Speaker 1:
From the library of the New York Stock Exchange at the corner of Wall and Broad streets in New York city, you are Inside the ICE House, our podcast from Intercontinental Exchange on markets, leadership and vision in global business, the dream-drivers, that have made the NYSE an indispensable institution for global growth for more than 225 years. Each week, we feature stories of those who hatch plans, create jobs and harness the engine of capitalism right here, right now at the NYSE and at ICEs 12 exchanges and seven clearing houses around the world. Now here's your host, Josh King, head of communications at Intercontinental Exchange.
Speaker 2:
A special episode of the ICE House today recorded live with Michael Novogratz, founder and chief executive officer of Galaxy Digital Capital Management at the NYSE Equity Leaders Summit. The setting was the stage in the New York Stock Exchange boardroom, just down the hall from our regular perch in the library here at the NYSE. The audience was senior equity traders from leading asset management firms and the brokerage community. They had spent the day here at the NYSE gathered to discuss the incredible market dynamics that are re-shaping today's landscape. CNBC's anchor Sarah Eisen did the honors of leading the discussion with Michael Novogratz. And I think you'll be drawn to what Michael said. The focus of the talk was the future of cryptocurrency, a topic we've explored before on the podcast, a topic which seems to have no end of interest. Michael is making a Wall Street comeback, and he's taking aim at cryptocurrencies to do it. The billionaire former Fortress Investments Group hedge fund manager, believes cryptocurrencies just might revolutionize finance as we know it. And with that, I'll turn the episode over to Sarah Eisen of the CNBC.
Sarah Eisen:
Thank you. Well, I'm excited to be here. It took me only an hour to get back from Englewood Cliffs. Thank you, Mike, for doing this.
Michael Novogratz:
Thank you.
Sarah Eisen:
I thank everybody's really eager to hear from you and me too, because I was just telling Mike that I cover currencies. That was my background and a huge currency geek still. And so there aren't that many people who are very famous for their currency trades. Mike is one of them. And he's getting into a whole new currency ball game. So, this is sort of your third act. Tell us how you got here.
Michael Novogratz:
People ask me all the time, how do you reinvent yourself? I was, "You got to kind of crash first." Listen-
Sarah Eisen:
It wasn't all crash.
Michael Novogratz:
It wasn't all crash. When I was at Fortress, I got a phone call. Someone asked me to look into to Bitcoin. I hadn't heard of it. So I Googled it. And-
Sarah Eisen:
This was when?
Michael Novogratz:
This is 2012. And quickly I realized that in a real simple way, there was a cool new technology. At the core of it was this idea that we didn't need to believe in central authorities. And if you remember, in 2008 financial crises, people started losing trust in financial authorities, in governments and JP Morgan and Lehman goes bust, and by 2012, some of that confidence came back and we got the European crises and central banks went into QE. And it wasn't just the crazies. I remember sitting at a dinner, a black tie dinner with Paul Singer, from Elliot Advisors, who is one of the great investors in the world. And he was banging the table that Ben Bernanke should go to jail because he was so treasonous to do this QE. And it was going to hyper-inflate the value of the dollar away. And so I was, "Wait a minute, we've got this group of people that don't trust a central bank policy.
Michael Novogratz:
We've got libertarians, we've got cipher punks, who've done this, who want to live off the grid. There are enough people that are going to buy into this." And so if nothing else, it's a cool speculative asset, Bitcoin at the time. And the Chinese had started buying it. So I bought a bunch. Like most things in life, when you buy something and it goes up, you start paying more attention. And as we started paying more attention and digging in, we realized just how cool the technology could be and that had a chance to be a lot bigger than a financial instrument. And I went on to our partnership and Fortress was a real asset place and we were an asset manager. And so we had this big partnership meeting and it was decided that we wouldn't talk about it publicly and we wouldn't put it on the firm's balance sheet, but we would fund a company off balance sheet.
Michael Novogratz:
And when I left fortress, I went to a friend's office in Brooklyn. When I had gone on TV and talked about Bitcoin, he had emailed me from Barbados. He was coding something called Ethereum. And he was, "Oh, forget about Bitcoin. I'm so proud of you." And I was, "Geez! Kind of strange." But I decided to go see him because I was looking at my portfolio which had kind of gone stale and trying to figure out what to do. And that's when I had this moment. I walked in there thinking I was going to find him and a crippled dog and maybe an assistant. And he had 25, 30 people from 35, 40 year old JP Morgan derivative sales guys that had left to 17 and 19 year old coders from Stanford and Harvard and MIT.
Michael Novogratz:
And they were plotting up like a revolution. They had whiteboards with the music industry and how were they going to disrupt the music industry, the cloud computing industry, and how were they were going to disrupt that from ride sharing and hotel sharing. And, there was a religious zeal to this group. It wasn't about the money. It was about changing the way the world's structured. I realized, right then this is a lot bigger than something financial. This is a millennial-led revolution and the people at the core of it care about change. They care about something that's, where they don't need to rely on Donald Trump or the Central Bank of Europe or quite frankly, any centralized system. And it's one of the things that gives this such resilience. And I ask people all the time, what's your favorite company? And someone will say, "Well, go on Google and see how many people have that tattoos of that."
Michael Novogratz:
And very few do. And if you Google Bitcoin tattoos or Ethereum tattoos, or now even EOS tattoos, you'd find thousands and thousands of people that have them.
Sarah Eisen:
Do you have one?
Michael Novogratz:
I'm thinking about getting one, but I don't yet. It was funny. I've given that story before. And the guy who is the CEO of EOS, which just dropped their blockchain yesterday. And it's an amazing story. This is a young 30 year old guy that had an idea a year ago, decided they would do this ICO. And they did an ICO every day for 365 days where they sold 2 million coins. And now they're sitting on a 6 billion-dollar war chest and they've dropped this blockchain, not 6 billion dollars of market cap, 6 billion dollars of cash or securities, eight guys. I was, "I'd never in the history of the planet, I think, has someone built a company where they have 8 billion in cash after one year on an idea." And so he got a tattoo yesterday. He sent me a picture with his EOS tattoo.
Sarah Eisen:
Yeah.
Michael Novogratz:
If I had done that, maybe I'd get one too.
Sarah Eisen:
Yeah. You're next. There's a difference between Bitcoin obviously and blockchain and you're in both. Sounds like in many other cryptocurrencies as well. Warren Buffet though calls it rat poison.
Michael Novogratz:
So I've found most people that are bald or over 60, have a hard time with this. I'm bald-
Sarah Eisen:
Is Jamie Dimon over 60?.
Michael Novogratz:
I'm bald, but I'm under 60.
Sarah Eisen:
No, there are a lot of haters.
Michael Novogratz:
There are a lot of haters. Listen, in a lot of ways, there's a couple leaps of faith you need. You have to believe that the world is going digital. If I give my mom digital flowers for Mother's day, she'll slap me in the face. But when my daughter gets digital flowers from her boyfriend, she says, "Oh, he loves me." 84 million people watched the League of Legends Super Bowl that was held in The Bird's Nest in China on TV. Just think about that. That's more than watch any of the world series games. And so we are hurling into a world where the digital world feels really normal to young people. There's 600 million Indians under the age of 25. And so as people age, just the concept of digital stuff is a lot easier. Bitcoin really, I think will have a use-case, not as a currency that we buy our Coca-Colas or Jack Daniels, more likely with me with, but as just a store of wealth. And this idea of digital gold doesn't make sense to some people.
Michael Novogratz:
But if you think about it, Bitcoin's got a limited supply. It's easily transportable. It doesn't have a negative carry, even if it has no other use, gold has really no other use. It takes a lot of energy. Mining gold takes more energy. And so I see a slow adoption of just that mindset. Forgetting that though, people talk about Bitcoin or, the coins, I like blockchain, but not the coins. What's really cool about Satoshi's white paper that started this whole thing is, in 10 years, he's going to win two Nobel prizes. One in kind of computer science because he solved these really complex issues that allows you to... If you want to think what a blockchain is, it's a Microsoft Excel database. It's literally a Microsoft Excel spreadsheet, but it can be shared and used by multiple people at the same time.
Michael Novogratz:
And it's immutable, you can't really change the data. And so when new data gets authenticated, it goes on all those databases at the same time. So, that's really what a blockchain is. The cooler part of his breakthrough, was this idea of token economics. How do we use a coin or a token to quickly create social networks where everyone's pulling in the same direction. And so there's these amazing business networks coming, our businesses coming, decentralized systems coming, where you're going to see the middle man who traditionally has controlled everything, get attacked. It's not saying that they're all going to win, right? If you think about Uber versus a decentralized version. Uber's got $80 billion, a market cap to want to protect. And so they're going to fight like crazy. But, all Uber does really is, match drivers and riders and they charge 25 to 30%. The blockchain is perfect for peer-to-peer businesses.
Michael Novogratz:
And so you could imagine a decentralized Uber that matches drivers and riders and doesn't rely on Uber with really two value propositions. Value proposition one is, it's 25% cheaper and value proposition two is, it's private, right? Three times Uber's been fined or investigated for illegally using driver data. One time they were doing it, they were blackmailing someone. And one time they were using it to follow the reporters and we trust people with our data and that there's a waking up to say, we shouldn't necessarily trust them. And so you have this idea that here's a company that we all think is the fastest growing company in the history of the planet and in a few years might be disrupted. And it's a perfect use-case. We'll see. What I'm positive about is, in a couple years, you're going to start seeing these decentralized systems really take off.
Michael Novogratz:
And then you'll be able to see if this revolution works or not. Right now, we're still in the storytelling phase, mostly because the technology isn't fast enough. What a blockchain is, is really a public utility grid that authenticates data and to do it fast when you're doing it decentralized is quite a computer science problem. And so thinking about it simply, if I have one database, like my Microsoft Excel spreadsheet can process thousands, millions of transactions in like this. But if I've got to do it on 15 different computers or 500 different nodes, it slows it down. And so you have all these different blockchains now. You hear about them, the Ethereum blockchain, the EOS blockchain, Stellar, Hashraft, Affinity. There are literally a hundred blockchains all broadly trying to do this same thing. All broadly trying to be this global supercomputer or decentralize AWS in a lot of ways, I'm fairly certain in four or five years, they will have scaled. We will not have a hundred of them. We will have four or five of them. And at that point, you'll start seeing these businesses or these systems built on top of.
Sarah Eisen:
The Uber use-case is interesting. What is it... How do you apply that to finance? And what's it going to do for banking and money transfer and trading stocks at the New York Stock Exchange?
Michael Novogratz:
There's so many parts of this that are interesting. So last year there's about $15 billion raised through ICOs. That's more than the venture capital business. It's within one year this kind of... And I don't know if it's going to repeat, because it was a bit of a craze and-
Sarah Eisen:
A bubble?
Michael Novogratz:
Well, it was a retail-bubble. What's really interesting is, 98% of all volume in crypto up to date has been retail. Right? I told about this was like a revolution of the millennials and people that were sick of the system. It was the people's revolution. It was Mr. and Mrs. Watanabe in Japan and Mr. and Mrs. Kim in Korea and the Smiths, I guess here. And that's why the regulators were off-guard. They were behind it. And so you had lots of money raised in this kind of really frenzied way. And all of a sudden, the SCC said, "Well stop." Not just the SCC, all the regulators around the world said, we're here to protect the little man. And quite frankly, the little man got screwed. Places like us insiders, not illegal insiders, but, major players we'd get into these things at 70%, 80% discounts.
Michael Novogratz:
And then the promoters would use the story and the hype and, the little guy would get in and lots of that volume that happened over $10,000 was FOMO of the little guy getting in. And so they've lost lots of money. And so I think regulators were right to come in. Today was a big day. The SCC said, "Not just, Bitcoin's not a security, it's a utility token, but Ethereum is a utility token." And so now we're seeing regulators slowly move towards helping define rules and helping set up a structure for this versioning industry. It's wildly important, right? There's this march towards institutionalization that's happening. I came down to meet Jess Brecker a few weeks ago, a month ago maybe. And I thought I was going to teach him a little bit about the blockchain. And after about 15 minutes, I just shut up and took notes.
Michael Novogratz:
That guy knows a lot about the plumbing of how the system works and how the blockchain works. And I have that experience everywhere I go. Goldman Sachs is starting to trade this. Barclays is starting to trade, JP Morgan, even with Jamie's skepticism has just hired a head of the blockchain. I had two pension funds in my office yesterday. And so I see this migration as the technology gets closer to being scalable, we're going to have institutional investors get in. And so we had a bubble, we had a retail-bubble, it was about a trillion dollars and then it popped. And now it's about half a trillion, maybe not even $400 billion. If you think about the internet bubble was in 1999, it was six trillion.
Michael Novogratz:
But that was a domestic-only bubble, right? It was a US internet-bubble. And that was $99. And so if you think of real estate prices from 99 till now, or the global GDP from '99 till now, two and a half times conservatively. And then if you think this is not just US, but it is China and India and Korea and Japan, a bubble that would equate to the '99 internet-bubble would be something $20 trillion. And so we're 40 times off of that. And so we're not in a bubble really. We are in a little mini-bubble. And this, I don't know if this will be as big as the internet, but it will be Web 3.0. It will redefine how the web is used.
Sarah Eisen:
But what does that mean for... I mean, you're talking about blockchain and how that's going to transform everything, but what does that mean for the value of Bitcoin and how do you even... I mean, I get, when you bet against the Thai bot during the Asian financial crisis, that there was a fundamental reason, how do you fundamentally analyze the value of Bitcoin?
Michael Novogratz:
Well, so Bitcoin itself, I think, and I'm maybe not the consensus on this, is not going to be the blockchain that revolutionizes the world, that all these business are built on top of. Right now, the leader of that would probably be the Ethereum blockchain, but who knows, there's an EOS blockchain and there'll be mergers and hybrids, but I think Bitcoin will still be around a long time, just as gold. And gold's got an $8 trillion market cap and Bitcoin's got $125 billion market cap. And so I can kind of just look at adoption. And as more people kind of buy into the system, I can see that going higher. The other ones are more complicated. Ether isn't a currency, it's a commodity, it's a fuel. It's a fuel that you buy to buy processing power on this global decentralized computer. And so people are buying it in advance speculatively, knowing that, or thinking that at one point, tons of transactions will get processed on this computer.
Michael Novogratz:
And once point when the computer really starts processing tons of transactions, it'll be a lot easier to have valuation metrics. EOS is a token that relatively similar, but if I own 10% of EOS tokens, I own 10% of the processing power of that network for a while. So, it's a little more like a synthetic equity. And so what's interesting is there's 2000 coins of which a hundred probably are significant. Each of them have different token economics systems that kind of drive people to do things. If you have a blockchain without the token, there's no real incentive for the miners to authenticate or for the stakers to... For people to operate. And so you can have private blockchains in companies or in small groups of companies, right? Microsoft has their own blockchain where they're doing treasury and they run separate nodes to run their database.
Michael Novogratz:
So, at the end of the day, when Microsoft Taiwan needs to settle up with Microsoft Seattle and Microsoft Buenos Aires, instead of Swift wires going all over the place with its two and a half percent error rate, they hit one button and the ledger goes. And so for them it's more efficient. It's less mistakes. They get to cut-out costs. I had an moment. I was sitting next to the head of Microsoft blockchain and he told me that story. And then he said, "I can't imagine any of our customers not doing the same thing." And so, there will be lots of private blockchains. Most likely, 10 years from now. If the public blockchain is running very effectively and efficiently, we've learned to trust it. Those private blockchains will just get plugged right in because the processing power will be a lot cheaper and people will trust how the system works.
Sarah Eisen:
Was just going to ask about trust. And what about the vulnerability for hackers? You hear about it all the time.
Michael Novogratz:
Yeah. So, listen, what's interesting is it's impossible legitimately to hack Bitcoin. The code itself, it's literally like five universes times a hundreds amount of energy would need to kind of crack the Bitcoin code, but you hear about how hackers all the time-
Sarah Eisen:
Exchanges.
Michael Novogratz:
And what's being hacked is all the on-ramps, the exchanges, the infrastructure built around the system, the code itself and all these new coins, some are not being done as well as Bitcoin. And so I was literally in a conversation two nights ago with this 19 year old boy-genius and another guy. And the third guy in the conversation was the number five employee at Snapchat. And they said, well, geez! If we could look at the Snapchat code, we could hack it in about 20 minutes, but we can't look at it because it's behind a firewall. And the Snapchat guy completely agree with him.
Michael Novogratz:
He said, "Of course you could it's... But, the hackers can't get to it." What's interesting about the blockchains, they're all open-source. And so for them to be effective, they really have to almost be perfect. And so the Bitcoin blockchain almost unhackable, because this is such a new industry. Remember this is like a third-grader. So the exchanges are places called Bitfinex and Binance. And I went out with the head of Bitfinex last year, he made $320 million or $309 million or $323 million of revenue. And he was so proud of his 97 and a half percent margin. And I was thinking to myself, that's why these exchanges are being hacked. Because the mindset was 97 and half percent margin.
Michael Novogratz:
I was, "Dude, how about spend some of your goddamn money to make your safety a little... Your platform, a little safer, a little bit more regulatory-compliant." And so as the industry grows up, the infrastructure around it is growing up. And so I'm sure when, when Jeff Brecker does his exchange or his custody or whatever he ends up doing, it's going to be done with institutional quality and it's not going to get hacked. And so it's just part of the process. You're seeing less of them and the ones that are, are at smaller places. But right now there's very few barriers to entry.
Sarah Eisen:
What about governments trying to crack down on Bitcoin or even central banks. Feels like there is resistance in certain parts of the world.
Michael Novogratz:
I fundamentally believe that this is less a currency revolution than a decentralized system revolution. The US is not going to allow privacy coins to be moving money all over the place. And so KYC an AML are the six letters that I live with every day now. You are seeing new systems put in place in the same way I said, you're going to have safer exchanges. You're going to have a system where the portals to get in and out of these systems are almost as rigorous or more rigorous as what the banks use to get people in and out of their system. What's interesting is the cool projects are building that in, to the code. And so it's going to become much more efficient than it is right now at banks or at our place, right? We're running a merchant bank and one of my guys is in here and every single client, there's all the same old school forms of getting them registered to be able to participant. And, one of the changes coming is that stuff is going to be done in a much more efficient way.
Sarah Eisen:
How should investors think about it? I mean, should you buy some of these cryptos hoping the value goes up? Should you invest in startups that are working on changing technologies around blockchain?
Michael Novogratz:
So, listen, I think there's two ways to approach this. I do think the macro. I'm not positive if I'm right on timing, I'm almost positive I'm right on destination. Institutions will come in and the overall index will go up. We just did an index with Bloomberg, which is a cool story in itself because Bloomberg's a conservative institution and got up to their manage committee, and the manage committee was, "We don't know." And had the same ideas everyone else did. Money laundering, North Korea, drug dealing and took a little bit of shifting the mindset from both our side and their side. And now they've got this Bloomberg galaxy index. And I looked back at 1992, I was at the fifth floor of 85 Broadway. I worked for Goldman Sachs and we did the GSCI commodity index.
Michael Novogratz:
If you look at commodity prices from '92 to 2008, they went straight up. And it was the idea of Goldman saying to people, this is actually an asset class. So let's move from just speculators to institutions that would buy this. Lehman did the same in both '72 and '82 at the Lehman Fixed Income Index. And then the Lehman Ag. And quite frankly, the SNP first started in 1962 with stocks. And this idea of institutionalization, it is happening. So I think the simplest way is just buy the index because, places like ours and there's multiple indexes and they charge 2% and it's a macro index and it re-balances every month. So as these coins come in, you don't get stuck with the ones that are all going down. There are a lot of hedge funds. They charge three and 30 or two and 40.
Michael Novogratz:
And to me, the play, unless you are with real experts, both in trading and getting access to investing is too much of a beta play to give up 50% of your profit. And so I don't really advocate hedge funds. There are a few groups of people on the venture side that have gotten great insight and great access to the best deals. And those are worth paying some fees to. Unfortunately, they have limited capacity and some of them already gotten too big. What happened last year and I can't imagine it continues is, the way these deals got done, is you have a hot deal and they let guys like us or guys like, a place from Pantera or MetaStable or Polychain. There are four or five players and you'd get a bunch of them in at the big discounts.
Michael Novogratz:
And then they'd get the next group of family offices in and then they'd take the retail in. And by the time the thing broke, we were already up six times on our money and you'd sell a little bit or sell it all depending. And there was a way these things traded because they traded up, but then they traded down. And they traded up because these are venture bets. Venture bets usually have a four to five year fuse to them and they had this sense of liquidity. Well, markets need new information to keep fueling them. And there was a couple new pieces information for the first 30 days and then there was no new information because these guys were building these damn companies.
Michael Novogratz:
So then the price would fall down. And I think it's something that industry's going to come to grips with. You can tokenize anything and you're going to see art tokenized and drugs tokenized and real estate tokenized, but there's still an underlying liquidity and an underlying story you need. And so I'm bullish on the space. I'm a little more worried that everyone thinks everything's going to get tokenized and trade on these 24 hours exchanges. You need concentration of liquidity around ideas to keep markets going. And so there will be tokenized things that don't trade, but I don't think it's going to be every last thing in the world tokenized.
Sarah Eisen:
How did you convince the folks at Bloomberg and I'm sure other skeptics that it's not shady business, that it doesn't fund illicit activity and drug deals because it seems like by its very nature being anonymous and being over the web-
Michael Novogratz:
Because I think as you get away from currency and you start looking at the power of what it can do, I mean, listen, to some degree, the blockchain is an imperative for us. We're in this crazy race right now with AI, right? So we've got these giant silos of data. We just saw what Facebook's problems were with the Cambridge associates. Who's done 23&Me in here? Anyone? When you lick the stick and you get your DNA or ancestry.com. And so we're all kind of idiots, right? Give them our DNA. So 23 means run by... What's her name? Carolyn Wojaky. I think-
Sarah Eisen:
Ann.
Michael Novogratz:
Ann Wojaky.
Sarah Eisen:
Yeah.
Michael Novogratz:
Carolyn was a tennis player.
Sarah Eisen:
Yeah.
Michael Novogratz:
Right. She to be a nice lady. I hope she is. Because she's got my DNA, my wife's DNA, my daughter's DNA. And my wife and daughters both have this terrible out gene that gives you early Alzheimer's. Well, that's kind of shitty that this lady has their early Alzheimer's genes.
Michael Novogratz:
And if she gets hacked and or sells the data to some insurance company, you shouldn't insure my wife and daughter. And so, giving that data away to essential authority, to someone that we have to trust or one system, it was crazy. It was less crazy 10 years ago, five years ago, even before AI could take a genome. I saw a... I was telling this to someone, I saw a presentation yesterday, AI for test-tube babies. They're now a million in vitro fertilizations a year. The first one in 1964, now they're a million here sky-rocketing like this. You can take a DNA sample of the embryos, the 30 embryos they take and know the height of a baby within one centimeter and the IQ within 10 points because they can now take the genome and run 60,000 combinations of genes. And so the guy showed me the app.
Michael Novogratz:
You can actually pick out your egg, not in the future it's available today. If any of you guys are thinking about in vitro and want tall kids. As AI is hurtling towards us. And, and remember, if the blockchain's a third grader, AI is already a PhD and accelerating. These big pools of data. China right now is so far ahead of us in digital currency or digital pay, right? Almost every financial transactions happens on either WePay or Alipay. So you got a government that has every single financial transaction, if they wanted. And it's amazing how smart these AI machines are getting. And so, I do think it's almost this imperative that... And there's so many systems where privacy is, and it might not feel right now, people are, "No big deal." But as it starts getting invaded more, you're going to see a bigger conversation around it.
Sarah Eisen:
So over the next five years, value of Bitcoin versus value of the US Dollar?
Michael Novogratz:
Value of, verse?
Sarah Eisen:
Bitcoin or the dollar, which one goes up more?
Michael Novogratz:
I think, listen, I think Bitcoin's going to go a lot, lot higher. I think the whole space is going to go a lot higher. When I think about the internet in 1997, '98, '99, when it was a bubble, we talked about this future and the future far surpassed what we talked about, right? The internet changed everything about the way we live from how our kids meet each other to how they watch TV and how we watch movies and how we shop and how we take hotels and how we elect presidents. We never even dreamed of it.
Michael Novogratz:
Bubbles happen around things that fundamentally change things. The railroad-bubble, same way. This crypto-bubble, which we're going to have is going to happen because this technology is going to fundamentally change. Even the concept of identity is going to change. And so once institutions get in and start doing the work and having to explain, they're going to suffer the same FOMO that we saw in retail last year. And the market's going to get way ahead of reality. I think the reality's going to be amazing and the same way the internet reality was amazing, but that's how markets behave. And so, I think the market's going to go far higher
Sarah Eisen:
Bitcoin or Ethereum. It sounds like you're a little more bullish on Ethereum.
Michael Novogratz:
You know, I'm bullish on this space. I-
Sarah Eisen:
You're not choosing favorites.
Michael Novogratz:
I have a... So I'll tell you a story. I came from a middle class family and my dad was in the army and we lived on one street in Alexander, Virginia. And it's 1999. I just made partner in Goldman Sachs. I sense the internet crash coming. My mother calls me up, starts yelling at me because I didn't tell her to buy Amazon. I remember, I was in the Asia, there was the Asia financial crisis. We weren't doing the tech stuff. Jean Wilson owns Amazon. Everyone owns Amazon and I don't own Amazon. And then they owned like $60 Amazon each. But, and I was thinking, I just made partner, how about a little pat on the back mom. But she got to me because all moms get to you. So the market crashes I'm feeling good. I'm, "You know what, I missed the internet. I'm not going to miss the Chinese internet."
Michael Novogratz:
We didn't have a crash in '99 in Asia, you had the '97 crash. It was building back up and there was vibrancy. And I met this guy, Micah Truman from... Had this company made for China, Got.com. Now he had Coke-bottled glasses. He was a fat little white guy. That should have been a tail. But I gave him a huge chunk of my liquid net-worth to bet on the Chinese internet, and it went to zero. And I went back and looked if I had separated that bet into 15 slices and bet on the 15 possible bets that were available. There weren't a lot of bets available in the Chinese internet.
Michael Novogratz:
It's staggering. What that would be worth today when you think of the Tencent and Alibaba and all these things. It all started right between '01, '99 and '02. And so when I started this thing, I was, "I'm not going to be so smart that I can pick the winner. I'm going to be diversified. I'm diversified against coin, across systems and coins. We buy the infrastructure. So I have... I got exchanges and wallets and custody companies in businesses. We're in the asset management business, the trading business, the direct investment business and the advisory business." And so I'm trying to take a broad view and I actually think that's the right, the right approach.
Sarah Eisen:
You're all in on the revolution.
Michael Novogratz:
I have a-
Sarah Eisen:
You and Steve Bannon, I learned today by the way.
Michael Novogratz:
Steve Bannon. So here's an interesting data point, not a good one, but it's interesting. Steve Bannon before he ran Brightbart was the CEO of really one of the first digital asset trading firms. They traded points on video games. And he had kids who played Farmville. Anyone Farmville. He could... I remember one day my son was buying Farmville points on a credit card. I was, "Who gave you a credit card?" And just spent $62 on Farmville points. Bannon ran a company that traded Farmville points. And his partner was a guy named Brock Pierce who now is one of the pioneers of the crypto space. But he wears pantaloon pants and a crazy hat and he's always smoking peyote and he is a quite charismatic speaker and he is actually brought tons of people into the space. And so, if you saw Steve Bannon and saw Brock Pierce, and thinking they were partners, it's one of the most beautiful [inaudible 00:33:55] you can see.
Sarah Eisen:
There you go. Michael Novogratz. Thank you. We're over time.
Michael Novogratz:
Thank you.
Speaker 2:
Our, thanks to Michael Novogratz. And CNBC's Sarah Eisen for joining us on Inside the ICE House. That's our conversation for this week. Our guest was Michael Novogratz, founder and CEO of Galaxy Digital Capital Management. From his session at the NYSE Equity Leaders Summit. If you like what you heard, please rate us on iTunes. So other folks know where to find us. And if you've got a comment or question you'd like one of our experts to tackle on a future show, email us at ICE House at theICE.com or tweet us at NYSE. Our show is produced by Pete Ash and Ian Wolf with production assistance from Ken Abel and Steven Portner. I'm Josh King, your host, signing off from the library of the New York Stock Exchange. Thanks for listening. See you next time.
Speaker 1:
Information contained in this podcast was obtained in part from publicly available sources and not independently verified. Neither ICE nor its affiliates, make any representations or warranties expressed or implied. As to the accuracy or completeness of this information and do not sponsor, approve or endorse any of the content hearing. All of which is presented solely for informational and educational purposes, nothing herein constitutes an offer to sell or a solicitation of an offer to buy any security or recommendation of any security or trading practice.
