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Hi, I'm Jim O'Shaughnessy and welcome to Infinite Loops.
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Sometimes we get caught up in what feel like infinite loops when trying to figure things out.
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Markets go up and down, research is presented and then refuted, and we find ourselves right back where we started.
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The goal of this podcast is to learn how we can reset our thinking on issues that hopefully leaves us with a better understanding as to why we think the way we think and how we might be able to change that to avoid going in infinite loops of thought.
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We hope to offer our listeners a fresh perspective on a variety of issues and look at them through a multifaceted lens — including history, philosophy, art, science, linguistics, and yes, also through quantitative analysis.
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And through these discussions help you not only become a better investor, but also become a more nuanced thinker.
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With each episode we hope to bring you along with us as we learn together.
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Thanks for joining us, now please enjoy this episode of Infinite Loops.
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Disclaimer: Jim O'Shaughnessy is chairman and Co-Chief Investment Officer of O'Shaughnessy Asset Management, where Jamie Catherwood is an associate.
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All opinions expressed by Jim, Jamie and podcast guests are solely their own opinions and do not reflect the opinions of O'Shaughnessy Asset Management.
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This podcast is for informational purposes only, and should not be relied upon as a basis for investment decisions.
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Clients of O'Shaughnessy Asset Management may maintain positions in the securities discussed in this podcast.
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Jim O'Shaughnessy: Well, hello everybody.
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It's Jim O'Shaughnessy with another episode of Infinite Loops and I'm super excited about my guest today, Zach Resnick of Unbounded Capital.
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I got a chance to meet Zach at Capital Camp, which is a little soiree that my son and Brent Beshore put on.
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And I personally think now, obviously I'm going to say this because my son is involved, but I honestly believe that it is probably one of the only conferences that I would go to because it's filled with interesting people.
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There are lots of fascinating discussions and one of which led to me having Zach on the podcast. But so we bonded.
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We were chatting about several things.
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We bonded over music and travel, which we're going to talk about later and about what is now, which just baffles me living in the United States of America, the seemingly controversial opinion that the individual should have maximum freedom.
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And the country they live in should have a rule of law. Welcome Zach.
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Zachary Resnick: Thanks for having me on today, Jim. Really happy to be here.
3:04
Jim O'Shaughnessy: So one of the things that I loved about our conversation and I'm just going to let you go because you looked at me and you said, and I admit that I know very little about Bitcoin.
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I'm studying it, I'm studying it, I'm studying it.
3:18
And maybe it's because I'm old that I'm not getting it entirely.
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It doesn't mean that I don't have some investments in it just to sort of see what they do.
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But you had a really interesting take, which by the way, you spell out very eloquently at your website, which we'll have in the show notes about why you believe in Bitcoin.
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Basically Bitcoin is a network created by incredible potential, right?
3:46
And one of the things that you say though, is you only believe in a specific kind of Bitcoin and I'm just going to let you give us your thesis. I will not interrupt.
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Zachary Resnick: Well, thank you, Jim.
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And just to kind of define some terms when I use the word Bitcoin, I'm talking about the technology or the network of which there's several different primary implementations.
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And when I'm going to talk about a specific asset or an implementation, I'm going to use the ticker symbol.
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So the popular version of Bitcoin is BTC.
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There's another one called Bitcoin cash or BCH.
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And then the there's another one called Bitcoin SV.
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And that's the asset and the network that I think is going to really transform the way that we interact as humans in the world and how our global financial system operates.
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So I think I want to first start with just what I'm excited about with Bitcoin, which is the possibility for a public database at scale.
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So historically all of our data has been in various different types of private databases.
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Pre-internet, pre-computers, these databases were physical.
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Then we kind of move these databases onto intranets.
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Then we moved it onto the internet, but still even doing this zoom right now, we're not using any type of public database.
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We're accessing probably somewhere between thousands and tens of thousands of different private databases today to have this conversation, there's a lot of things and for most data where that's the most efficient way to do things, but there's a lot of data, especially really important and secure data.
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We're putting it on a disparate amount of private databases rather than encrypting it and putting it on a single public database.
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Doesn't make a lot of sense.
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And we haven't seen, I'd say the move to a public database and mass yet, largely because most people in the crypto and blockchain world are not excited about scaling blockchains and having there be scalable public distributed ledgers.
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But they're really excited about inefficient ledgers that can be used to facilitate illegal and extra illegal activity.
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And I think that's a pretty strong claim.
5:56
Most people that are say excited about the BTC version of Bitcoin Ethereum, most crypto assets would not characterize their view.
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As we're doing this to optimize for activity that governments don't sanction, but whether they think it or not, the design choices the developer is behind these networks do.
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So when you look at the BTC version of Bitcoin, what you see is a version of Bitcoin with a severe limit on scale where the size of each block and the blockchain can only be one megabyte.
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And they're doing that because they want to make sure that if the government ever said, "Hey, you can't use the Bitcoin network or you can't use the Bitcoin network for X," then they would be able to on their phones, Raspberry Pi’s and laptops run the Bitcoin node software kind of in resistance.
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And the problem with scaling blockchains is then the blockchains get too big to run the node software on your phones and computers.
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That's what happens when you have economies of scale and efficiency.
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You go into data centers and highly specialized equipment.
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So that's kind of the core optimization that the Ethereum blockchain today makes.
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That the BTC blockchain makes.
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And I don't think that optimization is one that most people in the world want to make.
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I understand it for those that have a kind of a more niche anarchist point of view, and I'm a freedom loving, libertarian type of guy.
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I just think openly antagonizing governments and financial regulators around the world is not the most likely way of achieving freedom, call me crazy, but in the crypto world today, that is.
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So what is Unbounded focus on?
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We focus on scalable blockchains and from our perspectives there's really just one of those today, which is the kind of original vision and version of Bitcoin or Bitcoin SV.
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And rather than optimizing around kind of facilitating a very small number of financial transactions for a specific purpose.
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Kind of the original form of Bitcoin outline in the Bitcoin white paper or as today in the form of Bitcoin SV wants to have a scalable public ledger, such that, yes, you're doing lots of payments, but you're actually going to be primarily using it to store and interact with different types of data.
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And that's only possible when you have the capacity for a lot of data and when it's really fast and cheap to use.
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So there's whole business models that aren't possible today because we've never seen a micropayment or nanopayment technology take off at scale.
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We have that technology today with Bitcoin SV and kind of, from my understanding, the easiest and kind of most secure way to do micro and nanopayments.
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So I'm really excited to see how that's going really transform our world over the coming years.
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We definitely have some theses at Unbounded about which industries are going to be most affected first.
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I'd say we're definitely interested in exchanges in gaming say before we are healthcare.
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But I kind of view this as like in the mid-nineties even if you're the smartest VC investing in the internet, having a high conviction view about which industries are going to be majorly disrupted in three to five years is going to be really hard.
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So we just try to stay on top of it and support the entrepreneurs that are doing really ambitious things, where they need a scalable blockchain and where specifically Bitcoin SV is the only thing that could allow them to achieve their vision. Jim O'Shaughnessy: Wow. So that was very clear.
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And even I understood it, which means most people are going to be able to understand it.
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So tell me other than it's a provocative claim to say that many of the developers of BTC are doing that to enable basically criminal activity.
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And so we'll set that point aside for a minute.
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I understand it because of the limitations.
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Absolutely, I do understand it.
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Tell me why though, I mean, because you got me sold, why is your thesis not the dominant one right now?
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Zachary Resnick: So I think because of religion and tribalism. So the crypto world...
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Most of the wealth today in the crypto world is not held by large institutional investors.
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And if even those that are holding it, they aren't high convictions such that they're going to hold all the way down, say a 90% draw down or something.
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The people that are really moving markets and crypto are those that were in there to some degree early.
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And what are all the early crypto holders have in common, that for the most part they had a very kind of niche anarchist view, a form of libertarianism where they cared more about enacting that value in the world than making money.
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And typically markets are most efficient when people are kind of are trying to make money rather than trying to be part of a cool club or trying to change the world.
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I'm someone who cares deeply about changing the world.
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And I think doing that through companies and networks is really great, but I think trying to find the alignment of where things are creating longstanding enterprise value and making that positive change is the most likely way to achieve that.
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But I didn't always think that.
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I used to be kind of in this crypto consensus and naively thought that how could governments ever take down Bitcoin?
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We won't let them, we'll change the code.
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So network will be really small and they won't be able to do anything about it.
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I used to think that like most of the folks in the crypto world today.
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And when you have this kind of niche point of view, and you're probably an outsider for a lot of your life, maybe most of your life, and then you make more money than you could ever possibly imagine by doubling down on that viewpoint with this thesis.
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Are you really going to change your mind?
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And kind of the crude analogy that I like to make is, imagine your Hasidic Jew and one day because of these rituals that you're following you hundred X your net worth in a year.
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Are you going to be more or less likely to be open to another way of living your life?
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So I wrote a short piece on this that maybe you could link to in the show notes on kind of the crypto religion, but I really think it's fundamentally a psychological phenomenon, more so than a rational phenomenon.
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And most of the people that I speak with, my viewpoint sounds reasonable.
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Then they kind of go out and talk to their crypto friends or read mainstream crypto sources.
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And at some point maybe it sounds less reasonable after kind of that telephone game.
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But I really do think that as kind of blockchain grows, people will be excited about it for what it can do in terms of mass consumer adoption and changing mass industries, not kind of growing industries as large as we can in this kind of like outside of the reach government sphere.
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Seems reasonable to me, but you know, Jim, you're right.
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It is kind of a contrarian view right now.
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And we'll see how long that lasts.
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I have a lot of confidence that in the next few years that we'll go from kind of the contrarian view to a more mainstream point of view.
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But there's a lot of misinformation and the Mike Novogratz' of the world, for example, would not say that they're really long these assets because of these kind of specific optimizations.
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And most of the folks that are buying into these assets, I think don't understand really why these networks stop scaling.
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So I view not just kind of for our fund and our portfolio companies, but also kind of for just the development of the world.
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I feel a responsibility to kind of make that truth understood because right now we have so much capital going into these kind of glorified Ponzi schemes in the crypto world, rather than going to the hands of entrepreneurs, really changing the world for the better.
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Jim O'Shaughnessy: Wow, great answer.
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And you hit almost all of my hot buttons.
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You must have researched me.
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Zachary Resnick: A little bit.
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Jim O'Shaughnessy: The personal experience that you note with the Hasidic Jew a hundred X-ing, his belief system. Whoa.
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I mean, so I've done lots of research into belief systems.
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Man, oh man, they are incredibly powerful.
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They've even gotten me to the point where I try not to use the term "I believe' anymore.
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I try to use the term "I have a thesis" or a "hypothesis" because on the one hand beliefs basically are unfalsifiable, right.
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If we're going to be all Karl Popper about it.
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And if you have unfalsifiable position, well, okay.
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It's not something that you can go on by the way, to use your own idea to mainstream it because a lot of people are going to look and they're going to say, "Well, what about this? What about this? What about this"?
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And you're just going to say, "Ignore that right.
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Pay no attention to the man behind the curtain."
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So bingo for me, at least on the power of belief, the religious aspect, I also bing right there with you.
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Now to be fair, we've seen that happening.
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I have this thesis about what's going on right now.
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I call it the great reshuffle.
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And lots of things are changing.
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I think many for the better, for example, mainstreaming a blockchain that can do the things that you envision, like that is amazing.
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And I want to talk in just one minute about where you see the greatest use cases for that kind of blockchain.
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And then finally the promotional nature of a lot of people.
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I've been an investor in a fiduciary for a long time.
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And I call it the cringe factor if there's somebody who is unwilling to admit that whatever they're advocating for has some flaws, right.
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And when questioned about it, either try to change the conversation or go back to their script.
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All of that raises a red flag for me.
16:05
And obviously not all folks that I talk with about these new technologies are in that space, but I think that you're very right about the tribalism and it's not just confined to Bitcoin, right? It's like everywhere.
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Maybe we can chat about that a little bit more later on, but for right now, give me the five best use cases for your version of Bitcoin.
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Zachary Resnick: So I think a lot of it starts with micro payments and that's the area that I'm most heavily invested in and most excited about in the near term.
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So with any system you're only as strong as your weak link and at Unbounded, we would argue the Internet's weak link is payments like it's its first, second, third, fourth, fifth weakest link, every single regard.
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So I read a lot of financial newsletters, probably a lot of people listening to this are also fans of Matt Levine.
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He also links to other stuff at the bottom of his newsletter.
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I'm a subscriber at the Bloomberg, The Wall Street Journal, but not every single one of these things.
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So sometimes I click the financial times article that seems fun.
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And then I'm told I have to not just pay a bunch of money to become a subscriber or pay a small amount of money for a month and then pay more money later when I'm more likely to forget, but I have to go through all this effort to do it.
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And I read it on my iPad and it's just a terrible user experience.
17:28
I'd love to be able to swipe up and just pay 10, 20, 50, $2 for the right article. But I can't right now.
17:33
And that's not because there's a lack of, I'd say consumer preference for this, it's because we haven't had the technology until recently.
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And now most folks don't understand the technology or how to use it such that you can do micropayments in a secure, fast way.
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So if you could just with your apple pay do these really small payments, then how I consume articles, and this applies broadly to really all content, will radically change.
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So I still think there's a room for subscription models, but having subscription or bust is quite terrible.
18:06
And this also kind of goes into with the incredible market of online advertising, one of the biggest markets in the entire world, which is today we've monetized our internet by monetizing your attention.
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And there's a lot of people in this world that would much rather just trade that fair market value for your attention, which we have no sense of because there's no liquidity and no efficiency and price discovery in Google's algorithms.
18:32
But I also think that will change.
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And I think probably, Jim, you and I, in 99.
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9% of cases, maybe even a hundred, we'd rather just pay the money than trade our time for attention.
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And for centering on things.
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Maybe there's a few cases when I'm doing research where to buy something where I would want a targeted advertisement, besides that I pretty much never want them.
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And I'd love to be able to express that preference.
18:54
And today we don't have the tech stack to do that.
18:58
But when that changes, not just the way that kind of all consumer, I'd say content products will run will change but fundamentally the way we think about things will change is there's no longer going to be as much of an economic incentive to program us via advertising.
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It will be more just on kind providing quality content and we're seeing kind of more distribution of this information with things like Substack.
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But I'm really excited for the millions, the literal millions of business models that me and my partners and no one could come up with right now, but only the ingenuity of the entrepreneurs over the coming decades will once it's actually possible.
19:33
So that's kind of like one example of micropayments, but I think there's whole new business models, whole industries that are going to be wildly disruptive when businesses can profitably, say charge you 1 cent and have high margins. Jim O'Shaughnessy: Wow.
19:49
I mean, I completely agree with that.
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Again, the assessment of not wanting to be the product is near and dear to my heart.
20:01
Not wanting my attention to be monetized by someone else.
20:01
I'd like to monetize my attention, right.
20:10
I have a friend Brian Romelle, I don't know whether you're familiar with Brian's work, but he's nailed a lot of what's happening.
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And he has a history and actual dated things that he wrote.
20:24
And man, he's got a great batting average and one of his current...
20:24
I'm having him back on the podcast.
20:31
I'm really excited about that because sometimes he just goes offline, which I think is kind of cool actually.
20:35
But one of the things that he's been pounding the table about is that our current methodology, especially with social media, is exactly upside down.
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In Other words, Brian believes and I share this belief, that you, Zach, me, Jim, we should own our data and we should be able to decide whether we're going to sell it or not.
20:58
It puts the shoe on the completely different foot.
21:07
It turns everything upside down, I think, but man, as you point out the potential for this is almost limitless in terms of what future entrepreneurs will be able to do using that system.
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I have a little experience watching micropayments, not of this nature, okay.
21:33
Let me be very clear about that.
21:33
But this in the physical world, I in the past have supported a charitable foundation called the Acumen fund.
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I don't know whether you've ever heard of them. Zachary Resnick: I have. I've read her book. [crosstalk]. Jim O'Shaughnessy: Yeah.
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So one of the things that they did was introduce the idea of micropayments and micro loans.
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Most of their work is done in the emerging countries, but man, did it like transform the ability of farmers, the ability of people to buy land, the ability of people to buy mosquito netting for the avoidance of malaria.
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I mean, it was wildly successful.
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So that's it in the physical world.
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Imagine it with the unlimited leverage of the digital world.
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And man, that gets me pretty excited. Zachary Resnick: Yeah.
22:34
I'm really excited by this all.
22:34
And I view so much opportunity in funding entrepreneurs and funding people in the developing world.
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Even now today, the average interest rate that an entrepreneur, that a person is paying for say a loan in the developing world is so, so high.
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And this is in a world where you have some institutions that are happily losing their money with negative interest rates in a bank where they could be coming in and loaning at 20% annually and being at half or less of the market rate for that.
23:04
And now with the data you're going to be able to collect by having all of these micropayments, you'll be able to underwrite so much more effectively.
23:14
And this is also being said about what's FICO scores are probably the best at scale credit metric that we have, which is pretty laughable in 2021, as someone who used to run a couple businesses of getting the best of these systems.
23:34
Yeah, there's a lot of room to be desired.
23:34
And if you could easily in an anonymized way, say, look at effectively every transaction this person does on their phone or on the internet, you'd be able to perhaps underwrite better than someone you have years of traditional banking has with.
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And we even have a portfolio company that's working on this problem in Western Africa.
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And I think they're going to be one of many companies that just kind of really accelerates the flow of capital from the developed world to the developing world out of profit interest.
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And I think that the biggest opportunities over the coming decades will be not in the developed world where markets are most efficient.
24:13
Jim O'Shaughnessy: So younger people, mostly, some people a little older, but mostly younger people seem to have a somewhat negative view of capitalism.
24:25
And this makes me crazy because what they have a negative view of and what they should have a negative view of is crony capitalism, where regulatory capture by big firms, regulatory capture means they bought and paid for the people who make the laws, in many respects sometimes...
24:53
I mean, when do you think the last time an actual congressperson actually wrote a bill? Huh? Hint, a long time ago.
24:58
They're currently written by lobbyists.
25:06
And for the most part, there are some Congress people who will even admit that they haven't read it.
25:12
They literally have not read the bill that they're sponsoring. That is insane. And so [crosstalk].
25:20
Zachary Resnick: Well, you can't though.
25:20
I mean, if you read every single bill, you might not even have enough time to sleep with how long these bills are now.
25:25
Jim O'Shaughnessy: Well, exactly, right.
25:27
Gettysburg Address, how many words is it? Like 850. So you're exactly right.
25:37
And so the way that things are going right now, I think crushing crony capitalism is a high priority because I think that younger people, if they understood the free market, which is a completely different thing, right.
25:54
The free market is what enables all of the cool stuff that we have for the most part. Right?
26:01
Look I'm not panglossian here.
26:09
There's problems with everything, and there will be problems if we even move towards a freer market.
26:14
I believe passionately in the freedom of speech and the rule of law, and when you have those things if you look at the results over long periods of time, wonder of wonders, the countries that have freedom of speech and the rule of law, do vastly better than countries that don't.
26:32
Another thing that I think the free market can really help with is, it's a wave that is almost, if you let it happen, could be a tsunami, and it would just literally go over the crony capitalists, the people who have regulatory capture, and that's why I'm excited by it.
26:57
I think that if people would expand on the difference between crony capitalism and free markets, they're very, very different things.
27:12
It's one of the problems with people who become label thinkers, and I know you love poker and we're going to talk about that a little bit but, this is fantastic as far as I'm concerned, but let's ask the obvious question here is, man you are up against,
27:34
and you know that scene in Game of Thrones when John Snow is alone with the sword, and there's a thousand horses riding at him, don't you [crosstalk] Zachary Resnick: I haven't seen the show, but I've seen the meme. I'd say I used to feel more like that. I still feel sometimes like that,
27:48
I'd say I used to feel more like that.
27:48
I still feel sometimes like that, especially when as often happens to me, I'll have a great first interaction with someone, they'll be really interested, and then their diligence process will be, let me ask my friends that I perceive as smarter than me on this topic what they think.
28:04
For the most part, if they're going to really privilege the views of their friends rather than their own mental models, the relationship is probably not going to continue at the rate that we might have both thought it was after that initial interaction, and that's disappointing to me.
28:19
I'd say I used to be a lot more frustrated, but now I'm spending a lot higher percentage of my time around people that don't have the biases and the tribalism of the crypto world so they're a lot more open.
28:34
As well as, I am well, some crypto people are getting even more tribal, and more entrenched in their beliefs as they get richer and richer, doubling down, tripling down, quadrupling down on those beliefs.
28:45
on those beliefs. There also are a lot of crypto folks that are in this crypto consensus, people that folks would know as of lovers of Ethereum and BTC Bitcoin that went from, I'm never going to
28:58
talk to this guy, to reading my newsletter every week, and coming to the webinars, and some even investing with us and encouraging us not to tell anyone else about who these people are, at least for now where it's not politically in what they perceived as their short best interests likely over the short term. I'm really encouraged by the fact that, really the majority of my
29:19
I'm really encouraged by the fact that, really the majority of my conversations are with people that are open now, rather than people that are going up against me.
29:32
I do understand today, the BSV ecosystem is a tiny fraction of the broader crypto world, but as an investor, I love that.
29:40
There's this yin and yang not just for my industry, but between fundraising, and how profitable your strategy is.
29:47
Typically, the more profitable your strategy is, the harder it's going to be to fundraise and vice versa.
29:54
is, the harder it's going to be to fundraise and vice versa. It shows a lot of exceptions there, and there's a lot of really terrible strategies that are hard to fundraise for, but in terms of some of the best outperforming strategies, trades and things, they were never
30:07
easy to fundraise for at the beginning, because they often go directly up against the thesis at the person you're trying to raise money for, or many thesis, or in my case often they're like cultural identity, especially the younger, they are the less likely they are to have a family, the more likely that the crypto community is now their church, synagogue, family, everything all in one. I would say,
30:29
I would say, when I experience it, it's a love hate, which is, I really wish that I could be making a bigger difference right now.
30:38
I really think the world needs this.
30:38
I would love to be at that next stage.
30:42
The other part is, wow, I still have really not a lot of competition on what I think is going to be like the fastest growing market, and the most important technological innovation of the coming decades, and that's pretty cool.
30:50
Jim O'Shaughnessy: Yeah, very cool.
30:52
Again, the best technology doesn't always win, right?
30:52
The history is littered with examples of the best technology, not winning.
31:00
You think of Sony Betamax first VHS.
31:00
I mean, I'm old enough to have seen both, and let me tell you, Sony Betamax was a ton better than VHS, but VHS won for a variety of outside reasons, and the joke is, if you want to see where the world's going next, look at the pornography industry, because they are thought leaders, if you will, and they were also one of the big reasons that VHS won, as opposed to Sony.
31:35
I'm not saying that this technology won't win, I hope it does.
31:43
I mean it's really cool.
31:43
The other problem is with the trick.
31:55
The idea of memes is, many people who haven't studied it, think memes are relatively recent, they're not at all.
32:02
Memes are ideas that spread, and it used to be that they spread person to person, the robustness of a meme had nothing to do with whether it was true or false.
32:15
It had to do with how could it replicate?
32:20
Could it replicate quickly or could it not replicate at all?
32:20
If you study history, these are how great religions get founded, these are how great empires get founded.
32:27
The reason I bring this up is, the meme or memes rather, around Bitcoin are still overwhelmingly about BTC, I mean, do people who are a little more forward in the way they think about it than Ethereum, I mean, obviously you don't think this, but do a lot of people say to you like, "Man, that is a mountain that is just too hard to climb."
33:10
Zachary Resnick: I want to start by pushing back against your Betamax versus VHS thing.
33:13
A lot of people have this misconception that, Betamax was so much better, and VHS went out and it was a completely inferior technology.
33:24
I think the difference is looking at the product versus the technology.
33:30
My understanding of why VHS went out, was because it was a better product because it allowed you to record your shows.
33:35
Betamax while having higher definition, it wasn't as good as a product because most of the things you wanted to use it for, you couldn't use it for. I think that- Yeah.
33:46
I mean, in some ways like Linux has better technological features, but overall there's like few Linux overall product suites that compare to the average person for using Windows, using Mac, using Apple.
33:55
I think that's really what's most relevant here.
34:01
I think when it looks at, when you want to look at understanding Bitcoin, and the way the blockchain ecosystem has developed, I think you should really look at, not necessarily where people have tried to get rich on liquid crypto assets, and you should look at, I think what is most likely to be adopted as a future product.
34:16
Today a lot of people say BTC Bitcoin has been adopted, but it hasn't really been adopted in a meaningful way because it can't buy design, because one megabyte can only hold 3,500 simple transactions per every block per every 10 minutes, that's seven transactions a second.
34:32
MasterCard is trying to do 40,000 transactions a second, Ethereums at around 15 or 17, visas at 24,000, BSV today is at 70,000 transact actions per second.
34:46
They're really just trying to be two very different things, and BTC is getting speculated on by people.
34:49
People are looking to store their wealth, and speculate that will stay the same or go up, and many people are looking to not store wealth, but to put their money in the asset, and sell to someone else for a higher price.
34:59
I understand that something could just be something you speculate on the future value of and that you store wealth in.
35:09
I personally think that's unlikely to be competitive over a long time horizon, and potentially over a short time horizon, towards one that you can also store your wealth in, but then also transact at 110 thousands of the price, and potentially lower and lower and lower, but that's another, really another conversation.
35:22
These two things are not trying to be the same technology on any type of micro and nanoPay thing.
35:28
One isn't better or worse than the other, one can do it, and one can't.
35:34
That's what I'm betting on.
35:34
Which is, people using micropayments, people using it fast and efficient blockchain, adopting it by actually using it for transactions, and today, the BSV version of Bitcoin, regularly does between like 10 and 15 X the amount of transactions every day, compared to BTC Bitcoin, just by people not hearing about it.
35:54
That's because those transactions are capped where the BSV network like, Bitcoin was outlined originally is unbounded in its ability to scale.
35:58
It's just limited by Moore's law and human ingenuity.
36:02
I'd much rather bet on that than, layer twos and layer threes and layer four things masquerading as blockchains.
36:10
Jim O'Shaughnessy: I love the idea of a much larger total addressable market, but I got to keep asking, and earlier you talked about the government.
36:21
Let's talk about the US federal government for a little here.
36:27
One of my hard and fast rules, is never piss off the federal government because you know what, that is a losing, the probabilities a about that, now we've seen some certain personalities who shall remain nameless, who have off the federal government we think, but if you get them really pissed off, you're going to lose. They're going to win.
36:53
I mean, the point I often bring up is that, the department of education has something like 150,000 M16's.
37:07
The department of education is heavily armed.
37:07
I would not want to go up against that.
37:15
The question that I have here is, let's say the FEDS do get pissed, and like Al Capone, they don't ban Bitcoin, but they start taxing it.
37:23
Does your version of Bitcoin SV survive that better than BTC?
37:38
Zachary Resnick: Yeah, very much so.
37:43
I mean, I think most likely Bitcoin SV is going to be the most widely used database in the world over the coming years, and used by world governments to do things like collect taxes.
37:54
That's because this network is optimizing for scale.
37:54
I don't think most of the transactions on the network, will be used using this volatile really kind of commodity that is on a fundamental level, like expression of the value of the real estate of this database in the future.
38:13
If you want to find a way to bet directly on, people wanting to write data, and to use this blockchain, that is a way to do it.
38:19
Today the value of the asset is completely divorced really from that, and more, just about random speculative stuff.
38:25
I think as the market grows and matures, that will become more and more true for this asset, and the relationship between the asset, and the usage of the network. We're with BTC.
38:39
The entire value proposition is that if the government wanted to tax directly from it, it couldn't.
38:44
The second that the government is able to do so, which I am highly confident, it will, this whole thing comes crashing down.
38:50
I mean, already today, the government does tax your gains on BTC Bitcoin, whether you report them or not is another question, but this is not like this is an untaxable asset.
38:59
The real question is once governments wise up to how to actually compel miners to follow the law.
39:05
Today something that the vast majority of folks that are long BTC, that are bullish about crypto think, is that if you have this proof of work network, that's really inefficient.
39:14
Well, because you'd be able to run the software on your phones and resist, or that there'd be other jurisdictions where businesses could operate.
39:24
If governments ever say, "Hey miners, we see that this wallet on the blockchain that you're authenticating, every block is, the wallet of a Chinese fentanyl gang, and there's hundreds of millions of dollars of Bitcoin there.
39:39
We would like to confiscate that."
39:39
That's not a made up example.
39:44
We know that wallet address.
39:44
We also know wallet addresses that were used by Al-Qaeda.
39:50
Definitely the majority of transactions or Bitcoin are not money laundering, but to say that it hasn't been used for that is laughable.
39:54
With normal bank accounts, if you know that the bank account of a say drug cartel is X numbers, and you figure that out, you give an order to the bank, and the banker doesn't say, "No, actually, sorry, government we'd love to, but , this is a bank and these are our clients."
40:11
The government seizes that money, and the banks comply with that.
40:16
Today governments haven't really wised up to how to do that in an efficient way.
40:22
That's what I think the future of blockchains are.
40:22
It makes it much more difficult for say governments to seize assets, and you have to get a global consensus around this.
40:31
I think it provides a lot more freedom than say the traditional process of seizing assets, especially in the United States.
40:35
To say that these wallets that we know are controlled by nefarious actors that have committed global crimes are just going to be untouchable because, hey, it's a blockchain, and we can't regulate that, we can't touch it directly.
40:44
I think is hilarious now.
40:50
This is coming from someone that three and a half years ago, Gohong, there's no way they could do it, this is the future everyone's going to use Bitcoin or something like it.
40:56
Part of me thinks there's some advantages to that, but I think as I've gotten a little older, I would see that probably as a net negative, as much as I wish most governments were a lot smaller, but yeah, I'm chiefly a fiduciary and an investor that likes to make money, and betting on that world, which is if you're holding BTC or [inaudible], whether you think it or not, you're expressing that view.
41:20
At least if you're holding for a long time horizon, I think is a very indefensible thesis, but we'll see how it plays out. Jim O'Shaughnessy: Yeah.
41:29
That's very interesting in terms of, if you think the government can't find, and seize those assets, yeah, they can, and they probably will.
41:37
As you say, as they wise up, one of the problems that I always had when looking at traditional BTC was, to me, it's calling it a store of value actually made me laugh out loud, because the primary aim of any currency, is that it is a store of value, which means that there's not a lot of volatility tied to that currency.
42:11
Now I understand, what the FED is doing, is going to cause inflation.
42:18
It's another form of taxation.
42:18
I mean, even Ben Bernanke himself said, tax inflation is a tax.
42:28
We currently are still the global reserve currency.
42:28
I think it's going to be difficult to dislodge that.
42:33
I think maybe Bitcoin SV might be able to help that.
42:33
I like your thesis that, the reason for the differences, allow it to be more mainstream.
42:44
My question becomes you're obviously a totally switched on young guy, you know about all the technologies.
42:56
Most of the people that I know who are Bitcoin fans and enthusiasts also young, very switched on, with tech.
43:04
Why didn't they go to, Bitcoin SV first?
43:12
Zachary Resnick: I think there's a lot of reasons.
43:15
I could talk about why I didn't go to Bitcoin SV first, and my PC instructive.
43:20
Jim O'Shaughnessy: Please.
43:20
Zachary Resnick: I was aware of Bitcoin from pretty early on, due to playing online poker.
43:24
After black Friday, when the U.
43:24
S DOJ shut down the major poker sites.
43:31
Fairly soon after that, poker sites allowed you to deposit them withdrawn Bitcoin. I never really tried it.
43:36
I never looked into it besides maybe a Google search.
43:41
I was aware that this was something to be used, and follow the chronography for where an industry is going.
43:46
I think the gambling industry is also usually at the forefront as well alongside them, but I didn't really think about it until a chance encounter in 2016, and what got me into it was not so much Bitcoin itself, but what learning about Bitcoin made me realize about monetary policy.
44:02
I think a lot of folks, especially that got into Bitcoin say pre 2017, a lot of their interest and passion came from Bitcoin being tied to understanding that inflation is the most regressive tax ever to exist, and getting really passionate about that, of which I am today.
44:16
Still, despite loving Bitcoin SV and not thinking BTC a long-term chance of success.
44:25
I think when you come from that angle, and then you have this product that so easily says, it's going to deliver on this thing that you care about.
44:32
I think it could be quite a learn.
44:32
Then back to our tribalism, I mean, this is another version of the question you asked at the beginning of the podcast, which is, how can people, again, in financial markets be so wrong about things, and not spend their time looking at the thing that is likely going to win out or ends up pointing out.
44:45
You've studied belief systems a lot longer than I have, and this is not the first time, and it won't be the last, there is, I'd say a very interesting convergence of a lack of formal organized religion.
45:04
That's been declining at a faster and faster pace worldwide, especially in developed countries.
45:08
I think the eagerness to be more a part of a tribe today for someone my age, is so much greater than the average person your age, which makes them perhaps a lot more easily able to be seduced by a tribe that gets you really rich, and has a lot of fun all the time.
45:23
I do think most of it is behavioral.
45:23
Really, I think when folks come with an open mind, and have a conversation with me read one of our books, interact with some of the many hundreds of entrepreneurs that are building in the BSV ecosystem.
45:36
I think it's hard to walk away from that, and not at least want to, to learn more, but then a lot of folks they learn more, and then they experience, the negative social effects of being a contrarian or of being for this network that has a lot of really negative PR around it that isn't due to the technology, but more controversy around who created Bitcoin.
45:58
What happens is they'll express that to folks or folks that aren't from the crypto world will express, "Hey, I met with Zach really interesting thing happening in vSphere.
46:06
Well, I use this like game crypto sites.
46:06
They have all these users, and it was really cool. Oh, it's built on BSV. Oh, what's that."
46:10
Then their friends will say, "Oh, be careful.
46:10
I'm glad you talked to me because it's actually a scam just because of this one person that's associated with this distributed public network."
46:20
That's where a lot of it comes down to, and ultimately everyone wants to be a contrarian as an investor, but by definition only a small minority of people can.
46:32
I think that the social, emotional tribal reasons of being part of a tribe is explains not just this phenomenon, but really every widespread way that capital and culture moves phenomenon in our world today.
46:49
Jim O'Shaughnessy: No question, a book I'm currently reading called the Lucifer Principle, basically makes this case going back throughout history.
46:55
Many religions, and that's a whole different discussion.
47:04
Many religions were founded by the people who conquered people, and they found it those religions to keep the people they conquered placid, and thus Karl Marx, not a huge fan, but religion is the opiate of the masses. He got that one, right.
47:22
This is new learnings for me, which I get really excited about, because I get to unlearn some old things.
47:29
I had no idea that many of the major philosophies, religions, et cetera, were literally founded by people who had conquered vast areas and needed a thing to keep these people in line.
47:46
There's no question that it's powerful. Let me ask you this.
47:56
Let's say people listening to this, and they all get a lot of feedback like, "Oh, this is crazy."
48:02
Or " Zach is like this and that."
48:02
I always find when an argument is [inaudible], it means that the facts are not on their side.
48:10
What are the best arguments and points of your adversaries here?
48:21
If you don't mind me asking you to talk their book?
48:26
Zachary Resnick: Oh, no, of course. Yeah.
48:26
I think that's a really important part of being able to have an investment thesis, being able to Steel Man, and the other point of view very well.
48:32
Are we looking for the pro BTC Steel Man or the anti BSV Steel Man?
48:37
Jim O'Shaughnessy: Let's start with the Pro BTC Steelman. Zachary Resnick: Yeah.
48:41
So I actually think there's a...
48:45
If you have a different analysis to what I have on the probability that say, Bitcoin will be able to be confiscated, then I think there is, especially in terms of a small percentage of one's portfolio to hedge out the rest of the portfolio.
48:57
I think it does make a lot of sense.
48:57
And frankly, even with my current views, Jim, if I knew what I knew now and BTC was at a similar price to BSV in a similar market cap.
49:07
I think it would be responsible for probably me to own some of that in my portfolio.
49:12
I think buying it now it doesn't, but to steal me on the point of view, today, Bitcoin...
49:17
The BTC version of Bitcoin has been the highest preaching asset over a long over a set period of time and global financial history.
49:24
I think that alone, you don't mean to say anything more.
49:30
I think that that makes it pretty compelling to have some percentage of that in your portfolio, but really on top of that, every savvy investor knows that inflation is terrible for the cash and fixed income part of their book.
49:41
And, on some short term level good for perhaps the rest of their holdings, but really over the long term, I think having rapid inflation and lots of volatile in employment and in kind of all the things that happen in society, you don't want periods of rapid inflation, rapid deflation, you want something a little more steady.
50:06
And that I think anyone looking at markets today and is seeing, I think significantly more, not really inflation as..
50:13
We don't need to go down the inflation deflation rabbit right now.
50:17
But I think there's a really strong argument to be made that Bitcoin today right now has the market share, it has the brand for being the Crypto asset, the Blockchain Technology Network that you use to store your wealth outside of the Fiat monetary system outside of equities and outside of what might be in one's portfolio.
50:35
So it makes sense to have this asset as a hedge for inflation on a hedge on kind of the US government and the Petro dollar working out.
50:50
And today it has worked out better than everything else it has far the best market share.
50:54
So if you want to express that kind of anti-inflation crypto view, this is the best way to do it.
51:00
And you're also betting on blockchain technology, but don't ask too much about why you're betting on blockchain because then the argument starts to go apart, I think.
51:09
But yeah, it's the proof of work network as well, that has the greatest amount of hash power.
51:14
So in many ways the BTC network is the most secure network in the world today, still Bitcoin SV, even at a market cap of around 1200 something of the price.
51:18
It on some level is 1200th as secure as BTC, but still many orders magnitude more secure than the most secure private NSA or CIA type of server because of the nature of the distributed public database.
51:41
So I think it being the most secure network is a fact today.
51:41
But I think a lot of folks in the BTC world follow think that the hash power leads and then price follows where I really think it's the opposite and that's kind of an empirical problem that can be proven out, but that would be I think a part of the Steelman but not one that I think would be a particularly compelling part.
52:02
And then it could even be users a legal reserve asset.
52:02
So if we never have any blockchain that scales and becomes a good settlement layer, which I think is very unlikely.
52:08
But if that were to be the case, BTC today is the most secure and efficient way to settle something kind of for sure, with some degree of finality.
52:17
So it being used by Central Banks and Governments as purely that settlement layer where you're not doing anything illegal, but people are voluntarily just paying absurdly high transaction fees because they know that it comes with security.
52:32
I think that could make sense.
52:32
Again, there's a big if there, with that, if you didn't have something that was also secure, but instead of growing transaction fees, following transaction fees.
52:38
But I think that those are kind of the main Pro BTC arguments that I can get behind.
52:42
And really if it wasn't for my thinking that the probability that governments would be able to confiscate it in a technical way, was pretty high.
52:54
I think owning some would make some sense.
52:54
Jim O'Shaughnessy: Interesting.
52:56
And I think it was Lord Keynes who said, "If you want to destroy a country, destroy their currency".
53:05
And the Weimar Republic in Germany and lots of other examples of horrible things happening when the currency got destroyed and through inflation mostly because they just kept printing it and the script.
53:22
I think that's a weaker argument for the United States, the US dollar, again, that's a much longer conversation and an interesting one, I think, but I want to stay on this because I'm going to ask you now Steelman, the anti-Bitcoin SV argument.
53:46
Zachary Resnick: So when you say this, there's a few things that are coming to mind, which is, what are the most compelling sound bites against this?
53:56
But a lot of these things are founded with misconceptions on how the things work.
54:02
But I think probably the most helpful thing for the listeners is going to be talking about what people actually say against it and then maybe debunking why some of those things aren't. So, in fact, correct.
54:11
So I think the big thing that people will say, first is, Craig Wright did not create Bitcoin.
54:19
Craig Wright is a big fan of BSV and said he created Bitcoin is involved in the network, therefore, because he's a scammer and a fraudster, this Bitcoin SV network is also a scam and a fraud.
54:29
And I don't need to look any further.
54:33
I don't need to look at all the entrepreneurs.
54:33
I don't need to look at what you're doing, that's enough for me.
54:36
And what I would say to that is, you can link this in the notes.
54:36
I think whether Craig Wright created Bitcoin or not is relatively immaterial to the long term success.
54:43
I think it's perhaps material to the short term success and the probability of say a huge catalyst for more folks being interested in BSV.
54:53
But I'm a lot happier and enjoy spending my time more talking about the technology rather than this question.
55:00
And I direct you to our research and we wrote a piece on the site that maybe you guys could link to in the show notes to kind of fully explore that.
55:04
The next thing would say is kind of decentralization versus centralization.
55:10
So they would say that, BSV is a centralized blockchain network.
55:17
So you lose all the value of blockchain where the BTC network is really decentralized.
55:21
Crypto has its value from being decentralized, therefore BSV bad, BTC good.
55:27
So there's a couple things we need do unpack here.
55:27
One that in every meaningful sense BSV and BTC are about the same degree of decentralized.
55:33
And then we also need to, I think, unpack what decentralization is in means.
55:38
So the way that I think about how people use decentralization is it's kind of combining two things.
55:43
And Jim, as someone who is a fellow hates labels and things how they all often bring us apart rather than giving clarity on a topic or an idea.
55:55
I think this is a really good example of it where I think a lot of people like the word decentralized and let's not centralize it. Sure. That sounds good.
56:05
But what does that actually mean?
56:05
And I think in practice, it is a combination of having your network be able to exist outside of what governments want.
56:10
So even if governments wanted to shut this thing down or change it, they couldn't, and then it's distributing power and information.
56:22
So as you could probably tell, and I would imagine this would be the same for you, the latter is awesome. Let's distribute power.
56:25
Let's have everyone be a really small part of an underwriting process for a tiny loan in the other part of the world.
56:36
Great, let's have a hundred thousand people fund this loan, the transaction fee, the 1000 of a penny and everyone wins and is kind of more embedded together. But in terms of..
56:49
Now let's do this in a way where if you're doing it from the US, even though we have laws around being a money transmitter or a registered loan agent, let's just say, "No, we don't want that".
56:59
And because it's on the blockchain, it's actually not illegal.
56:59
And let's now build our systems such that we're trading off speed and cost to be able to do that.
57:05
So when I think about it, it kind of just makes my blood boil with how focused people are on decentralization and how little they do to unpack it.
57:14
Where I think a lot of the folks on Wall Street that you know well that are super excited about Solana that are really excited about DeFi.
57:19
They're really excited about the distributed finance part.
57:24
I don't think they're actually excited about the other, but they haven't really examined it, they haven't kind of unpacked that for themselves. So yeah.
57:35
Jim O'Shaughnessy: I love it. Okay. I think I love the fact.
57:40
I often ask people, Adam Grant has a great book on how to rethink things and the Steelman is a huge part of that. So...
57:48
Zachary Resnick: I get something, Jim. I got to show you this.
57:51
So we're such big fans of Steelmanning that the first book that we wrote, we took each chapter is kind of the Steelman of the consensus view and then our view.
58:07
So it's 10 chapter 10 things that do that, and I'm going to have to shamelessly plug it here.
58:12
How Bitcoin as fee will win, why the crypto consensus is wrong.
58:12
You can link to it in the show notes free@unboundedcapital. com. And....
58:17
Jim O'Shaughnessy: I love it. I'll read it.
58:20
Zachary Resnick: That's how we came to where we are today, which is by doing our weekly Steelmanning call, where we really believe as investors that you don't really believe, what you think until you know every argument against it and until you know kind of every argument for and the counter argument.
58:37
So I would highly recommend that book as well as that process kind of to anyone and appreciate, you kind of using that language and specifically pushing me on this, because I mainly just talk about the long BSV long blockchain scaling thing, but I think an important exercise to do more regularly, this kind of really being as charitable as possible to an opposing thesis.
58:56
Jim O'Shaughnessy: Yeah, I love it.
58:56
I think it's the only way to truly understand things is you've got to understand your opponent's viewpoint and you've got to look for everyone of their best points because it's one of the reasons why I subscribe to a bunch of Sub-stacks that I might not necessarily agree with their point of view, but I need to know about it because they're going to many times have really good arguments that make the case against what I'm making a case for.
59:28
And if there's been some instances where it's been so much better, that I changed my mind.
59:35
And so I think that is you really want to get good at optimizing how to think about things.
59:42
This is the only way to do it, chanting and it just sending into Dogma.
59:49
To me dogma equals brain death.
59:56
And now if there's a propaganda, they're going to say, "No, repetition.
59:56
And you're going to get people, you're going to put people into a place where that all they're able to do. Yeah.
1:00:14
Don't think so because there's always going to be someone who comes along and says, "Yeah, I understand there's this huge group that believes X", but let me tell you why it's Y but you got to understand why they believe X in the first place.
1:00:28
So, let's shift gears a little bit and talk about what we kind of bonded over at the capital camp.
1:00:36
And that is music poker and travel.
1:00:36
And so, I love all forms of music.
1:00:47
I'm the former chairman of the Chamber Music Society of Lincoln Center. I love Bach.
1:00:55
And so Jazz is another one.
1:00:55
So Dave Breckner take five, I love it.
1:00:55
And so I found a quote from Dave where it was really simple.
1:01:04
It's like "Jazz dance for freedom".
1:01:08
And I'm like, " That's really cool".
1:01:08
And then Gerwin said that Jazz was a lot like life, the best way is to improvise.
1:01:16
And then I found one final quote that really, I think, speaks to maybe what we're talking about here and it was by Miles Davis.
1:01:26
And he basically said Jazz is revolutionary and it often leads to revolutions in music.
1:01:34
And, finally Louis Armstrong, if you have to ask what Jazz is, you'll never know.
1:01:44
And so, I'm a huge believer.
1:01:51
Ah, see, I use the word there.
1:01:51
I'm a huge fan of Taoism and of who we and I think it offers amazing guidance for how to think and how to get along.
1:01:58
So what attracted you to Jazz specifically?
1:02:07
Zachary Resnick: So I was really lucky in that.
1:02:11
The guy who ran our school district was a Trombonist in the Stand Kenon Orchestra whose father was also a Trombonist in the Stand Kenon Orchestra, who was on the at Sullivan show briefly.
1:02:22
And wasn't just an incredible Trombone player and Jazz lover.
1:02:27
He also was a really wonderful teacher.
1:02:27
And I started playing trumpet in the third grade, just because at my school, we were lucky to choose to do orchestra or band.
1:02:34
And I auditioned for drums half of the guys, and they only picked the ones with the best rhythm and they told everyone else to do something else.
1:02:46
And two of my best friends were playing the trumpets.
1:02:46
I was like, "Okay, I want to sit next to the people".
1:02:49
And then this guy, Don DuPont, senior, he, yeah, for some of the students that he like, he would offer private lessons kind of outside of school.
1:03:02
And then for some of those people, he would run...
1:03:02
He had three different Jazz bands, he did every Tuesday night, each for a little over an hour, one kind of four like, middle schoolers or late elementary school, early middle school, late middle school high school, and then late high school.
1:03:16
And, kind of those of the dad's age of people in the band, maybe two thirds kind of adults, and one third of the good high school students.
1:03:26
And you would site read swing music from kind of the era that he played.
1:03:30
And that just gave me really big appreciation for Jazz pretty early on, where most of my fun playing trumpet was this every Tuesday night kind of Jazz band thing.
1:03:35
And then my parents really love to appreciate music.
1:03:40
And I grew up listening to a lot kind of like Stevie Wonder and really like kind of funk in R and B, which honestly have a lot of influence by Jazz music.
1:03:54
And yeah, and then I started going to music school in high school and went to music school for school and just kind of kept continually falling in love with it and still big part of my life today.
1:04:06
And I love playing the trumpet, playing other instruments and just listening, writing, playing improvised music. Jim O'Shaughnessy: Yeah. Well, me too. We're very... I don't play anything. So... Yeah.
1:04:21
Maybe, I'll do a Grandma Moses and take something up.
1:04:21
But Benny Goodman, my dad was a fan of the swing and things like that.
1:04:34
And I remember the first time I heard sing.
1:04:34
And there's a lot of our listeners who've never heard sing.
1:04:40
I urge you go to YouTube and find the longest, actual footage of Benny Goodman and his orchestra playing it.
1:04:49
When they debuted that at Carnegie hall.
1:04:56
It just I think that the people must have been blown away and because it was so foreign to the type, I mean, Gene Krupa with the riffs on the drums and it's just magical in my opinion. Right?
1:05:14
And so that's maybe how people felt about new forms of music today. Let's move to poker.
1:05:21
So Annie Duke is a friend of mine and she's been very successful at talking about how understanding poker and betting can really make you a better investor.
1:05:39
And so I've worked on, I do a lot of threads on Twitter and I talk about it here on the podcast and everything.
1:05:48
One of the things I was working on this really long thread where I was using the word bet.
1:05:53
And then I was trying it out on some friends and I watched for the reactions, right?
1:06:03
And so I stopped and I'll tell you why I stopped.
1:06:03
I stopped because I found that the term bet.
1:06:03
Had created a label that was so powerful that you say bet to your average human being, even if they're really intelligent, they think of gambling, they think that gambling is dangerous and or risky and they go down that path and you've lost them.
1:06:32
So, I think that every time you wake up, you are making a bet every day of your life with everything you do. It's a bet.
1:06:43
And if you really want to understand, is somebody well optimized or are they poorly optimized?
1:06:50
How do their bets turn out?
1:06:57
What are the base rates of their bets?
1:06:57
So I use different language and everything, but tell me, what have you learned from your love of poker in terms of specifically how you do investments absent that love?
1:07:13
Zachary Resnick: So I think Annie's written really eloquently on the subject.
1:07:17
And I think for a lot of folks, especially in the investing world, she's probably the biggest influence for kind of turning bet from a dirty word to a positive word for a lot of folks. Yeah.
1:07:27
I know for me, definitely a learning of just connecting to other investors was changing the language that I used to describe the same concepts coming from a kind of semi-professional poker player and mindset coach and educator to blockchain focused investor.
1:07:44
But fundamentally these are the same things.
1:07:44
You're doing the same types of decision making processes.
1:07:50
The difference with poker compared to other forms of investing or making bets is that you have really tight feedback loops and you have a no number of variables.
1:07:58
So in terms of it being a great stopping ground for just really honing your decision making processes for being aware of what are the things that get you in poker, they'd call on tilt.
1:08:15
And I think that language is being used more and more, or maybe like New York Wall Street world, but still saying on tilt outside of poker players is not something that you hear all the time in venture or PE or most investing.
1:08:23
But it's just this concept of when are you allowing your emotions to kind of dominate your reasoning into no longer serve you.
1:08:30
So it makes sense to use your emotions, to pick up qualitative information that can go into your algorithm, could make sense to follow your gut, but to allow your kind of emotions to override your systems and your processes for a variety of reasons.
1:08:49
That's kind of, when you get in trouble.
1:08:49
And with poker, you kind of know you get in trouble very soon if you're being honest with yourself, and if you're playing with someone else or someone's recording, or you're playing online, it's hard.
1:09:03
But I wouldn't say it's hard.
1:09:03
It's very easy if you want to find that information, most poker players are not honest with themselves, which is why most poker players lose or why most traders lose, which is why a lot of people can't do the types of things they want to, they think they want to achieve, but poker is just a really good way to say, "Here's going to be my new process.
1:09:21
Then, I'm going to play 5,000 hands online, eight tables at once over the course of a night.
1:09:26
Now, I'm going to had made 5,000 differing degrees of complexity with limited information.
1:09:34
Now, I can analyze these, and I could say, 'Okay, when I made this poor decision, was it because I didn't understand the strategy or was it because I didn't execute the strategy well?'"
1:09:41
The vast majority of mistakes in financial markets and poker is the latter. It's not the former.
1:09:48
I think poker's really good for creating good systems there.
1:09:48
I've worked primarily as a teacher in three areas of passion that aren't blockchain for me.
1:09:55
Now, of course, that's an area as well, but first music and teaching people music and then teaching people poker and poker strategy, and then helping people optimize their credit card miles and points and doing travel hacking and things.
1:10:14
But with the poker stuff, I find I didn't really learn it and understand it until I was able to simply explain it to others.
1:10:18
The process of helping people with way bigger tilt problems than me reduce their tilt helped me come closer to eliminating mine.
1:10:23
There's a great book on this as it applies to poker, but it applies to everything else, called Jared Tendler's The Mental Game of Poker. There was two of them.
1:10:36
Maybe there's even a third one.
1:10:36
I think he wrote one for traders, actually, as well, that I'm sure is good, even though I haven't read it.
1:10:44
I know now: what are the types of tilt that is most probable for me?
1:10:44
For me, it is entitlement tilt.
1:10:49
It is, when I'm playing poker, I feel like I'm better than other people at the poker table.
1:10:53
Maybe I am better than them.
1:10:53
Then, when I lose due to variants, I feel like I should have been entitled to some type of win.
1:10:58
That's the type of thing.
1:10:58
Then, the other type of tilt is mistake tilt, which is when I make a mistake, I compound that by being hard on myself, rather than being kind or forgiving myself.
1:11:07
A lot of the other types of tilt I don't really have. Those are my two things.
1:11:11
They apply just as much to my job today, which is sometimes you make a mistake and then you could be down on yourself for however long, or you could just soberly analyze it with your team, reflect on it and move on.
1:11:21
Then, entitlement, as well, used to be a much bigger problem for me at the fund.
1:11:25
Whereas especially early on at the BSV thesis was like, "Wow, we really figured this thing out.
1:11:30
No one's given us any money.
1:11:30
People that I thought were my friends were no longer wanting to talk to me because they're so into this crypto tribe."
1:11:40
I felt, man, I should be entitled to the success I was having before to some type of social thing.
1:11:47
Then, when I let that shit go, which not completely, you never let it go completely, but things started to go a lot better for us. Jim O'Shaughnessy: Wow.
1:11:55
Again, I don't know, man.
1:11:58
You might have been maybe... How old are you? Zachary Resnick: I'm 28. Jim O'Shaughnessy: Okay. Yeah.
1:12:03
You could definitely be a long-lost son of mine.
1:12:11
No, just kidding, just kidding.
1:12:11
Because, I mean, you're giving my own core tenants right back to me.
1:12:18
The ability to dispassionately analyze yourself is almost impossible to do.
1:12:30
I work with a lot of people on that score.
1:12:30
It's really, really hard.
1:12:44
I'm a big believer in writing everything down and doing it by hand.
1:12:44
There's some good research why that triggers a different portion of your brain.
1:12:52
But it also has led me to the conclusion that if you think, "Oh, I understand this entirely."
1:12:58
Then, you try to write it. You look at it.
1:12:58
You think, "I don't have a fucking idea about this."
1:13:05
Also, you have to reframe the mistakes.
1:13:05
I'm not hard on myself about mistakes at all because I look at mistakes as learning opportunities and as, "Wow!
1:13:21
Now, I get to find a way to reoptimize my mental models." I hate the term.
1:13:30
But Charlie Munger, with his latticework of mental models, it's like it really does work.
1:13:36
It's a meme that has taken over because it does, in fact, describe the way you always have to be error-correcting.
1:13:46
The minute you are very willing to say, "I fuck up all the time," that, at least in my life, changes things so dramatically that, guess what?
1:14:01
You start up less and less because you're totally open to correcting the error.
1:14:09
I love your entitlement thing.
1:14:09
I had that when I was younger.
1:14:09
Man, that’s a hard one to get over because another guy I love, Jed McKenna, he's got a great quote, which is, "The hardest thing to get over or lose is self-deceit because you don't think you're just self-deceit-ing yourself."
1:14:31
You are, and- Zachary Resnick: Always.
1:14:33
We're status-seeking animals. Yeah. Jim O'Shaughnessy: Yeah.
1:14:39
It's just like we're domesticated primates, man.
1:14:39
The more you understand that, the more you're willing to just look with bemusement and a lot of things.
1:14:48
The meme of yes/no, of zero or one, black/white deterministic thinking... I tell you what, man.
1:15:07
If you don't learn how to become a probabilistic thinker, and if you don't get yourself to be better at nonlinear thought, and if you fear chaos, you're not going to do well in the world that is emerging because there you go, another meme.
1:15:20
I understand, by the way, I am an anomaly in many respects in that I'm risk-seeking. I love risk.
1:15:39
Zachary Resnick: How would you define risk?
1:15:41
Jim O'Shaughnessy: That's a great question.
1:15:46
I would define risk as an investment that I deeply believe in, literally going to zero.
1:15:46
I don't define risk by volatility.
1:16:01
I don't define risk by my being wrong because I'm going to be wrong.
1:16:12
Most people look at risk as a number.
1:16:12
I think that's a huge mistake because it gets people...
1:16:21
Value at risk: I'm sure you're familiar with that idea.
1:16:21
I think it's crap because it lulls people into being over-confident because they think they're looking at one number.
1:16:27
"Well, it says here that the value at risk is only 13%." Please.
1:16:36
I mean, if you stress test these models, it's child's play to understand that all risk assets correlations go to one when people are panicking.
1:16:52
Again, I guess another great way to think about risk is, "Am I just diluted in terms of the way I see the world?"
1:17:17
That's hard for many, many people to ask because another good explanation, as far as me, is, if you think of risk as the possibility that you're going to lose all your money, or lose status, or lose a lot of things makes people very risk-averse.
1:17:35
I think just the opposite.
1:17:45
The biggest risk is not taking the risk, and- Zachary Resnick: This gets at something, Jim, that I'm really passionate about, which is a lot of people look at me as a very risk-seeking type of person or a high-risk tolerance person.
1:18:00
I don't view myself that way.
1:18:00
I think by the way you're talking about it, you probably wouldn't view yourself that way on the things that actually matter.
1:18:03
Which is, by not taking calculated risks, you're often taking huge, giant risks, whether you're aware of them or not.
1:18:13
I think you always have to look at risk in the context of the expected value.
1:18:22
This is a reframing for most people because, for most folks, it's like, "How can I do all the stuff I want while minimizing risk?"
1:18:25
Where, if you look at risk in the context of expected value, then you actually want to optimize risk.
1:18:31
Then, you'll probably find that most of what you're doing is to way too little risk on something and taking way too much risk on some other things.
1:18:44
I was curious how you define it, there, and the fact that you explicitly called out value at risk and that volatility is a part of it.
1:18:49
I think that makes a lot of sense and all these labels and these words.
1:18:53
Because risk is just so used and meant so many things by different people, people are just really often talking over each other when it comes to what is risk, or, "I'm doing something risky."
1:19:02
Really, it's the chance of a certain expected value.
1:19:02
To me, that's what risk is.
1:19:08
You could derive volatility from that.
1:19:08
In poker, you could actually know that expected value, or you could make a probabilistic estimate based on the range of hands.
1:19:21
What makes markets in real life more exciting is the unknown unknowns, which is, you know that at any given point for everything that you game out, even if you're the smartest, most diligent investor, you're missing so much.
1:19:34
I think that that's what makes these games the most fun and infinite to play rather than a game like poker.
1:19:42
Jim O'Shaughnessy: Totally agree.
1:19:45
Let me ask you one last question.
1:19:45
Then, I'm going to ask you our closing question because I got to look at my time here. Yeah. This is great.
1:19:50
What am I going to hear when I release this podcast?
1:20:03
Zachary Resnick: You are going to hear, "How could you let someone associated with something so bad and scammy on your podcast?"
1:20:11
That's probably going to be the main ad hominem attack, and then there'll be a whole series of other ones.
1:20:17
But that I'd say is going to be a lot of what you're going to hear.
1:20:24
I hope you're also going to hear, "Hey, I've never thought about it this way.
1:20:29
I'm excited to learn more."
1:20:29
From what I know about you and the Infinite Loop's brand, I'm confident there'll be a sizable portion of people that will be in that camp.
1:20:38
But the people in that camp are probably less likely to email you saying something, the people that love it than people that hate it. Who knows?
1:20:44
There's probably some percentage of your listener base that really likes Bitcoin scaling and BSV already.
1:20:49
But that's going to be outnumbered by the people that really like BTC, that really like Ethereum, that feel that a lot of what I'm saying now is going up against not just, again, their thesis, but, more importantly, their cultural identity.
1:21:05
That's the most difficult problem for me, which is why it's fun to have these conversations and speak very frankly about it.
1:21:09
But as someone who's also in the business of building connections and fundraising, I don't think I would necessarily speak in this way to everyone.
1:21:20
Now, it's in the public, so I guess I am. Jim O'Shaughnessy: Yeah.
1:21:22
That's what's great, man.
1:21:22
You're absolutely right about our audience.
1:21:26
It's like a self- selected group of folks.
1:21:26
What I always am very public about is I want to have people who have really interesting thesis on.
1:21:39
Anyway, I'm very excited to release this because I can hardly wait to see what the reaction is.
1:21:45
My son is the podcast king.
1:21:45
He took a really good question, but I like this one too.
1:21:56
We're going to make you emperor of the world for a day. You cannot kill anyone.
1:22:05
You can't put anyone in reeducation camps.
1:22:05
But what you can do is...
1:22:15
You've seen the movie inception, right? Zachary Resnick: I have. Yeah. Jim O'Shaughnessy: Okay.
1:22:19
You get to put an earworm in there that they're going to wake up tomorrow thinking two thoughts were their own ideas.
1:22:27
They're going to just change to those two things.
1:22:27
What do you got for them?
1:22:34
Zachary Resnick: I would say love yourself, and it's going to be okay.
1:22:38
Jim O'Shaughnessy: Oh, man. That is fantastic.
1:22:43
That is really great because that is one of the...
1:22:43
It's really hard because they get classified as spiritual, but it's not really.
1:22:53
Jed McKenna on awakening Daoism...
1:22:53
I mean, if you really understand the Dao, you'll freak a lot of people out.
1:23:03
The guy I'm going to refer to, Anthony de Mello, who was a...
1:23:10
He was Indian, from India.
1:23:10
He was a Catholic Jesuit priest. Hello?
1:23:24
He had an experience with a rickshaw driver in, I think...
1:23:24
I can't remember where it was, Bangladesh, I think. I might be wrong.
1:23:32
I'd have to look that up.
1:23:38
I've read everything he's written since this awakening.
1:23:38
Unfortunately, he died very young.
1:23:44
By the way, if anyone that's listening is interested, you just go to YouTube.
1:23:44
There's a bunch of takes of his talks and everything.
1:23:49
But love yourself, that is one of his conclusions.
1:23:58
By the way, same with Brian Roemmele.
1:23:58
People think that "How selfish of me.
1:23:58
How blah, blah, blah of me."
1:24:10
Man, the only person you can fix is yourself.
1:24:10
Instead of trying to change the world, change yourself.
1:24:18
Let the world unfold as it unfolds. I love both of those. Love yourself. What was the other?
1:24:27
It was going to be okay.
1:24:27
Everything could be okay.
1:24:30
Zachary Resnick: It's going to be okay. Jim O'Shaughnessy: Yeah. I love it. I love it.
1:24:31
Man, can you imagine what that world would look like?
1:24:35
Zachary Resnick: I'm trying to say that to myself every morning and still having a hard time believing it a lot of the time.
1:24:43
But the more I believe it, the more I like the way the world looks to me.
1:24:47
Jim O'Shaughnessy: It's transformational, man. It is transformational.
1:24:49
If you can also understand or come to the understanding that you cannot change other people, you can compel other people.
1:24:56
You can force other people, but you're not going to change their belief.
1:25:04
You're going to get their resentment, maybe. But you can help them.
1:25:12
I believe that for a long, long time.
1:25:12
Again, listen to me, "believe."
1:25:19
I should get a rubber band that I snap my wrist every time I say it. But very cool.
1:25:25
You are a switched-on guy, my friend. This has been awesome.