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Hello, my name is Andy Edstrom and I'm happy to welcome you to the 4th episode of Scarce Assets, a show that examines scarcity, the most fundamental driver of economics and markets, and the scarcest asset of all, which is Bitcoin. Today, I'm delighted to be here with my Co host Jesse Myers and our guests, the brilliant Pierre and Morgan Richard. Now, I had the pleasure of saying a few things about Pierre and Morgan. Morgan may be the most knowledgeable financial planner that I know, and she's demonstrated this with proof of work in the form of her book, the Personal Finance Quick Start Guide. Now, I've read the book twice and I've learned a lot from it. It's comprehensive, it's well written, and it's full of useful information for anyone who has any assets, which hopefully is everyone listening right now. I know she's also working on another book, which I'm sure we'll talk about. And of course she runs Origin Wealth Advisors which is an independent, fee only registered investment advisor. OK, now I get to talk about Pierre. Pierre is frankly legendary in the Bitcoin space and he's one of my absolute favorite Bitcoin educators. He runs the Bitcoin to Saving Twitter account which has hundreds of thousands of followers, and he and his friend Michael Goldstein Co host the noted podcast, which is one of my personal favorites. Pierre's been helping people learn about Bitcoin for many years and today he's the VP of Research at Riot Platforms which is a large publicly traded Bitcoin mining company. And disclosure, I'm a shareholder now. I also want to mention the Bitcoin for Advisors podcast, which Morgan hosts and Pierre assists just like I do with Jesse. So maybe we'll get to talk about the fascinating world of podcast hosting, Co hosting and assisting even with that introduction. I'm sure I've missed some great things you're both up to, but it's great to see you today and thank you for being here and how are you go? Ahead. See this is going to be a problem. Thanks for having us on. Is the nicest introduction I think I've ever received. So I really appreciate that. Thank you, Andy. Very kind words. Thanks, Andy. Thanks for having us on. Well, well deserved and can't wait to talk to you. So let's talk about, let's start with your combined Bitcoin journey. And I'm, I actually don't mean the story of how you met, though that is a good story. I mean how you've thought about Bitcoin over time. So for example, I might invoke 3 words, speculation, investment and savings. So, Pierre, what what do these words mean to you and how have you applied them to Bitcoin over the years? Yeah. So I think that from an Austrian perspective, the word speculation does not have the negative connotation that it has kind of in the mainstream. I think that for for Austrians, most things that we do in life are speculative. That is that we're performing an action with a particular expectation about something in the future happening. And so that that kind of speculation can broadly kind of go into two different buckets. One is taking a risk and a risk from an Austrian perspective is something where the outcome is quantitative, quantifiable and ideally that you even have some data that you could have an actuarial model on and be able to model that risk and to have some kind of expected values around that. And so that's one form of speculation is, is taking risk And then the other one is uncertainty. And uncertainty is more qualitative and I I when I think about speculation, speculation on uncertainty, probably the the, the most positive form of it is entrepreneurship or kind of technology. You know, research and development of doing something new where nobody's done it before or nobody's done it in the same way before or with the same combination of resources such that you you can't really build a actuarial model around entrepreneurship and say, oh, here are the probabilities of this person succeeding or not. Do I know that VCs try to do that and maybe that's their downfall. And so VCs are always coming out with, oh, it turns out that a 40 year old founder is better than a 20 year old founder or vice versa, because they're trying to create quantitative models when that it just doesn't apply. And so they're constantly having to correct to their investment approach. So that's on the speculation side, and specifically with regards to Bitcoin. Bitcoin's a combination of risk and uncertainty, and so different aspects of the Bitcoin system are uncertain and others are risky. So for example, risky is the purchasing power, right, the price of Bitcoin. And we can have debates on how it should be modeled, how it should not be modeled. But nevertheless it is quantitative, There's a finite range of values that it can have. And then an uncertainty would be, for example, what would an uncertainty be? Bitcoin has very few uncertainties, is actually one of the points compared to, for example, the Fiat system. An uncertainty is how much money will the government print, right? Because ultimately there that's qualitative. It's going to be decided by humans at the Federal Reserve and in Congress. It's not going to be decided by by a quantitative, although they they again they pretend to be quantitative whereas Bitcoins money supply has very little uncertainty because it is algorithmic. It actually is quantitative in the sense of, you know, you've got the halving every 210,000 blocks. And then on the investment side, you know the I think that this is really where folks like Warren Buffett and and others trip up is that they only look at the world through the lens of investment and they, you know, bitcoins complicated for them because an investment generates cash flow. I think fundamentally it's kind of the the the the idea of an investment, whether it's a liability or equity that is going to throw off some kind of cash flow. And Bitcoin being cash itself does not generate a cash flow, it is cash. And so that I think is for for investors out there confounding because they don't like the idea of purchasing an asset and then just sitting on it, you know putting it in cold storage and not earning A yield, you know not earning some kind of cash flow that is. And that that perspective I think is a result of the Fiat system where yes indeed you you do want to own assets that generate cash flows. Otherwise you're just taking on inflation and you know you're going to get diluted out of your dollars. So I'll, I'll let Morgan spend on them if she wants to or we can take the next question. I think you summarized that pretty well. I would say, just to add on the investment piece, like when people are looking for investments, they're specifically looking to grow themselves out of the inflation predicament that they're in. And so for the average person, right, investment is simply that, right? There are obviously expert investors who are looking at it very differently than the average person is. But for the average person, they're just saying, OK, I was told to invest because there's inflation over time. And therefore I have to take the money that I earn, anything that I save in excess of that and put it into something. And so if they're thinking of Bitcoin as cash, not Bitcoin cash, but as cash there, they would not necessarily be. And if they're looking for that, quote UN quote, cash flow that the investors are always talking about that you're supposed to receive, they're not going to necessarily value Bitcoin properly as opposed to looking at it as a savings vehicle whereby they can just sit on their money and they they won't lose purchasing power over time until they actually decide whether or not they're going to spend it or actually deploy it as some sort of investment. It gives you a lot more optionality to sit on savings rather than to sit on an investment. Interesting. So I'm going to try and pin you on it though is so it's a combination of a speculation and investment and savings or Morgan, do you do you think that the savings element or the savings framing sort of resonates most strongly for you? It's definitely savings. So when I look at it in a client portfolio, yes, we're looking at it in terms of investable assets, OK. For as far as investable assets are concerned, how are we going to allocate to this savings versus these investments? And so I guess it doesn't necessarily pin down exactly what you're what you're looking for here, but it is savings, right, because the difference is that I'm not taking it and putting it into something that has all these other extraordinary risks that are associated with investment. I think that we often minimize those risks because it's become so commonplace to use something like the S&P 500 as a savings account. And so we just think, OK, if we own 500 companies and we've diversified all away all the issues, right. But we haven't diversified away the systematic risk of just owning investments in general. And so you're it's just it's all trade-offs, right. So what you're trading here is that you're owning a long term savings vehicle and yeah, in that long term savings vehicle you're going to have a high volatility to aspect to that savings vehicle with you know the trade-offs of necessarily investing which comes with a slew of other risks. Yeah. And to to piggyback off of that with with the index investing, I I think that the, the main limitation there is that there's not really the kind of oversight that you would expect from the owner of the business. It's so essentially you know you're you're splitting up the ownership among so many different people and then you're putting so many middle men between the you know retail investor and the company and the management that I think that it's it we're we live in a world where there should be a lot less invest investors, right. There should be fewer people making investment decisions but making better ones, not ones that are based on automations, right? Oh, I'm automatically going to buy more of this portfolio of stocks. I I I think that that leads to capital misallocation, even though people do it for a reason today, right? Which is that it solves a particular problem they're facing that their their dollars are a melting ice cube. I I think there's an interesting conundrum here where Pierre thank you for sort of popularizing the Bitcoin is savings idea. I've I've certainly run with that quite a bit. I think that is the way that people should think of Bitcoin first and foremost as savings technology technology that grows the the purchasing power of your savings and happens to do it in a way that outperforms every other asset class out there. And and historically and I think in my opinion looking forward as well and that creates this conundrum because Morgan you as a wealth manager have to decide how much or or help inform, help advise how much of your portfolio should be in this asset class versus this asset class. But we have this, this problem of Bitcoin might be the the, the most certain, as Pierre pointed out and the highest performing because of its inherent properties and the certainty that that comes with all that. And so how do you Morgan and and I guess maybe how do you as as a pair talk about what is the right way to approach how to allocate or how much to allocate. And obviously it's on a case by case basis based on the circumstances of your clients, but how do you guys think about that and specifically you Morgan. Yeah. So the number one thing that you need to look at is spending. People don't like to do this because spending is the least interesting part of Bitcoin, right? Most people think, OK, I'll just buy Bitcoin and then I can get out of jail free. Basically, I don't need to worry about how much I'm spending. I don't need to even worry about how much I'm saving. I don't need to worry about how much I'm going to need in the future because I'll just buy this asset Bitcoin, and then the future, It'll go to the moon and then it'll solve all these other financial planning problems that I otherwise would have had. And it's just simply not the case on a case by case basis. Every time a client comes in, the first thing we look at is net worth and spending. And the reason why is because net worth and spending dictate literally every single aspect of personal finance down to how much Bitcoin you can even own. Because if you don't have something so like Menial is just a emergency savings account, you can't even buy Bitcoin, right? Because you will be selling that Bitcoin should an emergency come up. And so, like, not to get too deep into the weeds with specific, you know, examples on people, but if you're looking at spending, right, if you're looking at how much you're spending overtime, how much money you have coming in, how much money you have going out, how much you're actually saving. And you're sort of projecting out into the future your ability to either save or when you're actually going to need to spend this Bitcoin, right. Then from there, you can make asset allocation decisions based on how much I want to have in savings versus how much I want to have an investment. And so because there are so many different factors that go into all of those ideas, right, it's really, really hard to give a, you know, a specific number to people about what how much should they allocate and how much do they need for the future, right? Because all of those things are going to depend on how much they spend and how much they save. And so for a person who, you know, let's say they only spend 50 grand a year, they're going to need a lot less than somebody who's spending $500,000 a year, right? Those numbers are they're they're nowhere close to each other. And just projecting that out over many, many years, right? You're going to need just exponentially more money to keep up with $500,000 worth of spending versus $50,000 worth of spending. Yeah, that's helpful. That's helpful framing. So my one of my personal, so I don't know, realizations over time, I guess I'll say is I've just become more comfortable with Bitcoin and a sizable portion of net worth and Bitcoin with time. And what I haven't figured out is whether that's a change in my investment thesis, quote UN quote, or it's more about comfort and having lived through a couple of market cycles. Do you have any thoughts about that, Pierre? Do you think that over the years your investment thesis has changed, or your thoughts about why to hold Bitcoin have changed quite a bit? Or has it been more of sort of an evolution of your comfort level increasing? Or were you always very comfortable? Yeah, well, I mean, I think at first it was like, OK, I'm, I'm in my early 20s, let's call it. And I also, you know, it's like ideological right of oh, I'm buying Bitcoin to protest against the Fiat system and so it it doesn't really matter, you know, any kind of question about allocation or returns or things like that. Or responsibility? Yeah, exactly. And now though, I I think that now it's like, OK, what if if I was not, if I was not holding Bitcoin or if I was not allocating capital to to Bitcoin, what are the alternatives? What would I allocate it to otherwise and how do I evaluate those on their merits? And that's where, you know, I go back to Mr. Sailors. There's no second best because even on the consumption side, you know, it's like, do you want to buy a, a sports car that then you have to maintain And it does it really incrementally increase, you know, your enjoyment of life or your utility. And for some people that might be the case. For me, like, I'm not a car guy. So I think just in general, like, I I don't really have particularly expensive tastes when it comes to consumption. So it's pretty easy for me to be like, OK, well I I I don't care about what the Bitcoin price is because I'm not looking to cash out or anything like that. Yeah, that makes complete sense. You know, when you're in your early 20s, the good news is you don't have any capital to allocate any anyway, right? So who knows, maybe maybe you secretly had made a fortune in your teens. But absent that kind of scenario, unlikely that the stakes are are are very high. Yeah, no. And quite the opposite. I mean, going back to to what Morgan was saying that, you know, I, I, I paid off my student loan debt after graduating before, you know, acquiring more Bitcoin. And you know, hindsight 2020, if you did the math, it's like, oh, wow, that's that was not a good move. But I think that's only with hindsight. And if we think about financial planning as like a set of best practices, there is a best practice of, hey, pay off your debt, put up, you know, an emergency savings account of, you know, six months of expenses and then you're ready to start allocating to Bitcoin. And I think for bitcoiners, it's like the the immediate reaction to that is, well, first of all, that's an infringement on our freedom. And you know, Bitcoin doesn't care about my debt and I can do whatever I want. And that's true. Bitcoin gives you that freedom. Bitcoin gives you the freedom to go 100X leverage and to get wrecked, right? You can absolutely destroy all of your capital by using Bitcoin, sending it to a burner address if you want to, right. And so when I I think that the kind of the narrative around Bitcoin of, hey, it's freedom, Money has to be balanced with the fact that with tremendous freedom comes tremendous responsibility. And if you misuse Bitcoin, you might be thinking that, hey, you're sticking it to the Maxis, right? Oh, I'm doing this because, you know, other people don't like me doing this or whatever, But the reality is you're only hurting yourself, right? You're just destroying your own capital. And that that I think is is something to reflect upon. To circle back also to what you said about best practices, it does. Best practices don't necessarily mean best outcomes. And I think that people misconstrue that because they think, OK, well, in the best outcome. Right. I don't have the emergency fund, and I don't pay off my student loan debt that has high yield. And I don't pay off some consumer debt because I'm, you know, Bitcoin is going to go to the moon and I'm going to get and, you know, it's going to get inflated away, and it's not going to matter. Right. And that might be true, let's say, in 10% of the circumstances, that happens in Bitcoin. Right. But then there's maybe the other 90% of circumstances where it doesn't actually go exactly according to your plan. In which case there's a reason why there are best practices. It's like it doesn't necessarily mean that always the best practices are going to cause the best outcomes, But most of the time, they will. And that's why we have these procedures in place to help protect people so that they're not thinking about themselves as retired before they're actually retired. Right. If you're already spending all your capital before you've actually accumulated enough capital, right, you're never going to retire. So there are a lot of little steps that you have to take, little financial planning best practices that are there to save you from yourself. Yeah, that's that's very well said. And I want to loop in a question from our or really a comment from our mutual friend Jim Crater, which his, his comment is, don't underestimate how long gradually can take, but also don't underestimate how fast suddenly can happen. And of course he's talking about Bitcoin, let's say reaching its potential or perhaps the value reaching a a higher order of magnitude, A significantly higher order of magnitude than we're seeing currently. So what are, what are your latest thoughts, both of you, on timing? Do you think about or do you plan based on an expectation of where Bitcoin's price could go, let's say, over the coming few years? Or do you set a very wide range and just kind of sit back and wait for it to happen? I think general rule of thumb is after anyone buys Bitcoin, the price immediately goes down. Yeah, and. That's happened to me. That's my experience. Yeah, yeah. I don't know. I don't know who's on the other side of these trades. You know where they're like they're. Always on the losing side. But I'm definitely always on the losing side. So I think that this is where Matt Odell's, you know, stay humble, Stack Sats is really critical because the humility is knowing that, hey, look, Bitcoin is volatile. That's like the number one people say thing about Bitcoin is, is it volatile? And yes, that is true. Bitcoin is volatile. And therefore when you think about being in the market or you know, staying invested and and kind of that mentality, it's critical. With Bitcoin in in particular, there's analysis that have been done that essentially say, OK, let's assume you missed the 10 best days of Bitcoin over the past year and then they show that you have zero returns, right. It's it's kind of the returns are concentrated in particular time windows and the humility is recognizing that I'm not going to catch that most. I'd say 99.9% of people should not be traders or are are entirely unqualified to be traders And then the remaining ones should not be traitors for for other reasons other than their, you know, yeah they can be skilled, but it's probably still not the best use of their time And so that that's where you have to approach it from the financial planning perspective which which Morgan will get. To add to that, I would say to that people have this price, they have price expectations around the halving and so right. The problem with having price expectations around the halving is that if you're it's like counting your chickens before they hatch. If you're already deciding that, Okay, my stack is gonna be worth between 10 and 100 X what it is today, and therefore on May of May 25th of 2025, I'm going to be able to do whatever I want, you know, flip off my boss, go take my kids on a trip around the world, right? If you're planning all of these things in advance of actually getting that 100 to 150 X return, that may or may not happen, right? The problem is that, like, people start to live in the reality in which they're they're thinking in, right? And you have to live in their current reality. And so I tell bitcoiners this all the time, because bitcoiners always say, OK, well in the future there's not going to be an IRS and therefore estate planning doesn't matter. Iras don't matter, right? You name it, it doesn't matter. I don't need to do any of that stuff because by the time people actually inherit my assets, the government will not, will cease to exist and I will be living on my little sea setting thing or whatever they're going to be doing, right? Except that that's not the current reality, right? The current reality is that they live in Maryland and you know, they might pass away tomorrow and they haven't done any sort of planning whatsoever. They didn't take advantage of the four O 1K match that they have where they could have gone 100% return. They didn't, you know, take deductions along the way. They didn't do any of the things that they could have been doing where they actually could have been stacking more Bitcoin. And you know, whoever would have see if their Bitcoin actually doesn't even know where it is because it's in some treasure map that got lost, right? There's all these things where if we are planning for current reality, then we are going to make good decisions. And if we're planning for some future reality, that may or may not pan out and we're going to make bad decisions. And I would say that's true about whether it's in Bitcoin or whether it's in any sort of traditional finance, right. People do this all the time with estate funding. They think that they can gain the system or somehow, you know, pass money to their to their errors without worrying about estate planning, taxes and then the rules change, right. And then they get locked into these trusts and other things that they should have otherwise not have done because of the estate planning rules. And so my number one thing that we tell our clients is we need to plan based on what is happening today and we need to have long time horizons on these things. If we're thinking about using our Bitcoin in the next, you know, 18 months, then bitcoins not the right savings vehicle for you, right? We need to find a different way. Yeah, I'd say you'd have to have a time horizon of at least five years of, OK, I've, I've acquired this capital, whether it's a bonus or an inheritance or just your, you know, biweekly paycheck and then you have to look at, OK, if I put $50.00 into Bitcoin, could I hold that for five years at least? And if the answer is no, then as Morgan said, like that's not going to be the right path forward for you and vice versa, right? If if your circumstances have changed and you are holding a large amount of Bitcoin, that might be time to re evaluate your emergency fund and convert some Bitcoin into a Fiat in order to, you know, make sure that you have what you need. And so in a way, it's not so much that you're buying and selling Bitcoin based off the price chart, you're buying and selling Bitcoin based off of your cash flow and your balance sheet and your income statement. You know, it's very intrinsic to your circumstances rather than extrinsic to what's happening in the market. But there's also that element that you talked about before of the of the certainty that may or may not be there of. And I think that's maybe the trap that we fall into when we project forward past to having and and there's certainty about what will happen in terms of the the block reward but there's not necessarily certainty about what it will mean for the the price of Bitcoin and and those things can can cause us to be overly optimistic or or at least overly certain more certain than than we actually can be about what's possible And I'm certainly guilty of this. You know I I fall into the the the problem of you know they're like when talking about portfolio allocation in BlackRock did their little analysis and came up with the optimal allocation of 87% to Bitcoin which is you know some low level analyst at BlackRock doing that I'm sure. But you know that that's the historical outcome of of what has happened but that's not necessarily what will happen. And and I think that five year time right though funny enough that five year timeline could introduce volatility like depending on if it is a four year cycle and you buy at the top and then you sell a cycle and a year later at the bottom, it could actually come out the the wrong way so. I'd like to go on the record that I'm longer than A5. I just like I think 5 is short. Like I think bitcoin's like 10 plus years, you know, kind of asset, you know where you've been through multiple cycles, not necessarily one. And the other thing I will say on that is that Bitcoin, if it's a large portion of your portfolio is going to be the main, the dominant driver of returns both to the upside and the downside on your portfolio. And so I think that people don't, they look back at the returns, right and they say, OK, if I had bought let's say in 2014 and then I held you know over the last 10 years to today, then I would have been able to stomach it and I wouldn't have rebalanced and I wouldn't have anything, right. Because and it would have been the main driver of my returns. I would have you know had I don't even know X number percent is A6000. I really don't know it off the top of my head. But the problem right is that because that volatility is both to the upside and the downside, if you are not committed to just holding through and not being a long term asset that you're willing to hold for 10 plus years, right then you aren't actually going to experience that being the main driver of returns. And so like I've been looking into this quite a lot now because we're starting to look at what are, what are reasonable safe withdrawal, safe withdrawal rates for people who have concentrated Bitcoin positions. And we're talking about, you know, people are holding 40% or more of their assets in Bitcoin. And because once you're at that 40% number or higher, Bitcoin is the main driver of returns. And therefore you have to be conscious of, OK, how much can I actually port pull out of My Portfolio at any given period of time without risking my whole portfolio like in the future and then I actually have to go back to work or so forth. So those safe withdrawal rates are very different than what people think of typically in the Fiat world and that 4% number is generally what people are looking at. And I unfortunately don't have all the answers for this podcast, but I think it's just a it's an interesting thing that people are going to be working on going forward. That's a super interesting topic that are you finding that it it varies or that it's a more conservative number or higher number just kind of ballpark? Yeah. So what happens is that, so the way that I guess for the listeners, right, there's this study that was done by Bill Bengan whereby you can take basically what he said is over 30 period, 30 year periods of time, you were able to withdraw a safe withdrawal rate of 4% of that portfolio at the end of every single year. You would basically mark to market the value of your portfolio and then throughout the year you would be able to take out that value until the next 1231 valuation date where you would reassess how much you can take out. And So what we're finding is basically that because Bitcoin is so volatile the the withdrawal rates or like even if the withdrawal rate is very similar, right, the the amount that you can take out what like varies wildly. And so for most people, it's going to be like they have very unexpected ways of predicting what their fixed expenses can be unless they're willing to basically have like kind of muted fixed expenses and then have varied, you know, discretionary expenses over time to make up for those years where you have like a huge change in your portfolio, right, and then a huge down draw in your portfolio and that's the driver of returns. And so with without actually being able to give you hard data, because I'm not totally through all the data that's that's what I'm finding so far is that just the withdrawal rates are so wild that it's actually going to be hard for people to plan around those. Thanks for tuning in. If you're interested in exploring any of these topics further, or want to learn more about how we can help you secure a new or existing Bitcoin allocation, get in touch with our team at on rampbitcoin.com. We look forward to supporting you on your Bitcoin journey. Yeah, I think the, the time horizon, you know going longer than five years, talking about maybe 10 years. I think the, to my memory, the classic timeline for holding stocks right, for having an equities portfolio is having something like A at least a decade investment time horizon. Partly perhaps because you get a business cycle right and you get a bear market in equities every decade at least. And so you have to be able to not be drawing on those assets right in the downturn or at the bottom. Good news, I guess is that the cycle so far, good news, bad news is the cycles in Bitcoin have come, have come more frequently. I'd like to turn actually Pierre, to your work in the mining business now. What are the analogies perhaps when it comes to capital allocation and budgeting? I mean, I have to imagine if you are a Bitcoin mining operation, you face a lot of these issues as well. Of course you have the having which complicates your life, but still you got to live through a couple cycles to survive. What are there any parallels to personal behavior and budgeting and balance sheets and and activity? Or is it a different based entirely? Yeah, it's it's a little bit different in the sense that one could think of buying a mining rig as kind of committing yourself to DCA for a particular period of time of like hey, I'm going to DCA for the next four years. And you know, I think that the biggest challenge in the mining industry is the one of the biggest strengths of the Bitcoin system, which is that it's a dog eat dog hyper competitive industry in the sense that around the world everybody is producing the same commodity shot, 256 hashes and they're competing for the same fixed pie of rewards. And so it really is about who can find the best sources of energy and then who can operate these facilities in the best way to, you know accomplish that DCA and and to do it with with margins, right, such that, OK, I could go on an exchange and I could DCA for the next five years, right. Will I be, will I have a higher cost basis of acquiring those coins versus buying a mining rake today and then kind of looking at the cost basis there And then, so I think that there's a lot of different business models that work within the Bitcoin mining industry. But I think that's that's kind of where the parallels end. And I would just highlight, you know, Bitcoin mining is an investment, right, because it generates a cash flow of SAT's and that's how it should be thought about. And yeah, happy to elaborate in any direction there, but there there's it's it's a fascinating world. Yeah. Well, I'd love to learn a little bit more about the mind of a of a capital allocator in a in a Bitcoin operation. You mentioned one of one of the factors you mentioned was operations, basically operational excellence and efficiencies in operations. Does that mean sort of skunk works in, you know, kind of trying different methods for organizing the rigs within the data center, you know, for locating them, for doing immersion cooling versus air cooling? Does it seem to pay dividends in the long run or does it seem to have an investment payoff to try a bunch of different stuff? Or is it better to be a a fast follower? You know, better at copying somebody else's innovation? Or is it a combination? Yeah, that's a great question. So I think that throughout the industry, people are doing experiments, they're trying out different technologies. There's new vendors coming out with different offerings all the time. I do think that it is necessary to engage in that in order to then be able to scale it. I don't think that there's going to be a lot of success from copycat like fast followers because they don't accumulate the right tacit knowledge that comes with actually experimenting with the different technologies and how they come together. And so there's so many different moving parts to a Bitcoin mining facility at scale that if you just try to copycat, you're just going to end up missing one of those pieces and then repeatedly stubbing your toe, right? So I think that anybody who wants to get into the Bitcoin mining industry should probably start with like 1 mining rig and then go to two and then ten and then a hundred and then 1000 and then 10,000 and 100,000, right? If you try to go straight to 100,000, you're definitely going to you know be be banging your head against the wall or or worse getting electrocuted. So the, I think the, the, the operational excellence isn't just limited either to kind of the physical reality of electrical and cooling. It's also related to the financial operations of how are you financing this business in order to withstand Bitcoin's volatility, right. You have to have the right capital structure. I mean, if you go all in on debt at the top of the market, you're going to be upside down, right? And you're going to have to go through a a bankruptcy process that's going to be expensive and a big distraction as well as not just from financial operations on the capital market side, but also on the electrical market. Because if you're mining Bitcoin at scale, then you are a large participant in the electricity market of the local grid or you know you're producing your own electricity and that comes with its own can of worms. And so I think that from the cost of electricity perspective, I I've seen and just speaking for myself, not for for Riot, but I think that most people are right. We agree with me on this is that your cost of electricity is going to have a huge influence on what your margins are going to be as a Bitcoin miner. And so if you try to mine at home with like a residential cost of electricity at best you're going to break even. And that's really you know in the most optimistic rosy scenario is you're going to break even at home. What would be more interesting is if you reuse the heat to heat your pool, for example. Now you might be coming out ahead, but you know that that that just shows that if. You're not because you're coming out ahead, right, But because you have made use of this, right? Well, yeah, and and then. You don't. You don't net better applications because you heated your pool. Sorry, right. No, no, I agree with you. But the other thing? But you do get to enjoy a nicely heated pool. And I don't think you come out ahead from if you're billing your hourly labor, right? If you do that, then you realize that you sank a ton of time building a custom pool heater when you could have just bought a pool heater and you know, not. So it's kind of more of a hobby. I know that some folks might not want to hear that, but at the home scale, yes, if you have solar, if you got you know a situation maybe you've got some something to work with. But at scale, you know, you have to be thinking about how do I participate in demand response, How do I keep an eye on the electricity market to be curtailing actively? How do I negotiate long term power purchase agreements with electrical companies such that, you know, all of the economics work from that perspective? So I think that, yeah, it's a, it's a combination of managing a lot of different pieces and including real estate, right. Where is your facility actually sited in construction? How are you building your facility? Who's pouring the foundation etcetera and and lots and lots of engineering from civil engineering to mechanical to electrical to computer science, right. If you're, you got to have the software that's going to manage the facility and all of that does amount to a pretty significant entrepreneurial undertaking. So I think thank you for that overview, very helpful, Pier. I think what I'm hearing is that there's not gonna be a chapter in your upcoming book, Morgan on swimming, pool, immersion, cooling and tactics for for generating income or or savings. But but maybe you could tell us what is coming or at least one or two Nuggets in your upcoming book. Yeah, definitely. So I wrote a book, like you mentioned, about four years ago. Now it's just kind of crazy. The time flies. But the book is a it's a comprehensive personal financial guide. And what I found was that I was getting a lot of Bitcoin questions right. But my guide doesn't necessarily answer those Bitcoin questions, and if you go out into the market, there really isn't any. There's really a dearth of financial planning content for bitcoiners to access. So what bitcoiners need to do now is take current financial planning principles and apply them to their personal financial situation. And for most, right, That's going to be really difficult. If you don't like, if you're not kind of fluid already in financial planning concepts, taking them and then applying them specifically to your Bitcoin situation for most people is going to be difficult. And so the book is, is basically that I'm writing is to help people take current, you know, tried and true best practices in personal financial planning and apply them to portfolios that are, you know, 4050 sixty percent Bitcoin. Because that's basically what we're seeing now in my practice for the most part. People who are coming in our long time bitcoiners who they've been stacking for a while, they're not sure whether or not they're like how much they've amassed is enough, right? Like that question you were asking me earlier, like how do I assess how much is enough? How much should I be saving? How much should I be putting in Bitcoin versus other assets? How much do I actually need to retire? How do I need to be thinking about these withdrawal rates that we were talking about earlier? So all of these are, I think, key components to making sure that you have a solid financial footing, savings technology that people really have not like broached these subjects before just because for the most part, right, people have been saving in a currency that has not had all the attributes that Bitcoin has. And so this obviously it gives people a lot of freedom and how they save, right, because now they have a new place and a new way of doing it. But it, like Pierre was saying earlier, comes with the responsibility of figuring out how to do it for your situation the best. And so that's my hope with this book, and I am admittedly behind on writing it. I'm not as far as I had hoped, but I am like a good third of the way through at this point. So we're getting there. It's going to come out. My hope is that, you know, sometime this year, but Pierre hates when I promise these kinds of things, 'cause then it locks me into doing the work. It doesn't lock you in. I mean you. There's there's so many pre sale promises, yeah that's true. Been delayed in in this industry that as long as you deliver at some point within the next couple decades, Yeah. In the meantime, no. I am. I always do like, you know, personal research and writing. And so there are other things that will come out that are related that will eventually, you know, be fully fleshed out in book form. I think I'm. Hearing that, we need a. We need a white paper for the for the book, you know in the in the interim period just to just to slake people's appetites here, sometimes the only way to book. Tokens. Yeah. Book tokens. There we go. That's that's the. Way to go. That's the only way to get work. I can only finish writing if I. Have a deadline. So sometimes that painful deadline is what it takes. Yeah, yeah, for sure. The book. Is coming out. On March 1st. So we're really excited to be launching the book. Yeah, that'll that'll. Maybe. You can launch it at. May 2025, at the peak that you already predicted and put on the record there, Morgan. That sounds like a perfect. A perfect plan. Well, you know, you obviously Pierre have have managed to function in your role as assistant with respect to the Bitcoin for Advisors podcast. So, you know, maybe there needs to be an assistant for the for the new book who needs to assist with the writing. We tried that. Yeah, yeah, we did. Actually try it. Pierre was. Supposed to be writing the 1st 3 chapters of the book because I thought that people would get a better perspective on Bitcoin and money in the Austrian perspective of everything. But Pierre has also fallen behind. Yeah, just. Trying to heat the pool? Yeah, yeah, this is the layer I had one. Thing I will say about the pool heater. Thing. So this is the pool heater, the garage heater, and so forth. The one benefit I've heard from people is that it actually gets your wife on board. If you have a Bitcoin miner that heats the space that otherwise would have been totally cold, is that now your wife is thinking, oh, this Bitcoin thing is actually pretty useful because now my pool, which normally would have been 60°, is the nice 92. Well. That's pretty good. You know, I think pitching. The benefits of Bitcoin to the spouse has been something that all of us have encountered here in this conversation, some more than others. But yeah, there's no doubt that the adjacent benefits have to be have to be understood. And you know, I, I, I sometimes wonder one of the questions that's top of mind for me is what percent of people will ever understand Bitcoin. And you know, I see this with family members, I see this with friends. I'm just curious, what do you, what do you both think about that? And obviously this, that's not to say that any of us fully understands every aspect because it's a complicated phenomenon. But are we going to, are we going to get there? What percent of minds are going to actually wrap themselves around this thing? Well, what percentage? Of people understand cars. Yeah, good question. Well, I would also. Say to add to that. So if you had asked people in the age bracket of, let's call it 55 to 65 S 10 years ago, if you'd asked them if they would be able to very easily use their phone to go on the Internet, right? To buy, I don't know, socks for their, their nieces or grand nieces or whatever, right? They probably would have looked at you that like you were insane because they didn't know that their phone even had that capability. Leather, they could even do something like that, right? Whereas Fast forward 10 years today, right, We have people who are in their, who are 65 to 75 who are very easily using their cell phone to to buy things online or to interact with their friends on Facebook or whatever it is that they're using their phone for, right? They may not be able to use every single app the way a 25 year old can, but they have figured out sort of the basic things that they need to operate on their phone to make their day-to-day lives work. And so I think we often focus on that older group of the like, OK, they're not going to be able to do it and so therefore this whole experiment is going to fail. They're not able to do it today because it's not commonplace to use your phone to do a Bitcoin transaction, but it is becoming commonplace to tap to pay with your phone, right, in certain places. And so maybe a 65 year old person 10 years ago couldn't do that because that wasn't something that was even available to them. But today, right? They're starting to learn or somebody in their family has taught them how to do that. And so I would say that applies across all demographics, right? The more that this technology is around and the more that people are exposed to it, need to use it in some capacity and have easy ways of learning how to do that, the more likely that people will actually be able to do that. And then there's, there's always going to be a subset of the population that, you know, just still wants to use their horse and not their car, still wants to, you know, use their typewriter and not their computer printer, right. So I mean, we can't say that like there's not going to be vast adoption just because, you know, 5% of people are still using a typewriter, right. I would say that most people are using a computer at this point. It's probably not even close to 5%. I'm just throwing numbers out there, so don't don't get mad at me on Twitter, but I'm just saying, like from from that perspective, right, the longer that a technology is around, the more likely people are going to try to use it and the more likely people in the future will actually be able to use it. Yeah, that's it. And getting to. Your comment about who understands their car Here I understand two things about my car. One is that my primary vehicle is is literally falling apart and I have to replace it. And yeah, I don't know how to, how to, how to fix it myself. There's no chance I would ever understand what's going on under the hood. And the other thing I understand about it is to your much earlier comment, which is I have no desire to spend any more on its replacement than I have to because it means, yeah, it would mean at the margin less savings or less cash into investable assets, including in it, especially the investable asset that I see has the highest risk return potential. Yeah. Shout out to the. Check Engine Light gang on Twitter that is is very proud of their check engine lights. Help. You know what? Gas to put in your car. Andy Yeah, that I've got figured out. That. Well, you know, it's funny. I did put out a tweet of like, it was a picture of a gas station pump. And I was like, there's no way this is going to go mainstream. Nobody understands what any of this means. 9385, Like, what do you what What are you talking about? And yeah, here we are. Yeah, right. It's amazing. I always. I always think. About the Henry Ford quote of if I'd asked people what they wanted they would have said faster horses. You know if you if you ask people what you what they want and money they'd say more dollars we don't need more dollars we need better money. Money that grows in purchasing power. Money that is savings technology. That's what we need. And and and I think Morgan to your point like people will figure this out whether it takes a few generations or you know a long enough timeline of human behavior playing out to prove that the winning strategy was to save in Bitcoin and and use that as your savings vehicle. Eventually that osmotically trickles, you know, through the population and becomes accepted wisdom in the same way that currently the 6040 portfolio is the accepted wisdom because of 40 years of declining interest rates. Bearing that out as the winning strategy, I would also say the more invasive. The banking system becomes, and they were becoming even more invasive than ever before. Let him know. Let him know what happened. So I was trying to send. A Zelle transaction for our child's school and it got blocked. And then I tried to send it again because I just thought that the system was being stupid. And then not only did it get blocked, but they actually locked me out of my Chase account. And so I had to call Chase basically to get my account unlocked and also to send this Zelle payment for my kids school. And they proceeded to ask me so six questions right off the bat, which I felt like we're very invasive. And I had answered enough about the fact that this was my for my son's school. And then the woman said no, I'm not done. I have more questions to answer you, for you to answer. And I was like, am I having a colonoscopy right now? Like, what is happening? Like, it's just a small transaction going to my son's school. Like, I'm telling you that it can go there. You're speaking to me, the client on the phone affirming that, yes, in fact, I want to send this like, you have released your responsibility as far as this transaction is concerned. But no, they want to protect people from fraud, or at least that's what they're saying, right? We want to protect you from fraud. We want to get as much information about this as possible. And our point was basically that if I said multiple times that I want to send money to a Nigerian Prince, and they tried to dissuade me of it, but I kept insisting that I send money to a Nigerian Prince, then that Zelle transaction should in fact go through. It's my fault that I sent money to a Nigerian Prince. And so I just think that the more that this kind of thing is happening and the longer that something like Bitcoin is around, the less likely people are going to want to use dollars because they don't want people in their business all the time, right? It's a it's kind of crazy that they have so much data about what people are doing, right? You can basically just pull, I mean we do this for clients all the time, right? We pull all their transaction data and we put together an income statement for them. And we know a lot about a client because we go through all their transactions, right, and put together that income statement for them. And that's just like because I'm doing that as a financial planner and I'm trying to help this person, not because I'm trying to, you know, screen as much, Yeah. Police as much information from this person as possible so that I can then cut off their transactions to certain places and force them to send transactions to other places, right. And so forth. And so I think that the more that the banking system becomes invasive and the more people want to get involved, the more something like a CBDC happens, right? The more the government kind of gets their hands on our big banking gets their their fingers involved in these things, the more likely people are going to not only opt out, but they're going to figure out how to use the new technology very quickly. It's also it's kind. Of funny because sometimes they they put on restrictions with regards to buying Bitcoin, right. So they don't want you transferring dollars to Bitcoin exchange. And I I feel like that is the Streisand effect. It's basically, you know, you're highlighting what the value proposition is here, which is that they control your money and you don't control your own money. And so the the more Bitcoin succeeds and the more they freak out over it and try to stop people from buying it, the more they're advertising what the use case is, what problem Bitcoin is solving. This happened to me in. In 2018 I received a wire from Kraken and Wells Fargo terminated my long relationship with them because of this wire from a crypto exchange. Not only that, but they also they they said that it wouldn't impact my safe deposit box with them, but a month later I found out that they had drilled my safe deposit box as a result of that. Wow. That was a very scary. Very scary day. But yeah, that's that's part of why you set up, Set up. Your security and your. Storage in a, in a in a in a safe, redundant way. You know, it is amazing. How much custom and how much business the banking system has maintained despite behaving so badly over such a long period of time? And I suppose it's because they have been the monopolist, the incumbents and people just haven't really had a credible alternative. And yeah, many of us are pretty interested and excited that Bitcoin can play that role. I don't know if it'll be commonly used for that role in the United States anytime soon. Of course, we know that it's happening globally in countries with much weaker currencies that that debase much more rapidly. But yeah, it seems like the behavior of the banks, they just keep doing it to themselves, right? They just keep shooting themselves in the in the foot, both with respect to customer service as well as their broader activities, whether it be facilitating money laundering or or crime or or what have you. I still have to answer the, you know, the question of what wait doesn't. Isn't Bitcoin for for criminals? No. Here here's the chain analysis report. No, we don't like chain analysis, but yes, we like that. They have nice data for us to send our clients to dissuade us or dissuade them of this of this old trope that Bitcoin is for criminals. When when really more of the criminal activity goes through the existing Fiat system. Yeah, and on. That it's it's. Fascinating to me to to look at the government auctioning off Bitcoin, right, because it raises so many questions. I mean one of first of all, somebody is buying that Bitcoin at the auction. Are they a criminal? Should you know, should the government arrest anybody who bids on the auction? Because that's kind of seems to be the the, the, the thinking there. And then second, if Bitcoin itself is inherently criminal, then the government should be destroying the Bitcoin, right? Just like they would with, you know, if you find crack cocaine in the White House, you know, just laying in a bag there, then you you would destroy that. You wouldn't. Purely hypothetical, you know. Hypothetical. Scenario Purely hypothetical They. Do auction it, but they don't. Tell people yeah, Hunter Biden won the. Auction everyone. You know you got to make money, you. Got to make money somehow, right? You can't. You can't make all your money serving on the boards of foreign companies. Here we we have a deficit in this. Country. We got to, we got to auction these things off, yeah. Yeah, so. And and and then the other thing too is that, you know, if if they're like, well, Bitcoin doesn't have any like utility. I mean the government is using Bitcoin, right, because they are currently holding Bitcoin and it's increasing in value. So they're they're doing well for themselves because they haven't auctioned it off yet. But then the the hilarious part to me is that they're they're selling Bitcoin to acquire an asset that they can create for free. That that part is mind boggling. But obviously it's just like it, I call it a spite auction, right? They they they want to sell Bitcoin to spite bitcoiners, which it's not going to have positive results in the long run, but probably feels good in the short run for them, probably does and for the. For the moment, it seems like they can. They can afford it. Somebody's buying all this, all this Treasury debt, all these T-bills and these notes and these bonds. Who knows, this year long dated bonds might even be a somewhat scarce asset. If they start printing or keep printing more of those the shorter term bills instead of turning out the government debt they're just rolling you know borrowing on a on a 13 year sorry a 13 week maturity basis. It doesn't sound like those guys running the the Treasury have have thought about the safe move of turning out their debt structure like a responsible individual. Well and and then they they. Go on about how payday lenders are predatory. It's like, well, I mean you know what's going on in the treasury market, eventually you'll get to a point where it's a two week, you know, or one day everything's one day, day-to-day we're going to roll our debt. That's. It that's it, that might. Be the direction we're going Well this has been a really fun conversation. We covered a lot of ground. I want to make sure though, that that you each get to leave us with any parting thoughts or anywhere you'd like to send people online to learn more about what you're up to me. OK, so you can find me. On Twitter, I'm at Morgan with an E Rochard. My financial planning practice is originwa.com. We deal predominantly with people in the US We've been getting a lot of outreach from people abroad. And unfortunately, as much as I would love to help people abroad, I simply don't know enough about tax and estate situations abroad to truly be able to help these people. And so people have said, oh, you don't want to deal with me. And it's no, we. We do want to deal with you. We just can't provide like the full plethora of the services that I would normally provide in my financial planning practice. So if you are somebody international, feel free to reach out, but know that we're going to try to help you find somebody internationally instead of working with us domestically. I also have a consulting practice called money owners. People can find me there if they've got someone off Bitcoin questions. Nothing like investment advice or investment related there, but I do get a lot of questions about estate planning and custody and sort of those sorts of things. And so if you've got some questions about that, feel free to find me there. And you mentioned we have a podcast that is long overdue for a current episode, but we did this instead so everybody can listen to this episode or and then. Eventually we're doing. To fill that role, yeah. We're happy to fill that, that role. What about, what about you, Pierre? What else you got going on? You want to tell people about? Yeah. So my my DMS are open at Bitcoin Pierre on Twitter, and yeah, subscribe to our podcast. I've got a couple of other podcasts. Podcasts are abundant, you know, but I think it's great. Not scarce. They're not scarce. Yeah, except for podcasts with Pierre. Rashard are are more scarce than most and and more valuable in my humble opinion. So people should definitely and scarce under the noted label. I would say too, yeah. Yeah, I got to talk with Michael. We're. In a bull market now we need to be putting out content you get to work as. Yeah, I've been. Seeing him. Revive some of his old video clips, which are very fun to always watch on a Green Day? Yep, absolutely. Thanks for having us on. Yeah. Thanks for having us. Yeah, it's. Been a real pleasure. Real honor. Thank you. Both Pierre and Morgan. Tremendous conversation and this has been scarce assets.
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