Preston Pysh (00:04:41):
Well, Stig’s talking more about the supply and demand of your skillset. If you’re a neurosurgeon, and you know how to operate on a person’s brain, well you have a very specialized skill set that only a very few people have in the entire world that have the accreditations to do that kind of work. So you have an enormous demand, and there’s a very small supply that can actually perform that labor. So obviously, your value of that work performed is a lot higher than somebody who is flipping burgers at McDonald’s. It’s just a fact of of life that there’s a lot more value being added in that task. So that’s what money is, it’s an accounting mechanism.

Preston Pysh (00:05:21):
So whenever you look at a balance sheet, an income statement, you are keeping track of all the exchanges of your work performed. Whenever you’re buying a piece of material, somebody had to perform work in order to create that material. So all that work is basically stored in these dollars or whatever form of currency. If you’re over in Europe, you’re using euros. But in general, money is nothing more than an accounting mechanism. So with that idea, that’s where we want to start with cryptocurrencies. Because it’s really hard, I think it’s really far-fetched for a lot of people to think that there are just bits of data that are going to be used as money in the future.

Preston Pysh (00:06:07):
I’ll tell you, after reading the book and after seeing the technology that exists for this, I really do think that. I think you already kind of see this, but it’s just a mirage for a lot of people that whenever I send money to Stig in Denmark, it’s done through just a digital transfer. It’s not an actual dollar bill being sent anymore. I think that a lot of people have, they’re actually experiencing a form of cryptocurrency in a way, but they really don’t necessarily recognize it for what it is yet. I think it’s only going to get more dramatic as time goes on, based on some of the stuff that we’re reading in this book. Stig, did you have any other comments on what money is or anything like that for the start of the show?

Stig Brodersen (00:06:49):
Actually, I can think of a story here. So we actually see this once our systems all over the world. So we are seeing that in dollars and euros, as the person was talking about before. But I just thought about this the other day when I was buying Apple dollars. So I was actually buying dollars that Apple said are worth something. I think I’ve rented a movie or something like that. So basically this is really just a question of what we agree it is. So that is also a measure of value. I mean, I think rented a movie for five bucks or something because that is the value that Apple is providing me. So I just thought that was a funny story.

Preston Pysh (00:07:28):
I think that in addition to that, I think that if you would get a gift card at maybe a restaurant, if it’s not redeemable, you’re basically putting your money into the currency of whatever that restaurant is or whatever you purchase the gift card for. But that’s a whole nother discussion. We’ll just keep moving here. So what’s the purpose? Why did Bitcoin and cryptocurrencies emerge in the last five years, call it? There are really two main reasons. The first one I want to talk about, the next one Stig will talk about. But the first one is that governments cannot increase the supply of this cryptocurrency. So that might sound like a really far-fetched idea for people because it’s bits of data. But how they’re actually doing this is they have an open-source, and we’ll talk about this more later on.

Preston Pysh (00:08:18):
But there’s open-source program algorithm. It’s open-source, meaning that there’s a group of people that work on it, it’s just not one person. What they’ve done is they’ve programmed the algorithm so that it cannot produce more units or coins, if you will, of that system. So let’s just say there are 100 coins, okay. Let’s use an example of myself, Stig, Hari, and Colin, the four of us, okay. If there are 100 coins, and we divide up those 100 coins up, each person has 25 of those coins. The computer algorithm will not let us use any more than 100. You can see how we can keep track of each other in that little micro-economy.

Preston Pysh (00:09:07):
If Stig performs some work for me, and I give Stig five of my coins, my account is now a 20, his is now a 30. Colin and Hari would then still be at 25. The way that Bitcoin works, and we’re getting into a little bit of the technical, but we’ll talk about that now while we use that example. So the way Bitcoin works is I would have a piece of paper, imagine that I’d have a digital piece of paper. Each one of us would have a digital piece of paper. So Stig would have one, Hari would have one and Colin would have one. So whenever that transaction between Stig and I would take place where I would give him five of my coins, I would update my digital piece of paper so that it says that I have 20 coins and Stig has 30.

Preston Pysh (00:09:46):
Stig would also update his digital piece of paper. So it says that he has 30 and I have 20. So would Hari and Colin, even though they weren’t involved in the transaction. So basically everybody updates that ledger. That’s what it’s referred to in cryptocurrency is, is the ledger, it’s updated. So although there was no money, there is nothing physically exchanged as far as the currency goes, the fact that everybody has an updated ledger of where the accounting took place, that’s how Bitcoin or any of these cryptocurrencies work. I find that really fascinating.

Preston Pysh (00:10:25):
One other thing that I want to quickly highlight, I’m getting way off-topic. But while I’m on a roll, I want to talk about this, they talk about the different forms of money and how the best type of money to use. So when you go back into hundreds of years ago, the type of money that they would always try to use was something that was very durable, something that could hold up over time. Something else that they wanted to use was something that couldn’t be replicated or just produced on a whim like paper.

Preston Pysh (00:10:52):
So that talks to the reason why cryptocurrency has really emerged is that you can’t increase the supply of money. So that’s what they’re trying to get around here is all these governments, they’re printing money through the nose. they’re just printing as much money as they can because then that drops the value of their currency. It increases their exports out of the country, which produces their GDP to go up.

Preston Pysh (00:11:15):
So what you have is this race around the world for people to devalue their currency by printing more. so this cryptocurrency solves that problem by stopping that, by having a fine amount, a limit a cap, if you will, on the amount of currency that’s in the system. The other thing that’s nice is that it’s completely durable, meaning that you can’t break it or well, you could potentially hack it, which we’ll talk about later. But it will last. It’s not lie it’s going to wear out. The other thing that’s that’s nice is it’s very small. It’s not something you even put in your pocket, it’d be something you’d use every your smartphone. So those are the advantages.

Preston Pysh (00:11:56):
So it’s really interesting to see how this developed and what they’re trying to solve here by fixing the inflation, the currency inflation issue. But there’s another reason that Bitcoin has emerged. That’s what Stig is going to talk about.

Stig Brodersen (00:12:12):
Yeah, and that’s really all about cutting out the middleman. So right, now we’re using banks. As you probably are all aware of, it’s really expensive using banks. So I know this from my own experience when they were oppressed, and I would do transactions, that is extremely expensive. So not only because I would have to convert that in my own currency, while also because the bank would charge me just for receiving that money. Then when I’m doing my accounting, then my account will also charge me for using another currency.

Stig Brodersen (00:12:43):
So when you have different currencies or actually just sending money to each other, even though it’s the same currency, you have some transaction cost. Since banks as a whole really have a monopoly or close to a monopoly on that, things tend to get very expensive. So whenever I heard about this cryptocurrency and when they want to start a reading your book, this was really where I grabbed my attention. Because I was thinking, “Well, how can I avoid paying all those fees?” So I think in that sense, I think it’s really interesting. So in developed countries, I think it’s really interesting talking about how can we avoid paying those fees? Because basically, Bitcoin that is, I don’t know if it’s entirely free, but the transaction costs almost nothing.

Stig Brodersen (00:13:31):
So that’s one side of the coin, really. The other side that is developing countries, because one thing I found was really interesting was that they’re talking about the 2.5 billion people throughout the world who don’t have access to a bank account. So I think that was really interesting because cryptocurrency could really lift up the whole living standard because you need to have a bank account. Really, that’s what’s one of the fundamentals to improve your living standard. So I thought that was extremely interesting, not just from a personal point of view, but also from a more monetarian point of view. Another thing related to this is also that you have a lot of countries that might not be developing or developed but say somewhat in between. So just to give you an example, something like China or Argentina. Then you have restrictions of foreign currency, so how much foreign currency you can have. So I think that’s extremely interesting from a whole system point of view, to have a currency that everyone have access to.

Preston Pysh (00:14:32):
So one of the lead program developers for Bitcoin, I was watching a video of him talk about Bitcoin. He said, “The best way I can describe this as it’s having a bank in your pocket, every single person is their own bank.” So if I want to send money to Stig through Bitcoin, there is no transaction fee. It’s just I can just straight send him the money. There’s really no delay at all for him to receive those funds. He might want to wait a little bit for the encryption to work itself out so that you can see that it was actually a valid transaction and that there wasn’t double-spending that occurred.

Preston Pysh (00:15:07):
But I mean, it’s instantaneous, and there’s actually no transaction fee whatsoever. So that’s what’s really I think exciting for a lot of people that would potentially be using this. If the currency could actually have a pretty solid and steady rate at which it can be exchanged into other currencies, I think that you would really see this start taking off. But because it’s kind of all over the place, you’re seeing a lot of hesitation for people to start adopting this.

Preston Pysh (00:15:36):
Okay, so what we’re going to do is we’re just going to go through some of the technicalities of how this stuff works, because I think a lot of people are probably interested in knowing, well, how in the world, who’s hosting this software, and all that kind of stuff. So like I said earlier, this is open source architecture software, meaning that if you’ve ever used Wikipedia before, that’s the exact same thing. That’s open-source software that allows people to come in and create updates to different pieces of information, and you revolutionize the way that the encyclopedia works because everybody around the world is contributing to the information that’s housed in that software.

Preston Pysh (00:16:14):
So Bitcoin works very similar. I know that that might have some concerns for people because they think anybody could go in there and edit the source code. But it doesn’t necessarily work that way. You have a group of foundational developers that provide updates to the software. But the original software, the source code was written and is put out there. So you’re probably wondering, “Well, who in the world wrote the source code?” That’s where things get really funny, fun. I don’t know what the word is, interesting, scary, all those. What were you going to say, Stig?

Stig Brodersen (00:16:51):
I was going to say scary.

Preston Pysh (00:16:53):
Yeah.

Stig Brodersen (00:16:54):
I really enjoyed this part of the book though.

Preston Pysh (00:16:57):
So the founder of Bitcoin, specifically, because there’s a bunch of these cryptocurrencies out there. We’re talking primarily Bitcoin because that’s the one that pretty much has the only market cap that’s worth watching. But the founder of Bitcoin created this source code in 2009, which I find it kind of ironic that that came right after the crash of 2008 whenever we had this financial meltdown. I thought the timing of that was pretty interesting as well. But this person, he goes by the name Satoshi Nakamoto. Is that right, Stig?

Stig Brodersen (00:17:31):
My Japanese is not that good. Sounds right to me.

Preston Pysh (00:17:36):
You can see we’re hardcore Bitcoin people. We don’t even know the name of the founder. But Satoshi was the founder of this, or at least that’s the name that this person goes by. They say it’s a pseudonym. No one knows who this person is. A lot of people think that his Satoshi name is fictitious. I read some stuff where based on the timestamps of when this person was working, and posting in the forums, whenever they are developing this, they think that a lot of the timelines up with an East Coast US timeframe, and that the person wasn’t actually working this in Japan.

Preston Pysh (00:18:11):
I mean, there are so many different accounts. I mean, if you want to read some funny stuff on the internet, try to type in his name and just see what you get. You’re going to find a lot of people that have theories and hypotheses of how Bitcoin was created, who the original founder is. There are people out there that think that it was actually groups or organizations. Some people think that it could be government organizations that created this.

Preston Pysh (00:18:33):
But in general, it is a really fun discussion and research topic if you guys want to start digging into that. So why the person wanted to be anonymous, I have no idea. But for some reason, this person who created Bitcoin did not want people to know who they were. I will say that whenever he did this, he holds a very large number of bitcoins, correct? I don’t know how many, but I think it’s a very large chunk of the bitcoins, this founder still has them. So I think whenever the price was up, $1,000 of Bitcoin, this person was a billionaire. Whoever they are, they became a billionaire, whenever the price was at high. I don’t know if they’re still based on the current market price because a Bitcoin right now is $250.

Preston Pysh (00:19:17):
So it’s open-source architecture. That’s what we were talking about. So people can add to this and adjust it. But the developers add changes very, very cautiously where they go through testing. You could read all about it. But it is a very cautious implementation of code. So you might be asking, well, that’s really scary. I think that it is a little scary to think that just random people that you don’t even know could be adjusting this code. Then lead developers who you also don’t know are adding the code into the open-source architecture.

Preston Pysh (00:19:52):
But one of the things that I think that I need to throw out there that I think counterbalances that concern is that the people, the lead developers on this probably own a lot of bitcoins. Well, I know they do. They own a lot of bitcoins. The last thing that they want to see is for this thing to fail, because they’ve got millions of dollars tied up in this because they own so many bitcoins. So I think that that’s a good counterargument. I don’t know if that’s something that you want to throw 100% of your trust in. But that’s probably what would maybe counterbalance that concern.

Preston Pysh (00:20:21):
So like we said earlier, there was 21 million bitcoins that are going to be the final number of bitcoins that are released into the public. Right now, there is not 21 million bitcoins in existence. There’s far less than. I want to say there’s 14 million bitcoins in existence, somewhere around there. What happens is that bitcoins are they’re going through an inflationary period, which we said couldn’t happen, but it is happening, and I’ll explain why.

Preston Pysh (00:20:51):
So whenever bitcoin first started, there was only a finite number of coins. What happens is is this computer algorithm is going through and releasing more bitcoins into the system. It’ll max out at 21 million in the year like 21 something in 100-year period. But a majority of the bitcoins are going to be released in the public over the next couple years. I think from 2016 on your inflation rate on bitcoins goes down below 5%, it’s very small number of bitcoins.

Preston Pysh (00:21:24):
I think that the reason that they had that is because they expected the number of users to continue to increase with the inflation of the coins. But within a decade from now, the inflation rate is going to be very low, like a 2% inflation rate that you’d see in a regular currency. Then as time goes on, and you get further into the decades, it’s pretty much no more bitcoins being released. They actually say it’ll be deflationary. Because some of the accounts that are going to be used, people will forget the passwords and then those coins will be locked in that account forever. So it’s really just all this stuff is fascinating to me. I don’t know. I found it extremely interesting. Stig, what are your thoughts?

Stig Brodersen (00:22:05):
Yeah, I was really blown away about this book, at least from more ideological point of view. I think similarly we were we were talking about … Earlier we were talking about whether or not want to invest bitcoins. But I think this man, he must be one of the most, or organization, Nakamoto, he must be one of the most brilliant guys that will walk this planet because thinking about putting up a system to revolutionize the whole monetary system and just inventing that, that’s amazing. I mean, how can you come up with that?

Preston Pysh (00:22:38):
I’ll be honest with you, I went and I read some of his original writings, this Satoshi Nakamoto’s original writings that are out there on the internet. It is mind blowing, I totally agree with you, I think this guy might be one of the smartest people that I’ve ever come across some of his writings before. For him to understand because he has to understand a lot of different things here. First of all, you got to understand contracts. Because these are really smart contracts that are taking place. He has to understand encryption to just a ridiculous level, which is extremely difficult stuff if you’ve never studied encryption before. Then you have to have this unbelievable understanding of economics, macroeconomics, microeconomics, and how exchanges take place. This person would have had all this knowledge. I find it a little hard to believe that it’s just one person.

Preston Pysh (00:23:28):
But maybe there is just this total savant out there that just created this, it’s really quite fascinating. So let’s go a little bit more into the technical real fast so that you can really have an appreciation for what I’m talking about. So you know how I’ve seen that there’s going to be more bitcoins added to the system over this short period of time to get them all out into the economy? So how those are being released is an idea called mining. So if you remember how I was telling you that I would have a virtual piece of paper, and I would be keeping track of every one of the people’s accounts in our small group? Well, that’s what mining is. So if you have a computer and you want to mine, meaning you want to keep track of the ledger of all these different accounts, you can do that. What you’re doing whenever you’re keeping that ledger, you’re constantly trying to solve a puzzle.

Preston Pysh (00:24:23):
It’s an encryption puzzle. If you solve the encryption puzzle correctly, you’re the one that basically validated all the transactions on this blockchain that’s ongoing. This is very technical. We are breezing over this because we have … At least I do, I don’t know about Stig. But I have troubles understanding it myself to a very detailed level. But in short, these miners are validating the transactions by solving these puzzles, these encryption puzzles. Whenever they do that, they receive bitcoin for doing that and basically housing the ledger on their computer. So that’s how the new bitcoins are being added into the system is that they’re basically rewards the people that are using or housing this ledger and saving this ledger and confirming all the transactions and keeping it.

Preston Pysh (00:25:11):
So with the founder, this Satoshi had in mind whenever he was developing bitcoin was, “I need to get a bunch of people to house this ledger on their computers. Once I get enough people that can do that, then the way that payment basically will take place whenever all the bitcoins max out is there’ll be a transaction fee, but it’ll be very minor transaction fee that’s paid to the people that are confirming the transactions.” So that’s a whole nother story in itself. It gets very detailed whenever you start getting into some of the technical. So that’s all the more that I was going to talk for the technical unless you had anything else that you wanted to add Stig.

Stig Brodersen (00:25:47):
No, I think it’s … Yeah, I don’t get all this, Preston. I’m just listening. I really appreciate that you explained to me how this is happening. I got to be be honest with you, I thought that was really a hard part of the book, really understanding the technical part. So another good reason why this Nakamura guy, he couldn’t be alone doing this thing, how we can program this whole thing and do everything, I have no clue how one person can do that.

Preston Pysh (00:26:13):
That’s the other part is yeah, so he has this amazing understanding of economics. But then now he has to go program the initial code, the foundational code, this open source architecture code that does all this. I find that really hard to believe that one person did this. I think that’s what really piques a lot of the interest within the community of people that are really tracking this closely is like, “So who did this? What group did this potentially?” It is fascinating. But anyway, let’s go ahead and move on to the next thing, because I think I confused everybody enough with the technical piece.

Preston Pysh (00:26:48):
What we’ll do in the show notes to help people out, because whenever I was reading the book, I was really trying to understand it. There was parts where I was really having difficulty understanding it as well. But I went and supplemented that with some videos that I found on YouTube on how the technical piece of it works, we will have that in the show notes. I’ll tell you folks, come watch this on our show notes so that you can see this because it is really quite fascinating. I think you’ll get a kick out of it at the minimum.

Preston Pysh (00:27:13):
Okay, so we’re going to briefly talk about how bitcoin has performed to date. So whenever bitcoin first came out, there was this supposedly Satoshi, basically mining all the bitcoins onto his computer. Then he told some other people in this encryption forum, that’s where this originated, about this. So then other people started doing it just for fun, and they were getting thousands of bitcoins saved on their computer, which were completely worthless at the time. Then as more and more people adopted it, there was the very first purchase that took place where a person from England paid for a pizza, a Papa John’s pizza for somebody in Florida. I think they exchanged 10,000 bitcoins for that pizza.

Preston Pysh (00:27:58):
So that means that the transaction for that pizza was a $10 million transaction if that person would have held on to those and then sold out at whenever Bitcoin hit $1,000 a coin. So I find that hilarious. I think that that’s going to be pretty interesting. Looking 10 years down the road, 20 years down the road, if it does appreciate and value, which is a huge if, I think people will look back at that first transaction of 10,000 bitcoins for a pizza and maybe just be just blown away. But that’s how bitcoins first got its first transaction with really monetary value or something of real value to it was a Papa John’s pizza.

Preston Pysh (00:28:39):
Then what you had was … Have you ever seen these young kids at play Magic: The Gathering where they’ve got these cards, these magic cards, and they’re trading them? I don’t really understand the game, but I’ve seen kids play it before. There was a website called Mt. Gox. Mt. Gox, somehow the acronym is has to do with Magic: The Gathering. That’s what they actually sold, Mt. Gox was Magic: The Gathering. So a lot of the this crowd of people, these magic people were some of the early adopters of Bitcoin. So Mt. Gox, which was this internet trading site where you could buy these magic cards. You had people start trading bitcoins there and trading them for real money. That’s where there started to be … It was basically the first open market for bitcoins. Through the years, the Mt. Gox, I guess the founder of Mt. Gox, the person who is running this exchange, really had no idea what they were doing whenever they started getting this influx of all these bitcoin people trying to trade their bitcoins for currency.

Preston Pysh (00:29:44):
Had a huge fallout because the person mismanaged some of the exchanges, millions of dollars were lost. I think the person might have gone to jail who was running it. I don’t really know. But there was a lot of people whenever they hear bitcoin, and they hear the negative vibe that’s associated with it, it almost all goes back to this Mt. Gox thing because whenever the Mt. Gox, that company fell apart, you saw the price of bitcoin just go through the floor because I don’t think there was really an exchange for people to trade their coins anymore. So then that had an impact on the price, and people were just trying to get rid of them. It was a whole fallout.

Preston Pysh (00:30:20):
So where you have a big misnomer is a lot of people thought that there was a hack or there was something wrong with bitcoin in the software itself, but there was not. It was actually this third party company that was basically acting as a stock exchange of these bitcoins that fell apart and had issues. That was the reason that you had the major price go down. Was it before or after Mt. Gox? I don’t remember but the price of bitcoin basically started just had this massive acceleration. I want to say, when was that, back in 2013? Stig?

Stig Brodersen (00:30:54):
Yeah, just early 2013. Yeah.

Preston Pysh (00:30:56):
Okay. So early 2013, you saw the price of bitcoin go from 100, 200 bucks. It just went through the roof. It went up to over a thousand. I think it got up to 1100 or $1200 a Bitcoin. Then you just saw its go down ever since. From 2013 till now, you’ve seen it go down and go down and go down. Now it’s at around $250 a coin. Who knows where it’s going to go from here? That’s the big if. So that’s been the performance of Bitcoin to date. Stig, did you have any other comments for that piece of it?

Stig Brodersen (00:31:29):
No. I think I’m all good. I think that you explained that very well, Preston.

Preston Pysh (00:31:33):
Thank you, sir. Thank you. Okay, so let’s go to the next thing. The next topic that we’re going to be talking about is what’s the future going to look like for Bitcoin. I think that this one here is where we’re just going to take out our tinfoil hats and put them on and act like we actually know what’s going to happen here. Because this is the biggest if ever. Stig is going to go ahead and take this point, he’s going to talk about this.

Stig Brodersen (00:31:56):
Okay. So yeah. First of all, I think it’s kind of funny that two, let’s call these experts, are going to predict what’s going to have with a cryptocurrency that we have no clue about what’s even a month ago, when we have read this book, we had no clue what it was. Now we’re going to predict the future.

Preston Pysh (00:32:13):
That’s right.

Stig Brodersen (00:32:13):
I love that.

Preston Pysh (00:32:14):
Well, what I think is going to be probably the best way for our audience to know what to do is just do the opposite of whatever we say. You’ll probably be right.

Stig Brodersen (00:32:22):
I completely agree. Yeah. So the first thing I want to talk about that’s really trust, I think that the future of cryptocurrency and bitcoin in particular, that’s really boils down to trust. So if we take the example from before about Apple dollars, I don’t know if I trust Apple in particular, but I’m pretty sure that the $50 that have put up for this gift card, whatever it was, I will get my money worth of that. Even if I don’t, I will be terrible sorry, but I think I can swing $50, right?

Stig Brodersen (00:33:00):
So I’m willing to buy into different currencies, if you can say that Apple dollars is currency, because it does not really matter if this system would fail on that. I think a lot of people, including myself really perhaps don’t trust bitcoins, even though that they really dig more into what Bitcoin really is, that they might not really trust bitcoin, not as the leading currency.

Stig Brodersen (00:33:27):
I think that before bitcoin will be a leading currency, like the euro or the dollar, I think you will keep seeing this high volatility that you’re experiencing. So for instance, what Preston was saying before, you would see it increased tenfold, only to drop to a quarter of that value today. So having a system, having a monitor system, and the whole reason for a monetary system is really to ensure stability, at least that’s a big reason for that.

Stig Brodersen (00:33:54):
Having a system that is not completely stable, I think that would be really, really hard. I think it would be really hard for people to trust that system. I think from a monetarian point of view, I think it would be fantastic if we had bitcoin. But before we trust it, we won’t have a stable currency and we won’t have a stable currency before we trust it. So I think it’s going to be really, really hard to have bitcoin really to be a leading currency. I don’t know if I’m just too skeptic. What do you say, Preston?

Preston Pysh (00:34:29):
Yeah, I think that whenever you look at something that has an enormous strength, there’s always an enormous weakness that’s actually attached to that, tethered to that. I think with bitcoin, a lot of people out there really the idea that the government has no interaction or no control over the fact that these transactions are taking places, completely decentralized. So you don’t have to worry about a Ben Bernanke or somebody that coming in and just adding a ton of new bitcoins if the market would go down or whatever. That’s the advantage. That’s the huge advantage that everybody likes.

Preston Pysh (00:35:06):
Now the disadvantage that’s associated that’s basically tethered to that is the idea that you don’t have some federal reserve that can come in here and rescue the economy if it would collapse, if everyone would have started adopting bitcoins. So I think that that’s the bitter sweet piece of this, is that people like the fact that it’s decentralized, but I think other people have total concern over the fact that it’s decentralized and you’d have no control. You’d have no government backing on the currency itself. So if some hacker would come in and would actually have the ability to hack this system and take it down, everyone would lose all their money. It’s just that simple.

Preston Pysh (00:35:42):
So that’s a huge concern. I mean, I don’t think you could get a bigger concern that the whole thing could just collapse overnight. I think that that trust barrier is going to be the biggest difficulty for people to overcome when dealing with this. I think another concern too is if I had to explain this to my mother, okay, or my grandparents, would they’d look at me like I’m crazy. They’d be like, “What in the world are you talking about? That it’s saved on a ledger and people are mining coins?” They would look at me I’m an alien. So how are you going to get a large people to have trust in something that they cannot understand? I mean, you and I are having trouble understanding this, and we just read a whole 400 page book on it. So how is the person who’s never read anything on this going to trust this or believe it? I think that’s one of the biggest hurdles that they got to overcome is that piece of it?

Stig Brodersen (00:36:35):
Yeah. The real thing, you have a good point about saying what is really the strength is also the weakness, because you have a really strong niche community around bitcoin. But I think having this decentralized currency, that would be really hard to make a leading currency. Because as you said, there’s no one to bag it. We don’t have anyone who profits from it. So we don’t have a strong intermediary sector like the banking sector. We don’t have anyone to bag it like government or any federal service. So I think that if you want to go in that direction, making more, build some kind of profit margin into bitcoin, I think a lot of people will leave it because that’s why they like it.

Stig Brodersen (00:37:15):
But I think that if you don’t have that, and as Preston said before, you’re going to have five people who really run this show versus the central administration, I don’t think they can respond fast enough and efficient enough if there’s ever any problems. So it’s like the whole trust and stability, whatever comes first. But I really don’t think any of the two things will come. I think that’s really the challenge for for bitcoin.

Preston Pysh (00:37:42):
So I will say this, I think that that’s the problem that they have is for people to adopt it and to start using it because they are not going to understand it. But I do think this, I think that they’ve got a very good source code. I think that it’s going to be very hard for somebody to hack it. Do I think somebody could hack it? I don’t necessarily know. I think it’s pretty solid, to be honest with you. I would say it, I think it has a really strong chance of holding up. So I guess I’m optimistic on its ability to actually sustain itself into the future just as long as computer power, the processing power doesn’t have some extreme quantum leap that we’re not expecting.

Preston Pysh (00:38:24):
I think that’s the only thing that could really throw it off because then the encryption could be cracked. But right now, the encryption is so hardcore, you’re not going to crack it. So that’s where I guess I see it, I guess I have trust in its ability to sustain itself into the near future in the next 10 years. But I think a lot of other people might not.

Preston Pysh (00:38:44):
So I see cryptocurrencies and the current federal reserve type system coexisting, okay? I don’t see bitcoin basically making the dollar obsolete. I just don’t see that happening. But I do see them working harmoniously with each other where I really think Bitcoin is going to be used in 10 or 20 years from now. I could see it being used, cryptocurrencies in general, being used exactly gold. Where it’s a store of value that people go to whenever they’re fearful or whenever they’re thinking that inflation is going to occur or whatever. I think that it could be a source of protection for people to put their money into it.

Stig Brodersen (00:39:28):
Yeah. Another thing to consider is also that Preston and I, I don’t want to speak on behalf of you, but at least I’m thinking in terms of the Western world. I’m thinking in terms of being a small business owner, being able to explain to my mom why she should buy bitcoins, which I have no intention of doing. So this is our point of view. I think that when you have a developing world where there are so many people who don’t have access to a bank account, even though you see a lot of volatility, that might still be a lot safer and a lot better than just carrying around cash.

Stig Brodersen (00:40:03):
To me, well, it’s not like I carry a lot of cash. But I have a bank account, I have a system that I trust. I think that if you live in some rural area of the world, and you don’t have all that security, the danger of having a hacker to hack your account, that’s nothing compared to walking around with your net worth in your pocket. So I think in some developing countries, I think this might be the solution in the time to come.

Preston Pysh (00:40:27):
I totally agree with you 1,000%. In fact, I think that Bitcoin is really going to get its start in emerging markets. I think that whenever you go to a country that really has serious currency issues, I think bitcoin is going to be the solution. It’s just so easy. We’ll talk about this later to use. Here’s another thing, I think that if a country would adopt bitcoin as basically their currency, say you have a really poor country and their currency is super corrupt, I could totally see Bitcoin emerge as the solution for the people within that country to start using it. I think that you might see that slow adoption within third world countries around the world. I think that’s where this is going to get its start.

Preston Pysh (00:41:12):
Okay, so if this is truly going to catch on, there’s going to have to be people with a lot of money that throw some weight behind this. I think that’s really one of the critical variables is you’ve got to get the right mix of people. I mean, imagine if a billionaire goes and drops $100 million in the bitcoin, that’s going to have a huge impact just psychologically. Because what’s this guy know? Why is he doing this? I think that you’re going to have people that piggyback on that. Not to mention you’ll have a larger market cap on the currency itself. So that’s the one piece that Stig and I were researching on our own was okay, if this is really going to work, who out there is already doing it, and why are they doing it?

Preston Pysh (00:41:52):
So there’s a couple key people that we looked at. One of the biggest investors that we found out there were the Winklevoss twins. If you’re not familiar with the Winklevoss twins, they were supposedly co-founders with Mark Zuckerberg of Facebook. They went through this big legal dispute because they went to Harvard together. These gentlemen are actually Olympic rowers, which I found also very interesting. But they went through this huge legal dispute and they have put a ton of their money into bitcoin.

Preston Pysh (00:42:23):
I know that they’ve invested around $10 million of their own money just by owning the cryptocurrency of bitcoin itself. Then they’re standing up their own stock exchange around bitcoin. They’re also standing up another company relating to bitcoin. So these guys are heavily invested in bitcoin.

Preston Pysh (00:42:42):
The other person that I want to talk about who we always talk about is Warren Buffett. What’s his opinion on this? So there was a really funny interview that I’ve got pulled up here and I’m going to read it to you. He was on Fox News, and Liz Claman was the one interviewing him, and I’m going to read the exchange. So you can kind of hear this. This is really cool because it’s Warren Buffett. It’s Charlie Munger, and it’s Bill Gates on their opinion of Bitcoin. So this was the question that was posed to these three gentlemen, “We need to talk about Bitcoin in a minute. I can’t wait to hear what Charlie Munger has to say about this. Let’s bring in Charlie Munger, the Vice Chairman of Berkshire Hathaway. Bill is going to move over so you can come sit down. Good morning, Charlie.”

Preston Pysh (00:43:24):
So Charlie says, “Good morning.” I don’t know if you’ve ever seen any of his videos, but he is absolutely hilarious when he talks I just laugh whenever I listen to him because he’s just so … His sense of humor is so dry. I guess I really like dry sense of humor. Anyway, so Liz Claman says, “I just had to get your thoughts on bitcoin, this digital currency that’s out there that people say, ‘Oh, it might be the next big thing.’ What do you think, Charlie Munger?”

Preston Pysh (00:43:52):
“I think it’s rat poison.”

Preston Pysh (00:43:56):
Warren Buffett interrupts, he goes, “Put him down as undecided.”

Preston Pysh (00:44:01):
Liz Claman says, “Do you understand what they’re trying to do with it?”

Preston Pysh (00:44:04):
Charlie says, “No, but I regard it as deeply flaky.”

Preston Pysh (00:44:09):
Liz Claman says, “Deeply flaky. Okay, bitcoin. Bill, Bill Gates, what do you think?”

Preston Pysh (00:44:15):
Bill Gates says, “I think it’s the technical tour de force. But that’s an area where governments are going to maintain a dominant role.”

Preston Pysh (00:44:23):
So that’s Bill Gates’s way of saying that he thinks that it’s revolutionary, but he thinks that he’s a little concerned about what the government’s role is going to be as they regulate it.

Preston Pysh (00:44:34):
So then Liz says, “Warren, what do you think?”

Preston Pysh (00:44:37):
So Warren says, “I think either Charlie or Bill is right.”

Preston Pysh (00:44:41):
That was their exchange. So it was kind of a short, funny exchange. I thought that that would be pretty fun to read. But of course, Warren’s always in the middle. He’s just, oh boy, the beacon of balance. Okay. So Warren Buffett, you heard Warren Buffett, Charlie Munger, Bill Gates thinks that it has a lot of potential. He’s very concerned, I’ve watched some other videos of Bill Gates talking about Bitcoin. His big concern is really the government’s role in it.

Preston Pysh (00:45:07):
So the people that I really am focusing on that I’m trying to really understand their opinions are these founders of PayPal, because I think those guys understand this space better than anybody out there. Because people might not realize this, but that’s one of the things that PayPal was trying to do back in 2000. They were trying to create their own digital currency to basically make it a global currency around the world. They were not successful in doing that. So the people that I really want to focus a lot on are people like Reed Hoffman, because he was one of the founders of PayPal. You got Peter teal, who’s a billionaire now that we also pay very close attention to. We did one of his books in one of our earlier episodes. The other person is Elon Musk, who went on to do Tesla and SpaceX. He was also a PayPal, then these guys are called the PayPal mafia, if you’ve never heard that before.

Preston Pysh (00:46:01):
So those are the gentlemen that I’m paying very close attention to when it comes to Bitcoin. So Reed Hoffman, the founder of LinkedIn. He, I guess, in the last couple months, made a purchase, it’s probably pennies for him the amount of money that he put into it. But I think it’s around the 40 million mark, maybe it’s hard for me to remember what all the stuff that I was reading. But I think he’s dropped tens of millions into an investment of a company that would be basically in a wallet application for bitcoin.

Preston Pysh (00:46:35):
The stuff that I read on Elon Musk, I don’t think that he has really invested much in it at all. Then the other person is Peter Thiel. So we’ve got a audio clip that we’re going to play for you from Peter teal, who’s this billionaire who now owns Palantir. He is the original founder of PayPal. So he understands this space really well, we’re going to play an audio clip from him. Before we play that, I also want to highlight that Richard Branson owns some bitcoins. How many, I mean, he might not want Bitcoin for all we know. But I imagine he owns a few since he’s so wealthy.

Preston Pysh (00:47:06):
Then this gentleman named Patrick Byrne, who is the CEO and owner of Overstock.com, he is a huge proponent of bitcoin. So he’s another person, if you want to do some research and look up what he’s done. There’s one other thing that I want to throw out before we play the audio clip. That was in January 2015, Silicon Valley, put a bunch of money, $75 million into this company called Coinbase, which is another wallet application for bitcoin. So if you wanted to buy bitcoin, and you wanted to store it in a digital wallet, Coinbase is probably the company that you’d go to right now that’s located in the US at least. So what we’re going to do is we’re going to go and we’re going to play this audio clip of Peter Thiel. This came from probably about two months ago, I think he did this in January of 2015. That these were his opinions on bitcoin. So we’re going to play that for you now.

Troy (00:47:57):
I mean as you look back at PayPal, which is where you first really got a successful business out there that made a lot of money. I mean, we’ve now had this revived interest in bitcoin and digital currencies and so forth, which all run up against the problem of will the state allow a private money system to exist? Do you do think that PayPal could have evolved differently along those lines or do you think that fundamentally, that could have been the equivalent of Uber for Finance? Is it Bitcoin going to do it this time around?

Peter Thiel (00:48:35):
Let’s see, Troy. Well, I always think PayPal had these goals of creating a new currency. We failed at that we just created a new payment system. I think bitcoin has succeeded on the level of a new currency, the payment system is somewhat lacking. So it’s actually very hard to use. That’s probably the big challenge that exists on the Bitcoin side.

Peter Thiel (00:48:53):
I would say that with respect to finance, we’re generally in a more heavily regulated world than we were in 99, 2000 when PayPal got started. So it might actually be very difficult to start PayPal today. I’m not even sure you could build PayPal today because the regulations are tougher. A lot of this was in a somewhat gray zone in 99 and 2000. Today, it might be much harder to get started. Much, much bigger barriers to entry. At the same time, there’s still a lot of people trying to do things in financial technology in one way or another, challenges that it’s a sector where you’re having increasingly heavy regulatory headwinds, and that’s a big worry.

Troy (00:49:39):
If you were to the payment system around bitcoin, I mean, do you think it could catch on in a way that would be seriously disruptive to existing fiat currencies?

Peter Thiel (00:49:52):
Hard to say. Fiat currencies, if you look at a dollar bill, it says, “This is legal tender for all debts public and private.” The stress you have to always put is on the word “public”. So as long as you have to have dollars to pay your taxes, if you don’t have dollars to pay your taxes, people with guns will come after you and lock you up or do something bad to you. So you can’t use bitcoin to pay taxes, you’ll have to still convert it into dollars. So on that level, it doesn’t really threaten the supremacy of the dollar as a reserve currency, which is probably ultimately backed up by US military power.

Troy (00:50:35):
What if a government somewhere, maybe the Swiss or someone, was to say, “Let’s embrace an algorithmic digital currency, and put the weight of the state behind it.” Do you think that’s what Bitcoin needs to to really catch on and be an effective currency?

Peter Thiel (00:50:50):
Well, it becomes a threat. Let me put it this way, it becomes a threat to fiat money at a point where bitcoin is encrypted in such a robust way, that the tax authorities can’t break the encryption, can’t tell how much money you have, what transactions you’re doing, where it all becomes untraceable. This was the 90s cipher anarchist vision of the future where encryption technology would make it very hard for the tax authorities to break in. It was this defensive technology where the state would get diminishing returns on violence and extracting revenues or tax revenues from from its subjects.

Peter Thiel (00:51:38):
Now, this is not the way the computer revolution has really gone in the last 17 years. So in the 90s, we were thought of the IT revolution is trending towards a decentralized world that empowered individuals. Today, it’s again, perceived as trending towards centralized databases, centralized servers, a more transparent world which privacy is always perceived to be somewhat threatened. That’s one where again, bitcoin only threatens if you can’t trace any of the things you’re doing with it.

Preston Pysh (00:52:12):
Okay, so you can see from Peters comment there that he’s not too concerned about the government piece of it with respect to Bitcoin being a threat to the dollar, which I totally agree with him. I think that he brings up a really good point that it could always just be converted into dollars in order to pay your taxes.

Preston Pysh (00:52:29):
That’s why I think the US government at least would never have some issues. When you look at the news, there’s a lot of countries out there that do have issues with bitcoin. You look at China. I know over in the UK, they were pretty restrictive on some things. I think Russia is pretty restrictive on it. So it really depends on the government as you go around the world. But there’s some governments that are more accepting of it than others. But I think in general terms, when you hear Peter talk about it, and there was some other spots in that interview that we didn’t play, where he talks about … I think the gentleman says, “What do you think the probability of success is for bitcoin at least?” I think he says somewhere around 20% or something like that, 20 or 30%.

Preston Pysh (00:53:12):
So he, I think, at this point in time, still sees it as a potential, but not a real high probability event that bitcoin is going to really kind of take things by storm. That’s his opinion. I think that he holds probably more weight on that opinion than anybody else in the world just because of his background with PayPal or at least that’s how I’m treating it. So this comes to our final point in the show, should you invest in bitcoin? I think that’s really the big question here. Stig, let’s get your opinion.

Stig Brodersen (00:53:47):
No. Wow. That was way too short. No, I think that my problem with bitcoins is that I don’t know how to estimate the intrinsic value. It’s like I don’t want to invest in dollars either. Because to me, dollar doesn’t really have intrinsic value. Well, it does in the sense that I know that I could get a given amount of groceries for $1 for instance. But it really doesn’t make any sense for me to buy as it doesn’t produce anything. So it’s really hard for me to say that today, the price is $250. But the intrinsic value is $600. I mean, I don’t know how to make that estimation. I think that is really what’s puzzled me. Perhaps if I knew more about the currency, it might be easier for me to do that. It might be a good investment for some, it certainly has. But I think that is my main problem. That is I don’t know how to estimate the intrinsic value.

Preston Pysh (00:54:45):
So for me, I’ve got a little bit of a different opinion. For me, I guess every investment that I do, I look at the upside versus the downside. So the downside on Bitcoin is that it loses all of its value. Somebody hacks it or the government basically shuts it down and you lose pretty much everything in it. So the downside is huge. The upside, whenever I look at it, I think the upside is also huge. When you look at it as a currency, a global currency, let’s just say you have 1% adoption across the world on bitcoin, if you added up all the different currencies around the world. Bitcoin would take up a 1% spot in that, that would put the value of one bitcoin well over $1,000, probably I would say let’s call it 10,000 bucks, is what I would think that a 1% mark would probably be.

Preston Pysh (00:55:34):
If it would take even more than 1%, then you’re talking in even higher value. So for me, I see that there’s a very high upper limit on the value of bitcoin if you even have a small amount of adoption around the world. I guess for me, if I take a small position, a very small position in this, I don’t necessarily see that as a bad thing. If you have the ability to just straight up lose it, it’s almost like casino odds I think are probably where you’re at. If you’re going to play roll out, your chances of winning are 47%. So I kind of see bitcoin in a very similar manner.

Preston Pysh (00:56:08):
But I think that the upside is very, very big. It’s not like you’re getting double your money, you could potentially get a thousand times your initial investment. That’s why it kind of piques my interest. Did I buy bitcoin? Yes, I bought a few bitcoins. Do I recommend other people buying bitcoins? Not really. I think that if you have the ability to just say, “Hey, I fully expect that I could lose all this, and it’s not going to really make that much of a dent in my portfolio or I’m going to enjoy just doing this,” then I think you should do it. But I think if you’re relying on that money, and you’re really looking at that money for retirement purposes or whatever, this is probably not a sound investment for you.

Stig Brodersen (00:56:48):
Yes. So I just want to say two quick things. The first thing that is that you can actually buy an ETF that is tracking the price of bitcoin. So if you are not up for opening an account and doing, understanding the system, it’s really easy just to buy an ETF, at least if you’re a stock investor and you know how that system works. The other thing that is, do you necessarily need to invest in bitcoins to invest bitcoins? I would say no. You also have a chance to invest in the sector. So you can think of this like oil. Are you buying an oil company or are you just buying a barrel of oil? I mean, I think that’s probably very similar.

Stig Brodersen (00:57:29):
So I would say that, especially after listening to the thing about Silicon Valley, and all the money that is putting money into the industry, I don’t know the sector that well, but I think there might be no way to profit from bitcoins without buying Bitcoins. Because I think that the whole technology is something that is worth considering whether, whether or not intrinsic value is overvalued, undervalued, I think that’s harder to to understand.

Preston Pysh (00:57:55):
So I want to give you an example of something that a person told me whenever we were having a discussion on this. He was talking about back in 1849, there was an American Gold Rush out in California. All these people were going out in the droves to California to try to find gold and they may get rich. He said that the average person that went out there actually went bust and really never found any gold at all. But the people who made a ton of money were the people who were selling the pans and the shovels and all the gear that complemented the people to try to find the gold.

Preston Pysh (00:58:28):
So Stig’s point is a very good one. I think if you are interested in potentially investing in this area, I think a very safe play would maybe be doing something that would be an index for cryptocurrencies. Because one of my concerns is really, this is open source software. So what’s there to stop anybody from coming along and using the open source software to start their own coin and call it Coin Z or whatever the coin might be called that would then compete with Bitcoin?

Preston Pysh (00:58:55):
You actually have that happening right now. I think there’s hundreds of cryptocurrencies out there. None of them are getting any kind of traction because I think they’re having a hard time overcoming the branding of bitcoin. Everyone knows Bitcoin because they’ve heard it in the news. So that’s a hard obstacle to overcome at the present moment. But that doesn’t mean that some other form of a cryptocurrency could come along three years from now. Just all the money that’s in Bitcoin gets basically pushed out of that and into this other cryptocurrency, then that one emerges, and you’re out all your money.

Preston Pysh (00:59:25):
So I think that Stig has a very good point that if you are interested in investing in this, and you’re a little hesitant to do the bitcoin leap, which I think is a very good and sound decision if it’s not money that you just feel you can just throw away, I think that that’s the best way you need to look at it.

Stig Brodersen (00:59:41):
Like you, Preston.

Preston Pysh (00:59:42):
No, that’s definitely not me, I promise you. The reason I did it is because I was more interested in understanding the technology. I wanted to see what it was like to buy something with bitcoin, to have my own wallet, to just conduct transactions. That’s more of the reason why I did it than the investment side of it, because I wanted to understand how easy it was how there was no transaction cost. I wanted to just basically play with the toy, I guess, is the best way to describe it. That’s what I was doing.

Preston Pysh (01:00:13):
But I am close, I am tracking this very closely because I think that there is huge upside potential, it’s just a matter of when that’s going to hit and when you’re going to have critical mass where you have a lot of people adopting it, and it takes off. So I think it’s definitely worth watching. But something that you need to stay on the sidelines for.

Preston Pysh (01:00:32):
I will say this, since I have played around with the Coinbase account and used it a little, it is very easy to use. I was on my phone, I went up to a QRC, like a scanner code, I just scanned it with my smartphone, I said how much I was going to send, I hit the send button and boom, it was gone. It was that simple. There was no transaction fee whatsoever. It was pretty amazing to be quite honest with you.

Preston Pysh (01:00:54):
So just fascinating technology, but a lot more to be shaken out on this type of technology in the coming years. I think that it’s something that people need to maybe look at a little bit closer, not just write off as being something that drug dealers and all these other people, which there’s that whole side of the story that we didn’t even talk about today. It’s called Silk Road. That’s a whole nother piece of this that has a real negative connotation to it. I think a reason a lot of people are just very weary of it all is because of stories like that. Yes. Go ahead Stig.

Stig Brodersen (01:01:27):
Yeah. Before people thinking too much about what does drug dealer has to do with cryptocurrency. The thing is really that the strength about cryptocurrency or at least bitcoins is that you’re anonymous. So that has a lot of good things to it. You don’t need to be validated. You don’t need to be approved by a bank. But it also attracts some sketchy people, for instance, drug dealers, because you can be anonymous. So I think it’s really hard to admit that side if you want to have a a bitcoin system that has all the advantages. I think that’s pretty much just the price you have to pay, if that is what you want to set up.

Preston Pysh (01:02:05):
Yeah, I would totally agree. All right. So we’re at the point in the show where we’re going to play a question from our audience. So this question comes from Stass Plompkin. Here’s his question.

Stass Plompkin (01:02:15):
Hello, Preston and Stig. My name is Stass. I’m from Frankfurt, Germany. Recently, I read the book, Too Big to Fail by Andrew Sorkin. While reading, I realized that large market players Goldman Sachs, large commercial banks, investment banks, as well as huge investors Warren Buffett, they actually receive new and partly insider information straight away and actually do act on it. So my question, for them and you guys as well, do you really believe that we, average investors, have a chance to be successful with investment stocks and bonds? While we do not have the comparative advantages of the sharks and professional players do? Thank you very much.

Stig Brodersen (01:02:54):
Yes. Stass, I really this question. I’m going to start off my answer with a quote. It’s actually a quote from Warren Buffett. what he’s saying is that, with enough insider information, and a million dollars, you can go broke in a year. So I found that quote quite funny. Now, do Warren Buffett have some kind of inside information? Sure. What I think Warren Buffett really means for this quote is that when he’s talking about insider information, I think he’s talking about people thinking that they know something that other people don’t. I actually think that’s really dangerous approach to have. If you’re thinking that you are sitting with the knowledge about what a company will do, I think that you tend to overvalue that piece of information.

Stig Brodersen (01:03:40):
I think that the 99.99% of the knowledge you need to acquire, that is already public. Then you might have some few rare situation which is illegal, by the way, you have people have an insider knowledge about what a company will do, which will completely drag down the stock. Tomorrow, if something terrible should happen, then they have announcement about that. But basically, personally, I don’t put too much emphasis on that. I think that the minute you think you need to have inside information, the more knowledge then is publicly available, I think that you will probably read the information that is probably available the wrong way.

Preston Pysh (01:04:23):
Toby Carlisle had a point about this in his book where he talks about this double counting and how the market often moves in dramatic waves where one little piece of information comes out. If it should move the stock up 1%, it moves it up 2 or 3% because everyone overreacted and they’re polarized by the information. So I totally agree with that. I think that if you look at Warren Buffett’s portfolio and whenever he made the large gains that he made, he never did it in a one-month timeframe. He never did it in a two-month timeframe. He did it over years of ownership because he saw something that was special in a company. He saw that the price was undervalued in general terms. He saw that the company had a competitive advantage that he knew was going to take them into a 10 or 20-year period that was going to outperform other businesses.

Preston Pysh (01:05:17):
So when you look at Coke, when he made a large purchase of Coke back in the late 1980s, that was a decision because he felt people were going to continue to drink soda into the future. That Coke had a brand that was a huge competitive advantage over any other person out there in that space. It was at a great price whenever he bought it. That was the reason why he has been extremely successful as an investor is because he continued to hold that great stock for that long period of time after he got it for a great price. That’s why he was beating the market. I don’t think that that had anything to do with insider information or having a little known fact 10 minutes before the other person.

Stig Brodersen (01:05:54):
Yeah. Stass, as a private investor, I can see why you would often think that, say that Coca Cola increased by 5% tomorrow. That you were thinking, “Wow, it would really be great if I bought in today and then sold tomorrow.” But these investors, and especially Warren Buffett, they have so much money, and they really move their market. So as Preston say, he’s really in for the long run. He can’t place a bet on a call increasing tomorrow, even if he knew that, because it really wouldn’t make any difference with the kind of money you have. So basically, I would said in theory, yes, of course. It’s nice to have insider knowledge. But in practice, I don’t think it’s that important, to say not important at all.

Preston Pysh (01:06:33):
I think that that’s a great question. Because I think a lot of people have that same opinion. They see it like, “Oh well, there’s no way I can win. Because I don’t have the same access to information that other people have.” I think that access to information is very important. Don’t get me wrong. But I think at the end of the day, it really comes down to this fundamental elements when you’re buying equity in a business is do they have a competitive advantage. Do they have a good stable income statement balance sheet? Is the company undervalued? Is it at a good price relative to all the other options that are available on the market? Those are the key factors that I think people need to pay close attention to.

Preston Pysh (01:07:09):
All right, Stass. So we’ll send you a free signed copy of the Warren Buffett Accounting Book. For anybody out there, if you go to AskTheInvestors.com and record your question, we will go ahead and send you a free signed copy of the book if it gets played on the air. Stass, thank you so much for sending that in. We really appreciate everybody in our audience for joining us each week.

Preston Pysh (01:07:26):
If you’re enjoying the show, make sure you go to iTunes and leave us a review because that really helps our show out. It helps us capture a larger audience. We just really appreciate everything that everyone in our audience is doing for us. So with that said, we’ll see you guys next week. Thanks for joining us.

Preston Pysh (01:07:40):
So one of the things that Stig and I are very strict about is not endorsing any kind of service or product that we don’t personally use ourselves. So with that said, we give our full endorsement of our sponsor’s content, RealVisionTv.com. Real Vision is a site that Stig and I personally use ourselves and it has had a profound impact on the way that we view the financial markets. One of the most important things a person can do is seek the knowledge of highly successful investors and business leaders and more importantly, understand their thought process and how they make decisions. With Real Vision, you get exclusive and in depth interviews and presentations from the world’s sharpest independent analysts, fund managers, geopolitical strategists, economists, and investors all in the same place.

Preston Pysh (01:08:26):
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Preston Pysh (01:08:55):
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Extro (01:09:33):
Thanks for listening to The Investor’s Podcast. To listen to more shows or access the tools discussed on the show, be sure to visit www.TheInvestorsPodcast.com. Submit your questions or request a guest appearance to The Investor’s Podcast by going to www.AskTheInvestors.com. This material is copyrighted by the TIP Network and must have written approval before commercial syndication.