've spent my career having the greatest job in the world. I got paid to talk to the smartest people in the world about investing. Like literally people put me in a seat, whether it was at the universities or as an outsourced CIO or as a fund to funds manager. They said go find the smartest people in the world. And so I've literally spoken to all the great investors. Over the years I've had capital with hundreds of the very best managers everyone from. You know George Soros and Julie Robertson and Michael Steinhardt and Paul Tudor Jones, and you know anyone that you can add. You know I've met with Myron Scholes and Nobel laureates and I don't really like him very much Too tan and very condescending. But ultimately you have to choose where you invest and that's the neat thing is by hanging out with the smartest people in the world. You don't have to be very smart to see when there's real innovation and to get excited about it. And the caveat to my post is sometimes I don't even understand, like to this day. I don't understand how you and I are speaking into metal and glass boxes and instantaneously, through the airwaves and landlines, we can see each other in high definition. I don't really understand how packet switching and voice over IP works, but I don't really care, because I made a ton of money in the 90s investing in Google and eBay and Yahoo and all these crazy names who were integrating Internet protocol and ultimately creating the stack that we call web one, which is TCP, ip, ftp, smtp, https and wwwweb.

Speaker 2: 33:56

One was all about ownership and Chris Dixon wrote the book about this read, write, own. I mean, it's all, I'm sorry, it's all about read. So you post information on the internet. We could read it like an information page. It's like it'll be britannicacom. And then it was read, write. So now we could edit wiki page and Wikipedia and we could put videos on YouTube and create content and people would monetize it because you didn't own it. Well, now web three, we can own our content right.

Speaker 2: 34:31

Think about cookies. Your cookies are a record of all the activity you do online and companies will pay for that. Well, how about we turn that into an NFT, a non-fungible token, just a record, and we own it and we decide who gets to see it and who pays us for our information? Or how about our health records? How about not Epic owning our health record. How about you and I owning our health record? So when we talk to a doctor we can decide should they see our medical record or not? So all of this movement to the digital age unlocks huge opportunity and ultimately, I look at it as the innovations are easy to spot because they don't happen very often.

Speaker 2: 35:18

In computing it's every 14 years. There's a major innovation in computing about every 14 years. Why 14 years? It's about half a generation and young people create all the new stuff. So there was a big innovation in 1954 with the mainframe 68, the microchip 82, the personal computer 96, the internet 2010, the mobile net.

Speaker 2: 35:37

I actually remember being in Seattle at Craig McCaw's family office, a big investor in cellular, and I asked this family office guy do you think that the mobile net will be as big as the internet? He's like Mark, are you joking? Ask people if they want a computer, like whatever. Ask them if they want a phone, like I already have two, I don't need another one. It's true, I got two phones. So the mobile net was really big. Web one right Created about $2 trillion of value. Web 2, about $5 trillion of value and now Web 3, we think will create closer to $15 to $20 trillion, because it's an exponential growth curve. And those innovations get built on better technology.

Speaker 2: 36:23

Right when petscom was created, it was a great idea. It failed because we needed broadband technology and GPS tracking. And 20 years later, chewycom is a multi-billion dollar company, same as Petscom. It just needed more innovation. So, as Newton said, right, I'm not that smart, I stand on the shoulders of giants. He was pretty smart, but we now stand on the shoulders of these previous innovations, and so I don't really think I'm that smart. I think I hang out with really smart people. That's what I love to do, and I hang out with young people because that's where the innovation occurs, because they, when you get older, you're like well, I've always done it this way and I don't really want to try something new, but young people don't know what they don't know and I'll use something that's not politically correct.

Speaker 2: 37:15

So back when I was growing up, bill Cosby was not a bad guy. He was a funny comedian right, and he had these record albums that I would play and I would listen to his comedy routines. And he had this one about this kid at the playground. He said this kid could ride his bike anywhere. He'd ride up over the swing set. He'd ride around the top of the fence. He'd do 360s six inches off the ground. He never fell. You know, the first time he fell when someone told him about gravity right, when he didn't know about gravity. He never fell. So if you think about Marc Andreessen, 19 years old, invents the browser of Sergei and Larry they were in their twenties, sergei and Larry, I mean.

Speaker 2: 37:55

So if you think about that tweet, it's simply follow the talent In 2000,. All the talent. The easy thing was all you had to do is follow all these young people who are not going to consulting or iBanking. They were going to Silicon Valley and to Seattle and to tech companies. It made sense Invest in those. We put 500K in Google when I was at Notre Dame in 96. It turned in 200 million. Not because we're geniuses, not even Sequoia geniuses. It was Larry and Sergey, but we were smart enough to put the money. There is the biggest migration of talent the world has ever seen. All the smartest people are going into this space. Why? Because it's where the future is and we're building on top of networks that are so powerful and so global and decentralized that they are truly world changers. So that's the fun part of investing in innovation truly world changers.

Speaker 1: 39:03

So that's the fun part of investing in innovation. See me a few comments from those watching the live stream. This one's on X MetaPlanet early investor innovation.

Speaker 2: 39:14

Right here. Let's talk about MetaPlanet a little bit here. Yeah, look, metaplanet is. You know, we are a small version of MicroStrategy and this says we want to be the MicroStrategy of Asia. Right, good artists borrow great artists' steel, so said Picasso. So you know, we're blatantly copying Michael's approach, now on a much smaller scale. But the short version is you know, people can see my, my PFP. It's a, an on-chain monkey, and and through the on-chain monkey community, I met some guys and they said, hey, we got this idea to create this, this Asian company, and uh, turned out that uh, one guy had a public company uh called Metaplanet. He, he had a couple of us make some investments and become board members. We did that and we adopted officially the strategy of MicroStrategy, which is to take the treasury and buy Bitcoin and then ultimately tap the credit markets and buy Bitcoin.

Speaker 2: 40:18

And it makes even more sense in Japan than the US because you're denominated in yen and the yen is even more cooked than the dollar in terms of a race to the bottom because of their debt issues. And so in 2011, the yen was 78 to the dollar and today it's like 158 or something and the yen is going to be lower the rest of our natural lives, and so it's going to continue to deteriorate because they have no way out. When you get massively in debt, you got four options. You can pay the debt back In Japan, us, europe. You could tax all the wealth. Forget the income. You could tax all people's wealth. You can't pay the debt back, so you're not going to pay it back. You can restructure it.

Speaker 2: 41:04

The problem is someone has to take the other side of the restructuring and everybody's so screwed they can't do that, so you're not going to restructure it. You can default on it, but then the politicians get kicked out of office. They don't like that, so no one's going to default on it, except in third world countries. So then your choice is to devalue it, which is to basically devalue your currency, and that is the history of mankind. There have been 775 paper currencies in the history of the world. Three quarters no longer exist. The rest are on their way down. So if you think about where we are in that process, the US and Europe trail Japan in their need to devalue their currency. So for us, it was a natural to do MetaPlanet in the Japanese markets.

Speaker 1: 42:18

Can we talk about the yen a little bit, because I've been on this kick since August. This scenario that I've been playing out, which is that the yen keeps weakening, japan has to import all its oil. They can't control the price of oil. They can control the price of yen, which means oil price in yen. They can manipulate. Yen keeps getting weaker. Everyone thinks that that's a good thing because it's inflationary Too bad. The exports don't actually reflect that.

Speaker 1: 42:44

When you look at Japan's economic data and now you're starting to see the reversal. Now I have you know, going back to the whole point about NVIDIA. The irony of all this is that again, all the stocks I had to pick on it was NVIDIA. It seems like a large part of that momentum was driven by the carry trade, as money was borrowing from Japan and going to AI names. Now, not all of it, right, and clearly there's some real momentum there that's US home dollar driven right. But I want to hear your thoughts on, just given your experience in the industry, on how currency crises play out. I mean any kind of examples or anything that we can point to that would suggest that you know what this could be a bigger deal than people realize. And here's how, historically, you should be thinking about it.

Speaker 2: 43:25

Yeah. So look, the problem with trying to time the yen implosion. Kyle Bass has been trying to do it for 15 years, 15 years. And there are people that predated him that said, hey, when you get to 100% debt to GDP, you got to collapse. Well, maybe it's 150. Maybe it's 180. Well, maybe it's 150. Maybe it's 180. Well, maybe it's 220.

Speaker 2: 43:52

Well, the reality is because of the yen carry trade. And what is the yen carry trade? So if you have interest rates at zero and people from around the world can go borrow money at zero and buy anything with a yield, that's a carry trade. So for years, the yen was the ax in that global carry trade, which was really interesting because other countries could have lowered their rates to zero, which eventually they did, and so there was this period three years ago where the yen actually strengthened. You know, like that can't be right.

Speaker 2: 44:36

Everything about this country is imploding, except the quality of life. The quality of life is really really high, especially if you happen to live already in Tokyo. You know, food's great, apartments are great, it's great quality of life. But short version of the long tail is once the Fed went back to punishing well, punishing the masses by raising rates, or I should say unpunishing savers. I should say unpunishing savers Because by going to zero, you're punishing the savers and you're stealing money from the savers to give it to the rich because they lever up everything. So once they reversed that, the yen carry trade was back and it has been backed as the preferred trade. And so the dichotomy is you're right In theory, a country with 226% debt to GDP should implode, the yen should skyrocket out of control and it should be a really bad experience.

Speaker 2: 45:41

But the demand for yen to fund this global carry trade which is encouraged, by the way is almost infinite because the fiat countries keep printing more money. So think about the race of the money. Everyone quotes DXY, right? Oh, look how strong the dollar is. No, it's not. It's just less weak than the yen or the euro. If you look at it relative to the renminbi, it's actually not strong.

Speaker 2: 46:13

So this global race to the bottom is inevitable because of demographics. Demographics are destiny 65 to 85-year-old people. They don't spend a lot, they tend to save and they like fixed income. And so what we've seen as Japan first, then Europe, then the US. Every single day, 10,000 people in the United States and Europe turn 65 for the next seven plus years and that is going to continue to play out. So if you want to know what's going to happen in US and Europe, that is going to continue to play out. So if you want to know what's going to happen in US and Europe, just look at Japan 11 years ago. And so they peaked in 89, we peaked in 2000,. Their debt got downgraded. 11 years later, us debt gets downgraded, same kind of things happen and ultimately, I think the yen is a controlled demolition, not an out-of-control demolition, and I think the yen carry trade is back to being the most preferred because they're the place that still has zero rates.

Speaker 1: 47:19

Until they don't, until they don't. As you know, mark, for those who want to track more of your thoughts, more of your work, which way to go?

Speaker 2: 47:28

So I mean I'm on Twitter. So at Mark Yusko, your thoughts more your work, which way to? So I mean I'm on twitter. So at mark usco uh, we have a website, morgan creek, cap, capcom that has some links to stuff. I mean, I, I do a lot of things on the internet. Uh, we have a youtube channel. Uh, around the world with usco. We also have one for digital currents. We do a weekly show on the ABCDs, so that's probably the easiest place to find me.

Speaker 2: 47:58

You are keeping busy, any major travel coming up, any places you're going to, you know, yes, so we are in the midst of what I call the Willie Sutton tour. So you know, willie Sutton tour. So you know Willie Sutton, the famous bank robber. They asked him, willie, why do you rob banks? That's where they keep the money. Um, so we are raising our, our fourth fund for the digital asset business and, uh, we are headed uh over to the middle East here, uh, in the fall. So two of the guys just got back and I'm headed over in September. So that's one area, and what's going on in the Middle East is truly extraordinary in terms of just the embracing of the digital asset ecosystem, the digital age focus on all things digital and innovation. So that's a very exciting place to be. Southeast asia, another place where we're focused on uh heading to singapore and hong kong. Um, but you know I I don't travel as much as I used to because of of zoom and and other tools. Um, but I do like being out on the road. I, I was just, I just backed.

Speaker 2: 49:10

Last week, 20 years ago, I left North Carolina, university of North Carolina and I started Morgan Creek and I took my first full two-week vacation in my career up to that point, and so, for our 20th anniversary, I decided I was going to do that again. So my family and I disappeared for two weeks. And when I say disappeared, I mean I disappeared. I didn't tweet, I didn't do anything. And so I said how can you do that? And I said because I had a great first boss. My first boss had a great line. He said if you can't disappear off the face of the planet for two weeks and not be in contact, just completely gone, you're not paid enough. I'm not that important. So it was easy to disappear for two weeks and it was glorious.

Speaker 2: 49:56

We did Italy and I love going to places with history and it makes you realize a couple of things. One, there's nothing new in this world. All the stuff we think we invented in modernity were all existing in antiquity and some of the things were truly, truly extraordinary. Like you know, the Temple of Hercules in downtown Rome, across from the Mouth of Truth 2,000 years this building's been standing. Not one piece of mortar, hand-cut stones, no power tools, earthquakes. I mean how, how is that possible? We can't build homes that last 20 years and this thing has been standing for 2,000 years. That's pretty cool.

Speaker 1: 50:44

As the expression goes, they don't make them like they used to.

Speaker 2: 50:47

Amen Amen.

Speaker 1: 50:48

Everybody. Please make sure you follow Mark. I appreciate those that are engaging during the live stream. Again, this will be an edited podcast under Lead Like Live. Hopefully I'll see you all in the next episode and make sure you follow Mark on X and every other place that he's at. Thank you, Mark, I appreciate you.

Speaker 2: 51:02

Thanks for having me and look forward to doing it again sometime soon. Thank you.