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Many crypto platforms entice new investors by saying you should buy into the industry even if you don’t understand it, or else risk getting left behind. Andy has some issues with that. He speaks to reporter Laura Shin, who’s been covering the crypto industry since 2015, about his major qualms with digital currencies, from carbon emissions and marketing deception to its unregulated nature. Laura explains, and on many occasions attempts to defend, what’s going on in the crypto market and how it can be used to solve some real world problems.

Keep up with Andy on Twitter and Post @ASlavitt.

Follow Laura Shin on Twitter @laurashin.

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Check out these resources from today’s episode: 

• Listen to Laura’s podcast, “Unchained”: https://unchainedpodcast.com/category/shows/
• Check out Laura’s book, “The Cryptopians: Idealism, Greed, Lies, and the Making of the First Big Cryptocurrency Craze”: https://www.amazon.com/Cryptopians-Idealism-Greed-Making-Cryptocurrency-ebook/dp/B08Y8MQ66Z
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Transcript

SPEAKERS

Andy Slavitt, Laura Shin

Andy Slavitt  00:18

This is IN THE BUBBLE with Andy Slavitt. Cryptocurrency is often presented to us like something we’re not supposed to fully understand. There’s a lot of things we don’t understand why, because I don’t understand. But crypto is a different part of its premise is that we should buy some we should own some should join the club, even if we don’t understand it, or we risk getting left behind. And look, I’m no different from the rest of us here. I haven’t fully understood all the concepts and the details behind how cryptocurrency works. But what I did understand, I’ll admit, I’ve been pretty skeptical, I would say that some of the trouble I have with cryptocurrency is actually on some maybe weird moral ground that others may or may not appreciate me and I share may not agree with. But I feel like unlike other forms of investments, like say stocks, which give companies money to make things, the fact that crypto speculation is almost entirely about speculation about the speculation itself, that they making money off of one another to literally build nothing kind of bothers me. The fact that some crypto currencies, not only don’t create anything of value, but generate carbon in the atmosphere is all I needed to know to have an opinion. But I decided I needed to know more. And I decided I wanted to do a show so that we could all know more. And the reason is there are things embedded in the conversation about crypto like blockchain technology, decentralization, NFTs, smart contracts. All these are, you know, part of the world of crypto that one degree and other could have some value, but I wanted to understand it more. So I’ve been wanting to do this episode for quite a while and understanding both the predictable deceptions as well as the potential there might be in this whole world. And this was even before the spectacular blow up of FTX. And it’s earnestly both […] founder, Sam Bankman-Fried, who as you know, if you follow the news was arrested this week, and is now being brought up on criminal charges. But the fact that FTX and other companies of its ilk are blowing up, and that the market is tanking is neither surprising, but nor is it entirely proving the point of skeptics like me. What does seem clear, however, is it when people stop buying the money making stalls, and the desperation begins. Today’s guest is Laura Shin. She’s the author of a book called cryptonians, idealism, greed lies in the making of the first big cryptocurrency craze. She’s also the host of a popular blockchain and crypto podcast called Unchained. And she’s by her description, a reporter, and neutral to skeptical about crypto. Still, you might not find her that way. If she acknowledges she has some sponsorships on our show from cryptocurrency companies. Good for acknowledging that. But she turns out to be a very good foil for my skepticism, as she both explains and in many occasions attempts to defend what’s going on in the crypto market, how it’s been built. So if you know, next to nothing about crypto, this episode, is a great one for you. If you know a lot about crypto, I think you’ll have a lot of opinions and really enjoy this episode as well. So I’m excited about it. Let’s bring in Laura.

Andy Slavitt  04:09

All right, Laura, welcome to IN THE BUBBLE.

Laura Shin  04:11

Thanks for having me.

Andy Slavitt  04:13

So I think like 20% of Americans know everything about cryptocurrency, like 40% to 50% of us think we understand it. And then there’s probably another 20% or 30% that like what’s cryptocurrency? It’s what maybe started the most common denomination level, which is just for some definitions, maybe a little bit of crypto 101 What are cryptocurrencies? What are the different types of cryptocurrency? What do they do?

Laura Shin  04:38

Yeah, I would actually say that the category probably is more precisely termed crypto assets. And cryptocurrencies are one of the types of assets within that wider class. And the reason why the term cryptocurrency is used most often is because Bitcoin was the first of these crypto assets and that one is structured more like a cryptocurrency. The Bitcoin white paper famously has a subtitle that says, peer to peer Electronic Cash System. And ether is the second most popular crypto asset. However, most people would probably say that that functions more like gasoline or oil. And the reason for that is that Ethereum is a decentralized computing platform. Meaning developers can create decentralized applications, which are just little software programs that just run independently on a theory on the platform. And ether is used to kind of like pay for computation on the Ethereum platform.

Andy Slavitt  05:44

So people are buying computing power. Okay. But I think what you’re suggesting is different types of cryptocurrencies. Some of them can be traded, some of them are used as transactional things or contracts that help make other things happen. And those seem to have a different type of purpose than what we’re used to the sort of common definition. You know, I live in Los Angeles, there’s crypto.com. And the kind of cryptocurrency people talked about on TV. In fact, let’s create give an example. We have a famous actor here talking about crypto, maybe we can, we could play it. Okay, so that’s Matt Damon. And you know, what I hear in that is, by this thing, you don’t have to understand it, you just have to be brave. And this is how, presumably you will make a lot of money. Help us understand why is that a good thing? Or is this just like a tulip craze, or something where someone’s trying to sell something by creating the appearance of value this sort of them, I want to sell something to someone who understands it less than me, and then the price is gonna go up?

Laura Shin  07:15

Yeah, both of those things are happening here. And I should also disclose that crypto.com is also a sponsor of my podcast. However, just like anything on the internet, or pretty much any industry, you’re gonna have kind of the people who are responsible entrepreneurs and builders, and like actually trying to do something in a sincere way. And then you have the other people that are simply doing what in the crypto industry, they often call pump and dump schemes where they create a token, they, you know, have a large ownership of some of the supply early on before they let the public in, and then they kind of gin up interest in it. And once that interest reaches its peak, then they sell on the public that’s buying at that moment. So there’s both these things happening here. sort of similar, I think maybe also to the early .com days, where you had some more sincere efforts, and some that were not.

Andy Slavitt  08:11

So I’m gonna take your point that there are beyond the Matt Damon type of crypto, that there are some cryptocurrencies that play some other types of important functions that I do want to get to that, it may be able to just help to just define a couple of other things that people hear frequently and may not fully understand. You know, people talk about NF T’s people may see that that phrase or that expression, what are NFT’s?

Laura Shin  08:36

when people send things on the internet, they’re typically sending a copy. So if I sent you an email, I still have a copy of the email, if I send you a photo, I still have a copy of the photo, etc. And so Bitcoin, you know, was the first time when you could send a digital object, and it would be, you know, unique and not something that you could like copy or counterfeit, Bitcoins that are fungible with each other, right? So when I’m on an exchange, trying to purchase a Bitcoin, it’s not like I’m gonna say, oh, I prefer that Bitcoin over that one. And NFT is different in the sense that you can have unique digital objects.

Andy Slavitt  09:13

There’s only one of them, right? It’s like a painting.

Andy Slavitt  09:16

Exactly. And so even when you look at some of the popular NFT collections, where for instance, they may have like 10,000 of these bored apes or something like that. They’re just images of these apes. And they’re part of what’s called the Bored Ape Yacht Club. And they all have unique features. So for instance, you know, one of them might have like a halo or another one might have like one of those kind of little beanie hats with a propeller on it.

Andy Slavitt  09:50

So you’re making them sound very important, like we can’t possibly have existed in our life without having bored apes. But seriously, why do we need NFT’s or what’s the function of an NFT, what’s the value? Why do we like them?

Laura Shin  10:04

So for instance, with these bored apes, yes, of course, you and I could just save the photo of any of the bored apes, right? However, only the owner of the NFT of that bored ape can kind of claim the ownership of that and trade it and sell it in that way. It’s like, yes, we’ve all seen the Mona Lisa, the images kind of everywhere. I’m sure people even have it like on a mug or something. However, there’s only one Mona Lisa. So it’s just created this whole culture around trading, and also, frankly, just around creating an object that has value out of moments, or were items that people already valued, but never before had a price on them.

Andy Slavitt  10:48

So is this about money making? Or is it about another form of art, what’s driving it?

Laura Shin  10:53

It’s both. So on the Creator side, there are a number of creators who feel that the ways that they have had to earn money in the web to or the current version of the web hasn’t worked out well for them. For instance, I’m sure you’ve heard that musicians on Spotify feel that they’re vastly underpaid for their streams, that it’s too difficult to make money, or, frankly, nearly impossible, unless they’re a big star, that you probably often have heard that many of them have a bunch of middlemen that take a cut out of what they make. And so for the creators, when they make NF T’s, what they find is that, first of all, it gives them a more direct relationship to their fans, which they love, obviously, you know, for obvious reasons. And then it sort of kind of helps them be a little bit more entrepreneurial. So you could probably imagine, there are some super fans who love that star so much they would be willing to pay 100x, what another person would pay to either interact with that star or you know, see them perform or whatever. And so, you know, even if they only release 100, NFTs, they can capitalize on those 100 people that are willing to pay a lot of versus like, for instance, the everyday fan who just wants to pay the basic price of a concert ticket or something like that. And so yeah, it just kind of solves a number of these sorts of business type problems that they’ve been having. But you’re right that on the side of the consumers, a number of them are kind of like more speculative people and traders. A number of them, obviously, are the fans I’ve talked about. It’s kind of a mix.

Andy Slavitt  12:26

Yep. Yep. Yep. So it’s not that I can’t imagine someone having wall space in their home where they have a digital screen and put up an NFT, I can picture a future where that’s the case. But I have to say so far as we’ve been talking about things, crypto assets, NFT sound like money making schemes, in large degree. And maybe that’s a good topic to get into after the break, I want to take a quick break, and then talk about some of the criticisms that people have about cryptocurrency and then maybe some of the counters to that argument and then get into the news around FTX and some of the most recent events in the news. So let’s take a quick break and we’ll be right back with Laura. Back with Laura, Laura Shin. We’re talking about what’s going on in cryptocurrency. And I think it’s not easy stuff if you don’t think about financial markets every day. So let’s talk about some of the concerns people have about cryptocurrency, beginning with the fact that it’s unregulated. You know, you can buy it, things can happen, because of the lack of regulation and cause you to lose your money or cause people to do illegal things that may be illegal may even not be illegal, because there’s no regulation around it.

Laura Shin  14:06

I wouldn’t say it’s completely unregulated. There are certainly certain regulations that they can follow. For other parts of regulation. Yeah, it’s not clear what regulations they would follow, if any. So there’s definitely kind of a large swath where, you know, that’s all up in the air. But there are definitely other areas where it’s very clear, and you know, a number of those.

Andy Slavitt  14:29

[…] spend $1,000 buying a stock. The SEC has rules around what the what the company that sells the stock has to say about themselves, about what if they promised to pay dividends, they have to disclose risk factors, etc. Likewise, if I buy a government bond, there’s a whole bunch of rules around that if I buy $1,000 worth of a cryptocurrency, what am I guaranteed, what has been regulated?

Laura Shin  14:52

Yeah, that’s definitely one of the areas where the regulation has not been settled. And this may be goes to A point that I want to discuss, which is about decentralization. It’s not managed by any one entity. There’s no one entity that’s like, I’m the record keeper of what the kind of correct transactions are for Bitcoin. It’s just managed by whoever kind of wants to participate all these different computers around the globe that hooked up to the network and run the software to be able to record these transactions and, you know, come up with whatever this majority ledger is.

Andy Slavitt  15:27

So that’s on all bunch of computers sitting all over the place. And what’s the purpose of that? Why is that important?

Laura Shin  15:34

So the reason why this whole industry around crypto has flourishes that a number of other people have said, hey, if bitcoin is this kind of, like, decentralized version of money, or this decentralized electronic cash system, instead of, you know, being like Coinbase, which has its 1000s of employees, it’s just a little software program that enables people to trade crypto assets with each other without using a company at the center.

Andy Slavitt  16:00

So, decentralized, sounds like it should be a good thing, because we think about central banks and centralized risk. But I’m still fishing for the why part? Are you saying that? If we would have had blockchain, we would have avoided the […] crash in 2008?

Laura Shin  16:18

Well, you know, being a journalist I like, all I’m saying is that there are definitely people in the industry that believe that and that’s what they’re trying to build. Just because when you have a public blockchain a public ledger, you can see things like where the debt is where, you know, like I said, when, during the great financial crisis, people couldn’t even see where the bad debt was. So, you know, I’m not saying that, like, you will never have any kind of risk. I’m just saying, at least for that issue of visibility.

Andy Slavitt  16:47

Look, let me add a couple of other criticisms, and then we could turn to some of the responses to those criticisms talked about it being unregulated. It’s considered to be a hotbed of illegal activity. I remember being outside of Russia, and seeing a Bitcoin ATM that was explained to me was used for illegal transactions and basically, white washing money. But what we know that, you know, it’s, as you say, you know, on the one hand, you can track illegal activity through following some of these transaction ledger’s. On the other hand, people talk about how a lot of this becomes how a lot of illegal things like human trafficking and other things occur.

Laura Shin  17:29

So actually, for 2021, which is the last kind of complete year of crime statistics, it actually is the case that Chainalysis, which is this company that has the kind of industry standard crime report, they said that it’s 0.15% of all crypto transactions that are related to illicit activity. And I was either I looked this up for another interview I did a few months ago was either the World Bank or the IMF said that in the traditional financial system, it’s 2% to 5%. So there’s more crime being done in the traditional financial system than in the crypto system right now. I know, that’s kind of against the general perception.

Andy Slavitt  18:09

Feels like one of those studies paid for by the cigarette companies.

Laura Shin  18:12

I wouldn’t say that, Chainalysis they are the top blockchain analytics company hired by the government to help the government go after all the different crime actors.

Andy Slavitt  18:22

Okay, so what you’re saying is the general perception is incorrect. That there’s not a lot of illicit and illegal activity, or at least that illegal activity has been discovered,

Laura Shin  18:32

At least for now, I think the reason that there is that perception is because in the early days of Bitcoin, the first popular use case was the Silk Road, which was a dark web marketplace, where, you know, you could buy like drugs and, and other illicit things. The last point that I’ll just say is, when the government looks at crime in the crypto world, frankly, I’ve interviewed a ton of these different prosecutors about this, because I have done my own investigations and stuff, they actually will all tell you hands down, they would so rather do a crypto crime than a traditional financial crime. And the reason is because of these public ledger’s, they said that when they’re investigating crimes in the traditional financial world, they have to for instance, contact a bank to find out you know, whose account that is or what happened with those transactions. And banks don’t always send the information immediately. And then once they get, you know, that little bit of information, then it leads them to another bank. And you know, then they have to go to that next bank. And if the bank is offshore, that can take a very long time. Not every, you know, country is super compliant with the blockchain, they can watch things in real time. They all the information is in a standardized format. I mean, it’s just like so much faster, they said.

Andy Slavitt  19:55

So you gotta get some defenses of, let me throw a couple of more at you to come in and see what your response is, that it’s bad for the environment that we really unnecessarily generate carbon in order to create this digital market.

Laura Shin  20:11

Yeah. So when people talk about that they’re only really referring to Bitcoin. That’s the only blockchain that uses this. It’s called a consensus algorithm mechanism that is very electricity intensive, or energy intensive. However, the reason that it’s so hard to get really good data is because, you know, since it’s decentralized, and since there’s so many people that run these miners all over the globe, you would have to find out not only their energy mix, but you know, it changes by the season because a number of them, for instance, they’ll take advantage of cheap hydropower, when it’s like the rainy season, wherever they are, or, you know, there’s like different factors. And so at different times of the year, they might be more reliant on something that’s carbon intensive and other parts of the or they might not be, and so just the level of granularity you would need to get a complete picture is kind of sort of impossible.

Andy Slavitt  21:06

So carbon is being created. The question is how much. I want to come back and hit on what I think is maybe the most significant criticism which will lead us right into the FTX conversation as well. We’ll be right back, really fun conversation with Laura Shin. That was Steph Curry and Larry David, of course. So perhaps the most damning criticism of crypto, that crypto really, maybe in part by intent, just how it’s developed, takes advantage of people who know less by trying to appeal to their sense that they’re missing out, and that the people who own crypto almost by definition have to keep marketing it as being worth something because unlike gold, it’s only worth something if people decide it’s worth something. I mean, it’s true, like gold, gold with gold as well. But it’s even more true with something that’s digital. And so they hire these very famous people like Steph Curry, like Larry David, to say things that clearly Steph Curry and Larry David do not understand. Because they’re saying hey, you don’t need to be an expert, you just have to invest with FTX. So to me, the biggest criticism is you just have a lot of people who put money who put their savings into these things, because they were told, hey, you don’t need to understand it. And, of course, all that did was bid up the value of the people who already own crypto.

Laura Shin  23:21

Yeah. So I want to separate out two things. This is an advertisement for FTX, which is, you know, just one business in crypto. And they’re trying to get people to use that platform. I guess what I would say is, if you find out that there’s some fraud in an industry, like, you know, with Bernie Madoff, you know, I don’t think the lesson that people took away from Bernie Madoff was that, oh, I shouldn’t invest in stocks. So I would just separate out.

Andy Slavitt  23:53

Should I play the Matt Damon? That wasn’t for FTX?

Laura Shin  23:56

That was for Crypto.com, which is a company.

Andy Slavitt  24:00

But Matt Damon was basically saying the same thing. Fortune favors the brave; you don’t need to understand this. Just go boldly. Close your eyes and leap look over the edge. It’s making the exact same point that I’m not talking about whether the company is good or bad. I’m talking about the fact that they’re appealing to people who are buying this because they’re being told by celebrities, not to think about it. And therefore we’re getting lots of people who’ve lost lots and lots of money, some based on fraud, FTX, some, because they bought currencies at prices that made other people rich, if it were too high, and they’ve just lost a bunch of money, that that kind of marketing is really really, really deceptive and problematic.

Laura Shin  24:42

Yeah. I would agree with that. You know, like, it’s like when I said earlier that there’s these pump and dump groups. And, you know, there’s kind of a lot of people I’ve realized, in crypto, who they kind of come in, they don’t understand anything about this and all they hear or is, oh, I can get rich from this. And they don’t really do any research, and then they just sort of YOLO into things that they’ve heard about. And it’s not a good idea. I definitely don’t recommend anybody does that. So I think there’s yeah, I think there’s a lot of that happening in the industry. And frankly, I go into quite a lot of detail about that in my book, actually.

Andy Slavitt  25:21

It is, appears that there is a cultural group of people. And I could name a whole bunch of them, including Jack Dorsey, many other people that did form an online kind of crew of bullies. I think a lot of them feel like very much like the social media bros who just send out messages which essentially tell people they’re wimps are not buying; tell them they should never sell when it goes down. And that in this world, that could never happen if it were regulated by the SEC, where you where people would have to disclose risks, and they’d have to disclose your own financial position. These are people that own crypto don’t want it to go down and want to tell people I mean, there’s these bizarre messages from Jack Dorsey, which is basically we’re having a recession, crypto, you know, bitcoins gonna go to, you know, some crazy high priced number, and then lots of people buy so I don’t think that there are, it’s just the case that there’s a lot of people sitting around alone, feeling greedy, I think they’re being manipulated actively by people who already own these things, and are basically and I’m not saying they don’t believe that this is the future. But now we have people who I mean, you know, a lot of people have made a lot of money and cryptocurrency, bitcoins gone up to the, you know, 40 50,000. And it’s gone down a lot, since it’s there’s a lot of people who’ve lost a lot of money, including stories that we hear about people have lost their life savings, that’s not even talking about FTX, this is talking about fraud. This is talking about people who, because Steph Curry or, or […] told them that we were at the beginning of a striking gold invested. And anyway, that seems to me to be the criticism of crypto assets. That I think bothers me the most, this whole bullying and intimidation.

Laura Shin  27:17

Yeah, I mean, obviously, that’s not good behavior. But on top of that, I would say, you know, for people who are listening to this, who are wondering if they should be buying crypto or whatever. And frankly, this is just advice for like, anything you might do with your money. You shouldn’t buy it if you don’t understand it.

Andy Slavitt  27:40

That’s why the marketing appeal of you don’t need to understand this in order to buy it. That is literally their marketing appeal. I’m no expert. I don’t have to be FTX is, that’s the message that it’s not just from FTX. But what you’re saying is sensible. What the best out of crypto is not that message.

Andy Slavitt  27:42

Yeah. But I mean, their advertisements. So, you know, I think most people well, I would hope that most people take advertising with a grain of salt.

Andy Slavitt  28:10

You don’t think advertising works? People buy Coca Cola..

Laura Shin  28:16

I’m not saying, it doesn’t work, I’m saying I would hope that they would know since it’s an ad that they should take it with a grain of salt and do independent research, in addition.

Andy Slavitt  28:24

Well, millions of people didn’t, and millions of people lost money, right? Lots of unsuspecting people lost money. Let’s talk about FTX a bit and how this, this fits in the situation. And as you mentioned, FTX wasn’t the first casualty. So yeah, if you want to start a little bit further back than FTX, or to talk about, you know, Sam Bankman-Fried, who is the owner of FTX, the former CEO, help us understand how this fits into the equation.

Laura Shin  28:52

So FTX was a crypto exchange. And it was for parts of this last year, the second most popular one in the world. But the main reason that it’s in the news stems back to the fact that the founder, Sam Bankman-Fried also had a trading firm called Alameda research. And he actually started Alameda research first and then launched FTX a year later. And at some point, we don’t know exactly when, but the reason that FTX has collapsed is because it became known that at some point, they took the customer funds from the exchange, and they sent them over to Alameda research, which is his personal, you know, trading firm to, I guess loan that money because Alameda had losses.

Andy Slavitt  29:46

So if I stored my money in FTX, or my crypto without my knowledge that was lent to another business that he owned, which happened to be been run by a one-time girlfriend, I believe. But let me ask you this like three months ago, did you think FTX was a legitimate thing?

Laura Shin  30:05

Oh, yeah, yeah, the vast majority of people in crypto thought that.

Andy Slavitt  30:09

So I guess that just begs the question of how do we know what’s legitimate and what’s not? I mean, how do you know, you know, you said, you mentioned crypto.com is one of your sponsors. How do you know? I mean, how could you possibly know without the regulation without the disclosures?

Laura Shin  30:26

That’s the risk with these centralized companies. And that’s what people are saying, are the lessons of what I’m calling the crypto carnage of 2022, where you have seen a number of these centralized entities that have gone under in crypto, because, you know, they all have their sort of internal business practices that are not necessarily visible to the outside world.

Andy Slavitt  30:48

So if you were a crypto investor, first of all, I don’t even know do you have to put your cryptocurrency in some place like an FTX? Or is it have to be stored someplace? Did it? Can you just have it sitting on your computer? Why would you do that?

Laura Shin  31:03

Yeah, there’s two different ways to do this. When you store crypto on someone else’s exchange, or you give them what’s called control of your private keys, private keys for any coin that you might own are what enables you to send the money elsewhere. And so there’s a very popular mantra in the crypto world called not your keys, not your coins. And this is born out of the fact that there have been so many crypto exchanges that have either been hacked, or have gotten under or you know, just whatever. And those people that were storing their assets on those exchanges, they lost that money. The most famous one of these before Well, frankly, before FTX was one called Mount Gox, which back in 2014, was hacked out of 850,000 Bitcoins, which was at that time, half a billion dollars, and now is like many billion like dozens of billions of dollars. And so people that had their money in Mount Gox, they literally haven’t even gotten anything back yet from the whole bankruptcy process. They’re about to finally get some fraction of the coins they had on the platform in the next few months. So what’s the alternative? The alternative is you use the exchange to buy your coins, but then you withdraw them to your own possession. So I think people are understanding like, oh, okay, there’s a new option. And this is definitely when it’s more secure. And yeah, leaving it on the exchange is not a good idea.

Andy Slavitt  32:29

Okay, so I have three final questions for you, if you’re willing to answer them. The first one is, okay, you we’ve gone through this, as you call it, the crypto carnage, will that be thought of in history as a cleanup event? And things then got much better? Or is this the demise of crypto?

Laura Shin  32:52

I would definitely say the industry is here to stay. It’s a you know; I’ve been covering this stuff for seven and a half years. And back when I started in 2015, it was so tiny. And now it’s so big, it’s just impossible to keep up. So now it’s basically gotten too big for it to just completely die away. And there’s too many kind of true believers really for that to happen. But as for kind of what the shape of the industry looks like? That’s a big question. I would say that people are the true, you know, crypto believers, they would say, oh, the lesson here is that we need to double down on decentralization, that the smart contract works well, the centralized lenders were the ones that went under, we need to build more of this technology and do it in the right way and not kind of remake the traditional financial system, which is, you know, people have been saying that that’s kind of what they view all these centralized lenders that that got too big and how they all failed.

Andy Slavitt  33:48

Okay. All right. That was my first question. My second question is a lot simpler, but more but probably harder. Which is Why? Why? Why do we need all this? Why do we need a digital currency? I’m not asking why we need, what the does blockchain have a function or decentralization have a function? I’m not asking even if NFT’s have a function if people enjoy them and appreciate them. But why other than pure speculation? Just pure betting pure gambling? Why do we? What’s the function? What’s the purpose? What good does it do for society to have Bitcoin?

Laura Shin  34:24

Well, this is definitely a thing that I find Americans have a harder time grasping than people in other parts of the world. I have had some different entrepreneurs on my show who are from, for instance, Argentina, this is the person that people typically call patient zero in Silicon Valley. He was a very well-known entrepreneur in Argentina. And he was the first person in Silicon Valley to kind of grasp the importance of Bitcoin. And the reason is that when he was growing up, he saw his family lose their wealth, three different times due to hyperinflation and he told the story in my show about how the time that kind of, you know, really made an imprint on his psyche was when his mother grabbed him and his sister from school. And she had her salary in a plastic bag and they and she said, we’re going to run to the grocery store. And this was a period of hyperinflation. And this was before like barcodes existed. And so there was a person in the grocery who was running through like putting new stickers, like with higher prices on all the food. And she said, your job is to run ahead of that person and grab the food, like before the higher price gets put on it. And then they you know, what pay, and when they had money left over, she would be like, go back and get more food. And his sister was like, why don’t we just save our money and then just come back another day when we need that food? And his mother said, because it’s gonna be worthless tomorrow.

Andy Slavitt  35:48

I love that story. It’s a lovely story. But Bitcoin, I read the paper said Bitcoin was going to be an inflation hedge, if inflation has gone up. […]

Laura Shin  36:01

Yeah, for this year, I would say that, right now, most of the world views Bitcoin as a speculative asset. And so it gets lumped in together with all the other speculative assets. And so when you have this kind of situation that looks more like recession, or maybe we’re entering a recession, people, they’re not going to want to have their assets in a speculative asset. And so similar to kind of tech stocks, we’ve seen a lot of people pulling out of Bitcoin. And so yeah, I would, I would agree with that. And I would also say, though, that, like you, I like, I feel like you’re definitely looking at it from the investment perspective. But there are people in the world to, they’ve talked with me about how Bitcoin solves a real problem that they had.

Andy Slavitt  36:45

Yeah, I believe there. I believe there are people in order to believe that bitcoin does something important. And I’m not saying that there isn’t a legitimate answer. I’m trying to find out what that answer is. And the story about Argentina isn’t persuasive. If he may have felt it was going to be persuasive. But it didn’t turn out that way. We entered our first period of high inflation, and Bitcoin crashed.

Laura Shin  37:10

Yeah, but I wouldn’t say that that’s the only thing that people like the entrepreneur, believed about it. I think, for him, it’s like, this is an asset where the government cannot mess with this. So I think, you know, that’s part of that.

Andy Slavitt  37:23

So the fact that there’s not a central bank, government can’t create inflation by spending. And so if you believe that, particularly if you’ve got an anti-government point of view, but also if you believe that that intervention is gonna hurt cryptocurrency, that would be a case for Bitcoin or for crypto, right?

Laura Shin  37:40

Yeah. Or if I don’t know, if I would say, anti-government, in his case, I feel like it’s more just that, you know, he had been harmed by, you know, the way the government handled the money in his country. But bitcoin is, like, easily the best performing asset in the last, like, 10 years or whatever. So I think, yeah, you’re right. There are a lot of people that have lost money, if they bought it, like certain times where, you know, it was higher than it is now. But there’s definitely other people. And these are the true believers, where they bought at a lower price, and they they’ve never had anything that has performed so well for them.

Andy Slavitt  38:12

It doesn’t that make the point of the pyramid scheme that if you get in first, you’re a winner. But if you get in next, and when you run out of people that understand that less and less than you, then then it really becomes harder to make money.

Laura Shin  38:24

I mean, you could say that pretty much about any investment, you know, it’s like, oh, I, you know, bought apple stock early, or whatever.

Andy Slavitt  38:32

I wouldn’t, because Apple can have a good quarter and sell lots of phones, I can have a bad quarter and sell lots of phones. There actually is an apple, there’s something going on there that I’m investing in.

Laura Shin  38:41

Yeah, I mean, it sounds like crypto is not for you, the people, you know, that are really advocates.

Andy Slavitt  38:49

I was skeptical. But I’m also trying to just understand, like, is there a purpose to all of this other than speculation and money making?

Laura Shin  39:01

Yeah, there is. I mean, you know, whether or not you agree with these people and how they view Bitcoin, like I said, so once this is one, I have had some Afghan entrepreneurs on my show who one of them […], she’s kind of famous because she did the Afghan girls robotics team that, you know, couldn’t get their visas to compete here. And then But then eventually did much earlier on for one of her earlier ventures, it was some kind of like, blogging platform or something, and they had a hard time paying their writers because many of them were women. And in Afghanistan, women often either can’t get bank accounts or even if they do get bank accounts, then their male relatives will take the money from them. They could pay them in Bitcoin. And there was a woman who was in an abusive marriage and she saved up her bitcoins and her husband obviously didn’t know how to deal with that. And she was able to divorce him, there’s a number of instance. Yeah, I mean, it’s not I think to an American Yeah, like, we have such great financial services. And I understand it can be hard to understand how this could be valuable to anybody or like, why would you need it. But definitely there are other people elsewhere in the world.

Andy Slavitt  40:16

I get that. Yeah, that makes sense, I guess. So having your assets digitally, provides a degree of personal protection of security, that was saying the fact that it may or it may go up or down the fact that you may not have access to it. That’s something dollar denominated, that makes perfect sense. I’ll ask you my third question, but you don’t have to answer it, which is given but I am asking you because of all you know, your expertise is based on everything, you know, have you been an investor in crypto or have you stayed away?

Laura Shin  40:47

When I worked at Forbes, Forbes had a policy that you could own something that you cover as long as you disclose it. And at that time, I did own a little bit of Bitcoin and Ether. But then once I went independent, and I realized I, you know, I’m a journalist first and I want to write for any publication. So, in fact, the first place I freelance for was for the New York Times, which I mean, they don’t let you do that. So I don’t own any now my business owns a little bit for they’re like certain things where I kind of have to, but that’s not for investment purposes. It’s literally just yeah, for business purposes.

Andy Slavitt  41:20

Got it. Well, you’ve been a great sport. You’ve been a great explainer. I appreciate you letting me push you and ask you these tough questions. And, yes, you’ve uncovered some skepticism on my part, but I also learned from you so I really do appreciate you taking the time to be in the bubble.

Laura Shin  41:38

Oh, yeah, no problem. And frankly, people often say that in my show, I asked tough questions, or what they sometimes call my uncomfortable questions. So it was kind of nice to be in an interview with someone who has the same style. I loved it.

Andy Slavitt  42:10

All right, feel like you understand crypto now? Ready to go out and buy a whole bunch? Okay. Let me tell you what’s coming up. We got some very interesting episodes. Friday, we’re doing an episode about the very controversial plan in New York City for Mayor Eric Adams. He wants to involuntarily hold mentally ill homeless folks be able to pick them up and have them involuntarily held very controversial. We’re gonna get into it. And it’s not just happening in New York, it’s happening in other places around the country. On Monday, we’re going to talk about what happens when the public health emergency ends. And it is a topic that is taken on additional currency because it’s probably gonna end in April, and a lot of people are going to lose their health insurance and we otherwise disrupted […] people on for that. And on Wednesday, we’re gonna give you a 2023 preview of the economy with the great economist Justin Wolfers, and […] is going to participate in all of it apparently, cuz he’s barking. Okay. We’ll talk to you on Friday. Thank you.

CREDITS  43:18

Thanks for listening to IN THE BUBBLE. We’re a production of Lemonada Media. Kathryn Barnes, Jackie Harris and Kyle Shiely produced our show, and they’re great. Our mix is by Noah Smith and James Barber, and they’re great, too. Steve Nelson is the vice president of the weekly content, and he’s okay, too. And of course, the ultimate bosses, Jessica Cordova Kramer and Stephanie Wittels Wachs, they executive produced the show, we love them dearly. Our theme was composed by Dan Molad and Oliver Hill, with additional music by Ivan Kuraev. You can find out more about our show on social media at @LemonadaMedia where you’ll also get the transcript of the show. And you can find me at @ASlavitt on Twitter. If you like what you heard today, why don’t you tell your friends to listen as well, and get them to write a review. Thanks so much, talk to you next time.