MI Rewind: Masterclass on NFTs and Business w/ Tom Bilyeu

24:53To begin getting smarter about investing, just visit theinvestorspodcast.com slash get started with stocks. That's theinvestorspodcast.com slash get started with stocks. And for a limited time, you can use code stocks15 for a 15 % discount at checkout. All right, back to the show. Do you think that model is even better today because of the digital nature of a lot of products and services with Quest? I know you gave a lot of bars away for free, which clearly is a great strategy and it worked, but each bar that you gave away was cost for you guys, right? You had a ton of cost that goes into every single one of those.

25:30Whereas a course, sure, you have some time, maybe you have some hosting, but relatively speaking, you can give that stuff away for free, even at very little cost to you compared to a physical product. So I would probably think that that's even a better strategy today than it was with a physical product. It really depends on what the product is. So there is this notion with people that came up as digital natives that information should be free. So if you have an information product, it's hard to monetize that. And you really have to have what I talked about, like those sort of buckets of information that are massively usable.

26:02So I've got to have a free bucket that is extraordinary that someone could spend years in and then still feel like, all right, I've got to go to that next level. And then that next level has to be so rad that people are like, oh my God, I can't believe for years that I didn't take advantage of this. And that can be very, very difficult. Physical products, on the other hand, that is a harder game to find a way to give access to people if you're doing something for free. So let's take something in the collectible space because now that thing doesn't really have utility. So now it's just sitting on somebody's shelf.

26:34So now you're going to have to do your giveaways to influencers. So let's say that I'm the little figurines, the characters with the big bobbleheads. If I were trying to grow that business, then I would give them away to the right people that can bring attention, that are going to be excited about it, that will talk about it because they're getting it for free, that have as an audience through whatever value creation proposition they have, whether it's like I live in the anime world. So let's say that they do anime essay videos. So I know that they've got the kind of fans that I want to speak to.

27:05So if I were making anime figurines, I'm going to give some to those people. They're going to talk about it to their audience. That will drive people back to me. And then now we also get into things like hype. So you have to find a way to build hype and you're yourself going to want to be creating content as well. So content is king, as everybody says. The reason it's king is because it gets attention. Once you have attention, then you can sell, but you want to be able to create that interest and that FOMO by giving those away. So even something like that, which doesn't have inherent utility, you can build that excitement around by giving it away to the right people.

27:41So you just have to be thoughtful about what your sort of freebie strategy is and then how you take advantage of that on the backend. But between a content strategy and the giveaway strategy, either direct to your consumer, if it's a consumable or something that can be upgraded, or to influencers if it isn't consumable and doesn't have intrinsic value, but is essentially a marker of a community, then that's the knock-on way that you use that. Another model we've seen recently, whether it be Clubhouse, there's another app called Superhuman. It's an email management portal, I guess you could call it.

28:17And what they've done, they've created a lot of hype by creating basically a wait list. And you've seen this with a lot of crypto platforms, like exclusivity, I guess you could say. Rather than giving things away for free, you have to be exclusive to get access to their product and services. How do you think about these two different strategies? Are they one better than the other or do they both work in different scenarios? Well, I think honestly to succeed, depending on what your business is, if you're a business that's using a hype strategy, you are going to need to get very good at building scarcity because scarcity is the very thing that's going to lead to that hype.

28:50And it's an extraordinarily powerful self-reinforcing mechanism, but it's also incredibly difficult to get started. And so you have to be asking the question, why are people going to care, right? So if somebody creates a figurine based on a story that they wrote or a movie that they shot that nobody's seen, then the movie has no value, the figurine has no value, and you won't be able to build hype. So this is why a lot of these sort of hype-driven things, there has to be some kind of narrative. Either a literal story, film, TV, animation, whatever, that gets people emotionally connected to those characters and then the representations of those characters, or there has to be a narrative around your brand.

29:35So take something like Supreme, where they created that out of thin air and they built it up to be something very exclusive. But that, again, in fact, this is where you really have to look for timing. And so a lot of times it's betting on an upcoming artist. They're a nobody, nobody knows who they are. But if you're good at recognizing, you know, whether it's a motocross person, whether it's a skateboarder, whether it's a hip hop artist, whatever you recognize them earlier, because ultimately there is no way to remove the need for you, the entrepreneur to be gifted at something. So you've got to have something that is your like special gift that makes your company valuable because other companies would want to hire you because you're very good at this thing, recognizing talent early in this case, and you don't go work for them.

30:21You work for yourself. Now you need to go do that thing. So if what you're good at is recognizing who's about to pop, right? You find them when they're early in their career, you put them in your clothes in the case of Supreme, you do collaborations with them. Now, if they go from nobody to Drake and you were the one that was rocking with them when they were small and they show you love on the way up. Now, all of a sudden, your brand just explodes. This is exactly what happened with Nike and Jordan. Right? So Jordan wasn't the Jordan that we know now when he inked the Nike deal. And it was a pretty big bet for Nike to make on this young kid.

30:56I think it was his rookie year. And so you get these huge bets that brands will make on people hoping where they can each help each other. And And that really becomes the necessary strategy when you're trying to use a hype cycle, but you're a small company, nobody knows who you are. You have to be able to recognize somebody early so that getting just some free swag would be huge for them. And then as they rise, then that tide should lift all boats, as they say. And anyone that's seen The Last Dance knows that Michael Jordan absolutely blew those initial requirements out of the water for Nike. And clearly Nike has become what it is today.

31:34So you mentioned before when you're talking about building Quest about how you guys purchased some manufacturing equipment, things like that. You made a big bet. How do you, as an entrepreneur, fund the startup of a business, whether you need manufacturing equipment or you need something else? How does somebody fund a brand new business? And I think you mentioned you didn't even take any outside investor capital. So how does somebody get started from that perspective? So with Quest, it was in the beginning, we did everything nights and weekends. So we had this technology company. So the technology company was doing fine.

32:07It wasn't lighting the world on fire, but it was doing fine. And it allowed us to be making money during the day running the technology company. And the nights and weekends, we started building Quest, right? Because in the beginning, you don't know if it's going to work. And so we did nights and weekends until Quest was actually profitable. And then what we were doing is reinvesting all of that money back into Quest. I was the first one to leave the technology company and go to Quest full-time. And so I I was running Quest as the full-time person anyway, by myself for about a year. The other two were still hyper-involved, but they were still running the technology company.

32:41And I cut my salary way down and just had to tighten my belt, not go out, not eat out. Literally, my wife and I didn't leave the house for 18 months. We got rid of one of our cars. I mean, just really embraced that we were now making very, very little money. And by doing that, we were able to continue to reinvest everything into the company. And then we made one really, really smart decision, which was we had the opportunity to go either into stores or online first. And we debated it in-house, but I felt very strongly that we should go online first because that would give us an opportunity to touch the customer more.

33:23We weren't putting a middleman in between us because I remember I'm obsessed at this point with a thousand true fans. So I didn't want somebody in between me and that customer. I wanted to build that relationship. I just felt like that would give us the ability to build this community. And then the community would be something special. But at the time, this idea of community was people weren't thinking like that. So it was very atypical. And it was hotly contested inside. But ultimately, we did decide to go online first. And what ended up happening then was we said no to retail for over a year.

33:54And then finally, people were going into stores and saying, hey, why don't you carry Quest? So they kept coming to us with these terrible terms because retailers know that they're the kingmaker, that just by putting you on their shelves, they'll 10x your awareness and your sales. And they know that. So they build that into the price of the percentage that they take. And so we were just like, these numbers are ridiculous. I mean, we're making 80 % margin selling online. Why would I ever go to the 20 % margins that they want us to take? We're like, get out of here. So we just kept saying, no, no, no, no, no, no, no, until the margins were awesome.

34:30And so then we finally said yes, but we were saying yes from a position of power. We had negotiated a much better contract. And now all of a sudden, because we have a much better contract and we have these great margins, we're able to actually fund the business through our own cash flows. And then at some point, look, scale gets out of hand. One of the hardest things to deal with is a hyper-scaling business, especially in manufacturing. We have huge capital outlays. So we did eventually take what's called mezzanine debt, where you're basically taking a loan and they're saying, if you can't pay the loan back, this becomes equity.

35:03But if you can pay the loan back, then it becomes a much, much smaller portion of equity. So we did that. That helped us scale even bigger. And then by the time that we went to banks, we were doing hundreds of millions of dollars in revenue. We had a very long track record and we could just ask for a revolving line of credit based on our accounts receivable. And so that was how we did it without having the mezzanine debt ended up transferring into a tiny, tiny, tiny fraction percentage-wise of the company. But that was really, really a brilliant move that allowed us to begin to scale in the early days and then getting that revolving line of credit as it just got too big, the capital outlays because our growth rate was so crazy.

35:41We needed that revolving line of credit, which we were able to get because of the sustained track record that we had, and then just managed it until we sold a piece for basically just pure founder liquidity to just say, you're always in the food industry. You're one salmonella outbreak away from going out of business. And we're like, ah, let's hedge our bets. So we did that first. And then ultimately about, God, I guess 10 months ago now, no, whoa, this is all pre-COVID. I forget. COVID is sort of a blurry year. About a year and a half ago, we sold the company outright. Yeah. And still at that point owned the vast majority of the company.

36:19You posted a video recently where you talked about controlling your emotions. And on this show, we talk mainly about investing, personal finance, entrepreneurship, things like that. All of these things that when you can control your emotion, it's going to give you a big edge. So walk us through your process and your strategy for controlling your emotions. Okay. So the first part, and this is really important to understand, is there's a book called Mindset by Carol Dweck. I think it's the most important book in the English language. And the punchline of the book is really simple, but utterly transformational, which is that your talent and intelligence are malleable traits, meaning that you can get better over time.

37:01It's what I call the only belief that matters. So the only belief that matters is that if I put time and energy into getting better at something, I will actually get better at that thing. And that that skill has utility. So, you know, just to stick on the motorcycle racing theme here, the more you practice racing, the better you get, the better you get, the higher up in the rankings you finish, the higher in the rankings you finish, the more your prize money, the more your prize money, the more things you can do in your life. So the things you're able to do in your life, whether it's, you know, just have a better life for your significant other, your kids, whatever, is because you spent time on a racetrack getting better at riding a motorcycle, right?

37:41So there is an outcome that's predicated on that. Same with investing. You learn about investing. That knowledge has a utility that allows you to make more money in the markets. So that was like this huge aha moment and should be huge for everybody just on its face. But it has a secondary benefit, which is the following. Your brain is going to f*** you and you're going to mess up. You're going to be publicly embarrassed. You're going to feel badly about yourself. As you feel badly about yourself, it curbs your behavior. okay all of your beliefs control your behaviors so if you have the wrong beliefs i'm a loser then you will have the wrong behaviors you won't try things you won't try to get better at things because you think you're a loser and it's not going to work out and therefore you're standing still and therefore your life is not going to improve so that belief that emotional reaction that you had to messing up gave you the wrong belief which is that you're a loser or failing makes you a failure and so now your behaviors are out of alignment with what they would need to be for you to be successful.

38:39Now, the greatest thing that will rescue you from that emotional defeat of taking on the moniker of failure simply because you failed is the realization that your talent and intelligence are malleable traits and you can improve over time. So every time I mess up, I don't waste time feeling badly about it. I just go, okay, what skillset do I have to get better at or hire somebody to come in and do for me that will allow me to move towards my goals? It was only in the period of my life where I believed that failure was simply revealing the truth of my inadequacies. And there was nothing I could do about it.

39:16And so it was emotionally devastating. And so I would get stuck in this spiral of I'm a loser. I'm never going to amount to anything. And like I said, that then governed my behaviors. And so learning about the brain showed me that what's called brain plasticity, which is just a fancy way of saying that you can get better over time at whatever skill you want. that brain plasticity is real. And that now it was just a question of where am I going to allocate my time and energy? What are the skills that I'm going to invest in and get good at? And so that's step one of getting a hold of your emotions is knowing, well, I can get better.

39:52So this isn't a death sentence. Number two is to read a book called Man's Search for Meaning by Viktor Frankl. Now, Viktor Frankl survived multiple concentration camps. And you can imagine what you would learn about life in Auschwitz. And one of the things that he realized was you could predict somebody's death within 72 hours, that they would succumb to the elements or starvation or whatever. And the reason that you could predict that, or the thing that you use to predict it, was they would lose sight of why they were suffering. And there's a great Nietzsche quote. He says, a man can endure almost anyhow, if he has the right why.

40:33And that's a paraphrase, by the way, it's not the exact quote, but you get the idea. And you take those two ideas together. Okay. I can get better at something at any time. And then Viktor Frankl's idea of, you have to have a why for all this suffering. And the why comes down to narrative and realizing, and this is Viktor Frankl all day. He talked about this gap between stimulus and your response is a gap. And in that gap is going to be the quality of your whole life. And it depends on what belief, what narrative do you insert there? What why? Why are you going through this? Why are you suffering?

41:11Why are you struggling? What are you fighting for? Why are you willing to face this defeat, this embarrassment? Why do you want to control your emotions? And you insert that into that gap. So something happens, you get this really strong emotional response. Now you decide whether you're going to just respond and lash out, which is what 99.99999 % of the world does. They confuse emotion with truth and they don't realize that, hey, you feel something does not mean you need to react on it. And so Viktor Frankl gave me and everybody else that's read that book, the understanding that I can insert conscious control in this moment.

41:50And I can say, hey, I only do and believe that which moves me towards my goals. So this anger that I'm feeling, this sorrow, this fear, this sense of being stupid. I feel it, but now I have to ask, will it help me to behave as if this were true? If it helps me to behave in that manner, then I do it. If it doesn't, then I don't. And that's me in that gap, getting control of my emotions, whether it's feeling badly about myself, whether it's anxiety, whether it's rage, whatever the emotion is, and then recognizing, okay, the emotion is telling me something and And it's worth looking at that because that's your subconscious and your body communicating with your conscious mind through the language of emotion.

42:35So there's something there that's worth understanding. But I need to be very careful to recognize that emotion is not truth. This is something you do well and I like, so I'm curious to hear your opinion on it. But one of the things you do is you cover such a wide range of topics. If you look at your Instagram, so many different things you cover. And you just talked about the skills in the mindset book. and how you can learn any skill you want. How do we decide which skill it is? How do we decide which project? How do we decide on what to work on? So first, why do you cover such a wide range of topics?

43:08And second, where do you fall in the debate of the gurus who think you have to focus on the one thing versus trying to work on a bunch of different things? Here is a rule of life. When really smart people disagree on something really fundamental, they each have different base assumptions. So odds are that in certain areas, both of them are going to be right, or given their sort of natural inclinations, where their life has led them, everything that they've lived through, they're just telling you exactly what they did. So it's not that one is right and one is wrong. It's understanding for you, the open-minded person who is refusing to be dogmatic for you to say, when does it make sense to lean on this idea of what am I strong at and really leverage my abilities?

43:59So for instance, I didn't step out in front of a camera until I was like 38 years old. And the first time I stepped out in front of the camera, I did it fully understanding that I am very gifted verbally. So I knew, okay, cool. I have this magic trick that I can do. I'm very persuasive. I have a mastery, not only of language, but the ability to understand people, to read them, to say things in a modulated way so that they feel something. So this is a tool for me to leverage. But the sort of natural outcropping of that would be, well, then Tom, go be a speaker, right? Go be the next Tony Robbins.

44:32And let me tell you, Tony makes a ton of money. So there's a lot of money to be made had I gone down that path and maybe even more money than I'm making now. But the reality is my goals demanded something else. Everybody's goals should meet two criteria. Number one, it should be exciting. It should just be something that you're enthusiastic about. I'm not enthusiastic about making the sum total of my life, being a mindset coach or a public speaker or motivational speaker. It's a part of what I do and it's fun and I really enjoy it. But when I envision my life and that's it, I'm totally turned off.

45:06Nope. I have zero interest in pursuing that. Now, what do I have interest in pursuing? storytelling, helping other people change their mindset because only 2 % will change their mind through motivational speaking. 98 % you can influence through story. I'm just way more interested in that. So my goal said, cool, then you're going to have to be involved in something totally different, which encompasses business and storytelling and a whole bunch of other skills, some of which I have natural predilections for, some of which I do not. So in those moments, now you have to go, everybody's saying I should lean on what I'm good at.

45:38They're right. And so I leverage those skills wherever I can. I'm very good at galvanizing a team. I leverage that to my ability. I'm very good at articulating a vision. I galvanize that. I use that to my ability. But there are other things that I'm not good at. Finance does not come naturally to me. I've had to learn about it. Technology does not come naturally to me. I've had to learn about it. In learning about those things, it's really magnified the areas that I can reasonably marshal resources in and push forward because I can't be bamboozled, right? I don't know it as well as somebody else, but I needed to get good at it.

46:13I needed to know business finance that's just allowed me to move things forward. So rather than saying, I don't know how to do that. Somebody else is going to handle that for me. That puts me in a very vulnerable position. I've had to learn about that. Also, I don't have any entrepreneurial instincts. When I first got into business, it was ridiculous how I looked at the world. And so I just had to change and shape and figure out how to think in an entrepreneurial way, find those first principles, right? Think from a first principles place, which can be taught, can be learned. And so I was just like, cool, these parts didn't come naturally to me, but they're an absolute must.

46:43I can't outsource them to anybody else. If you want to be a CEO, let me tell you, you better learn business strategy. You just can't outsource that. So had to learn it. Other things you have to learn just enough to find the right people to bring in. And so you're taking from both buckets and letting people trap you in dogma, I think is a mistake. And so being open-minded, understanding what you're good at, understanding just how malleable the human mind is and that you can learn a lot. And that if your goals demand that you get really good at something that you can. Now there's a quote that I think people will find deeply comforting, which is you can't make a racehorse out of a pig, but you can make a really fast pig.

47:21So there are things where I'm a pig and I'm never going to be the greatest of all time, but I can get 10 times better than I am, 100 times better than I am. It's somewhere in there. Your life is unrecognizable if you get 10 times better at something than you are currently. I mean, just think about getting 10 times better than where you are now at motorcycle racing or investing or building business, 10 times better. That is insane amounts of growth. It's unrecognizable. So think about the difference between having $10 ,000 and$100 ,000, right? That's 10 times. That's a step function, right? It's just unrecognizably different in terms of what you can do.

48:02And then I think it's actually way more than 10X, but even 10X is transformational. So that's how I want people to think about it. Now, how do you know which skills to invest in? Here's how I think about it. You're standing in a room with a thousand doors. Your job as an entrepreneur, as a human, as an investor, whatever, is to shut 999 of those doors and walk through one with confidence. Now, the way that we do that is very simple. You're never going to know which is the right door. So the only thing you can do is make your best guess based on what gives you more energy than it takes. What's fun?

48:40What are you prepared to go learn more about than anybody else in the world? and that becomes this key consideration is you've got to, whatever you're going to pursue, you have to be able to answer the following question. Will I enjoy this even if I'm failing? Because the struggle is guaranteed, the success is not. So every door I walk through, I say, well, is this going to be fun even if I lose? If it's going to be fun even if I lose, amazing, because I know that I'm going to have enough energy to learn. And that's really the only question I'm asking when I walk through this door is, will I get more energy than it takes?

49:18Will I have fun even if I'm losing? And am I prepared to become the best in the world at this thing, knowing how much time, energy, and focus that will take. And when I walk through that door, I walk through with swagger and confidence, but, and here's the secret, I hold in the back of my mind, the crystal clear knowledge that at any time I can turn around, walk back out that door and open a different one and walk through that. And if you're young and you're hearing this, I will say this, don't prematurely optimize. It's Kevin Kelly. Again, if you don't know him, brilliant. When you're young, you have to discover the things that give you more energy than they take.

49:58And by encountering a lot of things, and this goes to your point about me learning a breadth of things, one, I'm just absolutely curious about everything. I so want to learn and know about different things because it gives me energy. I just love learning. And you cannot predict how that perspective is going to help you in a totally unrelated industry or thought process. And so when you ask people like, what's the greatest thing that you could do? I'm young. What should I be doing? You'll often hear people say travel. And the reason they want you to travel is because it forces you to see things from a new perspective.

50:39And then you're less likely to get trapped in your own narrow perspective. And I will say traveling is amazing, but reading is just as advantageous. It's a lot easier. It's a lot cheaper. And you can encounter all these different mindsets. And as you're encountering those mindsets, they're planting seeds in your mind that will come to you later. It'll be different ideas that'll connect in your head. And the fact that Nobel prizes are often given where two two unrelated industries overlap. And it's because somebody is bringing these two distinctly different worlds together and they're creating novel solutions that other people wouldn't have thought of.

51:16And one example that I use, not that this will ever be nominated for a Nobel prize, but I was coming out of Quest and Nutrition. We had like 60 ,000 points of distribution. I forget the exact number, but it was massive in 115 different countries or something crazy. and I'm getting near real-time data on all the different stores and where we're selling and which stores move the most units and all that. I'm just amazing amount of useful data. Then I move into comics and suddenly I have no data and there's only one distributor. It's all opaque and they don't give you any information. And I'm like, guys, you cannot run a company like this.

51:53How are you expecting us as publishers to know what's working and what's not working if you're not giving us the data? It's the most absurd thing I've ever seen. So we literally said, well, we're not doing this anymore. Now, I wouldn't have been able to move as quickly as I have into digital comics, discovered there that there's a platform that dwarfs everything else. Like, it's just ridiculous how Japanese-style storytelling married to the South Korean usage of the phone as the canvas is eating the world when it comes to comics. To give you an idea, one manga series called Demon Slayer outsells the entire Western comic market.

52:30One title outsells Batman, Superman, Wonder Woman, all of it combined is outsold by Demon Slayer. So they have a better style of storytelling, better way of marketing. And then by being on the phone, you've just got access to way more people. And the Webtoon, which is the dominant platform in the space, they, in Asia, there's a one-to-one relationship between the number of hours spent reading web comics on the phone and the number of hours spent watching YouTube videos. So think about how massive that is. And now in the U S we're showing the same adoption pattern, just 10 years behind. So now, because I had learned about distribution in the context of nutrition, and then I see it in the context of comics, I make a move that nobody else in the common industry is making.

53:17And I end up in this much bigger area and now feel like I'm 10 years ahead of my Western contemporaries. So that's where being broad of mind, constantly wanting to learn, right? I didn't know that learning all of that about distribution in the retail space and food was going to aid me in my quest to build the next Disney, but there it is. reading a book will give you an insight. It's just incredibly important to stay ultra curious. Let's take a quick break and hear from today's sponsors.

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57:11All right, back to the show. So everything you just mentioned about comics, is that what has led you to NFTs and your NFT marketplace? Sort of, yes. It's not necessarily what led me there, but it is the very thing that we were looking for in terms of a moment of disruption. So I had been introduced to the idea of digital rarity about six years ago. And a guy showed me this thing he called VATOMs, VATOMs, virtual atoms. And it was this idea that, hey, one day you're going to have this, we would now call it a wallet. I can't remember if you called it a wallet back then, but in your wallet, you'll have these items that we would now of course call NFTs and they let you do things.

57:53You could exchange them for a can of Coke. That was one of his demos. You could exchange this for a can of Coke. You have this virtual thing that somebody could plant somewhere, could be planted in the real world. Think Pokemon Go. You find it. You grab that thing into your wallet. Now, you can go into a store and redeem it for Coke. I remember thinking, oh my God, this is going to change my business forever. Then promptly ignored it because the technology wasn't ready yet. And then in early 2021, I heard about NFTs and I was like, ah, this is that digital rarity thing. I know exactly what this is.

58:28I've been thinking about it. So boom, now we're going to move heavily into this, made a multimillion dollar investment into the space that we're going to keep investing more and more and more in, in the coming years, and realize this was that moment of disruption that we were looking for. And look, if you have an audience that's into investing, one, I'll just say NFTs are like the craziest risky investment ever. And I don't recommend it as an asset class. However, as a technology, I think it's going to change everything. And so now as people engage in a community, they're actually going to be able to get some of the economics of that.

59:03You're going to be able to place bets on things like, I think the property market's going to go up. So I can't buy a house, but I can buy a portion of a house that's of the type. I was talking to Raoul Paul earlier today. And he uses the example of a fancy apartment in Manhattan, which are notorious for going up rapidly in price. And he said, so if you could invest in that, instead of investing in a duplex in Minneapolis, Minnesota, he's like, the odds of you getting an outsized return on your money are way better, but most people can't afford it. And so the only way in is going to be tokenization and fractionalization.

59:36And that now opens up. So I'm looking at NFTs through the lens of somebody who's trying to build the next Disney. And I realized, oh my God, like the way that we're going to crowdfund is going to be totally different. The way that we build community is going to be totally different. The fact that my community can reap the benefits of betting early on something, solve the problem between the Japanese model of doing manga, turning that into anime, which is this thing called Shonen Jump, which nobody in the West has been able to replicate. and it allows me to go, ah, I now know how I make sure that my creators are making enough money in the early days to get good, which is why everybody else lags behind the Japanese creators because they're the only ones with the societal infrastructure that allows these creators to get paid enough money to get good.

1:00:26And you're never going to advance until you've got kids raised thinking, oh, I can make that a career. So they get good. And then you get that second generation that comes behind them that learns from that first And so we're probably two generations behind the Japanese, one generation behind the South Koreans. And if we can now leverage NFTs to make that an economic viability for kids to come up and say, cool, that's what I want to do. Now we can begin to catch up. And I think NFTs give us that ability. And so seeing that was what ended up really taking me down that rabbit hole, which was then the thing that actually led me to crypto and so on and so forth.

1:01:07Robert Leonard For those who had never heard of NFTs before you just mentioned it, what exactly is an NFT? Robert Leonard All right. So this is the most fascinating thing that's happened in our time outside the blockchain. The blockchain is admittedly so foundational, but it goes like this. NFT stands for non-fungible token. So when I first heard that, I was like, well, every word there except token. I know what non is, but once you marry it to fungible, I'm like, what the hell is this? So I'm like, yeah, this doesn't make sense. I don't know what this means. And so the best explanation I heard is somebody saying, all right, think about money.

1:01:39Money is fungible. Now, once you understand fungible, you'll understand what non-fungible is. So if you have a$10 bill and I have two fives, we can exchange those and nobody's weird about it. If you have a 10 and I have a 10, we could exchange those and nobody's weird about it. So those are totally interchangeable and the amount of value that they carry is equally represented. It doesn't matter if you have a crispy 10 and my 10 is wrinkled, doesn't matter. The underlying value is all the same. Now, a non-fungible item would be the exact opposite. So take the Mona Lisa. I could do a brush stroke perfect version of the Mona Lisa.

1:02:13And while it would have value, it would not have the same value as the original Mona Lisa, not by a long shot. And so the mere fact that the original Mona Lisa was actually painted by Da Vinci, that it's old, that it's been handed down, that it's got this extraordinary story and a story that the public buys into. And so you've got that ephemeral thing of people have belief in that resource and it's provably the one. So now I always wanted that for digital because I'm obsessed with digital art. I have been for a very long time. And it was always distressing to me that you always had to get a print of digital art, but it never pops the way that it does on a digital screen.

1:02:56So I was always disappointed by that. So the only way that I could sort of get my head around it, was I would go collect pins on Pinterest. So I have spent years pinning pins of just like super dope art that I think is really cool. So now NFTs come along and go, hey, you can make that digital art a true one of one. Now, just like you can replicate the Mona Lisa, you can replicate that JPEG and I get it. And you can argue and rail and laugh all you want, that humans shouldn't value these JPEGs. But if you know anything about human psychology, you know that they do because of their non-fungible status.

1:03:34Anything that is provably rare, that has emotional resonance, people will glom onto. So now through the non-fungible token, you can put a piece of art inside of a contract that locks it and says, this is that one. So you You can assign it a number. You can say who created it. You can show that it's a one-of-one. You can basically give it a serial number. You can even give it properties. It can change based on the time of day. Anyway, we'll go down the very steep rabbit hole there if you want. But so now you've got provable scarcity in a digital item. And that really is the most basic element of what a non-fungible token is.

1:04:13But that isn't the revolution. The revolution is the technology that underlies it, that allows it to do all these other things, have utility, unlock things. It's really this truly extraordinary moment. Because you can put utility into it, you can basically, through what other people refer to as a JPEG, create a company overnight. All right, I'm going to explain it, so I don't want anybody to panic. So you've got this idea of fungible versus non-fungible. Now, you've built value into a digital item. Now, part of that value is going to be assessed on just what does the world say about this? So the world says that CryptoPunks are valuable.

1:04:58Therefore, you've got CryptoPunks selling for millions of dollars, even though they are a 24 by 24 pixel item that you can barely make out that it's a face or whatever. But I think they're rad because the world says they are rad. I want to be very clear. That is me totally buying into the hype of sort of this, the way that humans get in these hive minds around things. It's exactly the same as baseball cards, the same as non-dividend paying stocks. And anybody that tries to convince me they're anything but a baseball card is in for a rude awakening because they are the same unless they pay a dividend.

1:05:31So recognizing that these things now have value, that you can bake utility into them. Now it becomes a question of what do you do with that utility? And the most fascinating thing that just happened, and this is why I think NFTs will change the world forever. Have you heard of the nouns, Dow? I have not. Oh, my friend, I'm going to change your life. So here we go. There are these things called PFP projects, profile picture projects, and they're typically done as 10 ,000 units. And it's more or less one, like CryptoPunks is one of the original 10 ,000 avatar projects. BoardApe Yacht Club is the second one to really pop off.

1:06:08Now the Bored Ape Yacht Club is very easy to explain. It is a hand-drawn image of a monkey with attitude. And so it looks kind of fun and funny. And then what they do is they break that image of this ape into, I don't remember how many attributes, let's say it's 12. So there's, what do the eyes look like? What does their hair look like? What kind of hat is it wearing? Does it have an earring? What's the shirt? That kind of stuff. And there's 12 different things. Then of each of those 12 attributes, they create some number of variations. So let's say there's 25 different variations of the eyes, there's 10 different hats, so on and so forth.

1:06:47And then through a computer using a algorithm, it will randomly assign those attributes. So some combination of attributes will be very common, some will be very rare. And then you sell them on the open market. And with the case of Board API Club, they were sold for, let's call it, I think it was like 0.08 ETH, if I remember correctly. And so at the time, it was probably somewhere in the neighborhood of$200, something like that. So now 10 ,000 of those are sold to however many number of people. And then they start building a community around it. And owning one of those gave you access to do things like there was a website that had a bathroom in it.

1:07:26And if you owned an ape, you could go into that bathroom and write on the bathroom wall, and it would stay there. If you didn't own an ape, you couldn't. So that was one bit of utility. And then it was, they airdropped these dogs. And so you could get another NFT just for owning that first NFT and you can sell and trade these things and they have value. So now that starts with 0.08 ETH in value. And now it's gone up, dude, where the floor, meaning the cheapest one is like 14 or 15 ETH. So imagine what a return on your money that is. And so they get more serious and they reinvest the money that they make, because I don't remember what the contract is, but most of these NFT contracts, the original creators get, say, 10 % of every future sale.

1:08:08And so they use that money to fund their organization. Now, many of these organizations are what is known as a DAO, a Decentralized Autonomous Organization. It's basically like a company that's run on rules. So now that everybody understands what these 10 ,000 PFP projects are, a new one called the NounsDAO announced this was the first one sold about a week ago. And they said, okay, what we're going to do is we're going to sell one noun, which is just a little JPEG image that is pixelated. So it's probably 24 by 24 though. Don't quote me on that, but it looks like Nintendo made it back in the 80s.

1:08:48Okay. Very simple. The first one looked like a Christmas elf and really simple pixelated image. We're going to release one of those a day, every day, forever. So it will take them 27 years to get to 10 ,000. So now they have this really scarce model, but people know that somebody is going to get at it every day. But the real trick is whatever is paid to buy that, 100 % of that revenue goes back into the nouns Dow. And the only way to be a part of that decentralized autonomous organization is to buy one of the nouns. So now each of these owners buys it and they get access to the full amount of capital to do whatever they want, also known as a company.

1:09:31So now when you hear how much the first one sold for, you will realize that this is totally disrupted the way that companies will get financed in the future, the way that artists will get financed in the future, the way that comics will get financed in the future, everything. So they tell everybody, this is how the NounsDout is going to work. These are how these images are going to drop, this profile picture project. And now all of them go on auction once a day, every day, and you have 24 hours to bid. And the first one sold for 1.8, I believe, million dollars. So now you just had a company overnight get funded with almost$2 million.

1:10:04Then the next day, I don't know how much was added, but I'm sure it was hundreds of thousands of dollars, and it'll settle out somewhere probably in the tens of thousands of dollars. And that's just how much people will pay to own one of the nouns. And now though, the real magic is, well, you're one of, I mean, how many people are in the nouns down now? Seven, 10? Grows by one person a day or may not, right? Maybe people keep scooping up and they want to own more of that share. But that's real money, man. Millions of dollars are pouring into this thing and they're able to do, I don't know what the rules of the nouns down are, so there might be certain restrictions.

1:10:36They're effectively able to do whatever they want with that money. So it is unlike anything we've ever seen ever before in our lifetime. And if people like Michael Saylor and Raoul Paul are right, this is the greatest wealth transfer in the last 100 years, at least. And it's a retailer. So average person has access first before the institutions. Only time that's happened in any of our lifetimes. Robert Leonard I actually just had Raul Paul back on the show not too long ago. And we talked about NFTs too. So if anybody's interested, go back and listen to that episode a few ago. But yeah, I mean, it sounds incredible.

1:11:14Just like I did with Raul's episode, I'm going to have to go back and listen to this one again, probably two times, if not three or four to really fully wrap my head around it. Because I mean, you mentioned before that you weren't great with technology and I'm not either. And so this all is, I get it, but I need to hear it again and a couple of times just to really fully grasp it. And so I'm going to definitely do that. But now my question is, what are you doing in the NFT space? Are you doing one of these types of companies? I think I read that you were doing a marketplace. And admittedly, I did some research, but it kind of all went over my head a little bit.

1:11:42So I'd love to hear a little bit about what you're actually doing in the space. So the first project that we're launching, this will probably come out in mid-October. It's always tough with technology. It always takes longer and costs more than you think. So that one is a marketplace, an NFT marketplace focused on anime, manga, and video game art. And so we are trying to be the hub for that universe of people. And we've got some plans on how we'll make that the most dynamic, the place to be for people in that space. So I'm really, really excited about that. That for us is a five to 10-year play of just knowing that in the beginning, it'll start small and we just have to keep adding value and adding value and adding value.

1:12:25But we've got a pretty insane roadmap that's going to make it unlike anything else. We've got the capital to back it up. So we don't even need people to be pouring money into the system. We've already allocated the capital to do it. So that'll be huge. And then we also have a platform that we're developing that I'm going to be hyper-cagy about until we actually get closer to launching it, which that should be sometime at the beginning of 2022. And then coming not too far on the heels of the platform is we have our own generative art project. It won't be a profile pick project in the way that people are expecting.

1:12:57Very different, much more aggressive roadmap than what people have seen so far. And yeah, that one's pure IP, just like really telling a story with it, coming out with something that's interesting that people can invest in, emotionally invest in and collect. And we've got, again, another roadmap that goes out. We've imagined out to five years. So I think it's going to be, that one could be the surprise hit. I just don't know if it's going to take me, if we'll get juice out of the gate or if people are going to have to see what we have planned over the next five years. But those are our three major plays right now into the NFT space.

1:13:31Well, definitely count me as one of those people. I can't wait to see what happens with it all. I'll definitely be following it. Tom, this has been an awesome, awesome episode. I really appreciate your time. I know the audience is going to absolutely love it just like I did. For anybody that wants to stay in touch with what you're doing in the NFT space, what you're doing with impact theory, really just anybody that wants to learn more from you, which I highly recommend everybody does, where's the best place for them to find you? It depends on what you're interested in. If you want mindset, go to Impact Theory University.

1:14:01If you want business, part of Impact Theory we have is business decision-making. And then if you want to follow what we're doing on the NFT side, Twitter all day long, that's where I talk a lot about what I'm doing in that space. And then if you just want daily Dose is a mindset. Instagram, I'm very active. And everywhere, it's just Tom Bilyeu. Awesome. I will put links to all those different resources in the show notes below for anybody that's interested in checking it out. Tom, thank you so much for joining me. Thanks for having me, man. All right, guys. That's all I had for this week's episode of Millennial Investing.

1:14:34I'll see you again next week.

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