What is Bitcoin? The first question you need to ask in defining Bitcoin is what is money as defined by the current global economy? For people who are entering this ecosystem, Bitcoin is digital gold with a 21 million cap which means that the number of Bitcoins in existence will not exceed 21 million tokens. You can store Bitcoins in crypto that functions like a bank account that cannot be controlled by the bank. Adam Draper, Founder of Boost VC explains where the Federal Reserve can create reserves and has control of the money supply which inflates the currency, Bitcoin is pre-programmed to stay in the 21-million mark. Adam furthers explains the inflationary and deflationary aspect of Bitcoin.
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Defining Bitcoin As The Digital Gold Of The Global Economy with Adam Draper
Adam, tell us a little bit about venture capital and how you got started in this whole movement.
Venture capitalists have been around since Queen Isabella funded Christopher Columbus to cross the Atlantic Ocean and find India, and he happened to stumble upon our country of America. By the way, I use it as an example for it. It took him about seven years to raise the money to go across. In modern day venture capital, there were some people on the East Coast who funded some companies. Around Stanford University, there happened to be great ideas, and my great grandfather founded something called venture capital funds from a firm called Draper, Gaither & Anderson. He brought my grandfather, William Draper.
He was in the steel mills in the Midwest and he came out and worked with my great grandfather, and then separately after a little while, launched a fund called Draper Johnson, and then eventually launched a fund called Sutter Hill Ventures, which is still around. He had a long history of a lot of other things. He headed up the World Bank for Reagan and then he was Undersecretary General of the UN. Around that time, my dad started becoming a venture capitalist. He founded a fund called Draper Fisher Jurvetson and launched a global network of venture capital funds. It’s a long way of saying I’m a fourth-generation venture capitalist.
I wasn’t trying to get into the venture capital game. I was trying to figure out what I wanted to do. In between high school and college, I played professional tennis or tried to. I took a year off, played in Australia. It was fantastic and then I went to UCLA. I was an English major. In my senior year, one of my friends approached me and said, “I’m thinking about starting this company to help secondary markets transact securities,”
I didn’t know what any of those words meant. I started talking to him. His name is Thomas Foley. In 2008, there was a big problem with liquidity in the venture capital ecosystem. Doing secondary transactions was unheard of, so the ability for if I own private shares of a company to sell them to someone else, that didn’t happen. We were trying to create a platform to be able to do that. I joined him. I co-founded a company called Xpert Financial during that time with him. That was a secondary market for private securities.
Over four and a half years, I made every mistake known to man, hiring mistakes, firing mistakes or whatever other product mistakes, regulatory mistakes. We tried everything. I learned a lot. After four and a half years, I ended up leaving the company and I mentored a couple of startups. I invested in a couple of startups after leaving. I found a lot of fulfillment from helping those startups. I eventually founded an accelerator called Boost VC where I help people not make the same mistakes I did.
That’s a long back-channel history of me getting into venture. How I got into crypto was in that space where I was between Xpert Financial and Boost VC, I funded a company called Coinbase. Brian Armstrong was the CEO. We met at a coffee shop and he pitched this vision of what the future was going to look like. He said “At some point the world is going to be on one financial infrastructure.” At that time, I bought into that initially immediately because I felt that we were just a global economy anyway inherently. It made no sense that there are all these borders that are protecting money from movement everywhere. I was like, “I can buy into that.” He said, “I think Bitcoin is a new financial infrastructure.”
Then the third thing he said is, “Coinbase is going to be the means to onboard the world to that new financial infrastructure.” I was very fortunate to be pitched by Brian Armstrong who runs Coinbase, which is probably the most dominant app in the entire ecosystem now. Ever since then, I bought it hook, line and sinker. We were the first fund to focus on Bitcoin-related startups. We’ve backed something 85 crypto-related startups at this point. 2017 was the year that crypto dominated and took over the world. We’re excited that over five years of working on something that people thought was insane, it’s nice to have a small pat on the back that you’re not that insane.
They certainly have done a great job in 2017. Going off into the Coinbase aspect of this, Coinbase is what to brand new crypto audience that are just starting to dabble in this a little bit?
It’s important to cover what is Bitcoin. Ten years ago when it was started, what Bitcoin made everyone asked was, “What is money?” That was the first question. Anyone who’s reading this, you should try to answer that for yourself. You should try to answer that question of “What is money?” That was the question that hooked me. Initially it was, “Does it need to be issued by the centralized government system? Do they do it efficiently?” Then it makes you start asking questions of, “How does a bank work?” I’ve learned more from just asking more and more questions about how things that we take for granted in the world work. I’ve become a more curious person just based off of being a part of this questioning skeptical ecosystem. To understand what Bitcoin is, you need to decouple it and just think about what is money and what money is to you, and then assume that there could be a better way.
The history of money has changed many times over the last 6,000 years. What we’re pitching is this new concept of what money could be. Originally, it was the shells. Mesopotamia had town ledgers technically. Then it was chickens or cows. Then the Medici created ledger-based banking that we use today essentially. What we’re saying is we’re still based on that system. There could be a better system. We are a global economy. We are all united now. Very succinctly, Bitcoin, for the new entrance into the space, is digital gold. It’s a store of value that there is a limited resource of these tokens called Bitcoins. There will only ever be 21 million Bitcoins. It functions a lot like gold because there’s a scarcity of it. You can create this demand for it.
Why does gold have a value? Those are the questions that you start to ask. You start to be like, “I don’t care that much about gold personally and I think that’s something digital.” If you were to design money today, you would not make it paper, that wouldn’t make any sense. I never carry cash. I have to pay the penalty toll every time I cross a bridge because I’m like “I don’t have any money.” In essence that is what Bitcoin is. If you want to understand how it works, we can get more detailed into it, but I always feel like that is the best way to start. It is asking the question of what is money and then pairing it with this is a digital gold. That is what this works as.
It is a bank account that is not held. Think of the power of that though. Suddenly you can store money that is not controlled by a bank, that is not controlled by the government. Suddenly, you can hold money outside of the system, not in a nefarious way, just in an empowering way. People in Greece would have died to have this four years ago when 60% of their money was taken from them, from the government. Venezuela loves the concept of Bitcoin because their money inflates and they call it hyperinflation there. Not even there, everywhere.
Having something that maintains value is interesting for a lot of people. On the other side, this is still a global experiment that’s going on. It’s probably the largest global experiment of all time in a technological sense ever since the internet was an experiment. If you’re thinking about buying, I would never invest anything that you wouldn’t be willing to lose. It’s an exciting asset class that empowers the user. That’s why I love it.
Let’s talk a little bit about inflationary and deflationary. Can you explain the difference between the Federal Reserve note compared to Bitcoin?
It’s very simple. Bitcoin was pre-programmed to only have 21 million Bitcoins ever. To understand that part of it, there are a lot of network of computers all over the world. All they’re doing is one thing, they’re solving a problem. When they solve this problem, it’s an algorithm. When they saw this algorithm, they lock, they add up every transaction that has happened in the last ten minutes inside of the system, and then they log all of those transactions into a ledger.
That’s the crypto world and that ledger that I’m explaining is called the blockchain. This an infinite ledger that continues every ten minutes to have every transaction that’s ever happened inside a Bitcoin logged into it. It is fundamentally powerful. For keeping those computers online and checking each other’s work, they are rewarded a token which is called a Bitcoin. Those computers are called miners in our area. I think they’re misnamed, but that’s how everyone calls them, and they’re rewarded tokens. When people would say it’s not backed by anything, it’s backed by a work of computers.
These computers are doing work to keep this ledger online, and this ledger is very powerful. There’s an incentive to keep the ledger online and that’s the power. Over 140 years, the tokens get released on a logarithmic scale, so I believe sixteen million tokens have been released into the ecosystem. Over the next 130 years, there will be another five million tokens released. Every couple years there’s what they call the halving where less tokens are released for those computers to stay online. The incentive goes down but then they can also enable transaction fees and use miners. That’s something that is another debated topic in the crypto world, in the Bitcoin world.
I’m using crypto and Bitcoin interchangeably. Technically the crypto is the overarching ecosystem and Bitcoin is one of the assets. It’s the original and that’s why I use them interchangeably. I haven’t technically answered your inflation/deflation question. I just wanted to get background to get to the question and answer. That’s the background on how that system works. It’s pre-programmed there will only ever be 21 million Bitcoins. Federal Reserve notes, they can print as many as they want. The government prints tons all the time and so it inflates our currency.
My dollar today is worth less in two days’ time. Globally, that’s a huge epidemic. These governments all over the world do it wrong for power. They’re saying, “I print the currency so I have the power,” and that’s wrong for all intents and purposes. That’s the difference. The difference is Bitcoin has been preprogrammed to only have a certain number that was created by an anonymous person or group ten years ago. It’s preprogrammed to only have is 21 million Bitcoin number. The Federal Reserve can literally print as much as they want.
A question from an audience is, “If somebody programmed it to where it would only have 21 million Bitcoins and anybody who can program something can reprogram something, so what’s to stop us in five, ten, or fifteen years from somebody deciding, ‘Let’s do another 21 million’ which would then cause an inflationary situation?”
What you’re talking about is the governance, how this structure is governed. Technically, you could. I shouldn’t have started with that because it’s very difficult. It would be very unlikely is what I’ll start with. The reason is that how the system works is that these miners that are hooked up to the network are also the votes. If the community wants to enable a new update to the system, what has to happen is it gets proposed by the community, the Bitcoin core devs have to say, “We think it’s a good idea.” There are only five Bitcoin core devs and then all of the miners have to have consensus and have 51% of the network to say yes. How they say yes is they vote.
Think about it this way, it would de-incentivize me as a miner to double the number of tokens in the world so that my incentive is to keep a smaller number of tokens in the world because I’ve mined this token and I don’t want to inflate it. I don’t want that token to have less value. If you’re looking at the Law of Incentives, that just won’t happen because the miners want it to be a specific way. It’s a community-based regulation system. We call it governance, but yeah, it’s regulation.
These are guys that have vested interest and one of the other things about mining that people may or may not know is that that is a real expense and a real cost of mining these coins. Electricity, yes, that’s right. It’s not something that very flippantly you could just voila and produce these coins.
Even to compete for Hash Rate to get Bitcoin, you need a pretty intense setup now to be a vote in the ecosystem.
Let’s talk about China and China’s involvement as far as with the miners and what China has done in whenever it was months ago that said no more Bitcoins or they couldn’t keep up. Can you visit about that issue?
It sounds very basic on the surface, but there’s so much history behind all of them. It’s not about China specifically. China said, “No more ICOs.” They did the same thing to Bitcoin three years ago where they said, “No more Bitcoin trading.” All that means is they’re not doing any more trades from bank accounts. It turns out that it’s a very popular system, off-bank transactions, in China because they understand the value of keeping money that is not held by the government. Their citizens understand that value. China, as an organization or government, is like “They first go. I want to control,” and then they go, all ease up as this becomes a bigger and more trusted thing.
That’s what they did with Bitcoin and then ICOs. Bitcoin is one cryptocurrency. There are thousands of cryptocurrencies now. That wasn’t true five years ago. ICOs are the way in which these currencies of protocols or tokens have come into the world. China again said no and then the volume is slowly increased in China again. It’s one of these things where they publicly say no and then it eases up in the world a little bit. That’s on the regulation front. You’re talking about government of China.
On the mining front, China technically still has a large percentage of mining resources in China. That doesn’t mean it’s controlled by the government in China. There are a lot of individual mining farms all over China that I believe take up about 50% to 60% of the network, but they’re all controlled by a lot of different people. The major one is in China. His name is Jihan Wu. I believe what you’re hinting at was that Jihan Wu said, “Bitcoin’s not perfect for a payment system.” He created a fork of the network.
Bitcoin was going along as one timeline, and then at one point you double the entire network. From then on out, there are two timelines and they renamed one of those timelines, Bitcoin cash. That timeline has a couple small changes that they made to it. He’s a powerful enough miner. He has enough of the ecosystem and mining power that he’s able to sustain his own Bitcoin network essentially and it’s taken a life of its own. It’s a great thing where there are these two different Bitcoins. I don’t love that they’re both named Bitcoin; that’s confusing to people.
That’s everything I would say from China’s perspective. The government said no, opened it up, the government said no again, opened it up. Then on the mining power, it’s not the Chinese government, although they probably are starting to experiment and see what they can control. Think about it this way, what other technology in the world is every government talking about? Every government all over the world is having to take a stance on whether they’re pro or against cryptocurrency, and that is crazy.
Wouldn’t you agree that this is like a balloon that when the government says, “We don’t want cryptocurrency here,” it’s squeezed on one end and it only gets larger on other end, so it drives money to that other country that is accepting.
Historically, if you invested in everything that China banned, you’re good.
There was an article that China wants to try to have an orderly exit from Bitcoin mining, and so what they’re trying to do is go up on the utility costs because it is very expensive from an electrical standpoint to run a mining operation. If they can subsidize the electricity, then guys can get in there at a lower rate and produce all these coins, but once they start to say, “Wait a minute; we’re going to pull the electricity back; we’re going to go up on the price; or we’re going to take your water,” the things that make mining appealing, then that could change some things. Any idea on that?
From a government standpoint, that’s a good move if they want to move mining outside of China, but it’s just going to go somewhere else. What happens in this world is by decentralizing, by taking the power of money printing away from the government, everyone starts to ask the question of what is government to many. The first question that Bitcoin made everyone ask is what is money. The next question that’s going to be asked is what is government? The world is liquid. It’ll make people move to where the rules suit their needs, not control their needs. That’s an exciting time where competitive governance is going to be a real thing in the future.
Five years ago, it was more of a libertarian-type movement in the Bitcoin space. Do you see that that is the same? Do you see it growing? Do you see more tech getting involved in this?
I’d say it’s always been the tech people. It was just very appealing to technologists because it was something that challenged the status quo. The first generation were idealists and anarchists and bring-down-the-government type of people. It was very pie in the sky. It wasn’t that Bitcoins were trading it cents to dollars, not tens of thousands of dollars per crypto per coin, and then it was startups, the VCs and startups. The next level is going to be institutional. We’re about to have an incredible amount of institutional capital flood the market in a good way where it’s showing trust in the ecosystem and value in what’s being displayed.
There is a lot of speculation and that’s also driven a lot of the excitement and the desire to make this thing a reality, but it’s going through a generational adoption of the technology. I feel like a grandfather in the system because I’ve been around for six years in the Bitcoin ecosystem and it’s changed a lot. People have changed. A lot of people lost faith after three years. It was the 2013 or 2014 winter when it wiped a lot of people out. In Boost VC, we’ve doubled down during that time. We backed a lot of great companies who are now emerging as winners. It was like the adoption didn’t hit when everyone wanted it to and so everyone got a little worried. Some of the companies ran out of money. Some of them just lost faith for all intents and purposes.
Then the institutions came in and started to “work with the startups.” That’s a tough spot for startups to be because you start to just work for that big institution and build blockchain projects for them or whatever. None of those fruited anything. Nothing came of those projects that we’re working with big institutions, maybe Chain and there might be one or two that were able to deliver on projects that became public. Last year what ended up creating this excitement and craziness was Ethereum launched something called an ERC20 Smart Contract. I’m getting a little ahead of myself here, but Ethereum is another cryptocurrency. They decided you don’t first do this at Bitcoin transaction times, which is low.
The second thing that they’re saying is you don’t only need to log tokens into the blockchain, you could log contracts and anything. They launched the Contract which allowed anyone to crowd fund from anywhere all over the world and launch a token. The reason that everyone is going crazy over tokens and crypto is because of Ethereum. Ethereum brought the spotlight to the idea that researchers and people who have big ideas of building protocols could crowd fund from a very specific set of people. That’s how we emerged out. It got adopted fast, it went crazy fast. The last twelve months have been a whirlwind.
Let’s move into the venture capitalist section for a moment. What do you look for as a VC guy in a technology as well as in the makeup of the management team and so forth? Can you address those?
A lot of people ask that question and my answer is I look for the same thing that I looked for before, in teams. I want to know that they can deliver on the vision of this idea. I want a team that generally would have experienced before ideally, but if not at least a reason why. I try to get to the why of why a team is doing what they’re doing. At the end of the day, the why is what keeps them in the game. People who don’t have emotional or core attachment to their project, the thing they’re building, end up giving up easily. The people who don’t give up have a real true attachment to the project. The number one question I ask people is “Why are you doing this?”
Starting a company is hard. It’s the opposite of an intelligence test. It’s not intelligence that makes you win. It’s sheer will and determination. You develop an expertise in a very specific set of things. I look for the same thing. I look for good teams, good people who we can trust. Especially in this world of crypto that’s going on, there are a lot of scams. We happen to have a very great purview into the ecosystem. We have a group of people that we trust and those trusted people refer us great companies and great talent. We’re very fortunate that we’ve been around for six years in the ecosystem. It took a while for the world to catch up, but we’re happy where we are.
As far as investing goes, are you investing tokens? Or are you investing Federal Reserve notes? Or have you started to get into tokens?
My fund is denominated in US dollars. I don’t have a crypto fund, so I do invest in US dollars, but what’s interesting is these companies aren’t really companies, so in a token, there’s no profits, there are no revenue. That isn’t what our project is. These are networks. It would be the equivalent of investing in the internet, not Facebook. We’re investing in the equivalent of the internet. What would you value the Internet at today? For people who invented the Internet didn’t get any money. They didn’t make any money off the internet. This is a flip the entire profits/revenue paradigm on its head system.
We’re investing in these networks and these networks aren’t centralized. There’s no CEO. It’s one of these interesting things that we normally do invest in a company and that company might hold some of the token, but then also there is a project that’s outside of that company where the founders of the company might be lead architects on the token. It’s a very complicated thing that’s very new. A lot of the organizational issues are going to be sorted out in the next twelve months. Right now, we try to align incentives the best we can in the future winners of the world though, the people who change technology and how we live are starting. It’s probably some seventeen-year-old in high school who just built some cool thing.
There’ve been all kinds of different stabs at the different ventures. All the way from China, there was a famous story of a company that bakes cakes or something to that effect that made a coin and put it out there that had no revenue model that could sustain itself. Going back to this internet thing, you’re looking to something that you have a vision long-term that says, “That can work. Long-term, this idea can work. We can put some wheels on this. There’s going to be a time of investing, in getting people adapted to it, but after a certain period, this will begin to have revenue.”
That’s the old way. The new way is not that.
Explain a little bit the new way.
How will you measure the value of a company? Let’s say you’re trying to measure Facebook value. Its market cap is based off of future profits. That’s what they value everything off of, the share price is valued off of future profits. You could return your money in six years. They do the discounted cash flow analysis. These are measured based off of network throughput. It would be measured based off of velocity of money, like how many tokens are moving hands peer to peer in the network. It will be more like measuring GDP than measuring a market cap. It’s valuable because people are using it. It’s not valuable because you’re returning profits from the customers.
Networks are only valuable if other people are on them, and so that’s where crypto is very valuable; when other people are on them and I care that you’re on the network. Like Facebook, I care that you’re on the network. That’s a perfect de-centralized app. Facebook should be worried if there is a competitor that comes out that creates a protocol where we connect with each other that is not through their system. The coolest part about it is the early adopters could be incentivized with tokens to have this entire ecosystem work. Tokens are a great way to incentivize early adopters and early users of any platform.
As an example, let’s say that you could create a network for people to buy fuel and that fuel could be gasoline, diesel, propane or electricity. I have no clue if Elon has an idea of this or if it’s already out there, but if he wanted to roll out an ICO for charging stations for his electric vehicles, that would be something that has value.
There’re two different things. There’s a utility token and then there’s just tokens that work as equity. The tokens that work because equity, you might as well just be a Delaware C-corp and be a company. You’re probably fundraising as an ICO because it was difficult for you to fundraise generally or you are working around the crypto world and that makes a lot of sense because you want to gain recognition for that. In the utility token world where it’s not me selling things to you, it’s we’re a part of this network and I’m sending money to you like a bank would, but there is no bank there or it’s mostly sending different token amounts of money or creating scarcity of objects. I don’t know if you heard about CryptoKitties, but that’s a big deal. Creating scarcity is something the blockchain does well and that’s what CryptoKitties is. There’s only going to be a limited supply of Gen 0 cats and they’re all unique and then you can breed them. It’s very weird, but very cool.
Go into this next level, and this is the left/right paradigm shift.
Bitcoin is the equivalent of investing in the internet. TCP/IP is the Internet. That’s the protocol that we all use every day. You, me, we are all hooked up and connected to this thing. The world is hooked up to this thing. It doesn’t generate any money. There’s no internet company that creates revenue. There are a bunch of service providers who provide the Internet to people, but that’s not the internet. That isn’t an internet company. That isn’t the protocol. This is the equivalent of launching different types of the intranet.
What we’ve created here with Bitcoin is the internet of money, and so suddenly instead of service providers being displaced, this would be banks being displaced. There is no more banking system. This is the answer to what happens if banks don’t hold money. That’s the difference between a company and a protocol. The internet is the best example. There is no CEO of the internet. When people ask who is the CEO of Bitcoin, it is the equivalent of asking who’s the CEO of the internet.
To get the glisters off the left/right paradigm of saying, “Any type of company that you have, you must register it.” Bitcoin’s not registered. Bitcoin doesn’t have a CEO, exactly what you were talking about with the internet. It’s just out there. The governments of the world, the agencies, the for-profit tax-exempt corporations are trying to figure out how they can get their hooks in this thing so they can tax it.
For all intents and purposes, it is regulated. If I buy a token at $20 and I sell it at $100, that’s a capital gain. I should be taxed on that. That’s regulation in the jurisdiction that I live in. People will make it easier for me to do that and my rules will become better. I will eventually move to the country that has the best rules for tokens, but in general, the government will say “Pay your taxes.” I’m definitely not suggesting people don’t pay their taxes. Pay your taxes, but there’re always a lot of questions about, “Isn’t that the currency that all the drug dealers and bad people use?” No, the currency that all the drug dealers use is US dollars.
Bitcoin is an open ledger. If I were building a drug empire, I would not use a ledger that anyone in the world could look at. Anyone in the world can search the blockchain for every transaction. If I know that a transaction on the blockchain was for drugs or whatever, it’s leaving breadcrumbs. It’s only a matter of time before you charge out the entire system and you’re like, “This person’s building a drug empire.” It would be the worst.
What if there was a jurisdiction that had no tax? Do you think all the coins would go to that jurisdiction?
A lot of smart people would go to that jurisdiction. I’ve seen a lot of early adopters of the currency who are very visionary would go to that jurisdiction for no capital gains. There are a lot of people who have moved outside of the country for this reason, for this purpose.
There was a story about Trump’s Tax Plan and China said, “That’s fine.” If Trump’s going to lower the tax over there, we’re going to lower the tax to zero. With that zero tax, you have to see what other hooks come along with that, but if there’s a jurisdiction, and I think there is one coming that is not going to have a bunch of hooks in it that would have a zero type text involved in it, smart money is like water, it will go to the place where it needs to ultimately be to, and the people that want to stay in a jurisdiction that’s highly taxable, then maybe they get what they deserve.
I believe in the freedom of money, and that’s what this is. On top of that, I believe a government should be figuring out how to make your life better, not taking away from it. In my generation, we haven’t had the government try to be good.
As we’ve gone back to do a study of money from 1913 when the Federal Reserve was first set up, there is a long history of having absolute power in certain people’s hands and there’s a long history of bad things that have happened and I think that we’re coming to a point in time that people are voting with their feet and they’re saying, “We’re just not going to support an out of control drug‑dealing type and war-machine entity.”
People are liquid. We can move anywhere in the world. There are tools to be able to learn to speak languages, but most people speak similar languages. There are ways to communicate. There are places and ways to exist everywhere. It’s just fascinating to watch this. What I’m most excited about the crypto-Bitcoin ecosystem, this world that exists now, is that it’s challenging everything for people. They are asking, “What is money to me?” Honestly, most people who are speculating on this market don’t understand how powerful the fact that they’re owning this thing is. They don’t get it. Most of these people are buying and they’re thinking, “The price will go up.” They’re not thinking, “I have $20,000; I have $10,000; I have $5,000 that the government, no matter what, could not take from it.” That is crazy.
Someone asked me, “If the crap hits the fan, what happens then? Like the entire economy completely drops?” What I said was, “What’s going to happen? You’re going to run to your bank and try to cash out the $10,000 or $5,000 that you can get out of the account that day and I’m not.” That’s what’s going to happen. You’re going to try to figure out how to get to your bank and you’re going to try to figure out how to get as much money as you can out of the account. They have limited withdrawals. I’m going to think, “I have my money. I have my bank in the internet as long as the internet’s up.” If the internet goes down, I do have an issue, I will admit. We all have issues if the internet goes down. If the internet goes down, we’re in Zombieland.
If they truly hit the internet kill switch, which would be the power base, if they turn the power off throughout the world, then we all start over again and the best guy wins at that point in time.
There’s a great quote by a guy named Phil Libin who founded Evernote. He said, “The future either looks like Star Trek or it looks like Mad Max. Anytime, it can look like Star Trek, I invest.” That is usually my philosophy. We’re not going to bring cash to space. We’re going to be a multi-planetary species at some point. There’s no way we’re paying people on the space stations with US dollars. That would take up space.
At what point in time do you think that the Federal Reserve comes to the realization that the cat’s out of the bag, the gig is up, people know what we’ve done, so we better do a coin? Do you think that ever happens in the US?
It’s an interesting question because it’s about incentives. Jamie Dimon said, “I shouldn’t have said that Bitcoin was a fraud.” He’s already taking his statement back, which was two months ago that he said Bitcoin was a fraud. First off, it was a brilliant marketing move to peg himself against Bitcoin because I wouldn’t have known who Jamie Dimon was. Everyone in crypto knows because he was the enemy, the antihero, the antagonist.
It was a brilliant marketing move. He is smart. He knew what was going on. He was excited about it and I think it was a marketing personally. The banks are asking themselves what happens when we don’t control the money. People like Merrill Lynch who’s shutting down their brokers’ ability to trade Bitcoin and their clients’ ability to buy Bitcoin are idiots. Now might be the time to short Merrill Lynch because that is the dumbest thing to do.
They’ve shot themselves in the foot. Adam, you know that there’s going to be some other knuckleheads that will come out and follow Merrill.
It’s a ridiculous thing. It’s freedom. Anytime there is a liquid free market, it works better than if you control it every single time. For some reason, people keep not doing that. They keep wanting to hold their little honey pot like a hostage, and like “No, maintain. Not make better.” we’re the generation of make better. I want my government to work for me. I don’t want to think, “This money I pay every year goes into a sinkhole.” That’s what I think. I literally think that it does no value.
There probably is value in that system somewhere and I’m like, “Where is it? Show me that value. I want my government working for me if I’m paying 30% of my capital gains.” I’m in California, I’m paying the worst. Everyone jokes that it’s a tax on paradise or whatever, but our state is just bad. The next four years and the next ten years are going to be a dramatic shift where you’re going to start to see innovation from the government again.
There was already a massive shift when Trump got into office. That was the shift that people said, “We don’t like the way the establishment has been working over the past 80 years or whatever it is, so we’re going to take a chance on somebody that is not one of the insiders.” As we see this thing begin to morph, you’re seeing the economy increase, you’re seeing a lot of great things happen. People are starting to have your exact view of saying, “I want my government to work for me and to do some things. If you want a portion of my equity, my sweat equity, I’m going to demand you to do something.”
It’s not, “Give me things.” It’s, “I’m going to work. I don’t want things given to me. I want to work, but I want to know what I’m working for. What vision are you trying to paint?” It’s not, “Give me.” It’s, “I want to work. Everyone should want to work for something and you’re not giving us anything to work for. You’re giving us stuff. Stop giving us stuff.”
For decades people have said, “I don’t want to get involved in the government. Let them do whatever,” and we have gotten what we deserved. We’ve had this shift that’s coming in. I believe it’s been the blockchain technology. Like you said, people are starting to question money. How do we get here? The next step, people are going to start to question the administration, “What are you administrating?” and ,“Why are you administrating these things?” I’m excited for the next decade. It’s going to be awesome. There’re going to be great things coming.
It is not political. I am just like, “The world can be better.” That’s my thought process, and Bitcoin was my purview. When you get so obsessed with something and you learn about how everything works, the money system, the Fed Reserve, what currency is to you, what money is to you, and you start asking these bigger questions. You become more curious about everything. There’re better ways for things and I want people to be empowered. I don’t want people to feel they’re taken advantage of.
want them to feel like, “I want to work for this country. I want this country to work for me.” Otherwise, smaller governments are going to be better. Otherwise, these smaller countries are going to be flush with people because you will have a say in what happens. Everyone will have an actual set. A tenth of the entire country’s lives in California. That is crazy. We have a tenth of the country’s population in our state and we are the worst state.
I believe that change is coming and people are starting to wake up and the curtain is being pulled back to all the deception that’s happened. On our show, we don’t get into the Republican, the Democrat, the independent guy, or Libertarian per se, but what we want is that positive change and try to motivate people to get out there and hold these guys accountable.
I will believe that the government has changed when my experience at the DMV is good. Honestly, I think cars will be driving me and not going to the DMV. They will go to the DMV for me before that happens. When that happens, I will be like, “It’s time to move into government. It’s time for people to want to work for it.” It’s the government getting the smartest people. I don’t think the government gets the hardest-working people anymore because it’s not as exciting. I want that to happen again. My grandpa worked for the government. He always defends it because he knew a day when it was good to the people, it was helpful, and it was all those things. I’m like “I’m not there anymore.”
It’s changed and as the people over the past several decades have gone to sleep. It’s human nature that if you give somebody a lot of power without any type of accountability, they’re going to be off in the ditch and that’s where we’ve got with the administrations.
For awhile there, everyone was blaming millennials for stuff. They’re blaming us for their life because we look ridiculous. I’m technically a millennial, but I feel old sometimes. Now, it’s one of the biggest markets in history. Everyone’s changing their tune and not blaming the millennials for anything. It’s a funny thing that happened. Now that they have money, everyone is like, “I didn’t say that.”
Adam, we’d love for you to come on and give us updates and visit with us in the future. We’re very excited about the cryptocurrency space and what’s going on. I’m excited about the venture capital and how that’s moving this whole process forward.
It was great to talk to you and have a good one. It was a pleasure.
- Sutter Hill Ventures
- Draper Fisher Jurvetson
- Boost VC
- Phil Libin
- Jamie Dimon
- Merrill Lynch
About Adam Draper
Adam Draper is the founder and managing director of Boost VC. Adam is a 2x entrepreneur and a 4th generation venture capitalist. He also has a very large comic book collection.
In 2009, the same year that Adam graduated from UCLA, he founded Xpert Financial, a secondary market for private securities. After settling millions of dollars in private security transactions and becoming a registered broker dealer, he left Xpert Financial in late 2012 and began angel investing, where he backed such startups as Coinbase, Plangrid and Amplitude.
Adam then partnered up with Brayton Williams to change the face of global startup mentorship. The focus of Boost VC on future technology development stems from Adam Draper’s dream to create an Iron Man suit.