E77: Tech work culture, crypto regulation, stablecoins, $NFLX & more w/ Coinbase CEO Brian Armstrong

brian armstrong what's up bro what's up how are you good to see you it's good to see you as well yeah jason just pinged me yesterday and he's like why don't you just come on as a guest randomly and i was like okay great let's do it it's so good i'm really excited to hear what j cal's intro is for you oh man yeah you guys keep you keep getting watered on this ride [Music] [Music] hey everybody welcome to episode 77 of the all in podcast less than 30 days for the sold out all in summit and uh there's a wait list but uh sadly i don't think we're gonna get to anybody on the wait list we've got a great great episode for you

i thought i'd bring a bestie guestie in but not tell my bestie so we'll see if they can figure out who's coming on the pod today uh but let's get the intros over with he's investing in sas at different stages coming off a miami bender for the ages doing shots with her boy and vanilla ice the rayman is back he's twice as nice david sacks everybody how are you sir how was your adventures uh with vanilla ice yeah i'm still here you're still here and so vanilla ice uh that costs sixteen hundred dollars to get him to show up what is cost to show up for a party that's about 10k i think it's about 10

to 20. no a little bit more really a little more and did you go on stage and do ice ice baby with him i didn't but uh there's some like teenage mutant ninja turtles type dancing around with him whatever it was interesting it was interesting people liked it it was fun it was fun oh very nice very nice and you're still in miami for uh whatever tech week okay so he won't eat your meat but i'll take your mdma he's very interested in your dna when he's in the lab he's in heaven he hasn't been the same since that rave in 1997 the lord of the laboratory the sultan of science david freeburg how are you sir that was my favorite one

i like that one yeah you peaked in 97 yeah at about 2am you were peaking at about 2 a.m did you say he doesn't want your meat but he wants your mdma yes he wouldn't eat your meat but you shout out to uh producer nick who really crushed it this week ah his bank this one is too funny it's hard to keep it together for these sometimes this bank account would make a crown prince jealous his knitwork collection is overzealous when he's on cnbc he makes a scene the last time he did leg day was 2019. the supreme leader of spock's the dictator himself i've been actually spending a lot of

time working out on my legs really i have been working on shoulders and chest and my legs have always been diesel i will be doing a shirt off selfie this summer jkl it looks like you have not uh bought new shirts since you lost all the weight because that shirt looks about five sides too big i bought this one halfway through the weight loss and now it's still too big so i got another slimmer i got the slim fit no i got the normal fit and then i got the slim fit from peak to now you've lost what like 50 pounds 213 pounds was my peak like four years ago and i was 167 168 the other day yeah so whatever that is 45 pounds it's awesome something

i feel incredible i started running again and you know i did 40 days of skiing this year and i'm gonna take up kite surfing i think this summer i want another sport to do you know in the summers are the people around you annoyed at your increased energy levels yes people who work for me are annoyed uh i'm sleeping better uh everything's just going better i highly recommend everybody you know just try to lose some weight a lot of options out there for you including munique all right we have a very special bestie guestie today he's a lean mean crypto machine who sort of looks like mr clean if you need some

tokens you know who to call satoshi has his picture hanging on his wall his nft game is never lacking if you talk about politics at work he might send you packing the king of coins the tycoon of tokens who is he brian armstrong riot armstrong armstrong you guys got it brian armstrong's with us hey brian how are you what's up y'all you could have gone vitalik uh at the first part but we became brian by the office part anyway welcome to the show brian uh we've obviously talked about you a whole bunch and you've been on this week in startups and i think you know while the fell is here uh but thanks for for joining the pod thanks for having me this is awesome

i i listen to your show every week oh thanks for that so i guess you know the the topic we all have talked about a whole bunch is um work and keeping people focused at work you took a very bold step which toby at chopin i think followed and you said listen if you're coming to work our mission is crypto can we stop talking about every other thing in the world and and just stay focused on that and i think that was maybe was that a year and a half ago you did that everybody wants to know uh how that worked out for the company so maybe you could tell us what it was like to go through that

because i mean you were a target for for a period of time we all thought seems reasonable and then how has that actually impacted day-to-day life for the people who decided to opt into working at a single focused coinbase yeah so i would say you know short term it was quite a painful transition i think it created a lot of consternation there was you know some folks in the media decided to go call a bunch of people who left the company and you know write hit pieces and all that kind of thing and frankly you know about five percent of the company opted into the exit taxes package so there was some teams that were short-handed a lot of people had to

work extra time to fill in the gaps but long term i think it turned out to be an incredibly positive decision for the company i do think there's a lot of companies in silicon valley right now and probably elsewhere is that you know the ceos and the management team almost feel like they're being held hostage by the employees and i feel for some of these organizations you know sundar probably has an incredibly difficult job right now we saw that that video from microsoft i think last year with with satya and kind of was with people talking about their hair color and stuff and they don't feel like that they can

really lean in and move the company in the direction they want and they're they're fearful of kind of all these internal dynamics so you know i think there's probably a better way to do it than what i did which is if you're starting a company today just make that clear up front i didn't make it clear up front and so the company culture started to diverge and drift and i had to kind of realign it which was which was a painful process if if i was doing it over again i'd probably just set that as the expectation up front and then there wouldn't be this you know public awkward realignment but yeah i

think i'm i'm really glad that i did it i think coinbase has been very productive since then and we've been able to attract a lot of the best and brightest people from some of these other companies that are like i don't want to be in those companies anymore i want to work at a company where we just focus on the work and the mission because that's actually important so i'd say it's been positive brian i've always talked about this as being like the difference between a hard culture and a soft culture where hard cultures are companies that really define what they do and what they don't do and what they spend time on and

what they don't spend time on and sometimes what you don't spend time on can relate to products sometimes it can relate to things outside or externalities to the business do you think that that's become kind of a trend where you know soft culture in silicon valley is more about like appeasing a very fickle employee base and as a result you kind of aren't as clear about what you're not going to talk about and are going to talk about and suddenly the troops rule the day and things get kind of sidetracked and productivity goes down i mean can you talk a little bit about what you've seen

you know with other cultures around the valley and how that's kind of affecting work and what employees are choosing to go to and not go to yeah so i think you know ben horowitz always talked about like wartime ceo peacetime ceo and frankly you know i'm kind of a conflict avoidant person right i never thought of myself as like wartime ceo we're just like we're all going in this direction let's go go go you know i never really thought of myself like that but i think what i'm trying to do now is find the happy medium between these two so you the company should have a really ambitious mission and then i think you as a ceo you do have to

say no to things which are off track from that you do have to part ways with people who are not helping raise the talent bar in the company and so in some ways you have to be i guess hard in that sense but i don't think it's it's not like you know we're only here to make money and it's like it's bonus time or you're out or whatever it's like we actually have a much softer culture than that i think in silicon valley which is most of the missions of these companies are trying to do great humanitarian efforts and they're trying to improve the biggest problems in the world and so people sign up for those because they want to have a real impact and you know we take time to like go for

exec off sites and we walk in nature and you know we have like coaching we do all this touchy-feely stuff so i think it's kind of a mix of both is the right balance i don't think of myself as like you know a wall street hedge fund or like the most touchy-feely culture you can imagine why do you think companies now have sort of veered into this place where they have to kind of appease these fringes on either side did you spend time trying to figure out like how did we evolve there from just being mission focused to having to deal with all this other stuff yeah i mean one theory i have on this is that in

silicon valley especially pre-pandemic we were all it was so competitive to get talent right you know google and facebook they were just kind of one-upping each other on like higher and higher salaries and so i i know as a ceo of a company that was rising at that time i felt incredible scarcity like i had people leave to get out who got better offers and it was like a real issue and so i was doing anything i could to retain people and keep them and so if if an employee said hey i want you know another flavor of water in the kitchen or whatever i was like okay maybe we should do it right but i think you know during the pandemic we removed we moved

to remote first as a culture the the talent like the talent we could get opened up by 100x of people all over the world who were really hungry and like frankly thankful for these jobs and that actually changed the scarcity mindset a little bit to say hey you know if you don't want to be here that's fine we can we have other people we can go recruit and hire in who really are going to value it that's probably just one piece of it it's a much more complex issue than that i think one other one other thing is that you know like google and facebook i think kind of made this a common trend in the valley where

companies would host these open mic q and a's on every friday or every two weeks or whatever and it was almost like a town hall it felt like a democracy right and in a democracy like the leader you know works for the people they're elected by the people um but what got very awkward was at these open mic q as it became you know this kind of like hostile thing of like how can we make the person squirm and let's ask them these difficult societal issue questions that aren't actually related to the company and what we're all building and you know i think that was actually a mistake in silicon valley we've since gotten rid of these open mic

q as because it really encourages people i'd say one we were like 150 200 people everyone was on the same page everyone was asking good questions once we got to like 500 700 people it started to feel like there was a little bit of an us versus them and then you know the questions got very off track and i i realized at a certain point this is not a democracy i want everyone's input i'm not going to rule like with an iron fist but ultimately you know i'm the ceo i need i need to help guide this company in one direction and force the hard decisions not everyone's going to like them so we're not going to allow people to do

grandstanding open mic stuff there's just a little bit of a risk for that you know 99 of people don't do it but even one person does it and it kind of creates the snowball effect so we got rid of the open mics people can still submit questions but they're there nobody else can see them we read them ahead of the q a and if there's a good theme in the questions we address it but you can't like grandstand with an open mic i saw this um so it was in twitter nick maybe you can find it but it was like this general that had commanded all of these different battalions and he was talking about what it was like in all the different theaters in which he's operated and he

basically said you know eighty percent of the men and women that served for me were just absolutely incredible you could always rely on them a hundred percent of the time they were a hundred percent aligned and then he said there was fifteen percent that was wishy-washy and what they were looking for was how you managed and dealt with the five percent and the five percent of folks were always trying to push the boundaries and try to figure out where the escape valve was or where the exception was or you know whether they would be grandstanding or whether they tried to break a rule and he said his entire energy was focused on keeping those folks extremely

focused and on point or out because that was what solved for the fifteen percent because the 80 would be fine but if you didn't deal with the 5 the 15 would go crazy and then the 80 would get dejected and it just kind of the whole thing would rot and it was a really interesting reminder that there's these people that come into these companies almost with the desire to see these companies go sideways or just waste their time which is completely counterintuitive because you think you join for the mission but they don't all the time and to be fair you i think told people listen you you could

as a group of people off hours create your own you know uh dinner party and talk about whatever topics you want this is just when i'm paying you to come to work for those eight hours you know on the company servers if you're using slack or whatever you know communication platform you're using let's just stay focused on getting the work done so this could be a viable enterprise but you were fine with people if they wanted to self-organize and do that on their own time correct you weren't saying you can't have political beliefs you can't care not care about blm or some right-winger that was one of the biggest um sort of misnomers or miss

characterizations yeah exactly deliberate mischaracterizations about the policy is that it somehow silenced people or prevented them from you know taking positions on issues or donating to causes they cared about the policy never said that it just said that while we're in the office together on coinbase time we're going to engage in coinbase's mission and avoid fractious debates that divide us yeah that's right and there's a time for those debates and it just might not i think a lot of this has to do with slack i'd be totally honest yeah when people are in a slack room and they're frustrated and people can have valid frustrations like there are things

in the world that are horrible and yeah you want to talk about it and yeah you build friendships at work it's completely understandable that people would want to blow off steam and but just people have to look at slack as not an aol chat room it's not reddit it's not aol chat maybe you could talk a little bit about electronic communications and then i think david has a follow-up yes i agree with you slack i think you know it's an amazing tool but it does start to turn into social media once you get more than i don't know 500 people in a room or a thousand people a lot of ceos i've been talking to we're all trying to figure this out because we

still think slack is a net positive to productivity but it has a huge negative in terms of just both distracting people with lots of things popping up all the time but also these kind of social media flame wars that emerge and mob like behavior so some of the things i mean we've been trying is for instance if we get any kind of a slacker room that has say more than 500 or a thousand people we'll often try to limit it so only you know you can you have to be a vp or level 9 and above can only post in there and other otherwise it's read only so we're trying to you know dunbar's number is 150 people right you're trying to think who who can you remember everyone's name and have some sort of

group affinity with them and any too much above dunbar's number we try to like cap it so it's a read-only chat room but i think these tools need to keep evolving and i hope some i know there's a couple startups you all might have funded some of them um that are working on this yeah there's an actual neat feature you can do in slack now where like that level 9 person can post and everybody else can post in the thread like you can reply to the thread but the opening salvos and thread have to be started by somebody in that sort of group so but slack definitely needs to double down on this i also think they put that random room in there

and you put the random room it's like basically waving the flag like it's random put stuff in there i think you got to delete that if you're running i tell all startups delete the random room and tell people do not post memes and jokes david you had to follow up one thing i was going to say is so brian i agree with everything you said the the one place maybe where i would nitpick in a way that gives you a little more credit is you found a coinbase back in 2012 right yeah so if you had created this policy on day one i don't think you or anybody could have predicted that these issues would arise the way they have i remember 2012 was the year i

sold my company to microsoft we never had to deal with any of this stuff and we were using we didn't have slack back then we were using yammer very open culture people could communicate on anything we never had sort of hyper activist employees the word woke didn't even exist yet and um it just wasn't an issue so it would have required you i think to see ahead so many years and i think what's happened is over the last several years there's been this drift towards you know employee activism inside these companies i don't think it's coming from both sides of the political spectrum to

be honest i think it's coming from the sort of hyper woke employees and they engage in petitions and letter writing campaigns and threats of boycotts and they sort of hector and mao mao these ceos to basically give in to them and we've seen it at apple the way that the apple was pressured to fire antonio garcia martinez and they gave in and now they have a letter writing campaign every month and you just saw it in florida i think bob um what's the name of bob chapter business i don't think he's going to survive the year after what just happened at disney and it's because he gave in to the employees took sides against the you know governor in florida and the

legislature and they just ripped away disney special privileges in florida you saw it at netflix where ted sarandos was sort of malmowed by these employees who want to cancel dave chappelle he ultimately stuck by chappelle but only after groveling to these employees and so i think we're seeing these issues did not exist even five years ago i would say and i think the reason why the coinbase story is so relevant to a broader audience and what you did with your policy is so relevant is i just think every company is going to have to make a decision sooner or later or on where they stand do you give in to these

petitions and mobs and boycotts do you allow unlimited activism inside the four walls of your company or you take some sort of more neutral stance where you say listen we're all going to leave our politics to the door so we can effectively work together on the company's mission i think every company eventually is going to have to either be coinbase or be apple you're gonna have to be coinbase or be disney you're either gonna have to give in to the mob and suffer the consequences or you take the short-term pain of doing what brian did and you basically realign everyone around the mission and a year later you're very happy with where you are the

good thing with netflix and disney though is that they're going to be very clear examples of the business impact of getting distracted and i think that you know brian took leadership but the business impact at least from the outside looking in was not really measurable obviously he felt that the team felt it whatever they did and that business is working but it wasn't done as a public company pre and post so the counterfactual is hard to measure in the case of disney and netflix it's really clear to measure right meaning in all of this confusion netflix has completely botched their business model in all of this fighting now internally

inside of disney not only are they going to lose essentially a fiefdom inside of florida but it's going to have repercussions with respect to taxes with respect to debt with respect to the quality of the service they can deploy and that will eventually flow through the business and that will be measurable by investors and i think david uh i think probably what i think which is a slighter sort of more modified version of what you just said is in the next few quarters i think ceos will actually be better equipped to numerically point to why taking brian's path is the value creating path for shareholders and for

stakeholders and the cost of getting distracted quote unquote can be really expensive if you if you are a for-profit company and you also have the option to run your company and say you know what we care about this issue a whole bunch we really care about human rights here we really care about communications and freedom of speech and i'm gonna run twitter as a freedom of speech company and everybody has to align behind that if you believe in censoring this is not the right company for you if you believe in policing speech or you're uncomfortable with uncomfortable speech uh or speech that

makes you feel uncomfortable you don't have to work at twitter so it's not like you have to you know do what brian did and say hey we're just you got to decide on this you're going to have to make a decision and be international about it i think it's the higher order bet no my i was just going to say my only point is in the absence of intentionality jason you'll slip into one realm or the other and not really know what you're trying to do i agree with you and my only point is that you'll be able to measure the impact of unintentionally slipping and sliding around yeah versus picking a course and sticking to it let me ask you guys a question if you're an individual

and you want to affect social change where is the forum in the theater that you think you would go to first you spend most of your time at work and um maybe you don't have as much free time to go march and protest in the streets and if you did no one would pay attention to you there anyway so saks like i know that you'll probably have a point of view on this but like if you're giving a 19 year old who has a strong point of view or 25 year old who has a strong point of view about something that they want to see change in society what's the right forum for them to have their protest and to make their voice heard i think that

companies are a great change agent i think we all do being in silicon valley creating startups we all believe that startups are a great way to change the world those startups have missions brian's company has a mission around crypto and ex and um expanding democratizing access to the financial system based on crypto elon has a company that is accelerating the world towards sustainable transport and sustainable energy he wants to make where i equip a little bit with what jason said about free speech i think elon wants to make free speech restore its place back in twitter's mission so it's not like a separate thing it's actually like should

be very core to what they do i think that there's a mission-driven company out there for any young person who cares about that issue right and if there's not if there's not a for-profit vehicle there's a 501 you can go join a nominee or star wars or start one exactly donate money to a cause you have the whole weekend you got me you can write a blog post what i don't think would work is when you have people who don't who aren't really mission driven their mission is whatever the current thing is and so they're just kind of like oscillating from the the one the cur you know from one current thing to the next

current yes and every three months there's an issue du jour that that you know they care about more than anything else in the world look there's not going to be a company that can accommodate that sort of fickle activism brian can i ask you a question are there um any um systems decentralized systems that uh kind of give individuals you know but you viewed interesting models that give people the ability to affect social change um in a way that kind of historically may have been more of a hill to climb where people can kind of aggregate resources and aggregate a voice in a way that can kind of affect outcomes and do we think that that kind

of becomes a mechanism for social change in the future you're making me think of dowels and things like that but i think a lot of that is kind of unproven like daos are probably good ways to get new kind of governance systems in place for allocating capital or maybe even managing a city or or a society but like you know i kind of agree with david i think the best way to affect change right now today is for young people is start a company or join a company i think young people are sometimes a little enamored with like becoming an activist but i think fundamentally that's you're sort of giving up your power by

saying like well they have the power and i don't and so i'm gonna speak truth to power but i think you know some there's context for that historically whether that may have been more true but i think today a lot of people they have more power than they realize and if you go start a company which by the way companies are decentralized too you can have lots of little companies all over the world um they're not like you know monolithic usually and so if they start a company they can have a good impact i think on the biggest issues out there and i think over time as well the way that you have real impact is that you prove yourself in the market of ideas to

have a high reputation and to be really reliable and that is not something that you can just overpower you know because you're 19 or 20 and you're really upset by something at some point you're going to have to really invest your time and dedicate yourself to something that you really really care about and then the world tends to move to the good ideas so i think part of like what we also need to remind folks is that this is a like if you want to make real sustainable change it's hard it doesn't matter in which area you pick it is just really hard but if it's really worth it you should give your life to it but what

i think people push back on is the more superficial forms of just virtue signaling and saying yeah in this moment i really want to pretend i care about something but when push comes to shove i'm not really willing to take the next step i don't i think that most people find that very unreliable yeah i think a good question to ask for somebody who purports to really care is like what do you care about that's not currently in the news you know that's not like the hot thing that everyone is basically obsessed with well and then how are you changing it and what is your plan to change it over the next decade or two

like you have yeah because it takes it takes it takes many years to effectively create a startup you know five years ten years and so if your issue does yours is whatever's in the news you're not going to create that kind of change you know i do think there are a lot of similarities between mission-driven startups and political movements you know i wrote a blog post called your startup as a movement where i basically say that you know good marketing is about evangelism it is has everything in common with what good political leaders do basically they critique the status quo they tell you what the world likes

looks like today what the problem with that is and where the world needs to get to what the solution is and then how they're going to deliver that solution so you can i think as the leader of a company be very mission driven you can bring about that change you want to see in the world you just have to attach a business model to it if you don't have a business model you're just collecting donations let's build on that brian what is the stated mission today of coinbase yeah our mission is to increase economic freedom in the world and if for people aren't familiar with that term economic freedom is kind of an economic term like gdp but it looks at the measures of different countries of

the world and looks at factors like are their property rights enforced how stable is the currency how easy is it to start a business you know is there corruption in bribery prevalent and things like that and what's really cool about economic freedom is that basically countries with higher economic freedom um you know like singapore and the united states and ireland they tend to correlate with all kinds of things we want in society not just better economic growth but even higher self-reported happiness of citizens better treatment of the environment better income for the lowest 10 in society gender equality all

that stuff yeah gender equality and then yeah countries with net low economic freedom you know cuba north korea sudan these are some of the lowest they tend to have you know even things we don't want like higher corruption higher war higher infant mortality so it's basically when i read the bitcoin white paper back in 2010 i had this thought eventually that was like maybe cryptocurrency is this unique moment in history this unique technology that allows us to inject economic freedom into the countries all of the world especially now that more and more people have a smartphone and we can basically put good financial

infrastructure good property rights you know global trade a stable currency into 200 countries all over the world as one small group relatively small group of people and hopefully it has all these positive downstream impacts so that's the mission of coinbase when you look at the regulatory environment uh it has been far from clear what's allowed here in the united states in fact you had a pretty um strong lee worded tweet storm back in september of 2021 some really sketchy behavior coming out of the sec race recently story time maybe you could talk a little bit about the sec's approach to cryptocurrency

versus securities xrp comes to mind and knowing your customer you've obviously taken a very conservative approach to what tokens you uh put on the platform and then you have competitors who are offshore who it's kind of yolo anything goes um what is the current administration doing right wrong and what needs to happen here in the u.s to for us to be competitive in crypto while still protecting citizens from you know being bag holders yeah it's a big question so you know as a startup you're always trying to thread the needle here you don't want to wait too long for clarity because sometimes these things take five ten

years and so you'll just never launch a product but if you if you're too aggressive you can blow the place up and so what we always did in the early days of coinbase is we said we want to go do what we think is going to be required in the future go get licenses go do kyc go go do aml anti-money laundering and so we tried to basically do the right thing go and talk to these regulators practically now the u.s has actually been pretty forward thinking on this i'd say every year we get more and more clarity so coinbase is now a very regulated financial service business you know i can go through the whole list we

have a license from the cftc a federal regulator we acquired some broker dealer licenses which the sec regulates we have money transformation licenses we're a bit licensed in new york et cetera and that's just in the united states so we're in many many countries around the world so how do we get more clarity well one thing i'll just say is it's actually better for there to be lack of clarity than to be clarity that is um punitive or bad so it's good that there's a little bit of lack of clarity as long as it's not curtailing the industry but would be even better is to have clarity that does provide that right balance of good

consumer protection you know make sure that there's a fair level playing field for all the players and then it allows innovation to flourish and so what's good now is that in the us um you know dubai administration put out an executive order recently kind of asking all the different agencies and departments to come back with a clear plan and they did recognize the potential innovation in crypto in that in that executive order which i was really pleasantly surprised to see um so what's happening now is that there was a little bit of jockeying i think there where the sec said hey these all look like securities to us and i don't think that's quite true you know the

cftc is regulates commodities while some cryptos are going to be commodities i think here's here's what i'm realizing is that crypto is going to be many different things it's not just going to be one regulator doing it so you know think about cryptocurrencies like bitcoin that's pretty clearly a commodity or ethereum right like many of these are ethereum commodities that probably should be regulated by the commodities regular the cftc now if people want to raise money for their company a security token that should be regulated as a security by the sec that'd be great to have more clarity on that let's have we would love to keep working with the

sec to make that a well trodden path that any company can go raise money and that's how it would get listed on an exchange like ours and we could register as a broker-dealer or whatever license is needed um separately there's also some cryptocurrencies that are going to be currencies like stable coins and you know maybe the treasury should regulate those and finally there's going to be cryptocurrencies that are none of the above they're artwork or something that's probably shouldn't even be regulated and so the us with various financial you know international bodies like g20 and fatiff and all these imf are probably going to

put some policy papers together we're going to eventually end up with some kind of a test that says is this cryptocurrency a commodity a security a currency or something else like artwork and then maybe maybe five more things we haven't even thought of that it'll end up being in the future what would you make the test for this is a utility token versus specul speculative uh security because that seems to be the one that's really hard for people to figure out if 99 of people are buying a token on coinbase because they want to see it appreciate and they want to see it gain value and only one percent are using it

for the actual utility of it is it then a security is it by the percentage of people who use it how how would you as the the you know the leader in this industry you know uh actually define it what's your definition yeah so i think look i i don't want to be presumptuous here i think that we can we can put some policy papers together but i don't want to be you know it's the policy makers job to come up with the policy so i don't want to step on anyone's toes but that being said i think there's some existing case law out there like you know the howie test is something from a long time ago we could probably build upon that so the howie

test kind of says you know is this an investment in a common enterprise with an expectation of profit and that would make it that would make it a security so there's a lot of pieces to that you know is it an investment well if you're just giving the tokens away i guess people aren't investing right is it a common enterprise well maybe if it's decentralized and you don't actually control this entity like um you own you know less than a majority share or something maybe then that's not a security right or if there's not an expectation of profit people are using it for something so every startup right now in the space has basically had to

hire a bunch of expensive lawyers to go tease apart these old old rules that some of them were created in like the 1930s you know before the internet and everything and try to understand where they're falling and so i think building upon that howie test but it could be something that includes a commodities definition something or currency definition you know i think we should basically it's on us and the other crypto companies out there to go hire a really smart lawyer who has drafted legislation before and a bill and actually get a draft of it out there and then we can start to circulate it with various policy makers and get their feedback and maybe they take it and run with it maybe

they say thanks we have it we've got it from here but that's our next step freedberg saks jamath would you go with the howie test um or do you have thoughts on how to how the government here in the u.s should say this is a security this is a utility token i think what the eo did was basically kind of give people enough regulatory safety in the sense that something reasonable will probably happen in the reasonable future so that people could keep building and iterating my big takeaway in the last sort of like nine months is that this thing is now too big to fail and the government basically has

to just find a reasonable framework to enable something because the alt the the real big issue jason would be if they did something crazy and now you know retail would just get completely smoked because i think they are the what do you think is reasonable i think congress has to basically pass a sensible set of legislations that clearly demarcate exactly what brian said this realm of stuff goes to the cftc this realm of stuff goes to the sec now you guys go and implement and if left to their own devices those two will use these arcane laws and try to negotiate amongst each other who should be covering what but they can't arbitrate that decision and so as a result nothing will nothing

reasonable will happen um so i think that's what has to happen congress has to get together and write something reasonable freedom you are building companies at the production board every year you build a couple of companies you have to go through securities law you have to you know raise money from accredited investors you do it in the traditional way but you must be looking at crypto saying well i could launch conor munich whatever project and have a token associated with it and raise money and raise it globally or start a dow what do you think is a reasonable way for people like yourself who are

playing by the existing rules to be able to embrace this new technology and these new platforms and paradigms i think how should the government handle it well some perspectives important which is you know go back to kind of the 1920s in the united states and there were pre-1920s folks would go around and tell tall tales about interesting business ideas or business concepts or things that they were going to do with if they got a bunch of money from investors and investors gave them money and they didn't actually deliver on what they said they were going to do and they got swindled and there was swindle story

after swindle story that you can read about and we saw this even with the ico craze of a few years ago right where people tell a tall tale you expect some value or some asset that you're kind of putting capital into that will pay off over time and there's a swindle behind it and that's really the origin of securities laws in large part is to protect the individual from being swindled to protect the storyteller that can take money away from people and figure out how to kind of rip them off and create a set of laws that the government can then enforce through the risk of imprisonment against doing those

things the challenge becomes when there's this more thoughtful way of running capital markets on the other side and how do we actually resolve to some medium ground here i'm not sure that you're gonna have as quick of a resolution to say well let's go back to the old way where anyone can say anything to anyone they want and anyone can put money into any project that they want because the role of the arbiter is to protect those from being taken advantage of if 85 percent of those projects are great and 85 percent of the investors are intelligent to know what they're doing it's the 15 it doesn't matter it's the 15 that the government is here to protect

and that's the reason we have an institution called the government is to create systems of protection for those who are otherwise unable to protect themselves now a free market libertarian might say we should have at it but the problem is we all have them we all feel as a group at some point a moral obligation to protect those who are unprotected and that's why these systems emerge over time and that's why these institutions exist that's why the government exists and it's why these securities laws exist and so it's difficult to assume that we can just go back to the kind of you know um uh prototypical days of you

know let me raise money for anything with any story without any regulation and assume that it's going to work out well because all it's going to take is a few of these stories before you have folks standing up in congress saying this is unbelievable we can't let this happen anymore let's go shut down the miners let's go shut down the data centers let's go after every asset we can and by the way they will because look at what just happened with russia the way that governments can kind of coalesce around digital systems now and make significant change and block things from happening i don't know if there is a world where we can assume that even with a free and open internet that these

systems can truly be decentralized given the reach that governments have and it is going to be in my mind i've said this in the past kind of the great tension of the 21st century socially is the decentralized systems that really want to challenge what we believe to be a lot of overreach that's happening by governments against the government's believed role to be protecting those who are who need the protection and so i don't know that's a very long-winded moral statement well i mean i think it's a very interesting one brian what do you what do you think of this i get it these are complicated issues right we want to

balance protecting people but we also want to not have the government be in a position where it's picking winners and losers and so you know you just because something is legal doesn't make it make it a good investment i guess you know you could have you could have owned netflix last week or something like that and you guys might talk about that in a minute but look i think we all want to get rid of fraud right so if you commit fraud meaning you lied to investors then that should be a crime right like we i want to i want to work with anybody in government to go put that make that stuff not happen the danger is if we

ever get into a place where we say well only wealthy people can now invest because somehow there's an accredited investor test that's inherently exclusionary i don't i don't like the accredited investor laws if we ever get into a place where the government is saying you know well you have to you have to have xyz criteria and a person with this many years of experience on their resume and then now we get into like the government sort of designed by committee to pick winners and losers and that's that's inherently flawed because you know a lot of true breakthrough innovation they look like bad ideas at the beginning they're

the kind of things that a government body would never invest in or put money into right so that's the inherent tension we have to worry about we're protecting people but not putting the government in the role of picking winners and losers sacks you have any uh input on this sort of framework you are investing traditionally in stocks but you have also um allocated some money to multi-coin capital and other folks who are buying tokens and then you have to distribute them and you have to deal with these downstream legal issues how are you dealing with them and then what do you think is a proper framework here in the u.s for protecting consumers

while allowing innovation i think the big picture framework that we have is correct which is you kind of have this dichotomy between security tokens and utility tokens so security tokens basically it's a token that's issued that it's basically like a share of stock or a fractional ownership in some business doesn't really have a lot of functionality associated with it that's kind of an end run around the securities laws they should be treated like securities on the other hand though there are a lot of tokens that are issued as part of creating a new kind of technology network and those tokens have real functionality and if you were to subject them to

securities laws and impose kyc and accreditation you have to go through all these oops just to add one to your wallet it would destroy the potential functionality created by these systems so where there's real utility like that i think the government should foster innovation by having a lighter hand don't subject them to securities laws and really what entrepreneurs need in the space are some safe harbors some really clear lines around what would trip them up and and have them cross over from utility token and security token so they know to avoid those things so they can continue innovating on their core project

i think that's well said i i have uh three ideas brian i want to run by you number one a sophisticated test for investors in crypto and in startups so just like you get a gun test or you know you test for a driver's license we come up with a way for people to become sophisticated they take a simple test maybe it's a you know whatever number of questions and then second maybe some safe harbors around the scale of a project so any crypto project under 10 million can be an experiment and you know it's kind of like no need to have rules people just have

to sign a disclaimer a waiver this is an experiment then things may be between 10 and 100 million you implement kyc and maybe throttle the numbers those are some good ideas for when you're talking about the bucket of security tokens if you want to start imposing those kinds of rules on utility tokens you can't have a functioning network with like all these sort of friction well hold on but if then if the project gets scale then you just have to file a little more have a little more kyc and then finally the founders of these projects they can just launch them and disappear they have no director-like duty to the project do you

think there needs to be something similar to directors in corporations so just three ideas there that i've heard other people talk about or i've been thinking about right those are pretty good i like those actually i mean the nice thing about a driver's license test for financial literacy is that it doesn't measure how much money you have so it would allow smart you know aspiring people who didn't start a lot of money um like a lot of us to also be able to participate early on in these which would be really great um yeah i think it's you know some kind of a safe harbor or sandbox provision i think is is a really great idea as well and lastly

yeah i mean if you were able to um basically i think your three ideas are great so those are good i think that they're good for securities but i mean should if you just want to buy gas on a blockchain to run your program or you're a user of a application that's being run on a blockchain you just want to buy a token for gas do you really have to go through all these like kyc type hoops hopefully not especially if it's if it's a utility i mean self-custodial wallets and dapps or decentralized apps are this huge area of innovation that you know you wouldn't want to like imagine if the us government had said

you need to come in and register to make a website or something like that that would have been a terrible thing for innovation globally so and you have to remember too that a lot of this is going to flow to the country with the most permissive laws so a lot of governments around the world not the most permissive but the most well structured that balances all that all the pros may be clear yeah the thing that i would just add to this though is that there's a lot more than just aml and kyc guys that has to happen for this to be a functioning ecosystem we average i think one hack a week in the crypto ecosystem right this bean stock happened like just a few days ago

that was almost 200 million dollars last month axe infinity what was that almost 600 million dollars so there's a lot of stuff where in the in the normal securities world like if you're a director of a company and you don't have these adequate procedures and brian you live this every day where there's like an audit committee and there's somebody that shares audit that has to go and think about information security and blah blah and all these disclosures have to happen insurance but all these disclosures are really about actual work being done if you don't do that work and then you get hacked you're actually liable right

there's no version of this in a world where it is a little bit of the wild west so that stuff also has to exist this is what i what i mean by i actually think congress just needs to kind of like update the set of laws that actually allow the cftc and the sec to do their job to include this and say now go and incrementally figure this out because even if you get the aml and kyc stuff right then there's all this other stuff where you know these folks that had they're basically you know all this all this value deprived who do they go to to try to get the money back you know in in the case of axi i mean

this is it's an incredible thing but like you know they went to andreessen and they raised a new round they're like we're just going to make everybody whole but that's insane right that's like not you can't expect that to happen with every single project every single company it's not going to be possible yeah well i think a couple things will happen i mean in the s in the custodial world of crypto there'll be more regulation there already is right like we we have a new york trust company that we get audited for various um control environments and safety and things like that but in the self-custodial world

everyone is going to start to be in control of their own assets and i think that you know the tools are getting better and better for that like you know social recovery of keys if you if you forget your password and these kind of smart contract wallets and so you know both are growing um and i think in the future people may actually start to take more responsibilities for storing their own wealth if they want to choose to do that and that'll allow them to kind of access a broader ecosystem of things let me ask a question brian uh everybody seems to be very concerned about tether you i don't believe participate in the tether ecosystem at coinbase is that

correct uh well we're not participating directly but we support as many assets as people want to use and that is one of the ones that we've supported people to deposit and withdraw in coinbase they've been um banned in new york they've had uh regulatory action in canada uh people are concerned about their attestations or lack of clarity on their commercial paper what do you think of these stable coins getting very big and maybe usdc seems to have it pretty tightly covered but there's all these concerns and regulatory actions against tether is

that a big nothing burger or does it concern you that there's a lack of transparency into their holdings yeah so i would say you know some of the early stable coin efforts definitely didn't have all their ducks in a row from a reputational point of view you know i'm not i'm not an expert on tether my understanding is that there have been some investigations and enforcement actions which have required them to go in there and clean up some things and um you know our our digital asset listing group kind of looked at a lot of this in depth and made that judgment called that where they where they were and where they are now

but yeah i do think that we're seeing the emergence of new groups like you know usd coin is one of those that i think has some better controls around it and there's actually a bunch of um stable coins now that are decentralized you know die and fracks explain what that is and why it's important well so okay so it really comes down to trust i mean you know you can trust uh you can decide to trust something like usdc that has kind of audit requirements and you know a big four accounting firm come in and look at it and things like that or you can look at smart contract code and you know thousands of people around the world can

look at that and there's an inherent bug bounty if you find an issue there and if it hasn't been found then you can start to think about trusting that now i think stable coins like like dye and others they've been able to create these um relatively complex systems that have sort of um that one asset which is intended to be stable but another one which is sort of the collateral and you could imagine various black swan events where you know the peg would get broken and things like that but it really hasn't happened yet in die and it's shown a lot of resiliency which i've been very impressed by there's one

actually one other um type of coin which i think is even maybe more interesting than just wrapping a fiat uh like a dollar or a rupee or something like that because frankly you know the dollar is seeing a lot of inflation you guys have talked about it many times on this show so do you really want to have a stable quote stable coin that is inflating you know eight percent a year exactly there's there's some new coins coming out which i've been really excited to see which are i think you know biology calls them flat coins but they're basically looking at the consumer price index and they're trying to basically have flat purchasing power and

assume that the dollar and various fiat currencies around the world are actually going to go through more inflation that's a pretty cool idea and you can do that in a creative way on a blockchain by having various oracles which are these sources of truth and if enough of them you know 51 of them tell you the cpi we think is this this year it can kind of keep keep pace with cpi which is a really cool innovation i think thank you so much for brian armstrong for joining us for the first hour and now we'll continue on with our netflix discussion brian's fantastic he was very honest he answered a lot of questions very honestly and he's a super fan of

the show that business is a great business that business would be a great business he's thoughtful we like somebody who's thoughtful i really think that the challenge that brian faced a year and a half ago and the policy decision he faced is now being faced by every ceo across america and that's the broad relevance is you know what are they going to do do you see this this quote by the mcdonald's ceo the former mcdonald's ceo ed regency on wednesday said companies have no business being in politics and has launched a new advocacy coalition to fight woke corporate politics he said corporations have no business

being on the right or the left because they represent everybody there and their sole job is to build equity for their investors wait the people who make fileto fish are not gonna chime in on ukraine anymore yeah but but think about that because that actually is a pretty radical it is a line in this end yeah he's standing on brian's shoulders let's be honest i think you know the ceo of mcdonald's i mean that's like a big you know traditional fortune 500 type corporation and they're saying like we're not doing this anymore well you know what they were more than willing to do it if it scored them points what they realized

was it's going to be a never once you engage that you're never going to be able to disengage from it all right let's pivot over to uh netflix they reported a drop in net subscribers for the first time in 10 years uh and the stock dropped 35 market cap from 155 billion to about 98 billion according to bloomberg as of wednesday netflix was the worst performing s p 500 so far in 2022 stock down 63 year-to-date ackman uh dumped his entire stake and booked a 430 million dollar loss and a large part of this was because they didn't hit their 2.5 million or so uh target uh increase in subscribers and they in fact

lost all seven hundred thousand russian subscribers as part of uh boycotting um uh russia because of the ukraine war what do we think is happening here is this a bellwether chamoth for something more important going on or is this just netflix not executing well i think there are there's a macro thing and then there's a netflix specific thing the macro thing is that we are learning the broad sweeping impact of apple's privacy changes in my opinion you first saw it flow through into facebook's earnings and basically them saying this is going to be really tough and you had netflix even if you add back

the russian subscribers basically spend almost 600 million dollars in the quarter on customer acquisition to effectively they would have generated 500 000 subscribers net of churn right which was still about a million and a half under where they needed to be so the point is that i think netflix in some ways was a little bit of a canary in the coal mine for the the shrinking um effectiveness of online advertising and i think that's why you then saw two days later facebook got taken to the woodshed in two days was down you know now it's down i don't know 15 20 percent google i think has been down a lot today it's

just getting absolutely smoked relative to the market so that's the macro issue which is i think um it's really hard for these ads to be as effective as they used to be and it's only going to get worse because google has also said that they're going to implement a lot of the same versions of what apple did inside of android so customer acquisition is going up so if you look at then all the companies that have to live and die on cac it's going to be an expensive road that's the macro thing i think that not enough people are talking about i think the micro thing inside of

netflix is that you know people churn out of a service when there isn't enough value and i think that's the most basic explanation of why so many people are leaving netflix is that it's not that valuable so when you're spending 20 billion dollars a year on content but people more than ever are leaving the service you have to inspect how much are you really spending in these areas and what is it actually creating in terms of like library value you know disney plus i think has gotten has done an incredible job in a much shorter period of time apple after only a few years wins the first oscar of any of the streamers

right beating netflix even though they've been in there and spent a picture for best professed picture but i'm saying yeah so when you put all these things together uh i think netflix probably has lost a little bit of the script but they're also suffering from a really macro headwind which is the advertising business is broken i would imagine that like total subscribers to streaming services and if you were to add up total subscription service dollars it's probably growing a lot oh for sure netflix's relative share is going down because the quality of the competitors is improving so much even companies that are not able to

deliver like cnn shut down cnn plus this week after investing 300 million dollars in trying to build out the service i mean folks are putting serious dollars behind these projects um and so the competition is fierce and they've got deep content libraries behind them i personally think hbo max is the best streaming service now awesome followed by disney plus followed by maybe a mix of amazon netflix and um you know uh prime and so like netflix's relative value is going down because there's so much other content when i'm kind of thinking about what to watch i'm looking at disney plus i'm looking at hbo max and i'm like hey you know what

should i watch tonight and then i look at netflix netflix doesn't have a monopoly in content anymore and so when i've got limited dollars i personally looked at this after we were texting about it i subscribed to seven streaming services right now and if i didn't care as much about how much i was spending per month i would probably cut three of them and netflix yeah you're you're also then highlighting the second i think macro thing that is actually equally important maybe even more important which is you know the the first rule of capitalism says that excess returns will always get competed away so you know netflix had the run of the place where

they were an effective monopoly totally and now when everybody else woke up and got religion they decided to invest and they've created some really compelling content and so all of those returns will now get spread across seven or eight or nine competitors which means that just by definition mathematically netflix can't win the way that they used to and the network advantage in the streaming model is content and consumers so you have better content you get more consumers you spend you get more money from consumers you spend more on content at some point you get diminishing returns in that network model and now we're seeing those diminishing returns hit netflix they haven't built

advantages in search and discovery or in other words social sharing or other features into the app or into the service that will give them more of a lock-in value because all i'm doing is buying con is watching they're also three times elsewhere they're also three times the price of disney plus and other services so they're in the competition space people are starting to look at and go is this worth you know a disney and an nbc or is this worth a hulu and an nbc uh streaming service sax you had some dad well i mean i agree with that i would just add one factor to this which is what elon said which is he said the

woke mind virus is making netflix unwatchable i mean the quality of the programming has gone down i mean netflix used to be really good i can't think of like a show now that i watch on netflix and i do watch hbo max right now and disney plus because they got some shows that i like so i think somehow the programming people on netflix have gotten out of touch yeah are they pandering to that audience sax do you think and you know similar to kind of how disney ended up pandering and do you think that there's broadly this kind of media problem of trying to pander to the wrong audience i mean they almost threw

chappelle off who's the number by far the number one comic in you know in american comedy and they absolutely would have thrown chappelle off and done what a lot of those employees wanted if they didn't have such a big deal with him if he wasn't such a big deal no i think they held the line pretty pretty there's a lot of groveling there's a lot of government i think they've reasonably heard the concerns of their employees and said we reasonably disagree can i ask you guys look yes maybe but what i'm saying is that that episode revealed that the people are doing the programming in netflix obviously

are like they're not like i think they've lost touch with where most of the country is i will give a shout out i have not watched a series on netflix in probably a year ozark no no no but i will give a shout out to never have i ever which mindy kaling created she's amazing and that series is incredibly funny and poignant and cool and awesome but outside of that series i cannot think of a single reason why i would actually pay for netflix let me ask you guys a question so going back to because you know there was the whole disney panda hbo max however oh my god so good the whole industry is suffering this problem do you remember this we don't even watch it anymore this is

the question i have for you do you guys think that there's a difference culturally in the management of the media company so let's go through them warner media disney netflix amazon and do you think that that cultural difference may create an advantage and success do you think that warner media is operating hbo max differently because they're culturally different yeah because they're culturally different culturally different they have no and for or tours hbo has always sucked for years they got a few good shows now it's it's more like they've always been for tours they always have

gone of the director the vision of the writer and taking a lot of risk when you hear that hbo logo i agree they have some really good shows right now but until the last couple of years it was like pretty dismal business but i mean i too freebrook's point you know that netflix i would say i would say disney has marvel and that's why they have marvel and star wars and that's and that's kept them extremely relevant and the advantage disney has is the uh re-watchability of their content i don't know how many times your kids have all watched moana my kids have watched i've had to watch moana 107 times already

let's hear it let's start yeah and and you're welcome yeah you're welcome and the um and the star wars content as you guys know you could re-watch star wars and marvel i mean like the the content is very different right pixar movies too you can watch 100 times over that's very different content hbo max is thrilling and engaging and doesn't feel like it's pandering hbo right now is operating at the next level i mean so many good shows it for me but netflix was five years ago so i understand but we're not talking about the past we're talking about here today netflix went with these very big deals with big celebrity names and you know i think they just lost their

uniqueness in terms of taking so they went with adam sandler no offense to adam sandler fans and they're doing a lot of reality tv now and if you look at hulu like dopesick and then the dropout if you look at apple tv ted lasso we crashed uh and then you look at hbo max with just uh you know euphoria by the way yeah even even i like i can actually can you imagine euphoria is it on netflix it would never be on netflix it would never get made it would never get made on netflix they don't want to take risk hbo is like for adults it's paid and they're going to take risk and disney doesn't can't touch that i think hulu is a sleeper i

mean hulu's great have you guys watched the series called the great on hulu no it's about catherine the great it is incredible i can't believe my videos i can't i can't open my subscription so i'm watching severance right now that's amazing it's like really like you know by the way i started paying for youtube tv so that i could get streaming cable oh yeah that's my number one my number one watch thing it's youtube tv because i don't know do you have youtube without ads yeah you i do youtube right now it's such a great way how do you do that right youtube red or premium youtube premium it's cool it's nine bucks a month tomorrow you can afford it

you see no ads on youtube ask your assistant to ask her assistant to sign you up and and you won't have to watch ads on youtube are you functionally not able to use the internet now i actually have people that do it for me do they type in your email password for you yes yes you're like how does this work and they're like there's a person right there netflix if i can't get the mouse to work he's got the vp of product from questron who lives in a little shack in the house next door who comes over and uses the remote for him yeah thanks for tuning in everybody for the dictator himself the sultan of science and david sachs we

have a jam-packed agenda my god the summit is going to be amazing let's just do a little recap here of what's happening um we've got some pretty great speakers ryan peterson nate silver uh claire vickel uh brad gerstner uh palmer lucky's coming elon's coming keith reboy's coming joe lonsdale tim urban wait do you see elon's coming oh is that what it says on the website yeah he's on the website now elon musk he's coming nice of paypal uh antonio gracias i mean we've got uh just an all-star uh kind of very bullied there and i think uh glenn greenwald and matt tybee are coming yeah that's gonna be amazing

and so it's gonna be really great all right everybody uh we'll see you next time on the all-in podcast bye-bye [Music] and they've just gone crazy with them [Music] besties [Music] your feet we need to get mercy's [Music]