00:00welcome to the a 16z podcast I'm Michael
00:02Copeland and we are lucky enough to have
00:04today with us Michael Casey and Paul
00:06Vania authors of the recently released
00:09the age of cryptocurrency and to Wall
00:12Street Journal journalists so welcome
00:15thanks guys also in the room is my
00:17partner in crime sonal Chuck C shut so
00:19no hi guys look the Wall Street Journal
00:21has the words Wall Street in it and Wall
00:25Street hasn't been paying much attention
00:27to the world of Bitcoin and
00:30cryptocurrency until recently and and I
00:32wonder from your from your ends did you
00:35have a sort of conversion where you
00:37thought this is actually something I
00:38want to spend a lot of time and effort
00:40and energy focusing on and writing about
00:42yes absolutely there was it there were
00:45these moments in fact we've we go
00:48through it in the ball codified codified
00:50oh there's these phases and in fact
00:51we've realized when we sort of came up
00:52with this is the poles framework but
00:54ultimately we've realized as we do this
00:57these five stages of Bitcoin as we call
01:00it that that's actually something that a
01:01lot of people go through it seems to be
01:03actually a fairly common thing what yeah
01:05it definitely happened for me it
01:07definitely happened for Mike where we
01:08went through a process of the first time
01:10I heard about Bitcoin I was skeptical I
01:13thought it was a scam I thought it was
01:14so I wasn't gonna write about it you
01:16know but you keep hearing about he
01:18became getting interested in and I went
01:19through this Mike run through it and we
01:21talked to a lot of people that we
01:22interviewed for the book went through it
01:23too and I realized that it's almost kind
01:25of like the kubler-ross model the five
01:27stages of grief so we wrote about it in
01:29the beginning of the book and the stages
01:30it's you know it's it's dismissal it's
01:34it's it's disdained your first role one
01:38is disdain disdain dismissal curiosity
01:40the fourth one is actually the key the
01:42fourth one is the aha moment the Eureka
01:44moment and and we played around with I
01:46wanted to call it the oh because to
01:50me that really sort of encapsulates a
01:51like once it hits you that lightbulb
01:53goes off and after that is literally
01:56what I said you know like to myself oh
01:58like this is a you realize how big a
02:01thing this is and that's the real
02:02critical one and when people get to that
02:05moment we interview people who said I
02:07stayed up for three days just reading
02:10every single thing I could online I
02:12couldn't sleep the idea becomes very
02:14very it becomes huge in your mind and
02:17then just acceptance you accept it you
02:19realize that this is a a real big thing
02:22and you want to be part of it where do
02:24you think Wall Street and some of the
02:25other because you are coming from the
02:26Wall Street Journal and your backgrounds
02:27and your careers like we're doing Wall
02:29Street falls in this I don't know what
02:31Wall Street of course is a you know huge
02:33amorphous mass of people but if you were
02:37to kind of collective eyes the thinking
02:40I think they're possibly on the border
02:42of they're not at the oh moment no
02:45they lose that we're gonna use that
02:48phrase all the way through the process
02:49now you got it have any polls you look
02:51at the other you wouldn't let me put it
02:52in the pie got all crude on him but
02:56ultimately I think that they're they're
02:58at the yeah and I think you know we are
03:02certainly we've certainly seen a number
03:04of key players on Wall Street go through
03:06the four that are probably at the fifth
03:07acceptance stage which is which is
03:10really what's interesting right now to
03:11your point Michael it really they don't
03:13pay much attention at all until we get
03:14to really 2015 and we've started to see
03:17you know the big announcement in January
03:20of the New York Stock Exchange
03:21participating along with andreessen
03:23horowitz in the next round of funding
03:25for coinbase that was a big deal that
03:28was like this is a you know iconic Wall
03:31Street institution that has decided that
03:34it needs to participate in this form of
03:37the future of money and then you've seen
03:39so many others mean we had in in similar
03:41rounds I think it's the same rounds
03:42right we had the USAA they had BBVA a
03:44very very big Argentine family um
03:46Spanish bank and then you know Nasdaq
03:51had kind of cooperating with technology
03:52with noble markets you know we've seen
03:55we've seen some important names duncan
03:58need her out who used to be the NYC
03:59president working with Tara exchange the
04:02derivatives Bitcoin derivatives company
04:04at Grum was in that round Vikram Pandit
04:07former CEO you've got Blythe masters who
04:11was the inventor of credit default swaps
04:14and really quite an institutional name
04:17from JP Morgan x JP Morgan now the CEO
04:20of digital asset Holdings a very
04:21interesting company doing back off a
04:25the blockchain you know the names keep
04:27coming and coming it was really funny
04:29that before that announcement we would
04:32people I started noticing more and more
04:35people from here coming through New York
04:36you know when sis's just happens to be
04:38in New York Dan Moorhead just happens to
04:40be in New York and we sweat this kisara
04:42sums up yeah yeah what's up is that we
04:44started thinking you know it started to
04:46seem that these ties were starting to be
04:48built and then I remember when when the
04:51the team over there briefed us on this
04:54story and they're saying we're raising
04:55seventy five million dollars and I so
04:57that's that's a big number you know you
04:59guys are involved this is you know other
05:01NYC is involved USAA is involved and
05:04they start rattling off these names that
05:06had never been involved in this and that
05:09that was another lightbulb moment you
05:11Wall Street is getting it now you know
05:13and that was a really big significant
05:15story so let's talk a bit more about
05:17people getting Bitcoin so one of the
05:19things you guys talk about in your book
05:20is about that you actually had to start
05:22back to just concepts of trust and
05:26what could you guys talk about some of
05:28your thinking around that I may know
05:29there's a lot of common discussion
05:30around this right now but what uniquely
05:32yeah I mean I think it's do you thing to
05:34think about this is the challenge that
05:36we've faced as journalists ourselves and
05:38trying to get traction around the idea
05:40about writing about it and and the
05:42problem is I think that people have had
05:44the narrative wrong about about Bitcoin
05:46though they see it as a digital currency
05:48which it is but but what does that mean
05:51what they thought what people think it
05:53is is just some sort of digital version
05:56of a paper dollar all right the problem
05:58with that thinking is the paper dollar
06:01is also not a currency well it is not
06:03money put it that way the money is not
06:06the the piece of paper and so money in
06:11fact is a ledger it is alleged as built
06:14around multiple Ledger's in reality some
06:17of which are in our heads some of which
06:18are inside banks and in this it's the
06:20system for keeping track of value in the
06:22keeping track of ownership keeping track
06:24of debts that's what it is
06:27so once you gotta have we had to in the
06:30book get people to that point first and
06:32then talk them through what bitcoin is
06:33because bitcoin is a solution to the
06:35failings of that of that ledger system
06:38now which has been a centralized one the
06:40process being controlled by banking
06:42institutions and that itself was a
06:44technological advance 500 years ago that
06:48moved us to the to resolve the problem
06:50of trust this is where it all goes full
06:51circle back to trust in that we you know
06:54we were not able to participate in
06:58exchanges of value with people over
07:00distance because there was no means to
07:03establish that relationship of trust you
07:06didn't know whether what you were being
07:07given was actually real whether there
07:09was any real value there whether or not
07:10this was a fake a commitment of
07:15ownership to whatever funds you claim to
07:16have so the banks sat in the middle and
07:18said well we're just going to inter
07:19mediate that process and checking
07:21accounts and the like are going to be
07:22means through which we will stand by the
07:24truth of this the trusted third party so
07:28bitcoin is a solution to that because it
07:31out sources that role that intermediary
07:34of trust to the entire community and it
07:38finds a you know fascinating unique
07:41instrument that is the blockchain and
07:44the consensus process through its the
07:46miners come to confirm the transactions
07:49within the blockchain ledger to allow
07:53for a peer-to-peer exchange but let me
07:55just push back a little bit on that
07:57because I think for most people they're
08:01gonna need to trust in the blockchain
08:03and Bitcoin miners and the whole system
08:06without really understanding how it
08:07works so unless I become an expert in
08:09Bitcoin I'm still gonna have to trust it
08:11that it works so why aren't we back to
08:14the same done no no I don't think
08:15there's any problem because you know
08:17they're two separate questions right so
08:20do you trust the dollar and presumably
08:23we all do right that that's that's one
08:25question who do you trust to allow the
08:29transfer of your dollars to somebody
08:31else a bank so a Bitcoin solving that
08:34second question you're absolutely right
08:35that that one of the biggest challenges
08:37that bitcoin is face right now in fact
08:40it's in fact it's the essence of the
08:42challenge is to generate trust in the
08:45system itself and then one of the
08:46reasons why they say stroke with that
08:48it's because they've come up with this
08:49mean but I think is actually
08:51problematic and that is that there's no
08:53where a trustless activity we don't need
08:56trust anymore so you know you absolutely
08:58do need trust and you need them to trust
09:00you and at the moment the headlines
09:02don't always look so great when you know
09:03people are being hauled off money
09:05laundering and the like and you know
09:07these exchanges are blowing up and their
09:08wallets being hacked
09:09none of which necessarily in any way
09:12undermines the integrity of the
09:14blockchain itself but this story is one
09:17that is not actually conducive to public
09:20trust right now and that's it that's a
09:22challenge and the other element to that
09:23is is simply it's it's a time issue you
09:26can we can write a book people who are
09:30building Bitcoin companies can go out
09:31and talk it up and do everything but
09:33until Bitcoin proves itself over time to
09:36be a a stable reliable store value a
09:39platform a good platform people won't
09:42trust it I mean it literally is just a
09:45time element of this thing proving
09:46itself and one way to think about it is
09:49look at the car you know and when the
09:52horseless carriage first came on the
09:54road you had to know everything about
09:56how that car ran there were no shops you
09:58couldn't just take it to your mechanic
09:59you had to know how to run the car you
10:02had to know how to Maryland but yet
10:04exactly no system around it and in the
10:07early days of driver of horseless
10:09carriage I won't say driverless cars you
10:16know in the early days of the horseless
10:17carriage you had people being revolts by
10:21people wanted to outlaw it get it off
10:23the roads people thought it was
10:24dangerous and you had to go through a
10:27period of time where today people use
10:29cars they don't understand how they work
10:31they don't care how they work they don't
10:32need to know how it works exactly they
10:34trust that the car is going to do the
10:36thing that was built for Bitcoin is
10:38going to have to go through that too and
10:40that is it's literally just a function
10:42of time you can't rush that exactly I'm
10:45not convinced that people actually need
10:47to really even know what bitcoin is I
10:48mean for a bit of the day for an end
10:50user you just care about the GUI and the
10:51interface to the information and is it
10:53easy to use and am I getting what I need
10:54out of it I don't really care what's
10:57who does how many people understand
10:59indoor plumbing right you know only do
11:01you know what that little crook at the
11:03bottom of elbow of the drainpipe does
11:05what it's for no most people don't and
11:10they don't care they just mean works
11:12ya know and so in the book you're not
11:17trying to convince people to run out and
11:19start using Bitcoin for everything but
11:22what are you trying to convince them of
11:23well you know we've gone back and forth
11:26about the title what we're not just a
11:28table rows for the subtitle of the book
11:30and we end up with a pretty big broad
11:33claim that is being part of the process
11:36of selling a book catchy times when
11:38something comes attention but we stand
11:40by it I mean and that is that is that
11:42how Bitcoin in the digital and digital
11:44money are challenging the global
11:45economic order and if I were to say what
11:48is the takeaway I want people to think
11:49about the way our financial system works
11:52and how that feeds into systems of
11:54governance how it seems into the
11:55organization of society itself and how
11:58this type of technology a
11:59consensus-based technology is a very
12:02different and powerful way to think
12:04about how we grapple with some of the
12:06problems we've developed around the
12:07existing model and and that I think is
12:10so in some respects it's a book for
12:11policy wonks you know it's not really
12:13it's certainly not a how-to book how to
12:15go and get your Bitcoin and buy this of
12:17course we we do go through the process
12:20we explain what the blockchain is we do
12:21that sort of stuff so that people get a
12:22feel for what it is but I want we want
12:26this to be part of the public debate we
12:27want wewe think Bitcoin and blockchain
12:30x' need to be really out there in the
12:34mainstream as a discussion point for how
12:37we move technology forward just as the
12:39internet now you know obviously is just
12:41a part of the fabric of our lives there
12:43was a big discussion around it you know
12:46in those early days and I think that
12:47that's what we see ourselves as part of
12:49that process and even though we're early
12:51like what's accelerating that because if
12:53you think about the adoption time from
12:54people who were inside you know like
12:56early computer scientists working on
12:58computer networking protocols with
13:01Bitcoin it's come even though we're
13:03still talking about it being early days
13:04yet it's coming much faster like but the
13:06list of people you rattled off like that
13:08are interested that would have taken
13:10fifteen years in the past with past
13:12technologies like why do you think
13:13that's accelerating right now well III
13:16think you know one of the things about
13:18about bitcoins history is that its
13:21development it really is kind of a quirk
13:23of history I mean the fact that this
13:24thing comes out at the the height of the
13:26financial crisis the panic where you're
13:28seeing the old order literally collapse
13:30and fall apart and you're seeing all its
13:32failings in very painful fashion that
13:35created a groundswell under Bitcoin that
13:38helped it in some ways and hurt it in
13:40some ways it helped it because I think
13:42that that's part of the reason why it's
13:44grown so much faster than other
13:46technologies would have its heard it in
13:48some ways too because I think it got a
13:49lot of attention that it didn't need and
13:52and part of it was was the media too and
13:55we're part we are part of the media
13:56writing stories about it and you kind of
13:59write about it and talk about it
14:00thinking that it's a built thing Bitcoin
14:03is out there it's done it's it and when
14:06it invariably goes through it's growing
14:07pains and it has the failures and the
14:10breakdowns which are gonna happen in any
14:11system being built people say oh my god
14:14this thing's terrible it's broken it
14:15doesn't work it's volatile it's all
14:17no it's still being built it's still
14:20happening and so I think people don't
14:22quite understand that you know that this
14:24thing is that diversion zero-point-nine
14:26whatever now it's not even at one point
14:27oh forget 2.0 so the the financial
14:32crisis I think really kind of was fuel
14:35for the growth and I think it had both
14:37good and bad been apart aspects to it
14:40Michael you and Paul have both described
14:43the financial system as a failure how
14:44does Bitcoin address some of those
14:46failures and then you you also discuss
14:49how centralized Wall Street is because
14:51that's how it gathers power to itself
14:53you're among itself right
14:54how does Bitcoin solve for some of those
14:57things I think I mean I don't want to
15:00say that the financial system is a
15:02complete failure I mean obviously people
15:04go through their lives millions or
15:05hundreds of millions of people use it
15:07every single day and it works right did
15:09the problem though I think is is you end
15:12up with thought we do this we must allah
15:14we allah gize the dollar and you start
15:17to give it a power that it doesn't
15:18really have and people want to control
15:21that power and so you have this great
15:24of power in New York in Washington New
15:27York uses the banks use their power to
15:30affect what happens in Washington and
15:32that's where the problems come in and
15:35what I think Bitcoin can do is take that
15:37power of the currency and diffuse it a
15:40decentralized system where people really
15:43can be their own bank if you want to
15:44where you can use assert you know it
15:46takes that concentrated power and it
15:47diffuses it among the broader society
15:50that that's I think you know very
15:53briefly that's kind of that the big
15:54promise to this is that yes that's the
15:57big side of it and this is a simple
15:58practical aspect right so you've got the
16:00failure of the financial system and all
16:03of its concentration of power and the
16:04vulnerabilities we have the too big to
16:06fail banks the centralized trusted
16:08institutions that we put all of our
16:10faith in blew up and we all revolve all
16:12- that is what we're talking about there
16:13but then there's some other point of it
16:15is it's the model that as it is is just
16:18really expensive and inefficient it
16:20costs it costs more money and in many
16:25cases more time even to send money which
16:28is nothing more than bits and bytes
16:30right digital money from one place in
16:32the world to another than it does to
16:34send you know a good margin make actual
16:39cost the cost that you are charged for
16:41you know Bank wires and everything else
16:43that's laden into the system is more
16:44expensive than a good right right that
16:46is that is just a failure of the system
16:48and we need to get that because it is
16:49nothing more than digital but did and we
16:51know from cloud computing that that is
16:53there are the marginal cost of
16:54transferring data from one point to
16:57another it has reached zero right so so
17:00this is a that that is really ultimately
17:02the practical question how do we get
17:04that and that's why actually one of the
17:05reasons why there's a lot of interest
17:06right now in Wall Street to this where
17:08you're getting a kind of a coalescing of
17:10the concerns around the crisis and the
17:12need for reform of the banking system
17:14and all the problems that come the
17:15centralized trust problem the systemic
17:16risks associated with that and the idea
17:18that we can just actually save a lot of
17:20money and unleash a lot of capital
17:22because you've got three-day settlement
17:23times that's trillions of dollars it's
17:26just sitting on the sidelines it has to
17:27wait until it is actually cleared by the
17:29system to then get back to work right so
17:31that's do you unleash you just like
17:34going from three to zero three days to
17:37have unleashed money in the world on a
17:39profound level right and that sentiment
17:40you can define Bitcoin as like you said
17:42earlier real-time but it's basically the
17:43settlement network that's right that's
17:45right it's exactly what it is that's
17:46important yeah because you should you
17:48talk about the broader audience that's
17:50interested in Bitcoin and the framework
17:52for it outside of the US like if you
17:55could give us your thoughts on that
17:56because we talk a lot about the unbanked
17:58and bitcoins role in that but also just
17:59like who's reading your book I mean you
18:01you were surprised you said by some of
18:03the people writing to you I'm curious
18:04about that yeah I mean we've had quite a
18:07lot of speaking engagement requests from
18:09really from all around the world I was
18:11invited to speak in Marrakesh at one
18:13point that I couldn't couldn't go to but
18:16what it is is really the variety of
18:18institutions and I think that's what's
18:20interesting because it seems to reflect
18:22the breadth of interest in it you know
18:25consumer advocacy groups there's you
18:28know what do they want to know out of
18:30curiosity you know these guys we haven't
18:31spoken to yet but I mean that they will
18:34have to see but I mean the Philadelphia
18:36Fed is having us to speak at some point
18:38the Bretton Woods committee down in in
18:40Washington it's sort of you know a
18:42think-tank that's very focused on the
18:43structure the finite level financial
18:45system obviously we get your family a
18:48lot and they are family offices for
18:51financial funds who will want us to talk
18:54about the opportunity to invest in it
18:56you know we're getting countless I mean
18:59Wall Street firms we've got tech firms
19:03we've got just really a very wide array
19:06and then what we did our interviews
19:08around the time we were on radio we went
19:11for everything from Leonard low-paid
19:13who's NPR in in New York to the all out
19:19show which is this profane hip-hop
19:21serious and on Sirius radio to the
19:23coast-to-coast show you know people
19:26might know the after midnight UFO kind
19:29of thing I mean that actually pretty
19:31much they were really interested they
19:35asked good questions in very profane
19:38language but they were gonna call one of
19:41your phases like that right right
19:43five men were interested and they wanted
19:45the answers and they listened to us and
19:46it was really it was interesting the
19:48thing I think you look at it
19:49geographically the most interest we're
19:51getting is out of San Francisco in the
19:53valley out of New York and out of
19:55Washington and those are three huge
19:57power centers in this country and all of
19:59them are interested in what this is and
20:01that to me sort of illustrates how big
20:04this story really is and where it goes
20:06you know we don't know but yeah it was
20:08exactly and it was interesting is that
20:09it's simultaneously happening because
20:11there is a trend sometimes where
20:13something will start in Silicon Valley
20:14or it'll start first in DC or it'll
20:16start first and some other hub and and
20:18the fact that everyone sort of asking if
20:20that's what makes this technology unique
20:21yes it's not just a new toy it's not
20:24just a new way to do X it actually goes
20:27to the fabric of a system that we place
20:29so much value in so it needs regulatory
20:31interest it needs the financial systems
20:33interests and needs obviously the tech
20:34guys to run it what you don't want is a
20:36battle over it instead of a turf war and
20:38you really want to see this coalesce
20:40around a much more kind of collaborative
20:42process I think we're getting there's
20:43lots of institutions that are sort of
20:45trying to formulate around you know
20:47common standards and common interest
20:48across all these different parts of the
20:50world you asked earlier about the
20:52unbanked and they're all developing well
20:54what's interesting about anything with a
20:56little bit of a challenge is there's a
20:58there's a fairly broad consensus that
21:00the currency application of Pitkin this
21:02is a whole world of non currency
21:04applications that we weren't going to
21:06now but on the currency side and the
21:08payment side there's a consensus really
21:11that the biggest use case is sort of
21:14resolving the problems of the developing
21:17world where there's a lot of you know
21:19it's very expensive to move money if
21:20send remittances and there's lot of
21:22people who literally don't have bank
21:23accounts who could be served by using
21:24this as an intermediary to to money to
21:27transfer funds and so forth but to the
21:30extent to which there's actually kind of
21:31a groundswell of interest in the
21:33developing well I think that's one of
21:34the frustrations right now you know
21:36people are certainly trying to build
21:37products here to sort of service the
21:40developing world and there are certainly
21:42some startups that are basically and
21:44doing it I think that we're at that
21:45phase right now but I don't feel as if
21:48we've had like lots of phone calls from
21:49from people who represent emerging
21:51market countries who want to advise to
21:53come and talk about you know
21:54we've we've had some story the topic
21:58we've addressed but as to whether that's
22:00actually sort of coming from there the
22:02interest it's kind of it's a top-down
22:04level of interest rather than bottom-up
22:07right and I bet that shifts pretty
22:09quickly well Michael Casey paulínia
22:12thank you guys so much thank you guys
22:14the age of cryptocurrency and you guys
22:17are gonna be still writing about it
22:18before the next book comes out so we'll
22:19keep an eye out thank you guys
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