In this episode, we explore the evolution of Bitcoin and cryptocurrency, focusing on market timing, cryptographic challenges, and the potential impacts of quantum computing. We examine critical technical upgrades such as SegWit and the resistance within the Bitcoin mining community. The discussion also covers our decision to exit Bitcoin, investment strategies for high net worth individuals, and the shifting dynamics in venture capital driven by AI advancements. Further, we delve into the promising sector of AI-driven GPU data centers and their investment potential. Lastly, we touch on the unexpected shutdown of the UK Biobank and its broader implications.
Malcolm Collins: [00:00:00] Hello Simone! I'm excited to be here with you today! Somebody told me, one of our fans, they said, you guys need to do more episodes on like, How to make money and do business stuff . And at first I was like, well, I think we sort of covered those in our episodes.
Like how do you get rich? And things like that, because we've already done episodes on that. But I was like, no, actually I have some updates because in that episode, I told people very strongly. I said by Bitcoin this was on, this is not
Simone Collins: investment advice. We are not advisors and this is all hypothetical.
And we're talking about our personal experiences.
Malcolm Collins: I strongly felt it was a good time to buy Bitcoin. And the episode largely went into like, why in terms of valuing and investment, why Bitcoin was good on November 13th, 2023. And this is when the price was at 36. 5 K. Today the price is at 65. 4 K
Microphone (2- ATR2100x-USB Microphone)-1: No, the price has gone up to 67.2 right now this morning. So if you sold now, you would make even more money
Microphone (2- ATR2100x-USB Microphone)-2: off of this idea that we did. And for those who are like, oh, well [00:01:00] you, you know, you didn't. Get out at the top here. I am okay. Was doubling my money.
Speaker 5: I was paid too much! Billion dollars worth of Bitcoin two billion dollars well at the time a few days later the value spiked to like ten billion Then filled a fifty million and spiked again to a trillion and then dropped a bunch of times and right now It's all worth like seven or eight bucks.
Ah, geez. Yeah, I'm super pissed
Malcolm Collins: And we will be airing this a little after we record this, but we ended up closing all of our Bitcoin positions. And one of the reasons why we're doing this episode is just as like a, if I have an episode out there telling people go buy Bitcoin, And I have sold all my Bitcoin, which you didn't
Simone Collins: do because it's all not investment advice.
And this is all hypothetical.
Speaker 6: BiTcoin and you. Why you should be using the only truly free currency.
Greetings, financial wizards, industry leaders, and curious spectators, and welcome to the future. Yes, we're living in a high tech cyber world where just about everything is digital. The cinema has gone digital, radio is digital, why even love is digital? So then why, with the whole world going digital, are we still using dirty, crazy, non digital [00:02:00] government money?
That dollar bill in your pocket? A Nazi probably touched that So there's another way to spend and save money without the involvement of the government or the Nazis.
Bitcoin is that way. , Bitcoin is a purely digital currency that uses complicated cryptographic science to generate lots of super hard math problems. These math problems are converted by computers around the world into seemingly random strings of numbers that some people have agreed to pretend stands for a highly volatile potential sum of money.
Solving these math problems is called mining
you see, Bitcoins aren't backed by any real world items, such as gold or by a governing body like the Federal Reserve. So the value of a Bitcoin is entirely bubble based. But what a bubble it can be! Without the nuisance of regulation or real world value, a single Bitcoin could be worth anything from negative infinity to infinity billions of dollars.
I imagine if it reaches even half of that. So, whether you're a libertarian or just want to spend your money like one, consider converting your wallet to a Bitcoin wallet. Who knows how much it'll be worth tomorrow? It could be anything.
Simone Collins: And we're only talking about one
Malcolm Collins: person says I bought X, you know, other people are going to be like, eh, it should probably, [00:03:00] you know, be interesting if
Simone Collins: people were influenced by that episode, one, they would have profited as long as they held about
Malcolm Collins: doubled their money. So good for you if you did, but also remember to sell.
But I want to say,
Simone Collins: yeah, we, we don't want to be dicks to people who we may have inspired through our own actions. to get Bitcoin by not also sharing our concerns about Bitcoin now.
Malcolm Collins: Yes. And I will say, I mean, I'll, I'll briefly give my bigger concern about Bitcoin then I'll go into the specifics of it, the ways that Bitcoin can get around this particular problem and why I don't think they will be successful, but where they have been successful at doing something like this in the past yeah, there's a time in the past where Bitcoin got around the miners.
Where the miners didn't want to do something and Bitcoin forced them to the rest of the Bitcoin community to force them to. So we'll go around how that ended up playing out in the past and why it's very unlikely to happen this time.
And after we talk about Bitcoin, what we're going to do is we are going to go into what we are thinking about doing with capital right now. [00:04:00] Because it's a pretty tricky time in the markets right now to know where to deploy. So the general gist of why we're getting out.
So you don't have to watch the full episode is everyone has always known that quantum computing is a risk to Bitcoin and it's a unique risk to Bitcoin because the Bitcoin governance system is kind of captured by the miners who have equipment that is specific to Bitcoin. to working on the type of simple algorithm that bitcoin uses, which is not very quantum resistant.
And so they have a huge interest to not have a change and we'll get to where the fight is going to be over that in the future. And people can be like, well, it might update or anything like that. But here's the thing. I have talked to a lot of Famous Bitcoin investors recently who invest publicly in this stuff and their firms and ones who are like really, really big on Bitcoin.
These are people who have, you know, multi billion dollar positions in Bitcoin. And I was asking them about what they thought of the quantum risk threat and they were like, yeah, it'll probably be a threat in a couple cycles, but [00:05:00] it's not going to be a threat right now.
And I've, and this is the conversation. This isn't like if you, if you're hearing this and you're like, oh, he's describing a conversation he had with me. No, I've had this conversation with like five people. five people at this point. This is something that like everyone who is very educated and still holds a position in crypto seems to think right now.
And that really worries me because this is very different from the Bitcoin narrative before, which is to say, Bitcoin is a persistent new financial disruptor. And a new type of asset that will be on the market permanently. This is now people saying, Oh, well, eventually it's going to go off the market.
But in the meantime, I think I can make a profit in this cycle or the next cycle. And for me, that's where I was like, well, that's not really the way market cycles work. You don't want to wait. Till to sell when everybody realizes that this asset doesn't have long term value And you sent me a quote in regards to this.
I thought it was really interesting. So the quote you sent me was [00:06:00] from Scott aronson who is one of the leading quantum computing scientists And he said
Simone Collins: to any of you who are worried about post quantum cryptography, by now I'm so used to delivering a message of maybe eventually someone will need to start thinking about migrating from RSA to Diffie Hellman and Elliptic Curve. Crypto to lattice based crypto or other systems that could plausibly withstand quantum attack.
I think today that message needs to change. I think today the message needs to be yes, unequivocally worry about this. Now have a plan. I saw that and I was like,
Malcolm Collins: Well, we've always sort of had in the back of my mind. I just wasn't aware of how far quantum computers had gotten recently. And it was it was in
Simone Collins: my I keep goals for every year and I penciled in for 2025 a goal of.
Sell all of our Bitcoin position because I have been increasingly concerned about quantum computing and and to be clear, our [00:07:00] concern isn't like, oh, suddenly quantum computing has reached the tipping point at which it's financially feasible to like, sort of undermine Bitcoin entirely by the time that happens, Bitcoin is already so far gone that it doesn't even matter because Bitcoin's price is not A product of quantum computing per se.
It's a product of people's expectation of its future price. So as soon as people suddenly start to realize that soon quantum computing is going to be a real threat, then. Bitcoin loses all its price. So it doesn't really matter exactly when quantum computing becomes a genuine threat. What matters is when people start to believe collectively in any significant proportion of the Bitcoin owning population that it is.
Microphone (2- ATR2100x-USB Microphone)-5: To where this another way you don't need to exit your Bitcoin positions before quantum computing becomes a threat to Bitcoin, you need to exit your Bitcoin positions before the market realizes that in the future, quantum computing will become a threat to Bitcoin
Simone Collins: and with. This guy saying this, [00:08:00] that is, that is when this begins. It has begun. If someone who already in this space is that respected. Is one of
Malcolm Collins: the leading people in the space and previously was saying, don't worry about it. We'll figure it out later. That's a tipping point
Simone Collins: that makes me uncomfortable as an investor or as, as, as an owner of Bitcoin.
And I
Malcolm Collins: will also say here, people would be like, Hey, why are you right now when everybody's high on Bitcoin saying we should sell our Bitcoin? That's always when you should sell something. Hold on. I'm saying this is coming to you from somebody who, when we did our first Bitcoin video, Bitcoin was irrelevant.
We are not people who make regular videos about bitcoin doomerism, nor are we people who regularly pump a bitcoin. We are somebody who made a video saying you should buy it a long time ago when the price No, we never said you
Simone Collins: should buy it. We said, we think that bitcoin is something that we've heard about in the past.
It's a
Malcolm Collins: good asset. Okay, sorry. I worded it differently. I said something like that. And now we are people saying that we personally have decided to exit this asset class. I think that that makes this quite different than [00:09:00] a regular video where you're dealing with somebody who's like, you know, either really into crypto or really cares about this stuff.
We're just people. And I should give you also a, I guess I'll give you an idea about the confidence of our various positions here. We had over 10 percent of our portfolio in crypto, 15%.
Simone Collins: Oh, dude. At one point it was like, Oh, and of course, always, this depends on the fluctuating price of Bitcoin, but we bought really, really low in the beginning and it surged a lot.
And so at one point, I think over 30 percent of our net worth was in crypto in general. Yeah, so and then it went way down and our net worth went way down and I'm sure a lot of people who were early investors can relate.
Malcolm Collins: Well, and that was another thing that we learned from the last cycle is buy when you're sure you're probably below the average of a cycle and sell when you're sure you're probably above the average of a cycle.
And I can tell you right now we're almost certainly above the average of the cycle right now.
Microphone (2- ATR2100x-USB Microphone): Actually, this is a really important point to internalize because some people like. [00:10:00] For example, since we've sold, the price of Bitcoin has gone up a bit. , some people look at something like this and they're like, oh, you didn't fill at the top. Your goal was a. Heavily variable asset. Is not to sell at the top.
It is to sell it above average. Your goal is not to buy at the bottom. It is to buy at below average, do not beat yourself up over, not heating the very top of a market because that will lead you to make dumb decisions. Think, am I above average or am I below average and mentally reward yourself? If you were correct in that particular assessment?
Not in the assessment of did I sell at the very top? And this is also important. Take your, your realistic. What do you think the top of this cycle is for Bitcoin? For example? With something like Bitcoin. The realistic top of this cycle, I think is around 120. , I think my expected top of this cycle is maybe [00:11:00] 75 to 80. , and when I look at the difference between the gain I made by buying in, in the mid thirties, , and selling in the mid sixties, , versus getting out in the mid seventies is just not that big, a difference.
Microphone (2- ATR2100x-USB Microphone)-7: Also, , for full transparency here, we did make a, another major sale during the market cycle. When the price hit 70, we sold a half of our position. , but we ended up buying back in again, when the market went down to 50, unfortunately we weren't able to buy quickly. So we ended up getting in at 55 price, , the entire position back in.
, so we do do a bit of playing the markets when it looks like it's at a unique, low point or a you Eddie unique high point, but the decision we're making right now in. Bitcoin is a bit different than that in that it's an entire decision just to not play in this market, going forwards.
Malcolm Collins: Want to go further into one, why this is an issue and why Bitcoin specifically, not other cryptos, Bitcoin can't easily adapt to it.
Okay. Bitcoin's cryptography. [00:12:00] Bitcoin primarily uses two cryptographic algorithms. ECDSA, that's the elliptical curve digital signature algorithm. This is for digital signatures. And SHA2. 256. And this is for the proof of work mining algorithm. Of these two, the first, the ECDSA is considered the more sensitive to quantum attacks.
Then the, the other
now the problem that we have here is the role that miners play. So the way that miners right now use a specialized hardware called a six. So in the early days of of bitcoin what they used was more like generalizable hardware like gpus. Now these are different from cpus. They're used they're meant for doing tons of somewhat complicated little things at the same time asics are used for doing extremely simple things like an extremely goal directed activity But eventually asics were built that could just do the Crypto algorithm.
Now, this led to a problem well, for the Bitcoin system [00:13:00] that Satoshi never would have been able to really anticipate because I don't think that he ever saw, I mean, it would be so hard for him to really see it getting as big or as globally dominant as if it's gotten that entire chips were being designed just for the algorithm.
So in his mind, when he's building this, he's like, well, You know, you can just have it switched to a new system, right? If it's really obvious that it needs to switch, but I'm going to make the difficulty of switching to a new system quite high. Right now, the norm within bitcoin for a change is that 95 percent of miners have to go along with something.
They don't actually have to have to. We'll get to that in a second. But this is the idea. 95 percent of miners have to go along with something. And this is great if you want to make a system that's not like wildly swinging in different directions or that's susceptible to like somebody starting a ton of mining rigs and then trying to do like a 51 percent attack on something with votes by, to change the algorithm to insert, you know, a dangerous code in or something like that.
All [00:14:00] that is great. Here's the problem. Now you have all of these miners with these ASIC things in they, they really can't do anything other than this one algorithm and you somehow need to get 95 percent of them to selflessly vote their own machinery. Oh, into
Simone Collins: obsolescence and then buy entirely new machinery.
Malcolm Collins: This machinery is like billions of dollars. And what equipment,
Simone Collins: what, how, like how much more expensive is the equipment they would need to buy?
Malcolm Collins: Well, it's not that it's more expensive. It's it literally everything that they own, their entire operation would be worthless. You, you and so here I'll go over how A change happens.
So first you need minor signaling. So when a new upgrade is proposed miners are given an opportunity to signal their support for the upgrade. Typically, this isn't done through, including a special flag or code in the blocks. They mind the threshold for approval of 95 percent is mentioned as a common threshold for Bitcoin upgrades.
This means [00:15:00] 95 percent of the blocks mind need to. Or mind within a specific period. So like usually the 2016 blocks, which is about two weeks, need to include a signal supporting the upgrade. The importance of minor support. Minor support is crucial and plays a vital role in processing transactions and securing the network.
This agreement helps ensure a smooth transition and reduces the risk of chain splits. Now, can upgrades be made without minor approval? Yes, it has been done before. The segwit, the segregated witness upgrade, and the associated BIP 148 . U. A. S. F. upgrade in 2017 is a fascinating case study. And in which miners were resistant.
So the background, the SegWit was proposed as a solution to Bitcoin scalability issues and the malleability problem. It was designed as a soft fork, meaning it was backwards compatible with older versions of Bitcoin software. The initial minor resistance, miners initially resisted SegWit for several reasons.
Some miners, particularly [00:16:00] Bitmain, had developed An optimization called ASIC boost, which SegWit would have made less effective. There were concerns that SegWit might reduce transaction fees, a soft, a source of minor revenue. Some miners preferred alternative scaling solutions, like increasing block size, which eventually led to the Bitcoin Cash hard fork, which largely failed.
So, for people who don't even like Bitcoin Cash still exists, and it was a hard fork that ended up happening, and it turned out to not be the best option for doing this. But let's Why was there resistant to segwit among miners? Okay, there was resistant because it would be marginally less profitable, maybe, okay?
Simone Collins: Now, it wasn't even like essential. So I mean, it's not exactly, they didn't even
Malcolm Collins: know necessarily that it would be super less profitable. It would be marginally less profitable. Maybe that is how they bullied them, but that's the position they were bullying the miners out of not, I definitely will need to scrap the billions of dollars [00:17:00] of investment I have made in mining chips.
And keep in mind, these chips are much more durable in value than they have been historically. So you might be thinking of the person watching this, well, they probably upgrade their chips every few years, it's not that big of a deal. Which just isn't true in modern chip markets. Because Moore's Law doesn't decrease like it did historically what that means is, for people who don't know, Moore's Law basically stopped like five years ago.
And so chips just, Don't lose value that much anymore. You know, you will be selling like a new GPUs like three years later. Like if we because we're looking at getting into like selling GPUs personally and when we run the numbers, it looks like they retain about 80 percent of their value over a span of three years, which just shocked me when I think about like graphics card in a historic basis, which is what a GPU often is so what ended up happening?
How did they force them? So, Flag day was set August 1st, 2017, after which nodes running BIP 148 would reject blocks that didn't signal support [00:18:00] for SegWit. So, okay, I should explain who the nodes are. The nodes are something that like anyone can set up if you're interested in caring about crypto and helping the Bitcoin network stay secure.
And they basically are ledgers of all of the transactions happening on the Bitcoin network. Okay. They actually, at the end of the day, really decide what's happening for voting. And so they said, look, we are, we need to force the vote. So basically they forced the hands of the miners by saying we won't process nodes that don't have a vote on them signaling support for the SegWit update.
That would be very unlikely to have the same effect for quantum computing for two big reasons. But here we'll talk about the miner support really quickly here. As Flag Day approached, miners began to realize resisting Sedgwick could lead to a chain split, potentially devaluing their mined coins. This led to the creation of the New York Agreement and BIP 91, which was essentially a compromise to activate Sedgwick.
[00:19:00] Outcome. The threat to UASF, Combined with the compromise of BIP 91 led to miners signaling support for SegWit before the BIP 148 flag day, SegWit was successfully activated without a chain split. So this looks like, oh, we can get them to do it, but it doesn't actually mean that if it was devaluing all their equipment.
You would need to find a way to get the existing equipment to compete on quantum safe Cryptography, which is basically like systemically different from this non quantum safe stuff. Some people have talked about like building a layer two solution, but I can't imagine how that's functionally going to work or why the miners would allow that.
And I think that all of this comes down to, A huge problem in the way investors think one, these miners aren't necessarily individuals who care about crypto. There are people who are running businesses and need to make money on these businesses. So they are going to keep [00:20:00] signaling this until the last day that they can signal this in crypto crashes.
Basically they don't have a ever a reason to devalue all of their investment. In terms of the People who are like, yeah, but we probably have a cycle or two more as of 2024, the largest quantum computers have only a few hundred qubits, far short of what's needed to break Bitcoin's encryption.
Google's current quantum computer has 70 qubits. And to crack a Bitcoin within a 24 hour time frame, you would need 13 million qubits. If you were going to break it within a 10 minute time frame, you would need 1. 9 billion qubits. And so, people can be like, Oh, that seems like we're really far from this right now.
However most experts agree that that by 2032 to 2048 there will be a system for cracking the quantum computing algorithm on crypto,
Simone Collins: which is quite some time away, to be [00:21:00] fair, according to that.
Malcolm Collins: Well, but again, it doesn't, this is, this is the very interesting thing, and this comes to the conversations I was having with investors, but also conversations that I've had with investors around things like demographic collapse.
The reason why something like China just hasn't completely collapsed yet economically, which it will trust me. This is my main thing. We're like, everybody's definitely wrong about this. China will collapse as a world power. It cannot and as an economic system it's just, it's just cannot be stable where it is right now.
And I'll put on screen here for people who like, don't understand how bad the East is right now. Just within one generation, the percent drop in their populations at their current fertility rates, not considering for the fact that it's considering to continuing to drop, but investors in mass right now are not pricing fertility collapse into their models.
Investors right now in Bitcoin are not pricing quantum risk into their models.
Simone Collins: Yeah, it certainly doesn't seem that way at least.
Malcolm Collins: Yeah. [00:22:00] They're like, Oh, other people aren't pricing into their models. So I'm not pricing it into my models. And it's like. That that's how you get rapid collapses out of nowhere.
Don't happen because of a change in anything that happened because people start pricing something into their model.
Simone Collins: Well, I need so hard to predict because what we're talking about is essentially when a meme goes viral. And in this case, the meme is Bitcoin is no longer a safe investment, even among those who are enthusiasts.
And once that happens. It reaches a tipping point. There's no coming back and you won't have enough time to sell and often the way these things crash. It's kind of like when GameStop started plummeting, you know, things freeze up pages. Don't load. You can't sell fast enough. Even if you're 1 of the 1st to know.
So I just, you Wouldn't wanna be in that situation. So I tell
Malcolm Collins: you what probably gonna happen with Bitcoin for people who wonder what happens when quantum computers get to that level. And this is [00:23:00] assuming civilization doesn't crash first, you know? So other thing, other things can happen, but so what's gonna happen is there's gonna be a big kerfuffle.
The miners are just gonna be like, absolutely not. We're not gonna do this all the same. People will be like, oh my God, you actually have to do this. The price is going to drop a lot because a lot of people are going to think, oh, this problem isn't going to get resolved in time. And right now, if you're looking at like major stakeholders, you're getting things like BlackRock buying in tons and tons of money.
Do you think that they have like the ideological commitment to the price drop during this battle? No, like Bitcoin has moved to a more mainstream asset. And because of that, you're likely going to get a lot of cash outflows during this battle. But then what's going to end up happening is there is going to be a quantum safe version of Bitcoin created.
However, it's going to cause a hard fork but the hard fork isn't going to have a clear winner. And it's going to permanently damage both sides of the hard fork until the quantum computing kerfuffle ends up eating whatever the new basically Bitcoin classic, the, the version that doesn't go for quantum safe ends up being [00:24:00] because for a while it will technically be safer because it will have more mining computers running on it, which will lead to a portion of the community going with it.
And Bitcoin has a very conservative community when contrasted with other communities, just due to the large vote shares that are needed to do anything within the Bitcoin community
Simone Collins: because of the governance design. They behave conservatively
Malcolm Collins: because of the governance design. They behave conservatively.
Okay,
Simone Collins: like, I mean, anyone in crypto isn't necessarily seen as conservative. So I get it.
Malcolm Collins: So I do think that they'll get through it. But I think that the price is going to take a and and bitcoins price really hasn't taken an exogenous bash in a long time. So when I say an exogenous bash. What I mean is Bitcoin has not had to deal with one of two things that might be coming up in the near future.
One is a serious depression. Bitcoin has never had to deal with a very serious depression. [00:25:00] And when it has, like in the recession that happened during the COVID situation. It, it took a real
Simone Collins: big deal. Yeah. We got a lot
Malcolm Collins: in during the COVID period. That was when we first got into it.
Simone Collins: Well, yeah, I mean, we, we like to call any sort of. Stock dip or whatever, a flash sale. And I think it's because like when we first started learning about investing, we went to, someone sent us to a bunch of family office meetings, not because we have a family office personally, but because They thought we would learn from them and everyone there who represented these really high net worth family offices was just sitting on loads of cash and they just all anticipated a stock market crash and other market crashes and their habit.
It seems that the habit of people who have a lot of money and are good at hanging onto it is to sit on dry powder when times are good and when times are bad, buy everything on sale which is logical. And so we do that. And we get really excited when the stock market [00:26:00] crashes. We
Malcolm Collins: do help with financial management for some people.
Somebody's like, I would love it if people like you ran our family office. But we've written a book on family office government structure as well. This is true. It is something that we care about. But yeah that is Sorry, I forgot the point I was making here. I guess the wider point is it's very clear that just the mindset among the people who are putting the most money into Bitcoin specifically has changed to a mindset of we know it will eventually have this crash.
But we just think we can make money off of it in the short term. And I think whenever you hear a large pool of people having this mindset, you need to get out of an asset.
Simone Collins: Yeah. Like, Oh, like I'll just know when to, when to go get out. It's, it's, I think it's very similar to that. Like Ponzi scheme mindset or LM MLM scheme mindset of like, well, as long as there's someone downline for me, it's going to be okay.
Except you never know where you are in the scheme and you don't want to be the one left footing the bill. You just don't.
Malcolm Collins: [00:27:00] Yeah. Yeah. So, what are we doing money-wise these days? I think it's an interesting question. So we've made two big changes to the way we do our finances.
Simone Collins: At first I wanna say, here's a reason why. One, not only are we not providing investment advice, but two, we may not be the smartest investment advisors in the world. We did something specifically because I asked, so this is not a Malcolm thing.
This is more of Simone thing, but we did something that pretty much anyone who provides financial advice would say is super dumb, which is we we had a bunch of excess cash from something. And I was looking at our mortgage and I was looking at that amount of cash. And I was like, Ooh, we wouldn't have a mortgage if we just.
Pay it all off. We could use this cash to pay off our mortgage. And people normally say, this is a really bad idea, especially if you have a low interest rate mortgage, which we did when we bought our house. And that is because the argument is that you will be getting better returns by [00:28:00] putting the money that you could put toward paying off your mortgage or just buying a house outright on the stock market and get better returns.
And then you're paying an interest. And if, as long as that's the case, as long as you think that your loan will charge less in interest than you will be getting an investment payout, then you should maintain that loan. And I just didn't care and I wanted to get rid of it. And I wanted to be 100 percent entirely, completely debt free because I hate the idea of ever having an ongoing payment obligation that I don't have to have.
And Malcolm. Being the ever doting husband allowed me to yeah, you
Malcolm Collins: asked for it as a big present You're like I know this is financially irresponsible, but I want it as a present
Simone Collins: This is my push present for kid number four. I was like, can we just be completely debt free? It will make me feel so happy.
Malcolm Collins: Well, it's it's it is Historically a financially dumb thing to do.
I would actually not tell my kids to do it because I suspect either within Our lifetime or [00:29:00] within our kids lifetime, we are going to move to a market that goes down on average due to fertility collapse. Yeah, but in
Simone Collins: our time with our I mean, again, I don't know, like, I just, I can be very pessimistic too, where I'm like, I, you know, there's another
Malcolm Collins: silly financial thing you did.
Which we should also talk about because it's different from our last advice, which is we put all our money in S& P instead of investing in stock market theses that we thought were good investments. The reason you made this move is just because whenever you went over any of the studies on this the S and P always outcompete pretty much anyone who claims to be an expert on stock markets.
And so it's just not worth investing in them. You also have a problem with the VC market right now. So the VC market right now like, like we've heard of VCs, like, because we have lots of friends in VC. So we're just like, and for those not
Simone Collins: familiar with this, because actually a lot of people aren't VC count stands for venture capital.
That is to say investing in startups.
Malcolm Collins: Yeah, the startup marketplace since the invention of AI, which has really [00:30:00] changed what a good startup looks like has become a lot harder for the traditional VCs to access and arbitrage in the way they used to. So the way it used to be is the top VC firms really made all of the outsize returned in the VC space.
And most VCs just didn't make much money at all. And the way the top size firms were able to do is they had unique access to outsize talent. But that unique asset, Access was, I think, really based on let's call it like the Silicon Valley prestige networks that they could build. And those Silicon Valley prestige networks are not as stable as they were historically for two reasons.
One, Silicon Valley isn't where everything is happening anymore. Just because a lot of people are building Well, because of the housing price there and their crackdown on group houses is what really like destroyed it as a place for building good startups. It's just too expensive if you're a scrappy entrepreneur to live.
And then two a lot of scrappy entrepreneurs are what category of people? They are extremely libertarian males. And extremely [00:31:00] libertarian males are what? Usually right leaning these days in the past. They were usually left leaning but the left has scared away Most libertarians who formerly were sort of on their side was a recent more authoritarian push and that has further pushed a lot of the Psychological profile of person who otherwise would be a successful entrepreneur out of silicon valley and they're often interestingly these days, not because of anything to do with white people, but disproportionately white males, if you would be like, wait, why does it not have anything to do as white people?
Microphone (2- ATR2100x-USB Microphone)-3: I should clarify here, white, Asian, or Jewish because, , DEI treats, Jews and Asians as if they are white.
Microphone (2- ATR2100x-USB Microphone)-4: And it also note here I'm not taking a stance that use an Asian or white. I'm just saying DEI treats them as if they are, maybe they are. Maybe they aren't. I really don't see ethnic Distinctions as being particularly important in terms of how I view the world.
Malcolm Collins: Well, it's because the D. E. I. Programs have become so, so, so aggressive right now. That if you are a minority and you are [00:32:00] technically competent. You can get a large arbitrage just by going into Google or by going into Facebook. You know, there is a much easier pathway there for you than going into entrepreneurship.
Whereas if you are a white male, you are near frozen out of these companies. If you present assist these days like, yeah, you can get in, but it's harder to rise up. It's like, just all the cards are stacked against you. So at that point, you know, why not? Like, if you're judging a decision and you think you have a good idea, why not start a company?
So unfortunately it means that the type of people who are likely to be Republican or likely to have some resistance to the Silicon Valley ethos are the ones who are being disproportionately pushed out from a political perspective. Then you have the secondary problem, which is you know, as I've said before in my show, Startups these days, you know, they used to be like a hundred, 200 person teams of engineers in Silicon Valley going to these cool, like open space offices.
Now it's three guys and then a huge outsource team in the Philippines and then a ton of [00:33:00] independent AI agents. And these people are just not networking with these old you know, Silicon Valley VC groups. And
Simone Collins: they also need less money. You know, we're, we're getting to an age in which you can do with AI.
So much of what would otherwise have cost so much to raise. And, and also things that used to cost a lot of money that people used to need venture funds for things like teams, things like advertising. They're kind of broken. I mean, one, we can use AI and outsourced labor for most of the things that hires new hires and initial hires that people raised funds for used to do.
Then. Advertising, I think people are learning more and more. It's just inherently broken. It doesn't really work. So where a lot of people raised a lot of money to just own a market and advertise, which is something that was really pervasive in the venture capital world earlier. It was like, oh, we'll raise venture capital funds.
Just like flood a market. And basically outcompete unfairly everyone else who's trying to compete in this market, because you can just infinitely spend money and like undercut them in [00:34:00] price and then take over the market, put them out of business and then own the market. That doesn't really work anymore.
And advertising doesn't really work anymore the way that it used to. So I think that there's just less reason overall, but I think the other issue too, is that a lot of venture capital firms are returning a lot of the money that has been invested in them saying, well, sorry guys, we're not going to be able to spend this all because they're not.
They don't have enough opportunities to deploy the funds into it. I can give you
Malcolm Collins: a concrete example from our own experience of like why this is happening. Consider the Collins Institute. So with the Collins Institute, a lot of people are like, Oh, the text written in the Collins Institute looks like it was written by an AI.
And that's because, yeah, I mean, it was written by an AI, and we're using humans to go through and edit it and everything like that. And we have a some dry powder that we're sitting on, and we had taken it, and we were going to originally the plan when we first had the idea for the Collins Institute was to hire a team of PhDs to write every one of these answers.
And then we were like, Oh, no, it's easier to do with AI and then have, like, lower skill. People go through and clean [00:35:00] it up. And now we're looking at, like, what AI is outputting these days, and we're like, we actually shut down the team that was going through and cleaning it up because we're like, look, in two years.
I'm going to be able to have an A. I do all of this for a trivial cost. So we took a task that was originally for Ph. D. S. Okay, then said, Oh, we can give this task to outsource low cost people combined with a I to Oh, in two years, we can give this task just to a I. And so the amount of money we need to put together a project like this is just astronomically less than it would have been on a historic basis.
And this is what all of the VCs are seeing in terms of where they would have deployed capital. So that's created a problem. But then
Simone Collins: also in terms of selling and getting liquidity, I think that's another really big problem is that it, it seems that there are fewer opportunities now for startups to go public, to sell to like M& A seems to like, I think we're seeing some more friction when it comes to [00:36:00] M& A from like a, an antitrust perspective as well where it's more difficult for people to.
To cash out investments that they've made in startups because those startups aren't going public or selling the way they used to. And that's just another issue that this market seems to be breaking more and more. So that doesn't seem like a good option, but most people. Listening to this podcast, aren't accredited investors who could make venture capital investments anyway.
So I don't know how much this is relevant.
Malcolm Collins: It's very relevant and we'll explain why people need to understand what's going on in capital markets that they want to broadly understand what's going on in the world to these days. If you don't understand the, what the people with money are thinking about or what they're doing, you are making bad decisions.
About the way you're optimizing your career the way you're optimizing your finances and I think that that's why people come to this podcast partially is to get a perspective that they're not otherwise going to get so we one I would say that we've come up with a solution for vcs it's actually not fully [00:37:00] finished yet.
But you can check it out right now the site is basically a draft at this point, but we're going to do a big launch soon it's hard and ea.org. And what we are going to do is try to compete with the or original EA message, the effective Altru message, which is like, we're gonna fix major problems in the world but not do so in a way that primarily socially signals that since have been, I mean, the, everybody knows the only a movement has been completely captured by social signaling at this point.
It's all like environmentalism, which has like no arbitrage capability. It's all like all of these, the, it's this giant bloated. Bureaucratic peerage network at this point. Well, yeah, just
Simone Collins: yeah, it stopped to be what it was all about which was actually Achieving the greatest good regardless of signaling status and how things looked or felt or signaled.
Malcolm Collins: And so, what we're going to do is to try to create a network that, that actually puts money in places where it might matter. One of [00:38:00] the things that horrified me the most recently as going through, because recently, you know, this podcast, we're often you know, sort of pooping on AI safety. And recently, I was like, you know, it is an actual risk.
It's more just that I think that people focusing on it right now are doing so for personal gain and that the ways that they're attacking it can't actually fix it. And we are going to do a different episode on that. So I started going into what they were doing. I was like, Oh, none of these solutions.
Even a chance of working. You got real stuff there. And with this organization, we've already made a few capital deployments specifically in the bioacceleration as them space. So this is on stuff like IBG technology. This is on stuff like you know, human genetic stuff. And I realized, well, the way that I want to deploy capital as opposed to the traditional EA, which is doing it in this peerage network format is I want our nonprofit to to invest in companies that could potentially turn cash positive, but that also have a chance of saving our species.
And the way that we wanted to structure it is to say, okay, we will do that as a nonprofit. [00:39:00] We will open a grant and we actually have the grant thing open right now. You can apply if you want. But if you are a VC and you donate to us, we will give you our deal flow pipeline as we make these investments.
So that's Which could be useful to VCs, specifically in either the AI or bioacceleration of space, which are the spaces we're going to get the most potential opportunities. But then the other area where, anything else you wanted to say here, Simone?
Simone Collins: No, I'm just really excited about it. I, I want to support people who are doing.
Real work in this space.
Malcolm Collins: Okay, so we met through this podcast somebody who reached out to us and has been a fan from very early on in the podcast somebody who has a data center that used to run crypto stuff and what we are doing is we are like we personally have bought from I think NVIDIA or like a third party some GPUs, like a rack of GPUs that we're putting [00:40:00] in their facility.
And then there's these VARs that we can resale them on. Value added
Simone Collins: resellers
Malcolm Collins: to be clear. That's a value added reseller. So we put the GPU in the facility. His team helps us with, with running those. And then we help manage how it's being sold to people. So it's a, it's a more active investment for us than like a you know, like a security would be, for example.
It's something where we need to actively put some attention into it and like, make sure that it's being used by people. But when we run the math, it looks like because a lot of the, right now people who are focused on these big gpu data centers What they're doing is they're converting old data centers that used to be focused on Processing for like websites and and and the old processing that needed very low latency Periods because they were like being actively used by like constant online user stuff.
They Would put them in like expensive cities and stuff like that or in areas that were expensive Just because they had low latency and they were [00:41:00] next to like the main lines that the internet runs along whereas a lot of the crypto stuff was done very far from these areas. In areas where where power was super cheap and so we're looking to put them in those facilities and see if we can make money off of them we are going to see if we can put this together You In a way that it's possible for an average person to sort of, buy and manage their own GPUs so if that's something that you're interested in deploying capital on, you can reach out to us.
That said we'll, we'll see if we can find a way to make this, this, this work legally. The, the, the key thing to it is we can't manage it for you. You're going to need to do the management yourself. That's why, and you're going to need to own it yourself. So we'll like facilitate the buying process, but you will be the actual person owning the product.
A GPU, but anything I I'm personally really excited about this opportunity. Well,
Simone Collins: what makes me excited about it is we still believe, I think inherently in this process of, we want our [00:42:00] money to be in a thing that we think is going to grow, that has strong tailwinds as it were. And when we think about the only thing we can really depend upon in the near future with the rise of AI is a need for AI compute.
And power, like those are the two things I'm very confident about that power is really important and AI compute is really important. So, yeah, I want to invest in businesses that are providing those things, please. Like, I wish they were, you know, Small batch nuclear companies that appear to have a path to viability in the U S you know,
Malcolm Collins: our, our friends who are like super VC, you know, very, very, very competent VC people.
They're they're in small micro. They're all
Simone Collins: about it, but the pathway to getting proof from a regulatory standpoint in the U S is really patchy. And it's hard to say, What companies specifically are going to be the ones who finally make it through. That's why I'm like, I wish I [00:43:00] could, but I just don't see opportunities personally there right now.
But what I do see is that there is this opportunity at least to work with this team. And we, we really like them personally to be involved in AI managed hosting. And I'm like, all right. Yeah. Because the, you know, you want to, you don't want to in a gold rush, you don't want to go out to California. Yeah.
A pick and pan to go panning for gold. You want to go and sell jeans to gold miners and sell picks and gold panning dishes to them, you know, like just sell their supplies, be their restaurants build the roads, but don't be them. So that's what I'm thinking about. That's why I like this.
Malcolm Collins: Yeah, so we'll see.
What, what other things are we focused on right now? I mean, we put all our money in the SMP. That was one thing, but, but when I say all, not all, we, we still own a lot of property, but we've been getting out of multifamily housing, which is where we were traditionally the largest part of our, our investment.
Still [00:44:00] some medical office,
Simone Collins: still some multifamily housing. Most multifamily housing is typically like large apartment. buildings or condo units where people are renting that are managed by property management companies. These
Malcolm Collins: were, these were things that made money and we're growing during a period where the family unit was dissolving.
And, and this is something that people don't understand. They're like, why is real estate going up when population isn't going up? Right? Like why, or when population is even falling and it's because, well, one of the reasons population is falling is people aren't getting married. And so. And that means that people who would have had one house now need two houses.
And, and people aren't living with their parents and people aren't living with their kids. So they just like the number of people living in a house has dramatically decreased. Which means that low end houses and multifamily housing has been a really hot sector for a long time. But I no longer have faith in the sector at all.
Like when I'm looking at the multifamily housing returns, we can get, we're looking at like six or 7 percent and if we put our money in a long term savings account we can get 5 percent interest. So, like, why am I dealing with the risk and the [00:45:00] non liquidity of multifamily housing investment? When I can, you know, put my money in long term savings and then invest in, like, GPUs and stuff like that.
What are your thoughts more broadly?
Simone Collins: I know that we're not the best with money, but are you
Malcolm Collins: serious right now? Like, do you have any idea how much we've made on investments in the past? I want to say four years. You've probably doubled our capital.
Simone Collins: I don't think so. I can show you,
Malcolm Collins: you know. Okay. I'm just, just offline.
I'll cut this part out.
Simone Collins: Back, I'm sorry.
Malcolm Collins: Now that you've looked at the numbers, you realize I'm closer to right than you thought you were. I was.
Simone Collins: Y yes,
Malcolm Collins: I'm so bad at math. This is so
Simone Collins: sad.
Malcolm Collins: Anyway the point being, Simone, I, I love you. I hope that we can find a financial Ooh! Inflation!
Simone Collins: That's what I meant to say. Like, with inflation.
Malcolm Collins: One of the things that [00:46:00] we've been trying to do recently is really, really, really pulling back on our jobs and stuff like that I don't want to be involved in a day job that much anymore I want to be focused on things that make a difference in the world I think we're dealing with short timelines I want to be focused with this hearty a project once we can get it all cleaned up and nice looking I want to be involved in ai I want to be involved in the things that matter in the world today and in this podcast more I want to put more time and effort into researching for this so I can give you guys better Spicier more fun takes every day And I think that that's something I really want to focus on over this next year is to just say, even if we don't have a pass for like daily income, which is something I'm not focused on at all anymore, what?
No, I'm just not. I'm like, Simone's like, what are we going to do if we leave our jobs? And I'm like, well, we'll figure it out because I, I think that these other projects are where our attention needs to be focused.
Simone Collins: Yeah. I mean, our objective functions matter more than income. We like living [00:47:00] frugally. And yeah, people might be listening to this and thinking like, well, if they have all this money to invest, clearly, they have enough money to live without jobs.
But I think the key to not being broke is to do pretend that any money that you have invested and that includes any interest or dividends or payout that comes from that money is not yours. Any dividends and interest immediately gets reinvested. Like it doesn't exist. So it's not as though I can pretend like, Oh, I'll just use that.
If our income goes away, I have to pretend that it doesn't exist because. That's the rule.
Malcolm Collins: We only get to spend the money that we earn now is basically what she's saying, but it's for the greater good.
Simone Collins: I like living lane anyway. So it's fine. I love you,
Malcolm Collins: Simone.
Simone Collins: I love you too, Malcolm. She's awake. So I, and so this starts your process. I love this [00:48:00] weather. It's just so nice. Okay, turn your ring light up. I read today that 23andMe might go bankrupt as soon as next year.
Malcolm Collins: Ooh.
Simone Collins: Yeah, a lot of people are really concerned. Really shady
Malcolm Collins: stuff.
Simone Collins: About their genetic data. Yeah,
Malcolm Collins: I love that. Everyone's all worried about it. And meanwhile, I, they have our genetic data and I'm excited about it.
I'm like, yeah, bigger genetic data sets in the hands of people with money. That's a good thing. Cause that means more science. That's one of the things I always bemoan is there's not good genetic data sets right now because the big, like the bank in the UK, like close it off.
Simone Collins: It sounds like your mic isn't plugged in, by the way.
It's
Malcolm Collins: not close to me.
Simone Collins: Okay.
Malcolm Collins: So for people who don't know, they the big gene bank in the UK ended up actually closing off access. The UK. What?
Simone Collins: The UK biobank. That's what it's called. The British biobank.
Malcolm Collins: Yeah. And the reason they had to, [00:49:00] they, they ended up cutting off access to, to most of the projects is because somebody in one project accidentally, now this all happened accidentally, but they found out that within one, let's say Ethnic immigrant minority population in the UK rates of children that were born via father, daughter, something relations relations at a were 5000 percent higher than in any other group.
And apparently this was an offensive fact for them to discover. So they had to shut down access to most people doing anything really interesting with the data, which is
Simone Collins: Yeah.
Yup. So, let's do it.
Malcolm Collins: Alright sorry I'm pulling up my notes right now. It [00:50:00]
Simone Collins: was interesting though, to read.
Speaker: See, tell me something crazy. Uhhuh. Okay? Octavian. You popcorn. Oh, popcorn? Is that it? What? Popcorn. Oh, you like popcorn? Yeah, with popcorn. You like popcorn? Are you a popcorn? Yeah, I'm a wet popcorn. You're a wet popcorn.
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