Navigating the Future of Digital Securities: An In-Depth Conversation

(upbeat music) (upbeat music) - All right, I'm Phil Larmon. - I'm Ali Davoudi. - And I'm Douglas Sporthwick. - Remember to like and subscribe. We're on all major social platforms like Instagram and LinkedIn and all major podcast platforms. Also, subscribe to our newsletter on LinkedIn where you can get the latest and greatest for AI, crypto, Bitcoin, and digital securities. With that said, let's jump right into the episode. I've been talking a lot about the insurer model over the past couple of weeks.

And really because we've seen the passing of the Genius Act and the Clarity Act, which I think are going to absolutely change the economy as we know it. I think it's gonna change it specifically because with the, we're gonna see stable coins in everyone's wallet, a digital wallet in everyone's pockets. And on the back of that means we're gonna get used to having digital assets on our phones. Then that's really part of the Genius Act. Now the Clarity Act is giving a guideline for digital securities. And that's something that the SEC has also been pitching as well.

And so on the back of that, I think we're gonna start seeing a lot of companies create digital securities from the equity that they already have, both private companies and public companies. And when we see that, I think that's gonna be a bit revolutionary in terms of how we look at both consumers and how we look at investors in this market. - Right, so as a regular investor, right, maybe I'm not super well-versed with digital securities.

What happens when these digital securities are being launched and there's all these different platforms, someone has a different wallet, is it still like regular crypto where you have to swap it out onto another platform? Or how does this, is there interoperability with the different digital security platforms? - I don't think we have to think of it in terms of interoperability. It's more of, look, I own Nike shares, I'm a shareholder. Right now when I walk into the Nike store, Nike has no clue that I'm a shareholder. But if they knew that I own a million shares of Nike, maybe I'd get a discount whenever I buy my Nike shoes. - Doubtful.

- If I go to my coffee store, my local coffee store, and it's a private company, and they say, "Hey, do you wanna make an investment in the company?" And I invest in it. Then every time I walk into that store, the private equity that I've invested in digital form is on my phone. It shows up at the point of sale and I get a discount. So everything we do in our lives could move to this model. When you go to a lot of these large stores like Sam's Club or Costco, you join a membership. And when you join that membership, you get certain rights that are given to you.

Now that membership though is looked on as being a liability in the corporate balance sheet. But if that was turned into digital equity, that you bought digital equity, it would become not a liability, but rather an asset for the company. And every time I shop there, if I knew that would help my stock price go up, then I'd probably buy more shares and I'd probably buy more at that store. So that's looking at it in a Costco level in a very grand scheme. But I think that what we'll find soon is that all the equities you hold in your bank account, in your brokerage account over at Morgan Stanley, in your demand account. - In your what?

- In your demand account because they're not really being held in your account. You have a demand account when you're there. Fidelity, Schwab, anybody. When you want it, you demand it, they're there. But they're not really being held in your account. - When you own shares right now in Nike and you think it's held at Morgan Stanley, it's not in your name, it's in Morgan Stanley's name. And so Nike has no idea who you are. But if you held digital securities that were issued by Nike, then not only would they know who you are, they'd be able to see who you are. And obviously you've gone through KYC email to buy these.

But on top of that, you'd also be able to have portability. You could actually hold it in your wallets, in your digital wallets. And so then you're gonna see, okay, what about point of sale? I wanna make sure that when I'm buying Nike shoes, sneakers online, I get a discount 'cause it shows up in my MetaMask wallet. I wanna make sure that when I go to a store and I buy something, my wallet is scanned and it says, okay, you own shares in this so you can get a discount. I want to get discounts on every single thing that I own in my wallet. And I think that's where we're moving to where the investor and consumer are merged.

- Can the company afford to do that? Pay a three, are you still gonna be purchasing via a credit card and the company still has to pay a three and a half percent transaction fee or are you gonna be now basically purchasing with an underlying token that enables them to avoid that three and a half percent fee and instead, let's say, for example, pass some benefits to you, the consumer, the in-sumer, if you will. - That's a different angle. I think that soon we will be paying for things, like credit cards are gonna be around for a long time. Nothing's gonna change that.

We'll be able to pay those soon with stablecoins and when you pay with that stablecoin, maybe there isn't a transaction fee that happens, but you can already do that with your debit card per se. You're greatly reduced, right? - But if I own equity in Nike, my Nike shares aren't gonna pay for my Nike sneakers. I'm gonna pay in Fiat for my Nike sneakers, but I'll get a discount because I hold the Nike equity. - So this is a customer loyalty on steroids, right? It's, you know, it's adding another range. - It becomes a liability on the balance sheet.

- Yeah, it-- - Like if you're holding, if you're holding like AirMiles on United, that's a liability for the balance sheet. - Yeah, but instead of owning AirMiles, you own equity, then it's better for the company, but the company also gets tremendous amount of data from this. They can-- - You're telling me I can't use that equity. You're saying I can't use that equity to purchase the shoes. I'm still gonna be purchasing it with a Visa MasterCard. - That's right. - So if I'm doing that, what miles or what loyalty points am I getting and how is it benefiting Nike?

Because if I'm getting something as a consumer where it's basically a loyalty program on steroids, like Phil's saying, then isn't that adding just another layer of liability onto the balance sheet? I mean, yes, they've identified me by holding the share. So that's equity. So you've identified me as having to being an consumer because you know that I own let's say 100 shares of Nike. - And you can see that you're buying Nike sneakers. - Right, and I can see all-- - Now I'm matching both sides of this equation.

So normally when you have marketing, you're trying to pull in people or you're trying to push an idea onto some-- - With a customer acquisition cost. - With here, instead of spending money on the marketing, essentially you're diluting your shares and selling these shares to people that buy a lot in that store or that fly a lot on that airline. Based on the number of shares you own in that airline, now you're gonna get a discount whenever you fly on that airline. So instead of using membership share miles, you'll now just show your equity ownership. So it's like it's in your interest to buy equity in the companies that you frequent.

And it's in the interest of the companies that do yours too. - So you're also saying that this could be a way to identify additional investors where this could be a marketing component whereas it's like part of the loyalty program says, look, you spend a lot of money with us. Have you considered buying equity in Nike or said company and these are the benefits to you? 'Cause actually net net, you could actually maybe-- - Now you're soliciting security sales and it brings up a whole shit pile of other products. - No, but it doesn't have to be like that. Look, when I go to Whole Foods, if I'm a Prime member on Amazon, I get a discount.

It reads that I'm a Whole Foods member or an Amazon Prime member on my phone. And because of that, I get discounts all across the board and whatever I'm purchasing, right? Everyone sees that. So you see, that's a membership model. Now let's say though, instead of the membership model, they said if you own Amazon shares, you will now get all of these same rights you have as an Amazon Prime member. Now today you can't prove that you own the Amazon shares in order to get those rights.

But if you could prove that you had the Amazon shares 'cause you have a digital version in your wallet at the point of sale, much as they scan right now that you're an Amazon Prime member at Whole Foods, instead they'll scan your phone and they'll see, hey, this person is a shareholder. They own X number of shares and based on the number of shares I own, well, I'm gonna get discounts. Now they don't have to go right there. - Create a whole new class of liability, create a whole new class of liability associated with those shares. - That is not a liability. Equity, those are shares. - Hold on now, 'cause I know you know your point.

What I'm saying is, and I'd love to see how you defend it so you can explain it to me and Phil, because what I'm saying is right now when Amazon Prime takes on an $135 annual subscription, they have to record that as a liability. - That's correct. - So different than the cost. - That's correct. - And so now if I come in and I show, hey, I have, and by the way, how do they define it? Is it based on tiers? Is it gonna be like my United 1K or my Global Express or my 1K or my Platinum or my Gold or my Silver? You're gonna have different types of things that are available to you.

But we're not talking about status where you get upgraded and stuff like that. We're talking about an in-simmer model where you come in and you're now going, hey, I just walked into your Amazon landed store. I just scanned and I've been able to show that I own one share of Amazon that's been tokenized. It's on a blockchain. So now the company is able to tell when I come in, I scan it, okay, this guy is the thing. If they have to offer me even a half of 1% of a discount on anything that they buy in the store, this has to be recorded as a liability. And I'm not sure I know how you move that target.

You know, is the guy gonna buy $500 worth of stuff and 1% is, you know, a $5 deal? Or is he gonna buy 57,000? Is he gonna walk in with one share of Amazon and then try and buy somebody that doesn't own Amazon $70,000 worth of crap and get a discount on it and then let him have it, maybe even take it. So to me, it's a lot more complicated than that. Like in theory, they always say in theory, theory and practice are the same thing. In practice, they are not. As a company, I can see seven ways to Sunday to get fucking Rob blind with this type of loyalty thing. It doesn't matter.

Like just by showing proof that you have ownership, if it was going to reduce the liability, like your thesis was at the beginning, I totally get that, that would be great for the company. But right now, they already have their loyalty programs and now you have a whole new class of consumers, in-sumers that are saying, hey, but I'm also a shareholder. So now when I come in, I want another discount. - Exactly. It's a whole new class. - No, I'm talking about replace them. - What if you don't have a discount? - I'm talking about replacing the membership model altogether, not having both at the same time.

And now the shareholders are the ones that get all the-- - I see. So the only people shopping at Costco will be Costco shareholders, otherwise you can't come in. - You can, well, yes. Yeah, in that respect, yes. But when someone pays their $180 for their membership, instead of them getting a membership, now they get equity sent to their digital wallet. - I mean, I'm not sure again, like if I pay Amex for like a platinum card, right? I'm gonna get immediately upgraded to gold on Hertz. I'm gonna get upgraded to certain things on other ones. - Right, but American Express is not a very good example. American Express is a credit card.

It doesn't really sell things. Whereas Costco, you go there to buy things. - Right, the reason I think it is a good example is because what they do is they're selling you those status levels at the different folks that are selling you things. So they're your partner and stuff. So as part of that membership fee to Amex-- - Do you believe, do you believe that if I own a million shares of Costco, that maybe I own differently than if I own one share of Costco? - Yeah, I'm just not sure.

I agree that the mechanism to make that happen systemic-wide is necessarily available or necessarily really been thought through because if I'm the chairman of Costco and somebody comes to me internally with this idea, I've got a million fucking ways to Sunday that this is gonna create all sorts of new liabilities and it's gonna be an absolute tracking nightmare for us. - But surely have to be some sort of algorithm that would correlate based on your equity interest in the company versus what benefits you get.

Because to your point, Ali, there would be some manipulation of doing this and it almost turned into a business of getting discounts for someone's buying it 'cause they have certain status and then giving it to someone else, almost like an arbitrage of internal purchase. - If someone wants to get to that next tier so they buy another $50,000 worth of shares, why is that bad for Amazon or Costco? - Say that again. - If I want to get to the next tier, why is that bad for them? Am I buying more equity? - I didn't say it was bad for them.

What I was saying was it's an accounting nightmare and how to track it and then the whole premise was we're gonna get out of this thing where the membership is a liability to the company and instead because of the tokenization of your equity interest, you now get all these benefits and the company doesn't have to list it as a liability on its books. I just don't think that's the case right now. I think the company is still gonna have to list it as a liability on its books based on the way we're currently discussing it. That's all I'm saying.

But I think that's a point of view, the lawyers that I've talked to and I've talked to significant firms. - Oh good, the lawyers. - They all seem to have this very strong view that yes, this takes a liability which membership points are, membership tiers are all of that stuff is a liability. Someone's paid you for their membership and now it's a liability in your balance sheet. If they pay me for equity, it's not obviously. And if I can reduce my liabilities and instead sell equity and get more money in the bank. - They're not paying you for equity. - They're not buying it out of your treasury stock. - Of course they're gonna be.

The digital security is equity. - Digital security is equity. What I'm saying is the way we currently purchase securities, we're not buying, like unless we go to a secondary offering direct for the company where the company's issuing the shares and the funds are going to them minus the fees, whatever the fuck Wall Street wants to take from Main Street. What I'm saying is in that process, you don't have a way to really track all of this. You're not buying it from them, the way people buy right now, they're buying in a marketplace. You're going into Fidelity's world or Schwab's world.

You don't even know if they're actually getting the damn shares from outside of their walled garden or from inside of their walled garden. - Well, digital securities aren't gonna trade in the same way as the equities that you trade today. Obviously, you can't trade the digital security on the New York Stock Exchange, but they're moving towards that. The permissions are being written by the SEC. And when those positions come out, you will be able to trade a digital security of Nike if Nike decides to do a digital security. And that digital security you'll buy online through via an ATS or via their website 'cause they'll just buy an ATS.

It doesn't cost them that much to get it. - And so is your idea that it's gonna be pure trading? Like I'm gonna be able to go out there and sell my Nike shares without having to go through Fidelity or Schwab? - Absolutely, yeah. And peer-to-peer trading of public markets already exists. It exists at INX right now. The INX security is a publicly issued security. - Oh, it's so minute and it's not-- - It is when you, but it proves the model.

It proves the model that a public security can be traded in digital format, traded peer-to-peer, show up in your wallet and be identified as used in the-- - Well, I'd trade on the INX platform, so it's not peer-to-peer. - No, you could, yeah. You trade peer-to-peer in the INX platform from your own metamats wallet. - Peer-to-peer, in my sense, you get peer-to-peer I get your 64-digit address and I send your ass whatever the value-- - Right, but that's illegal under US securities laws. You can't do that, obviously. But what you can do is you can trade peer-to-peer is to trade peer-to-peer on an ATS-- - What's illegal?

Hold on, clarify what you said. What's illegal? - You can't take Nike shares right now and then me send them to you directly. It has to go through the world. - It has to go through the exchange, which means the whole peer-to-peer theory of self-reliance, fucking Bitcoin, not your keys, not your coin, all of that when it comes to the tokenization of securities, you're gonna have Wall Street standing in front of you like a wall not letting that happen. They're not gonna let you take their ego. They're gonna say, "Lego, my fucking ego." That's what's gonna happen.

Because right now, again, if I have the share of Nike, there's no way for me to trade that Nike share to you. Like, I wanna sell it, you wanna buy it, you've determined $85 is a good price, I'd like to sell it. It's still gonna have to go through somebody's walled garden, just like INX. I can't trade, like once I have the INX exchange, and you guys have like issued, let's say, shares on a company which you're saying is peer-to-peer. But the only peer-to-peer is there's 11 of us sitting in a garden going, "Hey, I got a bid, I got a bid. Anybody wanna hit the bid?" That's it.

It's not like I can actually go out with like crypto right now where as long as I know your wallet address, I can send you whatever amount of value. - We're going on a tangent here because obviously, if I own Nike shares, what we're talking about here is owning Nike shares, having it in your wallet, not me sending my Nike shares to Phil. That has nothing to do with the insurance model whatsoever. I want to know that I can hold Nike shares in digital format on my phone, short at a point-of-sale and get special treatment.

- One of the benefits is if I happen to walk into the store and I get scanned on my iPhone, which by the way I think is an invasion of privacy, unless I voluntarily, like my Costco Club, scan the barcode where I'm basically introducing myself as a member of that. But if I walk in there, what happens if I own a million shares of fucking Nike and I don't want anybody to fucking know that? - Okay. - Like there's a-- - You remember again, but you're assuming NFC, you're assuming that they're gonna scan your phone when you walk in as opposed to it creating a barcode that's then scanned and it can see, okay, this person is the tier.

The person that they get cashlessed or doesn't need to know that you're, how many shares you own, but they can certainly tell from a barcode that you're a large shareholder. - But if I'm in a tier, they're gonna know, they're gonna have a ballpark and this is a huge invasion of my products. - Well then, Ali, you don't have to use it. - Well, I think, yeah, I think it would go into, you could opt out. So I have a question, Ali, you brought up a point about discounts being a liability for the company. What if this is used more of as we come out of COVID, right?

The consumers or consumers are very much looking for more human experiences hence these run clubs and these different things that are going on that are starting to see great value. And actually VC is actually investing in this space as well to try to create more connectivity from human beings. Is it just that when we're talking about discounts or can it be used as like a deeper level, more data driven, another data point for loyalty, identification. - Identity marketing, yes. I get that, what I'm arguing about is I'm not sure the world wants to go there.

Like there's a whole privacy wall that the whole anonymity concept behind Bitcoin is what I like, it's anonymous. It eliminates the $35 billion worth of identity theft and everything like that that you have when you're sending in the payments and what have you. But like what we're talking about now with equity, I would love to solve this fucking problem for Wall Street and have them pay me trillions of fucking dollars because I just don't know that I would want the company, like when I'm walking into a store like Costco, I may not want someone to know that, holy shit, this guy's got 70,000 shares of Costco.

That may not be something that I necessarily want out there. Now, whatever it is that they're going to provide me as a benefit for that, for example, Amazon, you bring up COVID, that was a great example. During COVID, Amazon got fucked on Amazon Prime because what happened is they'd issued that liability out there for 135 bucks and now all of a sudden all the consumers, their consumer habits went up 400X whereas they used to go to the grocery store, they don't. Now all of a sudden Amazon's on the hook for all of this free shipping.

And so if you remember at the time it was $99, they took it up to 135, don't feel bad for Amazon, they're going to make their money back. My point is though, that it's a giant liability. And so as we're talking about for our audience, the tokenization of equity and everything like that, I love fucking Larry Fink and the son of a bitch wants everything. After he told us everything is shit with blockchain, now all of a sudden every asset in the world is going to be tokenized and be there for him to take his little piece of rake or fear, whatever the shit it is. Now he's getting onto it.

But the whole consumer model is so nascent right now and it has not been thought through well enough. It's how it will actually work like moving forward because all of these programs, whether it's Centurion Card, Amex, Amazon Private, everyone has these liabilities and to Doug's point, which was completely accurate at the beginning, it is going to take this liability and remove it. But not because you have a equity token. Like if anything, and you're gonna provide like other gifts or benefits or discounts based on the equity that you hold, that's just gonna create another liability column for the companies, in my opinion.

I don't know, I'm not an expert. We're just talking about this. But as we're talking about it, I can see a fuckload of problems that come up with it. - Do you think some of this is a mentality of when you have maybe different age groups, different net worths, different stock portfolios where someone that has a significant holding within a company or significant assets may have a different perspective of how much they wanna share with the world and on that consumer. - Well, sure. Just look at Wall Street Bets. Like those kids, they love like the fucking death porn. Like, look, I just lost 400,000. Look, I lost 200,000, sure.

- Right, where there's maybe a different generation coming in where maybe they don't care or they don't have enough to actually care or have that perspective to know what the liability of of sharing all this out there in the world is. - Or maybe they realize that they've already given up their privacy and they're not still living in a world where they believe that privacy exists. If you don't believe that people already know what's happening. - Look, that looks pretty soon. Someone's gonna wanna come into my house and sleep with my wife too.

They're gonna be like, "Well, you gave up this, "you gave up that, well, you might give this up." - I think you just saw like the EU now decided that they're gonna start looking at everyone's text messages. - Yeah, fuck the EU. The EU has completely gone communist on the other side. Like, the EU is not a crazy ship. - Well, maybe the EU though is that maybe they're just saying what the US already does, I lied. - Sure, but Edward Snowden kind of told us that. All I'm saying is we are at the precipice of a brave new world. We are transitioning from the industrial age to the information age. Our school system is behind.

It's still teaching antiquated shit. And you know, I feel like what we're discussing right here with the tokenization of equity is about the same amount of diligence that we're giving AI as we fucking run along and develop it with absolutely no oversight. There needs to be a shitload more thought and discussion given to this topic to decide. Like in a Petri dish, what problems, what new problems will this create? What liabilities does this create? On its face when talking about it in theory, sounds fucking great. I'll give you a great example. I just got back from the 60th anniversary of the Grateful Dead, as you guys well know.

And I paid up for VIP tickets, right? I'm going there with 50 of my friends. I wanna be able to get around to all of them and everything like that. So that money goes to the band, the promoters, et cetera. Now, once I get there, I'm in the middle of fucking Golden Gate Park. And the only thing separating me from my other friends that don't have perhaps the same money for the same type of ticket is just an entry gate with a wristband. And what I can do and what hundreds of thousands or thousands of other people did was they would walk through with one of their friends' bands, scan in, go through, grab one of their friends and bring them back.

It's just a hard way to police it. So I think kind of like if you look at the Grateful Dead, what they just decided was this is an acceptable amount of quote unquote, theft, slipping through the cracks, sifting, whatever you wanna call it, right? Every company is gonna have to come to that decision. How much are we willing to put out there in order to make this new consumer model work? Who knows Douglas? Maybe they go just like Amazon did in the early days. They go, fuck it. We're gonna take losses and losses and losses and losses. And then eventually we're gonna be Amazon.

We have all the eyeballs and then we'll start reporting quarter after quarter after quarter. (indistinct) But it's gonna be a liability on their books. - It's an interesting view, but let me ask you a question. If you have a million dollars worth of Costco shares, but the guy outside the store says, "Hey, will you transfer that million dollars of Costco shares to my wallet so I can get a discount when I buy something?" Would you? Of course you wouldn't. If you actually have to prove that it's on your person on your wallet, that's probably safer than if someone gives you their Costco card.

- What if he said, "Hey, Allie, I wanna go to Costco and I wanna buy $150,000 worth of gold." And because you have, let's say even up, don't say a million shares, a hundred shares of Costco. Can you go buy it for me? It's gonna cost you 3% less. So it'll cost you 4,500 less. And because I love you, I'm gonna give you 1,500. Just go buy it for me. So all I'm saying is how do you... - If Costco is priced at whereby they're making a profit, still, whether the 3% is just gonna say or not... - If there's an acceptable profit, they have to figure it out. - You gotta figure that, like, you know what? We'll price that in.

- Yeah, but at the beginning, but eventually, that will end up costing the consumer. - But if I have 100,000 shares of Costco, if someone comes to me and says, "Hey, will you go and buy this for me?" The answer is no, 'cause I don't have the time for that. I'm not looking to make an extra 1,500 bucks here or there. - You say that, but I don't think that, like, my aunt could come to me, my uncle comes to me, my son comes to me, my brother comes to me, my friend comes to me and says, "Hey, bro, can you just do me a favor and go grab this for me? It's gonna save me $4,500." I'd do that in a fucking heartbeat for my friends. - You're different.

- I don't want... Yeah, I don't have time for it. I got nothing but time for my people. What are you talking about? What else am I gonna be thinking about? - Well, you start thinking about it, how folks with crypto were doing platform arbitrage when Bitcoin was trading at something different versus another platform, and they were swapping it over and making their spreads. - Yeah, the kimchi premium. Remember back in South Korea, back in 2012, 2013? - And what happened? What happened? So many people started to do it. So many people started to do it that the premium disappeared.

So if everyone realizes that by owning 100,000 shares, guess what, everyone's gonna come to me and I'm gonna get paid money. Everyone's gonna go out there and try to buy as many shares. - There's one important distinction you make there, Douglas, which is the 100,000 shares. The other one, you didn't have to have the 100,000 shares. You could just be buying 200 million Cistos. - If people have the opportunity though, then they're gonna go out there and buy as many shares as they can of Costco so that all their friends will come to them and give them $1,000. And Costco is selling more shares and raising more money without lifting a finger.

- So this is a whole new paradigm shift that we're talking about. Now we're gonna go out and now we're gonna become new agents of Costco, whereby I am like an Amway distributor based on my level and status. - You've just said that you're willing to do. - Yeah, all the people beneath me will have to come up to me. So in a way now, I also become Costco. So I become the neighborhood patron for all of the friends of Ali Davoudi. - You become one of their biggest salespeople. - Yeah, that's right. - And you tell your friends, "Hey, you should really shop and not buy a good deal." - I don't have time for it, Douglas.

That's what I don't have time for. Right now, it's much more democratized. Everyone can afford a $99, $135 Amazon Prime membership and stuff like that. All I'm saying is it's great theoretically, talking about like the tokenization of assets, but this is a paradigm shift for the world. That means that every guy that's on Wall Street that has a job right now, like I'm just going through the airport and in SFO and there's a robot arm making the coffee, you get three of your consumers basically all videoing it and you're watching the death and destruction of normal jobs of normal everyday people.

And as this happens, there will inevitably be a point in society where we all are going to punt the brakes and go, "Whoa, this was an unintended consequence." Fucking 50% of the people are unemployed. I actually think that's what COVID was. It was a test to check out universal basic income. Can we pay Americans to sit fucking home, order Chipotle and play fucking Call of Duty without like revolting and rioting in the streets and stuff like that? But as now when we're talking about all this stuff, like, you know, I'm a huge fan of this because I love the fact that there's the immutability of code.

Like right now, Wall Street fucks Main Street constantly by naked shorting. They did it with GameStop when in, you know, every, all the individual kids had Ken Friffin and Citadel up against the fucking wall. And then all of a sudden Robin Hood, the SEC, everybody came in and changed the rules. So now whatever concept or social construct that they're coming up with for the tokenization of our equities and how we're gonna move away from the walled gardens of Schwab, Fidelity, E-Trade, all these guys, it hasn't been thought through. It has not been thought through. - You ever invested in a restaurant, Ali?

- Oh, it was the worst fucking investment ever, never. - Okay. I would guess that if you invest in a restaurant, when you go there, when you go there, you'd probably expect to be treated a little differently. - Yeah, but what if I didn't invest in the restaurant and the bartender's buddy, Phil and I walk up, it's our best, it's like me and you Douglas, we went to college together, you're bartending there. Now I show up. Now you're starting to pour me a double drink. Now you're starting to pour me a tipple drink. I'm gonna get butt hurt if I'm the guy that is the investor in the restaurant. There's just too many leaks.

That's why I didn't invest in that. That's why I'm also not an investor in the tokenization of equity idea yet because I've yet to have somebody explain to me how this brave new world is gonna work without fucking us all up. Because between A and Z, there's a wide chasm and I'm not sure how we get there. We can discuss it theoretically in the classroom, but when we go to put it in practice, it's gonna be a fucking problem. My two cents. - Interesting. I mean, you're the-- - It's an interesting perspective. - Yeah, I mean, I just don't know. I'm just saying like so many of these guys tell us how it's gonna be and then it's always fucking wrong.

I mean, I'm coming from a country where 45 years ago, my parents' country, the American president decided that they were gonna fuck up my parents' country and they were gonna take out the Shah and put it in like the Muslim clerics in Khomeini. And now 50 years later, I've got my president telling me, hey, we need to get him out and put the Shah's son back in. I mean, like get your fucking plan in order. What's the fucking plan? So before we just jump headfirst into AI and tokenization and consumer model and stuff like that, I think we need to like chart it out somewhere and understand all the pitfalls that are gonna happen along the way.

And how does it really work? - Yeah, I think that's companies that go directly to the consumer have been thinking about this for years. Four years ago, I had a F/O Fortune 100 company and they were thinking about how do we reward our investors at the point of sale. And they were talking to me when I was sitting there at INX and I'm talking about digital securities. So it may be charting new waters for you, but these are waters that these guys have been looking into for a while. They started with NFTs, they moved off of NFTs and they're looking at digital securities, whether you like it or not.

- How do you not use working out for the consumers? - Sorry? - How do the NFTs work? How do the NFTs work out for the consumers? - Well, I think that, well, I think that the like-- - 80% loss, drug pool. - No, I'm not sure that's right. I think that if you look at like the Nike NFTs where you own the NFT and then you got the sneakers at a discount, you actually got the NFT for the game but you also had the NFT where you could actually buy the shoes. - And do you think they carry that NFT as a liability on their books? - I have no idea, but the NFT is not equity. - Of course they ask you, they ask you. - An NFT is an equity.

Again, I'm pushing equity, not NFTs. - Right, but it's an equity, this is a great point. The Nike example is a great one, right? You've got the NFT, boom, there's the equity, but it just created a liability for the company because they're gonna have to give all those NFT holders a discount. - Yeah, the NFT was not equity. - You don't know if that NFT holder is gonna buy 20,000 pairs of sneakers or two. - You do because it could only buy one pair of sneakers with the NFT. - Okay, so you have to, so what you're giving me is a great example of something that is very well-defined. It's got a walled garden around it and it's easy for us to discuss.

But when we start talking theoretically about, oh, there's gonna be like, everything is going on the blockchain tokenization and now when you're walking in, there's gonna be a consumer model. I was at the, I was in Las Vegas and I was at this new resorts world and it's a couple of brothers from Malaysia, the Ghenti Corporation. And so it's really cool. They have like their whole food court area. Their own people that are working there are the ones that are gonna hand you their food.

So they have a bunch of kiosks and you walk up and out of like, let's say 38 different choices that you have, you know, Indian foods, Singapore, whatever, street hawk vendors. You put in your order, you put in your credit card, it gives you a text message and the only time that you get anybody that's meeting you and giving you, is when you're going to pick up the actual food. Well, it was around 11 o'clock at night. I think I got a slice of pizza and an ice cream. And later on during that same trip, every night at around that same time, I'm getting texted with, hey, here's $2 off on a pizza or an ice cream and everything like that.

And it sounds great in theory. Like that's great. Hey, Ali, you fucking like ice cream, you like pizza. Why not pay $2 less? But also maybe I don't want to fucking get that. Like I don't want to be walking around getting dinged constantly for like I'm walking down Madison Avenue and every store is scanning me and telling me, hey, you know, you bought for me before, get 5% discount here, 7% discount. - Again, but that's something completely different. That's digital marketing over your telephone where someone's sending you a text 'cause you visited the establishment and gave you your phone number. - Right, that's digital marketing.

It's opt-in in the consumer model. So, you know, what you're talking about is the consumer opting in. So, all I'm saying is right now. - I'm talking about the consumer, the investor actually getting better rights as a consumer and the consumer realizing that if they buy shares in the company, they're frequenting, then they're going to get it. They're opting in. Now, if you're a shareholder, if everything that I own shares in, I'd like to be treated differently when I go into the store. - Sure, I'm gonna go with everybody. - I don't see that would be wrong.

Now you may say, no, I don't want you to know that I own shares in this, but when you're going to Tiffany with the wife and the wife says, but you own shares here, why would you not tell him? You're gonna say, because it's my privacy? No, of course you're not. You're gonna say, look, guys, look, you scanned my wallet. - Doug, when you have that type of thing, you're gonna arrange for a backroom meeting. Like, let's be realistic, right? Like if you're me, you're somebody else that's going in there. - It doesn't have to be a backroom meeting. Why can't it just be the way it is?

- Well, you guys bring up, okay, you got me thinking about the social. - Are you gonna be okay if you get the same rights? If you have 100,000 Nike shares, are you gonna be okay with the guy that owns one share getting the same rights as you? - No, they wouldn't. They wouldn't. And in fact, there's gonna be tiers. And so everyone's aspiring to get to the next tier based upon how many shares they own. - One would hope, but how many fucking Nike sneakers am I trying to fucking buy in a lifetime that I want to keep aspiring to this? Fuck the aspiration. - Well, you don't, but Nike is very different.

Like, every single store-- (mumbling) - More of their fucking-- - Every store is going to be different, Ali. It's not the same model for Nike as it would be for Tiffany's. It would be for Estee Lauder's. It would be for blah, blah, blah. As it would be for Ford. Obviously, it's different. I'm not gonna get 50% off my Ford motor car if I own one share of Ford. But if I own $10 million of Ford, why wouldn't I get it at a discount? - Well, I think the moral of the story is to think through.

I was thinking of some social implications of what we're talking about of like maybe could be something where you're not getting a discount where maybe you're jumping to the front of the line. How would that impact socially? Maybe that's during the holidays. - That works just like the airlines. If you're 1K or level express-- - This is what I'm thinking, right? It's like, then what would that cause in the store when people are, it's the holidays, people are crazy. - You jump the line to pay for my shit. There's 500 people waiting to pay for 10. - So I think the moral of the story is just maybe it needs to be plotted out.

It's the right experience for the right customer at the right level that's opted in. - That's all I'm saying too. We just need to talk about it more. - It's nowhere near having a framework where people can like have really thought it through and it's gonna work. - Well, you're not saying you're completely against it. You're just saying, hey, what are some guardrails to where me as the consumer and equity holder has the right to say, yo, I don't want, or maybe I can turn it on and turn off when I actually want to implement this preferred treatment or discount or service.

- Especially as an equity holder, I don't want a bunch of assholes that are working trying to get their bonuses up and stuff like that. Coming up with theoretical things in practice would end up fucking my equity later on because what happened is they haven't really sat around and thought about it too much. They're like, oh, bam, throw it up against the wall, see if it sticks. And if it doesn't, guess what? It's gonna be three, four quarters of me, the stakeholder, having a reduction in the price just like they're experiencing right now. Nike is coasting down to its 52 week lows and stuff like that, all time lows.

So bad decisions will create that. All I'm saying is the same way we're looking at the AI infrastructure, this whole tokenization and everything moving on to a blockchain. I love it from some standpoints. I love the fact that there's 100% accountability for all shares. There are no go shares. There's not gonna be any more ghost naked shorting and stuff like that. But having said that, as we talk about all these other rights and benefits and things that come with it, that is a large cesspool that needs to continue to be discussed and evaluated because we really haven't gone through that.

Like already, if you just look at our three conversations, there's a million different angles that when you come up in conversation, it's gonna come up. I hope they're doing that in the boardrooms. I hope they're figuring that out because invariably what will happen is that we the individuals are going to start getting a lot more control over our lives, hopefully. The value that we get, for the better part now of 25 years, boy, since 1999 to now, with .com 1.0 to now, there is a whole generation of consumers of companies that have been making billions off of our likes and preferences.

And so as we move forward, I just think we really need to think about what is this brave new world that we're going into? And how do we really reward the Douglases that, for example, have been, let's say, maybe it's not based on the fact that you have a hundred thousand shares. For example, I just thought of another problem. What if you want to make a huge fucking purchase and the tier that you need is only a thousand shares and you go buy the thousand shares, you make the purchase, then you sell the thousand shares. Maybe it's based on the-- - Why is that a problem? - A plan that you've been a shareholder.

Phil Lorman has been a shareholder-- - Why is that a problem? It creates volume for the stock. Surely that's a good thing. It also creates arbitrage in gaming. And at the end of the day, are we going to gamify all equity positions? Because I can tell you, once we gamify it, those that have the power are going to absolutely hurt Main Street again. All the ones that are doing the fast trading, the instant trading, they're going to fuck up Main Street again.

So all I'm saying is, as we're talking about it, and it all sounds great in theory and everything like that, I'm a big fan of Bitcoin, but where we're going right now requires a lot more study discussion. And to look at things in a petri dish, like take a look at just the cryptocurrency universe right now. We always had Bitcoin, everything else was called Altcoin. And so all those utility tokens, including the many guests that we've had, that they all come up with some type of utility that Bitcoin doesn't satisfy, no problem. But even if we were looking at smart contracts and stuff, okay, they tried it out in the petri dish that was Ethereum.

And after six, seven years, eventually when we saw we liked that smart contract functionality, we had the Taproot update over to the Bitcoin blockchain, where now you can have smart contract functionality. But we can't just all of a sudden take 200 years of the stock market and the way that it's worked, and without maybe even like asking the masses and stuff. Hey, we're trying to have this whole paradigm shift, where we're gonna move to this. Like, how do we go about doing this? It just hasn't been thought out well enough.

And I certainly don't trust our bureaucratic fucking leaders and certainly not some fucking monkey executive in a company because they have shown us time and time again, they will act in their own self-interest and not for the interest of- - Do you think it hasn't been thought out well enough because you haven't been part of those discussions? - Yeah, 100%. - You're very focused on Bitcoin. You don't really get focused on tokenization. - No, I'm focused on- - I didn't see you in the White House for those meetings. So I'm just wondering- - Yeah, because only the JAGOs are gonna go there. Like, are you kidding me? - Right.

But what I'm, I guess what I'm seeing is that I can- - Why doesn't Donald Trump have to pay 1.6 million to sit in a room with me so I can fucking tell him some things about crypto? And some JAGOs didn't pay him 1.6 million- - Do you think the White House should spend some more time thinking about buying Bitcoin for their strategic reserve? Or do you think they should just go ahead and do it? - I think the White House is looking at how to take the ones that the Marshall already got. The Marshall Service already has and keep them. - They can't find- - And they've, correct. But that's a different issue, Douglas. Let's stay on point here.

But if they were actually going to have to come up with appropriations for how they're gonna, yeah, they fucking better like discuss that with the voters and stuff like that, for sure. That would require a much wider discussion. - They are not gonna discuss this with the voters. - Right, they're not gonna discuss it with the voter, but there hasn't been a large discussion about it. - Do you think that most voters would actually know what they're talking about? - Somebody in Nike has been talking to somebody at Deutsche Bank and they're all gonna make fees on it. They moved to this organization.

They've talked about it and I haven't, no, I don't- - Do you think this is a voter issue? Do you really believe that we should go to the voters and say, "Hey, guys, do you think that the United States-" - As to whether Bitcoin is gonna be a strategic reserve, I actually would love to have that be put to the voters. And I'd also love to have all 330 million voters in the United States vote via blockchain. - Okay, so you haven't thought that one out very well 'cause that's not gonna happen. Do you think every single decision that the White House makes should come through all the voters should decide on all the time?

- No, but I do think that the strategic reserve one is something that you could easily put out- - We've got strategic reserves and all kinds of crap in the United States. - Correct, like, correct. Do we have strategic reserves and diamonds? The shit that you can now manufacture synthetically? Because God knows that's gotta be about 98% down. - I don't know if we do in diamonds, but I know we've got it. Oil is the one that everyone always talks about, but we've got a whole bunch of junk in strategic reserves as well. Absolute junk. - We should have had a lot more in the strategic reserve minerals.

Like, you know, what we're doing now with MP materials, like before that, it was called MOLICORP. And Obama and that administration let it completely go. It's in Mountain Pass, California, but we should absolutely have made that a strategic national asset. Because the idea that we are reliant on a foreign country for 98% of what goes into our digital displays and things to me is fucking crazy. And yeah, I don't think anyone discussed that either. And they should- - You're talking about rare earths here. - Yeah, yeah. - Yeah, rare earths is a disaster.

And the fact that we can't go to war with China supplies, what we need for our missile is a problem. Or we can't go to war with the country, maybe they manufacture our uniforms. - In our bullets, in our drugs. - And everyone points at Adam Smith as a guy that came out and said free trade at all costs. But he said free trade, he had a specific, essentially, note to that, which was about strategic. And it was something about opulence. But the net of it was, he said, "Look, you can't do free trade all the way 'cause there are some things you have to be strategic about." And I think that the market forgot that.

From the '80s into the '90s, America forgot it. And they forgot it by signing deals with absolutely everyone. People talk about why do we need more car companies in the US? It's not to build cars, it's because the car assembly line builds planes and tanks when you need them. And we don't have that ability. And we don't have the ability to make technology in this country, which is why it's great that Apple's coming back here. But we need to build things in the United States 'cause if we ever get into a situation where there is a war, and we're relying upon other countries, then that's a problem.

Especially if they're countries that are adversaries. Like Europe had with Russia. Russia was supplying all the gas to Europe. So of course, Europe's gonna go their way when it comes down to getting a fizzy cuffs with Russia because they couldn't afford not to. They couldn't freeze in the winter. You can't rely on an adversary for things that you need strategically. - I think that goes without saying. But to go back to your point, why do we manufacture cars in America? It's to keep the fucking bullshit social construct going. Because when we sell that car for 50,000, it inflates the economy with about 150,000 of new made up money.

The bank is putting it on their books. There's no new money. The money didn't come from somewhere else. They're just creating it. And so my entire pull into this industry was because I realized the social construct of fiat money is complete bullshit. Complete bullshit. And at some point when the music stops, you don't wanna be the one left without a chair. - This is definitely a to be continued as we will discuss maybe what are some of those guardrails? What are the things we need to think about? And maybe put it out to the audience. What are the things that should be thought of? Or what are some of the use cases for it and against it?

You know, this is all about having a very deep dive conversation because this can be- - Dialogue, civil dialogue. That's it. - That's right. That's right. - Discourse. - So with that said, I'm Phil- - I got a lot of fucking questions. - That's right. That's right. With that said, I'm Phil Lerman. - I'm Ali Daberti. - And I'm Douglas Sporthwick. And this is "Old Men, New Money." - Got y'all next time.