Early Amazon Investor Explains Federal Reserve Critique and Private Currency Alternative

Bob Gelfond [00:00:00] And, and, and so it wasn't the government, you know, there wasn't the Federal Reserve printing dollars, but as you say, the federal government, you know, they, they, they say they hate monopolies, but they love the monopoly when they hold it. You know, they're always accusing, you know, businesses and of, of being monopolies. But you know, the, the real monopoly that you have to worry about is, is the one that the federal government has in this case, money creation. Howdy. I'm Hannah. New Itch, wonderer, a production lead at a soybean seed facility in central Illinois, and you're listening to Vance Crowe podcast.

Vance Crowe [00:00:32] Welcome back to the podcast. I'm glad you're here. Today we sit down with Bob Gelfond. Bob is a currency trader, small l libertarian, and really amazing man that I had a chance to meet a few weeks ago while on a trip to New York City. Bob and I sit down to have a fascinating conversation about the state of being a libertarian, some of the justice projects he's worked on, and then we talk about the Federal reserve and currencies and his experience trading currencies. And then go on to talk about all the different ways that Bob has invested in technology. Bob was one of the original investors into Amazon, and he gives a firsthand look into what he was investing in all those years ago when Amazon was just an idea before it had even sold a single book. We're gonna get to that interview in just a moment, but first I wanna talk about Legacy Interviews. Longtime listeners of the podcast know that I sit down with individuals and couples to record their life stories so that future generations have an opportunity to know their family story. Over the last few months, we have done a bunch of couples interviews where mom, mom and dad are sitting down together and talking about how they met, what their marriage was like, how parenting went, and the wisdom that they've learned to together as a couple. When I, near the end of a couple's interview, I always ask some version of, tell me what made this person so special to you over all those years. And when I ask the dad this question, he almost always makes a joke, and they both kind of nervously laugh, but then it gets serious, and the father usually takes a moment to pause, to think about what he's going to say.

Vance Crowe [00:02:18] And you watch this woman who's been married to this man, sometimes 30, 50 years, turn into that 20 something year old woman that fell in love with this man so long ago. She's looking at him expectantly, maybe wondering if he's going to say something that she really cares about. And always, dad says something really profound. It's not always complicated. It doesn't always have this perfect bow on it, but it's always something deeply meaningful, and you get to watch this couple have a spark. In fact, just last week, we had a couple in here and the father started crying, and he was a little bit embarrassed, and the mom said, you know, maybe we can cut this part out. And the dad said, no, I want my grandchildren to know that this is how they should feel before they get married, so that they can have the sort of relationship that I had with you. These sorts of moments happen in Legacy Interviews because an outsider like me can sit down and ask your parents questions that allow them to open up and share in ways that they don't always do when they're with the rest of the family. If you are interested in having me record an interview with your loved ones, go to Legacy Interviews dot com to find out more. All right, without further ado, let's head to the interview with Bob Gelfond. Bob Gelfond. Welcome to the podcast.

Bob Gelfond [00:03:42] Hi there. Its

Vance Crowe [00:03:44] So, you're a libertarian, so maybe the best first question to ask you is, who will build the roads?

Bob Gelfond [00:03:52] Like, well, I'm, first of all, I should make sure that, that, that people understand. I'm a small l libertarian, which means I have no affiliation with the libertarian party, which is a different animal. So in, in a, in a, I mean, went a long way from, from this worldview, but, but, but certainly in theory, private actors are certainly capable of building roads, charging tolls. I mean, actually do see this in certain places on, on highways where private firms charge tolls on roads and, and so you get incentives for them to upkeep the roads for them to provide, you know, the, the latest in and greatest technology. You also don't end up with things like we have here in, in New York City where I am, where they're in the process of repaving the roads. They dig up one road. It actually, the road in front of our, the street in front of our house, our apartment building, it's been, it was unpaved for close to two months. They pave it then in the middle of the day. So traffic gets stopped. It's no cost to them. You know, it doesn't matter how many tens of thousands or maybe even, you know, more than that of dollars of lost time, that gets, you know, that that gets cost to individuals because there's no, you know, they're, they're not incentivized to do it quickly, whereas a private firm would want to get that road back in service as quickly as possible.

Bob Gelfond [00:05:33] They'd do it at, at 4:00 AM you know, Sunday, and, you know, and it'd be done at 6:00 AM ready for rush hour.

Vance Crowe [00:05:43] So when you delineate that you are a small L libertarian, why do you make sure to make that point so clearly?

Bob Gelfond [00:05:50] Well, the, the, the libertarian party, you know, has, you know, there's a lot of people under that, under that, in that, in that tent. And there have been voices, and I don't, I don't follow it as, you know, super close, but I, I know there have been voices that are not what I would view as being, let's call it the, the classical liberal tradition. And, and so it's important to, to distinguish between the, the two,

Vance Crowe [00:06:25] Yeah, classical liberal, that's something that I don't think I had ever heard until maybe 10 years ago. And then it's a term that gets thrown around a lot. People say I'm a classical, but they never really describe what it is. So could you kind of lay out what that actually means?

Bob Gelfond [00:06:43] I, I think in, in general, this is also talking about small l libertarianism. It's, it's about having a, a very limited government and really one that, that if you read our constitution, I think if, if, if, you know, someone said that if we add an amendment to the Constitution, it should be, we really mean it, you know, if, if it actually gives a federal government very few powers, more powers to, to states and, and localities. And so it should be very limited. It should all be about the ideas that individuals are, are the sovereigns they give certain powers to, to the government to secure the blessings of liberty. And essentially, everyone should be free to live their life as long as you're not infringing on, on my right to, to live my life. I think that's, you know, maybe the best summary.

Vance Crowe [00:07:41] So when you think about people becoming a libertarian, like for me, I think I've always had these political leanings, and I kind of always thought that the parties represented this. And then you become an adult and you realize like, no, people don't necessarily want freedom. They, they want comfort from the government, they want subsidies, they want protection. Why do you think that the mass of the, of the population goes towards either Democrats or Republicans as opposed to this kind of libertarian ideal?

Bob Gelfond [00:08:12] Well, I, I think Americans, I think are, they, they don't describe themselves as libertarian, but you know, I, I think, you know, the founding of our nation and, and, and that sort of thing was, was built on libertarian ideals. And unfortunately, there are politicians whose job it is to get elected, and the way they get elected is by giving goodies to people. And it's, it's called disperse costs and concentrated benefits. So people see, you know, the, the benefits of, you know, maybe it's some sort of subsidy for something they're buying or, you know, now you see forgiveness for student loans. It could, you know, be all sorts of things. It's basically, you know, Rob robbing Peter to pay Paul, but the amount that Peter gets robbed is, is so small that it's not enough for him to say, you know, what's going on here? And, and politicians are very good at covering up the, the costs of, of those sort of things where they, they, they, they hide the cost so that they don't really get born by anyone for years, you know, out, out in the future. It, you know, a lot of localities or states, the politicians work a deal with the, the unions for these very generous, generous pen pension plans. And of course, the pensions, you know, don't, the, the bills on those don't come due until they're long outta office.

Vance Crowe [00:09:47] Yeah. So you have been active in the libertarian movement for a long time. One of the things, well, why don't you talk about some of the ways that you're active and then we can go into more specifics.

Bob Gelfond [00:09:58] Well, it's primarily been supporting a number of libertarian pre-market groups that, that do various things on the board of the Institute for Justice. They file, they take on legal cases, pro bono suing the, the government for a variety of things, although they focus on areas of, of private property rights, free speech. They also get involved in, they have been very involved in school choice, but we really, from a legal point of view, have sort of cleared the decks. It's all the constitutional hurdles have, have really been eliminated. Now it's just a question of the political will to implement. And, and there's a lot of focus now instead of cases where we see public officials using their power to punish people for their political views or for, for exercising their free speech and criticizing policies, cases of, of qualified immunity where doesn't necessarily have to be a policeman, might be some sort of government official, is really abusive in their, in their power that they're exercising and way beyond just a, you know, mistaken judgment. And, and, and there's no way to, to, to punish them essentially for, you know, for their, their wrongful act.

Bob Gelfond [00:11:33] The other group that I'm on the, the board of is the, the Cato Institute, which is a, they're strictly promote various policies, and, and they know that we're, we're not affiliated with any, any party. I think we have and are respected for having an intellectual realty that people from both sides can trust the research that gets produced, the, the opinion papers that, that get produced. They may not agree with it, but they, they at least view Cato as an honest actor. And, you know, unfortunately too often a lot of the, the think tanks in Washington, it's more about, you know, supporting the blue team or the red team, you know, whichever side that they're on and, and you know, and, and, and often tying themselves in knocks and losing their principles in the process. And, and Cato does not do that. And, you know, so I'm, I'm very proud to be affiliated with both organizations.

Vance Crowe [00:12:38] You mentioned the, the causes for justice that you've been involved in. You've personally, you know, contributed and been active. Are there any cases that really stick out to you that seem like a long shot, a long time ago and now you won, or at least made progress on?

Bob Gelfond [00:12:53] Well, I'll, I'll a lot of them as you, school choice is a, is a good example. It took many years, many cases. The, the lawyers at IJ are very strategic. It's, you know, that they're, there's many injustices out out there. Unfortunately, we can't address them all, but if you, you know, they, they've taken this approach of looking for cases where we can get, essentially get levered and, and not just correct the injustice of that specific case, but, you know, create broader reforms that, that will hopefully prevent, you know, take these things off the, off the board. I mean, one, one good case where even we, we lost actually the one Supreme case we lost, which was a famous case, Susette Kelo in New London, Connecticut. Her property, her whole was ca was, was taken by the city for use in a private sense. The, the Fifth Amendment does allow governments to take property if it's being taken for a public use, typically thought of as being a road a, a military base, some, some something like that. Here they were taking it for, for a clearly a private use. They were giving it to a private corporation and arguing that while there would be more public taxes, and that was a public benefit, and we, we lost that case five four, but it, it, it raged so many people around the country that even though we lost the case, we were able to get legislative reforms in, in many states.

Bob Gelfond [00:14:32] And in some cases also state constitutions offer screw protections for property owners. And then we've had wins there as well. And then, you know, if we do hope someday to have the Supreme Court revisit the, the case and, and, and perhaps get a better result from them.

Vance Crowe [00:14:51] Yeah. One case that I think IJ has taken on, I don't know if you know the specifics of it, but we spoke about it a little bit. It was brought to my attention by a journalist named Chris Bennett, who points out that there's all these federal officials that are going on to people's property, ostensibly in rural areas, to say, oh, well we need to monitor the game here, so we're gonna put up cameras, we're going to do monitoring, we're going to trespass on your property, and because we are overseeing the king's deer, we get to do this. That's one that really sticks close to my heart because I mean, if there's something that should be scro saying it should be that you have property and that you determine who can come on that land and, and where are you at on that idea?

Bob Gelfond [00:15:35] Yeah, I, yeah, the, unfortunately, the, the, the protections afforded by the, the Fourth Amendment that we're supposed to be secure in our home, that the government should get a war in before they, the search or come onto a private property, have been watered down quite a bit over the years. There, there's, and I'm, I'm not a lawyer, so I I one here is, that might be a little bit dangerous, but there, there's a, if they talk about open fields where, you know, the government can, can look at things where that, they say there's no expectation of privacy, but in some of the cases that, that, that, that, you know, that you're talking about, you know, where there may be hunting, let's say on a person's property, these game wardens are coming on, not because they, they heard a case, you know, something wrong was going on, some regulation was being violated, but they're just coming to check up. And that's not what the police or any, any peace officer should be doing. They, you should only be subject to investigation if there's sufficient evidence to suggest there might be wrongdoing and, and, and the, the police or government officials should be, have to go get a warrant to go make their case in front of a judge to say, you know, we have probable cause or this is going on and, and get the warrant from, from the judge and then, and then go on. You know, so we have, we do have some, some cases, you know, similar to what, what you discussed, and I'm not sure where they, they stand right now, but, you know, hopefully we will, we will win.

Bob Gelfond [00:17:15] And, and, and certainly improving the fourth amendment protection this is, is is is something that is very important to everybody and, and it's something that, that IJ is working on.

Vance Crowe [00:17:26] Yeah. It's one of those things that it's, it's like almost difficult to imagine how someone could justify doing it, right? Where, where you're like, but how could you possibly imagine that it would be okay to set up these cameras or just because I don't mow this area, that it no longer counts as I think the word is curtilage

Bob Gelfond [00:17:44] And, and it's, it's, yeah, and it's more than that. There, there are case, I mean, I, it's not an IJ case, but I had, I had a friend, they were doing a remodeling of their home in a suburban area and the town sent in drones onto their property looking in windows. I mean, there wasn't anybody living there on the time 'cause there was construction silt, but that's not supposed to happen, you know, wasn't that, you know, somebody didn't report a violation of building code or whatever it might have been. It's just, it's crazy. And unfortunately, you know, technology is, is allowing, you know, while there's great benefits of technology, it's also allows governments to become more intrusive if they're not being held back by, you know, the constitution and other, you know, laws to prevent the government from exploiting that technology to investigate people and properties.

Vance Crowe [00:18:40] Yeah, drones are a good example. I, in St. Louis, there've been now two different proposals. One time it got shot down, but it's back now they're, they're saying, look, you don't give us enough money to keep police on patrol. So what we'd like to do is have a private company come in and we're gonna use drones to surveil, particularly in large urban areas. To me, this is very dystopian. I don't know what protection you can have if the drones, you know, are, are hovering around on streets, but it seems very dark to allow a world in which you're surveilled by, you know, tiny robotic helicopters.

Bob Gelfond [00:19:13] Yeah, I I I think it has to be careful. It's one, it's one thing if it's happening on, you know, clearly in public areas, the cases, you know, I was talking about before, this is talking about private property where there's a, you know, the fourth amendment makes it clear that you should be secure in, in your home, in your possessions, public, public streets, public, you know, the parks, things like that, that, you know, I, I can see the case, but it's, it's, it's different. Let's, you know, let's take care of the obvious cases first. Before, before, you know, we worry about, you know, we're extreme trimesters. There's, there's a lot of work to be done before we, you know, we get, we get to these other cases.

Vance Crowe [00:19:54] So you've had long experience as in currency trading and, and all sorts of investing, and you're a libertarian. So where does this put you with the idea of a federal reserve and the ability to print money and to issue treasuries and bonds? How do you, how do you feel about this with your political belief system?

Bob Gelfond [00:20:16] So I, I think the, the Federal Reserve is a, a mistake. I, I I believe that we should have a competitive currency system where currencies are produced by private actors. I mean, currency, money, if you will, is really a product. We don't think of it that way. We, we sort of put it on a pedestal or some sort of special thing, but it's really a product. It's, it's a way that it was an invention to make it easier to, to trade, you know, and originally people bartered, you know, that's not so, so easy. You know, they used, in some areas they might use a livestock as a source of wealth, a store of wealth. They, they, you know, there all sorts of things came about. But of course, precious metals became the dominant means of, of storing wealth and, and we had money based on gold or might be silver. There's pluses and minuses, but, but governments, if they're given a monopoly, even in a gold system, you know, were would abuse that, that privilege. And it's essentially what happened, you know, in, in the US more and more debt pressure is put on to, to devalue the, the, the price of gold and in a, in a competitive system. And people think that, you know, it sounds very strange and when you hear it for the first time, but it's something that, that companies private actors could compete and like any other product competition makes that, that product better.

Bob Gelfond [00:21:58] And it's not that you end up with just one, you know, currency made by, you know, produced by Apple or, or Amazon. As with any product, you'd have multiple products and multiple currencies out there. You know, Bitcoin is a crypto currencies or possible solution there, but it should be competitive and, and, and let let the markets figure out what's, what's good, what's bad. Now, you know, you have a very, you know, dangerous situation where the, the Fed for many years bought up all the, not all the debt, but a a, a large percentage of the debt that, that the federal US federal government was, was creating. And it made it very easy for, for the federal government to spend on all sorts of things. And, you know, with all the, the, the negative effects that, that, that's happened, that, that, you know, that that created now the, the, you know, the debt is over a hundred percent of GDP interest is taken over, even defense spending as, as a huge item on, on, on the budget. And it's unfortunately wholly gonna go north from there unless there's, there's some sort of substantial fiscal changes taken, which doesn't seem to be in the ing regardless of who gets elected in, in November.

Bob Gelfond [00:23:32] So I, I, I had, I had an idea that I, I wrote about many years ago, and not that this is necessarily the solution, but just as plausible alternative, you know, one thing about the cryptocurrencies is that they don't have backing. A gold based system has gold, but you can always argue what, you know, what's the value of gold? I mean, it's stored been a store of wealth for thousands of years, and that's, you know, that sort of evolutionary advantage that it has is, is a good argument. But there could be other things. And my suggestion was, well, computing has become dominant thing in our lives. Maybe we could use cloud computing as a backing for a type of currency. And, and then, you know, people could hold that, that currency converted. You'd always be able to convert it. The, the, the ability to convert into some other asset is what gives a, a currency drink. You know, when do dollars were backed by gold. People had the option of going to the bank and, and getting their, getting gold in exchange for their dollars at whatever the, the other prevailing rate was at the time. And, and, and then obviously various private actors could produce this type of currency. And, you know, we, we could see if, if that worked, but I'm sure there, in a world where we deregulated the, the ability to produce money, there would be many more ideas and there'd be some losers and there'd be some winners and the market would, would sort it out.

Vance Crowe [00:25:10] I, I want to go into kind of that, that part of it, but I wanna understand your cloud computing idea. This is the idea that you would go out and buy, say some amount of credits or some amount of electricity and compute power.

Bob Gelfond [00:25:22] Yeah. And not, not, not electricity, because electricity is, is hard to, to deliver. I, you know, I, I can't just, you know, I, I need a lot of infrastructure, but take in many megawatts of, but you know, computing power, I can pretty much access as many cycles, as many, as much compute, you know, that I'm willing to pay for. So these, this currency, these certificates, whatever you wanna call it, would be convertible into, you know, maybe it's an hour of computing time on some level of, of, of computer. And I wouldn't have to actually, you, you know, convert that. It's, it's the fact that I could convert it that gives a certificate value over time. Of course, computers get better, they get faster. So you could pay interest on, on that currency to make sure that it, it held up to the, the, the, the improvements in the, the tech technological capabilities of, of computers that are, you know, likely to continue to, to happen over time.

Vance Crowe [00:26:31] It's hard to imagine the federal government ever giving up the ability to c control who, who has the power of the currency. It's like something that they have so strongly put their arms around it that people can't even imagine that there was a time before the government issued money or had this ability, and now their ability to say, not only do we control the currency, but if you transact in larger amounts than say $10,000, we get to look into any aspect of you that we want.

Bob Gelfond [00:27:01] Yeah. It's important for, for people to understand that, you know, prior to, to the Federal Reserve, even though dollars were, you know, were backed by gold, private banks could issue their own gold, you know, their own certificate, their own, their own dollars, and they might create a discount if people were worried that they, you know, that they couldn't cover all the, the money that they had issued. And, and it's one of the reasons when you, when you walked into a bank, you saw this huge, huge vault and you know, all, all the security there because people wanted to know that their, their money or their gold was safe and, and, and, and so it wasn't the government, you know, there wasn't the federal reserve printing dollars, but as you say, the federal government, you know, they, they, they say they hate monopolies, but they love the monopoly when they hold it. You know, they, they're always accusing, you know, businesses of, of being monopolies. But you know, the, the real monopoly that you have to worry about is, is the one that the federal government has in this case, money creation. And you're right, it's, it's not only for the ability to, you know, con control and, and monitor what people spend and, and do. It's, you know, it's also that they, they make money. The Federal Reserve makes money from senior age, you know, the, the dollar bills that they, they, they print dollar bills and they buy treasuries sometimes other things too, as they did during the, the crisis, but primarily treasuries from the, the federal government, those treasuries earn interest.

Bob Gelfond [00:28:36] The dollars they produce don't produce interest. So they, you know, they, you know, they make money on that difference. It's called senior age. Now they've gotten into trouble because they, they, they pay, you know, because they're worried about some of the monetary effects. They, they bought all these bonds and they pay interest on, on these reserves that private banks hold at, at the Fed. So they're paying, you know, roughly five and a half percent on these overnight loans. And their bonds are only, you know, depending where they are, their bonds may only be earning three and a half, four, four and a half percent. So they're, they're losing money now. And the amount of their losses is, is, is in the hundreds of billions of dollars right now, in theory con Congress is supposed to back that, you know, they, they, they're not, they don't have to give the Fed money. The Fed lists it on its balance sheet, but the Fed is, is actually technically bankrupt. I mean, they, because they can produce their own, you know, they can pay off their own bills. They're, they're not gonna go bankrupt the way a private company would, but they're, you know, their, their assets are less than their, their liabilities at this point. They hope to earn their way out of it as they did, you know, prior to the recent tightening cycle, you know, they were earning more on their, their long treasury holdings than they were, you know, they were sexually paying zero when, when short term rates were close to zero, they weren't paying anything.

Bob Gelfond [00:30:13] So they were that difference. They were accumulating that and they actually were paying the treasury every year, substantial amounts of, of money. But that, that game is over and, you know, probably it's not, not gonna come back no, no time soon, if ever.

Vance Crowe [00:30:28] I think most people are stunned when they realize that the Federal Reserve is not actually a part of the US government, right. That you kind of just assume like, oh, there's the Fed and the treasury, and I don't really know how they work, but they're all a part of the government, but explicitly the Fed is not a part of the government. And this makes it really weird. It's like there's one private corporation that gets to set so much of the US policy, although we don't have any control over who's on their Board of Governors, how they set up their balance sheets, who, when they sell, how they change interest rates for somebody that's both a libertarian and has an understanding of currencies. This must be slightly galling to you.

Bob Gelfond [00:31:09] Yeah, it's, it's for a couple of reasons mean one, you know, this should say that, you know, the, the, the sort of monopoly that's been set up, although the, you know, the president does get to a point some of the, the Fed governors and of course the head of the Fed. But more importantly, the other reason is that it means, you know, the way the Fed does business is that you don't have market setting interest rates up and down, you know, the Fed, the Fed is the Fed sets the, the short term interest rate, and you could get 12, 20, a hundred of the smartest people in the world, and you're not gonna come up with the right interest rate. The re the reason that the, the Soviet Union failed wasn't because they didn't have some smart people. You know, they have very, they have very, very well educated, very smart people there, but you don't put them in a room and have them decide what the price of wheated is or what the price of court is. You let the markets do that, and you need to let the markets decide the, the price of money. And it's probably the most important price the, the economy has because it, it, it, the price of money, it, it affects all other business decisions, consumer decisions that, that are, that are being made. So you have the most important price in, in the economy is, is being given the, the, the power of decisions being given to a handful of people, a couple of handfuls of people. We're not even, they don't even get to that position through their professional expertise. They, they get there through their political connections and they're, they're very smart people.

Bob Gelfond [00:32:43] Don't, don't get me wrong, but it's not like they had a, you know, they, they had to win some sort of contest to to, to get to the, to the position. Even if they did it still, it still wouldn't work because, as I said, you need, markets are the best source of, of deciding prices. Not that they're, excuse me, not that they're perfect either, but at least with more in a market system, you have a feedback mechanism that, that, that can allow, allows self-correction. When, when the Fed makes a, makes a mistake. They may not realize it for a long time as they, this is what happened recently, you know, when policy was too easy coming out of, out of COVID and, and inflation got sparked, you know, they, they, they, you know, at least they, they've seem to have done a better job since then. But you just only have that, that, that, that, that feedback me mechanism that you have with the, in a true market system.

Vance Crowe [00:33:40] Yeah. And the, and the way that they communicate information, it's, it's almost like wizards coming out of their cave to be able to then tell you what that interest rate's gonna be.

Bob Gelfond [00:33:48] It's, it, it's very, it's very much like, you know, they, when they, when they elect the pope in, in, in Rome, in the Vatican, you get, then you get the gray smoke, I forget which it is. You get the black, the gray smoke when they, when they elect somebody, the black, I think which way it goes. And, and in the Fed they send out some, you know, a gray-haired person to explain,

Vance Crowe [00:34:09] You know,

Bob Gelfond [00:34:09] The or not, to not necessarily explain the, the decisions that they make every, every, you know, couple of months or so. It's, it's, it's really a ridiculous idea. I, I I, I bel I'm, I confident that some point in the future, hopefully not because of some disaster that the system is creating, but the people will look back on, on, on the system, it'll, it'll be a brief interlude in the vast history of money, and it'll just shake their head. It'll be, you know, right there with, you know, bleeding people with leeches to, to, you know, to cure them of, you know, some mysterious ailment.

Vance Crowe [00:34:49] What do you think of these countries like that are coming together with the BRICS currency or people suggesting that perhaps the petrodollar, you know, it won't always be pegged to the US dollar. How feasible are these ideas in the, you know, short to medium term?

Bob Gelfond [00:35:05] I mean there, there's a case for smaller countries. Argentina is actually one that I, I was just talking to somebody about the other day. There's a good case for that, that they should have Dollarized Javier Milei, the, this libertarian president was elected the end of last year, and he had said he was gonna dollarize, but he's been, been slow to it for what seems to be various political reasons they have inflation running. So I don't know the exact number, but it's been, you know, something in about 150% a year, which is actually down from, from where it had been, and it's been coming down some. But if you, if you dollarize, you would've gotten rid of that, that inflation economy. What

Vance Crowe [00:35:53] Does that mean, dollarize?

Bob Gelfond [00:35:56] And, and it essentially means that the, the, the, the US dollar would become the, the legal currency in, in Argentina there would be at whatever the rate is. When you, you, you make that decision, we're gonna convert, you know, x number of pesos for, for $1. And, and it's been done in, in other countries. Ecuador did it several, several years ago. There've been other, other cases. And these are generally small countries that historically had lots of money printing and inflation as a result. And it, and you, you remove the ability of the, the federal government, the, the central bank, essentially you eliminate. And the central bank is the, the source of mischief in, in these countries because they just constantly print money to cover whatever the, the government is, is spending. And that that's what had been causing these great inflations in these countries.

Vance Crowe [00:37:00] And you think these countries that are having free fall economies, right, where inflation is running wild, you would say the US despite the, the criticisms we were just listing would be the good thing to hook their currency to the dollar. Yeah.

Bob Gelfond [00:37:15] It's, it's because the, the, the us the fact is the US dollar is, is ubiquitous in the global economy. So it's that it just makes it easy. Yeah. In an ideal world, I, I would like to seek, you know, competitive currencies in, in the US and Europe and all over, but we're not there yet. So these, these countries, a country like Argentina is facing an economic crisis today. And you know that this is, you know, these are the tools that are available. Yeah.

Vance Crowe [00:37:43] Argentina is one of the, the examples that we're gonna get to see when you take these theoretical ideas on libertarianism and you start to apply them into the real world rapidly, how does this work out? I mean, I don't know how much he's been able to let go of public sector.

Bob Gelfond [00:37:58] He's, he, he's, yeah, he's, he's strolling, but he doesn't have full control of, of the Congress, and that's limited or, or the courts. And so he, you know, he's gotten some things done, but he, he, it may take time, he may give, he may be thwarted, unfortunately, but he's, he, from what I'm told, he's very popular, even though the population is suffering with this, you know, high inflation. And there's also, in the short term, there's been an increase in unemployment. But the people believe him when he says that he is, he's completely correct that his predecessor is the prones are the ones that cause this problem. They've just abused the economy and, you know, been, we're awful stewards of the economy and it's, they're gonna have to take some short-term pain. But if he can get in his, his reforms, then they should have a, a, a much better future, hopefully, you know, we'll, we will be able to see it. And yeah, I, the, the evidence is pretty clear when you look across economies all over the world historically, that when they are able to put in reforms, I mean, there, there are no libertarian paradises here, you know, in any country now or in the past. But to the extent that they, they were able to, to liberalize in the sense of, you know, cutting the excessive spending, improving their laws, privatizing nationally, government run businesses or other things, the economy responds very, very quickly.

Bob Gelfond [00:39:40] And we saw this in the aftermath of the Cold War as the eastern European countries were converting from, from communism to to free mors. And the ones that just made the changes right away. Countries like Poland, within days, the, the, the, you know, there were people who were telling 'em, don't do it, don't do it. But when they free prices and you de deregulated it within days and weeks, their, their markets reacted. And, you know, and again, it's, none of these cases are, are perfect, you know, but they're, they're pretty good. And it's, it's a question of making a, making going in the right direction, making improvements over, over the status quo. And, and you see it time and time again that the, the benefits are, are there,

Vance Crowe [00:40:32] In the circles I run in, people often describe the US dollar as the cleanest dirty shirt. Do you look around the world and and see any other not quite as dirty shirts in terms of currencies?

Bob Gelfond [00:40:45] No. Well, you've, you've had the situation, you know, certainly in the, in the post the 2008 crisis, you had very easy monetary policy around the world, you know, with the end and, and the euro, you know, there, there's really, you know, three major currencies. The, the pound is not what it was, you know, prior, prior to World War I, it was the dominant currency. But the, you know, they're not up there anymore. The, the, the, the Chinese RMB is not, you know, is, is not, not there yet. The, it's still too many regulations there. And, you know, they're, they're a communist country. I, I wouldn't trust my wealth for them. So it's really those, those three currencies, and they all had very easy policy after 2008 and, and you know, haven't quite, you know, they, they, they have various problems since then. So that, that's really it. And so, no, I, I don't, I, I come, I don't see a better one may, you know, maybe they, they're smaller ones in certain countries that, that are worth in investing in. That's a separate issue. But that's different from, you know, saying we should, you know, move to, to one of those other currencies wholesale.

Vance Crowe [00:42:05] What makes a currency worth investing in? If, if you're saying, ah, the US is the best one, but you need, if you're a trader, you gotta trade somewhere. Oh,

Bob Gelfond [00:42:14] Yeah, but I, I mean, we do, you know, I i I not going to, you know, discuss our, our current positions, but our, our book is fairly complicated. We're we're long and short things. We're, we're quantitative traders and we're hoping to, to make money regardless of, of what scenarios play out. We're, we're lucky for to not have very high volatility and, and sort of grind out returns by having lots of relative value plays on, not only between currencies, but various interest rate plays in, in, in these countries that, that, that we trade in. You, you also, commodities we're long and short, so we might have small directional positions, but you know, that's, we're not like sort of the traditional macro funds where they say, you know, we're, we're buying dollars hand over fist, or we're selling dollars, or we're shorting this country, or we're, or that different style.

Vance Crowe [00:43:17] In your long career, you have done many things, one of which was doing some, like setting the line for betting. And it sounds remarkably similar when you're talking about doing currency trading, that it's, it's a little bit like that. If you're gonna be the house, you have to make sure that you're taking money in and, and money out. What does the average person not know about sports betting that you do since you were in this game for a while? Well,

Bob Gelfond [00:43:42] I, I, I, I, I didn't set the line, but I, I bet on the line. But, but the, the line, the betting line as, as the markets, the currency markets is, is just another type of market. And, and you have people on both sides. Obviously the currency markets are many, many, many times larger than, you know, even the Super Bowl. You got money that gets spent on, on the Super Bowl. But I think people do have this sense that the, the bookmakers know something and they set the line and that's it. The bookmakers, the ones that stay in business are market makers, and they, they, they, they might set the line and as money comes in, they're gonna adjust the line. They, they're not trying to make a bet on, on who's gonna win the, you know, who's gonna cover the point spread. They're trying to balance their books. They want roughly as much money bet on one team as, as the other team. And that's how they make money by, by making that spread, you know, just as, as market makers in the financial world, or not trying to predict the markets, they're, you know, they're trying to buy at the bid and sell at the offer that that's, that's their, their business. And yeah, the, the, you can't do it perfect. You can't be perfectly balanced. So you're gonna have may have some, some more money on team A than on team B, but you have the odds, you know, it's like betting on a, a pair of coin, but you're getting an odds both ways.

Bob Gelfond [00:45:17] Someone's giving you 11 to 10 odds on whether it comes up heads or tails. So you don't, you don't care who you, you know, whether you have heads or tails, but someone's gonna gimme 11 to 10, I'll, I'll take that bet all day long. Now, I'm not gonna bet my life savings on it. 'cause you know, obviously you have a 50 50 chance of winning, but I'll take a, you know, calculated risk or calculated size, bet size on that.

Vance Crowe [00:45:43] When you think about stock market and, and betting, how do you differentiate is, is is investing in the stock market substantially different from betting on in a game?

Bob Gelfond [00:45:56] Well, when you're, when you're buy a stock, you are, you are buying real assets in, in, hopefully you're buying productive access. If you're buying a, a good company, now you can, you might be paying too high a price for those assets. But that's the difference between investing and, you know, sort of pure, you know, betting on, on the roulette wheel, you know, betting on, on sports. If you're smart and you know, really pay attention to it, you can get an edge. And you know that there are people who, who can do it as prof, as a profession. And you know, that's, that's a, a a different game because you, you're not, you're and you're not, there's no asset there, but you're, you know, you're using, you know, your wits to try and gauge who's gonna win by how much. But you know, on the other side, it's a market and you're trying to both cases and then, you know, you can have a, a great company or you know, good company at a very high price or too high a price. And you can have a soso company at a very, you know, cheap price. Warren Buffett's, you know, one of, one of the secrets to success is that he always says, I I just wanna buy a good company or a great company at a fair price. And, and he, he's, you know, he, he doesn't wanna own a bad company at a really cheap price, even though, you know, for some people there are people who do look for companies like that, what they call deep value investors who try to find, you know, Aled up Dollar bill selling for, you know, for 20 cents.

Bob Gelfond [00:47:36] You know, there, there's all, all sorts of niches in the, in the investment gain.

Vance Crowe [00:47:41] So speaking of investing, you have done a great deal of investing throughout your lifetime. Notably, you were one of the early investors in Amazon. I think there are people that dream of having the chance to invest in something like that, but what did Amazon look like when you were first getting the opportunity to put your money into it?

Bob Gelfond [00:48:04] It was just an idea. I, I was very fortunate and lucky enough to work with, with Jeff Bezos when, before he started Amazon, we worked at a hedge fund D. E. Shaw together many years ago. And, you know, he had, he had this idea and, and, and, and the idea was really was originally was just to sell books. So, you know, there wasn't anything else, although I think you think in the back of his head, he, you know, thought of books could be successful, other things could be successful, but for the first several years, the total focus was, was books. And, and you know, he saw the advantages that an, an online book bookseller would have over a bricks and mortars, not that he thought he would replace, you know, the idea wasn't to re to replace the traditional, you know, Barnes and Noble or the local bookseller bookstore. It was just to give consumers another op, you know, another option to give them more choices. And, you know, it's a, it's really been an amazing, an amazing experience just to, you know, see that from the sidelines grow from, from this idea to be one of the, the largest companies in in the world.

Vance Crowe [00:49:22] Yeah. And there were many years where they were defying what people thought of as the proper way to do it. I remember their price to earnings ratio. I held some Amazon and, and a close family friend would always give me a hard time about it because he'd like, look at their p and e, it just doesn't work. And so, but they were reinvesting all that money into their company.

Bob Gelfond [00:49:44] Yeah. The, the people didn't always understand the company. I, I, I remember a few years, eight years after they were public and a fairly smart friend, wall Street guy was shorting Amazon. He said, you know, you look at their valuation and they, you know, they need to sell you like 10 times more books than that are published each year or they're, or that are sold each year. It's impossible. But he didn't see, and I would make the case to him, well, they're not just gonna be selling books at some point, they're gonna be, you know, think CDs were the next next choice. And, and, and eventually they added many other stores, and now they have, you know, just about everything you could imagine on there. And so people, even smart people can, can, you know, can, can get fooled unless they really understand the company. Now, it doesn't mean that every, every company that has a high PE and, and you know, even they may be trying to tell a good story, is gonna rep be able to replicate that. There's, there's certainly, there's a long or there's a big cemetery of failed companies who, who try to, or, you know, at least were telling a story similar to that, that, that that couldn't, couldn't pull it off. So you, you know, you, you have to be careful and, you know, this was just something that, that, you know, I, I got very fortunately,

Vance Crowe [00:51:10] The, the famous marketing professor Scott Galloway recently on a podcast said that advertising in its traditional sense is dead. Because in large part, companies like Amazon figured out if I can give you service so that you can get your sunglasses delivered in 24 hours or 48 hours, you don't really care about the advertising. You want those sunglasses. Now I think it's fascinating that they've continued to push the entire market into different ways, including something like advertising.

Bob Gelfond [00:51:41] Yeah, the advertising has become a very important and big part of their business. You have advertising, you know, just not only on the website, but now they, they do a, you know, small amount of advertising while on prime or you can opt out of it, but, you know, pay an extra few dollars a month. They also have an advantage that they see how the advertising works a lot better than, let's say the, the linear TV guys, the, you know, the old story in, in, in advertising with the, the marketing guy at a company says, you know, I, half of my money I spend on advertising gets wasted. I just don't know which half it is. But with Amazon and, you know, a lot of other, you know, not, not just Amazon, but they, they get better insights into, you know, what, which ads are working and what products actually are selling as a result of, of, of those ads. So it's, I don't know what the number is, but it's a substantial and, and very quickly growing part of their business.

Vance Crowe [00:52:46] So recently, you know, most of the stock market gains are really coming from seven companies. This feels very unsettling, although maybe it's just the a Pareto distribution. Does this concern you that that only so much of the stock markets gains are coming from just these seven companies? Or is this just the way of the world?

Bob Gelfond [00:53:08] I, I think it's, I mean, one, I think that the stock market has broadened out a little bit in, you know, in the recent months, you know, despite a little, you know, a little bit of a sell off in the last couple of weeks. I, I think, I think that people don't fully comprehend the, these companies have gotten so large that they can start doing things that may not be possible with companies at a smaller scale. And, and, you know, they're also, you know, they're investing tons and cons into, you know, capital expenditures. I think AI is, is a huge, you know, we, we are in the very early days of, of what AI I think is, is going to be able to accomplish. I, I think it's an enormous opportunity and the, these companies are you the, they're in on the ground floor, but it also takes tremendous amount of, of capital to, you know, at least right now, to exploit a lot of this and, and to put your stake in the ground. So I, I think it's not necessarily a bad signal. I mean, certainly there were times in the past and, you know, you go back into the, the late sixties, early seventies or what they had with what was called the nifty 50, which, you know, turned out to be, you know, a, a top in the, in the stock stock market before there was a, you know, big, big bear market in the early seventies.

Bob Gelfond [00:54:42] I think it's a, it's a little different, but yes, you, you do need other companies to participate and I think there are, you know, gonna be other, other companies participating, you know, that small companies that, you know, some are gonna be able to get large very, very quickly. Yeah. But with any, as with any new technology, there'll be, you know, winner and losers, but the ability to use that technology, you know, we're we we're gonna start seeing it in many other fields.

Vance Crowe [00:55:12] Yeah, I think the ability to use some of these technologies, we started off talking about cloud computing and then ai, we've also mentioned Bitcoin. All of these things require massive electric generation, and it's a question as to whether or not whichever country is going to win is going to largely be determined by can you generate enough electricity to make these things feasible. Do you think our regulatory system is set up for the amount of energy generation we need to be doing?

Bob Gelfond [00:55:42] That's a good question. Again, I'm definitely not an expert on it, but something, you know, it's pretty clear that it was a mistake not to have more nuclear power and, and, and now it's something that should appeal to, you know, people who are worried about carbon emissions and, you know, fossil fuels, you know, nuclear is, you know, solves the, a lot of problems. I think, you know, the, certainly the, we have, you know, we, we still have a lot of ability to generate energy through, through fossil fuels, but even things like solar and, and other alternatives are, you know, constantly getting better. They're constantly getting, getting cheaper. So I think the wherewithal is there if we let markets operate. But the big question, as you said, it's, you know, whether the regulatory system will be as flexible as, as needed, but the markets if allowed to operate, I'm, I'm, I'm confident we'll be able to provide this, this increase in oil energy that's we're it's already being seen and, you know, we'll, we'll be continuing to see it's not just the, the ability to produce energy, but you need the need the grid to be upgraded to transmit that energy to where it's needed.

Vance Crowe [00:57:05] Yeah. And I, I wonder be because of the way we approach nuclear, you know, there weren't nuclear engineering jobs available, so somebody went to college to study nuclear engineering, they came out and there was nobody there to hire them, or very few places. And so I think if we decided, hey, hey, all right, we're gonna deregulate this and all of a sudden allow in nuclear power, we're gonna actually have to create new engineers and even the professors to train those engineers. Yeah. Because of how much demand we'll have. It's a,

Bob Gelfond [00:57:31] It, it's a good point. I mean, there has been some work, I mean there, there actually that Bill Gates I know was, was involved in, in, in building or this, you know, designing these much smaller nuclear reactors that, that are easier to, to build them and, and maintain and don't need as big or shouldn't need as big a regulatory scrutiny as, as, you know, the large reactors of that we're used to seeing it. You know, I, again, I think people will, will get dragged into this, you know, for market incentives allow. And I think, you know, also it's something where as with everything in engineering, AI is gonna have a, a huge positive impact, you know, in there, in that area as well as everything else. So, you know, it's a solvable problem, but it's, it's definitely an issue as you people, you didn't go into that field as, as you mentioned, because why should they? It was, it was dead end.

Vance Crowe [00:58:41] I mean, we've definitely seen that with aerospace engineers. I know the ones that came outta school weren't getting design planes, they were sitting in bureaucratic meetings. I know. 'cause this is what my wife went through. Yeah.

Bob Gelfond [00:58:51] And

Vance Crowe [00:58:51] Now, you know, people weren't then told when they were in high school, oh, you should go become an aerospace engineer. And now when we need them the most, they're just not there.

Bob Gelfond [00:59:00] Yeah. Well,

Vance Crowe [00:59:02] So another thing that you and I talked about when I was out in New York was you were the first person to ever lay out the case for nanotechnology. For me, when I read a book about nanotechnology, I, it seemed so far away as to be science fiction and not even something I could wrap my brain around. When you think about nanotechnology, what is this field and what do you think the potential is there?

Bob Gelfond [00:59:30] Yeah, again, I'm not definitely not an expert here, but you know, the ability to, to control things at smaller and smaller scale is, is important set of geo. So if you look at Moore's Law, which is that semiconductor chips become faster roughly every, every 18 months or so. The reason that they were able to do that is because circuits they were shrinking over, over time. But you get to the point where, you know, you're doing things at the atomic level and The other part of it, which is called Rock's Law, that the, the, the fabs, these manufacturing facilities that, that build the semiconductor wafers, produce them. They're doubling in price at the same time. And that mean roughly on that, that that same scale. So, you know, being able to, you know, create tools to, to, to operate on that smallest scale as a way to not only reduce costs, but it's also a way to create new technologies that you, you, you know, you couldn't create otherwise. And new capabilities for, you know, as well, and I, I'm, I'm involved with a, with a company called now Choix on their board, and they're working on building these completely automated fabrication facilities to build a different type of semiconductor chip than, than pe you know, not, not like the AI chip that's say, you know, Nvidia uses, but the, these tips that are, are useful in, in controlling power consumption that are needed.

Bob Gelfond [01:01:23] And it's also addresses, you know, the, the, the power issue that you mentioned earlier, they allow for much more efficient use of power. So you know, you can get a three x or, or four X improvement, you know, essentially use a quarter of the, of the power, you know, in the same, in the same device. It was using these other types of chips. So, you know, this is, you know, as with ai, the, the, this is very early, early days. These are, and they're all, they, they're all connected, you know, these, these things and the, the manufacturing facility that Anatros is working on, they're the, the actual manufacturing processes designed by ai. You know, they, they've used that to help figure out how to, you know, how to, it's not just, you know, robots that are get programmed. It's, you know, it's devising, you know, it's using AI in manufacturing, you know, which is also at, its at its infancy. So it's, it's, it's very, very exciting times.

Vance Crowe [01:02:28] Yeah. You mentioned Anatros, the, the man that wrote the book that I read, Matthew Putman, the, the, he, it was so forward-leaning, his book that I find, I think of myself as being somebody that's like very open to new ideas. I wrote him back and was like, nah, man, this is way too out there. Not realizing he was actually running the very company of the book he was talking about.

Bob Gelfond [01:02:51] Yeah, yeah. No, he's, he's in there, you know, doing it. And he's a, you know, he is the, the, the brilliant guy who, you know, he's the scientist and, and in the CEO of, of the company and, you know, the, he's doing a, you know, a fantastic job. I mean, he is got a lot of other brilliant people working for him, of course, as well. And this is, you know, looks like it's gonna, you know, become a reality.

Vance Crowe [01:03:17] And you also have several, you've run several companies, but you have one magic. Talk a little bit about what that company does and where you think it will go in the future.

Bob Gelfond [01:03:27] So magic started in 19, 19 99, and the focus was on quantum computing and other things in that, that area called quantum information. This is the idea of quantum information, is that in regular digital technology, we have, we have, we use bits, zeros, and ones. In the quantum world, we have quantum bits, qubits that can be, because of the weirdness of quantum mechanics could be zero and one at the same time. So they can do a whole, they can do all sorts of things that digital, digital computers, digital things can cannot do. On the other hand, they can't do things. They're not just like a replacement. They're, they're an adjunct. But the, the, the progress went very slowly. We built the world's first quantum cryptographic device in the early two thousands. This uses the laws of physics, quantum mechanics to distribute encryption keys from point to point. So it was very cool technology, but it did not sell very well, frankly. But the research that went into that led us to develop these optical sensors that care being tested now in oil and gas exploration to replace electronic sensors that are used for all sorts of purposes.

Bob Gelfond [01:05:04] Not just say seismic activity, but measuring pressure in wells. Environmental monitoring, which has become very important. Companies have to monitor how much carbon is being methane. And we can do all that. And, and, and the big advantage over electrolytic sensors, which are used now, is that our optical sensors can be used at very high temperatures. As you drill deeper, the temperatures get, get very warm. The electrical sensors can burn out, you know, even at, even at lower temperatures, they, they don't last, so they have to get replaced. Optical instruments can also get essentially a much greater bandwidth of information. So you can analyze things in ways where, you know, you, you, you get more information basically than you do with these electronic sensors. So it's still in the, the testing phase. We're cautiously optimistic with that. And, you know, hopefully, we'll, we'll see some commercial success there soon. We also do some classified work for the Department of Defense around communication technology as well.

Vance Crowe [01:06:26] So with your experience in quantum computing, one of the things that the Bitcoin world is always a little nervous about is that SHA 2 56 will be cracked if you have quantum computing. What do you think? Is that a possibility? Is SHA 2 56 vulnerable to quantum computing?

Bob Gelfond [01:06:43] Well, all, all the, all the encryption that use these various mathematical techniques, there's no, they're not provably secure. You've had, you know, great mathematical lines who are unable to figure out a way to, to crack them, but, you know, it hasn't happened. So they're assumed to be, and I think that assumption is fairly safe, that they're, that they're safe from some sort of computational algorithm. It doesn't have to be from a quantum algorithm. You know, you could, there might be an algorithm, you could run out a regular computer, someone devises that, but that, that risk is, is out there that, you know, we use some smart kid in India or China or someplace, maybe in America, figures out the algorithm. Yeah. That, that, you know, there is a way to do this with classical methods. And, and that was the advantage of, of, of quantum computing, front and cryptography. That said, you had a, a secure protocol that didn't rely on mathematical complexity, but it used physical laws to guarantee the security. You know, the people who were a lot smarter and knowledgeable about these cryptographic algorithms are fairly confident in the ability to say one step ahead of, of improvements, whether it's in these type of algorithms I, I I talked about that maybe could solve these problems or just advances in, in quantum computing or other, other technologies that might be able to, to, to crack them.

Bob Gelfond [01:08:30] But it is, it's, it's definitely, it's, it's a risk.

Vance Crowe [01:08:34] Well, we're about outta time, but I have one question I think maybe is a little unique 'cause I've had a chance to meet some of your family and your friends and, and you have very strong close relationships with a lot of a small group of people. And if you were gonna give advice to somebody looking to, to have a great family and close friends, what advice would you have for them?

Bob Gelfond [01:08:58] I, I think, you know, as with the, anything in life that you, you get out of it, what you put into it. And, you know, if you cherish your family as, as you should and your friends, and you know, particularly that you, I'm very blessed to have a number of friends that I grew up with. I mean, from Time I was in, you know, second grade, and you, you know, you have to, you have to tend to that. And, and, you know, the, the reward is, is there if you do, and to, you know, spend time, you know, be, be, you know, be a, be a good friend, be a good family member, you know, obviously, you know, particularly with family, they're gonna have disagreements and, and bumps in the road. But, you know, remember that, that, you know, they're your family and you know, you, you only get one, one, you, you, you can get, you meet new people, but you, you only get one set of family and it's, it's good to have.

Vance Crowe [01:10:08] Well, Bob Gelfond, thank you so much for coming on today.

Bob Gelfond [01:10:13] Thank you. Ah.