Macro Investors and The Metaverse with Raoul Pal

TRANSCRIPT 
Disclaimer: The transcript that follows has been generated using artificial intelligence. We strive to be as accurate as possible, but minor errors may be present. 

Alexander Fernandez 00:00:00  

Hi everyone. It's Alexander Fernandez with a special edition of Video Games Real Talk. We have a great guest today, that I've wanted to speak to for a long time, because he has absolutely nothing to do with the video games industry, yet everything to do with the video games industry. We have Raoul Pal here, Raoul, how you doing, man? 
 
Raoul Pal 00:00:21  

Great to see you my friend. 
 
Alexander Fernandez 00:00:23  

It's great to have you here, man. I mean, I got a lot of things I want to talk to you about, but I think it's important for us to really kind of set the stage and really, specifically talk about how you got into this entire concept of metaverse NFT gaming habits swirling around there, but first please introduce yourself and what you do. Sure. 
 
Raoul Pal 00:00:40  

So, my name is Raoul Pal I'm the CEO and co-founder of, of a financial media business called Real Vision. In addition, I  am the co-founder of I'm sorry, the founder of Global Macro Investor, which is a institutional research service on kind of macro-based investing for the world's largest hedge funds, asset managers, sovereign wealth funds, giant banks, that kind of stuff. My background was 30 years of finance. So, I was working for some of the world's biggest investment banks. I started and ran the hedge fund sales business in equities and equity derivatives at Goldman Sachs in Europe. Um, then I went on to, uh, start and run a global macro hedge fund for one of the largest hedge fund firms in the world, GLG partners, and eventually opted out of the rat race back in 2004, moved to the Mediterranean coast of Spain, where I started Global Macro Investor. And then 2014, I started Real Vision. 
 
Alexander Fernandez 00:01:35  

Okay. So, there's a lot to unpack just with that right there. So first off like this for everyone out there, macro investment, just describe that real quickly. What exactly is that?  

 
Raoul Pal 00:01:45  

Yeah, so, you see people who, who look at a company and I think I want to buy their shares and it'll be based around the earnings and the cash flow and the potential growth of the company. Whatever it may be. Macro investing is the opposite. It's looking at economies and how economies work and saying, okay, if that economy is doing good-bad, then how do I want to make money off that? Because the economic cycle drives the price of assets. When I'm talking about assets here, I'm talking about shares equities. I'm talking about bonds, I'm talking about currencies, commodities, cryptocurrencies. So many things are driven by the business cycle, the economic cycle. So, our job as macro-based investors is we look across the world and look for opportunities where the market's perceptions of what is happening are behind what the forecasts are now showing. And it's not about following what Wall Street tells you, it's doing work and trying to discover what's coming in the future, our job in macros to live in the future. 
And we look for the big trends or the big turning points because that's when we make all of our money. So, the big trends in this world may have been the rise of cryptocurrencies. It may be the recent rise of commodity markets based on supply disruptions that everybody's read about, or it could be the rise of technology and how that impacts the NASDAQ. So, then our job is to live between six months and two years into the future to imagine what the world could be like, and then assess the probabilities of how it would get there. And then you place bets accordingly. It's a, it's a really amazing world of this. The world's most complex 3d jigsaw puzzle that you try and solve, and occasionally it all comes together and then it dissolves again and you have to start all over again. So, it's a huge intellectual challenge to put all of these moving parts, because you're looking at all of the economies and the interplay of all of the asset classes, but it's a very rewarding, um, way of investing. And also it gave rise to some of the most famous investors of all time. People like George Soros was a macro guy. People like Paul Tudor Jones, these are macro thinkers, macro investors, it's currencies and bonds and all of this stuff that most people don't really look at. Um, but it's a lot of fun. 
 
Alexander Fernandez 00:04:11  

It's funny because I described what you do is basically playing the original video game. Finance macro is the original video game of the world because it's so out there in terms of puzzling in terms of solving yet, it has such real ramifications. And the fact that it resets itself after a couple of years, that's phenomenal. You, you basically live in the future from what it looks like from how just looking at it from the outside. 
 
Raoul Pal 00:04:34  

We talked about the metaverse a bit, it's not wildly dissimilar because you're living in a future state of which your time trying to create or assess the probability of it, getting there, you know, in your world, what platform do you build on? Okay, well, that's a macro bet. What's the adoption. You know, how does Metcalf law play out? What are the incentive systems? You know, what has the best quality ecosystem does that matter? All of these are macro decisions. They're not micro decisions. So, we all do the same thing. Macro is actually how we think of our lives. Most of us do, particularly if you're in business, you're making macro decisions all the time. Just most of the time, you don't realize it. 
 
Alexander Fernandez 00:05:14  

That's incredible, man. So let me ask you something. You go from being this master of the universe, so to speak to basically going down to Spain and then ending up out in the effectively, The Bahamas 
 
Raoul Pal 00:05:25  

The Cayman Islands, the Cayman Islands. 
 
Alexander Fernandez 00:05:27  

Oh, okay. The Cayman’s sorry, but out in this, uh, effectively the Caribbean, let me put it that way. I, I don't want to offend anyone out there that basically when those are the difference between the two, but you're in a beautiful area, so to speak, but how do you end up there with this understanding that the world is changing? And then all of a sudden, you're getting introduced to this, like just blowing situation in terms of crypto, in terms of blockchain, how does that all happen? 
 
Raoul Pal 00:05:51  

Okay. So, most of us in the macro world from about the nineties we saw in about 97 and eight Asia blew up. And what that means is there was a financial crisis of epic proportions and it was driven by debt and that got everybody focused on debt. And the answers of the Asian crisis by the Western world was to cut interest rates, which ignited that own debt bubble. In fact, George Soros pretty much predicted it in the crisis of global capitalism. And that's what happened is the debt bubble moved. So as the debt bubble moved, we got to the 2000 recession and interest rates went down even further now at all-time lows. And we had a housing bubble. So, debts went up and people borrow more money on their credit card. Then the student loan bubble started as well. Then we got to around the bend, obviously now the financial system was by far the largest part of the global economy and that blew up. 
 
Raoul Pal 00:07:03  

But the answer to that was not to let it clear itself, which is kind of what happened in Asia to a certain extent, it was to support it. And the way of supporting it was cutting interest rates and do something called con state of easing, which was basically pushing free money into the system. So, people could service their debts. So, you created yet more debt because everyone was incentivized to create debts because now the government said, well, the central bank said, well, we're going to try and defend your debt from blowing up because we understand it's too big. So, you're now incentivized to do so. So, I'd got through the 2008, um, recession having forecasted. It knew it was coming cause this was in many macro people's framework. There's a debt crisis coming. What was surprising to us. It never played through to the logical conclusion, which was kind of a proper, full reset. So, the system was really pumped up with, with money and let it on its way again. And that made us think, wow, this is not good. The next part of the story was the European crisis, which was a sovereign debt crisis country, almost going bust and almost blowing up the whole of Europe. That was another opportunity to print money prop up the system. And now the European central bank were buying every bond, every debt of any bank in Europe, no questions asked basically you can lend to anybody and we'll just take it off your balance sheet and pretend it didn't happen. So obviously debts continue to rise. And it's at that point, having seen this and see the dramatic impact on had on people around me, don't forget things like Cyprus happened, where they basically took, they bailed in the, um, depositors in banks. What that means is a fancy word for saying, you paid for the bank's mistakes, and they took your money away and destroyed it or gave it to the creditors. 
 
Raoul Pal 00:09:04  

And it's like, I was just putting my savings in. I had nothing to do with your bank. I'm not shareholder that all changed. So now you're on the hook for all of this stuff. And I realized that this was unsustainable. And also we learned from the 2008 crisis on the European crisis, that all these financial instruments, because of leverage all wildly interlinked. And because you reuse things, collateral as it’s known, which you put down from a loan, like you put money down from a mortgage. When you reuse stuff, you don't know who owns it because it keeps getting reused. I spoke to the federal reserve at one point and found out that something like, um, average US treasury bond was being reused 32 times within the system. So, then you've got a problem of who owns, what, if anything goes wrong. And then it was a guy called the Emil Woods that you and I were talking off air a second ago. 
 
Raoul Pal 00:10:00  

I was looking at setting up the world's safest bank with a few global macro investor subscribers, slightly hubristic thing to do, but I thought I'd give it a go. And it was bloody hard. Anybody tried setting up a bank, it is not easy. So we went to Singapore, we went to Hong Kong. We went to, um, Switzerland and the US trying to set this up. And then Emil said, you don't need to look at Bitcoin and look at blockchain because this is an asset that is not encumbered, meaning you can prove ownership and it's fast and secure and you can transfer it. And all of these things that meant it could be the basis of a financial system was better. I saw that and I bought it immediately and I got it. And I wrote one of the first research papers, um, on the macro perspective of Bitcoin back in 2012 or 13, which was saying, okay, if this is like gold, then the value with gold at $1,300, Bitcoin should be worth about a million dollars. 
 
Raoul Pal 00:11:03  

And that made waves, obviously, because it was worth currently at the time was $200. Um, and you know, I think that forecasts will end up being pretty right in the end. Um, but that's what I'd realized. And then I was on-off investor in this space and I sold that in 2017 early, and I'd made 10 times my money and felt like a hero and I should have held on, um, because that's the stuff I bought a $200. I sold it at $2,000 and it went to $20,000. But, um, I then focused on the face space still, but I wasn't an investor. And the, this was the rise now of Ethereum and other blockchains. And I could see where this is going. Emil again had taught me through smart contracts and what it could mean for everything from the insurance industry to all sorts of different applications. Um, and crypto was silent and I was waiting. I knew that this was the opportunity and the savings vehicle and basically the life raft for the entire financial system. But most people weren't aware of it yet. It was this fringe thing. 
 
Alexander Fernandez 00:12:09  

Well, so here's the thing that I find fascinating about this. The run-up pre discovery of Bitcoin in your world, literally, you would, you explained, was playing a game in which you kept getting extra lives. The finance that the economy kept getting bailed out, it kept the money kept getting moved around extra life, extra life, no meaningful reset, no meaningful, sorry, the house lost. 

 
Raoul Pal 00:12:32 

There's no game over. There's no game over. 
 
Alexander Fernandez 00:12:34  

Right? And so, it keeps stacking. It keeps stacking. And you're sitting here literally at the frontlines. I mean, you're watching this all take place. And then you get introduced to Bitcoin. And this concept that this relatively obscure technology that's already been in development for at least at this point, by a decade, it already been floating around these concepts and it's starting to congeal and starting to become something that literally could become, I would say it to be dramatic, but Noah's ark to the financial industry. So, to speak because the floods they be coming, how are you looking at this? Because you know, this takes a lot of foresight to be like, wait, it's technology. It's not proven. It's a concept yet at the same time, it looks nothing like what has been governing the financial system for at least a hundred years and let alone, let's say the past 700 years, how do you make that leap? 
 
Raoul Pal 00:13:29  

It goes back to what a macro investor's job is. It is to live in the future and the assess, the probability of something getting to that end state. So new financial system and state. When is that? I don't know. When do we need it by, we're going to need it within the next 20 years, because this whole thing is going to be game over normally game over, but you computer's going to crash. In fact, all the world's computers are going to crash, right? So somebody has to solve this. So is this the thing I don't know, but at $200, if I think it could be worth a million dollars just based on some back of a cigarette packet, math's fine. I'll take that bet. It's a low probability higher award. And in fact, it was the highest reward opportunity I'd ever seen risk reward. And I wrote about that then. So that's how you think about it. You don't know. Every time anything is certain it's priced in what is uncertain and other people don't see it. That's when you make the most money, same with VC investing all of these. 
 
Alexander Fernandez 00:14:27  

I mean, that's entrepreneurship. You literally just described it right there. The only risk is failure. 
 
Raoul Pal 00:14:33  

Now what's great about Bitcoin is you didn't have to build anything. 
 
Alexander Fernandez 00:14:37  

Exactly. So, okay. You're sitting here, you're playing, you get out in 2018. Was it 2018? 2017 is when you jumped out. So you got out of the two. Yeah. Yeah. I would have been 41,000 today, so yeah. Okay. I feel you, I'm feeling less than know. We're not going to go into that. It's like, you know, I feel you on that. No problem. But, okay. So you're seeing this asset rise up, but then there's another thing that started to happen as well. And I think this is something that, where we get to. So go ahead. 
 
Raoul Pal 00:15:03  

So we've got this force, which is the financialization of the global economy and the fragility of it. And those things get exposed. Every time you have a recession. And we went from 2012, which was a European recession, almost a global recession. And now we're at 2019 and there hadn't been a recession. They come along every five to eight years. So, you're right smack in the zone. I see the global economy rolling over well before the pandemic, when it's like, well, we've got a recession coming and we need to be on high alert. We can make a lot of money out recessions in macro. You, you bet on bonds going up and stocks going down and all sorts of things. So, I start positioning myself for that. 
 
Raoul Pal 00:15:54  

Then the pandemic comes and it's like, oh my God, the world is going to stop for three months. Never happened before. So that is a total loss of economic output for three months. And we didn't know how long it was going to be, but we knew it was going to be a period of time. How the hell does everybody pay their debts? So, either everybody's going to go completely insolvent. Or the central bank is going to have to do things. And governments are going to have to do things that have never been done before. And either way, that is a bad outcome for a number of reasons. So, I had been waiting for the opportunity for macro this business cycle and crypto to meet. And this was going to be it either the system was going to be insolvent and nobody knew honed wallet. So therefore, something recorded on a blockchain. 
 
Raoul Pal 00:16:55  

Everyone's going to have the light bulb moment of, oh my God, this thing like owning physical gold is something I can get my head around. But unlike physical gold, it's an international payments network. It has smart contracts. You can build stuff on it. So, it's like, okay, but let's say the insolvency doesn't happen. And the central banks print money. So, what is this printing money? What does it matter to us? What if you imagine there is a you're really, really thirsty and somebody gives you a bottle of water. What will you pay for it? Pretty much anything. If they give you two bottles, when you're thirsty, you'll pay probably marginally less for the second bottle. If somebody gives you a million bottles of water, you'll pay nothing for it, right? That's the typical law of supply and demand and how pricing works. So, if the central bank pumps trillions of dollars into the economy, money becomes almost worthless. 
 
Raoul Pal 00:17:56  

So usually that means the price of something falls. So, if there's, you know, a single Banksy piece of art, it can be worth whatever. If he creates the identical piece of art in his own hand and makes 10,000 of them, they'd be worth a fraction of that. So, the same applies to money. You create too much money. It devalues it. And it's hard to see because every nation's doing it. So normally if the us did it, that dollar would collapse against the Euro, but the Europeans are doing. And the Japanese day and the Australians during the Brits are doing it and, and the Chinese doing so it was doing at the same time. So, what happens is your purchasing power in these rare things like gold or even equities or cryptocurrencies, your purchasing power goes down. You can buy less of them for your dollar. 
 
Raoul Pal 00:18:53  

So, you're actually getting poorer. What is an asset in the end? An asset is a savings vehicle to deliver future consumption. So, you buy something now to sell it later so your future self has money. That's protected over time, but what's happening is your future self is getting poorer because every dollar you earn of your salary, which doesn't go up in a debasement of currency buys you less of these buys you less of this savings. So that problem made me realize that, okay, if there's ever going to be a moment in time for crypto to become mainstream, this is it. And the chart pattern, I like to follow chart patterns, charts. Many of are used in financial markets. I just basically human behavior written down in a nice visual format. That's all our and humans are humans. We do the same thing. Every time you go into a cinema shot fire in 20 different cinemas, basically you get roughly the same outcomes. 
 
Raoul Pal 00:19:57  

There's no certainties in anything just probabilities. Probabilistic analysis is all we do. So, the probable ballistic analysis was Bitcoin, which had been kind of trading in this sideways range called a triangle pattern for a lot of 2019 into March, 2020 was likely to go up because people are going to get attracted to this. And also, just because they get debase the currency, but the first thing it did was the opposite collapsed because everybody had to liquidate any asset. They could to get some cash because this pandemic, so that spooked a lot of people they're like, oh no, this not this. And then it took off like a rocket ship broke 10,000. And then by the end of the year is at 30,000. So to come 300%, this is an asset class. And that was this moment in time that I've been waiting for. This is the moment in time that I really stepped up my exposure personally, and also publicly to say, listen, I didn't like it in 2008 and 2012. I didn't have a ability to get the message across of what was coming. Even though I'd forecasted it. It's one of the reasons I set up Real Vision to make sure that people had a level playing field of information. So, they get access to all the world's great minds so they can see what's going on. And then I could use this to my advantage to tell people, listen, this is your opportunity to save yourselves. 
 
Alexander Fernandez 00:21:28  

So when I'm, when I, when obviously this is a very, it's a moving story in many ways, because on one side you played on the front end, then you went through basically, I wouldn't say like a conversion, but yes, effectively you saw how the game is played and you see the ramifications. What happens when you win or lose on both sides. Now we have the entire world effectively in a collective moment in three months, not knowing if they're basically going to be at the end of the days or not only to come out and realize that this piece of technology that was created with the idea that it could effectively make it fair, democratize, or in a way, make it transparent. How and what we do if financially could be basically the saving grace now, as you're coming out of this and meaning, and basically the, of the actual pandemic, well coming out of the first initial phase of like, Hey, we're not all dead, we're alive and we need to trade, right? 
 
Alexander Fernandez 00:22:18  

We're human behaviors here. Humanity continues. You begin to make, basically realize that not only is this technology that basically is defying the laws of everything we know in terms of what has been written in terms of what those charts have said, but there's other technology starting to happen. There's other movements happening because human behavior, we can no longer sit inside of those theaters. We can't go to those restaurants. We still need to entertain ourselves. We still need to shop. We still need to conduct ourselves in some manner yet at the same time, how we used to do it has been radically changed because of a virus. Now take me into how you start to see this concept of metaverse because when did you first start hearing this word and all, like, how did that start to brew together into your mind? 
 
Raoul Pal 00:23:06  

And we'd all seen ready player one, and you know, all of that stuff. And that was future. We knew it was a future, most likely to happen. We kind of, all of us kind of who thought about it, thought about the singularity and artificial intelligence. And we could see where it was all going. We could see how popular gaming was, but this is a two-phase thing to happen to me. Firstly, I was in England seeing my oldest friend and his, it was on a Saturday and his son was in a gaming chair in front of big screen and was, had a microphone on him, was talking. I'm like, Daryl, what the hell is he doing? It's a Saturday afternoon, a beautiful days. He's like, well, he was out playing football this morning, but now he's socializing with his friends. I don't know. What do you mean socializing with his friends? He's on his own. He's playing a video game and he explain Fortnight and how they're all hanging out together. Yeah. And I was like, at first, I wanted to use the typical reaction, which is ridiculous. They're rotting their brains, but I didn't. And it sat with me and I thought, I want to digest this properly. So, when Daryl and I were kids, we'd hang out at the local shopping mall and we'd meet our friends on a Saturday and we go and have coffee and we find out who's having the party and what was going on and who was, you know, who's who had a crush on who and all of that stuff. Right. You know, the normal 
 
Alexander Fernandez 00:24:26  

You know, the normal stuff that you do when you're young.  
 
Raoul Pal 00:24:27  

That’s right. These kids were doing it online and I'm like, Daryl, who's he with? He goes, well, he's got two friends in America who are on this, his friend, he met in Spain on holiday last year, the guy around the corner, five of his mates from school and somebody else who's, who's now moved out and is living in Manchester. I'm like, whoa. So like older people might use Facebook to contact. They're actually living with their friends in this digital gaming world. So that got into my mind and I just let it sit there. And I realized, and I started writing articles about gaming. Yeah. Without seeing the bigger picture yet. So gaming. Okay, got that. I could see it was, that was going to be a big part of the future. You know, all of us have had our Oculus rift. We understood VR. We understood that the world's going somewhere there. 
 
Raoul Pal 00:25:16  

Then the pandemic comes along and we suddenly all turned digital. I mean, even Zoom for us is now, you know, it's a virtual reality for us because we don't meet each other anymore. We don't kind of need to. I'm pretty comfortable. I have drinks with people on Zoom and have a coffee and chatting. In fact, you and I have met on Zoom and it's normal, but this is a digital rendition of men and digital rendition of you. Absolutely. And yet it's completely normal. And that point I realized, okay, this is going to accelerate all of this because I'd already seen that humans were forming tribal communities or communities themselves online. And that those people wants to socialize with each others. And that was actually changing what borders actually meant or sovereign states. Absolutely. Um, and so I could see that if you were a Rottweiler lover, you would hang out with a bunch of Rottweiler lovers and somebody could be in Mexico and somebody could be in Taiwan and it made no difference. You, you, you, you shared the love of the same thing, which is a certain breed of dog. And you might be on social media, hating on the chihuahua lovers, because you know, they're a different group and they don't know what they're doing.  
 
Alexander Fernandez 00:26:29  

Yeah, everyone got into the niche. It was the niche of the niche of the niche. We got micro niches. 

Raoul Pal 00:26:33  

But you could. But now you start putting two and two together and thinking, what if they're already doing it in Fortnite, why can't we kind of live in that niche? What do you need to operate in society at all? In sovereign society? Yes. You need to pay taxes and blah, blah, blah. But a lot of the time, if we're spending all of our lives in front of a computer, if any people listening or watching this podcast, my guess is, most of you are eight to 12 hours a day in front of a computer. So, we're already in the digital world. It's just not optimized for us yet. So, I kind of got all of this and I knew that crypto was starting to make inroads as the system of money for all of this, for the internet itself. And, but that's, as far as I got to, and then somebody said to me, you need to meet Piers Kicks. 
 
Raoul Pal 00:27:30  

And Piers Kicks was an analyst and investor at Delphi Digital, which is probably the most prestigious crypto research firm. He's now gone to big craft, which is a VC. So, I'm like, okay, fine. So, I get this article about the metaverse and it kind of stopped me in my tracks. I'm like, oh my God, that's one of the best things I've ever read. So anyway, so I get this kid on, I mean, Pierce is like 24 annoyingly. It looks like a young Orlando Bloom is an English guy. He's incredibly good looking and stupidly smart. You know, he's got this guitar hanging behind him and he's just like annoying. 
 
Alexander Fernandez 00:28:06  

That's winning man. That’s winning right there. He found alpha. 
 
Raoul Pal 00:28:13  

And then he unveils this, this, this nexus between crypto and the metaverse and where this is all going and how this is the system of money and the system of value for the metaverse and how people are yield farming and how they're creating markets for, for skins and swords and levels in the game and how this being sold. And people are earning a month money in the Philippines in being an Axiom infinity and suddenly my mind explodes. And I'm like, what I thought was the future is actually the past. Yeah. And the present was further ahead than I thought. Right. And my job as a macro guy was to live in the future. I had missed this. Um, but it happened very fast. Most of the stuff that had basically happened in the last year, this is the same time in crypto. We see the explosion of decentralized finance, defy bank, non-banks' lending, money, algorithms, lending money, and stuff that banks did. 
 
Raoul Pal 00:29:08  

You know, there's all of this stuff starts happening all at the same time. And then you start out. And the other thing that had come over this period is the concept of social tokens that let's say that those communities online, the Rottweiler lovers that we talked about before, well, because they transfer value, they've got pictures and they've got, you know, um, products for their Rottweiler you know, special chew toys and whatever. Well, how you organize complex adaptive societies usually is through a system of money. Yeah. And the gaming to figure this out, just wasn't fungible. Yeah. Um, so the moment you had a fungible money system that you can transfer from one well to the other, and you give it to a community. Complex adaptive society, that's religion, sovereign states, or large groups generally ruled by sort of a mission, a set of societal rules and a system of money or value exchange. And that was missing the value exchange, the money part until crypto came along. And then it created, because right now in the gaming world, before this, in the gaming world, all of that stuff is worthless when you left the game. 
 
Alexander Fernandez 00:30:21  

Yeah, no. And it was pure passion. We just call that the passion economy basically akin to I work for free. 
 
Raoul Pal 00:30:27  

And then it became the real economy and he worked for something that has real value. That is transferable. Then the rise of NFTs come and you realize that skins can be owned and traded in a way that was better than were being traded because it was complicated, but NFTs has changed all of that. So now you've got the unlock for the gaming world to turn the gaming world from a passionate economy, into the future global economy. 
 
Alexander Fernandez 00:30:53  

That moment where you realize, oh my God, this is a new economy. Like where, I mean, do you, was it profound? Is it something in my mind that you're just like Eureka? Or is it just like, wait a second. This is really an economy. This is a layered economy on top of the real world. But it's just as real, even if it is digital, did that Dawn on you? Or was that a slow roll that then all of a sudden, you're like, wait a second. 
 
Raoul Pal 00:31:19  

No, it was the epiphany of after Piers Kicks, I tend to try and digest some of the things I've learned without making too quick and judgment on it. Right. And I kind of had the holy shit moment. Yeah. And most people, I don't think had really realized it. I was one of the first people to start saying to people, I don't think you realize we've just discovered the Americas. 
 
Alexander Fernandez 00:31:40  

Yeah, I saw when you started saying that. And I was like, you are so right. It's like, we just discovered earth. It's like, here it is. It's and it's untouched, unclaimed ready for you. 
 
Raoul Pal 00:31:53  

And what is it going to look like? What does it do? What societies can you build on it? We have no idea. Yeah. And that's where becoming the macro investor becomes fun again, because here we are with even more unknowns, but the upside as you've just pointed out is gigantic. Yes. So what a worlds are playing and it levels the playing field, everybody. Because if you think in this world, let's say we move education to the metaverse, which is a shoe in guarantee, guaranteed. So you are Harvard and you're in the metaverse and you're a kid from Ethiopia with no money and or whatever university. Now you can compete on a level playing field because you need to go and live in the United States. Your relative cost of education could be less because Harvard can scale education better because it, education becomes a SAS business. 
 
Raoul Pal 00:32:49  

But not only that, any prejudice based on rate, height, anything, any prejudice at all disappears. Once you use an avatar, that's true. Everybody is equal. You have no idea. Who's the billionaire. Who's the trash carrier. Who's the kid living in the favela in Brazil, or who's the kid growing up in Greenwich, Connecticut. You have no idea. Okay. That is powerful. So, then all jobs, because we're moving towards the digital world and software is eating the world, all jobs go into this metaverse because it becomes a profound driver of GDP or a new GDP. So therefore, you're going to open up opportunities to people who never had these opportunities before and that's already happening. And that's just started. That's really the last two years in the gaming world, when you've added money into it, you're starting to change lives. And it's barely, barely started because people still think of the game. This is not the game. Life is going to be the game. 
 
Alexander Fernandez 00:33:47  

So let's, let's, let's freeze right here because you, you literally hit something I think is extremely important that the metaverse itself with crypto and NFTs, would you say that is the reset that you expected or that you think is going to be the way for the new value to be created? As we said, there were all these extra lives coming in financial crisis, that sovereign crisis, all these crisis's that have yet to fully play out. Do you believe this new economy coming could be the spillover or at least the place where everyone else goes? 
 
Raoul Pal 00:34:18  

No, bigger concept. So, I think that crypto is the life raft. Okay. And Noah's Ark. All right. That's where we can move our savings and a financial system across in a migration because we've learned that we're not going to see a collapse. We're going to say debasement of our earnings power and our savings.  
 
Alexander Fernandez 00:34:41  

Okay, so slow rejection, so rejection of value over time. 
 
Raoul Pal 00:34:44  

So, we'll see them destroy it over time with the tail risk, the smaller probability that everything blows up. So, given that we'll all start migrating across, right? So, you and I have migrated across already and more and more of our savings and our transactions. And our Alliance goes into this new crypto world. Okay, that's fine. That's the saving that's. If I could get one message across to everybody, it's get involved in that world. First. I know most people, most people here are involved in the metaverse and somewhere understand it. But first is the crypto step. Without that there is nothing. 
 
Raoul Pal 00:35:25  

So now we've decided we're humans and we know how to screw everything up. We can now create a new world without sovereign borders, because by the end of it, you will lose in government in what format does it mean right. In the streets. But you'll want to create your own societies. Now with tokens cryptocurrencies, you can have your own currency for your particular community. You can have a token that represents your role in that community. And so, so now you're living in a sovereign state that is not a sovereign state. It is a complex adaptive society with the system of money that's happening in a digital world. So this now becomes the future world where you can redo over mistakes or create a world that you want. Now what's interesting about the metaverse it's it's infinitely expandable. So we can both live in different metaverse experiences and never the Twain shall meet now, which is good and bad. 
 
Raoul Pal 00:36:28  

I mean, most of us actually like mixing with humanity. Sometimes we don't because social media is polarizes. This tribalism online has polarized us, but you can with, if you've got a system of money and the world is now digital, you can do anything. So I don't think of it as the savior. I think if it is where it goes, when we recreate the world, which is like, it's the Americas, the Europeans kind of had enough of what was going on in, in, in Europe. And they created a new life and that was the Americas. And this is our opportunity. 
 
Alexander Fernandez 00:37:02  

So as, as we're evolving forward on this, and we start to take a look at that idea that the metaverse in itself will create these. It will become very porous, right? It's poorest between different Metta versus the idea of I can be focused on this niche. You're on that niche. We have a way of trading value, whether it's through exchanges that represent different, different understandings of value between our tokens and different value exchange. Based upon what we actually do. We begin to actually recreate our society by also removing what didn't really work in our society, whether those are the gender bias, racial bias, ethnic bias, whatever bias you want. We can strip that away because we're a walking emoji at that moment in time where it's like, I'm the smiley face? Someone's the thumbs up here. It is. We're basically seeing it based on that. 
 
Alexander Fernandez 00:37:45  

What I find fascinating about this. And, and really when I, as I read you, I read all your materials. I love reading the research that you guys produce. And of course the stuff that comes out of real vision. But what I find fascinating is that there, there is this excitement that comes in with the idea of what can be, but firmly rooted in what has been. And this is something where I've always wanted to know as you look towards the future, it's very easy to get caught up. And, you know, gene Roddenberry's version, it's like, here we are, it's all star Trek and here's everything happening, but it never comes across that when I read your stuff and I read what you guys do, how difficult is that to live in the future? And yet still be solid ground. Is that because it's finance or is that just the way your analysts, the analysts, the analysis and the analytical nature of your mind comes out? Because, I mean, it would be very easy to get caught up in it 
 

Raoul Pal 00:38:32  

Because humans are, and we're relatively predictable. We repeat the same mistake over and over again now. So, you know, you've given us slightly utopian version of what this new world is going to be, but we are humans and we will totally fuck it up yet again, right. The crypto world currently doesn't have it deals with leverage differently. It has no leverage, but it deals with it differently. Um, which is, there's no marching calls. You actually have your position liquidated. So in now, but we're humans and we will recreate leverage and we'll screw up the system too. The good thing is we know who owns what, so humans will recreate bad society because there is no ever example of a utopian society because we're humans and we're flawed. You know, we're just monkeys with guns. 
 
Alexander Fernandez 00:39:23  

Yeah, no, you're right. I mean, let me ask you this, uh, on that line of basically humans being humans, I mean, how do you think governments are going to play in this space? Because, you know, I mean, clearly control is great. Control of currency is great, but when you get over to this idea of there's a sovereign and then there's the sovereign, but yet the niche kind of controls things. I mean, and we're already kind of seeing that last week is a great example of what happens when countries say, Hey, no further than this, you know, how do you see that? I mean, where do the governments go? Well, for 
 
Raoul Pal 00:39:55  

Honestly, at one level, why do governments care taxation? Right? Absolutely. And taxation actually counter to the narrative is like the evil. It's basically tape. We, the society shares in the burden burden of society, right? European countries are pretty good at doing that. Nobody gets it right? It's not, it's not a perfect science. Um, people thinking of taxation is theft. It's actually not. It's sharing the burden of society with society. Agreed. So what is interesting is humans are being replaced at record numbers by by machines, right? This is the software is eating the world. And so governments are having to think through in 10 years time, it's now working up the food chain. I mean, lawyers, I mean, everybody's been displaced disrupted. So how are humans going to have income? So one of the things we're thinking through is universal basic income as a methodology to give people something. The other thing is maybe the metaverse solves a lot of that, that we can earn a living in a different way in this different world. So it solves problems. Governments don't care as long as they get that tax, because then they can create the society now. So what is that society for us? It's where we physically live. So we pay a share of tax for where we physically live, because we want healthcare. We want roads, we want lights. We want, you know, the basic facilities now, 
 
Alexander Fernandez 00:41:18  

Sanitary, we want the conditions of a sewer for God's sakes. We need that 
 
Raoul Pal 00:41:22  

That's right now, it's your choice as a voter to decide whether you're overpaying for military or underpaying for military dependent, what your point of view is, whatever right society. But now we can live in these two societies. There is going to be a battle about, okay, I now have a choice. Do I live in this country? Or do I leave it? Because my business is in the metaverse. I don't physically need to sell coffee to those guys at JP Morgan, who across from my coffee shop in their big building. I'm now doing something online, which is already happening. But now if you kind of living and socializing and everything else online, the sovereign has to treat you well because you can leave. Sure. They'll put up barriers to do that. But you know, many nations don't, the us has been particularly strong with it. Others don't, you know, anything that's a British ex uh, uh, colony has basically the English rule of law, um, which allows basically if you live and work abroad, there's the only way of building an empire was you don't get taxed. 
 
Raoul Pal 00:42:35  

You get taxed in the country that you go to. Um, so, um, all of this will change. Governments are so far behind, but anybody listening to this, there's a really important book to frame. As I said, the reason why Matt people get this pretty quick is we look at the past, look at that behavior, make predictions that humans are going to do the same things. Again, there's a fantastic book by Neil Howe and William Strauss called the fourth turning, which is based on demographics, which is the, almost the fundamental driver of economies. Bizarrely enough. It's how many humans there are, um, is the big driver and what age those humans are and what they're doing in their life cycle. The fourth turning is a phenomenal book about this. I cannot stress it enough and it will totally frame everything I'm talking about in an aha moment. 
 
Raoul Pal 00:43:27  

And even listening to this will realize, this is what the other side of the fourth turning looks like. It's happening in front of our eyes. Part of the fourth, turning is a complete disruption in how we govern and how society infrastructure at a societal level operates. I, the institutional stuff, you know, the IMF, the world bank, the federal reserve, all of these things, they will probably change, adapt or die. That is the process of change we're going through. And this new world is showing us that. I mean, if there could not be anything more first for turning that an entirely new system of bloody money, an entirely new financial system, because the old financial system from the last 40 years, 60 years broke, and here we go in the full turning who be crazy enough to think we're going to bring a whole system of money into play. 
 
Alexander Fernandez 00:44:22  

We have no, absolutely. Well, I think this is something that it's important for the, our viewers and listeners out there to realize it's like, you know, we didn't have to go that far to talk about. Metaverse just look back at the past 30 years of technology, go back to 1994, pre real adoption of the internet and imagine, and remember what life was like. And then in 30 years, look, what's happening. Now, you're watching two guys talk to each other online. Wow. 
 
Raoul Pal 00:44:47  

So to put the crypto theme perspective, this is really important. 1997, there's 150 million internet users. This is the fastest growing technology the world has ever seen. Just come on the back of mobile phones as well, which were less but growing fast. But the internet exploded that, but the internet was growing 63% a year. We'd never seen anything like it. We're all aware of it because everyone listening to this has been involved in it and everybody sees it. Then crypto comes along 2021. It's been growing at 113% a year. It's got 150 million users. The same as the internet in 1997, it's growing at twice. The speed it is by far and away, the fastest adoption of any modern to any technology in all human recorded history. If you extrapolate the maths, very simply, you're at a billion people by 2024 and you were at three and a half billion by the end of the decade, we have no comprehension. Our this is moving 
 
Alexander Fernandez 00:45:48  

Well. Okay. So let's, let's take that. Let's take that growth because that's exciting. I mean, effectively we have the nearly half the world effect saying 15 years, 20 years you've eaten the world. You're going super quick. Now one thing is to have a system of currency that allows people to trade value, then you layer on this concept of metaverse and then you start to see these worlds coming together, where people are working in transacting and from our, from our vantage point, just as a games company, looking at it, the adoption of the metaverse in the past 12 months, let's just just 12 months. I look back and I can see that basically 12 months ago made the, say the word idea of metaverse besides it being something that we set in corners and darkly lit corners. So people wouldn't laugh at us, uh, was something where basically we're like, okay, yeah, it's coming. We see something there. 
 
Raoul Pal 00:46:35  

And then Balenciaga just do this incredible skins and Ft drop for the metaverse Dolce Gabbana are doing it. Rockstars are having gigs in the metaverse and we barely started just the pioneers are there. And everybody who sees it has the holy shit moment. I saw it. I was at the, I was at the pre-launch of the Dolce Gabbana, um, NFT, um, and they had clothing that was physical clothing. That was an NFT. And they give you a digital representation in the unreal engine in 4k. It's beautiful. Right? Beautiful. But then they had clothing that the designers had made. It was only digital of impossible fabrics. And they produce this men's jacket. I don't really like Dolce Gabbana, but it was gorgeous. And I'm like, yeah, I'd want that to represent myself digitally. Hell yeah. Now the digital world is not ready for this yet. And even they admitted it. It's like, yeah, we can make this, but it's pretty difficult to find enough experiences. You can wear that in to make it worth your money. But if you can hold it in your digital wardrobe, I, your NFT wallet, and then you can then transfer it to the metaverse that you want and walk around looking like the dude then. Okay. Oh my God. Now everything has changed. We knew it was coming, but to see it, and it's such gorgeousness and same with the, um, with the Balenciaga stuff that came out this week. 
 
Alexander Fernandez 00:48:07  

Yeah, absolutely. Well, grab onto that thought for a second. That gorgeous jacket that right now we can't make, because the fabric doesn't exist. Imagine when it does. And then because you hold that NFT, you can go in and say, Hey, you know what? I now can get my actual version, physical version of this jacket because realistically speaking, the way I see this, metaverse all playing out here is your physical and digital persona becomes that unified reality where there will be products that 
 
Raoul Pal 00:48:31  

I call it digital flow fluidity. When we live in an out live in, in and out of these worlds, fluidly across worlds, physical world to digital world, just fluidly. We don't even notice it 
 
Alexander Fernandez 00:48:43  

Well, and this is the thing. I think that again, when you get down to the idea of what NFTs represent for brands in the most basic of terms, it's brand affinity, it's loyalty. It's the willingness for my community, for you it's community. Exactly. And so in the end, the video games industry has always understood community because let's be clear. The games industry is only in existence because of a small niche group of people who believed in making games that happened to find other people worldwide, who also wanted to make games and then happened to entertain people who one day would make games. 
 
Raoul Pal 00:49:17  

And so understand that armed with knowledge of the power of community. And now you can create money for the community and transfer of goods for the community and NFTs. And we know that a system of digital money has network effects like no other, because the more people who've joined your network, the more the system of money goes up. That's the value proposition you've created the most powerful business model man has ever seen. Yes. And people haven't got their heads around this yet. I'm working on this stuff right now because I think nobody understands it. I don't think gaming industry yet understands that anybody does how big this social tokens movement is going to be in conjunction with the NFTs. And then the metaverse and all of this ties together is an order of magnitude of change of something we've never seen. And it's going to change from businesses that sell stuff to you online, you go onto Amazon, you buy a pair of shoes, whatever it is, it's irrelevant, right? You've got no relationship with the retailer, but you're going to have a personal relationship and be a community member of the brands that you love. The influences that you love, the music artists, the film franchises. Yeah. And if you can't create a community, you don't have a business.  
 
Alexander Fernandez 00:50:38  

There you go. Basically, everyone becomes a patron of human endeavor at that moment in time, you're literally sitting down finding patrons who support, not only your brand, your product, your technology, your culture, your ethos, but we're going back to this whole human concept. To me, it reminds me of what Greek philosophy was and really what it meant to be Greek 3000 years ago, the idea that we would sit down and basically develop people's capability across science and art humanities, and really study that because in the end, that's the whole human. And when I sit there and I think about for the games industry, what it means for us as video game developers for the first time we actually can do from the cradle to the grave in our industry, you can literally be born to play B, be able to actually sit down and start earning in an allowance in a game, become a prosumer by the time you're 16, go professional. By the time you've graduated and you have an income. 
 
Raoul Pal 00:51:30  

And there's another thing here that we've not talked about. The gaming industry got super fast and that the world experts at is in the last two decades has been a meteoric rise in a new study of economics called behavioral economics. Now behavioral economics have been around from the advertising industry for years. However, with the advent of big data and huge data sets and the internet behavioral economics was a way of creating incentives. Everybody in gaming understands this intuitively crypto comes along. It's actually the same thing. It's a behavioral incentive, the most powerful lever and creative, which creates network effects. Once you throw that all into the mix, you understand how powerful this all is and how nefarious this can be used or how positively and it will be both because we're humans we'll use all of it, but the behavioral economics was the one thing that enabled it all to happen because that's what created these super communities. And that's fine. And gaming figure that out. The world experts on, on behavioral economics now are game designers. Incentive systems. 
 
Alexander Fernandez 00:52:41  

Yeah. It's funny you say that because we, we, for the, for the industry that  was the most kind of like shy, timid, uh, outcast, like we sure as hell figured out how to basically, uh, not only shape the world, but effect it in a way that basically just came down to the human emotion. And so, one thing I'm curious about is you're very forward-thinking and in your industry, in your world, you are very much cutting edge. Do you see the world of finance finally keying in on this? Are there still people being like, no, man, that's crazy. Stop, you know, put down the bong and, you know, get back to reality. 
 
Raoul Pal 00:53:18  

I live in a bit of an echo bubble because you know, I'm a very well-known person in this particular space, but when I step out of it, my, the reality seems about right, is 20% of people understand any of this. Even just the crypto currency spot let alone the metaverse, forget that, but just like crypto level, it's probably 20% of non cynics and 80% are sill either on the fence or don't even know about it or ignore it or are angry at it. Um, but it that's what adoption is. That's what met cast is, is more than all these people. When I look at that, I'm like yippee this four X here in the number of people in these Cummins to that network, what's the net wealth worth. Well, it's going to be worth 50 or a hundred, 500 X from here. 
 
Alexander Fernandez 00:54:09  

And it really is the 20% they'll make the 80% difference. That's I mean, this is what, this is really where we come down to. I mean, cause honestly, when I look at this and you know, we see the regulation that's coming in into the crypto area. That's a great thing. Thank goodness. Thank you for the validation. Thank you for basically acknowledging that this exists now, granted in the end, you know, some people may be as basically bah humbug because you have to pay your dues towards whatever nation you belong into. Let's just call it being a good citizen and really realizing you're here because there's other people here that help support that. So no big deal. It's like no, no harm, no foul. But what I find fascinating is that for this industry specifically, for games to find itself at the intersection between finance media, entertainment, technology, human behavior, and to finally be basically validated in a way that we never knew possible it's opening the door to so many opportunities, to be able to sit down and say, even speak like with someone like yourself who sees and comes to the same conclusion from a different area. 
 
Raoul Pal 00:55:06  

What you're going to get, and again, I don't think your industry's ready for it. 
 
Alexander Fernandez 00:55:11  

Probably not. 
 
Raoul Pal 00:55:11  

You’re going to get a gigantic infusion of talent. 

Alexander Fernandez 00:55:15 

Yes. That's true 

Raoul Pal 00:55:18 

From people you never dealt with. But when you get your, and it's going to be like creating the Americas and suddenly a bunch of economists turn up go, how can I help? And a bunch of finance guys. And then a bunch of crypto guys and a bunch of people in education and a bunch of people doing this and all of these people are going to gravitate to your world. So, you know, I've always thought, you know, somebody like Epic Games is going to be, you know, the, the next, you know, trillion $5 trillion company, because this it's, you know, so I'm a macro guy. So, we go back to the beginning of our conversation, I'm looking for gigantic trends. So here we've talked through why the culmination of all of these things ends up in the metaverse, which is the final state of which we don't know what that's going to be. Right. But to place your bets, there is, we just don't know the time length, but we can see how fast it's going and the curve is exponential. So, it's going to come much faster than we imagine. And it's still underpriced as a kind of whole asset class thinking about anything in the metaverse that people didn't get phenomenally rich for having spent the last 10 years, locked away in their bedrooms, building stuff for passion. And that's great. 
 
Alexander Fernandez 00:56:39  

It's funny because I will literally, at that moment in time message, every parent, whoever asked me if their kids were wasting their time going into this as a field, as being someone to do as a profession. And it's so fascinating to hear this from you. Because one thing that I find interesting is that Epic Games, Unity, those are literally the operating systems of the future that are taking place right now. That is your Windows. That is your Mac OS happening right in front of us. And literally these businesses are generating completely new industries and new expertise that when learned by an individual, in any walk of life, in any part of the world, it can basically have a social economic mobility that their parents and generations before never had. That is what's exciting to me about this is it truly is to me the next stage of globalization. It's the one which parody comes in and in which I really fairness is all possible and it's all transparent, but ultimately in the end, it's just the expression of humanity. Finally reaching that apex moment where we can all create and we can all benefit. So, I mean, that's how I look at at least, I mean, I don't know how you feel about it, but I mean, 
 
Raoul Pal 00:57:47  

Um, the thing that's, that's spot on and look, it's it's right to be utopian now, but when you build stuff, you need to build to understand that humans are flawed. So, if we can get it right and don't screw it up, like Facebook did or Google did, you know, Google soon dropped their don't be evil. You know, which just be cognizant of what you're doing. You guys live at you are immensely powerful and you don't know it and you will shape human civilization. It's that big. And so don't, please don't fuck this up. 
 
Alexander Fernandez 00:58:16  

Yeah, and so here's the thing in order to help us not fuck this up. We need people like yourselves out there looking at this, because here's the thing it's hard to be introspective when you've never looked in the mirror. Right. And this is the first time I think our industry as a really video games industry is finally had a mirror held up to it saying, look in the mirror and realize your power, realize the reach. But it's very difficult when you've been introverted and you've been shunned because that's how a lot of people 
 
Raoul Pal 00:58:41  

Well think about these behavioral incentives that you know how to pull. Just be careful. Try and create a better world. Don't try to use it for nefarious gains because it's powerful. And we all understand that. But if you guys can, can learn from how other screwed up before you, then we stand a better chance. 
 
Alexander Fernandez 00:59:03  

Well, man, Raoul, honestly, I want to thank you for your time. And for coming out here and giving us this message, let me ask you, how can people follow you? How can they find you? How can we continue on this journey with you? What, what can they do? 
 
Raoul Pal 00:59:13  

Yep. Simply you can find me on Twitter. I interact with a lot of people and I'm always around @RaoulGMI I um, the best thing I'd say for anybody to do, because I think crypto have told everybody, if you do not have figured it out yet, you should do. We've created a free crypto channel called Real Vision Crypto. So just go to realvisioncrypto.com, simple as that, just input your email. And there is a wealth of information. And I have a video every week where I'm interviewing the most famous people in this space to help every build in their learning journey, to take people through this from Bitcoin to the metaverse, it's all there and a play it all out for you. And I'm doing it for all of you, because I want to take you on this journey with me, because I don't want anybody left behind. If we're going to go to the promise land let’s do it together. 
 
Alexander Fernandez 01:00:06  

No that's very well said and everyone, I can definitely attest to this. Please do check out Real Vision, check out everything that they're doing, because ultimately at the end of the day, it pays for you to understand how other sides and other industries are doing things and how they're looking at our industry. And of course, keep that knowledge expanding because ultimately compounding knowledge creates leverage, which will create opportunity for yourselves. Uh, Raoul, again, I want to thank you for coming on to video games, real talk. It was a pleasure. You have a open invitation whenever you want to come and you want to come and spouse, please come and share it with us because 
 
Raoul Pal 01:00:37  

This was an amazing conversation, I've never had the chance to do this properly. So I loved it. 
 
Alexander Fernandez 01:00:41  

I mean, listen, we love to have smart, intelligent people who basically understand what they're talking about and more importantly are willing to share. So you're on anytime you want. And of course, to all our listeners out there and now viewers out there, please keep joining us on video games real talk next week, we're going to have some more fun and as always keep your questions coming. You can find me @starveup where you can hit me up, or you can hit us up @VGRT on Twitter and www.videogamesrealtalkcom. Thanks for joining us this week. And we look forward to hearing you and watching you again. Thank you.