Tim Draper on Bitcoin, Crypto Currency, Inflation, IRS Tax Revenue, SEC Regulations, Ray Dalio, etc.

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Tim Draper on Bitcoin, Crypto Currency, Inflation, IRS Tax Revenue, SEC Regulations, Ray Dalio, etc.

“The Tim Draper brand stands for…five words: ‘Freedom and trust for humanity’.Joanne Z. Tan.

“I actually don’t think that we’re going to have fiat currency in 20 or 30 years. I think it’s all going to be Bitcoin and crypto.” – Tim Draper.

Bitcoin is immune to inflation, hacks & power outages. It’s borderless, open, trustworthy & even good for IRS, but bitcoin regulation should be light-handed by SEC.  -Tim Draper 2nd interview with Joanne Tan.

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Joanne Tan 0:00

happy to see you again Tim. Tens of thousands of people all over the world enjoyed our first interview recorded on May 30th this year. Personally, I bought my first Bitcoin afterwards, even though it was less than 5% of my total investment portfolio, and I’m not easily persuaded by the way, and I never gamble.

Tim Draper 0:23

No, this isn’t gambling. This is investing. Yes, exactly. Buying a currency of the future.

Joanne Tan 0:32

Yes. Nonetheless, these interviews are not for me to personally promote or demote crypto and Bitcoin, but for getting quality information and insights to the general public. I have 20 questions today to be answered within an hour.

Tim Draper 0:47

Let’s go through them quickly.

Joanne Tan 0:47

Yeah, if you talk too long on one of the subject matters, I will have to intervene. Sorry about that. Thank you for this interview. I need to briefly introduce you. Tim Draper is a billionaire investor in technology startups, very successfully, and an early adopter of Bitcoin with 19 million worth of Bitcoin purchase in 2014.

I’m Joanne Tan, the founder and CEO of 10 Plus brand. We establish and market business brands for technology companies, funded startups, b2b services. We also build personal and professional brands for leaders, influencers and professionals.

Okay, question number one: crypto and Bitcoin fluctuated wildly in the last four months after our first interview, there is not a dull moment. As of today, September 23, 2021, Bloomberg News reported that the crypto market is starting to knock on the doors of big bond funds and institutional investors for loans against their virtual assets. Fidelity Investments said it would allow institutional customers to pledge Bitcoin as collateral against cash loans. Well, news like this drives up Bitcoin. Many issues keep driving down bitcoins’ value.

Other than China’s cracking down in their authoritarian way, do you see any systemic flaws in the cryptos trading mechanism that have caused the wild roller coasting?

The examples like yesterday’s 90% drop of Bitcoin on Pyth was caused by computer botching basic math, the day before, the blackout at Salona. And the use of robot traders in high frequency crypto trading, etc. What are your thoughts about these systemic flaws, or phenomena, or growing pain?

Tim Draper 2:50

Yeah, well, the market is the market, if the market believes that Bitcoin is worth a million dollars a Bitcoin, then it will be worth a million dollars a Bitcoin; if the market believes it’s worth 30,000 Bitcoin, it’ll be worth 30,000. So the market actually eventually speaks, there will be little fits and starts and we’re always talking about what’s the value of Bitcoin in dollars. But over time, one bitcoin is always going to be worth one bitcoin, because there are only 21 million of them. And it’s the dollars that are very volatile against Bitcoin as they slowly disappear from our use. Eventually, I don’t think anybody’s going to want to hold on to any currency that’s tied to a government, I think they’d much rather tie or use their currencies that are crypto driven. So I think that this volatility that you’re seeing is people realizing that the marketplace is changing. And a lot of them are saying, oh, boy, this is a real thing. I’ve got to have some of this for my portfolio, or I’ve got to, I gotta use this for my trading system, or I’ve got to lend against it or borrow against it. And then there are the other people who are like, trying to cling to the past. The Chinese government, for instance, is trying to cling to the past and say, “No, I want to control everybody and control everything, and I’m not going to let them use this Bitcoin.” So he puts his people at a disadvantage by limiting their use of Bitcoin or their ability to…

Joanne Tan 4:47

I have another question about it, later, Tim. Question number two:

 It seems that Bitcoin holders are primarily in two large camps. The first one: highly educated, intelligent and sophisticated investors and usually they’re financially secure…

Tim Draper 5:07

I think that’s the whole camp.

Joanne Tan 5:09

Oh no, the second:

Herd mentality blind followers, some of whom are gamblers. Is that another contributing factor for crypto and bitcoins’ extreme volatility, since there are far more blind followers than seasoned investors? And if so, what can be done about it?

Tim Draper 5:32

You know, I believe people are smart, look, we’ve all made it, you and I, and all the other people on the earth have made it through millions of years of evolution. We’re smart, we know how to survive. We are all the people on the earth, they all know how to survive, some of them survive by leading, some surviving by following, some survive by taking risks, some survive by not taking risks. We are all survivors. So I always feel like giving the individual their choice. If they feel like hey, I’ve got some money, I want to put it into bitcoin, because I think it’s the future. I think they should be able to do it. Put it into bitcoin, because somebody else tells them to put it into bitcoin. Fine, they did it, it’s their own choice.

Tim Draper 6:22

And I think there’s something wrong with people doing this, which is they make a choice like that for themselves based on a bunch of information. And then if it doesn’t go well, then they blame other people. But if it goes, Well, they take full credit for it. I don’t know what’s wrong with us all that this way, but that is sort of a human nature thing. We want to point to somebody else if something’s going wrong, take responsibility for your action. If you buy something, and it doesn’t work out, hey, that’s on you.

Tim Draper 7:01

But I look at Bitcoin in this way. I look at Bitcoin as trust and freedom. Trust and freedom are the most important parts of any society. If a society has great trust, they’re trustworthy, they’re trusting, that society will grow at an extraordinary rate. If they’re free, it will grow at an extraordinary rate. If they’re government controlled, it will not grow at any rate, that maybe even regress. If they are untrusting and untrustworthy, that will also shrink the economy. So Bitcoin to me represents trust and freedom. That’s why I wear a tie. World, Look, it is important to be trustworthy and free. And keep it that way.

Joanne Tan 7:57

You just answered my last question about what your brand stands for. But let me focus: it’s about volatility. Because there are people who come in and exit emotionally so that compounds the volatility of this wild swing, okay.

Tim Draper 8:18

If you make decisions emotionally, some of those are the best decisions you’ll ever make. And some will be bad decisions. And that’s your responsibility.

Joanne Tan 8:28

Okay. I agree.

Tim Draper 8:30

Look, you have made it through human evolution for millions and millions of years. I trust you to make the right decision for you.

Joanne Tan 8:38

Yes, it’s personal sovereignty. A robust economy must be based on INDIVIDUAL sovereignty and freedom. Okay, number three,

Tim Draper 8:46

Bitcoin is free, and open, and transparent, and all those good things. And it’s trustworthy. Yes. And so you put those things together, and that is really good for society.

Joanne Tan 9:01

Good. Number three,

Is the lack of circulation or inadequate circulation and liquidity another reason for its volatility?

Tim Draper 9:13

Well, volatility, a lot of it is when people read certain things in the paper, they talk to somebody or somebody else. They react, and if that reaction includes buying or selling or trading in some commodity of any kind and it’s going to move. So what’s interesting about the news today is that if somebody tweets something out, it can have a ripple effect all the way around the world. People are learning it at different times. But as soon as they learn it, they say, Oh, I have to put that into my thinking when I’m investing or buying a currency, or whatever it is I’m doing, I have to put that into my thinking. But I have a very slightly different approach to investing, which is, I have a long term view. So these little changes, big changes, whatever, these changes in the dollar against Bitcoin, are in my mind very temporary, because I actually don’t think that we’re going to have fiat currency in 20 or 30 years. I think it’s all going to be Bitcoin and crypto. I don’t see a reason for governments to have currency other than trying to control people.

Joanne Tan 10:41

Okay, let’s get to the details to prove your proposition. Oh, by the way, I’ll quote that as a headline for pushing this out. Number four:

What caused the malfunction of El Salvador’s launch of Bitcoin?

Tim Draper 10:56

Oh, that’s just getting the system in place. I think software, it takes time for software and it needs to kind of go through iterations before people are up and ready. But El Salvador has discovered that open node works perfectly. And so people can and retailers can accept Bitcoin, use open node. Open node’s been tried and true. It’s been used for many, many years now. But it’s a little like when Obama had the health care software, and then it just broke. Well, sure, I mean, software is gonna break at the beginning, but then people will fix it, fix it, fix it, and eventually, it’ll work beautifully. And I’d say El Salvador made a brilliant move. They suddenly were globally recognized on the map. They are, if I’m an entrepreneur, and I’m thinking, where do I want to go? I go to a place that is forward-thinking, I go to El Salvador, or Panama, or any of these other countries that are making Bitcoin a national currency, Japan…

Joanne Tan 12:10

Okay, you’re single minded focused on Bitcoin,- whoever adopts Bitcoin the fastest. And now here’s my question:

Do you think El Salvador’s bold move has something to do with that their currency traditionally was pegged to the US dollar anyway?

Tim Draper 12:29

Great. Well, you know, I had a discussion with the president of Argentina. And I made this bet with him. I told him about Bitcoin and then two years later, I met him again. And I told him again about Bitcoin and Bitcoin had dropped from 10,000 to 4000 during that time, and I said, and during that time, also, the Argentinian pesos dropped from 75 cents to 25 cents. “So I’ll make you a bet.” This was President Macri. I said that I’ll bet that if the Argentinian peso outperforms Bitcoin over the next year, that I will double my investment in Argentina, and he said, okay; and I said, but if Bitcoin outperforms the Argentinian peso, then you have to make Bitcoin a national currency. And, he hesitated because of the IMF, because they have these debts with the IMF, and creating a new currency could throw off the system that is controlled by, you know, the IMF. But what he didn’t realize was, if he had put some portion of his National Treasury into bitcoin, he could have paid off the entire IMF debt! He didn’t, I mean, instead, he got thrown out of, he got voted out of office, and the new person in there is a socialist and the currency has gone from 25 cents down way below a penny. So it’s a disaster. But if he had done it, he would have been able to pay off his entire country’s debt! And, he would have attracted all the great entrepreneurs from all over the world because Argentina, let’s face it, is one of the most beautiful places in the world.

Joanne Tan 14:30

Yes, wow. hindsight is always 2020. But now move on to the next question…

Tim Draper 14:36

I’m sorry, but I would call that foresight. I gave him a chance.

Joanne Tan 14:42

It takes a lot of guts to go in, and audacity, and clarity of vision to take that move for the country. Okay, so number five:

Ray Dalio recently said the value of Bitcoin is “imbued” rather than “intrinsic”. He says Gold’s value is intrinsic, and the imbued value of Bitcoin, he cited, was at least based on the impressive fact that it has never been hacked. He didn’t mention that Bitcoin has a limited edition capped at 21 million coins. What do you think of his characterization?

Tim Draper 15:24

It’s semantics. But look, Ray Dalio, a brilliant man. He’s just gotten into bitcoin and crypto. He hasn’t had what I had. I’d have from 2012 to now almost 10 years of time to like, understand and build my understanding of Bitcoin. He is brand new. So he is just starting out. But boy, he’s a brilliant man, he’ll catch up very quickly. And it’s just semantics, that’s just putting a definition on something that is amorphous. So I would just say, hey, Bitcoin is a store of value, it’s a currency, it’s a new way of operating businesses, it’s a new way for retailers to, to use another form of currency. It’s just better, it’s better, that we should all be using. It keeps perfect records.

 Tim Draper 16:31

So like, if you’re in an untrustworthy industry, let’s say you’re in the movie business. It’s not a trustworthy industry, people don’t get paid what they think they’re supposed to be paid, there are all sorts of problems with it. You embed Bitcoin into that industry, and suddenly everybody’s paid exactly what they’re supposed to be paid in a bitcoin wallet. And it keeps perfect records on the blockchain, and it’s all built into a smart contract. Why would you use anything else? And then, you know, of course, why would you use anything else anyway? Because eventually, once I can get my groceries, my clothes, my shelter, by paying in Bitcoin, there’s no reason for me to hold dollars.

Joanne Tan 17:20

So if his criteria for categorizing something as intrinsic, rather than imbued, is based on physical attributes that you can physically touch, and feel, and hold gold, but you cannot do that with a digital currency, then…

Tim Draper 17:37

well, that’s also imbued. I mean, who decided that was intrinsic? It’s just something physical that he can think about? Hey, electrons are physical.

Joanne Tan 17:48

Right.

Tim Draper 17:51

we use, we use paper. I mean, that’s not exactly that’s got to be imbued too, it’s not. So that’s why I’m saying it’s semantics. He’s just sort of defined it in some way. And he doesn’t think of electrons as physical, but they are.

Joanne Tan 18:09

Right and the convenience,…

Tim Draper 18:11

and it’s all about trust and yes, convenience and

Joanne Tan 18:14

speed of transactions,

Joanne Tan 18:19

Yeah, that intrinsically is associated with digital currency, you know, the speed and the convenience. Okay, so number six:

Has the definition of money changed in any way with the birth and growth of Bitcoin? Does Bitcoin ownership vs gold ownership give Bitcoin owners more responsibility, participation, and other new elements of ownership?

Tim Draper 18:47

Well, if you define responsibility as ownership, which it kind of is, when you own something you kind of are responsible for it to be put to good use, then yeah, I think that’s right. Has it changed? Yeah! Changed in this way, just the way when you went to gold, to the promise of gold, to the promise of silver, to the promise of the full faith and credit of the government, each of those created more liquidity in the market. With more liquidity in the market, the people of the world or of that marketplace become wealthier, because if you and I do a deal, we’re both better off and you multiply that by the 8 billion people on the planet. We want more deals to happen. Well, Bitcoin is pretty frictionless. You can do a deal in Bitcoin in five seconds. If I have to send you money I have to go to my bank. I have to wire it. It’s a very complicated process or I’d write a physical check and mail it to,… if I need to send fiat money. If I want to send electronic money, it moves very quickly. So yes, we are moving into a period where we are all going to be much better off because there’s going to be less friction, the banking system today, the governments today create a lot of friction to us doing commerce with each other. Yes. But if you’re operating in cryptocurrency, it moves very quickly. And we don’t have to wait for the bank to go through their whole process, because that process is all done very quickly in software, on the blockchains.

Joanne Tan 20:47

So every individual has more, sort of, theoretically, ownership over their own money.

Tim Draper 20:57

Oh absolutely! If I’m holding my money in a ledger, like this, if I’m holding money in a ledger, I have this feeling like, Oh, it’s right here, I have my money. But if I’m holding it in a remote bank account in some place, to get that money out is hard. If I have $20,000 in a bank account, I want to pull it all out. I can’t do that very easily. I can take out $9,999 without too much trouble. But I can’t get more than $10,000 out of that bank, at any one time. It creates huge friction for people who are moving large amounts of money.

Joanne Tan 21:49

Okay, I have my next question is pretty macro:

 

Ayn Rand brand of libertarian capitalism, in my opinion, was based on the dated view that the world’s resources are almost limitless, that’s back in the 20s and 30s, an utopian and idealized understanding of limitless potential of capitalism, back defined then as “capitalism”. Now living with the reality of global warming and the realization that, first, resources are limited, and second, the window of opportunities is rapidly closing to reverse climate change…

Tim Draper 22:26

so you’ve got so many things wrong in that question. One at a time. No. Okay, well, here’s what you have wrong. You are looking at it with a Marxist philosophy.

Joanne Tan 22:37

No, I am not looking at it with a Marxist philosophy. I am absolutely against Marxism. I know you’re a libertarian, but let me finish…

Tim Draper 22:48

I’m not ready to build any kind of political party. … I’m not any of those political parties. Karl Marx, “We’re gonna run out of food, there isn’t enough food and the population is growing faster than the food supply.” He was so wrong. And why was he wrong? He was wrong because of capitalism. He was wrong because people innovate in food supply. They got better at it, it’s entrepreneurs did interesting things on how to grow more food per acre.

Joanne Tan 23:27

I like the word “innovative”. The word “capitalism” is innovating. I believe in capitalism that is innovating. So..

Tim Draper 23:36

And then you talk about limited supply of resources … global warming, that’s going to be solved by entrepreneurs. It’s not going to be solved by some government. In fact, you go to the governments of like North Korea or Russia,…you go those countries, they are big polluters. … the cleanest countries are usually the capitalist countries…

Joanne Tan 24:16

We were big polluters before the early age of industrial revolution. We have a government

Tim Draper 24:22

and then they came up with the catalytic converter that wasn’t the government, that was an entrepreneur…

Joanne Tan 24:29

But the government did play a role: EPA was non-existent before. Okay, the government did play a role, you cannot deny that. … I want you to entertain other ways of thinking and don’t label me Marxist or capitalist, I’m neither. I’m not labelable.

Tim Draper 24:48

I didn’t. I just said that Karl Marx was the one who said we have limited resources and everybody’s going to starve if we keep…

Joanne Tan 24:56

No. There is no limit to human innovation. There is no limit to human progressive ways of, like redefining money and redefining capitalism, in an innovative way. But here, denying the government has any role to play in the global warming crisis…

Tim Draper 25:14

no, no government should be involved when there are people who are hurting other people in some way or another. So absolutely, there is a time. But I also believe that governments should have to compete with each other for those people, that they have to provide good enough service. Yeah. So that those people can want to stay in that government. So we got an opportunity now to have more virtual governments. Those governments have to compete with each other for us.

Joanne Tan 25:52

Yes, I present all points of view. I know what you said. But that doesn’t stop me for presenting other points of view, because I’m here representing the general public, the left, and right, and in the middle. Okay. So based on the fact that the national governments do have a role to play, in addition to private actions of entrepreneurs, to combat global warming and climate change, so the questions are:

Could Bitcoin undermine the national government’s control of central banking in economic policies? Next question. In China, a couple of months ago, a great flood happened in a large city, there was no power, no internet, people were so used to digital payment, they found themselves needing paper cash for everything. What do you think of its implication to bitcoins’ use and circulation, when there is no power?

Tim Draper 26:44

Well, what’s great about Bitcoin is that the power could go out, you still have your Bitcoin, as long as the power comes back on, you can use it. So during some period of time, where there’s a blackout, there are a lot of things that don’t work during the blackout, your lights don’t work, your computer doesn’t work, a lot of things don’t work. …so you have to kind of go back and, you know, like candles and, and pay with IOU or whatever. But I’ll tell you that power out around a bank is much more disastrous than a power out when there’s Bitcoin. Because the power out in a bank could be shutting down contracts in between when they haven’t been done. But in Bitcoin, that blockchain is replicated all over the world. And it is kept honest all over the world. So if one place goes down, another place can represent the trade. But if a bank loses its energy, that can be really disastrous. The vault can open up, you know, so many things can happen, whereas with Bitcoin now, you still have your Bitcoin, but it can be used somewhere else. So yeah, absolutely Bitcoins is better in power out.

Joanne Tan 28:12

Question number 10:

Assuming that you do not prefer to live in a country without government, without borders, what is the right place for Bitcoin to fit in? coexist with Fiat?

Tim Draper 28:28

No, I actually think long term, our governments will not really have borders. I think our governments need to trade. I think China and the US made such a mistake by creating a trade war, that they are hurting themselves. Every time you put a trade war together, you hurt your country, you hurt your people, your own people, you think you’re damaging the other guy. No, you are hurting your own people. And whenever there’s any kind of barrier, trade barrier, tariff, tax, whatever, yes, you are hurting your own people.

Joanne Tan 29:04

And Americans got hurt more.

Tim Draper 29:06

You ought to be trading with each other. Yeah. And that borders should be as open as possible. … I think these guys are the last breath of the dying lion. It’s the big roar before they’re gone.

 

Joanne Tan 29:22

I think you’re way ahead of the time. I think the national government is going to be around for many years,

Tim Draper 29:29

It moves pretty quickly. You know, now around the world, you get a new product, a new meme of some sort, it moves around the world pretty quickly. Once, what happens when El Salvador triples their GDP because of what they’ve done? It’s going to ripple throughout the world. They’re gonna go, Oh my gosh! And then what happens when, you know, people are trying to keep people in Mexico from coming over the border? But what happens when it’s nicer to live in parts of Mexico than it is to live in the US? That border doesn’t mean anything. I think I think those things are happening. Because, look, I can start a business anywhere. And if I want to hire somebody, why would I ever hire anybody from California, California has all these regulations, I wouldn’t have all these regulations that forced me to do things for my employees that I don’t necessarily want to do. And, and so I can, I can go hire, if I could have two people in California operating my business and I can have 4500 people from Pakistan. And eventually that means that Pakistan is going to rise and they’re going to have a better economy and all those things. And then the borders between the US and Pakistan will mean very little. The quality of life will be similar. And I think once you have that you’re going to have a very free and open world. And then what’s your currency going to be? I’m not going to use Pakistani rubles or whatever they are, to transact business. I’m gonna use Bitcoin.

Joanne Tan 31:18

Okay, so, you said in the last interview with me that China’s government issued digital wallet is a threat to Bitcoin if their digital wallet is accepted outside China

Tim Draper 31:30

never said it was a threat to Bitcoin. I think I said it was a big mistake. So in fact, I used Aurora coin, the Icelandic as an example, where it’s only accepted in Iceland, it was the stupidest thing ever. All the things like currency that’s accepted all around the world, and now you’re going to create a currency that’s only accepted in Iceland.

Joanne Tan 31:56

Conversely,

If Aurora coin or China’s digital wallet are accepted outside of their own country, in the world, do you think that is a threat to Bitcoin?

Tim Draper 32:08

No, because it’s still tied to political force, so China would just print more renminbi if they wanted to, and for the people holding those digital renminbi the digital Won, that money will decrease in value over time through inflation, whereas Bitcoin won’t.

Joanne Tan 32:32

Okay, that’s digital Yuan, Won is Korean. Okay. So,

Do you think technology has borders?

Tim Draper 32:40

Yeah, well, it shouldn’t. But I mean, it does as long as government’s get in the away. But no, no, technology, we can use it anywhere. You know, the Koreans should even be richer than the South Koreans, North Koreans are stuck in the Marxist world. And I feel for them, those poor people in our country, we need them to be a part of the world economy. But the South Koreans have been so advanced in their technological thinking, they built incredible technology, but because until recently, they didn’t speak a lot of English. English is the money language. It was hard for them to do business. But boy their technology was so good. And I mean they had broadband before anybody they had. They had video phones before. They had so many things that these massively multiplayer games, they were way ahead on. Mostly because it’s a free country, and it’s a democracy, and it says it’s open in the free market.

Joanne Tan 33:49

Tim Draper’s utopian world is borderless: technology has no border, the currency has no border, and people freely live

Tim Draper 33:59

live on the world!

Joanne Tan 34:00

yes, sure. …The reality is…

Tim Draper 34:04

and ownership, the title for ownership is in the blockchain, because then we are going to know who owns what. We don’t have any sort of crazy military fights…what good is that?

Joanne Tan 34:22

So the reality today, the reality today is…

Tim Draper 34:26

whenever I hear that, I think, I’m not sure your reality is my reality…

Joanne Tan 34:31

Bitcoin is based on the value of Fiat.  So if the value of bitcoin is priced and based on the value of Fiat, what makes Bitcoin immune to inflation of the US dollars?

Tim Draper 34:45

because there are only 21 million, of course they’re immune. There are only 21 million. US dollars, – they’re printing 3.4 billion right now. … they’ve printed 6 trillion. They got to keep printing, of course. And when they print money, the money you’ve got is worth less. So let’s say you’re trying…

Joanne Tan 35:09

I totally know that. Yes, my readers, my very smart audience also know that. So let’s move on to the next question.

Is crypto a threat to the US government’s national security?

Tim Draper 35:21

No. Not at all …because I think security is tied to all the branches. I think security is tied to peace. It’s not tied to bigger weapons. It’s tied to peace. It’s not tied to controlling people either. … that’s insecurity. It’s the government officials who are insecure, who are the ones who are saying, No, we have to control everybody, we have to tell everybody what they have to do. The secure government, people are saying, Yeah, let’s innovate, let’s come up with new things. See what you can do, and then it’s a safer world, because you’re not creating a bunch of, you know, but you’re not creating threats to other people that are in other that just happened to live in other places.

Joanne Tan 36:18

Right. So the next question is a little long that has three parts, So hear me out, okay.

Regulatory scrutiny is being ratcheted up by the SEC. And the chair of SEC said that he believes it’s better to be proactive on digital currencies than to react following a crisis. So Michael Hsu, the Acting Chief of the Office of the Comptroller of the Currency, he said that on Tuesday, that cryptocurrencies and decentralized finance maybe evolving into threats to the financial system in much the same way certain derivatives brought near collapse more than a decade ago in 2008. So three questions: number one,

Tim Draper 37:10

Okay, I get there are two there, there’s Gary Gensler. And then there’s the talk about derivatives. No, it is not a threat, like the derivatives are a threat because it is the derivatives were a system that was actually driven by government regulation, that forced banks to lend to people that they will lend on houses to people who they knew were bad credit risk, they were forced to do that by the government through a bill that went through. Okay, good. And then it crashed, because of course it was going to crash because they were not going to pay because they were bad credit risk. And we were sitting there going, Oh, god, what do we do? Do you support the banks, or do you let the banks fail? Or do you …what do you do? Well, we were put in that situation, because the government put a restriction on banks, a forced restriction on banks, that they knew was not economically viable, but it pushed the ball down the tube…

Tim Draper 38:21

If the government over regulates these cryptocurrencies, it could have a similar bad effect. Yes, it could have only if they over regulate, and I’m not sure. Gary Gensler is a great guy. And he does it… He’s a really bright guy. I’ve been on a panel with him, and he is terrific. But I don’t know if regulation should anticipate every new innovation, I think they should let innovations run for a while to see what might go wrong.  And then get in there and say, Well, maybe we need to do something about this. Maybe we don’t. Because when you regulate what you’re doing is you’re putting regulation on, well, in the case of the SEC, that’s 300 million people. That’s so many people. And if it works for one person, that doesn’t mean it works for the other 299,000,299.

Joanne Tan 38:25

Okay. So here, follow your thought if it is true that it was the government over regulation that created the derivatives, the mortgage subprime and then the financial system collapse. Well, it was a government, the political power, you know, started with Henry Paulson, and they had no choice but to rescue the lending institution, the big, too big to fall bankers. I mean, the Government does have a role in that systemic crisis moment. And you could argue the other way that they shouldn’t; they just let everybody fail and then repeat, you know 1929…

Tim Draper 40:12

It’s that you put one bandaid on, then you have to put another bandaid on, you created a discontinuity in the marketplace. It collapsed the way you would, I mean, I could have predicted that, and then they had to do something about it. And they knew that the government in their hearts knew that the government was at fault, and they looked and they said, Yeah, it really wasn’t the bankers’ fault. The bankers just did what we told them to do. And we together got us into that problem

Joanne Tan 40:49

we have to bail them out

Tim Draper 40:50

I think they were making reparations, now the press didn’t write it up that way, but I think the government was sort of going okay, okay, we know we forced you into this thing. now we’ve got a problem we got to solve it, and they did, but I in general, sure, the government is great if they come in and do something to get to rally people…

Joanne Tan 40:54

right. Okay, I have to start to interrupt you, Sorry to interrupt you, but I have to relate to the crypto market okay. Because you see on the horizon SEC and the controller office are coming to regulate, so hear me out with three questions:

Does it mean that Bitcoin and other crypto currencies are more likely to be treated by the government as a security rather than currency? In the last interview, you said that Bitcoin is more like a currency, have you changed your mind? Second…

Tim Draper 41:53

No, I’ve already… I know I laid it out: the SEC just defined Bitcoin and Ethereum as currencies, the other ones they have yet to define. They are generally trying to get them all to be securities, I mean, if you’re in something called the Security and Exchange Commission, everything you see is a security or an exchange. So you know, if you’re a doctor that does only cancer of the ear lobe, everything you see is going to be cancerous ear lobe. I think they’re they’re focused on that, they’ve got to keep in mind though, that you got to balance, you’ve got to encourage innovation, if you are really trying to in some way protect the buyer of these currencies, and i think that you know, to date they’ve done an adequate job. But I think down there I would have been a little lighter touch, but I’m a little concerned about them picking out the biggest one and trying to pick on them. I think they’re trying to set an example but I think that may be the wrong way for the SEC to operate. I think they should look for absolute fraud and go ahead and pick those off. But if it’s not fraud, I’d let it rip.

Joanne Tan 43:22

So let’s hope that it’s light handed regulation, Okay, now about tax:

Do you reserve tax payment for all your Bitcoin capital gains since 2014, if and when you sell some portion of it or just use some portion of it for purchasing goods and services?

Tim Draper 43:42

Yeah, of course. Okay. I know very well, that if I sell Bitcoin, which I don’t plan to do, or if I use it for any purpose, I now have to pay a capital gain on that Bitcoin. I mean, that’s the law. Here’s what’s really interesting in taxes. Let’s say, I raise a fund completely in Bitcoin. I invest it completely in Bitcoin, all my employees and suppliers. I mean, all those companies pay their employees and suppliers in Bitcoin. And we have a closed system there that where the money comes in, it’s on a smart contract when money goes back out, it goes down a certain waterfall, and it’s all built into a smart contract on the blockchain. You can put a tax system into that, you can build a tax system into that entire system, and then you don’t have to go around and break people’s kneecaps to get them to pay their taxes. You can just come right out of the trade that’s being done with Bitcoin. And, and I don’t get why the IRS people haven’t recognized that. This is a bit opportunity for them to get tax revenue, to move all of commerce to Bitcoin so that they no longer have to go out and find who’s cheating, who’s not, who’s whatever.

Joanne Tan 45:13

We will send this link to the IRS okay. Hopefully they’re going to have some innovative kind of awakening moment. Now number 16:

 

On the one hand taxes and regulations on Bitcoin will legitimize it, and graduate it from the Wild West jungle, okay. But on the other hand, do you think being taxed and regulated will make Bitcoin lose some of its incorruptibility, transferability and uninflatability?

Tim Draper 45:48

Well, it’s not going to lose its uninflatability, there are only 21 million Bitcoins. I’ve said that four times already, it’s not going to inflate. So that part, no. But is it going to lose its, … well, if it gets over regulated in one country, it’s going to pop up in another country that’s freer. And when that happens, all the innovators are going to go to that country. So people in government regulate at their own peril, and not only their own peril but their country’s peril. If I start telling everybody in the world that they have to wear a Bitcoin tie, you got to where Bitcoin tie, that’s it, you have to, this is what you have to do. And everybody then just does what with a Bitcoin tie … strangle people that I might, you know, chafe on other people. People have different desires, they’re gonna want different fashions, they’re gonna want different things, and for me to be a politician, or somebody who’s trying to tell other people what to do, I’d better be really sure that everyone will benefit from my decision. And that is not the case with all these regulations. And certainly certainly not the case with President Xi and him telling every single parent exactly how they’re supposed to raise their kid. And you think that the President of the United States knows better how to raise my kids than I do? No way.

Joanne Tan 47:34

Today, the Chinese government dares to call themselves a democracy citing Abraham Lincoln. It was like, what a laughingstock. Anyway, we have six minutes to finish the next four questions.

What do you foresee as the worst possible scenario to Bitcoin, other than the solar flare that wipes out all digital records and civilization based on electric power on earth? What is the worst that can happen?

Tim Draper 48:02

By the way, solar flare wouldn’t be a problem. All electricity goes down, not a problem. People have their Bitcoin backed up if they have their Bitcoin on Ledger’s, they backed it up with a handwritten. So yeah, not a problem. What would or could go wrong? Well, lots of things. But it’s, I think, generally, you know, people try to muzzle technology, they try to stop technology, technology wins, It always wins. Because the consumer in the marketplace, the consumers are always right, the consumer knows what’s good. And the consumer knows that, hey, this is just better currency. So why would I use this other currency? So why, you know, why do I use fiat currency when…

Joanne Tan 48:53

do you see the government, the national governments could be the worst that can…

Tim Draper 48:58

No, because they have to compete with each other for us. So if one national government says like China did – shuts it down, then other national governments say, Hey, bring it here. So what was kind of cool was, China said, Bitcoin mining is illegal, well, all the Bitcoin mining came to other places, the US and Iceland… where energy was cheap. So it’s one of these things where they are pushed down in one place, and it pops up somewhere else…

Joanne Tan 49:33

so let me ask, what do you foresee as the best

Tim Draper 49:36

look, progress could be slowed down by government regulation, and that would be bad. But eventually it’s gonna come. You know, it’s like…

Joanne Tan 49:46

Genie is out of the bottle.

So what do you foresee as the best possible outcome of Bitcoin? How many decades or years will it take to get there?

Tim Draper 49:55

I think I’m an optimist But I actually think that the future is even more optimistic than I am. But I’m optimistic that I believe that the first thing that will happen is all the retailers start accepting Bitcoin. So they don’t have to pay the banks 2.5 – 4% every time they swipe a credit card. And then we start looking and saying, Well wait, why would we hold on to this other currency because I can get my food, clothing and shelter with Bitcoin. And then people start innovating, realizing that they have the security of knowing that those innovations create stored value. And that stored value is not going to be taken away from them through inflation, or government controls or whatever, so they will build value, and they’ll be able to hold that value. And I think that that will create incredible innovation in all the young people that who are trying to get started in the world, they’re going to come out and they’re going to go, I’m going to start some cool because, hey, if I make this money, I keep it. And it can’t be taken away from me. And that’s, that is a big deal.

Joanne Tan 51:19

Yes. So number 19:

What do you think about the corporate monopolies such as Google, Facebook, Apple, Microsoft, Amazon, and the social media platform becoming more powerful than the government in certain areas?

Tim Draper 51:36

I kind of like that they’re becoming powerful. I like that. Think about this. If you’re a startup, and you’re looking and you’re saying, how great Could this be, you know, used to be that you could get to be a billion dollar business. Now, you could be a trillion dollar business. That’s amazing. People should aspire to be that great.

Joanne Tan 51:57

But do you think monopolies…

Tim Draper 51:58

For that part I don’t mind. The part that we have to watch out for is if there’s any restraint of trade. So if we’re getting bad service at a high cost, and we have to from that supplier, that’s trouble. But if as long as there’s a place for an entrepreneur to come in, and innovate and compete with that, and provide better service at a lower cost, hey, let entrepreneurs become huge successes. They’re great models for all the young people in the world. You know, God, I mean, what young person who’s starting a new business doesn’t want to feel like, Hey, I can make this as big as Apple, or Facebook.

Joanne Tan 52:45

So as long as they’re not anti-competitive.

Tim Draper 52:48

Right. And you know, what’s happened in China? They’ve taken away like, Jack Ma got his wings clipped, and all those young people are looking and going, Oh, so that guy built that great business, so they’re saying, Why would I do that? Yeah, there’s a lot of sacrifice to get to where he is, and he worked very hard to get to where he is…

Joanne Tan 53:14

It is a power and control thing, because the Chinese system is very much of a Leninist system, the party is paramount. The party’s control is paramount. They used…

Tim Draper 53:26

by the way, it was a free market for all, the way through Deng Xiaoping.

Joanne Tan 53:31

That’s because Deng Xiaoping had no other way of surviving. The country was going to collapse. So they used entrepreneurs…

Tim Draper 53:39

because why? Because they were Leninist, Marxist.

Joanne Tan 53:43

Yes. They are still, they’re still Leninist

Tim Draper 53:46

And now they’re going back.

Joanne Tan 53:48

They’re going backwards. Yes. Going back,

Tim Draper 53:51

I know they are going back, how people can’t? …North and South Korea is such a practice…

Joanne Tan 53:56

We know that. Okay, Tim, let me ask the next question, Okay. Last question: As a brand builder, the cornerstone of the entire practice of brand building is empowering individuality, be it in the form of a large corporate brand, or an individual’s personal brand. Bitcoin is one of the decentralized way of expressing and exchanging value, decentralized, okay? At least in theory, it gives everyone more control over their own money and the protection from inflationary risk of losing value of their hard earned money. So individual sovereignty, liberty and self government, they were the values of our own country, they were the cornerstone of the United States, okay. And the foundation for democracy is the freedom of individuals and a truly free market economy. Okay. So I asked everyone in my interview this question,

What does the “Tim Draper brand” stand for? What do you want to be remembered as your legacy long after you exit from this planet?

Tim Draper 55:03

great, you know it is true that brand is so important and in how you present yourself, how you treat your employees, how you treat your suppliers, all so important. Your customers, how well do you treat your customers. And I’ve always had that in my mind, I met a really good brand guy way back when and, and he just explained that to me. And I said, Yeah, it’s not just your logo, it’s not just your, in this case, an NFT, it’s not just your NFT.

Joanne Tan 55:35

DNA.

Tim Draper 55:36

It’s everything. And, and so you saw me I had a mission, which was to spread venture capital and entrepreneurship around the world. I did that. And, and then the world changed a little when Bitcoin came. And I realized that now my mission is freedom and trust around the world, led by Bitcoin. And so I wear my Bitcoin tie every day. I dress up every day, I tried to I, I encourage entrepreneurs from all over the world to come to me, I’m an I’m a natural magnet, I tell them what my email address is tim@draper.vc, we have “meet the Draper’s“, we have a show that’s dedicated to entrepreneurs, allowing people from anywhere to come onto the show, and get crowdfunded. The viewers can, can invest, we have Draper University, for people who are kind of, you know, trying to figure it out at the early part of their career to come and get trained to become entrepreneurs. And so all of this is a natural magnet for entrepreneurs to come into our fold or ecosystem, and then potentially get funded and grow and become great. And so my whole brand is built around that. And venture capital is very much a trust business. You, you, when you write a check, you’re sending your trust to someone. And in my experience, almost every time the entrepreneur lives up to that trust, and even more, yes, and if you’re in a society, where the government’s telling everybody what to do, and they’re saying, oh, what are you doing what, and they’re looking at you that way, you will also live up to their distrust. So as a human, if somebody trusts me to do something good, I’m going to do everything I can to do that good thing. And if somebody is very skeptical, a call about me and looking at me sideways, and oh, you’re doing something wrong, I know you’re doing something wrong, I might end up doing something wrong because of that. So I think trust in a society is so important. And the idea of a government telling everybody how to manage their children? Nuts! is spreading distrust throughout that country. And that country was awesome. It was so much fun. …the economy was taking off, there was a free market. There were entrepreneurs everywhere, there was tons of venture capital, the the buildings were going up that the high tech, the place looked fantastic and that now it’s going to deteriorate, people are going to not trust each other, they’re gonna be watching each other and say, Hey, wait, I saw him he was doing something wrong, you know, that kind of attitude. That’s the beginning of the end of a society. And that’s what they got in North Korea. That’s what they got in Russia. And now that’s what you got in China.

Joanne Tan 58:53

You know, my expertise is to summarize the brand essence with no more than five words. So may I summarize what you just said? So the Tim Draper brand stands for freedom and trust for humanity. Five words: “Freedom and trust for humanity”. Okay, so now I’d love to have you back again to him maybe next year to talk about your amazing accomplishments, but we will continue with entrepreneurship, which is another passion of mine. You’re helping the entrepreneurs.

Tim Draper 59:20

Okay. Great questions.

Joanne Tan 59:21

Thank you so much. Okay. Take care.

 

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