SPEAKER_00: Okay, we're back here on this week in startups. I'm your host, Jason Calacanis. I'm an angel investor in 350 companies over the last 11, 12 years been doing this podcast for about the same period of time, actually. And one of the things that is the bane of my existence is people asking

SPEAKER_01: me the same basic questions over and over again, I try to be super helpful. But I decided what would be most helpful is if I could just give people a URL and say go to this week in startups.com slash basics, just like I wrote the book Angel. So I could stop having the same conversations about how do you pick companies, I send them the book, or I say go to Angel University, and then ask me your question. So we're starting with questions on third base. Well, here we are, I wanted to do that for legal accounting, HR, marketing, all this stuff. So we started the startup basic series, it's gone incredibly well. And one of the great reasons it's gone so well is we have a series of providers that we use kind of on our shortlist. When we fund a company, they'll say, hey, I need accounting, I need legal, I need this, we give them a shortlist, hey, here's people we trust. And one

SPEAKER_00: of those people we trust and we work with all the time is Scott Ornn. He is the chief operating officer of Cruise, you can visit them at cruiseconsulting.com slash twist. Welcome back to the program, Scott, we've been going through all these basics. Again, this year, we did stuff on end of the year. And now we're going to talk today about crypto. When did crypto start hitting your

SPEAKER_01: customer base? And when will you start? When did you start first facing these accounting issues?

SPEAKER_07: And what were the first couple of accounting? Yeah, there was a wave about four or five years ago with a lot of the ICO stuff, but that got a little crazy, a little too, it was almost like a

SPEAKER_09: gold rush. And maybe not, I mean, there's definitely been some awesome companies and crypto tokens come out of that. But the difference now we're seeing the second wave over probably the last nine months, a year. And we're seeing like that, like blue chip serial founder, along with like really smart young people who want to get into this category. So to me, this has this is like the next SaaS. This is the next consumer internet. This has so much entrepreneurial energy behind it. And it's pretty exciting for us. And we've got we don't have a ton, we've been kind of tiptoeing into crypto accounting. And now as the tools have developed, as we understand the tax ramifications

SPEAKER_10: for a lot of stuff a little bit better now, we're starting to sign up some of these companies. So

Chamath Palihapitiya: I'm excited to talk about this with you. So the ICOs were a bit of a disaster. I saw that

SPEAKER_00: happening. And I was like, gosh, knowing what I know, having gotten a quick education as an investor about accreditation laws, KYC and all this stuff. Gosh, you break the rules at your peril,

SPEAKER_01: you are responsible. And not knowing the law is not an excuse or a defense against breaking it. You as a founder have a fiduciary responsibility to understand the law to understand what the rules are. You can't come into the chess game and say, I didn't know the queen couldn't do that. And, you know, I want my queen back. No, you go to jail, if you screw up some of this stuff, or you get a serious fine, you can be blocked from working at a company, you got to get this stuff right. Crypto, a lot of people think because you're doing something new, that the old laws don't apply. Maybe you could speak to the old laws, and innovations in crypto and how those align. I

SPEAKER_17: know you're not an attorney, but just in general, how you think about that.

SPEAKER_09: Yeah, you mentioned like things like KYC, or doing a securities offering, which the SEC actually regulates. And so you're, I know you've done a couple episodes on this recently with Coinbase and SEC kind of in this tug of war, so to speak, the SEC's modus operandi is to regulate, like that's what they do. And so they're seeing this giant, kind of financial innovation center happening, and they're kind of getting in there now. So the crypto stuff that I think is most compelling, is this is where crypto is really like a software tool. It's a tool for facilitating

SPEAKER_22: transactions, things like that. I think that's maybe the difference between the

SPEAKER_23: utility coin, right? Now we're at the point where people are building applications. There is a token that is serving a purpose in the world, beyond speculation. Now there might be

SPEAKER_01: people speculating on the tokens. But there is a valid argument to say, this is like an airline mile. This is like mana in a game or a skin in a game like a video game. It's being used for a purpose in other words, and that is the major shift that's occurred. Yeah, I

SPEAKER_25: totally agree. Yeah, you said it better than I can say it. Yep.

SPEAKER_01: So what do people need to know about how to categorize this? Because I had somebody on the program, I don't remember who, gosh, we would have some crypto people on, but he had sold a bunch of tokens. And I said, Well, if you're selling those, it's not an investment, right? So this is not an investment, people are going to use the tokens, they're buying them, they're saying, when they buy

SPEAKER_27: them, they're agreeing to buy these for the purpose of utilizing them to buy time on the network,

SPEAKER_23: whatever it is. I said, Okay, great. So does that mean it's a profit for your company? So again,

SPEAKER_01: we pay tax on it. And I'm like, Well, what kind of what's the tax treatment on selling tokens? So maybe you could explain that a little bit? How do you account if I sell 10 million tokens of Solana to somebody, and they're going to use it on the Solana network, I'm just picking a random name out

SPEAKER_27: here? It's not an investment, you're not you didn't buy equity, but you're buying them to use them. So that means there should be tax treatment, correct?

SPEAKER_32: You're, it's a, it's a great question. And there's kind of two ways I think about this,

SPEAKER_09: the first and I'm thinking about it from the company, in the accounting and tax perspective, there are companies that get tokens, whether they're doing work, or a company or a crypto network or are paid in tokens. There's also companies that are buying tokens or buying crypto as a cash management tool, right? And we can talk about those two scenarios. But those are kind of like passive ways of participating in the crypto world. And it's the accounting treatment is actually pretty clear on that. And I can talk about that in a second. Yeah, the second component is crypto is our business, which I think is some of the stuff you're talking about. In crypto as our business, that's probably the biggest change we're seeing right now. Like, so many companies are coming to us with crypto as a business is not a fundraising structure, it is actually the way they're transacting. Yeah, it's a currency. And when you when you're doing that, and the token is fluctuating price and going up, yes, that can be realized or unrealized gains, you can pay taxes on that. Yeah, if you're swinging at the profit, probably one of the biggest for all those categories I just covered. You're the entrepreneur you were talking to was smart and was on the ball and knew they had

SPEAKER_34: to pay taxes. We've actually now that I remember was it was Solana founder, Anatoly was on the

SPEAKER_23: program. And he said, Yeah, we paid a big tax check. Why was this savvy for them to pay that big, big tax?

SPEAKER_09: Because, well, first of all, not paying it means you can go to jail. Okay, yes, that's number one. Number two, oftentimes companies are surprised when we're doing their taxes, like in March and April, they're like, Oh, my gosh, I didn't know that if I sold that crypto and realized to gain, I have to pay tax on it. And so they have not spent the money, they spent the money and they didn't pay. Yeah, exactly right. And they didn't pay their estimated taxes. So they have a tax bill and they have penalties.

SPEAKER_23: Explain what estimated taxes is. So I sold these coins in q2, I never paid tax on it. Now you're

SPEAKER_00: cleaning up my books at the end of the year. And it's February 15. And I'm getting ready to

SPEAKER_01: get this tax bill paid. What does it mean I didn't pay my estimate?

SPEAKER_32: The IRS is smart, and they want their money kind of as the year goes, because they understand the

SPEAKER_47: concept of time value of money. And they can put take that money, they get paid, put it in the bank, get interest, so to speak, right? So they want you to pay q1, q2, q3, q4, estimated taxes, like clockwork. So if you have that big gain in q2, well, they're expecting a check at the end of q2, or at least in q3, to cover those taxes, they want to, you know, make interest on that, so to speak.

SPEAKER_09: So if you don't do that, they will actually charge you a penalty at the end of the year. So in paying your estimated taxes, protects you from the other scenario, which you just covered, which is spending the money. Yeah, like the worst, the worst hole you never want to find yourself in is owing taxes, and not having the cash to actually pay us. So estimated taxes protects you from the penalties,

SPEAKER_48: but also just make sure you're actually fulfilling your obligations.

SPEAKER_01: Right, super important. Okay, now, when you're investing in these, if you sell them, it's capital gains, we all know that is there infrastructure yet for managing all of this? Because everybody talks about the blockchain. I mean, this is pretty rudimentary. And QuickBooks and, you know, accounting software is nothing to do with the blockchain. So and then you have all these transactions occurring. And, you know, you have people who maybe are earning crypto because they put servers on a network, they get paid in crypto. If they get paid in crypto, do they owe taxes on

SPEAKER_27: that? Is that a profit? If they don't sell it? Because it's kind of like getting paid in equity and stock. Dude, what's the tax treatment on that?

SPEAKER_52: Yeah. And that's a... Let me tread carefully on that because I'm not a tax CPA.

SPEAKER_47: But sure, if you were making... If you delivered a service, if you're collecting payment for that,

SPEAKER_09: like revenue, yes, that would be taxable. So that's... But that's actually... You mentioned the infrastructure growing around this. That's one of the things we're most excited about, and it's allowed us to kind of get in the crypto accounting game in general is essentially QuickBooks, which is what most, almost all startups use for their accounting, is not set up for crypto accounting. If you think about it, traditional accounting is on the bank ledger, right? Money going in and out between the bank accounts and someone else, right? That's why we all talk about bank reconciliations. That's how QuickBooks is set up. Well, crypto by definition is on a different ledger, a ledger in the sky, right? It's something you can actually evaluate, check, look at, but it's not a bank. And so what we're seeing is a whole new breed of accounting software pop-up that is capable of essentially capturing those transactions off of a blockchain, letting you do just what we, you know, the usual accounting. That's fascinating. Yeah. Vendor categorization. And then the best part is inputting that or integrating that into QuickBooks because a lot of companies have a kind of normal operational business and then they've got this crypto happening over here, right? Yes. And so pulling those together in QuickBooks is really important. And again, as a taxi...

SPEAKER_55: It's almost like you're doing two sets of books and then you got to merge them. Oh, what a disaster.

SPEAKER_52: That's exactly right. But believe me, it's so much better now. Like, you know, we're recording this in late 2021. Six months ago, these companies were just getting formed.

SPEAKER_59: They probably had like some developer running a cron job or something to give them some reporting.

David Sacks: Totally. That's exactly it. Actually, they were doing like this hacked report themselves, then trying to hand that to the accountant. Yeah. So yeah, and it could be wrong. That's exactly it.

SPEAKER_62: So what could go wrong? Everything.

SPEAKER_09: Yes. And so now what's really cool, like, hopefully, we'll do this again next year, and you and I will be sitting here with like big smiles on our face. Yeah. Because I'm like, we're seeing how fast these technology companies are innovating on the accounting side of crypto. And I'm like, it's gonna be the it'll be ready by then, it'll be so much easier for everybody. And when you talk to the founders, this is like one of those, like little things in the like the crypto founders in the back of their head. They know this, they have like kind of a weakness, or it's not maybe being done right. And they want, they want a good accountant, like we talked to them, they're like, kind of like asked, they're, they're hoping we will take their business. And the cool thing right now is because these tools have developed, we can actually say yes. Now we're still not saying yes, like 200 at a time,

SPEAKER_52: we're picking our spots and making sure our processes want to do it with people who are, you know,

SPEAKER_00: highly ethical running a tight ship and who have the resources to put the time and to do this

SPEAKER_35: correctly, I would assume. That's exactly it. And people we could Yeah, you said it perfectly.

SPEAKER_00: And you know, if you look at, you know, these new concepts of how to run a business, you know,

SPEAKER_01: you have these people who are running nodes on network to make it decentralized, they're getting paid, they're getting paid by the company, or maybe the nonprofit that gets set up in Panama or something, there's a lot of weird stuff going on. Sometimes they create five things putting aside the Panama nonprofit that manages 300 millions in tokens that were sold, and nobody knows who's on the board, because they have security issues, like people who work at Goldman Sachs or Amazon don't

SPEAKER_68: have security issues, like they have security details for that reason. Let's put that aside for

SPEAKER_27: one second. When you run a company and you're paying vendors, you will ask them to sign a W9,

SPEAKER_01: correct? Or and you have some sort of, you know, hey, I paid this person a million dollars this year

SPEAKER_27: as a consultant, I paid exactly $5 million a year. Don't these things, aren't these the analogous? And so are those people who are running nodes in Malaysia or China, who are getting paid crypto, don't they need

SPEAKER_34: to get some sort of, you know, KYC and knowing who they are, because this seems to be antithetical to

SPEAKER_01: decentralized anonymous crypto land where anybody can participate. And you're saying, hey, we got to put a throttle on this, you need to sign some tax documents before you can participate in the

SPEAKER_09: network. And that's what the SEC is saying. And so you do have to find, you know, if your company running a token or running this exactly described, you're going to have W2s for your employees, you're

SPEAKER_47: gonna have 1099s for all the contractors in the US. And for people who are abroad, you are going to give

SPEAKER_09: them a W-A-B-E-N, which is kind of like the 1099, but it's for people in other countries. But it's definitely still the Wild West out there. Like you talked about the Malaysia, you know, node, like, maybe they're getting the W-A-B-N, maybe they're not. But if you are running your business, you, you, that's like you said, you have the obligation to do things correctly, you can't just

SPEAKER_47: like, say you didn't know two years from now. So it's really good to do this stuff the right way, protect yourself. Even if you, you know, you as long as you make a huge effort and actually can document the effort, that's going to get you the benefit of the doubt. With the IRS and I see they're still, you know, they're still going to want things to be done correctly. But not doing it

Chamath Palihapitiya: at all is a fast. Ignoring it is a road to disaster. Because then, if there is some mistake that you

SPEAKER_01: make, if you have shown good faith, and you've paid your taxes as best as you thought you should, then when you go into the conversation, you say, look, we paid our taxes on the sale of these tokens, we put it into our tax returns, we pay quarterly in advance, we want to do it right. We didn't know that this person set up 100 things in Malaysia, and then actually they were based in the US, and they had a shell corporation, we obviously want to fix this and make it right. Tell us what we need to do. Exactly. One conversation. And that usually goes a certain way with government agencies, correct?

SPEAKER_47: Totally agree. And by having like, with this accounting software being developed, it's going to be so much easier to show a record and show all the transactions and who the vendors and who the categories are. Like that's been kind of like, I do feel for a lot of the founders in the crypto world,

SPEAKER_09: because like, it was hard, it was, it was beyond hard. It was arduous. Yeah. And so like, sometimes you're tempted to look the other way, but but doing it the right way is so important. And now you

SPEAKER_47: don't really have any excuse. Like it's, it's out there, you can do it correctly.

SPEAKER_27: Yeah. And you know, it'd be a good analogy is before credit cards existed, people would submit expense

SPEAKER_34: reports, they would pay cash, they would have written receipts. And if they went and stopped at a restaurant in the Southwest, everybody had the same receipt pads. And it was common, I remember when I was coming up that people who worked in my industry had three or four receipt pads in their bags. And the waitress, when you went to that diner would say you want some extra receipts, and they would give you 10 extra receipts and give them a nice tip. And then people would be like, I had lunch, I had lunch, 20 bucks, 20 bucks, and you're taking the whole 20. So the people were kind of, you know, massaging their expense accounts back then, and there was no paper trail, because there was no credit cards. Credit cards get introduced. Now they're imported, you have corporate cards. We talked

SPEAKER_01: about all the unique new cards that you can set per individual per dollar amount per month, whatever. And it's all tracked. That's going to happen in crypto when it's all tracked, fraud and these things,

SPEAKER_00: you know, are harder for people to pull off. I totally agree. The other interesting thing

SPEAKER_79: like my story about the book of receipts, the waitress giving you like an extra

SPEAKER_81: time. I'm actually old enough to remember the book of receipts and how people do it.

SPEAKER_68: Yeah. I remember when we used to fix computers and laser printers, we got paid for taxi rides,

SPEAKER_01: we got paid for everything. And so what people were doing on their expense reports, they'd say, listen, kid, don't take the $6 taxi, walk, or hop the turnstile or you know, whatever. And you made six bucks going there, you know, and you're making 10 bucks an hour. Now you're making 16 bucks an hour, you know, and they were basically mentoring me on how to work this stuff.

SPEAKER_85: Yes. Yes. Which in journalism is, uh, because the.

SPEAKER_23: Well, this is when I was in IT. I was an IT guy. But you know, the journalists, people were doing it too. They would submit to their magazines, a bunch of expenses. Hey, I went to Brooklyn to interview this person. I took the subway, I took them to lunch, whatever.

SPEAKER_27: You know, when people build a receipt for $12 or $34, who knows the difference, right?

SPEAKER_22: It's, it's a, it's a much better place. Now there's like, especially if you're running the company, cause you're not paying for all that stuff anymore.

SPEAKER_27: Yeah. Well, I mean, it's actually, when you think about it, did you ever work on a business that had miles or an incentive program that would be the analogous of the miles or points

SPEAKER_00: programs into accounting for that? How did the IRS look at, you know, American airlines miles or Bonvoy, you know, SPG points? Yeah. How did they look about owning it as an individual when you start to own millions of them? And then

SPEAKER_90: people who were giving these away, what kind of tax treatment did those get?

SPEAKER_10: Yeah. Miles sit on the balance sheets of, uh, airlines, I believe. They do. Yeah, it's a liability, right?

SPEAKER_09: Yeah, exactly. And that's why they've started like deprecating them or, and they also have a major incentive to inflate them away, you know, by making it instead of 50K to fly to Florida, it's a hundred.

SPEAKER_92: Now it's a hundred, now the liability goes down.

SPEAKER_09: Yeah. But, um, but yeah, there's, it's, it is analogous, but the, what's interesting is there's people, people didn't transact as much in miles as they are with like NFTs or things like, like what we're seeing now is it's, it's, it's financial innovation. It's amazing. Like, I'm sure, you know, some creators who are like issuing NFTs and that's going to be like an annuity or a royalty for the rest of their life every time it's, it's bought and sold. And that's, what's so exciting about this. And that's, that's partially what's fueling the gold rush a little bit, but to even be able to do that, like my, my 2000 brain from, from when I was a investment banking analyst, 2000, I never would have ever thought about any of this stuff being possible. It's why we're seeing so much entrepreneurial energy. Like people are building.

SPEAKER_23: It's inspiring. Let's face it. It's super inspiring to think, Hey, I'm Quentin Tarantino. I don't know if you saw this story, uh, go on a little tangent here, but Quentin Tarantino took seven pages of the

SPEAKER_01: Pulp Fiction script that didn't make it into the script. He took pictures of them or whatever, and he made NFTs that were trying to sell them. Now the person who owns Pulp Fiction Miramax, which I think is owned by Disney now is suing him saying, Hey, we own Pulp Fiction. He said, well, you don't own these seven pages that I never put in the script. These are my ideas that never made it in. And so you, but he, but it is called Pulp Fiction and they own the IP for that. So now we're gonna have a little court case

SPEAKER_34: or whatever, some settlement, but what an incredible idea that now, if you think about it, every frame of the empire strikes back could be sold and you know, whatever, a number of seconds and frames per

SPEAKER_16: second could be sold as an NFT. Who knows what the rights they get for that. And Lucas gets nothing. And, uh, you know, I might buy a NFT of, you know, Boba Fett from there. If I,

SPEAKER_03: That sounds pretty awesome actually. Yeah. Yeah. Sorry to give these ideas away for free on the pod, but now we've got to look at, cause they do say in those agreements. I remember when I was a journalist covering this all derivative works. Yeah. Yeah. Known or unknown. So when he sold to Miramax, that contract says all future, all current platforms and future ones known and unknown in the

SPEAKER_00: world. And boom, those characters are going to be, you know, sold as NFTs or whatever. And the

SPEAKER_84: originators of them will get nothing. Yeah. And that's what's fueled the, the streaming strike,

SPEAKER_09: you know, three or four years ago with the writer's guild and they, everyone had the workout house. But the cool thing is this is a new revenue stream for everybody. And you hope that, uh,

SPEAKER_10: people can actually get together and figure out how to split it and not be like, so really, they kill

SPEAKER_17: the whole idea. Yeah. I mean, and people have been selling these forever. Like you can literally

SPEAKER_00: buy, I'm looking at right now for 35 bucks, a still, uh, from a 35 millimeter print of the empire

SPEAKER_01: strikes back. So people will buy an old print if they can get their hands on it, cut up each cell

SPEAKER_00: and make a memorialized plaque that you can put on your wall. And obviously there's those things, those old prints wind up in people's private collections or thrown in the garbage because

SPEAKER_105: they, they deprecate over time. So why not clip them up and give people some joy from them?

SPEAKER_01: Um, what, what makes you nervous about crypto right now in terms of the regulatory environment

SPEAKER_00: or tax treatment? Are there any red flags or things that you've identified that there could be more

SPEAKER_01: clarity on and that you hope to see more clarity on from either regulators or accounting best practices. And there's an accounting group that sets the, like the gap standards and all that stuff. Have they started putting out crypto best practices yet?

SPEAKER_09: They have yet. The AICPA has given out some guidance. Some of the stuff that we could talk about is like some basic accounting. Like if you have a bunch of crypto on your balance sheet and it goes down, the guidance from those groups is to write it down. This is when crypto is not your business. This is like the people who are paid in crypto or speculating on the cash management perspective. Um, and then the guidance it's, it's doesn't make a ton of sense, but it's an intangible asset. So they do, they want you to take the right down, but they don't want you to write it up, which doesn't make a ton of sense to me, but that is the, I think the most conservative accounting guidance they're giving that's different again than if crypto is your business. If crypto is

SPEAKER_10: your business, you are writing it up, writing it down. That is, you know, all taxes.

SPEAKER_23: So I buy, I have 10 million in my bank account. I decided I'm going to put 1 million of my treasury into Bitcoin. It goes down 50%. I decided this year, I'm going to take that loss, $500,000. I had

SPEAKER_28: a profit of $500,000. I'm going to try to not pay taxes that year. Correct?

David Sacks: Exactly. And we can, you can, Tesla actually does this, right? Tesla bought a bunch of crypto,

SPEAKER_10: very well for a while. And then it went down. And so they, you can actually read their financial statements. It took a loss. Yeah, exactly. Exactly. So that's a good lesson for startups

SPEAKER_09: in that like crypto does go down. Like we're in this huge wave right now. And the fundraising climate is so frothy that companies that may be raising 5 million or 10 million before raising 20 million. And sometimes they're looking around saying like, what should I do with my money? So probably my biggest thing I'm worried about is companies not having a good cash management plan,

SPEAKER_10: something that's board approved, speculating a little too much or reaching for yield and some of the dows and things like that. And then Armageddon happens. Yeah. But you know what I'm

SPEAKER_01: talking about, right? And all of a sudden, I mean, I had this recently, I had a company that raised, you know, a large, large, large, large round, like mega round that you're reading about unicorn size

SPEAKER_00: round and first time founder, what am I supposed to do with this, you know, 10s of millions of dollars. And I was like, your job is not speculate, you can put it into short term treasuries bonds, maybe some of them can go into revenue back municipal bonds, you know, 10% of them, they might give you 4% versus whatever you're getting in treasuries. But our job is to grow revenues 2x year over year, that'll dwarf this. That's not our business. That's the correct discussion,

SPEAKER_09: right? It's absolutely correct. And I'm going to cut that out and send that because I get that

SPEAKER_10: question at least once a week, you're not fiduciary, you are not, you know, people are not investing your company to speculate on cryptocurrency. So be super careful. I know it's tempting, especially like inflation starting to take up. So people get kind of nervous, and they they feel like they need to do something. It's just not your it's not why you were given the money,

SPEAKER_27: you were given the money by venture capitalists who were given the money by foundations and retirement associations and endowments and high net worth individuals who are doing that in the other part of the portfolio of which you are five to 15% of their overall mix. They don't want you mixing it

SPEAKER_01: up in that five to 15%. They want you focused 1000% on that which you told them you would do,

SPEAKER_00: which is grow a high growth company, period, end of story. They have exposure to crypto, they have exposure to equities, they don't need more.

SPEAKER_09: And you can buy it personally if you want to use your personal bank account to buy some if you want exposure.

SPEAKER_105: You want to dabble go dabble.

SPEAKER_09: Don't use your company's bank account to do it.

SPEAKER_105: Definitely a bad idea. Alright, listen, crypto is going to be this big opening will certainly next year when we get together and do this again in 2022. We should definitely

SPEAKER_135: update on what's going on in crypto because I'm fascinated with these DAOs and decentralized organizations making bets. Like that's like a fun structure. How is that all going to work? Oh my

SPEAKER_09: Lord. I mean, nobody knows, right? It is inspirational. Like you use the exact right word. Like I'm a finance nerd. I think it's amazing. I just think you should use your personal money or money that you should be risk averse or not not use risk averse money to play in that

SPEAKER_01: world. I mean, NFTs is the perfect example. You know, people were like, I'm buying them because I enjoy them. And I was like, you're buying a board eight for 200,000 because you really that piece of artwork speaks to you. How many pieces of artwork did you buy before you're bored ape? And they're like, none. I'm like, Okay, so you saw this. And that got 200,000. But in the last 20 years,

SPEAKER_16: you've never bought art. Okay, got it. If that goes down to 2000, you're telling me you'll be just as happy and like, No, I won't be happy at all be disaster. Lost 99% of my money. I'm like, that means

SPEAKER_01: you are buying this for speculative purposes. Like, well, not totally. And I'm like, Hmm, it does seem like it's totally what you're doing. And so that's the that's where the disconnect happens for me. If you were buying these things for $100 or $500 or $1,000 even, and you didn't care if it's speculated or not just like somebody buys a muscle car, they buy some Mustang from 1970 for $20,000. So like working on the weekends, like taking it out, they lose 1000 $2,000 a year maintaining it. If it doubles in price, and they broke even after 10 years, like, okay, whatever. But they enjoyed it. Like, I don't think that's actually what's happening with NFTs. That's like $250,000 car.

SPEAKER_04: Like, you know, some perfect Corvette, and it's actually a big number, right?

SPEAKER_147: And you and I have had the benefit of going through the dot com boom when we were young. And so you see

SPEAKER_09: that you like, we've experienced that like, I remember an eBay was $500 a share and things like that. That was the equivalent. And by the way, some amazing companies that changed the world came out

SPEAKER_150: of that. And yeah, the one out of 500 that survived. Yeah, it was just one out of 500. Like, to be

SPEAKER_27: clear, like, there were, there were so many public companies that went to zero. Like, the number of

SPEAKER_34: public companies that went to zero was shocking, like, three cents on the dollar.

SPEAKER_09: Yeah, I was at Hamburg and Quist doing M&A for those companies as a young pup, you know, so, but I think this is the crypto trend right now is very exciting. And we're seeing like those, those people who you like bonafide founders who are getting into this, I think they're going to create some amazing super legit. So I don't want to take the steam out of this. Like, I think it's a major trend. Just be careful. And like you said, know why you're buying something? Is it speculation? Is it for fun? Is it because you're super excited about that? Yeah, yeah.

SPEAKER_00: It could be some combination of those things. And you know, the way the way it's perfectly analogous to what we saw in the Clone Wars, you know, back in the dot com era, we're like old Jedi here with

SPEAKER_27: like missing limbs. But you know, I can tell you about the Clone Wars. All of that energy was correctly placed, the internet was going to transform society, it was correctly placed, but the bets were placed poorly. And the bets were placed at insurmountable odds on people who had no idea

SPEAKER_01: what they're doing. And the crater that was left was the risk of ruin for many people. So the correct way to play it was to get as involved as possible, maybe make some intelligent bets, but avoid the risk of ruin. And if people don't know what the risk of ruin is, it's a gambling term for when you put all of your money into one bet, or into a small number of bets, and you have the actual risk of ruin, that's bad bankroll management, you can look at bankroll management as well. And it just goes to

SPEAKER_105: diversification and some of those other concepts that are super easy to understand. Going all in on one cryptocurrency is a road to disaster, going all in on five, still a road to disaster. Going

SPEAKER_01: all in with a third of your net worth, if you're super aggressive and don't care if you lose it, okay, that's a different story. Yeah, that's good advice. My Lord, I mean, if you have one of these bored apes, and you can sell it fractionally, and you bought it for 2000 and it's worth 250. Would it kill you to take 10% off the table and lock in a 10x win, like lock in the 10x win? There's no shame in doing that. I sold Uber shares

SPEAKER_00: at, you know, 30 some odd dollars a share was able to buy a home. Well, you know, was able to put money into, you know, 529 accounts for kids educations and you know, sleep well at night. You know,

SPEAKER_01: the company, Masayoshi-san wants to buy some at 40, whatever, you know, you sell a little bit here and there. You cover your bases, you lock in wins. I sold a little com, you know, doesn't mean I don't believe in com. It just meant I bought com at four and a half million when it hit 250 and then a billion.

SPEAKER_04: The right thing to do is to just take 10% off or something in my mind and lock in some wins.

David Sacks: Totally agree. And sometimes those founders appreciate it because you're giving a little bit of ownership

SPEAKER_09: up to the big institutions who need it to come in. And so it's, they did appreciate it. In fact,

SPEAKER_01: they were very, it was, listen, the way I looked at it and I did game theory on the Masayoshi-san investment. I was like, okay, Masayoshi has investments in every Uber competitor. If he doesn't

SPEAKER_34: get a nice piece of Uber and he's offering an extraordinary price, like giving them years and

SPEAKER_01: years of credit. If he gets that, like, what if he goes and invest in Lyft? I mean, he's got like 50 billion dollars sitting here, a hundred billion dollars from the Saudis and whoever else gave it to him. Like, do we want him giving a war chest to lift? Like, no, let's lock him in, get him on our team. He's got DD, Grab, he's got all these other things. Man, just think of how M&A will go and sure

SPEAKER_00: enough, all these great things happen where Uber got to own portions of other great companies because of it in Russia, Southeast Asia, and China. So you're going to be thoughtful. I think that's one of the things I'm like, kind of people might have noticed this from the podcast. I was really negative on cryptocurrency with the ICO phase. I was very into it. 10 years ago when we first started talking about the pod because I found it fascinating technology basis. Then the ICO has happened. I was like, this is a scam and a grift and NFTs. I was like, this is a scam and a grift.

SPEAKER_105: This is manipulated. There's a core technology here. That's interesting. And now when I see people

SPEAKER_01: properly incorporating, paying their taxes, and I see the DAOs, and I see some of these NFT

SPEAKER_00: platforms and Jeremy Allaire doing USDC, like a legit entrepreneur doing a stablecoin that's

SPEAKER_01: auditable and all this stuff. I'm like, okay, now out of this huge underbelly, it's bifurcating. There's going to be offshore stuff that's fugazi and weird. And you don't know if you're taking a terrorist money or a money launderer or drug dealers or human traffickers money. And then over here, you're going to have the clean money and you're going to have the clean infrastructure that's going to scale nicely. China's out of the game. The United States is regulating. These are great signs. An authoritarian country is out of Bitcoin and the democracies are building frameworks

SPEAKER_00: to make this fair and to protect consumers so that people pay their taxes. This is a good thing,

SPEAKER_171: ultimately. That's a really nice summary. You think it's a good thing? Oh yeah, I love it. I love it. And you said like the market regulation

SPEAKER_09: can be good. Like making sure things are done correctly gives everyone so much confidence

SPEAKER_10: long-term. So that's why I think it's actually good the SEC is involved and you just want them, everyone to be constructive and get to a point where they preserve the value. They let cool stuff

SPEAKER_47: innovate and actually happen, but make sure that everyone's protected as well.

SPEAKER_00: Yeah. I mean, it's such a no brainer. Like, do you want people running a bunch of servers on your network if you're providing some service and you need servers out there, you need some people to

SPEAKER_01: be doing hash or whatever for your new project? Do you want them to be in some authoritarian country using coal or some illegal labor or who knows what they're doing and for what purpose? Maybe you're paying them coins that are going to a nefarious human rights violating organization or some dictator that's making people suffer. You don't want that. You want legitimate. And that was the great thing about Bitcoin coming, going out of China. Now that gave all the West control over this great promising technology. Wonderful. All right, listen, this has been great. I just like talking to you.

SPEAKER_00: Thank you, Jason. Chewing the fat as it were. We'll do this again next year, hopefully. And who knows what's going to happen? I think DAOs are going to come up for sure. Yeah. CruiseConsulting.com slash twist. You can connect with Scott. He's on Twitter and all that stuff. You can find him. Thisveganstartups.com slash basics for all the basics. Thanks again, Scott. I really appreciate you taking the time being so candid. You're very helpful. I mean, we've worked, I don't know which startups you've worked with of mine, but I'm trying to remember,

David Sacks: but it was a long list. Well, Density just announced their latest fundraise a couple days ago. And you're working with Density. Yeah. They actually just brought their accounting in-house,

SPEAKER_52: which is what happens with our clients. That's what we call it, like going off to college. And we totally encourage that. But like, I think they're a unicorn now. I think we can say that

SPEAKER_17: publicly. I think you can say that publicly they announced it. And that's a great win for both of us.

SPEAKER_171: You mentioned Calm, Superhuman. There's a few others I'm forgetting, but I know we've worked

SPEAKER_105: together quite a bit. Yeah. I mean, it's great. They all just talk about how great you and your team

SPEAKER_01: are. So thanks for supporting my companies. And it's wonderful to have you in the program, sharing knowledge and not just one of the things with the startup basic series is I need people who can come on who aren't like hire a professional, hire a professional. I'm like, here's an interesting question. Hire a professional. And I'm just like, yeah, that's a one minute conversation. Like, here are 10 issues and hire a professional. It's like, well, can we unpack the issue? Of course you want to hire a professional, but like, let's unpack and talk about issues and why they exist. And you did a great job on this series. So everybody go watch the entire series. This

SPEAKER_34: week in startups.com slash basics. All right. We'll see you all next time. Bye-bye. Thanks, Scott.