Anthony "Pomp" Pompliano is the co-founder of Morgan Creek Digital. He is the host of The Pomp Podcast, where he talks to investors about business, finance, Bitcoin, and crypto.
Morgan Creek Digital is a hedge fund that specializes in blockchain technology and digital assets and is backed by investment management firm Morgan Creek Capital. The firm was founded by Mark Yusko, Jason Williams and Anthony Pompliano in 2018.
He has built and sold numerous companies, ran Product & Growth teams at Facebook and Snapchat, and invested over $100 million in early-stage technology companies.
LISTEN AND SUBSCRIBE
SPEAKER
Anthony Pompliano
Founder
Pomp Investments
MODERATOR
Anthony Scaramucci
Founder & Managing Partner
SkyBridge
EPISODE TRANSCRIPT
John Darsie: (00:07)
Hello everyone, and welcome back to SALT Talks. My name is John Darsie. I'm the managing director of SALT, which is a global thought leadership forum and networking platform at the intersection of finance, technology and public policy. SALT Talks are a digital interview series with leading investors, creators, and thinkers. And our goal on these SALT Talks is the same as our goal at our SALT conferences, which is to provide a window into the mind of subject matter experts, as well as provide platform for what we think are big ideas that are shaping the future.
John Darsie: (00:38)
And we're very excited today to welcome you back to our latest episode in our digital asset series, but really our guest today, while he's known largely for his investments into digital assets and Bitcoin and crypto, he is much more than that. He's also an early stage investor in a lot of tech companies as well. So we're very excited today to welcome Anthony Pompliano aka Pomp to SALT Talks. Pomp has invested over $100 million in early stage technology companies, including multiple unicorns.
John Darsie: (01:08)
He's the host of The Pomp podcast, one of the top 10 most popular investing podcasts in the world. And he writes a daily letter focused on digital assets to over 100,000 investors each morning. I know that subscriber base is quickly growing. So by the time you're watching this, it'll probably be over 150, 200,000. Pomp previously co-founded Morgan Creek Digital and ran numerous product and growth teams at Facebook. He started his career serving as an infantry sergeant in the US army during Operation Iraqi Freedom. And as a North Carolina native, it's always a proud moment for me to welcome another North Carolina native here to SALT Talks. So, Pomp welcome.
John Darsie: (01:47)
Hosting today's talk is Anthony Scaramucci, the founder and managing partner of SkyBridge Capital. A global alternative investment firm, which as you may know recently invested what at the time was about $180 million into Bitcoin starting in November through December of 2020, that's quickly more than doubled our value of Bitcoin holdings is somewhere around 400 million at this point. We also launched a SkyBridge Bitcoin fund as a private vehicle for accredited investors to invest into Bitcoin. So Anthony is also the chairman of SALT. That's enough for me though. I'll turn it over now to Anthony for the interview.
Anthony Scaramucci: (02:21)
Darsie, I just took a picture of you, me and Pomp. Pomp caught that, so he was smiling. You were rambling on and I was wavering whether or not to cut you out of the picture just to have the two handsome Italians in the picture, but since your name ends in a vowel, I think I-
John Darsie: (02:37)
It ends in a vowel so I'm like an honorary Italian at this point.
Anthony Scaramucci: (02:39)
I think I included half your face, just so you know. I just want to make sure that you're aware of that, okay? Anthony, first of all, it's a pleasure to have you on. We got so much to discuss, but I want to go back to the podcast that you were kind enough to invite me on. And I would say it's almost two years ago now, right? Probably 18 months ago. And were you getting vibe from me during that podcast that I was moving towards Bitcoin? Yes or no?
Anthony Pompliano: (03:04)
I think that my big takeaway was, this guy's really smart and he's eventually going to get there. And I couldn't really put my finger on where you were at the moment, but you understood enough about the macro economy and what digital asset promise was. So I figured you'd get there pretty quickly, and you obviously did.
Anthony Scaramucci: (03:24)
You describe an aha moment. Some people say it's a Eureka moment. Michael Saylor says he had a Eureka moment over the summer. And then he said, "My God, please let me buy this stuff ahead of the other people that are going to get to their Eureka moment." When was your aha moment with Bitcoin and other digital assets Anthony?
Anthony Pompliano: (03:44)
I first heard about it in 2014 when I was working at Facebook. I did absolutely nothing, didn't even Google it. In 2016, I had a young guy who was a freshman in college pitch me on mining. And that was really when it kind of hit me. My father has been in the data center business for 40 years. And so when I saw mining, it basically was data centers on steroids, right? There was a better unit economics, there was persistent demand for the computing power, there was no sales force, et cetera. And so that's really what started the journey for me. I went and I bought some mining equipment, I set it up and cashflow started coming in from there. It was just, how far down the rabbit hole could you go till today?
Anthony Scaramucci: (04:29)
I want to be Bitcoin skeptic, okay? I'm going to put my sky... This is my SkyBridge Bitcoin hat on. And since I have a full head of hair, I don't like wearing hats. So I'm going to reverse it. Oh, wait a minute. There's a Bitcoin sign on the side there. I'm going to sideways the hat, okay? Now I'm going to be a Bitcoin skeptic and it's worthless Pomp, all it is, is a crypto graphic encryption on the internet. What is the big deal for that? Goldman Sachs just said that it's irresponsible to put it into clients' accounts. What I find ironic is Coinbase is going to have a larger market cap than the 151-year old Goldman Sachs when it goes public. But I want you to explain to the fear, uncertainty and doubt crowd, the FUD crowd, what they're missing.
Anthony Pompliano: (05:23)
Look, I think that the first thing to understand about Bitcoin is it's simply just an open, decentralized digital protocol. And all that means is that anyone with an internet connection can essentially use this open protocol. And so what it's used for is to send value back and forth. And so we use all kinds of different payment systems in the traditional world, whether it's Visa, MasterCard, you can use all sorts of banking, ACH, SWIFT, all these different things.
Anthony Pompliano: (05:51)
And what we find with something like Bitcoin is that, there's two key, I think improvements on those legacy systems. One is that it is decentralized, meaning that it is not controlled or owned by anyone individual or organization and also two is, it is artificially capped, deflationary, hyper secure asset. Meaning that no one can create more of it. And so I think in today's macro environment what you're finding is, there's two types of people who are basically finding this valuable. There are people who are using it as a store of value. They're saying the dollar is guaranteed to lose value. And based on Bitcoin's market structure of a fixed supply asset, if demand continues to rise, then you are guaranteed to have your purchasing power growth over time, have the US dollar price appreciation.
Anthony Pompliano: (06:43)
And then there's a second group of people who are using it as a medium of exchange. And that medium of exchange essentially allows people to send money or value anywhere in the world at any time, near instantaneously, for very low cost, without asking for permission from anyone. So if you want to send it to any other person with an internet connection in the world, you can do that. And so I think that those two key use cases are really driving the growth of an asset that 12 years ago didn't exist, today is a 700 plus billion dollar asset and continuing to grow at a pretty aggressive rate.
Anthony Scaramucci: (07:18)
Anthony, I took my hat on because... I mean, I took the hat off because I was really starting to believe you, I was getting excited, but I got to put the hat back on now. I'm putting the hat back on, okay? And I got to ask another skeptical question because there are a lot of fuddy-duddies out there. There are 70, 89-year old people. There are people my age that act like they're 150 and they think SkyBridge Capital is crazy, you're crazy, Michael Saylor is crazy and we're selling nothing. And we're making a greater fool bet that there's a greater fool out there that will buy what's in our portfolios from us at a higher price than the price that we bought it at. Why are they wrong? What is the fundamental mechanism that you're looking at from a metric point of view to measure value in Bitcoin?
Anthony Pompliano: (08:13)
Well, the first reason why they're wrong is because my Bitcoin is not for sale, right? And so it doesn't matter what price somebody offers me, I'm not selling the Bitcoin. And so the greater fool theory would be that I bought it at a low price and somebody's going to pay me at a higher price and I'm going to give it to them, but that's just not the case. And it's not the case for many Bitcoiners.
Anthony Pompliano: (08:30)
What they've done is they've fundamentally shifted from a dollar denominated world to a Bitcoin denominated world. And I think that's a really key piece. And you see this in the data in terms of 60 plus percent of Bitcoin hasn't moved in the last 12 months, even though there's been hundreds of percent of upside, there's been 50% drawdowns in a single 24-hour period, through all of that volatility, 60 plus percent hasn't moved.
Anthony Pompliano: (08:52)
And so these people have a very deep seeded belief that this is an asset they're going to hold for the long period of time regardless of what happens to the US dollar exchange value of it. And I think that when you start to really look at how do you value something like this? Prices simply determinative of supply and demand, right? And the beauty of this asset compared to most markets is that if we look at other assets, we essentially have to do work and our best estimate as to what the supply will be, and also what the demand will be, right? There's two inputs into the equation to determine the price today, and then what the price will be in the future.
Anthony Pompliano: (09:27)
When it comes to Bitcoin, one side of that equation is not a variable, right? We know with 100% certainty, because we can verify in the code exactly what the total supply of Bitcoin is, what the circulating supply is and what the daily incoming supply is. And so that verifiability of the actual supply side of the equation means that we have a 100% certainty, and we can know what that input is.
Anthony Pompliano: (09:52)
What that then leads to is an analysis on the demand side of the equation. And what people then want to speculate about or debate about is, why is demand increasing? Why will demand continue to increase? And I think that that's where you get this spectrum of arguments, everything from store value to medium of exchange. I personally believe that Bitcoin is at least a 10X better improvement in the technology from a store value standpoint than gold. Many people probably think it's even higher than that. It could be a 100X or better.
Anthony Pompliano: (10:20)
And so when you see that very significant improvement from a technology standpoint and a store value, what you're going to find is more and more capital will flow into the asset. And as demand increases for a fixed supply asset with a known supply schedule, the price will continue to appreciate. Five, six years ago, you could have made the argument, "Hey, there's not a lot of trading volume. This is kind of a speculative asset. The market may be manipulated." All of these detractions that I think a lot of people did make.
Anthony Pompliano: (10:50)
Today, when you fast forward, what you find is you've got an asset that has tens of billions of dollars in daily volume, it's on regulated exchanges, it's held by many of the most well-respected financial institutions in the United States. And the price has pretty healthy, pretty high volume price discovery. And so what I think Bitcoin is worth is obviously what the market is determined. Today that's sitting around 36, $37,000. And then the big question is just, how deep is your conviction that demand will continue to increase in the future and price will be a proxy or a result of that increase in demand?
Anthony Scaramucci: (11:27)
But Anthony, this was a penny, then it went to a dollar, then it went to $400. Now it's at, let's just call it for the sake of where we are today, 36, $37,000. Haven't I missed the run in Bitcoin.? Isn't it fully priced at these levels given where it started?
Anthony Pompliano: (11:52)
I mean, look any asset starts out at a low price and then has volatility. It can go up, it can go down. If you look at something like Amazon, I think Amazon stock, when they IPO'd in the late '90s was $18. Today Amazon's price is over $3,300 per share. And that's not a straight line, right? There's all kinds of splits and everything along the way. Lots of volatility. Amazon's stock at one point dropped over 90%. There's also double digit drawdowns on an annual basis. The average intra-year drawdown of Amazon stock is over 30%. And so when you have a highly volatile asset, the reason why that's happening is because there's innovation, there's a repricing of the asset, right? The world is trying to figure out what is this worth?
Anthony Pompliano: (12:39)
And so if you had looked at Amazon's stock at $18, you could have looked backwards and said, "Oh, I could have invested in the seed round or in the series A, I missed it. Now it's a publicly traded company and there's going to be no returns." You would have been wrong. If you had then waited till it was a 100 or 250 or 500 or a 1,000, or even $2,000, you still along the way would have thought, "Oh, I missed it." But what you ended up finding is for the small few assets that actually are disruptive, that are highly innovative, and that do benefit from true market price discovery, you aren't late. Actually what ends up happening is you're probably underestimating the future price performance or the future appreciation. You're underestimating how addressable the market is.
Anthony Pompliano: (13:18)
And so I think an asset like Bitcoin is a perfect example where what you're talking about, it's about a 100 million people globally out of seven and a half billion people in the world. Only a 100 million people have any sort of relationship, ownership or interaction with this asset. And so what you're essentially saying is that a 100 million people would be the total adjustable market. That it's captured everything that it's going to capture, and there's going to be no one else who's going to want this.
Anthony Pompliano: (13:45)
In fact, what we know though from history is that money is a very, very viral product, right? You have to send it to somebody. And so you're constantly bringing more and more people into a monetary network or a monetary system. And so I think that the belief that it's too late really just refutes or ignores history, and then also is a pessimistic view of the future. It's to say that all of the innovation is done, all of the people who need this have found it and therefore there's no future value to capture or create. And I just don't agree with that.
Anthony Scaramucci: (14:18)
I'm going to give some stats for people actually. Amazon went public in May of 1997. It was May 15th, 1997. If you put $10,000 Anthony into Amazon, it's worth 21 million, $140,000 as of yesterday's close. And so if you accept, which I have accepted that Bitcoin is actually a monetary network akin to what Amazon is, is a retail network, which Google happens to be an ad and search network. Then Bitcoin has a lot of room to go given that adoption number that you just presented.
Anthony Scaramucci: (15:03)
I'm going to turn it over to John in a second because he's a millennial and he thinks he'll ask smarter questions than me, Anthony Pompliano. But I'm going to try to ask one last [inaudible 00:15:13].
John Darsie: (15:13)
Anthony knows it's true. The young Anthony Pomp knows it's true but continue.
Anthony Scaramucci: (15:18)
I'm going to try to ask one more, which I happen to think is a smart question, but I want to get your arms around it. And this is about banning Bitcoin. It's about banning Bitcoin in China. It's about banning Bitcoin in India and regulations out there and fuddy-duddies out there. They're in regulatory agencies that want to knock out Bitcoin. I want you to answer that question. What do you say in response to that? And then secondarily, the Chinese are repairing a digital Yuan, and how does a digital Yuan big foot or not big foot something like Bitcoin?
Anthony Pompliano: (16:00)
When we talk about banning something, what you essentially are doing is you're essentially creating a law that's highly unenforceable but a law that would say if you are within a geographic boundary, if you're a citizen of a specific country, you are not allowed to interface with this open decentralized protocol. And so the way that I usually talk about this is the internet is an open decentralized protocol. And so there are countries who have banned the internet, right? North Korea is a great example. If you are a citizen in North Korea, you can not use the internet. That hasn't worked out so well for that country.
Anthony Pompliano: (16:33)
And so regardless of any one country's viewpoint on banning or not banning, the open digital decentralized protocol is going to be used by people, right? It's out there, you can't shut it down. And so it is going to be adopted. And so countries have a choice. They can either choose to be pessimistic and they can choose to ban the participation of their citizens, or they can be innovative and optimistic. And they can say, "Actually, if anyone's going to benefit from this, we should be the ones that benefit the most and therefore we should go and we should embrace this."
Anthony Pompliano: (17:03)
And so when you go around a geographic map, if you look at something like China, China has essentially taken the stance that we're not huge fans of this Bitcoin thing, we're going to create our own digital currency, we're going to take some of the principles of it but we want control. We want to be able to surveil it, we want to be able to control it. And so we'll see how that plays out, but I tend to think that that won't be a great outcome, but you can see that there is a theme here of countries like China or North Korea who are banning their citizens from participating in that open de-centralized protocol.
Anthony Pompliano: (17:35)
If you look at something like India, there's a legislation that's recently been proposed that would outlaw the participation in Bitcoin and other cryptocurrencies. The legislation is actually misinformed in that they call them private currencies. But there's nothing private about it. It's an open, publicly available. Anyone with an internet connection can interface with this. And so you can't actually enforce a ban but what you can do is you can threaten people and all of that.
Anthony Pompliano: (18:01)
What we know is that when a country does ban their participation, you can look at somewhere like Pakistan who banned the participation in Bitcoin, but a key thing happened. Adoption went up and not down. And so, even though they per posed and eventually passed legislation that banned their citizens from participating, it actually drove more adoption, not less. And this came from not only mining it, right? From a cashflow perspective, but also people who wanted to participate in the digital economy, who wanted to freelance, who wanted to do work and get paid.
Anthony Pompliano: (18:32)
Well, in Pakistan, they can't get paid in some other currencies. And so Bitcoin became this censorship resistant way to ensure that they got paid for their goods and services. So I think that that is a word of caution for people in the United States. And there's folks, everyone from some politicians to other people in the regulatory world, all the way to Wall Street asset managers who believe that America should ban Bitcoin. And what I continue to say is that couldn't be more of an anti-American view of the world, right?
Anthony Pompliano: (19:04)
The view that, hey, there's a piece of technology, that piece of technology is going to be used by people all around the world, regardless of if they are our enemy or our friend. But we, as in the United States are going to select, to opt out, to prevent our citizens from embracing this new piece of innovative technology because we deem that some other country may benefit from it as well.
Anthony Pompliano: (19:26)
And so people who are advocating for the banning of Bitcoin are no different than people who would be advocating for the banning of the internet in the United States. They essentially are asking the US government to sanction US citizens, to cut us off from this new digital global financial system. And not only do I think it's, un-American, I think it's a dangerous point of view, right? It's a misinformed point of view.
Anthony Pompliano: (19:45)
I think that what we're going to end up with is, we've now got Bitcoiners in Congress, we've got Bitcoiners on the Senate banking committee, we've got Bitcoiners inside, many of the largest financial institutions in the United States. We even have Bitcoiners who are running some of these regulatory bodies and where I think we're going to end up is exactly where we should. We're going to embrace it, we're going to realize this is a disruptive piece of innovation technology and it's an open decentralized protocol that everyone in the world's going to have access to. And so if America wants to retain their position of leadership on a global stage, we should take every step possible to make sure that we use it to further that position, rather than try to somehow inhibit our growth and our future innovation potential by banning it.
Anthony Scaramucci: (20:26)
And just address the sovereigns who now have fiat currency digitizing their currency, what's the implication there?
Anthony Pompliano: (20:34)
Historically, we've lived in a single currency world. So any one of us gets paid in a single currency, we store all of our wealth in that currency and then we eventually pay our taxes and pay for goods and services in that currency. And the reason why that happens is because there's a high switching costs when it comes to different currencies. And so if I want to go from, let's say dollars to euros, I have to go to the bank, or I have to go to a currency exchange, or at an airport or somewhere else. And so it's a high friction activity to switch currencies if I'm not a Wall Street currency trader.
Anthony Pompliano: (21:05)
And so what we're going to see here is, every currency is going to get digitized, whether it's Bitcoin and other decentralized currencies, whether it's private currencies, things like Facebook's Libra or Diem I guess it's now called. Or, other fiat currency. So there's going to be a digital dollar, a digital Euro, digital Yuan, digital RMB. And when you have digital currencies, now you've gotten to feature parody on a technology landscape. So every currency is digitized. There is no competition or any switching costs by going from one currency to another, it's literally the click of a button. And by reducing that friction, what it does is it now brings the competition from the technology layer, it brings it up to the monetary policy layer.
Anthony Pompliano: (21:42)
And so what you're going to see is regardless of what currency you get paid in, regardless of where you live in the world, with a click of a button, you can switch from your native currency that you get paid in to any other currency in the world. And when you look at the monetary policy structure of all of these assets, Bitcoin's monetary policy is superior in every way when it comes to protecting purchasing power.
Anthony Pompliano: (22:03)
Now, what we're actually going to do is we're going to digitize these fiat currencies. We're going to onboard billions of people with digital wallets, and then we are going to drastically reduce the switching costs. And so what people are likely to do is they're going to get paid in their native currency, they're going to switch into something like Bitcoin to protect their purchasing power as part of their savings or investing strategy. And then if they then have to pay for taxes or goods and services in their native currency, with a click of a button, they'll switch back and they'll actually pay for those expenses.
Anthony Pompliano: (22:28)
And so I think that the fiat currencies are going to get digitized. They're not going to necessarily be competitive from a zero sum game with something like Bitcoin. In fact, they're actually going to be very additive. They're going to drive adoption of digital wallets, and they're going to drive down the friction of the switching costs between currencies. And I think that in that environment, Bitcoin ends up being the greatest beneficiary, because what it has is it has the digital application of sound money principles that if anything we've been taught over time is that capital will flow to the soundest, hardest money. And that's what Bitcoin is. And so I think that we want the governments to go and digitize their currencies because it will ultimately really benefit those who are working in this digital de-centralized world.
John Darsie: (23:14)
I'm going to jump in now Anthony, your time is up. It's my turn to talk. So Pomp, Michael Saylor has become a great friend of ours as we've done our journey into Bitcoin. We've hosted him on two SALT Talks. He hosted his own conference recently that was focused on Bitcoin for corporations. So he was a pioneer in that space. He owns, I don't know, a billion odd, maybe billion and a half dollars worth of Bitcoin today.
Anthony Pompliano: (23:39)
Two billion now.
John Darsie: (23:39)
He had a great session during that conference with Ross Stevens from NYDIG, or from Stone Ridge, which is the parent of NYDIG who's a really impressive player in the space that's bringing the institutional world into crypto in a really effective way. And Ross gave a tour de force on the macro economic backdrop for why he had his Eureka or aha moment on crypto, and on Bitcoin specifically.
John Darsie: (24:04)
How much in your view was Bitcoin as Elon Musk tweeted, inevitable that people were going to learn about this one hell of an invention as Ray Dalio called it? And how much of it's driven by the macro economic backdrop, this massive expansion of the money supply, money printing by central banks. Did it just accelerate a trend that was already happening? Or what's your view of the macro economics and how that's driving the adoption of Bitcoin?
Anthony Pompliano: (24:30)
Look, I think that what's really interesting about Bitcoin is, I have yet to meet somebody who spends the time, is open-minded, intellectually curious, does the work, learns about Bitcoin, can explain it back in very simple terms, right? Showcasing their understanding and does not believe that it will have a place in the world. There may be disagreement in terms of how important it will be or how large it will be or who will hold it. But I have a very hard time finding anyone who says it will be worthless, right? If they've done the work and become educated on it. So I think that's a key piece. And so what that tells you is that, as more and more people learn about it, the inevitability of understanding this will be a thing, was always there.
Anthony Pompliano: (25:11)
Now, what I do think has happened is in the macro environment, in terms of monetary policy intervention and frankly just a lack of discipline across economies and central banks is that we essentially had a $3 trillion marketing campaign or this $4 trillion marketing campaign running the United States last year for Bitcoin. And really what it started out as was, "Hey, there's a public health crisis that is going to lead to an economic crisis. When that economic crisis happens, we are going to have elected officials and the federal reserve that's going to step in, they're going to intervene, they're going to manipulate the market to try to mitigate short-term pain." When they did that, anyone who was paying attention said, "Wait a second, they're going to print a lot of money." There is a fear of inflation, whether it comes or not, we fear that the inflation is coming. And therefore there is a potential issue at hand.
Anthony Pompliano: (26:00)
And they went on a global scavenger hunt looking for the best market or asset in which they could move their wealth so that they could protect the purchasing power and benefit from the activities of the central bank. And so what ended up happening is many, many intelligent, very intellectually rigorous people all arrived at the same conclusion, which was that the inflation hedge bucket of assets is going to do very well in this environment. And inside of that bucket, Bitcoin will be the big winner. Bitcoin will outperform all of the other assets, whether you look at real estate, precious metals, even stocks, to some example, et cetera.
Anthony Pompliano: (26:34)
So far, and we're not out of the woods yet, but so far, what we have seen is that if you came to that conclusion, you were right. And so I think that in March of 2020, Bitcoin was trading somewhere between eight to $10,000. And I think it was March 12th, it literally fell below $4,000, right? I mean, just absolute fell off a cliff. At that time, there was a lot of people who said it's going to zero.
Anthony Pompliano: (26:58)
But what I continued to tell people and I think what's really important to understand was, we were in a liquidity crisis. And during a liquidity crisis, investors sell off any asset that has a liquid market so that they can raise dollars, right? The dollar strengthens, asset prices sell off, you get correlations going towards one. And that's what happened to Bitcoin, it happened to gold, happened to stocks, across the board. But now all of a sudden, as there was this liquidity injected into the market, and you literally just had a system that was flush with cash. Everyone ran for protection and Bitcoin ended up being a great beneficiary of that.
Anthony Pompliano: (27:30)
What I think has happened is not only an acceleration of just the adoption in terms of individuals and some financial institutions buying it. But I think actually psychologically people were reminded. We live in a system that is guaranteed for the dollar lose value. And it is a system in which if you can find a capped supply asset, where demand will continue to increase over time and has utility, as both a store value and a medium of exchange, it is likely to do much, much better because of the programmatic monetary policy and the decentralized security that it brings.
Anthony Pompliano: (28:02)
And so that's where you see people going from, "I know nothing about Bitcoin, I don't want to spend the time on it, I've got a pretty good life." To now rotating and saying, "Wait a minute, this is the most important invention." Right? Or, "This is something I'm going to go take literally 90 plus percent of my balance sheet. I'm going to go convert it from dollars into Bitcoin." And I think that when you get that level of interest, something is happening and the big message to people is always, in my opinion, if you have zero exposure, that's the wrong answer.
Anthony Pompliano: (28:33)
I don't know if the right exposure for you is 25 basis points or 25%, but you got to go do the work. You got to get educated. And if you, for some reason, think that you are smarter than the market, both in terms of the individuals and the organizations that are participating here, or you think that you are going to identify some trend reversal across all of these different market data points from transactions to users to market volumes, et cetera, then you were gambling, right? You were essentially defining what the market is telling you and maybe you're right. But what I do know is that the cost of being wrong here is getting to the point where there's a high risk to being wrong.
Anthony Pompliano: (29:16)
So instead what you should do is, you should figure out what the allocation is to the asset, you should put into your portfolio, you should forget about it and come back and look at it in 10 years. And you'll either have lost a small percentage of your portfolio or it will have appreciated so aggressively that you'll be really, really happy and really thankful that you actually put it in the portfolio.
John Darsie: (29:34)
One thing I've read, you do a lot of writing and you do a lot of a podcasts as well is you talk a lot about investing in things with asymmetric outcomes. And so I think everybody goes on an intellectual journey with Bitcoin. And for me, it was just the notion that you mentioned that it's just asymmetric, right? I mean, the likelihood of it going to zero seems very low at this stage. It feels like the horse is out of the barn, crossed the Rubicon, whatever metaphor you want to use. But the asymmetry that's there seems so compelling.
John Darsie: (30:02)
And it feels like one of the reasons why corporations now are listening to Michael Saylor, there was several thousand people on that call he did, the virtual conference that he did basically where he's opening up the playbook in an open source type of way and explaining to people, "Okay, this is how I did it, this is why I did it." And the interest level from not just CFOs and executives from small companies, these are major companies saying, "It might be a risk for me to hold dollars. So what would it hurt for me to put a small portion of my balance sheet into Bitcoin?" Is that your analysis on why corporations are looking at this?
Anthony Pompliano: (30:35)
Yeah. Look, it's very rare that you've got any sort of treasury management strategy that would allow you to one, protect against inflation or other degradation of your purchasing power. Two, to do it in a asymmetric way, right? Meaning that you can actually put less of your treasury in. So reduce the risk from a percentage of exposure but still gain the same upside potential. And so an easy way to look at that is if you had an asset that you thought could double in value and you took 1%, that would eventually end up being 2% of the portfolio, everything else staying the same.
Anthony Pompliano: (31:12)
Well, if instead that 1% allocation went into an asset that you actually thought could have 10X upside, right? It just ends up being much more beneficial. So if you go back, this data's a little bit outdated but probably about 18 months ago, this was true. If you go back in the five prior years and you took a 60/40 global portfolio, and you took half a percent of your stock portfolio and half a percent of your bond portfolio and put that total of 1% into Bitcoin, you would have taken a global 60/40 portfolio that annualized at 7.2% and you would have taken it up to 9.2%. So you would've got that 200 basis point upside.
Anthony Pompliano: (31:48)
If you had taken that same 1% and it had gone to zero, you lost all of your money, you would have gotten from 7.2% to 7%. So a 20 basis point downside. And so when you have assymetry that is 10 to one upside the downside based on a very small allocation, it ends up again being more risky to not have the exposure than to actually have the exposure. And I think that's the message that corporations are starting to understand is they're saying, "Wait a second, is it worth betting the company?" Right? Is it worth making this big, in some cases multi-billion dollar bet that this thing is not going to end up actually having value in the future. And I think that the opportunity cost is too high at this point.
Anthony Pompliano: (32:27)
And so you're going to see some people are going to do 1% and then some people are going to go do big double digit percentages, right? But I think that's the beauty of it is the work that Michael Saylor and Macro Strategy is doing is, they don't care where you end up. They just want to make sure you have the information. They're saying, "These people are intelligent, they're experienced, they can make decisions for their own shareholders. But if we give them the information, we think that that's the best scenario." And I tend to agree with them.
John Darsie: (32:49)
One thing I admire about you as well is that you're not afraid to debate people, right? You debate people all day on Twitter. You recently did a debate on Real Vision with Mike Green, who's a very smart guy and a skeptic on Bitcoin to say the least. And I would say a detractor probably would be a better term.
John Darsie: (33:09)
But one of the accusations that he made and that people make frequently is about Tether and its ability to manipulate Bitcoin or manipulation in general around the price of Bitcoin given the opaque nature of, we don't know who the founder is, Satoshi Nakamoto and there's all kinds of things that people come up with in terms of the manipulation on the price of Bitcoin. How do you respond to that accusation? And if you don't think that's a credible risk that exists for Bitcoin, what are the most credible risks in your eyes?
Anthony Pompliano: (33:39)
If you just look at, let's compare two systems, legacy system, and this new digital decentralized system. In the legacy system, you can't tell me how many dollars are in circulation, you can't tell me what any future monetary policy decisions are, you can't show me any of the transactions and you can't tell me how many dollars are printed or taken out of circulation on a day-to-day basis, right? Talk about opaqueness, there's just no transparency whatsoever to the point where people literally can't tell you how many dollars are actually in circulation. They can't prove it. So it's a narrative based system, right? And that's actually served us pretty well for the last number of centuries, where we just understood generally, or how to best guess estimate. And that was kind of the best we had. And so we ran with it and it was fantastic.
Anthony Pompliano: (34:24)
When you look at Bitcoin, everything is provable, right? So there's an auditability to the actual monetary policy. And what I mean by that is I can show you exactly what the total supply is, 21 million Bitcoin. I can show you exactly how many are in the circulating supply, which is 18.6 million. I can show you exactly how many Bitcoin are coming into circulation on a daily basis, 900 Bitcoin per day. And then I can actually tell you almost to the day exactly what the future monetary policy decisions are going to be for the next 100 years. I can actually prove it to you and you can audit it in the code.
Anthony Pompliano: (34:57)
And so when it comes to manipulation, right? Just on the surface, which one of those systems do you think is going to be easier to manipulate? Do you think it's going to be the system where there's complete opaqueness and literally no transparency and no provability or auditability? Or the system that has 100% transparency, complete validation and auditability? Of course, it's going to be the former, not the latter.
Anthony Pompliano: (35:18)
Now, when it comes to actual manipulation, right? We have in the legacy system stated manipulation, right? When the federal reserve and elected officials step in and they manipulate interest rates, when they manipulate the quantitative easing, right? They are actively taking actions and they're announcing to the world, "We are trying to take an action today that will lead to a future outcome that we think is positive." Sometimes they're right, sometimes they're not. Frankly, there is no final conclusion, right? It's up for debate.
Anthony Pompliano: (35:46)
And so what they have is they have a very short-term pain mitigation strategy that interventionism is the default and manipulation is the standard. When you then move to the Bitcoin system, there's a whole bunch of theories. It's not just Tether, right? I mean, there's a whole bunch of theories of price manipulation and all these different things. But the beauty is that it's all on chain.
Anthony Pompliano: (36:07)
And so without getting into the details of who owns what corporations, what nation states are there, all these things that I frankly just push to the side and say, "It's all my new details." Is, let's give the detractors all the credit and say, "Every single thing that they're saying is right." Which I don't believe. Let's just say that they're right. Bitcoin still is not going to go away. Bitcoin's adoption is not going to stop and I do not believe that it would change the argument for why people should have access and exposure to Bitcoin.
Anthony Pompliano: (36:39)
When you take that into account, what ends up happening is it ends up highlighting the fact that most of these detractors are basically upset or, with no pun intended, salty for a couple of different reasons. They either one, missed it, meaning that they didn't buy any, it went up a lot and to Anthony's point, they feel like I can't possibly buy it at this high price. Two is, they stake their reputation on it being a failure. And so they need to double and triple down rather than change their mind in public. Or three is that, this asset and this network, and what has happened over the last 12 years violates their worldview. With Mike specifically, and for those that want to go watch the debate they'll see it is, I think that Mike is actually in the third bucket, which is that he has a worldview, this asset violates that worldview and therefore he does not believe that it will be successful in the future.
Anthony Pompliano: (37:29)
As I closed out the debate though, I said, "The beauty of this is, it doesn't matter what his opinion is, it doesn't matter what my opinion is. The market will determine what happens. And if you're an investor, if you're an operator, if you're an individual sitting at home, all you have to do is just watch the market. If the market adopt something, then the market is the ultimate referee and it levees this decisive victory in the hands of the holders or those that are long. If the market rejects something and the price goes down and an adoption dissipates, and the market has levied to decisive victory in the hands of those who are short, or those who are the detractors."
Anthony Pompliano: (38:00)
So far, the bulls are winning and the bears are losing. That could change, sure. But I think that's ultimately what it comes down to is this system is the best we have, it's better than a legacy system and the market will be the referee. And I like the odds for for three of us on being on the right side of history.
John Darsie: (38:17)
And it's something Bill Miller, the legendary, people call him a value investor. But to your point, he's a guy who adapts with the times. And when he sees the environment change, his mindset changes. He's not crystallized in the way he thinks. He's got more pliability in his brain, still as a guy who's been in markets for many decades. But he says that Bitcoin is the only asset that he can think of that, the higher the price goes, the less risky it gets because of the adoption curve that's taking place. And I feel that as well.
John Darsie: (38:46)
When I see Bitcoin go back to 30,000, as we've seen it bounce around in the 30s over the last few weeks and months. At 30 I'm saying, "Wow, I don't know that I really want to buy this." When it gets back to 40 I'm saying, "Okay, I got to double down on my position here. And I got to do like your friend Jason Williams and ape into some Bitcoin." But it's fascinating in that regard, just the pure psychology that goes into buying Bitcoin. So I want to move where Bitcoin maximal is at SkyBridge from a-
Anthony Scaramucci: (39:17)
Sorry. Before you go there Darsie, I got to chime in for a second. So you're never selling your Bitcoin, but let's say you become very wealthy as a result of your Bitcoin. Then what do you do? You just don't sell it? You live in your hoodie for the rest of your life? What's the game plan?
Anthony Pompliano: (39:33)
Well, if you think of-
Anthony Scaramucci: (39:34)
Sorry Darsie. I had to get in and just ask this question because Pomp has thought this whole thing out.
John Darsie: (39:37)
No, that's what it's all about.
Anthony Pompliano: (39:38)
If you think of, let's say, go to Indian culture, right? In India, what families do is they go to work, they make a living, they take that, they convert it into a store value asset, usually gold jewelry, et cetera. And then they pass it down from generation to generation. And so there's no reason to come out of that store of value. That is the family's wealth, right? And if you think of it in terms, if you had an Indian American today, right? And I've got many friends I've talked to about this. The idea that they would sell their families gold, right? In terms of go into something that is not that store of value would be blasphemous.
Anthony Pompliano: (40:12)
Now, if you look at Bitcoin as digital gold versus analog gold, that's one thing. But if you were to go sell it into dollars and then go spend it, people would be pretty upset. And so I think it's a similar thing here, which is, I view Bitcoin as something that I will hand to my kids one day, right? And so what I do is I basically keep a small amount of money that I need for living expenses, et cetera. As Anthony so poetically pointed out, I have not a very high threshold for the amount of money that I spend on a monthly basis. And I basically take all of my dollars and I convert them to Bitcoin. I'm super happy, I don't trade, I don't do anything crazy. And I live a pretty relatively simple life.
Anthony Pompliano: (40:54)
But the reason why that's so valuable is because the more patience I have, the longer time horizon that I have, the more that I've benefited. And so what it's actually done is it's helped me go back to some timeless investing principles which is, you should buy assets that you want to hold for a long time, and then you should sit on your hands and not try to be too smart. That's exactly what I've done. And I've done pretty well on that.
Anthony Scaramucci: (41:15)
What could go wrong Anthony? What could go wrong?
Anthony Pompliano: (41:18)
I think the number one threat to Bitcoin is actually, what I call it a self-inflicted wound, right? Meaning that there's still active code that's being written and being contributed. And so if a bug was to be introduced or some kind of major critical flaw, that would be a pretty bad situation and is definitely a threat.
Anthony Pompliano: (41:37)
Now, there's obviously things that are done to mitigate that, there's a very extensive process in terms of the review of the code, how it gets contributed and there are some repercussions if something bad was introduced that could mitigate or avoid actual catastrophe. But that to me is the number one thing. The second thing I think is, the narrative, right? Is if you can psychologically convince people that Bitcoin is only used by criminals, which the data vehemently rejects. Less than 0.4% of all transactions were used for illicit purposes based on the recent studies. But if you can convince people of that, you can drastically reduce the speed of adoption, right? You can convince people that only bad people hold this asset, it's much less likely to actually happen.
Anthony Pompliano: (42:21)
So I think that those are the two major threats. One is a technical threat. The other is a psychological or societal threat. There's other threats that exist. There's people who think that, all of the global superpowers will get together and they will ban ownership. There's people who believe that there's the possibility of a 51% attack, all of these things. And without spending hours and hours, sitting and debating the merits of those concerns or what's being done to mitigate them. I tend to think that most of those have very low probability of being successful. And really the two highest probability is one, you can have a technical flaw that's introduced, or two, is you can basically psychologically convince people that this is not going to be a thing. But even that, it seems to be mitigated at this point in terms of the narrative really switching.
Anthony Scaramucci: (43:10)
You worried about a bug Anthony?
Anthony Pompliano: (43:13)
I am not. Listen, I've had the great pleasure of meeting a number of the Bitcoin developers. These are some of the most intellectually sharp people that you could meet. They're obviously human. And so they're not perfect. But the beauty is that Bitcoin optimizes for security, stability, and sustainability. And so the development process, one of the big knocks against Bitcoin from other people in the crypto community is that the development process is slow, right? Or that it's not highly iterative. And what people don't realize is that's by design, right? You now have an asset that has over $700 billion of value that is at stake.
Anthony Pompliano: (43:51)
And so you want to make sure that you're very careful. You want to make sure that you're always double and triple checking things and really ensuring that the process at which you develop the code and commit the code is minimizing any error. And so far that's been a successful endeavor. And I think that the people who are responsible for that have done a great job. And so I don't worry about that on a day-to-day basis.
John Darsie: (44:15)
This metaphor just came to me, but I feel like Bitcoin is like the US constitution, right? It's like the core values of the system are hard-coded and you're never going to be able to change them and that's why our country is able to sustain itself. But it's something that the founders allowed you to build on top of it as was necessary as time change. And so it's an interesting analogy to me. And the explanation you just gave made me think about it in that way. But, I want to talk about-
Anthony Pompliano: (44:40)
Yeah, I think-
John Darsie: (44:40)
Yeah, go ahead.
Anthony Pompliano: (44:41)
...one thing John that I think is really unique about that, right? Is we could change the constitution if we want, if enough people got together and said, "Hey, we should take away an amendment or add an amendment." Or, whatever. We can change it right? I think you and I probably both agree that it's very, very unlikely, right? Just given how serious of a situation and how much you would have to build consensus in order to do that. Well, the same thing is true of Bitcoin as well. In terms of, if you can get more than 51% of people to agree to a change, it could happen. But now that we're talking about tens of millions, if not hundreds of millions of people, a fully diversified decentralized system, the odds of that happening are near zero, right?
Anthony Pompliano: (45:22)
So I think it's actually a great analogy to consider the constitution, both in terms of the hard-coded ethos and rules. But also there is flexibility that there could be change if absolutely necessary, and you could build the social consensus but very, very unlikely for it to happen.
John Darsie: (45:38)
Well, my last question I want to ask you is, outside of Bitcoin. So we, as a firm at SkyBridge, we're very much focused on Bitcoin. We think it's going to be the big winner in the space. We are curious about other things that are going on, but I would say unlikely in the near term to invest in other areas of the market, but we don't necessarily think there won't be growth there.
John Darsie: (45:56)
So you launched a website, a jobs board called pompcryptojobs.com, which I think is a testament to the growth that's taking place in the industry that you could build such a robust database of jobs in the industry. What are the most exciting things that you're seeing from a corporate perspective? Companies that are innovating in the space, other protocols that are being built that you're most excited about and what is the fact that you launched that job board say about what you view the future of the industry being?
Anthony Pompliano: (46:24)
Look, at the end of the day while people may know me for all the tweeting and all the content stuff, or they may know me from the investing side. I like to build things, right? And I'm probably one of the most opportunistic, capitalistic people you'll meet in the sense of, if I see something that can be built and no one else is building it, then I have no problem waiting into the arena and competing. And so when it came to the job board, I kept talking to a lot of people who didn't work in the industry and they would say, "Hey, I want to transition, do you know of any open jobs?"
Anthony Pompliano: (46:55)
And then I've got the fortunate day-to-day activity of talking to a lot of the founders of these businesses. Some of them just starting out and very small, some of them very large corporations at this point. And they kept saying, "We can't find great candidates. It's the hardest thing, it's finding the right people." And so it was easy to identify, hey, there's a market opportunity to create a marketplace where you bring together job candidates and job roles.
Anthony Pompliano: (47:17)
I reached out to three companies that I felt were industry leaders in Blackfin, Gemini and Coinbase. They all immediately said, "Yes, we'd love to be a part of this." We put it together and in just the first week, we've had over a 1,000 people upload their resumes. We've had almost a 100 companies. There's hundreds of open roles. And there's been, I think over a 100,000 views of those open roles. And so it's very obvious that there's a need for this. I think it'll continue to grow.
Anthony Pompliano: (47:44)
But what it ultimately shows is, when you look through that job board, there's all types of different roles, right? Whether you're technical or non-technical, whether you're a finance executive, or you're a marketing executive, you're operations, you're security, you're PR, pretty much go down the line of any traditional industry, all the different roles that are there, those roles are open in this industry. And so I think that if you want to transition to work in Bitcoin and crypto, the opportunities are there. And what really excites me I think is, the advice I always give to young people who are just coming out of college is, don't start a company and don't go work at IBM, right?
Anthony Pompliano: (48:23)
What you want to do is you want to go find a series A or a series B company that's a rocket ship. You want to jump on, you want to do a great job that can give you more and more responsibility as that business grows. And you, over the next couple of years will have your first stamp of approval and your career will be associated with the success of this business, even if you had nothing to do with the success, right?
Anthony Pompliano: (48:43)
And so I think that that's one of the enticing parts about this industry is there are so many companies that are going from creation to multiple billions of dollars in value that there's just tons of open roles, there's tons of things for people to do. And so if you're a self-starter, you've got some sort of skill set, you're intelligent and you're excited about the future, just go there, find an open role and let's get to work.
John Darsie: (49:05)
And going back to Anthony Scaramucci's earlier point about Goldman Sachs coming out as another detractor of Bitcoin, you could easily see Coinbase when it IPO's here likely in 2021 have a higher market value, market cap than Goldman Sachs, which I think says it all. But Pomp, thanks so much for joining us. This was a lot of fun. Anthony, you have any final words for Pomp before we let him go?
Anthony Scaramucci: (49:29)
No. Pomp, you don't need to hear this from me, but I'm proud of what you're doing as an American entrepreneur and stick to your vision and keep it up. Hopefully we can be helpful to you. And hopefully we get you to a live SALT event at some point. It's hard for me to imagine that you've missed some of these events, but I think you would add something. So I'm looking forward to that as well.
John Darsie: (49:50)
I appreciate you guys having me.
Anthony Pompliano: (49:52)
Yeah. We missed loading the boat in 2014 when the Winklevoss Twins came to the SALT conference in Las Vegas and said, "Guys, you got to jump on this Bitcoin thing." Everyone was like, "All right, Winklevoss. What are you talking about?" But I wish they had pulled me aside and said, "You got to do this." But anyways-
Anthony Scaramucci: (50:10)
I've always pushed back on John for that because we're institutionalists and you have to, to your point about sticking to your knitting and sticking to your investment thesis, I'm more comfortable with Bitcoin at 30,000, believe it or not, than I was at 400. You have the network in place now. You have that scalability, you have a metrical ability to make an analysis of what the value is. And that's where I think Sharmin from Goldman Sachs is just making a mistake. She's not looking at it carefully enough.
Anthony Scaramucci: (50:41)
And like you say, there's a lot of market participants that are betting against her. We'll have to what happens. It makes it fun, but we also caution cautious clients that you just have to have a small amount of this. I do believe Anthony and John, this is going to be part of the index matrix that people are going to be judged by on a going forward basis. And so, when you look at an asset allocation model that includes hedge funds and private equity and gold and stocks and bonds, well, guess what? It's going to have a sliver of Bitcoin in there and maybe other digital assets. And so IF you're going to be benchmarked against it, You really have to think about it very carefully.
John Darsie: (51:21)
And thank you everybody for tuning into today's SALT Talk and continuing. For those of you who are less familiar with the digital assets, Bitcoin space, for continuing to learn with us. And for those who are familiar, thank you for continuing to engage with us and being our partners if you're invested in our SkyBridge Bitcoin fund.
John Darsie: (51:39)
Just a reminder, if you missed any part of this talk or any of our previous talks or you want to sign up and watch our talks live in the future, you can go to our website, salt.org\talks and sign up for all upcoming talks and view our entire archive. Our YouTube channel also has every episode of these SALT Talks. Please follow us on social media. We're on Twitter, LinkedIn, Instagram, and Facebook, and please spread the word about SALT Talks. We love growing our community, which we've done a great job of during the pandemic. So we're excited to continue growing the digital side of SALT. But on behalf of the entire SALT team, this is John Darsie signing off for today. We'll see you back here again soon on SALT Talks.