NCI: Fed vs Bitcoin: Who will win?

NCI Fed vs Bitcoin Who will win.mp4

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Speaker 1 [00:00:00] By the way or by. 

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Speaker 2 [00:00:02] All right. Welcome please to get started with non consensus investing. I'm joined by Michael Turpin Michael Turpin. Super interesting background. Venture capitalist and serial entrepreneur. You started in New York. Angels. Actually, you're an investor. 

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Speaker 1 [00:00:19] In angels for angels. 

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Speaker 2 [00:00:20] Oh, any. Got it? Got it. And you invested in, you know, multiple unicorn multi unicorns like Pinterest. Then, you know, once you share the story, let's share your background. Go ahead. 

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Speaker 1 [00:00:32] Yeah. No, I did not invest in Pinterest. No, you're you're I think you're mixing a couple of the stories. Okay. I presented to the New York Angels, in 2013. Okay. And when I first got into Bitcoin and there was 100 people in the room, and, none of them were interested in Bitcoin, they kind of gave me this look like I was talking about, you know, I don't know, something from Mars. And, in ten years, at the end of the decade, the New York Angels, my friend Brian Collins, the chairman at the time. Yes, he actually invested in the seed round on Pinterest when it was a million and a half dollars and, you know, went public at 10 billion or more. And, when the when the New York Angels were asked what their biggest regrets, what they didn't invest in during that prior decade, number one was nobody other than him invested in Pinterest. They all passed on it. And, number two is they didn't invest in Bitcoin when I made my presentation in July of 2013, and it was $66. And the only comment I got because nobody asked any questions publicly, the only comment that I got was, a retired professor from Princeton came up and told me, I better run away as fast as possible because I'll get arrested. The only thing that the Bitcoin can be used for is prostitution and drugs. 

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Speaker 2 [00:01:48] Wow. Well, this is why this show is called non consensus investing. If you're non consensus and correct you can do well. And you know this is the classic example. So before we get into the story I know you're publishing a book called The Bitcoin Supercycle. And you know Michael is an OG Bitcoin investor. I met Michael at the Satoshi roundtable in Dubai. Think back in Feb. And I sat down with Michael and just unpacked his brain and is full of knowledge and wisdom, which I was actually into my memory in real time and my notes as fast as I could. And I said, we should share this, the world and, you know, get into your frameworks, and your history. But I guess before we get to Bitcoin, what was your journey as an investor up until then? 

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Speaker 1 [00:02:39] So, I grew up, in Buffalo, New York, you know, sort of, my dad worked at a factory. He was an artist. That's really the jobs you could get as an artist was working in a factory doing silk screening. He actually invented a few techniques, and, you know, grew up, traditional, sort of like, you know, working class, family and, you know, wanted to go and, be a writer. That's something that I thought I wanted to be from a very early age. And, so I, was able to get a fellowship to attend Syracuse University. And, and then, which is the top journalism school. I'm on the board now, since 2000 and, one of the top journalism schools. And, you know, that's really what I wanted to do was to write, and, you know, whether it's magazine articles, newspaper articles, books, etc. and, that got me into public relations because, after, you know, spending a couple of years after Syracuse, working in a small town daily newspaper, chasing fire trucks and interviewing, crime victims, I decided that the public relations was actually a cushier job. And, so I got into that with no training in PR other than being a writer, and, did PR for a couple of universities, went back and got my master's degree in fine and creative writing. Excited that even though I won some awards for my poetry, that, that was not a good career opportunity. Bestseller and poetry, you know, sells about 5000 copies and you can't pay the rent off of that. So, I then, you know, went into, public relations and, you know, was the PR director for a few university, a few universities, and, but my shingle up started an agency and decided that I wanted to do whatever was growing faster than the economy because I figured it all I had to be was average, and I could succeed. And I thought I did better than average. And so, the fastest growing areas, in the 90s were, medical technology and, and high tech. And both my brothers are high tech. My, my one brother, Mark Turpin, graduated from the MIT artificial intelligence lab. He actually studied with Minsky and, my other brother, Christopher Turpin. You know, got several degrees and, is now an app developer. So they were the kind of the geeky guys in the family, and, I was the writer, and, but I decided that, I could write about technology. And so I put a shingle up, started my agency, and, the 90s, that ended up, you know, being one of the top agencies to represent, the dot coms. And so I launched, America Online, greenhouse and, EarthLink and a whole bunch of companies that, you know, went public through the.com. I sold that firm to, Investor relations roll up because they needed more, you know, companies to go public. And they figured if they hired the PR firm for a bunch of them, then that would work. And then I did my own, startup where I had to raise venture capital. And it was called Internet Wire. It's now actually, and then we then partner with Nasdaq to, change the name to Market Wire and, sold out and, Sequoia Capital, it backed it. And, it's the first internet based press release distribution company, and it's now, half $1 billion a year, valuation division of Apollo and it's called Globenewswire is the new name. And so, that was sort of, part of my entrepreneurial journey. And I got into investing because in when I ran my PR firm in the 90s, there are a bunch of dot coms that, you know, couldn't afford my fees, but they wanted me to invest in them. And I was like, well, how about if I invest in you? But then you have to spend the money paying my fees. And so they were like, great. And so I ended up investing in about 30 companies. And, you know, very typical VC ratio. Most of them went under or they just became lifestyle businesses. But the five of the 25, the five of the 30, that that made it, I had A2X, I have three x and A5X, and I had a 100 x that made up for everything. And that's sort of like what drives the VC industry is finding that unicorn parallel distribution. So yeah. So that was, that kind of got me addicted to, the thrill and agony of, angel investing. And I probably invested in, I don't know, 5 or 600 companies over my career. Some of them, you know, in exchange for, doing advisory and marketing other ones, just because I thought it was a good opportunity. And, you know, I then moved from I sold that PR firm at the top of the boom, in, like 2000. And, then, you know, again, did mark a wire an accident that 1 in 2006 and, started a social media agency when that was sort of nascent in, 2006. And, and then crypto came along in 2013 and I, I, I consider myself blessed and cursed to sort of see trends early. And, you know, I got into internet and 93 when there wasn't much going on, but, you know, five, six years later, I had a lot of experience and a lot of insights and was able to monetize the bubble there. I got into social media initially in like 2001. It was able to, you know, kind of monetize the, the bubble there, decade later. And then, you know, I stumbled into crypto in early 2013. I actually got introduced to it in 2012, but I ended up sending someone to a conference where the first, bitcoin, exchange in the country trade Hill was presenting, and I went to a different conference, probably the most expensive conference I ever went to because I missed the chance of getting in. The Bitcoin one is $4 instead of $100. And, I asked, the head of my San Francisco office, you know, I said, I'm interested in this Bitcoin. Did you listen to them? They're like, yeah, they're smoking crack. This is never going to work. Whereas I know that if I had seen the presentation I would have been like, yeah, that's going to change the world. So, the few things that are in the 12 and May of 2013 was, you know, 30 times of value right now. 

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Speaker 2 [00:09:09] Great. And that's just the beginning of the story. He used the word bubble in three different use cases, internet era, social media and Bitcoin will come back to that. Of course. Bitcoin first time in its history achieving new cycle high before the happy day. I want to come back to that too. But before we do just three observations. 

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Speaker 1 [00:09:25] On I was just say. Great. I, I have a I have a new theory on that. And I know we discussed that was the first time that he hit a new all time high. It didn't because, really it hit a high for that cycle, right? So in other words, it was a new all time high, but it was for that cycle because, the having, you know, happens every four years. That's sort of what I have, this narrative about what I call the four seasons of Bitcoin. The original title of my book with the publisher like Bitcoin Supercycle. And that was part of the narrative as well, that I believe we are going to be entering into a supercycle in the next, you know, cycle or two, which is that when the diminishing returns that happens every cycle, stops diminishing for a little bit and, takes some it takes in account the fact that you're going to have a mess, you know, move of adoption that always happens in any new technology when you reach about 8% and they happen in cell phones. That happened in the internet, it happened. And and you go from 8 to 80% in about ten years. And that's when you move from the, you know, what they called in the, you know, the Crossing the Chasm and Jeffrey Moore's other books, the early adopters to the early mainstream. 

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Speaker 2 [00:10:39] Right. So let's, you know, one observation, your background, real quick pattern that I've identified several times in great investors. One, you're an operator, turn investor. Number two, nontraditional background. The worst thing you do to become an investor is go to Harvard Business School or get a Wharton MBA. And related to that, you also are in PR and you learn storytelling how to summarize, simplify. And I think storytelling is the highest skill you can have, you know, in life. I guess the last point there is, you know, you are a writer and clear writers, clear thinking, or anyone that's read Buffett's annual letters or Howard Marks quarterly letters and recognize the relationship between clear writing and clear thinking. So now help us unpack your framework for Bitcoin. You talked about the four cycles of of Bitcoin how for the four seasons of Bitcoin. All right. 

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Speaker 1 [00:11:32] So guys so I what I find it frustrating is that ever since I first got into Bitcoin in 2013. And I would tell investors you know as early as, you know the New York Angels were friends of mine. And I was telling them about this remarkable new opportunity called Bitcoin that was $66 at the time. And, nobody was interested. Nobody's interested. They were like, let me ask my broker how they say it's a scam. And of course, none of them had ever tried it. None of them ever, you know, read the whitepaper, had any desire to read the white paper when you read the white paper, it actually makes an awful lot of sense. If you if you're able to read other tech, a technological, you know, decks and this and that, it makes a lot of sense. And what I do in the book is I, I explain, I have an insight in 21 chapters for the 21, million Bitcoin, but that's divided into five books. The first book is where I actually talk about what Bitcoin actually is because there's so many misconceptions. You know, Elizabeth Warren got on Meet the Press and said, Bitcoin is just error. It does nothing. And that couldn't be further from the truth. You know, error does not allow you to spend an unlimited, virtually unlimited amounts of money, you know, from one party to the other without permission. And, I actually taken one of the chapters and I reprint the entire, you know, nine page white paper, and I annotated. So if you look at just the, the, the abstract, the first, it's 174 words. You know, it actually gives a pretty good vision that if you only read that about what Bitcoin is and you go, oh, this would be interesting. I then do a whole chapter on the cypherpunks and show how this did not just come out of out of thin air. It was a development that happened for a search for, you know, a better form of, money and money, you know, basically goes all the way back to fur pelts and, and seashells and, and every time that a society collapses, it's when, you know, the money gets sort of corrupted in some way, even with gold, which has been, you know, the leading form of money, for 6000 years, you would have, civilizations where they print gold coins and then all of a sudden they there are half gold and a half led, and they expect that the same value or by the end of it, when, you know, everybody starts, rioting and, and society disintegrates their gold plated, and then they, you know, go to someplace where they actually have real gold, you know, and it's just fascinating. And we're now in, in a world, you know, that we basically, you know, reconstructed the New World order after World War two with the US being the, you know, reserve currency for the world, you know, replacing, Britain's role that it had for quite a while, which replaced, you know, Spain had it, Portugal had the Dutch had it. I mean, each of these, you know, sort of, world leaders in the economy had their moment in. The sun, and it did not last that long. And, you know, we are now at a very precarious point with both China and India and on the rise, where, we have, abandoned, as a society, hard money. We're just all in, Keynesian economics instead of Austrian economics. And, Ellen Green, Stan and I, I quote him in, in my book, I started a chapter with a couple of, quotes that have to do with the chapter. He said in 1966, I believe it is, that, the world needs gold, as protection against governments. Just printing money. He said without gold, there is no protection from governments stealing wealth. And, you know, several years later, that's exactly what happened when Nixon abandoned, you know, the tenants of the, of the Bretton Woods, deal where everything had to be exchanged for gold with $35 an ounce. 

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Speaker 2 [00:15:23] Right, right. So what. 

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Speaker 1 [00:15:26] Does it matter of a gold? It was probably best said, in the, you know, book, the the Bitcoin standard by, civilian analysts is a Lebanese economist. He put that book out in 2018, is now sold 1 million copies. So, obviously someone's listening to that message and he does a great job of explaining why it is that, you know, Bitcoin is is is a harder money than what I refer to as, his, his thesis. And, don't spend that much time, other than referring to the book about its truth, but, so it's let's, let's. 

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Speaker 2 [00:16:00] Let's unpack your framework. Let's assume you've got an informed audience that knows digital assets, Bitcoin. They can read the website. 

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Speaker 1 [00:16:07] I actually go for an uninformed audience. I go for an informed audience that understands at least one. Investing is because I find that what's frustrating to me is I will have people, you know, going back to when Bitcoin was $200 and it's gone up to a thousand and went back down to 200. It stayed around two 300 for a whole year, 20, you know, 15. And and I was telling people that, you know, this is a really good time to get in because it already proved that could get over $1,000. It's going to do it again. And I talked about the cycles and they're like, I'll ask my broker or no, it's a scam. It's going to zero. And they just have no. And I think a lot of was they just got bad information about what it is and the fact that there's cycles and they understand stock market cycles, they understand real estate cycles. And yet unless you have a really provable framework to show them, they don't believe that there are cycles. 

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Speaker 2 [00:16:55] Let's go there. What are the cycles and what is your framework. And is Bitcoin meant to be modeled or is meant to be rotated into and out of given those cycles? 

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Speaker 1 [00:17:04] So, you certainly can do well, hodling, but I believe that you should be, at a minimum trading twice every four years. And that is to basically go in and sell, whatever is not in your long term holdings. And some of this, you know, is around, you know, taxing taxation on short and long term, you know, investments depending on your jurisdiction, and your citizenship, residency. But for the most part, you've got a situation where every four year cycle, I break it into four seasons. Every four year cycle starts with Bitcoin spring. That's when I like to say the seed of the having, is dropped. Right. So, so the four year cycles I see the question here they are roughly four years. They actually on average have been 46 months. It starts from what having it goes in the next. Having they have things are actually 210,000 blocks. So then that time to be four years. But they're roughly four years because the blocks are supposed to be designed. They happen every ten minutes. And the difficulty will will go and try to keep the blocks as close to ten minutes as possible. If the developers too hard and it takes longer, it'll ease up on the difficulty and make it, closer to ten minutes. If it's less than, that will make it harder. And the more people who are mining the the stronger their, mining gear. That is what then, is built in algorithmically to make, the, the algorithm harder. And the algorithm is basically it's based on this thing called a nonce, the number used only once. And so in the last question about like, you know, what is the square root of 742 or whatever? I think when there was difficulty, one, which was the first year and a half, is probably a question like, what's one plus one? And any computer can answer that. But by having it calculate the difficulty to, as I say, solve the block and seal the records that are in there. They want to make that difficulty stronger than the amount of, of power that would take to defeat the network. And so it's a brilliant, you know, addition to what had developed before over a decade or more. In other words, there's all these things that developed slowly. There was, the Merkle root. There was, public key cryptography. Some of this stuff dates back to the 70s and 80s. You typically MIT and Stanford, and. Berkeley. And, you know, these these concepts develop slowly. There were a lot of really good frameworks in the 80s and 90s, but they were all theoretical. Nobody built anything. And Satoshi was the first one to actually build it. He actually built something very similar to what David Shawn and had written about in the early 1980s, in his PhD paper at Berkeley. In 27 years later, they made one change, which was, the proof of work, and Bitcoin was born. And it worked. 

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Speaker 2 [00:19:54] Right. Was it is a fusion of multiple interdisciplinary concepts, from cryptography to messaging problems to how do you solve double spend. And, and an incredible, accomplishment. Now, where are we in a cycle now, especially this is the first cycle we've had. Bitcoin hit a price cycle high ahead of the having credit. What's the significance of that, by the way, that one of the point is that what I have see from my senior cross asset class investors, markets in general are accelerated. Timelines are compressed. I can tell you many a story where things should have taken place over two years, and the ramping and four months. 

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