EPISODE 178

Victory or Death? Patrick L. Young, International Man of Mystery, is Licensed to Pith

74 minutes · June 1, 2020

“Exchange Invest” delivers PLY’s pith, developed over decades immersed in markets, around the world each morning, cutting through the clutter in the “parish” of global bourses. Patrick’s take is a must read for exchange industry leaders and back benchers alike. He joined the pod from his perch in Malta to break down the markets’ response to COVID-19, his career arc from auto racing to fintech, and his most recent book, “Victory or Death? Blockchain, Cryptocurrency & the FinTech World.”

Speaker 1:

From the library of the New York Stock Exchange at the corner of Wall and Broad Streets in New York City, you're Inside the ICE House. Our podcast from Intercontinental Exchange on markets, leadership, and vision and global business. The dream drivers that have made the NYSE an indispensable institution of global growth for over 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 ICE'S exchanges and clearing houses around the world. Now, welcome inside the ICE House. Here's your host, Josh King of Intercontinental Exchange.

Josh King:

Ever since I started working for Willis Group, the British based insurance broker back in 2009, I've had to condition myself to the fact that key events affecting my job had a five hour head start in the workday. I wake up, for example, and there's already a raft of emails exchanged between my UK colleague, Rebecca Mitchell, and Stewart Williams, the President of ICE Futures, Europe on any number of issues emanating from Brussels or London. I find myself resistant to arising at three in the morning in an internal state of catch up.

Josh King:

I also catch up on my global history and the seismic shifts in the markets, courtesy of another reliable correspondent, the prolific Patrick L. Young. A guy many listeners may never have heard of, but serves for so many of us in the exchange business as an endlessly flowing font of wisdom emanating from across the pond. Patrick always begins his exchange in Best newsletter with a bit of history corresponding to the number of additions he's published since he started sharing his views with the world in this manner back in 2013. We learned today, for example, that issue 1761 coincides with the year when two earthquakes struck London, the first breaking chimneys and line house, and poplar, while the second struck Hampstead and Highgate.

Josh King:

Now, Patrick might also have noted that 1761 was the year when King George III authorized the transfer of Thomas Boone to become the Royal Governor of South Carolina, after proving to be unable to work with the local assembly as the Royal Governor of New Jersey. Now, if only ruling was that simple these days. At Patrick's current rate, in a few weeks we'll start moving expeditiously into more modern history, reminded as more issues of Exchange Invest role into our inboxes, of the years when Boston's zealots took to dumping tee into the harbor, or Captain John Parker's minutemen repelled 700 British regulars at Lexington Green under the command of Lieutenant Colonel Francis Smith, leading his Royal Highness's government to declare Massachusetts to be in a state of rebellion. We know where the story goes from there.

Josh King:

That kind of wisdom only represents the first few lines of Patrick's daily musing, which spans the globe from who will replace Charles Lee as Head of the Hong Kong Stock Exchange, to what will become of the glut of oil currently threatening to overflow the storage tanks in Cushing, Oklahoma. In a minute, our conversation with the magnificent and mysterious Mr. Young, who aggregates the biggest stories in the market and layers them with his analysis honed over three decades, working with exchanges, derivatives and startups, his keen eye for what will come next in FinTech and how innovations like digital currencies will change market structure, makes his insights a daily must read appointment for many of the leaders of the modern financial firms. You'll get a delectable appetizer of that right after this.

Speaker 1:

Now, a word from Ron Delia, CEO of AMCOR, NYSE ticker AMCR.

Ron Delia:

Today is a really big day for AMCOR. We've been around for 160 years. After so much time, takes the passion and dedication of our people around the world, and it takes resilience. We have lots of that at AMCOR. Well, our aspiration is to be the leading global packaging company, and that means winning for our customers, our people, our investors, and the environment. We have a big pledge around sustainability. We really hope to change the world as we look forward. AMCOR, now listed on the New York Stock Exchange.

Josh King:

Our guest today, Patrick Young, is a serial FinTech entrepreneur and thought leader, who, among other ventures, is Chairman of the Blockchain Malta Association and the advisory firm, Derivatives Vision. As a trader and former stock exchange executive, Patrick was quick to identify the impact that our increasingly online existence would have on the financial industry, which he captured in his 1999 book Capital Market Revolution. Which examined how electronic trading, ETFs and digital currency would change the gets forever. He's published several additional books on FinTech, including most recently, Victory or Death?: Blockchain, Cryptocurrency & the FinTech World, which included a forward by our recent podcast guest, Jeff Sprecher, who's also on record as a daily reader of Exchange Invest. Welcome, Patrick, inside the ICE House.

Patrick Young:

Thank you very much, Josh.

Josh King:

This conversation has been long in the works. We're waiting for your international book tour, but one of the unexpected outcomes of the world going remote is we've been able to expand our guest pool from just visitors at our library at 11 Wall Street. This is our first international recording. How are things going in Malta?

Patrick Young:

They are fantastic. I have to say I'm delighted and honored to be in the virtual library of the New York Stock Exchange. It's an epic epicenter of capitalism, and it's just incredible. I'm here in somewhere where the city is merely 500 years old, which I suppose puts a lot of the United States in some degree of the shade. I'm in Valletta. It's a beautiful square-gridded city. It's not home to many people. It's about the size, for U.S. readers, of... well, if you take State Island, Manhattan and Brooklyn put together, that's about the size of this country. We've a population of just an under half a million, so about the population of Staten Island.

Josh King:

That half a million has certainly grown over the years. Was it the Island's growing reputation as a crypto hub that inspired your move to this 122 square mile archipelago? Or is it the defiant underdog culture, the scrappiness that inspired 2,000 nights hospitaliers and 4,000 inhabitants to repel the Ottoman Empire in the great siege of 1565?

Patrick Young:

Well, it's a mixture of a number of things. Actually. I've lived in 10 different countries around the world at different times. I was spending a lot of time between Monaco, another even tinier country than Malta, and Poland, where my wife comes from. I was looking for somewhere different to live, preferably somewhere a bit warmer than Poland, because much as I'm a huge enthusiast for the Polish nation, we were looking for somewhere new, interesting, and essentially pro-business, with good weather. When you're looking for those things, it's very difficult to find that around the Mediterranean, because there are a lot of countries here, which have had their financial problems during the course of the Euro crisis.

Patrick Young:

Malta benefits from being part of the British Empire. It's Anglo-Saxons law, so therefore it's very easy. I mean, if you are an attorney in New York, you can look at Maltese law and readily appreciate what's going on, the same if you come from the UK or any other common law country. Speaking English is a great advantaged. The people are really good fun. We have fantastic resources of fish, because let's face it, we're surrounded by more fish than people. Ultimately, it's an incredibly close traveling time to the rest of Europe. It's about three hours to London max. Therefore, you can be all the way around here or indeed in North Africa in less than an hour. Of course, that's provided, there are flights, which currently there are not.

Josh King:

As you talk about the lack of flights now around Europe, you're a self-proclaimed globe trotter, prolific conference speaker and market commentator. How has this unprecedented time of self-quarantine impacted your ability to connect with other industry leaders?

Patrick Young:

Well, of course, it's very interesting because for one thing, I haven't lived in a major financial center for a long time. The last one was probably London 20 years ago. Since then I've been living in places like Romania, Poland, Monaco, also living in Latvia and various other places, so I've been used to this sort of connectivity that we're having now. I suppose I've been living Zoom life for the past two decades. Therefore in one sense, it's been very interesting because suddenly I seem to be talking to more people than I ever was before, because when you can't go to the coffee shop to meet somebody, when you can't actually step out of your office and see somebody on the other side of the street, then, hey, everybody's the same distance over Zoom or some other telecoms conferencing software.

Josh King:

What propelled you and Mrs. Young to embark on this nomadic journey across all of these spots around the map?

Patrick Young:

Well, Mrs. Young is much more recent in terms of her nomadic excitement. We met in London about a decade or so ago, and then got married. For family reasons, she needed to be in Poland for a number of years, so we built a business there. She's very much involved in women in technology. She runs her own organization, Women On It, which promotes women entrepreneurs, women in technology, women in business around the world out of Malta. Certainly, she's enjoying this because previously she had lived in London, she'd lived in Poland. This is her first exciting opportunity to have, well, good weather. I mean, the wonderful climes of Malta cannot be ignored in any way, shape or form. In fact, we're having even a minor heat wave today. It's a lovely first day of summer for us. That's why it's good to be actually locked up inside for once talking to you, Josh.

Josh King:

Toby the pug also finds the weather agreeable?

Patrick Young:

Toby the pug absolutely loves this opportunity to live here. He was adopted by us just a couple of years ago. He's nine, 10 years old. People can catch him on my IPO video series, IPO Vid, which is on YouTube. He offers some very useful opinions, I think, in terms of calming people during these unprecedentedly volatile times that we've been living through.

Josh King:

You wrote on a Medium post last month about the changes you've seen in your business from increased reader feedback to greater use of video. What else has changed and are you planning to make any permanent changes to how the business runs moving forward?

Patrick Young:

Well, we've been very fortunate. We have a side office in Poland. All our staff there are well and thriving. We've been able to maintain digital contact as we usually did. It's been tricky for my wife because she's actually had some trips canceled, as well as myself. Our business will continue to grow. One thing I've noticed is that without a water cooler, suddenly the flow of information is much more difficult, and exchange of information is Exchange Invest. Exchange Invest is the exchange of information. That's what I always call it. Thus, we suddenly find that readers are flocking to us with higher engagement because we are the only centralized exchange of information that they can find.

Patrick Young:

Therefore, if you're looking at this world which fascinates us day to day, Josh, the parish of exchanges, we have become really the must read. That's obviously very exciting. It's very gratifying. It keeps us going 24 hours a day. I think the next step is going to be, we'll probably be actually employing people and adding to our payroll in order to add more multimedia as we go forward. As I mentioned earlier, we did some fun videos, which we do every day with Toby the pug, just trying to explain simple investing terms for the average investor who has been terrified by what they've seen with the COVID-19 closed time.

Patrick Young:

I think it's very important to manage to get that message out there. One of the things Exchange Invest is very engaged in is we are really, really proud of the sector that we cover, because exchanges have been spectacularly efficient during the course of the last couple of months. That's something that has to be said, not just of the New York Stock Exchange and the Intercontinental Exchange Group, but throughout the world of exchanges. Actually, uptime has been almost 100%. All of the major technological businesses have survived without a single flaw. We've seen actually amazingly volatile markets going to settlement absolutely perfectly, such as Brent Crude.

Josh King:

With everything in flux, Patrick, the one thing I can count on is your newsletter, Exchange Invest, hitting my inbox every day to provide some historical fact and plenty of the market commentary that we've already talked about. Why did you decide to launch the newsletter in 2013, and how did you grow it beyond what you've seen over the last eight weeks to become one of these leading information sources for business leaders?

Patrick Young:

It was a long process, Josh, but I had always been interested. I've been publishing online since 1994. In a different life entirely when I was a student, I used to actually be a journalist writing about cars and motor sport, and old car racing. Therefore it came naturally to me to contribute to different publications over the years. When the inter web thingy came along in the early 1990s, I was early to adopt that and we published a number of different periodicals going along, and I found that quite a fascinating medium. Exchange Invest came about as a confluence of things.

Patrick Young:

One was that when I ran a small exchange, and it was a microcosm of the New York Stock Exchange out in Romania, I noticed how poor the information flow actually was about the business. I could be sitting in Romania and unless I actually phoned up people in London or New York or Atlanta, and all the way around the world, I didn't know what was going on. In that sense, I realized there was a gap. I would say it was a gaping, huge, enormous gap, but actually the reality is it was a tiny little microcosm that was too small for established publishers. You can't employ journalists in order to do it because they don't necessarily have the domain skills of understanding the business of exchanges.

Patrick Young:

After a couple of years of sitting around and playing with it, and doing various other ventures, I realized that I was actually too infuriated by low standards of commentary on some areas and things that were just not understood in the world of the exchange, that I really felt I can do better than that. I can actually unify the world of exchanges and bring together 500 markets in 120 countries worldwide, and provide them with daily insights. They need also a touch of my pith, which is analysis, sometimes rather brutal but always, I feel educational. But delivering an honest take of how I view the development of those markets. More importantly, I really want to be positive. I really want to say good things about the business all the time, but sometimes it's complicated, as I suppose everybody's Facebook post has said at some point in time.

Josh King:

If you think back to the period, over 1761 episodes going back to 2013, what role do you think you and the newsletter have played in helping the public understand the discussions around these important and very complicated topics?

Patrick Young:

It's an attempt to try and make things understandable because exchanges and financial market structure, they're like lungs and kidneys. We have them, we use them, we think about them maybe once or twice a day maximum, but we just take them for granted. Exchanges are only a problem when they don't work. That's, as we've seen actually recently with, for example West Texas Intermediate and problems there, people really don't think about this business until something goes wrong. I suppose our job has been to be, I feel, a harsh, but fair policeman of what goes on, and also to enable a lot of discussion that helps smaller exchanges see that the very largest exchanges aren't perfect, although they are very, very good, and at the same time, to encourage dialogue throughout the industry so that people can achieve a better-best practice.

Josh King:

Let's dive into that specific topic a little bit. When discussing the recent news surrounding oil contracts and prices, you wrote that there was a lack of comprehension among the analyst community regarding WTI contracts. What can exchanges do to bridge the gap between their products, the analysts, and eventually the investors who use them?

Patrick Young:

It's very, very difficult, obviously, because the challenge of exchanges are that at one sense, they're incredibly simple businesses. I mean, they're an easy business model. Hey, 300 years ago, a group of guys all go, they sit underneath a buttonwood tree and they go, "Hey, I'll sell stocks to you, Josh, and you, Josh, will sell stocks to me, and we'll give it a name. We'll call it the New York Stock Exchange and we'll go from there." Actually, if we look at the model, the model remains the same to this day, even though a huge amount of it is computerized. What we really need to see though in the modern era is that a lot of people just switch off. I mean, people go, "Oh, it's complicated investment product."

Patrick Young:

I am naturally, and by training, a derivatives trader, and I know that immediately, that causes two thirds of the world population to go, "Well, that's too complicated for me." Yet, I would say to all of those people is just a second. You've spent the last two weeks trying to get to grips, if not the last six weeks, with epidemiology, with understanding COVID-19. Now, I am no biologist, but we've all read 500 articles. We've all spent... we're well on our way towards our 10,000 hours of understanding, actually, how these things work. No one's going to claim to be an epidemiologist and we're not all trying to be Dr. Fauci, but at the same time, derivatives are an incredibly important part of our marketplace because they effectively help us all to transact business.

Patrick Young:

Therefore, if you fly on an airplane at any point in time in your life, you're effectively a huge derivatives trader when you buy that ticket, whether you're buying it for Southwest Airlines or Ryan Air, or whichever airline in the world it is, because they're using those means to hedge their oil, to hedge the interest rates, to hedge the currency risk. Because let's face it, multinational airlines, they often deal in 50 or 60 different currencies every day. Trying to just reconcile that requires a lot of skill. That's why they have very keen treasury departments. Exchanges come into that by providing those services for them, and therefore being a fair and honest market at the epicenter of these products.

Patrick Young:

I think it's incredibly easy to fail to understand when you're within an exchange, that 99% of the people don't really understand what you're doing other than people stand up, and there's a bit of campanology when people ring a bell at the start and the end of the day, and there are all sorts of other things that happen on CNBC that's very colorful and prices whizz by, but nobody really follows what's going on. The issue also is that trying to explain the complexity of settlement is quite tough. I mean it's just the same thing as looking at the plumbing of financial markets. I mean, nobody, I think, in their right mind, wakes up in the morning and thinks "I must learn more about central counterparty clearing," but at the same time, it's such a vital epicentral product that is helping the banks of the world interact with each other, and the banks of the American nation interact with each other across the states.

Josh King:

As you're beginning your day, I'm curious when it begins in Malta, and you start the scan and you find all these links, what's your process for putting together the newsletter every day?

Patrick Young:

The joy, the absolute joy of putting together my newsletter, Josh, is that computers do a great deal of the heavy lifting for me while I sleep. When I wake up in the morning, I have a series of little bots that come in and report to me across my screen. They say, "We've trolled the world's news so you don't have to do it." I then have this distilled into a series of list, which are then worked through by myself and my colleagues. We start taking out... there are always false positives. Actually, when you're studying, for example, the world of exchanges, it's very tough because the word "exchange" comes up very often. Quite often, you'll see, for example, the President says something about the New York Stock Exchange. That's interesting.

Patrick Young:

The President was concerned about the Palestinian exchanges of hostages that are being negotiated. Not our business. Very important to the world. We very quickly get that down to... the AI itself has worked on a process of managing to reduce that to a couple of hundred headlines. We then take that. That will reduce to... ideally, we'd like to be down to 12 to 20, and most days, it tends to be more than that. We then very quickly read at different publications. Sometimes we've read things the day before that we already know will be going in. Sometimes we've got embargoed materials and so on from exchanges, which we will have read. Then it really is a very, very rapid process of pithing.

Patrick Young:

I mean, I just shoot from the hip and I have to be very fast and I have to very quickly collate a lot of things together. We have a series of databases which we can use for fact checking, but time is limited because you've really only got a couple of hours in the morning to actually do all of this process and get the newsletter turned around. Often, it's a little bit like chess playing. If you look at average chess players, they look all around the board and they're very, very interested in everything that's going on. If you look at the grant masters in chess, they're very, very focused on exactly where people are moving right now. I wouldn't like to say I'm a grant master of exchanges, but my focus is very much on those two or three squares in the board where the action is at this juncture, but obviously that's very difficult because we have to jump through a series of product sets.

Patrick Young:

We're looking at 500+ exchanges markets and clearing organizations throughout the world. We're in 150, 160+ different countries. In fact, there are only 27 countries in the world that really don't have stock exchanges at the moment, plus a few that obviously are not going to have them for the time being, I would imagine, such as North Korea. Therefore, it's a very, very fast moving gallop through all of these things, add together the pith. We have one opportunity to reread it and then it goes and we set it, and then we read it very quickly again, and we send it on. In process terms, it's rather like old fashioned news media doing a newspaper at the turn of the 20th century in terms of the stress and excitement, but we do it all digitally.

Josh King:

But the pith and the accuracy combined with the shooting from the hip. I mean, I find when I read your stuff, as if you are channeling, really, the CEOs of these exchanges, because you are so pointed, maybe like the chess grand master, on exactly what the debate is at that particular moment. I also have to offer a little bit of concern. Having now read you for over two years, you're rapidly getting... you're at issue number 1761. You're going to be at 2020 pretty fast. What do you do when you get ahead of history?

Patrick Young:

Oh, well, when we get ahead of history, that's fine. We've already got a great plan. I'm not going to share it with you right now, but in terms of the PLY pithing, I'm moving it very quickly. Yes, it's very concentrated. It's quite exhausting. I'm usually a zombie around about 11:30 in the morning and quite humorless for the course of the next hour, because it does take a lot of effort, but it's like anything. I mean, you talk about the Malcolm Gladwell thing. I've definitely done my 10,000 hours in exchanges. I've visited exchanges the world over for 20, 30 years.

Patrick Young:

I started as a derivatives trader on the floor of the Life Exchange in London, which at that stage was in the Royal Exchange building, which is a hugely historic center of commerce and trade that dates back several hundred years to the times of Thomas Gresham, who's a very, very famous trader in the city of London. Equally, that business has now become part of ICE. My first book talked about how I felt exchange is a model were going to change. That was driven because when I was trading derivatives on the floor of the Life Exchange, and also from an office, and trading OTC derivatives and so on, I got very interested in the mobile of the business. I'm just a naturally curious, I suppose, nerdy person.

Patrick Young:

I'm an autodidact, if you want to put it that way. I love finding out what's behind things. I like taking them apart and understanding how they work. I studied exchanges with a fascination, and then suddenly discovered about 10 or 15 years, actually the number of people who've been bothered to study exchanges globally, as I have, and visit all these exchange around the world are few and far between. It was a perfect idea to bring that to bear and start pithing the Exchange Invest daily in order to deliver insights that can build a better marketplace for everybody.

Josh King:

Long before we get to edition 2020, let's dive into some of the issues that are revolving around the 1760s, and maybe over the next few weeks. Let's start here. ICE Benchmark Administration operates a number of energy and other benchmarks, including [Libor 00:25:15], Brent and Sonya, just to name a few. You said that benchmarks, and I'm going to quote you, "don't appear to be thought through or indeed consistent with either banking or the digital age". What are your thoughts on bringing future benchmarks into operation and how should they adapt to today's digital world?

Patrick Young:

Well, let's just take that back a step for a moment, because you mentioned ICE's benchmark administration business, and there are others around the world. One thing that's happened here is that benchmarks as a whole were a sleepy hollow, which were still being calculated in a fashion that would not have been unbecoming of the merchants of the Amsterdam Stock Exchange in 1720. If you go and read that great book, Confusion de Confusiones by Joseph de la Vega, it's about a Jewish merchant...

Josh King:

It's on my night table right now, Patrick. I promise.

Patrick Young:

It's a great read. It is just such a good read. Actually, if you, like I, worked in the world of floors exchanges, 300 years later, you could read the book on your nightstand one night, come into work the next morning and you'd go, "Wow, that's the guy who was in the book last night, who was trading Spanish government bonds," or something. In that history, people have taken benchmarks for granted. I think there's a huge difference between the analog age and the digital age. Although we are 20 years into what I call the capital market revolution process, which was my original book in 1999, what's fascinating is we've still so much work to do. Intercontinental Exchange, the incredibly boring database company, as Jeff Sprecher would love to call it himself, that is true because in the 1980s, think about oil.

Patrick Young:

Well, the truth is we only really had a market where you could have pits, and pits involved lots of people standing around shouting at each other. Although they look incredibly disorderly when you watch a movie like Trading Places or something on Netflix these days, the simple reality was for an analog era, that delivered the best price. Now, clearly in the modern day, producing lots of electronic nodes that all go meet somewhere in a data center in New Jersey or wherever it is in the world, makes for a better market because hundreds of thousands of people can connect at the same time, including me from Valletta and Malta, et cetera.

Patrick Young:

Therefore, benchmarking changed because if we look at oil, in the 1980s, when these contracts were first created, and the two major contracts were West Texas Intermediate and Brent Crude, the reality was that what people were looking for in the new world of benchmark was something that they could more or less lick their thumb, waggle in a generally builder like direction at the wall and think, "Yeah, that resembles the oil that we're getting out of the ground." Of course, if you think about the oil business, I mean, what's fascinating is that West Texas Intermediate and Brent Crude achieved one incredible thing, which was they removed the political risk dimension from the oil business.

Patrick Young:

Because a lot of people nowadays seem to forget that until 1989, we had that Berlin Wall thing, and the Round Table in Poland brought down the Soviet Union and the Warsaw Pact, and was a huge opener for free markets the world over. But before then, vast amounts of oil reserves were actually being held in totalitarian countries. West Texas Intermediate and Brent Crude, they were great things because they were ultimately not going to fail as a result of Soviet influence. Or at least, they could have fallen because the Soviets invaded the UK, for example, but at that point in time, we would've all been in the Catskills or the Cotswolds knitting our own sweaters and trading beans, because it would've been the end of our civilization.

Patrick Young:

Benchmarking in the digital age has become really interesting, because in the floor trading era, you could look at one thing. Because floor trading is like a Zoom call with 50 people. We're looking at each other now. We would be looking at 50 or 100 people, and all of the time, it's like one mega poker match. We're trying to see what tick they've got. What's going on? "Oh, his eyebrows lifted. I think he's about to sell. We're going to trade." You can only concentrate on one market like that. Nowadays, we've got digital markets, digital screens. That enables us to have two or three or four, or even more screens on our desk.

Patrick Young:

Those screens therefore mean we can have more contracts, which means we can have more benchmarks, which mean that if you're sitting in, for example, Abu Dhabi, the Abu Dhabi government and the Abu Dhabi National Oil Corporation go, "Well, actually, why is our oil benchmark not being traded, given the fact that a significant percentage of the world's oil is based off that benchmark?" Therefore, you get ICE Futures Abu Dhabi, which is a very exciting business, and I know has been the subject of one of your previous podcasts. Therefore, we've gone into a multi benchmark world. In the same way that television, and particularly for Europeans, television in the 1980s was maybe four or five channels, then we all got onto the satellite cable bandwidth thing, and we got thousands of channels. Nowadays, well, kids don't even watch television.

Josh King:

In addition to the proliferation of benchmarks, there is the proliferation of data feeds. Recently the SCC has asked exchanges to improve these public data feeds. What are your thoughts on market data and its role as a crucial commodity that keeps the markets open and functioning?

Patrick Young:

Well, market data is obviously vital, because what do we rely upon an exchange to do? We go to an exchange because an exchange is not a merchant in its own right. The exchange is simply an independent provider of a series of functions that allow people to buy and sell stuff. They do that within rules. It is essentially a level playing field for all of the participants. Therefore I, a member of the retail trading [inaudible 00:31:04] on [Walsh 00:31:05] can take my position and trade on the New York Stock Exchange, right alongside these mega investors, the George Soros' and people like that.

Patrick Young:

That's a great leveler because you had a great podcast a couple of weeks ago with Kevin O'Leary. I mean, Kevin O'Leary has a fantastic business in public markets, but he also does a lot of stuff in private markets. Now, in private markets, Kevin O'Leary has a big advantage because he's Kevin O'Leary and therefore people take his phone calls where they don't necessarily take phones calls of Patrick Young, understandably. Exchanges, as a level playing field, generate data. Computers are really good at processing data. Humans are not really good at processing data in the same way. In fact, humans are basically pretty binary.

Patrick Young:

I mean, we start at fight or flee, and then work our way forward. No matter how many PhDs a human can manage to get, they're still basically a dumb terminal compared to actually the average cell phone. Therefore, market data use becomes exponential because in the old days, think about that floor. On the floor, you wrote everything on a card, on the futures exchanges. You then handed that card to somebody who then typed... wrote out another form that went to be settled, that then got typed up, etc., etc. Obviously, there was a series of minutes before that happened. Right now I click a mice, I enter an order, the order goes straight to the exchange in a matter of seconds or less, and it generates a huge amount of data that you simply couldn't do as a human.

Patrick Young:

I mean, literally in the old days, nobody paid attention to what shoes the person was wearing as they were running into the pit, but actually, modern data, they can generate something that says, "Oh, this is interesting because this came from a computer running the following operating system." Of course, the more trading data we have, the more people will look for patterns. Technical analysis is a very, very vital thing for traders the world over. Therefore, we will look at charts and we will look at all sorts of weird, wacky and wonderful things. Markets generating more data is a great thing.

Patrick Young:

That's a good thing because it allows us to get more insights. It allows us to look at more possibilities, but at the same time, of course we have to be sensible because nowadays markets are generating pretty much as much data every day as all markets generated from the origin of exchanges in ancient Phoenicia. So several thousand years before Christ, until about 1760, if not later. You're talking about a huge amount of data every day. Now, when it comes to the issue with data, there's a always a slight challenge because obviously very large traders, in a way, feel as if they've helped create that data. They have, because their orders are in there.

Patrick Young:

Therefore you get a huge number of intermediaries and banks and so on who say, "Well, hold on a second. That's our data that we created." Then the exchanges say, "Well, hang on a second. We did a lot of processing to that data and ran it through several hundred miles of cable at our own expense, and through several processors. Made sure it was correct and then brought it back to you." Essentially what we seem to have in the USA at the moment is a lot of haggling over price.

Patrick Young:

Now, that's partly delivered also because it has to be said in the past, the U.S. Securities and Exchange Commission has an interesting, almost Soviet style, one has to say, adoption of centralized platforms, and I'm not necessarily sure that they have always been for the good of societies. Some things have worked, some things have not. Right now in data, you've got this incredible situation where the exchanges do a lot of hard work to process everything. At the same time, the banks and the brokers, they say, "Yeah, but we built that data," and it becomes a little bit like the farmer who produced the wheat in the first place, going back to the bakeries and saying, "Well, my bread should be a lot cheaper because that's my wheat."

Josh King:

Talking about production of wheat, five year plan, the Soviet style of adoption of platforms, open access has been critiqued by even our Chairman, Jeff Sprecher, as a measure that would reduce rather than stimulate competition. What do you think?

Patrick Young:

Well, I think it's incredibly difficult when you suddenly open wide the opportunity for someone to take a stake, and to effectively walk in and take somebody else's business. This always feels to me a little like when you go to South Africa, there are a lot of stores and there are very wide pavements. There are guys who turn up in the morning and they roll out a carpet, and on that carpet, they set down a whole load of goods and they then try to get you to buy those before you go into the store. Of course those guys, they've got the great advantage that they're not paying for their sidewalk. They've got a carpet as they're overheads. They don't have a store and lighting, and all of the other things that you need to have when you're a store, and therefore stores are not unreasonably going to seek to sell at a slightly higher price.

Patrick Young:

I think that that's where we end up getting to with the sort of an open access argument, because open access arguments often revolve around the lines of, "Yes, well, I'd love to be a competitor, so therefore I could do really well." But then depending on where you're looking at the open access, there are a lot of things where people have invested a huge amount of capital. If you're not willing to spend a proportion of amount of money investing in that capital, it seems quite unfair. It's rather like turning up and saying you're a football team and football team A only uses their stadium every Sunday evening. Therefore, we demand the right to use it on a Saturday afternoon. Well, that has a huge number of risks when you're not really paying for the stadium, particularly because you might cut up the grass and leave a pitch that's just not going to be viable for Sunday night or Monday night football.

Josh King:

Related to open access, Patrick, Brexit has recently resurfaced with the EU pressing the UK to engage in talks concerning access, for example, to the UK's fishing waters. Other topics that need to be addressed at the negotiating table include UK's desire to secure agreements on electricity and gas trading, as well as cooperation on nuclear energy. What are your thoughts on the negotiations and Brexit in general, given the state of the world in which we're in right now?

Patrick Young:

Well, I must declare I was originally a Brexitier. In fact, long before that, I was a huge devotee of the European Union. The difficulty was when I got close to the European Union, I realized its many flaws. I am a passionate European. I believe very, very strongly and would love to see nothing better than strong European nations. However, for me, the reason why Brexit was a good idea was because it allowed the fifth or sixth largest economy on earth to become independent of what had become a program that was essentially very good at paying for things with other people's money, but wasn't actually so good at encouraging growth. The problem with the European Union remains this thing called the precautionary principles.

Patrick Young:

The precautionary principle is you must first do no harm before you go forward. Now, that's a great idea if you're a doctor. I believe thoroughly in the precautionary principle for medical practitioners, although even there, I can see how in certain emergencies, you may actually have to do something that actually hurts your patient in order to cure them. With the precautionary principle in mind, the European Union now has reached a tragic point actually, because the reason I was a Brexitier in 2016 was because I could foresee that the Euro was not a viable currency because it's not effectively a political mutual entity, like the U.S. dollar.

Patrick Young:

The U.S. dollar is owned by the American people in essence, and it's divided with the Federal Reserve being the central bank of the USA. That is not the case with the Euro, which just happens to be really a payment layer that unifies everybody in a similar currency. When you see there's no debt mutualization, i.e. the Germans who have got less debt than, say, the Greeks, per head of population, aren't willing to pay for things, it becomes tricky. I'm not saying that that's a bad move by the Germans. I can understand why they don't want to see their thrift falling apart. However, you can see how very rapidly things could fall apart, rather like a really, really bad student night out, when they discovered that actually they bought 10 pitchers of bit and they only have pulled eight pitchers of beer in terms of hard cash in the first place.

Patrick Young:

Where we're at, at the moment, is a tragic situation. The Brexit movement wants a strong Britain and we want a strong Europe, but the European Union has suddenly ended up having said that lots of things it does can never be changed. Borders must be open. There must be free movement of people, etc. Well, we lost all of that within a matter of days, once COVID-19 came down. There are huge problems with how they're going to fund Europe going forward. That's very, very worrying, and that's a worry, even if you're sitting in the middle of Colorado and think that Europe has nothing to do with you, because sit on your porch and sooner or later, there's going to be a Mercedes or a VW go by. We are very much an interconnected world.

Patrick Young:

The rest of the world is looking at the UK and going, "You know what, UK? Anglo-Saxon law, free trade, big financial center, and you're pretty good at doing the whole international thing. Indeed, you have a Commonwealth to this day of 60 something countries. We'd like to do a trade agreement with you. We would like to do a free trade of agreement with you." Therefore, negotiations are open with the USA. The President has said he's very eager to make that work. Frankly, I think that even becomes bipartisan. I cannot see that if Joe Biden's elected president, he's suddenly going to go, "No. In the middle of a recession with however many people are unfortunately unemployed, come next January at Inauguration Day, I don't want to accelerate the idea of more trade and people being able to get more jobs."

Patrick Young:

Japan, negotiations are opening there, and equally Australia, Canada, New Zealand, they will be in very quickly. That leaves a problem because the European Union essentially has a trade surplus every month of about $100 million with the United Kingdom. I think the European Union, at this point, where its economy is hugely impacted by COVID-19, arguably even more impacted by COVID-19 than, say, the USA or the UK, certainly it's no less so than either of those economies, they've really got to get together and start negotiating, maybe more pragmatically, like me, an entrepreneur, rather than negotiating like the politicians they are.

Josh King:

With the precautionary principle in mind about the number of pitchers of beer to be consumed after our conversation, after the break, Patrick Young, author of Victory or Death?: Blockchain, Cryptocurrency & the FinTech World, and I will discuss his latest book and how his career set him on the path to go from budding racing event planner to a leading voice in FinTech. That's right after this.

Speaker 1:

Now, a word from Charles Goldman CEO of Asset Mark, NYSE ticker AMK.

Charles Goldman:

Asset mark is in the business to help independent financial advisors serve investors. We power that independent investor to do that work. We've differentiated our platform on technology and on investments, but especially the service relationship that we have with our advisors. We chose the New York Stock Exchange at Asset Mark because of the great reach that the New York Stock Exchange has. We really appreciate the value brought to our IPO. Asset Mark is listed on the New York Stock Exchange.

Josh King:

Welcome back. Before the break, Patrick Young and I were discussing some of the topics he's been covering in recent weeks in his widely read daily newsletter Exchange Invest. Now, Inside the ICE House is, first and foremost, a podcast about finance, but if you look back at our 170 episodes or so, you'd see an unexpected secondary theme, something Patrick talked about earlier, referencing in our conversation, automobile racing. We regularly host the winner of the Daytona 500 as they take the checkered flag. Recently, Jeff Sprecher spoke about his tentative foray onto the track, but Patrick, your first business was planning racing events in your native Ireland. Here in the U.S., racing as big business. What's the market like in Ireland?

Patrick Young:

Well, the market in Ireland is quite remarkable because the number of events that we've had per square mile are enormous. In fact, the origins of British motor sport is the 1903 Gordon Bennett Trophy Race. Which was James Gordon Bennett, who was in fact a famous New York bachelor who ran essentially the forerunner of the International Herald Tribune newspaper, and then went off to Paris to live for various reasons. He set up the first brawn pre-motor racing events, which were events between nations at the turn of the 20th century. In 1902, Britain had won those events, but the problem was, and this was before anybody thought of the idea of tracks or circuits, the British law did not allow you to close the roads for racing.

Patrick Young:

The government of Ireland... and at that point in time, the United Kingdom and Ireland were all very, very closely allied within the British Empire. The government of Ireland came forward and said, "We will host it." They hosted it in a place called Athy in 1903. From there, actually we have had a panoply of motor races and a panoply of rallies around Ireland. The Circuit of Ireland Rally when I was a boy was one of the biggest events in Europe for the world of rallying. Before I was born, we had a thing called the Tourist Trophy Races, and they took place in Ireland between 1928 and 1936, very close to where I was born, only 10 miles away. And about 10 miles in the opposite direction, they went to Dundrum, and all of the great names of Motorsport in the 1950s and the factory Mercedes and Jaggers and Ferraris, and Maseratis all raced there.

Patrick Young:

I suppose it was inevitable... my father was interested in racing. He'd raced a little bit in the 1960s. He was an official and he was actually the clerk of the course, running the races in Ireland, or at least in Northern Ireland at our local circuit, at a little tiny former World War II airfield called [inaudible 00:45:31]. I was fascinated by cars from a very early age. My first experience of speedy motoring was... and this is such a ridiculously Irish story. I remember being in a very old MG saloon, sitting on a bench seat between two adults in the back who were essentially holding me propped upright, what the nephew of Samuel Beckett, the great playwright, tried his hand speeding around the race course just after the day's racing had concluded. From then, I was hooked. By the time I got into my teens, I saw that old racing cars, historic cars, those that were built between 1945 and 1970 at that stage, were being ignored.

Patrick Young:

I spent a school holiday looking for where these cars were, and lots of the drivers, and the owners said wistfully, "If somebody put on a race, we would love to try it again." Now, without actually doing any of the technological things that one would do today in business planning terms and sorting out how realistic it was that these people were going to go racing, etc., etc. I just jumped forward and I organized a series of races for several years while I was still at school, which were the first events for old car racing and old racing cars in the country. From there, I ended up becoming a part-time car journalist when I was at university. I wrote for most of the world's major car magazines. To this day, I find myself an occasional commentator on motor racing and old car racing, whether it's on television or indeed at the only historic car racing we have every year in Malta, the Mdina Grand Prix.

Josh King:

My good friend, Evan Walker, owner of a 1972 Ferrari Dino has it up here in the Catskills, sent me a photo yesterday of being pulled over by the local sheriff who Evan was concerned, did he not signal when he made a right turn onto South Street, or what was the problem? The sheriff said, "No, my business is exporting American muscle cars to Europe, and I just wanted to check out what you have." Even in the Catskill, the Dino is a very popular car.

Patrick Young:

Well, look at the Catskills. I mean, you're not that far from the other side of the Catskills. You've got Watkins Glen where the U.S. Grand Prix used to take place over many years. My boy, hood hero, John Watson, who was from Belfast, used to race, etc. Everywhere you go in the world, there's an interest in motor sport. Of course, the one thing about, well, Ferrari Dino's or motor racing, is it's a fabulously expensive business. I suppose that's how I got into the world of investing because I started asking people, how did they come to afford these exotic and interesting cars? The one thing I realized very quickly was I better try and learn something about money. Here I am on the New York Stock Exchanges inside the ICE House several decades later.

Josh King:

How did you transition from cars into finance, and are there any similarities or lessons that can be learned and applied from both fields?

Patrick Young:

Thanks to more my entrepreneurial background and doing things, and also being able to write, I found myself a job in an inter-dealer broker. They were called the Money Brokers in those days, talent in Tokyo. I've got to say, in some ways that felt a little bit like National Lampoon's House of Finance, rather than some of the more professional and polished organizations that one might see today. I suppose the key issues are that you've got to be very sharp, have reasonable reflexes and a clear understanding of risk. I mean, I noticed that Jeff Sprecher was talking about Mario Andretti and he said, "Yes, one of the great things about Mario Andretti was that, clearly, he was a lot braver than the average person," but I think also you've got to allow for the fact that there is a huge amount of risk understanding going on.

Patrick Young:

Thus Fangio won the Monaco Grand Prix once in the 1950s because he'd studied the postcards the day before, and noticed what it looked like to come around this corner to grand stands full of prides. When he came around that corner, the next day, he noticed something was wrong, and what he suddenly realized was he couldn't see people's faces. He could see the backs of their head. He slowed down, everybody else ran into the wreck. He worked his way through the wreck and went on to win the grand prix. There are a lot of ways in which you've got to use some out of the box thinking in order to really manage to succeed in motorsport. I was always fascinated by design and how people engineered their cars.

Patrick Young:

Certainly if we look at the history of a company such as Porsche, it's absolutely stunning, the ways that they were innovating over time, sometimes incredibly riskily. But at the same time, this endless thirst to go faster. In the case of Porsche often to go faster, but to do amazing endurance events, five, six, seven day rallies, the 24 hours of Le Mans. That led to remarkable innovations in the way they were able to do business, and also how they were able to build a better road car, as well as building a faster racing car.

Josh King:

Talk about your transition from the racetrack into little brokerages. I think I made my first stock trades on the nascent E-Trade system when I was in the white house in the 1990s. Fashioning myself as an aspiring, but ultimately doomed day trader. You were an early adapter of online commerce, Patrick, going as far back as 1994. What made you interested in the interwebs technology and eCommerce?

Patrick Young:

Well, I've been using computers since the 1980s. Computers nowadays aren't as powerful as the average smartphone. Certainly actually aren't even as powerful as the average smart watch. I was just intrigued by technology and how that would have an impact upon us. I could see that network technology really made a difference. Because having been involved in Motorsport over the years, having been involved in finance, it was suddenly really fascinating to find that I could sit at home and connect with people around the world as easily as we'd be able to do in a brokerage, just a number of years earlier. The difference being, of course, the brokerage was paying for a direct line to the floor of one of the Chicago exchanges or the New York board of trade. That was costing it $7,000 a month or something like that.

Patrick Young:

Whereas now for literally the cost of a local phone call, you could suddenly be online. I saw that as a very, very interesting dynamic in how we could advance the presentation of information. Equally I saw that very quickly as being a way that the exchange in financial industry was going to have to change. That really in '94, '95, '96, I was banging the drum extremely passionately for why analog financial businesses and particularly exchanges needed to get online. They needed to embrace the digital world, because that was going to lead to a flattening of cost, but an unbelievable amount of distribution that would allow them to do volumes that were simply impossible to conceive all during the, [inaudible 00:52:29] era. And of course the financial industry essentially completely ignored me and told me I was stupid.

Josh King:

I mean, eCommerce has continued to grow since Dot Com boom, and in the midst of the pandemic has reached percentages of the economy, not expected to hit us for several years. I've bought more or perhaps useless stuff on Amazon, eBay, Etsy and Wayfair in the last eight weeks than I've bought in the past two years. But we were talking earlier about all the fresh fish available to you in Malta. I've also bought loads of fresh fish from far away, Portland, Maine, thanks to the website of the Harbor Fish Market, and also plenty of fresh meals from a far thanks to Goldbelly. Where do you see all this going in the next five to 10 years based on what we've really been seeing in the last three months?

Patrick Young:

Well, I think the big issue is a lot of companies have been doing digital, but people who've been working at home during the course of COVID-19, they're living digital. I think therefore I call myself one of the members of the bold generation, because I was born analog, but I'm living digital. It's nothing to do with how much hair I may or may not have on the top of my head. I think where companies are at noise, they've got to be living digital. And the biggest problem we face, and the biggest problem we face, particularly in a lot of conservative areas in for example, finance is a lot of lip service towards doing things digitally, but actually not waking up in the morning and thinking this is the best way to go.

Patrick Young:

I think it's fascinating what you are talking about because actually what are you doing when you interact on the internet. In essence, what you're doing is using the greatest classic model of commerce in history you're going to a series of exchanges. Because when we use Uber, when we use Airbnb, when we use Amazon... I know when there are lots of people at conferences, they stand up and they go it's really amazing, I mean, Airbnb, they don't own a single apartment and Uber, they don't own a single car. I go, "Well, yeah, the New York Stock Exchange doesn't own a single stock. It hasn't owned for 300 years since it was formed a single stock because it's an exchange." Very much one of the things that I think businesses have to get mindset of understanding is how they can manage to collapse all of their costs by interacting in a exchange style fashion.

Patrick Young:

How they can be selling online. I particularly love the story that until recently, until COVID-19, our nearest carryout takeaway restaurant was transplant laden haven of the locals, which I must say I would not touch. Whereas now actually our local carry out in COVID-19 has a Michelin star. Why does it do carry out? Simply because they can't open the restaurant. They've pivoted with Gusto. Ultimately digital is something we have to be living rather than thinking about as part of the strategy. And if you are not living digital, you are at a fundamental disadvantage in any line of business.

Josh King:

We now got to your first book Capital Markets Revolution. How did the market react to the ideas that you were putting out at the time and how has the thesis held up over these past 20 years?

Patrick Young:

The reaction to Capital Market Revolution, which was published on the 1st of July, 1999 in a lovely room of the British Library was quite incredible. A lot of people were in utter denial and huge numbers of people were very eager to tell me that it simply would not happen in their patch of the market. There were vast numbers of people who were arguing floors would remain the utterly dominant way of being the transactional business of exchanges. Lots of other arguments were thrown up. Actually it was quite funny because I "enjoyed" a series of lunches with people at that point in time, which mostly felt a little bit more like the financial industry, trying to do the Sopranos. Rather than being a pure opportunity to exchange thoughts.

Patrick Young:

Let's put it that way. There was closed thinking in huge areas. People were in, I think, such a degree of terror that they felt a little bit like the end of 1984, the Orwell novel. Actually, if somebody had been putting the metaphorical career bullet in their back, they would've been relieved, not having to think about what was going forward. But at the same time, it was very interesting because, the people who supported the Capital Market Revolution thesis were not necessarily young thrusting people. They were at all levels and understandings of the financial business. There were a lot of very senior managers who got very, very involved in trying to understand better what they needed to do to change their business. Of course, then we got into the whole world of the technological development of product and the expansion of the network.

Patrick Young:

Now you ask the question, how did Capital Market Revolution, hold up over the course of the last 20, 21 years? And actually shockingly well. I wrote the book hoping that 30, 40% of it would still be relevant within about 10 years. I think we can still argue that 60, 70, 80% of it is relevant today. In fact, what's so much fun is when you give it to the average hipster with his Frappe Moya solo, chino latte, whatever it is that he's got from some suitable hipster Café Entrepot they look at it and they read it and they go, "Well, that was all obvious." And you smile sweetly and you go, "Well, actually, you needed to be there at the time because when we look at history going back, yes, of course it's all obvious." That nice Mr. Daimler invented a car. Then some guy called Henry Ford and Detroit.

Patrick Young:

He gave up building bicycle things and said, "Let's have that Model T and we'll build that." Nobody bothered to think that actually they reached T in design terms because they run most of the way through the alphabet before they really hit a winner. Therefore, it's the same thing in this world. People don't look at history and really understand quite how volatile the environment may have been in terms of what the changes are. However, looking 20 years later, what has been the most fascinatingly exciting thing to see? That was, I was on a trip to London when really the markets were totally kicking off with COVID fever. I got just back to Malta before it was closed down. When I was in London at that stage, I could look at the markets. I could see them doing volumes that were exponentially larger than the volumes that markets were capable of doing in the 1990s without a hiccup.

Josh King:

When Kellyanne Conway, President Trump's advisor talked about alternative facts, sales of 1984, spiked back to the top of the New York Times, best seller list. I don't know exactly where your current book, Victory or Death?: Blockchain, Cryptocurrency & the FinTech World is right now in the best seller list. It looks at the future of financial companies, such as exchanges. Tell us a bit about your outlook for the business and what you're writing in Victory or Death.

Patrick Young:

Victory or Death is not a purely bleeding edge moving forward book as Capital Market Revolution was, but it's trying to fill in some of the gaps of what went on. Therefore you've used many great political analogies, Josh and I know you used to work in the white house under President Clinton, and it's a fascinating career history for you. But when you think about it in financial markets terms, who's the greatest president in the history of the United States of America for financial marketing infrastructure? That is a man called Richard Millhouse Nixon. Now Nixon is someone who, when I'm looking at this beyond the pure play world of exchanges has a somewhat controversial pedigree, and we don't need to get into that today.

Patrick Young:

But what Nixon did was he was the man who drove the deregulation of the sleepy world of Wall Street. It was something which Mrs. Thatcher then adopted in 1986, 11 years after the somewhat appropriate May the 1st, the Pan-European dive Socialist indolence 1975, when Nixon abolished the idea of fixed commissions. Now talk to the average stock trader today and tell them, "Well, the reason you have E-Trade today is actually because in 1974, you had to pay 1% for your stock trader. People who are using things like Robinhood, they don't think they're paying anything for their stock transactions. By doing that, and by taking America off [inaudible 01:01:05] he revolutionized the world of finance because the financial world could no longer think about getting 1%. If it could no longer think about 1% of income, it had to find new products.

Patrick Young:

Therefore it had to adopt the ideas of prescient geniuses, such as Professor Dr. Richard Sander who was inventing financial futures at that point in time. Victory or Death brings together a very broad arc from the ancient world through to the modern discussing a series of key factors as to why they're important. It outlines the understanding of how the exchange is in fact the epicenter of what's going on. It's an attempt to try and help people get on with the financial world and that Victory or Death has got nothing to do with disease. It's actually to do with the very much as I see it, career binary trajectory. If you're not living digitally, you're going to be dead in career terms, in business terms, whatever.

Patrick Young:

Therefore, I try to explain how the blockchain is changing the world in terms of effectively, it's enabling the biggest financial change since double entry, bookkeeping. Double entry bookkeeping, being something which was invented by a man called Benedikt Kotruljević. Kotruljević's original book, the book of the Art of Trade... Funnily enough, the oldest copy of it that has ever been is about 500 meters from here in the ancient library of Valletta of the Republic of Malta. Think about this way, a child is born today in the era of COVID-19, they're going to live to be 130 years old. Their world is going to be unlike anything we've ever seen.

Patrick Young:

They're probably not going to have a driving license because by the time they reach 16, 17, 18, it'll be driverless cars. They may never actually have a conventional bank account, because while banking is everything, actually the bank may be nothing. That's a 500 year super cycle we discuss in the book. If you're taking that child going forward, the world that they're being born in is like nothing else. They are going to end up using something like an Exabyte of data during the course of their lifetime. Now bear in mind the fact that most people in human history, certainly up to 1761, barely managed to use more data than would've been the storage capacity of a rudimentary computer in the 1980s. By the time you reach the '90s and the 2000s people are getting towards gigabyte usage.

Patrick Young:

Now we're at the point where they're going to be using Exabytes, petabytes, huge, huge amounts of data. That's going to be driving a world where the reality of the physical is going to be very, very close to the enhanced AR/VR of the world. Which may also be a very useful thing if they have to spend a few weeks working from home due to the outbreak of some sort of a virus. Victory or Death is tying together the way that ancient methods of commerce stocks, bonds, commodities come together in a digital world. How cryptocurrency impacts upon that. How the blockchain in the whole new way to look at accounting, settlement and indeed every possible process of business, and therefore understand better the ways that we can profit from the future.

Josh King:

Talk a bit about the importance of cryptocurrencies and blockchain to the financial markets and to the exchanges, not in 2020, but maybe 2022, 2025.

Patrick Young:

Let's go for the blockchain first, because the distributed ledger is a mechanism by which we can deliver trust across huge amounts of the world. Therefore we can use things like RFID tags and other things. We can affix those two barrels of oil. We can have those within super tankers. We can see everywhere our shipment is going. Obviously that's something which is already happening. A friend of mine bought a Ford Mustang and had it delivered to Australia last year. Boy was he disappointed when that ship decided to go land in New Zealand for a couple of days, instead of going straight to Sydney, but he was monitoring it on the internet. Of course, with a distributed ledger and you can have a centralized, trusted environment. That's something which of course exchanges are good at doing, which is providing a trusted environment.

Patrick Young:

It delivers lots more data, which in itself spins out a whole business opportunity. Think about auditing, think about accounting. It is possible in old fashioned accounting world that you can make a mistake on a database one day to the accounts and that won't be picked up. It'll just go there and sit there forever. If you have a blockchain that records every data entry, very quickly it becomes much more difficult to go back and change that subsequently. Where does financial fraud emerge from? Financial fraud emerges from people quite often taking the books, cooking them, and then reinventing them as what was the truth. Blockchains remove that. Real time auditing is going to be upon us. That's a great advantage. The world of cryptocurrency is a fascinating one because we all talk Bitcoin. But what actually is Bitcoin?

Patrick Young:

I spoke at one of the very, very first Bitcoin conferences in Europe. It was in Poland in 2013 at a university, also lectured at the Nicholas Copernicus University in fact. There I talked about how Bitcoin is effectively the Copernican revolution in finance. It moves the power of money away from centralized issuers at central banks, back into the hands of other people. In fact, in Capital Market Revolution in 1999, I spent a great deal of time talking about without understanding or knowing of the distributed ledger, how electronic money would be a very, very potent tool in the future. Because obviously if you're a massive multinational company right now, you've got a balance sheet that's bigger than countries.

Patrick Young:

I don't even mean a country like Malta. I mean lots of African countries, lots of emerging countries. If you go out to the market and issue your currency, people are going to get excited. What happened in 2008 in Germany was very interesting. Lots of money [inaudible 01:07:19] banks because people were terrified that some of those banks had big derivatives exposure. What were the banks that people wanted to put their money into? Interestingly enough, the financial banking franchises of Daimler Benz, BMW and Audi. Why? Not because people thought the bank was better wrong, but because you could stand looking at the railway line and the railway yard, and you can see 10,000 Mercedes already to be sent around the world and you have to presume, well, they're worth something, therefore I'll get my money back.

Patrick Young:

Now therefore they can potentially issue cryptocurrency, and that becomes very interesting. The way you can settle cryptocurrency therefore becomes interesting because it can be a lot smoother than having to use the old fashioned pipes and levers. However, Bitcoin, while it is the crypto... The cryptocurrency revolution is the Copernicus Revolution in finance, Bitcoin itself becomes essentially the Model T Ford of cryptocurrency. It's not particularly brilliantly designed, but 10 years ago, it was absolutely the bleeding edge point of genius. If you look at the Ford Model T and it doesn't matter what car you drive today, the DNA of the car you're driving today is essentially 80, 90%, the DNA of the Model T Ford.

Patrick Young:

But I can broadly guarantee you because I've done this in conferences around the world. If I offer you the chance to drive home in your own car or to drive home in a Model T Ford, which might need oil, and probably won't be particularly warm and comfortable to drive, and will be quite quirky and won't slow down very well. Nobody wants to drive the Model T Ford, and that's where we are with Bitcoin. I think we're actually at an even more interesting turning point with Bitcoin because perhaps in the future, in the near future, it will already be proven that Bitcoin has really done its job. What was its job like the Ford Model T? The Ford Model T got people traveling. People were able to deliver stuff more easily, move things around, but then they got into leisure transport.

Patrick Young:

They started driving out of the center of times on the weekends. How did you get people to drive to your area? The thing was you had to not live digital, but live automotive. Put your melons and your tomatoes by the sides of the road. "Hey, hold on a second. There's a lot of dust on that. Can we find a way to put asphalt on our roads, because people will prefer to drive the asphalt road rather than trying to drive on the dusty stony road?" Then people go, "Well, actually selling them groceries is good, but those guys, they just want a cup of coffee. Sell them a cup of coffee. Suddenly we end up a driving culture. As you can, that's what the Ford Model T phase of Bitcoin has delivered us. It's delivered an infrastructure that was not there with previous electronic monies, such as beans, for example, which dates back to the middle of the 1990s.

Josh King:

Well, as a contrarian, Patrick, if you did give me a chance to take a Ford Model T for spin up here in the Catskills dusty roads, I would certainly take you up on it more than the family Acura MDX or the Chevy Colorado pickup. But from Nicholas Copernicus University to Valletta in Malta, as we wrap up, having worked in and commented on the capital markets throughout your career, how do you perceive your role and the relationship with the markets now? And where do you see it going forward in the next five to 10 years as we ultimately get ready for the next published work from Patrick Young to follow on victory or Death?

Patrick Young:

Well, in some ways, I suppose the stuff we can't talk about, the non-public discussion are probably where I've made maybe a greater impact behind the scenes in the course of the last few years. Having been an exchange CEO once, I still find it very interesting to watch how different markets are being managed. I'm fascinated by the driving of data. By the living digital objectives, and as an entrepreneur, I'm perennially looking at other opportunities by which we can manage to make this a better place. I think there's a huge opportunity. I have a pyramid of exchanges. I draw it for people at the very, very top. You have great businesses such as the intercontinental exchange in the very top tier of three markets.

Patrick Young:

But when you get down to the very bottom of those exchanges, there's huge opportunity in the digital age for the development. Therefore, I'm very excited because I see that the exchange is the epicenter of commerce. It has been since the Agora in ancient Greece and Rome, and before. It remains the epicenter of a digitized world market. It enables us to fund and move risk, and therefore develop the world in a way we've never seen before. Thanks to digital markets, it's cheaper than ever to run these sorts of businesses and platforms to develop the opportunities to go forward. I'm super optimistic in the long term. This is an exciting digital age to be alive in.

Patrick Young:

And from Victory or Death, I really want everyone to succeed, and I'm looking forward to discussing our victory, whether it's in two years, five years or 10 years. Not merely getting through the COVID-19 era, but looking to the next fascinating era of technological development, which is going to look very, very different to how the world looked when either of the current candidates were born ahead of this year's presidential election.

Josh King:

The epicenter of commerce from where we currently stand at [inaudible 01:12:51] 1761 with exchange, invest. Hope we'll get together, Patrick again around 2020 issue, and we'll see where you have secretly decided to take it from there and check in again on whether Victory or Death has been achieved in the markets. Thanks so much for joining us inside the ICE House.

Patrick Young:

Thank you, Josh.

Josh King:

That is our conversation for this week. Our guest was Patrick Young author of Victory or Death?: Blockchain, Cryptocurrency & the FinTech World available on Amazon. And the publisher of Exchange Invest, a daily newsletter covering markets and finance. If you like, what you heard, please wait us on iTunes so other folks know where to find us. If you've got a comment or question you'd like one of our experts to tackle on a future show, email us at [email protected] or tweet at us @ICEHousePodcast. Our show is produced by Weronika Slompka and Pete Asch. With production assistants from Steven Capriles, Ian Wolff, and Rebecca Mitchell. I'm Josh king, your host signing off from the remote library of the New York Stock Exchange here, in the Catskills. Thanks for listening. Talk to you next week.

Speaker 1:

The information contained in this podcast was obtained in part from publicly available sources and not independently verified. Neither ICE, nor is affiliates, make any representations or warranties express or implied as to the accuracy or completeness of the information, and do not sponsor approve or endorse any of the content here in. All of which is presented solely for informational and educational purposes. Nothing here in constitution offered to sell, or solicitation of an offer to buy any security or a recommendation of any security or trading practice. Some portions of the proceeding conversation may have been edit for the purpose of length or clarity.

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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, express or implied, as to the accuracy or completeness of the information and do not sponsor, approve, or endorse any of the content herein, all of which is presented solely for informational and educational purposes. Nothing herein constitutes an offer to sell, a solicitation of an offer to buy any security, or a recommendation of any security or trading practice.