I believe bitcoin will have more purchasing power in twenty years, as not year.
To year, but certainly decade to decade.
I get asked all the time, like what do I think is going to happen with the presspect and I say, I have no idea.
Figuring out where it will be in ten twenty thirty years is easier than where it will be in ten twenty days. Twenty thirteen, You'll work in New Jersey and you said it was a big problem. How big of a problem?
I would say, it ends up being a tech problem, in operations problem. So I'm just like, Hey, Wells Fargo, Hey Bank of America, are like, why don't you give bank accounts to people in West New York?
And the answer was.
Zach Townsend is the CEO and co founder of Meanwhile, the world's first bitcoin life insurance company. He was California's first chief data officer and the founder of a banking API startup acquired by Silicon Valley Bank. With deep expertise in finance, tech and policy, he's now reshaping how we think about financial security.
Life insurance in particular can be like needlessly complicated. That complication partially exists because of the way life insurance is sold, right, I'm aligned entirely that like this is like a basic, fundamental tool. It's not just that it's boring, it's also that the associations that people have with life insurance is like this thing that's being sold to you, right, not a thing that I choose to buy because it's solving this like fundamental need I have in my family.
Zach, thanks for joining me today.
Glad to be here.
You work in the most boring industry in the world, and I'm sure whenever you mention it, people probably run for the hills. But it's actually something I'm super interested in, cool, something I spend a lot of time with. But I think it's because people misunderstand the tool. Yeah, so the dirty word we're going to talk about is insurance. Maybe it's as bad of a conversation starter at a cocktail party as maybe taxes. Yeah right, But but it's a
super powerful tool if you know to use it. Most people just don't, so I want to get into that. I think there's I talk about it because there's a way to build massive wealth, tax efficiency, legacy planning, and extra capital to even work with in some way if it's done right, but most people just don't understand that. So I think, oh, like insurance, like stop right, But
there's a lot that I want to dig into. So before we get into all that, give me your bitcoin journey and tech and bitcoin and then why the heck insurance, But let's start with like tech, your early life in tech, what you've built, and then how you got into bitcoin.
Actually to start a little bit before that, I worked for Corey Booker, who's now a Senator, but he was the mayor of Newark, New Jersey, and I was like the head of Innovation CTO of Newark. I had grown up in New Jersey, had like studied finance and data science stuff, and I got assigned the financial inclusion portfolio. So I was really asking this question of why do people in West Newark not have bank accounts and like why do they do check cashing? And that's sort of
what launched me in this whole journey. So Corey decides to run for Senate, yeah, and I was like, I don't.
Care about the Senate, Like you can't do anything in the Senate. Yeah, I want to build stuff.
And I had this background in data science and fintech and getting stuff done, like interacting with this financial inclusion and I really just went on Hacker News, which is like WHI Combinator's forum. I was like, what's the most innovative fintech company that keeps coming up? And that's how I ended up moving to San Francisco. Is I got a job at Stripe, and I didn't really know much about credit card processing or much about them.
Other than they were doing a cool thing using tech and finance.
Yeah, what year was that?
That's twenty thirteen.
Okay, early, let's stop right there on that part of the story, the financial inclusion piece. Yeah, so if you can remember, that was a long time ago, a whole another world ago for you, Right twenty thirteen you're work in New Jersey and you said it was a big problem. How big of a problem? Do you have any remembrance of the numbers at that time? And and and why was why.
Is that a problem?
Yeah, it's why it's a problem. Is like still somewhat mys serious to me? I think that fundamentally, I would say, it ends up being a tech problem and an operations problem. So you go, I actually, because Corey is Corey, I got to talk to like big banks, and I'm just like, Hey, Wells Fargo, Hey Bank of America, Like, why don't you have give bank accounts to people.
In West Newark?
And the answer was it's actually unprofitable, like the accounts are so small, and the operational costs of serving those people and servicing those accounts makes the like union economic subside down. And my immediate takeaway at the time was that doesn't make any sense, right, Like the cost of a database entry is free, Like we're all like the transactions in the bank account are not more complicated than the transactions like running through Twitter or Facebook.
Like it shouldn't be that expensive.
Now, I would say, I like have a lot more nuanced there, like there's fraud, there's like risks, koc. But at the time, I was just like, these are database enturies. They should be like almost free. Thus everyone should have a bank account.
Yeah, and now I've like been on this whole journey, but this sort of I skipped over. But like I grew up relatively poor.
I mean my dad was or lower class, Like my dad was a postman, my mother was a waitress. Like we like clipped coupons. So I was like very inherently interested in this question of like money, but.
Definitely spending time.
I forget, but like twenty five percent of the people in New York at the time were using check cashing and didn't have a make account. So I was like, this is just like profoundly broken.
Most people can't even imagine that they don't live in that part of the world. They don't realize that about a billion, billion and a half people in the world today have no access to banking. And that's not just the world, it's the US.
Yes, that's now. I mean you gotta think ten twelve.
This is like before Chime, before Square Halts, before Venmo, Like, yeah, there was, Yeah, it was a even a bigger problem than but I completely I am not to come to the president, but like that's partially why we my co founder and I are both profoundly interested in this. You mentioned a billion people. That's actually what we say. We want to serve a billion people, which is like ten times more than a number of people will have life insurance. Yeah, and the point is just that digital money.
Well, anyway, I'm skipping way ahead and stuff.
So let's go back. So then you move to San Francisco, you get a job with Stripe For those that don't know, they're one of maybe I don't know, the fastest growing, biggest online comment processes. They're certainly in the online niche for sure. Yeah. I was with them forever or they were great, and then about a year ago, for some reason, they decided to shut my account off. But I haven't been there twelve years.
But I wasn't the risk.
Them though, So yeah, maybe I made a mistakes all those years ago.
Yeah, so so you went there? What happened?
Yeah, basically I got to Stripe and it's sort of a funny story.
Simultaneously to applying to Stripe, a good friend and I applied to y Combinator. Okay, so famous startup celerrator.
And so I started at Stripe and then y C offered us an interview, and you know, it ended up being the best life decision I ever made, Like to do y Combinator and start a company. There's obviously like one of the worst financial decisions ever made.
Because even the small amount of.
Sock I had will would be worth I don't even I try not to, like, like tens of millions of dollars. Yeah, but I think even in the few months I was there, you do get inculcated pretty fast into like you can just do things and you can just build things, and like I remember lividly, almost every email in the company at the time would be BCC do an email list that you could subscribe to or you could like so you you like really see what the company was doing.
I remember I woke up and I had, you know, three hundred emails and it was all Patrick, the CEO of Stripe, emailing our three hundred biggest customers, just saying like, hey, how's it going, Like is there anything we can do to change? So it was a very short but fast education in I think the ways of y Combinator of startups of you know, just being an agent in the world, an entrepreneur, and then you know, interview at YC, get into YC and.
Start a company called Standard Treasury. Same thing.
Standard Treasury built financial infrastructure. It was relatively another like boring topic. We built like API layers between banks and FinTechs.
Stripe actually ended up being one.
Of our biggest users with they like a company in a box product closed Stripe at lists and the.
Bank you get a bank account when they open the account.
But it was sort of all of this part that like how do I use technology to like lower the marginal costs of these like basic building.
Box and finance. And that company was a little.
People won't be aware, but like there are many successor companies.
Maybe people have done this afterwards.
Actually two of our engineers went and founded another company that did it. Another one of our engineers moved with the UK to start a bank. We were just too early, like we couldn't really get the bank partnerships working, and ultimately sold that business to Silicon Valley Bank, which was.
A going concern in twenty fifteen. And you're a respectable place to tell the company.
Yeah and yeah. In that journey, that's when I was first introduced to actually the very first time I ever heard about bitcoin, which I sort of regret, not like going is a bunch of the infrastructure engineers at Stripe, like we're mining bitcoin in their MIT dorm rooms. Yeah, and it was like a dinner conversation or something, but it seemed quite distant for me. And the first time I really got it.
Was in twenty fifteen.
I was selling Standard Treasury and Coinbase was interested in buying the company, not really because they wanted the financial like the tech we had built, but because we don't want to like payments expertise and KYC and AML expertise, and we sort of had that. We were a small team, but like we really knew that stuff well. And so the first bitcoin ever received, I don't remember if it was Brian or Fred, but like literally they like download
the coin base app and like sent me bitcoin. And I understood a media even with the little experience at it Stripe, but then the big experience as Saren Treasury, like this was something categorically different, right, Like it was so.
Fast, and that's because you had been focused on lowering costs and finance specifically, and so all of a sudden you saw that and it like clicked for you.
Yeah yeah, yeah, but I guess didn't click enough to sell my company in Coinbase.
Yeah.
And then I, I mean, we can talk about the other parts of my professional life, but I've basically been like dollar costs averaging into bitcoin since then. Definitely, like sort of saw the Ico bubble of like eighteen nineteen, and so I thought that was ridiculous and really came back to it like when it was the rice right like moment in my life to start a company again.
Yeah, Now I'm curious a couple of things. So one, it kind of shows your focus, right, lowering costs, more inclusion, things like that. But you said that, you know, going to the White Combinator and the short stint at Stripe and things like that maybe weren't the best financial decisions, but what worked really well. And you said that you had a short education, but something that was really impactful.
I'm curious, you know, as you found in different companies, what are some of the key things that you've learned there that you continue to repeat in the businesses that you that you run.
Now, yeah, I think I alluded to it, But I think that people often like need think they need permission from other people to do things. And I think being an entrepreneur is realizing that there's no one else to do the work and that you can just do it. Like I look back, even over the course of this company, we've been running it for about three years.
I didn't know anything about life insurance when we started. I mean I knew a little bit about it.
I knew enough about it to say, like, I think there should be a bitcoin life insurance company.
But I just had to go and learn it, Like I had to like.
Read legal documents and you know, write a business plan and recruit people.
And I think that you can.
And I was on this train too, right, Like you go to a good high school, you like get straight a'ge, you like do well in the SAT, you like go to a college. It all seems very laid out for you. And there's just like things you can achieve. And entrepreneurship is a lot of ambiguity and you just have to wake up and like decide what am I going to do today? Just like and like how do I push the company forward? And there's no one telling you that.
And but you also like come to realize like you can just do things like everything it's actually this amazing like change your perspective, like everything was made by someone. How this microphone was designed, Like someone designed it right, someone on your team decided how to set this up. Like every single thing in the world is the result of agency, and most people just don't act that way.
Why I I.
Don't have a good answer. I've sort of always been this way. Maybe it's something I think a.
Lot about, Like on my team and my and my children, those are different things. Is like how do you instill a sense that like the world is a place where you can be an author.
Oh, it's harder, it's more uncomfortable. You fail a lot. And my first company is essentially.
I mean it's looked back on, like I learned a lot, and venture capitalists and other people realize now think we were geniuses.
We're just too early.
But at the time, like I put three years of my life into a company and we sort of like failed up into like an acquis not an acquihire, a little more an acquihier with Seve and that's like I think it could be crusher.
Yeah, I also think about this question a lot, so I was curious what your thoughts were on that. I think maybe as you become a father you think about it even more because I'm trying to think about my kids and like, how could I instill this in my kids? And is it nature versus nurture? Things like that, And we were just talking before we started recording. Last week, I went up to Canada. I took my youngest with me.
I like to do individual trips with my kids. Took my youngest up there and we did some snowboarding and helli boarding and things like that. And I was asking her these types of questions. You know how she's fifteen, okay, and so you know, I asked her, like, well, we were talking about, like imagine like most people they get like two weeks of vocation a year. Yeah, Like we've taken two weeks offication this month, just as much as January, like,
but they get two weeks a year. And I want my kids to think that there's this other world for them, right, And I'm like, why do you think it is that most people just want to work for forty years and get two weeks of vacation a year, like, imagine that life, right, And she's like, I don't know. I think you know because I guess going on your own is harder, right, kind of what you said, But I said harder, but they work way longer than I do. Yeah, right, so
then maybe it's like the sense of risk. Maybe it's to the point that you said, where like we've been told to go to school, giggod grades.
It isn't It's not necessarily true that you work harder, although you probably do work a lot of like me, like a lot of odd hours, and yeah, you know you're always thinking about it. But I think it's yeah, it's not it's risk. It's emotional risk, like it's risk about your self reception, it's risk among your peers, like if all of your peers are the fear.
Yeah, I think it's a lot of fear.
Yeah, or even like.
I don't know, like arepreneurship puts stress on my relationship with my life right, Like we started this, but like now it really starting to it is like working and it feels that way, but we're in year three.
Like the first year we just like work to get regulatory licenses, and in the second year we just like built tech and then we launched and then like now it's a year later and we're like, oh, like it's working. But that's three years where my wife has had to be very patient and gracious and and that's hard. It's hard to make that choice when you have kids.
When you have people will rely on you, and it's certainly not a smooth path. I mean, my entrepreneur journey has seen feast and famine, boom and bust, right, so then there's there's that. There's that as well. So safety or or freedom or whatever right, safe, safety or adventure, I guess choose which one so to other lessons maybe if there's any lessons on management or like how you think about scale with the business. I mean you had to have learned some really good stuff both at Stripe
and White Combinator. I'm just curious and.
Yeah, yeah, I think there's a tolerance for risk. We talked about a realization that the downside maybe isn't as bad as you can imagine it, that you can do things in the world. I think Online Combinator and Stripe are both very focused on.
Having you be focused, maybe.
Like being really clear on what it is, yeah, or just like what matters, Like people can really even fill your.
Time with things that don't matter.
It's really easy, like in entrepreneurship sometimes like to go to meetings or go to conferences or talk to people aren't So when I did y see Hall Graham, who was the founder, was running it, and I think his line was something like you should eat, sleep, exercise, talk to users, and code and it's not on that list,
don't do it right. And so there's a certain discipline there of waking up and saying, like what really matters, not what makes me feel good, not what's gonna maybe get me esteem or make me feel like I have his team. I find this actually a lot easier after having kids, because every hour I am working is an hour I'm choosing not to be with them.
Put a new priority.
Yeah, so it has helped me even like focus more. But I think that maniacal focus is something I definitely learned on management. Neither of those places when I was you know, when you're in YC, you have like it's you and your co founder or you and your two compounders and stripe. I think at the time there weren't managed, so it wasn't I think in the overall journey of entrepreneurship. You know, I just had I'm I'm in the process of raising some more money for Meanwhile my company.
And I had a vc UH he wanted to interview they wanted to interview a bunch of my team.
So this happened just this week actually, like interviewed like four or five minute people.
And he was giving me a.
Debrief just before I came over here, and he's like, these people like believe like this is a mission for them, And it's so corny to like say this line where you're like, you don't teach people to to build a or you don't tell people to build a boat, you like inspire them to long for the ocean, or like there are all these lines like this, but I think that's true. Yeah, and there's a lot of like tactical
management things about like how you give empathetic feedback. But I think the most important thing I find is I need to believe what I'm doing. And if you really believe in what you do what you're doing, you to find a way to communicate that to others so they believe and then they'll run through mountains. Like then you're not asking telling people to work sixty hour weeks or eighty hour weeks or whatever. They're working those weeks like they you know, you might have to tell them they
need to do this better or that better. But that's to me, like the core of management is to like think of it less about managing people and more about leading people.
Yeah. I loved the I mean, both of those tips are amazing, But the first one, which was like the maniacal focus something. For the last like six seven months, I've been just really honed in on. I had a conversation about that earlier today, and I think about the difference of Elon Musk. Maybe the greatest tech on direpreneur that we have at least today, right and a homeless guy is how.
They spend their twenty four hours.
Yeah, that's right, or difference of me or you. It's like what am I choosing to read or eat or whatever? And it's like and then and then when you start thinking about that, then it's like what I what I say is like really being ruthless with how I spend every hour. And I love the point that you said about taking away from your kids. So I love that something Like I said, I think it's so I'm super passionate about right now and just like maniacal focus on
that as well. Okay, So what I find interesting is you said that you know, working for Booker, you realize there was a problem with banking and people being unbanked and inefficiencies there, and then like going to Stripe as a company that sort of makes that easier. You set up another company that also helped with that as well, and like I think as a founder, like we're trying
to create solutions to problems. Yep. Right, So now you have a company that's in the life insurance space, so you it seemingly would be that you saw a problem that needed to be fixed and you wanted to solve that, but you said that you don't know it or didn't know anything about insurance.
Well, I didn't know a lot about insurance.
I guess I should say, right, like, now I have to know like actuarial math and like tax rules. And I won't even bore you with the acronymics. I mean, like, there's so much about running a life insurance company, right, But.
I think that you're right that it's interesting. Actually, in Bermuda, which is.
Where our insurance company is based, they don't call it life insurance.
They call it long term insurance.
And that is what really attracted us to it, Like it's it's really about everything long term. It's retirement, it's what happens after you die. It's what happens if you live longer than you're supposed to and you didn't plan for that. It's it's this class of like savings. And that's really what animated us from the very beginning, is we said, Okay, there's this new economics system being built
in front of our eyes, and it's an economy. It's not you know, it's not just trading numbers on the screen, like there's a new economy coming into the world and it's unique and that it's global and it's decentralized and it doesn't have a government as far as bitcoin. Bitcoin, yeah, right and that. But that economy, more and more people are going to come on to it, more and more people are.
Going to use it. It's going to grow.
That economy is going to have like basic fundamental financial institutions that are solving like core financial needs. And we came to life insurance like through that angle. We were like, Okay, yeah, there are payments companies, and there are banks, and there are exchange or things that like a look like banks and bitcoin and exchanges. We're really comfortable with a lot
of regulatory pain. That was something like we realized about ourselves and we sort of naturally iterated to this is like a core fundamental financial like in the end of the day savings and it really fits into hoddling like this this just like cultural idea and bitcoin that you're saving for your kids, that you're passing on your generational wealth, that you're like hedging against inflation and currency debasement, and that like all fit together in our minds, like at
very beginning, like we like we're like, oh, this is like what life insurance is about.
I love I love how you said that it's they don't call it life insurance, they call it long term. Yeah, And I think back to kind of the intro where I said, like, insurance is the most boring subject in the world, and most people don't want to put away for a rainy day of something that maybe never comes sort of thing. But but I said that it's a tool, though, and if you use the tool properly, you can build massive wealth with it. That's how I'm I'm using it.
Most just don't understand that, so they're not interested in it. But sort of what you.
Said where it kind of just one thing I'm sorry to interrupt, is that there's also this undercurrent that insurance it can be like life insurance in particular, can be like needlessly complicated, and that complication partially exists because of the way life insurance is sold.
Right, So there are.
Agents who sell life insurance. Agents want big commissions, so they're incentivized to sell you products that have high margins. High margin products tend to be like complicated products. So there's like all these terms and indussies and optional options and riders and all this stuff, and it's I think
it's it. I'm aligned entirely that like this is like a basic fundamental tool, Like I assume we'll get to me describing the actual product we have, but it is like a product from the eighteen thirties.
It is like very simple, it's very straightforward. It's like fundamental.
And I think it's not just that it's boring. It's also that the associations that people have with life insurance is like this thing that's being sold to you, right, not a thing that I choose to buy, because it's solving this like fundamental need I have in my family.
Well, and I think it's like, okay, great, so I pay every month and then when I die, I get money.
Yeah, but it's so.
Much more than that if you use it properly. And I think that's what I'm alluding to, or it's not like just some boring thing where I just like pay every month and maybe if I die within this timeframe, I get some money, as opposed to like, oh no, there's a way I can actually build my wealth faster using it.
So yeah, let's talk about.
The product, So how does the product help me to build wealth, store wealth, transfer wealth better than just the old pay for twenty years and if you die within that time, we're gonna get some money.
Yeah.
Well, I'm gonna have to start by explaining some boring life insurance things.
So our products are they're important, subjets, pay attention.
Are our products a whole life product, so it lasts your whole life, as opposed to what you're talking about, which is term life which at last.
Insurance survivorsus insurance you rent.
Yeah, so a whole life last your whole life. And not to be the baar or bad news for anyone who's watching or listening. Since you will eventually die, there will eventually be a payout. Our product is called limited pay, so you don't pay forever. You pay for ten years, although a bunch of people prepay, so you'll sort of like pay up front and then there's a fixed guaranteed payout.
So I'm just gonna use like relatively large numbers.
You might pay like one bitcoin a year for ten years, and then when you die, your kid's wife beneficiaries will get fifteen bitcoin.
Ay.
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So what are you getting from that? It's it is so much more than the fifteen as you're saying. So
the first thing is there is like literal protection. Right, so you put in one bitcoin the first year, get hit by a bus, your kids get fifteen, so there is some like chance you'll do tomorrow and you are protected from that in a again like inflation hedged, like durable store of value you know, fundamentally, if you bought a whole life insurance policy in twenty eighteen, you've seen the value of your that goes to your family decrease by thirty percent.
Because of inflation, not nominally nominally purchasing and purchasing power.
Yes, so you've seen that purchasing power go down, Whereas if you had bought the same policy in bitcoin, you've seen the purchasing power go up. So there's that protection in that store of value.
So for round, I mean, we're just spitballing around the numbers here, but you're saying that potentially the amount of bitcoin I put in could grow by about fifty percent.
Yes, that would be for like a forty year old, healthy.
Forty year old yeah right. Versus, if I was doing a traditional FIAT based plan, I might see my wealth go up by one hundred percent or two hundred percent, but the purchasing power of that one hundred percent increased fiat went down. Versus, even though my bitcoin would buy fifty percent, Not only they get fifty percent increase in bitcoin, but I also got the other whatever.
Yeah.
Actually, just to explain why that is is there's sort of like a rate of return in the policy, right, so we turn ten into fifteen and we we will definitely talk about how we do that. But the like in a dollar policy, you go buy corporate bonds, there's like a treasury yield curve, like people can get seven eight nine percent returns and dollars and you compound that over your lifetime. In our policy, because it's in bitcoin terms, that is everything we do is every promise we make
the whole company is entirely denominated in bitcoin. We make a much more conservative promise on the yield because getting yielded in bitcoin is you know, is something we're very careful about. Yeah, there are no like safe seven percent returns in bitcoin, so that's why the ratio is lower. That actually gets to the second benefit. So the first is the protection. The second is we are turning ten
to fifteen two percent returns. Is at the policy, if you could could get two percent returns on your own bitcoin, which maybe you can, maybe you can't, you would owe income tax every year. So that compounding that growth inside the policy is tax free. So in that way, it's like a four one K or an ira or any number of like tax advantaged.
Vehicles.
The third thing, which I think you've alluded to a few times is that you can take a policy loan out of the policy. So you're putting this value in the policy. That value is increasing over time because of the savings rate is also increasing over time because of the price of bitcoin or the purchasing power ability of bitcoin is going up over time. And then we comply with all of these complicated US tax rules so that US folks can borrow again bitcoin out of the policy tax free.
So that means if bitcoin.
Is at a million dollars a whole coin or ten whatever you think it's going to be, and you need liquidity, you can pull value out of the policy without incurring new capital gains tax.
So for most of our policyholders, we're really.
Talking again about the hoddling, like this is about saving for your kids, but also there's this optional like be your own bank like wealth building element of it that if in ten years or fifteen years or twenty years, you did want to get some liquidity from your bitcoin, this is the vehicle to do it in because if you sold bitcoin like out of your self custody wallet, you would ow capital gains tax in the whole life.
Most people sell it as like sort of like this infant banking concept, right, be your own bank kind of concept. Right, So instead of borrowing money from the bank at eight nimes whatever the interest is, I can borrow myself and pay myself. The key is paying myself back the same interest I would be paying the market se come out ahead. And so you're saying you could use it similar in a way.
Yes, yes, yes, that we have some policy holders who like don't even yet aren't marited of kids, and I think it's both that they conceive of their bitcoin wealth as like intergenerational savings.
I'm curious on like a typical whole life policy. You know, typically they have like a five percent guaranteed rate of return for example, right, you're saying it's like two percent, two percent guaranteed, Like they, okay, we have two percent. So typically, like I would have a five percent guaranteed rate return and then I could borrow at maybe five percent.
Yeah, So ours works is that we guarantee you two percent returns and then in the future you can borrow and then our stated int straight charges three percent, which actually, like what companies do is they charge you what they expect they could earn on the asset. You're borrowing. Yeah, so you are like paying a little bit more than we're guaranteeing you.
And how that works is we end up setting a maximum amount that you can borrow out the policy, which is like ninety percent LTV against like the saving the implicit value of the policy. And with that ninety percent LTV requirement, you can never owe more than the death benefit that you're owed.
And you're paying two percent compounding. Correct, And so what a blood people don't understand is the difference of compounding versus simple interest.
Ye.
Yeah, So if I were to put fifty thousand dollars into an account and earn five percent compounding over five years, I think I did the math was like sixty seven thousand. If I borrowed the five percent back out and paid five percent interest, It's like it was like fifty four thousand. It was. It was a nine thousand dollars difference, whatever
the exact math was. But even though I'm earning five percent and then borrowing at five percent, I end up with a nine percent, nine thousand dollars advantage because one's earning compounding versus one is simple correct. So I haven't done the math on your numbers, but potentially, right, even a two percent compounding beats the three percent simple or comes out someone.
Yeahecause they come out basically flat flat.
Yeah, that's sort of maybe the way to think of it.
Okay, Yeah, and then at the end of the day, you never pay the well, you don't pay the loan back. You eventually die and again tragically.
And then we don't get out alive.
Yeah, and then it's like netted against the benefit.
Right.
So in the example I used earlier, where you've put one bit whinning a year for ten years, you're getting fifteen guaranteed when you die or your your kids are beneficiaris. And then you know, in year fifteen or whatever, you want to borrow five bitcoin out. You borrow that five bitcoin out. It's you know, you're being it's a loan, so you're like being charged the interest. So let's say that five becomes seven, you die, then your kids just get eight, right, the fifteen minus the seven.
Right.
So the expectation isn't that people would like actively be trading the loan, and that's one of the things that people find attractive, right, Like, sometimes you get asked this question, why couldn't I just go on ave or you know some DeFi protocol, or couldn't I go to the bank
and borrow dollars against the bitcoin. But fundamentally then you're dealing with a currency mismatch, and you're dealing with like the potential like just you know, month over month volatility of bitcoin or you know, having a margin call or whatever. In our case, you know, you make the loan and like there's no, it's all in bitcoin terms. So it's in that way a lot safer and more secure, and you're getting the tax RFT.
So when you say it's in bitcoin terms, that mean like when I come and make a make up, make a loan or request alone, it would be like, hey, I need two bitcoin, correct versus I need two hundred thousand dollars. But then that would also mean I have to pay it back in bitcoin again.
But because you have this death benefit coming in bitcoin terms, yeah, it's not really like you're not really short bitcoin, because you're right right right, you're a long bitcoin on the death benefit.
Yeah yeah, yeah, yeah. Uh. Debt works really well in an inflacenary economy. That doesn't work that works against you in a deflationary economy. So that's just something to keep
in mind. And then I think you know, another strategy that people would typically employ on like a whole life policy would be like spinning down the death benefit, which I think is basically what you're saying, right, it's kind of kind of the same thing, right, and then when you die in this example as you proposed, right, so then my kids get the eight bitcoin for example, or war the fifteen whatever. Is that tax free?
Yeah? It is income tax free.
Income the way not capital.
Is Yeah, it's capital gains and income tax free. Whether it's a state tax free is a life structuring question.
So the state taxes, yes, state taxes. So that the way that works is you have a trust, you have a trust irrevocable. Yeah, you put you have the irrevocable trust by the policy, right which we have.
You know users do that.
So that the way you get insurance policy outside of your estate is the same way you get like any asset outside of your state.
And you know, we.
Have policyholders with a range of sophistication and you know, different structure goes, so that the estate tax is the only one that like you need like an extra layer of planning around and that's.
Where you need to learn how to use the tool properly. Correct, Right, it's a tool, but some people know how to use and these.
Things are actually someone in conflict that we've been talking about. Like if what you care about out is.
Like spending down the policy before you die, you actually want to be the owner because you're the one who borrows against the policy.
But if you're primarily.
Using it as a tool to pass on uh bitcoin to your you know, more bitcoin to your children, then yes, you put it, you put it inside a trust.
It gets it gets complex because my trust could borrow the money and then it could loan me the money. Correct, And we can do layers and yeah.
Your your wife's a beneficiary. Yeah yeah, yeah, so consult your attorneys.
Yeah.
Well, and it needs to be done on an individual basis of course. So this is something that that does require, you know, I advocate for using tax strategists and tax attorneys and then a state state planners and attorneys and all those things. I mean obviously depends on the size of your state, the more intricate you'd have to be.
But it's exactly what you said, Like I guess just to pause and say, to go back.
To the financial inclusion story for a second, Like our ultimate vision, right is if you are a middle class person in Argentina, you do not buy life insurance because you are going to live longer than the Argentinian beso but most likely right, Like just historically there's been there have been many versions of the Argentinian beso over you might live longer than the US dollars, you might live longer than the US dollar, right, So that's a core fundamental beginning for us.
Is most importantly, like.
This is a tool in like the true global store of value, and like that is why we create the company.
Now.
It is also the case.
That every country in the world basically that has taxes, has tax benefits and tax privileges for life insurance, for annuities, for various long term insurance products. And that's what we've gotten to this conversation about. So, if you're an American, we've designed the product specifically to serve to comply with the time actuals.
So you can get those benefits. But it is like all these things at once.
Yeah, So you mentioned Argentina, So is it available in Argentina or is only not your available? But that is an aspiration share, Yeah, so a couple of things that I think about. So number one, like when I think about using these whole life insurance companies, I think about will they be there in fifty years to pay that claim once I'm dead? Can they guarantee that five percent over a long period of time? You know, some of these companies has been around for a hundred years or
long hundreds of years, hundreds of years. But then I also still worry that, like man, we had a decade of zero interest rate policies, and how far out on the risk curve that they have to go. And now with the COVID that we went through, like they're probably way off sides on their actuaries and like there could be a lot of potential risk there. So I think about that as we should right tor to mitigate that risk. From a bitcoin standpoint, it gets even more risky potentially,
I would think. So number one, most people just right off the bat, they've been burned by the Celsius and the blockfis and et cetera. And so you know, not your key's not your coin. If I give it to you, I may not get it back. The counterparty risk that's involved, and then how much risk there is. So I'm curious how you think about mitigating those risks.
Right, I'm whayed to use the word mitigate because like in some ways, that's all we can do is we are in build these things. We can tell our story. People come to trust us. We're very fortunate that a lot of policy oilers have come to trust us. But there's no perfect answer, right, Like, so you mentioned a lot of things, but let me start by saying, you know, we are regulated in licensed life insurance company in Bermuda,
not the Bahamas. Bermuda is like a legit place where many life life insurance and P and C insurance companies are down the sid There are quite difficult tourists, difficult in the good way there.
They like provid al of oversight.
They're really the only offshore jurisdiction that's respected both by the American regulatory bodies and the European regulatory bodies.
There's all this equivalence and stuff. But what that means, So why would.
You go there as opposed to Bahama since it's so much more difficult, Because it's so much more difficult, so you could have more trust into we could have set this company like it took us almost two years to launch.
We had to write a giant business plan.
We ended to get internal auditor and external auditor and improved actuary, insurance manager. We had to like convince all these people, none of who've ever thought about crypto and insurance before. You know, we have a chief risk officer, chief compliance officer, like seventeen corporate policies under fifty corporate controls.
We could have set this company.
Up and came in or the Bahamas or British Virgin Islands a lot faster, but being in a jurisdiction that people know is trustworthy is super important. But critically they're trustworthy, they're difficult, they're maybe difficult, they're challenging. They provide a lot of oversight and this is also where coinbases offshore operations are. They're also like very innovative. They want things to happen on the island. And in that way we were able to have a dialogue.
I think they're the first country with the CBDC. Yeah, they're very was it Bahamas?
I think I I Other than they have a CBDC, they have a.
What it called the shell CBDC.
There's a very interesting history on the the monetary policies of you know that I won't get to do here.
Anyway we want it. It was Bahamas. Yeah, sorry, it was Bahamas.
I'm against it.
So one is that there is a lot of oversight and like, true, we're not like Block five, who was essentially like acting like a band in this unregular fashion. Like we started by saying like we need to be regulated and licensed, and what that ends up meaning in practice is that, as I said, like, we're in the process right now of getting an external audit.
You know something that many people in crypto have never had.
Right, we we have to post a bunch of capital. Right, That's how insurance companies work. So we have we as a company have a bunch of our own bitcoin in a company and then users you know, pay us premiums and then we invest that corpus.
But our our capital is like first of loss capital. Right.
It's like we made some mistakes, the bermuna monetary authority would shut us down and we would have to like give everyone their money back, right, and we would be the ones who lost the like our bitcoin first.
Right.
So the way we gain trust is sort of like walking people through you mentioned how it's it can be like a complicated thing to think about every single policyholder. We have, every single person who comes to our website and signs up, Me or my colleague Ganny get on the phone and we talk to them and we talk them through the enterprise risk management framework and we talk them through. This is exactly why to go back. We promised two percent returns because, yeah, is there a chance
we could be the wrong way on that. There is, but we definitely don't think there are seven percent risk adjusted returns to be made into COO and that's not where we want to be on the risk curve. So we deliberately made it a number that we thought we could achieve. And every single thing we do is in that conservative nature, like the product is priced conservatively. We to be honest, we reject a ton of people because every single person we take on that's a liability, right.
So we do underwriting.
We make sure you're healthy, but that not only is about that person, it's about protect ding the entire company. We have a you know, a credit committee, have.
Sides on that risk correct the insurance companies go down.
Yeah, and then on the asset management side, you know, look, we have something that no one else has in bitcoin, which is we have duration, right, like users are trusting us with their bitcoin for decades, and so we trade duration to counterparties. But what we want is credit production, and we're really conservative, like we want we're not going to a Voyager or three Arrows like respectable name brand
institutional counterparties. We demand a lot of collateral or security seniority, and we're like running a private credit desk in.
Bitcoin, and we walk people through that.
All and again, I think we're fortunate that that has given a lot of people in assurance.
But the tax benefits are good too.
Let's talk about that a little bit, right, So if this is really fitting for a bitcoiner, which is, as you kind of said, a long term Hoddler holder, right, which which should be. I mean, if you're a bitcoin you should be thinking long term. I try to tell people all the time, and it gets annoying, but I understand this is where we are in society today. But you know, where's bitcoin going to be by the end
of the month. Hey, it's January. It hasn't gone up, but you said it would go up in January, right, And I just tell people like, man, if you're looking at your portfolio on a monthly basis, like you're just you're never gonna move.
I should say this is the best thing about running a life insurance company, is I tell like I get asked all the time, like what do I think is gonna happen with the press bitcoin? And I say, I have no idea. I don't know what's going to do today, tomorrow, this week, this month, even this year. What I the conviction I have to have and I won't try to get our pulseholders to have is I believe bitcoin will have more purchasing power in twenty.
Years, in thirty years and forty years.
Yeah, and that's the timeline that we're thinking on.
Yeah, but I also feel like figuring out where it will be in ten twenty thirty years is easier than where it will be in ten twenty days or But what I was going to say, though, is so if you if you think about it long term, then a strategy like this can work. Because I'm thinking long term, and so ultimately my goal to get it from ten to fifteen over you know, decades makes sense for me. And so some of the ways I can do that.
Number one, compounding at two percent great, but also like tax efficiencies, correct, right, So I mean if people are trading their bitcoin, they could potentially be losing up to fifty percent short term you know gains or whatever. So think about every you know, every time you try and buy and sell around the cycles, you're losing fifty percent at a time. As suppose you're just like so, I
guess maybe some of the tax efficient strategies. What would be a couple of things that you would tell someone who is long term focused A couple of the things that they may want to think about as far as like really increasing their stack using this type of a tool in a couple of maybe ways that most people wouldn't think of that really helps them increase their stack.
Well, there's a question of like this tool and in general, And I just want to start by saying I completely agree with you in that I think very few people have the ability to or the luck to like time the markets carefully. There's a lot of like transactional costs to like selling and buying bitcoin. I'm like relatively proud of just like setting it and forgetting it on coinbase.
I'm not necessarily advocating for Coinbase, but like I just dollar cost average into bitcoin over you know, seven or eight years, and I think that was a great decision for me. I think like that that's a great way to think about it. But yes, this policy in some ways, like I'm designed a whole company to solve my own.
Problem, right, Like, okay, I have two kids, that's the way to starts.
Yeah, like I have two kids.
I believe that bitcoin will be significantly more valuable in purchasing power terms in the long future.
That's not year to year, but certainly decade to decade.
And life insurance is for me. Both instills discipline in that like it's in this policy, and it has like the tax benefits that we mentioned. The other thing actually is like you know, there's a whole other angle, like we have a legal obligation to make sure your beneficiaries get the payouts like the best of our ability. And there are like tragic stories about people who like mismarriage their keys or you know, there they die and their like wife has no idea how to get their bitcoin
or doesn't know where it's buried. So you know, that's also there's just like practical operational legacy benefits to insurance
to the life insurance product. But I want to like connect your two questions and say, like we're very honest about what we do, right, like, and there's a lot of things that are uncomfortable, like you send us bitcoin, and there's a real reason for that, by the way, because the like a lot of what tax and estate planning is about is like getting whatever your asset is like just slightly outside your reach, because that is what makes it like it's.
Not part of force the discipline.
Yeah no, no no, but it's not just for I mean like legally, Like that's what makes it like not taxable, right, is that it's not something that you can like actively manage. So we take possession of your bitcoin, we have possession of everyone else's bitcoin, so there's like a hypothecation, and then we do like super conservative lending with the bitcoin mostly like way over claudalized. Actually, there's some interesting things we're doing there, but that's uncomfortable.
All three of those things are comfortable.
And what we find in every like bitcoiner's heart is this tension between a like like love and desire for self custody on the one hand, and they like, uh love a good tax optimization on the other And people are just on that spectrum. And the thing that we are very clear about is like maybe this isn't necessarily for all of your bitcoin.
Well that's a great point, I was right.
Like, people, you have some self custody, maybe you.
Have don't put all your money into insurance. You don't put all your money in there like you own other things.
Yeah, and maybe you have some at like costs our unchain and some multi six solution and maybe you have some in the ETF I don't know, and maybe you have like some in in this product. And like another thing that people love is we have a max. Like so our smallest policy size is one bitcoin, so that's a tenth of bitcoin paid over ten years. Our biggest policy that we'll accept is up to a death benefit of fifty but particularly for like really big whales who
have been like burned five lock fine other things. When we say like we can only take like twenty five of your bitcoin, like you want to give us war, we can't take it, And I think that, like the point is, like we and that's so the reason we.
Do that, by the way, is if if you take.
Too much risk on one person's life and then you just get un lucky, that person gets hit by a bus.
See, then you're screwed, right and like.
Right, so we're like every choice we make is a choice to be long term. What juristiction we're in, like limiting our policy size, like who's our independent board members, like all the way down, because I fundamentally just to be selfish for a moment, like this is going to be a huge company, Like it is such a fundamental financial service, like in this rapidly growing economy, and the only way I'm going to screw it up just reselve it.
The only way I'm not going to make like billions of dollars is if we screw up who we ensure or we screw up acid management. So like we do, we work really hard to make sure those things are are right. Yeah, I want to wrap this up, but I want to ask you one other question. So you know we're thinking long term here, we're thinking death benefits to our beneficiaries.
We're gone. This is something I spent a lot of time thinking about. Legacy. You're a father. There's a big growing movement and especially really seems to be strong in the bitcoin community but also globally. Right, there's a best selling book Die with zero. Really, the FIAT system is designed to like save up, live off my savings and hopefully die at zero. Right, the books die with zero, and a lot of people, especially in the bitcoin community, I see, I'm saying, Oh, leaving money for your kids
is terrible. Jimmy Song went back and forth with me on that, like, you can't leave money for your kids, You'll ruin your kids. Allahah, I disagree. What's your take? How do you think through legacy planning passing down to your kids, your kids, kids, kids kids? Is that good?
Bad?
How do you do? How do you think about that?
Yeah, it's interesting.
His a tension between like die with hero and like retire my bloodline. Those are like the two like estate planning or memes inside the bitcoin community.
Look, I I understand.
I haven't talked to him about it, but like I sort of understand this idea to go all the way back to like entrepreneurship to agency, like how do you inculcate in your children a desire to be more than what you give them and to strive to like make their lives better, to make their kids' lives better, to make the world better. And I sort of think that that's some thing that's so important and worth working on. But that doesn't mean that you should deprive them of of everything you've.
You've worked for either.
I think having a legacy for your children and maybe your children's children, although that's well, your children's children will know your children's children's children is a little more abstract. I think it's worth planning for, and it's worth thinking about, and it's worth.
Designing, you know, a little bit of your life to think about that. I have to believe that. I guess I started the life insurance company.
Right But how are you thinking about it for your Yeah? No, I mean they're young right now.
I was the first policyholder of meanwhile, so I don't want to so I.
Yeah, I think it's it's it's a hard question, you know. Sometimes.
You know, I had a relatively tough upbringing, and I noticed of a lot of the entrepreneurs, I know they have some like childhood trauma or life trauma, and that like motivates them, and you don't want to You want your children to not be traumatized, but then you also want them to like work hard, and.
I that that.
I think that tension exists outside the question of whether you should leave them some wealth.
I think you should.
Because like what are you or that's part of what I feel like I'm working for is for my children. And then additionally, I'm also like think a lot about like how you inculcate those virtues in your children to not necessarily decide what I would decide, but how to you know, be wise.
So the way I think about it is that money doesn't make kids bad. Yeah, okay, so if you're if you raise good kids, hopefully they'll be goo kids if you raise bad kids. So money seems to exaggerate or magnifying, right, So I loved what you said, right, which is like, you know, not just helping the kids, but the world. So I just think about, like we earn wealth, we create wealth by solving problems, which is providing values to
the world. I think about money being important to help my family have options and help more people in the world. So if I think that we should use money to solve problems in the world, I want my kids to think about having money and solving problems in the world. So if my kids want to be actively solving problems in the world, they should have access to the money.
If they want to have access to partying and drugs and doing nothing, then they probably shouldn't have access to the money, right, I shouldn't enable that, right, so then you know how good have I raised my kids? They say, the sign of a good father is not how good their kids turn out, but how good their grandkids turn out. So I think about that. And then what we've done inside of our trust is set up a family constitution.
So then the family constitution is a guideline of what my values are, the way I view the world, the way that I think we should be bringing value to the world. We should take care of our health, we should take care of others, all these types of things.
And then there's like restrictions. So then it's like the trust then is managed to a constitution, just like a US constitution would have, and then the trustee will determine if the errors and it could be kids, kids kids, kids, kids are living up to the terms of that constitution and if they're not exuding the values and virtues of that constitution, then they don't.
Get access to the money.
And then making sure that the money is there to help them do more but not hurt them. So for example, you know if they have if they are able to qualify to buy a house. Certainly will give them the money to buy that, like as a down payment on the house, certainly, right, But if they're just doing nothing,
they don't get the money. If they want to launch a business that they have a sound business idea and plan for, they can have the money to start a business, right, And so the just guardrails put onto it things like that. You know, these are things like the Rockefellers did so well, right.
That's actually that was immediately what I was thinking about as they the multi generational trusts like lack of Fellers or the Preskers.
Yeah, so those worked really well. But then it comes with like what type of education am I put into the family? And the Rockefellers have taken it way more serious where they each generation then has to go through right education and all those things. But anyway, I was just curious you take on it, and I guess to the point that you said your money is where your mouth is, so to speak. Obviously you believe in generational wealth because you started a life insurance company. H Man,
we covered a has gone long. That's great. I love it. Like I said, I spent a lot of time at this stage of my life as I've gotten older, my kids are getting older. I think about it a lot. I think just from a long term Hoddler perspective, Bill Gates said, who I don't like to quote, but Bill Gates said that people overestimate what they can do in a year, but underestimate what they can do in ten.
And I think that really applies to building wealth, right because like kind of going back to the story I said earlier about people working forty years and getting two weeks of vacation a year, they hope to have a million or two million dollars when they retire, and so like to increase your stack by fifty percent, which could be millions and millions and millions, Like they don't underestimate that, Like the tax efficiencies you could gain could be more
than what most people would hope to make over that time period. So good stuff. We're going to link to your stuff down in the show notes down below if anybody wants to get in touch with you guys. I meanwhile, we'll link to that down below if they want to get in touch with you, and they you also want to close it out with no.
Thanks for having me, Mark, and I'm I'm so glad you're familiar with like the virtues of of life insurance and that we were able to talk talk through it. I'm you know, we we take it very seriously, the obligation that we're we're making to every single one of our policy holders, and there's nothing more important to us, and I'm really glad to have got to talk get through with you.
Cool. Thanks, all right,