Digital Assets & the Future of Financial Innovation with Michael Novogratz, Founder & Chief Executive Officer, Galaxy Digital. Moderated by Andrew Smith Lewis, Chief Innovation Officer, CAIS.
PRESENTED BY
MODERATOR
SPEAKER
Michael Novogratz
Founder & Chief Executive Officer
Galaxy Digital
Andrew Smith Lewis
Chief Innovation Officer
CAIS
TIMESTAMPS
EPISODE TRANSCRIPT
Michael Novogratz: (00:07)
All right. Let's do it.
Andrew Smith Lewis: (00:09)
Thanks for joining me. Let's do it. Digital assets and the future of financial innovation.
Michael Novogratz: (00:13)
Small topic.
Andrew Smith Lewis: (00:14)
Small topic for 40 minutes. Why don't we start with where we're at now. What's happened in the last couple months? How are you feeling about things? And then we can talk about what it all means and where it's going.
Michael Novogratz: (00:27)
So I'm feeling great, hence the purple jacket and the cool shoes. I think the last two months have been really special if you've been in the crypto business as long as I have. The thing about Bitcoin, really started in 2009. So we're what? 12 years, 13 years into this. And up until recently, when people talk about crypto, they mostly thought about Bitcoin, even though there were all these other ecosystems and currencies.
Michael Novogratz: (01:00)
And they mostly thought about crypto as a hedge versus the debasement of the dollar. We're buying Bitcoin because central banks and Ministry of Finances around the world, and including the one here in the US are being really irresponsible. And we were printing money. You said, what? 20% of total money?
Andrew Smith Lewis: (01:20)
Last year.
Michael Novogratz: (01:21)
Printed in the history of the country in the last year. And so that was the story. And people said, "Well, what's Bitcoin backed by? Is it a real currency?" And you'd go up this explanation over and over that, no, it's this digital gold. And you're not going to buy your shoes in Bitcoin, unless really all hell breaks loose. But there was a much bigger story that was happening. And it wasn't really being well explained and people weren't picking up on it.
Michael Novogratz: (01:48)
And I think what's happened in the last two months is a real realization that Web 3.0 is coming. The Internet of Value exchange is coming. So the Ethereum network and the potential Ethereum killers or collaborators, this base layer of trust that we're building to program on top of, is actually a real thing. And it's happening. And there have been some symbolic things. Visa buying an NFT. So people think, "Oh, is that marketing?"
Michael Novogratz: (02:28)
Visa bought an NFT because they think digital goods will be the future. That's why they bought it an NFT. They bought an NFT because they think today, when you look at their whole user base, this is a $500 billion company, the average person swipes a Visa 0.9 times a day. They think in the future, because we'll be buying so many digital goods, their average customer will swipe a Visa 10 times a day. So they're making a huge bet on Web 3.0.
Michael Novogratz: (02:57)
This isn't Bitcoin going to the moon with a bunch of YOLO-ing going on. This is a serious, serious company saying the future of the financial markets are going to be built on this new infrastructure. Walmart and Amazon, interestingly in the same week, put up help wanted signs for crypto. Two of the biggest retailers in the world. Every time I meet a CEO, I get a follow-on email. "Hey, could you come talk to me about, how would we think about our company in this new ecosystem?"
Michael Novogratz: (03:31)
And so I think what you've seen, and you saw the price of Ethereum and Solana and LUNA and Polkadot, all of these level ones skyrocketing. What triggered it was the NFT craze. And you've got, what's an NFT? If you think about it, let's break it down and make it really simple. The genius of Bitcoin, and in some ways I always thought it took my simple mind to try to make it simple for me because I wouldn't understand it when I talk to all the computer science guys, the genus of Satoshi's white paper was it was the first digital signature you couldn't counterfeit.
Michael Novogratz: (04:09)
That was it. Before then, we could control, paste, copy, and have lots of things online, digitally. And Satoshi made it possible for us to have uniqueness. When we have uniqueness, we can have scarcity. When we have scarcity, all kinds of things, we can have value transfer. And so we saw it in art now. We're seeing it in collectibles, with NBA Top Shot exploding, gamifying, collecting video clips. We've seen it in art. Things like generative art, art blocks has exploded. Ringers.
Michael Novogratz: (04:41)
I had Alex [Cherniak 00:04:44] at my house and he was showing me his ringers. And I said, "Those are pretty cool." And I was going to buy one, it was like $3,000. And three months later, it's 2.3 million. And I was like, "My damn phone was dead." And so this explosion of NFTs triggered this mindset that shit, that's happening on Web 3.0. And I think now, every investor I talk to, if it's a hedge fund investor, a retail investor, family offices or institutions realize they're short the next internet.
Michael Novogratz: (05:18)
And so why we're seeing every venture fund who says, "I'm going to raise ..." They're closed in a week. There's this FOMO going on because people realize, "Hey, this is the next chapter." And again, I don't know if that means prices are going to go up straight, in a straight line. They never do. There's always volatility around, lots of risks, but it's a very different conversation that I'm having today with users, with investors than I was four months ago, even.
Michael Novogratz: (05:47)
And so there's a shift that's gone on. And I really think if people now see this as a technology play, it's not just a speculative play.
Andrew Smith Lewis: (05:54)
Let's talk about that a little bit. Let's unpack that a little bit. So I spend most of my time speaking with people in wealth management, financial advisors, about crypto, about Bitcoin, and other asset classes in our work.
Andrew Smith Lewis: (06:06)
And one of the things I find is that there is ... You talked about FOMO. There's a feeling that maybe they're too late, that they've missed out on Bitcoin. What do you say to somebody who thinks that?
Michael Novogratz: (06:18)
Listen, every year you look back, you're like, "Gosh, I should've bought that thing." You could've done the same thing with Amazon stock. Amazon stock had one of its best years this year. Ever since 2000, every year it looked like you missed out. And so I think big monster trends that really do change the way we behave, go for long periods of time.
Michael Novogratz: (06:41)
Total crypto wealth, roughly two-and-a-half trillion dollars, which is maybe a half a percent of total global wealth. So if you see all the trends I'm seeing, or you can see just by reading the newspaper, something really bad has to happen for total crypto wealth not to go from a half a percent to something like two or three, or four or 10 over time.
Michael Novogratz: (07:08)
And so while we might not see the ecosystem expand as fast as it did in the last year, we went from 350 billion to two-and-a-half trillion in say 17 months, it's really hard for me to not see it expand. And so when I look at Bitcoin specifically, Bitcoin as digital gold is being adopted. And the story is being bought into.
Michael Novogratz: (07:32)
I don't think the Treasury Department and the central banks around the world are going to do a good enough job in this really difficult period they have, to get people to believe that they're not going to debase currencies. In some ways, the only way out for the US dollar is in what we're hoping, for praying for, is a slow depreciation of the dollar as opposed to a fast one. And so Bitcoin adoption is continuing to happen.
Michael Novogratz: (08:04)
Bitcoin right now, what? It's like so we're at $900 billion. Gold is 10 trillion, so we're 9% of gold. We're going to get to a 100% of gold. We're not going to get there next year, but we'll go from 9% to 16%. Then 16% of 25%. And then 25% we'll be like, "Why isn't it 50%?" And so four or five, six years, Bitcoin will be 500,000. Assuming gold price stays where it is, I actually think it'll all go higher.
Andrew Smith Lewis: (08:31)
And so you talked about Internet 3.0. So if this is Internet 3.0, and if we think about Internet 1.0 and if we draw the analogy, what year are we in, in terms of this? Are we in the late '90s?
Michael Novogratz: (08:45)
If you've ever been to a NASCAR race, the cars go around for a while and they have a green flag. And then all of a sudden, the checker flag comes out and they all go for real. The checker flag just fell. We literally just started the race. People didn't believe in Web 3.0. And quite frankly, a lot of the ecosystems in what you're seeing now, aren't built to scale yet.
Michael Novogratz: (09:07)
So, why is Solana so exciting all of a sudden? It's because Ethereum is on this path to scale, speed, and complexity over time. But it's not fast enough right now, to process as much crap as the world wants to process. The idea of a decentralized Internet of Value, exchanging value across people is so exciting. Everyone wants to do it now.
Michael Novogratz: (09:36)
But the computer scientists haven't figured out with Ethereum, how to do it fast enough today, on a decentralized form. So there's thousands of nodes in Ethereum. So, what do you do? You say, "Hey, I'm going to create another system that's less decentralized, less secure in that respect, more easily manipulated, but probably not going to be manipulated." That's much faster. And so all of the other block chains, Solana, LUNA, they're much faster, and you're seeing adoption.
Michael Novogratz: (10:06)
Now, the market will tell over time, how much we care about decentralization. Regulators will make the OAM when they really understand it. Do we want the future of finance, the future of commerce built on a platform that might be manipulated? Probably not. And so I think even a protocol like Solana, if it's going to survive longterm, it's going to have to find a way to be much more decentralized than it is.
Michael Novogratz: (10:32)
Again, I start getting out of my league as a computer science guy because I'm not, but that's the simple way to think of these different L1 protocols. There's a trade off between speed and security, speed and decentralization. But what I'm telling you is why they're all working is because everyone wants to build on them right now.
Michael Novogratz: (10:49)
Every conversation I have is, how do I build on Web 3.0? There's so much that you can do. We're monetizing community for the first time ever, monetizing social prestige for the first time ever. And so-
Andrew Smith Lewis: (11:00)
And that's all based on the blockchain. And the first principle of this is understanding the blockchain and what that allows, correct?
Michael Novogratz: (11:05)
Yep.
Andrew Smith Lewis: (11:07)
And if you think about it, you mentioned NFT. So if you think about we're hearing a lot about CryptoPunks and digital assets, and digital artwork and generative artwork, but isn't there also a big connection to the analog world, right? So if I'm an art collector or I'm an art gallery, what are the implications of this trend in NFTs, in terms of vindication?
Michael Novogratz: (11:30)
I'll tell you a fun story. One of the legends of art was having a party to talk about NFTs with all his old collecting friends. And I crashed the party. I had to have a few too many cocktails. And I brought this woman, Emily Chang, who is known as people pleaser to the party. And I interrupted. I said, "If you guys want to talk about NFTs, why don't you talk to a young NFT artist who's just crushing it?"
Michael Novogratz: (11:55)
And as she was talking, it made so much sense. We'd love to have you in our community. We don't need you. Who's supporting NFTs, this crypto community who's made lots of money recently? And they're supporting their artists, their movement. It's fascinating to them. And so, who bought the Beeple for $69 million? A crypto guy. Who's buying most of the ringers or the Denzas? Which are really cool art.
Michael Novogratz: (12:24)
Ringers and Denzas are an extension of [Solueth 00:12:28]. It's algorithmic art done by these genius artists that will get collected by traditional art people in the future. But right now, it's crypto people supporting crypto art. And in some ways, it was so interesting, they don't need that. What the crypto has done is it allowed a community to form much faster than we ever formed it before.
Michael Novogratz: (12:52)
If you're Pace Gallery or Larry Gagosian and you worked tirelessly to cultivate your buyers, and you tell the story of an artist, the gallerist deserves a lot because he's creating value by telling the story of why Jeff Koons is important. Why is Balloon Dog a $30 million sculpture? Because people say it is. That's it. How many people say it is? Well, who can afford a Balloon Dog? A very small subset of the global population.
Michael Novogratz: (13:22)
They're all connected by the Larry Gagosians and the Pace Galleries of the world. We are doing that at a much faster scale in crypto and in NFTs. And so it's exact same thing happening. Why is the Denza ... It's beautiful. It's cool. It's limited. There's only so many of them, and we're connecting to communities that are passionate much faster than in the past.
Andrew Smith Lewis: (13:46)
Yeah. I think about, though. Have you seen the movie on Netflix, Made You Look?
Michael Novogratz: (13:51)
No.
Andrew Smith Lewis: (13:52)
It's a great film. It's about the oldest art gallery in America, 165 years old. And over the last 10 years, they sold $80 million plus of fraudulent artwork, unknowingly. Big deal. Does that happen in the future where we've got this sort of ability to prove visually for provenance?
Michael Novogratz: (14:09)
No. And one of the nice things is you're going to have provenance. It's going to be there. Listen, it doesn't mean that the crypto community is all a bunch of white hatted good guys. You saw yesterday, some jackasses posted a fake press release from Walmart that they were buying Litecoin. And Litecoin jumped 15%, and all the crypto jumped. And I scratched my head. I was like, "Who would buy Litecoin? Why?"
Michael Novogratz: (14:35)
And it made no sense to me, but I wasn't quick enough to short it. And then of course, it turned out to be fraud. They had bought a website, walmartsomething.com a month earlier, sent a very formal looking press release out. And so hopefully, they end up getting arrested. We're going to continue to see in any hot industry, fraud, scamsters, fly-by-night excitement. We don't want to lose the forest through the trees.
Michael Novogratz: (15:08)
And I mention that because a lot of the ... In crypto, they call it FUD, fear, uncertainty, or doubt, a lot of the backlash from politicians and the regulators that aren't educated is, "Oh, this stuff's all used for bad shit." You couldn't be further from the truth. I was part of a group that hired the ex head of the CIA to do a study on crypto.
Michael Novogratz: (15:33)
And he spent eight weeks or seven weeks doing a deep dive with all the agencies, with players, with all the security companies in crypto, like Chainalysis and CipherTrace. And he determined that in Bitcoin, a tiny amount was used for illicit actions. And most of that was scams. It wasn't terrorist financing or kiddie porn. And quite frankly, it was a lot less than the traditional finance world, and a lot less than cash.
Michael Novogratz: (16:02)
And so I mentioned it because people say, "What could go wrong with crypto?" Well, what could go wrong is we could have some really crappy regulation which will slow things back. If the US and Europe doesn't get regulation, it will slow the growth of Web 3.0 immensely. And there are vested interests that don't want it to happen. At its core, the blockchain allows to cut out rent takers.
Michael Novogratz: (16:28)
And so if you're banks, or if you're the NASDAQ, you're really worried about Uniswap or SushiSwap. You really should be. Smart companies are quickly pivoting and figuring out. If you look at Visa, they're pivoting, how do they work within this new ecosystem? But there's going to be winners and losers like in any technology transfer. And so ...
Andrew Smith Lewis: (16:51)
Mike, talk a little bit about applications outside of finance, where you see companies getting on the bandwagon, because this is not limited. The implications here are not just limited to finance, right, in terms of what this Internet 3.0 is going to do to business at large?
Michael Novogratz: (17:07)
Yeah. Listen, there's a couple of really cool ideas that showed up that have surprised me. One is in the last five years, we've created this idea that identity is worth something. GameStop, there's not one equity analyst on the planet that would tell you that GameStop has a discounted cash flow value that's worth anything. But the stock is resilient as heck, because the people that buy it, have identity. They're GameStop guys. They're Reddit warriors.
Michael Novogratz: (17:44)
Cardano, it's a big crypto protocol with over 80 billion the last time. I think it might be a $100 billion. I can't find people in our community that are building on it. It doesn't have a lot of activity on it. But man, oh man, when I say something bad about it on Twitter, I get attacked by a wave of hornets. At times, death threats. They have their identity in Cardano. Very similar quite frankly to anti-vaxxers.
Michael Novogratz: (18:11)
Texas, there are seven vaccines you need before you can send your kid to school, but God forbid this COVID vaccine. The anti-vaccine is an identity. It's not even intellectual. It's the same way GameStop isn't an equity buy. It's an identity. And so this idea of identity is real. And it might be much more resilient than all of us think. Because our first instinct, especially as old investors is, "Oh, this all is going to get the shit kicked out of it. It's all going right down."
Michael Novogratz: (18:41)
Well, it hasn't been because we now have this idea that value can show up in all kinds of places. One of the unintended consequences of zero interest rates forever is this idea that, who are you to tell me what's valuable? And we have a balkanization of the world. So one of the downsides of decentralization is balkanization. Hey, this is my stuff, leave it alone.
Michael Novogratz: (19:07)
I get that so often when I make not even a critical, when I make a semi-critical comment of a crypto ecosystem. I either get, "You're an F-tard," or, "I want to kill you." Or the more intelligent comments are, "Dude, just leave us alone." And so I think, thinking about how identity plays in our evaluation frameworks, it never was part of evaluation framework, but that shows up in other ways.
Michael Novogratz: (19:34)
You're going to see a deluge of fan tokens. Remember when you were a young kid, you joined the Bobby Sherman Fan Club or whoever, you're the Farrah Fawcett Fan Club. You'd pay a dollar, you joined their fan club and you get nothing. You're going to see fan tokens where people are going to pay and they're going to get meet-and-greets. Or if you get 25 tokens, Paris Hilton will give you a kiss on the cheek.
Michael Novogratz: (20:04)
They're going to be non-equity dilutive, but they're going to be identity tokens in some ways. People will never use the goods they're used for, just like very few people use the Binance BNB token for discounts on their commissions. But they buy it. And so I think this idea of identity and actually having it have value, is a new idea. It's a radical idea. And it shouldn't be dismissed.
Andrew Smith Lewis: (20:34)
There are a lot of people who look at blockchain as maybe a cure-all for what's going on in society. So you look at issues with education and with healthcare. Are you bullish on the implications of with the blockchain? You've seen it [crosstalk 00:20:47].
Michael Novogratz: (20:48)
Think about supply chains, right?
Andrew Smith Lewis: (20:49)
Yeah.
Michael Novogratz: (20:51)
We go to Starbucks and it would be nice to know that the coffee's not being picked by slaves in some part of South America. And so you're going to have a lot of, and you're seeing this already, a lot of supply chains done on a blockchain. So you can prove provenance. And at one point, maybe it'll change the way we think. If we knew each time we bought a 4.50 mocha latte, that the guy that picked the bean was only getting two cents of that 4.50. And the barista was getting 80 cents.
Michael Novogratz: (21:23)
If you could actually see the breakdown, you might change your spending habits to something that felt more just. You might not, but the blockchain will allow that. And so we're seeing lots of different companies, private companies, and some public ideas of, how do we use blockchain for supply chain as one idea? It's impossible to think that in some period of time, and it's probably longer than we all want, that all our healthcare records will be NFTs.
Michael Novogratz: (21:56)
It's crazy right now. If I got hit by a car and I went to some hospital, they said, "What medicine are you on," and I don't even know what medicine I'm on, but I'm on a lot, and my healthcare records are all over the place. It should all be an NFT.
Andrew Smith Lewis: (22:11)
Diplomas, the same thing, right?
Michael Novogratz: (22:13)
Yeah. That's happening already, right?
Andrew Smith Lewis: (22:14)
Yeah.
Michael Novogratz: (22:14)
University of Arkansas put all their diplomas on the blockchain.
Andrew Smith Lewis: (22:17)
MIT as well, block certs. Yeah.
Michael Novogratz: (22:20)
And so what? You're hiring a kid, you can really check if he actually went to MIT or if he just told you he did.
Andrew Smith Lewis: (22:25)
Yeah. I think it's good for MIT. I think it's also really interesting when you look at the refugee problem. So classic story of Syrian refugees who come over and their records are washed away, and their schools are no longer there.
Andrew Smith Lewis: (22:39)
How do you prove that you are a doctor or you are a pharmacist. Putting that on the blockchain is going to really change things significantly for those populations, which is pretty key moving forward.
Michael Novogratz: (22:50)
And so the takeaway is we talked a lot about this stuff in 2017. We're hanging out with Joe Lubin at ConsenSys, and he would give me the map of what was going to happen in the future. But it was a lot of talk. And what I'm telling you loud and clear is something shifted in the last few months. And now, there is an energy going into these projects and energy going into this space that I haven't seen since I've been in it.
Michael Novogratz: (23:14)
And I tell the people that work for me, I say, "Two years ago, you were taking a lot of career risk. This whole thing might not work out. I think it's going to, but it might not." Now, I tell my employees, "We have execution risk. The competition is coming. We got to work our butts off. Everyone's getting into this space." Do we have a lead or not? I don't even know, but we better keep working because it's all about execution.
Michael Novogratz: (23:40)
And so I think, listen, the roadmap is not completely clear because this stuff's complicated, but the idea that we're not going to live in a world where block chains are a big part of it, I think is limit down.
Andrew Smith Lewis: (23:54)
And it's speeding up, because you look at convergent technologies. What really happens when AI and blockchain intersect at scale?
Michael Novogratz: (24:03)
Well, you're seeing it with generative art. What is generative art? It's using AI to create art. And it's the hottest part of NFTs. And if you were telling me right now, "I have a million dollars, I'm not going to look at it for 10 years and I need to buy NFTs, that's all I could buy," a 100% I would tell you to buy generative art, as opposed to CryptoPunks or Apes, or any of the other avatar-like, cool identity things.
Michael Novogratz: (24:32)
What's a CryptoPunk? It's an identity. Matter of fact, I was on stage at Christmas. Sometimes you can be smart and an idiot at the same time. And Jay-Z had just bought a CryptoPunk as his avatar. And I was like, "Guys, Jay-Z is the king of culture. If he's buying one, we all should." And then I went and I started looking, and I couldn't find the one I liked. And then I forgot about it. And now, they're all up 15X.
Michael Novogratz: (24:57)
CryptoPunks were selling at $6 million. There are 10,000 of them. They're pretty cool. There are different scarcities, but it's identity, again. Again, I'm less confident that the value of CryptoPunks will hold up versus say generative art, because I think generative art will be looked at as real, an extension of art, as opposed to a collectible, but I could be wrong. They're not that many CryptoPunks, and there are a whole lot of rich people.
Michael Novogratz: (25:28)
And if you think about when I said earlier three, 350 billion to two-and-a-half trillion, so let's call it $2.15 trillion of crypto wealth created in the last 18 months, owned by some traditional people that had wealth. I started, I was a pretty wealthy guy. Lots of people that didn't, lots of young people. So this is a generational shift. The baby boomers are the ones that have kind of screwed the world up. They've been in charge for 30 years.
Michael Novogratz: (25:57)
We've gotten 30 pounds heavier on average in America. Our deficits have blown out to levels that we don't think we'll be able to pay back. The planet is not in such great shape when it comes to global warming. And so the stores of our country for the last 30 years, from Bill Clinton here to Joe Biden, haven't done a great job. And Gen Z and millennials know that, they're angry, and they're doing their own thing.
Michael Novogratz: (26:24)
And so the crypto revolution is a young person's revolution. It's started. Satoshi wrote the white paper because he just lost trust. My friend, Joe Lubin got involved in Ethereum because he literally was at his wit's end after the financial crisis. And he wanted a different way to look at the world. And so don't miss out on that this is a generational thing.
Michael Novogratz: (26:45)
And so things that seem strange, talk to your young kids, talk to the kids in your office or your own children or 18-year-olds, and you'll get a whole different perspective on crypto art, a whole different perspective on why this is important to them.
Andrew Smith Lewis: (27:00)
You've talked a lot about education being important in this space. So you've got the young generation who get it, and maybe the older generation who's being left behind. And that gap's widening, because it seems like there's just a daily dose of information about crypto, about Bitcoin. And it's never ending.
Andrew Smith Lewis: (27:22)
What's your advice in terms of educating financial professionals, for example? I know you've done a lot of work in that space, working with wire houses and independence. How do you bridge that gap, so that a financial advisor is actually able to convey something that's accurate, with confidence and clarity to their clients?
Michael Novogratz: (27:39)
Yeah, it's a great question. And I think part of this revolution going on, Robinhood, crypto is the democratization of finance. Well, that's got its downside. And generally, I'm for it. But I'm like, "Dude, I got a lot of knuckleheads out there gambling their money and thinking it's easy." Being a prudent and good investor has never been an easy job. It takes lots of work. It takes lots of discipline. And if you don't have hard work and discipline, you're going to lose most of your money.
Michael Novogratz: (28:10)
And so I think the financial services industry will change. But I think it serves a huge, huge role on a go-forward basis, in educating and actually giving advice to people who don't want to spend their time thinking about making money. You might be a doctor or a lawyer, or a housewife or an artist that doesn't really care about what's happening in the market on a day-to-day basis. And so A, I think the group that needs to get educated are your guys.
Andrew Smith Lewis: (28:47)
Yeah.
Michael Novogratz: (28:48)
Right, the financial advisors. I don't think they're going away, and I don't think they should go away. I don't want the whole world focused on the price of Ethereum day-to-day. You have all these young kids that think they're working just by looking at their crypto prices 24 hours a day. I was like, "Dude, that's not work. That's like dopamine."
Michael Novogratz: (29:06)
And so it's imperative for the FAs to actually dig in. And the only way they're going to learn is to work, is to get on Twitter. There was a guy walking around here, John Cheeseman, who was an old FX sales guy. And now, he's one of the best crypto sales guys. How? Because two years ago, he just dove in. He got on the right Twitter groups. He got on the ... I'm sorry, Telegram groups, got on Twitter.
Michael Novogratz: (29:33)
And so there's no easy road. There's lots of information. The good news is crypto lives on Twitter. And it'll take you two weeks to figure out, who are the right people to follow? There are spectacular explanations of everything on YouTube, anything Vitalik Buterin did. He's articulate, he's bright, and you can kind of understand it. Some of it gets too detailed and you got to figure out what you need.
Michael Novogratz: (30:03)
And you also have to understand that you're not going to catch everything. Right now, if people ask me, I don't want to spend my whole life doing crypto, but I want to be invested. I'd say buy some Bitcoin, buy some Ethereum, buy a basket of other level ones, and buy Galaxy stock, because we kind of do a lot of everything.
Andrew Smith Lewis: (30:23)
Of course. Well, let's talk about that for a second, because I think you're talking about a generation of people who are not used to learning through social media, not used to learning, looking at Twitter as the source of truth. And you have a very high signal-to-noise ratio with all of this. So also, I find that we work with a lot of financial advisors and we look at the challenges of learning about digital assets. And it's really interesting because we see a great increase in demand.
Andrew Smith Lewis: (30:52)
They want to learn about it. But compared to traditional asset classes, hedge funds, private equity, it takes three times longer for these advisors to reach a level of mastery equivalent. And we've been thinking a lot about that. And what's occurred to me, and I'm curious what you think is, that there's a gap because it's not just about being a finance expert or a wealth expert. You have to understand the technology to a certain extent. There's an underlying story to this that's not just the way you learn about a hedge fund.
Michael Novogratz: (31:26)
Yeah, and I think it's important. But in some ways it's not as important as people think. I always thought about-
Andrew Smith Lewis: (31:32)
What's not important?
Michael Novogratz: (31:33)
Well, how a blockchain works.
Andrew Smith Lewis: (31:35)
Okay.
Michael Novogratz: (31:36)
What's the consensus mechanism for the different block chains? For our industry to be successful, that's the back of the TV. When my mom turns on the TV, she's just really excited that her show's on. She doesn't understand how the TV works, nor do I.
Andrew Smith Lewis: (31:51)
Right.
Michael Novogratz: (31:51)
And I think in the long run, even knowing something's peer to peer versus going through a clearinghouse, is you're a little indifferent as a consumer user, unless you've got a real political side to you. And so part of this is going to be made easier because with all the capital coming into our space, and the fact that these block chains are coming up to scale, finally, that the ecosystem is big enough for people to invest in, finally.
Michael Novogratz: (32:20)
You're going to see wild innovation in the UX/UI and the user experience. User experience, pull the MetaMask wallet to try to buy an NFT, and it's not a pleasant experience. Or even trying to buy an NBA Top Shot was absolutely not a pleasant experience. You have to remember, two years ago, our industry was a lot smaller. We had gone through the crypto winter, people were building, and it wasn't built for scale.
Michael Novogratz: (32:46)
And so when lots of big institutions say they missed it, I was like, "You didn't miss anything. You're so big you couldn't have participated in our market before." It didn't have the liquidity or the size. And so we're only now getting to the liquidity and the size where a CalPERS or a Texas Teachers could actually make a meaningful investment in Bitcoin, or in Web 3.0. They couldn't have two years ago.
Michael Novogratz: (33:12)
It would have been almost comical. And so you're seeing a natural evolution as this industry grows up. And I keep coming back to this. And this, two years from now, you might think that guy was a cracker, but I literally think I have this intuition that something important happened in the last three to four months, two months, that we crossed this threshold, that Web 3.0 is a thing. And I see it. And so I think all this capital coming in is only going to grow itself.
Michael Novogratz: (33:44)
The success is going to beget success. And you are going to see this year, the first big pension funds come in and say, "Hey, for our pensioners in the state of X, we're putting half a percent into Bitcoin." How much risk is that? I've told them all, "Dude, it's the greatest marketing you could do." You want to attract young people? Tell them you're crypto-forward. They'll come your way. The mayor of Miami got that really right.
Michael Novogratz: (34:13)
Lots of corporates are now figuring that out. Hey, let's at least accept Bitcoin. We're speaking the language of Gen Z and millennials. Why do you think Major League Baseball, we partnered up with Major League Baseball and a company called Candy, to sell digital sports memorabilia, digital goods in baseball? All sports are having a hard time getting younger kids interested in their sports. Let's use the thing those young kids love to bring them into our community.
Michael Novogratz: (34:45)
All sports are perfect places for crypto. They already have tribes. And so you're just using a new technology to pull more people into your tribe. And so I think you're going to see more and more companies think, how do I connect both with young people, but all people via this new technology?
Andrew Smith Lewis: (35:03)
Oh, I certainly agree. But when you come back to advisors, you've got independent advisors who run plus or minus $8 trillion of high net worth wealth. You want to see that money I presume, start moving in this direction. And I think that it's hard to tackle crypto without thinking about tackling the education system, without tackling the way we learn about this stuff.
Andrew Smith Lewis: (35:25)
And I think a modern new system like this, requires a refresh in terms of learning. It's like the system hasn't changed in so long. And how can we keep pace with this innovation, get the right content the right way? What do you think?
Michael Novogratz: (35:41)
It's a great question, because I literally, and this is not to pat myself on the back, because I'm getting sick of it, I get asked to speak four times a day. I could literally just do nothing but speak because there's this wealth of information, and there are not a lot of macro guys. There's a few other really good macro speakers that talk about this.
Michael Novogratz: (35:56)
Raoul Pal understands the intersection of this, and Dan Morehead, but not a lot that came from macro that understand this. And I'm hoping over time, at Morgan Stanley, when they started selling Galaxy's fund, we did all these sessions to 4,000 or 15 to 2,500 RAs. You're hoping that they become the salesman and it's not just me. That's why I think this is going to go viral.
Michael Novogratz: (36:23)
I think it just takes time. I don't think there's an easy fix. If there is, I will literally carry you on my shoulders. And if you crack the code, you'll be my favorite guy. I think learning takes time for people. [crosstalk 00:36:37] I need to hear things seven times before that really clicks with me, because it is complicated. If you want to simplify it, a blockchain is a database. And if it was just our blockchain, it'd be really fast and really easy to manipulate.
Michael Novogratz: (36:52)
We'd be like, "Let's screw those guys." And so the more nodes that have to look at that database and verify it every five minutes, every 10 minutes, every one minute, whatever the protocol is, the slower it is, and the more complicated it is, and the more expensive it is to upkeep.
Andrew Smith Lewis: (37:13)
Yeah.
Michael Novogratz: (37:14)
And so even that decision, should I build up? I had one of the great Web 2.0 innovators. I ran into him in Big Surf three days ago. And he was asking me, "Should I build on Solana or Ethereum?" And I was like, "Oh God, you're asking the wrong guy. I'm not a computer science guy." I can frame it for you, but that's a real technical question.
Andrew Smith Lewis: (37:37)
Yes.
Michael Novogratz: (37:38)
And so for an investor, I think the best they're going to do is understand what the board is.
Andrew Smith Lewis: (37:43)
Yes, I would agree with that. And I would also agree that learning takes time. And if it takes seven impressions for you to learn, I think the key is though, is it seven times, you hear it seven times in a row, or seven times spaced out over time? And what's interesting is there's a lot of good research about how you help people learn that doesn't get applied here.
Andrew Smith Lewis: (38:01)
And I think we have to make this switch. You talked a lot about how the internet has chased the price of things down to zero. And you think about knowledge, knowledge used to be incredibly valuable. A kid in Africa versus a kid who had access to information at Harvard, there's a great disparity there.
Andrew Smith Lewis: (38:16)
But now it's equalized. And so anybody has access, equal access to information, so that's not enough anymore. And this deluge of information doesn't afford us the ability to really learn and absorb those things.
Michael Novogratz: (38:30)
Well, if you think about what really works in NFTs and what really works in lots of things, it's the gamification.
Andrew Smith Lewis: (38:38)
Yes.
Michael Novogratz: (38:38)
So if you can gamify learning for your FAs, you'll probably win. All the best projects are gamified right now.
Andrew Smith Lewis: (38:50)
Yep.
Michael Novogratz: (38:52)
There's an age-old DNA in all humans. They love to gamble and play games. And that's part of, I think, how you accelerate getting the older guys.
Andrew Smith Lewis: (39:02)
And it's kind of crazy. The education system hasn't really adopted those principles at scale. And I think there's an opportunity to do it here. And I think you've got a generation of people that would appreciate that and participate in that ecosystem. So if you were to gamify crypto-
Michael Novogratz: (39:16)
Andrew, I see a future for you. You're going to leave CAIS and you're going to start, how are we going to gamify teaching FAs how to learn crypto?
Andrew Smith Lewis: (39:24)
You're going to back that?
Michael Novogratz: (39:25)
Sure.
Andrew Smith Lewis: (39:25)
Okay. Never, I'm not leaving. But we're going to do it at CAIS anyway. So I think that's the way to go. It's interesting.
Michael Novogratz: (39:34)
Awesome.
Andrew Smith Lewis: (39:34)
Good. Thank you.
Michael Novogratz: (39:37)
Very good.
Andrew Smith Lewis: (39:38)
Great talk.