Transcript+
Let's be clear, Bitcoin is an international asset. We are spending like drunken sailors. Bitcoin is the only economic entity. Where the? Supply is unaffected by the demand. If you want to preserve your wealth, you have to convert that currency into an asset that's scarce, desirable, portable, durable, and maintainable. All right, welcome back to Scarce Assets. Excited for this week's episode. I'm joined by my Co host Tim Kotzman and Glenn Cameron and we are joined by Matt Cole, Matt's the CEO of Strive and the Chief Investment Officer of Strive Asset Management. Before getting to Matt just real quick, scarce assets for those who've been haven't tuned in before, it's a bi weekly podcast. And so we're dedicating this podcast to exploring the investment landscape shaped by the paradigm of scarcity as the ultimate driver of value. And so as traditional investments struggle to provide real returns and Fiat currencies lose their appeal to the basement, our show provides a forward-looking lens on how investors can preserve and grow their wealth in the 21st century. So Matt, you're a great guest for the show because before we hit record, we were talking a little bit about your background as a fixed income portfolio manager at CalPERS. Can we talk a bit about that? Can we go into some of the detail that, you know, we just touched the high level, But if you can share a bit about your history of CalPERS, what it was like to manage a fixed income portfolio. And then we can get into how did you start to how did Bitcoin kind of fit into that worldview that you had and had and how did that all shake out for you? Yeah. Well, first, thanks for having you guys. This is going to be a really fun conversation. And I've spoken a lot of the last couple years about my background at CalPERS with regards to issues with ESG and DEI. That was part of the day one mission focus point of Strive, but less so, but more so recently about Bitcoin specifically. And, and it's really an important part of my journey because this was actually part of my journey even before the ESG, I stepped Bitcoin specifically and some of these more macro issues. And it ties back to even why I started my career at CalPERS. So I started as an intern in 2006 as I was trying to figure out what I wanted to do. And while I was an intern, the great financial crisis happened. And that great financial crisis obviously caused issues all throughout the world. And pensions were hit specifically hard. And they were hit hard in the sense they became underfunded for the first time. And so for me, that was a very personal thing because my parents, my grandparents, my uncle, they all had their pension. I had to CalPERS specifically, and CalPERS didn't have enough money to pay out to pensioners. So I'm looking at that problem. I'm looking at an exploding debt crisis in the globe, but also in America. And I wanted to help fix that problem. And so I decided to join CalPERS instead of doing things like go to Wall Street, go to New York because I there was a personal mission to me trying to help fix this problem at CalPERS. Interesting. My first job was in in fixed income markets. I was doing agency mortgage trading. I was mainly focused on agency mortgages, structured products, which by the way later on structured products will be interesting has a lot to actually Bitcoin bonds and some of that kind of stuff. But structured products and then eventually US Treasures, I worked my way up to be their youngest portfolio manager, their top performing portfolio manager and was managing about $70 billion. Their fund is about was about 500 billion at the time. So think about it as managing about one in every $6 for CalPERS and but specifically those assets that were meant. I was managing specifically the US Treasuries. You're looking at the debt prices in America every single day. You're looking at the printing of money, which was interesting because in the institutional context, there was a debate of if it was printing money or not printing money. My view was always it was printing money and it was obvious. But when you talk to people at the Fed, there was arguments about why it wasn't printing money, but they're printing money and they're debasing their currency at a rate of over 6% per year on average since the Great Financial Crisis. And if you are a reader or a fan of Milton Friedman's work, you'll see that printing money is inflation, whether or not it increases the price of eggs. My argument will be that because of the specific way that they were printing money through QE, the inflation most obviously manifested itself in financial assets, whether it was housing stop the prices of, of equities. But it's something that everyone and specifically people that didn't have exposure to those assets like millennials felt. So we were all really aware of the problem, thinking about that problem every day. And there was not an obvious solution to that problem. And, and so while I was there, call it in the early 20 tens, I started following Bitcoin, but I was not buying Bitcoin. In fact, I thought it was a scam and I had a very institutional mindset to Bitcoin that I'm I'm managing billions and billions of dollars of I know that the institutions know what's going on. I don't know what all these kids are are using Bitcoin for. It's going to collapse. It's a scam. So that was that was my early viewpoint of Bitcoin. Call it in 2010 through through most of 2015 into 2016 was just that this thing was going to collapse. But I was watching, I was watching it and I was well aware of the problems that Bitcoin theoretically should fix In, in mid 2016, I had a, an awakening around Bitcoin and it was really because my thesis around it collapsing kept not being true. And so I, I humbled myself and it wasn't to say that I believed in Bitcoin at a time, but that I'm clearly missing something is if I think something's going to collapse in it, it's not collapsing. So I went deep down the Bitcoin rabbit hole in the late 2016, just forced myself to integrate within the Bitcoin community, ask questions, understand stuff like this and challenge my assumptions because as investors, we're always going to be wrong at times. And I think people that end up being the best investors are willing to, to humble themselves when they're wrong in questions. I went deep down the rabbit hole and became a Bitcoiner myself in very late 2016, early 2017 and since then have just been a big fan. Put myself my personal portfolio on the Bitcoin standard and off to the races from there. So you can I ask a follow up question, which is so you mentioned DEI and ESG in there, right. And and that, that was like kind of a big focus at, at CalPERS, obviously at Strive, we've taken a pretty forceful and high conviction position on all of that kind of stuff. So I wanted to ask you what it was like working CalPERS in that respect, but also whether you see a connection between these things, you know, like the monetary debasement. I mean, obviously treasuries and dollars are the probably the least case thing around. I mean, I'm just wondering if this sort of, you know, this sort of social engineering and the money, if you see any kind of connections there or something like that and what your position and all that is. I do think that there that there is some connection between ESGDEI and, and Bitcoin and, and the connection that I would, that I would draw is there's really two very different mindsets of the future of the world. And one of them is ties back to control and the other ties back to free. And so my view was that the ESG mindset, the stakeholder capitalism mindset, the blockchain, not Bitcoin mindset, CBDC mindset, all those things tie back to control that. And, and, and I know a lot of people that that fall into that mindset that they are often well meaning people, but they're, they're well meaning This, I think actually falls back into something that I think is they think that they and the managerial class know what the world needs better than the average person. They want to control that and they want to help that in their way to help humans do better in the future. But it's extremely misguided and I completely disagree with it, fight back against it in every way. But I think that's what goes in the mindset of all of these different things. Think about ESG and what ESG was and is the forcing in of certain values across government, across corporations, to everyday citizens, a forced implementation. And that forced implementation, we're not even talking right now of if those values are good or bad. I think they're bad, but like that you could take the other side. But I think what's not debatable is that it was the forcing in of values into and across corporations in corporate America. And I think CBD CS would be the exact same Bitcoin where I think it does tie in and and it was interesting. So, you know, later on in my, in my journey at CalPERS, as I was talking about Bitcoin there all the time as the young portfolio manager, you know, top performing portfolio manager that also happened to love Bitcoin. And you know, I thought it was crazy. Eventually I think they realized that they didn't, they don't understand it. So they asked me to help teach. So you know, part of the teaching was looking for how to, how to implement it on an asset allocation side. Another part of it was I hosted some fireside chats where I would bring in industry experts and we would have a conversation with, you know, me and this person kind of like what we're having right now, but just internally right with the entire investment staff. Well, I, my first conversation, I actually brought in Ryan Selfless when he was still the CEO of of Masari. And so we started talking about Bitcoin and I thought it would be fun because, you know, I'm obviously was different minded than a lot of them to actually position, which I really believe is true that Bitcoin should be the ultimate ESG asset if ESG is actually first principle based and not a forcing in of, of certain values into corporations. So I said, hey, let's actually dissect this on ESG. What does Bitcoin mean and, and why Bitcoin shouldn't be anti ESG, but it should actually be pro ESG if we're, if we're being honest about what ESG should be. So, so we talked about that, but obviously in ESG circles, Bitcoin has not been, even though Bitcoin is a mechanism to actually force clean energy. You think about what's going on in Texas where flaring of gas has been able to be utilized versus just spit out into the universe as an emission utilized to mine Bitcoin. Well, that's actually really good for the environment, but doesn't get counted in ESG circles, right? You think about S the democratic, the democratization of of a scarce asset and the ability to transact freely with Bitcoin. That is really meaningful, especially in in emerging economies, right? Less so than than developed that that's a really meaningful thing. Yet it doesn't get any points on this. You think about governance. Well, there's in my view, no better governance mechanism than how Bitcoin operates in its decentralized manner, but yet it's not positioned that way. So I do think it all ties back to this same fundamental viewpoint differences. And I think it's why you've seen the current administration in the United States take a very positive stance. Bitcoin, I don't think it's from the perspective of they want Bitcoin to replace the dollar or I think they're still in in both sides of politics. I think that a lack of acceptance of of where things are going and what that likely means all over the long run. And I'm always position myself as someone that's America first, not color 1st. And I think that has back to my view on Bitcoin and how the government should adopt Bitcoin, but at least not killing it and deregulating and allowing it to compete is something that we're going to see, we are seeing at the governmental level. Yeah, yeah, very well said, Matt. I'm, I'm excited to dig in, in a bit more into the ESG learnings about how Strive is taking an approach to advocating for Bitcoin within corporate treasuries as a shareholder. One thing I want to go back to just because I didn't know your full back story about the motivations to join CalPERS. And I think that's commendable that you saw a problem that affected you personally and your family. And then of course, millions of people, 10s of millions of people within the state of California. What are your thoughts now? You know, zooming up to 2025, we're starting to see just a few basis point allocations at some of these state pensions within the Bitcoin ETFs. It seems like that might be part of the due diligence of just getting up to speed on the asset class before really lagging in with a more substantial allocation size. But I guess that that problem that you saw with the underfunded pensions that still persist today and perhaps it's gotten worse, you could tell, tell us, I'm not entirely sure, but how does Bitcoin kind of fit into this objective that you initially set out on, on your career? Yeah. So, so first taking a look at the the pension crisis in this country, you would think that post great financial crisis, we've had over a decade, call it 15 to 17 years of pretty good returns. You would say the problem probably has gotten better. It hasn't. It's stagnated. And, and what's happening is that baby boomers are starting to retire, which kind of starts this pension loop and they haven't been able to actually substantially increased their funded ratios after they dropped in the great financial crisis. So I think you're seeing this problem play out in real time and I think it unfortunately likely ends in a pretty negative way and, and very concerned about it still to this day with regards to Bitcoin and institutions and pensions, One of the things that I think is unfortunate about the institutional investment community, I think it's also similar in corporate America is the lack of ability for most of these managers to move outside of a consensus. So I think there's really a, a, a, an afraidness to be the first mover or the 1st movers. And so I think that's why you're seeing a few basis points here, a few basis there. I think that they'll likely move in kind of a pack that once you start to see more people implemented to adopt it that you'll see, you'll see kind of a mass adoption in a in a relatively short period. And I have, I have some thoughts on how I think it likely plays out. But I'm, I'm, I don't have like conviction in that. But one of the things that I think will likely play out is, is if you think about pensions and how they often allocate to other commodity or, or real assets. I mean, I'll, I'll use a commercial mortgages as, as, as an example, most pensions, you think about a commercial building and taking risk on it, they'll typically buy the AAA rated securities of that, of that commercial mortgage. So you'll think about whatever the some Class A property the in New York that they might buy, they're not taking the full risk of of a default on that loan. They're taking the AAA tranche, which means that it's typically protected all it 30 to 40% of the downside losses. They don't even. And that's where a commercial mortgage, that's what that's where institutional buyers concentrate. And then that those commercial mortgages are sliced and diced and hedge funds or other types of, of buyers might buy the more risky tranches of those types of securities. It makes sense when you think about a volatile asset like a like Bitcoin or even like a, a, a full Bitcoin treasury or Bitcoin standard company, like a micro strategy for institutions to be more interested in, in the, the quote UN quote safer version of that while they might still want access to it. So I think the idea of slicing and dicing Bitcoin and creating structured securities makes a lot of sense to for something that an institution would likely actually have more interest in in. And I think that would give them comfort to move more in scale. And I think for the Bitcoin community and Bitcoin bulls, those more, more risky assets I think would be very interesting because the Bitcoin, the Bitcoin bull thesis plays out, then you're able to get clever exposure to Bitcoin. That's fascinating, Matt. Yeah. Could you won't hold anything against you, you know, if it doesn't play out as as expected? But I'm curious like so in these pension portfolios, then what, what do you surmise might happen between, let's say spot ETF exposure, which, you know, just vanilla exposure to Bitcoin versus some of these structured products, whether it's, I guess in this case more so protecting the downside, but I'd imagine some investors, perhaps not pension funds may want to participate in more of the upside. What are your thoughts there in terms of portfolio construction? Yeah, I think small to medium sized pensions, smaller states, probably more red leaning states that tend to agree with the the world view of people that would like Bitcoin would be more likely to buy Bitcoin ETF. And that's what you're seeing in practice. You look at a, a pension like a CalPERS or or a New York pension fund, they were to buy Bitcoin. I think it's way more likely to be in structured form with downside protection. And I do agree with you. I, I think that today it would be a massive amount of demand for the more risky version of tranche Bitcoin in the Bitcoin community. I would probably be a buyer of that myself. And, and I think that there's likely demand for pensions and less risky or the safer version. I think that that happens. And this gets into kind of some of the conversations of, of Bitcoin bonds and, and structuring and all this stuff. I think what will ultimately scale best is something that is bespoke that you can't just put together on it. So like, let's say as an example, the idea of taking AUS treasury debt, sprinkling in a little bit of Bitcoin and combining that to someone. Well, I could actually just do that myself. I can buy a treasury, I can buy a little bit of Bitcoin and I can replicate that. I don't, I don't need them together to do that. So if that's all it is, I, I don't think I, I mean, I could be wrong. I don't think that that scales or or would be interesting to an institution if it's something that they cannot get access to absent for that security. I think that also provides some interesting exposure and and and and beta to Bitcoin, I think. Yeah, I wanted to go back to something which is, you know, you were talking about the underfunded pension schemes and the reasons for joining CalPERS and stuff like that and. I know if you go to like an RIAA for advice or something like that, or wealth manager or whatever, essentially they'll take into account on, on your side of the pond, Social Security on this side of the pond, they'll take account of what we call the state pension, which is the British equivalent. And so it's super interesting because the US government data is about £3 trillion. I mean, it's obviously a different size of economy. It's, it's about 108% of GDP. And the, but then they've got all these state, they're meant to be state funded pensions for like the National Health Service for the firemen, all of this kind of stuff. But they don't have a dime put away, right? And they all define benefit pension schemes and they owe like 2 1/2 trillion on those. And then they owe but another 5 trillion on the state pension. Like if, if you calculate the present value of the liabilities of these things, right? So, and in the US, the numbers are, you know, comparable, you know, like 6-7 times the explicit date. And so it seems that either you're going to get your Social Security, your state pension, but it's going to be kind of a debased version of it, right? Or at some point they're going to have to go listen, sorry, after this date, nobody's getting it anymore. And then everybody's financial plans are being kind of done around the fact that, oh, I'm getting this payment on a monthly basis when I retire and I'm going to be short, right? So I just wondering if you see like how Bitcoin potentially kind of comes into that picture and how it kind of solves that issue? Yeah, in, in entitlements are are super interesting in, in, in specifically in the United States. So if you've been following DOGE and all these things about reducing spending in the United States, which I'm a I'm a huge fan of, I think that entitlements are something that's still a sacred cow that people are not willing to touch on either side of the political aisle. And even when you look at government spending in the United States and you compare pre COVID to now, and I think there's been some some people talking about, well, if we could only go back to 2019 levels of spending, then we actually have the tax receipts with balance the budget. Well, The Dirty little secret in that is that, yes, there's been some increases of spending for silly things, but most of that's actually entitlements like Social Security and Medicare in the United States. And it's because baby boomers are retiring. And so unless you're willing to touch entitlements, there is no going back just by slashing a few agencies, which needs to happen, but that's that's not going to go back to that amount of money. So what happens? Do you gate the flows of of entitlements to people or do you just print money and increase the debt and keep paying it? I, I think, you know, there's, there's what I would like to be true and then there's what I think happens. And those are often two different things, right? And, and so as an investor, I always invest on what I think happens, not what I think should. And, and, and my prediction is that the kick the can down the road mindset continue idlements most because it's the the most comfortable thing to do. And, and it and the can gets kicked until something breaks. I wish that wasn't the case, but I, I just don't see how that's not the case. And so if that's the case, then OK, Social Security becomes insolvent in a few years from now. We increase the levels of debt for some reason to keep funding it. My guess would be other countries do a similar type sort of thing. And ultimately it's going to continue to fuel people, young and old, specifically younger people that see this problem as you know, their parents are getting paid Social Security that from an insolvent fund to things like Bitcoin and an interestingly, you know, Bitcoin in so, so many ways has been a great asset. But one of the things that's been particularly great about it in my view is that smaller people, smaller organizations are able to move before larger ones. So I think it gives power back to the people in a major, major way. And I think that will likely continue. And I think individual adoption of Bitcoin will continue to front run institutions. I think that institutions are going to start getting involved more and more and the ones that are able to humble themselves will do the best over the long run. But I think that it will be a a massive tailwind that continues for for Bitcoin option. At Onramp, we believe that Bitcoin is the most important asset of the 21st century. The hard part is securing it right. There are shortcomings with keeping your coins on an exchange, but also with setting up your own self custody arrangement. Onramp solves for these concerns. Our multi institution custody solution maximizes security and minimizes counterparty risk, ensuring that your Bitcoin remains securely in your possession and provides built in inheritance planning to ensure your family is protected as well. On Ramp provides Peace of Mind for your Bitcoin journey, whether for your whole stack or for part of it as a compliment to your existing self custody set up. For more information, check us out at on rampbitcoin.com. It's it's well put. And this ties into Glenn, both your question and Matt, your response. One thing that concerns me is exactly what you laid out right that we have a massive entitlement problem. The most likely scenarios that we government, the central bank creates more currency to fund these entitlements, which leads to decreased purchasing power, which ultimately the the main concerning thing here is that retirees don't actually have the ability to retire right? They 10 years into their retirement, they don't have money to live for another 10/15/20 years. One thing that I want to drive toward that concerns me is, well, you know, we all understand individually and most of our listeners probably understand the merits of Bitcoin at an individual level, but adoption is still so marginal, material adoption, right? Like you see these statistics of how many people have crypto or Bitcoin wallets, but not that many people actually have material exposure, call it like 5-10, twenty, 50% of their net worth in Bitcoin. Not to say that 50%'s the right answer, but you get where I'm going with this. So what could states or the federal government or other, you know, institutions do to adopt Bitcoin on behalf of their constituents? Do you think that that's part of what we see here with legislation at the state level? Because ultimately, you can't get every individual forcefully to buy Bitcoin, but maybe these institutions start to adopt it on their behalf to, you know, see the writing on the wall for these issues. Yeah. And, and the conversation around states is, is really interesting and on, on, on multiple dimensions. So several states in the United States have bills to adopt stockpiles or reserves of Bitcoin. And that makes a lot of sense. I think that the, the federal government should adopt Bitcoin and, and massive Bitcoin stockpile, but I think that's harder for a state. Can I think really credibly say that our stockpile of Bitcoin is a check on a federal government that's spending in a reckless way that we can protect ourselves? And and that as just a concept is the same concept of why the individuals, even though obviously not every individual, but individuals have moved before corporations or institutions, right? You see it because they can identify with the problem in a much more tangible way. And and so I think that, you know, I'm sure that a lot of these bills will will not pass. I think some of them will pass and and there's pretty big support from major names. I mean vague who's likely to be running for governor of of Ohio has come out and sort of Ohio owning Bitcoin and, and I think he that problem. And I, and I know that in Texas, where I live, some of the leaders have also come out in support of, of this and, and it makes, it makes a lot of sense to me and it does protect their constituents. And in life, you know, as an American citizen, people are America first. I think people tend to be think that they're going to put first the things that are closest, right? Like my family is, is first before for myself, before, you know, my stage or my nation. But all those things are first and my nation's first before the, the world. It's not to say that you don't care about those things, right? You care about those things, but there's a there's a priority of people's individual responsibilities that tend to move closer to the school. And I think that that leads to like states adopting more nations and then on within nations, likely more developing nations moving before developed nations. But for the United States, Iowa's come back to how would you feel if the United States and, and there was an announcement that China was firing billions and billions of dollars of Bitcoin? How would, how would, how would you feel if you're now following behind that versus that? I think as a nation, we have the ability to lead. But you know, that conversation is, is sometimes challenging, even with people that are allies. And, you know, all of us are trying to push that in the right direction, But I think it's something that's easier to go a bit smaller, like states. Yeah. And so if we go in the other direction, somewhere between individuals and say states or nation states, we've got corporations, right? And I know you were involved in the vote that Microsoft took about whether to take a position in Bitcoin on the Microsoft balance sheet. And it was less than 1% of the shareholders that voted for that proposal. And I'm guessing you were on the side that voted for it because you were directly involved in it. It would be super interesting to hear you know what went on there and any insights you can share with us. Yeah. So that was the first vote that Strive did with regards to Bitcoin treasury strategies at companies. And I'm it was a no brainer for us to support it. We did not expect it to pass. I thought it was actually going to get more than 1% support, but that shows you where we are as as a movement with regards to large asset. But there was a lot of positive learnings for that from our perspective. One, Strive was just founded a couple years ago. Our first bite was ESG and DEI. And when you looked at some of those proposals, they often would get very similar levels of support, one percent, 2%, less than 5% support fell overwhelmingly every single large asset manager voting against it, the board recommending to vote against it or, or for it, whatever. And, and, and if you were on the side of pro capitalism or pro meritocracy and about the aisle, this was very similar. So with regards to why and I think then you it's interesting of like what is strive going to do to help push this forward in corporate America, which we have you know, we started talking about a strategy there. There's different companies. Our view is that at least one company in every single sector of America should put themselves on the Bitcoin. Ultimately, I think every company should, but the first company in every sector I think is going to put themselves in a very leading position to maximize returns for shareholders while still in pursuit of their corporate mission over the long run. And you look at a company like Microsoft, Microsoft is a cash cap. So they're extremely profitable. They're sitting on a ton of cash. They're, you know, rightfully, you know, they're, they're sending off dividends, they're doing massive stock buybacks. And you think about how do you maximize return to shareholders while in instead of your mission with this cash, it makes so much sense to me that they should acquire a massive stockpile of it. And, and you think about all these different things that are happening. There's massive AI innovation. Microsoft's going to be leading in actually helping do that in that, that, that, that AI work and investing in AI companies like chat, open AI, ChatGPT. But there's actually a big risk for Microsoft that as AI disrupts that smaller companies might be the beneficiary of that AI more than larger that the most of these large companies might have might decrease. OK, that's a huge risk. I think it's a material risk factor to every single large company out there. And I think this kind of goes back similar to how Bitcoin is in my view, a great power enhancer to the individual over over the institution. I think AI is going to be a great power enhancer to the individual, to the small corporation over the large corporation over the large state, the large nation state. So if you believe that in your in your Microsoft, how do you guard against that? You acquire a massive stockpile of the thing that's likely to benefit that you can invest in with your cash stick. And if you buy that Bitcoin, well then if that plays out, you can leverage that Bitcoin in the future to acquire a merge with the winners that maybe, you know, reduce your Moat that you have and you and you have and you reduce that that substantial risk. And also you increase the return to shareholders in a substantial way more than owning cash and and sitting in a short term treasuries, which by the way, have a negative real interest rates of losing their purchasing power on that. And that kind of gets into part of this is that there's been a lack of a savings vehicle world that there is nothing that you can park your cash in that does not have a risk, that doesn't just lose real purchasing power every single year. And Bitcoin restores, in my view, a a savings vehicle. If you have a savings vehicle in an era that's going to have massive disruption, then one of the types of companies that makes the most most sense to adopt Bitcoin are companies that have a lot of cash like Microsoft. And there's other companies for different reasons that I think make interesting candidates as well. But they make made a great they make a great candidate. And so we voted yes and I hope that they end up adopting it, although obviously they don't appear to be doing so in the short run. You. Know what I was wondering about that situation because obviously Blackrock's taken a position on Bitcoin, you know, with the ETF, with Larry Fink with, you know, all the things they've said and whatever. If you look at the sort of shareholder list of most companies out there, they're, you know, they've got BlackRock kind of got the proxy vote on a substantial portion of the shares. And I imagine it would be the same Microsoft, I haven't checked. So that alone, you know, you would have thought that they would have voted for that if they truly understand Bitcoin, but obviously they didn't because less than 1% of the vote was a yes. So I just do you have any thoughts there? I'm, I'm just sort of curious. Yeah, so. Like any large organization, BlackRock has employees that are true. I know some of them that are there, but at at at the executive level, I don't think they understand Bitcoin even to this date. And I think that they view Bitcoin more as a as something that should generate revenue and generate interest in their firm rather than something that they aren't organically believe in and and want to push out in America. If they do, they would have voted for proposal like this. Even when you see things like their research reports about adopting Bitcoin, words really matter in there. And and the words and things like that are such that if your client wants Bitcoin, here's how to do it in a smart way. Not we think your clients should own Bitcoin or Bitcoin belongs that that's a very different viewpoint of of Bitcoin. And so they're obviously providing, you know, an ETF that provides access at a very reasonable fee. They're helping financialize, you know, Bitcoin. But even if you go back to, you know, some of their previous comments, you know, even before about the use case of Bitcoin, I don't think that they're that they're true believers that and I think that will filter through and hopefully we can convince them and they can start supporting Bitcoin treasury companies. But I think that'll be a, that'll be a big signal, right? If if you actually believe in Bitcoin and what it solves, why would you not support some of these initiatives? Yeah, Yeah. Tim, curious to hear your thoughts on that too, just with the Bitcoin Treasuries podcast, if there's anything you want to go more in depth there. Yeah. Matt, I was curious if you kind of called this the year of the Bitcoin Treasury Company. Are there any like companies or segments or industries that you think are like most likely to lead the shift or is it kind of like all up for grabs? Yeah, I think, I think it's going to play out in a few different ways. I think you're going to see handful of companies that will go public in various mechanisms as Bitcoin treasury companies. And I also think that you're going to see some adoption in public companies already to put themselves on the Bitcoin standard to buy Bitcoin. And what's going to happen in my view, is that as those companies do it and as their success, it's going to fuel more companies to so you're, you're seeing this, you're seeing, I mean, I know a handful of companies that are considering things in the industry hard and, and really learning from the micro strategy playbook because it has, it hasn't been very long since they've done this. And, and I think that's something to everyone remind themselves of. It feels like it's a long time, but it hasn't been very long. They've done it very successfully. They're going to always be the blue cap of the large cap company of a Bitcoin treasury companies. But when you think about corporate strategy, there's just too many issues with the dollar that I, I just think that there's, now you look at it as an example, GameStop came out and they talked about they're considering doing it. Actually have some pretty big concerns with some of the things that I saw about crypto, not Bitcoin like, and, and I think that for them there's, you know, there's an opportunity to really do this right and, and to take the the blessing that they have that they're a meme stock that's highly traded and become not a meme in the future. Like they actually have that opportunity and they're blessed that they have a very high volume stock that people have interest in and watch, even though their business is completely failing that that's something that failing businesses would would wish they could have. And, and I hope they don't fumble the bag. I mean their their their stock is in some of our ETFs, so our clients have exposure to GameStop. So I'm like actually personally concerned with them getting this right, but I think that they're moving in that direction right? And I think it'll be. And I think that's for companies that for whatever reason are have a lot of cash, are able to implement a Bitcoin treasury strategy. There's that makes a lot of sense. Another sector just or out of sector that I think is interesting is the biotech sector. So in the biotech sector, companies that might start having trouble with drugs and getting them approved, they'll often trade literally below the value of their cash. We'll have a bunch of cash on, on their balance sheet and their company's worth less than their cash. And their pipeline of product development is, is struggling. And there's not really a future for these companies. Oh man, put some of that cash in Bitcoin. And not just to, to have the pop up because you're a Bitcoin company, but actually to say, OK, our pipeline of medical development is not great right now. We can either keep burning cash or we can get a Bitcoin stockpile and then take some of the time pressure off and say we're going to actually just step back, think opportunistically, wait for projects that we think could be the Bitcoin hurdle rate and and then you give you give yourself time while you're still in pursuit of your mission. It's not about every company in America stopping even thinking about being a company and just buying Bitcoin. You know, it's actually about buying time and being able to flourish and maximize returns over the long run. I was going to say, so we've kind of spoken about pension schemes, we've spoken about individuals, nation states, states, corporations, I guess every investors got a slightly different kind of set of investment objectives, different risk tolerance, different income drawdown or or or whatever. So if we just kind of think about like how does Bitcoin fit into portfolios, portfolio construction, Germany sort of thoughts for those kind of different cohorts? Like for example, if you've got like a company like a biotech company and they're sitting a whole bunch of cash, right? They're going to need they're going to need certain amount of money for operations and stuff like that. How do you think about, like, how much should go into Bitcoin? You know, if if that's on the table, you know, all other types of investors go where you go, where you like with that vision, Yeah. Yeah. For corporations that are actually tie this back to AI, that my view is AI is going to just disrupt the country and commerce and corporations to such a large degree. And this concept that 100 years of innovation is going to happen. I think that you can't underestimate what that means. And and so it leads me to corporations that can get their boards to yes, that actually understand Bitcoin. And I think that's one of the largest constraints to adoption is CE OS and boards that just don't understand it. If you don't understand an asset, you can't put your entire cash balance in that asset and actually hold it with conviction. Like right, I wish you could, but you can't. So you got to understand the asset. If you do, then the maximum amount of Bitcoin that you possibly can buy. I think the the right answer, that's for corporations. So for corporations like biotech companies that are sitting on a bunch of cash and they're spewing money without good prospects, I think they should literally shut down as much of the operations that they can as possible and put as much of their cash into Bitcoin as possible. And then continue to try to buy more Bitcoin and fire a war chest for the for companies that are massively profitable, more like the the Max 7 type sort of companies. I think for them, they should less so just like shut down their operations, but leverage their large amount of cash, discontinue things like stock buybacks and use that cash to buy more Bitcoin, potentially issue some some ATM, you know, shares to buy more Bitcoin while continuing to operate their core businesses because they're profitable and and invest where they think they have conviction that their investments won't be massively disrupted by AI and be the Bitcoin hurdle rate. But that's very different than what a biotech company or a company like GameStop would look like. And I think every industry is going to have a very different answer. I mean there's there's many industries that I think the turtle rate for capital deployment has gone too low, it's gone too low because of this lack of a savings vehicle. So for some of those companies, I mean the answer might be shut down substantial part of your operations, but not to just do that forever, but to do that in pursuit of you know a longer term strategy. Lastly for the individual, so on our well side of the business, we recommend a three to 5% allocation to that point and that allocation is actually constrained versus if you were just to do a a pure total return efficient frontier analysis like how much could you put into Bitcoin without you know, while still maximizing risk adjusted returns. But our view is that you can strain that because if people aren't educated and have conviction and understand Bitcoin, they won't be able to handle the volatility at higher levels. So getting them some exposure and then to me, it comes back to the actual individual client, the more educated and the more conviction that they have, and we obviously try to help them with that, the higher amount of Bitcoin that they can hold and not the basically demand that it gets sold at any time because of volatility. That's, that's it. That's a huge risk of actually putting Bitcoin into whether it's a corporation or individual's balance sheet when they don't understand it or they view it as a as a get rich quick scheme versus something that's going to enhance returns and provide a lot of benefits of against different risks over the long run. Yeah. I love that you mentioned education just because it is so critical, whether it's a corporate boardroom and trying to educate on the merits of it or just, you know, on the private wealth side working with individual clients. I don't think there's enough education out there yet. And then obviously we focus on a lot at On Ramp and as you do at Strive as well. One of the things that that's challenging is the volatility aspect that you mentioned, Matt, just because the traditional assets that investors allocate to have negative skew, they have more downside volatility than upside. So naturally as investors, we then anchor to volatility inherently being bad. Whereas Bitcoin and I believe gold as well has a positive skew. They have. There's more positive volatility, so up days than down. And so I agree with you that education is critical. And as part of that educational effort, I wanted to hear about what you've mentioned a couple times on this call now and you've been tweeting about as the Bitcoin hurdle rate. Is that a component of education on the corporate side or on the individual side? How do you kind of think about that as an individual but then also as part of the business? Yeah, absolutely. And and this gets into a actually a very hard question. OK, Bitcoins, the hurdle rate, what does that mean and what is the percentage hurdle rate, right. And we're doing a lot of work on that right now and expect to have some some research that comes out over over the coming months. But I think if you start with the problem and the problem that the current hurdle rate of cash creates a broken hurdle rate in a broken system because the real interest rate is making there is not a savings vehicle. So when you plug that into whether it's ADCF type sort of model or whatever type sort of model, you have negative interest rates break almost every single model that's out there. OK, so, so you have broken models today. Those broken models create weird financialization schemes that are going on like stock buybacks or you know what, whatever you whatever you might see things that typically you wouldn't see exist because it's kind of a hot potato of, of cash is is bad and, and and you don't and you want to move away from it. Bitcoin is a true savings vehicle and so if they reintroduction of a true savings vehicle means that a true savings vehicle should be a hurdle rate. Now what do you what does that mean? You look at bitcoins returns over the last ten years, five years, I I believe over the last 10 years about 80% a year. Over the last five years, about 60% of a year. I think that there can be different viewpoints of what the future return rate of, of Bitcoin is. I think it could be somewhere between 20 to 40% depending on your view of the world. I think the sailor pegs at around 29%. Kathy Wood I think pegs at around 40%. You discounted a bit, but something that is at a minimum 20% over the next 10 years. So I think that would be a a very conservative turtle rate that if you say, OK, if I can't beat 20%, why am I putting my capital to work to something. And you and you look at the IRRS that are typically required for CapEx in America and it's typically around 9:50 to 12% is, is the average return on capital for capital CapEx expenditures. Well, that seems very risky to me to try to earn 10 to 12%, right. We're in, in the beginning moments of of an AI exponential innovation move move that seems very risky. Why would I not prefer to put myself in fire a massive stockpile of Bitcoin to strategically deploy over the long run, I think that's going to be a a much less risky strategy. And and so it's more of of the macro viewpoint of of Bitcoin thinking about a true savings vehicle and questioning whether the current use cases of capital have been good or bad for the company versus owning Bitcoin. And I think when you look at what they what they've done, I think it's easy to say that even if you discount Bitcoin future returns heavily, that Bitcoin as a hurdle rate is like Bitcoin is likely a better asset than what a lot of corporate actions have been. Yeah, it's fascinating. What what do you think of the timeline for this, Matt, because you mentioned earlier in the conversation that D i.e. SG was unpopular when Strive became a proponent against it and that was, I don't you correct me if I'm wrong, like 3 or 4 years ago maybe. And then of course, yeah, yeah, perfect. So and then of course that's become a center of political debate and discussion. And ultimately, I think contributed to the Trump administration and their campaign and success was that Americans were particularly fed up with this model of ESG and DEI. And so now we're saying things that are typically unpopular and probably very minimally discussed, right, not only in the US but also in the world as this idea of Bitcoin as a hurdle rate. What do you think like two or three or four years from now looks like in terms of the discourse there? Do you think we'll see material in interest and appreciation for that mental model? And let me add to that question a little, right? Because you are CEO of an asset management business, but you're also the CEO of the enterprise business and there's a wealth management arm and stuff. So you must have some kind of feel for because obviously we've had a president, we've got states talking about Bitcoin. It's kind of in the news all the time. So as well as what Jackson's asking, what are you actually seeing at the moment like from your client base? Yeah. So, so maybe with start with it's corporate adoption of, of Bitcoin and what do I think we see? I think we'll see by the end of this year some multiple of companies versus the current amount of publicly traded Bitcoin treasury, probably in the magnitude of three to 5X the a general prediction of the amount of, of increasing Bitcoin treasury companies over the next 10 months. Thinking by 2030, most public companies will own Bitcoin. And, and I think the reason I have a lot of conviction in that is I think that people still struggle to wrap their minds around how much AI is going to disrupt corporations and how fast it's going to happen. True, exponential technological advancements do not work well in how a human mind thinks. And, and so as that disrupts industries and disrupts workforces and in in major, major ways, I think Bitcoin becomes their winner in that. And I think corporations are going to adopt it in, in, in, in massive amounts. And so these companies that they are able to move this year, whether it's whatever, 50 companies, 20 companies, I think they're going to be big winners over the long run, big, big winners. And, but, and that's why I call it the year of the Bitcoin treasury company, because I think it's the time that we move from just a couple to to many. But those many I think are still going to be early versus every single company adopting it. And and once every company adopts it, I think they'll still be better off. But the in the S&P 500, the 500 company that adopts it, they don't have to be a winner in that. They're going to be a follower, right? And they're going to be doing it out of desperation. Yeah, yeah. And and in your client base, what are you seeing currently because the narratives of this shift. So I'm wondering if you're getting clients rather than you driving the message, hey, you should have 3 to 5% in your portfolio. Are you getting people knocking on your door saying, hey, when we're putting Bitcoin in My Portfolio, can I talk to you about Bitcoin or are you seeing that sort of thing yet? Yeah, Yeah, we absolutely are. And so this kind of gets into what types of clients to strive really hit in a major way. And, and our viewpoint of kind of our, how we're thinking about the world is we want to be excellent in bringing Bitcoin to the masses of people that love capitalism, that love meritocracy, that love freedom that may or may not own Bitcoin today of helping them own it. I think there's, there's already some really great service providers out there for Bitcoiners that may have a massive amount of Bitcoin and they're thinking about estate planning and future planning and, and I think there's some pretty good options out there today. Ours is how do we bring Bitcoin to the masses? And I think the, the response from clients has been overwhelmingly positive of this is this is interesting. What you know, I've never had my, my advisor talk to me about this before. I thank you for bringing this to my attention. I've wondered or I've already owned it, but I've been, I haven't wanted to talk to you guys about it. So I thought, you know, whatever. So it has been, it has been extremely positive and, and think about strives, strives, customer base and people that love capitalism, freedom, meritocracy, they, they tend to, I would say be the 2/3 of America. So call it independence. Libertarians and conservatives, some Democrats, but like, you know, less of less of those that they're also getting introduced to this for some of them for the first time when they hear the administration talk about it a lot. And and so that also peaks their interest in and I think that to one of the things that Jackson brought up earlier is like, how do we not enough people own it? There's a lot of people that own it, but not enough people. How do we bring this to the masses? And that gets into the education conversation, lower allocation help them understand volatility that they might have seen in their portfolio before. And then ultimately, I think it expands from there because most people that have a journey around Bitcoin education, the more they educate themselves around it, the more they feel like they are short or don't have an adequate amount of Bitcoin in their portfolio. That's probably most of the listeners of this podcast, right? But but how do you educate and introduce in a in a reasonable way that position or yeah. Love that. I think of it as the reverse of the cancel on effect, right? The more people you can put Bitcoin in their hands, the more it kind of spreads what's coming over the next, like, ten years and kind of equalizes society in a way, in a freedom capitalistic way, rather than in the sort of socialists kind of way. Yeah. That maybe to wrap up here, I'm just curious, one non Bitcoin question, what what are you paying attention to at strive or personally outside of this asset class? Is there anything you could speak to just in terms of strategy at the firm or or things that you're looking into personally? Yeah. So probably not surprising, but outside of Bitcoin actually maybe as far as like an amount of my time I'm spending thinking about it, I'm thinking about integrating with AI in a massive. And it really has been eye opening to me just the advancements of AI and what AI could do, how it could productivity. My view is it's probably already at the place where it's better than about half of white collar workers today. I think it's probably a matter of time before it's better than anyone, myself included. And, and, and I think that there's different ways you could think about that, but I think not being afraid, but actually integrating that into our work flows, I actually think it's going to be a beautiful thing for society. It's going to cause a lot of disruption and a lot of uncomfortable feelings as we go through a massive amount of change. But from an investment perspective, our view is that three things matter. It's Bitcoin, AI and it's energy. And, and so all of those things matter a lot and, and countries and corporations that have access to more energy are going to be able to leverage AI more, have more ships to be able to leverage AI more. And then Bitcoin being the savings in the investment vehicle and the most clear winner in that change. But I don't think that you can spend really too much time in AI right now. Yeah, we're tapping into it more as an organization and I've really been enjoying it. So looking forward to doing more of that. Well, great, Matt. I mean, is there anything else that you wanted to touch on that we didn't get to today? No, no. I mean, you know, we maybe briefly we announced days ago our plan to engage with companies beyond Microsoft and help them adopt Bitcoin standard. And you know, I'm excited to announce that we're actually bringing on Ethan act. So Ethan was the guy that made the Microsoft proposal and, and really LED that in a in a very interesting way. Tim, I know he's been on, on your podcast before and I was just really impressed with his ability to not only kind of do a 0 to one on getting that conversation out there at the corporate level, but then also not just do it for his own benefit. I mean, he was willing to drop the proposal at Microsoft if they took a meeting with Michael Saylor, right? Like he was just how do I get the win? And our view on engagements and as we've taken engagement strategy is going to be that how do we get the win? We're going to we're going to leverage partnerships across the Bitcoin community, across various different networks to not only just engage with them, but to do it in a way that's collaborative with the ecosystem. And I think as we do that, you'll see a lot of success. And so I'm I'm really excited that you're going to drive team. Congratulations, that's exciting. Yeah. Thank you. That's awesome. Well, Matt, thanks again for joining. Where would you like people to follow along or get in touch if they want to learn more? Yeah, give us a follow our our X page for our company is at Strive Funds, I'm at Cole Macro and then you can find ourwebsite@strive.com. Awesome, Matt. Thanks so much. Thanks guys. Thanks for listening to this week's episode of the show. If you found the information valuable, please share the episode with a friend or leave a rating on your favorite podcast app. All the links we discussed in today's show will be in the show notes inside your podcast app. Before we finish, a quick reminder that Onramp Media is for informational and entertainment purposes only, and nothing should be construed as investment or legal advice. Regardless of where you are on your Bitcoin journey, we'd love to hear from you. Visit onrampbitcoin.com contact to schedule a consultation with one of our private client advisors.
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