‘There Is A 100% Certainty’ Bonds Won’t Save Your Retirement Warns Strategist | John D’Agostino
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There is a 100% certainty that you will not achieve a sufficient retirement based on your you know just do the math. you will not achieve it based on bond market returns for exactly the phenomena you've just so so what is your option that disease is killing you once you've had the ability to transfer money whenever you want it as fast as you want it to ask people to go roll that back I think the probability of that is virtually zero prediction markets are better at predicting interest rate hikes and cuts than the top pollsters I'm here with John Douglas you know, he's a head of strategy at Coinbase Institutional. And joining me to co-host the show is >> Bonnie Chang. >> Welcome to the show, John. >> Good to see you. >> Good to see you, David. Good to see you again. Bonnie, >> you're very passionate about the market structure. Bill, what is it that people do not understand about it yet? >> I think it's a very wonky thing, but I think people underappreciate how big of a deal this is. We don't do new market structure legislation willy-nilly in the US. It happens, it usually happens when there is a catastrophic disaster. It usually happens when you have a a great financial crisis of some type of of massive massive um uh explosion where you know moms and pops you voters are dramatically affected. So market structure is usually a negative reactionary thing. the fact that you have this asset class which from an institutional perspective has really existed in modern form for seven or so years, right? It's existed for about 15 technically about I'd say 9 to 10 from a retail perspective and really seven years. The fact that a brand new asset class is getting market structural legislation not because of some massive blow up but because there's a recognition of how impactful it's become in the US economy. we we should all be incredibly grateful that we have the opportunity to live during this time and and for those of us who work in the asset class, we should be very very grateful. So, so I understand there's negative uh crypto sentiment if you look at the broad indices, you look at Twitter or X sentiment, I I don't see it. I just see an extraordinary achievement for this asset class. >> Sorry, go ahead. >> For someone that doesn't really know what's going on, what does it really change? >> Sure. Well, I mean, look, it it it there's been there's been a couple of reasons that large institutions have said it's it's I'm going to do the work. I like I like the technology. I like the asset class. I can't push uh investment capital into that class yet or customer capital or I can't allocate or hire out a team. By the way, they're all hiring out teams. I've gotten all the phone calls. Um all the folks who are screaming and yelling about clarity are secretly hiring out very very senior teams. Um but I understand why if you're a highly regulated entity um really committing to the asset class has been challenging because you have this kind of regulatory overhang. We don't really understand the ter the term of art is regulatory a lack of regulatory clarity which is a bit a bit silly because many many existing legacy industries operate without perfect clarity but but it's understandable because there's just no framework around it. So genius provided a framework for stable coins. What happened? Stable coin stable coin adoption has been just a a a raging bull market. So you're looking at that and you're saying okay now that narrow niche of stable coin once it achieved regulatory cl by the way not perfect no one was thrilled with the genius act. Um when it came out there were lots of naysayers about it just like with this latest draft of clarity but it provided a framework that you could operate within and then we saw just massive takeup hockey stick takeup. So the institutional players are looking at that and saying if that's what happens when we got this tiny little on a relative comparative basis tiny little bill. Imagine what happens when we have broad-based market infrastructure bill even if it's not perfect. >> Can we just talk about stable coins for just a minute? Let's back up and think just macro. >> Sure. >> Now I keep hearing the narrative and I'm think pretty sure Bonnie has as well. Stable coins is going to change the future of finance. We all need stable coins. It's better form of conducting business B2B or even B TOC. You know, Bonnie and I were just talking about this offline about how according to some surveys and polls, 37 Americans don't have $200 saved up. >> Five >> 35 >> sorry 37% 500 $500 saved up. So for those people, crossber remittances are not the priority in life. So who are stable coins for? So, um, stable coins are for anyone who would like to get clarity around where their money is within seconds or hours versus days. And I would argue that while crossber payments are not important for that person with $500, I would argue that if that person with $500 is receiving a a transmission, a wire transmission um, or a money transmission, that it is even more important for them to achieve clarity on whether or not they have that money within seconds, hours versus days. I'd argue that it's more important that they be able to send or receive that money for pennies versus tens of dollars. I just sent a wire from a major US bank to a major US bank and I was charged $30 for that transmission. >> Kitty and I'm a good customer of that bank. >> US dollars you transfer. >> You I transfer I'm not going to say how much. It shouldn't matter, right? >> But I transferred US dollars. Doesn't matter if I'm transferring $5 or 500,000 over the same wire system, the same electronic system, I was charged $30 and I am a good customer of that bank. So, um, that is a massive problem whether you have $500 or $5 million. So, I think about it this way. I think about very simply. I my mom asked me this all the time and I said to her what once you've had the ability to transfer money whenever you want it as fast as you want it to ask people to go roll that back is like asking us to go back to watching movies when the movie theaters tell us we are allowed to watch movies I think the probability of that is virtually zero so I understand that folks with smaller amounts in the bank maybe they're not as comfortable leveraging new technology with that smaller amount of money I get it once they experience it. They will never go back to waiting for banker hours. >> I want to ask you about um yield on stable coin. >> Don't you want to keep the yield? Isn't it better for Circle and Coinbase and all that issuers? >> Wait, we've been very clear. Brian Armstrong is arguing against >> exactly >> the selfish interest of of everyone who works at Coinbase. Um we believe So would I rather in the short term from a greedy perspective? Yes. in the long term, I'd rather have a smaller piece of a massively larger pie. Um, so we decided to build our um we want to give that yield back cuz we think ultimately that will inspire not just 250 or whatever 300 million stable coin users, 3 billion stable coin users. So we think um the idea that you are paid an interest rate from the US government that is roughly 4 and a.5% and you give your customers 10 basis points points of that is inherently problematic. And so we think that if we can flip that around and push the majority of those rewards back to the user, which is what we do currently, um then that just means the pie is that much larger. So our goal is to get a billion people on chain. You get a billion people on chain by solving a problem. 10 basis points of interest in your checking account is a big big problem. People, what the difference between 10 10 basis points and two and a half 3%. Compound that over the lifetime of a child. That is a that's a car. That's a year of education that is inherently meaningful compounding effect over 20 years. So that's what we're trying to give back to the American consumer. >> Before we continue with the video, let's talk about today's sponsor, Delete Me. Now, there's an entire industry built around collecting and selling your personal info. Data brokers collect information such as your name, address, and phone number, then package and sell it to third parties. Delete Me is designed to help reduce that exposure. It only takes a few minutes to set up and they handle all the work in the background. They identify where your data appears, verify those listings, and submit removal requests to hundreds of broker sites. They also keep monitoring since these listings can come back over time. I've been using Delete Me for over 2 years now, and they have reviewed over 325 listings of my information. This saved me over 12 hours of searching and reviewing it myself. The reports show exactly what was found and what was removed, which makes the process transparent. Scan the QR code on the screen here or go to joindeleteme.com/davidlin, link in the description down below, and use code davidin for 20% off. Now, back to the video. >> I hear two very different voices on stablecoin. One is stable coin issuers are not going to be as profitable because of this. And the second is the pie is going to be so much bigger that it doesn't matter. >> I believe in the latter part. So, so when I when I got first started in finance, my first job was to um electronify the open air crisis system in the New York Merkantile Exchange. And I I got lots of arguments as to why we shouldn't do that. And then and there were good arguments by the way. It was working really well. Everything no trade breaks. We priced the most valuable commodity in the world, crude oil. Worked fantastic. What was hard for them to understand because they only had grown up in that structure was that we could septuple or quintuple the size of that market by going electronic and I don't blame them for that. It is hard to imagine a world that is that much larger than the world you live in and when all you see is things working really really well. Why are you upsetting the apple cart where the world's most valuable commodity? Uh price discovery is amazing. Um we're trading trillions of dollars of notional crude oil. um if you consider the derivatives, why would you mess this up? This is going really really well. Um that that market is now 10 times the size of what it was in back in 2002 because of that evolution of technologies. So I don't begrudge people who want to say hey hold on the things are very liquid right now. It's working with us is the envy of global capital markets. I completely appreciate that perspective. um it can be so much bigger if you move from t plus 24 hours to t plus 24 seconds and it's difficult to appreciate that in its current form unless you've been through that trans I've been lucky enough to be have gone through one of those transitions so I I I see this coiled spring that is this shifting from you know 10 20 30x lower latency times it frees up hundreds of billions of dollars of capital It lubricates the capital system and it makes it continues to make the US the envy of all capital markets. >> There was last year I was paying him and he said I only take USDC. >> Okay. >> Uh and in in Asia we use a lot of USDT. Yes. >> And he said I only use USDC. And now I'm thinking, okay, >> if in this region you can only use USDC and now you're welcoming a lot of more competition by expanding this pie. >> Yes. >> How does that affect Circle and Coinbase? And >> so look, I I I give full credit to Tether. What they, you know, my understanding is they were all sitting in a room one day and said, "Let's monetize US treasuries." And that was a brilliant brilliant idea. Um, we talk about, you know, tokenization taking off. That that is tokenization. We don't think of stable coins as tokens, but that's what they are. They're they're real world assets tokenization. So I give Tether all the credit in the world. I don't think this is a monopoly. I think this is an igopoly. I think you have two maybe three or four dominant global stable coins backed by US treasuries and other similar assets that um dramatically and rapidly transform and modernize the payment system. So I I I think again I think the the the global pie is much larger than any of us can imagine. So I'm not worried about cannibalizing tether or tether crest US. I think I think I actually think the rising tide carries all ships. I think I think it's probably healthier for the global economic payment system that you have two if not three um options available tra in general people in general investment community participants traders whatever payment participants they don't like monopolies they like igopies and and there's reasons for that. You want you want diversification. You don't want too much diversification because the the fractured liquidity is less useful liquidity. But I think a world of USDC and USDT, you know, one being dominant in the east, one being dominant in the west, that's a healthy healthy world. >> Speaking of yield, can we talk about asset allocation for just a minute? The bond market in the US has been in a structural bull market since the uh mid70s with the double digit interest rates and the 10-year yield now down to at a certain point when it went down to near zero. Did you think to yourself this is the end for the 64 portfolio? How do you how do you how do you go up from there when the yield's literally at zero? And now, by the way, since the last three couple years, the bond market's just been not doing great very great. And so now, people are thinking about ways to substitute the bonds in the 604 portfolio with something else. So, I know there's a lot to unpack there, but >> it's a great observation and I think it's part of the the sort of cultural zeitgeist that gave birth to blockchain technology, right? Right. So there's a realiz a growing realization amongst um an incre I think more Americans more young Americans understand the relationship between interest rates and the security of their retirement than ever before. And more young Americans understand that you cannot rely on a savings account yields to provide for you an effective retirement. And what that naturally gets you towards eventually is you have to take on risk assets. Then the question becomes what type of risk asset? The the only thing riskier than not taking risk the only thing riskier than taking risk is not taking risk when there's 100% certainty the yield will not afford you a sufficient retirement. >> Good job. You're speaking my language right now. But how do you say exactly that to a 66 year old? >> That's great. I I got asked that question the other day and I said and I I I asked my if there was 100% certainty, >> right? >> 100%. So I it's a probably a bad analogy. use disease as analogy, but they had a 100% certainty a disease was was going to kill you in 6 months and someone came to you with an experimental thing that had a 50% chance of of killing you in 6 months. You'd be any every human being in two, of course, I'll take that risk. >> Yeah, >> absolutely right. Why wouldn't I make that trade? That's a fantastic trade. So, I'm saying there is a 100% certainty that you will not achieve a sufficient retirement based on your, you know, just do the math. I can set I can set the spread. Claude can set the spreadsheet up for you now in about 30 seconds using plain English. How much do I have? What do I need to retire? What rate of return am I getting? Ask Claude those three questions and it will tell you you will not achieve it based on bond market returns for exactly the phenomena you've just so so what is your option that disease is killing you. What is your option? Their option is to take some risk. Take thoughtful risk. Don't jump off a cliff. Don't say I have this cure at the bottom of that of that cliff, that's obviously a bad trade. But incorporating risk assets into your portfolio, the the it's insane not to consider it. >> Where do we go for yield in 2027? >> I think we'll start I I don't think my mom will be getting DeFi yields, but I think you'll start to see DeFi get normalized and and wrapped and packaged uh through, you know, some form of intermediary that will provide some sort of uh vetting process for the the the quality of that of that protocol. Um, I think they'll start to normalize. I think you'll see yield in wrapped assets and ETF type assets for Bitcoin and other wrap sec other uh wrap securities. I think you'll get yield if you're a non- US citizen and it's difficult to access the incredible economic growth engine that is US economy. I think you'll get it through tokenized equities and uh and wrapped ETFs. I would love to see a world where everyone in the planet who's able to scrape together $5 can bet on the US economic engine through some type of tokenized S&P 500 rapper without having to go through the headache of of advanced AML. I think I think that's an incredible thing for the US government to get behind. It's the it's a wonderful marketing program. I >> I'll pass it to Bonnie for now. When we come back, I I have some questions on tokenization and the markets. >> Sure. >> Go ahead. >> Okay. Sure. Thank you. Well, the uh you know, we were just talking about token She has more creative questions than me, so I wanted to switch it up. But anyway, the tokenization aspect, I wonder if the crypto industry through tokenization is cannibalizing themselves. Let me explain what I mean. >> Just in the prior interview, we were talking about how Hyperlid is now trading more on on in ter in terms of volume commoditized or sorry securitized oil, gold, and other commodities. >> Yes. >> Now, this just opens up the door to 24/7 trading on those particular commodities or any other real world asset. We're not actually putting money into layer ones and twos. We're actually just trading those commodities on the blockchain. Now, get this. A lot of these securitization uh companies want to back their, you know, tokenization one to one, which means they have to buy the underlying first. >> Yes. >> Doesn't that just drive up demand for that underlying and suck capital away from blockchain? >> I I I so I I don't think I I appreciate your point. Yeah. And I don't subscribe to the notion that blockchain is competitive with the legacy financial system. >> I see. I I think it is an upgrade. I do think it's an upgrade, but I think there will be elements of the legacy financial system that will work side by side with blockchain technologies for all of our lifetime and probably our children's lifetime. And that's and that's healthy. You don't replace everything in your home at the same time as as as new technologies as new technology upgrades. So I um I think that uh if we can marry a traditional um securities model in the US which is the envy of the world. If we can start to see blockchain as an expansion of that securities model that way everyone in the world who wants um at least the price um uh at least access to price exposure um can get access to price. They may not get access to corporate actions day one, but these are these are ev these are evolutionary not revolutionary in some way, right? >> Um, and it's really really important that we figure out ways to marry legacy systems and blockchains. >> So, going back to your point earlier about, you know, you were using Taipei real estate as an example, how does tokenization not create the biggest bubble we've ever seen in finance? >> Well, leverage creates bubbles. It's not not distribution. >> Okay, elaborate on that. So an average home in Taipei right now costs 185 months of average household salary. So that's just an apartment. >> Wow. >> It's very very expensive. Now you see companies, you know, do stock splits because they want it to seem more affordable for more people. Now if we do the same with tokenized housing, tokenized homes, >> we're starting communes. How are we all living in that home if we fractionalize it? So, you do not buy into this tokenized real estate. >> I think tokenized real estate is useful because the legacy systems for recording real estate are just archaic and silly. I just bought an apartment in New York. I had to buy I had to buy um insurance to make sure that no one came along in 5 years and told me I actually own this apartment. That's just silly. That's just that's just poor recordkeeping, >> right? >> Um >> I don't subscribe to the belief that it's a long cover. I I did a so so he might he might hate if I name drop him, but Nuro Erbini, dear friend of mine, f brilliant economist. I won't talk about his views on crypto because it's not fair to him because he's not here, but he's someone we should all listen to. I'll say that. He and I used to talk and we we we did some work together on uh asset bubbles and he's the king of that. And and what I learned in that in that in that chance I had to piggyback on his on his genius around asset bubbles um is they are an endemic part of markets. And so I'm not going to say they're good things, but I'm going to say they're like like like like hurricanes. They just exist and they're ways to cleanse out market structure. And so I don't think changing the distribution mechanism for how you buy and record a home is what causes bubbles. Um I think what causes bubbles is overexuberance and the existence of cheap leverage in a system. And I will argue that for healthy economic systems they are going to continue to exist. Um one little one little tidbit of research that we discovered is during uh bubbly periods in assets patent filings for technology when those assets go up four times. >> Yeah. And so another way of saying is it would be wonderful if we could be all be sober thoughtful investors and dedicate resources to technologies that matter. But um that's not how we that's not how we do things. I pray for ass I pray for bubbles in medical technology because during that bubbly period so so investors will get harmed. There's no question. But during those bubbly periods we have a step function in innovation. And so it's just how we invest as a species. We're just we're we're we're quicksotic until agents take over and remove all emotion. We will have asset bubbles in cloud. But it's not it's not whether it's a tokenized distribution or a DTC security. That's not what causes bubbles. What causes bubbles is human nature. And so in some ways bubbles are good because they inspire innovation. Um but you know I think that's why I think we'll always have some type of regulatory structure around it to protect individuals because they can also harm investors. Final question for me is is tokenization not just a form of leverage in itself. How is it different fundamentally from a collateralized debt obligation for example? >> So if if you have a onetoone back tokenized offering there's no leverage incorporated right. So so it's it's based on it's based on the the you know right now I mean you get you get implicitly you buy a future on the New York Merkantile Exchange you're you're 5 to1 levered right and then you go borrow on top of that. So so we don't don't blame don't blame the technological mechanism. Um, if you're concerned about asset bubbles and leverage, you really have to worry about the credit community. That's what causes bubbles, not not the fact that we are um writing it on a piece of paper or putting it into an Excel spreadsheet or storing it on a blockchain ledger. >> Bitcoin started after a financial crisis and it was because >> because of all these wrapped and leveraged products. Now we're >> in a cry at a crypto conference talking about all these different financial products. That's a great observation, right? Blockchain wasn't wasn't even a dream when that happened and we found out that there were uh companies that were overlevered 100 to one uh that were regulated and should not have been doing that, right? That was just that was just illegality. That was just malfeasants. So, this problem has existed since the dawn of time. I'm sure there was a bubble in sea shells at one point when the cavemen were were trading them. Um I don't think we ever get away from that. And I think even agents ultimately will have human characteristics that will be prone to uh uh momentum trading and irrational exuberance. Um you know that's just you know we talk about crude oil and kind of where it where it sits now. Crude oil less than 3 years ago was negative. You had to pay someone to take delivery of the world's most valuable and important commodity. Right? So and that is a very institutional highly credible highly regulated market and it was negative for a brief period of time. People are all like hand ringing about crude oil being 130 bucks a barrel. I was more worried when it was negative. What does that say about global demand than production? So I just don't think I don't think we blame the system for that. That's just human nature. >> I think off camerara we were talking about AI companies trying to give you really really really good bon good offers but you declined them. >> Um thank you. I hope my boss is watching. And uh um look, it's super exciting. I I I I love what they're doing in AI and my my daughters, you know, my my daughters have an AI quota every every week. They have to produce at least two games with Claude about what they're working on in school right now and then push those games out to their classmates. >> Oh, I'm sorry. Your your daughter is working with Claude in school. How old? >> No, my daughter my my I have a nine-year-old and a 12-year-old and they both have a No, this is me at home. I'm I'm a tiger dad except I'm Italian. I'm a pasta dad. The school is aren't for the school. No, they have they have a quota. Unfortunately, the schools are only teaching them that AI is scary. They have a quota at home to produce two AI games. One on what they've worked on, one on what they will work on and push it out to their classmates. And I think you're doing your children a disservice if you don't arm them with that with that information. So AI AI is going to decide to use crypto as a value transfer mechanism. We we know that. That's clear. Um, and so I'm particularly now I'm skeptical that we'll have AI agents trading on our behalf as American consumers anytime soon, but I do think they will uh help organize payments for us. Um, I think, you know, I think about the things I buy every month. >> Why do you say that? >> I I think that the legal structure and the liability around making investment decisions, truly porting over investment decisions, maybe I'm being too close-minded, but I I it's the same reason I don't think we'll see driverless cars, you know, as much as we should anytime soon. It's not that the technolog is there, it's all of the liability and the infrastructure around it that just takes time to change. But, you know, having my AI agent um, you know, pay for my groceries um, every I order the same groceries every month on Amazon, having it put in the order automatically that I made last month and then wiring the money. That that makes perfect sense. And it will that will use stable coins to do that. >> My friends who go to tech conferences say every one of them is all about building AI agents now. So, if you're an investor, which you are, how do you how do you, you know, cipher the noise from the signal, who's a scammer, who's legit, >> how do you quick? Yeah. What's the checklist here? >> Any any adult male dressed head to toe in a single fashion designer? That's a good That's a good sign of who a scammer is. That's the only way I know to All of them have that like that sideways baseball cap, right? Um, no, I think it's it's hard. It's hard now. I just got offered uh I just got offered a preIPO offering of Anthropic at like a trillion dollar valuation. And normally I'd laugh at that, but I had to really consider it because >> trillion dollar valuation >> 800 billion like all the banks are selling pre it's it's public information. I got pitched by my banker and normally I would just laugh at a company but how can you not take that seriously? I mean when you when you look at the TAM, right? Um I'm investing more on the data center and power side because I like I like the picks and shovels model. Um but you know again people have a hard time imagining how large these markets can be and so I think um you know as with anything as the advice I give about crypto invest you know a proportional amount of money relative to your risk appetite um uh I don't yolo into anything and I don't think anybody else should. Um but if you're being sober and thoughtful and you have a risk allocation that's that's reasonable for your your wealth level I think you know the sky's is the limit on these stocks. I mean it's just they're they're it's there are just extraordinarily um paradigm shifting technologies. I it sounds cliche um but it is it's very very likely that twothirds of the planet will be leveraging AI in one way or another. Um and the backbone of that will be crypto value transfers. >> Why aren't you taking an AI job then? >> Um I enjoy I have a great job. So that's that simple. I I I enjoy what I do. I trust the people I work with and um I get to sit here and talk to great people like you. So um I'm I'm I'm happy. >> Do you think money is leaving crypto market >> and going into AI >> thesis? No more prediction markets is the thesis, right? I >> going to prediction market. >> So I think look I I have this theory based on my history in in kind of idiosyncratic assets like commodities and crypto. I think to have a healthy market you need different layers of in different strata of investors. You need boring hedgers who want to just come into the market to offset their risk. You need long-term value holders. You need short shorter term value holders. You need institutions, retail, educated retail, non-sophisticated retail. And you need this sort of wild wacky strata of just riskchasing trader. And that tiny they're not a huge proportion of the industry. That strata does move. It follows trends. If it if that's the strata that wants to turn a dollar into $500. So it is going to chase that over time and that's okay. Um because as you get more evolved as an asset class like crypto is that strata becomes less and less important. They're really really useful in the very beginning and they're fueling a lot of what's happening in prediction markets. Um as prediction markets grow and evolve and more and more you know thoughtful capital comes in. They become less important and they'll move on to the next thing. They get you where you need to be in the early days but they're not necessary as you evolve. And so I'm not that worried about that that tiny portion of risk capital that was chasing, you know, a meme coin that can turn, you know, 10,000x over the course of an evening. Their natural home is in that next that next thing. And so I think that we've lost them to prediction markets, but that that's not the core Coinbase user. >> Going back to your picks and shovels comment, so if AI is a gold rush, who's selling the shovels? >> Power companies. Yeah, >> the power the power demands are just, you know, if you thought Bitcoin sucked up power, try training an LLM, right? That's um and there's just we just don't have enough. We don't remember we don't we have to do other things besides train LLMs with our power, right? We have to like power dialysis machines, too. So, so we have to make sure all of this stuff is available um uh infrastructure plays, right? our our power distri battery technology which is just you know I have physicists tell me why batteries are the hardest part in the whole power uh uh stack um imagine like a really strong Swedish accent he said there's he goes John in physics we have a a name for when you shrink power into a smaller and smaller place uh physical footprint it's called a bomb he goes that's why ultimately battery technology is really really challenging right if your battery if you wake up tomorrow and they say we have a battery that can power your phone for a year straight. You should be very worried about what you're carrying in your pocket, right? That's that's a fundamental physics problem. And so, um, that technology has to evolve. We have to be able to transport energy better. >> Bloom Energy is doing that. >> I've heard about them. Yeah. Yeah. No, it's anyone who can crack that that code is, you know, anyone who can take a Tesla and make it 50% lighter is going to change the world. Is prediction market gambling? >> Some of it. Yes. Yes. Some of it. Absolutely. I I is is it but but to be fair is buying a penny stock on the NY who has negative earnings. Is that gam with no assets? >> That's faith. >> It's gambling. >> Faith, >> right? It's gambling. Faith and faith and gambling are very close. So, I think we just have to be real. Well, I think we have to have a conversation as a country about how we want adults to engage with with these types of opportunities cuz it's never you used to have to go to Vegas to place a sports bet. Now you don't have to. Now it's on your phone. And I think it's a valid conversation to have and I'm we should be open to that conversation. But we should also know the backbone of this should be adults should be allowed to do with their disposable income what they want to do. Like you know if we if we we never stopped an adult from getting on a plane and going to Las Vegas and betting everything on black. We didn't stop them. But now we're gonna have we're gonna tell them that you you can't do something similar because it's available on your phone. Um, we have to have a conversation about that in this country. But I would say I I care less about that. What I care about is the fact that prediction markets are better at predicting interest rate hikes and cuts than the top pollsters. I care about uh prediction markets being really really good at uh predicting crude oil prices. I care about the fact that if you if the US launches a missile into Iran um at 2 a.m. on a Saturday, you don't have to wait until Monday 9:00 a.m. to hedge that crude oil exposure on hyperlquid. That is what I care about. The gambling discussion will be had as a country and as a society, and we'll sort all that out. Um I know there's a very elegant legal argument about who has control over that. Um I won't pretend to to be able to to convey that argument. Um, and we'll have that discussion. But in the meantime, prediction markets are showing incredibleformational value that you should not throw out with the bathwater because you're concerned about the societal impact of gambling. >> We know that prediction markets are very accurate when it comes to data. >> 100%. >> But why is it accurate? >> Because curate because they are cur crowds aren't that wise. Curated crowds are very very wise. And so there's a natural curation that occurs when you have a specific market venue that people are drawn to it and you get the best of all worlds. You get breath of market, depth of market and you get a degree of curation around that market and that's when crowds are really really smart. >> Can you explain that breath and depth? >> So sure. So so if you had um if you put a random a completely random 100 people in a room and asked them a really really tough question about physics. solve this physics problem, more than likely you probably aren't going to be able to do it. Now, if you have a completely random million people in that room, there's a higher probability they get that they they get closer to the answer, right? But still probably they won't be able to do it. But if you get a 100 people in a room of the top mathematicians and physicists, they have a higher better chance of doing it than if you have five curated SK curated large crowds do better and better at solving complex problems. um random assemblies of people. It's a coin flip. So, but I will say this, there is even value in knowing what large random groups of people do because because prediction markets actually don't protection markets are like futures markets. Futures markets on January 1st are really bad at predicting the closing price of crude oil on December 31st. They're not they're not sants. They can't they can't predict the future, but it's really but they get better and better as the year goes goes on and they get better and better than random prediction. Day one, a year from now, a coin flip is probably as good as a futures market and predicting what the closing price of crude oil will be on December 31st. But as you get closer and closer to that day, they get better and better than a coin flip. Now, the time that's passed is not useless because as a trader, I want to know the consensus at any point in time. So all of that information is incredibly valuable, but they're not they're they're not magic. And so, but we we want them to be active and liquid because we want that information. And then they do get really really good and way way better than random prediction at solving that problem of price prediction as you get closer to the event. >> Let me just add to that if I may, John. So there's an element of financial gain involved that makes it accurate because this is why some economists have told me that the reason polls on elections have not been as accurate. >> No skin in the game >> as exactly as prediction markets is because those same people, you know, the curated crowd have no skin in the game when it comes to polls and so they don't participate but they participate in the prediction market. >> Nim Talb another brilliant guy who hates crypto but he's a brilliant guy and we should listen to him. you should listen to people who have different views from us. Uh Nim Talb um talks about I think it's Hamoptra's law. I think it's a that if you uh at some point in one culture uh the rule was if you were a bridge designer and the bridge collapsed they buried you under stone. So this notion of skin in the game is extremely avoidant. Couldn't agree more. Now there are negative perverse financial incentives that can develop but it's it's a delicate ecosystem. But the general it is it is known that curated crowds scale and intelligence. >> Um in Asia there are a few companies building prediction markets and they frame it as the information market. >> I agree with that. It should be viewed that I think I think I think we should think of them as as information markets not prediction markets. I agree. >> Could you explain why? Um because to your point because polling is polling was a good science when we didn't have the ability to gauge actual sentiment when we didn't have people's opinions in digitized form when we didn't have the abil meaning Twitter meaning X right when we didn't have the ability to get the X fire hose engaged sentiment of very very large groups of people calling up a thousand people and getting statistically relevant sample set was the best we had. So information it's trading is always about having using the best information available. No one has perfect if you have perfect information you're insider trading right by definition. So unless you have inside information you're trading on imperfect information. And so it's all about just having slightly better information than my competitor. That's all I need. And knowing the views and beliefs, the, you know, behind the scene, if you will, views and belief from 10 million people is better than interrupting a thousand people at dinner and getting their non non-unbiased belief. Um, anonymity has value. Understanding how people act and what they say versus what they what they say that what they do versus what they say they do. So, all of that is valuable information and it can be used by professional traders to make better informed decisions. How are the world's best algorithm trading companies and funds, the citadels of the world, going to compete in a world where the average 15year-old with Open Claw or Claude is going to build a bot that does pretty much the same thing? >> I'm a seller on that. I think good luck competing with Citadel for a long time. I don't care if you have Claw. I don't care how good you are, Claude. >> Um, until everything is run by agents. >> Yeah. >> And even then, not all agents will be created equal. And I guarantee you, Citadel will have the best agents. you know, James Street will have the best agents. So, I I um you know, that's why I always tell you, be careful about day trading. Uh you're up against, you know, you're a sheep amongst lions. It's very, very challenging. Uh buy and hold, invest in ETFs. Um you know, I I I I don't think you can compete. I don't think you'll be able to compete. Whatever whatever you have in your home, they have on steroids and they've had it for longer than you. >> Yeah. Okay, fair enough. >> There is this uh >> Oh, we're doing a Joe Rogan long form interview. All right, let's go. >> Okay. There is this index that shows retail investor does not outperform the NASDAQ, >> right? We know that. By the way, 75% of hedge funds don't perform out don't outperform the S&Ps. That's not just, you know, >> Well, what are people trying to do then? >> I don't try to I I I try not to judge. I mean, I think I think it's I think it's it's hope. I think they want to believe that they have the ability to outperform. It's ego. Um, you know, I I think it's Why do people buy lottery tickets? cuz somebody won, right? So, um, you know, I think I think there's an element I believe in an element of freedom that everyone should be allowed to take that chance. Um, I think that with a reasonable amount of your wealth, it's probably smart to do so because we should all have hope. We should all swing for the fences with something in our lives. Um, but in general, the average investor who doesn't have the ability to monitor markets at least five hours a day at minimum, uh, would do better off investing in poolled vehicles, you know, Bitcoin ETFs, things like that. Um, but I don't want to I don't want laws that tell people what to do with their money. That's why I shy away from restrictive laws about things like prediction markets. >> My last question to you, um, you've got two kids, like you said. Would you encourage them to study finance? >> So, my my 12-year-old daughter has a show on the floor of the New York Stock Exchange. >> You're kidding. Wow. >> Children's Financial Network where she interviews uh she interviews big investors and she asked them how they teach their kids about money. So it is a constant source of conversation in our home and uh I think you um I think the schools do a horrible job of teaching children um financial literacy and so I think it's incumbent upon all of us not just in crypto but in trad um to strongly encourage our children to find joy in this particular topic. >> What is one rule you teach at home? It's kind of it's kind of nerdy, but I have a I have a little I I I moved it to Claude. I used to have a little spreadsheet on my on my phone that that future value. So, anytime we walk into a store and they want to make an impulse purchase, um I don't want to I don't people money should be for joy. So, like I don't want to be that that look at everything, you know, on the net present value basis. But if they we walk into a store, we want to buy X and they and they say, "Oh, X was great. I also saw Y impulse purchase." I make them put the present value of that impulse process into this little app now spreadsheet and it pops out at a 6% annualized return what that would be in 20 years. >> Wow. >> And I asked them, are you sure you want this? Because this is what you're giving up. So opportunity cost and future value calculations. They're super simple to understand and it forces you to make smart decisions. So sweetheart, would you like this or would you like $120 in 20 years? And we do it. We have it on my phone. We do it all the time and I', you know, their kids are smart and I'd say 80% of the time they go, "Yeah, I want the 120 bucks." Sometimes they go, "I want the toy." But that's okay. They're making an informed decision at that point. >> I'd be curious to see how their decisions progress as they age. Maybe you can do it every year and track that. >> We we My 12-year-old does it all the time. She does it. She does she does the math in her head now >> and she rounds it up and she says, "You know what? This isn't worth it, daddy." But now she tracks it, so I have to give her that when she's older. Um, but I think just basic basic lessons and opportunity costs. What does it mean to take on risk? When is risk a good risk versus a bad risk? Kids are really smart. They understand this stuff. >> Excellent. >> Do you do that when you buy things, too? >> All the time. All the time. I think about when I'm when I'm 80, you know, I want I We all value different things. I value I value safety and security. I'd rather have the security of knowing the money's there than the shiny thing. That's that's my personality. Um, I don't judge other people for what how they think about it, but um, I think you just have to teach that's that's a non-intuitive thing that math is non non-intuitive. Um, and so I think you have to be taught that. I was lucky enough to be taught that at at business school and I think we should it's these are not hard concepts. We put jargon around things to to make it seem more complicated than it is. Future value versus present value is not a difficult concept. Um, you know, there's a meme going on that my daughter uh has showed me about like your future self screaming because you're not studying. All the kids are doing this meme and it's like it's it's sad. It's like it's funny to them, but it's sad to me. It's like a grown person like seeing their teenage self not studying for the test and like banging on the window. It's horrifying as an adult. The kids think it's funny. And I'm trying to help her understand why that's so popular because it's it's it's it's speaking to a a universe of people who wish they could go back in time and make those smart decisions, but they weren't given the they weren't given the ammunition to do so. It was unfair of them. It was unfair to expect them to do that. So, that's what I I try to teach. Not just my kids, I do I teach at schools um and uh I do as much as I can. and my daughter and I are working on a little YouTube video channel that we hope to push out just for that reason. >> Children's Financial Network. We try to teach kids in fun ways using games we make on Claude things like opportunity cost and all that stuff. >> My last question for you is you live in New York. >> New York City. Yes. >> Yes. And people that was that was a very obnoxious thing that was when you ask somebody say New York and they go I live in Staten Island. Uh which I grew up in. I grew up in Staten Island. New York City. I'm very snobish there. Yeah. Yes. What >> do you ever played a status game? >> You have to up your car, your houses. >> I grew up, my mom worked three jobs. My mom cleaned toilets. Uh my dad worked two jobs. I remember when he used to come home from his first job, I used to be waiting for him with my baseball net and we'd run out in the street and play catch. And I remember waiting for the street lights to go on and being very sad and anxious cuz I knew they were about to come on cuz when the streets light street lights went on, my dad had to get into his car and go to his second job. And um so no, I don't but I don't I don't I don't want to, you know, I don't want to virtue signal here. I don't begrudge people who want to work hard and have toys. Um I uh I'm just not I I just I just don't um I I just I didn't grow up like that. So I uh it's just not important to me. Um but you know, I I I have a status of like wanting my daughter to get straight A's. That's my that's my status. So I pay for tutors and things like that. We we all splurge on on on things. Um you know, don't judge. Find out what's important to you. try to give back a little bit. It's the best you can hope for. >> That was a beautiful end. >> Yeah. Well, thank you very much. And uh I encourage everyone to check out uh John's daughter's channel. >> Oh, thank you. >> What is it called again? >> The Children's Financial Network. >> Children's Financial Network. And also, you were featured in the book Rigged, the true story of an Ivy League kid who changed the world of oil. We don't have time to go over that book, but uh >> this one. >> Yeah. What was your what was >> I was lucky enough to be in a place where I was tasked by the New York Merkantile Exchange to build the first ever oil exchange in the Middle East. >> Yeah. Okay. Check out that book. Check out his channel. Check out our channel. Subscribe. Thank you very much for watching. Thank you, John. >> Thank you.
‘There Is A 100% Certainty’ Bonds Won’t Save Your Retirement Warns Strategist | John D’Agostino
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There is a 100% certainty that you will not achieve a sufficient retirement based on your you know just do the math. you will not achieve it based on bond market returns for exactly the phenomena you've just so so what is your option that disease is killing you once you've had the ability to transfer money whenever you want it as fast as you want it to ask people to go roll that back I think the probability of that is virtually zero prediction markets are better at predicting interest rate hikes and cuts than the top pollsters I'm here with John Douglas you know, he's a head of strategy at Coinbase Institutional. And joining me to co-host the show is >> Bonnie Chang. >> Welcome to the show, John. >> Good to see you. >> Good to see you, David. Good to see you again. Bonnie, >> you're very passionate about the market structure. Bill, what is it that people do not understand about it yet? >> I think it's a very wonky thing, but I think people underappreciate how big of a deal this is. We don't do new market structure legislation willy-nilly in the US. It happens, it usually happens when there is a catastrophic disaster. It usually happens when you have a a great financial crisis of some type of of massive massive um uh explosion where you know moms and pops you voters are dramatically affected. So market structure is usually a negative reactionary thing. the fact that you have this asset class which from an institutional perspective has really existed in modern form for seven or so years, right? It's existed for about 15 technically about I'd say 9 to 10 from a retail perspective and really seven years. The fact that a brand new asset class is getting market structural legislation not because of some massive blow up but because there's a recognition of how impactful it's become in the US economy. we we should all be incredibly grateful that we have the opportunity to live during this time and and for those of us who work in the asset class, we should be very very grateful. So, so I understand there's negative uh crypto sentiment if you look at the broad indices, you look at Twitter or X sentiment, I I don't see it. I just see an extraordinary achievement for this asset class. >> Sorry, go ahead. >> For someone that doesn't really know what's going on, what does it really change? >> Sure. Well, I mean, look, it it it there's been there's been a couple of reasons that large institutions have said it's it's I'm going to do the work. I like I like the technology. I like the asset class. I can't push uh investment capital into that class yet or customer capital or I can't allocate or hire out a team. By the way, they're all hiring out teams. I've gotten all the phone calls. Um all the folks who are screaming and yelling about clarity are secretly hiring out very very senior teams. Um but I understand why if you're a highly regulated entity um really committing to the asset class has been challenging because you have this kind of regulatory overhang. We don't really understand the ter the term of art is regulatory a lack of regulatory clarity which is a bit a bit silly because many many existing legacy industries operate without perfect clarity but but it's understandable because there's just no framework around it. So genius provided a framework for stable coins. What happened? Stable coin stable coin adoption has been just a a a raging bull market. So you're looking at that and you're saying okay now that narrow niche of stable coin once it achieved regulatory cl by the way not perfect no one was thrilled with the genius act. Um when it came out there were lots of naysayers about it just like with this latest draft of clarity but it provided a framework that you could operate within and then we saw just massive takeup hockey stick takeup. So the institutional players are looking at that and saying if that's what happens when we got this tiny little on a relative comparative basis tiny little bill. Imagine what happens when we have broad-based market infrastructure bill even if it's not perfect. >> Can we just talk about stable coins for just a minute? Let's back up and think just macro. >> Sure. >> Now I keep hearing the narrative and I'm think pretty sure Bonnie has as well. Stable coins is going to change the future of finance. We all need stable coins. It's better form of conducting business B2B or even B TOC. You know, Bonnie and I were just talking about this offline about how according to some surveys and polls, 37 Americans don't have $200 saved up. >> Five >> 35 >> sorry 37% 500 $500 saved up. So for those people, crossber remittances are not the priority in life. So who are stable coins for? So, um, stable coins are for anyone who would like to get clarity around where their money is within seconds or hours versus days. And I would argue that while crossber payments are not important for that person with $500, I would argue that if that person with $500 is receiving a a transmission, a wire transmission um, or a money transmission, that it is even more important for them to achieve clarity on whether or not they have that money within seconds, hours versus days. I'd argue that it's more important that they be able to send or receive that money for pennies versus tens of dollars. I just sent a wire from a major US bank to a major US bank and I was charged $30 for that transmission. >> Kitty and I'm a good customer of that bank. >> US dollars you transfer. >> You I transfer I'm not going to say how much. It shouldn't matter, right? >> But I transferred US dollars. Doesn't matter if I'm transferring $5 or 500,000 over the same wire system, the same electronic system, I was charged $30 and I am a good customer of that bank. So, um, that is a massive problem whether you have $500 or $5 million. So, I think about it this way. I think about very simply. I my mom asked me this all the time and I said to her what once you've had the ability to transfer money whenever you want it as fast as you want it to ask people to go roll that back is like asking us to go back to watching movies when the movie theaters tell us we are allowed to watch movies I think the probability of that is virtually zero so I understand that folks with smaller amounts in the bank maybe they're not as comfortable leveraging new technology with that smaller amount of money I get it once they experience it. They will never go back to waiting for banker hours. >> I want to ask you about um yield on stable coin. >> Don't you want to keep the yield? Isn't it better for Circle and Coinbase and all that issuers? >> Wait, we've been very clear. Brian Armstrong is arguing against >> exactly >> the selfish interest of of everyone who works at Coinbase. Um we believe So would I rather in the short term from a greedy perspective? Yes. in the long term, I'd rather have a smaller piece of a massively larger pie. Um, so we decided to build our um we want to give that yield back cuz we think ultimately that will inspire not just 250 or whatever 300 million stable coin users, 3 billion stable coin users. So we think um the idea that you are paid an interest rate from the US government that is roughly 4 and a.5% and you give your customers 10 basis points points of that is inherently problematic. And so we think that if we can flip that around and push the majority of those rewards back to the user, which is what we do currently, um then that just means the pie is that much larger. So our goal is to get a billion people on chain. You get a billion people on chain by solving a problem. 10 basis points of interest in your checking account is a big big problem. People, what the difference between 10 10 basis points and two and a half 3%. Compound that over the lifetime of a child. That is a that's a car. That's a year of education that is inherently meaningful compounding effect over 20 years. So that's what we're trying to give back to the American consumer. >> Before we continue with the video, let's talk about today's sponsor, Delete Me. Now, there's an entire industry built around collecting and selling your personal info. Data brokers collect information such as your name, address, and phone number, then package and sell it to third parties. Delete Me is designed to help reduce that exposure. It only takes a few minutes to set up and they handle all the work in the background. They identify where your data appears, verify those listings, and submit removal requests to hundreds of broker sites. They also keep monitoring since these listings can come back over time. I've been using Delete Me for over 2 years now, and they have reviewed over 325 listings of my information. This saved me over 12 hours of searching and reviewing it myself. The reports show exactly what was found and what was removed, which makes the process transparent. Scan the QR code on the screen here or go to joindeleteme.com/davidlin, link in the description down below, and use code davidin for 20% off. Now, back to the video. >> I hear two very different voices on stablecoin. One is stable coin issuers are not going to be as profitable because of this. And the second is the pie is going to be so much bigger that it doesn't matter. >> I believe in the latter part. So, so when I when I got first started in finance, my first job was to um electronify the open air crisis system in the New York Merkantile Exchange. And I I got lots of arguments as to why we shouldn't do that. And then and there were good arguments by the way. It was working really well. Everything no trade breaks. We priced the most valuable commodity in the world, crude oil. Worked fantastic. What was hard for them to understand because they only had grown up in that structure was that we could septuple or quintuple the size of that market by going electronic and I don't blame them for that. It is hard to imagine a world that is that much larger than the world you live in and when all you see is things working really really well. Why are you upsetting the apple cart where the world's most valuable commodity? Uh price discovery is amazing. Um we're trading trillions of dollars of notional crude oil. um if you consider the derivatives, why would you mess this up? This is going really really well. Um that that market is now 10 times the size of what it was in back in 2002 because of that evolution of technologies. So I don't begrudge people who want to say hey hold on the things are very liquid right now. It's working with us is the envy of global capital markets. I completely appreciate that perspective. um it can be so much bigger if you move from t plus 24 hours to t plus 24 seconds and it's difficult to appreciate that in its current form unless you've been through that trans I've been lucky enough to be have gone through one of those transitions so I I I see this coiled spring that is this shifting from you know 10 20 30x lower latency times it frees up hundreds of billions of dollars of capital It lubricates the capital system and it makes it continues to make the US the envy of all capital markets. >> There was last year I was paying him and he said I only take USDC. >> Okay. >> Uh and in in Asia we use a lot of USDT. Yes. >> And he said I only use USDC. And now I'm thinking, okay, >> if in this region you can only use USDC and now you're welcoming a lot of more competition by expanding this pie. >> Yes. >> How does that affect Circle and Coinbase? And >> so look, I I I give full credit to Tether. What they, you know, my understanding is they were all sitting in a room one day and said, "Let's monetize US treasuries." And that was a brilliant brilliant idea. Um, we talk about, you know, tokenization taking off. That that is tokenization. We don't think of stable coins as tokens, but that's what they are. They're they're real world assets tokenization. So I give Tether all the credit in the world. I don't think this is a monopoly. I think this is an igopoly. I think you have two maybe three or four dominant global stable coins backed by US treasuries and other similar assets that um dramatically and rapidly transform and modernize the payment system. So I I I think again I think the the the global pie is much larger than any of us can imagine. So I'm not worried about cannibalizing tether or tether crest US. I think I think I actually think the rising tide carries all ships. I think I think it's probably healthier for the global economic payment system that you have two if not three um options available tra in general people in general investment community participants traders whatever payment participants they don't like monopolies they like igopies and and there's reasons for that. You want you want diversification. You don't want too much diversification because the the fractured liquidity is less useful liquidity. But I think a world of USDC and USDT, you know, one being dominant in the east, one being dominant in the west, that's a healthy healthy world. >> Speaking of yield, can we talk about asset allocation for just a minute? The bond market in the US has been in a structural bull market since the uh mid70s with the double digit interest rates and the 10-year yield now down to at a certain point when it went down to near zero. Did you think to yourself this is the end for the 64 portfolio? How do you how do you how do you go up from there when the yield's literally at zero? And now, by the way, since the last three couple years, the bond market's just been not doing great very great. And so now, people are thinking about ways to substitute the bonds in the 604 portfolio with something else. So, I know there's a lot to unpack there, but >> it's a great observation and I think it's part of the the sort of cultural zeitgeist that gave birth to blockchain technology, right? Right. So there's a realiz a growing realization amongst um an incre I think more Americans more young Americans understand the relationship between interest rates and the security of their retirement than ever before. And more young Americans understand that you cannot rely on a savings account yields to provide for you an effective retirement. And what that naturally gets you towards eventually is you have to take on risk assets. Then the question becomes what type of risk asset? The the only thing riskier than not taking risk the only thing riskier than taking risk is not taking risk when there's 100% certainty the yield will not afford you a sufficient retirement. >> Good job. You're speaking my language right now. But how do you say exactly that to a 66 year old? >> That's great. I I got asked that question the other day and I said and I I I asked my if there was 100% certainty, >> right? >> 100%. So I it's a probably a bad analogy. use disease as analogy, but they had a 100% certainty a disease was was going to kill you in 6 months and someone came to you with an experimental thing that had a 50% chance of of killing you in 6 months. You'd be any every human being in two, of course, I'll take that risk. >> Yeah, >> absolutely right. Why wouldn't I make that trade? That's a fantastic trade. So, I'm saying there is a 100% certainty that you will not achieve a sufficient retirement based on your, you know, just do the math. I can set I can set the spread. Claude can set the spreadsheet up for you now in about 30 seconds using plain English. How much do I have? What do I need to retire? What rate of return am I getting? Ask Claude those three questions and it will tell you you will not achieve it based on bond market returns for exactly the phenomena you've just so so what is your option that disease is killing you. What is your option? Their option is to take some risk. Take thoughtful risk. Don't jump off a cliff. Don't say I have this cure at the bottom of that of that cliff, that's obviously a bad trade. But incorporating risk assets into your portfolio, the the it's insane not to consider it. >> Where do we go for yield in 2027? >> I think we'll start I I don't think my mom will be getting DeFi yields, but I think you'll start to see DeFi get normalized and and wrapped and packaged uh through, you know, some form of intermediary that will provide some sort of uh vetting process for the the the quality of that of that protocol. Um, I think they'll start to normalize. I think you'll see yield in wrapped assets and ETF type assets for Bitcoin and other wrap sec other uh wrap securities. I think you'll get yield if you're a non- US citizen and it's difficult to access the incredible economic growth engine that is US economy. I think you'll get it through tokenized equities and uh and wrapped ETFs. I would love to see a world where everyone in the planet who's able to scrape together $5 can bet on the US economic engine through some type of tokenized S&P 500 rapper without having to go through the headache of of advanced AML. I think I think that's an incredible thing for the US government to get behind. It's the it's a wonderful marketing program. I >> I'll pass it to Bonnie for now. When we come back, I I have some questions on tokenization and the markets. >> Sure. >> Go ahead. >> Okay. Sure. Thank you. Well, the uh you know, we were just talking about token She has more creative questions than me, so I wanted to switch it up. But anyway, the tokenization aspect, I wonder if the crypto industry through tokenization is cannibalizing themselves. Let me explain what I mean. >> Just in the prior interview, we were talking about how Hyperlid is now trading more on on in ter in terms of volume commoditized or sorry securitized oil, gold, and other commodities. >> Yes. >> Now, this just opens up the door to 24/7 trading on those particular commodities or any other real world asset. We're not actually putting money into layer ones and twos. We're actually just trading those commodities on the blockchain. Now, get this. A lot of these securitization uh companies want to back their, you know, tokenization one to one, which means they have to buy the underlying first. >> Yes. >> Doesn't that just drive up demand for that underlying and suck capital away from blockchain? >> I I I so I I don't think I I appreciate your point. Yeah. And I don't subscribe to the notion that blockchain is competitive with the legacy financial system. >> I see. I I think it is an upgrade. I do think it's an upgrade, but I think there will be elements of the legacy financial system that will work side by side with blockchain technologies for all of our lifetime and probably our children's lifetime. And that's and that's healthy. You don't replace everything in your home at the same time as as as new technologies as new technology upgrades. So I um I think that uh if we can marry a traditional um securities model in the US which is the envy of the world. If we can start to see blockchain as an expansion of that securities model that way everyone in the world who wants um at least the price um uh at least access to price exposure um can get access to price. They may not get access to corporate actions day one, but these are these are ev these are evolutionary not revolutionary in some way, right? >> Um, and it's really really important that we figure out ways to marry legacy systems and blockchains. >> So, going back to your point earlier about, you know, you were using Taipei real estate as an example, how does tokenization not create the biggest bubble we've ever seen in finance? >> Well, leverage creates bubbles. It's not not distribution. >> Okay, elaborate on that. So an average home in Taipei right now costs 185 months of average household salary. So that's just an apartment. >> Wow. >> It's very very expensive. Now you see companies, you know, do stock splits because they want it to seem more affordable for more people. Now if we do the same with tokenized housing, tokenized homes, >> we're starting communes. How are we all living in that home if we fractionalize it? So, you do not buy into this tokenized real estate. >> I think tokenized real estate is useful because the legacy systems for recording real estate are just archaic and silly. I just bought an apartment in New York. I had to buy I had to buy um insurance to make sure that no one came along in 5 years and told me I actually own this apartment. That's just silly. That's just that's just poor recordkeeping, >> right? >> Um >> I don't subscribe to the belief that it's a long cover. I I did a so so he might he might hate if I name drop him, but Nuro Erbini, dear friend of mine, f brilliant economist. I won't talk about his views on crypto because it's not fair to him because he's not here, but he's someone we should all listen to. I'll say that. He and I used to talk and we we we did some work together on uh asset bubbles and he's the king of that. And and what I learned in that in that in that chance I had to piggyback on his on his genius around asset bubbles um is they are an endemic part of markets. And so I'm not going to say they're good things, but I'm going to say they're like like like like hurricanes. They just exist and they're ways to cleanse out market structure. And so I don't think changing the distribution mechanism for how you buy and record a home is what causes bubbles. Um I think what causes bubbles is overexuberance and the existence of cheap leverage in a system. And I will argue that for healthy economic systems they are going to continue to exist. Um one little one little tidbit of research that we discovered is during uh bubbly periods in assets patent filings for technology when those assets go up four times. >> Yeah. And so another way of saying is it would be wonderful if we could be all be sober thoughtful investors and dedicate resources to technologies that matter. But um that's not how we that's not how we do things. I pray for ass I pray for bubbles in medical technology because during that bubbly period so so investors will get harmed. There's no question. But during those bubbly periods we have a step function in innovation. And so it's just how we invest as a species. We're just we're we're we're quicksotic until agents take over and remove all emotion. We will have asset bubbles in cloud. But it's not it's not whether it's a tokenized distribution or a DTC security. That's not what causes bubbles. What causes bubbles is human nature. And so in some ways bubbles are good because they inspire innovation. Um but you know I think that's why I think we'll always have some type of regulatory structure around it to protect individuals because they can also harm investors. Final question for me is is tokenization not just a form of leverage in itself. How is it different fundamentally from a collateralized debt obligation for example? >> So if if you have a onetoone back tokenized offering there's no leverage incorporated right. So so it's it's based on it's based on the the you know right now I mean you get you get implicitly you buy a future on the New York Merkantile Exchange you're you're 5 to1 levered right and then you go borrow on top of that. So so we don't don't blame don't blame the technological mechanism. Um, if you're concerned about asset bubbles and leverage, you really have to worry about the credit community. That's what causes bubbles, not not the fact that we are um writing it on a piece of paper or putting it into an Excel spreadsheet or storing it on a blockchain ledger. >> Bitcoin started after a financial crisis and it was because >> because of all these wrapped and leveraged products. Now we're >> in a cry at a crypto conference talking about all these different financial products. That's a great observation, right? Blockchain wasn't wasn't even a dream when that happened and we found out that there were uh companies that were overlevered 100 to one uh that were regulated and should not have been doing that, right? That was just that was just illegality. That was just malfeasants. So, this problem has existed since the dawn of time. I'm sure there was a bubble in sea shells at one point when the cavemen were were trading them. Um I don't think we ever get away from that. And I think even agents ultimately will have human characteristics that will be prone to uh uh momentum trading and irrational exuberance. Um you know that's just you know we talk about crude oil and kind of where it where it sits now. Crude oil less than 3 years ago was negative. You had to pay someone to take delivery of the world's most valuable and important commodity. Right? So and that is a very institutional highly credible highly regulated market and it was negative for a brief period of time. People are all like hand ringing about crude oil being 130 bucks a barrel. I was more worried when it was negative. What does that say about global demand than production? So I just don't think I don't think we blame the system for that. That's just human nature. >> I think off camerara we were talking about AI companies trying to give you really really really good bon good offers but you declined them. >> Um thank you. I hope my boss is watching. And uh um look, it's super exciting. I I I I love what they're doing in AI and my my daughters, you know, my my daughters have an AI quota every every week. They have to produce at least two games with Claude about what they're working on in school right now and then push those games out to their classmates. >> Oh, I'm sorry. Your your daughter is working with Claude in school. How old? >> No, my daughter my my I have a nine-year-old and a 12-year-old and they both have a No, this is me at home. I'm I'm a tiger dad except I'm Italian. I'm a pasta dad. The school is aren't for the school. No, they have they have a quota. Unfortunately, the schools are only teaching them that AI is scary. They have a quota at home to produce two AI games. One on what they've worked on, one on what they will work on and push it out to their classmates. And I think you're doing your children a disservice if you don't arm them with that with that information. So AI AI is going to decide to use crypto as a value transfer mechanism. We we know that. That's clear. Um, and so I'm particularly now I'm skeptical that we'll have AI agents trading on our behalf as American consumers anytime soon, but I do think they will uh help organize payments for us. Um, I think, you know, I think about the things I buy every month. >> Why do you say that? >> I I think that the legal structure and the liability around making investment decisions, truly porting over investment decisions, maybe I'm being too close-minded, but I I it's the same reason I don't think we'll see driverless cars, you know, as much as we should anytime soon. It's not that the technolog is there, it's all of the liability and the infrastructure around it that just takes time to change. But, you know, having my AI agent um, you know, pay for my groceries um, every I order the same groceries every month on Amazon, having it put in the order automatically that I made last month and then wiring the money. That that makes perfect sense. And it will that will use stable coins to do that. >> My friends who go to tech conferences say every one of them is all about building AI agents now. So, if you're an investor, which you are, how do you how do you, you know, cipher the noise from the signal, who's a scammer, who's legit, >> how do you quick? Yeah. What's the checklist here? >> Any any adult male dressed head to toe in a single fashion designer? That's a good That's a good sign of who a scammer is. That's the only way I know to All of them have that like that sideways baseball cap, right? Um, no, I think it's it's hard. It's hard now. I just got offered uh I just got offered a preIPO offering of Anthropic at like a trillion dollar valuation. And normally I'd laugh at that, but I had to really consider it because >> trillion dollar valuation >> 800 billion like all the banks are selling pre it's it's public information. I got pitched by my banker and normally I would just laugh at a company but how can you not take that seriously? I mean when you when you look at the TAM, right? Um I'm investing more on the data center and power side because I like I like the picks and shovels model. Um but you know again people have a hard time imagining how large these markets can be and so I think um you know as with anything as the advice I give about crypto invest you know a proportional amount of money relative to your risk appetite um uh I don't yolo into anything and I don't think anybody else should. Um but if you're being sober and thoughtful and you have a risk allocation that's that's reasonable for your your wealth level I think you know the sky's is the limit on these stocks. I mean it's just they're they're it's there are just extraordinarily um paradigm shifting technologies. I it sounds cliche um but it is it's very very likely that twothirds of the planet will be leveraging AI in one way or another. Um and the backbone of that will be crypto value transfers. >> Why aren't you taking an AI job then? >> Um I enjoy I have a great job. So that's that simple. I I I enjoy what I do. I trust the people I work with and um I get to sit here and talk to great people like you. So um I'm I'm I'm happy. >> Do you think money is leaving crypto market >> and going into AI >> thesis? No more prediction markets is the thesis, right? I >> going to prediction market. >> So I think look I I have this theory based on my history in in kind of idiosyncratic assets like commodities and crypto. I think to have a healthy market you need different layers of in different strata of investors. You need boring hedgers who want to just come into the market to offset their risk. You need long-term value holders. You need short shorter term value holders. You need institutions, retail, educated retail, non-sophisticated retail. And you need this sort of wild wacky strata of just riskchasing trader. And that tiny they're not a huge proportion of the industry. That strata does move. It follows trends. If it if that's the strata that wants to turn a dollar into $500. So it is going to chase that over time and that's okay. Um because as you get more evolved as an asset class like crypto is that strata becomes less and less important. They're really really useful in the very beginning and they're fueling a lot of what's happening in prediction markets. Um as prediction markets grow and evolve and more and more you know thoughtful capital comes in. They become less important and they'll move on to the next thing. They get you where you need to be in the early days but they're not necessary as you evolve. And so I'm not that worried about that that tiny portion of risk capital that was chasing, you know, a meme coin that can turn, you know, 10,000x over the course of an evening. Their natural home is in that next that next thing. And so I think that we've lost them to prediction markets, but that that's not the core Coinbase user. >> Going back to your picks and shovels comment, so if AI is a gold rush, who's selling the shovels? >> Power companies. Yeah, >> the power the power demands are just, you know, if you thought Bitcoin sucked up power, try training an LLM, right? That's um and there's just we just don't have enough. We don't remember we don't we have to do other things besides train LLMs with our power, right? We have to like power dialysis machines, too. So, so we have to make sure all of this stuff is available um uh infrastructure plays, right? our our power distri battery technology which is just you know I have physicists tell me why batteries are the hardest part in the whole power uh uh stack um imagine like a really strong Swedish accent he said there's he goes John in physics we have a a name for when you shrink power into a smaller and smaller place uh physical footprint it's called a bomb he goes that's why ultimately battery technology is really really challenging right if your battery if you wake up tomorrow and they say we have a battery that can power your phone for a year straight. You should be very worried about what you're carrying in your pocket, right? That's that's a fundamental physics problem. And so, um, that technology has to evolve. We have to be able to transport energy better. >> Bloom Energy is doing that. >> I've heard about them. Yeah. Yeah. No, it's anyone who can crack that that code is, you know, anyone who can take a Tesla and make it 50% lighter is going to change the world. Is prediction market gambling? >> Some of it. Yes. Yes. Some of it. Absolutely. I I is is it but but to be fair is buying a penny stock on the NY who has negative earnings. Is that gam with no assets? >> That's faith. >> It's gambling. >> Faith, >> right? It's gambling. Faith and faith and gambling are very close. So, I think we just have to be real. Well, I think we have to have a conversation as a country about how we want adults to engage with with these types of opportunities cuz it's never you used to have to go to Vegas to place a sports bet. Now you don't have to. Now it's on your phone. And I think it's a valid conversation to have and I'm we should be open to that conversation. But we should also know the backbone of this should be adults should be allowed to do with their disposable income what they want to do. Like you know if we if we we never stopped an adult from getting on a plane and going to Las Vegas and betting everything on black. We didn't stop them. But now we're gonna have we're gonna tell them that you you can't do something similar because it's available on your phone. Um, we have to have a conversation about that in this country. But I would say I I care less about that. What I care about is the fact that prediction markets are better at predicting interest rate hikes and cuts than the top pollsters. I care about uh prediction markets being really really good at uh predicting crude oil prices. I care about the fact that if you if the US launches a missile into Iran um at 2 a.m. on a Saturday, you don't have to wait until Monday 9:00 a.m. to hedge that crude oil exposure on hyperlquid. That is what I care about. The gambling discussion will be had as a country and as a society, and we'll sort all that out. Um I know there's a very elegant legal argument about who has control over that. Um I won't pretend to to be able to to convey that argument. Um, and we'll have that discussion. But in the meantime, prediction markets are showing incredibleformational value that you should not throw out with the bathwater because you're concerned about the societal impact of gambling. >> We know that prediction markets are very accurate when it comes to data. >> 100%. >> But why is it accurate? >> Because curate because they are cur crowds aren't that wise. Curated crowds are very very wise. And so there's a natural curation that occurs when you have a specific market venue that people are drawn to it and you get the best of all worlds. You get breath of market, depth of market and you get a degree of curation around that market and that's when crowds are really really smart. >> Can you explain that breath and depth? >> So sure. So so if you had um if you put a random a completely random 100 people in a room and asked them a really really tough question about physics. solve this physics problem, more than likely you probably aren't going to be able to do it. Now, if you have a completely random million people in that room, there's a higher probability they get that they they get closer to the answer, right? But still probably they won't be able to do it. But if you get a 100 people in a room of the top mathematicians and physicists, they have a higher better chance of doing it than if you have five curated SK curated large crowds do better and better at solving complex problems. um random assemblies of people. It's a coin flip. So, but I will say this, there is even value in knowing what large random groups of people do because because prediction markets actually don't protection markets are like futures markets. Futures markets on January 1st are really bad at predicting the closing price of crude oil on December 31st. They're not they're not sants. They can't they can't predict the future, but it's really but they get better and better as the year goes goes on and they get better and better than random prediction. Day one, a year from now, a coin flip is probably as good as a futures market and predicting what the closing price of crude oil will be on December 31st. But as you get closer and closer to that day, they get better and better than a coin flip. Now, the time that's passed is not useless because as a trader, I want to know the consensus at any point in time. So all of that information is incredibly valuable, but they're not they're they're not magic. And so, but we we want them to be active and liquid because we want that information. And then they do get really really good and way way better than random prediction at solving that problem of price prediction as you get closer to the event. >> Let me just add to that if I may, John. So there's an element of financial gain involved that makes it accurate because this is why some economists have told me that the reason polls on elections have not been as accurate. >> No skin in the game >> as exactly as prediction markets is because those same people, you know, the curated crowd have no skin in the game when it comes to polls and so they don't participate but they participate in the prediction market. >> Nim Talb another brilliant guy who hates crypto but he's a brilliant guy and we should listen to him. you should listen to people who have different views from us. Uh Nim Talb um talks about I think it's Hamoptra's law. I think it's a that if you uh at some point in one culture uh the rule was if you were a bridge designer and the bridge collapsed they buried you under stone. So this notion of skin in the game is extremely avoidant. Couldn't agree more. Now there are negative perverse financial incentives that can develop but it's it's a delicate ecosystem. But the general it is it is known that curated crowds scale and intelligence. >> Um in Asia there are a few companies building prediction markets and they frame it as the information market. >> I agree with that. It should be viewed that I think I think I think we should think of them as as information markets not prediction markets. I agree. >> Could you explain why? Um because to your point because polling is polling was a good science when we didn't have the ability to gauge actual sentiment when we didn't have people's opinions in digitized form when we didn't have the abil meaning Twitter meaning X right when we didn't have the ability to get the X fire hose engaged sentiment of very very large groups of people calling up a thousand people and getting statistically relevant sample set was the best we had. So information it's trading is always about having using the best information available. No one has perfect if you have perfect information you're insider trading right by definition. So unless you have inside information you're trading on imperfect information. And so it's all about just having slightly better information than my competitor. That's all I need. And knowing the views and beliefs, the, you know, behind the scene, if you will, views and belief from 10 million people is better than interrupting a thousand people at dinner and getting their non non-unbiased belief. Um, anonymity has value. Understanding how people act and what they say versus what they what they say that what they do versus what they say they do. So, all of that is valuable information and it can be used by professional traders to make better informed decisions. How are the world's best algorithm trading companies and funds, the citadels of the world, going to compete in a world where the average 15year-old with Open Claw or Claude is going to build a bot that does pretty much the same thing? >> I'm a seller on that. I think good luck competing with Citadel for a long time. I don't care if you have Claw. I don't care how good you are, Claude. >> Um, until everything is run by agents. >> Yeah. >> And even then, not all agents will be created equal. And I guarantee you, Citadel will have the best agents. you know, James Street will have the best agents. So, I I um you know, that's why I always tell you, be careful about day trading. Uh you're up against, you know, you're a sheep amongst lions. It's very, very challenging. Uh buy and hold, invest in ETFs. Um you know, I I I I don't think you can compete. I don't think you'll be able to compete. Whatever whatever you have in your home, they have on steroids and they've had it for longer than you. >> Yeah. Okay, fair enough. >> There is this uh >> Oh, we're doing a Joe Rogan long form interview. All right, let's go. >> Okay. There is this index that shows retail investor does not outperform the NASDAQ, >> right? We know that. By the way, 75% of hedge funds don't perform out don't outperform the S&Ps. That's not just, you know, >> Well, what are people trying to do then? >> I don't try to I I I try not to judge. I mean, I think I think it's I think it's it's hope. I think they want to believe that they have the ability to outperform. It's ego. Um, you know, I I think it's Why do people buy lottery tickets? cuz somebody won, right? So, um, you know, I think I think there's an element I believe in an element of freedom that everyone should be allowed to take that chance. Um, I think that with a reasonable amount of your wealth, it's probably smart to do so because we should all have hope. We should all swing for the fences with something in our lives. Um, but in general, the average investor who doesn't have the ability to monitor markets at least five hours a day at minimum, uh, would do better off investing in poolled vehicles, you know, Bitcoin ETFs, things like that. Um, but I don't want to I don't want laws that tell people what to do with their money. That's why I shy away from restrictive laws about things like prediction markets. >> My last question to you, um, you've got two kids, like you said. Would you encourage them to study finance? >> So, my my 12-year-old daughter has a show on the floor of the New York Stock Exchange. >> You're kidding. Wow. >> Children's Financial Network where she interviews uh she interviews big investors and she asked them how they teach their kids about money. So it is a constant source of conversation in our home and uh I think you um I think the schools do a horrible job of teaching children um financial literacy and so I think it's incumbent upon all of us not just in crypto but in trad um to strongly encourage our children to find joy in this particular topic. >> What is one rule you teach at home? It's kind of it's kind of nerdy, but I have a I have a little I I I moved it to Claude. I used to have a little spreadsheet on my on my phone that that future value. So, anytime we walk into a store and they want to make an impulse purchase, um I don't want to I don't people money should be for joy. So, like I don't want to be that that look at everything, you know, on the net present value basis. But if they we walk into a store, we want to buy X and they and they say, "Oh, X was great. I also saw Y impulse purchase." I make them put the present value of that impulse process into this little app now spreadsheet and it pops out at a 6% annualized return what that would be in 20 years. >> Wow. >> And I asked them, are you sure you want this? Because this is what you're giving up. So opportunity cost and future value calculations. They're super simple to understand and it forces you to make smart decisions. So sweetheart, would you like this or would you like $120 in 20 years? And we do it. We have it on my phone. We do it all the time and I', you know, their kids are smart and I'd say 80% of the time they go, "Yeah, I want the 120 bucks." Sometimes they go, "I want the toy." But that's okay. They're making an informed decision at that point. >> I'd be curious to see how their decisions progress as they age. Maybe you can do it every year and track that. >> We we My 12-year-old does it all the time. She does it. She does she does the math in her head now >> and she rounds it up and she says, "You know what? This isn't worth it, daddy." But now she tracks it, so I have to give her that when she's older. Um, but I think just basic basic lessons and opportunity costs. What does it mean to take on risk? When is risk a good risk versus a bad risk? Kids are really smart. They understand this stuff. >> Excellent. >> Do you do that when you buy things, too? >> All the time. All the time. I think about when I'm when I'm 80, you know, I want I We all value different things. I value I value safety and security. I'd rather have the security of knowing the money's there than the shiny thing. That's that's my personality. Um, I don't judge other people for what how they think about it, but um, I think you just have to teach that's that's a non-intuitive thing that math is non non-intuitive. Um, and so I think you have to be taught that. I was lucky enough to be taught that at at business school and I think we should it's these are not hard concepts. We put jargon around things to to make it seem more complicated than it is. Future value versus present value is not a difficult concept. Um, you know, there's a meme going on that my daughter uh has showed me about like your future self screaming because you're not studying. All the kids are doing this meme and it's like it's it's sad. It's like it's funny to them, but it's sad to me. It's like a grown person like seeing their teenage self not studying for the test and like banging on the window. It's horrifying as an adult. The kids think it's funny. And I'm trying to help her understand why that's so popular because it's it's it's it's speaking to a a universe of people who wish they could go back in time and make those smart decisions, but they weren't given the they weren't given the ammunition to do so. It was unfair of them. It was unfair to expect them to do that. So, that's what I I try to teach. Not just my kids, I do I teach at schools um and uh I do as much as I can. and my daughter and I are working on a little YouTube video channel that we hope to push out just for that reason. >> Children's Financial Network. We try to teach kids in fun ways using games we make on Claude things like opportunity cost and all that stuff. >> My last question for you is you live in New York. >> New York City. Yes. >> Yes. And people that was that was a very obnoxious thing that was when you ask somebody say New York and they go I live in Staten Island. Uh which I grew up in. I grew up in Staten Island. New York City. I'm very snobish there. Yeah. Yes. What >> do you ever played a status game? >> You have to up your car, your houses. >> I grew up, my mom worked three jobs. My mom cleaned toilets. Uh my dad worked two jobs. I remember when he used to come home from his first job, I used to be waiting for him with my baseball net and we'd run out in the street and play catch. And I remember waiting for the street lights to go on and being very sad and anxious cuz I knew they were about to come on cuz when the streets light street lights went on, my dad had to get into his car and go to his second job. And um so no, I don't but I don't I don't I don't want to, you know, I don't want to virtue signal here. I don't begrudge people who want to work hard and have toys. Um I uh I'm just not I I just I just don't um I I just I didn't grow up like that. So I uh it's just not important to me. Um but you know, I I I have a status of like wanting my daughter to get straight A's. That's my that's my status. So I pay for tutors and things like that. We we all splurge on on on things. Um you know, don't judge. Find out what's important to you. try to give back a little bit. It's the best you can hope for. >> That was a beautiful end. >> Yeah. Well, thank you very much. And uh I encourage everyone to check out uh John's daughter's channel. >> Oh, thank you. >> What is it called again? >> The Children's Financial Network. >> Children's Financial Network. And also, you were featured in the book Rigged, the true story of an Ivy League kid who changed the world of oil. We don't have time to go over that book, but uh >> this one. >> Yeah. What was your what was >> I was lucky enough to be in a place where I was tasked by the New York Merkantile Exchange to build the first ever oil exchange in the Middle East. >> Yeah. Okay. Check out that book. Check out his channel. Check out our channel. Subscribe. Thank you very much for watching. Thank you, John. >> Thank you.