00:00welcome to the a 16z podcast I'm Michael
00:02Copeland mentioned Patrick Byrne the
00:05founder and CEO of overstock.com
00:07and you'll elicit a strong opinion in
00:112004 one hedge fund manager labeled
00:13burned the most hated men on Wall Street
00:16a label he wears proudly Byrne started
00:19overstock.com in 1999 and the online
00:22retailer has been through a lot of
00:24change in the intervening years at the
00:27outset Byrne didn't want overstock to be
00:29a technology company trying to get
00:30retail right he wanted to be a retail
00:33company that was amplified by technology
00:36looking back Byrne says he had the
00:38emphasis wrong it should have been on
00:40technology Byrne has been focused on the
00:43technology side of things ever since
00:45pushing overstock.com further into the
00:48cloud as well as becoming the first
00:50major online merchant to accept Bitcoin
00:52Byrne joins this segment of the a 16z
00:56podcast to discuss the state of online
00:58retail value investing in tech and why
01:01Bitcoin and the crypto revolution is
01:03bigger than the Internet
01:05welcome Patrick thank you Michael good
01:08to be here we had a chance to talk a
01:10little bit earlier and you were talking
01:11about the origins of overstock and how
01:14at the time you viewed this market
01:16marketplace that you want to get to as a
01:18sort of flea market but that in those
01:21days as you were building it and even
01:23though you were building it on the
01:24internet you didn't view yourself as a
01:26technology company right
01:28well we that's absolutely correct in the
01:31in 99 there was a lot of craziness going
01:35on and crazy thinking about the internet
01:39a lot of people getting involved doing
01:41I've been a normal business man I had
01:45I'd run a couple old meatspace as I call
01:50it there's cyberspace in meatspace I'd
01:52run a couple meatspace companies and so
01:54there was some some crazy thinking it
01:57seemed to me about the Internet and then
01:59so when we started I just I didn't want
02:02to take part in any of that and so we
02:05were really about revenue and expense
02:07control and trying to cover our expenses
02:09and generating positive cash flow and
02:1299 that was actually considered crazies
02:14yeah that was heretic I mean I have
02:18literally people I get well I got I was
02:20up here on Sand Hill Road I was turned
02:22down by 85 venture capitalists it's the
02:26height of the dot-com boom when folks
02:28were dropping out a Stanford Business
02:30School a one-paragraph business plan
02:32raising a hundred million dollars here I
02:35had run some companies I had I thought
02:38I've had this great but I went up and
02:40Sand Hill Road met with 85 venture
02:43capitalists and 85 VCS turned me down I
02:46mean I'm sure they didn't Hall have the
02:48same answer for why they said no but you
02:50did what was the gist of why you got
02:53rejected like I think I seemed
02:54old-fashioned to them they would say
02:56things like well what okay if we put in
02:5810 million dollars what are you going to
03:00do with it and I said well we're gonna
03:01build it this out inexpensively as
03:03possible and and just you know what our
03:07business people used to talk the VCS
03:09would say no no if we do this it's all
03:11about you know it's all it's all land
03:13grab everything's and land grab so it's
03:15just about you know getting as much
03:16sales as you can or get it and it was
03:18nothing about sort of running a
03:20disciplined income statement and balance
03:22sheet and so that's why we never saw a
03:25so if you weren't a technology company
03:28back then even though you were building
03:29this thing on the internet and and I
03:31want you to describe kind of what that
03:33business was and how the sort of if it
03:35was a marketplace who the what the sides
03:37work but then you've also in the in
03:40recent years had this transition to
03:42becoming a technology company so I want
03:44you to take us through the original
03:45thinking and then why that has shifted
03:47okay well the original thinking was we
03:51had to get the retail part right we
03:54didn't want to be a technology company
03:55trying to do retail but not knowing we
03:58wanted to underwrite ale part right and
04:01then amplify it with technology so I
04:03used to say tell folks in our company
04:04look we're a word lemonade Stalin aid
04:07stand that has a computer in it let's
04:10not think ourselves as a tech company
04:11let's get the lemonade right and once
04:13that's right then we'll war so that's
04:15where we got started and and then once
04:22that's and I probably if I had to do
04:24over again I was probably wrong or at
04:26least my emphasis was on the wrong
04:27syllable I should have been more focused
04:29on the technology to begin with how did
04:31that change and how did your thinking
04:33change around that I mean it was it as
04:35the company growers as you saw others
04:38around you really leveraged technology
04:39whether that's Amazon or Google or
04:41somebody else it was as the company grew
04:44and probably as I grew as they but as
04:47the company grew and we kept you know
04:49our first year was a million eight then
04:52it was about 30 million in 75 million
04:54and 115 two hundred three fifty five
04:57hundred and the very simple systems we
05:01had put in place to begin with just it
05:03was kinda everything was at risk of
05:05breaking at the seams in fact we used to
05:07have to it was turn off parts of our
05:12parts of our company our financial
05:15system as such just because our computer
05:17our entire company was running on an HP
05:19and clasp box sort of a $300,000 box
05:22about the size of this little table in
05:24front of us and that was okay when we
05:27were you know 10 20 30 million dollars
05:31but you turn around a few years later
05:32and you're five hundred million dollars
05:33running on this one box it became like
05:36Star Trek you know Scotty turn and
05:39divert all power to the shield's we had
05:41to divert all right just to keep it you
05:46know in the in the Christmas season with
05:48all the traffic we would have to turn
05:49off the financial system we would even
05:51have to turn off reporting we'd have to
05:53turn off departments there was a point
05:54we had to actually turn off products on
05:57our site just so we had enough power to
05:59support the Christmas wave and then
06:01finally around oh four oh five we said
06:03this is silly and we raised 120 million
06:07dollars and we went out and built big
06:09enterprise class systems over the next
06:10few years and has that I want to get
06:13back to the changes in your business but
06:14the changes in technology so and but
06:17when you say big enterprise systems did
06:18you do things in-house and are you now
06:20going through this process of sort of
06:22taking it out of the house and putting
06:24it into the cloud no we did not do the
06:28things in-house and there was no cloud
06:30back there we became a great third party
06:34and that's how we say well we did data
06:37warehouses and such with Terra data but
06:40what we we didn't have the we actually
06:43didn't have the skill sets back in Oh
06:45506 we had 13 developers we were five
06:48six hundred million dollar company with
06:5113 developers and we were you know I was
06:54fighting people who were saying we
06:55should take it down to seven to save a
06:57few pennies and I was like no we should
06:58be taking it up to a hundred two hundred
07:00so we be we integrated with a lot of
07:03thirty third parties and I think that we
07:05became known among third parties as the
07:09biggest of the e-tailers who would do
07:12these external integrations to handle
07:14things dealing thus a recommendation a
07:17recommendation system and so we became
07:19it became something of a feather in
07:21people's cap to get us because if they
07:23could get us to integrate then they
07:25could get a hundred other customers and
07:27so we became quite good at doing third
07:29party integrations and that's the way we
07:31leveraged having a very small IT
07:33department but in retrospect I don't I
07:35say this is a cautionary tale because if
07:37I had to do over again I would go back
07:39and have and and hit the throttle on
07:42getting good technologies in several
07:44years earlier than we did probably from
07:46the beginning how are you viewing then
07:48as a company of your size this shift
07:51that we see you know had a pretty large
07:53scale to the cloud or how are you guys
07:56looking or embracing or or staying away
07:58I well we've not made as much of a
08:02transition to the cloud as we should
08:03have but it's and I'm a huge fan of the
08:06cloud we do have parts in the cloud we
08:09we think worth the size where we we you
08:13know a lot of our technologists say well
08:16we're we have the scale that it's no it
08:18wouldn't save us any money to do things
08:20in the cloud I'm not completely
08:21convinced to that because if all your
08:24comparison is as well if we did it in
08:26the cloud versus if we buy these boxes
08:28what it costs that's one thing but you
08:30really got to remember that unless
08:33you're doing things in the cloud you've
08:35got you know it isn't just that you have
08:37to buy the boxes you have to have the
08:38people who run the boxes and dust the
08:40boxes and plug them in enough and those
08:42people need secretaries and you need
08:45a toilet paper and there's light and
08:48heat and electricity there's all these
08:50other costs that multiply and I'm a big
08:53fan and it's really only been in the
08:55last three or four years that we've made
08:57a push into the cloud so parts is much
09:00if we can I want us to push as much up
09:02into the cloud as we can there's some
09:04natural resistance within our tech group
09:07and and but I'm always pushing and
09:09because again it's just the nature of
09:12things that people when they analyze the
09:13cost they're missing all the overhead
09:15costs associated with and it's not just
09:18about the boxes it's about all the the
09:20toilet paper and the dust stirring and
09:23all that kind of stuff you mentioned
09:24that there's some resistance to pushing
09:26maybe other parts of your business into
09:28the cloud where does that resistance
09:29come from do you think is that sort of
09:31territoriality or is it just we're
09:33afraid of what we don't know well it was
09:36territoriality there's been a real
09:38turnover in the leadership in our tech
09:40department in the last few years and the
09:43new leadership is embracing the cloud
09:45but the old leadership was quite
09:47resistant to him and I think it was by
09:50nature territoriality people and any
09:53organizations start measuring themselves
09:54by how many people they have and what
09:56their budgets are and things like that
09:58and I should make clear that starting
10:00around oh seven we got we got good
10:04enough that we could we didn't need as
10:06much of the third party anymore we got
10:08good by four or five years ago at our
10:11own recommendations no we started doing
10:13that and our own internal search and and
10:16all kinds of functions so we started
10:18displacing a lot of the third parties
10:20but it really ultimately it was two or
10:22three years ago I had to remove some
10:24people who were quite obstructionist to
10:25moving into the cloud and the new
10:28leadership has been much more perceptive
10:30you guys are not the only company who's
10:32going through that what would you tell
10:35other CEOs and leaders of companies who
10:37kind of in this same technological Jam
10:40as I were as they want to move forward
10:42well I would tell a story that my great
10:45mentor who will I suppose we'll get to
10:48told me Matt was working from 16 17
10:53years ago and we were talking about
10:58he said you know Patrick and the the
11:02financial people don't really understand
11:05the cost of owning inventory at the time
11:08this was inventory some apparel I was in
11:09the apparel business and he said you
11:11know when you're CFO and stuff looked at
11:13it and they they tied my cost to capital
11:15and and involved in inventory they in
11:19general they underestimate what the real
11:21costs are of having a warehouse full of
11:23slow moving inventory the real cost is
11:26not just the stuff that's sitting on the
11:29Shelf it's the cost of the personnel who
11:32are there cleaning it and counting it
11:34and dusting it and the cost of heating
11:37and lighting the warehouse and all these
11:39other costs build up without inventory
11:41cost and if you just look at the cost of
11:44having the trousers on the Shelf you're
11:46not really seeing the full cost and I'd
11:48say it's the same is absolutely true
11:50about IT that if the people doing the
11:54comparison are just looking at well
11:56what's the cost of having this box for
11:58support of having something in the cloud
11:59they're missing the real cost of having
12:02it's all the staff and everything
12:03associated with that that is the that
12:06that gets missed from the in a
12:08conventional analysis
12:11overstock.com is one of the original
12:13ecommerce companies and I just wonder
12:16how your business has changed I mean one
12:18thing is back when you guys launched
12:20there wasn't really any competition or
12:23maybe there was and and maybe that
12:24competition was you know on the ground
12:26but not on the internet but how is your
12:28business changed since 99 and where does
12:31it head next well it's changed
12:33considered with a hundred products that
12:36were you would find in the flea market
12:39industry tchotchkes and dreck as what it
12:42would be known in the retail trade just
12:43dress just you know epilady just which
12:46was one of my bad buys just really
12:48cheapo stuff and we got going with it
12:51and then one of the things that happened
12:54was we were turned down when I said we
12:56were turned down by 85 venture
12:58capitalist about six months later we
13:01were sputtering along I'm trying to get
13:03the business model working dealing with
13:05these little products and and this
13:07wonderful thing happened called the
13:10and as all these companies went out of
13:12business we found that the supply chain
13:15that we had built to deal with over
13:17stocks and canceled orders work really
13:20well on bankruptcies - and we went in
13:23and liquidated 19 companies that had
13:26been funded by the same fellows who
13:29turned us down I'm ma promise Michael
13:32I'm much too mature to take any
13:34satisfaction from that I'm sure you're
13:36just smiling like a Cheshire Cat right
13:38now maybe this is the wrong place to be
13:40telling that story but I have a huge
13:42respect for your firm I really do it's
13:44it's such a premier well we weren't
13:46around then the tenure down so that was
13:49ten years before you guys even came into
13:51existence so you all of a sudden you
13:53have this new supply coming in from from
13:56dot bust companies right and did that
14:00change your kind of mix of of inventory
14:04and then also kind of your view on how
14:05to grow this business it changed it it
14:08changed the mix of inventory which
14:10triggered another change that people
14:11suppliers stopped seeing us as the folks
14:15who were selling low-end direct and
14:17because we got say Mia door which was a
14:19Mia door column was a jewelry company
14:21that just about a mile from here that
14:25went under and we got it they were I
14:28don't know seven ten million dollars
14:30worth of their diamonds and watches and
14:31all this stuff for a few million dollars
14:33and we started selling that and then
14:36other higher-end companies went under we
14:39started liquidating well that greatly
14:41improved the quality of stuff on our
14:43site so they say on Wall Street
14:45liquidity baguettes liquidity as we had
14:48that stuff more suppliers with really
14:51good young cartier watches and people
14:53like that started coming to us and we
14:55started liquidating their stuff and
14:56Seiko and so it all fed itself once once
15:00we started having some really good
15:01high-end products a lot of other people
15:04with good high-end products came to us
15:06and we crawled out of dealing with the
15:08dreck and turned into dealing with
15:10really higher-end products and then
15:12another thing that developed was we had
15:15a we had one supplier at the time we
15:17were buying all this stuff and bringing
15:19it into Salt Lake and selling it but we
15:23who was selling vacuum cleaners or
15:24something and every week we're buying a
15:27truckload of vacuum cleaners and we
15:28finally said let's say he was in Chicago
15:30which I think where he was and we
15:33finally said you know instead of buying
15:35these and moving them down to Utah and
15:37then to our warehouse and then selling
15:39them why don't we just open a little
15:40hole on the back of our database you can
15:42upload every week what how many you have
15:44and then you can ship them right out of
15:46Chicago and thus began our partner
15:49program we were the first to the market
15:51Amazon followed a couple years later and
15:55now 90% of our business we never
15:58actually touch it's we've got all these
15:59suppliers all over the country as a
16:01platform for them interesting
16:03so you mentioned Amazon and I wanted to
16:05get to that how how do you compete or do
16:09you guys sort of run in parallel and you
16:12know how has your business changed
16:14because of them getting bigger and
16:16bigger and bigger well they were always
16:1830 times our size they we've kind of
16:22stayed all around the same relative
16:26proportion here in the US we've we've
16:30gotten much more upscale or not we're
16:32more what's called in line now where it
16:35really isn't all bankruptcies and stuff
16:37but there's a lot and in many ways we're
16:39like Amazon except I like to say about
16:4110% cheaper on average and with better
16:43customer services several industry
16:45groups have certified but and we have
16:48two million products they have I don't
16:50how many 10 domains but so you compete
16:52them priced you also then compete on you
16:55know differentiated stuff that you sell
16:56like you can't get what I can buy an
16:58overstock on Amazon some of that is just
17:00to some degree yes we're having products
17:03that aren't showing up anywhere else in
17:04the supply chain or there's model some
17:06difference in model models but more and
17:09more we are less and less we are a true
17:13overstock closeout business and more and
17:15more a general inline retailer whose
17:19products are salted with with you know
17:22close outs and bankruptcy and really
17:24good buys right ecommerce and much of
17:27retail is a really small margin business
17:31and you know the pressure on retailers
17:34is squeezing their margins even more
17:36so how do you either maintain margin or
17:39have such scale that that you can make a
17:42business sing with the margins that you
17:45can get well it is a tight margin
17:47business we operated basically a 1% net
17:50margin about free cash flow is more like
17:543 or 4 percent and the the the truth is
18:00those margins it's awful tight to break
18:03into e tail now the rise of cloud means
18:07that people don't have to make the huge
18:08upfront capital expenditures that we did
18:11but the way you compete is it's all
18:14about it's about supply chain marketing
18:19is sexy and people come out of business
18:21school and they want to talk marketing
18:23they want to talk strategy but Klaus if
18:25it said amateurs talk strategy
18:28professionals talk logistics and that
18:31was about war but it's same thing is
18:33true for its really a lot of people take
18:36for granted and how that it's easy to do
18:39some of this logistics it's actually
18:41really hard and finding places to just
18:43shave nickels and dimes all day long and
18:47have a seer a set of content a product
18:50continuous improvement processes that's
18:53really I think been our see our part our
18:57secret sauce is logistics and it be
19:01really tough to break in from scratch
19:02into that I in do for example our corner
19:06of the market because just so you need
19:09some scale but it's also a matter of
19:11getting you know getting things ironed
19:14it's just it's unbelievable you're we
19:17keep looking around and still seeing
19:18dollar bills we can pick up off the
19:20ground places we can we can just keep
19:23squeezing cost out of our supply chain
19:25in a way you can look at the business as
19:27it's a race who can do that faster and
19:29as you can do that faster and pass the
19:32savings on to the consumer that's your
19:33mo so it seems that I can sort of find
19:37anything anywhere and I at times it's
19:40overwhelming right so you know I have my
19:42phone or my laptop and there's somebody
19:45in the world who has what I want in a
19:46sort of long tail sense but then there's
19:50aggregation like overstock and what is
19:53the value of curation and have we kind
19:55of over corrected to one place where
19:57like the world is infinite and now we
19:58need to go back to some more focused
20:00view of things that's exactly where the
20:03world is and we realized about six or
20:06seven years ago some of the real value
20:08we could bring would be in the curation
20:10we went from seven years ago we had
20:13about 50,000 products we moved up to a
20:15million and but we're they're hand
20:19selected we have buyers we're much more
20:21like a department store we have buyers
20:23who are taught we don't allow anyone
20:25does it come up and put anything they
20:26want on our site we're we're designing
20:28categories when we get into you know
20:31bridal gowns we've got a specialist in
20:34bridal gowns who's who's and talking to
20:36the suppliers and choosing the right
20:38things a lot of analytics drive that so
20:41on the border between curation and non
20:45curation is your recommendation system
20:48because your recommend if recommendation
20:51system if it's good it means you can
20:53offer more products and people don't
20:55feel like they're lost in a bazaar
20:56because your system is driving them to
20:58things they're interested in so the
21:01recommendation algorithms they and some
21:06of that distance but at the end of the
21:08day if you want to go and be shopping
21:10among tens of millions of products and
21:12any anything there's other sites for
21:14that like eBay or Amazon in our
21:16departments we have real buyers just
21:18like you would have at Nordstrom who
21:20have a vision of who our customer is and
21:22they want to you know what they want to
21:24be getting and what kind of a department
21:27they want to have and so that's
21:28something that's different with
21:29overstock versus the other big a
21:31tailor's I want to get to you as the
21:34most hated man on Wall Street first off
21:36oh who said that and why well they had
21:40the fellow who said it as himself not
21:42such a bad guy so I don't want to use
21:44his name but he's wrote well-known kind
21:46of a graybeard of the hedge fund
21:48industry uh-huh and well-respected guy
21:50and himself not hanging up in anything
21:53untoward but this is what happened we
21:56went public in Oh too and when you're a
21:58public company's CEO you're out there
22:00swimming in the mix you're out there
22:02and prime brokers and regulators and
22:06bankers and between o2 and o4 I became
22:10convinced there was a whole bunch of
22:12no-goodniks on Wall Street and a know
22:14for I came out very publicly just
22:17started saying it and explaining and a
22:19NOFA I did a press conference 500 people
22:21online and I spent Wall Street's full of
22:25a bunch of criminals this is who they
22:26are by name this is what they're doing
22:28how they're doing it by the way no one's
22:30ever gonna sue me because they can't
22:32take discovery that's how sure I am of
22:35what I'm saying and among my claims was
22:37the SEC is what economists call it
22:41captured regulator in the you know
22:44Society sets up regulators to protect us
22:47from certain industries but it's a
22:49standard feature of regulation since the
22:52first regulator the Interstate Commerce
22:54Commission that they become captured
22:56they become Cowboys for the industry
22:59they're supposed to be regulating and so
23:01I started talking about that and then
23:02the East Coast press was running photos
23:05you know photoshopped pictures of me
23:07with UFOs coming out of my head this is
23:09some conspiracy theory that they what
23:11Wall Street's in bed with the SEC and
23:13the señor this doesn't make it this is a
23:15crazy conspiracy theory well I think
23:18anyone is awake he hasn't been living
23:20under a rock gets that now I think our
23:22SEC is better today than it was Frank
23:25under Chris Cox and then it was in the
23:27in the last decade and they're more
23:29Sparky I'm more open-minded so but
23:33anyway in January 2007 this well-known
23:35hedge fund guy asked me to come see him
23:37and we had known each other at a
23:38distance for ten years and he sat me
23:42down and he said first thing he said was
23:44Patrick I want you to know you're the
23:47single most hated man I've ever known in
23:49my life used to be kind of a golden boy
23:52on Wall Street but now you could kill
23:55people and we wouldn't hate you like we
23:57hate you in this town so to which I say
24:00please carve that on my tombstone
24:02I will that engine here lies in January
24:062007 the most hated man on Wall Street
24:09so in the system kind of dropped to its
24:11knees a year or two after that
24:14do you do you feel vindicated to you oh
24:17yes sir yeah The Wall Street Journal
24:19wrote a story at the end of a wait
24:20saying ok there were five guys who
24:21figured this out and you know it Nassim
24:24Taleb but and Patrick Byrne Bloomberg
24:27actually did us a emmy-nominated
24:30documentary in 2007 a half-hour show
24:36about me saying there's this basically
24:38there's this crazy guy you've been
24:39hearing out about in Utah and he sounds
24:42crazy but if you look at his data
24:44there's actually seems to be something
24:46to what he's saying and they were really
24:48the most progressive of any of the of
24:50the East Coast media and then after
24:53after oh eight yes the the there's no no
24:56no yeah there were a bunch of
24:58vindication stories and Associated Press
25:01and other things like that and then so
25:04that to me in my mind that whole fight
25:05was over your company has been one of
25:09the early adopters of all kinds of
25:11technology but in particular payment
25:13technology so PayPal for merchants to
25:16use and in 2014 early right 2014 you
25:21guys shifted to to Bitcoin right so
25:25let's talk about Bitcoin and why that
25:27move in and what that's meant for your
25:29company well okay I can it happened I
25:32somewhat stumbled across it although I
25:35was reading about Bitcoin and probably
25:37by 2012 or 2011 as a curiosity I was
25:44reading it and then and I will never
25:47forget December 19th 2013 a reporter
25:52interviewing me said out of the blue
25:54you're gonna take Bitcoin anytime soon
25:55and I operating on the Dilbert principle
25:58of nothing's too hard when you don't
26:00have to do it yourself
26:01I said yeah sometime in the next year in
26:042014 sometime we'll take it well I said
26:06that is an offhand comment figuring well
26:08you know sometime a year later if we had
26:11some free cycles and our development
26:13team we'd throw the project at them that
26:15little mention zipped around the world I
26:19started getting yeah there were things
26:21from South Korea and Thailand a stuff
26:24there were articles about this and I
26:26wow this is no longer some little cult
26:29there really are people paying attention
26:31and I called one of your companies
26:33coinbase who was super responsive I
26:36called them on December 31st of 2013 and
26:41on January 2nd they flew a team out to
26:47help us with an integration and we were
26:50integrated when they stuck some people I
26:53in room with we put a few dozen
26:56developers and I now always him that
26:58much maybe a dozen and basically slid
27:01pizzas under the door for a week and on
27:04around January 10th so not much more
27:06than a week later we brought live a coin
27:09base as our processor and were the first
27:11I knew by then that there was some real
27:13value in being sort of the first major
27:17merchant what what value would is that
27:19or would that be well there was first I
27:22knew that there was a value in being the
27:24first that you just the publicity value
27:26of the global publicity also there was
27:29it makes such sense that this so at the
27:34time it was maybe 1/10 of 1% of sales
27:36and it's it's grown to be let's say a
27:39quarter of 1% of sales I think it's very
27:41early stage I actually think I have I'm
27:44kind of a gloom and doom guy about the
27:46economy in the financial system
27:48so I think when it all cracks you know
27:50there's going to be the pollute that
27:51guys back in Washington are gonna be
27:53able to draw it we're going to be
27:54pushing us to they adopt to the IMF
27:57there'll be a global currency and the
28:00powers that be want that global currency
28:02to be based on the IMF SDR is the
28:05Special Drawing rights I think that
28:07that's just the right time for
28:08civilization to make the switch and get
28:11off of a kind of currency than any
28:13political authority and in political
28:15mandarin can whisk into existence with a
28:17pen so that really goes to the my other
28:20reason for getting involved in with
28:21Bitcoin is I'm a pro freedom guy I'm a
28:25small L libertarian there's another way
28:27to say that the basic dilemma humans
28:29have always faced is when you get into
28:31consensual exchange do you go peer to
28:34peer in which case Trust is an issue
28:37or do we have some central institution I
28:40don't need to trust you I don't know you
28:42but I just if we each trust this one
28:44central institution so take the issue of
28:47land titling you know you could come and
28:50say well here's I'll sell you my piece
28:52of land here and here's a piece of paper
28:54and I'll give you but I don't know if I
28:56can trust you that you own this so you
28:58know years and years ago so civilization
29:02adopted this method of well let's have a
29:04central office that keeps the titles and
29:06then we all go there in that way the
29:09trust issue is solved what the what the
29:11blockchain does is for the first time in
29:14man's history lets us have peer-to-peer
29:17exchange which is trustworthy you don't
29:19need the centralized institution that's
29:21why I think it is unlike Al Gore I was
29:25not here quite for the beginning of the
29:26internet but I was five years later and
29:29it was we knew we were doing something
29:32as revolutionary as the Gutenberg Bible
29:34but I so I think the crypto revolution
29:38is even bigger than the internet it's
29:40political implications are so profound
29:42because there's all these centralized
29:44institutions that people tend to think
29:46it's like they came out of a burning
29:48bush it just has to be this way you
29:49don't need them including many of the
29:51functions of government so we're going
29:53to be disrupting the crypto revolution
29:55is going to disrupt all kinds of
29:57political institutions that that you
30:00really didn't we just have to wake up
30:02and remember they didn't come out of the
30:04burning bush they didn't come out a
30:06stone tablet there were institutions we
30:08created to accomplish some end that we
30:10can now do for free through the
30:12blockchain who's using Bitcoin at
30:15overstock and how are you seeing that
30:17you know it went from an eighth of a
30:18percent to a quarter or whatever it was
30:20small percent to a larger small percent
30:23but who's using it well it's interesting
30:26it's it's they tend to be we can tell
30:30from their shopping patterns they tend
30:31to be more technology or in it they tend
30:33to be more male were were significantly
30:36our our customer bases larger female
30:39than male they end up generally spending
30:42about the same but because you know
30:45women shop more carefully and men come
30:49200 bucks on their first visit and such
30:51so but anyway we've we've generally are
30:54more female-oriented site but with
30:57Bitcoin it's tend to be more the
31:00purchasers are more male still I so more
31:04male and more technology focused
31:06although our oddly enough they're buying
31:08things that women nor well I mean when
31:13you get talking marketing you sound
31:14terribly sexist nor whatever but this is
31:16just there are men buy different things
31:18and women buy products they're buying
31:21our products that women are more prone
31:24to buy like pillows and blankets and
31:28such so I don't know if that means that
31:30in the household the woman is using the
31:33guy's Bitcoin account or if the Bitcoin
31:36guys are buying something I don't know
31:38but the the counts are skewed towards
31:43owned by men you know so 6,000 years of
31:48history and choosing between kind of
31:49centralized institutions versus
31:52peer-to-peer trust it doesn't sound to
31:54me like from buying pillows and blankets
31:56there's a clue as to if we're gonna
31:57overturn that anytime soon but I guess
32:00we'll see Patrick you call yourself a
32:03value investor and one I want to know
32:05where that comes from and then give us a
32:07sense of the technology industry and
32:09whether there's a value to be had there
32:11there's definitely value to be had I had
32:13a among I've had an extraordinary set of
32:17tailwinds in life both the parents that
32:19I drew I won the ovarian Lottery my
32:22parents my family lives sort of the
32:24Horatio Alger dream and from when I was
32:28born and my dad was a GI Bill grad
32:31student and such to the town I was about
32:3320 somewhere in that process when I was
32:35about 13 this funny guy from Nebraska
32:38started showing up and staying with us
32:40and he was incredibly generous with his
32:43time with me I don't know why but
32:45whatever he would visit he would send
32:46word ahead and schedule two or three
32:48hours to sit with me so we were just
32:50sitting talking he would teach me about
32:52things and I thought he was kind of a
32:53farmer because he would teach me about I
32:56you know if okay now powder him I've got
32:59a of an acre of land
33:01is 440 bushels a corner year and this is
33:04the cost of the land and interest rate
33:05it would walk me through this stuff but
33:08more importantly he would teach me about
33:09life and character and decision-making
33:12inside and he was call him rabbi he was
33:15my great rabbi in life while I was in
33:17college and I saw his name appear in
33:20Barron's for the first time his name was
33:22in the press he wrote this essay that a
33:24named Warren Buffett wait so this is the
33:27mentor you mentioned earlier right and
33:29so he was really my great Dutch uncle
33:31through life and has been my room my
33:33real means my rabbi so you know Silicon
33:36Valley is is constantly looking at
33:38valuation and value you're a value
33:41investor you're saying there's plenty of
33:42value in tech how do you see that and
33:46how do you see private companies in the
33:49staying private longer and and then
33:51public companies like your own how
33:52they're valued these days well it's
33:57there is absolute value intact somebody
34:00actually said this in the first dot-com
34:02bubble something about you know an
34:04answer to the people who saying
34:05everything's a bubble it's all
34:06overvalued I remember somebody saying
34:08well most things are and some things are
34:11going to turn out to be wickedly
34:12undervalued and so if you take a step
34:17back and look at this just at a secular
34:19level the stuff that's being created
34:21here in Silicon Valley is going to
34:23change air is changing human history
34:26it's immensely valuable collectively you
34:28know 50 years from now people will be
34:30looking back and stand still this this
34:33tech boom isn't over it's we're remaking
34:37we're remaking all kinds of institutions
34:40and gosh you only have to look back 20
34:41years out differently things used to
34:44work I also think there's going to be
34:45quite soon a big dip in the next two or
34:47three years a big disruption in our
34:48economy I think a no way or worse is
34:51going to happen and with each disruption
34:53people will shift it farther and do
34:57online and then it ratchets we just made
35:00it through and Oh 8 but nothing's been
35:02fix us that it's just been more and more
35:04Novocain and eventually the I think the
35:07financial system faces something bigger
35:09than oh wait well on that sobering note
35:12Patrick thank you so much thank you
