Transcript+
Welcome back to another episode of Wake Up Call. Before we get started, please like, share and subscribe to unramped media channels to receive the best Bitcoin education and content in the industry. And also be sure to check out our latest research report called Bitcoin The Emergent Asset Class has Arrived, a three-part series aimed at introducing important Bitcoin centric concepts to the institutional allocator world. Part 1 available now and LinkedIn, the show notes explores Bitcoin volatility and why it is a uniquely desirable characteristic of the asset that can boost returns and dampen overall volatility in traditional portfolios. Wake Up Call aims to educate financial professionals on the merits of the Bitcoin investment thesis. How this asset class represents both a threat to legacy financial services businesses and an opportunity to differentiate oneselves to retain and attract new clients. Hosted by Mark Connors on Ramps, Head of Global Macro Strategy and Rich Kerr on Ramps President of Managed Wealth, this weekly show seeks to provide financial professionals the wake up call they need, prompt them to have an open mind with respect to Bitcoin, rethink their prior assumptions, become more educated on the topic, and learn from others who are already farther down this path. Wake Up Call is live streamed on LinkedIn every Monday morning and the recordings can be found across on RAMP media channels. Now time for the show. Well, good morning everybody. Happy Monday. Thank you for joining us on wake up call. This should be a real special show. Today we are delighted to have Jennifer Murphy, who many know is a 30 year Trad 5 vet in the asset management space and Jennifer, your experiences at Legg Mason and Western Asset Management and now leading Runa Digital Assets. It's just awesome. We're delighted to have you today. And before maybe we kick off, we'll kick it over to my Co host, Mark Connors. Let's talk a little bit about what's going on in the world. It's got your attention. All right. Well, thanks for that, Rich and Jennifer. They were really excited about ripping it up with you today on probably the we talked about being bilingual about the person who brings that history of traditional finance and then why and how you ended up focused on digital. And some of the news points suggest that we're going to be in the right side of history here because some of the players are getting loud in Tratify Microsoft, which we will talk about later because that's one of the pieces in some of your foundational research about the the arc of revolutions in technology. They have driven value. Microsoft stated that our files that they plan on voting on whether or not to add Bitcoin to their balance sheet. You know, people say it wasn't on their bingo card. Certainly it's not a slam dunk. The board is against it. Shocker, right? They want to add value. They don't want it to come from a decentralized commodity that they had nothing to do with. So you know, we understand incentive structures drive a lot of value or a lot of attention and innovation and the shareholders apparently want it. So we'll see. The reason that's relevant is because one other company that added as we all know is MicroStrategy and MicroStrategy was lagging Microsoft for decades until he added Bitcoin. And now Microstrategy's 20 year compounded return is 21% and and Microsoft's is only 17. Now 17's a good number, but just shows you the power of this of adding Bitcoin to the balance sheet. So front and center that ranks up high. And the other one which will pull on from the investment side was has to be Paul Tudor Jones when he said all roads lead to inflation on long, you know, Bitcoin on long commodities. I don't own bonds. And if nothing, he can, he can really pick out those regime shifts. I mean, 87 he was there when, you know, Fort Black Monday kind of made some money on that trade and then the rest is history. So my ears perk up when when he says all roads lead to inflation. And then just the divergent in markets is pretty legion right now. You have a lot of commodities dropping. You have oil down, you have, you know, Europe going to single digit slash fractional growth, less than 1% GDP expected yet inflation's almost 3% there. So tough spot there. You have equities hitting all time highs. You have bonds in the basement down month to date. Some of them are down over the past one year and five years and 10 years as far as longer dated bonds. So kind of a a mess all around. But the one thing that's there is low growth and inflation means that central banks may have lost the plot or the ability to manage the economy effectively like they used to. So the the last thing I'll say before I hand it back to you all and and also poke at some of the things I spoke about in case you want to add anything, is in credit. You're seeing high yield and investment grade have almost no distinction. Historically, it's the lowest spread between high yield and investment grade that we've seen in the last five years and almost the last 30 years. It's the tightest spread since 2007, which if memory serves, was right before a little bubble pop. So no one is thinking there's a problem in credit yet. On the Treasury side, volatility for Treasuries is in the top quartile over the past 10 years. It's like a VIX at 40. It's just it doesn't make sense in the brain. Except the government has assumed so much risk and the buyers of Treasuries have walked away. So it's not unusual to expect that there's going to be kind of pushback. The reserve tank is blowing out. No one's going to be buying treasuries or more people are walking away. They're buying gold all time high. So, so that's the market we have right now. We have low growth. We have regional distinctions, we have market asset class distinctions and we have Bitcoin just racking up good news and returns along the way. So I know it sounds a little too bullish to believe, but I'm data-driven as you are, Jennifer, and we're going to go through some of the work you've done. Look forward to it. And why don't you Rich, kick off or give me Jennifer? How does that want to proceed? Yeah, maybe a maybe a you just kind of jogged my memory. I believe it's 95 years ago today that the mark, the stock market dropped 12% on a Monday and then came back the following Tuesday, Black Tuesday, which dropped an additional 15%. If I, if I remember the, the math and, and let us into the Great Depression. And so I don't want to be doubt, you know, bearish or anything of that nature. I don't want to forecast. That's not what I do, but it is an interesting period of time. And and Mark, you were just going over some very interesting, you know, insights into, you know, bonds and, and how they played out in 1987 or in 2000 and seven, 2008. And so interesting period of time. And, you know, we'll see where everything kind of goes from here. But you know, I, I had mentioned, you know, kind of just briefly, you know, how excited we were about having Jennifer join the show today. I mean, CEO of Legg Mason Capital Markets. And you know, that would what a tremendous distinction that is. But you know, what I didn't cut, you know, provide color on is, you know, she also has quite an academic background, a CFA, an MBA from Wharton. She is just, you know, a wealth of knowledge, but also a leader in the space that helps kind of shape where the industry is going. And five years ago, I believe you kind of made the big journey into the digital asset space. So might be a good time just to share a little bit about your career arc because it really is quite exceptional. And you've come across some amazing, amazing people in your own right in your journey. And so I'd love to kind of hear and share with the audience a little bit about who you are and what you're up to these days. Jennifer. Great, Rich. Mark, thanks for having me. In 1997, I was working with Bill Miller, who was also my first boss. I had a couple of other jobs in between coming back to work with Bill. But in 1997, I was working with Bill Miller, who I, I know you both know is a very, you know, one of the world's best equity managers at that time. He was, I think six or seven years into a streak of beating the market, which he would do for 15 years straight, which no one's ever come close to. I think the the closest streak before that was eight years. But interestingly, he was a value manager. That's how most people would describe him in the in the time, as you both know, in the late 90s was the Internet. Would have what eventually would be called the Internet bubble, You know, and I think one of the most interesting things about Bill is he as a value manager kind of rejected this Warren Buffett idea of I don't understand technology. So I'm just not going to invest in that. And he really waded in. He met with Jeff Bezos when Amazon was going public in 97. He sat down with him and really wanted to understand what Jeff had in mind. And that was back when you could still do that, you know, as a as a portfolio manager. And what Jeff described to him was not what he heard from other people. You know, he described a global e-commerce platform and sort of a focus on capital allocation. If you look at the a lot of people like to refer back to the Jeff Bezos 1997 IPO letter. And if you read his letter, it's sort of a Tour de force and how to think about capital allocation. I think people recognize that now, but at the time you have to get to Page 3 before he even says the word book. You know, whereas back then when during the IPO, most people would describe Amazon then as bookseller and they would sort of analysts would view their potential as well. How much of the book market can they take from Barnes and Noble or, you know, other booksellers? So that that what what Bill really focused on is the description. Is that the right description of Amazon as a bookseller? And his conclusion was no, Amazon's a global, global Internet, you know, sales platform and maybe more than that. And here's their CEO is incredibly focused on capital allocation. And so I think those two insights from Bill of the description matters. And he's, he's a philosophy PhD student, so he he would put up slides in front of our clients quoting Wittgenstein and other philosophers about how important description is. And you know, it's very and it worked. You know, Bill could make that work. So, so, but I really took from that, that how you describe something matters a lot. And so sort of Fast forward to Mark and Rich things I know you're well aware of, but when Jamie Dimon calls Bitcoin a pet rock, you know, is that is that is that a good description of Bitcoin? You know, absolutely not like so, so you have sort of that you and you have people like Larry Fink and Jenny Johnson at Franklin Templeton and Abigail Johnson at Fidelity. You know, their description of Bitcoin is a global financial asset. You know, their their vision is it's total addressable market is the global financial market. Those two differences in descriptions matter a whole lot, right? That's a dramatically different outcome. So I think one of my great gifts of my career is and what really set me on this arc was really Bill's, you know, insistence on always sort of going to the root of the matter, going to the data, as you said, Mark, but also to important concepts from history and really applying them without being relegated to well, value investors can't buy technology. Wow. Yeah. This is something, Jennifer, that Rich always brings up or often brings up is the anchoring. You know, we're smart people. The advisors are disruptors. But in that condiment Diversky book about making it fast and slow. And what reminded me is when you said Bill Miller was a student of philosophy. I mean, we love data, but variations on a theme don't get you to the next one. And you have to step back sometimes and bring on people like you who've done work and say, wait a minute, you know, that's this has run its course or we have to rethink and reimagine. And the description that you bring to it that you mentioned Bill did that, that got you thinking differently. That's what we're trying to do here. I mean it that we didn't really know we're trying to do that until we said, wait a minute, It's exactly what we're trying to do. No doubt. Yeah. I mean, he, he brought a similar sort of insight I think to Google then its IPO. It was. You know, you probably remember this, but Google was. Went public in 2004. This is after the Internet bubble burst. You know the. Exuberance was gone. There was a lot of skepticism. And you remember Sergey Brin and they they didn't want to do evil, so they wouldn't use an investment banker. It was a Dutch auction to try to level the playing field. For the little guy. So it had all these like weird aspects to it from the point of view of a trad 5 firm. So you know, the initial price talk was $1.35 a share It, it ended up coming at $85 a share, which was a $23 billion valuation. And because of all these obstacles, as it turned out, only two institutions bought Google on the IPO. That was my boss, Bill and Fidelity, the Fidelity portfolio manager and the rest was, you know, retail investors. So that seems incredible now given that, you know, Google is now 20 years later, A2 trillion, 2 plus trillion dollar company and one of the great most valuable companies in the world. But at the time it was described as a search company that had a lot of competition. It wasn't clear how they were going to monetize it, that, you know, there, you know, their user base. And I think that whole idea of network effects, Bill, Bill was already talking about those things, about the power of networks and how networks have such important attributes. And there was a lot of work being done by people like Duncan Watts who wrote the book 6° That whole idea of 6° of separation, you know, that comes from that. So the, I think that whole idea of the, of the power of networks is very non intuitive. So, and in essence, the idea is that the value of networks are grow faster than the than the network grows itself. Its value comes from the the growth and participants on the network. So I think Bill was sort of focused on that early and and persisted with it, whereas I think most people are still 20 years later today. I think if you ask most people to describe network effects other than you 2 and maybe some of our our peers, you know, they would have trouble describing it. Still not a familiar concept. So actually, this is fascinating. So how? I mean, those are really powerful early lessons in your career, right? And and I'm certain that those have stuck, you know, with you, but maybe share with our audience, you know, how that's, you know, kind of stepped you into into the digital asset space. And then maybe what you're seeing with Bitcoin in particular, because I I think largely admit must most of our audiences is pretty focused in that space. But I would love to hear some of your thoughts and how that how that those lessons in your career have stayed with you as as we're watching this massive transformation happened right in front of us. Well, I spent a lot of time, you know, working with Bill directly and then then when he retired or went off to do his own thing, I was, I sort of continued on. So I worked for a long time in equity asset management and then in fixed income asset management in many roles, some some financial, some leadership roles. So I have many different seats and but all the while sort of following this sort of Bill approach of heavy reading, you know, heavy thinking, listening to podcasts, you know, people like you talking about things broadly. So when I was at Western asset in, I was this chief operating officer there, one of our, I was reading about blockchain and thinking, I don't, this sounds important, but I, I don't know. And I asked our technology team about it and they were very skeptical, which I find is common when someone is really knowledgeable about something, you can really see the flaws, right? So the technology team was very cognizant of a lot of this stuff has been around for years. These are just databases. They're ledger's. It's not revolutionary, you know, so they had a lot of skepticism and correctly, they believed it would take a long time. That was true. But what was interesting to me was our operational team brought it to me. So Penny Morgan who at the time was in a operation leadership, the role in operations with me, she came to me and said we should be doing more with this. We could collapse our infrastructure with this technology. So we started working with the support of our CEO Jim Hershman, we started working on applications that were developed. They were sort of written for us by IBM and using their proprietary blockchain software. And we actually developed and implemented those applications and demonstrated that they could work. So proof of concept and Western we with JP Morgan, even though Jamie Dimon says bad things, he doesn't they they do a lot of positive things. We bought the first bond that was issued on a blockchain infrastructure from the National Bank of Canada through JP Morgan. Western was the buyer of that. And it was so interesting to me because we had been talking, you know, the business and operations team to the investment team about why we thought this was important. And they were like, you know, OK, maybe. But when what was interesting was when they actually, they did the trade, you know, on the, on the blockchain Pat for so this was a new issuance. They did the trade and it everything settled and updated. Everything happened instantaneously. And that was the first time they walked out of that room. And they said to us this, this would change the whole way we manage our accounts. I was like, yes, exactly. That's great. And and this is, this is 2018 if I'm not mistaken, right? That's so you're talking. Was that a good thing? Did they did they take that as a good thing or a scary thing? Definitely a good thing. They definitely saw it potential of it and but it was interesting that we we could tell them about it and and that wasn't very effective and when as soon as they did it, they used it, then they they were telling us, you know, what would happen if this infrastructure, you know, came to pass. So it was that was a powerful lesson for me that really people do really need to experience these things to really, you know, incorporate them. Most people need that. So, so that was when so to sort of bring this to a close, Rich, sorry I'm taking too long, but the, I started thinking, you know, in several years ago, this is going to transform. It's certainly financial services infrastructure. Bitcoin looks like it may be among the most important assets going forward for investors. And what am I doing? I'm I have a front row seat to all this and it's happening right now around me and I have a great my partner, Max Williams is equally committed to these ideas. And we thought we gotta we gotta try. We have to leave these comfortable roles and traditional finance. He was at NASDAQ and we need to dive in here. So that's what we did. You're on mute there, Rich. We're, we're, we're a bunch of 30 year trapfi refugees sitting here on the Internet talking about something that has got us really, really energized about the future. And, and thankfully, you know, in many respects, like I, I, I constantly am grateful that I was able to fight past my own. I don't know what it was. Maybe, you know, my indoctrination into traditional finance. It was such a struggle for me to break that and actually get intellectually curious and, and, and see what, what, you know, kind of live behind Bitcoin in particular for me. And, and, you know, I was one of the naysayers and, and spouting FUD and, and then all of a sudden here I am, you know, completely on the other side of the fence. Because I think once you really start, you know, speaking with people like yourself, Jennifer and, and Mark, and you start doing a little bit of research and you're looking at the world and you're like, Oh my goodness. This is a really, really tricky landscape for an individual investor, let alone a registered investment advisor to be able to think about how do I really do well by my clients. Because this is going to be a transformation in the financial services industry, let alone other industries, by the way. But it will be a significant transformation that requires, you know, some, some rethinking of things that I thought I already knew. And so, you know, here we are today. It's a, it's a pretty interesting world and I am just unbelievably grateful to have found Bitcoin. I'm very optimistic about where the future is going to go. And maybe we'll, I'll, I'll table it. I, I want to talk to you a little bit towards the end about how you see the future. And you've seen a lot of significant changes in your career and and LED a lot of those changes. And so I think it's going to be an exciting show to kind of let it unfold. So sorry for the aside, but I just had to say that. So rich. Oh, sorry, go. Ahead, I was going to lead us into Rich wants to land the plane saying, where are we going, right? It's just like, let's open the presents up now and see. What we got like the kid at Christmas, I'm so excited. I love that, but go ahead, I'm going to I'm going to bring us basically a Jennifer. I look at you like an iceberg, which is one of the highest compliments I can pay to someone. You show this much and then just hang out because you got a lot below the surface that you've done that. We're going to try to, you know, share with people. But before I do that, you were going to say something. I was just going to say, Mark, you mentioned history and I think one of the benefits of the, that we have that everyone can have by reading is history. But I, I have access to some amazing people to teach me. Like, I don't know if you know Chuck Royce, but he's one of The Pioneers of small cap investing, famous long term small cap investor. And he started his firm in the 70s. And when he started, he was, he had to take the train, take Amtrak from New York to DC and go to the Securities and Exchange Commission to copy the pink sheets so that he could price his portfolios. Like that's how little information was available and small cap stocks were considered. See if this sounds familiar, low quality, too speculative, not necessary. Why do you need to invest in small caps when you have these high quality companies available? So institutions had no interest in them. There were no indexes available to you know to benchmark yourself against. There were no allocation buckets from consultants, etcetera, etcetera. So when I was thinking of launching Rena Digital Assets, I went to talk to Chuck about that and it's, it's so hard to experience the, the, the emergence of a new asset class because it only happens every, I don't know, 30 or 40 years or 50, I don't know, but many, you know, more than. You know, maybe a. Generation, so, so I think it, but if you look back through history, it has it does happen periodically and the emergence of a new asset class is generally very important to investors, you know, to to future returns and I think that's what we have in digital assets. Well, you gave me a layup there to go where I wanted, which is some of the work that that you've done, which, you know, it's proof of proof of work. We can talk a lot. And as we said, some people like to just sort of assert and say stuff. And then Shazam, there's nothing behind the curtain when you go open it up. And then, you know, joke's on you, but you've written it, you've published. And what I think what I love about, you know, searching for different people is I never heard of Carlotta Perez before. So I'm going to raise my hand and say didn't, didn't know about her. And what we're hopefully. Yeah. Sharon, here is something that I think you wrote about and I don't know if you want to sort of share with how you found it and how it's relevant to what I think you just spoke about with information. Well, Carlotta Perez, she wrote this book. This book, which is very small, but it's called Technological Revolutions and Financial Capital. It's very small but dense, but it is a book about concepts, as you mentioned before, Mark, and it is, you know, the subtitle is the dynamics of Bubbles and Golden ages. But in it she, it's more, it's a it's a data, it's rooted in data, but it's more she attempts to describe how technology creates revolutionary ages that impact not only investors, but society, you know, all of the way all of us live and the governments that we have and regulations, etcetera. So in this book, she goes back to the industrial revolution and goes from there. And she observes, she tries to sort of lay out a number of different technological ages, each of which is, you know, roughly 50 years in length that not not perfect, but roughly. And she points out that there are some in each of these ages. There's several big technologies often interacting with each other. So not just one, but usually several that end up first disrupting, causing enormous disruption of speculation and corruption. Corruption is. You know a. Common feature of technological ages and but ultimately leading then to regulation and a golden age of enormous value creation. So she lays out these and I think they'll the final one, the information age will be familiar. You know, I think to everyone watching this, but if you notice, 1971 is about 50 years ago. And so I think Carlotta Perez is thinks and we we agreed that we're likely entering a new technological age and so. We think that's important for a number of reasons, but for investors, I think Mark, you know, we, you and I talked a little bit about this, but the. Why? Why do investors care about this? The if you look at all the companies that were public from in the last, in the 90 years from 1926 to 2016, there were 25,000 plus companies that were public. And of those 25,000 companies that were public, they created a total of $35 trillion of value. I mean, these are just big numbers, but five of those companies created 10% of that total, 35 trillion in value, and 90 of them produced more than half of it. So you think about that, 25,000 companies and 90 of them were responsible for more than half of the value creation and all the other ones returned less than T-bills, which is a remarkable stat, right? And this is, you know, these are called sort of fat tails of distribution. I know, I know you're both familiar with them, but what that means is in in distributions that have fat tails, a very few, few things produce the majority of the returns. And that's certainly what happened in, in equities. So you see here, these are the five that produced 10% and they were the top, you know, producing value producing companies of this whole time period. And you'll notice each of them started at the beginning of of one of Carlotta Perez's technological ages and some captured too. IBM was, you know, able to to ride the wave of two of these ages. But it it sort of speaks to the importance of being in early and getting the benefits of that compounding for the entire period of the technological age. So I think you know, if you if if we went went around, decided to my family and asked them, you know, what do you think? This is one of. The most valuable company in the world at the time, now it's NVIDIA, I think, but it was Microsoft. And I think that surprised a lot of people because Microsoft seems to them sort of like. Old tech, maybe you know, but one of the great advantages of Microsoft is it it, it began as Apple did you know it right at the beginning of the of the information age. So I know, I know you know where I'm going with this. But we believe we're in a new technological age. It's likely. AI is certainly a huge disruptor that is part of one of those dominant technologies. We think blockchain is too, and we think Bitcoin. Is Bitcoin is the OG, it is the IT is the asset that is at in at the beginning, it in fact created the asset class and so that's one of the reasons we're so. Bullish on Bitcoin? It it is the, we think one of those dominant assets that will be one of the biggest value creators over this very long, you know, period of this new technological age. 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. Onramp 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 setup. For more information, check us out at onrampbitcoin.com. Yeah. And and what we we're showing here about the fat tail, pardon my times, my watermark over some of the labeling here. Traditionally when people think of distributions, they think of kind of like normal distributions, like gold has a relatively normal distribution, little bit Poly skewed, some good, good numbers, some bad numbers. Around 3% mean you're, you're looking at the last five or seven years of returns distributed in the histogram. But equities believe or not in the aggregate, you know, when you lump in those 25,000 companies or the 500 in this Bloomberg large cap, which is like the S&P, we know that 7 have done very well. But when you put everybody in there it, it kind of pulls the index a little bit to the left more than it does to the right. There's more numbers down the downside and bonds in particular, which we've talked about just there's no way to turn that frown upside down when you're buying bonds these days because there just aren't as many buyers. So back to data. I mean, Carlotta wrote it, you popularized it and Bitcoin is demonstrating what a fat tail looks like. And as you said, it seems like the being in that beginning of the and revolution is a key component. And you know, we started out the conversation what's going on that maybe is why Microsoft is getting in because they're not happy that MicroStrategy added four years before they did and now leapfrog them on wealth creation, on being a more optimally created or vehicle for wealth preservation and creation. Like, and what we love about these calls with rich, it's like we never know where we're going to go. But we just the key is like Bitcoin, like getting the right ingredient and getting you on here. It's just spurring all sorts of ideas for us. Right. Yeah, I agree. I think the, I think Bitcoin, I think MicroStrategy, one of the great benefits of MicroStrategy, even if it's controversial, is I think it's it the numbers are now so compelling that you really even the skeptics have to decide I need to learn about this. That's, that's I think the great benefit of, of what Michael Saylor is doing. So I think, you know, Microsoft, they, they may fight it now, but I think eventually, you know, other people, I'm sure you saw, I know, you know this, but you know, might have metaplanet in Japan is, is pursuing now a micro strategy strategy and appears to also be doing so successfully. So I think that's going to get harder and harder to ignore. And I think eventually I think Microsoft, I hope will start to link back to that. Bitcoin really is part of a new technological age, which what there's no more natural place for Microsoft to go then to, you know, to look to dominate a second age as as IBM did in the past. Yeah, and it's interesting. Right before the call, I, you know, I'm a junkie, right? Like I'm, I'm constantly scouring for interesting videos and, and news items and things on that nature. And right before we, you know, joined together in the green room, I saw a Michael Saylor video where he was basically outlining why Apple ought to solidify their balance sheet. And, and it's a pretty compelling, you know, 62nd clip. And I was just like, man, that guy really, really has done his work. There is no doubt about it. And, and we're already seeing all of these small and, and, and mid sized companies starting to think about solidifying their balance sheets, you know, with, with Bitcoin, which I think is really exciting because that does so much for small businesses not to be, you know, thinking about how to preserve their store, you know, their wealth and retained earnings and things on that nature. But they can actually focus on their business and their clients, while, you know, their assets are, are keeping up with, with the debasement of currency or money, money supply. So that being said, it's a, it's a fascinating period of time to, you know, watch what's happening not just in the corporate space with balance sheets, but also nation states, right? I mean, I saw you had the bricks are are potentially threatening to, you know, purchase Bitcoin in significant ways. That could be a game changer in terms of reserve assets, you know, for currencies and things on that nature. So there's so many fascinating things that are happening in Bitcoin. One of them is ETFs and I know that you've been paying attention to that space and you know maybe share with with our audience because I know that it's something that they're paying a lot of attention to, not just looking at 13 F filings, but just in conversation that I'm having with a lot of the different registered investment advisory firms. And you know, they're all paying attention to the ETFs and they're contemplating ways to enter the asset class on behalf of clients. So I'd, I'd love to hear your thoughts there on that disruption. Back in 2023 in the summer when the the the great SEC lost its battle with Grayscale about the filing of a Bitcoin ETF, when the, when the judicial system, you know, the courts told the SEC that they're continuing to deny an ETF for Bitcoin spot Bitcoin was arbitrary and capricious. We and I think many others, you know, sort of sat up, you know, I liken it to like, you know, like Prairie dogs and. Like. What this is we at the time we wrote, I think this is the most important thing to happen in digital assets since Bitcoin like it was. We thought it was so important because the two reasons we thought was important, one was just the reputational risk of buying Bitcoin at that time, given the SEC especially being so hostile towards it is so high. Where with the with that change with Bitcoin ETFs, we believed and this has happened that companies like Franklin Templeton and Invesco and Fidelity and BlackRock are all, you know, especially Larry Fink's been very, you know, vocal as has Jenny Johnson, Franklin Templeton out there really making the case for the asset class. So I think the reputational risk, they are really bringing down that that significant reputational risk. You know, we thought that that would happen and we also thought the rest of the world now finally could through their brokerage accounts, invest in Bitcoin. And so we'd really move from the early adopters who I think are own Bitcoin right now. You know, the sort of innovators and early adopters on that sort of classic technology adoption curve. And you know, the the big numbers start to come in when you get into the early majority and the late majority. And I don't think we're even, I think we're just sort of getting to the early majority now. But we thought this is going to push us across the chasm to the early maturity. And that's where most technologies die because they never cross that chasm. Anyway. Fast forward a year. The Bitcoin ETF's, I think we got the, the reputational benefit. These are the most successful ETF launches of all time. Mark, you probably know these numbers better than I do or maybe rich you do the, but I think of, you know, ETF's for the year there, you know, the top five ETF launches for the year, like four of the five or Bitcoin ETF's, you know, or something like that. And they're the, you know, they're rivaling in size the largest ETF's in the markets already. They haven't been out for a year. So I think we really did get that reputational benefit of those really big credible firms out there, you know, talking about and educating people about Bitcoin as you are. But I think we didn't get the second. BlackRock did a study of people who bought their Bitcoin ETF and in the study said only 20% of buyers were 13 F filers, those institutions that have to file 13 FS about their, you know, investment activities. So 80% were not, they were, you know, more individuals or smaller, you know, wealth offices. So the, well, only 8080% were were not institutions. And then of that 80 percent, 80% of them were, this was the first time they bought any ishare product according to BlackRock. So these were like completely new buyers, which I maybe that's good from black box point of view, but from my point of view, it's like, wait, I think these are people like me and you and March and Rich and Jennifer are the ones who bought the Bitcoin ETF, son. I did. I bought them for my, you know, children for my retirement plan, you know, things like that. So, so I think we did not yet get that, you know, early majority through the ETFs based on the data that that BlackRock has given us. I don't know, is that what? What do you think based on? Yeah, Yeah. I think it's evolving quickly, which is good. The number of firms that I'm talking to are all in some level of due diligence, which is, which is a healthy thing, right? Like they're giving, they're giving the asset a little space and they're trying to recognize, OK, what how do we bring this forward to our client base? You know, how do we do it thoughtfully? What are the risks that we need to consider? Custody and digital assets is very different than than, you know, what we have come to experience as custody in traditional asset classes. So how do you mitigate those risks and what are the best types of products and solutions to enter into the space? But you also have other elements too, right? It's not just a regulatory framework that they're looking for more, you know, teeth that gives them that air cover. They're looking for partners, too. And they're trying to figure out who's going to help us, you know, one, be expert in the space because we are financial advisors and we are getting paid by our clients to have a point of view. And so they're, they're, they're really trying to build the competency. They're trying to, you know, work with their compliance partners. In fact, I think in the next month, Mark, you and I have a compliance firm that will be joining us to talk a little bit about how they're guiding and advising the advisor in approaching the assets. So I think that there's a lot of moving parts, right? It's making certain that they that they've done their level of due diligence, that they've skilled up their organization to be able to talk intelligently and ask answer questions of end clients and they're looking for some level of air cover. A true partner that you know, is providing them with, with sound investment council and asset management firms will produce a lot of things for a lot of people, but it doesn't necessarily customize to the RIA level. And that's one of the challenges I think that they're facing. So just some thoughts there that I have. I'm, I'm curious, I mean, do you have observations there, Mark or Jennifer? Following on what Jennifer said just prior about the ETS and about 20% were filers. That's definitely green space. And, you know, talking about you and, or Bill Miller and Fidelity being the only two institutions on this odd Dutch auction for something called Google, which yes, there was a broad field. You know, it reminds me of we just did a report on bitcoins unique quality of fat tailedness that you mentioned about its ability to reduce risk and AD return. And the opening quote is from Gibson about the future is here. It's just not evenly distributed in that the the ideas are there, but you know, we got too much going on and there's a, you know, we're a mile wide, an inch deep, but really can't take everything in. So I, I think when we looked at what was the university that just the first endowment to add Bitcoin. Thank you, Emery. And $11 billion. Fifteen million only .1%, but that may be the little bit of that might be potent enough, you know, because SWIB did that too. State of Wisconsin added just point 1%, which was 150 million for them because they're bigger. So, so it is 20%, but it was 0 a year ago until Judge Rao's decision, which you I just love the fact you call it like Prairie dogs. That's the maybe the best image I've ever heard to a reaction of a legislative for efedropping because you're like, she said how many, how many times did did she say arbitrary and capricious in her 21 pages? That image because my head popped up too. And like, is anyone else seeing this? It was, it was like a bugle blaring that no one else was hearing. So before I get to what Richard was saying, yeah, I, I, I, I do think the arc of adoption is there. It's proven. It's, you know, it's, it's not a Tulip bubble, which is three years. This is 15 years hasn't been broken, proven. It's just transforming. So on the part about compliance, Jennifer, maybe if you know you spent a few minutes talking about, we talked a lot about what you did and now what are you doing and how did you start a digital asset firm going from all that support at your prior firms to now doing this? What were the hurdles and what can you share with other advisors? Well, there there are hurdles still and that's natural. You know, you think about one of the things I like thinking about was like the auto industry, like the, you know, the first automobiles were were invented by bike manufacturers, like in the late 1880s, eighteen 90s. And you think about it then they had they had to manufacture every single component themselves, like every like the tires, the the the carburetor, the any component they had to manufacture themselves. There were no suppliers. There were no roads that were, you know, automobile roads. There are no gas stations you had to buy gas at like at. At the drugstore it was sold in like a quart, you know, container. There were all the like, there were so many, so many things that prevented adoption of automobiles. And yet, you know, and what really accelerated it was assembly line technology. When Henry Ford combined the the automobile with assembly line technology, that's when everything took. Off. So I think what I'm expecting is we have all this stumbling around that we experienced too in trying to start up our own firm. We, we have all the same concepts as traditional finance firms. We have a custodian and a prime brokerage relationship and trading relationships and an administrator. But all the mechanics, the technology, everything is different. It's all different rails, we call them, I think. So the when, when you come from a traditional finance background as I do, the concepts are very familiar, but the mechanics are not. So my partner Max is, he's our chief operating officer and he he plows through all this stuff. So, but getting that up and running, getting a bank account, you know, banks are not anxious to serve, you know, digital asset firms. That was a challenge. In fact, the first time we sent money to Coinbase, our bank reported us to the FBI for money laundering. So. Nice, can't catch a break. Fortunately, you know what's funny was the local the FBI agent in the Baltimore field office told me. Don't, don't worry, I'll explain it to them like he knew. He understood what we were doing. So there were lots of obstacles. Many of those things are being smoothed out now. They're getting better and better all the time. So but it was a big challenge before. So I think that's a there's some opportunity there where we can on behalf of investors, you know, you know, take care of a lot of those things so they don't have to. On the other hand, I think it prevents a lot of innovation that could be happening, you know, if if a lot of these frictions, you know, didn't occur. So, so I think there's still still a lot of friction out there. And I know you both know this, but we all lament the sort of the user experience on digital asset rails and crypto is still pretty confusing. And you know, for for many people, more than they want to, more than they want to get into themselves. Yeah, Yeah, it wouldn't. It's interesting. I, I, you know, not only do I speak with a lot of registered investment advisors, I'm speaking to a lot of custodians and, you know, in traditional finance and they're all trying to pull together a cohesive way to think about the space, right? And more importantly, what is their role, you know, that they have. And, you know, so like, often times when I'm speaking with the Rias, they're like, hey, look, yeah, I know, you know, all of the custodians. What? What, where are they at in this space? Like, until they enable, I feel like I'm hamstrung and I have to work in completely unfamiliar grounds. And so very similar to what you are describing there, Jennifer, if you know and opening up, you know, various relationships with, you know, frankly what are new or fairly, you know, startup type of entities. Now, they may be very bright people and very capable technologies and platforms, but they're, but from a, from an experienced eye, you're taking a bit of a chance. And so they get a little bit nervous. And I think that that's a, a, a, your experience is, is what, you know, a lot of my clients are experiencing today, which is, you know, doing the right level of due diligence, not just on the asset and, and the space, but who am I working with? Who am I working with? And are they credible people? And, and you know, and so that's half the battle. But you know, I think, you know, traditional custodians are really trying to figure out who they are, what their what their point of view is, what their value proposition is and how to integrate those rails that you were referencing. Yeah, that's where we really need this legislative action or some help from regulators. You know, bank regulators are really making it impossible for banks to be have meaningful, you know, offerings and digital assets, custody and other things. But you're right, I many of the people we talked to, they want that custodian to be a household name. You know, they want that to be custodian they know will be there through thick and thin and will help them if there's a problem. And there's very, there's not a lot of choices. There are a few, but not a lot of choices there right now. Yeah. So go ahead, Rich. I was just going to ask, I mean, Jennifer, you've had significant leadership roles, right? You know, CEO at Lake Mason, CEO at Western, I mean, huge firms, very accomplished firms. And, and you know, part of your job is being able to kind of cast forward a vision of where things are going. And, and you know, you're in the, in the heart of it in digital assets with Runa. And, and I'm, I'm fascinated to, to hear from you. What do you, how do you see the next three, 5-10 years playing out not just in traditional finance, but but also in the digital asset space with this emerging asset class? Well, two things. One, I think that one of the things you hear from asset management firms is that how little organic growth there is available to for asset managers or at least especially in the United States, but there's a real struggle. This is why you see them branching out to private credit and private equity and other things trying to find growth areas. So I think one thing that will happen is I think as digital assets become more understood by regulators, by legislators, and we get more clarity there that we will come to this. Carlotta Perez describes it as a golden age of really getting a value, you know, out of these rather than having corruption and disruption. We're going to have, you know, a legislative framework and a regulatory framework and really the big, you know, firms can, can also and will also participate because it is a new a growth area that's available and those are so they're so hard to find. So I think the firms that are early, especially like Franklin Templeton and Fidelity, we're very early to this. I think they'll have a big advantage because they have so many people working on this that, you know, you mentioned an iceberg. That's how they are. There's so many people internally that have been working on it for years. So I'm expecting them to, you know, provide to some of some asset managers really will get it and and catch that growth wave. So I am expecting that to happen, but I'm also expecting in digital assets, you know? There are, there are already. You know, I don't even know how many digital assets there are because of meme coins and think there's like hundreds of thousands of digital assets already. So they're, they're just, you know, people call it a Cambrian explosion. It definitely is that. And that's common in a new technology to have a lot of experimentation. So you have all these different, you know, there used to be back, back to the car analogy and there used to be hundreds of car companies in the United States until you sort of coalesce on, on sort of who the winners are, who's got it right, who's, who's put the right combination of technologies together. So I think that we'll see that in digital assets, most will fail. We we invest with the idea that almost everything will fail. Only a few will survive. I think Bitcoin is clearly, you know, a survivor. I think Ethereum is 2. Maybe you'd put Solana or Uniswap in that category. But beyond that, it's like it's all a big question mark. I think it's TDD, which is typical. But I do think one thing, one interesting thing that I think is coming around now is AI dominates everyone's thoughts, especially investors. You know, AI is why that Magnificent 7 is really outperforming everything else. And I think the, the, the promise of AI is so big. That's why I think investors are having trouble even gauging how big it is. But what AI needs it the support that it needs, kind of like the auto business and the assembly line. You know, maybe the assembly line isn't that sexy, but it was critical to the to the development of the auto industry. It was also, by the way, how IBM started was applying that technology to typewriters. So that was, I think that's what will happen with, with block chains. And AII think AI has some problems about how to how to, how do you establish what's real, you know, provenance, where did something come from? You know, how to stamp something in a way that can't be faked, How to, how to have AI agents that can make contracts and do transactions. All those problems that people are already seeing in how to make AI do the fantastic things that we want it to do, I think blockchain and and Bitcoin are essential technologies for that. So they may not be as visible or as sexy as AI, but they're essential. So I think that that sort of connection, people are going to start making that much more overtly. I love that layering you did of the collapse in the time of the 100 year old assembly line to the integrity of Bitcoin maybe being aggressions, law manifesting AI where they choose the most integral currency to play on as they as they scheme together to create money. Like who's? And like Anderson's project, you know this stuff is moving fast here. It is. It is. That's why I love it every day. Every day we wake up, there's some big thing that's happened, right? But not of a sentence so. Rich and I were talking before I know we're, we're, we're running up close or and as Rich said, we were going to break all barriers because we had Jan here on time. Rich, we were talking about old tools and new toys and does when you started your, your firm Runa, were you able to port over existing metrics and tools to assess the behavior or portfolio of a pool of assets that would help use a familiar lens that people could then say, oh, I, I know what this looks like, you know, change it. And so all of a sudden they can see the behavior of what you're doing. Yeah. So the thing you mentioned, I have a CFA, so I have to sort of closer all the classic training and evaluation work and, and securities analysis and all that stuff is very relevant, but it isn't immediately applicable. So there are a few things like, pardon me, like Ethereum that have significant revenues, you know, billions of dollars in revenues. They have profits, they conduct things that look like dividends or stock buybacks. And so you can cast some of the more mature assets in a light like that, but most of them are not, they're much more like venture capital or like something completely new than they are like familiar equity analysis. So we we take the ideas that are familiar from sort of classic investment ideas, but we we have to come up with new tools. So one of the things we found was, for example, we think a big, an important difference between digital assets and other assets is that their networks. And so if you, there's a law called Metcalf's law that, you know, it's not, it's not a real law, it's just an idea. But the idea is that, and there's a lot of data to support this, that network value grows faster than the, then the network itself grows. So, and one of the implications of that idea is early networks tend to, all things equal, dominate because they have more time to make connections, which makes their value grow. So we think that's a really interesting idea. And we took, you know, Facebook, we looked at the value of Facebook and you know, you can look at Facebook's revenues and earnings and all cash flows and all sorts of metrics, classic metrics. But if you just regress Facebook's price against its growth in the network, you know, number of participants on Facebook, that explains 94% of Facebook's price action, you know, so it's pretty much like it's a network. That's it. That's the, that's the answer. And the same thing is true of Bitcoin. So if you regress Bitcoin price action against Bitcoin wallets for example. Or you know. Bitcoin participation in the network that explains 91% of Bitcoin price action. So for us, concepts like Metcalf's law are not they're certainly familiar like the the top company, you know those magnificent 7 companies, almost all of them are are network effects companies. But that idea is still not very talked about, but it should be. And I think that that sort of thinking is what the kind of thing that we're bringing to digital assets because I do think we need some new new metrics and new ideas because these are different. They are not, they're not equity securities and you know, on different technology software. I got to say First off, Jennifer, that that was a great description. Oh, jeez, Mark, I was just going to give you a kudo. Hold on, that was a great descriptor. But you know, Mark is getting quite good at, at flashing slides and and his timing and sequencing is just really good, Mark. So a little kudos to you. But yeah, this is a really interesting slide here. So maybe you were just kind of describing it. I didn't mean to to talk over you if I did. So you've, you've got Facebook here. We're at 94.46, is that right? Yeah, that's the R-squared on regressing Facebook's price with its participants in the network. So it explains 94% of its price change. So, and you can see on the right, same thing with Bitcoin, it's, you know, very high R-squared for for Bitcoin as well. And that's really a, you know, a the implication of Metcalf's law. You know, if Metcalf's law is is a valid concept, you should find this sort of result and you do. Yeah, and linking it back to, you know, a concept, applying it to tratify with something that obviously broke the barrier what Facebook did when the biggest networks on the planet. And one reason why we, you know, have you hear what we try to be besides The Muppets and the balcony, you know, casting aspersions upon people, not adopting digital assets. It's really to be that bilingual animal to be able to speak to both. And you did it perfectly in this slide. I can't believe it took me this long to bring it up. Rich Chinese. Yeah, this is, this is such a powerful slide. And Mark, kudos to you too, because you're doing some really interesting research as well, which just, you know, I think, you know, we spoke about last week when we had Fidelity Digital assets, Chris Kiper, head of research there, join us. And, and, you know, the, the work that you're doing on volatility, it's, you know, it's really, really helpful, I think to the larger investment community who's, who's saying, OK, what, how do I lean into this a little bit with things that are familiar? And so, you know, Metcalf's law and the, the work that you did with good ball, bad ball and, and, you know, really compelling stuff. And it's, and I'm, I'm grateful to both of you for, you know, helping, you know, people figure out different ways everybody comes to Bitcoin differently. I've come to find and, and you guys are helping bring some familiar ways for, for investment advisors forward. So thank you. Well, that being said, we're at the top of the hour, right? And I, you know, we had a chance to meet with you, Jennifer, over the weekend and I knew the second that we started talking, my goodness, we're going to be in for an hour and we normally go for 3035 minutes. Try to keep it short and sweet, but you know, your insights and your sets of career experiences and the journey that you've had into digital asset space is rare. And, and it, and it's very, very valuable to our audience who's, you know, grappling with how do we bring, you know, digital assets or Bitcoin forward to our clients and thoughtful and prudent ways. And, and so we're just overjoyed to have you and, and grateful for your time and, and the work that you're producing in the community to help others, you know, see the opportunity with a clear lens. And so thank you so much for for joining us today. Any closing thoughts on how people can find you, Jennifer? We do. You can find a lot of our work at our website runadigitalassets.com. And Mark and Rich, thanks for having me and I'm really enjoying what you're doing. So keep keep it going. I'm I'm following along with great interest. I think especially Bitcoin is especially important to to really developing the whole space. Awesome. Well, thank you. Jennifer Pleasure was ours. Thank you. 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 On Rat Media is for informational and entertainment purposes only, and nothing should be construed as investment or legal advice. 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