How the Winklevoss twins are building a crypto empire

Tyler Winklevoss:

You may think I have Bitcoin, but I only have Bitcoin as much as I have time on this Earth. Any possession, anything you have or own or done, it really means you just have time. We’re all investors and time is more precious than Bitcoin. …we don’t know how much we have. There’s not that much of it, so we have to use it wisely and some people invest it incredibly wisely. They understand the game they’re playing.

You have folks like Elon Musk, Jeff Bezos. He doesn’t have more time than me. He doesn’t have more time than you, but he’s using it, and he’s finding leverage, and he’s getting this output. It doesn’t always have to be, “Oh, successful company,” or whatever, you can create tremendous output with learning and growth and reading, you just got to build those leverages.

Tyler Winklevoss:

Well, thanks for having me, Alex.

Tyler Winklevoss:

What you read, it might be true. Yeah.

Tyler Winklevoss:

That is a great question. What we saw or what we learned when we saw it and we started digging deeper was that Bitcoin was the first money that was ever purpose-built for the internet, and so a lot of our money like credit cards, ACH, even PayPal has a solution that your money’s working on the internet, but really it’s almost, like, I’d call it internet-enabled banking. It’s still running on the old banking rails that were set up and built by bankers as far back as the ’70s, before the internet even existed.

People have tried to COBO payments and money onto the internet through PayPal and other applications but no one had really built an internet-native money. That’s what Bitcoin is, ultimately. It’s the world’s first internet-native money. It works like your email and it has characteristics that are very similar to gold. That’s why we call it internet gold or gold 2.0. The idea of this gold that’s built for the internet, we thought was a pretty big idea.

Tyler Winklevoss:

That is a great question and that is one of the questions. In the United States, its legal designation is a commodity. There was a CFTC enforcement order called the Coinflip Order in 2015 that designated it a commodity under the Commodity and Exchange Act and I believe a district judge, a federal judge in New York confirmed that rule.

In the US it’s a commodity like gold or other commodity assets, but that doesn’t mean it can’t be used as a currency — like gold was used as a currency. They are, technically, I guess the term is commodity money, until the advent of Fiat currency. You can use these things as a medium of exchange.

There are generally three properties of money. There’s medium of exchange, unit of count, store of value and you don’t have to function as all three of those to be money. Gold has historically functioned as all of those, but today it really sits in vaults, much of it in vaults under the Thames River and it plays the store of value role.

We see Bitcoin as an emergent store of value. It’s gold 2.0, so it could disrupt gold so it could appreciate a lot more from here. Bitcoin’s market cap is somewhere in the 300 billions, gold is nine trillion. If Bitcoin disrupts gold, its market cap has to be worth nine trillion, which puts a price of 500,000 a Bitcoin today. Even if Bitcoin only plays a store of value role for money and does a better job than gold, it’s still like a huge… it’s a huge deal.

Tyler Winklevoss:

Yeah, I’d probably throw the question back. I hope that’s not a cop out.

Tyler Winklevoss:

Everybody agrees that gold is valuable. I mean, it’s in our movies, it’s in Game of Thrones. I don’t think you could talk to anyone on the street and they would be like, “I don’t understand what’s gold all about. I wouldn’t want gold.” If we all agree on that, then the question is, why do we all agree on that? You have to look at… so you go to the properties.

I had the same question too when it came to Bitcoin and gold and trying to value Bitcoin, what are the properties that made gold, gold? It’s scarce. There’s not a lot of it. It’s somewhat portable, you can carry it around. It’s somewhat divisible, you can smelt it. It’s durable, it can sit on a shelf or in a vault forever. It’s not going to degrade like a vegetable. You can cut it. You can divide it so it makes good money.

A good thought exercise is to put Bitcoin up against gold and each of those characteristics that we all think make gold, gold. In terms of its supply, Bitcoin’s actually fixed, there will only be 21 million. The supply of gold is actually unknown. It’s scarce, but it’s increasing when people find more gold and that can be technological breakthroughs, that can be an increased demand for gold.

Gold is found and mined and actually, the above-ground supply of gold has increased 60% since the ’50s. There’s still not a lot of it, but it’s slowly getting bigger. Bitcoin’s actually fixed. Gold bar is portable, but a Bitcoin you can send around like an email. You can carry a Bitcoin wallet in your head, in your pocket on a piece of paper through borders so it’s very, very easy to transport.

You can divide a Bitcoin into a hundred million pieces. This is a common misconception. People think, “Oh, Bitcoin is now at $18,000 a Bitcoin. I can’t afford that.” Well, you can come to the exchange we built called Gemini, and you can buy $10 a Bitcoin, a hundred dollars, $500. You can buy a full Bitcoin. You can buy millions of dollars of Bitcoin. When you go down the line, Bitcoin either matches gold or it’s superior.

The reason gold has value is because we all think it does, it’s supply and demand. If people do that analysis on Bitcoin and realize that it’s actually better at being gold than gold, people can buy into it just like people decided a Picasso was a rare special thing, and there’s no more going to be made.

It’s like art and gold, it’s supply and demand but it’s all based on what we decide and if people wake up tomorrow and say, “You know what, I just don’t think Bitcoins does it for me,” then it won’t be worth anything. But if people wake up and say, “Bitcoin’s better than gold,” then there’s a chance that it disrupts gold and gold is really not that special.

Tyler Winklevoss:

Yeah.

Tyler Winklevoss:

Yeah. I mean, so I don’t know if you’ve read the book Sapiens, but it does a good… it’s a pretty popular book.

Tyler Winklevoss:

It’s a good quick read. It does a great job of talking about the fictions that man creates. Humans are basically, we’re effectively storytelling monkeys and we’re status-seeking storytelling monkeys but we can spin up these stories. We can spin up these fictions like a border, like crossing the Mexico-American border. No animal knows they’re crossing that border, but as a human, you’re like, “Oh, there’s the border patrol, get your passport out. It’s a big deal. We are now we are in Mexico. We are now coming back to the US,” or, “We’re in a different state.”

We’ve all made this up. It’s a collective hallucination and money is one of these other great imagined fictions that man, woman, humans have created for commerce. You’re absolutely right that these are ideas. There’s so much fiction in it, but that’s what makes us humans and different than other animals, is that we can come together and coordinate around these ideas, like patriotism, duty and start wars over it, and in crusades and religion, and it’s just an idea, you can’t point or touch. I’m always fascinated with how people are like, “But it’s not real. I can’t touch it.” Most of the things in your life, including your dollars, you can’t touch and they’re not that real, but [crosstalk 00:11:58]-

Tyler Winklevoss:

Yeah, and it’s being printed so much, so that’s been a huge driver for Bitcoin because people are like, “Wait, there’s got to be a scarcity of money,” and the money supply of dollars, it’s a simple like fifth, it’s not even simple arithmetic like third grade, fourth grade kind of stuff. The supply is getting bigger. My share of that supply is staying the same, but as a percentage overall, it’s becoming much smaller.

I’ve put my whole life into this system and it’s degrading, it’s depreciating, so I want to put my blood, sweat, and tears over in a hard sound money like gold or Bitcoin, because it’s just not getting to base and there’s no inflation over there. 2020 has been the year of chaos, uncertainty, money printing stimulus, helicopter money. This idea that literally governments are dropping money out of the sky, people are getting their checks.

There’s probably more of that on the way and it’s literally the Federal Reserve waves the magic wand and everybody gets money. I think, even people who haven’t thought about this are scratching their head a little bit and saying, “How does that work? Is this really real?” I think that’s driven a lot of people into crypto.

Tyler Winklevoss:

That is just what the creator… That’s the rules of the game that was set up.

Tyler Winklevoss:

They could, but you’d have to get more than half of the network to vote on it and nobody’s going to do that because then they would be debasing themselves. Like me personally, I’m a HODLer, I hold a lot of Bitcoin, why would I want to own a lesser percentage of the pie? There are very strong economic incentives to… I think incentives are like, I don’t know who said this, was it Einstein or Buffet or someone, that they’re like the eighth wonder of the world.

The incentives are aligned for people to play nice and play good, but also to keep it a fixed supply. Just like if you owned a Warhol and any Warhol painting or some sort of piece, you wouldn’t want to be able to agree with people to all of a sudden bring them back from the dead and that would be actually very cool. We’d all agree to that, but you can’t make any more.

Tyler Winklevoss:

We can hang out with you, you can be here, but you can’t make any more future mouse because I have one of however many, 10, and I don’t want a hundred because then my investment goes down the toilet.

Tyler Winklevoss:

I think the drivers are what I said before. I think it’s all the money printing. I think it’s the oncoming inflation, but the cast of characters who are really taking up large positions are very different. You have legendary investors. Paul Tudor Jones is a legendary hedge fund investor of the last quarter-century. You have Stan Druckenmiller. You have other hedge funders who are taking huge positions and coming out and talking about it.

But unlike business channels, it’s not super mainstream and they believe in the gold 2.0 story. They’re like, “Hey…” Paul Tudor Jones said this and he sent out a really cool investment newsletter, that in the ’70s in the US we had a lot of inflation and one of his famous trades early on was gold. It would have been Bitcoin, but we hadn’t invented Bitcoin so today he sees the same qualities in Bitcoins, so he’s putting his wealth in Bitcoin.

There’s a lot of legendary investors who you can’t… maybe you can knock us like, “Hey, we’re the Facebook guys from the movie, what do they know? They have Bitcoin, but that’s not convincing me.” But when you start bringing in Paul Tudor Jones, these investors who have made tremendous value for themselves and in their investors, and this is what they do and they’re saying this is a good investment, that’s a little harder to turn your nose at or deny.

Secondly, and just to wrap that up quickly is, there are publicly traded companies like MicroStrategy. Michael Saylor is the CEO and Founder of that company and Square, Jack Dorsey’s Square, who have put in some of their cash on their balance sheet, some of their treasury money into Bitcoin for the same reasons that these investors are — because they’re worried that their cash is turning into trash. They want to save their values.

You’ve got institutional investors, you’ve got publicly traded companies starting to buy Bitcoin, and it’s almost quietly, because it’s not a FOMO crowd. It’s not like this [inaudible 00:17:28]. It’s not rappers and celebrities tweeting about it like 2017. It’s the smartest people in the room who are discreet and quiet and they’re taking these bigger positions rather than the noisy people in the room with much smaller pockets.

Tyler Winklevoss:

In short, the more people that buy into it, the more the market capital increase, the value will increase. The larger it gets, the less volatility it will get, but also the less upside and appreciation will be available too. People complain about volatility, yeah, like Amazon, when it was a small tech stock was really volatile and it was scary, but that was if you got in early in 2000 versus 2005, ’10, ’15, I mean, your gains are just that much more.

There’s no reward without risk, so high risk, high reward and if you get in early, you are rewarded for that. The more early you are, if people end up coming in and piling and behind you, you will ride that up. If Bitcoin’s worth nine trillion, it’ll be mature. The price will be steady, but it will not have what I’ve predicted as a 25 to 30 X from here. It just won’t have that.

When I say Bitcoin is a store of value or playing that role, what I really mean is that today it’s an emergent value. It’s growing into that and that’s where you get the asymmetric return. It’s not just preserving wealth, but you can actually 25 or 30 X your wealth by my math. But over time, as more people come in and when you’re the last person to the party, you’re just not going to have the secrets out in the open.

The secret is out in the open but everybody’s started to build consensus around it. That opportunity just won’t be there. But, you have to have strong hands, be willing to weather storms and volatility. It’s not an asset you want to look at every day or it’s money you want to be able to put away for 5, 10 years, and that’s going to be great, but if you wait till it’s safe and boring, well, that’s not settling the frontier, waiting for everyone to get to California and then being like, “Now I’m going to buy property.”

Well, it’s going to be a lot more expensive than it was when you got there before the sheriff was in town, before there was infrastructure, before there was a saloon, it was fun. Now it’s boring, so I think there’s… but everyone’s got to make their own investment decisions, obviously.

Tyler Winklevoss:

Yeah. I’d say my number two favorite, and I also have a full disclosure material position would be Ether, which is the crypto of the Ethereum network. Ethereum, I don’t think Bitcoin and Ethereum are competing for the same things. Bitcoin is your emergent store of value gold 2.0. Ethereum is a decentralized virtual computer. Think of it like Amazon cloud computing, that’s what Ethereum is, decentralized, and Ether allows you to use that computer.

Ether is almost like a digital oil. Bitcoin is digital gold. These blockchains have the highest demand for people who want to invest, for engineers who want to build on them. You can look at the demand for the space in each transaction block of the blockchain and their transaction fees are high because space is scarce and people want to be in there. There are metrics that show there’s a ton of economic activity and demand happening for both of these cryptos.

I think when people are saying, “Hey, how do I get into crypto? What do I do?” My feeling is that, look, it always starts with Bitcoin, but I really think it starts, these days, I think it’s fair to say it starts with Bitcoin and Ether and some combination of those two, you have a lot of your basis covered because Ethereum is, if you think of Manhattan, it’s the land, the substrate of what’s going on. There are all these projects being built on top of Ethereum because it’s like an operating system.

Bitcoin is very… it’s simple. It’s like moving gold from A to B. Ethereum, you can create all of these applications and there’s this movement called Decentralised Finance, where you can borrow, you can lend, you can do all this stuff on Ethereum, but these are projects built on top of Ethereum. If you own the substrate, sort of the layer one of Ethereum, you have exposure to what’s going on up there without having to pick which of the many, many projects is going to win. Some people, unless you do it for your full-time job, it’s going to be a bit hard.

I say, look, own a piece of the racetrack, and as long as the racers are running, you don’t have to pick the winning horse, you will do fine. When you get up the stack and you pick the horses, it can be higher returns, but also it can get pretty ugly because some things just won’t work out and most people like I commit, all I do is eat, breathe, sleep crypto and that’s what I’ll do for at least the next decade or two or many more, but I appreciate that that’s not what everyone does.

The cool thing is that you can own pieces of this network by owning the coins. You couldn’t own a piece of the internet, really. You’d have to domain squat, like get a domain like pepsi.com and then sell it to Pepsi or something, but you really couldn’t buy a piece of the internet and you’d have to invest in these companies and a lot of them blew up. But now you can invest in the internet, the internet of money by just buying these networks and just buying the underlying coin, so it’s a different paradigm.

Tyler Winklevoss:

Oh, I mean, I don’t think anyone would deny. If you’re talking about its scaling and its [crosstalk 00:24:52]-

Tyler Winklevoss:

Yeah. I mean, I think everyone admits that or acknowledges that it’s got to get better because there’s just so much excitement and it could fall victim to its own success. The weight of its own success is getting heavy for it. It just passed a really good milestone last week, where it’s going to move into Ether 2.0, which is… I’m not super close to the details, I need to freshen up there but essentially, it’ll move to a proof of [inaudible 00:25:25] and just upgrade in a way where it can scale more, can be more transactions that can handle more applications.

Because you’re absolutely right, if Ethereum doesn’t grow at that level, some other chain will. I do think it’s very much like Ethers to lose at this point. It’s got so many network effects. Everybody, if you’re going to build somewhere, you start there, but we saw even with social networking friends who had technical difficulties, it was hard to log in. Then Myspace came, then Facebook had its own breakthroughs and then probably my guess is that like Facebook, you’re not going to unseat Facebook the way it is if you try and do that. They just got enough things right.

But interestingly, there are new blockchains in social media. You have TikTok now and stuff, but I digress. Ether has a plan to improve. It needs to improve. I think all of these chains do because tech moves so quickly, even Bitcoin has to keep getting better and more secure and everything. As long as the community is committed to that, I think I’m an optimist on it.

Tyler Winklevoss:

I think a blockchain that… usually there’s this idea in tech that it has a new product to unseat the incumbent, has to be 10 X better. One thing I’ve heard is that Solidity isn’t as user-friendly to engineers who don’t have these higher skills maybe, so creating, spinning stuff up in Solidity, which is the language, the programming language of Ethereum right now, it’s difficult. It’s not impossible or something. I don’t think it’s like C+ or C# or something, but it’s maybe not as easy as Java or HTML or something like that.

Another blockchain comes on with the language that Ether uses an existing language that everybody knows or create something that’s super easy, where you and I can open up a book or two, not even a book, read a chapter in a book and just or not even, just go on the internet and build something, that’s going to be huge because it’s so easy now to spin up your startup on Amazon Cloud. It just took away these barriers to entry and that friction.

Then there’s a movement to, or this idea of interoperability where you can bounce between blockchains. A chain that’s super easy to build on that can interact with other blockchains, where the switching costs, it’s sort of the economic term, it’s not that hard to leave if you’re in and everything migrates. I might be getting this wrong, I got to brush up on my…

But there are efforts like Cosmos, Polkadot, Algorand. These are big names that have been around and I believe all of them and many more are also trying to solve the problems that Ether 2.0 will probably solve for [inaudible 00:28:56], but competition’s great and nobody wants to wait around. Everybody wants their shot at greatness.

Tyler Winklevoss:

It is.

Tyler Winklevoss:

Yeah, we like to joke that we don’t have our skin in the game, we have our whole bodies in the game. The way we got the idea for Gemini is basically how we’ve gotten any idea, which is we were dissatisfied with the state of play. Some of our earliest Bitcoin we bought on Mt. Gox, and whenever there was a bit of a bull run back then, it could take a minute to get your order placed to buy or to sell. It was unclear who was running the show. It was two Frenchmen in Tokyo with their cats and just, it was like a black box and super scary and not user-friendly.

Just to get over there you had to apostille documents. It’s something I learned. I guess, technically, instead of a notary in the US, you go to the state department and the federal government authenticates your documents, you mail them over to Japan, then you wire your money over to Japan and so you’re in their legal system if anything happens. I don’t speak Japanese, although, many Japanese always speak impeccable English even better than US citizens, but it’s just foreign and you want to keep your dollars, they’re not FDIC insured.

It was just sketchy and so we, as investors, we looked at investing in other companies, other exchanges, but we really couldn’t find anyone who we thought was doing it right. Everyone was like, “Oh, I can build a better exchange and I’m going to do it offshore because I don’t want to deal with regulation and all that stuff.” We just weren’t quite satisfied with that race to the bottom, race offshore. We were like, “I think there should be a US exchange for cryptocurrency.”

Tyler Winklevoss:

We have the New York Stock Exchange. New York’s been the home of finance for a long time. Why can’t it also be a home, not the only home, but a home for this new revolution of finance like Wall Street 2.0? We couldn’t find something to invest and at some point, we said, “Screw it, we’ll just do this ourselves.” We picked up the phone to the regulator in New York. Actually, we got subpoenaed by them. They were like, “What is this Bitcoin thing?”

A lot of people, and it’s a fair point, is this for criminals and for bad stuff? We had already talked about this in the press so they subpoenaed us and a lot of other people. They were like, “Tell us about this. Is this like some Ponzi scheme or whatever?” It was a little bit antagonistic, to say the least, but we went in, we educated them. We’re like, “It’s not a Ponzi scheme. There’s a fixed amount. There’s real merit here. I know you read about Silk Road, but it’s about a lot more than this.”

To their credit, they completely turned around on that. They held a Bitcoin hearing in January of 2014. I think 150 countries, people from different countries piped into this hearing, which is very crazy for a New York state regulator hearing. I think it was 25, 30,000 people and they got on board. They’re like, “Shoot, there’s merit here to their credit. Let’s usher this in and if you want to be legitimate, come apply.”

We basically did that hearing and the next day we called them up, we’re like, “How can we get licensed? We want to bring this to New York and build an exchange. Do it the right way, with the right security, with the right compliance. We’ll help you answer your questions.” I think it’s super important to engage with regulators because regulation is a spectrum. There’s very thoughtful regulation that builds healthy markets and helps consumers, protects them. There’s one that is way too Wild West, like Mt. Gox was just too crazy and there’s one that is too… they stamp out and they clamp regulation.

You could make an argument that the US has been a little bit too far. It could be a little bit more into the thoughtful Sandboxie, let’s run with this thing but that’s our story. We built this to solve our own problem, to help mainstream crypto and do it in a way that we thought was the right way or rather, a way that was important to build confidence and trust in the asset class and ultimately attract the big money that is starting to come in.

Tyler Winklevoss:

That took… totally blanking, but I think it was a year and a half, which was really, it was a significant amount of time which at the time we were also building our technology, but there was a period of we were waiting. We were like, “Hey, we need to get out the door,” but our ethos was, let’s ask for permission, not forgiveness. Almost by doing the right thing, they’re like, “Oh, well, you can’t really do this until we’re ready.”

A lot of exchanges went outside of New York and then came in later and I don’t know, in the long run, I think that’s okay. I think people respect the fact that we did it that way. We didn’t unrun New York, but it was a year and a half, and it’s intense. I mean, I really respect the rigor they put us through. It was really important at the time because people were like, “Is Bitcoin illegal? How can we trust this?”

Having the New York Department of Financial Services on our side, Ben Lawsky is the guy, the superintendent at the time who pioneered this, having their sign of approval was really helpful because it helped us build a trust, and then we could get a bank account with a bank. Now if you start a company, you can incorporate and open a bank account in the same afternoon, but if you say crypto or cannabis, all of a sudden you now can only talk to five banks in the entire country that will take your call and even that’s a big process.

When you have something like a New York Trust Company license, that is the type of license that Bank of New York started with, that Brown Brothers Harriman has, the State Street started with, that really makes the conversation a lot easier. It’s still a difficult conversation, but it’s because of what New York did, New York State, that allowed us to actually start this adventure.

Basically, if you get the regulation right, it really, it allowed us to build a business. We now employ 330 people. Most of them are in New York and I like to say, they’re not just jobs, they are careers. People come here and they go on to great things. A lot of people have been here from day one, but we’re really changing. This is an economic miracle story that is all a result of healthy, thoughtful regulation.

Tyler Winklevoss:

Yeah, so one of our values is the long game and it’s super important because you’re absolutely right, it’s much more profitable right now in crypto to be a short game. The biggest businesses right now are unregulated off-shore. There are times when it looks like, “Wow, I wish we could be doing that a little bit more,” but you have to have conviction because those kinds of businesses are limited time only. I think you’re already seeing some regulatory enforcement.

I didn’t want to start on this adventure for only five years and make as much money as we can, try to not get it in trouble and then ride off into the sunset. For better or worse, we were already public figures, so that might work for someone else who’s anonymous and then they quickly do their thing, before regulators wake up, they’re gone. That really wasn’t a game we could play or we’re willing to play.

We want to be in this for the long-term and I think our athletic background taught us that. In sport or anything, whether it’s an instrument or trying to be excellent at anything, changes take a long time and you improve over years and you think about things in Olympic cycles of the next four years you get your chance again. It’s very long-term thinking. It’s a day-in, day-out grind.

There are no shortcuts in the sport of rowing and most sports. Anything that looks like an overnight success has really been a decade probably in the making. Even Bitcoin, people are waking up and my friend Max Raskin, wrote an article about this and he said, Bitcoin’s overnight success has been a decade in the making. It’s super fun right now, but I’ve been in this. It sounds like you’re in crypto, right? The winter is cold, it’s harsh, the crypto winter and we had to have the conviction and the fortitude to get through that.

That’s just in our DNA, myself and Cameron. We are very committed to… We just believe that the real results take a long time. How do we get people to join? Well, we blogged about it. We got some press and media. The cool thing about the crypto community, especially back then, it was very loyal. People were excited. It was a very underdog mentality, so it wasn’t hard to get the industry’s and communities’ attention. It’s like I said, it’s not like day one you open your doors and boom, there’s a tidal wave because people got to sign up, KYC, put their documents, link their bank accounts.

I mean, there were some blogs who a day or two in was like knocked our volume where you can’t even sign, I mean, it’s just hard to sign up that quickly and for people to start [inaudible 00:41:18] their algorithms up. Now you can sign up to Gemini in under 90 seconds. We have a mobile app, but back then on day one, you’re talking about MVP product and you’re asking people to put millions of dollars. I mean, you can’t even get millions of dollars in your E*TRADE account like that.

It takes time, but all of a sudden you look back and like, “Look how far we’ve come.” You can say the same thing with the Bitcoin industry. The quality of entrepreneurs… My first Bitcoin investment was also Bitcoin, but also in a company called BitInstant and the CEO and Founder went to jail. He’s Bitcoin’s first felon. That was one of the better companies in crypto. That, and you had Mt. Gox. You can imagine how, if I was horrified by that, and I was in my early ’30s and a risk-taker, still am, what do you think the institutional money thinks of that? Of course, they’re going to think this is a joke.

They meet these people, they see people going to jail, they see Silk Road, they see that getting busted for jail. We had to totally change that narrative and I think Bitcoin has, but it’s just time. There’s no Hollywood fix. Even you see these diet programs that are like, “We’re going to lose weight so quick.” You got to change your lifestyle, your mentality. It comes quick, but it does take time like anything.

Tyler Winklevoss:

Came onto it?

It was pretty insane. We handled it as best as we could. I think like many companies that were already operational, it was just, “keep your head above water, keep the lights on, try not to drown”. There were days when you’d get tens of thousands of new users and things weren’t as automated back then so it was humans going through licenses and KYC-ing people. That’s why crypto winter, when the price came down and things calmed down, we were like, “Wow, we get a breather. We can build now and thank goodness.”

You have to play your strengths to both sides. I have a friend who went through the Navy Seals and they do all these exercises in the water, in the sand, and he’s like, “When I was cold in the water, I was thinking about how great it would be to run on the beach, and then when I was running on the beach with the boat on my head and putting the logs up, I was thinking how great the water would be.” You have to play them back and forth and just be grateful for what you are in, but take advantage.

There’s no time to get better customers than the bull run. People should be coming in during the winter but they always do the opposite. They see the price action and they come in. It was hard. It was just scaling and keeping systems up versus building new. The crypto winter, it sucks a bit because your revenue comes down, you’re not making as much money but you can build a lot of stuff. There was a point in 2017 where we went from 50 to 150 in a month or two.

We just threw on a hundred people, and very high-quality people. We did not lose that or compromise that, but all of a sudden, myself and Cameron were leading a company of 15 people. It became 20, 25. Wow, 30 is a lot, and then literally overnight 150. We tried to interview everyone till we couldn’t. We were in Asia for two weeks promoting a product and we were just block… it was going to block the hiring pipeline, so we just delegated that. We no longer were in every hiring, but we literally, everyone from the most junior to the most senior for the first 75, which is great because you set the culture.

But now I feel like the culture is so strong and everybody in it knows what it is. They’re all stewards and custodians of it, that they understand it as well as I do. It was growing pains. It’s like being a teenager, you have this growth spurt and you’re super gawky and you aren’t coordinated. We started in a 5,000 square foot office and then we opened up or got some space in WeWork and then the WeWork became four times bigger than the office, we start the headquarters. In the meantime, we looked for a new office. It’s 50,000 square feet and we’ve been in that for a couple of years now.

We have a smaller office in Portland, Oregon, about 30 people. We have an office in Chicago, an office in London and Singapore. Many places where you have to get licenced, they require you to have some boots on the ground and people there, like a head of office in London, head of clients there, in addition to the head of compliance in New York. Yeah, we built a global footprint. It’s really cool. I mean, it’s definitely intimidating too. You start a company leading people like, “These people really want to follow me?”

You get over that, I don’t know, quickly, hopefully, and then all of a sudden 30 is the same as 20 and a hundred is the same as… If the company becomes a thousand, it won’t feel different to me at this point. It was really the first 15 people that was the founding team that was new but at some point, it’s like, I don’t know if you’ve done public speaking or something, when you’re on a stage that’s so big, it’s like a spacewalk, you can’t even see people. It’s almost like you’re talking to yourself versus giving a talk in a coffee shop. It’s really intimate. You can see everyone’s eyes and everyone’s face.

The company changes, but it’s been wild but I mean it’s a dream come true. I think that when we got into this journey in 2012, if I said I was going to be sitting here talking to you in 2020, and this was going to be the facts and this is where Gemini is and whatever, I’d be tickled pink, so very grateful.

Tyler Winklevoss:

That’s right.

Tyler Winklevoss:

Winklevoss Capital predates crypto. Basically, we are most excited with the earliest stage companies like the entrepreneurs that are just starting out. That’s super exciting. Find bright people, hear their ideas and try and be the first money in. Most of them are with a technology focus. It doesn’t have to be. We’ve actually put some money into consumer-packaged goods companies but pure tech plays, pure software plays and it’s anything that is solving a problem for someone else.

I know that sounds vague, but we started building Gemini because we wanted to solve our problem, local problem. We started rowing in high school, but there was actually no team. My next-door neighbor was a rower. He went to boarding school. I wanted to try the sport. There was no team, but there was water. We started it. That was our first startup. We said, “Okay, I’m not going to accept this answer. I’m frustrated by that. I’m going to do something about it.” That’s how we got into rowing. We started the team then became Olympians.

That was the early… That was how we started with social networking, we wanted a better way to connect with students so we started a social network. With Gemini, so I think when I see that in other entrepreneurs, they’ve been living with the problem, they’re frustrated, they have a good way to build it, you could say it’s about reducing friction. It’s building a better world. It’s all the same thing. It’s like people who have the courage to not accept the world they’ve inherited and realise that, “Hey, I can actually shape this, change this, and the way I want.”

That’s the ethos. We’ve invested. A lot of those companies… Winklevoss Capital started in 2012. We incorporated in early 2012. We went on vacation to Ibiza, we found Bitcoin and so we started investing in Bitcoin. But many of the companies, there wasn’t… it was only Bitcoin. There was no crypto, there was no Ethereum, no Ether, and so a lot of Winklevoss Capital investments were into startups, so were non-crypto.

Over time, we’ve invested in a lot of startups that are crypto. It’s like crypto is becoming it all. It’s coming together, whereas venture capital really wasn’t necessarily internet companies. At some point it became that, but before that it was semiconductors, it was personal computing, a lot of hardware technology stuff. There were no funds dedicated to big tech companies. That was a novel, exotic idea for a fund to focus on that in the ’90s.

Similar to crypto, there just weren’t that many great entrepreneurs or great stuff being built. Now, I would say Winklevoss Capital, it was doing non-crypto stuff. We would do Bitcoin and we were doing other stuff and now it has a huge focus on crypto companies as well so like Protocol Labs, we were the first money in Protocol Labs, which created Filecoin, which is similar to Ethereum but it’s decentralised storage. If Ethereum is decentralized computing, think of Amazon Elastic computing.

Filecoin is like Amazon S3 buckets where you just store data. That is a Winklevoss Capital company. Another company called Flexport, which is helping freight forwarding, basically making it… electronifying the idea of moving freight from let’s say China to the US. There’s fax machines, it’s opaque, there’s manuals of different code. It’s like dark age. They’re making it transparent, tech enabled and they’ve been doing great. We were the first money in there. They now are well over a billion-dollar evaluation type company. I think they recently took around from SoftBank. Then Founders Fund before that.

It’s really fun to follow the progression of those companies, but the interesting thing is crypto is so liquid. You don’t have to wait 10 years for the company to IPO. You can buy the token and it’s liquid today. You can trade in and out of it on Gemini. The model of how a startup raises money, does it raise from a venture capitalist? Does it do a token sale? It’s going to be interesting to see how that plays out.

Tyler Winklevoss:

That is a great question.

Tyler Winklevoss:

Yeah. We are, and this is always when you blank in the interview, but there’s a lot of interesting infrastructure companies in that are now servicing blockchain. We use a company called Plaid to help people link their bank accounts, which is, I wouldn’t consider it a crypto company. It’s not an investment of ours, but its infrastructure that we use, I imagine that many other exchanges use as well.

There’s a company called TaxBit that we invested in that’s helping make crypto taxes easier. Gemini is going to use them right at some point. We’re already integrating with them. Companies like Coinbase, all the other exchanges are going to need to provide this service for their customers. It’s probably a service that they themselves just don’t want to be get… they’re not on the business of that.

There’s amazing plumbing startups that maybe don’t touch crypto, but allow the crypto industry to grow. At this point, the industry is getting so big and my feeling is that it will be so big that we may not have to… we may do most of our investing in it. In terms of trends, I got to say that I really have been thinking only crypto trends.

Tyler Winklevoss:

Yeah, it’s-

Tyler Winklevoss:

Can you tell I’m hooked on this?

Tyler Winklevoss:

Okay, VR is obviously something that’s going to be the future. The hard thing to know though is, how do you get on that train? What do I invest in? Is that the game that’s going to be won by the big tech companies like Apple, Facebook? Is there an opportunity? AI is a huge trend. There’s nothing new there. I’m not spilling the beans. Again, how do you get into that? So-

Tyler Winklevoss:

Yeah. Okay, that’s a great… I’m glad you brought that up. We invested in Eaze, which is like an Uber for cannabis. As an app, comes to your house. Super easy.

Tyler Winklevoss:

You know what you’re buying. Eaze is cannabis, but everybody has a cannabis idea. You can find your way into cannabis, but what’s the quality? Is it dispensary? Is the tech enabled platform like Eaze? We went for the software because that’s what we know, but everybody has a cannabis idea. Obviously, cannabis is here to stay. Huge trend. I think psychedelics, psilocybin was a big win in the ballots in 2020. I think you’re going to see the same cannabis trends happening with psychedelics.

Tyler Winklevoss:

I think it’s really cool. It’s a new frontier in a good way. That’s going to be cool to see, but to be frank, most of our energy has really been going into building in the last couple of years, especially with Gemini. We recently acquired this platform called Nifty Gateway that allows people to trade, buy, sell, and store digital art and collectibles. You can programme art that’s scarce on the blockchain now.

niftygateway.com, we’ve got a lot of artists to create art for it. We have users. We have a great audience that buys the stuff and we do drops, similar to how sneaker culture does a collaboration with an artist like a Nike sneaker or something, an Air Jordan with some artists. They do a drop, people buy them, they wait hours in line to get the special edition shoes. They might wear them. They might put them on their shelves, show their friends, they might just flip it and sell it.

We brought some of that culture to the blockchain. Between building Gemini and Nifty Gateway and all this stuff, we definitely have been putting our mind there. But investing is really cool because we meet young people and see new ideas, and that’s how we got into Bitcoin. We always want to keep that muscle going a little bit.

Tyler Winklevoss:

Yes.

Tyler Winklevoss:

I would say the most obvious thing is probably get a mobile app out earlier. One thing I didn’t quite appreciate is that a lot of gen Z-ers or young folks, that is their laptop. They don’t even have a computer. That is their computer in their hand. With our experience with Mt. Gox, we message that institutional exchange is very important to be the institutional guys, but crypto has really been a retail phenomenon for forever.

We have definitely moved into… We have a retail story now. We’ve had an app for a couple of years. It’s great, but having that a couple of years earlier might have caught the market where it was as opposed to where it was going. In some, I’d say like this, we almost built a little bit too much to where the puck was headed, like the Wayne Gretzky quote where he says, “I don’t skate to where the puck is. I skate towards going.”

But you want to make sure to grab the puck too and bring it with you. I think that we might have just started pure retail, more retail first, which doesn’t mean you have to get rid of the institutional grade technology, it’s just you have to make it user-friendly for them. We have an incredible retail story today, but I would’ve front-loaded that a little bit more.

Tyler Winklevoss:

That is tough because I think the books that… each book trains your mental model, and it’s hard to know which one had the biggest effect, but one that I did love that I think is super… it resonated with me a lot is Zero to One by Peter Thiel. If you really want to understand the art of startups and how and why they work, and a lot of it is really counterintuitive.

I’d be the person who would be like, “Oh, you want to launch a perfect product, wait till it gets all right.” That’s exactly what you don’t want to do. You want to launch a product that’s almost embarrassing and, or at least you look back on it and it’s embarrassing and you want to get out there quick and iterate and find the traction. This book is like a Bible for anyone who wants to understand how startups work and Peter Thiel of course is legendary, is PayPal Founder, legendary investor, a great polymath, one of the greatest deepest thinkers from Silicon Valley. That’s a great starting point and I would say, I would start with that for sure.

Tyler Winklevoss:

Yeah. My dad always said he tries to hire people that are smarter than him, and I’ve tried to follow that. Always hire people smarter than you that are just brilliant and incredible. I recently read the Netflix book by Reed Hastings and I think Erica Meyer, No Rules Rules. They have this concept of every employee should be stunning, a stunning colleague.

Only hire people that are absolutely stunning. I think that never compromise that. I’d also say that hire in terms of three things. I would hire… your values are the most important part, like integrity, character. Those are things that are really baked in and hard to change. Then abilities, which are raw horsepower, which are also hard to change. Then you have skills.

When you’re assessing someone, you have to get the values right, are they high integrity, high character, trustworthy people? That’s the most important thing. The second is the abilities like the raw horsepower. The skills is the least important, the easiest to change. If I get someone with great values, high abilities, I can teach them skills. Gemini will teach them skills.

Experience is not that helpful or important in crypto because everything’s so new. A lot of times experience is another word of saying bad habits or bad assumptions and if you bring all this baggage and bullshit to Gemini, I prefer a clean slate. Give me a person with a clean slate, high integrity, incredible values and incredible abilities, we’ll take care of the rest.

Those two mental frameworks, the study bar, and values, abilities, skills, I think are really a good way to think about hiring. Then also yeah, you’re going to be spending more time with these people than your significant other so you better like them.

Tyler Winklevoss:

That’s good. I have been thinking about this recently. I think people make the mistake of not chunking things enough. I recently read this blog that said, if you read 30 minutes a day, even if you’re a slow reader, they did the math, you will read 50 books a year. That’s a lot of books and if you are a fast reader, you read an hour, I guess that means you read a hundred books a year. 10 years, that’s a thousand books. You’d be one of the most well-read people you know and maybe in the world.

Books are the ultimate skill because you can learn anything. You can learn how to program, learn entrepreneurship, crypto, whatever. I think people make the mistake of thinking, “Well, I need an hour of free time to read,” and you have a minute, five minutes here, 10 minutes here, you take the subway, you take the cab, you’re sitting in the doctor’s office, waiting for your appointment. If you have a Kindle, you can find 30 minutes a day and all of a sudden, you’re reading 50 books a year.

Most people say, “Oh, I got to wait till I’m on vacation then I’ll read these books that I’ve been meaning to get to,” and they procrastinate because they take it too big and then work calls you when you’re on the beach and there’s an emergency and then you don’t read it. I think chunking things in really small bits, you can literally learn language, learn a new instrument.

You could read 50 or a hundred books in a year if you thought in five or 10 minute chunks and just found those moments each day, which we all know we have a tonne of them as opposed to waiting for like, “Oh, I’ve got this big, an hour and now I’m going to learn piano in an hour,” or, “Now I’m going to learn French or Spanish.” Just 10 minutes a day or chunks of 10 minutes of day, you get super-efficient.

I think that’s a really important time management thing that I’m trying to work on not waiting for too much space and being too perfect, but really diving in and constantly like… it’s [inaudible 01:06:59] start-ups, they’re constantly iterating and learning.

Tyler Winklevoss:

Yeah, and three times 12, which is 36 books. I mean, we all would grow a lot from that. Of course, pick books that you really like. I think there’s a choice. The only thing we have is time. I love this idea. You may think I have Bitcoin, but I only have Bitcoin as much as I have time on this earth. Any possession, anything you have or own or done, it really means you just have time. We’re all investors and time is more precious than Bitcoin. It’s [inaudible 01:08:06], if we don’t know how much we have. There’s not that much of it, so we have to use it wisely.

Some people invest it incredibly wisely. They understand the game they’re playing. You have folks like Elon Musk, Jeff Bezos. He doesn’t have more time than me. He doesn’t have more time than you, but he’s using it and he’s finding leverage and he’s getting this output. It doesn’t always have to be, “Oh, successful company,” or whatever, you can create tremendous output with learning and growth and reading. You just got to build those leverages. Yeah.

Tyler Winklevoss:

I feel like there’s so much. I think, I don’t know if I received it or just learned it. Only do business with people that you enjoy kind of thing. The same thing with picking co-founder, it’s like a marriage. You’re going to be wedded to this person for at least a decade, so if there’s any question or you’re making excuses like this person is really brilliant but they’re shady or they’re a jerk, don’t even come close to it.

Or if it’s a partner, you’re trying to work with someone or a customer or a client, and they just, they don’t share your values or they’re just too difficult, it’s just not worth it. You find the people who understand your value, that you guys see eye to eye, that you’re in sync on. If it’s too difficult I find, even in the hiring process, when you find yourself hustling too much to pitch the company and the person doesn’t get it, it just wasn’t meant to be.

You’ll find incredible people who, you don’t have to hustle and you do your pitch, they pitch you and it’s a beautiful thing. It’s like a great relationship. Both people are engaged. No one is chasing… They are both chasing each other, head over heels. I think forcing it, if you want it bad you get it bad kind of thing. I’ve learned to think… You try and hire someone, you don’t get them and early on you’re disappointed. Maybe you’re like, “Damn, could I have sold it better?”

But it had nothing to do with you or Gemini or something else. It was [inaudible 01:10:45] persons, they just weren’t that into crypto or they’re wife didn’t let them, or husband didn’t let them join or they had to pay a certain bill and take a job at a hedge fund. Just being okay with all. Letting it go and realising that, good, I’m happy for them, happy for me. It just wasn’t the right fit. I don’t know. I’m blabbing a little bit, but I think-

Tyler Winklevoss:

Yeah, I mean-

Tyler Winklevoss:

… and you’re not going to click with everyone. It’s okay. It’s okay. But you know when it just fits right and it’s like the person is… and sometimes it’s a person you’re like, “I really…” They’re this superstar and that the sell is so easy, and some person who’s much less of a superstar, more junior and they reject the offer and you’re like, “How does that make sense?”

The person who’s the real rock star, was so easy to talk to and they came and the person who’s super junior, who’s asking all these questions and difficult and they didn’t take the offer. Yeah. You learn these things when you do a startup. It’s one of the hardest things you’ll ever do, but it teaches you so much respect for your time and it’s so much [inaudible 01:12:37]. Those are my little tidbits.

Tyler Winklevoss:

Yeah. The office is everywhere.

Tyler Winklevoss:

Two things, working out is great. It’s a great mood alter for me. You get the endorphin slowing, so either run, get a good sweat on, lift some weights. Anything active is great. I love reading. I love films. I play the piano. I grew up playing the piano and I restarted playing at 35 again, I’m 39, so about four years ago. I just was like, “I need something else in my life.”

Tyler Winklevoss:

Yes, I know. It’s a sickness. We’re all indoctrinated. It’s like, “Achieve. Achieve. Go. Go. Go. Go. Go.” At some point, you can’t just do that. Then meditation. I’ve been on and off a meditator for maybe seven years. I learned from this guy, Tom Knowles, a guru. He’s based in Arizona, but he travels the world. He’s got a website. He’s great. It’s a mantra-based meditation, but I’ve been in and out of practice.

But if you’re feeling stressed, you’ve got a headache, your mind’s spinning and you’ve got to go to bed and you’ve had the longest day and you’ve got a long day coming up, 20 minutes of meditation is quite a good way to just flush your brain, your mind and wipe it. Which is also very good at night because sometimes if you work out too late, it keeps you up. It feels so good, but sometimes you want to work out in the morning, it sets your day up, but you don’t want to do that kind of activity.

An instrument or a movie or meditation are incredible ways to wind down. I’ve always found… I always say my temple is a movie theatre, not anymore, I guess, because of COVID and the lockdown, but in Mad Men, Don Draper would go work all day, have these ideas and then he would go to the movies and the idea, the eureka idea would come because neurologically, you’re just using a different part of your brain. You’re creating that space. I find if I go to a great movie and just watch it, it feels like meditative for me.

You can do that in your house and stuff. I think these things that use different parts of your brain, not just work, work, work, this is crypto, crypto. The thing I love about crypto is it’s so intellectually stimulating, [inaudible 01:15:26] show me different things that I don’t feel like I’m in one track. You’ve got economic theory, computer science, so many different disciplines that you have to think about and learn, that it’s like an intellectual feast, but still it’s the context of Gemini and work and crypto.

It’s great to just throw on a classic movie or read a book and totally switch off. I think that’s so important. It makes you better at business too. You get your ideas over there and you come back and forth and it reduces stress and stress, we’re all dying of chronic stress.

Tyler Winklevoss:

It’s pretty simple. You can go over to gemini.com or you can go find our app in the App Store on Apple or Android. You download, you open an account then you connect your bank or your debit card and you can place an order to buy crypto like Bitcoin. It’s similar if anyone’s ever traded stocks, they’ve opened up an E*TRADE account or a Schwab account or an online bank account. It’s basically like opening up an online banking account.

We ask you to verify who you are. It’s pretty quick. We can do it in 90 seconds automatically. You add your credit card or your debit card, your bank account, and click buy for however much you want. We’ve got 26 cryptos, Bitcoin, Ether as we mentioned, ZCash, a bunch of others.We’ll be adding more and right now you can buy, sell or store your crypto, but we’re going to be getting into things like earning, spending, more money verbs, is what I like to say. We’re trying to just be this one-stop shop for you to come and get into crypto.

Tyler Winklevoss:

Yeah. We’re open in all 50 states. We’re in the UK, Europe, Canada, Singapore, Hong Kong, Australia, some parts of South America. We actually have areas of availability on the website, but we have pretty big coverage, over a hundred countries so chances are we’re open where you live.

Tyler Winklevoss:

Oh yeah. It’s spelled as the astrological sign, so G-E-M-I-N-I.com.

Tyler Winklevoss:

Yeah. Thank you so much for having me. This was a really fun conversation. I appreciate it and thanks for the kind words.

Tyler Winklevoss:

All right.