#45 Decoding Crypto: 3 Working Principles to ‘Right Size’ your Exposure

Ryan: Hello there welcome back to the passive income project. Terry, I think I mentioned in the second episode, potentially that we’re about to go on a wild ride and I think we’ve done just that. I feel like we’re blowing our brains to pieces a little bit and a few comments have came back saying the same, and today is all about pacing that brain back together.

Isn’t it going from that theoretical, you know, a lot of the ideas and kind of piecing that together and thinking about how do we actually use that? What’s the practical application and what do we do with that information? And so going to be a lot around rounds, I guess what we’ve learned, how things have changed for us, but also how we see things playing out over the next 10 to 20 years as well. Right?

Terry: Yeah. I think it’s important. yeah. Wrap it all up in a bow and say, well, what does this mean? I think this has changed a few things for us. in terms of how we view things, how we positioned even ourselves and how we are positioning ourselves for, for the future. So we’re going to walk through some of that logic in terms of our thinking some of the different moves that we’ve actually made as a part of this journey and then share some working principles that we’re using right now to guide our decisions and actions, to hopefully set us up for what could be a pretty uncertain period. going, forward.

Ryan: We just want to make sure we come back and hit this point home. This is definitely not financial advice. This is for education and hopefully entertainment purposes as well. But remember, do your own research. We’ve put together that crypto library, which is a great place to go. And browse a lot of the resources that wave looked at. and upon that we want you to go and look beyond that and say it from different angles that we haven’t seen it from as well.

Terry: Man, I think that’s critical. And I think the thing that builds conviction, which is what you need to make a decision, then. act on it Is to answer all your own objections, which is essentially what we’ve tried to do. What are all the objections And I start from the start massive objections? What are these hues objections to this? That mean that it’s not real, it’s not true. It’s not going to make a difference or that kind of thing. That’s how I would go about it. Try to disconfirm it and find evidence,

to the country and then both ways. Right? So then you start to believe in it. then go back and then try to find other evidence, trying to find other arguments that, I do the country everywhere. you’ve got to that’s essentially we’ve done I’ve been kind of looking at the most thoughtful debates that I can find between very smart people around, why yes. Why no and at least different areas kind of battlegrounds as well. So I feel like that is the way to inform yourself is to understand all sides of the argument. We’ve tried to present the side. That’s not necessarily pre. You already know the surface level arguments of headlines. and that kind of thing, but definitely look for the others as well.

Ryan: Nice. and so where are we going to start with? This is really what has changed for us. Like how has this influenced our thinking? it’s such an interesting space where, it’s not just specific to how we actually utilize Bitcoin, but it’s also how it’s made us question everything else as well, and kind of look at things from a lot more of a macro perspective. And so what’s a big shift for you?

Terry: The big one for me is I guess I’m thinking on the market and how we view the market and how I’ve kind of been taught to think about the market. this is a tough one because, generally we love to. be. pretty positive. we have a great deal of faith in the fact that humans get up, they have really great ideas. They put those ideas to work. They create new value. That value gets captured. And as a shareholder, you can actually have a slice of that action. But we’ve kind of had to acknowledge that potentially the market’s not as free as we would like to believe it. Is. Would that be a fair comment from your perspective?

Ryan: Yeah. I don’t think the underlying ideas that exists behind investing in equities is necessarily changed. Like we very much buy into, Peter thorn Hill’s philosophy around, capturing value via human endeavor, human consumption, you know, people wanting to go out, create bigger, and better things.

But also that human beings will continue to consume they’re going to use food, water, shelter, all of those things. It’s just that we’re probably less romantic and. a little bit less idealistic about what we think the market is and how free we think it is, and that it is free from some of the outside influences.

And it’s kind of just a recognition of those influences that helps you just kind of see it more so for what it is not to say it’s right or wrong as just saying that it’s not necessarily as free and pure as what we may have thought and so it’s just kind of added nuance to how I view the market for sure.

Terry: Yeah. I just think it’s just, my just little bit more pragmatic around that. for me, it just kinda made me think, well, are we a little bit overexposed in that area because maybe had too much faith in that it’s not to say that you shouldn’t have vaped in the long-term.

I still think that thesis halls that humans do cool stuff, and you can capture that in the markets but in the shorter term, how do we sort of position ourselves? So we don’t get crushed. If something changes in a big way and We didn’t say that in 2020. So I started to think a little bit differently about debt as well.

Debt I see as something that can protect you in the environment that we see ourselves in right now, particularly if we continue to see governments create more new money and keep putting in the supply. If you have well-structured debt against a hard asset like property,

Then you actually benefit from inflation as opposed to being punished by it. So for me, it was actually the calculus changing and the opportunity cost of not having debt is actually now a lot higher than it was for me previously. Part of that is because of what I just said. I think there’s another part that’s just more stage of life as well, where we’re at in terms of the business, uh, home and that’s kind of a nice forcing function as well that’s sort of, forced me to think, well, let’s just reconfigure things a little bit to reflect

how things have changed externally and also internally for us for us that just meant buying a home and having more exposure to the real estate market and well-structured debt against property.

Ryan: Yeah, I think the debt is a huge one. it’s definitely made me a lot more bullish on it in the sense that it is that calculus of people that have used debt to buy assets have been heavily rewarded because their asset bases have increased. But their level of debt has stayed the same, which means that they’ve created equity.

They’ve created more capacity to borrow and invest an example of that might be maybe you bought a house two years ago and it was worth a million dollars and you had an $800,000 mortgage against it. That house might’ve grown by 20, 30, even 40% in some places. So it’s going up to 1.3 million, let’s say.

But your debt has an increased with that inflation. in fact, there’s been a deflationary effects on that mortgage. So maybe you’ve made some repayments and it’s down to 780,000 now. But your home is now up at 1.3. So your debt ratio has changed from about 80%. So 80% of that million dollars being debt now it’s, down around 65% just because money’s being brought into the system.

More money buying the same amount of assets means price of assets has gone up. and so on the balance sheet from a net worth perspective, those people that have been holding debt last two years has been heavily, heavily rewarded. The reward of that it’s not necessarily that they now can sell that house and go buy a bigger and better one because that other house has now increased in value at the same time.

So that’s relative, it’s more the fact that they now have more equity, that they can secure more loans to be able to purchase more assets. And so with that, I know you referenced back in that last episode about people that are credit worthy being rewarded by this.

And, that’s what we’re very much seen in the last two years. And so that credit worthy nature just means that basically if you’re using debt, you can create more credit worthiness by creating equity because he creating greater levels of security, something to borrow against, to buy more assets, to secure more loans.

 thinking about the high inflation environment, if there’s more money that will continue to get tipped in, then you would suspect that those people that are holding loans right now will continue to be rewarded. for me, it’s very much been the same, a little bit more bullish recognizing that maybe there is a tipping point where that doesn’t make as much sense.

 Making sure that, like you said, it’s, well-structured, you’re not taking it too far. it’s a cashflow decision. You always come back to your cash flows and go, how does this impact things? how do we set this up? So it doesn’t crowd out the other really important things. But making sure that you are acquiring and asset base or investments, that can actually be rewarded by the conditions that we have set for us right now.

And so for us, we made a similar decision, Britt and I. We’d decided to buy a block about three months ago now. And it was very much for that purpose. It was a lifestyle decision because we become grounded where we are. And we enjoy the idea of designing and building a house.

But it was also, we bought a block that doesn’t actually title for 48 months from that time of purchase, about 12 months away now. And the decision was we can see things continuing, like they will for at least another three to five to 10 years. And rather than have the market continue to run, let’s just look in the price right now.

And if in 12 or 18 months time, when it titles and we can get into that house, if the value is going up. Doesn’t mean much because we’re going to live in it anyway. But if it goes down, it’s okay, because we’ve got enough time, we’re flexible in our timeframes and we can wait it out if we need to.

And so, yeah, the debt thing is something that, we’ve had some good, solid discussions over as well. I remember we had a good debate on this one early days.

Terry: I reckon we added to our debate and I was kind of going you start to learn about and You start to think this system is so fragile and It could all fall over tomorrow, but the more you learn about it, the more you go, this could go on. for another 10, 15, 20 years. And

if you are continually sitting on the sidelines, hoping that it is all going to fall over so that you can, while in and profit, you might be waiting a long time.

 And so that was the debate wasn’t I was like, man, this this whole is a little broken.  everything’s credit and credit. And so it’s kind of like railing against the system, versus Working with the system and trying to profit both ways, which is essentially what this whole episode’s about

How do we profit both .

Ryan: yeah, absolutely.

I remember you kind of made the comment to me. It was along the lines of feels like a house of cards. That’s all going to come crashing down. And so having debt in that house of cards was like, it was such a big feeling of, so risky.

And yeah, I remember we had that discussion of like, well, it’s probable that it could continue like this for a period of time, but there is change coming and it is how do you kind of balance, that shorter game as well as the longer game you, can’t kind of be too  idealistic towards one or the other, you have to be balanced in both of those approaches. And

I remember we had a pretty solid conversation around who gets protected and yeah. The role that property plays in our economy and how central authority, central banks government stimulus, how they’ve been used to protect property owners as well.

And that asset in particular, I guess how big of an impact you saw with, with COVID in particular where, it was the first thing that got propped up and stimulated to keep people in jobs to make sure the construction industry, which is such a big part of our economy, made sure that kept moving, made sure there’s money still being spent.

But then also on the banking side, making sure that people are continuing to lend and kind of kept everything going there as well. And so that was probably another change for us in that conversation around buying properties too. Wasn’t it

Terry: Yeah, there was one particular paper. I remember reading, it was a white

paper by a guy called VJ boy party who we will have on the show, having to get him. in And we’ll be sharing that interview in the future. and he wrote interview about, I guess how the system really works. And we’ve kind of been talking about how actually central banks

They don’t really run anything. They’re just more responding to the events  they kind of get thrown their way. It’s actually the commercial banking system that does all the activity.

And then when things go wrong, central bank stepped in. And once I’d kind of realize that, which is, as a result of reading his paper and talking to him, he had a conversation on Jekyll island, which is where central banks were created with a central banker about this

and the central bank had told him, yeah, actually, this is, how it works. And once I realized that had to think, okay, so commercial banks daikon around everything, the economy in, control, in terms of, they make the moves and who’s their number one revenue source. It’s people who own property. It’s a homeowner, particularly in Australia, real estate, to $10 trillion market in Australia. Shares are 2 trillion. And so who’s going to be if the worst comes, it’s probably going to be the number one source of profit.

Ryan: We just need to follow the incentives around, who is having an influence and what are their economic incentives. probability of those interest rates going up, like we talked about last episode, it feels very slim because that is at the direct consequence of the property market and the flow and effect of that is those commercial banks that you’re talking about.

 it’s just where you kind of got to consider what is the ripple effect of some of those decisions and look beyond those headlines again.

Terry: And who’s making them, I think it’s really important as well. Right? What generation runs things right now. it’s not the millennials yet.

It’s still the boomers. And, boomers are gonna wanna look after boomers. Most of The real estate in Australia is tied up in that baby boomer generation. That’s where their wealth is. That’s where their retirement is. Do you want. to be the one That’s telling them, oh, actually, you know what, we’re going to put up interest rates and evaporate Two-thirds of your wealth in the next year. I think that’s going to happen. what’s interesting about that is that’s always going to be the case like deflation a drop in prices is always going to benefit younger generations

At the expense of older generations who built it up. But this system is kind of perpetuating that because it’s actually those older generations who get to make all these decisions and generally I’ll serve themselves. two views terms of how things

in terms of how things have changed. views on the market views on debt.

The last one I want to explore, it’s not really a change for me, But it’s just more important than ever, I think. And that’s just asset allocation, making sure that you’re well aware of where your money is at work. And being very deliberate about that. you might be passive in your investing style, but actually taking a lot of care as to going well, where is it? Is it well diversified so that I can, spread my risk, based on what’s happening. what do you think

Ryan: Yeah, completely agree. I think it’s just added more importance placed upon this one. And it’s just thinking about how do you kind of incorporate positioning yourself for success in the existing.

And, the probabilities that things can continue like they have for that little bit longer in terms of the decisions being made. But then also positioning yourself for the new system. And, what is the split? How do you kind of navigate that and how does that change over time, as well as you kind of accumulate more information, but we also get more signals from the market as things kind of evolve.

And so asset allocation, critical one.

Terry: You can kind of think about it along two dimensions. Like you can think about it in the classical way of like, you know, asset

classes, stocks, bonds, commodities, blah, blah, blah, blah, blah. Or you can also think about it in terms of all world new world, traditional finance where finance is going. It’s kind of a whole new dimension. You’ve added to it that’s, a, question that you, I think you should be asking yourself a lot

Ryan: Okay so there’s a few things that have changed for us let’s now turn to where we think things might be going, and this is kind of diving into our view and the reason why we want to do this is because, like I said before, we want to position ourselves for success. You know, I always think about Wayne Gretzky the famous Ice hockey player was the best in the world.

 And he would always say, I don’t skate to where the puck has been, but where it’s going. and so that makes us think about like, where might things be going? what could this look like in five years or in 10 years? And so, mate, let’s share our view.

Terry: Yeah, no, I think this is critical. and I always respect The pool player that calls the shots before he takes them. So I think nobody knows what actually gonna happen in the future. But I think, if you have a real think about it and you can look at these trends and look at the trajectories, then you can make a decision about where you think the puck is going. Before you then start skating and moving somewhere. So we are going to talk about working principles and what we’re doing, but this is really just to give you a bit of context for why we’re doing those things.

if That makes sense. So before we even get into what we think is going to happen as well, I want to focus on what doesn’t change first? So I’m going to call on Jeff basis again. And he’s number one insight you know, around starting Amazon. He’s like, everyone’s sort of focusing on what’s changing is like, what we’ve done is we focused on what doesn’t change. In order to be able to position ourselves to profit from what does, so let’s talk about, what’s not going to change.

The biggest thing that I think is worth noting. And I want to go back to Dalia on this. and He talks about it in his book principles. He says, loft supports what supports so this is someone who studied markets and studied, entire civilizations in studied sort of how economies grow and develop and change and shift and rise and fall. And one of these major insights is that life supports what supports life. What does that mean?

It means that humans as a species generally are going to course correct towards structures and systems that benefit more humans with the passing of time. Now key point with the passing of time. So the way, I like to think about it as this, right? it’s almost like ideas, different ideas, they’re all in this jungle competing to survive. And it is survival of the fittest. The ideas that survive are the ones that are generally best for humans in the long run. The ideas that don’t survive are the ones that are not best for humans in the long run. So we’ve been talking about this whole system and whether it’s set up and how well it’s working for us, we recognize that it has worked well for us at certain points in history.

What the corner of acknowledging now is that potentially it might’ve got towards logical endpoint and maybe there are better ideas. And so I think that’s not going to change, right? Humans are going to optimize. for What’s better for for humans. The other thing that’s not gonna change is that humans at an individual level, not at a group level, humans are lazy. Self-interested brilliant creatures.

And then we’re going to look for the path of least resistance. So let’s have a think about what this means for the individuals within this system. I think for the insiders, the elites, the people that. have been Calling the shots in this current system and this game that we’re playing, I think it means for them, they’re going to do whatever they can to clean to power and control.

 I think that’s not a very controversial, view. no, one’s going to argue with that. Right. So we’re going to see them, make moves to be able to do as much as they can to hold onto what they’ve created for themselves. This is where I think it’s going to get really interesting. Everybody else.

Who’s not an insider and is going to be moving through their lives and trying to do better for themselves and their families. I think they are just going to do what they’ve always done, which is use the best products and services. The things that make their lives easier and better with Tom. And this is where think it’s critical to understand Bitcoin as a technology, because if you come across a technology, that’s going to make your life easier and better with time audiology doesn’t matter.

You just use it. we’ve been talking about inequality and all that sort of stuff. I don’t think that’s, what’s going to drive the change because frankly, most people aren’t going to do the research to really understand that what’s going to drive the changes, a technology that makes my life better and easier with time.

And that Bitcoin network will be that technology in the way the internet has been that technology for the world as well. What do you think?

Ryan: For me, it’s just kind of going deeper into thinking about the incentives of people, as the extension of that. And it makes me think of that saying by Charlie Munger, show me a man’s incentives and I’ll show you his behavior. And so it’s just kind of thinking about where do those incentives lie and makes you kind of go, like you said, the incentives with people is to remove friction.

What are the incentives for people in decision-making positions? where are the incentives, the people that want change, where’s the incentives that people that don’t want change

Terry: Yeah, Eric, and how that’s going to play out is we hit peak centralization

over the next little bit.

 and probably a sign to look out for on that. One is central bank, digital currencies, a digital currency that a central bank creates gives them a whole nother level of control and power they’ve never had before. essentially removes the banks as the intermediary. As you’ve said, there are potentially good path.

The bad of that is a level of. control surveillance that you’ve never seen before, you’re actually already seeing this right now happen in Canada.

There are truckers that have been protesting against vaccine mandates in Canada and because the government and the banks are in lock step and they have that kind of unholy marriage, the government’s basically saying, Hey, shut down and freeze all of your accounts.

Anyone who’s involved in this process, guess what? You don’t have access to your money. Now, if you’re thinking well, that’s okay. That’s, you know, blah, blah, blah. it’s actually not okay. It’s your money? And we’ve been so indoctrinated into this system that we probably thinking, oh, that’s, their job. It is not their job. Your money has nothing to do with the government. And it’s so hard to really understand that like the government has nothing to do with your money. They didn’t do anything to earn it. A, quite a big thing. When you think about it, like Canada’s a J seven country, that’s a developed country.

That’s. acting In a very authoritarian way. and it’s a slippery slope. So I think You’ll see more of this central bank, digital currencies. Ultimately I think originally people think, oh, this. is great. This is just makes it easier for them to give me money. But in the long run, you’ll actually see that you’re giving up more and more parts of your freedom.

And then the pendulum starts to swing the other way.  the demographic shifts pretty much. They’re just going to cause this demographics are destiny. already sort of pushing this push away from authority in all ways. And once you start to see that there’s a technology that enables this, I think Bitcoin is going to be sort of front and center to be able to make that point.

And like you said before, it’s not gonna be one decision where someone says, oh, I’m going to switch over. I’m going to become a Bitcoin. That’s not actually the way it’s going to happen.

I think what’s going to happen bitcoin. The network is going to create a level of competition that hasn’t existed. before. There’s an interview that I would highly encourage you to listen to. I’m going to put this in the show notes and it’s a 27 year old by the name of Jack Miller.

And this guy is pretty much the mark Zuckerberg of the next evolution of the internet, the version of the internet that has the internet money. once you listen to this, you’re going to start to understand that what the internet did for information democratize information. We’ve talked about this and sort of almost deemed materialized and defunded all these massive institutions. It’s going to do that for banks, because the white Bitcoin set up as a network, it can make your life much, much simpler and easier if you use it the right way, it doesn’t even matter whether using dollars or euros or whatever.

 when that starts to become more sort of used that network effect starts to take hold. that creates some pretty disruptive change over the course of a decade in the same way, that the internet is disrupted, the post office and a lot of other industries alongside it. going to be. slowly like on a day-to-day basis, you’re not really going to notice it, but you’ll look back in 10 years and go, whoa, what the hell I used to have to talk to my bank about this, this this. I don’t have to talk to them at all about any of these things anymore. My bank used to charge me fees, a B, C, D E F, and G

 I don’t get charged any of that stuff. I definitely think those insiders they’re going to cling to that power. They’re going to try harder and harder, but also the majority is going to have their say and at the end, humanity is going to have it to vote and it’ll basically vote for what’s best for everyone. Not for what’s best for a few.

Ryan: Yeah. And just to kind of dive a little bit deeper into what you were just saying there, which is, it might not necessarily mean that you need to be trading in Bitcoin to use the Bitcoin network. You could be using Australian dollars. You could be using the Euro. you could be doing business between anywhere in the world, but you do not necessarily need to use the Bitcoin currency.

Which is a huge thing, right? Because you might fast forward two years from now and be making all of these transactions and not even realizing that using the Bitcoin network, it’s just that it’s replaced visa or MasterCard in that, kind of transfer of value over space which is a huge, huge thing where again, it’s just, they subtle changes that happen that stack up very quickly to kind of push things forward.

Terry: Yeah, man, this is going to be so interesting. I love the fact that we’re recording this and kind of putting it out there because I would love to look back when my kids are sort of 20 years old and see how it actually played out. We don’t know. That’s the truth we don’t know. We’re going to look at probabilities and that’s why we’re trying to base our thinking on how humans act and interact as opposed to what’s going to happen in the technology and all those kind of things.

Terry: And I just see Bitcoin and this whole space, not crypto, but just Bitcoin.

I see it as a vote for the future that I want for my kids. The other way I see it is it’s just an insurance policy against this Fayette system as well, because we’ve said this before, but every single Fiat’s system in history has gone to zero for the same exact reasons. So it would be naive and say, to think. Oh, and I, but, this time. it’s different. So that’s kind of how I’m seeing it,  how are you seeing

Ryan: I think the big thing for me, and I’ve kind of referenced it before in this episode, but the big thing for me is just recognizing that we can be highly rewarded by the existing system, if we position ourselves diligently, but we definitely need to open our arms to the new system and go, what could this mean for me and make sure that we are considering, the short term potential awards, but also the long-term potential awards and you can’t necessarily choose to play short all the time and long all the time.

Comes back to how you see it, what your view is. And so you want to lean into that as much as possible and, , put some principles around the way that you’re thinking. which leads us into the working principles that we’ve been talking about. The things that we’ve developed to help us navigate through this and kind of position ourselves for success on both sides of that.

Terry: Let’s talk about the first one we’ve been discussing for us the way we say it right now is that we want to be saving in Bitcoin because we probably underexposed, to that’s called a new world where money’s going, but we still want to be earning inequities. recognizing that it’s income that powers your life. And we want to be growing sources of passive income, but also we want to make sure that we are not non-exposed. I don’t think it makes any sense to have no exposure to Bitcoin. I think that is probably one of the riskiest things that we could be doing right now. would that be fair from your perspective

Ryan: Yeah, absolutely. It’s the opportunity cost is the risk in terms of the difference. And I think a danger in having this conversation, having this series on the podcast is the thought that people might think that we’re throwing the baby out with the bath water in terms of everything we’ve talked about up until now, that is definitely not the case.

I’m definitely not selling equities. That’s not where we’re at. But it is thinking about like, what is that asset allocation? How has that adjusted in the bigger picture and how does that orient, allocation of my surplus over time. yeah, I was definitely just looking at Bitcoin and saying, it’s not something that’s going to earn us an income. But it is a fantastic savings mechanism. And I think about like a savings mechanism, because it is more like, putting money in the bank. But instead of having that bank account, that savings account lose its purchasing power over time, which, our stock standard kind of Fiat based currencies are doing right now.

 It is putting it there and having some confidence that it will actually sustain or improve its purchasing power over time. And so it’s kind of just recognizing where does that fit into my. where does that fit into the way I’ve got things structured? again, still very much got that preference of income. We don’t want to be in a place where you have to sell your investments, or reduce your savings in Bitcoin for the purpose of generating income. We actually want to be able to still grow that income stream, but use the other mechanisms as well.

Terry: Yeah. There’s a couple of important considerations with this too. Isn’t it? So it’s not just like saving Bitcoin, earning equities. there’s a couple of things you need to think about to right-size this before you even talk about exposure. So the first one is time horizon, do you wanna just quickly talk through, the adolescence, you know, so saving Bitcoin

Ryan: Yeah, the big one here is thinking about how much time you had before you need to use that money. To consume it to buy something, to purchase something, to, put it to its use. And so, for us, we’re probably looked at the maturity of Bitcoin and the volatility of it. And we are looking at it right now, and this can change and adapt, but we’re looking at right now. And if you need that money within the next three years, saving in Bitcoin might not be the answer unless you’re flexible on that timeframe.

so maybe it’s a house that you’re looking to purchase. and you’ve got the stake in the ground for two years, time to say on that date, we’re going to purchase this house. you might put in 50,000 right now, maybe it’s only worth 30,000. So that would be a very tricky situation because that’s obviously in a negative position, but if you’ve got flexibility to say, well, if in two years time, it is less than what it is right now. We’re actually happy to wait a year or two years or three years, then that flexibility gives you the ability to go okay. Maybe we can utilize this as a savings bank in ism now for that purpose.

Terry: I think that one’s critical because flexibility is probably the most important trait that you could have. And do you want to cultivate in this current state that we find ourselves, right? Like The way to think about that is like, all right, we’re going to buy a house sometime within the next five years. And then when you decide to buy the house and you say, okay, we’re going to buy a house. Let’s say you have been in get straight out of Bitcoin get started out of it. Because you’ve been dealing with that volatility the whole time. You’ve, You’ve gotten paid for that, But once you’ve made that decision, move it, move the money because yeah, it’s a bumpy ride and you don’t want to get caught out at the wrong time.

 Like I said, that’s time horizon. That’s the first really important consideration. If you’re thinking about saving a Bitcoin as we’ve kind of discussed. There’s another one. Well, how much do you put in there? What is your exposure? So this is critical. right? You need to right size this there is no formula for this is very, very personal. It should reflect your personality. It should reflect your goals And the way you think about and deal with the volatility that counts with being in something like Bitcoin? Because yeah, like we’ve said before, this is unparalleled in terms of how much it goes up and down.

Ryan: Yeah, I think when it comes to exposure, it’s just about making sure that your exposure reflects your level of conviction and that they’re in sync. And the thing about your conviction is it’s going to be a byproduct of your education, of your understanding of the time that you’ve taken to make sense of what it means, but also. And how it’s kind of informed that view that we just talked about before. And so if you feel like they’re not in sync, maybe you’re exposing yourself, but you don’t have that conviction. You’re just kind of seeing a shiny object. It’s definitely a clue to yourself to dig into the resources and learn that little bit more, kind of consider this a little bit more deeply.

Terry: So if you are unwilling to stay on the ball, when it’s going up and down and that sort of thing, then it means you don’t understand it well enough, because if you really do believe like Greg fosters that Bitcoin, right. now is worth $2 million and you can buy it for $55,000, then why do you care? If the market went down last night, that’s just another great opportunity for you. And so that is a signal. if you feel like, oh my God, I’ve got some Bitcoin I should sell. It’s going down. Guess what?

You don’t have the conviction, which means you don’t have the understanding. And if you are unwilling to do the work, you probably should think very carefully about how much, if at all you put any into this, and not to get too meta on you, but like there’s a consideration to this consideration as well. right. So we talked about exposure, right? Sizing your exposure. Being a function of your conviction, conviction, being the functioning of education.

 If you educate yourself a lot, You can also fall prey to something called motivated reasoning. And you should fact that they seem into your thinking about exposure as well. What is motivated reasoning? It is one thing, something to be and then finding as much evidence as you can to support that thing whilst you’re ignoring all these other evidence. the classic story of this is this art historian. whose name was Abraham bredius. and he got caught. And the reason he got caught is because he was supposed to be this world expert and he was supposed to know more than anybody else.

When it comes to these famous religious paintings, this was only a handful of these paintings. the people that everyone referred to, he was the guy who was the thought leader, And someone brought a painting across his desk and said, well, this is one of those famous paintings. And he’s like no, It’s not, this is a fake. And it turned out he was wrong. It actually was one of those

paintings and that false negative that ate away at him, for decades I do, I had him for a long period. of time And he developed all these kinds of theories to explain the why, how he got it wrong and why got it wrong and what he actually thinks is going on. And what happened with. All these people sort of art community was reading all this stuff. And there was one particular artist who was reading it and he decided

to take all that on board and then paint a painting that confirmed all of his theories. So he’s basically gave him exactly what he wanted, put it in front of him. And when this guy saw it, what he saw, he didn’t see the painting. He actually saw a chance of redemption. And so what did he do? He bent reality to fit his identity, to fit what he needed to and wanted to believe. And so

he got canned again and he missed it again and he lost all his credibility. So the point here is that wanting to believe something, and believing in something that can blow your vision and in pay your judgment as well. So here’s the massive one, right? So for me, I’m a massive believer in what Bitcoin’s about philosophically, but I also recognize that’s a risk. That is a big risk.

and so when it comes to thinking about how much exposure I want, I probably don’t go with how I feel, because how I feel is probably beyond where I should actually be. and so the thing you need to also keep in your mind is like the deeper your expertise, the more education, the more research you’ve done, actually, the more susceptible you are to motivated reasoning. And the reason is, is because you can build a stronger

case to fit your argument, right? it’s easier for you to bend reality. You’ve got more data to work with. You gotta be real careful with motivated reasoning. So when you think about it, and maybe you have educated yourself a lot, I reckon it’s safe and it’s okay to just come back a little bit from. what you feel. If you have a strong, strong feeling  I am not

like michael Saylor. I don’t think it’s smart to be like is all Bitcoin.

Ryan: Also the bias that Daniel Conaman surface, which is he calls it YC Addy, which is what you see is all there is,

there was a lot of people started their learning journey with Bitcoin in particular. And you know, it was quite narrow and they went down that rabbit hole without having sort of a broader understanding beforehand. And it meant that that whole viewpoint was shaped by just that community.

that can be a trap. And it’s always just thinking about, we’ve observed this in our learning around this is you should feel like that the more you learn, the more there is that there is to learn.

And so, for us, it’s kind of saying the best way to start is probably. Avoid, just aping in joining the crowd, jumping on board instead, just dip your toe in the water, test the water, and then decide how deep you want to go.

And so I think we’re both aligned in the view of, we think you should probably have at least some exposure, if you don’t right now, just enough to make you want to learn and make you want to dive in and understand it that little bit more as well. But we also think your ideal exposure It’s not too high that you lose sleep over it. If it went to zero but just enough to one want alone, but also to be able to make a significant difference if it goes your way at the same time. time.

Terry: And if your is time. And if your time is monopolized wondering what’s happening with the price of Bitcoin probably tells you that your exposure

Ryan: Yup. Yup.

Terry: You want to be living your life. Definitely.

Ryan: I’m not doing anything that affects my slate no way.

Terry: So I think the next working principle to discuss is making yourself credit worthy. Now, obviously that’s got nothing to do with Bitcoin, but We did talk about being able to position ourselves, to be able to profit both ways. And I think making yourself credit worthy is one of the smartest things you can do right now.

Seriously, because you don’t know what’s going to happen with the supply of money in the future and having great access to credit. It is an edge for you in the current system. So. I feel like that should factor a fair bit into your thinking in terms of like what to do.

Ryan: Yeah, absolutely. I think if we continue to see the use of quantitative easing increasing the supply of money and we see that effect on asset prices, then those people that are making themselves credit worthy right now and making use of that can be heavily rewarded over the next five to 10 years.

And so, it’s not being too bullish that you put yourself into a a hall. But you know, it’s definitely making sure that you’re building the case for yourself to able to get the credit use debt and, have it structured in a way that allows you to benefit from that

and so it’s just positioning yourself so that you can, make decisions that align with your convictions and have the ability to fund those convictions and we definitely say that you can utilize that as a very strong tool to accelerate growth over the next, five to 10 years  

Terry: And critical to this, as well as having a great team of experts around you.

Ryan: They’re Really important. One, we’ve got one more working principle. What’s that one

Terry: Diversify and defend. I think it’s probably really important, particularly when you’re thinking about. Bitcoin And I’ve had a few comments I definitely felt this way, particularly early on in the journey you feel like you should just act It’s really like a crisis sense of urgency in you. And that can send you as trays cause you can kind of overexpose yourself to risk. And if you overexpose yourself to risk, you are exposed yourself to ruin at the same time,

I don’t know if we’ve talked about this before, but there’s this idea of the Kelly criterion, which is kind of right-sizing your exposure on a why to think about which is really just a principle that says, make sure you never expose yourself to a point where you could absolutely destroy yourself, never to be able to play this game again.

And so diversified defense spread your risk, like we said before, and just make sure that your exposure is not too high in any area where it could ruin you. So we’re, we’re going into a time where frankly, it’s unprecedented, like what we’re facing now, the conditions are the things we have, it’s a very hard time to allocate capital. And so I think being defensive, but still being optimistic and sort of banking on what humans do and how humans work is still worthwhile. But yeah, making sure that you don’t put yourself in a position where you can wreck yourself basically.

Ryan: Just having the ability to kind of shift and change new information as things change, you know, as you conviction grows around different things. Just kind of maintaining that position of being able to prosper from change, but also being able to move with change as well.

Terry: I think that’s a good qualification. So when I say defend, diversify and defend The defensive actions actually, to reconfigure your finances so that you are more agile, that you can move, that you can shift and change. So how do you make sure that you can do that? Everyone can do that. It’s just a matter of kind of thinking their way through it. I think it’s a important point to make.

Ryan: Yeah. Nice. And so that brings us to the end of those three, really key working principles, again, working principles. There are things that will adapt and change. And so that first one was saving Bitcoin, earning equities. Yeah. We still want income from equities. We’re all about buying back time and you do that with income, not price. And so it’s saying Bitcoin as a savings mechanism, you know, a version of saving that can appreciate in purchasing power over time. We also talked about, you know, making yourself. Giving yourself the ability to benefit from the existing system to fuel the asset allocation that you create. And then the last one, which was diversifying defense, make sure you position yourself from change is long and short term. And so this brings us to the end of this crypto series. What are the big takeaways for you?

Terry: Oh, that’s such a big question. The biggest takeaway for me is you can never be. You should always keep learning, which I think is only going to become even more important as this space evolves because it’s just moving so fast, but doing nothing whilst things change around you, that’s going to make you a lot really hard.

Ryan: Yeah. There’s never been a more important time to either put savings, to work, do something with that, or to create savings, to be able to fuel the opportunities that exist for us right now. It’s very much the feeling of if you’re doing nothing, you’re going to get done. And we don’t want to be in that position where we are sitting on the sidelines.

It’s never been more critical to have a plan for positioning yourself for success. And that plan can’t be setting the stone it needs to be something that’s set just enough with enough certainty to get started for you to make actions, create the learning, create the progress and that fuels more progress.

So it’s definitely deepens my commitment to wanting to spend intentionally be very organized and thorough with a why that money has set up and be very intentional about the decisions you’re making now, because I think the cost of the waste that might exist for you right now has never been greater.

Terry: I think those like back to basics, back to fundamentals and being able to put that kept money to work. There’s never been a better opportunity. And it might not exist forever in this way, because it will change with time. It will become sort of more and more widespread and that opportunity will decrease in its magnitude. So having all those ducks in a row, having a set system, to be able to funnel extra surplus money into areas where it’s going to improve your life, absolutely critical, but let’s be really explicit about this, right? We’ve done this whole exploration of Bitcoin and crypto, and we’ve separated those two things. And we came into it and said, we’ve got a little. Are you a believer in Bitcoin?

Ryan: I’d have to say I am. I believe in Bitcoin. Yes. Are you?

Terry: I think it’s pretty obvious that I am, but just, yeah. I just want to make it Cleveland, but cause people are like, well, what do you think? I definitely think it is the future of money. Sorry. That was the question we said at the stock. Is it fool’s gold or is it the future of money? And I believe that it is. Am I sure that it is. But I believe that it is based on everything that we’ve learnt. Um, I will continue to learn and we’ll continue to look for new information, but so far after a six month learning journey, I’m pretty confident to say it is not fool’s gold.

There is something really, this is something worth paying attention to it’s worth devoting your time to understand because it’s going to have a huge impact on the future. And those who do understand it can benefit disproportionately from, from everybody else.

Ryan: And just an extension upon that would be, if any of our members are listening to this at the moment, and we haven’t necessarily adapted your plans, I’ve lost two to three months and you get to make sure you direct message me by the cashflow co-op and we’ll make sure we work through this and kind of navigate those discussions together because yes, we want to have a very deliberate approach to how we set ourselves up for this and how we utilize this now and be thinking about how that can change over time.

Because as I’ve talked about before, the more that we can remove doubt about what to do in this. The easier it is to take the next step and the next step. And, you know, as soon as we’re unsure about what the next step is, we still, so have a plan in place, have a system in place to help you get more of that put yourself in that best position. Mike, does this bring us to the end of the crypto series? Please tell me it does for now.

Terry: Yeah. Um, I’m looking forward to arrest, but it’s not all, we’re still going to be talking about crypto in the future, but what are we gonna be? Is going to be bringing on some of the interviews.

We’ve talked about how I’ve been consulting experts, thought leaders in this space, and we’re going to start to publish some of those conversations. And so you can see what information. And what interactions have informed some of this thinking along with the independent learning we’ve done along the way, and also what we’ve been discussing together.

So look out for those coming up. There’s some big names in there, man. Like I got some pretty big names coming your way. Like there’s only a handful of people who would truly consider themselves. Thought latest experts in this space. And I’ve managed to get a good few of those people as there’s one guy that’s coming on VJ boy party, who he’s written the bullish case for Bitcoin, it’s the most read literature in this space and for good reasons.

So I’m excited to be able to share some of those conversations and with some different voices in the space, different diverse voices coming from all these different angles. And we’re looking to do more of that in the future because I don’t think it’s a conversation. We’re going to stop having, we need to keep learning in this space, but in terms of this series and the way we kind of structured it together, yes we’re closing it out.

Nice. So I did coding. Crypto has come to its final ends and what I would say, mate, a quick kudos to you on the work you’ve done. I said the start of last episode, that’s a big Rubik’s cube of ideas to PC. And hopefully you guys have been out to kind of absorb a lot of our learning and kind of come on that journey with us.

And, you know, maybe there’s someone that you think could really benefit from this. Maybe someone you’ve been having a good, solid, deep, and meaningful, or an argument with someone you’ve been trying to crack through to share. Oh, someone you think that can benefit from it as always, maybe even review the podcast too.

That’d be nice.

Yeah. Lover. just want the entire, I’d love to know what you guys lock, what you don’t like when you were

Ryan: Nice and that’s it from us. Thank you, mate.