Joey Krug on Prediction Markets, Crypto Treasuries & the Next Era of On-Chain Finance (Partner at Founders Fund)

33:00And those, those sorts of like founder reasons that are relevant to why founders fund likes to invest in stuff. I think it was very clearly, I think even, even in the memo we sent out about Polymarket to the rest of the founders fund team, I think there was a line there that was something like, you know, if, if anybody can do it, it's this team. If they don't do it, it's probably not going to work for another five to 10 years was sort of the Ralph mental model. What were the sort of founder market fit pieces that really spiked in terms of Shane? And when you looked at the team that made you think, okay, this is the folks, if anyone's going to do it, it's going to be these guys.

33:36I think the way I would describe it is like, if you look at Shane, he's basically super, super obsessed about just like there being more efficient markets and there being a way to basically get data about kind of anything in the real world that people care about you know i think one of the kind of frequently used lines is like if it's on the front page of the new york times like there should probably be a probability on it for how how real it is and polymarket's the best place to go to get that the other like founder thing is the sort of extremely strong perseverance and relentlessness you know he he did take the the legal risks that that we did it and there there was kind of the first cftc settlement and then after after biden lost there was you know the fbi raid and i think you know a lot of people like reasonably probably would have just like you know folded um and not wanted to take on the extreme risk but you know he sort of had this extremely high conviction that this needed to exist it was right you know the government was was wrong to be going after them and that he wanted to build it anyway and i think that that is just sort of it's impossible to fake and then it's also really good for rallying people like around you to your cause and if you think about like what's important for a founder to be able to do it's be able to have a clear compelling vision and then get other people to support that whether that's you know investors people on the team partners of the business and you know i think he really spiked on all those things.

35:11And then the second piece that I kind of alluded to earlier is just like this really high obsession about product. And having wanted to have the product for himself sort of thing, I think is really a big part of that as well. You mentioned sort of the interest of the CFTC and the FBI, right? For folks that maybe didn't chart that story, what was sort of the pricey of what happened and how he was able to sort of manage that process so so the short story of it is basically you know the first version of poly market it's completely global um based on smart contracts they didn't block us ips or anything um i think it was under the under the biden admin they had to settle to cftc and basically block us ips for very obscure reasons the u.s government says that prediction markets are swaps um and uh there's kind of a great matt lagoon piece which is like everything is a swap um If you Google that, it's kind of interesting to read.

36:10And then if you fast forward, you know, it's like 22-ish, something like that. And then it's 2022-ish. And then if you fast forward right after, you know, Polymarket predicted the Trump election win and Biden lost, roughly a few days, maybe a week after the election, you know, the FBI raided Shane's apartment, took all his electronics and phone and everything. it's kind of sort of unclear exactly what what the thing they're trying to get at or go after was i don't like it ever really um kind of full fully got explained but um and eventually ended up getting you know basically dropped you know earlier this year but that's sort of what i was referring to is you know they they burst into his apartment at like 8 a.m or whatever and um and you know took all took all his stuff and and uh he he didn't give up like i spoke to him you know like a day or two after and he seemed in as good as as good as spirits as as usual um which which is just crazy crazy impressive and and yeah it's hard it's it's it's like i would be pretty sad if the fbi raided me to maintain your focus yeah uh but you know he he stayed focused and on track and and you know they've i think they just did more more volume than the election month you know last month so it's it's it's crazy where you know again another another situation where like if you look at what polymark has done over the last year you think for a majority of that you know they were again fighting with one hand behind their back because the government was incorrectly trying to go after them now that they're not you know imagine what they'll do with like 100 % full focus is sort of how I think about it.

37:54Yeah. I mean, also just from the perspective of your investment, it feels like it was astonishingly well-timed and that you guys first invested ahead of the election cycle. And I think there were probably a lot of folks that were questioning, okay, maybe it works during an election period, but it's going to cool off. And this is going to crater to, I don't know, 5 % volume, 1 % volume, however bearish, I suppose you want to be. And, you know, while there obviously has been a correction, it seemed that there has been still this sort of growing variety of use cases and sort of a higher base. You know, naturally, there are these spikes.

38:32But was that something that you felt confident about at the time that you were making your bet? Or was that sort of one of the pieces that that felt like an unknown even to you? The way I think about this stuff is always like, what what's the market pricing versus what what are v pricing right and i think um you know in in this case the way i thought about it was like the market was pricing that there would be like a 90 decrease in volume you know that was come she squalled twitter that was the common sentiment we thought that was wrong you know i i our view is sort of that like or at least my view is sort of that you know maybe there'd be like a 50 decrease and then it would kind of take a while to to rebound but um there wouldn't there wouldn't be this like 90 drop and the reason behind that was like if you look you know polymarkets volume i think the percentage was like 50 maybe 60 elections like there was still this chunk that was not not elections and so to think it would drop a ton had you had to believe that all the users that came in for the election would just leave and not trade anything else but that wasn't really what it looked like from you know the underlying data which is all on chain and you can you know verify it and so you know i think it's it's probably the volumes have performed probably better than we thought they would have a year ago.

39:46But we sort of priced in them doing better than the market did, which I think is like, when you think about edge as an investor, you don't have to predict everything 100 % precisely. You just have to, the delta between you and what the market thinks just has to be wide enough to be right. When I sort of looked at some of the data over the past year, it's clear that Polymarket has seen the most volume of any of the prediction markets, but that it is sort of, I don't know if you would say it's closing or it's quite close with Calci in particular. When you look at sort of the way this space shakes out, how do you see it progressing?

40:23Is this a winner takes all space or are certain parts of it sort of cordoned off in a winner takes all dynamic? If you look at financial markets in general, historically anyways, they tend to be you know basically duopolies so you have coinbase and buyance you have you know you know cme and cboe you have new york stock exchange and nasdaq it's that's one one lens is like maybe there's a duopoly thing why do you think that is out of curiosity i think it depends on each like if you look at the finance and coinbase one that's a clear split of just like international versus you know predominantly western u.s markets um if you look at if you look at the like options in futures markets like CME, CBOE.

41:09I think that one was probably more of like a product type split in the fact that they've just been around for so long that it's sort of naturally developed where there's one place you trade grain futures, another one where you predominantly trade oil futures, you know, so on and so forth. And the liquidity kind of concentrated. I don't have a good explanation for New York Stock Exchange and NASDAQ. I'm sure there is one, I just haven't looked into that too much. If you tie this back to like Polymarket and Calci and other people trying to compete. I think the US versus international lens, I think Polymarket's the clear winner internationally.

41:44And then they're about to launch in the US. I guess, and then in terms of the market categories, if you look at, again, Polymarket's roughly, I think sports is like 40 something percent. And the rest is other things. CalShield is like 90 % sports which is another interesting lens but i guess to more directly answer the question i i do think it'll end up being a bit more of a lopsided duopoly than the than the other stock exchanges like my mental model is closer to you know uber versus lyft than you know nisey versus nasdaq there's a bunch of different like vectors upon which the the competition will be fought but But I think when it comes to product, I'm pretty bullish on Polymarket being able to ship the best consumer product, which I think is where most value capture will end up long run here.

42:38You mentioned that Shane has maybe this product sensibility and this sense of what the UX should be back to even emailing you at Augur and saying, here's what you should be doing. When you look at it today, what are the pieces of the Polymarket product that you think, hey, it's actually really important that this thing that maybe doesn't look that significant is done in an XYZ way or is represented this way? I think for the non-US product, I think part of it is like, I do think crypto is like the ideal market structure for something like this, where if you're having to have like a decentralized system, you know, you look like Uniswap as an example.

43:20If Uniswap was instead a centralized exchange where, you know, they had to KYC people from like 150 countries. Yeah. I think the liquidity pool would just be a lot, a lot less deep. Another interesting factor on the product side is you look at kind of the different players in this space. There's sort of a split, I think, in terms of like, do you view prediction markets as a betting exchange, like in like the sense that like Betfair is a betting exchange? Or do you view them as like a financial exchange? and a lot of people would probably like meme that sentence on on twitter and say you know it's just sports betting or whatever but but to to concretize it and make it something that's actually like um something that you can discuss and it's not just qualitative if you look at that fair you know they take 50 of the winnings of the market makers on the platform uh 50 of their profits if you look at some of the other players in the prediction market space you know like the fees are quite high you're talking multiple percents if you look at most financial exchanges the fees are very low you know we're talking basis points and so one one lens is like do you view this as an actually as actually as an exchange yes or do you in the financial market sense or do you view it more as like like betting and i think um you know the polymarket ethos is is closer to the financial market exchange and i think as a result especially once they launch in the u.s i think the volumes are just gonna are gonna skyrocket um because it will be like the most efficient most liquid place to trade um i think that's one ethos difference and then i think um i probably can't talk about the u.s product but it should launch you know maybe by the time this is this podcast is out you know in a few weeks and i think um the the user experience on that is just so so much slicker than than anything else that i've that i've seen in this space like it's something where you know once once it's out i've looked very forward much much very forward to using it myself, probably multiple times a week.

45:24I think it'll be really, really cool. One of the things that has maybe been tricky for some of these markets and Poly Market has had issues with this in the past is how you manage resolution. And sometimes you think these things will be straightforward and they end up being more complicated than you might ordinarily imagine. The example that I think comes to mind most is the, is Zelensky wearing a suit at XYZ event and he sort of is, he sort of isn't. And, and, and, you know, that's when there start to be these questions about, you know, how manipulatable are these, uh, different markets, et cetera, et cetera.

46:01Uh, how do you sort of like get comfortable with the constraints and, and the different trade-offs that, that, you know, uh, these companies make and particularly the ones that polymarket makes yeah i mean i think um this is a problem that i thought a crazy amount probably too much about you know when i was building augur you know we we spent all this time on on the resolution system and i think in terms of outcomes it worked pretty well but in terms of speed it was just you know horrendously slow um and so that was the wrong trade-off um I think if you look at kind of the state of things today, yeah, I think one lens is that nobody has as perfect, even the big sports books, sometimes according to the betters, you know, will pay things out wrong.

46:48So it's a problem for the industry writ large. I think the suit thing, you know, is one where there's an incentive for, you know, competitors to create, you know, FUD around this stuff. Like if you read the, if you read what the actual designer posted, um you know he he says that it was like cut from separate fabric which according to some of my friends and and in sort of the fashion space that that means it's not a suit but ignoring ignoring like the specifics of that market i think it is a a kind of thing that needs to be addressed for at large i think this best way that i can think of to to addressing this is probably actually to utilize like ai in terms of like writing the market descriptions you know i think i think they may be doing this to some extent already but you know i think the companies in the space should basically provide like their draft you know description to like you know dpt 5 pro or whatever yeah and have it analyze it like a really you know icky you know lawyer would and just try to cover as many edge cases as possible the one caveat is that you still want like you want to cover all the edge cases but you also want a huge like what is the common sense person's understanding of of of what happened you also want to cover edge cases of like you know i i think like technically there's there's some types of like pajamas that they're very technically are a suit because they're cut from the same cloth right like you don't want slansky to wear pajamas and then be like oh yeah it was a suit you know um and and so there's a lot of these edge cases but i think this is probably one of the one of the things in the space like ai probably is actually uniquely suited at at helping with really interesting Okay, well, I'd like to maybe move on to one other part of, you know, the crypto landscape that I know you've been involved in and that I think feels like a big, big part of the market today, which is really the sort of emergence of crypto treasury companies.

48:46I feel like that's been something that has really gathered a ton of steam over the past 18 months. And Founders Fund is involved with one of the sort of front-running ETH treasury companies. How did you first get involved with Bitmine? Yeah, we had ETH position, then bullish on ETH for a while. It's sort of been a tough cycle for ETH. But when we came across Bitmine, that was sort of kind of two or three things kind of converging at once. Once was that this sort of treasury narrative thing had started to happen. Two was that we knew one of the kind of creators of it is this guy Shen from this fund called Mosaics.

49:32And he was actually one of the founders of WorkRise, which is one of our portfolio companies. so we knew him there's some level of trust there and then tom lee i'd known a bit you know off off and on over the years or passed across a little bit and if you look at what these vehicles do you know in my in my mind it's basically they are a way to you know accumulate an asset popularized by michael saylor with micro strategy um in this case it was you know with eath Bitmine sort of launched at a time when ETH was pretty, you know, in my opinion, oversold. I think it was like the low 2k range. They had kind of a combination of two things that I think is really important to make this work.

50:14One is like the capital markets expertise with Shen. Mosaic is a hedge fund. He ended up starting a hedge fund. And then Tom Lee, also with the capital markets expertise, but also like the branding and marketing and awareness building that he's really good at. that combination of things is why we decided to invest. And I think that the ETH ones have some kind of interesting elements to them that I think makes sense for them to trade it. Not a crazy premium, but still maybe a slight premium, which is like, if you look at ETH staking, the ETFs, since they can be minted and redeemed, won't be able to stake 100 % of their ETH even when the SEC approves it.

50:50And so if you have a capital structure where the corporation can basically stake the ETH. One, you can stake 100 % of the ETH. And then two, the other interesting dynamic is that you basically get capital gains treatment because the company is the one paying the tax on the staking yield versus it being directly income to you as a shareholder, which is somewhat interesting. And I think there'll probably be some demand for that from capital markets. Those are the longer term reasons why it's interesting. And then the more shorter term, why we invested that are kind of tied to the people. Like almost, you know, anything else we do, that's sort of where it starts.

51:28You know, that's such an interesting point on the sort of difference between an ETH treasury company and a Bitcoin treasury company. There are these sort of quirks to it. For folks that maybe haven't really followed this as a trend in the crypto markets, like what is the value of someone, at least in theory, investing in MicroStrategy, which, you know, is a Bitcoin treasury company versus an ETF versus the underlying asset? Let's start with the underlying first. The underlying benefits of that are it's traded 24-7. You can just set it to any exchange that you have an account with and you can trade it there.

52:08It's self-custodial. If you're really, really libertarian and think that the government's going to seize your Bitcoin or something, I don't think that. But if you were paranoid about that, you know purely self-custodial spot is a good way to go um and and there are people who live in countries where like that is actually a valid concern right and then if you go kind of you know one step up you have the etfs for the etf i think the benefit there is just convenience like if you buy you know a bitcoin or etf in your interactive brokers account even if your computer gets hacked or whatever like you kind of have the legacy financial rails to protect you there like um you know it's it's not like you're gonna wake up one day and all your ether bitcoin is is stolen um and then and then i think when it comes to the treasury companies these are sort of more like a higher beta kind of supercharged version of of the underlying asset where they own you know ether bitcoin there's sort of a couple reasons why why one might be willing to pay you know a premium for that think about a company like you know apple or tesla or facebook there's like debt for it that you can trade.

53:18It gives you some exposure to it. It's higher yield than treasuries, but you don't really have the same downsides you have as investing in underlying meta stock, as an example. For Bitcoin and Ethereum, prior to Saylor, that didn't really exist. And so he basically created this way for people to buy convertible bonds, where it's collateralized by Bitcoin. There's some sort of capital stack. They get some amount of upside if Bitcoin does well, but they're able to invest via debt structure and its lower downside. And there are people who want to invest in that or who can only invest in those sorts of vehicles that do want exposure to crypto.

53:58They can't buy the underlying. So there's this interesting financial instrument that he created as a result that has some value. And then you can debate around the margins, what is the premium of buying MicroTrategy stock that it's worth in exchange for him providing that service. And I think my view is that the answer isn't zero, probably not 3X either. But I think that's sort of the notion of why you would buy it because he's basically selling this service. And as an equity holder, you're basically getting the monetization of that service or the benefits of it, sort of the high level way that I would think about it.

54:34And the fact that we're now seeing, you know, ETH treasury companies, Solana treasury companies, you know, other ones coming up the pike, like, do you see that as, I don't know, simply mimetic behavior? Is it telling us something about the maturation of this market and the players in it? How do you think it changes the structure of this market? it yeah i mean it's definitely memetic like we've napoleon and peter i've talked about that stuff to some degree as well like yeah in some ways i'm like this is you guys must have had a an alarm bell going off uh in making this investment because there is such a memetic quality in a way right yeah so there's so there's there's some memetic element to it which i think like if you think about financial markets if you're if you're early to a memetic phenomenon that's good that's kind of the classic soros argument um if you're late to it it's bad one thing that i think people kind of overcomplicate it's like you sometimes especially last year you see on twitter all these people talking about you know oh michael saylor is buying all the bitcoin you know there's there's not any real demand and it's like well if you zoom out one layer more of draft from that like why is michael saylor buying the bitcoin it's because people are buying his stock they want bitcoin exposure that's really there's still someone who's like you know pressing the buy button yes that is then triggering that inflow it's not like saylor is just magically you know printing all this money out of thin air even like the stock issuance he does that then buys bitcoin someone is buying that stock which is really you know in a world without michael saylor i think that money would have eventually found its way to crypto um but he's created a way for people to buy it that for for whatever reason like the idea of maybe getting some extra you know beta on this like bond trade that we talked about or maybe they just can't buy spot or ets for some reason like there are certain asset managers that can only trade underlying stocks and so a hacky way to buy bitcoin is or or yeast is to just buy one of the treasury companies right yeah and then to answer your question about the medic or the mimesis you know of other companies doing this i think it probably works less well as you go down the list of assets um and the same reason that like you know a small micro cap stock can't really issue that much debt um you know it's like people want to buy Apple bonds or Goldman Sachs bonds, they don't really want to buy the small to mid cap.

56:55Well, HIMSS is maybe sufficiently large. That's not a potshot at HIMSS, but that sort of comes to mind. But yeah, like three years ago, they wouldn't have wanted to buy HIMSS bonds as an example. Taking a step back and reminding listeners that none of this is financial advice, as I'm sure they know what is your your view on the state of the crypto markets today like where does it feel like we are in the cycle there hasn't really been any sort of euphoria this cycle um you know in prior cycles there was this there are points where it got super super crazy i think maybe the craziest this cycle got was some of them some of the meme coin stuff on on solana but even then that didn't get really that crazy that was it was more of like um it was more of like a new version of like betting or gambling almost because like with a small exception there's a few that that did actually persist most of these you know traded way up and then traded way down versus in prior crypto cycles you had assets that for years traded really like way way up maybe that's like too many people got burned last cycle maybe it's that like more money is flowing into like sports betting and prediction markets and stuff um maybe it's just that we've kind of been through like this like rolling consumer recession kind of thing in the u.s where like the vibes are bad like the kylos gammon thing like i think that's real like if you look at the Michigan consumer sentiment it's been kind of negative recently maybe that's why retail hasn't come in but then i think on the flip side you know you do have a lot more a lot more institutional inflows and you know people that they're just kind of fairly long-term investors that you know buy bitcoin and kind of just hold it and sit on it as a small percentage of their portfolio, but their portfolio is very large.

58:38So it ends up making for a good amount of, of net inflows. Yeah. I think you, you kind of combine those things. It sort of feels like you look at prices today. I don't know. It doesn't really feel like anything's like crazy expensive or crazy undervalued. It kind of just feels like we're in this, like, you know, interregnum period or, you know, purgatory or whatever. And I, I think, I tend to be pretty bullish. There's a lot of fundamental catalysts coming over the next couple months. You have the next East Hard Fork upgrade, which I think is positive because if they ship it, that'll be two in a single year, which means they'll revert it to a faster shipping cadence.

59:24You have the Clarity Act, which I think will be a huge deal because it basically legalizes. It's already legal, but it makes it official that it's legal. you know the kind of overall crypto market structure in the united states and then and i think that'll be big for for kind of more institutional inflows and then you have kind of some macro positivity with you know continued rate cuts and the fed ending ending quantitative tightening which sort of if you look if you look at alts they tend to really not do very well when the fed is still tightening and and then you have the government shutdown which i think you know hopefully gets resolved for the next week or two yes and i don't really have the mechanism why but crypto historically has underperformed in government shutdowns for whatever reason it's kind of ironic but yeah it is um uh maybe it's maybe it just goes back to like the vibes thing um where people are just like not bullish because they just feel like stuff is broken or something i don't know yeah you're not you're not in the mood to take new risk in that in that way for whatever reason maybe i sort of remember covering this in the founders fund series that we published and the generalists that you guys made a pretty remarkable and prescient investment into Bitcoin and ETH primarily in sort of the summer of 2023 when, you know, I think the first buys were somewhere around like 30K for Bitcoin.

1:00:42And I remember hearing, I think that you guys had basically exited the Bitcoin position, but we're maybe still holding ETH. What is your sort of model for ETH and what needs to happen and why it's maybe still worth hanging on to, you know, given that you've maybe made a different call with Bitcoin. I think the high level logic there is basically that, you know, ETH tends to kind of run and outperform kind of later in the cycle, often, you know, often after Bitcoin has topped, you've got people sort of rotate into it. And then, you know, I think, and so i think that's that's sort of part of it and then i think part of it is that you know it's sort of got the narrative got kind of so oversold especially like during april where you know there's kind of this narrative that like solana is everything and it's just going away and yeah it was a real real bummer vibe on on x yeah exactly and and you know the ethereum foundation can't ship and all this stuff and i think you know sort of the the new leadership at the EF seems pretty strong.

1:01:51They do look like they're going to ship this upcoming hard fork in early December. And so I think sort of holding onto the ETH is more kind of like, I think there's probably some mean reversion and repricing that will take place. Because also, if you look at kind of fundamental usage, it's still the number one platform for stablecoins. Polymarkets on Polyon and Ethereum layer two, or investors in this other company called LIDR, which is you know one one of the you know top couple you know perpetuals decentralized exchanges they're also an ethereum layer two and i think they've proven that you can actually get a really smooth onboarding experience as as an eth layer two it's pretty easy to deposit and withdraw funds like i do some of my own trading there now at this at this point um and so yeah i think i think sort of like kind of got way oversold and became very contrarian this this spring and i think there's probably, there's probably some room to go on ETH is sort of my mental model alongside, you know, these catalysts, like the Clarity Act, where, you know, basically clarifying that DeFi is legal.

1:02:54ETH is like the number one beneficiary of that. And so similar to kind of all the media you saw around stable coins in the summer. I think the same thing happens around the Clarity Act, you know, whenever that passes over the next couple months. We've talked around, you know, talked about some of these regulatory changes that have been made under the Trump administration. and how much hostility there was under the Biden administration. You shared, I think you'll have to remind me where you were on stage. Maybe it was ETH Denver talking about some of the pieces of Operation Chokepoint that you sort of got to see, maybe not firsthand, but heard from folks that went through it firsthand.

1:03:33Yeah, I'd be curious to hear that story. And maybe a few months later if folks came out of the woodwork after you gave that speech and shared that and maybe even more of those sort of horror stories came to light? On the Operation Choke Point stuff, you know, where you basically have, you know, had all the banks kind of cracking down on crypto, people have definitely shared that more. I think after that talk, I made a tweet about it where I was like, you know, retweet this if you had a bank account shut down as a result of being in crypto is kind of one of the more viral tweets I've had. And the Trump admin has definitely kind of reversed all that stuff.

1:04:16A lot of the banks that wouldn't bank me or some of them have reached out now offering me to join their private wealth management. I've ignored all those because... You didn't want me back in the day. Yeah, it's like... So I think that stuff seems to have gotten fixed. I think the other thing is just that's been even a bigger deal has been kind of all the all the regulatory stuff like, you know, under the under the Biden admin, there was this thing, you know, the SEC, which was infuriating, you know, they would say come in and talk to us. But, you know, probably like 95 % of the founders I know who tried to get a meeting, you know, they wouldn't meet with them.

1:04:58And then the very few that did get a meeting, you know, the SEC would kind of just listen. and then usually later use anything they said against them in some BS lawsuit. I think the most absurd thing I remember under the Biden admin for crypto was that the SEC actually tried to take the position at one point that stablecoins were a security. Even though if you buy USDC, you can't really make money. It's pegged to a dollar. That's the entire point. um and and you know the there are some like very obscure legal arguments you can use to say that it is but like everybody knows it's not like in practice it's not it's like trying to say the sky is is you know green or something it's just like it doesn't have any real logic to it but yeah so i think the trump admin is basically fixed you know essentially all that stuff the new sec chair seems really good um the new you know person that they're hopefully getting confirmed soon for the CFTC seems really positive.

1:06:02So I think that's taken a complete 180. Taking clarity as red, let's say, what are the sort of other pieces that maybe feel like they're still missing or you would still like to see further action on? I think the other area that probably doesn't get into the Clarity Act that I think would be good is you know there's kind of these like regulatory exemptions for like spot exchanges that are decentralized like uniswap and things like that it's kind of unclear whether they're going to exempt and probably not you know things like decentralized perpetual exchanges you know things like hyperliquid and and lighter and stuff like that um you know the same thing for for prediction markets um like anyone in financial markets you know would would clearly tell you that a global liquidity book is just going to be far more liquid and better than you know where poly markets currently happen to end up which is which is you have you know u.s exchange um and then you have kind of the offshore one um i think a much better like long term you know i think over many years regulatory structure would be sort of like what um hester pierce kind of proposed the SEC back in the day, which is she had this idea that it's like, DeFi should exist, you should be able to trade on it, it should be legal, it should not be illegal.

1:07:29But the one negative of trading on DeFi is that you don't get the regulatory protections if you trade on a regulated platform. And then if you want those regulatory protections, you can build a regulated thing on top of it. And so I think if you look five, 10 years, the ideal way that something like Polymarket should work is you have the core platform, decentralized smart contracts based, the liquidity book is completely global. And then in the US, you can also trade on that if you want. But there's also like a thing on top that feeds directly into the same liquidity pool. And that, you know, has kind of the regular regulatory licenses.

1:08:04If you're, you know, Citadel and you want to bet, you know,$100 million on some, you know, Fed action or something. Yes. That's probably what you use because you want the full regulated financial system. but you still get the same share of liquidity. Like that's, yeah, that's sort of for like over a five to 10 year horizon. That's the way I hope this stuff goes. Versus right now, you know, kind of feels like we're trying to, you know, the market structure of having these things be separate doesn't really make sense. And like, it's very clear that the smart contract based way of doing it is superior.

1:08:37And so it's just like a matter of time and who knows how long that takes. But that's sort of the one thing that I think probably doesn't get done in this admin. I think there's probably people in the admin who do want it to happen, but it's more like, you know, with Congress, you got to be practical and get what you can get done versus trying to, you know, get everything all at once. Yes. Well, before we maybe go into a wrap up question, one final thing that I was curious to hear about is maybe how your investing lens has changed since joining Founders Fund. And, you know, obviously, when I sort of looked back at your Medium post announcing that you were going to Founders Fund, you talked about how prescient Peter had been in sort of predicting the contours of cryptocurrency back in the late 90s.

1:09:26And, you know, the value of being part of a really high quality generalist investing team and how that can influence your thinking positively. So after, I guess, a couple of years of this or maybe longer. Yeah. How has that maybe changed the way you think about your work? A bunch of different ways. You know, I think one of the, you know, one of the things when I first joined Founders Fund is there's like a, I forget who, someone on the investment team sent me a link and it's all the historical, you know, annual meeting talks Peter's given. And I kind of just flipped through all the slides of them.

1:09:59and you know one of them is this thing where there's a slide and it's like Michael Jordan and it's a slide of him as when he was playing baseball um and then there's another slide you know right after where he's playing basketball and and I forget what the slide said but it's something like you know down to market fit is is probably like the number one thing um you know incredibly important you know Michael Jordan was not a very good baseball player but world class at basketball that's that's something I think a lot about um you know it's founders fund in the name it's about backing the best founders but then i think there's this other aspect of like is this the right founder for for a different market and product that they're building and then i think the other really interesting thing is there was another slide like this um i've heard peter talk about this sense as well it's like this this notion that really great founders they're not like this like you know checklist in fact they're really really great at some things and really really bad other things um and i think that's probably true for for greatness writ large.

1:11:01And that's a really interesting thing. So then, then it sort of forces the question when you think about investing. Um, I think one of the things, you know, that we do well at Founders Fund is try to zero in on like, what are the most important one or two questions for whether this will work? And then also, you know, how do those tie into who the founder is and what they spike at and, and, you know, what they're bad at. Um, and that's, that's probably one, one area. And then I think the other thing, you know, that has kind of affected the way i invest is just looking at things from the lens of like if you read like zero to one peter talks about this a lot but it's like you know people really underestimate the power law and then there's kind of this notion that that like getting to scale matter matters a lot um and you know i think i think if you look at that like one way to apply it to crypto that i've kind of applied it to is if you look at things like polymarket as one example uh we you know we doubled down again and then you know early earlier this summer um and some of these i know thought that that was like a too expensive price you know and then they raised a way way higher price you know a few months later because their traction 4x and i think it just comes from like people tend to really underestimate the power law and how there's many cases where something that um you know feels expensive actually isn't or something that feels not expensive is actually incredibly expensive and i guess the last thing on this question um you know our our growth team recently kind of did this analysis of like if you look at companies and how long it took them to get from of the ones that made it how long it took them to go from like you know 10 billion to 100 billion market cap and then 100 billion to a trillion it's actually faster for for the larger scale um within tech which is kind of surprising now of course the hard part is making sure you're in those companies as opposed to the ones that failed, which makes being really selective really important.

1:13:00But I think those sorts of lenses are, some of them are things I thought about but hadn't realized how important they were prior to being at Founders Fund. And then some of them are just, the growth one is kind of counterintuitive, but empirically true. What a thoughtful answer. I'm going to be mulling that one over for a while, I think. Well, as a final question, I always like to ask guests, if you had the power to assign a book to everyone on earth to read and understand, what is the book you'd want to assign people? I think one book that's really good is there's this book about the history of hedge funds.

1:13:41A lot of people listening to this have probably heard of the power law and the venture side, which I actually haven't read. But the same author wrote this book called More Money Than God. And it's a lot of history of financial markets and of hedge fund investing and trading. and it's probably the um probably the most interesting investing book i've ever read maybe alongside like soros the alchemy of money um or finance or whatever the title is um because both of them provide like a really insightful window into how like really great investors thought about the investments they were making at the time that they made them um versus i think a lot of them a lot of investing books talk about you know oh we did this this and this and it was so great and all this stuff versus these books kind of walk you through like the trades and investments at the time, you know, nothing's ever as certain as it sounds in hindsight.

1:14:35But you can see like how people think. And there's a lot of interesting stuff that I picked up from those books. That is a great recommendation. I have read The Power Law, but I have not read More Money Than Got. So that's a good prompt. Joey, thank you so, so much for taking this time. I really enjoyed it. Yeah, me too. Thanks for having me. That's it. Thank you for listening to this episode of The Generalist Podcast. Please subscribe on Apple Podcasts, Spotify, or your preferred podcast app. Ratings and reviews help others discover these discussions, so if you enjoyed the conversation, I'd be grateful if you could take a moment to leave one.

1:15:13For all past episodes and more, visit us at thegeneralist.substack.com. See you next time as we continue to explore the future. Thank you.