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Mark Cuban: The Billionaire Crypto Degen

Mar 24, 2021 ·

By Anil Lulla, and Jose Maria Macedo

The Delphi Podcast Hosts Anil Lulla and Jose Maria Macedo chat with the one and only Mark Cuban about everything crypto. 

The conversation covers everything from Mark’s view on the Internet bubble vs crypto right now, DeFi, NFTs, and more!  Although he needs no introduction, Mark Cuban is the billionaire start-up investor, Dallas Mavericks owner, and everyone’s favorite shark on ABC’s Shark Tank. 

Every Delphi Podcast is dropped first as a video interview for Delphi Digital Subscribers. Our members also have access to full interview transcripts. Join today to get our interviews, first.

 

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Music Attribution:

  • Cosmos by From The Dust | https://soundcloud.com/ftdmusic
  • Music promoted by https://www.free-stock-music.com
  • Creative Commons Attribution 3.0 Unported License
  • https://creativecommons.org/licenses/by/3.0/deed.en_US 

Show Notes:

(1:19) – (First Question) Crypto vs. Previous Technological Revolutions.

(5:14) – When did Mark first realize about Store Value / Smart Contracts.

(9:07) – Crypto now vs 1 year ago.

(12:37) – Yahoo stock / Broadcast.com Exchange.

(15:02) – Thoughts on Valuation in Crypto right now.

(19:52) – Pre-Hype cycle or Hype cycle?

(22:02) – Thoughts on value capture / metrics in Crypto space.

(25:58) – What specific metrics does Mark look at?

(30:25) – Mark’s methodology for learning about a new space.

(35:09) – Explaining Crypto / NFTs to friends.

(39:21) – Mark’s thesis for Crypto Space / Areas of Interest.

(44:22) – What does Mark look for in a crypto founder?

(45:25) – Moats / Value Capture.

(52:00) – Thoughts on Fountainhead by Ayn Rand / Regulatory side in the space.

(54:23) – What is Mark farming right now?

(56:12) – Mark’s portfolio breakdown.

(57:04) – When are we getting a Shark Tank episode focused, exclusively on crypto?

Interview Transcript:

Anil (00:01):

All right, everyone. Welcome to the Delphi podcast. I’m in Anil with my co-host Jose. It’s also from the Delphi Digital team. Today, we have a very special guest, billionaire startup founder, Dallas Mavericks owner, and everyone’s favorite shark on Shark Tank, Mark Cuban. How are you doing, Mark?

Mark (00:18):

Good guys. How you all doing?

Anil (00:19):

Pretty good. Really excited to have this conversation and you’ve been on a bunch of crypto podcasts over the past few months anyway, so we just wanted to kind of get right to it, not waste anyone’s time. So, given your experience, living and thriving through the internet revolution. We’d like to spend some of our conversations digging into the similarities and differences between this and crypto right now. So, you famously saw the opportunity computers and the internet presented very early on. And obviously starting an exiting broadcast.com, MicroSolutions. You also saw these other tech trends pretty early, having lived and thrive through these previous technological revolutions. How do you feel crypto compares to this, and what stage are we at right now?

Mark (01:01):

Well, it’s not really crypto, because crypto’s been around and it’s analogous to what the internet was like… crypto’s kind the department of defense internet in the ’60s and ’70s, where there were very specific applications. What really changed everything was smart contracts, right? because that’s what gave it some intelligence. You could always, with Bitcoin, you could do transfers and that was great and it was a store of value and that was awesome. It’s a better alternative to gold, which is phenomenal. It’s taking money away from gold and it’s going to continue and that’s why I own Bitcoin and why I never sold any. But that’s one thing. That’s not really where it compares to the internet. Where it compares to the internet is when the internet started to happen, you started seeing all these applications that could disrupt things that happened in the analog world.

Mark (01:53):

When we looked at streaming, because I wanted to listen to Indiana University basketball, I couldn’t do it on the radio in Dallas. If the game wasn’t on, literally we would buy a six pack or maybe a case and get some of my buddies and we would put a speakerphone on the table and then somebody in Bloomington, Indiana would put a radio next to a speakerphone and then I’ve done networking with my first company MicroSolutions and we were one of the first local area and wide area network integrators, wrote distributed database applications and so when the internet came along, it was like, all right, this is just a connected database where you could just bits or bits. They don’t care what they are or where they go. But it wasn’t decentralized. Everything was centralized.

Mark (02:34):

And so, we had, for audionet that turned into broadcast.com, we had a server farm. We had thousands of servers and everything was centralized and bandwidth was a limiting factor. Now, fast-forward 25 years, and you’re going to whatever how many years, but now you look at what’s happening and you saw smart contracts come along and you saw some of the ICO phrase in 2017. But then, more and more applications came along and they became more prevalent and more accessible. And that created DeFi and that created NFTs, but the smart contracts and the fact that they’re decentralized and there’s no one in charge, the governance is completely different. That’s what changed the game. So now you can look at things and say, any business where there’s friction created A, because it’s centralized or B, because decision-making is centralized either the data centralized or decisions centralized, it’s going to be disrupted. They are fact, right?

Mark (03:44):

And so that’s what got me excited. So it went from, could you take something that was analog and make it digital? That’s what got the internet going. And that’s where all those applications came from. And when you made them digital, you centralize them because that’s where you could get the benefit of scale. Now, you look at it and you say, decentralization is dead, because bandwidth isn’t expensive, storage is not expensive. We’re used to free Gmail, free this, free that. Those costs are negligible and so now then if you can start adding decentralization and governance and intelligence with smart contracts, the applications are through the roof and you can do almost everything and so that’s why it’s a lot like the internet.

Jose (04:31):

I’m just curious. When did you first realize that? Because I know you were, I guess not so positive on Bitcoin or is still aren’t as a currency, which we really aren’t much either, but when did you start sort of see the store value thesis, and then when did you see the smart contract stuff? Because you were involved in 2017, but I guess recently you seem to really have gone down the rabbit hole.

Mark (04:52):

So yeah. So here’s what I have. So the early days of Bitcoin, 2012 and everything, which I guess isn’t early, early, it’s not 2009, but people were like, it’s a currency. And it’s like, guys, we’re going across the country showing they can do everything they wanted, only spending Bitcoin. And I’m like, it’s just not going to work. It’s too hard. It’s too slow. There’s a limit on the number of transactions. Then you get to 2017 and there’s all the forks. And there’s all the decision-making, there’s all the arguments about block size. And it’s still not a currency, but the entire time I said it was a store of value where if you could get people to believe that it was a better alternative than gold then, because it’s algorithmic scarcity, the price is going to go up like anything else, whether it’s a share of stock that scarce, whether it’s a baseball card that scarce, or whether it’s Bitcoin, they all share the same principle.

Mark (05:45):

If there’s more buyers than sellers and there’s enough holders, the price is going up. So that store value concept. I was always positive on, going back, before 2017. I just got into it with the whole banana thing over the utility of block of Bitcoin, because I just didn’t see it as a currency. And I still don’t, but I own it. Then when you get to 2017 and the ICO started to happen that was the tokenization side and some smart contracts, but it’s only over the last three years when some of the standards really started to happen where you got 720, 721, etcetera, all the ERCs. That’s really what got my interest and then what really propelled me down the rabbit hole, I went to Mintable.app because I just wanted to learn more about NFTs.

Mark (06:34):

And as I was looking at it, there was one little data field that said royalty percentage. And I was like, what the fuck? I mean, I’m like, are you serious? If I create something to digitize it and it gets resold in an after sale, I get to keep royalty? All bets are off. This is a game changer and then as I started under and that got me to start to digging into solidity and understanding smart contracts and the fields and the capabilities of smart contracts that got me into layer-1, which helped me understand the scalability of different blockchains of why people are creating competitors to Ethereum, layer-2 and the difference between roll-ups and sharding and this and that. And so that introduction to minting and the capabilities of a smart contract and that’s what got me there and then learning everything else and governance and everything else. That’s what got me super excited and kept me there.

Jose (07:32):

And what was the moment when you dove back in recently? Out of curiosity.

Mark (07:37):

That was it. That was when I went on Mintable. And so.

Jose (07:38):

That’s cool.

Mark (07:41):

Yeah, I went on Mintable, it’s only been January. Maybe December, and that was January. And once I saw the royalties, which got me into smart contracts and fully understand these smart contracts and that got me into solidity and understanding how simple, relatively speaking it is to program this shit. I was like, okay, this is the game changer. This changes everything because that decentralization and the fact that smart contracts can control everything that happens in a transaction or a process, that, knowing what I know about business, putting my Shark Tank hat on, it was like, okay, this is crazy. This is really going to change the game.

Jose (08:25):

Yeah. Your learning curve has been insane and we’ll dig into that, but just wanted to move back to sort of the comparisons between the.com bubble and this, and obviously you were super early there, you had the systems integrator, MicroSolutions, and then you had broadcast.com later. And I’m curious, you kind of went through all the pain points of setting up the internet and how hard it was the UX and all of that. What point do you think we’re at right now with crypto in comparison if you had to put like a year, I guess?

Mark (08:51):

It’s still proof of concept. So everybody’s seen, you’re not seeing a ton of unique business applications. What you’re seeing is the NFT market really showing people how smart contracts work. And you’re seeing different versions of NFTs, whether it’s Flow and Top Shots versus Beeple but it’s not really… No one’s in there doing insurance claim applications. I’ve seen one brilliant application of smart contracts insurance for farmers, where they take oracles for precipitation and for national weather service and continuously monitor them based off of location. And the farmer can say, okay, how much is it to buy insurance for X number of dollars in the event, I get more than X amount of rain or the temperature falls below a certain number because that damages my crops.

Mark (09:52):

And then the smart contract automatically pays it. There’s no going to an insurance company and bitching and moaning to get your money back or get paid. And that kind of stuff has really started yet. That’s the only true example I’ve seen there. So just like in the early days of the internet, we would stream Chicago Cubs games. And back then in 95 and 96, in order to be able to stream, and we call it an internet broadcasting in then, a Cubs game, and back then the Cubs played almost all their games, actually all their games during the day. So if you were stuck in the office, the only way that you can listen, if you were Cubs fan, was to stream. Now, in order to be able to stream, you had to have a PC, you had to have a 56k modem or connection to your corporate internet.

Mark (10:36):

You had to get through the firewall. You had to have a TCP/IP client. You had to have a media player. And you had to have all those things working together through a browser that had -.

Jose (10:48):

What year was that?

Mark (10:49):

95 and 96.

Jose (10:50):

Okay.

Mark (10:51):

So the hassles were through the roof, just like they are now. You got to figure out what a mask is, or what a wallet is rather like Metamask. You’ve got to figure out other than a couple of places like Nifty and Top Shots that you’ve got to fix, set up a wallet, you got to get money into the wallet. You’ve got to figure out where it’s being custody and then you’ve got to figure out when you’re trying to buy something and the price is in Ethereum what that actually means. And if you’re just coming in buying, that’s the biggest pain in the ass on the universe.

Mark (11:20):

And that’s one of the reasons Top Shots has done so well, because it’s like buying a pair of socks. You just put in your credit card, you pick the socks, then you get them. And now getting your money out is a different issue, but that’s a topic for another conversation. But that’s really the analogy. It was a hassle at the beginning back then, but I knew over time, it would get easier. And year by year we added new features and it got simpler. We added video, the video got better in quality and the same thing, what happened here, all those pain points and all the resistance points that you face now are going to disappear because everybody knows what the problem is and everybody’s working on.

Anil (12:00):

Yeah. That’s great. I guess on a little bit of a tangent, you bought a ton of puts to hedge the Yahoo stock, you received an exchange for your broadcast.com which was obviously one of the greatest trades of all time. At that time, what made you do that? Obviously that people think that was a crazy move because everyone was in this only market. And how does that compare this and now?

Mark (12:23):

Yeah. First, I remember going on CNBC right after I said that I had done that and Yahoo stock, we got paid in stock, had gone up, like a lot. And one of the guys on CNBC in the morning goes, don’t you feel stupid that you left hundreds of millions of dollars on the table? And I go, you know what, I’m sitting in my G5, I don’t feel real stupid at all right now. But to answer your question, after I sold my first company MicroSolutions, I was 29 and I initially decided that I was going to invest like an old man. Because I needed to save all this money for retirement because I retired. I bought a lifetime pass in American airlines and just traveled and partied like a rock star.

Mark (13:08):

My goal was to have drinks with as many people around the world as I possibly could. And I got really, really good at it. And then one, the guy I used as a broker would call me all the time asking me questions about technology companies. Because as a systems integrator, I installed all these different bridges and routers and all of these local wide area networking products and software. And I knew them intimately. And they would ask me a question then the next thing you know, I’d see it on CNBC where the analyst that covered that stock for the broker was talking and saying the exact same thing I said, and my broker was like, you got to buy or short these stocks because you know them better than our analysts. So I started doing that and was just crushing it, crushing it. I was making 80 plus percent a year, started a hedge fund that I sold within 90 days using my trading path. It was great.

Mark (13:59):

And so when you asked about why did I hedge, I had seen stocks go straight up and straight down, PC software stocks, PC stocks, wide area and local networking companies, their stocks, were bam, they were hot and then they weren’t and I’m like, look, I got to a b next to my name. I never imagined in my wildest dreams that, that would ever happen. I don’t need to get greedy. Let’s just lock it in and be happy about it. And that’s why.

Jose (14:29):

And was there something in the market that gave you that feeling? Obviously you’ve been through it before and how does that compare to what you see right now and how you think about valuation in crypto right now?

Mark (14:38):

Yeah. Totally different. So for me, it was just a matter of not being greedy. How much money do you need? I mean, it was nothing more than that. But in terms of now with crypto there’s no algorithm is scarcity in stocks. There should be, right? but there’s not. Companies can keep on issuing stocks forever in a day and they do. And then they’ll buy back shares of stock to try to balance it, so they’re not… So there’s all kinds of games that get played in the stock market. But effectively, if I took… And I wrote this on my blog, blogmaverick.com 15 years ago, at least where I said, if I put a share stock that does not pay a dividend on my desk, and I put a baseball card on my desk, they’re both basically the same thing. Their stores of value that they’re worth what somebody will pay for it.

Mark (15:29):

It doesn’t really matter how the company performs as long as they don’t go out of business, it just matters what somebody will pay for it. Everybody was like, you’re an idiot. That’s just wrong. That’s just wrong. But I’m like, crypto is the same way, there is supply and demand only with shares of stock. You can buy shares in some companies where they’ll just keep on issuing stock day after day, after day. And diluting everybody and you see this with startups too. Go invest in a startup. And you invest X amount on Shark Tank Friday nights on ABC, you invest X amount on accompanying Shark Tank, then they do another raise. Then they do another raise and you start off with 10%. Then you’re down to 2%.

Mark (16:14):

And so with crypto, you know if they have inflation, you know pretty much in most cases what the inflation is going to be, or if it’s going to change like 1559, you know what’s going to happen and you know the process, you don’t have that with shares of stock. And so in a lot of cases, as long as you understand what you’re getting into with crypto, then you’re okay. But where they’re very similar is the hype factor. Because the internet stocks, there are people who didn’t have any clue what they were buying. I remember when we went on a road show for broadcast.com and we were trying to explain the whole concept of streaming. And literally we’d get questions, or like, so you have CD players, one for every listener or viewer, you have a DVD? No. And most of them did not understand what we were saying at all.

Mark (17:08):

They understood it so little that Todd Wagner, my partner, and I would like laugh at each other and switch up our presentation. So it made no sense at all, and nobody would catch it. And everybody who came to these meetings bought every share of stock that they could get. And it was the biggest one day IPO rise in the history of the stock market at the time. And so people didn’t understand the internet stocks back then, and that’s part of what came back to bite them. And so, with Bitcoin where it’s like digital gold, only a store value doesn’t pretend to be anything else. That’s great. That’s why I own Bitcoin.

Mark (17:41):

With Ethereum, where it’s kind of, what’s the right word? It’s fungible. It’s changing. It’s adaptable over time, and you’re seeing that going to 2.0, and 1559 and all these Ethereum improvement proposals. That is more lifelike. And so I have a lot of Ethereum as well. I wish I’d bought it sooner, but I started buying it four years ago, simply because I think it’s as close as we have to a true currency. And then there’s all these other tokens that have stories about them, where the hype factor is really high, and you really have to understand what the transactions are, but the one difference, the one enormous difference is, I can look at the volume of a stock on the stock market, but I get so much more transparent data with blockchains, and tokens that you did have with stocks. You look at what happened with GameStop. You don’t know immediately what the float is. You don’t know immediately what the number of share short is. There’s a lot of data that isn’t available to everybody.

Mark (18:53):

And so that’s a significant difference, but hype is high. So you have to be really careful with both. And so I wouldn’t tell it, like, I had a kid asked me the other day, stocks or crypto, I’m like, well, you know, it depends which one you know better. And you just have to be able to put the hype aside and really make an effort to understand and learn. But at least with crypto, you can go, like would you guys look at research and understand what’s going on more in some cases there’s more information with crypto than it is with stocks because of blockchains.

Jose (19:27):

Absolutely. And before you mentioned the pain of using the internet 95, 96, and the word at a similar proof of concept stage with crypto, do you buy like every new technology or technological revolution, like Carlota Perez style needs this hype cycle to fund it. And do you think we’re like pre-hype cycle, or do you think this is, this the hype cycle?

Mark (19:47):

This is the hype cycle.

Jose (19:48):

Okay.

Mark (19:49):

So, this could be multiple hype cycles. So there’s the hype cycle with NFTs. And we’ve already had the hype cycle in 2017 for Bitcoin and Ethereum. And then we had a hype cycle with ICO’s and that was very informative because people recognize that there’s risk associated with it. And now with smart contracts at NFTs, it’s a hype cycle again, but each hype cycle is also educational. And there’s people who are going to make money and lose money in each of them, but it becomes the platform for the, next layer, next level. So with NFTs, we haven’t seen the business applications yet, but we will. And the business applications aren’t going to be hype. They’ll just be business applications. And I’ll give you a perfect example, CliffsNotes. Every kid has used CliffsNotes at some point or another.

Mark (20:39):

There’s no reason why CliffsNotes should primarily be sold as a physical book for whatever the price is. That should be digital. And when you’re done it because it’s effectively perishable, you should resell it to the next kid. And the original author should get their 10, 15, 25% royalties. That’s the beauty of an NFT and a business application. So we have the hype cycle now that allows people to understand it via what we’re seeing today. But once you get into an understanding, those same people are, like myself. We’re going to say, ah, here’s the business application. Then you’ll start seeing the business applications and don’t be a hype cycle there where everybody’s coming in and saying, I’m competing with DocuSign. There’s no good reasons to have them in a centralized database to do what they’re doing when it could be all burned to Ethereum or whatever and blockchain.

Mark (21:25):

And then people will come back and say, well, no, it won’t work because of gas fees. And then somebody will say, well, e2.0, we’ll take care of that. And there’s layer-2 solutions, that’ll take care of that. And yada, yada, yada, and that’ll have its own little hype cycle for applications.

Anil (21:40):

Yeah. So I guess, with the advent of the internet, people had to come up with new ways to think about value capture and how to value companies. And initially Google, Facebook, Amazon, these companies never looked good by traditional metrics. And investors kind of stopped at that idea of like eyeballs as a metric. And at the same time, there were a lot of bullshit metrics like enterprise value per user and things like that. You’re seeing that in crypto right now, too. Whether it’s total value locked TVL because it vastly differs between protocols. How are you looking at these metrics? Which ones are real to you, which ones are fake.

Mark (22:13):

So, that’s a great question. We’ll go back to the early days of the internet. People used hits. Now what’s a hit? Back in the day, a hit was just on your web server. It would show up as a line in your logs. And so, it was easy for someone to say, Oh, yeah, for my website, we got 10 million hits. Now 9,900,000 of them were just graphic files that were loading when they kept on hitting refresh every time. And everybody talked about hits. It was the most meaningless, meaningless data point ever. TVL is the same thing. And you’re seeing a lot of that now because you’ve got just a few people that go around, not just a few, but there’s some number of people that go around, bouncing around, searching for years, knowing that if they’re big enough money and they’re willing to move and keep their money there for a little while. The need for an LP, the liquidity provider is enormous.

Mark (23:20):

So they’ll pay almost any price to get them. And you start seeing those statistics game. So if I buy, I pay somebody a six zillion percent yield for some period of time, so that my total value locked is $50 million over the weekend. That makes me look like a bad ass. So that must mean everybody else is going to follow them in. And to a certain extent it is but then all of a sudden you realize the tokens that you’re getting to pay for that are just shit and there’s no liquidity, or you end up having to pay for that on the back end by making it almost a Stablecoin for some period of time where you’re putting up dollars to make sure that, that money that you gave the whale actually can be converted to something of value.

Mark (24:09):

And so there’s all these games being played. It’s the same with transactions per second, with blockchains. And sidechains and everything else. It’s just like, let me gain this thing so that I can say that my transactions per second are way up here and Ethereum down here and everybody else is in between. So that’s another way the game is being played and then users the same way. And just like apps used to talk about downloads or podcasts talks about downloads, just because you download a podcast does not mean you’re going to listen to it. Even if you start to listen to, it doesn’t mean you’re going to listen to it for more than three minutes and you probably don’t even get through the commercials in the front of the podcast. And so, in any new industry, any new marketplace, everybody looks for the parameters that bring more excitement to them because those are great marketing points to talk about.

Mark (24:57):

And then you get to go and do all the interviews and say, look, my TPS or my TVL or my LPs or my this or my that. That’s just the way the game is played. But then eventually you have to deliver. And what you’re selling has to be real and authentic and work. And as those things happen, the game players will fall off, particularly in DeFi because it’s great to say that you’re doing a 300% APY until someone tries to sell those tokens and the real APY doesn’t cover your gas.

Jose (25:30):

Yeah. That’s a great point. And then there’s two sides to that. Because people also make crypto look really small by referring to user numbers, and then the opposite with TVL where they make it look much more impressive than it is by referencing TVL. I’m just curious, what specific metrics do you look at or what are you digging into it?

Mark (25:50):

First of all, the number of users is tiny. That’s a good thing. So I just invested, what hasn’t been announced, CryptoSlam. And so, yeah, you go on CryptoSlam and you see the total number of buyers and you see the total number of transactions for whatever, whether it’s CryptoPunks, whether it’s Dapper with Top Shots and you see the numbers relatively tiny in the bigger scheme of things. It’s great for them. And it’s growing for sure, but 300,000 transactions or 125,000 buyers, whatever may be, that’s tiny, but that’s the beautiful thing because it means there’s a whole lot more people to bring in as customers and eventually you will.

Mark (26:36):

And so those are the types of metrics that… To answer. I didn’t really answer, so I go to CryptoSlam and I don’t look at TVL at all. That’s meaningless to me. And in terms of DeFi I really don’t pay that much attention to any specific parameter. I look to see whoever’s issuing the token, what business they’re in and is it good? So, I own some Aave because I think a decent amount of Aave, because I think they’re a great platform. And so that’s what I look at. I put on my Shark Tank hat on Friday nights on ABC and I say, what is their business? And is it a valid business?

Jose (27:17):

Yeah. No. We would love to have a team. And one, I’m curious about you, you’ve obviously had like a lot of famous hits, the internet and broadcast.com and HD TV. I’m curious if there are any early tech trends that you were early to that didn’t pan out and what are the signs that you look for to see whether something is panning out according to your thesis, or when you got this excited about something, did it always make it kind of thing?

Mark (27:43):

It always made it. I might not have been the one who made the money on it though. So, I was one of the first to do low query networking. I made money on that wide area, networking. Networking wasn’t the first, streaming I had the first, all high-definition TV network. We did the first day and date releases. And that was 15 years ago and we made okay amount of money, but not like they’re doing now that all just changed over the pandemic. What others? I mean, lots of stuff in basketball with analytics and other stuff, AI is a perfect example. AI is going to change everything, but AI is very broad and it’s not easy to learn. And within companies their AI haves and AI have nots. And literally the only companies are investing in the stock market are companies that are great at AI.

Mark (28:40):

And so that’s something where I haven’t started a company because I’m not smart enough. I haven’t dug in enough to… I’m creating… My best bet is a three layer neural network and JavaScript, I’m not doing GPT-3 and six billion variables and crazy stuff like that. So I’d never really got the chance to monetize within the AI space because it just blew by me too fast. And I was too late, but one of the interesting things I tried to look to see if there’s any overlaps between what’s happening with AI and just the nonstop advancements there versus DeFi in other places and you see them at a certain stance just because AI is always used with financial instruments. So it’s used to arb everything. It’s used to hedge everything. Everybody comes in there’s high-frequency trading but it’s not all that big yet because there’s still, when you look across all the different dexes, the Delta in pricing is enormous. Relatively speaking.

Mark (29:44):

And so, we haven’t seen that pure HF, high-frequency trading hit yet, but somebody is out there making a shit load of money off of it between hedging and everything and using AI and being a quant and using NLP to look for triggers. There’s still going to be money made there. And I just am not smart enough to fully take advantage of it, unfortunately.

Anil (30:11):

Yeah. I guess jumping off that, what is your methodology for learning about a new space? I think everyone on our team and even the crypto community in general is just like, holy shit, Mark Cuban is not only dipped his toes in, he’s fully into the space. You’re almost like a pirate just like us now. How much percent of your time are you spending on crypto?

Mark (30:31):

A lot.

Anil (30:32):

Where are you looking other than annoying emails from me sending you our research reports?

Mark (30:36):

No. I love your research reports by the way. They’re really good.

Anil (30:39):

No. I appreciate that. Yeah. But, how do you learn?

Mark (30:42):

Here’s what I do. So, first of all, people don’t realize I wrote software for seven years in my first company. I taught myself to code. I had some basic stuff but for the most part, I taught myself to code and I did mostly database applications. And I did integration of database application so that… I worked with a company like Zales jewelry, and back they kept her watches in a safe. And so I got these old things called target boards that would take pictures, not even videos and take those pictures, use an API to put them in a database, put that database so that it could scale into multiple locations. And this was back in the ’80s before you motherfuckers were even born. And then I got into wide area networks, and then I did the whole streaming thing.

Mark (31:27):

And I also did applications like Lotus Notes and did custom work there. And that was all distributed database stuff as well. So getting into crypto and blockchain, it’s the same stuff only better. So I have all the fundamental understanding there and I haven’t programmed in a long time, but I took my Coursera Python class. And I did some basic Python things and I took machine learning tutorials on AWS, and I’ve done basic JavaScript neural networks to learn. So, point being that I had enough of a foundation that I don’t have to… This stuff is important to me. And so when I go in and I take a solidity tutorial that teaches me about zombies and I understand it all. I don’t have to memorize it enough to be able to just write code off the top of my head, but enough that I can go on to Etherscan and look at the contract and say, okay, I understand what’s going on here.

Mark (32:27):

Once I got that, now it’s the hard part like it is for everybody else is, learning the nuance differences on all these different competitors for everything. What does Flow have that’s different? What are they doing? What are the economics versus what other people are doing? What is Near versus Matic/polygon versus, pick any blockchain. So I just take in there and I read. I’ll read their white papers and you don’t have to read the whole white paper. You just have to read the parts that are different. And that’s what I’ll do. I’ll just sit there and I’ll read the stuff because it’s all the same, just different in a little way. And so you just have to be able to identify the little differences.NFTs, learning those, the smart contracts are straightforward. I know digital bits are bits. And I know business and I know marketplaces. So pulling all those things together was all really straightforward and fast.

Anil (33:24):

Yeah. I think you’ve put it beautifully where crypto… When we first started Delphi a few years ago, what excited us was there were no experts in this space yet. And you can’t just come from finance and immediately become an expert. You can come from wherever. How do you find time to juggle that with all your other responsibilities? I, like..

Mark (33:44):

I spent a good three hours a day, four hours a day, reading this shit. I may be laying in bed at two o’clock in the morning, okay, someone’s talking about this, or there’s this new layer-2. And what’s the difference between roll-ups and sharding and multi-processor approaches and then doing interviews like this, where you just pick up little bits and pieces. Based off the questions you could ask and all that just comps together, because I’ve been doing this. I was an integrator. That was my company. We were one of the largest systems integration companies in the country at the time. And so that was my whole job was to integrate new technologies. And back then, it was like, it wasn’t just Ethernet, was the Dom there, was token ring, which was a deterministic arcnet, Ethernet, all these different varieties. There wasn’t just one Ethernet operating system. It was Banyan. We are the largest reseller there.

Mark (34:42):

It was Microsoft at one point we were the largest token ring reseller for IBM. All these different networking protocols. And so if you understand the different layers of networking, crypto is relatively easy. And so you just get in there and you learn it and you see the similarities across all the platforms.

Anil (35:03):

Yeah. I guess you must have a bunch of different friends that are asking you, what the fuck is going on here and etcetera? How do you even explain something like that to them? You have your friend, Mr. Wonderful who flip-flops on Bitcoin every few months now and then?

Mark (35:18):

Yeah. I don’t know if I’d call him a friend. No, I liked Kevin. He’s a good dude. Yeah. Kevin’s all about just making money. If bananas were worth more than Bitcoin, because there was running bananas, you’d be all about bananas. But in terms of explaining it to friends, particularly with NFTs, all I’m saying is that there’s always value for digital content. Intellectual property always has value. The question becomes, how can you sell it and resell it? And the only thing that’s really changed is the fact that with smart contracts, there’s nobody in charge of it effectively. And so it makes it very, very simple for anybody to put something into the market to see if there’s value. And right now the only friction are the gas fees, but you could use like mintable.app and its gas list and others have similar solutions. And so you can dip your toe in the water doing a gas list approach. And it takes 15 minutes to put something out there to see if there’s value.

Mark (36:17):

Now, if you find something with value, then the question becomes, will it be resold or not? And what I explained to them is, this is the first time you can earn royalties forever more. And that alone is the ultimate game changer. And so, I forget what the EIP is for the changes, so it’s multi featured royalties, but that’s just going to advance. So whether it’s music or business, white papers. So, I mean, for you guys, for Delphi, for your research, you’re going to end up putting your stuff out there as an NFT because it’s perishable. Once you read it effectively, okay, I read it. I consume the knowledge. I don’t need to go back and look at it again 20 times, let me sell it to the next person, you set the royalty of 50%.

Mark (37:09):

And so the real question becomes, why haven’t you done that yet? Because from you guys where you are with your knowledge to getting to that point, that’s the bridge we have to cross to make all the applications really work for business. Once you figure that out, that is your holy grail because you try to get subscribers and you try to get people to really respect your research and see value in it and what they pay you versus what they receive and value. What they can earn from that is how you try to price things. But not everybody needs the immediacy of it. It might be its perishable to that trader or whatever.

Mark (37:46):

And so if you let that person resell it and you put in there at 50% or 75%, because whatever they keep is found money for them, that they wouldn’t have gotten otherwise and students or whatever else, people who were last to the game are buying it, that’s the application bridge. And that’s the business process bridge we have to cross in order for NFTs to take their next step, because then you’re just talking about business applications. So I’ll turn it out to you guys. Why are you not selling your research as an NFT?

Anil (38:20):

I think you are jumping the gun here, leaking some secrets already, Mark.

Mark (38:23):

But you see what I’m saying. Your subscriber has a token, and you check the wallet. And if you have a subscriber token in your wallet, then you know, you get it for free. And if not, whatever right?

Anil (38:33):

Yes.

Mark (38:34):

Or then once it’s past a certain date, it’s resellable, not all smart contracts are going to be transferable like that across all marketplaces. But that’s part of the goal as well, because royalties aren’t necessarily all transferrable from marketplace to marketplace. Not all contracts have standards, but that’s part of the goal, for all of business that wants to push crypto forward. And so to me, that’s part of the value that you guys can bring. And I know I’m going all Shark Tank on you here, but you see my point, right?

Anil (39:08):

No, we are loving it. Yeah. I see.

Mark (39:09):

You see my point?

Jose (39:13):

Yeah. Absolutely. We’re looking into a lot of stuff like that, but we won’t leak too much alpha right now. I’m curious. So with all the work you’ve done, all the hours you spent researching this stuff, both high level and low level, I guess what’s your thesis for this space? What are you most excited about? You just went and gone into NFTs, which is an area we’re excited about as well. Other than that, what are you most excited about? And then low-level what projects are you interested in, you don’t have to mention names, but just areas that you looked at first.

Mark (39:44):

Exactly what we just talked about. How do you change the nature of subscriptions? Is one area that I’m interested in. So how do you take NFTs and apply them to new businesses so that you can disrupt them? That’s everything right now, whether it’s you guys with subscriptions. So if you’re able to come up with a better solution to make it easier for you to sell, I’ll give you an example, with the Mavs, we’re trying to find a good option for turning our tickets into NFTs. And we want to be able to find ways, so that not only can our consumers, our fans buy tickets and resell them, but we continue to make royalty money on them. And that’s a simple concept, but because there’s so many other elements that Mavs fans are used to getting when they get season tickets.

Mark (40:31):

But what happens a lot is, in a traditional season, out of 41 home games before playoffs, we may have there’s one or two high demand games. And there’s a lot of season ticket holders, that’ll sell those one or two games to try to pay for their whole season ticket package. How do we balance all those things to maximize our revenue and maximize the value for season ticket holders as well. Those types of market analysis and business process optimization things is exactly what I’m focused on right now, because once you can start solving that, so if guys solve the optimization of the subscription play for research, and you’re able to productize that, you win. Delphi Digital. If you’re able to productize that, that’s a win across the board. And so just like when I looked at Indiana basketball and streaming and said, Oh, this isn’t just Indiana basketball this is about bits or bits. And if I can transport multimedia bits to people around the world, the world just got a lot smaller, and there’s a huge business here.

Mark (41:44):

And I remember three, four months into our business sitting in front of our 10 employees or whatever, saying, if we make this shit work, we’re all going to be fucking rich. And out of 330 employees, when we sold 300 became millionaires and 100 plus had more than 10 million. You guys are in the same boat, and that’s the type of thing I try to work on, what are applications that this new technology can turn upside down so that I can disrupt an industry and make a fuck load of money. And so now I’m not as concerned about the fuck load of money, but you guys should be. And that is the opportunity that I look for. How do you disrupt industries using this new technology because nobody sees it coming?

Mark (42:32):

Banking’s already done. You already know banking is going to be turned upside down because all the industries and, stop me if I’m going too far a field, but all the industries that are built on trust and look at me, I’m smarter than you, are going to have problems. Every mid to big sized city, what are the three largest buildings are banking buildings. And all those people in that building are there to try to make it look like the bank of whatever is smarter than you. And you need them in order to transact your money. And you should still give us all your money even though we only pay you 0.02% interest on your savings account.

Mark (43:15):

And no matter how much you save, you’re only going to make $20 over the next 10 years. And so, those types of businesses built purely on trust, blockchain is designed to disrupt. And so, I spent my time thinking, okay, how can I fuck them up? And knowing that if they’re going to be fucked up, one, don’t invest in them. Don’t get caught down that rabbit hole thinking, because I get hit up all the time, let’s get a bank and we’ll go digital. So we went from old school banking to fintech, to distributed banking, where everything in a bank has an API and that’s relatively new, to blockchain based DeFi and DeFi won’t be the end. All right. There’s going to be something that supersedes DeFi, because DeFi still too complicated. My first DeFi transaction, I spent more on gas than I earned on the APY because you don’t realize it until it’s too late and at least I do. And so those are the types of things I look at.

Jose (44:22):

Yeah.

Anil (44:24):

Yeah. I guess speaking about disrupting industries, obviously, one thing that you’ve put into everyone’s mind. So, these seasons of Shark Tank is just how important founder being so passionate about what they’re working on and just being balls within walls. One thing that I think we can competently say talking to so many teams in crypto is that, no one in crypto sleeps. We all are just 24/7 working on the vision and the mission, how have you been talking to crypto founders? What do you look for in a crypto founder?

Mark (44:55):

No at all. I’ve only been doing this hardcore a couple of months. And before I can talk to a crypto founder, I have to know my shit, otherwise I’m just some rich guy that is trying to get involved in something they don’t understand. I got to be able to walk in and have them realize I’m doing the work. And so like you guys, and I’ve talked to a bunch, but the hard part is just hiring people, because anybody who knows crypto has already made a shit load of money over the past six months and they don’t want to work.

Anil (45:28):

Yeah. No. Absolutely. And given the open source nature of crypto, how do you think about moats and going back to value captured there as well. That’s a trillion dollar question on everyone’s mind right now.

Mark (45:41):

Yeah. It just depends on what application. It really depends on what you’re trying to do. So on layer-4, you can build moats, layer-2, there’s this raise between building layer-2 apps, or layer-2 protocols and solutions versus e2.0 and what will e2.0 enable that these layer-2 solutions are trying to overcome, transactions, et cetera. And are they short-term or long-term solutions, but I just dig in. And I just kept trying to go out there and the more I learn, the more opportunities that come to mind, and the more I can go after and then it’s just trying to pick my spots, but to your question about moats, it just depends on the application. What I don’t think is a moat that everybody’s pegging to, is transactions per second.

Mark (46:41):

That’s short-term and short-sighted. TVL, that’s short-term and short-sighted. Number of users that short-term, maybe not 100% short-term, that’s more valued if you can retain them because like Metamask, like Coinbase charges 4% on their transactions. It’s ridiculous. But it’s sticky because it’s geared towards people that don’t know that they’re getting charged 4%. I just created something a week ago, six days ago, it’s an app called lazy.com. So if you own NFTs and there’s really no way to show them, and so I created lazy.com. You go there, you sign up and you connect your wallet. And it just very simply just gives you a URL, So if you go to lazy.com/MCuban for that wallet, it shows all my NFTs.

Mark (47:34):

And I put that URL into my Instagram bio, into my Twitter bio at the bottom of my SIG for my email. And so if you want to know what NFTs I own, because I’m sick of being asked about it. Bam, there it is. And we’ll start adding more and more features in six days we’ve had 50,000 users give or take, which is crazy, because all I did was tweet about it a couple of times. But there’s plenty of opportunity there. You just got to know what is substance and what is shit.

Jose (48:09):

That’s awesome. And do you see the… Because with the internet, there was a lot of value in owning the customer. People who own the customer could then just like integrate backwards and own everything else. Do you think there’s some of that with crypto, like..

Mark (48:21):

Yeah. Of course.

Jose (48:22):

Yeah.

Mark (48:24):

But when you do that… So my kind rule of thumb for any business always has been, how do I kick my own ass and how everybody else trying to kick my ass? And so if you’re continuously improving, then you can keep those customers. But you always have to be the path of least resistance. It’s like wallets, wallets are awful. People like Metasmask because once you figure it out, it’s not so bad. But figuring out a wallet period is the worst thing ever, trying to buy your initial crypto is the worst thing ever. The fact that other than on flow and empty gateway that you have to do things on crypto first. And so you have to buy crypto before you buy something else, is the worst thing ever. It should be like buying socks. So you might have a big customer base, but if your solution is not the path of least resistance and low friction, someone’s going to kick your ass.

Mark (49:14):

And so you’ve got to anticipate that because every marketplace that I talk to, everybody who’s trying to sell NFTs in any way, shape or form. Everybody’s trying to come up with a solution that is more like Nifty and Top Shots, Dapper, where either you do the KYC after the fact, but it’s not buying an NFT is like buying a pair of socks on Amazon. You just put in your credit card, you get it. Bam, you don’t have to think twice. But just because you own a customer now, like Nifty and Top Shot, doesn’t mean they’re not going to be superseded by something better. And so they have to keep on improving, otherwise they’re not going to retain those customers.

Anil (49:58):

Yeah. I guess and if we came to you in five years and said crypto had failed. And this hypothetical, we can pretend that big point stays its digital goal. But what would you think is the main reason for that?

Mark (50:11):

There was something better. So for instance, let’s just say, if I was going to try to fuck up Bitcoin, I would have to have a 25 year plan or a 20 year plan. It wouldn’t be a one or five-year plan. And let’s just start seeding, I created a free wallet equivalent for every person in the United States and every person born in the United States going forward. And I just made it available to everybody, just come claim it. Show me your social security card in a picture. We’ll put it on not an Ethereum blockchain, but a unique blockchain that let’s say we created from open source and for certain things that you do, I’m going to deposit a token in your account. And if you just do these things, you graduate from first grade, you get a token, you graduate from second grade, you pass this reading test that I put out there, you get a token, dah, dah, dah, dah.

Mark (51:11):

And by the time you’re 12 years old, you realize you’ve got hopefully what is, $1000 worth of tokens. And they still may appreciate, are you going to care about that token and what it’s going to do for you, or are you going to care about Bitcoin?

Anil (51:26):

That’s fair.

Mark (51:27):

Yeah. And particularly if it’s algorithmically controlled inflation where there’s no inflation, unless somebody’s born, or there’s no inflation unless the governance, everybody votes on it, whatever it may be. And if somebody dies, you burn those coins. You don’t let them give them away and you can’t spend those coins. You have to huddle them for at least you’re 18 years old, or 25 years old, or 30 years old. And you’re not allowed to borrow against them until you’re 21 years old. There’s all kinds of things that you can do if you have a long enough term horizon. Now, whether or not those coins end up having value is going to be hard to say. Things, technology’s going to change. What happens with quantum computing, who knows. But there’s lots of ways that you could screw it up if you really set your mind to it, but it wouldn’t be easy or fast.

Jose (52:19):

Awesome. Switching gears a bit, coming to the end. I read that one of your favorite books is the Fountainhead by Ayn Rand, I don’t know that. Yeah. I really liked that book as well. I think what appeals to me about crypto is also some of the values in that book. And I’m curious if that’s some of what attracts you to this and also how you see, I guess the other side of the coin there, in terms of the illegality, the scams, all the bad stuff, some of the bad stuff that the media talks about with crypto that in some ways it’s the other side of the coin of that like liberty.

Mark (52:47):

Yeah. I don’t really connect the Fountainhead to crypto at all. I mean, I liked it not so much because it’s this big political theorem type thing, but Howard work was just ass kicker. He was just the guy that was going out there and said, fuck, I don’t give a fuck what you think about me. I don’t give a fuck what’s happening around me. This is my mission. This is my goal. And I’m going to do the work to get there. And if I do the work and you like it, great if I do the work and you don’t like it, shit happens. And so it was that personal motivation thing that really got me. So I don’t really connect it to crypto per se, but I get your point. There’s no government intervention decentralized. But it’s personal, it’s individualized. And so I can definitely see the connection there. What was the second question?

Jose (53:34):

Yeah. What are your views on the regulatory side?

Mark (53:36):

On the regulatory side. Oh, yeah. The scam. Yeah. I don’t mind the regulatory stuff at all. The KYC stuff I think is good. I don’t have a problem with that at all. I can understand why people would, but you need to protect it and you need to protect people’s money. And in terms of scams, there’s more scams with cash than anything else. And so, if you add KYC, if allow the AML, the anti-money laundering, I’m good with that. Because if you really want this to be ubiquitous, then you’ve got to know where people are. There’s got to be some identity. And even with identity, you can create 375 zillion wallets, that yes. They can try it back to you and I can understand why people want anonymity, but I’m fine with it because I think it’s more important for all of the crypto world to grow.

Anil (54:32):

Yeah. That’s fair. Yeah. I guess, one thing I tweeted out before we recorded this was that we were going to have you on the pod and that we’ll just ask you a few questions that people wanted. So we’ll do a quick lightning round if that’s okay with you.

Mark (54:49):

Sure.

Anil (54:51):

Yeah. So, one question people ask was, this guy, Diamondxbt he asked, what are you farming right now?

Mark (54:57):

I’m not. Because I just don’t have time. Because in order to farm, you really have to understand the tokens and what’s going on behind them. And so, I was in a couple of pools and I staked some Aave and I still have that, but I’m not really farming searching for a yield because I just don’t have time. Because you see some of these crazy APYs, but you got to understand what’s going on with the token behind it and how they’re playing the token economics. So I’m not. But there are some places where my crypto is being held that I’ve done deals with. I let them loan it out and they pay me a flat APY.

Jose (55:45):

Cool. Yeah. A lot of people ask this because you said you’re very familiar with Terra in a tweet and we had multiple people in our thread asking whether you hold LUNA and if you have an investment thesis there, or.

Mark (55:56):

I don’t. I haven’t done anything with LUNA at all. There’s a bunch of that I’ve read up on, tell me what, No, I’m not going to say, because I know what’s going to happen to the price the minute I say something. And because a lot of these… But there’s some I do for fun. There’s some I do for experience, because I just want to learn. But there’s none that I’m just all in this other than Bitcoin and Ethereum, that I look at as being at equivalent and investment, but I own probably 10 different tokens. And I’ll tell you what I’ve done is, if I think there’s a decent idea and most of those are really, really cheap at the time when they’re first happening, I’ll buy 10,000 or 100,000 and spent 50 grand right on it just to have them in case it hits. But none that I’m all in on.

Anil (56:51):

Yeah. I guess, jumping off of that, what is your portfolio breakdown? And if you don’t mind us asking, like you can do the percentages, right? Like 30% Bitcoin.

Mark (56:57):

Yeah. So it’s probably 60% Bitcoin, 30% of Ethereum, and 10% the rest.

Anil (57:08):

Got it. And what’s your favorite app in crypto that you’ve used so far?

Mark (57:12):

I like CryptoSlam. I like Mintable.app. I like Zapper. I like Bitcoin market, What’s it called? Total market cap. What the hell is it called? It’s yeah, it’s Total market cap. I think it’s called or crypto, I’ll tell you here in a second. So they get the credit. Where you..

Anil (57:40):

See you on page?

Mark (57:42):

Yeah. It’s on my phone. CoinMarketCap. Yeah.

Anil (57:48):

CoinMarketCap. And how many..

Mark (57:51):

CoinMarketCap. And actually I’ve used the Exodus wallet, which is not bad. I’m sorry, I used Exodus, which is not bad. And I use Rainbow, which was even better. So I switched from Exodus to Rainbow. And I still use Exodus.

Anil (58:01):

Yeah. That was actually going to be my next question. And then, last question. When are we getting a Shark Tank episode focused, exclusively on crypto?

Mark (58:08):

I have nothing to do who walks in, but this summer I’ll make a point to say, we need to do some Shark Tank crypto stuff. I’m sure. Since it’s so hot, the producers we’ll bring someone in. But we know nothing about the companies that are coming in until they show up.

Anil (58:23):

I Love it. Yeah. Mark. This has been fantastic, man. We really appreciate the time.

Mark (58:27):

No. It’s fine. I really enjoyed it. Great questions.

Anil (58:31):

Thanks. Talk soon.

Jose (58:32):

Thanks very much.

Mark (58:33):

Uh-huh. Thanks guys.

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