Why Bitcoin is Schmuck Insurance

Market Disruptors podcast. Today I am sitting down with Mark Usko from Morgan Creek and his experience working with institutions and endowments through what he calls alternative investments, as well as his amazing view of the macro the global economic view leed do some very interesting conversations. We talked about the evolution of bitcoin growing to mascual adoption. We talked about the current state of the global economy, what's going

on with that. We talked about what he's what he calls China playing go, and then we talk about big point, where does it fit into all of this? UM, how people should be approaching it, risk levels, etcetera. UM. Some really good conversations I really enjoyed. Let's go ahead and just jump right into it. Hey, everyone, welcome to another episode of the Market Disruptors podcast. Today, I am sitting down with Mark Usko from Morgan Creek Capital and I am super honored to be with him. He's one of

the hardest working guys in the space and so welcome Mark. Well, thanks for having me and great to be with you. And uh, I'll try to live up to the hardest working title. Uh, it's a big shoes to fill, but I appreciate that. Well, you're you're definitely doing your part. So Mark, Um, for those that aren't aware, I want you to just tell us a little bit about like what you've been doing and how you got here and

what you're doing right now. Yeah. So the short version obviously I don't do short well, but the short version is, uh, you know, I came out of the investment world that we're an insurance company and asset management firm, got into endowment management back at my alma moderate Notre Dame, spent five years there's the number two. Then it took over

as the head of University of North Carolina. This is a long time ago, back twenty one years ago, but fifteen years ago, spun out on my own and form Morgan Creek and the whole idea about morgan Creek was to bring alternative investments to lots of investors, so, you know, build products and services that would allow people to integrate this idea of alternative investments into their portfolios. And how little did I know that it would come full circle

here today? Uh, you know, back from hedge funds twenty years ago in private equity and venture capital and and now we're talking about crypto assets and cryptocurrency so pretty exciting stuff. Yeah, yeah, really alternative now. Yeah, And you know, look,

morgan Creek today is a resure investment advisor. We've got just under a couple of billion dollars of assets, a lot of that in private investments, and then a year ago we launched a new subsidiary called morgan Creek Digital and we've raised a venture fund around that to invest in infrastructure and crypto it self. And just excited about this, this new set of opportunities and how it all fits together in the big world in which we all have

to deploy capital into today. Yeah. So I'm super interested to hear your viewpoint on this because of where you sit, having previously worked with endowments and now today kind of

with more incre digital, working with institutions and whatnot. So um, I think uh, bitcoin's emergence has been a little bit different in a sense where it started retail, but really to kind of get to mainstream at some point, if we believe it's going to be this store of value, there's probably gonna be this this evolution um that it has to go from maybe a collectible where it's at today,

speculative asset into a store of value. And I think that it has to probably go through the institution's first before it hits mainstream. Would you agree with that? Yeah, look, I totally agree it, and I think evolution used exactly the right word. I wrote a letter about this a few quarters ago on on kind of financial natural selection or the evolution of of technology revolutionary. I mean, there's nothing really revolutionary about the ideas of distributed ledger technology,

and in triplentiary accounting. There is some revolution in in solving the double spend problem UH and getting getting a new technological application a use case for d LT. But I do think that the evolution is is more appropriate and and to your point, the big money is controlled by institutions and the institutions of God. To get comfortable with anything for it to become really part of of the fabric of of the investment landscape. I mean, go

back fifty sixty years. Most endowments, institutions, foundations, pensions were prohibited by charter in many cases from investing in stocks. I mean think about that. They were mostly in fixed incomes securities. And then stocks were the new news. There were the alternative investment. And then it was international stocks with Arissa back in the seventies. Oh my gosh, you're gonna invest outside the borders of the United States. How risky?

Not risk you at all. But uh. And then it was you know, twenty plus years ago, when I was back at Notre Dame, it was hedge funds and and junk bonds. You know, first time we brought distress securities to the board. There you can't invest in junk bonds. I'm like, wait a second, fifty five per cent of the fund is in equity, which is junior to even the worst debt. So think about it that way in

terms of unsecured claims. And then when we tried hedge funds, like, oh no, you can't invest in hedge funds because that's where all the bad people are. Like what are you talking about the right, Well, they charge these high fees, like, well, in what business do you know, does the best person not charge the highest feet right? Dr lawyer, football coach,

basketball player. That's the way the world works. So and then it was private equity and venture capital and all these assets of actually become mainstream because, as you point out, the institutions finally become comfortable, and it's not until that time when the rest of the investment landscape and particularly the firms. Right here's the crazy thing. There are asset management firms. I was just having a conversation with my

wife last night. She's got a little bit of capital she's investing, and uh, you know, I was talking about, hey, maybe we should put some exposure to to bitcoin in there. Let's just buy GBTC because it's easy. Oh yeah, you know, the brokerage firm that that we work with for her account, they prohibit ownership of GBTC. That's just silly. And it

goes further. There's one firm out there. Won't name names, but it's the biggest one broken jus from not only do they not let your own g BTC, they won't let a financial advisor take a new client if their wealth was created by crypto. Wow, that is absolutely insane on every level. Yeah, that's insane. So, uh you've seen this.

I guess you've seen this where you had to kind of go back to these um funds or these endowments and tell them over and over, hey you should look at this, or so you kind out this history of breaking new assets or risk your assets in So I guess you've seen this this playout before, and so today you're they're kind of pitching these guys now saying, hey, this is the new thing that you need to consider. Yeah, Okay,

I'm a big movie buff, seen this movie before. Uh, this is not the first time, it won't be the last time. Look, innovation is scary, you know for the ok the name of your your pod, right, you know market disruptors. Uh, it's all about disruption and disruptive innovation. And every incumbent fears disruption, as they should. And you know, the street sweepers passed out pamphlets saying that if you've

got an automobile, you die. And you know, the candle makers passed out stuff saying, you know, you go blind if you look at that. You know, lowing or that Mr Edison created or my, my, my, uh my grandfather in laws parents, you know, chastised him from leaving the safe job at the railroad to take the risky job at that American airlines company. And uh, you know, because people really believed that if you got in an airplane and you went faster than a certain miles per hour,

that your body would cave in on itself. So there's all this fear, uncertainty, and doubt around disruption, and it occurs in every disruptive phase, whether it's technology, whether it's innovation, whether it's custom and thinking about Galileo, poor Galileo, right, it's like, you know, guys, my data says that the earth um actually revolves around the Sun, not vice versa. And they labeled on a heretic and you wanted to burn him at the State. But it is dangerous to

have a view different from the masses. But that's where all the great wealth is created. That's my pin and tweet on Twitter, right, is great wealth is created by investing in something that you believe in before everyone else even understands. So having seen this movie before, um, if you have a perspective there, but you're also on the front lines talking to them about it. Where are we I mean, I'm guessing over the last year you've seen a lot of people are starting to warm up to

this idea. I mean we've seen, you know, maybe the Yell and Diamond Fund dip their toe in the water a little bit like so where are we with that? Yeah? Look, I mean Yale got a lot of pressed, but they barely dip the tip of their toe nail. I mean, the amount of assets they put in the fun relative of their total access was was teeny tiny. The guys actually get credit is Harvard. Harvard put in some real money.

They went big into the fund, about ten times as much as Yale put in, and then they went into to a direct deal. Um. So that that's pretty exciting. Uh. And ARV is a great ceio over there at Harvard. So if you think about what's going on, we're still in that you know, early early adopter phase. You know, we haven't even gotten into the early majority. And I'll say in the individual world, the retail world, we're probably in the early majority, but we're just at the very

knee of the S curve. You know, we're probably going from like eight percent to eleven or twelve in terms of adoption, and we've got a long way to go before we've got got full adoption. And and there's the couple of things at work here. One, there's the fear. Right. You know, you've got you got people of influence like Jamie Diamond or Warren Buffett or Charlie Munger you know, calling it bad names, a fraud or you know, Warren calls it rat poise and I always say, well, how

do you know what rap poise? And taste like um? And then you got Charlie saying it's like trading, you know, harvested baby brains. And my really w t f Charlie seriously brains. So why do those guys want you to fear it? Well, Fort of Berkshire Hathaway as in financial services. Financial services are at risk of being disrupted by this new technology and so they're they're gonna say bad things about it. And one of the things that's important for

institutions is to consider the source, right. Don't listen to people who are shilling projects that have no you know, foundation or basis in in the future. You know, you look at I don't I don't like the term, but you know, people call them shiit coins, right, and they're not even coins right there, their utility tokens. They are. They're basically precede and seed stage venture capital projects which have a loss ratio, which should not be surprising to anybody.

Most companies fail. And there's only about a dozen or so cryptocurrencies that actually should be called cryptocurrencies. Everything else should be called utility token and call it what it is, preseed stage venture. So focusing on the differences and not conflating terms and getting information right is is going to help this thing is. Don't listen to the fomo either. You know, you've got the people who are, oh, we're

gonna miss it, We're gonna miss you gotta get it. No, no, right, there's plenty of time, plenty of time to you know, have a plan, find good people to work with, find a logical step wise progression. You know, you don't have to just invest in cryptocurrency. You can invest in venture capital and infrastructure. You can invest in lending, you can invest in in uh certain forms of cryptocurrency or even

derivatives related to cryptocurrency. There's lots of things that are evolving for institution to look at and the smart ones, and we've fortunately found a handful of the smart ones are doing just that. So you're talking about and not just buying coins, but buying in like infrastructure place so like for example Microsoft is has been and probably will be a big benefitiary you could look at like in

video making video cards for mining to stuff like that. Yeah, look, there's there's all the way to that extreme that you're talking about. Which are the existing companies that support the the ongoing development, and you know, the challenges is finding the right ones. It's like like IBM, IBM, what they're doing in blockchain is really interesting, but it's such a tiny piece of their overall dying business that it probably

wouldn't buy that stock. Microsoft a little bit different, a little bit better, something like a m D or in video, you know, a m D in particular, where you've got so much of the exposure of their business to this this evolving technology. I like it a lot. Now it's gone up a lot, and I think it's it's a little richly priced today. Um, but that's just you know, how you do it. You buy the dips and you hold for for long periods of time on those those

companies that are helping to build out the instruction. But when I talk about infrastructure, I mean the private investments in the private businesses that truly are building out you know, exchanges, software tools, um, you know, education and resources. You know, somebody is going to create the bloomberg of peptoe. We think we've tested in that that firm digital asset data, but we'll see yeah great, so um, we're we're in

that evolution stage. It's happening. Um, But it seems like there's stuff going on globally that's seeming like it wants to accelerate that. Right. It's like almost like all these like global macro policies are like just wanting people to

buy a bitcoin or adopted alternative system. And I know you've talked a lot about You've tweeted a lot about like quee um, zombie companies, negative interest rates, right, and so these are all things that possibly could be these black swan events or really push this is that what you think? Look, you know absolutely, you know the macro is lining up and has been lining up for a

decade now. It's not a coincidence that bitcoin in particular as a use case for blockchain technology and specifically about monetization of value or money or stores of value. Uh came a out in two thousand nine. Right, that that's not a surprise, A trough of the goal financial crisis, you know, the genesis block refers to the chancellor second bail out of the banks. Uh. And and everything that's gone on in the last decade from central banks becoming

very very kind of omniscient godlike uh people. You know, a friend of mine says the best, Right, I remember a time. I'm old enough, I remember a time when I didn't know the names of central bankers. I long for those days to to return, and you know they aren't.

The The idea that if if it was easy to create wealth by printing money literally by pushing a button and printing money literally physically printing printing press kind of physical notes and coins or you know, ones and zeros in a bank account, if it were that easy, then wouldn't everybody do it? Wouldn't every country just print as much currency as they possibly could. They'll try, and they

do try, right, and we've seen the outcome. Right, We've seen in the hyper inflationary outcome in places like Zimbabwe or Venezuela. You know, a cup of coffee a year ago cost you know, nine cents. Today it costs you know what is the fourteen thousand dollars or something um four thousand percent um monthly inflation. So now that's the hyper inflation side. The thing that I'm more worried about

is the deflationary side, which is you've got bad demographics. Right, You've got too many old people, meaning sixty day five and sixty five year old people don't spend as much as five year old people. They're not as productive. Then you've got too much debt. You've got all the developed world, Japan, US, Europe, you know, most developed world drowning in debt and overspending. And we were a trillion dollar deaths in the United States because of the silly Tax to Formact that we

passed a year and a half ago. And then on top of that, you've got deflation. So deflation is essentially put us in this place where we feel compelled as governments to print more currency and devalue our currency in a race to the bottom to try to inflate our

way out of the debt. But it's not working. And so what the problem is that we have is you have this you said, the perfect storm for a fixed supply hard currency or sound money like bitcoin to come in and say, wait a second, if I want to opt out of the fiat currency system, or the Fiat fiasco as I like to call it, uh, if you want to opt out of that and have a little bit of chaos heads or a little you know, schmuck insurance as somebody called it, I should be in kredit.

I can't remember who said it, but the schmuck insurance. You know, we got scho leaders all around the world doing stupid stuff. Whether it's bad policies like trade wars, whether it's bad decisions like you know, trade dept or budget deficits spending, whether it's bad things like que all of that is leading to this devavaluation and this depreciation of the value of these assets. And look, if I were them, and I were the dictator, I would do

the same thing. Well, actually I wouldn't because I have conscience. But dictators go by the dictator playbook, right. They amass the assets, then they devalue the currency. That's the way it works, and that's exactly what's happening today. And the problem is the average person, right everage person in America doesn't hold a stock. People in this country have no stock, not one not They're four when Caplin, they're a pension fund. They don't own stock directly. They are not benefiting by

the increase of real assets, financial assets. They would benefit from holding a sound monetary um aggregate like like yeah, and that's why we have this growing divide between the rich and the poor. The richer inflating their assets. The poor don't have assets. And because there because their money is becoming less value, it's there. Their wages have gone down, their producing power has gone down at the same time. So it's like this this growing gap. Well, it's the

worst since the nineteen thirties. It's the worst income and wealth inequality in the history of the United States. We were doing better from kind of nineteen thirty through the late sixties, and really since nineteen seventy one when we did you know, the Fiat fiasco. We went off the gold standard, and and some would say, well, you know, all of this isn't working. You know, the QUEI is not working, the change of the goals. No, it's working

exactly as they planned. If if you actually stopped for a second and say, wait, the haves like being haves and they would like to have a greater percentage of what they have, then it makes perfect sense. And they have not don't seem to. But I don't understand is they have not seemingly vote for the policies that are making them less rich. Well, I think it's not. We're an election cycle, so it's not. Uh, I don't think

it's it's hard to understand why. And if you look at the debates that are going on, someone's promising freeification, someone's been promising free reparations, promising free thousand dollars a month. Someone's promising I mean and so q E pays for that, right, Like, that's that that pays for that. So it's it's not a big it's not a big stretch to see how that gets in. But we don't want to jump into

politics because we could go crazy there. But um, we do have these narratives in bitcoin, right, and so we're always talking about uh it seems like it drives this. And so one narrative I see is like and people have last onto this is we talked about the economy is good. The economy is good. The economy is good because the stock market is high. But the stock market being high doesn't mean the economy is good, especially for the little guy, right, that's what you're saying, not at all. Now.

In fact, you bring up one of the most important points is the economy is not the stock market. The stock market is not the economy, and there are lots of examples. Right. The fastest growing economies in the world over the last two decades have not had the best performing stock markets. Right. The best performing stock market in the world the last two years is Venezuela. Their economy is in the hitner. I mean, I hate to use

that word, but that that's where it is. But it's the best performing stock market because on a nominal value, uh, you know, the price of of things goes up and the dictators takes all the assets because they own all the assets. So to your to your point, everyone points to, oh, the economy is great, Well, the economy is actually not good. The economy is good on some measures. You can say, well, a lot of people are working. Well how are they working?

Are they underemployed or they fully employed? You know, if you lose your job as a manager at a T and T and you take a job as a barista, you still show up as employed. Now, I would argue your life is less good unless maybe you want more free time. But then the other problem you have is every day someone turns sixty five, they get taken out

of the workforce or workforce participation rate drops. Then you got this other crazy thing called the birth death ratio that occur is when the BLS, the Bureau of Labor and Statistics, makes up data based on where we are in the length of the economics cycle, and they said this many companies should be born, this many should die, so we have this many new jobs. Well did you actually count the jobs? Oh? Well no, Well you do realize that this risk recovery is half as strong as

previous recovery. Sure you're justing for that, right, Well no, okay, So all of that, you know, indications of oh, people point to um, you know, uh, consumer confidence. Well, of course people have consumer confidence because they read the headlines every day at the stock market is great. Wow, a president tweets about the tweeter in chief every day, woks up. When the market goes down like today, he won't be

tweeting today about the market. But said, like you said, the people own no stock so what do they even care? What makes sense the economy. We just had the worst ten years of economic growth the United States in history. Now part of that as figures lie in the liar's figure, in the sense that it is the law of large non verse and it is harder to grow a very large economy at a high rate, although China is doing a pretty good job of doing that. It was so

it's made up. Well, I love about that is people say, well, the Chinese data is made up, You mean more made up than our data. It's actually the same amount of made up. And in fact, Bloomberg tried to show how

much the data was made up in China. So they created a thing called the Lee Kua Kong Index, which is, you know, using electricity and employment and money flows, and they calculated what they thought the GDP growth was, and it turned out that number was actually saying that China was understating because they don't want to freak people out. So it is possible to grow quickly, you have to have a different type of of command economy as opposed

to appear democracy. Uh. And some people would argue against that, but the bottom line is, you know, our growth United States is not high. Growth in Europe is not high. Growth in Japan is not high. It's demographic problem. It's a debt problem. And all that comes together back to your original point, it creates this perfect storm where the macro suddenly has there's a there's a role as a macro hedge or a safe haven. And I've gotten great debate.

It can't be a safe haven, it's too volatible. Well, if you define safe haven simply as volatility of an asset, you're missing the point. The point of a safe haven is what do I feel comfortable and secure in holding a portion of my assets if there's chaos someplace else. And one of the best things about cryptocurrency and bitcoin in particular, it's not seizable right in some ways it can actually be um not um recordable, meaning people don't know where you have it or where you're storing it.

It can be moved globally instantaneously. You know, all the things that we think about to say here, like gold is really hard to to move around. It's heavy, you know, it's hard to divide. You've got to pay someone to ensure it or store it. Um you crypto has some huge advantages, and that's why I think bitcoin has digital gold as its first use case is really quite interesting. Yeah, so let's talk about that for a minute. Um, so you know, we have this perfect storm. You you kind

of frame that up for us really really well. Um, demographics and you know, inflation, deflation, these things, and we have this case set. So traditionally gold has been that. Um when when when currencies inflate, people can go to gold because it's not inflatable, can't be inflated. Um, potentially right with gold is called digital gold or I'm sorry bitcoin is being called digital gold. But uh, in an

inflationary environment, gold should work really well. But we saw in two thousand and eight that gold actually got hammered at the same time as the financial crash. However, it did bounce back right away. So it almost seems that, um, you have this deflationary move that happens first, right, this debt de leveraging, which pushes gold down, but then all of a sudden they're gonna start printing to try to reinflate it, which pushes it back up. So is that

kind of what you see? Absolutely? Well, the thing about gold, it's the only asset in the world until bitcoin was created that acts both as a currency and a commodity, and so you think about there are lots of commodities, and commodities can do, you know, very poorly in an economic downturn. Global financial crisis was certainly an economic downturn, and a lot of people thought of gold in its

commodity form first and they sold. Then it turns to currency or store of value, and then people are, oh, geez, you know, there's gonna be this fed reaction or this this central bank reaction, and I'm gonna need uh an inflation heads. The problem is we haven't had any inflation. We've had deflation. And so gold does have this really interesting history, and you know, people say, well, has it has uh you know, people have faith in it. We'll know what they have is its custom, right, It's been

a custom for five thousand years. It's a long time that one ounce of gold has bought a fine man's suit. And so despite all the ups and downs of currency and other than seven or seventy five paper currencies in the history of the world, three quarters of them no longer exist, and the rest of them will go away over time too, because paper currency will always go away because not backed by anything it's FIA, and so ultimately

gold does act as that store. But the reason that it has is custom Now, what's interesting is in the last ten years there's been this new customary asset Bitcoin, where people, particularly young people, say, huh, it's more portable, it's more easily stored, it's more easily divided. It may actually have another use case as a method of payment at some point, although it's pretty slow to do that.

I'll probably a second layer like lightning. But the bottom line is, if you ask the average thirty five year older younger how much gold you are, well, none. Why would I have your own gold? If you ask him how much bitcoin they have, the answers might surprise you some. And that is a a difference in other assets. And one of the things I really really love about bitcoin, and one of the things that reasons I think institutions will adopt it sooner rather than later, is Look, I've

been doing this a long time. I got white hair to prove it. Although my son said, you know, this weekend, Dad, you're your hair still black in the back. I'm like, well, yeah, okay, but um, I've been around long enough to see all of these promises of alternative investments that are going to give you a better return or lower correlation or diversify diversification benefit. And you know in national stock correlated hedge funds correlate, even bonds correlated, so they don't give you

this perfect correlation. Hedge Bitcoin, interestingly, through the ups, through the downs, good bad, is only fifteen point one five correlated, and in some cases, like May and today, it actually has negative correlation. So I'm not saying it's gonna be negatively correlated all the time. It's not gonna be a perfect head, but that point one five correlation is really important.

And where does it come from. It comes from the fact that stocks, bonds, commodities, traditional assets all derive their value from the same thing economic growth, interest rates, and central bank policies. Bitcoin derives its value from very different things technology, regulatory changes, millennial usage, and this this need for an alternative store of value, so it moves differently and independently, which is a huge advantage when you build

it into a portfolio. So when you're building that into a portfolio, you want to take you want to take into consideration the volatilely that it has, which is kind of the risk that it has um. So with bitcoin, we have this huge asymmetric upside with you know, a smaller downside, but it's also way more volatiles, which you know has a risk adjusted basis. So then when you're putting it into whatever portfolio, whether that's being institute portfolio

or retail portfolio, you should try to consider that. And how does someone look at that? We definitely have to consider it. But here's the problem with volatility. Volatility is not risk, right, risk is risk of absolute loss or permanent impairment of capital. The intersestant thing is Harry Markuts. I'm a big Harry Marquts fan. Of fact, I got to have dinner with him once, and you know, I got to ask him this question, and I had heard that he said once that he wouldn't have used volatility

for the capital asset pricing model. What do you semi variants? Because you should only penalize an asset for downside volatility. We all want upside volatilly, that's what we crave. In fact, we should want as much upside volatility as we can possibly get, of course, and I said, would you is it true that you said I would use semi variants? But the math was too hard, and he said, well, of course, and I wouldn't have won the Nobel price.

I really want to win the Nobel prize. So when you penalize an asset for upside volatility, that's a perversion of the whole idea of assets. What we want our asset that have asymmetric upside, and we're willing to accept some downside risk, but we can hedge most of that downside risk away with other assets or with position sizing.

You know, I use this example over the last five years, so five years of reasonable time, because at that point you could have put one percent of endowment assets into bitcoin. So our last five years, if you had taken one percent and put it in bitcoin, half percent from stocks, half percent from bonds, and endowments over the last five years made seven point two percent, that one person allocation of bitcoin would have taken it to nine point two Had that one percent gone to zero, you would have

only gone to nine to seven percent. So point two percent downside two bases points of upside. That's a ten to one asymmetry. So we should embrace that upside volatility and be mindful of downside volatility and risk. But the interesting thing about it is the risk of total loss is very low at this point because of lots of things related to Metcalfe's law and the Linda effect. The

longer something survived, the longer it's likely to survive. And the way Satoshi San, whoever Sotoshi San is, or the people or they or them or whatever, whoever designed it was genius in the sense that there are these embedded advantages for its longevity. Right, because as the price declines, more people are gonna want to own it. As the price declines, the difficulty adjust in the mining algorithms, and

so more people are uh are incented to mine. And so there's this beautiful uh ying and yang about the asset. And I would say the miracle was it went from zero to ten dollars ten to a hundred to a thousand, thousand to ten thousand, ten thousand a million. That's not a miracle, that's just increased usage and increase adoption. The miracle was that it survived getting usage at all all and became a custom where we could exchange it for value.

And I survived that that first really bad bear, that bear crash, that bear market, So whant to survive that one it was like, Wow, this thing is resilient. Now it survived a couple of them, which makes it even more resilient. So the investors should look at it as a total loss and not just the downside or the temporary downside. I guess if you're looking out over a long enough time timeframe as well, right, well, look at it. What is it? Ninety seven percent of all days that

it's been in existence, you've made money. So if you bought it other than like one or two percent of days, you've made money. So yeah, if you chased it on December eight, two thousand seventeen, you pay twenty year down. But other than a handful of days, it's a it's been a positive basset. And the thing that people focus on that I think is improper is they focus on

the peak price. Price is a liar, right. The value of any asset is the value the price is just with two both decided to exchange some unit uh in the current period. And so when assets get above their fair value, they tend to fall back to fair value, and they get blow fair value to tend to go back up to fair value. And so when we look at it, we look and say, mmm, well, making meaning attractive or unattractive. But what we should really look at as a diversifying asset is each year over the ten

years the low has been higher. That's incredible. That means fundamentally, more people are using it, more people are holding it, more people are looking for additional use cases. And if that trend continues and every year we get higher lows, that's very positive for the future. Yeah. Yeah, and uh, I mean, like you said, the price is a liar. Really we have valuations which is difficult to price because

we don't really know exactly what it is. I've been I've been having fun watching these macro guys like Raoul Paul uh and Dan Tapirero is starting to talk about this and um, they have a different perspective that makes

it seems so much bigger than it is. And there was another article that I saw you talk about that was like, uh, something about he was talking about the volatility um something and then nothing at all or whatever, and he just said, Hey, we have this global transfer system of transferring value peer to peer, Like, what's that worth? Is that worth two billion? I guess we're a lot more than two billions. We're a lot more than two and look what people aren't capable of of understanding yet.

And it's not a criticism of anybody, it's it's just this is how big technological evolutions happen. Right when the Internet was founded, there were very very few people, right myself included, who saw the incredible upside potential. Now, we made some good investments, you know, we invested in Google and we made you know, two hundred times our money, and we invested in Sycamore and and Sienna and a

whole bunch of other things. We made a bunch of money, but I didn't buy you know, Amazon on the I p O and hold it to today, and you know, I wouldn't even have to work so because it was hard to see the upside potential because when when Netflix came out, it was a crappy little company. Those discs got broken, they got lost, they were hard. And then it was gonna be video on demand. Well you couldn't do video on demand motives, and so that business was

gonna die. And then Blockbuster was going to put him out of business. And and then suddenly what happened, Well, South Korea gave us broadband. Now, when broadband came like whoa whoa, Now we can do streaming. We don't call video on demanding, We're called streaming. And what people weren't capable of understanding is just how many people would cut the cord and transfer to streaming instead of cable. And

the same thing is true with the mobile net. Right when I remember two thousand ten being in Craig McCaw's house up in Seattle for a party, and you know, talking to the head of his family off was Reginal investors in in mobile telephony, And I asked this guy, so, what you know, do you think the mobile net will be as big as the Internet? He's like, Mark, you kidding me? Yes, people fifteen years ago if they want a computer, like what do I want a computer in

my house for? Yes, people today if they want a cell phone, like, well, already got to probably don't need another one, butter and do more to be awesome. And then ten years ago the iPhone, or eleven years ago the iPhone comes out, and suddenly our world has changed. And now we all got sore thumbs and crooked nits and these bolts on the back of our head from leaning over too much. But you know, we can't comphend

the change. That's gonna occur. And when you take money and value and all the assets in the world and you think about what will be done to them, the same thing that the Internet did too, or what email did to information, or what the internet did to commerce. It's it's really incomprehensible. And I think that's why people struggle with getting exposure and make an investment because they can't see the future because the future has been tomorrow.

It's gonna happen over a decade or fifteen or twenty years. But think about this. Forget digital gold, right, that's a seven seven a half trillion dollar market. What about money marketing accounts? What about just instead of having a bank money where the bank could take assets like they did in Cyprus, what if I had an unseizable asset like bitcoin and I could have that being my money market.

Oh that's pretty interesting. That's why the government and Libra is not even a cryptocurrency, right, it's a centralized corporate digital asset. But it's still could be the largest money market in the world by a factor of ten if they instantly distributed it to all their their clients. So yeah, governments don't like that. Drains asked in the banking system.

Think about this. Ali Baba created a money market account back five ago, maybe seven years ago, and in nine months there'd eighty bi billion dollars, became the third largest money market in the in the world in nine months. Took forty years for Van Garden Fidelity to get up to a hundred billion dollars, And the p BOC said, whoa time out, we're changing the banking laws. You can't

do this because you're siphoning assets out of our banking system. Today, that account without any new app for two hundred billion dollars by far the largest money market in the world. And that's what can happen with new technology. And so then we go from there too, Well, what about currencies. Do we really need all the different currencies around the world. What about a borderless currency It's possible, that's eighty six trillion dollar market. Well what about real estate that's three

times as big. How about that two billion dollars I'm sorry, trillion dollars, six trillion, a billion um on. So so then then you go to total private businesses and total total assets. We're talking seven hundred billion dollars of assets that will be digitized. That will be traded free. Seven they will be owned in a fractional basis. I mean the few is so big it's almost too big to comprehend. And that's why people just don't do anything. Yeah, boy, it is too big to comprehend. The big risk that

we have those, as you said, these disruptive technologies. Companies don't like that. Blockbuster obviously didn't like getting taken out by Netflix. But now we have sovereigns Now we have government, So the p BOC says, hey, no, Ali baba, you can't do that. So now we don't really have this free market anymore. A nowly of a sudden, we have like governments that maybe we'll shut it down. I think that adds an element of risk in addition to just

like new technology risk. I mean, we have government regulation risk. Now. It's a really really important point. And uh and that's not new in the sense that you know, the government tried to regulate the Internet, and you know they tried to regulate cell phones and you know, look, we got all. All of these things occur when interested parties feel their dominance slipping right. Financial service institutions don't like the idea that you and I can exchange value today directly, and

we don't need a bank. You don't need a bank account. I don't need an account. I get in transfer value instantaneously, and let's do that across borders. Well, that's the problem is today Western Union charges twelve if I want to send money to my mother in law and Brazil, I don't have the mother in lawn present I did, and I want to send her money. It costs me twelve. But my mother in law's in Tulsa, Oklahoma, doesn't cost

money to send money there. But the key is that if I cont across borders, you know, the Rothchild's like the fact that their two banks get paid and they don't want that to go away. So over time, disruptive innovation is going to dominate and and there's no putting the genie back in the bottle here. We're going to see increasing and increase you stage, We're gonna see different

use cases. We're going to see government push back, we're going to see regulatory But the key is in a borderless world, in a decentralized world, or de central land, which one of the terms I like in de central land, if the US makes it really hard to open businesses around this new technology. What will happen. They'll open up in Russia, They'll open up in China, open up in Argentina, they'll open up in the Bahamas or Cayman, and the

will have question is going to happen? And then, well, can people then make it criminal to own the asset? People forget it was against the law to own gold from nineteen thirty three to ninetevent literally against the law in the United States to own. Plenty of people on gold, so it's got to be enforced, it's got to be monitored. So all these things become tougher in a decentralized world where you know, you literally can store your bitcoin in your head. It right, You don't have to have it

on your computer and have it on your phone. You can have your seed phrase in your head and and just be happy. Now, will they start carrying gating you? Absolutely, But people will figure out a way around that. I heard one guy say, well, I just wipe my computer before I go through plank computer. You're more suspect than the guy who has, you know, a coin based account

on his computer. So we'll all figure it out. Yeah, yeah, all right, Well, um, such such good information that I really appreciate taking the time well ahead and try and wrap this up. I'm just curious. Um. Now we've talked about, uh, this global stage that's setting up to to um create this perfect storm to push this uh lots of risk in the world where uh, you know, all these accounts are overvalued and potentially you know, Marcus could come crashing down at any point. But at the same time we

have this new asset class. How how do people uh look at this? I mean, where where are the safe places for people to go by bitcoin and buy gold? Keep? Okay, I love it. It's the it's the ultimate softball question for my favorite hashtag, which is hashtag get off zero. Ten years from now, we're gonna look back and it will be fiduciarily irresponsible for anyone individual institution, For investor to have zero exposure to crypto assets and particularly bitcoin

will be irresponsible. And why is that? It's because when you look around in the world is did you just summarize perfectly, Uh, just about every asset class is in a bubble. Real estates in a bubble. Stocks are in a bubble. Government bonds are in the greatest bubble in the history of bubbles. I mean the fact that the Greek tenure trades below treasuries absolute insanity. The fact that

Italian interest rates or single digits insanity. So with a buyer of last resort is a government entity that can print money at a whim to buy assets, and they economic reasons to own. Yeah, we get bubbles. And it is irresponsible to own debt of corporations that wildly over levered. It's irresponsible to own equity of companies like Tesla where they don't have enough money to pay back their debt holders, let alone the equity holders. So I think what's gonna

happen over time is people are gonna wake up. They're gonna say, oh, there are these diversifying assets, and they're gonna start with one per cent, then two, then five, then eight and ten, then fifteen, then twenty. And the younger you are, the more you should have because you've got this wonderful thing like a pseudo fixed income instrument,

which is your future earnings potential. Right, a young person should have zero bonds, none, Right, Their bond is their future earnings from jobs they're gonna have in in over the years. And so you should have as much private investments take advantage aliquidity. Premium should have as much Diversifying assets are asymmetric assets like bitcoin in your portfolio when you're young, because you've got more time to make up

for your mistakes. And so you know, Michael Steinhard had a great lines, and make all your mistakes when you're young, Okay. And that's how we should think about investing, is we should be pushing. And so I went on vacation last week and I sent out a post a picture on Twitter of me water skiing and someone said, uh, falls question mark, And I said, if you're not falling, you're not skiing. So if you're not falling down occasionally, if you're not having a loss occasionally, if you're not having

a setback occasionally investing, that you're not investing. You're not taking enough risk. And one of the things that people don't like to be wrong, so they don't put their their opinion out there. They don't put positions on where they could be wrong or lose money. Well, the whole purpose of this business is sometimes being wrong, because you're

only gonna be right mathematically about half the time. And it's not whether you're right or wrong, it's how much money you make when you're right, now much money you lose when you're wrong. And Sorrow says it best. I'm only rich because I admit my mistakes faster than other people, and I cut my losses. And so good investors, great investors, are wrong way more than bad investors, because bad investors are paralyzed by fear of being wrong, and so they

sit in cash or bonds and don't do anything. And great investors make investments, take views, make you know, wild assertions like I do all the time, saying, Hey, I actually think there's gonna be a value here. I think this asset is going to take off. He said, well, what if you're wrong. I'm wrong all the time. So I make a mistake, I change it, fix it, go

on to the next idea. So the key to all of this is adopt a portion of your assets in these diversifying assets, particularly crypto assets, reduce your exposure to the overvalued assets around the world, and prepare for an environment at which stuff is gonna go on sale. So there's a reason the very best investors in the world to day have the highest cash positions they've ever had. Like one of my mentors Julian Robertson, guys always invested.

He's basically fully in cash. He's got a lot of longs, a lot of shorts, but net he's basically neutral because he knows that assets are overvalued. He's shortly overvalued assets. He's long with a few things that he thinks are are undervalued, and he's waiting with a lot of cash to buy the assets when they get cheap. Just timing it is the problem, all right, A Japan's kept it going for twenty thirty years? How long can this game

go on? Right? Absolutely? And the markets can behavior rationally longer than the rational investor can remain solve it only though, that only applies if you lever If you don't lever up. Cash is like valium. It keeps you calm and it lets you wait out. But if you put a lot of leverage on your assets, yeah you're gonna get stopped out at precisely the wrong time. Leverage can never make a bad investment good, but it can make a good

investment bad. And so today you want to have max some flexibility, You want to have a focus on constantly rebalancing, and yeah, could this game go on longer than I think it can. Of course, well, central banks do everything they can to keep it going. Of course, Well the elites do everything they can, including passing stupid laws. Of course. But at the end, I believe gravity rules right, Newton was right, and assets returned to their fair value and

even go below. And if you wait long enough, um, you get to buy him it with a margin of safety, which is the key to life. Yeah, awesome, So that's good stuff. You're definitely a wealth of knowledge. I appreciate you sharing that with me in the audience conversation. Um, so anybody listening told definitely be following you on Twitter because you put out a lot of good information, a lot of retweets. I don't know how you get any work done. My wife asked me the same thing. She

she thinks I'm a Twitter holic. But Twitter is awesome because one, it's an engaged community, and I've made some incredible relationships around the world, been introduced to some some really cool opportunities. Uh. The second thing I love is I get instant feedback, right, And when I put out an idea and everybody hates on it, and like, oh, that's a pretty good idea. If I put it out an idea and everybody loves it. I'm like, oh, maybe

that's already in the price, So great instant feedback. Um. But the thing I really like about it is it's it's a way to to build and grow a community of like minded people in different areas, whether it be crypto or finance or China. Um. So we didn't even get talking about China. May will do that next time, But there's so much going on in the world today. Uh. And one thing I really like about about twitters it's instantaneous.

I don't have to wait for a producer to review a journalist article and eight hours later I get, you know, somebody's view of what happened. I can watch a periscope live of people standing in the polling place in Argentina and get a sense that mockery is gonna win and good things are gonna happen. So very cool stuff. Is there anywhere else that anyone should follow you to you write? You write like blogs or do you have anything else?

And just follow you on Twitter? Our our website is Morgan Creek cap c ap dot com and we've got a lot of quarterly letters that I've written over the years. Uh, a number of them on on bitcoin and crypto of the last of the last couple of years, kind of on the origins. And then we've also got a YouTube channel called Around the World with us Go, and I've got a lot of presentations about forty five minutes each with audio that we do on this on a monthly basis.

We post those, and I've got a number on on crypto and China and energy and stocks and you name a topic, it's out there. Cool all right, Well, thanks so much for taking the time to share the information with you. Appreciate it, all right, Thanks, take care. Hey, if you like this episode of the Market Disruptors Podcast, please help us take this to the top of the podcast charts. Just please do me a favor and rate,

review and subscribe. Taking fish teen seconds to just leave a quick review goes a long way in helping us reach more people and disrupt more markets. I really appreciate you listening and I'll see you next time on the Market Instructors Podcast.