 This is Mises Weekends with your host Jeff Dice. Well ladies and gentlemen, welcome once again to Mises Weekends. We're joined by a good friend of ours, Caitlyn Long. I always feel like I'm in the mafia when we talk about friends of ours. Caitlyn is chairman and president of Symbiont, which is a distributed ledger company involved in smart contracts. So to the extent such a thing exists, she is a blockchain vet. But she's also a Wall Street vet. She spent about 20 years, I guess, at Morgan Stanley, Credit Suisse, Solomon Brothers. She has a law degree from Harvard Law School and also a degree from the Kennedy School of Government. But much more importantly and much better, she is a University of Wyoming cowboy. So we like that. The Harvard stuff we can do without. But first of all, thanks for your time. What's happening in the blockchain sphere with your company and with some others is so interesting to us. Let me ask you a big picture to begin with. A lot of what we think about in the old economy, the non-digital economy, is middlemen, intermediaries. So on a big picture conceptual level, a lot of what blockchain does is eliminate intermediaries. So can you talk about that a bit? Sure. The way I like to phrase it is that the financial industry, when it started to digitize, it digitized the existing old legacy workflows and didn't really, truly get the benefits of digitization because digitization enables completely changing the old workflows and streamlining the old workflows. And so those early digitization efforts in the industry, to the extent that they just merely locked in legacy workflows that were a function of technology limitations or regulatory limitations that applied 40 years ago, they didn't really help the industry that much. And so this new technology admittedly isn't necessary to streamline everything, but it has become the impetus for change. And it's fascinating to see how much it has actually been a true impetus for change. Okay, so you're a lawyer and as you understand, a lot of what lawyers do relates to mistrust on some level, right? They're both in the transactional setting when you're creating a contract or even when things devolve into litigation. When strangers enter into business arrangements, there's a level of mistrust. What does blockchain technology mean or what can it do to sort of help us overcome this problem that seems to be inherent in human nature? Well, it creates trust among peers. And ultimately, that's what this technology provides. Is it a way for peers who either partially trust each other or don't trust each other or maybe don't even know each other to be able to interact and trust that their transactions are happening on a valid basis or that the information that they're drawing down from the distributed ledger is itself valid. Because it was added to the distributed ledger by participants who play by the rules of the network. And so it is capable of replacing institutions as trust. And frankly, I think a lot of folks in today's world trust math more than they trust institutions because institutions are fallible. They have a finite life. They are ultimately at the end of the day people. The laws of math are infallible. And that is at bottom what makes this technology better and able to replace humans and institutions as centers of trust. So if you were talking to someone a stranger, how would you describe Symbion and how would you describe Symbion's, you know, a target customer? We are an institutional distributed ledger company that uses smart contracts to automate business processes. We are, unlike the public blockchains like Bitcoin and Ethereum, we are a private distributed ledger company. And we've done that for one simple reason, which is that institutions for anti-money laundering and know your customer requirements and really just identity are really struggling with using the public distributed ledgers. I personally think they'll get there someday, but for now it's a very, very high bar. And so we are in a way an intermediate step in the sense that some folks give an analogy of intranets that companies started to adopt intranets with these big walled gardens before they actually tore down the walls and truly opened up their platforms to the internet, at which point you saw just a flourishing of human creativity. I think we will go through that, but that's a 20-year process. And in the meantime, institutions really truly do want to know who they're dealing with and understand that their counterparties have been vetted, they're permissioned, they are agreeing to play by rules. Now that said, we are very different than a lot of the industry sponsored, what's called permissioned distributed ledgers, in the sense that we are decentralized. So we are permissioned but decentralized. That's a really important distinction because some of these other platforms are permissioned and centralized, which means that there is a trusted third party sitting in the middle validating transactions, seeing all of the data. Our network is very much consistent with the ethos of the public distributed ledger projects, which is decentralization. It's just that it's institutional peer-to-peer involvement as opposed to anyone in the public being involved in the network. That's really the biggest distinction. Let's just take a common example, and this might relate more to blockchain generally than to symbiote. Standard real estate deals, someone's buying a house. The seller needs, we have to go into this escrow process, which from my perspective hasn't changed much in 30 years. The seller has to know that the money is there, and the buyer has to know that the title is good and clear. How does blockchain help us do a simple housing deal without all this rigmarole? It's fascinating because if we can get everything on the ledger, so the entire loan file exists on the ledger, all of the participants are signing documents, uploading documents, and it's all in one place, then what happens is you can not only have what's called delivery versus payment, so you can actually exchange to your point that the funding happens at the point in time when the exchange of value occurs, whereas right now, that tends to be separated by at least a couple of days. More importantly, the loan file is in one place. Right now, believe it or not, we did look into this. In the mortgage market, a physical loan file, all of your documents for your mortgage changes hands three times between the point in time at which the loan is originated and its final resting place in a securitization pool. The physical loan file is FedExed or messagered between the financial institutions three times. That's still today, so there are certain parts of the financial industry that haven't been digitized at all. We have not decided to pursue the mortgage opportunity simply because it's just too fragmented. The data is just in too many places. There are network effects that these technology platforms require, and so it's the syndicated loans project that we've announced just on Thursday is actually, I think, in some ways a beta test for the banks because that's a syndicated loans, it's an institutional marketplace. Only institutions transact in those. You can, of course, as an investor, invest in a loan mutual fund, but your mutual fund manager would be the institution who would be the participant in the market on your behalf. It's a small enough market, but yet it's decentralized enough that the characteristics fit very nicely with this technology. Our announcement was that 19 financial institutions participated in a prototype, and there were actually 15 different institutions in the demo themselves who actually entered data and had a role to play in the demo. It's a very broad participation from the banks. I think this is kind of a beta test for the banks, eventually, to take this technology to the consumer markets like the residential mortgage market. It'll probably be a good five to 10 years. Again, it's going to start in the easier, smaller markets when I say smaller, not by dollar amount necessarily, but by number of participants who can create that network. Okay. Well, we can talk about a real estate contract. Let's talk about Wall Street. Let's talk about equities and bonds. You are a colleague in a sense of Patrick Byrne who has obviously done a lot of work around the DTC. I'm sure a lot of our listeners are familiar with the concept of the DTC and the fact that you don't actually own the stocks or bonds in your brokerage account there. You're the beneficial owner of them, but not the legal owner of them. There's this enormous middleman, unlike the mortgage industry where they're scattered far and wide. There you do have one repository and talk about counterparty risk. What could blockchain mean for investors? Well, ultimately, blockchain is going to mean that you actually own the securities in your brokerage account. We don't own them right now. What we have, just like with our bank accounts, we've lent those assets to the counterparty. In this case, we're talking about a brokerage firm as opposed to a traditional bank in the case of money. You don't own the bank deposits in your bank account. You've lent them to the bank. In your brokerage firm, you don't own the shares. You've lent them to your brokerage firm who lent them to a custodian who borrowed them from the Depository Trust Corporation. It works very similar to the structure of the banking industry. That creates a lot of problems. Today, I was reading an article that New York Times put up a few days ago. There was quite a bit of press coverage of this same story, which is the Dole food case. There are 49 million valid claims filed, but only 36 million shares outstanding. One of those nightmare scenarios where you think you own what you thought you owned and suddenly an extra 25% show up and claim with valid claims to what you thought you owned and then you're going to be diluted down. It's fascinating to see how the industry is going to deal with this because a Delaware court judge kicked it back to the broker dealers and said, you go figure this out. It's not going to be easy for the broker dealers to get some of the cash back that they've already paid out to short sellers three years later. Long story short, I think the broker dealers are going to be taking it on the chin. Just as the story I read today said, look, they should. This is their problem. They created this issue. They need to figure out how to fix it. I think blockchain technology is the fix to this. Interestingly, we have a very, very tremendous partner, which is the state of Delaware. The state of Delaware has actually got something called the Delaware Blockchain Initiative. My company is a technology provider, a technology partner to that. I think even the purest anarcho-capitalists would agree that registry of property and resolution of disputes surrounding registry of property is a legitimate function for government. I think even the purest would look at this and say, gosh, that's, that's, we approve. The monarch certainly would approve, but needless to say, Delaware got interested in this technology pretty early on. They just two weeks ago released a proposal to permit distributed ledger registrations in the state of Delaware. A very important state, almost 85% of new incorporations in the US happened in the state of Delaware in part because there is such a well-developed registry, but also body of corporate law and litigation history surrounding the exact requirements of administering a corporation. Watch for more to come in that area, but you actually have, believe it or not, a government that is more innovative and moving faster than a lot of private sector institutions on this very front. There's a lot to come out of the state of Delaware that I really take my hats off to them. We are their partners. It was my company's founder's idea to approach them with this idea. At the time, the governor, who's an ex-McKinsey consultant, understood exactly what the opportunity was both for Delaware and for cleaning up the back office of Wall Street. He got it very quickly and said, yes, this is something Delaware should get behind. We've already rolled out our technology at the Delaware Public Archives. We are in the process of uploading data to our platform. Then as of August 1, presuming that the legislature approves the change to Delaware corporate law, it will be recognized as a legal registration of a corporation in Delaware if the company is registered on a distributed ledger. Just to finish the thought, the really important takeaway from that is that once a company registers on a distributed ledger, there is no piece of paper that can sit at the DTC and therefore you essentially completely change the plumbing of the securities industry and allow record owners to be beneficial owners of shares again and the Dole situation. There was also a Dole case, too, so Dole and Dole happened to have similar cases with problems between the registered owner of securities and the beneficial owner of securities. Once that system is in place in Delaware, those two can be brought back together again, so you have no intermediaries and you have clear property rights in the securities that you own in your brokerage account again. But then also imagine an individual Dole owner could sell some shares to an individual Dole buyer. That's exactly right. This facilitates peer-to-peer investment. Now, of course, it's still going to have to go in a public security situation. It would still have to go through a registered regulated part of the industry. But there are a lot of things happening in the private securities market and we're working on a number of those as well where it could literally be a peer-to-peer exchange. I hope that that is coming, but it sounds like Delaware is doing what the federal government is not. As I'm sure you're aware a couple years ago, the IRS issued some guidance about the tax treatment of Bitcoin, for example. More recently, we've seen the SEC deny registration on the New York Stock Exchange to a couple of Bitcoin related ETFs. Bitcoin is kind of a separate question, but let me ask you this. Congress, statutorily, not at the administrative level, but to my knowledge, Congress is not really enacting any legislation with respect to cryptocurrencies or blockchain technology. Am I wrong? That's right. There is a congressional blockchain caucus and it's bipartisan. There's both a Democrat and a Republican sharing it. And part of their stated mission is to enable this innovation to flourish. And so there has not been any legislation passed at the congressional level that would impede this innovation, which is a terrific outcome. Yeah, let's keep it that way. So I'm going to leave you with one last question. Caitlin, you poured a lot of your life and your energy into blockchain technology and thinking about it and working within it. You left. What I imagined was a lucrative all-street career. Getting back to those middlemen, those intermediaries, whether we're talking about government or banks or middlemen of all kind, do you ever lose a little sleep wondering if they're not going to go quietly into the night, but rather they're going to fight this as it grows? And it's sort of like Uber. It's so obviously and evidently a good thing that the only people who could be against it are the people who might be financially injured. By does that cause you any heartburn? Well, we think about it obviously, but the value proposition of what we're bringing to the table is so clear that the participants in the market where we've actually been engaged have been very clear to support it. And so syndicated loans is a perfect example. That's a market where banks and investment firms interact with each other. Both sides agreed that for a whole host of both cost and regulatory reasons, that change was necessary. So the ball got rolling and that's a market that kind of like the mortgage market hasn't really been digitized yet. So the case for change was pretty clear. In some other markets, I think it's going to take a lot longer and there will be more friction. It won't be such an obvious case. But the way I think about it as a business person is if we generate value to customers, then customers will buy the product. And we have to prove that there is value. We have to prove that there are costs that can be taken out or that there are new products that can be created as a result of deploying the technology. And I think at the end of the day, the market wins. Uber proved that they could take on the taxi and limousine commissions because they deliver a product that is just that much better and consumers voted with their feet. And I think that the analogy will be true here as well. I'm not suggesting that we think it's going to be an easy road, but we're very targeted in the opportunities that we're pursuing. And we think that the securities industry will end up moving over to the distributed ledger solutions. But I don't think it's going to be fast. And I think, ironically, public equities might actually be the last product to convert over to distributed ledger technology. And that may take 20 years. Look at where we are with loans just getting started. So it's going to take some time. But I think we're going to get there. And I think in the meantime, that these technologies are going to bring a lot of value to the participants in the markets. Well, Kayla Long, president, chairman of Symbiont. Thanks so much for your time. It's great seeing you again. Thank you. And ladies and gentlemen, have a great weekend.