Nick Black On Mastering MMA & the Markets

23:28Well, guess what? Those people are, they're on the soup line because you have to as a corporation, right? And so I think that people are grappling with this right now. Who's safe and who's not? And I think people that believe that what they do as humans is so unique and creative, there's going to be a pretty rude awakening to the reality that, you know, if you put all of humanity's data in a bag and you can search it and you can next word predict enough, what you get is something that looks a lot better than what any of us individually could probably produce. The last question on this, then we'll move on to something else.

24:05But I want you to further fuse the two because AI and blockchain together, I think it creates something that unleashes tremendous amounts of economic innovation. Again, I'm paraphrasing Nick Black. So tell me what that is. So I think that there's a lot of pent up value that's that's not been unlocked. I think a lot of the of the benefits of disintermediated systems, right, like removing the rent takers, which you could think the rent takers don't necessarily have to be a bunch of, you know, fat, rich, white dudes from Omaha. It could be handshakes and diodes and transistors and all of the bits of software that slow down a transaction, that slow down some permission system.

24:47I mean, imagine a system that monitors the brain health of your grandma and that system is slowed down by all of these software handshakes that occur as transactions propagate back and forth. So if you could clean that up, if you could reduce all of those frictions where that system could monitor grandma's brain at light speed or near light speed, you know, like like what HyperCycle is doing with their ledgerless blockchain. Then you have something where humanity can move forward in a very interesting way. And so in traditional rails, I just don't think that's possible. So I don't know that when humans get to generally intelligent systems, AGI or digital super intelligence or digital synthetic intelligence, whatever word soup you prefer, that's the last invention that humans make.

25:33But I do think that the railway for it will be a lot of these distributed systems, a lot of these protocol layers where it eases the friction so that health and welfare and medical and research and science and, you know, just general city infrastructure and planning and just overall life will improve. like it will be demonstrably better because of a lot of these foundations that have been built in these protocol layer assets in the crypto space with AI sitting on top of it. One of the old, you know, things in crypto used to be like, what's the killer app? Everybody's, everybody wants the killer app.

26:09And I think that maybe the killer app is artificially intelligent systems on their way or on their path to generally intelligent systems. I mean, if that's the killer app, I mean, it's the last one. Hopefully killer is not, does not mean like T-1000s descend on us from Skynet. right well i mean if you're elon musk i'm certainly worried about that but i you know i'm i'm in the camp that we're doing it one way or another and we have adversaries we have allies always that's the fate of human race and so the human race so we got to do it so we're going to do it so we have to leave it at that but i get to something about you that i find fascinating because you are self made and you can completely transform your life and so we have a lot of stuff going on in the world right now where there's some people that have a lot of hope, but frankly, there are other people that have a lot of hopelessness.

26:57And we also, in the age of social media, Nick, you and I have talked about this. We do a lot of comparisons and we're comparing our unfiltered life to somebody's very filtered life. And I think it brings some people down once in a while. And so I want you, if you don't mind, to give the Nick Black uplifting message to my listeners about how you think about all this, how you went from$50 a day of living expenses to where you are today and how people have to frame their mindset for true success. That's kind of a loaded question, but I'll start with this. One, you have to pick a budget that's two kind of two mental clicks beneath what you could spend.

27:36So if I could spend a thousand bucks a day, then I should probably spend a maximum of like, you know, 200 bucks a day, right? Like worst case scenario. I try to always live two clicks beneath my means. Obviously that's changed, but I still, I still keep myself at a hundred dollar a day budget. I can spend$10 ,000 a day until I die, but that's not, that doesn't make any sense. One, it's not going to get me any more happiness. And two, there's, there's no longevity there. And then I don't have a lifeboat. So I've always lived beneath my means as just a general rule. And anytime I've had any kind of windfall throughout my life now, and just to kind of walk that back, when I was living on 50 bucks a day, I had, I had kind of sacked away many hundreds of thousands of dollars that I've been making over the years.

28:18I just, I spend as if I'm frugal and thrifty and, and I'm not going to say poor because that's, that's poor as a mindset. So is, so is rich. So is wealthy. These are all mindsets. There's no dollar amount. Um, the happiness you experience as a, as a millionaire or multimillionaire is the same happiness that you can buy for$8 ,000 a month. But like, that's, that's like the actual amount in a linear market anywhere in the United States, where if you make 8 ,000 bucks a month extra, you live the same happiness, 90 % of the same happiness, probably more than a multi, multi, multimillionaire because they have all these other stresses that maybe you don't.

28:52So, you know, to your comparison point, people do compare to the Joneses and to their, to their neighbors and to the people that are on the, on Instagram and their filters and things like this. But you have to just look at your life and you have to say, okay, how can I incrementally make my life better? And then the way I found to do that was you can arbitrage either stupidity or laziness. So my, my fundamental thinking is get out of your own way and move forward faster than the people around you. So the way I get out of my own way is I study cognitive bias. It was a really great speech by Charlie Munger in 1995, Harvard, which I'm sure you're familiar.

29:26And he went into what he thought were the 25 cognitive bias. And this was when he, I think Charlie Munger was at his best. Not that he's not, but this was like Charlie Munger, right? And it made an impression on me. So I listened to it several times and I started digging into understanding cognitive bias. And these are these systematic deviations in rational thought that we have. An example, you're raised in Alabama versus someone that's raised in upstate New York versus someone that's raised in Sacramento or in San Francisco. Your indoctrination into the world, right? Your nature and nurture and that self-evolution, it's going to be a lot different.

30:01And you may all have your own thoughts and prejudices and kind of immediate judgments that may not be based on reality. And so when you're exposed to situations, we have all these cognitive bias, these things that because of our nature and our nurture and this weird self-evolution, we may have irrational thoughts that get in the way of very rational sound judgment. So if you're aware of these things, these cognitive biases, then you might not be able to defeat all of them. But when you see them presenting themselves in your decision-making, you go, ah, wait a minute, I got to scale back. That's a reaction, not a thought.

30:35You know, I need to be aware that these biases exist in my personality. And then I need to have a structured way of thinking, a way of thinking critically. And that is my structure is game theory. When I really started studying game theory and how it applied in economics and psychology, it just got real easy to outthink the people around me because you don't have to, you don't have to be a hundred percent better than anyone. If you're two to 3 % better decision maker in time management, in not spending stupid and being somewhat frugal and being aware of the benefits of compounded interest and being able to front run just public discourse and thought by just a few weeks to a few months, then you make so many decisions in your life that you just rise above your peers by doing nothing more than being aware of your cognitive bias and thinking game theoretically, looking at all these strategic interactions between all of the players in these complex systems.

31:28And you just reduce the noise and your decisions just accidentally get better and you win. I didn't want to interrupt because I think your thought process is spot on and I wanted people to hear the linear but also the exponential levels of the way you're thinking. And one of the things that I believe, which is why I think we're close, is the whole notion that you have enough, the whole notion that you don't have to be the billionaire, not that it's not great. And of course, if you had the billions, yes, you'd buy your requisite yacht and you'd floated in the Mediterranean, but there are so many simple pleasures in life that you can take in that you don't necessarily need that.

32:06And I think people need to just relax into their lives a little bit more. I went on safari and I got a lot out of it. I mean, but one of the main things is that the animals don't care about dying. They're here living and they're just working on it. Because of our sentience, we know we're going to die and it creates all kinds of phobias and anxieties related to it. But at the end of the day, just watch the animals. They seem to be a good time. We have to figure out a way to do that for ourselves. I'm down to the last part of our podcast. What I do with everybody, authors and thinkers and leaders like you, is I'm going to put out five concepts and I want you to react to these five words.

32:43It could be a sentence. It could be a word. It could be just your sort of Malcolm Gladwell blank reaction. Okay. You ready? Here's the first word. Volatility. Arbitrage. Okay. Is it manageable? Is volatility manageable or does it just require patience? I mean, volatility is necessary to be able to find arbitrage in markets, value arbitrage. I think without it, none of us would be able to make money. If all markets were linear and smooth and the graph was sloping straight up into the right, no one would have any more than anyone else. Everybody would index in and there's no benefit to being either smarter, faster, luckier, or more intelligent.

33:20Okay, very well said. Adoption, like in something like Bitcoin, how do we encourage adoption? I mean, I don't believe in encouraging adoption. I believe you encourage inclusiveness. If you show people that there are opportunities for them in places they haven't looked, that's, in my opinion, way better than trying to convince people of some weird technology that they still might be grappling with. I mean, between me and you, most of the people in this space are still grappling with it. Even people that run big money are still grappling with it. So, you know, I think you lead people by showing them that there's all sorts of benefits and it's kind of like a little, what is it, like a cafeteria?

33:59Just grab the benefits you like and if it fits, put some in your back pocket. Regulation. What should it look like? What is the U.S. getting right and wrong? It needs to be thoughtful. I'm not in the I hate Gary Gensler camp. I'm actually, Gensler's a smart guy, man. He's MIT for a long time and he's not a dummy. I think he's in a really tough, unenviable position. I think thoughtful regulation is important, but people are asking for the SEC to do it. The SEC is not, they don't write law, right? All they can do is regulate with a very narrow tool set. It's Congress and our elected representatives that need to expand these definitions and create some kind of thoughtful regulation.

34:39And we're in a position where most Most of those are maybe aging and having a tough time grappling with how complex the world is. And maybe crypto regulation is not on their mind. However, inclusivity is paramount. And in order to get that, we need disintermediated systems to at least be a possibility to ease friction. And the only way that's going to happen is with thoughtful regulation. So if I was to sum it up, I would say that just in the case of Gary Gensler, I think he wants to be sued. I think they want to be taken to court and they want to be forced to put it back on regulators and legislators to legislate first and regulate second.

35:19Okay. All right. So, I mean, yeah, I mean, I think one of the criticisms would be on Gensler, at least, that he doesn't have the mandate from the Congress. What they did in years past when they were creating new businesses is they went to the Congress with a set of proposals. He hasn't really done that. He's claiming that the current laws on the books and records that exist now are appropriate enough to regulate crypto. That's, you know, you can listen to his interviews. That's more or less what he says. Do you believe that to be the case or do you think we need a different set of laws? I mean, most of these things look like securities if you really boil it down.

35:54Right. So if we're being intellectually honest, most of this stuff is they are securities, the ones that aren't scams. Now, there are a good handful, a dozen to 18, 20 assets that fall in this weird space of commodity and rail. We totally agree. I guess that's the point I'm getting at. It's the commodity and rail piece that I think is the one that I'm getting at, you know? Yeah. And I, you know, again, I think some thoughtful lobbying and I think what I see what Gary's doing, he's trying to scare the creeps out of the space. I don't think that's going to necessarily work. And I think that they're going to be overwhelmed.

36:30But again, what's the cure for for no regulation? Regulation. What's the cure for high prices? You know, higher prices create lower prices, right? Like, so the market at some point will force. Now, if they end up kicking everyone out of the United States, well, then that's on the US. They'll look back and they'll say, boy, we blew that. Okay, two more. Ready? Location. Let's say you were starting a cryptocurrency company today. What is the best location? What is the most friendly location? Well, probably somewhere in Europe. Right. So the Europeans seem to be a little bit more open and a little bit more practical than the Americans, right?

37:01Right. They just have poor financial governance and just systemic problems. And most of those nations are profligate. So they have their own bag full of problems. Yeah, it's very tricky. Luckily, most of these distributed systems exist in a world that has no boundaries. And so at the end of the day, you would probably take a kind of approach like Binance, where you just go everywhere you can. And if you step on a landmine, you just pull up, you pull stakes and go somewhere else. I mean, I think Coinbase is taking that same approach now. You'd have never thought three years ago that Coinbase would say, we're heading to the Bahamas.

37:34But here you are, you know, it is what it is. And so these companies are going to do what's best to maximize shareholder profit. and do what's best for their version of what the ecosystem should look like. Completely get it. America, how could we do better? Well, if I knew that answer, I'd probably be nominated. But I would say that people need to be less judgmental and they need to focus inward instead of outward. You alluded to this earlier. I think if people stopped comparing themselves to what they see, and I know the blanket term social media. But if you compare yourselves to other people you've already lost, you need to just pursue your own happiness and try to imagine that it should not come at the expense of someone else's happiness or freedom.

38:19And if you can manage that, I think you have already gotten like a kind of rich or wealth effect that no amount of money can possibly offer you. Amen. I think it's really, really, really well said. So before I let you go, because you're a predicting king, a couple of last minute predictions here. Where is Bitcoin and Ethereum at the end of 2023? So if you math that out a little bit and you assume that that's probably when we would start seeing rates coming down, even though, again, nothing the Fed does matters, but a lot of dummies believe it does. So I always imagine what would dummies do? So risk assets probably move, tech probably moves, although that's mostly pushed by AI.

39:00So imagine three, four months of this dithering, a pause, a rollover, rates start reducing, you know, back to zero bound is where we're going. But we're also in the throes of a recession. The good thing about a recession is no one admits it until you're halfway through with it. So now we're on the way out. Hopefully, hopefully some bad banks go bad. Hopefully some regionals get folded up into bigger banks, but they don't all go into the fold of Jamie Dimon. And by end of 2023, I would say we're two or three months into a more bullish phase. So I would probably see, you know, I don't know, 40 to 60 K Bitcoin again, seems fairly reasonable.

39:37Ethereum, I'm not so sure about, I think the argument that, that Ethereum is money is a very poor one. It's, it's tragically flawed on a, on a bunch of levels that we won't get into. And they, the fee paradox has not been resolved and no one at Ethereum, everybody there is rich. They don't care. They wake up in the morning, They have zero given S in the tank, right? So I just think Ethereum is probably languishes in the mid, you know, kind of the 1500 to 3000 range. Obviously, there'll be some excitement if the market were to pick up and people run into it. But at a certain point, people ask, wait, why do we own this again?

40:11I was saying buy NFTs. Okay, cool. That's not exciting to me. And as these other, you know, like Algorand and Cardano and some of these other really quality, what I think are quality infrastructure plays, start hosting more new companies, new assets. it's just going to make sense that you don't, everything isn't Ethereum anymore. I mean, even Ethereum is an Ethereum. Everybody's using layer, you know, if you're doing anything, you're going on Polygon, uh, you know, with Matic or you're going on Optimism. And if you're not going there, you're going on Harmony one, like people are choked to death.

40:40So I don't think Ethereum is the play, but it probably melts up. And then I would say in the next 15 or 20 assets, you just see a general melt up. And we're probably back in that kind of two to$3 trillion range, as far as just total kind of crypto asset market cap. Discounting the AI space, that's its own sector inside the crypto space, which there are no rules. That space, I think, will do very well. And there's some people that, there will be some 100 ,000X assets. I don't know which ones, but in the AI where it meshes with crypto, I think that's where the next billionaires and 100 millionaires are gonna be minted.

41:16Well, listen, you are fantastic as always, legendary Nicholas Black. I appreciate you joining me today on Open Book. We're going to catch up with you at the end of the year. We're going to pair notes again. For sure. All right. God bless, man.

41:35We can learn a lot about life from Nick. Incredible discipline, preparation, training, building good habits, being present, listening. You know, Nick is an undefeated fighter for a lot of different reasons. And certainly he's talented. But how many talented people do you know fall short of their dreams because they're not motivated? So you need talent and motivation and discipline. You need to push yourself that extra mile. You need to get up sometimes earlier than you want. You need to go to bed sometimes earlier than you want. It's that sort of thing that drives people to this level of success.

42:10So I'll tell you, when I met Nick for the first time, I was blown away by his in-depth knowledge of crypto. And I was blown away by his almost fanatical approach to wide open intellectual curiosity. One of the things I pride myself with is being intellectually curious and trying to learn a lot about many different subjects. But here's a guy that is killing it in crypto. This is a guy who didn't talk about this on the show, but he's got this huge rental business in exotic cars. I can't wait to get to LA and actually rent one of his Lamborghinis as an example. But he's killed it in crypto. He's killed it in car rental.

42:44And he's killed it in MMA. There's a reason for that. I'm so happy that you had this opportunity to meet him on this podcast. I'm glad Nick is on our side in crypto because I certainly wouldn't want to be on the other side of him given what he's done in the MMA world.

43:04My next guest was a guy named Nick Blackma. He was a former MMA fighter. So that's where it's not just boxing, but they kick each other and they go crazy on each other. This is stuff that my cousin Bobby does or his son Robbie. You know, you know what I'm talking about, right? It's like all the karate. Yeah, his son Robbie. Right. I think, I think Robbie is a good driver for you because if you ever got in trouble with some nut, Robbie would step in and he would twirl him and throw him out the window. Oh yeah, no, he gets a$50 ,000 bonus if he breaks somebody. If someone's coming after me and he breaks the kid's jaw, but the jaw's got to be hanging, he gets a$50 ,000 bonus.

43:41So he knows that. So of course I've publicized that so people are a little wary, you know? Yeah, but people, I don't know. I think that he would kill for you. I do. He's that type of a kid. But what would you have done if I took up fighting, right? I wouldn't want you to. What if something happened to my nose? Wouldn't that be bad, Ma? Yeah, but you have a perfect nose. I have a perfect nose, right? Yeah, you have the DeFeo nose. Of course it's the DeFeo nose. It's not a Scaramucci She knows, right? Well, it's not a doorknob, that's for sure. Oh, my God. Don't ask. Don't ask me, sir. So my father has a doorknob for a nose, Ma?

44:23Is that what you're trying to say? He's got a bad nose. You know it. All my grandchildren say, how do we miss that nose, Nana? Oh, my God. Oh, my God. All right. They have pepper noses, too, some of them. But, Ma, we learned how to defend ourselves as kids, though, right? That neighborhood was tough, right? The neighborhood had it mixed up. What happened with Billy Whiteley, me and Nana? Your mother. What happened with Billy Whiteley, me and your Nana? You remember that story? What happened? He was a tough little kid. And my mother was very with it. And she said, Aunt Antonio, go outside and I'll stay in the door and I want you to beat him up.

44:59You remember that? He was picking on me. He was bigger than me. He was picking on me. I went inside the front door of the house crying. and Nana, your mother said, what the hell's wrong with you? What are you, like a bambino? Go out there and punch him right in the face. And I remember I said, I said, Nana, he's twice my size. You go out there, you punch him right in the face. This was a different time in America, right? I went out there, I smacked Billy Whiteley right in the mouth. I got up on top and was beating his ass. You remember this, right? And then what happened, right? What happened?

45:32He stopped, right? My mother was thrilled. No, your mother was making meatballs over that. Billy cried, ran inside the house, but then what happened? And he never touched you again. Yeah, there you go. That's the true story. All right, so to be - That's the true story. But to be a fighter, you have to be disciplined, no? To be a fighter, you have to be disciplined. Yeah. You don't just fight with people. You have to know your time when to fight. All right, but sometimes you got to walk away, right? Particularly if the person can beat your ass in, right? It depends. Like, Robbie wouldn't walk away.

46:05He wouldn't beat the kid up. You remember the fight I got into in high school and I got suspended for two days? Yeah. Yeah, that cost me my admission. With Zon. Remember that? Yeah. Of course. Yeah. You went to school with his father, right? I sure did. Mm-hmm. And he was a real bully. The Zon kids were very tough. He picked a fight with me. I smashed his head against the wall a few times, almost knocked him out, and then I ended up getting suspended, right? You remember that? Yeah, that was another - Bobby, the DeFeo children were raised together with my children in the same area, and you kids stuck together.

46:45No, there's no doubt about that. No, my older cousins would never let anybody that was bigger than me beat me up, right? That's for sure. I mean, older than me, I should say. All right, so. They were more street, the kids. Mom, what's your. You know, they were raised without a mother and a motorcycle shop. And they were raised tough, but they were very good in the heart. You know, they were good kids. But that's a bit if anything happened to you or David. Susan was a little too young, but they would be right there. They'd pulverize whoever. That was the neighborhood we grew up in, that's for sure.

47:16Ma, what's your routine like now, Ma? What are you watching? You watching Dr. Phil still? What do you do? What are you watching? I watch The Price is Right, Make a Deal. and Dr. Phil. Those are your favorites, right? Yeah, and that's it. Then you go get your nails done, you talk cops out of parking tickets, you get your hair done. What else do you do? I get my hair done twice a week, which is real selfish, but it's my vice. And I get my nails, a manicure once a week and a pedicure every three weeks. All right, that's your routine, but no exercise, right? God forbid any exercise, right? No. I can't because I was a heavy smoker and I get out of breath.

47:56Between leukemia and the smoking, I get totally out of breath. I would love to walk. I used to walk with Sonny up at the landmark. I tell you, you could go... I can't do it anymore. You could walk down the block and back a little bit. You know, you could build it back up. You don't want to listen. All right, I just checked. I get out. Dr. Forte told me if I don't do it, I'll lose it. Right, that's what I'm trying to tell you. I tried doing it, and I went to the other corner of Webster, and I couldn't get back almost. I was panting like an idiot. But how about in a verbal fight, Ma? Aren't you like an MMA fighter in a verbal fight?

48:28Can't you just like torture people? Well, let me put it like this. I take a lot of guffs. My personality is easy breezy. But if you keep hurting me, then I can't get myself in control. You go crazy on a person. I got that from you, right? No one's ever really seen me lose my temper. One or two people have. But look out, right? But when you lose it, it's over. Right. And that's how I am. Yeah. I don't know if that's the right way to be. You should graduate. Probably not the right way to be, Mom. But what are you going to do? We're Italian. We've got to live with it, you know? Right. All right. All right.

49:02I love you, Mom. Thanks for joining the show. I am Anthony Scaramucci, and that was Open Book. Thank you for listening. If you like what you hear, tell your friends, and make sure you hit follow or subscribe wherever you listen to your podcast. While you're there, please leave us a rating or review. If you want to connect with me or chat more about the discussions, it's at Scaramucci on Twitter or Instagram. You can also text me at plus one nine one seven nine oh nine two nine nine six. I'd love to hear from you. I'll see you back here next week.