Risk Tolerance and Life Philosophy

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Today, we've got the first of a two part series on the systems that run the world I'm talking with Bark Butler, the CTO of Proton a company that makes private and secure productivity software It's impossible to create a back dooor that can only be used by the good guys No company is going to go to jail for you Often the response is, well, if you change the legal foundation here, we will leave. Yeah. How real is that It's dead serious. With all due respect to Swiss authorities and everybody else, I think it would be suicidal. to continue down this path. subscribe where your podcast. This series is presented by Comcast Business This episode is brought to you by Street Easy Who do you want to be? That guy in Florida playing backgammon? or the Chelsea fixture still turning heads And you know how the Chelsea guuy did it Never left In twenty years of NYC know how, Street Easy has the tools, agents, and guidance to make you a forever New Yorker too Visit streeteasy. com to buy or rent in NYC Street Ey is an assume nam of ZillowWink, which has licenses in all fifty states Today's number fifty point one million dollars. That's how much a T Rex named Gus sold for at auction this week setetting a new record for fossils. had a true store. I actually bought A gun from Guss. He's my small arms dealer Has Michaels symbolist forgiven us yet? I'm not going answer that question You know why? Because I love the dad jokes. I don't want them to ever end. I know you're into the diry stuff, but like just objectively, the dad jokes are very, very strong. By the way, do you see my new shades, my new peepers? Look at these. Wow, yeah. You know where I am, right? You know what's going on here? I know where you are, but maybe our audience doesn't. Where are you? I don't like to be a shareon. I don't wantan to talk about my kids without their permission. I'm in Charlottesville And I'm at orientation which is fucking ridiculous that I'm even here All right I woke up yesterday, got to have breakfast with my son, despite that, you know how uncool he must have felt having breakfast with me And then he basically told me that it wasn't really necessary that it dropped him off at his dorm where he was spending a night And I'm like, No, I'm come to your door with you.'m fucking' dark hundred hours. And so we go to his dorm hauling comforters and there's all these nervous looking parents with their are like, you know, shirpas and people bringing shit for one night in the dorms And I'm not exaggerating. We barely walk any, turns around and hugs me and practically body blocks me out of the room And I amm taking my revenge. I picked up these bad boys. at registration and I've been wearing them. I wore them out last night So I came down here thinking, and I said to him, I apologize, but during the middle of the day, I' have like two or three hours of podcast I haven't seen themem since eight AM yesterday He hasn't Like he texted me late night last night. I called him. I'm like,, we' getting together. What's to do? We got him dinner And he wrote back, Is it important That's what I've gotten back I'm like no any he goes, I'll call you later tonight. Did't call me Anywways, so Im in Charlottesville What are you doing at? That's amazing. It sounds like you're having an amazing time. Just to clarify, does he have activities that he has to attend to, like is he like meeting all his friends? Be in that case, I give him a pass because he needs to kind of focus on socializing, being cool, etceta Is that what's going on or is he just, you know, chilling without you? No, he's busy. And what you realize and you have a long time to prepare for this emotional trauma, but you have this this these these mixed emotions of We've clearly done something right. He's at launch. You don't want a kid clinging to you and worried and calling you and anxious. So we've done something right But you can't help it. You also, you're just really sad. you want your little boy back. I mean, it is it's a very emotional time that that he's busy So I'm trying to continue talking so I don't get emotional. He's busy, but the parents calendar, they have all day, they have schedules for us We should not be here Let me summarize Everything I've learned from the parents events Every child is on the verge of a mental breakdown. And but don't worry, we have eight hundred, eight hundred numbers and we have a SWAT team. If your kid even blinks suspiciously A swWT team of adolescent psychiatrists are gonna drop from the sky and give your kid therapy. and call you in accordance with HIPA laws or whatever. And I'm like if the kid isn't fucked up, the parents are gonna to be fucked up by the time they leave this session that has convinced us Every kid is an emotional tide pool. A's actually fascinating this experience for you. It tells you a lot about Where college is headed, where young people are headed, it's really interesting But that's very exciting stuff. very I'm very happy for you, and I'm very happy. your son. And I'll also say I met your other son for the first time Talk about well adjusted kids Had a great time at the England game with you and your son and your buddies. and I had an incredible experience. England is I mean it's hard to talk about it because this episode will be out on Friday so we don't actually know what the result of the semifinals will be And I'm not going to make any predictions because I don't w want to jinx anything Um, but that was That was highlight of the year into the England game. So, thank you for bringing me. I've been talking about this a lot. I feel like all the goodwill that was bottled up between nations in and amongst each other is coming out of this World Cup. It was great to have you there I've taken my sons to the last three World Cups now. We're going to the final on Sunday and to see all the UK, all the British fans rowing and to see all the Norwegian fans also singing Sweet Caroline. I just thought it was And I've described it. It's like cousins who love each other doing a sleepover when their parents are out of town and despite the fact their parents are fighting all the time. I've been to World Cups. I was' at the World Cup in the US. and I think it was ninety four. I've been to Russia, Qatar, and now this one. This one is the best. Okay, well, we have a big episode to get into here. We're speaking with the one and only Mike Novograt, So let's get into it Today we're speaking with one of the most prominent leaders in the crypto space. He founded Galaxy Digital in twenty eighteen, one of the industry's leading digital asset investment firms and has been investing in crypto for more than a decade Back in twenty thirteen, he invested seven million dollars of his own money in Bitcoin when it was trading for roughly a hundred dollars hundred a coin. Last year, it peaked at more than one hundred twenty six thousand dollars But recently crypto has fallen on hard times Bitcoin is down twenty seven percent year to date. Ethereum has fallen thirty seven percent and Solana has fallen thirty eight percent At the same time AI has emerged as the market's new obsession and few investors have embraced that shift more aggressively than today's guest. So we wanted to talk to someone who's been at the center of bothoth worlds to get his take on where he sees both industries heading from here. This is our conversation with Mike Novogratz founder and CEO of Galaxy Digital. Mike Great to have you on the show. Thank you so much for joining us I want to start with crypto. And then we'll talk about AI, and then we'll talk a little bit about your investment philosophy. We have to acknowledge what I would say is the elephant in the room, which is Bitcoin is having a rough year down fifty percent from its peak, down forty seven percent from a year ago. The industry itself is struggling right now. I'd love to just get your views on why this is happening what you make of it and where things go from here littleittle context, right? Crypto was a storytelling business. I mean, I think I was well suited for it because I'm a storyteller by nature. And we told the story of this is an important technology. It's going to change the way the world processes information, moves value around Right? Like this was going to be the new plumbing for both. financial markets and the consumer markets. And that was the story and some very bright and creative Ereneurs, you know Arthur Hayays starting created this idea of the leverage perpetual future on crypto tokens. And that really created the crypto markets because it allowed young people, especially, but all people to gamble leveraged on these stories. And it created a tremendous amount of excitement and capital into the system, especially after COVID when everyone was sitting around at home with nothing to do And really kind of crypto chapter two, that grand move that brought theum to four thousand and all these These tokens you've never heard of into multipi tens of billions of dollar market cap was really fueled by a gambling mania of young people wanting to get wealthy. They didn't want twelve percent returns. They wanted twelve thousand percent returns and A lot of capital got brought into the system. Some of that capital was really well spent buildilding this infrastructure And We're now at this crossroads where actually going to be used And that blockchain infrastructure, tokenized stuff is going to get used all over the world Some with crypto tokens, but not many, many with traditional assets perpetual equities, tokenized equities stable coins, which are perpetual currency. I mean, which are tokenized currencies And so it's a really interesting place. At Galaxy, we're pivoting of a lot of our business to helping Trefi companies build that infrastructure This thing is the wallet Well you'll have your tokenized equities, your currencies, your interest rate, this is the nil bank of the future. and you see businesses outside of the U.S where financial services aren't as good like By B Binance, Bit getet No one here has hurt a bit get or by bit They have a hundred million customers Each U Right, Robinhood has fifteen million. So these are monster businesses connect to the rest of the world and Why crypto iss exciting from a U.S. perspective is the rest of the world wants the great American brands They want to buy Apple SpaceX and hopefully Galaxy and Google I'd like to be in that category And so The infrastructure of crypto was going to survive be hardened and thrive Those tokens that we used to trade, if it was Avalanche or Solana, some will survive, but many will drift down because they were really association tokens. And a lot of that was the fault of first Jake Clayton and then and then Gary Genszler really making the rules clear and prosecuting people. so people made crap tokens, like Franken tokens so they could kind of You know, skirt the rules And we're too scared to have a token that gave you economic value And Th they were like, they're going up anywways. And sos why I don't have to give away the economic value and I'm getting paid just for in essence, creating a bunch of meme coins and Now you're seeing that You know, those those things drift down to less relevance, not to oblivion because those communities still care about them Right? What was unique about crypto is You build community around a story That community was fiscally incented to bring more people in their community actually to drive the price of your token up And man, they don't want to give up because they're like religions And so screw with the XRP army, and there's hell to pay It's really interesting to hear you say that because I mean, you're describing this dynamic where it was this, as you say, speculative gambling mania that really drove this bull market. It's interesting to hear that coming from you because that has long been the largest criticism that some have said that there's something it's not just speculation, it's not just gambling. There's something more inherent to it. And it's usually been the crypto bez who say kind of what you're saying, which is it's a lot of leveraged gambling. That's what drove the valuations to them. Listen, there is a technology that is being used. I mean, I'm literally doing deals with five or six, hopefully, a big traditional institutions to help build infrastructure. Right? You're going to see that crypto infrastructure automatic settlement u being able to transfer value over the internet. used all over the place H Again, overseas, crypto is a lot more important than it is in the US. We have great financial services here And the other thing that's happened is we've got sports betting and same day options. And so and now betting on Korean stocks, right? Every young kid that used to buy Solana is buying Heinigs or some memory, you know company. And so a lot of the oxygen of that speculative frenzy shifted. And you just like in macrero, you saw it, you know, there was a golden and silver bubble at pop That was the top. That's what tops look like Crypto had that same topping pattern. and it doesn't mean these things go back to zero. I think Bitcoin probably holds sixty thousand and if the The Clarity act passes, it's probably a six thousand forty that it does U we head up a little bit higher There too many people that have bought into the Bitcoin story as its own store of value for it to go away U but Someone asked me what crypto was like this year. I was like MBH, man You know, peopleeople aren't as excited about it because there's other things to be excited about. How much of the value at this point at the current price point? You mentioned that earlier on in the crypto cycle, a lot of the value was kind of propped up by this speculative gambling mania. A lot of that energy has been sucked out of the room To what extent is that still a part of the crypto story at current price levels in your view? Well, listen, if you think about Bitcoin, Bitcoin is a story. If you trust me and I trust you, we trust this ecosystem, we're going to store our wealth there. And so it's always the value comes from trust. And there's a core group of people that that trust hasn't been eroded And so I think again, Bitcoin is the most stable of all the cryptos because it has the biggest community Eereum, which was the second biggest A technology story, not a store of value story, right? Bitcoin was digital gold. Ethereum had we're going to build the base layer of trust, this giant database for people to build on top of That story drew people in, but the valuation came because enough people believe it it becomes money It becomes money just like Bitcoin became money. And so that they're still fighting that battle Right? Vitalic kind of having less of an impact, less presence hurt that ecosystem because he was such a a charismatic in his own way and brilliant and decent guy. right? I mean he really is Ifone gets a hero A herero awward for crypto It's Valic And the rest of them it' just in smaller and smaller ways What's been hard about this crypto universe is there were lots of fraudsters and and hypsters and scamsters And And so as you separate the wheat from the shaft, we'll see which of these big Big protocols are used to build a And then there's new ones that come out, right? I mean, Robinhood is pretty interesting to look just how quickly people have jumped on their chain. I buy and that. Bitcoin is legitimate store of value and consumers on both sides of the trade, they get to decide what is a legitimate store of value. If a baseball card or Pokemon cards are a store of value. There's no reason that Bitcoin can't be. So I buy that What I heard in your earlier comments is you think we're at a bit of a tipping point in terms of the underlying technologies trading utility across different industrial transactions or businesses I haven't seen that I feel like we keep getting promised this future where this underlying technology becomes this incredibly efficient plumbing infrastructure for all types of businesses. And I'm not saying it doesn't exist. I just don't Can you give us some examples of how An end consumer or an end business is benefiting or is recognizing the benefits of this tipping point of the incorporation of technology into consumers or businesses lives. So the only really big one has been stable clients and with cross border payments Right? So there's we have invested a lot of different businesses that in Latin America and the rest of the world that do cross border payments and make that much more efficient And those are Those are, if you just look at stable coin usage, it's mostly out of the United States And so some of its's store of value just in dollars instead of Bitcoin, but a lot of it is in transaction value. And so I think Stable Cans is the first We're seeing the very beginning of tokenized equities. Explain what that is, Mike. You take galaxy in tokenized form and it's the exact same thing as owning it. There are eight billion people on the planet, probably five and a half billion don't have access to a brokerage account. Maybe six billion And so if you're the kid in Bahrain and you want to have some savings, and you want to buy a fraction of an Apple share, you're going to be able to buy it Like I said earlier, most crypto kids want leverage And so what's been interesting is the product that has grown faster than tokenized equities perpetual futures, tokenized perps on real world assets And so if you think about like this company XYZ My friend Jeff Lobbil It was doing it's doing or it annualyzed a trillion dollars in vole volume for a six month old company. But the SpaceX pre IPO It got all the volume It literally predicted the price to the dollar of where it was going to open Right? And so twenty four seven trading nine KY C So anybody in that six billion just shows up with an account and starts buying and selling M That I think shows you the demand globally U when you got six billion people that are outside of the financial system. So this question is more about kind of how you've been able to manage your brand and Galaxy's brand. When I think of crypto, I think of some central players Sort of adjacent is Trump because I would argue and we'll get to this question because of the His ability to use crypto as an empty vessel for his corruption Obviously that's loaded comment There's FTX. that didn't end well There's Michael Saylor. and I think Michael is seen as a legitimate business person, obviously There's real substance. And anyone who knows Michael's background knows there's real substance there and also that he votes in a big way with his feet. I mean, his actions match his conviction. But at the same time I think a lot of people look at some of his perma bull on it with a decent amount of skepticism And And then there's Mike Novberratson Galaxy. And you're sort of perceived as and granted, I'm known for glazing our guests, but it doesn't mean I don't mean it. But you're sort of seen as the clean, well lit corner of crypto you haven't been tarnished with this sort of Carnival Barker constant pumping You're somewhat sangine, you have you You've called out you know, fraud or hype where you see it J just sort of curious as to why what are the principles and why do you think you've been able to if you will get infected with what feels like a little bit Barnam and Bailey. slash. Adam Newman like Sam Bankman Freed like skepticism here. What What principles do you try and incorporate into the firm and into your own brand that's been able quite frankly, just seem a little bit above the fray. Well, I mean, part of it is, you know You have your kitchen cabinet in life, right? And so your family's part of that. But my macro kitchen cabinet, right? guys like Paul Jones and Lewis Bacon and Stan Druckamller, it would just be embarrassing to not be truthful right? Like you got to kind of call a spade of spade in some ways And because I grew up as a macro trader and in that community, it's my fantasy football league. Its it's guys I speak to every day at least up one of them every day, they help hold you to integrity. The people you surround yourself with in life are the people that hold you to integrity. I mean, you'd like to think it's all internal, but it's also not external. Like who's your community that you don't want to disappoint U And I think that's important not like who you surround yourself with in life And so Listen, I'veent a bunch of time with Michael Sayor. What the thing I'd say about him is he believes everything he says, which sometimes like Michael, that sounds insane, but he literally you, he might be wrong, but I don't think he's a fraud. Right And I think listsen he did a lot of good things in pulling Bitcoin in. and now it's, you know, one of the weights on Bitcoin is he's got this too much leverage uh onto a big pile of coins And he's got to dig himself out of this over leverage position. When you speak with him, Mike, because that's the real problem and it's a problem that we all knew and could have predicted would have happened. And we had him on the show and we were like, what happens if it goes down what happens to your position? And he said he s something to the effect of like, well, what happens if a meteor strikes tomorrow? Which to me was like just a total false equivalence. Now he's in that position. like does he acknowledge the point that you're making? To be fair, and you can call me a whimp I haven't had a really hard conversation with them post this the last time. You know, I saw him for you know, at length was a year ago summer when it was all working well. And I did think, Michael, I'm skeptical He believed he was going to buy so much Bitcoin there was no way it could go down. I like that's just that's just's it's ology that doesn't work with me And You know, I he also had this fascination tapping into the fixed income markets, right? The fixed income markets are two and half three times the size of the equity markets in the world. And so creating a fixed income product, which he did with his his, you know, etual I mean, the crazy part is not that he would do it because it would really tarnish his brand If you read the contracts on these perps STRC Paying the dividend is optional I mean, it really is equity. He could turn the dividend off legally and just like p fluck And he can turn it back on when he wants to. It's not it doesn't accumulate. doesn't And so You know, he he was very thoughtful in how he structured this stuff It just is not thoughtful enough because once you Once you do that, then the game's over And now he's got to He's got a big burden to carry unless listen, what could get Bitcoin going higher again You saw the CPI number today You know, Kevin Morth breathed a huge sigh of relief I don't think Kevin Hikes ritates this next meeting and he probably doesn't in in the fall if you know, inflation stays stay sanguine U but if You flip to where he's cutting and you get clarity past You know, the Chinese are big players in this and I never believed in the four year cycle But everyone else did. And the Chinese certainly do in that cycle kicks back off and Oober of this year And so you could put you can make a narrative where the buyers come back in and and you get a story again I don't see a lot of energy in the space. You know my headedphone guys usedays call me every day. Now they call me once every two weeks about crypto. they call about other stuff. I You know, it's just not as exciting of a space. And so all the crypto businesses are kind of back down the hatches We do see what's coming. I mean, XY Z' is doing a trillion dollars vole. That business didn't exist hyper liquid who created a token where It feels like an equity Right? as it does better, the price goes up And so the future is kind of out there But we haven't seen itet We'll be right back after the break. and if you're enjoying the show so far, send it to a friend and please follow us on YouTube, Spotify, or wherever you get your podcasts Support for the show comes from Vanguard. To all the financial advisors listening, let's talk bonds for a minute. Capturing value and fixed income is not easy. Bnd markets are massive, murky, and let's be real Lots of firms throw a couple flashy funds your way and call it a day, but not Vanguard. 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This is a paid sponsorship We're back with prorofty Markets I think that Sailor has really become the face of the industry and when he goes out and he's says he's selling and then does sell I mean, that's a real problem for the industry. But then on the other side, I would say that Trum's involvement Um I mean, the fact that we just learned that he he one point four billion dollars from crypto last year. He out eararned every company in America. he earned more on crypto than Coinbase earned last year. It' just unbelievable. How much do you blame it on him It's so interesting. it's a dou ed sort. like Genszler and the Democrats were' terrible on crypto. And as a Democrat, I was like, this is almost not American what they were doing. And Trump ran on, I'm going to take care of crypto and he did That initial surge was, okay, we've got an SEC and a CFTC that are going to be very crypto positive. And quite frankly, to be fair to the head of the SEC, he said, have you ever talked to him right before the inauguration He said Until their rules, I'm not going to enforce the rule. Like I'm not going to enforce non rules And so in etence, he said, go for it until the Clarity Act passes and people did. So companies like Q quite frankly, hyper liquid and XYZ non KYC companies are growing and thriving. not thinking they're going to have You know, the same thing that CZ or orr Arthur Hayes did, right? The long arm the U.S. law getting them, even if they're not US companies H I think What Trump also and listen, Paul Akins, I been telling me this, he said, listen, I'm all about disclosure If it's disclosed, buyer beware, right? That's a big boy's Republican idea Right? Democrats want to protect the consumer buuyer beware All of these Trump coins willfy The meme coin. If you read the frickaking tiny fine print It says, Oh I It's not it's not he made all his money from selling the coins every transaction, they got a marketing fee. And so it's all in the frrein fine print. and it's like, o my goodness. The question is who reads the fucking fine print? Yeah. So like they made six hundred million dollars off Trump coin when it went straight down. U And then there's also people that sold the coins And so I listen, it doesn't help at all. like this Clarity act. if it if it doesn't pass, It's going to stumble because of the ethics piece There even Republicans are saying we need some. that's like It's hard for Republicans they are running on this thing that looks more and more corrupt U and people are like, and I go down to DC at least once a month. now. I'm like, guys passed it What's good for the country, what's good for the industry. Give clear rules. That's good for any industry And there were plenty of legal ways to go after a president who's doing bad things, right? fromr em evoluments clause to just you're not allowed to insid or trade. Like we have a Department of Justice who has decided not to pursue cases against what normal Department of Justices would pursue And so I argue that why should crypto have a special set of rules Right? You can look with the same thing with the rare Eth the Kazakhstan deal. I mean, there are plenty of deals that that don't feel up and up U But the bulk was crypto of the wealth And so that's become a real political hot hot potato for what you said before that kind of crypto is a story. if you have an asset that doesn't produce Underlying cash flows doesn't have hard assets And then it is sort it feels like an empty vessel that is filled with a story or a narrative. And that describes a lot of stocks right now. and the word we use is meme, right Do you think that the energy and I like the way you describe it, there's just more energy elsewhere Do you think the story shifting to SpaceX and AI Do you think a lot of that mentality or that gu staled or the kind of person that was buying crypto is now quite frankly, we're interested in trading, you know, zero day options on SpaceX right now. We see it one hundred percent. That's that's it's so interesting because you could even in Non crypto people. So one hundred percent within crypto people. When I talked to those two big Chinese firms I was telling about, they were like, they're dying to get into the tokenized equity game because theirir customers want it People want to go where the heat is U But even in bigger macro, because came out at the beginning and started down you know, bashing the dollar really, right? I don't want to be part of the international community, you know, like they wanted to wein dollar Bess has changed that a little bit, but the early story was screw Canada, sccrew We're going to take out, you know Greenland. and this idea of where should you if you inherit ten million dollars at Like what's the safe place to be? Was it in the dollar? Was it? so everyone went gold and silver. then gold and silver had a hge moveon in its bubble. It was Bitcoin and then gold and silver, and then Korean stocks. And so moving the hot potato of where to stay ahead of your neighbor. becausea remember, wealth is all about, am I richer than you Right? It's not an absolute number. it's a relative number And and so I think being a wealth manager has gotten so much more complicated because you have these hyper vaall places which are exaggerated by all leverage. I mean, right now in the U.S equity market, we have never ever had as much lever. Seeing global markets. This is we're one of one here. We're above twenty nine, We're above zero seven, We're above ninety nine U And so It's a very dangerous place to be. We had Tom Lee on the show and he I mean we had him on when Bitcoin was suffering recently He said he sees Bitcoin going over one hundred thousand dollars by the end of the year Do you agree with that? and do you have any predictions for Bitcoin price? His lips to God's ears. Listen, I make can I make a pace for it.ure. We would need Clarity Act. We would need the Fed cutting rates And we would need some buyer base to get reignited. I'm not seeing those three things. I don't think we cut rates this year. I think we'll be good enough not to hike them. Um C I think this is a sixty forty, maybe even two thirds at this point. I my gut feeling is somehow they find it to getay across the finish line and that will help. I don't see where the newew enthusiasm comes from But the one thing I would say is every time the crypto feels dead likeike something happens and you're like, whoa And so I don't want to I don't want to count it out But I don't see it And in the past, like the easiest crypto The Full market of all time was COVID 'use you're like, oh That's my narrative And I feel like I'm an insider because I'm one of the storytellers And I figured out what's the story I can tell to get people excited and it was, you know The money printer goes Bur Right? L we were gonna to throw tons and tons of money at the COVID problem. and you had kids that now had more time to sit around and do nothing but gamble. Yeah, it's exactly right. So If you had to predict a price point by the end of the year, I think sixty is going to hold and I think eighty eighty is going to be a top. And if we can get through eighty then one hundred is going to be a top. But would I would say we're sixty eighty for the the rest of the year unless we get a real nice setup shifting to AI for a moment. if everyone knows Galaxy Digital as a crypto company, they know you as a crypto investor, which is why I think a lot of people might have been surprised to read a headline in the Wall Street Journal last week or maybe a couple of weeks ago, it said, quote, Galaxy digital stock surges on AI data center business. This is a very interesting story Galaxy Digital is now in the AI business. How did that happen How did you get into this You know, the crypto. munity sometimes has a little rainbow that follows it around the biggest users of energy free AI, were Bitcoin miners And We got into Bitcoin mining partly out of another Trump thing when he came up with the twenty twenty opportunityzones or maybe was twenty sixteen. when was the opportunity zone thing came in But in twenty twenty one, there was a monster year in profits in crypto and I was like, I don't want to call this capital gain tax. Let's put it into an opportunity zone One of the best assets for an opportunity zone within our space was Bitcoin mining So having never been a Bitcoin miner because I didn't like the business, I'm like, well, but for this tax advantage, We'll go into Bitcoin mining And You know, I said something before, you don't have all the cleanest players in crypto And after a couple mistakes of hosting our machines other people's data centers, we decided we wanted to buy our own data center. And now it's twenty twenty two and there's this company that owns a giant data center in Texas that is close to bankruptcy. and we help them avoid bankruptcy by buying their big data center and lending them some money. And so we we got our hands on what looked like one of the best Bitcoin mining data centers in the country. and we put our machines there and it was a decent Bitcoin mining data center when AI Den people started talking about this giant The bull market in power Dudes, we don a lot of power And you know, so some of it's lock Some of us us being smart and saying 'a every wanted to buy it or partner with it and'd say, No, no, this is more valuable than we think And now we've developed it. I think this Helios is the campus P're pretty certain it will be the largest data center in the United States. that's not being built behind the meter. that's part of the grid. We're already one point six gigawatts approved. There's another Uh gigawat that is in the is in the queue U that we'll know about in First quarter But even at one point six gigawatts, this is a massive data center. is uss, it's about us sixteen billion dollar CapEx spend then the people that put the chips inside it Probably another sixty So just from what we're already contracted. It's going to be a seventy five billion dollars Capx bill. If you build the whole thing out, it'll be over a hundred The only hundred billion dollars CapEx build in American history is the interstate highway system And so For me, it's interesting to become a landlord because businesses We have the power We Go get a a lease from somebody who says, I'll rent it from you. You take that lease, we go to the bankers and say, we need to borrow the money to build it build it, you got to build on time and on budget and then you collect rent In prayer tenant doesn't go bust. know Exactly which is increasingly the question for the AI data center laterels for someome of these companies, right? Yeah. I look back I couldn't find an example of a top three market cap company in the world ever going bankrupt in a fifteen year period, right? Nokia got close. you know. Yeah, but I just want to double tap on that because Amazon lost ninety two percent of its value so did Cisco. They didn't go bankrupt. They lost ninety twocent And what I want to describe a dynamic and just get your thoughts. It seems to me that in the last ninety days there's been this dramatic shift potentially from supply crisis in AI to a demand crisis. and that is a lot of the front end guys who were supposed to be creating all this demand on the front end, including Mad other the largest skilled platform in the world. XAI have all of a sudden decided, okay, we overestimated our ability to create demand on the front of these LLMs But we have this incredible infrastructure we've developed And then we have uh, Mike Novograts who who recently or fortunately built a bunch of data center. capacity for crypto It feels like And tell me where I got this wrong. We've moved, we've flipped from a supply crisis, where there's not enough compute to potentially notot only meeting the supply because everyone's flipping from demand generation to supply generation for Essentially, as far as I can tell, the the only people creating demand right now are anthropic and open AI. Are you worried that the pendulum iss swinging the other way to a demand crisis. It's going to be a very quick moving pendulum back and forth. And I tell you what First of all, most of the power you've talked about, like of our one point six gigawatts, two hundred megawatts is now up and running and producing, you know, AI stuff And so it's just getting started, this power being brought online. But most companies aren't really using AI yet because they're scared to. they don't know how to We don't have robots yet. L when you look at the exponential usage of compute. when it starts really happening It's hard to think of this, but we're in like the first out of the first inning And I mean, even in my company, I didn't scream we got to use morere. we just did a forty minute call with, you know anthropic and their internal team to because they have a team to help people learn how to use it better. Oh I think And we should be more cutting edge. I think the bulk of America isn't even really using AI yet And The real use I mean, the real use casees are going to take so much more power And so but I don't think it's a linear line because I think you're right. You're not going to have five of them Yeah I can have few of these You're going to have some guys win and other guys get knocked out H I just think it's early to even to thinkthropic is going to be the winner it's early to know. Like every time I've countounted Elon Musk out in My life, I've been smacked in the in the jaw. Tell me about it, brother. So but that's you've just zeroed in or you've identified what I think is the fulcrumb or the epicenter or the plates crashing into each other around what is the central question or debate And that is, are we just scratching the surface We didn't even imagine all the different uses for broadband, right? We thought, oh, at some point if the chip keeps doubling in power and having and cost every eighteen months we' we're not going to need anymore. And we have invented ways to use broadband a lot faster than even the expential increase in it. And I absolutely conceptually understand At the same time, I think there's a countervailing argument that actually Its not it's not that we're on the precipice of an explosion and ways to use it A lot of companies are using it. They're just not getting the return they'd initially anticipated And then we might, in fact, I think there's a decent thesis. that a lot of CFO's are going to say Paytime is over. I need you to either justify the return on investment in our token consumption or to reduce it. Well, the cost of tokens is going to have to go way down Here let me tell you a story, good quick one. I invested through Galaxy, PA investment in this Young kid who is building an insurance company health insurance company based in Texas brilliant kid. he was scientist of the Ye in the UK when he was like sixteen, not young scientists, scientists of the year Uob And You know, he had a great thesis and he was going to use AI, but the thesis was more, can I incentivize people to get tested early on? And then if I do that, I'm going to give them no c pay and no premiums because I can driveical c medical expense down thirty percent And he's doing that So then he says, I'm going to use AI. F it was all the back office, right? There's huge amounts of paperwork pushing at Eetna and US Healthcare Right up needs you is health care U Legally they could have a fifteen percent charge, eighty five percent goes to the providers, fifteen percent to them And they do two to three percent margins H And he said, I can AI all the paperwork Then he said, let me create an AI salesforce. And I was like, what and there hundredundreds of pitals and ins and psychiatrist and healthcare systems that you're trying to sell this to And He created AI Lucy that scan the phone book and I figured out who my targets were, figured out who to talk to at that target, sent them an email, started the conversation, start to finish, he got the he got the the docu sign. and his sales force of fifty people Mm. did ninety clients ninety in the two in the two month sales period did ninety Contracts. So bas to each Lucy and her first two months didid five times that by herself And he was like, oh my God it's the first example I've seen as someone who's actually created a real Super human employee That's soup to nut sales ob in a pretty complicated business Now listen, this bys, he's a boy geni, they think I'm gonna make more money on this company than I have on any venture bet U And so I'm a cheerleader Imortly, I was like, You know, that's not just processing and making so more efficient That literally is superhuman. I just think we're so early h in this thing. But it's a good, here's another example. Lorman was telling me that They rec all the conversations. E end of the night they run it through and figure out what's what's the collective brain thinking? And you said, well, you get these little robots that follow people around. So if I'm having a conversation, with you, the only way the recording is going to be if the robot follows me around. And so now it's recording us talking by the water cooler Robot has so many you know, touch points to be able to follow you around and record Like that's That's the usage where they say it goes infinite Right? That every last device is connected to to this grid of AI It's a future that's a weird one That's the bet And if it's just people using it to make their email more efficient, Scott you're one hundred percent right. But it's You've got to have that. imagination that like there are no driverless cars in New York right now And I never I, I'm sure there are a couple, but you never see them If in five years the whole fleet's driverless And if you got the new Tesla You know test flood. self drive. I mean, I hadn't done it in years because I was just You know, take your hands off the wheel and it would stop. Now you just can go like this. I don't know what I do know is Scott's right in that. You're going to have this Lurch left, lurch, right, lurch left, lurchs right Not going to be linear And we're at parabolic markarkets went parabolic and so I think it's very the every markets are very dangous right now. Yeah, I guess the trouble is to your point These futures are totally possible. They're totally on the table The amount of capital that is going into them that is being invested would make you think that they're inevitable And that's the problem is they're not necessarily inevitable and similar to what we saw with the Dot com boom There was a massive period of over invvestment overbuilding, knowing that something would happen, but not necessarily knowing what it would actually be. it does seem quite similar to what we'reing seeing right now. Even the stats I gave you, for us to build out our full data center is over one hundred billion dollars. And that's got to be the biggest C capapEx. L Galaxy was a small company Uh Like we're in a dataenter company. We're not you know we're you know,em tenemplus billion dollar market cap now, but but There's a lot that has to go right for us to actually by twenty thirty one, say, dude. spent a hundred billion doll See, I think you could spend it dude, it worked because is the hard part. I think in this enirment you could probably spend it. Well, but there's so many. I mean, what you're saying now in Texas is they're like, okay, stop becausecause so many people applied for permits and whatnot. If you looked at and why the politics are changing at data centers, if you looked at every thing that was to be built, the whole country would look like one giant data center I mean, the whole state. So now all the politicians are like, well, wit, w it's not right? And so they're doing some smart things to say, hey, you got to put the money up first and lots of people are falling away But I think of what you read about and hear about and proposed, ten percent will get buillt. That's still a huge number We'll be right back and for even more markets content, sign up for our newsletter at profymarkets dot com This episode is brought to you by Google Chrome. You think you know a browser, but Gemini and Chrome, that's new. It can help you with practically anything on the web, like restoring a vintage motorcycle from a fifty page restoration block or finally break down that long article you've had open for weeks. Gemini and Chrome is here for it. Ready to make anything online makes sense? There's no place like Chrome. Check responssees setup requirered compatibility and availability varies eighteen plus When you need to build up your team to handle the growing chaos at work, use Indeed sponsored jobs. It gives your job post the boost it needs to be seen and helps reach people with the right skills, certifications, and more. Spend less time searching and more time actually interviewing candidates who check all your boxes. 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You before, I mean, now you've made this incredible AI bet that is paying off You had the crypto bet that paid off. You started Galaxy digital. You worked at Goldman For a long time, you made partner by nineteen ninety eight. Before that, you were the captain of the Princeton wrestling team Prinon al myself go Tiger', helicopter pilot in the New Jersey National Guard. Like you've had a pretty incredible strike record. He's launching a cologne called testosterone. Jesus Christ So my my question fucking ah. Yeah it's a good it's a good, it's a good resume. My So when I when I ask people like what is the secret to Novo, they I always hear the same thing Everyone tells me Novo has a risk tolerance unlike anyone I've ever seen consonsistently Where does I come from The irony is it start off with fear of failure. like I was likeike you know, I was supposed to do well Hm cute little kid. My mom told me I was going to be the senator one day. And so I felt all this pressure to succeed. And actually it stopped a lot of early success. I think my wrestling career would have might have been better if I wasn't so nervous all the time. And then Havy failed a couple times. and realize I didn't die There was kind of the opposite of fear of failure It was like Hey, let's go for it. Let's have fun And I do have a high risk tolerance, partly You know, I grew up in a great family Mm. And I was really happy when I was poor our middle class, or I went to the arrmy I made eighteen thousand dollars. some of most fun years. And so while I spend a ton of money and I have fun with it, I was never attached to it as much Uh and so Listen, there's still in I don't want to fail Ge and me, but it's not the fear of it and I don't have the fear of looking stupid A And maybe that's coming from confidence of having been raised by a loving mother or whatever But I don't have the fear of looking stupid. And I've looked stupid a few times, you know. I mean I've got a Luna tattoo and Luna went to zero You know, I'd like certainly have looked less than less than you'd like to. that doesn't scare me so much I'm like, hey guys, I got on this thing. We actually made money on it. And You know, the world's turned and u And so I do think it comes from some confidence that you get as a young kid M. Because otherwise you're going to sit there And it's always what do people think about me? if you get away from what people think about you and say, hey All right And I used to say it on TV, I said, listen to my employes I said, you guys are taking a lot of risk joining this company because crypto might not work and you're going to have taken your great years of your life I said, all, I'm risking. I already have money. I'm risking like reputation. I'm going to look like a complete idiot. I'm willing to do that H But that's that my mind was less risk than the twenty eight year old who's at that core of their career saying, I'm going to spend the next six years in this weird industry And I'm happy for lots of people, it paid off Yeah, I think the journey itself was good enough for most people in this industry to feel like it wasn't a waste. But I don't think how the same people in this industry the next five years, right? They'll take those skills and do other things Just I just want to pause on that, you know, Goldman Sachs Army. multi billion dollar firm Princeton and what you said that really struck me is that if you reverse engineer your own confidence, you reverse engineer to A loving mother U I'm going I want you to end here, but I just want you to talk a little bit about your parents You us. I have me middle class family. My dad just passed and We had his funeral and we were like, When we were writing his obituary, You know, some of the siblings were saying, Well, he did this. He was an all American. And the obituary really became who he was, not what he did And So I had a really strong quiet dad who You know, I was comparing him to Trump. I don't think my dad has broken one of the seven deadly sins in fifty years And you know, it was a very kind of moral center. And I had a mom who was really aspirational cheerleader. and there were seven of us. She worked as a waitress at one point, you know, to kind of keep selling antiques. She was a hustler escape from Queens. She's still alive and is still going strong And You know, we just had that kind of idyllic nineteen seventies American you know, military family Hm. You know, my mom always told us We can be the world. I mean, I think she thought we should be the Kennedys. I mean, she named my sister Jackie, my brother, Rob Bobby, I was Michael Don Jan, who had similar names but it was that era and, uh, You know, she's a big che's she's still a big cheerlead to all of us and all the grandkids and you know, my My dad's funeral that those the ing point was there was the caskets going down nowland. there twenty three grandkids walking behind it. and that legacy of a big family. You don't have that as much in America anymore, but it does allow you to take more risks becausecause you know there's some people, you're going to screw up and they're going to like You to have your back. and when you do well they're going to take the shit out of you Like, you know, they're you're you you're Brothers and sisters and big families don't allow you to be special So just one anecdote that is related I was doing a podcast with your sister, Jacqueline And I was talking about something in my usual cynical depressed manner. She just kind of stopped and she said to me, she looked at me and not a In a sincere way, she had looked at me and she said I get the sense you could really use a hug And It was so arresting like I just wasn't expecting that. and I feel like I can handle anything and I'm like Yeah And she got up and I got up and she hugged me So anyway, it's a weird way of saying like your mom clearly did something right. We are a family of huggers And drinkers.. First time a podcast guest has said to me, you need a hug and was right, by the way. I'd like to go back and see what went wrong in that interview to get to that point. Anyways, bring us thought I might get on. Yeah, just one final question here. You said P part of your success was you were able to shed a fear of failure and a fear of embarrassment, which I think from all accounts I've heard about you is U a lot of young people listen to this show And I'm sure a lot of young people would like to know how to get rid of that fear. What would be your advice? I had screwed up at Goldman Sachs and I was no longer there and I was trying to figure out I felt so embarrassed with myself. and I did this S marathons in a row across the Sahara. and about halfway through in grueling pain, but in this gorgeous you know, son and Mountains of sand listening to the same nine songs because that's all you can get out an NP three player I was like, what are you complaining about? You're fucking alive And that physical to it brought me back into my body and like, you know, stop being a whiny bitch, like go for it again. And And so I for me, it's been a lot of them. I mean, from Iyahaska to trying that journey to understanding. because one thing about Aahuasca when you're on it and you're like puddle on the floor and you're crawling around and you're throwing up You're like you like how idiotic it is to think you're more special than the next you're just like God's name. And so that All of those things and I don't think I've reach some you know, Buddhist state by any stretch. I think I'm as far from it as as most But that journey helps you kind of