Innovation as an Asset Class With Mark Yusko
Listen in as we are joined by Mark Yusko, CEO & CIO of Morgan Capital Management, LLC, as he discusses “Innovation as an Asset Class”. Most people think of stocks, bonds, currencies, or commodities when thinking about classical asset classes. And while that's certainly true, those wouldn’t exist without innovation, right? From Bitcoin to AI, there's innovation all around us.
What does that mean for the Fat Pitch?
RECORDED JAN 20, 2023
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Mark Yusko: 0:00
In the old days, I want to know about the Argentinian election. I wait for the New York Times to send someone to BA, write a story, send it back, edit it, get it out three days later, find the store. Today, I go online on Twitter and watch a periscope people standing three hours in the rain, chanting mockeries name that's better, made information bidirectional, and busted open the monopoly of all of the people who controlled information. So media, commerce, all that wealth went from centralized to big tech. So the internet web one busted that monopoly. Web two, which is the mobile net was about ubiquity. Right? Always having accent like, I literally have bought an airplane tickets sitting at a red light.
Paul Barausky: 0:59
Hello, and welcome to the fat pitch Podcast, the podcast where every week we bring you interviews with thought leaders, legends, luminaries, and even a few lunatics from the world of alternative investing. I'm your host Paul Borowsky chief distribution Officer of Sealy investment securities and every week I'm joined by my co host, Clint Sorenson, founder of wealth shield. What do we mean by that pitch podcast? Well, I bet everyone's heard of Ted Williams, one of the greatest baseball players of all time, Ted famously described his approach to hitting as waiting for the fat pitch. What he meant was that he would only swing it pitches that were in the strike zone, and were exactly where he wanted them. In other words, he was willing to be patient and wait for the perfect opportunity to take action. Williams knew that swinging at every pitch, even those outside the strike zone would result in a lower batting average in missed opportunities. But by waiting for the fat pitch, Ted was able to maximize his chances of success. And he certainly achieved extraordinary Hall of Fame results. That philosophy can be applied to many areas of life, including investing where Warren Buffett, the legendary investor and businessman also use the term fat pitch to describe his approach to investing. Just like hitting he believed that the key to successful investing was in is to wait for the right opportunity to come along and wait for the perfect Fitch. In Buffett's view of fat pitch was a rare and undervalued investment opportunity that had the potential to generate significant returns, he would wait patiently and still does for these opportunities to present themselves and then take decisive action when the time was right here at the fat pitch. As I mentioned, every week, we're going to have a chance to chat Clintonite with fantastic minds from across the spectrum of investing. We don't know if it's the fat pitch, perhaps they're going to suggest to us that it is time for the fat pitch. But I think you're gonna have a lot of fun as we do each and every week listening and talking to some of these terrific opportunities and we'll find out is it a fat pitch or a ball outside the strike zone. Welcome to this week's edition of the fat pitch podcast on your co host Paul Borowski, Chief distribution Officer of Sealy investment securities, and I'm joined by your other host Clint Sorenson, from wealth shield. Many of you may know the fat pitch podcast is all about looking for that fat pitch across the plate and having the patience having the eye to really see if that's what it is. Every week we make an attempt to bring the you legends, luminaries and thought leaders from a wide variety of investment disciplines. Clint heard me say everything from cold storage to cannabis and everything in between. Clint wanted to tell everyone about this week's special guest. Yeah, thanks, Paul.
Clint Sorenson: 3:56
And, you know, I just think it's an honor that Mark yusko has decided to join us for this week. He's been a friend manage the Carolina endowment and really did wonderful work for us, which is my alma mater, as you know, Paul, and spent his time and then damnit world, you know, launched essentially a fund to help bring the endowment style of investing to individuals into advisors, and now he has an incredible firm Morgan Creek. He is really a pioneer, a great thinker, a market historian and his knowledge and memory of numbers and facts is astounding. So
Paul Barausky: 4:27
I saw that firsthand a couple of weeks ago, so I think we're gonna go with thought leader and astounding memory and
Mark Yusko: 4:33
look, I appreciate that. I appreciate the kind intro and Paul Thanks for hosting and again, thanks for hosting in Dallas had real fun at your event. I am wearing the Carolina blue today. I'm repping for the school. I'm not a Carolina grad but I played one on TV for seven years. But I am making jealous I am going to what's called the bench seat dinner tonight. So dinner with the team and really sad it's an annual event for friends of the program. And then, you know, when I left UNC, and I asked for one thing, I said, Can I still buy tickets? You don't have to give them to me, but can I still buy them? And they're like, No. And I waited for the hahaha. Like, I did generate a billion dollars of value for you, but, and there was no hahaha. It was like, join the Rams club and earn your points like everybody else. And my wife looked at me and said, Get me my damn tickets cuz she is like upper Ashley ultimately. Okay. So we did endow one of the players scholarships, and we love the heels. So stay tuned. Yeah, tomorrow. We're gonna
Paul Barausky: 5:39
turn this into a sports podcast this time around. I went to Penn State just see you know basketballs and abysmal men's sport there. So I've always been a Carolina fan. And before we move on from basketball, you spent a long time at Notre Dame. And of course, Mike Brey one of the top coaches for winning at a single school just announced he's stepping down. Yeah, we
Mark Yusko: 5:59
thank Mike for his incredible service. I mean, a guy that did it the right way. Incredible person and recruiter and great, great kids, you know, cm all over, you know, NBA post NBA on television, you don't read about him in the tabloids. Mike did it right. We're grateful for his service to our latest universal since
Paul Barausky: 6:21
I only met you through Clint not too long ago, but it feels like quite a while ago, with Notre Dame be in your background there. Can you give a little broader scope of your background, Clint mentioned that you have an endowment background and he brought that to the investing public. So
Mark Yusko: 6:36
the short version, although I don't do short, well, everyone who knows me knows that. So it's gonna be hard for us to stick to the 3040 minutes. But you know, the quick and dirty is, you know, I grew up on the Left Coast. I went to three high schools, I hated my parents, but I've forgiven them now. But it taught me a couple of things helped me be resilient. And it actually taught me how to meet people I haven't met but you get to know people. But I went to school to be an architect. I wanted to be Mr. Brady from The Brady Bunch. Young people have no idea what I'm talking about. There's a show on TV. And I wanted to be that guy. And my parents were not college people. So my guidance counselor said here are the great architecture schools. And it was UVA rice Notre Dame Wash U. And thankfully, I never visited UVA. Because had I visited UVA no way I would have gone to South Bend. I mean as much as I love Notre Dame, no way. But I ended up at Notre Dame loved it. I dropped architecture after a semester didn't love it, tried engineering hated that ended up pre med, graduated 1985. If you're a pre med graduate, and you decide not to go to med school, you can do two things. You can be a consultant in healthcare, got a job offer that or you can be a pharmaceutical sales rep. I'm not six, four and handsome, not going to be a pharmaceutical sales rep. So the guy who is going to hire me as a consultant said, hey, you know, you have no business classes, go to business school, back then you could still go to business school right out of undergrad. I did that with Chicago. And then I just took the first job that was offered. I got a job in insurance company. And I had a happy accident, the guy who's doing investments, retired, and I took over and I was managing a bond portfolio. And then I left and went to an equity firm run by two professors called disciplined investment advisors, where I learned the most important thing in investing is to invest without emotion, which I'm sure we'll talk about and discipline. But then we got the call. So back to sports. Lou Holtz famously had a lifetime contract at Minnesota unless Notre Dame called Notre Dame called him out there was awesome last national championship for us when he was coach a gazillion years ago. 88 Long story short, I had the same thing. I worked for two guys. We had a billion dollars back when a billion dollars was a lot of money. This was the first quant fund that spun out of the university. We had a machine the VAX computer on Northwestern campus. And we were the first customer of copy stat. And so we got the tape first. Literally, we got the old tape on Friday, they would send the rest out snail mail, and we had a four day Headstart to run screens, and buy stocks, value stocks, and I would stay there forever, because they didn't pay me anything because I was a young guy, but eventually I probably would have made some money. But I got the call to go back to the alma mater and I didn't know why I wanted to go back. But again, happy accident. What I learned is I used to think investing was all about picking stocks and bonds. Nope. Investing is about asset allocation is about where you invest. Do you invest internationally or domestic? Do you invest in stocks or bonds in private equity and venture capital? You know, energy, natural resources, distress, not distressed growth. And that epiphany for me was big. And I'm sure we'll spend more time talking about this and I told him to short but this is important point. I had my Real epiphany that changed my life. And back to Colin's point about innovation as an asset class and fat pitches. You don't get very many fat pitches. But as Warren famously said, you don't have to swing. And you can wait and you can wait. And so in 1996, we got a massive fat pitch. And look, it took a little bit of skill, not a lot of skill, but a little bit of skill to recognize it because Scott Malpass who is my boss are two of us at Notre Dame, and we went up to California, and we spent a week going around trying to get capacity with venture capital funds. And again, 9094 95 Sequoia was not a brand name. Kleiner Perkins was not a brand name has called Kleiner Perkins, Caufield Byers. I always feel sorry for Caulfield and Byers because no one ever talks about them anymore. But long story short, Sequoia was about to split. Don Valentine, who famously invested in Intel had hired this guy, Michael Moritz. Michael was a Wall Street Journal reporter, and Don had met him and hired him. The other partners were like, WTF Don, we're the future the firm, why are you hiring this kid? He's never done a deal. Now anyone knows Michael Moritz. He's one of the great venture capitalists of all time. First deal Yahoo. Second deal, this little company called Google. And we give them 5 million bucks. They put 10% in this company, Google actually remember the board at Notre Dame's. And that's a stupid name. What do we need other search engine? There's web crawler. There's Alta Vista, there's asked Jeeves, we don't want the 21st search engine. What they didn't understand was Larry and Sergey weren't building a search engine, they were building a new form of information management called index. And here's a factoid most people don't know. There are 1.7 billion websites in the world. Half of them are owned by Google. Because every time you type a question into Google, if it's already been asked, which is most questions, it goes to a website that has all the information. If it's a new question, they build a new website and find the information to answer your question. And so that's why it works. And that's why by the time you're done typing, it knows where to send you. And so they transformed information management, the same way that blockchain is transforming Value Management, which we'll get to, and that's the new fat pitch. But the fat pitch then, which was kind of hard to recognize, was this thing called the internet. And I don't know if you ever seen the clip of Katie Couric and Brian Gumbel.
Paul Barausky: 12:37
Yeah, what is this? How do you combat? Yeah, well, cream even say, Yeah,
Mark Yusko: 12:45
it'll never be more important than a fax machine. Little more important than fax machine. And we put a whole bunch of Notre Dame endowment. And you know, that 500k That went into Google turned into 200 million cash. Okay, there should be quad at Notre Dame called the Google quad. So 400 times our money. And the year I left in 98, to come down North Carolina, that next fiscal year, Notre Dame was the best performing endowment in the country. Not because Scott and I were geniuses, but because we were at least smart enough to give the money to these guys who are swinging at Fat pitches all day. But the thing about fat pitches, unless you are Ted Williams, who could like see the seams on the baseball, they're hard to know, when they're coming. And so what you have to be willing to do, and it's my pin tweet on Twitter, at Mark yusko, if anybody cares, is you have to invest in something that you believe in, before others even understand. And that is the key to long term wealth creation and innovation, as an asset class, is the most important lesson of investing of all lessons of investing.
Paul Barausky: 14:08
Yeah, when I hear you say that the baseball analogy I think of is, you know, the pitcher is going to throw something and you're sitting waiting for it. And that's when you see a guy hit a titanic homerun and the announcer says he must have been waiting for it and the pitchers is because I prepared because I knew it was there and I sat and I just dumped on it. And that goes back to your asset allocation thought,
Mark Yusko: 14:33
you know, that act of jumping on it. If you're wrong, you strike out. And so one of my favorite stories is Babe Ruth is getting interviewed and he's smoking a cigarette and he's having a drink and they say, you know, babe, how you feeling? Yeah, you struck out four times tonight. PSA is awesome. Like, what are you talking about? says I'm not much closer. My next home run. Right, man. I have to start Take out a certain number of times in order to hit a certain number of homeruns. And if you don't swing in that way, like if you don't jump on it, you can't hit a homerun. And so it's that ability to recognize the pitch to be right where you swing the plane and the speed. And then there's the magic, right? And the flip side of that is Ichiro. Right. I grew up in Seattle, and this legendary unbelievable guy, he would joke, right? The only time you ever hit a homerun is a complete mistake, because I'm trying to hit singles every time. And he was notorious right? Infield singles, because he's left handed and he was just so fast. But occasionally he would swing the bat and miss and he'd hit pop up and it would go out and you'd be like, Okay, I hit a homerun. But he was a talented.
Paul Barausky: 15:48
Yeah, I think he was talented enough, correct me if I'm wrong, I think he's somehow magically hit a homerun in his last game.
Mark Yusko: 15:54
I think that is that you're good. You're good.
Paul Barausky: 15:56
I think just to show everybody hey, if I want to, I could also do this. I could. Well, it sounds like what you look for as an investor. I mean, we're not infallible like each row, it's a heck of an on base percentage. That's for sure. You just mentioned innovation as a fat pitch investment. I've heard you talk a lot about it, Clint brought it to my attention. First, you want to pull on that thread?
Mark Yusko: 16:17
Yeah. So innovation. Again, I believe it's an asset class, right. Most people think their stocks, their bonds or currencies in their commodities. And that's certainly true. And those are the four classical asset classes. But I will contend none of those exist without innovation, right? Innovation allows you to create companies, which issue stocks and borrow money and create debt, and better be priced in a currency. And then we have commodities that become the raw materials of those goods and services. And so, to me, innovation is trying, I was talking to someone earlier about this, on another show that it's the human condition to be positive and optimistic and innovative. And this guy was lamenting the fact that you know, AI is going to kill all these jobs. Like, right, the same way that automation was going to kill jobs in the same way the steam engine was going to kill jobs in the same way that railroads were gonna kill jobs. We have more jobs today than any time in history. Fact, we have more jobs today, despite all the jobs gone to China. I remember Trump came down to North Carolina when he's running. He's pointing at this woman, I'm gonna get your job back. Like, No, you're not her jobs never coming back. She makes furniture. It's never, you may get her a different job. That's different. But you're never getting her job back. Not ever. And so the human condition is positive. And I always joke about who was the third guy? Because back then it was guys guys were hunter gatherers. And the women, you know, were the nurturer. Who was the third guy who went out to try to get a mastodon with a spear? Because the first two never came back. So who is the third guy said, oh, yeah, I'm gonna do this. And he figured out if you hit him right here, and it goes up through the head, he kills optimism, right optimism. And so it's a long answer to what's innovation. Innovation, is where through necessity, or creativity, or mostly through necessity, right, I need this, therefore I'm going to create it, you build something new and you innovate. And I have live and I'm luckiest guy on the planet amongst all of us who are privileged to live in this time, where my whole life was the series of innovations that I talk about all the time, what I call the 14 year cycle. So my dad sold and installed mainframe computers. So in 1954, there was an innovation out route 128 in Boston, which was the center of the universe. The center of the universe in tech was Boston outside of Boston, Dec. Wang, IBM Digital Equipment Corp deck, and he said, no one will ever want a computer in their home. And then his company was bought by personal computer company, Compaq, which is kind of funny. But what's funny is 54 the mainframe was created. And you had this four year window where there was massive opportunity to make huge amounts of money. I mean deck was founded with 70,000 of venture capital, he made 1000s 10s of 1000s of percent return, IBM DAC Wang borrows all these great investments, and then there's a crash. And then 14 years later, there's an innovation out in Silicon Valley around the microchip, and Don Valentine back Fairchild and Intel, and they did pretty well. And you had microcomputers and sun and those things marked up and then 14 years later, up in Seattle where I grew up. Now, it's always 14 years, by the way, why 14 years? Because young people invent everything, right? It's not all people because old people, right? We're stuck in our ways. We were worried, don't even know what they don't know. Right? They don't know that you can't create a new company. You've heard that people would want a personal computer. And most of my friends from high school don't work anymore. They're smart enough to go to work for this little company called Microsoft. I wasn't that smart. Now I defend myself. If you ever seen the picture, the original microsoft 11. Google it tonight. They were a motley crew right now. I shouldn't make fun of them. Because they're multimillionaires. I'm not. But there are a lot of people wouldn't go to work for them. And I was going
Paul Barausky: 20:23
back in here and typing to pull it up. Yeah, to show everyone the picture. The
Mark Yusko: 20:27
amazing thing is, you know, they built an amazing business. And Steve Ballmer, his mom said, Honey, why don't you go to work for that company? No one want a computer in their house. He's 18 billion reasons. He was right mom was wrong. There it is. There it is. And come on. Now we all look bad in the 70s. But come on, work with this group.
Paul Barausky: 20:47
Paul Allen looks like he's gonna go open for Blue Oyster Cult. That
Mark Yusko: 20:51
is a motley crew. The other funny story about this is Look how young tray could by the way, this is tray. Bill Gates, do you say Bill Gates in Seattle? You're talking about the dad, not the third tray. So tray grew up. And the reason he's super rich, and not this couple in California? Is IBM need an operating system for their new personal computer? They flew to Seattle, they met Trey. And they said you're the coffee boy. It's your boss. And they're like, No, I'm the boss. Hit No, no, you're not. We're out. And they left. And they went to California to meet the couple that invented CPM, which was a much better operating system. Right? Never crashed, far superior. But the guy who invented said sign my NDA. And they said we're IBM. We don't sign NDAs. He said, Well, I don't want meet with you. And they went back Seattle and signed Microsoft. True story. So But Steve Ballmer, his mom was wrong. And people have a computer in the house. Right? You have one I have whatever hazard. So 14 years later, the internet 14 years after that the mobile net I remember being back in Seattle at Craig macaws house, his family office, very famous cellular pioneer, and asked this guy do you think the mobile net can be as big as the internet? Sec. Mark, you kid me ask them if they want a computer like whatever assets they want a phone like I already have two. I don't need another one. Yeah, the mobile net is going to be bigger than the internet, which it has been. So web two is bigger than web one. Well, now 14 years later, which is next year 2024 Is the truth net, you know, the age of blockchain. And it's going to be bigger, better, faster, stronger than web one and web two. It's the greatest wealth creation opportunity. I'll see in my lifetime. It's the biggest fat pitch we're gonna see. And you know, that's where we are.
Paul Barausky: 22:39
Take us You said truth net. of follow up to drag is
Mark Yusko: 22:49
the internet is the internet, because it was the interconnection of information. And what the internet did is it made information bi directional, right in the old days, and you go all the way back. So for hundreds, probably 1000s of years, the church controlled everything. So you'd go to church once a week, and you'd be told by the pastor what to think how to think you didn't read and write. That was what you did. Then the printing press busted that monopoly. And you could learn to read and write and it took a while. But over time, then government through the media, government owned media and state controlled media, like ABC, NBC, CBS, when Dan Rather than Walter Cronkite will tell you the same stuff every night at six o'clock. They control everything. And the internet. Busted that open like you think about it. The old days, I want to know about the Argentinian election. I wait for the New York Times to send someone to be a write a story, send it back, edit it, get out three days later, find the story. Today. I go online on Twitter and watch a periscope of people standing three hours in the rain, chanting mockeries name that's better, made information bidirectional, and busted open the monopoly of all of the people who controlled information. So media commerce, all that wealth went from centralized to big tech. So the internet web one busted that monopoly. Web two, which is the mobile net was about ubiquity. Right? Always having accent like I literally have bought an airplane ticket sitting at a red light. Just think about that in the 30 seconds waiting I can buy a ticket on Travelocity put the phone down drive. You know, that happens. And so that ubiquity always on and always at your fingertips. You got any question asked Siri whatever. And that created a lot of wealth.
Clint Sorenson: 24:54
Isn't this just everything you mentioned? Seems like it's just another step decentralized from the previous day. But it's another step of information
Mark Yusko: 25:02
and the decentralization of information is valuable. But what's the biggest industry in the world? Financial Services, money by orders of magnitude, right? And people think, oh, stocks, stock markets, big bond markets way bigger, like orders of magnitude bigger. And then the currency market orders of magnitude bigger. And then derivative orders of magnitude bigger financial services. Every SEC
Clint Sorenson: 25:35
creation and innovation thing again,
Mark Yusko: 25:37
right? Every
Paul Barausky: 25:40
thank goodness, I didn't. I was gonna say religion was
Mark Yusko: 25:43
not well, yes, the oldest Yeah. But
Paul Barausky: 25:47
this form of social control. She says anyway, yeah. second
Mark Yusko: 25:50
oldest.
Clint Sorenson: 25:54
About the 3000. Yeah.
Paul Barausky: 25:56
But our PG 13. Continue.
Mark Yusko: 25:58
Here's the crazy thing, right? Is every year 7 trillion with a T trillion. And I always remind people that $1 trillion is three of us. I've sit here for 31,710 years, should be pretty unpleasant. We have spent $1 Every second, that's a trillion. So every year seven of those babies are wasted. Because of legacy financial systems using legacy technology. 7080 year old technology like swift and Ach, and it's all and I used to use the word Cabal. Someone told me that's anti semitic. I'm like, What do you mean, anti semitic? I guess it's a trigger word for people to Jewish they thought I stopped using Cabal. So what should I use? said we'll call it a cartel? Well, I'm just gonna piss off people in Latin America. So a group of people, a small group of people for 800 years, has run banking and financial services. Right? In the old days, I want to lend Clint money. I lent him 100 bucks, he comes back to pay me 110 with interest. And I wrote in my ledger, I'm sorry, Clint, you owe me 220. So you only gave me 100 says right here in my ledger. And I've the only ledger your word against single entry accounting. So 800 years ago, the muddy cheese came along and said, No, Clint, you keep a ledger mark, you keep a ledger and with benevolent Monday, choose for a small fee will determine that the ledgers match. Okay. Then they said, Oh, by the way, Mark, you don't want to carry those sacks of gold around. So why don't you deposit them with us, and for a small fee, when you want to send some to Clint will facilitate that for a small fee. And the small fees add up and now $7 trillion a year. So now, we have technology, which is the trust net? So how does financial value transactions occur? Trust, I trust that the money I put in the bank is there. Like I have this nightmare. I'm not making this up. Doesn't happen. Like every day, every day. But a couple times a year, I wake up and like I met the ATM, I punch in my code and it says zero. Holy shit, how would it prove it's not zero? I don't have a statement. I'm an if statement. Here's their word against mine. So I have to trust them. And when
Clint Sorenson: 28:22
you watch when you watch the World Economic Forum, and they're talking about a cyber attack, yes. Yeah. I started freaking out. I sent you a DM about it because I was like, oh, no, they're smart. You gotta
Mark Yusko: 28:36
do well, but imagine being in Cyprus in 2012. And you wake up, and you go to the bank, and they say, Oh, I'm sorry. $1. Now you have 25 cents. What do you mean? Well, we took the rest when you took it? Well, it's ours. People don't know, right? When you put the money in the bank, it's the bank's money, you have an IOU. And then I use good 99% of the time, but that one percents a bitch. And so that's where we're in a world where we trust and we trust these financial institutions. And most of the time that trust is valid, but when it's not valid, it's a bad outcome. Well, now we don't need trust, because we have truth. What blockchains do is they establish a triple entry accounting ledger. The third ledger entry is public, encrypted, secure, permanent immutable. So in the old days, I want to send Paul I'm gonna send you $1 I have to have a bank account, you have to have a bank account, I send you the dollar, they take their you know, 20 30% fee, and you get your dog for 70 cents on the dollar. Okay, today if I want to send you a Bitcoin, I don't have to beg beg beg count. You don't have to have Bandcamp we have a ledger that says three things. One, Mark has a Bitcoin show back to Mark sent it to Paul J. Three, Paul has a Bitcoin. Now immutable, permanent and reversible. And it was all I don't like that. Why, right? That's truth. And people say well, there's different versions issues. No, there's not there's truth, saying there's opinions. But there's truth. There's one truth. And truth is really important. And for the first time, we can establish truth like, technology had this flaw, until 2009. Where think about albums, I grew up listening to record albums as black vinyl discs, right that you play. I had a foreigner album, double vision. I lent it to a guy, Lucky Rodriguez in college. And he never gave it back. I'm still bitter about that. And somewhere in Texas, he's got my foreigner album. Now, a couple years later, Michael Dell comes along and says, you know, I can convert those vinyl discs into mp3 files, and you can play on this little stick. And Napster was born. So now I want to share double vision with Paul, I make a copy, send him a copy, he listens to the copy, he's happy, I'm happy, who's not happy. The record industry not happy. They want him to buy it, or they want me to replace my album by another one. And so what do you do? Hierarchy Corporation Napster, one CEO, one home office, one server, you arrest the CEO, Sean Parker in jail, and you blew up the server end of Napster now, Satoshi whoever he she they comes along does night and says I can create a permanent copy on a decentralized network where it's not one computer, but it's 1000s of computers. And so if you kill one, can't kill them all. And now, all of us how do we get our music, we stream music independently, and we all pay for it. And the people who actually wrote the music get paid, which is kind of nice. So the middle people are losing all their power. Same things can happen to financial services. If I want to stream value to you, I'll be able to do that I don't have to pay Bank of America or JP Morgan. And so why does Jamie Dimon get up on WEF? And say, Oh, it's a Ponzi scheme. And it's terrible? Of course he does. Because he's being disrupted. And it was mad that he's you know, it's pissing on Bitcoin? No, no, flip it around. You have one of those powerful people in the world. Whether you love him or hate him doesn't matter. He is one of the most powerful people in the world runs one of the largest banks in the world. You don't have to love them. But you have to acknowledge is one of those powerful people in the world. He's got 10 minutes on television from this love fest in Davos. He's talking about Bitcoin. You can judge the quality of an idea by the quality of its detractors. If nobody cared, it's not a good idea. If stupid people care, it's not a good idea. If a really powerful smart person cares, you got a really good idea. Because it's causing them stress,
Paul Barausky: 33:01
disruption, you
Clint Sorenson: 33:02
know what I love about blockchain? You know, Bitcoin being an expression of that in financial services, is, again, like I told you, I credit you with helping me see decentralization first, and I can't unsee it, I see it everywhere. It drives me crazy. Now to this point, we can start to think about blockchain. And what it really has the potential to change. It's everything, everything everything, it puts the power of creation, innovation, back to the individual node for everything, you own your content, you and your data, like you take this as far as you want to take it. But it is an incredible platform. So I'm gonna play devil's devil's advocate and just ask you to think through what disrupts that platform. One thing, obviously, idea would be central like as, yes, centralization in it, because that's, again, back to the trust versus
Mark Yusko: 33:55
truth, trust versus truth. So a couple of really important questions there one. Decentralization is decentralization, very different than centralized activities. So if you think about financial services, there's a spectrum and there's a transition. Traditional finance banks, insurance companies, brokerage firms, using analog pieces of paper and electronic use IPs, to sci fi, centralized finance, coin base, block phi FTX. exchanges, and basically pseudo banks, financial services, companies, digital financial services companies, and then there's defy decentralized finance, right? So you have to think about them differently, in the sense that every saying, well FTX proves that this is bad. No. FTX proved a couple of things. bad people do bad things. And that's been going on for centuries. As long as there's money, bad people are gonna steal it. It also proves that centralized institutions, banks, financial services, brokerage insurance has a risk. One of the risks is related to leverage if you get over leverage if you don't match your assets and your liabilities you can go under. Here's a stat that you know, it's funny. since the global financial crisis 538 banks have gone bust. No one's talking about that 538 538 banks have gone bust. FTX was just a virtual bank, right? They were a virtual bank. And their assets didn't match their liabilities because a couple of people stole the deposits. Right
Paul Barausky: 35:37
we heard was the prosecutor lawyer just basically said, hey, at the end of the day, new technology, old fashion fraud
Mark Yusko: 35:44
old fashioned Charles Keating, right savings and loan from the 80s or the bad guys doing CDOs like orange MAN Angelo Mozilo doing the bad stuff with mortgages and how
Paul Barausky: 35:58
you can't derive the innovation you've talked about, because there's always gonna be some bad actors that find their
Mark Yusko: 36:04
way crypto failure, right? The tech Exactly. Just fine. It wasn't a decentralization, failure, defy bad actors. Fine. It was a bad person doing bad things. And look, at the end of the day, it's going to come out. This was a really bad guy. And it'll really come out that it wasn't him. Right? I'm telling you right now. Sam Venkman, free, and Caroline are the masterminds of nothing. They're useful idiots, way down in the totem pole of the bad people doing bad stuff. And it goes all the way to the tippy top of the deep state that everybody's like, Oh, it's not real, yet is. So not time talking about it today. But all you got to realize is do a little work on who Sam's parents are, and what their jobs are, and who they've worked for. And what to do a little work on who Caroline's dad was. But back to the fat pitch, because this is the fat pitch podcast. And we've rambled a lot, which is what I'm trying to do. And I'll come back another time. But the fat pitch today is two things. So one is this evolution of technology, this 14 year cycle is going to happen. Blockchain, right the technology, which is an operating system, for the Internet of Everything, were all things of value, every stock, every bond, every currency, every commodity, every house, every piece of art, every collectible car, everything of value will eventually be digital will be tokens, which means a record in a database, that's all a token is it's a record in a database. And instead of being centralized, like Sun Microsystems and COBOL, and Fortran and C++, it will be run on blockchains, which are operating systems the same way that the mainframes run on COBOL. Today, as we're speaking visa processes, all their transactions using COBOL. On a mainframe computer, and when I ask them why they think well, it's kind of like as Mote because no one knows how to hack COBOL. He said, The only problem is when it breaks, I've got to put on a light at the Sunnyvale retirement home and get some 80 year old to come fix it because no one knows how to code. And he's not lying because my 84 year old dad can still code COBOL so the second thing is mainframe general COBOL microcomputers ran on Spark, personal computers ran on DOS and Windows, the internet runs on TCP IP, we're using it right now to communicate. The mobile net runs on iOS and Android, mostly Android 80 plus percent. And the trust net or the truth net runs on blockchains. So that is inevitable. It's the greatest wealth creation opportunity we're gonna see. And there are myriad myriad ways to invest in it, and happy to come back and talk about assess the biggest fat pitch. So I'm gonna spend the rest of my career and it's amazing. The Second Fat pitch is the distress that was created by the worst year in market history in terms of the 6040 and there is a huge amount of distress out there people who got over levered and assets are trading at now, you know, kind of cents on the dollar. And they're going to be a lot of ways to play that. The challenge I see is people think the fat pitch is the Fed pivot. That is not a fat pitch, right? Because not raising rates is not cutting rates. And what we need to go back to the craziness of ridiculous multiples and mean stocks going up every day is again fiscal irresponsibility, and I just don't and monetary responsibility which I just don't see happening. So if people are hoping and hope, by the way, not investment strategy, it's a four letter word. If they're hoping that a Fed pivot is going to bail them out, and they can keep pressing these levered long Fang ish. That I think is a mistake. But there are some really distressed value assets out there that I think people should be looking at. So those are the two fat pitches I would focus on. Well,
Paul Barausky: 40:23
this was absolutely fantastic to have you back out anytime, because I want to get into
Clint Sorenson: 40:29
all kinds of stuff,
Paul Barausky: 40:30
make requests. Now, we're going to sit on these two fat pitches, see if it's the right time to swing and you come back, and we'll talk all about AI, because that's what's in the news right now. See how that ties that? How's that for a deal?
Mark Yusko: 40:44
Yeah, no, I love it. And again, to tie it all together. You know, one of our big things is, you know, AI is also an evolution of this tech power. And it combines with blockchain and something that we actually coined the term blockchain intelligence. So we'll definitely come back and talk about that. Oh,
Clint Sorenson: 41:00
I love that. Fantastic. Clint, you want to take us out thank you bar for joining us on the fat pitch podcast. We heard about fat pitch investing, why blockchain is going to change everything. Let's get with the truth net. Can't wait to view that or watch how that plays out. And then also, you know, thanks for enlightening us on the Second Fat pitch was there's there's going to be distressed, there is distressed, there's going to be more distress, and so there's an opportunity there as well. So thanks, Mark. We'll have you out again soon.