Interview: Halsey Minor on Innovating in the Blockchain World [Part 2]
Halsey Minor is a world-renowned entrepreneur most popularly known for founding CNET co-founding Salesforce.com, Uphold, and Minor Ventures. He is also the Founder of LivePlanet, an end-to-end capture, distribution, and monetization system for immersive video, and VideoCoin, a distributed computing project that aims on storing, encoding, and streaming video at an affordable, efficient, and sustainable rate.
This is the second part of a two-part interview – here’s the first part of Halsey Minor and VideoCoin if you missed it. The following interview primarily focuses innovation and entrepreneurship with new technologies, problems with the current banking system, regulation, the global landscape, and how the cryptocurrency industry contrasts with the nascent Internet industry in the mid to late 90s.
Editor’s note: Getting the chance to interview Halsey Minor was awesome, and we made sure to ask a variety of questions that allowed him to shed light on different aspects of the cryptocurrency world from his unique series of high-level experiences. Questions highlighted in italics and bold were shortened to save readers from our interviewer’s (my) rambling.
Alex: You’ve been very close to the core of the development of Internet infrastructure. Essentially, you’ve seen the rise of the Internet, you’ve seen the rise of social media and you’ve seen the impact that’s had on society. What’s your opinion on the rise of blockchain within the context of those developments?
Halsey: When I was doing CNET and Jerry Yang was doing Yahoo, all we were doing was taking these databases and sort of unlocking them and basically giving them away for free. It was like simple stuff like the weather. I get weather on Yahoo so when flew to New York, I knew what the temperature was. That was an evolution because it allowed you to know how to pack, which sounds like a stupid, silly thing. But what I think is so powerful about the blockchain is for the first time, it allows the ability to share information and money at the same time. There are so many times that in the early days of the Internet, you’d go into a room and you’re negotiating to do something. Like for instance, us giving our content to Yahoo, and its sense of meaning both sides would look to the other and say, well, you’re the one paying. You’d say to Yahoo, we’re getting your content, you’re paying.
And they’re like, no, we’re making your brand more ubiquitous, you’re paying us. And so, the whole issue around paying was really problematic on a whole bunch of levels. Primarily, just because it was hard to do. How do you actually pay people? And the thing that made Bitcoin really make people stand up and take notice is the fact that it’s country-less and I know people say this all the time, but if you think about it, it’s the first time being able to pay people everywhere without having to move money through the banking system.
Obviously, being able to move it between two people quickly, that’s great. But the fact that it’s borderless, that has opened the door to applications like ours that could never exist if we had to use the traditional system for moving money. We rely on two basic things, the ability to gather information about each server, its capacity and what’s done and bundle that information with money. And so, at this very, very high level, you’ve got something that you just think about it that way. The Internet was unleashing information and this time we’re leasing information and money and God only knows how far that’s going to take us.
Just borderless money attached to a certain service or product. Just the higher level of efficiency that comes through using blockchain for anything is, it’s actually pretty crazy to think about. It’s a very exciting journey to follow. What would you like people who have read and/or listened this interview leave with?
I think this industry is going to go through, and already has, these incredible ups and downs and the Internet had been, not quite to the same degree. Since I started doing this, when I first started doing this, Bitcoin was Silk Road. They were the same and it was kind of hard to say, well, I’m doing something Bitcoin thing because Silk Road defined what Bitcoin does. I think that, like we said, no matter what the SEC says, no matter what the Chinese say, this is a real innovation and one of the reasons that you see people taking advantage of what’s happening is because there is something so fundamentally important happening that you’re always going to have people show up who try to take advantage of people’s willingness to invest.
It happened on the Internet and when the Internet melted down in 2000, nine trillion dollars were lost. But it picked itself up very quickly and you had huge numbers of companies that came through. Like Amazon, they’ve gone on to become the most valuable companies in the world and a lot of ideas that failed in the 90’s later succeeded in the 2000’s.
So, I think my experiences of having been through both of these is that the overinvestment is important because the most important thing is to have all ideas funded so the good ideas will make it. I tell people it would’ve been great if people would only fund the good ideas, so people would lose money on the bad ideas. But nobody really knows what the good ideas and the bad ideas are sometimes until they’re tried.
And so we really need periods like this where people will take high-risk capital and invest in businesses whose future is really sort of unknown. That doesn’t mean people shouldn’t be very smart about how they invest. But fundamentally having something that’s going on is the most efficient way of moving society forward faster. It’s a good thing and I’m all for the SEC coming in and taking out the people who are committing fraud, but it’s also very good for capital to keep flowing because, like I said, that’s how you move society further faster.
It’s crazy to think about how you could have first mover advantage without even having product market fit and it’s because no one really knows where these projects are headed. Something like Crypto Kitties, for example, might seem silly, but then you’re just like, wait, they’re one of the first digital beanie baby collection things out there and that could be a billion-dollar industry and it’s global.
Exactly. Beanie Babies became Beanie Babies because of eBay. Silly things can become billion-dollar ideas. Time Warner, I think, made $3,000,000,000 on Beanie Babies. Everybody should have laughed at that business plan.
You see all the wacky aspects of the startup world just bundled into a global ecosystem. But then you’ve got even crazier things but they’re on the blockchain and they’re global. It multiplies your potential user base by huge multiples.
I had to grow CNET at the pace of the Internet. And so, when I launched CNET, there were 300,000 people on the Internet. When I launched in ’95 through 2000 when I left, the pace of my growth was defined by the pace of the growth on the Internet. Now, you’ve got 2.7 to 3 billion people that if some app catches on, it can explode into 500,000,000 users, virtually overnight.
Think about all the people who play the lottery. That’s actually run by the government. You take your ticket and you can be very successful. Governments provide this service to people. I personally think people are much better off not putting their money into the lottery but trying to figure out what the good companies are because people can make a lot more money than even going in the lottery.
Ideas like Beanie Babies, on the face, and may seem completely ridiculous but it was the technology of eBay that allowed that to happen. My great hope is that the SEC does not come in, that they stick to people who are bad guys. And although I think they’re driving innovation offshore, that they really don’t harm innovation by harming people who are legitimately trying to build services that legitimately do important things. It’s going to be a test here the next couple months on how that sort of plays out.
The global landscape is super interesting too because you have Russia, China, and the United States where they’re all either trying to undermine or prevent the undermining of the US dollar through cryptocurrency. The bet there is just like wait, let’s see this play out before either completely banning or fully endorsing blockchain.
But I think the inflection point of just like, wow, the cryptocurrency market made that much noise last year and it’s still a very teeny, teeny, tiny fraction of what it could be like. The market cap of Facebook, Google, Amazon, and Twitter is eight times what the market cap of the entire cryptocurrency industry is right now.
Agreed. Bank of America hold more money in capital, by a lot, then the entire cryptocurrencies. I was thinking that this morning. The SEC is rapidly hiring people to go after people in crypto who are ripping people off. I’m all for doing that but do you know how much fraud is going on within the fundamental banking system? If you’re going to hire a bunch of people, you should point them at where the real fraud is going on. We’re seeing a lot of the same things emerge again in home loans where they’re, again, selling these high-risk home loans. It looks a lot like 2006, 2007.
During the nineties when the Internet bubble happened, the investment banks were making so much money. They were taking out companies with no revenue, that had no right going public. They would get a $500,000,000 valuation and Goldman Sachs would make 30% because they get 6% of whatever it was. And then there was M&A. I bought a company for $750,000,000. I bought another company for $600,000,000. All of this crazy money was all going through the traditional banking system. Nobody said anything about this. And by the way, there were a lot of companies that were flat-out fraudulent, but the SEC wasn’t ramping up to do whatever.
The big problem is that all of [the current ICO model and cryptocurrency fundraising model] is not going through broker dealers, investment banks are not getting anything, but the entire size of the crypto ecosystem, it’s minuscule. There was a there was a mistake that Bank of America made. They wanted to give a dividend to the shareholders and they needed to have what’s called tier one capital and they needed to have enough capital that they could give some of it away to their to their shareholders. They had to give the government the amount of capital they had, and they made a $250-billion-dollar mistake. That was a mistake. The number that we’re talking about right now in crypto, what is it? It’s Bill Gates’s and Jeff Bezos’ net worth? Is that we’re really talking about in terms of the size of the industry?
When you’re looking at 2008 and what they were doing with collateralized debt obligations in the housing market
the government did literally nothing punish anyone in charge of doing that.
There multiple generations that saw 2008. They saw exactly what happened and they have like the sense of like, OK, the government clearly isn’t going to stop this. So, if they even attempt to go after the cryptocurrency industry, that’s just showing where their heads are really at.
I’m just curious to see how people’s ideologies evolve with a cryptocurrency world because you’ve got this mix of the anarchists’ crowd, the libertarian crowd, the “we’re trying to change the world by innovating and using this technology” crowd, etc. I don’t really foresee a clash with the government in a way that the government can shut down something that’s global and decentralized.
I think it’s as hard to shut down crypto as it is to shut down the Internet. I’ve said specifically to people on a number of occasions that I’m all for them going after bad actors in crypto and putting them in jail. But, I would appreciate if they would start by putting the bad actors who brought the world to its knees because of the fraud that went on the banking industry. As soon as you put all those guys in jail, then I’m absolutely 100% OK with you coming around and finding the guy who took $15,000,000 and ran off with it when we had financial institutions that burn $4,000,000,000,000 of our cash, incinerated it because they created fraud that allowed them to be paid outrageous amounts of money on effectively false profits. Since the beginning, people had been right about being cynical about these government institutions.
There is an absolute crime that has been allowed to go on and that is that banks in this country collect $36 to $37 billion dollars in bounced check fees. Think about how big of a company that is. If this happens anywhere else in the world, the cost will be 25 cents to process a bounced check. They charge you $35 and 20% of bounced checks come from what’s called reverse processing. If you write $100 check and then five $1 checks and you have $100 in your account? They will first take the $100 check and process it so now you have no money and then they’ll take the next five $1 checks and they’ll charge you $35 each. They’ve actually set up their system to maximize the amount of money that they can get out of the people on bounced checks.
The thing is you’ve got people who are incredibly busy. It’s hard to manage your checkbook. There’s never been a bank that sat around and said hey, how do we make sure that people know what their balances are so they don’t bounce checks? They do everything to make sure you can bounce your check. Forget about crypto, just figure out how to get the 35 billion back that all comes out of the pockets of people who fundamentally are at the lower end of the socioeconomic spectrum. It’s ridiculous, but this is why this movement has such force behind it.
It’s just people that are just beyond frustrated to the point of just being bored and cynical of how transparent it is that people with a lot of money in the United States, especially the banking industry, are capable of influencing political decisions in their favor. and then just continues to rip off the general public $35 at a time.
2009/2010, all of the financial institutions were living off of government money because the government had to bail all of them out. In 2009, half of all of the money going to lobbyists was from banks. They took money from the government, recirculated it, hired lobbyists, all of the people who had anything to do with banking, with senators or congressmen, they were all snatched out and turned into financial industry lobbyists. It goes on and on.
Besides the inflection point for many things, for technology, for human evolution, but also how people are viewing power also. I remember seeing Zhang Shouchang, a physics professor at Stanford, talk about how money is actually a storage of energy. With that in mind, energy helps facilitate momentum and innovation. The ability to exchange energy across the world nearly instantly at any time is going to be the future very interesting. That’s kind of what’s really fascinating about the growth of the crypto world, for me at least.
Well, we’re going to find out very soon how all this is going to play out. I’m hoping for some enlightenment.
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