How blockchain will change the business world

This episode is with Tim Draper – founder at Draper Associates, DFJ and Draper University, and one of the most influential people in the investment and cryptocurrency space. Tim helps entrepreneurs drive their visions through funding, education, media, and government reform. His investments include Skype, Hotmail, Tesla, Coinbase, TwitchTV and SpaceX, and he’s an early investor in Bitcoin (in 2014 bought around 30,000 seized bitcoin from the US Marshall’s Service which today would be worth around $1.8B). In this episode we talk about how cryptocurrency and blockchain will change the business world.

LINKS

You’re listening to The Growth Manifesto Podcast, a Zoom video series brought to you by Webprofits – a digital growth consultancy that helps global and national businesses attract, acquire, and retain customers through digital marketing.

Hosted by Alex Cleanthous.

SHOW NOTES

  • 00:01:03 Tim Draper’s introduction to the Growth Manifesto Podcast
  • 00:01:57 What’s your approach to choosing investments?
  • 00:04:05 Tim tells the story of how he helped Hotmail grow to 11 million users in 18 months with no marketing budget
  • 00:06:44 Tim explains his mindset when it comes to entrepreneurship and venture capitalism
  • 00:10:21 The businesses Tim invests in tend to compete in industries where the incumbents are making a lot of money but not providing great service
  • 00:12:43 When did you see the potential of cryptocurrency and the blockchain industry?
  • 00:18:15 Where do you see Bitcoin’s value going in the next 3-5 years?
  • 00:21:33 When do you think Bitcoin will stop being a stored value and start being a currency?
  • 00:26:11 Tim touches on the other cryptocurrency besides Bitcoin
  • 00:28:16 What are some of the problems that the blockchain industry solves?
  • 00:32:18 Are there examples of how cryptocurrency has changed the world today?
  • 00:34:56 What does it take for cryptocurrency to change the way more stable countries like The US, The UK, and Australia do business?
  • 00:37:40 How does a traditional company start to embrace the technology of cryptocurrency?
  • 00:45:41 Are there places where companies can start to invest in blockchain solutions to improve their innovations?
  • 00:47:57 Tim believes that major changes in business and new industries will come from entrepreneurs and startups whether it’s to disrupt or to support.
  • 00:51:04 According to Tim, the best way to choose a company that has a solution your business needs is to look for the one that’s most successful
  • 00:54:49 What are you most excited about in terms of bitcoin and cryptocurrency in the near future?
  • 00:56:48 What is one thing you want the listeners of this podcast to do?

TRANSCRIPT

Tim Draper:

And so you knew that there was a problem there. The consumer was suffering, and now you look and you say, “What are the big oligopolies that need to be transformed,” and that’s the way I’ve been investing recently.

Alex Cleanthous:

Mm-hmm (affirmative).

Tim Draper:

I go, “Okay, what are they?” It’s like banking, finance, commerce. Commerce has Amazon.

Alex Cleanthous:

Mm-hmm (affirmative).

Tim Draper:

Insurance, government, and health care and you look at those and you go, “Okay, what technologies are around that can help transform those,” and that’s where you get into Bitcoin, blockchain, smart contracts, artificial intelligence, and surveillance. You go, you put those together and you can create an insurance company with no people, that’s safer, better, faster, better service, cheaper than anything that we’ve got out there.

Alex Cleanthous:

Today, we’re talking with Tim Draper, the founder at the Draper Associates, DFJ and Draper University and one of the most influential people in the investment and cryptocurrency space. Tim helps entrepreneurs to achieve their visions through funding education, the media, plus government reform. His investments have included Skype, Hotmail, Tesla, Coinbase, Twitch, and SpaceX, and he’s an early investor in Bitcoin. In 2014, he actually bought 30,000 Cs Bitcoin from the US Marshal Service from Silk Road, which today would be worth around 1.8 billion dollars. Today, we’ll be talking about how blockchain and cryptocurrency will change the business and finance world.

Just quickly before we get started, make sure to go ahead and hit that subscribe button, so you get the latest episodes as soon as they’re released. Now let’s get into it. Welcome Tim.

Tim Draper:

Great. Thanks for having me on your podcast.

Alex Cleanthous:

Really excited to have you here because you’ve been in the VC game since the ’80s quite successfully actually. I thought we could just start there because you’ve invested in companies like Hotmail, Skype, and Tesla, right? This is back in the ’90s and the 2000s. What’s your approach to choosing investments because you’ve seemed to have a pretty successful track record all the way back then?

Tim Draper:

Yeah. It’s fun to think about whether what the magic was, and all the way up to Coinbase which looks like it’s going to be one of the biggest companies in the world-

Alex Cleanthous:

Yeah.

Tim Draper:

… but here’s what I always look for. I look for somebody who is really dedicating their life to something, and that thing is something that is a little unusual, a little bit off. Maybe not something that would be mainstream to start with, but it’s going after a major problem. Then I like to look and go where most venture capitalists are always looking for what could go wrong. I don’t worry about that. All I care about is what if it works? How great would it be? How really cool would this be? That’s usually enough for me to pull the trigger on investment. You mentioned the internet and how we got involved early. Yeah, and I thought my mission at that time was to spread venture capital and entrepreneurship around the world.

I feel that that has been accomplished. I was also capitalising on the internet and how it’s been able to transform communications and information and gaming, entertainment, media, all these industries and I thought, “Wow, I really got an amazing ride there.” Then all of a sudden, Bitcoin shows up and we’ve got…

Alex Cleanthous:

Well, before we get into Bitcoin, just before we get into Bitcoin because I just want to get your thinking quickly, right? Because you seem to choose things that end up becoming something, right? Because lots of investors, they choose a lot of things that don’t become anything, but you seem to have gotten onto the Hotmail working and just for other listeners of the podcast, can you confirm that it was you who said to put that the little line at the bottom of the emails to say to get your free Hotmail account, which became the viral marketing kind of-

Tim Draper:

Right.

Alex Cleanthous:

… the case all?

Tim Draper:

I mean all social media is tied to that one day, which is great. Yeah, we didn’t know how we were going to get the word out. We had free web-based email and I said, “Well, why don’t you just put it out on that web thing,” and they said, “That would be spamming.” I said, “Well, wait a second, you’re giving away free email. What if you put a little message at the bottom of everybody’s email that says…” and I told them to say PS, I love you, get your free email at Hotmail. They were thinking I was out of my mind and they pounded… I kept pounding, pounding, pounding and then until finally, they said, “Okay, we’re going to try it, but no PS, I love you, just get your free email at Hotmail,” and I said, “Okay, okay, good.”

Now we could have had a much more peaceful and loving world if you had kept that little message, but in any case, it spread to 11 million users in 18 months with zero marketing budget. The founder was from India, and he sent one email to his friend in India, and we had a hundred thousand registered Hotmail users in India in about three weeks.

Alex Cleanthous:

Wow.

Tim Draper:

It was just exploding and to that date, that was the fastest growing consumer product of all time. Yeah, I came up with viral marketing and it spread and it was fabulous. Then we used the same thing when I invested in Skype, and then all social media, all these other kinds of technologies have all been able to take advantage of the idea of communicating for free around the world and then producing value in other ways through advertising, or just using that. The real value of that was that it was immediate distribution, and that’s why Microsoft wanted to pay so much for it.

Alex Cleanthous:

You’re quite entrepreneurial at heart. Yes, you’re a person that runs the VC funds and a professional investor, but you’re also quite an entrepreneur, which is why you seem to be good at finding these opportunities it seems because it’s a pretty good track record. I’m trying to understand your head space in terms of how you think about these things, because someone that’s had like as much success as what you’ve had, there’s something about that which I’m trying to understand before we start talking about the blockchain stuff, because it’s that kind of mindset which I am really trying to get into

Tim Draper:

Think of it as, yeah, I’ve always felt like there may be a better way and I’ve always had good resistance to peer pressure. I’m always looking for when people ask me is the answer A or B, I always look and I say, “Well, wait, that isn’t even the right question. It’s Z. It’s something completely different.” If you always get to that it, I think it makes you happier, and you can be more honest with yourself if you aren’t just saying it’s A or B because somebody asked you if it’s A or B.

Alex Cleanthous:

Mm-hmm (affirmative).

Tim Draper:

I usually feel like, “Well, wait a second, let’s get back to the basics and let’s figure out what’s the fundamental issue here.” At Draper University, we say there’s a 6-part programme where we start by saying what’s the biggest problem that you see in the world, and then how are you going to solve that problem, and then how are you going to turn that into a business? See, so we go to the fundamentals. Then how are you going to make money in that business? Then how are you going to make your customer into your sales force the way we did without them?

Alex Cleanthous:

Mm-hmm (affirmative).

Tim Draper:

We put that package together. It’s starting with the fundamentals. Fundamentals are really like what’s the real problem before you go into like would you rather be on Facebook or Myspace? What’s the real problem?

Alex Cleanthous:

Yeah.

Tim Draper:

What do you want to do? How do you want to deal with it? Then all of a sudden, it’s like, “Well, we want to see pictures on the screen. We want to do something innovative. We want to find old friends, whatever it is.” Then you go, “Oh, that’s what you wanted.” Twitch, my God, we invested in Justin.tv. He’s really an extraordinary guy who started that business, but it was just people showing each other what their day was like. Then they realized that the real problem or the real opportunity was that a lot of people were using it, 40% of people were using it so that they could watch other people play video games. Then they said, “Aha, that’s the problem we’re trying to solve, that’s the opportunity we’re trying to capitalise on.”

Then they focused just on that and then Twitch of course that came up.

Alex Cleanthous:

Then Twitch, okay and so…

Tim Draper:

Billion, multi-billion, wonderful.

Alex Cleanthous:

Multi-billion, yeah. You look for areas where there are companies that are solving large problems that potentially haven’t been sold before, which is the example of all the companies which I have spoken about so far as part of this introduction, right? They’re all companies that seem to be doing things that are novel that haven’t been done before, and the opportunity is big. That seems to be your MO for the kind of companies-

Tim Draper:

They tend to be…

Alex Cleanthous:

… which you want to be part of, right?

Tim Draper:

They tend to be competing in areas where the incumbents, the oligopoly is making a lot of money, but not providing good service, like Skype completely transformed long-distance telephone barriers. I remember paying $50 a minute for…

Alex Cleanthous:

I remember that as well.

Tim Draper:

Yeah, and all of a sudden, it’s free everywhere and now we can see each other as we are today.

Alex Cleanthous:

Mm-hmm (affirmative), mm-hmm (affirmative).

Tim Draper:

You knew that there was a problem there. The consumer was suffering, and now you look and you say, “What are the big oligopolies that need to be transformed,” and that’s the way I’ve been investing recently. I go, “Okay, what are they?” It’s like banking, finance, commerce. Commerce has Amazon.

Alex Cleanthous:

Mm-hmm (affirmative).

Tim Draper:

Insurance, government, and health care and you look at those and you go, “Okay, what technologies are around that can help transform those,” and that’s where you get into Bitcoin, blockchain, smart contracts, artificial intelligence, and surveillance. You go, you put those together and you can create an insurance company with no people, that’s safer, better, faster, better service, cheaper than anything that we’ve got out there and what is government, but a bunch of insurance companies. You can transform the government. Banking’s being transformed by Bitcoin alone. The bankers freaked out when it came, but then they realized you got to get on board, or you’re going to lose your clients.

Alex Cleanthous:

Mm-hmm (affirmative), mm-hmm (affirmative). When did you see the potential of the Bitcoin currency and the blockchain industry across the board? How long ago was that?

Tim Draper:

Well, it came before that because in 2004, something like that, I talked to this guy from Korea and he said, “Yeah, half of Korea is playing this game Lineage,” and I said, “Really?” He said, “Yeah and it’s so important that I’ve hired a guy to be my avatar when I go to work,” and I said, “Wow.” Then I started to think, “Whoa, so people are using fiat money to buy virtual goods,”-

Alex Cleanthous:

Yep.

Tim Draper:

… and then I thought, “And there’s going to be money in those games and it’s going to be virtual money,” and then I thought, “Well, digital money would go across from game to game, and then there’d be a whole new currency.”

Alex Cleanthous:

Mm-hmm (affirmative).

Tim Draper:

I was watching for it, and I thought it would be game to game, but it turned out that Bitcoin showed up and all of a sudden, you had a completely trusted, controlled environment. The decentralized part was even better, even more than you could expect. Then the blockchain was this thing that kept perfect records. There isn’t a better banking system in the world, and I got very excited about it. I bought a bunch of Bitcoin.

Alex Cleanthous:

How much did you pay for it back then, because I remembered it was back when I first heard about it…

Tim Draper:

$4… well, $4 a Bitcoin, but then it disappeared in the Mt. Gox thing, yeah, where they disappeared the money and I lost the whole thing. I thought, “Oh, too bad. Well, that’s the end of that. Well, maybe there’ll be another one that comes along,” but no, Bitcoin didn’t disappear after that. I thought, “My God, that’s like they had 60% market share on the trading, and they just stole the money or disappeared the money.” I thought, “Oh, this is gone,” but it wasn’t. It dropped only 10% on the news and I thought, “Oh boy, people really need this,” and that’s when I really dug in and…

Alex Cleanthous:

It was about 2013, wasn’t it-

Tim Draper:

No…

Alex Cleanthous:

… or 2012 the Mt. Gox thing?

Tim Draper:

I think I bought the auction money in 2013. I think it was like 2011, 2012 when I was…

Alex Cleanthous:

Yeah, okay.

Tim Draper:

I was buying some and learning more and building, and trying to figure it out. A real light bulb went off when Sebastian Serrano went through Boost and Boost as an accelerator my son created. He went through Boost and he said, “Yeah, I’ve lived in Argentina all my life, and my parents’ fortune has been built and then disappeared three times in my life, and I’m only 30 years old.” He said, “So currency manipulation is almost worse than one of these African governments that comes in and says your money, I’m taking your business from you with guns.” Anyway, he said, “Bitcoin is our saviour. There are only 21 million of them.

They can’t inflate out of it. They can’t print money and destroy my value. I can build a business that has great value, and no one can take that away because it’s global and it’s frictionless, and can move from one country to another.”

Alex Cleanthous:

Sure.

Tim Draper:

He got very excited. He created something called Ripio, which is one of the leaders in Latin America. It’s like the Coinbase for Latin America, and I thank him periodically for all that he’s done because he basically guided… there were other things. You could do remittance across borders. You do micro payments. You can do things you can’t do with fiat currency, and it is more trusted, more stable, all those things. People say, “Oh, it’s very volatile,” and I said, “What are you talking about? One Bitcoin is worth one Bitcoin. It’s all these other currencies that are very volatile as they slowly disappear from use.” Then they say, “Well, so are you going to sell your Bitcoin?”

I say, “Into what? What am I going to do, take the currency of the future and trade it for the currency of the past? What? It’s like taking dollars and converting them to confederate dollars or taking Euros, converting them to French franks or drachma.” I mean you don’t want those…

Alex Cleanthous:

I remember drachma…

Tim Draper:

Those currencies are no good

Alex Cleanthous:

No good, yeah. I remember…

Tim Draper:

I’m very excited about the future. I think we’re going to have a currency that is global and no longer tribal. All our currencies were tribal. We used to all be tribal, until the internet came on. The borders really meant something important. You don’t cross this border or else, we’re going to have a war, but now, we want to cross the borders because we want to trade, and that all came with the internet. Now with Bitcoin, we have something to trade with.

Alex Cleanthous:

With, with. Back in 2014…

Tim Draper:

That’s trusted on both sides of that border.

Alex Cleanthous:

Yeah. Back in 2014, when Bitcoin was around 400, you predicted it would get to 10,000. I think people were making fun of that statement, and all those people have eaten their words now, right? Because it got there a few times already now, and now it’s at 60,000… 55,000 today, which was 60,000 a couple days ago. You seem to know something that others don’t. Before we get into the rest of the conversation, this is just a question I want to ask. Where do you see its value going in the next three to five years, let’s say?

Tim Draper:

Yeah. Wait, 2013, Bitcoin was about 200 and I made that prediction that it would hit 10,000 by 2017 on Fox News. We are actually–

Alex Cleanthous:

Oh, so you did it publicly. Yeah, of course.

Tim Draper:

Yeah, and then it weirdly about three years to the day, it hit 10,000 and it went beyond that, came back down to about 4000 in 2018. I predicted then that it would hit 250,000 by 2022, and I’m saying by the end of 2022 or early 2023, we’ll see it hit 250,000. I’ll tell you the reasoning I have. Every industry goes through this sort of thing where it goes up to a point, and then it drops back down. You get a high point because everybody’s saying, “Oh my God, this is going to be so great,” and everybody’s excited about it, but it’s not ready yet. It’s not ready for prime time yet. Then it drops back down while all those engineers are working and building and making it so that it fulfils its dream that it was at the top of the hype curve there.

Then it goes way beyond what anybody ever imagined. I mean I think the 250,000 might be conservative, but I felt that it would get to a point after all the engineers had figured out that once they had figured out how to put it together, take the blockchain, turn it into a balance sheet and an income statement, be able to tax with it, have the ability to accept it as retailers and have the transactions happen as quickly as they do with the visa network, that this only represents like 5% of all the market for currency. I thought, “Well, yeah, it can definitely hit that,” and then I actually think from there, it goes up steadily because it’s going to be needed, more and more people are going to be using it.

They’ll use it not just for a store of value, not just for remittance, not just for micro payments, but for as a currency. It’s going to have that value. It’ll just keep going.

Alex Cleanthous:

There’s so many parts I want to talk about. I’ll try and keep it to the topic which I said before because I’m interested in a few of these points, but if we’re talking about the mass adoption of crypto across the economies and stuff like that, right? At the moment, it is a store of value, right? People don’t want to spend it because at the moment it’s going up. If you’d bought whatever, a car three months ago for $10,000, but it was the one Bitcoin, that car now, you’d be like, “Well, that would have been a $60,000 car, right?” When do you think it will stop being a store of value and start being a currency because right now, I wouldn’t want to spend it on anything, because I’ll know that maybe it’s going to triple in price in three months, in six months, in like a year. When do you think that will happen?

Tim Draper:

Well, I mean that’s what makes a horse race is that there’s always somebody on the other side saying it’s coming to an end and when they do, then they’ll go ahead and spend theirs. I’m not. I’m a hodler and I’m an acquirer-

Alex Cleanthous:

just for the…

Tim Draper:

… because I look and I say…

Alex Cleanthous:

Just for the listeners, a person that’s a hodler is someone who holds on for dear life. It’s a blockchain statement because of the fluctuations over the past five years, a hodler. Yeah, sorry Tim.

Tim Draper:

I’m also looking and saying, “Well, how much fiat cash do I need to make all my capital calls and support my family and that kind of thing, and then what’s left?” It’s either in startups or it moves into Bitcoin, and that’s been my investment strategy, my personal investment strategy, but what’s happened is a lot of these things have happened. Cryptio creates a balance sheet and an income statement off of the blockchain, so a tax authority can go in and tax you in Bitcoin if you have a Bitcoin walled garden of business. Then OpenNode allows any retailer to accept Bitcoin and it’s faster than the visa network. My big hope is that I am going to be able to raise a fund in Bitcoin, raise a fund.

They pay me in fiat, turn it all into Bitcoin, then invest in Bitcoin into all these startups. Then have all the startups pay their employees and suppliers in Bitcoin, and have the whole thing on a smart contract, so that we keep perfect records not just between me and my investors, but also between me and my entrepreneurs, so that the entrepreneur can easily show look, here’s how we’ve spent the money. I can keep an eye on how people are spending their money, and I can say, “Well what about this?” You say, “Oh yeah, it was a mistake we made back when.” “How about this,” and he says, “Oh, I didn’t really see that, and we got to figure out how to tighten that up, or do something with it.”

That kind of thing is very difficult to do with fiat and banks and entrepreneurs, but if the whole cash flow is all done in Bitcoin, it can be automatic, and you won’t need the accountant, the auditor, or the bookkeeper. You don’t even need the lawyer for the whole thing because it would all be built in a smart contract. That’s the vision I have at least in my world. I imagine in the Hollywood world, they’re thinking, “Oh my God, that means we can pay all these people by just giving them a Bitcoin wallet and dropping the money in as it comes into the business.” That’s like magic. All of a sudden, there’s trust in that system. Right now, there’s no trust in Hollywood.

No actor, producer, assistant to the lighting guy has any trust for the people who are managing it and handling the money and doing whatever. They always feel like they get these checks in the mail for 25 cents. This isn’t right and-

Alex Cleanthous:

Let’s just talk about that quickly…

Tim Draper:

… if the Bitcoin wallet just drops in, doesn’t touch any people, there’s no room for corruption, it’s exactly the way it should be. There will be thousands of other industries that are all doing different things, doing their business in new ways because of Bitcoin.

Alex Cleanthous:

That’s what I wanted to understand is so what problems does the blockchain solve, or does Bitcoin solve, right? Because we’re specifically talking only about Bitcoin, or are we talking about any of the cryptos? I say, for example, Ethereum, Litecoin, or any of those other ones, or are we talking only about Bitcoin right now?

Tim Draper:

Well, Bitcoin’s the one that has a limit on how many there are, and it’s also the most decentralized. It’s the one with most engineers and entrepreneurs working on it, and it’s the one that if you’re a retailer, that’s the one you’re going to accept first, but these other currencies have certain purposes, special purposes. I look at Bitcoin and I say, “Well, that is the Amazon and these other currencies, they are the other e-tailers,” but the other currencies are all doing really cool things and we’re investors in many of them. Tezos has a new way of governing and a new way of keeping on the block. The blockchain for Tezos is proof of stake, rather than proof of work, which means it doesn’t require all that energy to make it happen.

They’re set up really well for smart contracts which is Ethereum’s favourite thing.

Alex Cleanthous:

Mm-hmm (affirmative), mm-hmm (affirmative).

Tim Draper:

Tezos, I have great hopes for. ANT, the Aragon is a token that allows you through crypto to create a jury, and that jury that could, just as easily be a voting system. It could lead us toward a liquid democracy. A lot of interesting things can happen there.

Alex Cleanthous:

Then what are the problems that blockchain solves then? Is the finance industry the main thing right now? Yeah, yeah.

Tim Draper:

The blockchain keeps perfect records of Bitcoin, but it also can keep perfect records of data, so that data can be anything from, yeah, this purse is legitimately air maze, to this piece of art is the one that really counted. It can be like an NFT around art, it can be an NFT around music. It can be any number of things and it can keep permanent records. It can keep a record of you, of your health care, of all the things that have happened in your health care, and it’s permanent. It doesn’t change. It can be your driver’s licence or your diploma, or your real estate licence or nursing licence, or whatever, so anything that you need that is permanent. It can also be like collectors, baseball cards or whatever.

Alex Cleanthous:

So that’s a record…

Tim Draper:

There are some great applications that are coming up for the blockchain and NFTs.

Alex Cleanthous:

Blockchain…

Tim Draper:

In a smart contracts…

Alex Cleanthous:

Yeah, sorry. You go ahead.

Tim Draper:

Smart contracts are really cool because they allow you to set up a contract that is indisputable. It’s in software. It’s built in and you see how the waterfall flows. You see how if this, then this. It’s all set up like a software package. There’s no wiggle room for people to create a dispute, and that’ll save us countless hours in legal work. There are a lot of great applications coming with these new technologies. Then when you come, you can add things like artificial intelligence and surveillance. That has the ability to change the whole insurance world because I could have an insurance package that I provide. Right now, the way insurance works is you pay your premium, pay your premium, pay your premium.

Then you issue a claim, and then you fight the insurance company. You fight, fight, fight and then eventually, the insurance company somehow, there’s a settlement. Well, what if you put it all on surveillance and that surveillance could either be on your body for a medical issue, or on your house? You could pay your premiums in Bitcoin on a blockchain, and then build it into a smart contract that when surveillance saw that your house burned down or the doctor said you’ve got some disease, the check doesn’t even have to come. The money would just drop into the Bitcoin wallet, and you’d have enough to rebuild your house, or to pay for medical expenses. Think about that in terms of government.

Government is, what is it? It’s all insurance, it’s health care insurance, it’s workman’s compensation insurance, it’s unemployment insurance, it’s Medicare, it’s your welfare and your pension and Social Security, all that stuff and it’s all insurance. Governance can be very thin and very competitive, very accountable to its people and very fair because it can all be done on this blockchain. Yeah, you asked about the blockchain. Yeah, you got more than…

Alex Cleanthous:

Yeah. No, no, no, that’s exactly what I was after, but just where… are there examples of how it’s changed the world today? Are there examples of how the blockchain or the crypto or smart contracts have actually changed, actually how we do business or how we live today?

Tim Draper:

Yeah. Well, we have a company called BitPesa in Africa, and they translate Nigerian naira for Tanzanian shillings. They do it on the Bitcoin block. They change the naira to Bitcoin, and then the Bitcoin is shillings so that the rails are in Bitcoin. They’ve done it with many countries, and now moving off the African continent, going to Southeast Asia, and other places. They’ve done incredibly well, allowing these people to do business in their own currency, but then translating it and storing it maybe, holding it in Bitcoin makes it so that it’s a trusted system that otherwise maybe wouldn’t have a lot of trust to it. Then here’s how it really changes the world.

Let’s say you’re in Africa, or one of the bad places like Venezuela or whatever, and you’ve got a bad dictator. Anybody who builds anything of great value, the dictator comes in with the military and takes it away from you, or it’s just Nigeria where the naira just drops in value 50%, 70% a year, and so any value that you create, any value you want to hold and you’ve created with your business just disappears over time. What they can do now is they can operate in Bitcoin, and these people are operating their whole businesses in Bitcoin. They’re storing their value in Bitcoin, and that value can be all… it’s out there on the wires, it’s out on the internet. It gives spirit to people who otherwise may not have spirit.

They think, “Oh, if I do anything and build anything of value, the government’s just going to take it from me, so I’m just going to live for today.” Those people are now saying, “I can build something and I can hold that value.”

Alex Cleanthous:

Mm-hmm (affirmative). What about for countries that are a lot more stable like the US and the UK and Australia? What does it take for it to change how we do business here?

Tim Draper:

Well, the US just printed how many trillions of dollars-

Alex Cleanthous:

Really.

Tim Draper:

… making all your dollars’ worth less and that’s what happens. Then if it gets out of hand, you get inflation and that inflation compounds, and then you start getting the same thing. People don’t want to work because if they build anything of value, it’s taken away from you through inflation. No country is immune, and all countries look worse. All these business people in the world, they’re smart. They look and they say, “Well, wait, that country’s doing something wrong. They’re printing too much money, or they’re not operating… well, they’re living beyond their means or whatever.” Then they go, “Okay, I’m going to move to another country.” We actually created something called the Draper Innovation Institute. It’s draperhero.org, and you can look at all the countries…

Alex Cleanthous:

You have so many companies, aren’t you Tim? You have so many…

Tim Draper:

This is a non-profit.

Alex Cleanthous:

Non-profit, yeah.

Tim Draper:

It’s a non-profit-

Alex Cleanthous:

Okay.

Tim Draper:

… and you can look at all the countries, and you can see which ones are good places to go and innovate. It turns out on the whole, the US is still number one, but it’s fast on its heels are Singapore and Switzerland.

Alex Cleanthous:

Mm-hmm (affirmative).

Tim Draper:

Then you see countries like Turkey starting at about 80th, and then they drop to 140th because this guy comes in and says, “I’m taking everything and Bitcoin’s illegal here and whatever else.” Whenever you see something like that, then you go as an entrepreneur, you say, “Oh, I’m going to go to another country,” and that’s why there’s a mass exodus from Argentina going into Uruguay. It’s the reason why there’s a huge brain drain out of Turkey. There’s been a brain drain out of Greece for years and years. It’s really because if you’re an entrepreneur, you can now move, and you can operate anywhere and you can build your business and Bitcoin, and build your value in Bitcoin and hold it.

Alex Cleanthous:

Then for these mainstream companies that are operating in fiat, they are traditional, but they know this blockchain thing, the crypto thing, it’s coming. I should start preparing somehow, but they already have this operation that is running. They’ve got staff employees, they’ve got offices and stuff like that. How does a company like that start to embrace this technology now, rather than waiting too long and some startup comes and eats their lunch, right? How does a company start to do this?

Tim Draper:

There’s two ways… okay, let’s say well, I’ll try two different angles here. One is if you’re a fiduciary and let’s say you’re Apple’s CFO, and you’re looking at whatever he’s got. They’ve got tens, hundreds of billions of…

Alex Cleanthous:

Hundred and fifty billion offshore or something like that-

Tim Draper:

Yeah.

Alex Cleanthous:

… cash.

Tim Draper:

Billions of dollars, and it’s in fiat, and you realise that the US government just printed trillions of us dollars. All of those billions of dollars just dropped in value. You think, “Oh boy, if they do that again, it’s going to drop again and if it starts to be a spiral, we’re going to have a problem, and we hold all this stuff and it’s getting to be worth less and less as we sit here.”

Alex Cleanthous:

Mm-hmm (affirmative).

Tim Draper:

Well, in that case, you would say, “Well, I want to buy Bitcoin because I need to hedge against inflation because you know they’re only 21 million Bitcoin out there, but the dollars can keep being printed, depending on which government it is and whatever.” Okay, that’s from the fiduciary point of view.

Alex Cleanthous:

Right, and they buy some Bitcoin and steal some of the cash reserves into Bitcoin, step one.

Tim Draper:

And that’s where Elon did that with some of the Tesla cash because he said, “Oh, they’re printing these dollars, we need a hedge.” Then so did a bunch of other people, and micro strategies made it a huge part of their asset picks, and it grew. Now, you invest in that company, you’re actually investing in Bitcoin as much as you are in the SAS product, but then there are some that are saying, “Well, look I’m assuming this much inflation, so I’m going to buy this much Bitcoin.” They’re the ones who are really paying a good attention to the money, and they’re not just seat of the pants and…

Alex Cleanthous:

Sure.

Tim Draper:

The fiduciaries, that’s one way.

Alex Cleanthous:

That’s one way, yes.

Tim Draper:

The other thing that’s happening is on the consumer side, and Elon hit it on both sides. He said, “And we accept Bitcoin for these cars.” I think he may be using OpenNode too because the transaction speed is incredibly fast. if you use OpenNode, you don’t have to pay the banks two and a half to 4% when somebody swipes a card.

Alex Cleanthous:

Mm-hmm (affirmative).

Tim Draper:

I think the retailers and e-tailers are going to go, “We accept Bitcoin because it’s going to save us two and a half to four percent,” which seems not like not that much to the consumer, but to that retailer, retailers are on a very thin margin. That can triple their profits if they can get all their customers to buy it in Bitcoin. If Bitcoin continues to increase in value, it’s even better, but most of those retailers go, “Okay, we’re going to accept Bitcoin, but we got to make sure that 80% of the money we bring in is fiat, and the other 20 can be Bitcoin, and we can store the Bitcoin, but we need the fiat to run our business.”-

Alex Cleanthous:

Okay…

Tim Draper:

… or now, or now…

Alex Cleanthous:

Yeah, because I was about to ask you that question. Yeah.

Tim Draper:

But eventually, it’s going to be a full crypto walled garden, and then they won’t need the fiat anymore. At that point, when we look and we go… retailers are going to be saying things like, “Well, I don’t take fiat cash. I only take Bitcoin,” and that will be the turning point where all of a sudden, people will be just trying to bail out of their cash and move into Bitcoin. That’s when it I mean it goes through the roof. We will have extraordinary prices on Bitcoin at that time.

Alex Cleanthous:

Just on that point, just to clarify, so basically you’re saying take a proportion of your sales in Bitcoin, but store that, right? Because if you’re going to keep exchanging it, it can be volatile because of the fiat currency, right? Store the sales in Bitcoin, but accept it. Then in time, that will grow…

Tim Draper:

Yeah, I’m not giving them any advice on how to run their business.

Alex Cleanthous:

Not a device, but no, no, but I’m just trying to understand how you’re thinking about it…

Tim Draper:

But that is what people are doing. At Draper University, we’ve been taking Bitcoin for years. Two guys who paid in Bitcoin basically paid for the school for about four years, but we accept Bitcoin through an open node and we accept it for rent in Hero City. We accept it in all sorts of different ways, and it’s an easy frictionless way to get Bitcoin. We store all 100% of that, but if I had to run my business hand to mouth, I would hold on to the currency that I can still buy the food with.

Alex Cleanthous:

Mm-hmm (affirmative).

Tim Draper:

Once that’s Bitcoin, then there’s no reason to hold any government cash.

Alex Cleanthous:

Basically, the first one is like the fiduciaries just store a portion of their cash like into Bitcoin as a hedge against the inflation rates and potentially the currency rates and so on. That’s the first one. For the second one is just accepting Bitcoin as a way that consumers can start to pay you for the products or services, and then have a strategy for how much you keep, and then how much you convert back to funding the operation. Is that right?

Tim Draper:

Yeah, and as an investor, as a venture investor, I looked at all that and I said, “Well, I’ve got to buy some just for my fund.” I bought some Bitcoin, some Ethereum, and some maker just for the fund so that it could have this as a hedge against inflation, separate from all the startups that are currently operating in fiat.

Alex Cleanthous:

I really like your thinking around the acceptance of Bitcoin as part of the standard operation, and I think there’s also just to the listeners out there, not a lot of your competitors are going to be doing this. Aside from the fact that this will open up a whole of the market for you, it’s cool and it’s a way to really stand out from this crowded marketplace that we’re in. By just saying, “Hey, we accept Bitcoin,” that could be-

Tim Draper:

Sure.

Alex Cleanthous:

… a point of difference in a place where every insurance company sounds the same, talks the same, just says the same thing. There’s one that now accepts Bitcoin, that might be like an interesting way to stand out especially because it’s so competitive these days in the digital space, but aside from cryptocurrencies, but you talked about smart contracts and distributed ledgers and all that type of thing. Are there places where these companies can start to invest in blockchain solutions to improve their operations?

Tim Draper:

Yeah, we backed some of those companies early on, and it didn’t take off because it takes a lot of hand-holding to get a company to change what is right now a database to turn that into a blockchain system or a NFT. It’s years of effort, so that part hasn’t really taken off the idea that I can store all my data on the blockchain, and it’s got to be data where you need permanent records. There are specific uses that are more valuable than a normal database. You want something that will not change. If you have some data that you never want to change, that’s perfect for the blockchain. If you have data that’s moving in and out changing all the time, then you don’t want that for the blockchain.

Health records are great. Historic financial records are probably fine. Anything that stores it permanently, and then authentication is possible on the blockchain, and that’s where you can put a private key on every piece of art, or every whatever that anybody has, and then you can authenticate it.

Alex Cleanthous:

Okay.

Tim Draper:

Yeah, so anything that seems like a permanent record, that is the kind of thing that is good for the blockchain.

Alex Cleanthous:

But like you said, it takes years of time to do and it changes how the company fundamentally operates. It’s almost in the too hard basket for lots of these organizations, right? Does that mean then that it’s a lot of these entrepreneurs that are just creating startups in the blockchain in the crypto fields that are there to support these larger companies, that’s really how this starts to shift things. Is that a fair statement, or is that just wrong?

Tim Draper:

I’m not sure I get that question, but I can spin it a little bit.

Alex Cleanthous:

Mm-hmm (affirmative).

Tim Draper:

I actually think that the existing businesses, think of big huge businesses as big huge boats-

Alex Cleanthous:

Yep.

Tim Draper:

… and they’re in the ocean and they can turn maybe two degrees without messing the boat up too much.

Alex Cleanthous:

Mm-hmm (affirmative).

Tim Draper:

Think of startups as these little boats that can turn 180 degrees without even blinking.

Alex Cleanthous:

Yep.

Tim Draper:

I think that the major changes in the new industries are going to come from the small boats. They’re going to come from the entrepreneurs. You’re going to see all sorts of interesting things happen around NFTs, around the blockchain, whatever. Then first, there’ll be consumer products that people go, “Oh, that’s really cool, I can try this.” Then over time, eventually it hits the enterprise and then the enterprise starts saying, “Well, we need to use this for this.”

Alex Cleanthous:

Got it. Would you say that these types of companies are more companies that will, but disrupt specific industries, or that they will support them in different ways?

Tim Draper:

There’ll be both. I mean the best startups create a nice wedge into an industry, and then they slowly grow that wedge. Some startups are just creating products that provide better services for their customers, their corporations. It’s the difference between these consumer brands, Facebook, Google, Apple, whatever and the corporate brands that are the SAS products, Salesforce, and Microsoft, and others, IBM, those are the ones that help the corporation become something successful. They are slower in general to move and adopt new technologies than the consumers. The consumer can just say. “I’ll buy that.” The consumer usually comes first and then it–.

Alex Cleanthous:

The consumer comes first. Okay, that’s interesting, it’s interesting. I’m just trying to get the listeners’ heads around so how can they start to prepare for this change that is happening? It’s starting with Bitcoin, but that’s just the start. Let’s just talk quickly about okay, so now I’m trying to find some blockchain solutions, right? Okay, so now you talked about the balance sheet software, but there’s all these supporting blockchain solutions that can help organizations improve how they serve their customers, or how they manage their Bitcoin. How does a company choose a reputable company to work with, because there’s like thousands of them at the moment, right?

Alex Cleanthous:

Lots of them are solving the same thing, but how do you choose a company to say that’s a good solution, that’s what I’m going to put the resources into?

Tim Draper:

I’m not a good one to ask that, because I am doing a portfolio approach and I invest in 10 companies assuming that five of them go out of business.

Alex Cleanthous:

Okay.

Tim Draper:

I’m not trying for perfection. Now as a customer of some product, where I’m actually paying dollars for a product, I’m going to be very discriminating and try to figure out how to use it and what it can be used for, and how I can help my customers with it, but I think I’m pretty much the wrong candidate.

Alex Cleanthous:

Okay, so where would somebody go…

Tim Draper:

I think as key as the CIO or CTO of a big business is probably the one to check on that kind of thing.

Alex Cleanthous:

Where would somebody go then to find these solutions, because they’re not easily I guess identifiable through mainstream channels, right? Where does somebody go to start to find…

Tim Draper:

Oh. Well, I mean yeah, you mentioned one thing about trust. Trust and freedom are what make great countries. I mean that’s all there is to it, and that is also what makes great companies. If you are building a great company and you provide great trust from not just how you treat your employees, but your suppliers and your customers and everybody, then you’re building something of amazing value one brick at a time and you go up. If you’re creating more freedom for people you will be more successful in the two country models or Singapore trust and South Korea versus North Korea for freedom. Freedom just works and trust just works. How do you find the supplier that you can trust? It’s usually the one that’s successful.

Alex Cleanthous:

Oh, okay. Yeah.

Tim Draper:

They’re the ones who have customers who love them, referrals, all that.

Alex Cleanthous:

Okay, so it’s the same process exactly for any kind of supplier?

Tim Draper:

If it’s a raw startup…

Alex Cleanthous:

It’s to find…

Tim Draper:

If it’s a raw startup, you’re always trying to figure out how to gain credibility with a customer, but that first customer in this new world is not as hard as it used to be to get, because there are a lot of people that are willing to like, “Okay, we’ll try it. We’ll be your beta customer. We’ll try this thing out. We’ll see if it works.”

Alex Cleanthous:

What is the thing which you are most excited about in terms of Bitcoin and the crypto industry over the next like 10, 20 years, far into the future?

Tim Draper:

That’s funny, three things came to mind. One is Coinbase because they have taken the high ground. If you’ve got the high ground on a business, it’s good for generations. One is Coinbase. Two is the decentralization of everything, which includes decentralization of free speech, of money, of everything. We have a company called Unstoppable Domains that allows us to buy. You can buy Alex.crypto and put whatever you want on there, and put your wallet on there and put your whatever. It’s all secure and no one can come and say… they can’t stop you from saying things that you believe, and I think that’s incredibly valuable for the world. I mean it’s what made the US, the US is the free speech thing. I think that was as important as anything. After all, you’re in the media. You like free speech.

Alex Cleanthous:

Yeah, definitely.

Tim Draper:

Then the third is Bitcoin and I just think that in the altcoins, I mean a lot of these altcoins are going to be very exciting, very interesting. They’re going to be doing new things with them. D5 is just the beginning. Decentralized finance is just the beginning. There are many, many new applications that are coming along. Yeah, stay tuned. I think, yeah, if I were to pick three, those are the three.

Alex Cleanthous:

Cool.

Tim Draper:

Coinbase, Unstoppable Domains king of thing, the decentralization of everything and Bitcoin.

Alex Cleanthous:

Great, and if there’s one thing that you want the listeners to do, a site to visit, book to buy, a place to go, what would you like them to do?

Tim Draper:

Well, you watch Meet The Drapers, that’s our show on TV. We have 12 million viewers, and you can invest in the companies that we interview. It’s like Shark Tank-

Alex Cleanthous:

Cool.

Tim Draper:

… but you can invest as a viewer. Then I wrote a book, so go look it up. It’s How to be The Startup Hero-

Alex Cleanthous:

Yep.

Tim Draper:

… and then the other thing is for the women, only one in 14 Bitcoin wallets is owned by a woman. I think once the women realise that they can save two and a half to four percent every time they swipe their credit card at retail, women control 80% of retail, it’s going to be full speed ahead. I encourage women to go out and get a Coinbase account and-

Alex Cleanthous:

Buy some Bitcoin.

Tim Draper:

… buy some Bitcoin.

Alex Cleanthous:

Yep, great. Tim, thank you so much for coming on the podcast and talking about everything about crypto, and how it’s going to change the world. I so appreciate your time today. Thank you so much.

Tim Draper:

Terrific. Thanks for having me.

Alex Cleanthous:

Thanks Tim.

Tim Draper:

Bye-bye.

Alex Cleanthous:

Thanks for listening to the Growth Manifesto Podcast. If you enjoyed the episode, please give us a five star rating on iTunes. For more episodes, please visit growthmanifesto.com/podcast and if you need help driving growth for your company, please get in touch with us at webprofits.io.

Adrian Clark

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