OUT OF SCOPE, Ep. 1: Hot Takes Roundtable with Tori Pastore (Soup) and Austin Campbell (Zero Knowledge)

Speaker A: Foreign. Welcome back to Validated. Uh, today we are joined, first off, special guest Tori. Tori, welcome.

Speaker B: Hi. Thank you for having me.

Speaker A: Thanks for joining us today. I should say for those tuning in and saw the episode title, this is a little different. Uh, Tori is co hosting today and we're going to be chatting with Austin Campbell in a little bit, but also chatting about just tech news, crypto, the world, Bigfoot. We'll see where it goes.

Speaker B: I've told Austin that Validated needs to be less technical and more fun.

Speaker A: So we brought Tory to have fun. Uh, tell the people a little bit about yourself besides the fact that you are Chairman Berb Bernanke on Twitter.

Speaker B: That's true. Um, I am Chairman Bert Bernanke on the Internet. And one of the things I can say about that is people come up to me all the time and go, you're burb. And I go, yes. And I don't know what to do with that. Um, so I think this, I'm going to use this as my, uh, platform to say you have to give me more information than that. And people should be way cooler about that than they are. Um, I've been in and out of crypto since 2013, and I have had every single job in crypto that you can have, except for developer. I have done everything that you could call non technical. I've been a marketer, I've been a BD person, I've been ops. I have been everything other than the technical person in the room.

Speaker A: Uh, and you are also known as, I believe, the originator of the term Chinese peptides.

Speaker B: I don't want to take full credit for it, but I think I will take full credit for, um, exploding it in some very interesting ways. A lot of what I like to do is around memetic, uh, R and D, if you will, and how to make ideas spread and how to incept an idea into someone else's mind. And a lot of my best work is actually things that were other people's ideas originally and I magnified in a different or interesting way and everyone kind of caught on from that. Um, so the full term was actually originally gray market Chinese peptides. And that was the term that was going around crypto for a while and going around Twitter and the AI guys that got in on it. Um, especially my friend Atlas, who is Creatine Cycle. He's the other person that I will shout out as being a really big part of this one. He and I have had many debates about it. Um, he is also much more on the anti side and I am on the pro side of the peptide debate. But one of the things that specifically kind of pushed the gray market Chinese peptides into the zeitgeist was that I threw the Chinese peptide rave, uh, back in December. And a lot of my branding for it was really just what the heck is a Chinese peptide rave? Um, and to that I have to say, you have to read the New York Times article about it.

Speaker A: Do you think the peptide cycle is like, like, where are we in the peptide cycle? Because I, I feel like there was this like thing that happened maybe two and a half years ago where people were like, you understand GLP1s, these are the most incredible class of drugs since mRNA things have come on the market. But then we started to see all these like fairly credible theories that to me seem like they never quite played out. Like GLP1s are going to kill the fast food industry, they're going to kill casinos, they're going to kill like, uh, you know, free to play games where it's like anything where like 10% of your users are responsible for 90% of your revenue is like you're kind of just like, you know, gambling, hacking someone or some, some type of mental illness is stepping in to provide a profit margin. And it feels like none of that happened. And I'm not sure if like, are we just too early on the peptide thing? Is this kind of like how chat GPT4 was not transformative but five and a half was, or is the peptide thing a little overblown?

Speaker B: I don't think it's overblown. I think it's actually just still very early. Um, I've thought it's early for a while and I think the GLP ones, you're right, they were the first ones that came out that people were like, oh my God, this is incredible. This is life changing medicine. And as someone that took them and lost 33% of my body weight in a year and a half, yeah, they are life changing technology. Um, but what they've also really done is explode out this other class of what we're calling peptides as like a catch all term. And I want to be specific about something here. Actually, peptides doesn't really mean anything. That's, that's like a catch all term for like multiple types of uh, give me some aminos.

Speaker A: Right?

Speaker B: Like all of a peptide is, is like a chain of amino acids. And this is kind of important because when they're under 40, they're a peptide. If they're over 39 at 40 they become a biologic. Um, so some of them have patent issues because they're technically the same length as things that are naturally occurring in your body. But back to your original question about the GLP1s. I do think it's just that market penetration hasn't gotten that deep yet. Um, something like 1 in 10Americans has taken a GLP1 and we don't quite have enough data or a long enough timeline to see, like, what the effect of industry is going to be. Um, there are all these studies coming out showing that in clinical data, like, it's helping with people's addiction, it's helping with impulse control, it's helping with a lot of things that have nothing to do with just like, how much you eat. I know for me specifically, it had a lot to do with changing, uh, a lot for me that had nothing to do with how I was eating. Um, for example, even from the first shot, my resting heart rate dropped 10 beats a minute before I lost any weight.

Speaker A: Yeah, so. So like a 15 drop.

Speaker B: Yeah, I'm, uh, not doing the math on that to figure out what that means. Uh, no, but a lot. Your brain is incredible tech. It can regulate how many breaths you take a second, how much you're breathing. It regulates all sorts of autonomic things that you don't even think about on a daily basis. It regulates your digestion, it's regulating, you know, your body temperature. And you're going to tell me that hunger is manual. I don't believe that's true. I just don't believe that's true. I believe that your body should be able to regulate your amount of hunger, should be able to regulate, you know, your body fat percentage, like at a set weight and be like, okay, well stop eating. You know, your, your body has enough fat on it. And people will argue things about like, evolution hasn't caught up this, that the other. But they have a fair point there, I think. But also, and this is not conspiracy. I talk a lot about things that are conspiracy and kind of out there, but this one's not conspiracy. It's just, this is just true. There are food scientists on record in America. They exist. They're paid by Doritos, they're paid by Nestle, they're paid by everybody. And their whole job is to figure out how to make your food hyper palatable. Um, there's an article that I was reading where they were talking about how they learned that through these studies, um, you would eat more chips if they crunched louder. So what the food scientists did Is turned up the crunch volume because that's the thing they can manipulate. So now of course you're going to eat more because the crunch is ultra satisfying. And there's all these things that like, your body has to fight against. So I think it's a brain problem rather than like a body problem. And I don't think the cure is willpower.

Speaker A: I love that.

Speaker B: Because if a shot can fix it, then it's not willpower's problem.

Speaker A: Yeah. Uh, so I like the stuff you're talking about peptides though, because I think to me we've had this sort of like, for my entire life. There's been these like, sci fi elements of like, oh, what if things were different in the future? And like one of the big areas that you. And you know, it's like the premise of a lot of sci fi, but it's also just the same. Welcome to, you know, the foundation books. Um, but when you look at this stuff, it is the last area that has not been dis. Intermediated yet. Like we see what happened with technology and it went from like a mainframe to like things you have in your house, to AI to claude bots, to like this entire process has been about removing intermediaries from your relationship with the technology. This is the Bitcoin story, this is the zcash story, this is the Solana story. Uh, you know, it's this whole thing about how do we get closer to the real thing and get fewer middlemen in the process. And it feels like biology is like for the first time, maybe with gray market Chinese peptides, we're like starting to get a semblance of what that might look like when you have sort of. I always thought about like biology would be like computer science if like you needed like 12 years of schooling to be allowed to code. And then like a lawyer had to review every git commit.

Speaker B: It's worse than that. The lawyer can also look at your git commit and tell you, no, that's wrong, but not tell you why and then send you back and like tell you, please fix, please fix, please fix. Or maybe if you just did this, you know, and then like none of their suggestions make any sense. Um, right.

Speaker A: And then your unit tests are run on a bunch of like, randos from

Speaker B: like Nebraska who have nothing in common with you.

Speaker A: Yes.

Speaker B: Um, yeah, I think there's. Biology is a really exciting place. Technology in general is getting really exciting. And I think what's interesting here is like, what all of this technology is really enabling is maybe this is a Little bit transhumanist of me, but, like, I think we're going to be able to evolve past our bodies. And it is really sci fi, um, especially from the angle that, like, you can now program your body, you can hack your body, you can do all these things. Like, biohacking is getting big, all of this stuff. Like, I know you're laughing a little bit, but it is true that, like, a lot of the things that changed for me on Tirzepatide had nothing to do with eating. They had everything to do with personality. So, like, now that we're learning, we can signal certain things and it gives you personality change. A lot of my question is like, how much of personality is just metabolic? Which is like a very philosophical question and a little bit outside the scope of the podcast. But I think what you and I are really getting at here is that there's a whole wide world of cool tech to explore.

Speaker A: If you think your emotions cannot be programmed, then you've never taken an ssri. Yes, exactly. Like, we have been in the field of professionally programming emotion since at least 1920. Um, just not on a granular enough scale to make it interesting.

Speaker B: And a lot of things come out of path dependency and folklore and folk wisdom. Like Tylenol is from willow bark, which no one really knew why it worked. We still actually don't know why Tylenol works. We just know where it comes from and that it does help. So there's all these things. I think you're right. Disintermediation is maybe the story here of, like, that is the bitcoin story of, you know, getting, getting rid of the middlemen and now maybe medicine and now biotechnology. And even in technology, we're getting rid of middlemen more and more. And just seeing like, what is enabled by the world around us now is so cool.

Speaker A: It really is. And I think we actually do have like a perfect guest to go through and talk about this entire weird world of intersection of technology and regulation and government and control systems, and lack of control systems and trust and risk and verification and the future of money. So, um, today I'm very excited to say we are chatting with Austin Campbell, all about, uh, the crazy world of stablecoins, risk management and what he's been up to the last few years.

Speaker C: Thanks for adding me to this webex.

Speaker B: This could have been an email.

Speaker A: This could have been an email. How you doing?

Speaker C: I'm doing well.

Speaker A: So this is why we brought you on today to talk about conferencing systems, uh, and, uh, to rank them in terms of functionality. Um, but to get into actually why we brought you on today, Austin, why don't you give a quick intro and background to yourself before we get into it here?

Speaker C: Oh, boy. Um, all right, let's do this quickly. So my background is kind of some overlapping layers of things that make me very difficult for a lot of people to deal with, by which I mean, I spent a long time in traditional finance and some of the gnarly stuff that people don't normally work with. Everybody at home who doesn't work in the industry thinks of things like stocks, and I was in the dungeon working in things like repo trading and like, stable value funds. So I know all the grotesque inner workings of the financial system. I've been in crypto for a while. I helped build one of the early bitcoin custodians. I ran the reserves for the third largest stablecoin in the world, the only one that went from existing to zero without losing anybody's money. And now I also do a lot of teaching and advisory work. So I have the misfortune of having to take complex topics and try to figure out at least semi entertaining ways to explain them to normal human beings so that they will possibly understand the things we are doing in crypto and or finance.

Speaker B: I have a general little story thing I kind of set up if you want me to read that too, Austin, please. It's a little silly, it's a little dramatic, but I figured you guys would appreciate it. And so what I had was a.

Speaker A: Uh,

Speaker B: excuse me. Somewhere right now there's a woman in Buenos Aires getting paid not in pesos because her pesos lose value when she sleeps. She's getting paid in dollars. And not like stacks of dollars she can hold in her hands, but dollars on a phone that no bank really gave her permission to have, or no government really signed off on. She didn't wait for anyone to, like, build her way out of a currency eating her savings. She found one. Now, Austin didn't just wait watch this happen. He built a machine to help. Austin ran the reserves behind one of the biggest dollar tokens on earth, helped build PayPals, and has spent a decade saying the quiet part out loud, which is that the banks are a cartel and there are ways out. He's a rare guy who'll do every bit of it by the rules and still scare the hell out of the incumbents. So, Austin, first question for you. What did you build before anyone said you were allowed to build things?

Speaker C: Oh, God. Are we going back to my Teenage day where the answer is like, firecrackers, slash bombs in the, uh, garage.

Speaker B: Absolutely. I love weapons, so.

Speaker C: Totally. May have blown up some potted plants. We'll leave that aside.

Speaker B: I mean. Or I can go into the question that came after it, if you want. If you don't like that question.

Speaker C: No, no. I would say in terms of building things that people don't give you permission for, that has kind of been the course of my entire career, especially in the context of running into burning buildings where the previous thing there has burned down and having to rebuild it. Um, one of the things that nobody had really thought a lot about until maybe early 2000s is there's this gnarly market most people don't think of, but actually is kind of essential to the functioning of the world called reinsurance, which I will describe for you as insurance for insurance companies. Right. That is to say, when a giant hurricane or fire or earthquake happens, the insurance company that sold you your policy is bankrupt because all of their policies just exploded at once. And so there's another layer behind them called reinsurance. And that historically was a very cartel like business. We're going to see a theme emerging here, um, that was dominated by people like a couple of rich dudes in Germany and Switzerland and Warren Buffett and Charlie Munger. Right. Because a lot of where Berkshire made their money was reinsurance, and that was a market ripe for disruption. So one of the things we tinkered with in the early 2000s, and these were not really a thing that existed before nobody gave you permission, was, hold on, what if, what if instead of relying on a cartel of rich people, we lock a bunch of money in a box and say, that's the money if something goes wrong, and then sell people protection based on that. That thing is called a catastrophe bond, which is not a bond that itself is a catastrophe, but rather is a bond that protects you against catastrophes. And so there's probably tens of billions of those around. But I started building those in the early 2000s, uh, when I was still in the reinsurance space. And not only did nobody give you permission, a lot of people were very angry about it at the time. And usually you're going to find if you're building something that's useful, it will make people angry.

Speaker A: It's funny because, like, at the end of the day, like, it's very similar to a stablecoin business where it's like, in some ways what you're doing is a roll of the dice every day that the protocol doesn't get hacked and there isn't some sort of major thing.

Speaker B: Catastrophe.

Speaker A: Yeah, but catastrophe. But in exchange, you get to play with $50 billion. And as long as you mostly keep it in mostly things that are mostly cash, like pretty good business.

Speaker C: And, uh, you've actually kind of hit on part of why I was dragged into stablecoins in the first place, which is the risk profile of these things is at least related. Yeah, I would say in stablecoins you're actually promising people stability. And so your job is to avoid risk at all costs if you know what you're doing. And in fact, like, one piece of advice I give people is financial innovation in stablecoins is usually a red flag. Right? Like the innovation should be in the technology, not the reserves. If you're innovating in the reserves, it's probably not actually stable.

Speaker A: Uh, thank you. Celsius.

Speaker C: I mean, Celsius. Terraform Labs, Iron, if anybody remembers that thing before Terra was like, there's a long history of experiments.

Speaker A: Terra never pretended they had any real asset anywhere.

Speaker C: Correct. And by the way, for those of you listening at home, in the current era, the AI data center debt backed stablecoin and M, the STRC backed stablecoin will explode. Right. On a long enough timeline, those will die.

Speaker A: So especially when they're valuing their H1 hundreds from a depreciation perspective at six years.

Speaker B: Also, uh, wasn't STRC made with ChatGPT?

Speaker C: It almost doesn't matter how you're valuing them though. This comes back to how do you keep a bank alive for the long run? And how do you have something like that stable? The number one thing you need to do is either just own treasuries or you need to have a different, deeply diversified set of things. So like, if you really hypothetically wanted to run a diversified stablecoin, you should be buying little bits of all kinds of uncorrelated stuff with a margin of safety and holding extra capital against it. You will notice that what I just described is basically the bank regulatory regime.

Speaker A: So, uh, I'm curious, as you think about these things yourself, um, the easiest thing to do is to be a doomer. Right? Risk management in part makes you be a doomer. Um, what keeps all of your money out of gold and bitcoin, or is it all in gold and bitcoin?

Speaker C: It is not all in gold and Bitcoin. Um, I actually have a pretty diversified portfolio, so I would say a couple of things. One, you, you need to understand what you're doing when you invest in things. And what the purpose is. I am highly skeptical of risk and very averse to it. When we're talking about cash stability products, if we're talking about a bank deposit, a stablecoin, a money market fund, a ah, stable value fund, that is something where I need to be institutionally paranoid. Because like, if Tori is the owner of that, the deal I've made with her is give me your money and you will get at least the amount of money you gave me back. Right? And if that is my investment purpose, the number one thing I need to do is protect principal. On the other hand, let's actually take the single most boring financial instrument known to ban Vanguard's Total Stock Market Index Fund. What do they do? A stock exists, they buy it. That's basically almost the entirety of that rubric. There's weights to how they do it. But guys, it's not much more complicated than what I just said in that thing. You've made no promise of safety. You're telling people very specifically there may be very large drawdowns in this thing over time. See, for instance 2008. And what we hope is that on average over time we make money. Because essentially you're trying to be long the US economy or perhaps the global economy, depending which one of those you own. M And that's been a pretty good bet historically. So for me, the question with risk that people often don't pause to ask is like, what is our investment mandate and what is our goal here? And then you need to set your risk tolerance appropriately because you should be taking insane amounts of risk in venture capital portfolios and very little risk in a government money market fund. And then people should be buying them as appropriate. So like, no, I'm actually very like pro risk. To me, it's a question of representations. And being the thing you purport to be.

Speaker B: Is that why you're not in gold?

Speaker C: I mean, I do own some gold.

Speaker B: I have a question. Do you own gold or do you own gold futures?

Speaker C: I actually own gold. I used to work at Paxos. There's a thing called PAX G, if people are familiar with that, that is allocated gold bars at the London Metal Exchange. So that is gold.

Speaker A: Gold.

Speaker B: It always used to drive me crazy. One of the reasons, uh, everyone when they're like, oh, I'm dooming and I'm just buying gold, is they would go out and they would buy like futures or uh, etf. And I'm like, that's really not the same thing as owning gold. That's owning like Price exposure to gold. But if something actually happens, good luck trying to colle on that.

Speaker C: I, I'm going to go the other way though. I'm totally cool with people owning the futures because if you're in the situation where things are so bad that you wanted to collect your physical gold, I actually would suggest you did not go hard enough. By which I mean, if we're at the world where everything is collapsing, you want to own guns, ammunition, canned food and water maybe, because then you can go take somebody else's gold.

Speaker A: And also you want to have physical possession of your gold, because I don't think like they're going to send a courier from London with like your bars.

Speaker C: No, but, but again, if the world is that bad, like, go look at historical analogs. Gold is also not the right thing to own. You want to own a monopoly on force,

Speaker A: everybody's private monopoly on violence.

Speaker C: I mean, I'm just calling it like it is. Right? And this is one of the funny things about investing is there are a subset of tail cases that it's kind of not worth worrying about from an investing standpoint. Because, you know, I get this critique a lot, by the way, from the bank people on stablecoins. They're like, well, what if the US treasury defaults? And I'm like, well, all of your banks are gone too, so why are they?

Speaker B: Then we have bigger problems.

Speaker A: Yes, I had this exact conversation, um, with, uh, a guy recently who was talking about kind of financial planning and sort of, oh, well, how do I pay for my mortgage if the US goes into hyperinflation? I'm like, dude, you're set. You've got a fixed rate. Hyperinflation is the thing you should be rooting for if most of your net worth is in your home. Like, that is actually a pretty uncorrelated asset to, uh, inflation because the price of your home will track with the inflation. But your mortgage is at a fixed rate. It creates some pretty perverse incentives in the long term.

Speaker B: So speaking of perverse incentives and a monopoly on violence, two questions I guess I could ask. One is that, uh, Austin, when we started, I said something that, uh, you've been making the case that banking, uh, is a cartel. And I think you could expand on that for people that have never really heard it put that way. Or the other question I've got for you is that you said, also, you're one of the only people that's taken a Stablecoin from like $20 billion to zero without losing anyone money or going to Jail. Um, which story do you want to tell?

Speaker C: Let's start with the banks, because I think that's probably better education for people. So let's travel back in time, uh, to before even I was born. As we established earlier, I'm the oldest person on this podcast. Banks, um, were largely not involved in day to day economic activity. If you rewind to like 1970, nobody is buying a sandwich by, like using a bank. You're not writing a check, you're just going to the deli and you're giving them cash. Okay? And even moderate purchases like refrigerators or something of that sort, you're probably paying in cash. And the economy largely ran that way. And it worked fine. Over time. There was this creeping electronification of the payment system that was also paired with this sort of creeping expansion of federal control over payment systems. And what it led to is us accidentally giving banks a monopoly on electronic payments in the United States. So previously you needed a bank if you wanted to, like, buy a car or buy a house, but you did not need a bank to buy a coffee. Nowadays, it's actually surprisingly hard to buy a coffee without involving a bank.

Speaker A: And so, and sorry, can you just drill into that? Because I think a lot of people listening might just be like, what do you mean? I just use my credit card, Right?

Speaker C: Okay, so if you ever tap with a card, behind that card is a bank deposit somewhere, right? You have an account, there are deposits against that. They're going to take the deposits from your account and end up with them in the merchant's account. That process could be anywhere from very simple if you're at the same bank, to incredibly gnarly if you have to do a couple of hops. But the point is, a bank deposit is going from pocket A to pocket B, and it's bank deposits all the way down. Nobody shows up to the merchant with like, here is your cash, right? They are getting a bank deposit. And so what that means. This sounds very weird, but to be allowed to buy coffee in the modern economy, you have to lend money to a real estate billionaire, right? Which is a very bizarre thing. But the reason I say that is that if you look at what banks actually do with the money you put in the bank, I want to be clear, they're going to hold themselves out as like, oh, we are the salt of the earth. We primarily lend for mortgages. We're letting people buy homes. Homes. Less than 20% of what banks do is mortgage lending, right? You can go look at their balance sheets. You can see what they hold. You can see what they're doing with the bank deposits. The answer is that is not what they are doing. They are doing project loans, they are doing hedge fund lending, they are doing commercial real estate, they are doing asset backed securities. Right. And a lot of the stuff they retain is like credit card and home equity loans at very high interest rates and query whether we even need those in the economy. So there's this very distorting effect of the way we built things because a lot of people who don't really want to be involved in this are trapped. And this gives banks cartel like powers. I want to remind everybody the risk free rate in America has been 3 to 4% for a while now. And you are getting zero on your checking account, right? So they are kind of holding you hostage to be able to buy a coffee and taking all the money to pay themselves bonuses.

Speaker B: And you also put this to the test too and tried to live without a bank account for a while, right?

Speaker C: I mean to be clear, I kept a bank account but I tried to put as many things through the not. Yeah. The non bank as possible. The answer is it's shockingly hard.

Speaker A: You're like the guy that did uh, live by the Bible for a year, right?

Speaker C: Exactly. If you try to live in the modern economy where you're not making ach payments to anybody, it is terrible. Right. And that also means not writing checks. Like I've either got to pay you by cash or by stablecoins. Right. Or in kind. And there are a ton of things that are just not set up to do that. Like great example, I probably can't pay my taxes, right. Like the IRS is not going to let me show up at their building with cash.

Speaker B: Have you tried?

Speaker C: Uh no. Because the one group you don't fuck with on that is the irs.

Speaker B: That's true, but isn't it you know uh, because you see these all the time on the Internet of people being like I just didn't want to whatever, I got some crazy ticket or whatever and this is you know, legal tender. So they go to the ticket, they got a ticket or something like a parking ticket and they paid in like pennies and like wheelbarrows.

Speaker C: Right? But there's like a place to go to do that. I dare you to roll up at the IRS building in D.C. and even try to get in.

Speaker A: I did once get a ah ticket like when I was in high school. I was so annoyed. I grew up in like Amherst Massachusetts like a 30,000 person town, um, that I went to city hall to pay my ticket with stamps.

Speaker B: Can you still do that in New York? I have a ticket I need to pay.

Speaker C: Okay.

Speaker A: You should be allowed to legally. I don't know.

Speaker B: Well, maybe this can be an episode on the road where we go with me to see if I can pay my MTA ticket in stamps. Um, I got a ticket.

Speaker A: Did you get a ticket?

Speaker C: It's worth a shot actually. The place where mostly this falls down, interestingly enough, is dealing with private vendors, none of whom accept cash. So like how do you pay for your Internet or something like that? That starts getting tricky if you don't want to use a bank at all because they're also going to give you a massive surcharge if you try to use some sort of card they really want. Ach.

Speaker B: Well, and the other side of it too is like an employer or something. Right.

Speaker C: Depending on your employer, some employers will pay you in stablecoins if you work in crypto. But like when I was at J.P. morgan. Absolutely not. Under no circumstances. Right. And so again everybody is trapped in this world where it's like banks have a monopoly on payments that they were never intended to have. And so one of the things I've been a big proponent of is we need to do one of two things. One is give non banks access to the payment system or the other one is hammer banks back into the box that allowed them to exist this way to begin with, which is called Glass Steagall.

Speaker B: Yes.

Speaker A: I will also say though, even in your stablecoin example, there's still a bank under the hood.

Speaker C: There, there can be, there does not necessarily have to be. Um, nobody has had the courage to run a stablecoin that is backed by physical cash. But it is a thing that you could possibly do.

Speaker A: I love that idea.

Speaker B: If anyone's listening, that needs a startup. This is my request for startup.

Speaker A: Imagine the insurance premium on the warehouse where you put the cash.

Speaker C: We'll call it a central bank, physical currency and ah, we'll force the Fed to give us vaulting capacity.

Speaker A: Cbpc.

Speaker C: Yep.

Speaker B: And you often get in fights with the government, so you're used to it. The government, Parts of the government.

Speaker C: I have a very good relationship with many parts of the government because like uh, here, advice for people in crypto. I do agree there have been some genuinely bad people in the regulatory space. See like Gary Gensler and some of his deputies. That was deeply unethical. A lot of them however, are faced with an unsolvable problem and get blamed for things they are not in control of. Because if You're a regulator. You kind of have three problems. Problem number one, you are not writing the law. So if Congress writes something stupid down, you're kind of stuck with it. And even if you feel otherwise, you can't just not do the thing. So if I have, for instance the 1940 act that requires a ton of intermediaries and people invent a better disintermediated system, I don't technically have the authority to let them use it. And so this creates a very complicated situation. Two, regulators get blamed whenever anything goes wrong and they get ignored when it goes right. To that extent they have the same public profile as plumbers. Right. Like nobody cares until something breaks. And so you've got to understand these people get screamed at when things go wrong and they get ignored when things go right. And that if you want to have a better relationship with them, you should probably be nice to them most of the time because they are going to get screwed in the media no matter what. The last part is, they don't get paid. You could actually go look online what people at the CFTC or the SEC get paid. That is public information. And let me tell you, it is shockingly low. So a lot of these people are doing this to try to help the world because let me tell you, making 90 grand in new York when you are like a relatively talented lawyer is not a thing you would do if you're into money. So we should also probably quite frankly pay them a hell of a lot more and hold them to higher standards. But in the meantime, please be sympathetic. These people are broke.

Speaker B: There's kind of a perverse incentive there too for them. When they're, when they're not paid well by the government, it makes a lot more sense to go into private. And so you just get a giant talent drain.

Speaker C: And that has been a constant problem. We have this critique over and over of the revolving door and why do these people keep going into private sector? And it's like because you're paying them poverty wages, what else are they going to do? Yeah, like have you heard of food? They would like to have my favorite.

Speaker A: Like this is related. Like we get, we get mad at there being wealthy people in Congress and it's like, well we like Congress should be, Congress should be. No problem with Congress being a $2 million a year job.

Speaker C: I, it probably should be. Another related thought if you look at how Congress was originally structured is the Senate was not elected, it was appointed by state legislatures. And I think we have.

Speaker A: Are you a 17th amendment truther? As Well, I.

Speaker C: We should repeal it.

Speaker B: There are so many of you in crypto.

Speaker C: We should repeal it. I'm it. I had this view long before I got to crypto because the whole point of the House and the Senate was to have different decision making frameworks. And when you standardize them, politics both got broken and got deeply federalized. Because let me tell you, when you were the senator from Rhode island, who happens to be a Democrat, and if you give Rhode Island's power away, you're going to get recalled. That is a very different decision making framework than I am the Democratic senator from Rhode Island.

Speaker A: 100%. I am completely on board with this. Expand the house by probably about 5x and repeal the 17th amendment. Do it in one big, beautiful constitutional amendment.

Speaker B: Do you think we could actually get a constitutional amendment passed right now? Okay.

Speaker C: To expand the House? My answer might be yes.

Speaker B: Okay.

Speaker C: Uh, because that's just more seats for politicians, which makes it more likely that they keep their jobs. I'm, um, actually not totally certain that expanding the House would be out of bounds that that is possible. Do we think we could move the Senate back to being popularly, like remove being popularly elected and returned to state appointments? The answer there is probably only if the states start agitating about that because that's the pathway. The senators won't want that themselves, given the current crop. But on the flip side of the coin, you could probably override that if the states get angry enough because they control local election laws and could really knock a lot of those senators out anyways. So then it's damned if you do, damned if you don't.

Speaker B: So what I'm hearing is that we should put prediction markets on this.

Speaker C: Actually, what I would suggest to the crypto people is that your lobbying efforts have been very niche focused on your industry, but you would actually do much better pushing a lot of good governance proposals that would additionally help you a lot.

Speaker B: Do you think that's what we're seeing in AI right now?

Speaker C: I think what we're seeing in AI right now is a lot of people who are very out of touch with how politics works.

Speaker B: You know, I'm sure I'm going to get all sorts of, uh, opinion for this one, but it seems to me that anthropic in particular, particular is really running the FTX playbook.

Speaker C: I mean, there are gay people on both sides of that. And I would say one of the characteristics you tend to get with that community is that they are incredibly high on their own supply and also have no idea how reality works because they

Speaker A: Seem to be, yes.

Speaker B: I've met rationalists before.

Speaker C: Yeah, they seem pathologically unwilling to go outside and talk to normal people. So let me propose from an outsider's perspective. If you run around saying my model is existentially threatening and could destroy the financial system in the US economy, everybody's going to lose their jobs, we're going to be in control of everything and we can hack everything. And then you also say, yo, the guardrails aren't a big deal. Why are you guys so upset? Why is this a problem? You are likely to get trumped by the government. Right? Like, they've taken a very, I think, inadvertently antagonistic and sort of paternalistic view of how things should run and just appointed themselves to be in charge while nobody else agreed with that. And unsurprisingly, they're getting exactly the reaction that you would expect. What Anthropic is doing is not much different than the cranks who go find an offshore oil platform and declare that they're running a micronation.

Speaker B: It's very, what is it? The ea, where it's, you know, we know how to do this better than you do and we have the humanity's best interests at heart, so you should just let us run it.

Speaker C: The EA people remind me so much of the libertarians, which is to say all of your ideas are excellent in your little closed box of theory that has absolutely no resemblance to how the world actually works. And if you're not willing to adjust for that, you should be nowhere near the levers of power because you're just going to break stuff. Uh, let me go down a rabbit hole here for a minute. One of the things you learn teaching is that most people don't have an understanding of the theory of mind of lots of other people out there. And this problem gets worse on two vectors. One that people are at least somewhat familiar with is intelligence. Right? That is to say, if you're a 140 IQ person, you probably can't understand how a 120 IQ person thinks, much less an 80 IQ person. And so this is sort of the genesis of my constantly puking all over the crypto, do your own research thing. I'm, um. Like many of these people literally cannot. Right. And you were essentially arguing in favor of like, scammers scalping people who are not sophisticated endlessly. But the other angle that people don't think about is, call it core neurobiological structure, eg, neurodivergence. Right. And one of the things you've gotta understand is a subset of people are literal fucking psychopaths, right? And so as you go down this, you have to build systems that account for the existence of people who are going to actively exploit the system for the maximum amount of gain for themselves and the maximum amount of pain for everybody else.

Speaker B: Thank you for the segue to my next question.

Speaker C: What's that?

Speaker B: I said thank you for the segue to my next question.

Speaker C: Yes, but that's where the EA people often fail is they don't have like a theory of how do you deal with people who are actively opposed to your goals and will deliberately support them. And they regard that as a feature, not a bug.

Speaker B: Speaking of people who are going to actively exploit the system for the maximum of gain for themselves. And yes, I did pull up the recording to make sure that I got your explicit words right because it was so perfect. Um, prediction markets are tens of billions of dollars a month in volume now. And some of them are like settling on real economic data. And I think there's a really interesting thing happening here where like some of these markets you could potentially front run the government's own numbers. Uh, what does that do to perverse incentives and to just the structure of government if you know, you can disrupt all sorts of things like jobs reports.

Speaker C: So I think there's two layers to this. One layer is the classic problem with insider trading, which is it insider trading.

Speaker B: If it's not a security, uh, you

Speaker C: can insider trade on non securities. The theory of insider trading is actually misappropriation of private information and using that for personal profit. It's like a fiduciary problem. Now the SEC can't come after you if it's not a security, but that doesn't stop like the doj, for instance.

Speaker B: Um, so would you rather have the SEC or the DOJ after?

Speaker C: You'll be honest, you would always rather have the sec. Just reminder to everybody, the SEC cannot put you in jail, the DOJ can. That is a big difference.

Speaker A: A reminder to everyone the DOJ is much better funded.

Speaker B: Huh?

Speaker C: And the people there are very talented.

Speaker A: I know it is the highest quality tier of people working in government, except possibly like in the military.

Speaker B: So what we're saying is that insider trading on securities is better than insider trading on polymarket?

Speaker C: No, because securities you may just get, both the DOJ and SEC are not exclusive. You could get a yes and yes. Um, what I would say though is that the first problem is just confidence in markets. Like if I know somebody has access to this data and is trading on it in front of me, I'M just going to avoid that whole market. And that damages capital formation and price discovery. Like it's one of those invisible taxes on a system that slowly over time degrades everything.

Speaker A: Okay, I want to push in on this a little bit because this is how the entire retail financial market is currently structured.

Speaker C: Yes. And you're probably aware that I have some complaints about how that works.

Speaker B: Um, could you complain about it?

Speaker C: I will complain about that momentarily. That is to say, I think it's fair play if these are all public actors finding public data and doing their own research to actually build a market. So if I'm at a hedge fund and I hired a bunch of people to go spy on all of Apple's suppliers, legally, not illegally, and I gather

Speaker A: all trucks outside the factory to work,

Speaker B: what's the difference between legal spying and illegal spying?

Speaker C: Uh, legal spying would be, for instance, I had people wait outside the factory and count people coming in and out and trying to estimate the shipments. You're allowed to do that? Illegal spying would be I got people hired at that factory to steal information and give it to me, which they were not supposed to do.

Speaker B: Thank you.

Speaker C: Okay, so I'm okay with legal efforts to make markets more efficient, but I think the problem that we have currently in markets is sort of twofold, which is one, if there's so much of that and retail people don't have access to it, at some point they should back away from the market because they're just getting scalped. And you can do that in one of two ways. One is just like literally don't put your money in the stock market. The other way is just on a passive index fund because then all of that noise kind of goes past you and you're not trying to individually trade, but there are implications for things like governance and whatnot that have something to do with that too. I think we need reforms on, call it disclosure, trading activity, positions, et cetera. The second level of unfairness is there's probably a lot of genuinely unprosecuted insider trading in markets. I don't think our market surveillance regime is effective currently because the SEC is primarily using exchange based data, which is not a great vector for detecting things. And you should be using like open source intelligence and social media based data to try to track all these things down. And boy, I bet you'd find a lot more insights of trading.

Speaker A: Also, the percentage that actually hits lit exchanges is much smaller than it was even 10 years ago.

Speaker C: I agree. But there's nothing technically stopping them from getting all the Non lit data. The question is they're just not.

Speaker A: Right.

Speaker C: Right. Being bad at your job and the job being impossible are two separate problems.

Speaker A: What a quote.

Speaker B: So if you were going to fix these things, if you were in charge of the reforms, what would it look like under the Austin Campbell regime?

Speaker C: So I would say a lot of it is, um, the do better adjustment. Right. Because before we talk about changing laws, we need to ask are we doing a good job with the ones that are?

Speaker B: So it's an enforcement question as opposed to a change, uh, in regime type.

Speaker C: Yeah. I mean if you want my hottest takes on reform, it's that we should about double or triple the salaries of most of our regulators, give them far bigger budgets for technology, but then also hold them significantly more accountable for outcomes. Right. And keep in mind, define the outcome properly. It's not the number of insider trading prosecutions, it's the amount of insider trading. So if you prevent it all, great. Right. And so to me it's skilling up these people to do the kinds of things I just said, which is much better detection, much better monitoring, much better understanding of market structure. Throw all the people actually doing it in jail and then ideally just have much less of it because people understand this is a one way street to prison.

Speaker A: Yeah. You know, I think this is actually, um, the more I have dug into different sectors of government, the more that this is consistently the only way to fix it.

Speaker C: Yeah.

Speaker A: And there's, there's actually only one part of what I would sort of call like public sector employees that actually function like this. And the feedback loop is incredibly powerful and incredibly effective. And it is public university football coaches and um, basketball. And basketball. Right. But it is largely like it is these flagship and even like their second tier people at large public universities that are generally the highest paid people in government in general. But they're the contract. I mean it's clearly possible because these contracts are written in such that they can be fired basically capriciously if they don't win enough times.

Speaker C: Yeah. And I would say, you know, we're diverting into politics here, but my biggest critique of the Democratic Party and their current stances is you keep asking for more money in taxes while doing an absolute trash fire level job of using the money you've already been given. I would propose the following fix. Cut all government budgets, federal, state and local by 50%.

Speaker B: How do we pay them more if we.

Speaker C: Well, hold on. Force people to iterate on that to see what's broken because you're going to flush out a Lot of stuff by cutting it that much and then go back and rebuild with much better people and much better bureaucrats. Right.

Speaker B: This is Doge ideology.

Speaker A: Right?

Speaker C: Well, it's the Elon Musk idea of cut until things break and then find out what's broken. But the reality is like, you know, say Mamdani in New York asking for more money. That's insane. We should cut the New York City budget because we're wasting a huge amount of money. We spend more money per pupil than almost anywhere else. And by the way, are getting worse educational results than Mississippi.

Speaker A: Look, we spend six.

Speaker B: That's actually because Mississippi is a miracle. And what they've done in their education.

Speaker C: Right, but the point is, it wasn't about money. It was about methodology.

Speaker A: $60,000 a year per student, 49th outcomes.

Speaker B: Yes.

Speaker C: You do not deserve more money. You all deserve to be fired.

Speaker A: $88,000 a year per homeless person.

Speaker C: Yes.

Speaker A: Which is higher than the median income in New York.

Speaker C: But I would also point out. Let's go back to the problem. How much of that 88,000 goes to the homeless people? Let me give you a hint.

Speaker A: It's a jobs program.

Speaker C: Yes.

Speaker A: But not for the homeless.

Speaker C: Correct?

Speaker B: Yes. Now that we've had lots of spicy takes, I'm sure. So technically, uh, validated. Pro billionaire. Pro paying government more. Uh, anti regulation.

Speaker C: I'm not sure I'm pro billionaire. What's the right way to say this? If you got there by creating value for people in the world, I'm okay with it. We do need to do a better job of how we think about estate taxation though, because passing on generational wealth forever is a different question. But I bear no ill will towards Jeff Bezos. The world is better off with Amazon. And trust me, I lived before Amazon. It sucked. Um, but on the other hand, if we're talking about, like, billionaire wealth either through inheritance or market manipulation, those I have significantly more questions about. So traditional commercial billionaires building stuff that makes the world better. Doing things like electronic cars or, I don't know, curing cancer. Right. Or like building out America's infrastructure in schools. I'm totally down with financial manipulation and like, dynastic wealth being inherited. No. So, again, oversimplification of the problem in

Speaker A: media, as is usual.

Speaker C: Sad but true.

Speaker A: I, I want to get into a few of the other things that kind of you have done and worked on, um, as well as some of the other just conversations we've had about stuff that you, you, you kind of care about. I think we, we talked on a bet on prediction markets. I want to go back to that topic because, uh, if you look at the volumes like prediction markets did somewhere around $22 billion last month. I think they're at $20 billion this month already, and it's only June 19th. Um, this is like a rapidly growing sector. There are obviously some concerns about insider trading. I think you could make a stochastic argument that the insider trading also washes out in the wash for any market that trades of a significant enough volume. Um, which is, which is, uh, a larger question on is insider trading a victimful crime or not? Um, we can skip that one.

Speaker B: Wait, wait. We should hit this one too. Does insider trading matter? Is it a crime? Should it be a crime? So we're hitting all the hot takes we possibly could in this episode. I just want to make sure we're on record on this one.

Speaker C: Uh, I will say two things about that as we think about hot takes. One, one of the problems you have with insider trading is it eventually creates an incentive to manipulate.

Speaker B: Yes.

Speaker C: So in that case, it is definitely a crime. Like sports betting, where you rig the match is a great example of insider trading because you knew in advance it was going to happen, you traded in front of it and the probability was wrong. So one, but that's a different.

Speaker A: That's like a slippery slope argument, and I don't love those.

Speaker C: This is a slippery slope we've repeatedly observed in financial markets and have had to regulate repeatedly throughout history. So I'm pretty sure this slope is not just slippery, it's real.

Speaker B: Can you give us some examples?

Speaker C: Yeah. So, Enron, why do we have the securities regulation that we have in the United States at all? It's because if you look at things like pool trading and insider rings in the pre1929 crash market people are openly manipulating the market for profit by pumping and dumping things to take money out of the hands of.

Speaker B: This is why we're not allowed to trade onion futures, among many other things.

Speaker C: This is also why you have all the disclosure and like exchange monitoring and like rules. Uh, but point is, this is a recurring known problem throughout financial markets globally. I don't believe this is a slippery slope. It's just a slope like, we've seen this many times.

Speaker A: Sorry. What I mean by slippery slope is not that it won't end in a problem, it's that it itself is separate from the ultimate problematic outcome.

Speaker C: But not policing these things in a way that stops them from happening has historically always led to that outcome. Right.

Speaker B: Here's my objection.

Speaker C: To the slippery slope. Right. Is that is you are hypothesizing that these things are true. And I am arguing to you this is not a hypothesis. I have plenty of concrete evidence.

Speaker A: I would agree that these things are true. Right. But I think there is an interesting argument on these things. Like for example, commodities trading.

Speaker C: Yes.

Speaker A: All of its insider trading. If I'm a farmer and I look at my field and I go, oh, these soybeans don't look so great. I'm going to go hedge my debt. That is insider trading.

Speaker C: So I agree. But that has the important characteristic of somebody with a fundamental legitimate economic interest in hedging there. Right. Like here's a different one. Hypothetically, m. The farmer in a year that's like mediocre goes, doesn't look great, goes and puts a bunch of money on soybean crops being bad and then burns their own fields in the fields of those of their neighbors. Sure. Right.

Speaker B: So crime.

Speaker C: Crime.

Speaker A: But I think this, but this crosses what you were talking about before about like legal spying versus illegal spying. It feels like there's a certain amount of this stuff that is like.

Speaker C: Exactly. And so the way we regulate that right now is by having a whole monitoring regime. And if it is the farmer themselves hedging, we are willing to tolerate that amount of things. But if it were somebody like blowing up the farmer's after putting shorts in, they would have a problem. But also equally so if it were somebody like breaking into greenhouses to look at those things, who did not have an economic interest and was not supposed to be there and then doing it, that's a problem.

Speaker A: Okay, so, so let me give you, let me give you uh, uh, a posit then. Insider trading should be fined by employees of companies, but not by anyone who's unemployed by the company.

Speaker B: Isn't that the definition of insider trading? It does, uh, mention who has like privileged information.

Speaker C: This.

Speaker A: But this, because this is, this is where we're going back to. Like I have as an employee of a company, I have an economic interest in that thing and I can be very bearish on what I see happening at the organization. And I want to hedge my RSUs.

Speaker C: Okay. So technically the argument should be. I'm going to clean up your argument so we can have the real argument that shareholders of the company be allowed insider trade.

Speaker A: Yes.

Speaker C: Because non shareholder employees, insider trading. Boy, is that a different kettle of fish than what you just said.

Speaker A: Sorry, I was assuming shareholders of the company. But yeah, we can extend this to anyone who has an economic and uh, a direct Economic ownership relationship to.

Speaker C: Correct. And then the problem you run into is the second one I was going to raise to Tori's question, which is if you start tolerating significant amounts of that, what you are telling people is if you do not have direct access to that information, you should not own the thing.

Speaker A: Yes.

Speaker C: Because you will essentially constantly be arbitraged against by the people with better information. So what that means your argument is essentially public stock should not exist.

Speaker A: Yes.

Speaker B: Right. Okay, well, hang on. Is that not essentially what happens when you own a stock right now is that you're constantly being arbitraged against by people who have more information than you?

Speaker C: So the answer to that actually. So this is a weird one. It depends how you own the stock. Right.

Speaker B: Um, like if I am passively investing, if I have like, I don't know, a total market mutual fund, that's kind of just true.

Speaker C: No, it's actually weirdly not like this is the Warren Buffett, because if I bought the stock once in 1980 and have done nothing all the way to the current day, I kind of get all the informational benefits of the insider trading. That's only a problem when you're actually going in and out.

Speaker B: Well, you get it if it's uh, all good information. If it's bad information, you're in it longer than you should be.

Speaker C: Maybe. But again, if you are truly a long term holder.

Speaker B: Okay, so now we're talking about long term holders.

Speaker C: Right. But I'm saying this is sort of the implication of markets that is super weird that we come around to. Is, is the problem that we've essentially like over indexed on short term liquidity.

Speaker A: Right. And so this is actually where I think things get quite interesting is the argument of oh, we shouldn't have public stocks. Like a lot of this to me feels like we have created through regulation a problem which AI is running far ahead of our ability to police. Which is this idea of like if you actually go through usc, like US Criminal code, and then you go through each state and local code and if you actually have perfect observability systems able to catch every infraction, everyone's getting fined constantly, every day for something. Every like most people are going to jail at some point in their life. We're soon going to be in a place where the social tolerance to enforce the laws we have on the books and at the level they're written and that the ability AI will give us to enforce them will not be acceptable to anyone. And I, I think insider training falls into this Same category a little bit.

Speaker C: Because like Austin, I want to pause you, please. What you're making, and by the way, I kind of agree with this is an argument to fundamentally just rewrite like the laws. Like you have too many, they're too complicated and they're mutually contradictory.

Speaker A: Yes.

Speaker C: I think you could get to a trading framework that probably works better where insider trading is less of an issue. But it probably looks something like you don't have the ability to trade in and out of things at short term intervals.

Speaker A: Right.

Speaker C: Like if you bought a stock and your minimum holding period was one year, I think that takes out not all, but a lot of the insider trading problems.

Speaker A: What if we just put a 50% tax on insider trading?

Speaker B: I'd be okay with that. What if it goes to like an insider trading fund for, I don't know, reparations, index fund holders and everybody just gets some of the money back at the end of it?

Speaker C: It turns out there should just be an AI bot that has a direct API access to Nancy Pelosi's brokerage fund

Speaker B: and mirrors perfect markets trade once a year and we all make the same trade at the same time.

Speaker C: No, it's, it's not that they trade once a year. It's more insider trading kind of relies on being able to time specific discrete events. So if you take that capability away, it's less of a problem.

Speaker B: I suppose. So, uh, if you're talking about stocks, but not if you're talking about options,

Speaker C: options markets in that structure become a thing where you have to ask the question of should we even have them?

Speaker B: Well, yes, but I mean the question I think is more should retail be able to degen.

Speaker C: As a former options trader, as a former options nerd.

Speaker B: Uh, there are plenty of legitimate hedge cases for them there.

Speaker C: Again, there are, but so should go back to this point if we're pausing and rethinking what is the framework in which we want to allow people to invest in markets writ large. Right. That is to say, if we accept that most retail people are not informed and that most people who are not the most efficient markets people are probably being systematically disfavored and we want to get to a better system, you probably end up in a world, Tori, where options should only be traded by the big guys. Right. And only for significant types of like hedging or legitimate purposes, which is going to make for a lot less dynamic and liquid options market.

Speaker A: Okay, so we're getting into something very interesting here. Uh, there's a macro point I want to make, but I Want to hang on that last thing you said at legitimate interest. So I own some SpaceX stock. SpaceX now owns XAI. They own a bunch of stuff. It's in a bunch of different areas. Is my economic interest now allowed to options trade, electrical markets? Because that is one of the things.

Speaker B: Can you expand the thought?

Speaker A: Sure. So the only input that matters, literally the only input that matters for AI companies growth is the ability to get access to power.

Speaker B: True.

Speaker A: Like chips are downstream from that. But if you talk to every AI company in the world, what they're limited by now is grid capacity and their ability to generate electricity, more so than supply of chips from, you know, tsmc. And so I guess if we start putting some of these like, uh, you know, do you have a real legitimate interest? It reminds me a little bit of like these, this, these like weird laws we see in California that are like you have, you know, if we find that you are not minority enough in a contracting thing, we can throw you in jail for like, uh, having gone through like you claimed you were a minority group, but you're not. And so now you're violating contract law.

Speaker C: Now let me, let me roll back to a much earlier point we made, which what I would say to you is that a healthier paradigm for US equity markets might be if you want to own the thing, you just kind of have to own the thing and eat all the risk and that's what you're getting paid for. Right. That is to say, if you want to be outright long, be outright long. And if you don't, don't. And that should be a binary decision. And that, uh, the people who I think would have a legitimate case to do things like use options in that way are the people lending to SpaceX out of vehicles like banks that need to keep a PAR level to redeem depositors.

Speaker A: Yes.

Speaker C: Right. I might argue that forcing capital markets towards long term acceptance of risk as opposed to short term optimization might be a better capital market structure for long term economic growth than what we currently have.

Speaker A: I would totally agree with you on that. I think where we differ is I think it's fundamentally unenforceable, Ben.

Speaker C: And that may be the case. And like, I'm not strongly saying we should do this right now, but I am saying it's an interesting thought experiment of what if you just had to be naked long stocks and could not trade them short term, but then we

Speaker A: just, we just hedge them on hyperliquid.

Speaker B: Yeah, tell us what you think about perps then.

Speaker C: All right, so ignoring the whole Philosophical point on how should investing work? Perps are a great product.

Speaker B: Um, right. By which, okay, perps do kind of slap though.

Speaker C: Right. But by which I mean deliverable futures are a huge pain in the ass.

Speaker A: Yes.

Speaker B: So I used to clerk for a high frequency trading firm and I found out the hard way what the maximum amount of legs that you can put in at a time on the NASDAQ is. And it's 267.

Speaker C: Yeah, you're telling me. I also know somebody who had to find some short term storage for orange juice in Singapore. Um, so.

Speaker B: Well that's why we had negative oil a couple years ago. That was so fun. But negative front month oil was really fun.

Speaker C: Yeah. Deliverable futures, there's a good reason for many of them to exist. I'm not disputing their existence, but there's also a very good reason for non deliverable futures to exist. And so I think perps are a product where if we accept the argument that it's okay to financialize and like make everything granular upstream of this perp should definitely exist and have a lot of value options.

Speaker B: Bad, perp's good. No insider trading. Okay.

Speaker C: I'm saying if we're going to accept the current market structure, eg, our preferences, liquidity and everything at all times and fragmentation, perps are a very good product. Like you kind of have a macro thing on rules upstream of per. So let me say, let's use a sports analogy here. Do we think the three point line is a good thing for the NBA or not? Is upstream of do I think a three point specialist is a valuable player to have on your team? So if we're in the three point era, I'm super in favor of players like Steph Curry. But if we're in the 1960s with no three point line, I'll take Bill Russell. Thanks. And my point is we have two separate questions. One is what should the macro level rules of the game be and then within those rules, how do you play it? Well. And I'm saying within the current rules we have, perps are great, but I'm willing to have a discussion about the rules.

Speaker A: Personally I feel like the NBA should allow you to leverage trade your three points.

Speaker C: We should have six point shots but if you miss, you lose three.

Speaker A: Exactly.

Speaker B: That would make the game more interesting.

Speaker A: Like uh, I'm going to go levered long on Steph Curry.

Speaker B: I mean I think there's places you can already do that

Speaker A: but internalize to the score.

Speaker B: So sports betting does have prop markets like this which Essentially do function the same way. They're just really crazy parlays.

Speaker C: I would also point out to our earlier discussion, a lot of the reason that like betting markets are running so hot right now in the prediction space is the World cup. Like this is just sports betting.

Speaker A: Yeah.

Speaker B: Is it to my earlier point about, you know, look at those numbers and things like that. No.

Speaker C: Go look at the demonstrable volumes on Kalshi and Poly Market. A significant amount of the aggregate volume and increase of volume is sports betting.

Speaker B: Okay, I have a really spicy one then for you.

Speaker C: All right.

Speaker B: Do you think they should allow assassination markets?

Speaker C: No, um, I don't think that's a spicy take because that is, I think they should. That is. No, that is paying people to assassinate people.

Speaker B: It's putting a uh, price discovery on how much people want you to die.

Speaker C: Okay, but so long as we think murder should be illegal.

Speaker A: Right.

Speaker C: Paying people to murder people is also illegal. Assassination markets as the law is currently written are probably a crime.

Speaker B: So what about death markets in general of when someone's going to die?

Speaker C: I don't believe there should be specific individualized death markets. I am okay with population mortality death.

Speaker B: Okay, uh, so anti taunting.

Speaker C: I, I am anti taunting back to reinsurance because like we also have experience with how those work out. Right. It as a general like social matter. Even if you find the financial like aspect of it interesting, if the core existence of your market incentivizes people to break the law, you probably should not have that market.

Speaker B: Definitionally depending on how the laws are written.

Speaker C: Right? Like, because like where, okay, we had death markets. That's like one thing that's obviously pretty grotesque, but like there are many other bad types of like crimes. Should we have like burning down cities markets?

Speaker B: Okay, well what about like, what's the

Speaker C: most odious market we could come up with? Rape markets. Like where do you draw the line?

Speaker B: So I have one for you then. Um, to go somewhere totally different, there is a rapidly expanding ecosystem of gray market Chinese peptides and there are all of these websites that have sprung up to test them. Do all this purity testing, make sure what you get is actually what it says you're getting. Um, some of these companies have a terrible track record and some of them have like a really good track record. Should we be able to prediction bet, like who's going to be the top of the FINRAC leaderboard?

Speaker C: No, I think what we should do is fix the fucking FDA so we can have a legitimate supply of regulated peptides. But this goes all the way back to the government should do its job. Like all of these things are workarounds for broken systems. And my answer in many cases is stop putting band aids on band aids, on band aids, on band aids, on band aids and fix the problem.

Speaker B: So how do we fix the fda?

Speaker C: I want to go back to exactly what we were discussing earlier, which is you probably significantly cut the funding because a lot of it is waste. You give it outcomes based. Right. Like metrics which are to say your job is to disapprove bad medicines and approve good medicines. And so if you fail to approve something quickly, that's good penalty. And if you approve something, that's bad penalty, penalty. And then we pay them based on

Speaker B: that penalty, for whom? The person that actually just approves it.

Speaker C: Yes. They should have a direct financial interest in accuracy. Right. Because if you think of the should,

Speaker B: they should be able to insider trade the.

Speaker A: Should they be able to hedge their.

Speaker C: Uh, no, because you want them to be exposed to their own decisions. Right. This is another argument against people hedging their stock is you want them to actually care about doing their job. Um, but like back to that, this is again, the brokenness that regulators also face is currently the FDA gets yelled at constantly if they approve bad things, but they get no credit if they approve good things. So what do they do? They say no to everything and make processes that take forever. You actually need that forcing function to work both ways.

Speaker B: Um, I do have so many other questions I could ask you, but if you had a magic wand for like one structural change you can make in any market over the next year, or any regulation even, I'll broaden it, what would it be? What would you do?

Speaker C: So I think there's two potential arguments here, and I'm picking these based on things where I have personal expertise and I'm relatively confident that what I would do will have a net positive outcome. Okay. Number one is to bring back Glass Steagall. And I say that because if we have this too big to fail banking problem, the easiest way to do that is to break things back apart. Yeah. And make people focus on the things they're good at. I think that would also fix a lot of our banking problems because now you can't have a mega entity using the customer deposits to do hedge fund lending. Right. Either literally or by cross subsidization. So bringing back Glass Steagall I think would be a good thing. I think it would also help a lot of the smaller banks who are having a very hard time competing and dying off constantly. So that's one, I think it would be very positive. The other one I would do is wave the magic wand to get rid of the BSA as it currently exists and replace it with a modernized, not solely KYC based version of the bsa.

Speaker A: Also preferably something constitutional.

Speaker C: One constitutional, but two actually does the thing that we want it to do. Right? Because the current one is probably unconstitutional and doesn't solve the problem.

Speaker B: So,

Speaker C: I mean, I'll ask the question this way for you two. Who do you think knows more about you, your bank or Google?

Speaker B: Google. But that's because I tell Gemini a lot of bullshit.

Speaker C: Okay, but for almost everybody, it's Google. And the point is, a working version of the BSA would have much better structural identification of people that reveals less information at each point about who they are. Like, go into like social graph theory and zero knowledge proof disclosure. You would do that. But you would also combine that with open source intelligence operations to scrape a huge amount of things so that we could stop scam rings, drug traffickers, human traffickers, because those have observable behavior patterns that are more important sometimes than knowing the specific identity of people. So we would both have more privacy and more crime interdiction by modernizing the system. And by the way, you're never going to have absolute privacy and stop crime and you're never going to. Like, what's the right way to say this? You could have a lot of crime if you had a lot of privacy and you could trade both off with each other. But the balance point is important to think about and we've done an incredibly poor job of that. So those would be the two.

Speaker B: Thank you for that.

Speaker A: All right, well, I think that's about all the time we have today. But Austin, thank you for joining us today to chat about a whole bunch of different topics.

Speaker C: Well, thank you, Austin. And Tori, please change your name for that.

Speaker B: Okay, I'm going to be Austin for the rest of the show. Um, I am also Austin. Thank you so much, Austin, for coming, uh, on. And thank you, other Austin, for, uh, letting me terrorize your guests. And, uh, this was really fun.

Speaker A: Yeah. Uh, Austin, if people want to learn more about you, more about your company, read your blog. Uh, where should they go?

Speaker C: All right, so one. Subscribe for the zero in newsletter. It's free. My creative director is totally insane. So you're going to get wild stuff like Michael Saylor dressed like sailor or Elon Musk dressed like a fashion model holding a golden rocket. These are things that have actually happened. Shirley is amazing. You should subscribe for the newsletter. It's genuinely funny. It will always be free. Um, also, I'm probably on Twitter too much, so you can find me there. I am justaustin Campbell on Twitter.

Speaker B: Just Austin Campbell. Is that the ad or is it.

Speaker A: No, it's Austin.

Speaker C: Austin Campbell.

Speaker B: Okay, just checking. For those listening at home,

Speaker A: this episode brought to you by Nvidia H3 hundreds. Send us a box.

Speaker C: You know you're just getting a leather jacket now.

Speaker B: You haven't even heard about my like, pro killing old people takes?

Speaker A: No, I always love the uh, like looking around a plane and be like, how much risk is currently on this aircraft? Is it priced in? Probably not. We've seen a proliferation of cameras in the last 20 years. We have not seen a proliferation of Bigfoots.

Speaker B: The way the current wealth is, uh, concentrating in San Francisco and the way they all live in group houses there, the next thing everyone there is going to do with their liquidity is, uh, just buy houses for their group cats to live in. Because some of the members of the so called permanent underclass might just be really cool to hang out with.

Speaker A: We can brand this as the Mormonification of everything.

Speaker C: We'll call it the Church of Latter Latter Day Saints. So tier one, Google Talk and Brave Talk, they are superior to everything else. By the way, the only one of any of the video conferencing softwares that doesn't spy on you is Brave.

Speaker B: What about Jitsi? Jitsi doesn't spy on you.

Speaker C: Keep believing that. Okay, just below that is Zoom. Because like, look, listen guys, it exists. Below that is Microsoft Teams, which I personally regard as an insult when you send it to me, but one at which I will still be friends with you. That at the bottom is WebEx where I just immediately block your email address when you send me one of those.