JH: Tim, I appreciate so much the time, thanks so much for doing this for the german community.
TD: Thanks for having me on your show Julian.
JH: I would love to start off with a question that was crowdsourced on twitter by someone. Someone on twitter said, ask Tim if he would invest in a crypto project started by a 12 year old. I didn’t find anything on the internet about it so I was like okay let me lead with that question and see where this takes us.
TD: Yes, the answer is yes. Because I did. There’s a company called “pocket full of quarters” that was a contestant with the 12 year old and his father. Were the 12 year old was a contestant, very impressive guy, on the show we’ve got ‘Meet The Drapers’ and ‘Meet The Drapers’ is a little like a kinder, gentler Shark Tank but the viewers can invest through crowdfunding and we now have 12 million viewers around the world and not that many in Germany, so we’re looking forward to maybe some of them joining up. But we did. I backed him, he’s great and so far we’ve had an up round.
JH: Cool, okay great. Nice to start with that. I didn’t know that. Let’s go to some serious topics. I would really love to kind of discuss a bit of some current things. El Salvador just announced that they were gonna accept Bitcoin as legal tender there, how do you see that? And I would love to obviously tackle it a bit from from a political aspect. I mean the IMF has kind of voiced some concerns there. I would love to see how you think the US is going to deal with that. What are your thoughts on all that?
TD: Well first, it makes me want to go visit El Salvador. We have something called the draper innovation index at draperhero.org and that is an index of all the countries in the world and how they are accepting of startups and innovation. And really we’re just measuring their trust and their freedom. If you’ve got freedom and trust, that’s the best way to build a great economy. The more freedom for people to innovate and try new things and the more trust and trustworthy and trusting a government is, the richer it becomes. I might just use as an example, Korea, so there was the war in Korea and then for peace they drew a line between North Korea and South Korea and in the north they took on marx’s philosophy, a socialist dictatorship everything was government controlled. Everybody’s life was pretty much determined by the government, what they did, what they ate, all those things. And in the south, South Korea was completely a free market, democracy capitalistic, open system, open borders, free trade. And now that experiment has gone 70 years and the average South Korean now makes 460 times what the average North Korean makes in a given year and that is accounting for purchasing power. And they are now four inches taller than the average North Koreans, so freedom works. It just works. So that’s freedom. My best example for trust is that Singapore used to be the poorest country in the world and it was very untrustworthy and people looked at the world as a zero-sum game, for me to win you have to lose that kind of attitude and then Lee Kuan Yew came in there and he built trust in Singapore, one brick at a time. Just one year at a time he kept building more and more trust and now I would say Singapore is the most trusting and trustworthy country in the world and it’s one of the richest. So the same 70 years has shown that trust is incredibly valuable. So you put those two things together and you build for a great economy. El Salvador has just shown that they recognize that trust and freedom are really important to them, because Bitcoin represents trust in, that it is a series of algorithms that are going to always be the same and always be taken seriously by everyone involved and they’re all watched over regularly by a hundred thousand Bitcoin miners. And it’s freedom in that this is a currency that you are that is open and transparent and global, anyone can use it. The value is recognized globally and that makes it a good place to start for El Salvador and I kind of look at El Salvador as a poor untrustworthy, untrusting government that is now looking and saying, hey if we bring on Bitcoin, suddenly there is a store of value that everybody can trust. People can build something of value, they know that the government can’t take away from. If you’re in a lot of countries in Africa, some in southeast Asia, if you’ve built something of great value the government just comes in and either they take it, or they inflate out of it and you end up with nothing. One of my friends from Argentina said to me when he was pitching me his business, that his family has built a fortune three times and lost it to currency manipulation in Argentina and each time they’ve built the value and then lost it, built the value and lost it. He said, three times and I’m only 30 years old, so during my lifetime every decade the government has completely taken away the value that they created through currency manipulation. El Salvador has just said, hey we have a currency you can trust. So if you’re an entrepreneur, come here. All of a sudden El Salvador moves up 10, 20 places on the draper innovation index. So this is really exciting and Bitcoin is a great vehicle for a country to say, hey we’re in business, we’re allowing our people to earn, to build something of great value and keep it.
JH: The first time I invested in Bitcoin was 2014, when I invested serious amounts was 2015 and my thesis was never that of a cryptocurrency. Because I always mentally struggled that someone wants to use something as a currency that is deflationary and therefore probably sort of gonna appreciate in value rather than decrease in value. Do you see this as a possibility for them, that actually things will be priced in Bitcoin? Do you actually think people will use Bitcoin as a currency? Or do you rather think it’s a great escape mechanism whenever needed, that people can leave the dollar whatever local currency to go into Bitcoin and actually use it as a currency rather than just as a store of value as an asset?
TD: Actually when I went to Tokyo the last time, I saw this this jewellery priced in yen and priced in Bitcoin. I think there are places all around the world that are starting to say, hey you can get it in dollars, you can get in Bitcoin, you can get it in euros or you can get it in Bitcoin. When I went to buy a house, they knew who I was and they knew I was big in Bitcoin and they said, hey you can pay us in Bitcoin and I said no I’ve got diamond hands I don’t want to give up. And the same thing when Stanford was asking for money they didn’t want dollars from me, they wanted Bitcoin. So it’s starting to be recognized as something that has a value across the board. And actually a value that is not tied to any political force, any government, anybody who wants to inflate their economy. These fiat currencies are a thing of the past, in fact everybody asked me when are you going to sell your Bitcoin and I say into what? What would I possibly want to sell my Bitcoin into? Take the currency of the future and turn it into the currency of the past? It’s like I want to take my euros and convert them to deutsche mark. I don’t want to do that, I want to go for the currency of the future and so I look and I say this is what people will build businesses around. And it’s where they will look to how much Bitcoin they are able to grow and that will be a determination of how much they’ve been able to store. How much value they’ve been able to create and store. So I think it’s great and knowing that it doesn’t inflate when all these fiat currencies are inflating. People say, but it’s very volatile and I say, wait a second, no one Bitcoin is still worth one Bitcoin. All these other currencies are very volatile as they slowly disappear from use and I think that’s the way the world is moving and as these governments get more desperate, they print more money. They’re just showing their cards. They’re just showing that they cannot handle a flat, they can’t handle an economy that doesn’t have inflation built in.
JH: At the moment El Salvador is pretty much the only soldier as a country kind of doing that.
TD: Japan was really first, because they accepted Bitcoin as a currency.
JH: Right. Four years ago.
TD: Pretty sure that Malta will take Bitcoin anytime anywhere and I think there are several others but El Salvador made that statement just after that great Bitcoin Event in Miami and I think that that was very wise.
JH: How do you see the US and the IMF dealing with that?
TD: The IMF, this is great. I had this conversation with the President of Argentina at the time, President Macri and I met with him in 2017. Whenever Bitcoin hit 10.000, I think 2017. And I told him all about Bitcoin. I said you guys should put some of this into your national treasury. Then I came back two years later in 2019 and Bitcoin had fallen to 4.000 dollars and I said, I told you about Bitcoin and it’s gone from 10.000 to 4.000. He goes, yeah and I said, but the Argentinian peso’s gone from 75 cents down to 25 in the same time and I said I’ll make you a bet. If Argentinian peso outperforms Bitcoin in the next year, then I will double my investment in Argentina. But if Bitcoin outperforms, you’ve got to make Bitcoin a national currency and buy some for your treasury. Well if he had done that, today they would have paid the IMF everything they owed them. Their entire debt would have been clear. But instead he got elected out and some socialist has come in and now all the brain drain is leaving Argentina and going to Uruguay to where there is a much freer country. The IMF could have had their entire debt paid by Argentina. Maybe they doesn’t like that, maybe they want to lord this over Argentina but Argentina would have been cleared of their debts.
JH: Elizabeth Warren just came out or two days ago three days ago and voiced, based on some false facts, negative concerns against Bitcoin. How do you see that?
TD: I think politicians are going through a learning process. Janet Yellen is also going through a learning process, where at first she said, oh it’s all criminals and whatever. Then they realize that actually if people use Bitcoin, they’re more likely to get caught if they’re criminals. If you’re a criminal use cash.
JH: Yeah we saw this with the cyber attacks just one week ago where the FBI caught them.
TD: Right and the US marshal’s office has known this for years but I think that they’re still responding to articles that they read about Bitcoin five years ago, ten years ago maybe. They are not up to date and they need to get up to date before they start spouting off about whatever they need, they think that should happen with Bitcoin. I think it is really clearly very important if all these governments are all up in arms trying to figure it out. You know Bitcoin is a very important part of our future and here’s how I look at it. We’ve always been tribal, we draw a line, we say hey you don’t go over this border I don’t go over this border and we’ll have peace. And we’ll both prosper right? That happened for a long time and then all of a sudden the internet opened, that opened up the world and we realized, hey I can trade with you and we’re both better off. And you multiply one trade by the eight billion people around the planet and we’re all a part of this intricate web of economic systems and economics and deals and business and whatever. And it’s all inter related and now we realize how wrong the shutdown was, because now we’ve got shortages in all sorts of areas that we never thought would have been a shortage, but they became big shortages. You want freedom and you want trust in your system and now we become a global people and some people in some governments are trying to go back to being tribal. And these geographic borders are meaning less and less and less to all of us. We’re able to move freely around the world and find the government that’s right for us, you want to start a new business you can go to our draper innovation index and you can see where germany fits and you can see how it compares to switzerland and how it compares to france and how it compares to uk and how it compares to the US and then you decide, well where do I want to start my business. Well it’s going to be the country that provides the best freedom and the best trust. And that trust, if you’re using Bitcoin you have the most trust, because you realize you can build value in Bitcoin and then you can pay your taxes do all the other things that you would need to do. But um the governments that are the most accepting of Bitcoin are the ones who are going to thrive and the US benefited hugely. I remember all these arguments about the internet and they were going to shut it down and tax it, do whatever else. And then they started to realize that this internet thing is bringing in huge economic value to the country and they said, oh okay hands off, let’s just see how it goes and I think they should do the same thing with Bitcoin.
JH: Let’s hope. I want to talk about a fellow billionaire of yours Elon Musk about obviously him being a big cheerleader in february and then kind of going the other way a bit. Now he has kind of a back battled a bit with the mining. I actually want to ask you about the mining a bit later on Kevin O’Leary also came out with the green energy kind of focus there. But first I want to get your thoughts on Elon’s back battling a bit do you think a lot of rumors obviously on the internet go around that the US pressured him with all the the carbon credits or the green credits. What do you think went on there?
TD: Well first, Elon, let’s face it, greatest entrepreneur we’ve ever had. He’s so extraordinary, he’s created so much incredible value, he’s focused on like we want this world to be greener and better and so he’s created the tesla and it’s fabulous car, it’s better than anything else on the road. He said well we’re going to hedge our bets and go into into space and maybe we need to populate another planet and he created spaceX. That guy has done so much for humanity. Well he’s gotten a lot right, and he got Bitcoin right. I don’t know, I don’t think he responded to pressure, I hope he didn’t and I don’t think he’s responding to the fact that he can move the market. I sure hope he’s not front running his tweets but I think he got it right and then he got all these people telling him, oh it’s not that green because it uses a lot of energy. And then what happened was he realized that, oh well actually this is really good for clean energy because all these Bitcoin miners are innovating and finding energy where there never was before. And the overall price of energy is going down and over time the amount of energy it costs to throw a switch continues down. It doesn’t quite work according to moore’s law but it used to be five volts to throw a switch and then it was three and then it was 1.8 and it was 1.3 and then it was 0.8 or 0.9 and it has continued down and it will continue down. What we’re going to have is a whole bunch of innovation in clean energy, green and clean, because of Bitcoin. And then we’re going to see the need for that energy continue down over time, so Bitcoin ends up being a real boom to clean energy. I think Elon went from, hey this is really fantastic to, oh maybe it uses too much energy to oh wow the long-term effects of Bitcoin are going to be really good for our earth. And certainly it’s a lot better than the banks. I mean what, you drive to your bank branch, a whole bunch of people drive to commute to their bank branch. And if I’ve got to send money from one place to another I have to talk to somebody get a wired agreed to have the other bank have that wire agreed to it. It uses a ton of energy and then here’s the real killer. They talk about how much energy it uses per every time you move the blockchain. Well it turns out that the blockchain moves very slowly, but all of these solutions now that go off of lightning network or openNode are allowing the retailer to have faster response times than the visa network and use a fraction of the energy of the visa network. And so openNode now, I could be a retailer I can bring openNode into my system. What it does is, it takes the the transactions off chain, so they don’t have to all go through the blockchain. And so you don’t need all the miners wasting a lot of energy on small transactions and that was one of the arguments that people were making. I think that that was all overblown and I’m really thrilled that Elon has now kind of come back and he realizes, hey overall this is a lot better. Bitcoin is a lot better and he’s accepting Bitcoin for tesla’s again. Good for him, he’s gone through the whole thinking process and I think he’s come out to the right conclusion.
JH: Retail obviously follows him closely. How closely do you think institutional investors hang out with individuals pay attention to his opinion on Bitcoin? Do you think they move independently, they’re like screw what he thinks like I can make my own opinion or do you think they get influenced? Obviously retail always wonders.
TD: Elon’s got 20 million followers.
JH: I think he has 60. I think he’s blowing up and crazy on twitter. I think he’s insane.
TD: Right, yeah okay 60 million and I’ve got like 200.000. When he speaks, I’m sure there’s some institutional investors that are following. I’m sure there’s some individuals who are following and they’re saying, hey if he says yes, yes. If he says no, no. Because he’s been so prescient before with paypal with tesla with spacex. He’s been extraordinary and I think that naturally he’d have an extraordinary following of individuals, institutions of all sorts and if he says something’s the case, I understand that they’d want to follow him almost blindly. But when he reversed his decision on Bitcoin the first time went from positive to negative, he was wrong. And now he’s back and he’s right. And I think that all visionaries make mistakes, you’ve got to be willing to fail if you’re going to succeed that big and he has.
He’s been right a lot.
JH: Definitely and you don’t always have to be right. What are the projects aside of Bitcoin that you are looking at? Obviously you have invested I think you were really early as a VC to invest in many other coins aside of Bitcoin. You have seen value in those earlier on.
TD: We backed the two first ICOs. We backed Tezos and Bancor and we got a little bit of arrows in our back but we ended up by being pioneers. But we ended up with a couple of really good tokens there, fabulous. Then there was a flood of them and maybe I should have just backed them all, but I kind of pulled back a little. I just picked the ones where I thought the entrepreneur was extraordinary and doing something that wasn’t just a copy of Bitcoin, because I think those copies of Bitcoins will go by the wayside. I think Bitcoin is the great store of value, it’s the best place to be. But the copies, if they had really good uses for them I’d like them. And then we backed coinbase and that has been a fantastic company, will continue to be.
JH: You’re still holding even though they’re public?
TD: Yeah, diamond hands baby. I think that this is something that first we’re watching the entire financial system be transformed. I know these wealth managers who are saying, oh my god what can we do, we’re losing all of this money all my investors money is now going into crypto. What can we do? And so then they’re rethinking their business and they’re rethinking how do we create a crypto economy, a crypto product for them. I think it’s just a unique time you’re going to see the transformation of some of the biggest industries in the world, finance, banking. We have investment in Crypteo, which allows you to take the blockchain data and turn it into financial statements. And that will make it so that I can have my my big dream of raising money. This company Crypteo can give me my big hope of raising a fund, all in Bitcoin. Investing it into a bunch of portfolio companies in Bitcoin having them pay their employees and suppliers in Bitcoin and have the entire system on smart contracts. And then what can happen is, that the taxes can be taken out automatically, the accounting, the auditing, the bookkeeping can all be done automatically you don’t need the accountant the auditor or the bookkeeper to do that. Gives them a higher and better use for their high brain power and then the legal can all be built into software on a smart contract and the lawyers no longer need to fight about it, because everybody’s agreed to the smart contract. I actually think this is going to be a whole new way for business to operate and I’m hoping that it comes soon, because I would much rather raise a fund in Bitcoin and operate it in Bitcoin, then raise a fund in fiat and then operate the old-fashioned way.
JH: What other sectors, other than crypto are you looking at in investing or is crypto the only thing you’re looking at, at the moment? I would assume you look at other sectors as well.
TD: I look at everything I love healthcare, I love what is happening in healthcare all the diagnostic treatments are all data now. They’re all data driven, in fact our company cloud medics did a better job, they outperformed the average doctor in diagnosing disease and the way they did it was just with people’s health care records. You combine that with their blood test results with their genetic history, with the airplane seat they sat on, the food they ate, where they’ve been, who they’ve interacted with. You start putting all that data together, you’re going to have a really good idea of how diagnostics can just be done by data and when combined with a doctor they’ll be even more productive. And then therapeutics are going to go through that, a big change too, because you notice that we were able to come up with a vaccine for Covid very quickly and that was because the entire wet lab has been completely transformed into the dry lab. The dry lab is using computational biochemistry to design drugs and it’s amazing how these drugs can predict how something would happen in the wet lab in the chemical, when you’re actually combining blood with drugs and seeing what happens. And so we ended up with a vaccine faster than ever before and that is really the beginning of really changing health care as we know it. I think that’s going to be fabulous, we have a couple of companies atomwise and verge genomics that are just going after computational biochemistry and hopefully they’ll be able to solve problems like ALS and cancer and Covid.
JH: Cool, Tim I promise you we’re going to stick to around 30 minutes. Is there any last topic where you felt I didn’t ask or something you want to get off for the viewers?
TD: Yeah, there are other things I’m kind of looking for. So any entrepreneurs out there, I am [email protected] Only if you have a business plan, don’t send me your life story or anything. But entrepreneurs please do send me your business plan, particularly the things of particular interest to me are any kind of decentralized world that we’re going to move into, where the borders become less relevant. Any kind of new health care system, any new using Bitcoin for insurance. I actually imagine an insurance company of the future where you pay your premiums into Bitcoin wallets for the insurance company and then the insurance company uses surveillance and you actually get the money into your Bitcoin wallet, before you know that your house burned down or you have cancer or whatever. Because they used surveillance techniques that weren’t available when old insurance companies were created. I actually think that we will now move into a period where there’s a new kind of insurance company and what is government but a series of insurance companies, your health care insurance your workman’s comp, your unemployment insurance, your pension, your social security, they’re all welfare they’re all insurance programs. Insurance can be done where it’s completely automated and that automation is going to be able to replace many government workers and those government workers will then have higher uses. My son said AI is going to take everybody’s job and I laughed and I thought, he’s right AI will take everybody’s job. But then their jobs will be much more interesting and more valuable and more creative and that’s what’s happened. I mean the plow or the tractor, they’ve made all of our lives much more interesting and artificial intelligence is just yet another anthropological leap, so very exciting. I’m after whatever you as entrepreneurs are generating. I’m very interested in hearing what you’re doing.
JH: [email protected] we will link that up down below. Your twitter handle anything else we should look at?
TD: @timdraper, very simple that’s my twitter handle. And I encourage you to, if you’re an entrepreneur and you’re trying to figure out how to build your business or if you have what it takes to build your business, I encourage you to try draper university. Either the online program or the hero training which is in person. We’ve turned out a couple of unicorns and some extraordinary entrepreneurs from draper university. And it’s only 10 years old so we’re making a lot of progress and we encourage anybody with entrepreneurial verve and a little passion to apply.
JH: Cool, we’ll link everything up down below and I’m sure a lot of people can be interested in that. Cool.
TD: And then they can go to meet the drapers.com to either apply to be on the show, it’s interesting these entrepreneurs are getting like a million dollars of crowdfunding for being on the show. And now the limit has gone up to five million dollars in the US, so that’s going to be very exciting too. We’ll see you next season meet the drapers.com. Very exciting. Thank you so much for having me Julian, I appreciate it.
JH: I appreciate the time. Thank you we’re going to be in touch. Thank you all the best bye.
TD: Bye bye.
JH: Thank you.
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