Anthony Pompliano Tries to Convert Me To Bitcoin | Interesting Times with Ross Douthat

Yeah, thanks for having me. Super excited.

Well, I usually think about these assets as: It’s all finance – and that’s a very important part. If you go back and look at history, every single asset in the world was physical. So you had a physical stock certificate, you had physical bonds, and if you bought Apple stock, they literally sent you a physical stock certificate that you would put in a filing cabinet.

If you wanted to take down the Nakatomi Tower in "Die Hard," you were going to get the safe to get –

The bearer bonds. Even the deed to your home was physical. And so at some point, there were some very smart people who said: You know what?

Maybe actually having these physical things that you need to protect from everything from theft to fire, et cetera, is not a good idea. Let’s make it a little bit more efficient. And they created electronic assets. And these electronic assets really revolutionized the financial industry. It allowed for a lot more people to get access. But at the same time, it also allowed for a lot more assets to become available. So if you think of crypto in general, there’s two different types of assets. There are assets that end up being just like the traditional assets of stocks, bonds, currencies, and commodities. But rather than an electronic form, they’re going to be digital now. You’ll just buy those assets the same way you do today. You won’t even know that there’s a difference. And basically, all of the value is going to accrue to big financial institutions who have better efficiencies and lower cost. But there are some crypto native assets, things like Bitcoin, where people are having to understand them, learn about them and then evaluate: What is Bitcoin? Do I want this in my portfolio? What does it provide to me that I can’t get in a traditional asset? And so if you go and you look at why is Bitcoin itself valuable, there’s basically one big idea that I think an entire generation of people have finally come to peace with, which is that the United States government and governments around the world have to print more money. That is a fundamental structural belief that people now have. And Covid was a part of that. I think that there were people who started to look after the global financial crisis, as part of that. But once you realize — And that’s — just to pause — that’s because the United States government and governments around the world — rich governments, governments in developed countries – just owe a lot of money that they are unlikely to simply raise taxes to pay for, meaning in terms of pensions, entitlements, health care and so on. It’s a huge part of it. We spend more than we take in. And so if you look at these kind of national deficits, the only way that we can do that is we can also print money. The problem for the average American is if we create more money, it makes the dollars that you own less valuable. Now, if you think of this, the reason why there are not people in the street protesting it is because half the country is suffering under this, half the country is benefiting from this. And so I always say that there’s a lot of folks who get very upset about people who have gotten wealthy and investors and all this kind of stuff. It’s really a knowledge gap more than anything else. The wealth inequality gap in America really just comes down to a knowledge gap. And what I mean by that is there’s about half of the country who understands if you hold cash, it loses value every single year. Instead, if you convert that cash into assets, whether it is stocks, real estate or cryptocurrency or whatever, over time, they will go up because the dollar is going down. And if you look at some of the stats, I mean, it’s pretty compelling. The 50 percent of Americans who hold cash in their bank account — If you go and you look since 2020, the U.S. dollar can now only buy 70 cents worth of goods and services. That means that you had to drive immense increase in your wages, in your income, or you had to be an excellent trader in the market. You had to be an excellent investor. But if you just held cash, you’re poorer today than you were in 2020.

And what I mean by that is there’s about half of the country who understands if you hold cash, it loses value every single year. Instead, if you convert that cash into assets, whether it is stocks, real estate or cryptocurrency or whatever, over time, they will go up because the dollar is going down. And if you look at some of the stats, I mean, it’s pretty compelling. The 50 percent of Americans who hold cash in their bank account — If you go and you look since 2020, the U.S. dollar can now only buy 70 cents worth of goods and services. That means that you had to drive immense increase in your wages, in your income, or you had to be an excellent trader in the market. You had to be an excellent investor. But if you just held cash, you’re poorer today than you were in 2020.

So what do you do? You acquire cryptocurrency. I don’t think that the answer is only cryptocurrency. But explain, explain basically without making it a kind of universal case. The idea is that cryptocurrency holds value under inflationary conditions in a way that just keeping dollars in a bank account or as at least one of my friends does in shoeboxes under their mattress. That doesn’t hold value in the same way. Why? What is Bitcoin? Let’s say that and then explain why what it is enables it to hold value.

Bitcoin is ultimately just a currency, right. So in your life you if you’re in the United States you use dollars. I always joke that you get paid in dollars. You save in dollars, you pay your taxes in dollars, you invest with dollars, et cetera dollars to you are the only currency that matters. You probably don’t have dollars and yen and yuan and euro and pesos and all these. You just have one currency. Bitcoin is the exact same thing. It has a couple of details that were custom built to make Bitcoin valuable, but ultimately it is just a currency. And so what does that mean? It’s an asset that you can hold and store value in. It’s an asset that you can use to buy things. And it is an asset that some people will even price goods and services, meaning they will say, hey, I want to sell this home or I want to sell this table I built and I want to get paid in Bitcoin. So it’s one Bitcoin instead of saying it is $70,000. The reason why that’s important is we are entering this digital world. And so Bitcoin in particular is basically a currency that is backed by a network of computers that are outside of the system. So if you go and you look at gold, maybe a great example. Gold is valuable basically for two reasons. It has sound money principles, which means that no one can create more and no one is able to actually pull it into the system.

So yes and no. There’s a lot of metals in the world. The reason why gold has value is because it’s very scarce. It’s not 100 percent finite. We keep finding more gold deposits. We keep digging more up out of the ground. Why was gold the one that everyone wants to wear around their neck? It’s a sign of wealth. It’s a sign of luxury. And so ultimately, it is really good at storing that value because it is so good from a sound money principle standpoint right now, the reason why I say sound money principles are so important is ultimately, that is what Bitcoin is built on. But with Bitcoin, we know that there will only ever be 21 million. Bitcoin is an asset that no one can create more of and it is outside the system. And so if you were to think about putting Bitcoin and gold side by side with each other, Bitcoin is superior in every single way. It is more divisible, it is more portable, it is much, much more secure, it is more censorship resistant, et cetera the only area where gold has any degree of superiority to Bitcoin is how long it has been around. There’s a lot of people who say, hey, look, gold’s been around for thousands of years, it’s not going to go away. Whereas something like Bitcoin has been around for about 15 years or so. And so the question becomes, is this a fad? Is this something that’s just a fleeting idea or does this have long term staying power over centuries similar to gold? I obviously believe that it has that staying power, but we’re going to find out.

I think it depends on who you are. One of the things about a product that ends up being valuable in the world is it needs to be valuable to different people for different reasons. So in the United States, most people are not worried about not being able to go to an ATM and pull out cash. They’re not worried about the government censoring their transactions. They’re not worried about, those types of very authoritarian type actions against their money. There’s a lot of countries in the world where people are very worried about that. In the United States, I think that most people are looking at Bitcoin for one of three reasons. They’re speculating. They believe it’s going to go up in value. And so that is very attractive to them, no different than any other financial asset. Two is they’re very worried about inflation. They believe that Bitcoin is one of many solutions that could potentially insulate them. Or three is they like the fact that it’s outside the government. They like the fact that it’s outside of the financial system. And they feel like if there is some doomsday scenario, they’re able to hold this asset, they’re able to control it and have self-sovereignty and they feel like that has value. That may not just be economic, but also could be from a resilience standpoint. Those are US centric viewpoints, problems, et cetera. You can go around the world though, and I’ve gone and spoken to thousands of people around the world about this. Many people, they don’t care what the economic speculation potential is. What they really care about is, hey, I live in a country that is engaged in a war and I want to leave. I can’t bring my house. I can’t bring my gold. I can’t bring these assets. I need to get it out of the country. How do I do that? Bitcoin becomes very interesting. You mentioned Iran. And one of the things I think is very interesting that happened recently is on the same day Iran asked to be paid the toll in the Strait of Hormuz in Bitcoin, which basically means that there’s a bunch of countries that don’t trust each other. And so they’re saying, hey, I want to get paid in an asset that is not dependent on the monetary policy of any other country, O.K. So it’s this neutral, decentralized, kind of non-sovereign asset. Those people in Iran who are asking to get paid in Bitcoin. I think there’s a lot of people in the Western world that say that’s not really maybe the best spokesperson for Bitcoin. We don’t want to be saying, hey the Iranians like Bitcoin. So this is a great invention. On the same day though Morgan Stanley launched their Bitcoin ETF. And so if you look at those two as kind of polar opposites, you have what many people would consider United States adversaries, funders of terrorists, et cetera who are saying, hey, Bitcoin is valuable to us. And then you have one of the oldest investment banks on Wall Street trying to package it up and sell it to their clients as well. That’s what we talk about when Bitcoin is different things to different people. One is a speculative use case and one is frankly a use case out of necessity in a geopolitical situation where countries don’t trust each other.

So well what’s interesting is the counterfactual is that the currency of choice for drug dealers, criminals, smugglers, terrorists around the world is the US dollar. And what we have found in the data is that the number of bad actors that are using Bitcoin is very small. The reason why Bitcoin continues to appreciate is not because of that adoption by those bad actors. But instead the monetary policy is designed in a way where it continues to become more and more valuable over time because it’s a fixed supply asset. And so when you start to view it from that perspective now get into a scarcity conversation. You get into what is the market price of an asset if lots of capital wants to move into it. And that begs the question, well, why would they want to do that. And this is where the non-sovereign kind of neutral asset becomes really important.

I think that Bitcoin is the only asset that is trying to do this inflation hedge, this kind of chaos uncertainty hedge that Bitcoin we’re talking about. These other assets basically have taken the idea of Bitcoin right. Kind of a blockchain the decentralization, et cetera. And they basically have created other blockchains to try to do different things. And I always say it’s the difference between comparing the US dollar, a barrel of oil, and Amazon stock. They’re all assets, but they all exist in some electronic form in the traditional financial system, but you don’t confuse dollars and barrels of oil. They have fundamentally different use cases.

Bitcoin’s entire purpose is to be electronic currency. To be a digital store of value that you can use to either protect your economic value or you can use to purchase things from other people. So think of it no different than the US dollar. It’s just a digital version of that. Ethereum wanted to do a bunch of things where they wanted to take that idea and then make it so that it was programmable. We want to go and we want to build things on top of it, but Bitcoin isn’t built for that. It was very difficult to do that. And so there’s this gentleman, Vitalik Buterin, who said, hey, I’m going to actually take this idea and I’m going to change it. I’m going to make, evolutions to it, and I’m going to go create another blockchain, and this one’s going to be able to do this kind of computational work that Bitcoin can’t do. Usually when something gets created, the first mover does not stay the first mover, right. If you think of search engines or social networks or this stuff. It’s usually somebody who’s able to learn from some of the first attempts and then go and build this. Bitcoin has been able to stay as the number one because it has a network effect, but also because it is going after this problem of how do I buy something in the digital world that will protect my economic value. And I think that difference is really, really important.

Well, I think that there’s a couple of different iterations as you evaluate Bitcoin right. There’s the technical components. There’s definitely the network effect. And then there is a psychological. Or you can think of this as a global brand right. So if you look at going back about 40 years or so before Bitcoin was created, there were multiple attempts to create a digital currency. There’s a group called the cypherpunks and they were very into how do we create some digital currency that we can use that’s outside the system. Kind of what Bitcoin eventually became and attempt after attempt after attempt. What they realized was there was technical impurities or technical issues with those attempts. Bitcoin was the first one that finally I think people generally agreed, O.K, it has solved all of the technical challenges to this point. Now, just because you are technically superior does not mean you’re actually going to get adoption. I think of Bitcoin’s maybe most important aspect is it was created and put into the world at a time when no one cared about crypto. Those early years of Bitcoin were incredibly important, because you had organic growth of people who really bought into what is Bitcoin. They weren’t being paid to be there. In many cases, they were actually losing money because they were spending computational power or they’re wasting their time or whatever. But as this idea of Bitcoin started to grow and adoption grew, you had this kind of very big groundswell. When technology products get enough of a network effect, they are very, very hard to break. And I think that Bitcoin, because it is money and the ability for me to send it to you, you send it to me, me to hold it, the mining, all this stuff creates this network effect that I never foresee, a world where there will be another asset that can overtake Bitcoin in this use case. And so it’s pretty much the world’s got one shot. If Bitcoin is successful, amazing. If it is not successful I do not think that we will get a digital currency that is outside the system. And I think that’s why I’m so focused on hey I would love for this to be successful.

Stability is the single biggest lie in financial markets. And even if you don’t like Bitcoin, want to learn about Bitcoin. I do think that there’s an entire generation I call it the volatility generation. They understand that you need volatility in your portfolio in order to protect yourself. And so I’ll give you a couple of examples. If you go talk to a financial advisor in the United States of America and you ask them, I want to have a very safe portfolio. They will take your money and they will pretty much put it in cash and treasuries. Those are the only two assets in financial markets that are designed to lose money. So by definition, they are not safe. And so now what you’re starting to see is well forget for a second individuals. Let’s go and look at maybe pension funds in America. Most pension funds in America are underfunded. They do not have the money to pay. Social Security does not have the money to pay. And so why is that. Well, they all pursued what we were told was a safe, stable approach and they put the money in treasuries. They put the money in bonds or fixed income in these different instruments. And now what we’re learning decades later is actually that was a horrible decision. We did not keep up with the pace of inflation. We do not have the money to pay these promises. What do we do? And so the reason why I say that Bitcoin is alive or volatile assets are alive and the other ones are dead is because if you as an investor go and put majority of your money in those assets and you wait, you are going to end up like 50 percent of the country, which is you fall further and further behind and you end up on the wrong side of the K-shaped economy. Instead, if you look at what are the assets that are volatile. Well, we know Bitcoin is we know that certain technology stocks are right. And you just go through this list of all these volatile assets. They are the best performing assets in an investor’s portfolio over long periods of time at this point. And so ultimately.

I think the argument that I’m saying is the entire financial system is engineered around assets that have percent 100% downside, zero upside. Have no upside or downside. Bonds have no upside or downside. So those are 100 percent risk assets. These other assets. Yes of course, there is. If Tesla doesn’t work or something like that. But you’re getting paid for that risk that you’re taking because Tesla can appreciate. Now Bitcoin is very unique in that the reason why people think Bitcoin is volatile is not because Bitcoin itself is volatile. One Bitcoin equals 1. Bitcoin always has, always will. It’s actually the exchange rates where people start to look at the volatility. But Bitcoin is the same Bitcoin that it’s always been. And if you were to go back and look over 3, 5, 10 years, anyone who was given the choice put your money in dollars, put your money in real estate, put your money in Bitcoin, you were much better off buying assets of real estate, Bitcoin, gold, et cetera than you were putting it in dollars or treasuries.

No O.K. Tell me why. Tell me why that’s wrong. So before we get to the stock market, enthusiasm and inflation, I would say that I always get very nervous whenever the market assigns a consensus view that is very black and white. If we go back to 2020, a lot of people forget we had COVID. Everyone gets locked in their home and the government basically steps in. And it was very scary, I think, for a lot investors. The market had sold off significantly. Bitcoin went down 50 percent in a day. There was all these kind of problems. And when the government stepped in and they basically brought these monetary bazookas and said, hey, we’re to print trillions of dollars. The Bitcoin community was probably the single loudest group on the internet that said, you cannot print trillions of dollars without getting high inflation right now. There was two people in the world who kicked off what I call the Bitcoin bull run in the finance world. Now Paul Tudor Jones and Stanley Druckenmiller, because they came out in 2020. They went on national television and they said you know I’m buying an inflation hedge basket. I think the words that Paul Tudor Jones said is and I like Bitcoin because I think it’s going to be the fastest horse. And of course, that spread like wildfire online because the Bitcoiners were like, oh, we went and we got real people. They like our asset now, right. But what it did is it removed the career risk for people all across Wall Street because hey, I probably can’t get fired if I’m doing what Paul Tudor Jones and Stanley Druckenmiller et cetera are doing. But Bitcoin went from $10,000 in August of 2020 to $60,000 in March of 2021. Inflation did not move right. Inflation was at 2 percent. We only I think it was 5 percent inflation in June of 2021. So people say, well, why did that happen? The key thing that most people don’t realize about financial markets is they are forward looking. People do not wait for high inflation to come. And then oh let me go buy an inflation hedge asset. They say I think inflation is coming and they go and buy the asset in preparation of that. And so Bitcoin moving was actually an alarm system telling us high inflation is coming. And it ended up being right. Inflation ended up going over 9 percent according to the government numbers probably much higher. And so Bitcoin continued. With that stocks went up. Real estate went up. Everything kind of carried with that inflation. But Bitcoin was the first asset to say, hey, this is going up. Now the reason why that becomes really interesting is if you fast forward to 2025. Last year, Bitcoin was the asset that peaked at a new all time high and then began to aggressively sell off. I think a lot of people said, why is Bitcoin going down. Gold is going up, stocks are going. Why is Bitcoin going down? Well, now we can look at the data and realize that we started to get these massive deflationary forces swallowing the US economy. Tariffs, deportations, AI robotics, et cetera. And so once again Bitcoin was the first to sell off as kind of an alarm system. And so when you start to see this, what you realize is Bitcoin’s price is probably the most pure truth teller in financial markets. And it is the most sensitive to changing economic conditions. And so when Bitcoin runs a lot should immediately ask yourself, why is it running. What is coming that the market is telling me when it sells off a lot. Same question. What is it telling me as to why this is happening?

I believe that Bitcoin is a digital savings account. That’s probably the best way to think about how this fits into an ordinary Americans life. If you think in your traditional financial environment you have a checking account for day to day expenses. You have a savings account for medium to long term kind of capital that you keep and then you have a brokerage account and you go and you buy stocks and try to outperform the market and drive a higher return. In the digital world. We have now recreated a checking account, a savings account and brokerage account. The checking account are stablecoins. They’re just US dollars that is now represented in a digital form. So no different than Bitcoin is a digital version of a gold. Now stablecoins you can use $1. Most people who use stablecoins, they just see that they’re using dollars. They don’t even know. There’s a difference on the back end. And the advantage there is just it’s frictionless. You can’t be debanked. It’s cheaper, it’s faster, there’s a little bit more self-sovereignty to it. There’s also some things that you can do from a cross-border standpoint that is a little bit more efficient, et cetera. So again, just think of that as your digital checking account. If you want to go to the store and buy something, you can do it with stablecoins. If you want to just hold cash, you can do that with stablecoins and you just. But you have no inflation protection. You just go with the dollar. Now your savings account historically what did they have do you put dollars in your savings account and went down in value. That’s not a very good Bitcoin becomes that digital savings account isn’t it. Again more of a part of brokerage portfolio.

Well, savings. I don’t think most people look at their savings account as they’re worried on a they’re not using the savings account for a one week, three week, six month time period. Most people are looking at their savings as it’s money they hope they never have to touch over a long period of time. And so if you have, let’s say you’re a student and you think that you’re going to make a big purchase in three months, you should not take dollars and put it in Bitcoin. Obviously it can go up a lot. It can go down a lot, it could go sideways, et cetera. I don’t think anyone is advocating for that. Actually, what you hear most Bitcoiners say is you should dollar cost average into Bitcoin. And then you should hope to never touch that for the rest of your life.

It is a true savings account. And the example I always use is if you go to the country of India, the culture there is the family basically acquires gold, whether it is in jewelry form or physical bars, et cetera. And then they basically pass that gold down generation after generation after generation. And you're the black sheep of the family if you sell the family gold. If you're the third or fourth generation, you sell the family gold. Your great grandfather rolls over in his grave type thing. If you look in America, look at the great families that have been building wealth over the last 50, 60 years. They did it with real estate. Somebody at some point started to buy real estate, and they pass it down generation to generation to generation. I now believe that Bitcoin is for the next generation, that new thing. And so I always talk about, home affordability in America is horrendous. If you are a young person and you want to store value over your lifetime, the generation before you or two generations before you, they bought a home. Well, you actually do not have enough money for the down payment. You cannot afford the mortgage payments and you literally cannot afford the home. Bitcoin provides this savings account because ultimately, if you are able to dollar cost average into it and leave it there over a very long period of time, it is one of the best performing assets in the world, if not the best performing asset.

It's completely different. Yeah, yeah. I mean, because look, most of the other stuff, it's no different than the stock market. They all have different bells and whistles. They all have different promises. They're serving different customers. They have a different monetization strategy, and they're all trying to differentiate each other. And they're basically trying to sell whether it's the public, kind of coin holders or the market on, hey, here's our differentiated product, and this is why we're going to accrue value over time. The beauty of Bitcoin is that it doesn't change. If you broaden it, well, not that it doesn't change, the value of it changes, the system, the system underlying it doesn't change. One core component of my worldview is that we are entering something I call the age of automation. And Bitcoin is a prime example of this. Bitcoin is the very first currency in the world where we have automated the central bank. So if you think of the Federal Reserve, right, me and millions of people around the world hold our breath when Jerome Powell steps up to the podium, are they going to cut rates or are they not. What's the cost of capital going to be for the next 30 days? Bitcoin in 2009, laid out as the monetary policy for the next 100 plus years, and it has done exactly what it said it was going to do every single day. The reason why that becomes really interesting is because now we have an automated central bank that is immune to increases in demand. If gold price goes up, we start trying to dig more gold up because more valuable. If bitcoins demand goes up, nothing changes in the system. But the built in assumption is that the value of Bitcoin is connected to an inflationary future.

It's because we get an abundance of certain things. So for example, abundance of intelligence, abundance of robotics, those things drive deflation, right.

Yes. In that world, where do you store value? If everything is abundant with a snap of your finger, you can create companies and economic products and all these things. Where do you store value? Scarcity as we head into the AI future that I think a lot of people now are starting to recognize cannot have analog assets that end up being as valuable, because what we're starting to realize is a lot of those things are not going to last. We now have these digital versions of them that are destroying what we previously thought were hard assets or productive companies, et cetera.

And so again, it's very unique, and I think this is why people have such a hard time understanding Bitcoin is usually you do not have an asset that can benefit from inflation and deflation. But if you go and you look in the Iran war, if I had told you before the war kicked off, the war is going to happen. We are going to bomb this country. What do you expect to happen? Most people would say oil is going to spike. Stocks will rally. And bonds will rally and gold will rally because we're going to have to print a bunch of money. Inflation is coming. All these things. The war kicked off and what happened? Oil spiked. So people would have been right on that. Stocks, bonds, and gold all sold off. Bitcoin did not. Why is that? Because again, it goes back to it is a scarce, digital, non-sovereign neutral asset. And in times of uncertainty, in times of chaos, that's what you want as an investor in the digital world in times of chaos.

So well, that is chaos. Deflation is chaos. We're living through it right now.

Yep. Yep, it's very hard to make more.