Based Camp - Despite Our Bitcoin Fanaticism, We Sold It All—Here's Why (& Our Current Financial Positions)

00:00:00.000 hello simone i'm excited to be here with you today somebody told me one of our fans they said

00:00:04.440 you guys need to do more episodes on like how to make money and do business stuff and at first i

00:00:11.140 was like well i think we sort of covered those in our episodes like how do you get rich and things

00:00:15.440 like that because we've already done episodes on that but i was like no actually i have some

00:00:18.420 updates because in that episode i told people very strongly i said buy bitcoin this was on

00:00:24.860 this is not investment advice we are not advisors and this is all hypothetical and we're talking

00:00:31.020 about our personal experiences i strongly felt it was a good time to buy bitcoin and the episode

00:00:35.980 largely went into like why in terms of valuing an investment why bitcoin was good on november 13th

00:00:41.560 2023 and this is when the price was at 36.5k today the price is at 65.4k note the price has gone up to

00:00:50.740 67.2 right now this morning so if you sold now you would make even more money off of this idea

00:00:57.360 than we did and for those who are like oh well you you know you didn't get out at the top here

00:01:03.300 i am okay with doubling my money i was paid two billion dollars worth of bitcoin two billion dollars

00:01:10.360 well at the time a few days later the value spiked to like 10 billion then filled to 50 million then

00:01:15.800 spiked again to a trillion and then dropped a bunch of times and right now it's all worth like seven or

00:01:20.200 eight bucks ah geez yeah i'm super pissed and we will be airing this a little after we record this

00:01:25.040 but we ended up closing all of our bitcoin positions and one of the reasons why we're doing

00:01:29.520 this episode is just as like a if i have an episode out there telling people go buy bitcoin

00:01:34.140 and i have sold all my bitcoin which you didn't do because it's all not investment advice and this is

00:01:39.100 all hypothetical bitcoin and you why you should be using the only truly free currency greetings

00:01:44.540 financial wizards industry leaders and curious spectators and welcome to the future yes we're living in a

00:01:49.880 high-tech cyber world where just about everything is digital the cinema has gone digital radio is

00:01:54.060 digital why even love is digital so then why with the whole world going digital are we still using

00:01:58.520 dirty crazy non-digital government money that dollar bill in your pocket a nazi probably touched that so

00:02:03.460 there's another way to spend and save money without the involvement of the government or the nazis

00:02:07.480 bitcoin is that way bitcoin is a purely digital currency that uses complicated cryptographic science to

00:02:13.300 generate lots of super hard math problems these math problems are converted by computers around the

00:02:17.640 world into seemingly random strings of numbers that some people have agreed to pretend stands for a

00:02:21.980 highly volatile potential sum of money solving these math problems is called mining you see bitcoins

00:02:26.820 aren't backed by any real world items such as gold or by a governing body like the federal reserve so the

00:02:31.840 value of a bitcoin is entirely bubble based but what a bubble it can be without the nuisance of

00:02:36.600 regulation or real world value a single bitcoin could be worth anything from negative infinity to infinity

00:02:41.700 billions of dollars i imagine if it reaches even half of that so whether you're a libertarian or just want to

00:02:46.820 spend your money like one consider converting your wallet to a bitcoin wallet who knows how much it'll

00:02:51.020 be worth tomorrow it could be anything one person says i bought x you know other people are going

00:02:58.480 to be like and should probably you know be interested if people were influenced by that episode one they

00:03:04.780 would have profited as long as they held about doubled their money so good for you if you did but

00:03:10.020 also remember to sell but i want to tell you yeah we don't want to be dicks to people who we may have

00:03:15.000 inspired through our own actions to get bitcoin by not also sharing our concerns about bitcoin now

00:03:20.760 yes and i will say i mean i'll i'll briefly give my bigger concern about bitcoin and then i'll go into

00:03:29.600 the specifics of it the ways that bitcoin can get around this particular problem and why i don't think

00:03:35.420 they will be successful but where they have been successful at doing something like this in the past

00:03:39.780 yeah there's a time in the past where bitcoin got around the miners where the miners didn't want to

00:03:44.720 do something and bitcoin forced them to the rest of the bitcoin community forced them to so we'll go

00:03:48.640 around how that ended up playing out in the past and why it's very unlikely to happen this time and after

00:03:53.380 we talk about bitcoin what we're going to do is we are going to go into what we are thinking about doing

00:03:58.480 with capital right now because it's a pretty tricky time in the markets right now to know where to deploy

00:04:03.500 um so the general gist of why we're getting out so you don't have to watch the full episode

00:04:09.000 is everyone has always known that quantum computing is a risk to bitcoin and it's a unique risk to

00:04:15.360 bitcoin because the bitcoin governance system is kind of captured by the miners who have equipment

00:04:20.680 that is specific to working on the type of simple uh algorithm that bitcoin uses which is not very

00:04:27.400 quantum resistant and so they have a huge interest to not have it change and we'll get to where the

00:04:32.200 fight's going to be over that in the future and people can be like well it might update or anything

00:04:36.060 like that but here's the thing i have talked to a lot of famous bitcoin investors recently who invest

00:04:43.000 publicly in this stuff and their firms and ones who are like really really big on bitcoin these are

00:04:46.860 people who have you know multi-billion dollar positions in bitcoin and i was asking them about what

00:04:52.760 they thought of the quantum risk threat and they were like yeah it'll probably be a threat in a couple

00:04:58.560 cycles but it's not going to be a threat right now and i've and and this is the conversation this

00:05:03.560 isn't like if you if you're hearing this and you're like oh he's describing a conversation he had with

00:05:07.000 me no i've had this conversation with like five people at this point this is something that like

00:05:11.400 everyone who is very educated and still holds a position in crypto seems to think right now and

00:05:16.720 that really worries me because this is very different from the bitcoin narrative before which is to say

00:05:22.060 bitcoin is a persistent new financial disruptor and a new type of asset that will be on the market

00:05:28.800 permanently this is now people saying oh well eventually it's going to go off the market but

00:05:35.360 in the meantime i think i can make a profit in this cycle or the next cycle and for me that's where i was

00:05:42.400 like well that's not really the way market cycles work you don't want to wait till to sell when

00:05:50.120 everybody realizes that this asset doesn't have long-term value and you sent me a quote in regards

00:05:56.480 to this i thought was really interesting so the quote you sent me was from scott aronson who is one of

00:06:01.760 the leading quantum computing scientists and he said to any of you who are worried about post-quantum

00:06:07.380 cryptography by now i'm so used to delivering a message of maybe eventually someone will need to

00:06:13.620 start thinking about migrating from rsa to diffie hellman and elliptic curve crypto to lattice

00:06:19.820 based crypto or other systems that could plausibly withstand quantum attack i think today that

00:06:25.400 message needs to change i think today the message needs to be yes unequivocally worry about this now

00:06:31.640 have a plan i saw that and i was like well this is where you and we noticed this a couple months ago

00:06:38.620 well we've always sort of had in the back of my mind i just wasn't aware of how far quantum computers

00:06:43.360 had gotten recently and it was it was in my i keep goals for every year and i penciled in for 2025 a

00:06:50.920 goal of sell all of our bitcoin position because i i have been increasingly concerned about quantum

00:06:57.320 computing and and to be clear our concern isn't like oh suddenly quantum computing has reached the

00:07:03.120 tipping point at which it's financially feasible to like sort of undermine bitcoin entirely by the time

00:07:07.760 that happens bitcoin is already so far gone that it doesn't even matter because bitcoin's price is

00:07:12.720 not a product of quantum computing per se it's a product of people's expectation of its future price

00:07:18.560 so as soon as people suddenly start to realize that soon quantum computing is going to be a real threat

00:07:26.460 then bitcoin loses all its price so it doesn't really matter exactly when quantum computing becomes a

00:07:33.400 genuine threat what matters is when people start to believe collectively in any significant proportion

00:07:39.320 of the bitcoin owning population that it is to word this another way you don't need to exit your

00:07:45.560 bitcoin positions before quantum computing becomes a threat to bitcoin you need to exit your bitcoin

00:07:51.240 positions before the market realizes that in the future quantum computing will become a threat to bitcoin

00:07:57.340 and with this guy saying this that is that is when this begins it has begun if someone who already in

00:08:05.100 the space is that respect is one of the leading people in the space and previously was saying don't

00:08:09.740 worry about it we'll figure it out later that's a tipping point that makes me uncomfortable as an

00:08:14.060 investor or as as as an owner of bitcoin a former and i will also say here people would be like hey

00:08:19.580 why are you right now when everybody's high on bitcoin saying we should sell our bitcoin that's always when

00:08:25.580 you should sell something hold on i'm saying this is coming to you from somebody who when we did our

00:08:30.700 first bitcoin video bitcoin was irrelevant we are not people who make regular videos about bitcoin

00:08:37.340 dumerism nor are we people who regularly pump a bitcoin we are somebody who made a video saying

00:08:42.780 you should buy it a long time ago no we never said you should buy it we said we think that bitcoin

00:08:47.660 is something that is a good asset okay sorry i worded it differently i said something like that

00:08:52.540 and now we are people saying that we personally have decided to exit this asset class and i think

00:08:57.580 that that makes this quite different than a regular video where you're dealing with somebody who's

00:09:02.780 like you know either really into crypto or really cares about this stuff we're just people and i should

00:09:08.540 give you also a i guess i'll give you an idea about the confidence of our various positions here

00:09:12.940 we had over 10 of our portfolio in crypto 15 oh dude at one point it was like oh and of course

00:09:21.660 always this depends on the fluctuating price of bitcoin but we bought really really low in the

00:09:26.060 beginning and it surged a lot and so at one point i think over 30 percent of our net worth was in

00:09:32.140 crypto in general yeah so and then it went way down and our net worth went way down and i'm sure a lot

00:09:38.780 of people who were early investors can relate well and that was another thing that we learned from the

00:09:44.060 last cycle is buy when you're sure you're probably below the average of a cycle and sell when you're

00:09:49.900 sure you're probably above the average of a cycle and i can tell you right now we're almost certainly

00:09:53.900 above the average of the cycle right now actually this is a really important point to internalize

00:09:58.780 because some people like for example since we've sold the price of bitcoin has gone up a bit

00:10:03.740 some people look at something like this and they're like oh you didn't sell at the top

00:10:07.820 your goal was a heavily variable asset is not to sell at the top it is to sell it above average

00:10:15.660 your goal is not to buy at the bottom it is to buy at below average do not beat yourself up over

00:10:22.940 not hitting the very top of a market because that will lead you to make dumb decisions think am i above

00:10:30.380 average or am i below average and mentally reward yourself if you were correct in that particular

00:10:36.860 assessment not in the assessment of did i sell at the very top and this is also important take your

00:10:43.500 your realistic what do you think the top of this cycle is for bitcoin for example with something

00:10:49.500 like bitcoin the the realistic top of this cycle i think is around 120 i think my expected top of this

00:10:57.580 cycle is maybe 75 to 80 and when i look at the difference between the gain i made by buying in in the

00:11:06.540 mid-30s and selling in the mid-60s versus getting out in the mid-70s is just not that big a difference

00:11:15.820 also for full transparency here we did make another major sale during the market cycle when the price

00:11:23.020 hit 70 we sold half of our position but we ended up buying back in again when the market went down to 50

00:11:29.660 unfortunately we weren't able to buy quickly so we ended up getting it at 55 price the entire position back in

00:11:35.580 so we do do a bit of playing the markets when it looks like it's at a unique low point or you do

00:11:40.220 at a unique high point but the decision we're making right now in bitcoin is a bit different than that

00:11:45.420 in that it's an entire decision just to not play in this market going forward i want to go further into

00:11:50.940 one why this is an issue and why bitcoin specifically not other cryptos bitcoin can't easily adapt to it

00:11:58.460 okay bitcoin's cryptography bitcoin primarily uses two cryptographic algorithms ecdsa that's the

00:12:04.540 elliptical curve digital signature algorithm this is for digital signatures and sha256 and this is

00:12:11.260 for the proof of work mining algorithm of these two the first the ecdsa is considered the more sensitive

00:12:18.860 to quantum attacks than the the other now the problem that we have here is the role that miners

00:12:26.540 play so the way that miners right now use a specialized hardware called asics so in the early

00:12:32.380 days of of bitcoin what they used was more like generalizable hardware like gpus now these are different

00:12:38.860 from cpus they're used they're meant for doing tons of somewhat complicated little things at the same

00:12:44.620 time asics are used for doing extremely simple things like an extremely goal-directed activity

00:12:50.460 but eventually asics were built that could just do the crypto algorithm now this led to a problem

00:12:57.580 well for the bitcoin system that satoshi never would have been able to really anticipate because i don't

00:13:03.100 think that he ever saw i mean it would be so hard for him to really see it getting as big or as globally

00:13:08.940 dominant as if it's gotten that entire chips were being designed just for the algorithm so in his mind

00:13:15.500 when he's building this he's like well you know you can just have it switch to a new system right if it's

00:13:21.180 really obvious that it needs to switch but i'm gonna make the the difficulty of switching to a new system

00:13:26.060 quite high right now the norm within bitcoin for a change is that 95 of miners have to go along with

00:13:35.180 something now they don't actually have to have to we'll get to that in a second uh but this is the

00:13:40.300 idea 95 of miners have to go along with something and this is great if you want to make a system that's

00:13:45.980 not like wildly swinging in different directions or that's susceptible to like somebody starting a ton of

00:13:51.180 mining rigs and then trying to do like a 51 attack on something with votes by to change the

00:13:55.900 algorithm to insert you know a dangerous code in or something like that all that is great here's

00:14:01.420 the problem now you have all of these miners with these asic things in they really can't do anything

00:14:10.620 other than this one algorithm and you somehow need to get 95 of them to selflessly vote their own

00:14:18.620 machinery that they have into obsolescence and then buy entirely new machinery this machinery is like

00:14:26.220 billions of dollars and what equipment what how like how much more expensive is the equipment they

00:14:31.340 would need to buy well it's not that it's more expensive it's it literally everything that they

00:14:36.460 own their entire operation would be worthless you you and so here i'll go over how a change happens

00:14:43.340 so first you need minor signaling so when a new upgrade is proposed miners are given an opportunity

00:14:47.980 to signal their support for the upgrade typically this isn't done through including a special flag

00:14:52.060 or code in the blocks they mine uh the threshold for approval of 95 is mentioned as a common

00:14:57.500 threshold for bitcoin upgrades uh this means 95 of the blocks mind need to or mind within a specific

00:15:03.180 period so like usually the 2016 blocks which is about two weeks need to include a signal supporting the

00:15:09.420 upgrade the importance of miner support a miner support is crucial and plays a vital role in processing

00:15:14.700 transactions and securing the network this agreement helps ensure a smooth transition and reduces the risk of

00:15:20.780 chain splits now can upgrades be made without miner approval yes it has been done before

00:15:26.220 the segwit the segregated witness upgrade and the associated bip 148 uaf upgrade in 2017 is a fascinating

00:15:36.140 case study and in which miners were resistant so the background the segwit was proposed as a solution

00:15:43.180 to bitcoin scalability issues and the malleability problem it was designed as a soft fork meaning it was

00:15:49.420 backwards compatible with older versions of bitcoin software the initial minor resistance miners

00:15:54.860 initially resisted segwit for several reasons some miners particularly bitmain had developed an

00:16:01.340 optimization called asic boost which segwit would have made less effective there were concerns segwit might

00:16:07.900 reduce transaction fees a soft a source of minor revenue some miners preferred alternative scaling solutions

00:16:15.020 like increasing block size which eventually led to the bitcoin cash hard fork which largely failed so for

00:16:22.220 people who don't like bitcoin cash still exists and it was a hard fork that ended up happening and it turned

00:16:26.060 out to not be the best option for doing this but let's

00:16:31.100 why was there resistant to segwit among miners okay there was resistant because it would be marginally less

00:16:37.020 profitable maybe okay now it wasn't even like essential so i mean it's not exactly they didn't

00:16:47.020 even know necessarily that it would be super less profitable it would be marginally less profitable

00:16:51.420 maybe that is how they bullied them but that's the position they were bullying the miners out of

00:16:55.500 not i definitely will need to scrap the billions of dollars of investment i have made in mining chips and

00:17:03.420 keep in mind these chips are much more durable in value than they have been historically so you might

00:17:08.940 be thinking of the person watching this well they probably upgrade their chips every few years it's

00:17:12.540 not that big of a deal which just isn't true in modern chip markets because moore's law doesn't decrease

00:17:19.500 like it did historically what that means is for people who don't know moore's law basically stopped like

00:17:25.020 five years ago and so chips just don't lose value that much anymore you know you will be selling

00:17:30.860 like a new gpus like three years later like if we because we're looking at getting into like

00:17:36.620 selling gpus personally and when we run the numbers it looks like they retain about 80 of

00:17:40.940 their value over a span of three years which just shocked me when i think about like graphics card in

00:17:44.700 a historic uh basis which is what a gpu often is so what ended up happening how did they force them

00:17:50.220 so flag day was set august 1st 2017 after which nodes running bip 148 would reject blocks that didn't

00:17:59.180 signal set for support for segway so okay i should explain who the nodes are the nodes are something

00:18:05.980 that like anyone can set up if you're interested in caring about crypto and helping the bitcoin

00:18:10.940 network stay secure and they basically are ledgers of all of the transactions happening on the bitcoin

00:18:16.780 network um they actually at the end of the day really decide what's happening for voting and so they

00:18:23.180 said look we are we need to force the vote so basically they forced the hands of the miners

00:18:28.700 by saying we won't process nodes that don't have a vote on them signaling support for the segway update

00:18:38.620 that would be very unlikely to have the same effect for quantum computing

00:18:43.020 for two big reasons but here we'll talk about the minor support really quickly here

00:18:47.100 as flag day approach miners began to realize resisting segway could lead to a chain split

00:18:50.940 potentially devaluing their mind coins this led to the creation of the new york agreement

00:18:55.500 and bip 91 which was essentially a compromise to activate segway outcome the threat to uasf combined

00:19:03.340 with the compromise of bip 91 led to miners signaling support for segway before the bip 148 flag day segway

00:19:10.700 was successfully activated without a chain split so this looks like oh we can get them to do it but it

00:19:19.500 it doesn't actually mean that if it was devaluing all their equipment you would need to find a way to

00:19:24.380 get the existing equipment to compete on quantum safe cryptography which is basically like systemically

00:19:33.340 different from this non-quantum safe stuff right some people have talked about like building a layer

00:19:37.660 two solution but i can't imagine how that's functionally going to work or why the miners would allow that

00:19:44.300 and i think that all of this comes down to a huge problem in the way investors think one these miners

00:19:52.060 aren't necessarily individuals who care about crypto they're people who are running businesses and need

00:19:56.220 to make money on these businesses so they are going to keep signaling this until the last day that they

00:20:02.060 can signal this in crypto crashes basically they don't have a ever a reason to devalue all their investment

00:20:09.340 in terms of the people who are like yeah but we probably have a cycle or two more as of 2024 the

00:20:15.420 largest quantum computers have only a few hundred quibits far short of what's needed to break bitcoin's

00:20:20.700 encryption google's current quantum computer has 70 quibits and to crack a bitcoin within a 24-hour

00:20:27.660 time frame you would need 13 million quibits if you were going to break it within a 10-minute time frame you

00:20:35.180 would need 1.9 billion quibits and so people can be like oh that's seems like we're really far from

00:20:42.780 this right now however most experts agree that by 2032 to 2048 there will be a system for cracking the

00:20:53.900 quantum computing algorithm on crypto which is quite some time away to be fair according to that

00:21:01.020 again it doesn't this is this is the very interesting thing and this comes to the

00:21:06.220 conversations i was having with investors but also conversations that i've had with investors

00:21:10.380 around things like demographic collapse the reason why something like china just hasn't completely

00:21:16.620 collapsed yet economically which it will trust me this is my main thing we're like everybody's

00:21:21.340 definitely wrong about this china will collapse as a world power it cannot and as an economic system

00:21:27.420 is just cannot be stable where it is right now and i'll put on screen here for people who like don't

00:21:32.060 understand how bad the east is right now just within one generation the percent drop in their

00:21:38.060 populations at their current fertility rates not considering for the fact that it's considering

00:21:43.100 continuing to drop but investors in mass right now are not pricing fertility collapse into their models

00:21:50.060 yeah investors right now in bitcoin are not pricing quantum risk into their models

00:21:57.420 yeah certainly doesn't seem that way at least yeah they're like oh other people aren't pricing into

00:22:02.140 their models so i'm not pricing it into my models and it's like that that's how you get rapid

00:22:09.180 collapses out of nowhere don't happen because of a change in anything that happened because people

00:22:14.700 start pricing something into their model well and it's so hard to predict because what we're talking

00:22:20.300 about is essentially when a meme goes viral and in this case the meme is bitcoin is no longer a safe

00:22:27.100 investment even among those who are enthusiasts and once that happens it reaches a tipping point

00:22:34.540 there's no coming back and you won't have enough time to sell and often the way these things

00:22:40.140 crash it's kind of like when gamestop started plummeting you know things freeze up pages don't

00:22:46.860 load you can't sell fast enough even if you're one of the first to know so i just wouldn't want to be

00:22:52.860 in that situation what's probably going to happen with bitcoin for people who wonder what happens

00:22:57.180 when quantum computers get to that level and this is assuming civilization doesn't crash first you

00:23:01.500 know so i think other things can happen but so what's going to happen is there's going to be a big

00:23:05.820 kerfuffle the miners are just going to be like absolutely not we're not going to do this all the

00:23:09.900 same people will be like oh my god you actually have to do this the price is going to drop a lot

00:23:14.540 because a lot of people are going to think oh this problem isn't going to get resolved in time

00:23:18.220 and right now if you're looking at like major stakeholders you're getting things like blackrock

00:23:22.300 buying in tons and tons of money do you think that they have like the ideological commitment

00:23:26.460 to the price drop during this battle no like bitcoin has moved to a more mainstream asset and

00:23:31.180 because of that you're likely going to get a lot of cash outflows during this battle uh but then

00:23:36.060 what's going to end up happening is there is going to be a quantum safe version of bitcoin created

00:23:40.860 however it's going to cause a hard fork but the hard fork isn't going to have a clear winner

00:23:46.460 and it's going to permanently damage both sides of the hard fork until the quantum computing

00:23:51.740 kerfuffle ends up eating whatever the new basically bitcoin classic the the version that doesn't go

00:23:57.500 for quantum safe ends up being because for a while it will technically be safer because it will have

00:24:03.260 more mining computers running on it which will lead to a portion of the community going with it

00:24:08.380 and bitcoin has a very conservative community in contrast with other communities just due to the

00:24:13.580 large vote shares that are needed to do anything within the bitcoin community oh because of the

00:24:21.820 governance design they behave conservatively because of the governance design they behave

00:24:27.100 conservatively okay i'm like i mean anyone in crypto isn't necessarily seen as conservative so i get it

00:24:33.020 so i i do think that they'll get through it but i think that the price is going to take a

00:24:37.740 and and bitcoin's price really hasn't taken an exogenous bash in a long time so when i say an

00:24:44.380 exogenous that i what i mean is bitcoin has not had to deal with one of two things that might be coming

00:24:51.660 up in the near future one is a serious depression um bitcoin has never had to deal with a a like a very

00:24:58.940 serious depression um and when it has it has like in the recession that happened during the covid situation

00:25:06.060 it it took a real big yeah but anyway no but we we got a lot in during the covid period that was when

00:25:10.780 we first got into it well yeah i mean we like to call any sort of stock dip or whatever a flash sale

00:25:16.380 and i think it's because like when we first started learning about investing we went to someone sent us

00:25:23.020 to a bunch of family office meetings not because we have a family office personally but because they

00:25:29.660 thought we would learn from them and everyone there who represented these really high net worth family

00:25:35.020 offices was just sitting on loads of cash and they just all anticipated a stock market crash and other

00:25:42.140 market crashes and their habit it seems that the habit of people who have a lot of money and are good

00:25:47.180 at hanging on to it is to sit on dry powder when times are good and when times are bad buy everything

00:25:53.900 on sale which is logical and so we do that and we get really excited we do help with financial

00:26:00.700 management for some people somebody's like i would love it if people like you ran our family office

00:26:04.700 but we've written a book on family office government structure as well so this is true it is something

00:26:09.660 that we care about but yeah that is sorry i forgot the the point i was making here i guess the wider

00:26:15.740 point is it's very clear that just the mindset among the people who are putting the most money into

00:26:21.660 bitcoin specifically has changed to a mindset of we know it will eventually uh have this crash but we just

00:26:28.700 think we can make money off of it in the short term and i think whenever you hear a large pool of

00:26:34.060 people having this mindset you need to get out of an asset yeah like oh like i'll just know when to

00:26:39.100 when to go get out it's it's i think it's very similar to that like ponzi scheme mindset or mlm scheme

00:26:46.780 mindset of like well as long as there's someone downline for me it's gonna be okay except you never

00:26:51.260 know where you are in the scheme and you don't want to be the one left putting the bill you just

00:26:57.900 don't yeah yeah so what are we doing money wise these days i think it's an interesting question

00:27:06.220 so we've made two big changes to the way we do our finances at first i want to say here's a reason why

00:27:12.620 one not only are we not providing investment advice but two we may not be the smartest

00:27:16.780 investment advisors in the world we did something specifically because i asked so this is not a

00:27:21.900 malcolm thing this is more a simone thing but we did something that pretty much anyone who provides

00:27:26.700 financial advice would say is super dumb which is we we had a bunch of excess cash from something um

00:27:35.820 and i was looking at our mortgage and i was looking at that amount of cash and i was like

00:27:40.780 oh we wouldn't have a mortgage if we just paid it all off we could use this cash to pay off our

00:27:47.660 mortgage and people normally say this is a really bad idea especially if you have a low interest rate

00:27:52.380 mortgage which we did when we bought our house and that is because the argument is that you will be

00:27:58.060 getting better returns by putting the money that you could put toward paying off your mortgage or just

00:28:03.180 buying a house outright on the stock market and get better returns and then you're paying in interest and

00:28:09.740 if as long as that's the case as long as you think that your loan will charge less in interest than

00:28:17.020 you will be getting an investment payout then you should maintain that loan and i just didn't care

00:28:24.540 and i wanted to get rid of it and i wanted to be 100 entirely completely debt-free because i hate the

00:28:29.740 idea of ever having an ongoing payment obligation that i don't have to have and malcolm being the ever

00:28:35.820 doting husband allowed me to yeah you asked for it as a big present you're like i know this is

00:28:40.700 financially irresponsible but i wanted it as a big present this is my push present for kid number four

00:28:44.860 i was like can we just be completely debt-free it will make me feel so happy well it's it's it is

00:28:51.740 historically a financially dumb thing to do i would actually not tell my kids to do it because i suspect

00:28:57.500 either within our lifetime or within our kids lifetime we are going to move to a market that

00:29:02.380 goes down on average due to fertility collapse yeah but in our time with our i mean again i don't know

00:29:08.460 like i just i i can be very pessimistic too where i'm like i you know there's another silly financial

00:29:13.180 thing you did which we should also talk about because it's different from our last advice so uh

00:29:18.220 which is you're not going to talk all our money in s&p instead of investing in stock market theses that we

00:29:25.260 thought were good investments yeah the reason you made this move is just because whenever you went

00:29:29.340 over any of the studies on this the s&p always out competes pretty much anyone who claims to be

00:29:34.860 an expert on stock markets and so it's just not worth investing in them you also have a problem with

00:29:39.740 the vc market right now so the vc market right now like i like we've heard of vcs like because we

00:29:44.860 have lots of friends and vcs who are just like getting for those not familiar with this because

00:29:48.140 actually a lot of people aren't vc count stands for venture capital that is to say investing in

00:29:53.980 startups yeah the startup marketplace since the invention of ai which has really changed what a

00:30:00.460 good startup looks like has become a lot harder for the traditional vcs to access and arbitrage in

00:30:06.780 the way they used to so the way it used to be is the top vc firms really made all of the outsized

00:30:11.580 returned in the vc space and most vcs just didn't make much money at all and the way the top size firms

00:30:16.300 were able to do is they had unique access to outsized talent but that unique asset access was i think

00:30:22.620 really based on let's call it like the silicon valley prestige networks that they could build

00:30:27.980 and those silicon valley prestige networks are not as stable as they were historically for two reasons

00:30:34.140 one silicon valley isn't where everything is happening anymore just because a lot of people

00:30:38.460 are building well because of the housing price there and their crackdown on group houses is what

00:30:43.900 really like destroyed it as a place for building good startups it's just too expensive if you're a scrappy

00:30:48.860 entrepreneur to live and then two is a lot of scrappy entrepreneurs are what category of people

00:30:55.580 they are extremely libertarian males and extremely libertarian males are what usually right leaning

00:31:03.500 these days in the past they were usually left leaning but the left has scared away most libertarians

00:31:09.980 who formerly were sort of on their side was their recent more authoritarian push and that has further

00:31:15.260 pushed a lot of the psychological profile of person who otherwise would be a successful entrepreneur

00:31:21.340 out of silicon valley and they're often interestingly these days not because of anything to do with white

00:31:26.540 people but disproportionately white males if you would be like wait why did it not have anything to do

00:31:30.540 with white people i should clarify here white asian or jewish because dei treats jews and asians as if they

00:31:38.060 are white and i'd also note here i'm not taking a stance that jews and asians aren't white i'm just saying

00:31:42.700 dei treats them as if they are maybe they are maybe they are maybe they aren't i really don't see

00:31:46.940 ethnic distinctions as being particularly important in terms of how i view the world well it's because

00:31:53.340 the dei programs have become so so so aggressive right now that if you are a minority and you are

00:31:59.500 technically competent that you can get a large arbitrage just by going into google or by going into

00:32:05.340 facebook you know there is a much easier pathway there for you than going into entrepreneurship

00:32:10.780 whereas if you are a white male you are near frozen out of these companies if you present assists

00:32:16.140 these days like yeah you can get in but it's harder to rise up it's like just all the cards are stacked

00:32:21.500 against you so at that point you know why not like if you're judging a decision and you think you have

00:32:28.860 a good idea why not start a company so unfortunately means that the type of people who are likely to be

00:32:34.060 republican or likely to have some resistance to the silicon valley ethos are the ones who are being

00:32:39.260 disproportionately pushed out from a political perspective then you have the secondary problem

00:32:43.580 which is you know as i've said before in my show startups these days you know they used to

00:32:47.660 be like 100 200 person teams of engineers in silicon valley going to these cool like open space offices

00:32:54.140 now it's three guys and then a huge outsource team in the philippines and then a ton of

00:32:59.500 independent ai agents and these people are just not networking with these old you know silicon valley

00:33:05.340 vc groups well they also need less money you know we're getting to an age in which you can do with

00:33:11.740 ai so much of what would otherwise have cost so much to raise and and also things that used to cost a

00:33:19.100 lot of money that people used to need venture funds for things like teams things like advertising

00:33:24.220 they're kind of broken i mean one we can use ai and outsource labor for most of the things that

00:33:29.580 hires new hires and initial hires that people raised funds for used to do then advertising i

00:33:36.540 think people are learning more and more is just inherently broken it doesn't really work so where

00:33:42.060 a lot of people raised a lot of money to just own a market and advertise which is something that was

00:33:45.980 really pervasive in the venture capital world earlier it was like oh we'll raise venture capital

00:33:49.820 funds just like flood a market and basically out compete unfairly everyone else who's trying to

00:33:55.900 compete in this market because you can just infinitely spend money and like undercut them

00:33:59.740 in price and then take over the market put them out of business and then own the market

00:34:04.140 that doesn't really work anymore and advertising doesn't really work anymore the way that it used to

00:34:07.980 so i think that there's just less reason overall but i think the other issue too is that a lot of

00:34:12.540 venture capital funds are returning a lot of the money that has been invested in them saying well

00:34:18.300 sorry guys we're not going to be able to spend this all because they're not they don't have

00:34:22.620 enough opportunities to deploy the funds into that example from our own experience of like why this

00:34:28.060 is happening consider the collins institute so with the collins institute a lot of people are like oh

00:34:33.660 the text written in the collins institute looks like it was written by an ai and that's because yeah

00:34:37.500 i mean it was written by an ai and we're using humans to go through and edit it and everything like

00:34:41.900 that and we have a some dry powder that we're sitting on and we had taken it and we were going to

00:34:47.580 originally the plan when we first had the idea for the collins institute was to hire a team

00:34:52.460 of phds to write every one of these answers and then we were like oh no it's easier to do with

00:34:57.340 ai and then have like lower skilled people go through and clean it up and now we're looking at

00:35:01.660 like what ai is outputting these days and we're like we actually shut down the team that was going

00:35:07.180 through and cleaning it up because we're like look in two years i'm going to be able to have an ai

00:35:11.180 do all of this for a trivial cost so we took a task that was originally for phds okay then said oh we

00:35:20.220 can give this task to outsource low cost people combined with ai to oh in two years we can give

00:35:26.060 this task just to ai and so the amount of money we need to put together a project like this is just

00:35:31.580 astronomically less than it would have been on a historic basis and this is what all of the vcs

00:35:36.380 are seeing in terms of where they would have deployed capital so that's created a problem

00:35:41.980 now we then also in terms of selling and getting liquidity i think that's another really big problem is

00:35:47.260 that it it seems that there are fewer opportunities now for startups to go public to sell to like m&a

00:35:56.060 seems to like i think we're seeing some more friction when it comes to m&a from like a an antitrust

00:36:01.740 perspective as well where it's just more difficult for people to to cash out investments that they've made

00:36:09.580 in startups because those startups aren't going public or selling the way they used to and that's just

00:36:14.540 another issue that this market seems to be breaking more and more so that doesn't seem like a good

00:36:20.300 option but most people listening to this podcast aren't accredited investors who could make venture

00:36:25.580 capital investments anyway so i don't know how much this is relevant it's very relevant and well

00:36:30.940 i'll explain why people need to understand what's going on in capital markets that they want to broadly

00:36:36.220 understand what's going on in the world these days if you don't understand the what the people with

00:36:40.700 money are thinking about or what they're doing you are making bad decisions about the way you're

00:36:45.820 optimizing your career the way you're optimizing your finances yeah and i think that that's why

00:36:50.220 people come to this podcast partially is to get a perspective that they're not otherwise going to get

00:36:54.460 so we one i would say that we've come up with a solution for it's actually not fully finished yet

00:37:01.020 but you can check it out right now the site is basically a draft at this point but we're going

00:37:05.900 to do a big launch soon it's hard ea.org and what we are going to do is try to compete with the

00:37:14.460 original ea message the effect of altruist message which is like we're gonna fix major problems in the

00:37:19.740 world but not do so in a way that primarily socially signals that since have been i mean the everybody

00:37:25.260 knows the old ea movement has been completely captured by social signaling at this point it's all

00:37:29.340 like environmentalism which has like no arbitrage capability it's all like all of these these it's

00:37:34.380 this giant bloated bureaucratic purage network at this point well yeah just it yeah it stopped to be

00:37:41.500 what it was all about which was actually achieving the greatest good regardless of signaling status and

00:37:47.980 how things looked or felt or signaled and so what we're going to do is to try to create a network that

00:37:55.100 that actually puts money in places where it might matter one of the things that horrified me the

00:38:00.700 most recently as going through because recently you know this podcast we're often you know sort of

00:38:05.420 pooping on ai safety and recently i was like you know it is an actual risk it's more just that i think

00:38:11.100 the people focusing on it right now are doing so for personal gain and that the ways that they're

00:38:17.180 attacking it can't actually fix it and we're going to do a different episode on that so i started going

00:38:21.260 into what they were doing i was like oh none of these solutions have even a chance of working you

00:38:25.820 got really scared to create real stuff there and with this organization we've already made a few

00:38:30.780 capital deployments specifically in the bioacceleration of them space so this is on stuff like ibg technology

00:38:36.860 this is on stuff like you know human genetic stuff and i realized well the way that i want to deploy

00:38:41.820 capital as opposed to the traditional ea which is doing it in this purage network format is i want our

00:38:47.020 non-profit to invest in companies that could potentially turn cash positive but that also

00:38:52.460 have a a chance of saving our species and the way that we wanted to structure it is to say okay we will

00:38:58.620 do that as a non-profit we will open a grant and we actually have the grant thing open right now you

00:39:03.020 can apply if you want but if you are a vc and you donate to us we will give you our deal flow pipeline

00:39:09.340 as we make these investments which could be useful to vcs specifically in either the ai or bioacceleration

00:39:16.460 of space which are the spaces we're going to get the most potential opportunities but then the other

00:39:21.100 area where anything else you wanted to say here simone no i'm just really excited about it i i want

00:39:26.780 to support people who are doing real work in this space so okay so we met through this podcast somebody

00:39:36.780 who reached out to us and has been a fan from very early on in the podcast somebody who has a data

00:39:43.100 center that used to um run crypto stuff and what we are doing is we are like we personally have bought

00:39:53.340 from i think nvidia or like a third party some gpus like a rack of gpus that we're putting in their

00:40:00.140 facility and then there's these bars that we can resale them on value added resellers to be that's a

00:40:06.380 value-added reseller so we put the gpu in the facility his team helps us with was running those

00:40:12.060 and then we help manage how it's being sold to people so it's an it's a more active investment

00:40:18.700 for us than like a you know like a security would be for example but something where we need to

00:40:24.300 actively put some attention into it and like make sure that it's being used by people but when we run

00:40:29.660 the math it looks like because a lot of the right now people who are focused on these big gpu data

00:40:35.420 centers what they're doing is they're converting old data centers that used to be focused on

00:40:40.860 processing for like websites and and and the old processing that needed very low latency periods

00:40:47.820 because they were like being actively used by like constant online user stuff they would put them in

00:40:55.340 like expensive cities and stuff like that or in areas that were expensive just because they had

00:40:59.020 low latency and they were next to like the main lines that the internet runs along whereas a lot of the

00:41:03.340 crypto stuff was done very far from these areas in areas where where power was super cheap and so

00:41:10.860 we're looking to put them in those facilities and see if we can make money off of them we are going

00:41:15.420 to see if we can put this together in a way that it's possible for an average person to sort of

00:41:20.860 buy and manage their own gpus so if that's something that you're interested in deploying capital

00:41:25.340 on you can reach out to us that said we'll see if we can find a way to make this this this work

00:41:30.380 legally the the key thing to it is we can't manage it for you you're going to need to do the management

00:41:37.100 yourself that's why and you're going to need to own it yourself so we'll like facilitate the buying

00:41:42.380 process but you will be the actual person owning a gpu but anything i i'm personally really excited

00:41:49.740 about this opportunity well what makes me excited about it is we still believe i think inherently in

00:41:57.180 this process of we want our money to be in a thing that we think is going to grow that has strong

00:42:04.220 tailwinds as it were and when we think about the only thing we can really depend upon in the near

00:42:10.620 future with the rise of ai is a need for ai compute and power like those are the two things i'm very

00:42:17.580 confident about that power is really important and ai compute is really important so yeah i want to invest in

00:42:25.420 businesses that are providing those things please like i wish there were small batch nuclear

00:42:33.740 companies that appear to have a path to viability in the u.s well i you know our friends who are like

00:42:39.660 super bc you know very very very confident bc people they're they're in small micro they're all

00:42:46.700 about it but the pathway to getting proof from a regulatory standpoint in the u.s is really patchy and it's

00:42:53.420 hard to say what companies specifically are going to be the ones who finally make it through that's

00:42:58.860 why i'm like i wish i could but i just don't see opportunities personally there right now but

00:43:03.660 what i do see is that there is this opportunity at least to work with this team and we we really like

00:43:09.180 them personally to be involved in ai managed hosting and i'm like all right yeah because the you know you

00:43:15.660 want to you don't want to in a gold rush you don't want to go out to california with a pick and a pan to

00:43:24.540 go panning for gold you want to go and sell jeans to gold miners and sell picks and gold pin and dishes

00:43:33.420 to them you know like just sell their supplies be their restaurants build the roads but don't

00:43:38.540 be them so that's what i'm thinking about that's why i like this yeah so we'll see what what other

00:43:45.420 things are we focused on right now i mean we put all our money in the smp that was one thing but but

00:43:51.100 when i say all not all we still own a lot of property but we've been getting out of multi-family

00:43:55.500 housing which is where we were traditionally the largest part of our our investment so

00:44:00.620 still some medical office still some multi-family housing most multi-family housing is typically like

00:44:05.660 large apartment buildings or condo units where people are renting that are managed by property

00:44:11.180 management companies these were these were things that made money and were growing during a period

00:44:17.180 where the family unit was dissolving and and this is something that people don't understand they're

00:44:20.940 like why is real estate going up when population isn't going up right like why or when population

00:44:25.180 is even falling and it's because well one of the reasons population is falling is people aren't getting

00:44:28.860 married and that means that people who would have had one house now need two houses and and

00:44:33.820 people aren't living with their parents and people aren't living with their kids so they just like the

00:44:36.940 number of people living in a house has dramatically decreased which means that low-end houses and

00:44:41.260 multi-family housing has been a really hot sector for a long time but i no longer have faith in the

00:44:46.940 sector at all like when i'm looking at the multi-family housing returns we can get we're looking at like

00:44:51.420 six or seven percent and if we put our money in a long-term savings account we can get five percent

00:44:56.140 interest so like why am i dealing with the risk and the non-liquidity of multi-family housing investment

00:45:02.460 when i can you know put my money in long-term savings and then invest in like gpus and stuff like that

00:45:10.860 what are your thoughts more broadly

00:45:15.180 i know that we're not the best with money but are you really serious right now like do you have

00:45:22.220 any idea how much we've made on investments in the past i want to say four years we've probably doubled our

00:45:30.140 capital i don't think so like i can show you you know okay i'm just just offline i'll cut this part

00:45:39.260 out i'm sorry now that you've looked at the numbers you realize i'm closer to right than you thought you

00:45:44.220 i was yes i'm so bad at math this is so sad anyway the point being simone i i love you i hope

00:45:54.300 that we can find a financial inflation that's what i meant to say like with inflation one of the things

00:45:59.580 that we've been trying to do recently is really really really pulling back on our jobs and stuff

00:46:05.660 like that i don't want to be involved in a day job that much anymore i want to be focused on things

00:46:10.700 that make a difference in the world i think we're dealing with short timelines i want to be focused

00:46:14.620 with this hardy a project once we can get it all cleaned up and nice looking i want to be involved in

00:46:19.980 ai i want to be involved in the things that matter in the world today and in this podcast where i want to

00:46:25.660 put more time and effort into researching for this so i can give you guys better spicier more fun takes

00:46:31.660 every day and i think that that's something i really want to focus on over this next year

00:46:37.020 is to just say even if we don't have a pass for like daily income which is something i'm not

00:46:41.020 focused on at all anymore no i'm just not i'm like simone's like what are we going to do if we leave

00:46:47.820 our jobs and i'm like well we'll figure it out because i i think that these other projects

00:46:53.340 are where our attention needs to be focused yeah i mean our objective functions matter more

00:46:57.740 than income we like living frugally and yeah people might be listening to this and thinking

00:47:03.420 like well if they have all this money to invest clearly they have enough money to live without

00:47:07.740 jobs but i think the key to not being broke is to do pretend that any money that you have invested

00:47:18.540 and that includes any interest or dividends or payout that comes from that money is not yours

00:47:25.020 any dividends and interest immediately gets reinvested like it doesn't exist so it's not as

00:47:30.860 though i can pretend like oh i'll just use that if our income goes away i have to pretend that it

00:47:35.580 doesn't exist because that's the rule we only get to spend money basically what she's saying

00:47:43.500 but it's for the greater good i like living lane anyway so it's i love you simone i love you too

00:47:51.500 welcome she's awake so i and so this starts i love this weather it's just so nice okay turn your ring

00:48:02.860 light up i read today that 23andme might go bankrupt as soon as next year oh yeah a lot of people are

00:48:11.500 really shady stuff about their genetic data yeah i love that everyone's all worried about it and

00:48:17.260 meanwhile i they have our genetic data and i'm excited about it i'm like yeah they have bigger

00:48:21.820 genetic data sets in the hands of people with money that's a good thing because that means more science

00:48:27.180 that's one of the things i always bemoan is there's not good genetic data sets right now

00:48:30.460 because the big like the bank in the uk like closed it off it sounds like your mic isn't plugged in

00:48:36.060 by the way it's not close to me okay so for people who don't know that the big gene bank in the uk

00:48:48.380 ended up actually closing off access the uk right what the uk biobank that's what it's

00:48:55.740 british biobank yeah and the reason they had to they they ended up cutting off access to to most of the

00:49:02.540 projects is because somebody in one project accidentally now this all happened accidentally

00:49:09.020 but they found out that was in one let's say ethnic immigrant minority population in the uk

00:49:16.460 rates of children that were born via father daughter something relations relations at

00:49:27.260 uh uh uh were five thousand percent higher than in any other group and apparently this was an

00:49:34.620 offensive fact for them to discover so they had to shut down access to most people doing anything

00:49:41.420 really interesting with the data which is yes

00:49:46.460 yeah yep so let's do it all right sorry i'm pulling up my notes right now it was interesting

00:50:00.780 though to read okay see tell me something crazy uh-huh okay octavian

00:50:13.100 oh popcorn oh popcorn is that it oh you like popcorn yeah wait are you a popcorn yeah i'm a wet popcorn

00:50:30.460 you like you're wet popcorn popcorn popcorn popcorn popcorn popcorn popcorn popcorn popcorn popcorn

Based Camp - October 16, 2024

Despite Our Bitcoin Fanaticism, We Sold It All—Here's Why (& Our Current Financial Positions)

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