Episode 07: De-mystifying digital assets with Martin Green

Sandeep Murthy
17th February 2022

On this episode, we're speaking with an expert in investment management, Martin Green, who runs Cambrian asset management. Martin has 25 years experience in the tech sector. He began his career at Morgan Stanley, where he was a senior executive at CNET Networks, which was later acquired by CBS and Meebo, which was acquired by Google.




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Sandeep [00:01:52] Martin, I guess from a world of Morgan Stanley, CNET and the original internet, you’ve seen how tech has evolved and tech has grown and how it impacted things. What sparked your interest here? How did it start? Why did you decide that? Listen, I'm going to take a closer look at this. And how did it how did you get into it?

Martin [00:02:10] Yes, it's like most people. I was introduced to bitcoin and initially dismissed it, and it was introduced to me, probably 2011. I wish I hadn't dismissed it, obviously, with the benefit of hindsight, but an engineer that I was working with, who was also an adherent of Austrian economics, did not appreciate what the US Federal Reserve Bank was doing in the aftermath of the financial crisis with quantitative easing and thought. And he was a kind of a gold bug and a software engineer. And so that's a perfect combination to sort of read the Bitcoin white paper and get excited about it. And he started mining it on his MacBook. Actually, this is well before the degree of difficulty went up and mentioned it to me, and I fell into that trap that many people do, which is they let sort of experience cloud, their judgment to look at something from first principles. So, I remembered all the failed experiments for magical internet money and thought this is probably just another one, want to add to that list at the time. So that was 2011. It took me a couple of years to realize that it was it was a significantly important reference project that would have a chance of surviving and may and will obviously get into this may herald basically a reference project for other types of blockchain systems to emerge. And so, yeah, it was that early. But, but not but. But I wasn't convinced from the beginning.

Sandeep [00:04:17] And it's understandable why? Right? Because when we look at how things are valued, you look at, I mean, the world of equities, you look at underlying cash flows, companies’ strength and you look at all these fundamentals. And now here when we think about, and let's come to the other cryptos in a second. But when you just think about bitcoin in general, I think the question often gets asked, what's the underlying thing that's getting valued and how is that working? So how do you how do you answer, how did you rationalize that? And that was maybe we should also take a quick second to introduce how you look at the world at Cambrian. And because I think that has a lens as well on how to understand this.

Martin [00:04:52] Certainly, so at Cambrian, and we run an investment fund that seeks to essentially systematically invest in digital assets, including bitcoin and Ethereum. But we trade about 60 of the most liquid projects and that will expand as the market continues to expand. And we use a data driven quantitative strategy because we think that that's a much more reliable way to for us at least to invest in this space than on a discretionary basis, kind of trying to pick the winners and the losers or trying to time the market from a discretionary point of view, which is, as you mentioned from a valuation point of view is really difficult. And with the volatility in these assets, it's significantly different. So that's what the Cambrian does. But we've been we can talk a little bit about the underpinnings of the market.

Sandeep [00:05:53] Yes. So actually, if we can come back to that question on how the reasons why you and perhaps many people dismiss the question around, what am I valuing here? What is this? And so, yeah, data points aside to give direction to how to consider movement in it going forward. How do you actually think about what is being valued at the at a base level and the underlying asset?

Martin [00:06:14] Yeah, so a couple of points. Number one is these are networks, so all of these blockchain platforms are networks, so you're valuing a network. Now what is the network doing? At a fundamental level? It is a mechanism to allocate, coordinate, transfer value, across the internet without a central sort of corporate intermediary.

Now, in the case of bitcoin, what it’s doing is, it's essentially a decentralized escrow service. It's giving certainty of the ability to settle a transaction. That's, in my view, what bitcoin does exceptionally well, and does it uniquely.

Sandeep [00:06:59] Ok, so it's the idea that it does it uniquely, it does it well. But I mean, did we need this? What was what was the I mean, is it the fact that the people needed a decentralized way to do it and it changed everything? And that's where the value. And that's how you decide on the value because like I said, I would look at discounted cash flows. I would look at future earning potential as a way to evaluate how do I consider this ability to settle and the ability to efficiently settle in a decentralized manner and appropriate a value to that? 

Yeah. So imagine if you go back to the origins of the internet and you say, would it be valuable to have the ability to transfer bits across a distributed computer network and without having to clear them through a central intermediary? And then someone proposed TCP IP and that became a standard. Now imagine if instead of TCP IP being just an open protocol where there is no finite number of TCP IP addresses. Imagine if there was, but they were divisible. That's essentially what you have with bitcoin. And so, what you're doing is essentially owning a piece of the TCP IP infrastructure, but for value bits now.

Sandeep [00:08:32] So I guess that brings to another thought, which often is said, that's the way to think about this is analogous to the way that the start of the internet was back in. I know let's just pick an early date and around the early 90s where the basic idea of Ok, I can send information is never gone as far at that point in time, or at least not in conventional conversation around the idea that I'm going to be watching videos or we're going to be recording podcasts around the world, and this is not the initial thought around it. Do you feel? And is there a reason why we should believe that this is kind of that same juncture, and the changes are taking place here are going to herald and things that are massively different over the next 20 years in terms of how transactions move? Or is it just limited transactions?

Martin [00:09:18] No, no. I think that's exactly where we are. Yeah, I think, you know, we've seen loosely defined internet or technological networks such as the internet and then the web on top of the internet and then cloud and mobile. And you've seen these, they're almost platforms that enable a series of networks to be built on top of them and with, you know, network effects, positive returns to scale, decreasing marginal costs that go asymptotically to zero then enable and permissioned, importantly, permissionless programable infrastructure. Permissionless, meaning any developer can just start experimenting from their computer. They don't need to be given permission by a by a central authority, which opens the funnel up to any developer with intellectual curiosity can start experimenting. And then it's programable so you can build LEGO blocks on top of the protocols and the networks to enable an infinite number of experiments, and each one might have a very low chance of success. But in aggregate, what you see is an explosion. Pardon the pun, a Cambrian explosion of experiments. And what we're seeing here is an explosion of experiments about how to create Internet networks that allow for the coordination of value across the internet, which wasn't able to be done before bitcoin proved that you could have scarcity around value exchange because before bitcoin, if you had something that needed to be scarce like a song. You know, it's an asset, a song. But if it goes onto the internet without being secured but just regular internet program protocols, it can be infinitely copied and then devalued. But with blockchains and this obviously precedes NFTs and various other things, you can create scarcity and certainty of settlements, which is essentially if I have one and I agree to give it to you. The protocol is essentially making sure that I'm not also giving it to a thousand other people at the same time, if it should be just one copy. So now we have with bitcoin and the other blockchain networks, we have that capability. We don't know what's going to be created, but we've never had the ability to have sort of scarcity around value, be programable and exchanged across the internet before these technologies, before blockchain technology. And I think that's what's really exciting.

Sandeep [00:12:34] No, I think it's a that's a very interesting way to put it. And I think that those two metrics of scarcity of value and certainty of settlement in it really make it clear that what we're seeing there now in the rise of the creator economy and the idea that you now have the ability to actually, I guess, own things that you create in a distributed manner and actually ensure that you get paid in a certain way. It's starting to, I guess, move parallel universes forward. But I guess the next question that comes to mind as you look at that then, is things are going to go a bit crazy. And with the number of cryptocurrencies launching, I mean, you mentioned on your platform alone, you manage a certain number and many more are launched every time. How do you discern is Dogecoin real? Is Shiba Inu, real is, you know, what's the next one that's going to come, and should it be useful? Is there a usefulness metric that that you consider as you think about these things? How does a common person think about it? How should they be those?

Martin [00:13:37] The answer to those that question is how do we think about it and how would one of your listeners think about it might be different because we're a quantitative investment firm. And so we take we take the approach that over the course of time, the network effects of these assets will mean that winners will emerge. But ex-ante beforehand, we do not want to necessarily be in the business of trying to predict which ones will we want to allocate capital into the ones that, from a measurable perspective, seem to be having positive, you know, network effects, which could be in the form of tradable volumes, size and kind of momentum, if you will.

Sandeep [00:14:31] So you don't consider you don't consider the utility of it. You don't you don't worry yourself with is it useful or not?

Martin [00:14:38] We don't have yet. Let me answer that. The short answer is no. But the because we're so early in the potential adoption cycle of these of these technologies, and there are so many variables that we believe it is a bit of a fool's errand to try and predict which of these over the next five years is going to be, you know, the Google or the Facebook or the Amazons and which of them are going to be the technologies, you know, projects that at the time were exciting, but you've never heard of them because they failed. And so, yeah.  

Sandeep [00:15:25] I think your point is extremely valid. Even when you think about the late 90s ideas of a social network where I'm going to connect people that are really going to be something that's useful. I mean, even if you think about how Apple grew back and created it’s kind of strength back from the iPod and music and things that may seem, I guess, a little fluffy or not serious or not in the line of utility and monetization in a certain way turned out to be really big, important shifts that got created a lot of value for people. And I guess maybe your contention is today we don't know what those are going to be. Right?

Martin [00:16:02] Yeah. And folks like yourself and your firm, there's a deep, deep experience that goes into making decisions about which early-stage companies and founders’ teams to back. And I'm not going to suggest that what we're doing in in digital assets is applicable, you know, beyond the markets that we play. I think it's very specific to the things that we do. And but the interesting thing about these early technology projects, but they are traded 24 seven globally as if they, you know, can imagine you imagine an a very early-stage, seed stage or series a stage technology company. Where it wasn't private, it was public. We traded 24-7 around the world. And you know, it's not a now. It's not perfect analogy, but that’s what we've got here

Sandeep [00:17:06] it's and actually I want to maybe go into the technical side a little bit because we've, you know, I've mentioned to you in our conversation earlier today that this is getting a lot of traction in India. The number of accounts on the crypto side in some of the larger platforms is even greater than the number of accounts that people have on the straight equity side. So, these are consumers who are stepping in and betting on crypto. So, we spend a little bit more time trying to understand the underlying technologies and accuse the members of our team. When you get a sense of after you look at layer one and layer two protocols, do you have a view as to where things go from there? Are there particular things on layer two protocols that you're more bullish on and are maybe lumped in with that? Any thoughts on how Solana is growing and is it going to be a viable option against Ethereum? And so I'm not sure if we're getting deep into technical zone and I'm not interested in going too technical with it. But I do think that some of these topics are very much at the forefront as NFTs are growing and as people are thinking about which platforms they need to think about and worrying about necessarily learning about the underlying things. If there is a view that's not too technical for us, I think it'd be interesting to understand that.

Martin [00:18:16] Yeah, you're I mean, you and your firm and your listeners, will know this extraordinarily well, but will remember when in 2008, about a year after Apple launched the iPhone, that the App Store was created and there were a lot of pundits who said, How many apps do we really need? You know, maybe we need a map or, some messaging. But like how many more do we need? And I think that we're seeing those same questions being asked how many blockchain projects do we really need? And the analogy that I would and how many, you know, why are there so many? Why is there so much speculation here? And I think there are basically two things to say to that. One is there's some probability that because of the properties we talked about earlier around that that permissionless, very low and marginal cost, but high certainty of exchange of value across the internet that blockchains represent, it is very conceivable that we could see an explosion in the number of investable assets for investors, meaning investor. We're talking about. And you mentioned it, and it's absolutely right. There are a lot of investors. The number of investor accounts at these crypto exchanges often exceeds the number of investor accounts at traditional brokerage firms. But I'm talking about something else, which is the number of assets that each investor can conceivably invest in might be an order of or two orders of magnitude larger than it is today. Going forward 10 years, I think there's some probability of that.

Sandeep [00:20:14] Well, okay. So we're really just getting started, so trying to sift through the information at this point and figure it out. I guess, like you said, the answers for a data driven investor such as yourselves might be different than the answers for a retail investor may be different from the answers to a creator and what they're looking for. And I guess that's what will drive it. Yeah, but maybe I can. I want to take a step in another direction for a second and one of the, I guess, things that is also talked a lot about in relation to crypto and especially in relation to bitcoin to start. And I guess just to pass this one is energy consumption and overall energy consumption and the impact it's having. And is this the right direction in the world where everyone is, you know, getting concerned about different things? We seem to be blind to it in many other areas, but it's a topic that comes up here. That's a pure energy consumption. And then the second topic, which is not about energy per se, but I think often gets lumped into that conversation is gas fees that get related to a lot of these transactions. One, the idea that, you know, how do you think about these things? How do they play out over time? Will they cause issues? Do they settle down? How does it work?

Martin [00:21:28] Yes. Ok, so from the highest view, I'm a big fan of. And this may be very contentious, but just so you know where I'm coming from, I don't think humanity goes forward by trying to restrict energy usage. I'm a big fan of, I'd like us to move up the Kardashev scale. I think the history of our innovation as we require is more and more energy. And so, when someone comes along and says bitcoin uses a lot of energy. I don't disagree

Sandeep [00:22:09] You say great, that's where we need to be

Martin [00:22:11] Let's use more and more energy for various things that have really high value to us. Now that's not the result. That's only half of the equation. We need to have sustainable energy. We need to not burn the planet. All of those things that I think responsible people will agree to. So that's beyond my pay grade and my expertise. Although you and I'm sure there are many others that are experts on this.

So, I'm not in favor of using coal to power bitcoin, but I am in favor of monstrous amounts of energy being utilized for very high value things. And I'm in favor of people being able to make those decisions without a central planning authority saying we like this energy usage, we don't like that energy usage. And I'm also in favor of energy production, I should say that is as sustainable as possible.

So, I realize those things are a little bit in conflict. But I just wanted to say that to start now, bitcoin does, I should say, utilize a fair amount of energy. The amount that is used is in direct relationship to its certainty of settlement, its security. And so, if you want permissionless, decentralized security, it has to come from somewhere. And that is and the and the and that that energy usage is, is directly related to how secure the bitcoin network is now. It is also true that it used to be heavily powered by coal plants in China. That is no longer the case. And I think the latest stats that I've seen is that somewhere north of 25 percent of bitcoin's energy use is from renewables, and it's probably not yet over 50 percent. So it's somewhere between 25 and 50 percent, and that is a multiple of higher in terms of the percentage that's from renewables of the economy overall. So that's trending in the right direction. It's good. It could be better. It could be a lot better. But that's bitcoin, related to that. On the other, the other networks and some of it, some of your listeners will already know this, but Ethereum is about to go through an upgrade to a change its security mechanisms, from proof of work to proof of stake, which will utilize less energy. And it is also going, and people will argue that it's less secure than bitcoin, and they're probably right. But how much security do you need? Different things will require different levels of security. If I am minting an NFT, I need a lot less security than if I'm sending basically over bitcoin, you know, $50 million and I need certainty of settlement. So that's OK. And then related to the gas fees, there are a number of improvements to ETH layer two solutions, as you mentioned, and also. Competitive smart contract networks like Solana and others that should over time reduce the transaction costs, the gas fees. So, I think we're in a situation where we've got an imbalance of supply and demand for the computing platform. But there's some innovations, some competition and some probably evening out of that supply demand. That means that gas fees probably come down. I would guess.

Sandeep [00:26:45] so actually on the gas. You brought us actually also into the NFT world for a second here. And you know, like I guess like anybody who's trying to learn. I figured the best way to do this was to get in the game and start trying to play and figure out what's going on. And so, we went out there and we said, Let's buy some stuff in the NFT world and at least in a very novice way, we categorize things into to groups of utility in gaming, we looked at things that are more art and collectible oriented, and then things are just purely collectibles that might be there. And then as we start to buy, we realized that if you want to get something, you actually have to bid a certain amount on the gas fees. And the exchanges seem to provide different settlement based on how much gas fees you're willing to pay, which is independent of the actual unit. So, gas fees are not actually seeming to be a distributed or a amortized cost of production across a bunch of transactions. They actually seem to have their own dynamics and economics at play. Is that what's what's going on there?

Martin [00:27:47] Yeah. It's true. Yes.

Sandeep [00:27:53] And so is that is that a I guess that will be a deterrent. I mean, that's a that's an entirely opaque game where it was couched as gas fees. it's a convenience charge that Ticketmaster is charging and added varying rates based on how much they want to make on that point in time. Who's willing to pay for it?

Martin [00:28:12] Yeah. And I think, yes, and I think people, the people who are experimenting in this world and that's where we are, we're in the experimental phase of a lot of this. A lot of these applications, they're encountering things that they would say, well, this can't be it. It can't go mainstream like this. And they're right. But that doesn't mean it won't go mainstream because anybody who was using the internet back when you know, you needed to sort of wait for those tones as your modem connected to the internet. Sorry, I'm old enough to remember that viscerally that you could never go mainstream with that connection. And that's what we're dealing with right now is the utilization of the internet had so much overhead and so it had so much kind of marginal cost. But it wasn't a charge. It was a user experience cost. It was just messy and horrible user experience to connect to the internet or the web. Decades ago, it's much, much more seamless now. You will see over time In one experiment, which better solves this problem will then get adopted by everybody else, and the end user will win will be the winner over time as this stuff gets worked through. But we are absolutely in the experimentation phase, and it is painful. But I wouldn't bet against the aggregate collection of engineers and designers to solve these issues.

Sandeep [00:30:00] I think that's great. And the analogy is very apt because unfortunately, I also remember it and I have been through too many of those 128 KBPS hoping to get to 256 and that whole world. Exactly. Yeah, I know it well, but you bring me then to a different area, which is DeFi. And then when we're talking about user experience, we're talking about kind of the world. This really seems like the Wild West. And as an investor in new things, even as I look at this now, we look at this and this as far as I've come, my understanding is to say that if we were to invest in these projects, no longer. Is it enough for you as an investor to say I'm a hands on investor and I'll get involved. Your investment means that you're building the product and your investment means that you have a not just a seat at the table to think about strategy and direction, but you have to define the direction of the product and the project and ensure that people get behind it. And it's no longer a simple venture investors game or a passive investor game of any sort. These are you really need to have engineers and you're almost running a company in the DeFi world.

Martin [00:31:06] You're absolutely doing that.

Sandeep [00:31:07] Yeah, and that seems like it's sort of designed by committee and that's dangerous for products in general where you really want to have a strong voice. How do you see that shaking out in this world where it takes so many people to come together, it takes a lot of people to commit and agree to it? Are we going to be able to move UI forward? Are we going to be able to create designs and experiences that are going to work for the common person?

Martin [00:31:33] Yeah, I think that you raise a very, very good points there in terms of the technological innovation, this is my opinion Only and there are many, and really good entrepreneurs and venture investors who may well be right and have a different view of it, but my view is more likely than not small quote centralized teams are going to be able to be more successful at rapid iteration. And once they figure out what it is that should be built, and they enter the sort of steep part of the adoption curves, so I guess in the parlance of early stage investing, they've achieved MVP, or they've achieved product market fit and they're looking at scale. That's when they may be able to move to a more decentralized model. But I think at the beginning there's nothing like a very small, focused team that's complementary and can iterate rapidly rather than sort of a big, decentralized committee to get the feature set, right? Etc., etc. And I think Ethereum isn't a bad example of that right now where you would. I think the CFTC and the SEC in the United States have not been explicit about this, but they're implying that Ethereum is decentralized today or decentralized enough that ether would be considered a commodity, not a security. And I know we're now going into the realm of regulation, but if you go back six plus years, Ethereum was a small, probably central. They would probably consider it a centralized product itself. And that's maybe somewhat maybe that's kind of the way I think about it anyway.

Sandeep [00:33:55] So actually, you brought up an interesting area of regulation. And I think, you know, the market in India is confused about regulation, quite honestly. And I think that with increasing amounts of capital coming into the market, both by, I guess, retail investors wanting to buy into the asset class and institutional investors wanting to invest behind companies that are doing it where there's an increasing group of people now lobbying and pushing for an understanding or a direction forth for it. And I guess you've looked at this and you think about how it goes moving ahead, and I guess it's hard to apply one rule globally. So maybe that's not the right way to look at it, but maybe the question I'm going to come to is really around. Are there factors that and that you think that decentralized finance solves better that governments will appreciate? Because and maybe I'll explain for a second why I'm putting it this way that I would imagine that the government says I have various tools at my disposal to govern a group of people. I have an army, I have laws, I have rules, but I have money as well. Money allows me to control the economy, Money allows me to keep stability and in certain ways manage crises. So now you take money out of my hands, and I have a problem, then I'm perhaps over reliant on the other things. I don't have one of the tools I used to have. Therefore, I need to continue to function. But decentralized finance and crypto, and maybe they're not synonymous. And so maybe we have to take them separately, but they do something that should also benefit the way in which governing can take place. Is there anything there that does that that you feel that these guys should be embracing? Or is it going to be really a battle between the free world and the government and a fight to the bitter end to just figure out where this ends up?

Martin [00:35:42] That's a great framing of the question. I hadn't considered it that way, but I think that's a great framing of the question. And I think that there would be disagreement among different folks in government, in different countries as to whether or not some of the existing fintech is beneficial and they want to be supportive or even retail banking and things like that. I was recently on a panel talking about central bank digital currencies. It's just not my area expertise. So, I was actually listening to the others, the other panelists around this, and it dawned on me that central bank digital currencies are where the central bank wants to essentially you know, have a digital representation of cash that is actually less competitive with crypto than it is already competitive with the things that whether it's square. Visa, MasterCard or importantly, retail banks enable, which is digital transfer of money that effectively then gets settled back to the central system. But the transfer between companies or individuals is not by me handing you a bank note, and it is not by me sending you a digital representation of that banknote that's authenticated by the central bank. It is you and I having an IOU between us that's facilitated by a retail bank or Visa, MasterCard, Square or any number of those entities because they are often stuck at one another.

And so, it dawned on me that a retail central bank digital currency would be perceived as competitive with a whole series of technologies, companies and retail banks who would feel like, wait a minute, what is our role? If all users have to have a wallet and essentially receive their digital currency from the central bank, then what are we doing? You're the central bank is then competing with the existing fintech and banking infrastructure, and I just can't see that happening.

Sandeep [00:38:23] I'm gonna interrupt you there for saying I can tell you in India right now, digital transactions on UPI, the unified payment infrastructure, which I remember correctly, probably launched in 2016-17, is now on a run rate of about a trillion dollars. And so, this is the government-initiated platform to facilitate transactions, so of which they've allowed companies to build payment infrastructure on top of it. So, Google Pay is one, for example, WhatsApp has a pay system as well and Paytm does. You can do it. The banks are still involved and it's not your full digital currency yet. But in fact, you can see very much that in a country like India that the government has understood the importance of inserting themselves in the transaction and are doing that in a way with a financial stack and in one of the parts of that financial stack as UPI now. But that whole system will still be centralized, and therefore even tomorrow it is a digital currency. It's still centralizing to your point. All you're going to do is move money away or transactions, or processing away from a more traditional digital form of Visa, Amex, MasterCard and whatever else but the idea of a decentralized system where they don't have control. I guess I haven't yet figured out what is the advantage or benefit for the government in that. And if there isn't one, I guess this is going to be an interesting thing to play out because clearly customers are moving in that direction for one reason or the other. And perhaps as more content goes there from NFTs, as more content goes there from people getting into the metaverses of the world and things of that sort. I guess maybe the choice is going to get made by the consumer, more so and governments will have to figure out how they deal with it. So, I think that the evolution of it all is yet to come. I think one of the things you point out here today in that the fact that we are at the cusp of it all with thousands of more projects on the horizon, there are tens of thousands and thinking about it, like you said, as how many apps do, we actually need? Being a question is a really interesting way to look at it. And I guess now as people look at these projects and as people think about it, you talked about how perhaps you look at it and the adoption. Do you have a view or an advice for more retail mindset as to what parameters people should think about when they're evaluating these projects, when they're looking at different cryptos getting launched? Anything that people shouldn't mind, that that should be indicators for them.

Martin [00:40:56] I think it's a very tricky thing to invest in an active way, yourself, part time. I know a lot of people do it.

Sandeep [00:41:09] Actually Martin, if you could. Let's talk about that for a second. One of the things we did talk about earlier was and we didn't get deep enough into the volatility here. And what is driving that volatility? Yeah, how is it like you said? I mean, I've looked at this as a public market investor and I'm not a very active public market investor personally because I have friends who are and I look at the amount of information they have and I cannot match that and I'm never going to be able to make a decision there, and I'd rather let somebody else do that. But here, in addition to information, I mean, you have extreme volatility. And so how should one consider that when they're thinking about this asset class, how should one look at volatility in relation to this?

Martin [00:41:54] OK, so let me let me take a stab at asking your first question and then we can come back to the volatility because I found that my answer very unsatisfactory, which is it's difficult. So that's not a great answer. So yes, it's difficult. But what can one do? Well, one can do the following. One can say, do I want zero exposure to the asset class or do I want something small enough that if I lose the money, it doesn't change the outcome of my life or my family's life. But I want some exposure because we might be at the beginning of a new sort of technological revolution, I think somewhere more than zero percent exposure, but a reasonable maybe less than five percent of your portfolio to put in crypto somewhere in that range. This is a good point to sort of think about. Now let's talk about how to how to invest it. So, what you want to avoid is the situation where you're that person who tries to predict the future. You got the fact that this is a revolution, and it ultimately becomes really successful, right? You just picked the wrong horse, you know, and it went down and you got nothing. You invested in the sixth search engine, you know, 20 years ago, 25 years ago. And you've never heard of it before, Google? Yeah, basically. And so, you'll remember that Google was probably the 11th or 12th search engine, Infoseek, AltaVista, all of those are gone. Maybe you were one of those people that said search is going to be huge, but then you picked the wrong one. You know, you want to avoid that problem. So you probably want to put all of your whatever you've allocated you, you want to be investing in things that have. I don't think you want to try and necessarily speculate on what the next Ethereum is or the next bitcoin, you want to start with some exposure to bitcoin and Ethereum, and then because they have network effect already and then you want maybe you want an index or you want a spread of what's remaining of your allocation across a variety and maybe just rebalance every few months, that maybe a reasonable strategy where you're more likely to end up with a lot more money 10 years down the road, then. And if the overall space does well, you'll do well and you don't have that risk of investing and yeah, AltaVista etc. So that maybe that may be one way to go.

Sandeep [00:44:53] So blindly following tweets and putting money behind them may not be the best answer.

Martin [00:44:59] Probably not. But you asked another question, which is around volatility. What? Why are they so volatile? How to think about that? Yeah, I think that the quickest answer for that is these are early-stage projects. So, there is a market that is constantly trying to effectively discount or predict the future state of these assets and the future state of these assets could range from each asset could be it could go down to zero or it could be a huge multiple of where it is today over the next 5 or 10 years. And we're so early in the potential adoption cycle. The market's constantly taking in new information and revising essentially its estimate, and it's a weighted average estimate. So, you have some people on the one hand that, you know, think it's going to be huge and other people think it's going to be starting to lose faith, and think it's going to be zero and they're constantly trying to, you know, move each other from one side of the seesaw to the other, and that's the wild gyrations in the price. And then you have people coming into the market now because you remember these markets, I mean, they've grown a lot, but there still may be a 20th of the size. You know, there may be only five percent of the of the size of an equity market in aggregate. And so, when you've got new people coming into the playground and sitting on one side of the seesaw, I mean, oh my goodness that seesaw is going back and forth all the time. And so that's why these things are so volatile, because they're early-stage tech projects that are traded 24-7 and nobody knows the future.

Sandeep [00:46:46] And yet, and in that you've at Cambrian managed to distill out data points that you feel and give you the comfort and perspective that says, I have a sense of when it's going to shift one way or the other. And if I understand correctly, you really ensure that you're managing for the shift downwards while capturing as much of the upside. And there are the signals out there that that are available to people. You just need the right tools to look at it, and that takes a lot of effort to find what I would imagine.

Martin [00:47:19] We spend about a year cleaning that the market data to power our systems, several months to build the first instances and three years to iterate them. And we still don't get it right all the time at all. But the way humans are, we believe humans are predictably irrational in the way that they respond to price changes. That's true of all markets, and these markets are particularly volatile, which means the price changes are frankly a multiple of what people are used to seeing. Investors are used to seeing, and I'm not just talking about retail, that's where everybody's head goes. Oh, the unsophisticated retail investor. Family offices and investment committees are absolutely capable of making investment decisions that are a little bit irrational. They go from social signaling. The other endowment that we benchmark against. Put some money in and their returns went up and we're a little bit behind and we don't want to be left behind, so we should put some capital in. And you have all of those elements working in these markets at a multiple of what they would be doing in the equity markets. And so those are some of the things and that those patterns essentially of how human beings respond to price changes are big, a big kind of source of signal in our models.

Sandeep [00:49:03] And those are evident. I guess those are evident to you in just the numbers. You see it immediately, right? You see it in the irrational behavior. It's amazing that you don't need to question, is it happening or not? You've seen it. And I know we've talked in the past and you've told me that when the downturns have come, you've been able to manage against it by virtue of the these kinds of understandings. And this is one of those things where the information only makes you stronger and better over time. And if you manage even better.

Martin [00:49:30] Yeah, That's true!

Sandeep [00:49:34] Excellent. Martin, listen, I know I've taken a lot of your time, this has been fantastic, and I know that the last time I spoke, I learned a ton. And again, I've learned a ton more here. And I hope that at some point we sit down face to face and have a discussion about how this evolves in a market like India as well and can talk to that. And until then, I really look forward to continuing to see your great performance and continue to hear the journey and learn through your lens what's happening in the space. Thank you so much for joining us.

Martin [00:50:04] You're very kind. My pleasure.