 There are four ways to make money, only four. If you take none of those four risks, you make no return. Since the early days of his career, hedge fund manager Mark Yusko invested in the technologies that would revolutionize commerce and media. Today, Yusko is convinced that those innovations were only the prologue of a much larger revolution that will disrupt the financial system. The Internet of value will be bigger than the Internet, will be bigger than the mobile net. Why? As Newton said, we stand on the shoulders of giants. But as history has already shown, the more disruptive the innovation, the bigger the forces opposing it. The incumbents really don't want the disruptors to win, so they will fight really hard. They'll throw up regulatory barriers, they'll try to buy up the companies and shelve the technology. In the struggle between innovators and conservative forces, which side will prevail? And what are the assets that will define the future financial system? Find out in another exclusive Cointelegraph interview. First of all, I would like to know a little bit more of your background. So as many Bitcoin supporters, you have a past as a skeptic. So how did you transition from being a Bitcoin skeptic to a Bitcoin believer? Yeah, you know, it's actually really interesting in that, had I been less skeptical, I'd be a lot wealthier, but that's okay. So look, my history goes way back, you know, I came out of school, business school, went to work for an insurance company, managed bonds, and worked for an equity firm. Then I kind of went back to my alma mater, worked in the endowment world, and the endowment model really taught me all about investing in private investments, particularly venture capital. And I had this aha moment in 1996, we invested a little bit of money in this little company called Google, half a million dollars turned into 200 million, I joke there should be a quad at Notre Dame called the Google Quad. And essentially what that did is it made me realize that infrastructure around these technological innovation waves really matter. So fast forward to 2013, I had invested with a friend, Dan Moorhead, in his macro fund when he spun out a tiger. And he called me up and said, hey, come San Francisco, I want to tell you about what I'm going to do. And went out there and he said, look, I'm going to shut down my hedge fund. And I'm going to spend the rest of my career focused on Bitcoin and blockchain. And I looked, I wasn't running drugs on Silk Road. I was not a cartography student. I didn't know what Bitcoin was in 2013. Unfortunately, I joke, you know, the Winklevoss twins and I were introduced to Bitcoin about the exact same time. They're multi-billionaires. I'm not Soviet. Now I also defend myself saying I didn't have half a billion dollars to put into it, but I had something, but I didn't do it. Because even though Dan had conviction about it, I was skeptical. I didn't really understand. Now what I did understand was infrastructure. So investing in his early funds has been great. Those funds are up 11, 12X, I think now more with the FTX deal. But that pales in comparison to the Bitcoin fund, which is up 350 times best performing hedge fund in the history of hedge funds. So the short version of a very long tail. A lot of people have heard it already is about nine months later, I wrote one paragraph in a letter to investors, 40 pages. One paragraph saying Bitcoin might be an interesting special situation. You know, maybe throw a few basis points in prices, 500 bucks. I got hate Giovanni. I got hate from my clients. I mean, like, we'll fire you. Don't talk about this stupid stuff. Go back to doing your job. Wow. I mean, that is a violent reaction. So now what's interesting about that, the skepticism was quote unquote proven right in that the price fell over the next few months. The price went from 500 bucks all the way down to 185 bucks. And of course, I said, oh, see, everyone was right. Well, no, they weren't right. Price is a liar. Stole that from John Burbank. And the value kept decreasing. The value kept going up. So that was 2015, 2016. I finally got over the skepticism. Why? Because it did the work. I actually spent a year diving deeply into the technology, reading the white papers, really looking and talking to other people. And I had this aha moment. I mean, I couldn't make this up. I was literally behind the wheel of an RV in Eureka, California. And it hit me that this is simply an operating system. The blockchain technology is an operating system for the internet of value. And the internet of value will be bigger than the internet, will be bigger than the mobile net. And Bitcoin and other things are going to power that. Other cryptocurrencies are going to power that. And so finally convinced some clients to go in. 2017 finally took the really full plunge and form Morgan Creek Digital, a subsidiary of Morgan Creek Capital. And over those last four years, I went from spending 5%, 10% of my time on this to now close to 100% of my time. I would like to point out the fact that you have always been keen on non-traditional investments, which is the endowment model of investing, which is something that you have been promoting for most of your investment career as a strategy of investment. Maybe can you guide us through the key points of this investment model? And what role do digital assets play in it? Yep. So you think about the endowment model and it's a little bit misnamed. It really should be the multi-generational model because multi-generational families have been following the same model for centuries as have pension funds and other big asset owners. And it's really pretty simple. It focuses on a handful of core concepts. One is a value discipline. You want to buy things that are cheap and hold them for long periods of time where price catches up to the value. Second is you have to be global. You can't, all the smart people don't live where you live. People in America think all the smart people live in America. People in China think all the smart people live in China. People in the UK think all the smart people live in the UK. It's just not true. And in fact, if you look at investment styles, people in America have more US investments. People in China have more Chinese investments. People in the UK have more UK investments. That makes no sense, right? It makes absolutely no sense. You should have a global portfolio. Third is you have to have a diversified portfolio. If you take cash and you add bonds, bonds are riskier, meaning they have credit risk, right? Your portfolio risk doesn't go up. It goes down. When you add equities which have default risk, I mean, default risk have bankruptcy risk, your portfolio risk doesn't go up. It goes down. And so that construct means uncorrelated assets that you add to a portfolio add incredible value. Last piece is that there are four ways to make money, only four, right? Take no risk, you get the risk free rate. So you have to choose one of four risks or all four risks. You can take credit risk by bonds. You can take equity risk by equities. You can take illiquidity risk by private investments, private equity, private real estate, private energy, private debt, and you can use structure, which is just a fancy term for leverage. So if you take none of those four risks, you make no return. So you have to choose which risk. Well, the best risk to take, in my mind, is the illiquidity risk. So if you look at the best investors in the world, they are constantly overweight private investments, particularly innovation-oriented investments like venture capital. Yale's at 23%. You look at Jeremy Grantham, his private foundations at 40%, 4-0, and they are the best performing large portfolios around. And so why is that? Well, it's because innovation is an asset class. Innovation creates the businesses that create the stocks, bonds, currencies, and commodities. So without innovation, we can't generate new wealth. Printing money does not create wealth. Never has, never will, bad idea. So where does Bitcoin fit into this whole construct? Well, it's the perfect uncorrelated asset. All of these alternative asset classes over the years, whether it was international stocks, they're gonna diversify your portfolio, but they're 70 plus percent correlated. Hedge funds are gonna diversify your portfolio, but they're 40 to 50% correlated. Bonds will diversify your portfolio. They're still 30% correlated. Bitcoin is 0.15 correlated to stocks and 0% correlated to bonds. It's the perfect diversifier. So if you add it to a portfolio, your risk goes down and your return goes up. It's the perfect diversifying asset because it has a symmetry of upside versus downside. So it's a great asset. The second reason, it's the ultimate innovation, right? Bitcoin is an innovation in money, right? Gold is the only money in the world, right? Everything else is just credit. And every other currency in the world has an associated liability, government debt. Gold is the only asset that has no liability associated with it. That's why for 5,000 years an ounce has bought a fine person suit, right? Suit of armor, suit suit, fine man suit on Savaro today, fine woman suit, okay? It is the ultimate store of value, but it's not very portable and it's not very divisible. It's really hard to break a bar of gold so I can give you half of it. So Bitcoin is better and it's digital. And as we move from the analog world from the electronic world to the digital world, it is the perfect money. So for all those reasons, innovation and a diversifier, you have to have it in your portfolio and that's why I have the hashtag getoffzero. Cool, but just to make sure about your position regarding all this crypto space. When you talk about Bitcoin, you talk about the leading example of an overall innovation movement that is happening in the world of digital currencies or you are truly a Bitcoin maximalist that thinks that the only value is in Bitcoin. Yeah, no, thank you. So look, I am not a Bitcoin maximalist. I think Bitcoin is a fantastic asset. I think it is hard money, the better form of money, but I think tons of other protocols are gonna be great. I think we're gonna have a protocol stack for web three, the same way we have a protocol stack for web two. You know, today we have TCP IP, which you and I are using right now to communicate. Then we have SMTP for email, HTTP for websites, FTP for files, then we have www.thecannotieseverythingtogether. That's a beautiful protocol stack in the future. I think Bitcoin is kind of the base layer. I think on top of that, we got Filecoin to do the file stuff. Now in the middle, right? We have Solana and Polkadot and Cosmos kind of vying for those middle, maybe one of those will win or two of those will win. And then I think, you know, Ethereum is the www.thecannotieseverythingtogether as a toolkit. So I think you're gonna have huge opportunities in Bitcoin, not as huge as they were five years ago, but still huge. I will talk about that, I'm sure. Then I think you have bigger opportunities in Ethereum because it's a toolkit and more things will be built on that. And the nice thing about Ethereum is there's a business model where you can actually share in the revenues. One of the challenges of a store value asset is it generates no income, right? It's just there to store value. Then you've got all these other projects, things like play to earn, things like, you know, gaming, the metaverse, NFTs, NFTs are gonna be absolutely monstrous. I mean, people just don't understand what tokens are. So what the internet did to information, commerce, now blockchain and crypto does to financial services and to value. And so we have tokens today, very small number. In the future, we'll have billions, maybe even trillions of tokens that will represent digital ownership of every asset, every stock, every bond, every currency, every commodity, every piece of real estate, every piece of art, every, everything, it will be trillions. Everything will be tokenized. I totally agree with your non-maximalistic position. I think that it's having like an open mind about these all developing environment is the best strategy, is the best mindset. I'm also very excited to see if all these bets are going to be proven right, because that would mean that you were one of the early investors in both these two technological revolutions that happened in the last 20 years, which is the internet and this new blockchain revolution. So like it means you get right two revolutions out of two, so that would be great. I don't mean to, I don't mean this in a braggadocious way, but there's another one, right? It's a 14 year cycle. And so there was one in the middle, right? 96, we had the internet in 2010, we had the mobile net and the mobile net was bigger than the internet, right? When this got introduced in 2007, it started a wave of connectivity where we actually made way more money Giovanni on the mobile net than we did the internet, right? We invested early in things like Alibaba and Uber and Lyft and all of these businesses, Netflix, Tesla, all these things that helped people be connected, but now this new revolution starts in 2024, right? We haven't even started the trust net, as I call it, and it's going to be so big, like orders of magnitude bigger, why? Because as Newton said, we stand on the shoulders of giants. The internet made everything better, but the mobile net made that even better and it didn't make it better linearly. It made it better exponentially. Exponential growth matters and that's why networks are so valuable. That's why this evolution of technology is going to create more wealth than any of the previous by orders of magnitude. Yeah, and actually now I would like to talk about the value, the actual exponential increase in value that this technology can spark. So as far as I remember, one of your most famous price prediction for Bitcoin was $250,000 within the next five years. So can you maybe explain us how do you think that Bitcoin is going to reach that value within this timeframe? Yep, so that actually is kind of a pairing back of my original comment, which was Bitcoin gold equivalence. So if I believe that Bitcoin is digital gold, which I do, digital money, then gold's total market cap is about $8 trillion. $8 trillion divided by the number of Bitcoin gives you a price of around $500,000 a coin. But a couple months ago, I guess nine months ago or so, someone asked me the question. I said, well, they said, what's the short-term view? I said, well, if you think about it, all the gold really doesn't make sense because about half the gold is jewelry and chalices and stuff that doesn't get really traded very often. The monetary value of gold is about $4 trillion. That's for sure where Bitcoin's going. I mean, there's no doubt in my mind that we're going there. And that's about a 10-bagger from here. So at, you know, or actually it was a 10-bagger from back then, so about five-bagger from here. So that is, you know, from $50,000 right around to $250,000. And I said about a three to a five-year period. And the challenge is the price has euphoria and fear. And so you have the line of value and the price goes up and down above and below it. And so how quickly we get to that price? I think there are a whole bunch of people this year. Like, if you looked at the core model, it basically said the value of the network around now would be around $100,000. Okay, and I still believe that. Yeah, but actually I wanted to explore a little bit more your prediction for the next few years because you seem to think that we are going to face another big crash in the next few years. Specifically, I saw an interview where you were mentioning 2024 as the year where we are going to experience a bubble which is comparable to the dot-com bubble of the early 2000s. So I always thought that that dot-com bubble was more comparable to the crash that we already experienced back in 2017. But you seem to see it differently. No, we're so early, right? So if you think about the internet, right? Microsoft, Intel, Cisco, that's a lot of wealth, right? That is the x-axis. Or if you think about the internet, right? Web one is parallel to the x-axis. Web two is the knee of the parabolic curve and web three is parallel to the y-axis. So if you think of the area under the curve as the value, the area under the web one, Intel, Microsoft, Cisco, that's a decent amount of wealth but it barely looks like anything because it's parallel to the x-axis. Web two, Alibaba, Netflix, Google, Amazon, way more wealth, like orders of magnitude more, first trillion dollar companies, that's the knee of the curve, right? We haven't even gotten to the parabolic growth part of web three, which is gonna create untold wealth. And so, but every time there's a bust in between, right? We couldn't have the applications formed unless we had the failure in 2000, people said it's over, right? And so the other problem you have, and we'll probably talk about this, is that the incumbents really don't want the disruptors to win. So they will fight really hard. They'll throw up regulatory barriers, they'll try to buy up the companies and shelve the technology. I mean, people forget, right? This is a long time. People forget that in 1903, the largest car company in America was the American Electric Vehicle Corp. We had electric cars in 1903. That was going to be the future until Henry Ford, okay? Shut him down by shelving the technology because he wanted people to buy his partner, Johnny Rockefeller's, you know, kerosene waste product called gasoline. So now we have internal combustion engines. So for a hundred plus years, we used inferior technology because commerce wins that way. And so the same thing's gonna happen here. So we'll have a bust. It'll probably be around regulatory friction. It'll probably be around fear. It'll probably be around, you know, the transition from infrastructure to applications. But on the other side, massive. Okay, that's very interesting because you mentioned the incumbents. So I have the feeling that in the previous cycles, when we were talking about the first development of the internet, the rise of these tech giants that like embodied the second stage of this whole process of development of the internet, we didn't have the threat that cryptocurrencies and digital assets in general seem to pose on centralized actors like banks, like financial intermediaries. So it seems that this time, there are gonna be a lot more odds to face in order to succeed in this revolution because the opposing forces have much more incentive to prevent this revolution from happening. I think they have the same incentive. It's just different actors. Innovation always wins, but the incumbents will fight back. And there's no question that you're right that look financial services is far bigger than information and media and commerce, right? Those are big industries. Media industry is big industry. You know, commerce is a big industry. And what Amazon did to mom and pop or Walmart, okay? That's big. I mean, people tried to put up barriers to Amazon and you weren't allowed to buy more than this and you could always spend so many hours on the internet, all kinds of things to try to slow down the growth of the things related to the internet. Same thing's gonna happen in financial service. The problem is financial service is just bigger. I mean, money, we're talking $86 trillion globally. That's a big number. So when you mention the fact that there will be this correction and probably it's going to be related to regulatory hurdles, it seems to actually connect with my next question, which is related to something that Ray Dalio recently said at the SALT conference. He said, he was talking about the future of Bitcoin and he was saying that if Bitcoin becomes really successful regulators will try to kill it. So it seems that he was foreseeing this scenario that you were talking about. But I guess that for you, this is just a temporary hurdle and then the curve will continue growing after it. Yeah, look, I mean, Ray's exactly right. But it, well, I should say he's approximately right. It's not the regulators that are trying to kill it. It's the incumbents that are trying to kill it by using the regulators. And that's been happening forever and ever and ever. When the horse's carriage was being replaced, I mean, when the horse's carriage was replacing horse-drawn carriages, what did these street sweepers and the buggy whip manufacturers do? They lobbied, fancy word for corruption. They paid regulators to throw up barriers to make cars illegal in New York City. They tried that. What did the train companies do when airplanes came out? They tried to erect barriers to make it harder for the innovators to thrive. What did the cable companies do when streaming started to happen? They tried to net neutrality or the phone companies when wireless happened. But it's not the regulators. The regulators are not evil. It's the incumbents trying to unlevel the playing field to preserve their gravy train. And that's normal. That's natural, right? They're economic actors. They have families to feed and I get that. Great, so to wrap up things, I would like to ask you a price prediction for the end of 2021. So what is your view? How much Bitcoin will be worth by the end of the year? So look, a good economist says what or when, never together. So I think that we will head higher. The problem is short-term prices are notoriously difficult because they really don't depend on value. They depend on sentiment. And there's so many variables over the next three and a half months that could impact that. I'm probably in the camp that says we hover between kind of where we are and where we were in February that I think we're unlikely to have that big parabolic blow off top that a lot of people are hoping for. I just don't see that. It's certainly possible. I mean, and that thing about, it's like George Soros says it best, right? You should never think in point estimates. That's not the way the world works. There's a range of outcomes and is not always normally distributed. It's skewed one way or the other. And so I think the likelihood, right? The more likely scenarios, you have to think in scenarios are that there is no major blow-up in the world and that Bitcoin hovers somewhere in that 45 to $65,000 range. There is a right-tail scenario that says, look, things roll over, growth is bad, central banks start hitting, money printer goes burr, and we get another spike and we approach that 100K value. That was Mark Yusko, CIO and founder at Morgan Creek Capital. Thanks everyone for watching. I'm Giovanni, your host. As always, if you enjoyed the interview, don't forget to like the video and subscribe to our channel.