WBD026 Audio Transcription

The Challenges of Being a CEO with Richard Burton from Balance.io

Interview date: Friday 20th July

Note: the following is a transcription of my interview with Richard Burton. I have reviewed the transcription but if you find any mistakes, please feel free to email me. You can listen to the original recording here.

In this interview, I talk with Richard Burton from Balance.io about the challenges of being a CEO, delivering a return for investors and his frank opinions on EOS.

“I think the notion of a protocol which has 21 data centres to which you delegate priority to run smart contracts is a really interesting experiment, but nobody has explained to me why you need $4bn to run that experiment. ”

— Richard Burton

Interview Transcription

Peter McCormack: Richard, how are you doing?

Richard Burton: I'm doing very well.  Currently in one of the balance hammocks, living the dream.

Peter McCormack: I've noticed that.  So I can't even remember when we first got in touch or how it was, but you definitely stood out most recently with that EOS video.  What was the background to that; what happened there?

Richard Burton: Yeah, I was in Los Angeles to visit some friends and also to see Taylor from MyCrypto, who's one of my favourite people in the space.  She was heading to this event called Blockchain on the Beach and I went along.  I just thought it would be an interesting event to check out and see what the LA crypto scene was like.  I was queuing for the bathroom and someone pushed in front of me, pushed in front of the entire queue and then kind of swept out saying, "Oh, I have to be on a panel", and I just thought, "Well, that guy's a massive douche" and then for the next 45 minutes, him and three of the people on that panel just talked about EOS as if it was the second coming of Christ.  No one was pushing back and I was just increasingly irritated by what they were saying and then they invited questions at the end and I thought, "Well this is my opportunity".

So, I've disliked the EOS project for quite some time, a good kind of four, five months or even longer in fact.  Anyway I went and just asked them some questions, and you can see by the incredibly lacking quality of their answers that these are people who really do not believe what they're saying.  They believe it because they've made money, not because they actually agree with way the project's run.

I think that for many people, that video was quite cathartic for two reasons.  A lot of people in many different crypto projects from Bitcoin to Ethereum agree that EOS has gone way too far, and they couldn't go anywhere, they had to stay there on the podium and they couldn't walk away.  It's one thing to send tweets to people, it's an absolutely different thing to debate it in person and look them in the square of the eye.  So I guess that was really the context that I came into it and I just tried to ask them some very simple questions about the sheer amount of capital they've raised, the sheer lack of software that's actually run, and the unbelievably opaque and mysterious way in which this capital has been ingested and deployed.

Yeah.  It did a few rounds on a few different social media platforms and then I started getting loads of password reset emails and requests and all kinds of things, so it's been somewhat intimidating to have my entire online presence poked away at; that seems to have settled down for now, but we'll see what happens.

Peter McCormack: So outside of the money issue, obviously there's a lot of questions around that, they've raised, what, $4 billion; but outside of that just with the product alone, you as a product developer, product designer, what are the primary issues that you have with EOS?

Richard Burton: Well I think that the notion of a protocol that has 21 data centres to which you delegate priority to run smart contracts, which is essentially what EOS is, it's kind of like a distributed Amazon, I think that's a really interesting experiment.  So, at a protocol level I'm very excited about it, but no one's explaining to me why you need $4 billion to run that experiment.  So I'm actually not against the idea of dragging the dial between decentralisation and speed and making a set of trade-offs that are quite interesting, if it comes from a competent, ethical team who really want to kind of present this as somewhere between Ethereum and AWS. 

I think that's a very interesting idea and as a product designer, I think that perhaps we would interact with a such a protocol if it was run by people that had any moral backbone whatsoever.  So actually, I've no issue with the sets of trade-offs they're experimenting with.  It's really absolutely everything about the way in which they've executed those sets of trade-offs, which just strikes me as irksome, weird and just morally bankrupt.

Peter McCormack: Yeah.  Kyle Samani talks about it and he said there's essentially, like you said, "There's a line between decentralisation and speed".  Obviously, we've noticed with a number of the leading protocols out there that scaling has become an issue, and if these blockchains are going to be used for something which traditional businesses might use, they're going to probably accept the decentralisation trade-off for better scaling; yet, you have fundamental issues with actually what they've shipped by now.

Richard Burton: Or just how little they've shipped and just how opaque they've been with the community, and just the enormous amount of capital they've raised.  I think Kyle's a brilliant investor and a fantastic thinker and writer, but I think that he obsesses over the theory and the code without thinking about the people.  One of the benefits I have is that I'm not intelligent enough to understand the maths or the kind of in-depth engineering of mechanism design, and so I really approach this from the outside in instead of the inside out. 

From the outside, absolutely everything looks terrible about EOS, just their website, the way they communicate, the fact they don't have a wallet, there was no voting user interface, their branding, the fact they did advertisements in Times Square, the parties, the Puerto Rico kind of system that they've got, Brock Pierce, Dan Larimer's way in which he interacts with people online.  It just goes on and on, the list of just terrible things that indicate that these are not fantastic converters of capital into code, and I don't want to support people like that.

From the very beginning, every project I've been involved in in my short career, the things that have gone the best are the ones where the people had a strong moral backbone and were extremely good at executing, and those are the people that I like to partner with, because that's something I can understand.  I can't understand the latest theory in protocol design, I'm not smart enough, but I can get a read on people quite quickly and that's where I begin my research, with the people, because it's the people who make the protocol.

Peter McCormack: Yeah, so the money never bothered me at first.  I made an investment in EOS quite a long time ago, it was like 50 cents or something, not really knowing or understanding what I'm investing in, just as one of those crypto people who tends to spread his investments as they grow quite wide, but I took a look at it.  I thought, "Okay, it's another protocol", something that was to challenge Ethereum, but I'm not at a competence level where I can understand the tech.  So I made the investment not understanding how much they were going to raise. 

So obviously, it was a huge raise and I think if it had been a successful launch then maybe it wouldn't have garnered such attention, but what was really interesting this week were the tweets that I saw from Meltem about it.  Did you see these?

Richard Burton: Yeah, I mean she's great.  Meltem, for people who don't know, has had a huge amount of experience in the industry and she's conscious that many projects have way too much capital and need to manage their treasuries correctly.  She knows all about that, so she's helping a lot of projects, who have way too much money and are freaking out, manage that capital correctly and she really called out the EOS capital stack there, which was great.

Peter McCormack: Yeah.  So what was really interesting about that was that they're then reinvesting that money into other funds, and with your investment in EOS you don't legally have a right to anything.  So essentially, they've printed $4 billion off investors for something you don't have a right for, and they're therefore then able to invest that in other funds to grow Block.one, which has nothing to do with EOS really at that point, and in my mind I would have assumed that everything I'd invested into the EOS token would then at least be reinvested into the EOS product or infrastructure.

Richard Burton: Well look, Dan Larimer literally said on a podcast last year, which I tweeted out where he said, "We have no obligation to continue working on the EOS software.  This is not sold as a security.  We count this as revenue into Block.one and we're running all of that money through the Caymans".  I mean he said this on the Epicenter podcast.  This isn't a conspiracy theory, this is just him plainly stating what his lawyers have asked him to suggest, and that put me off last year.  I thought that sounds a bit weird and then it just got weirder and weirder the more I interacted with the team and then the more I found out about what the people are like who actually run it.

Peter McCormack: So what is the actual use case then for EOS?  You as a developer or product builder, what's the scenario that you would actually use EOS?

Richard Burton: Well I think if you would like to create CryptoKitty but have it run much more quickly, you could run it on EOS in theory; I mean right now, it doesn't even function.  The block producers are kind of falling over each other and coordinating on Skype, which is about as far from the decentralised future as we could possibly be and quite frankly, it's a very immature development environment with really bad tooling which obviously will improve with the sheer amount of capital they've got.  But if you want a dapp to run faster and you don't care about it being switched off, then just put it on Amazon and don't call it a dapp, just call it an application. 

So it kind of occupies this grey area between Amazon, which is superfast and centralised, and Ethereum, which is super slow and decentralised, and that grey area is an interesting area to experiment with small amounts of capital, not with billions of dollars.  It's just psycho.

Peter McCormack: So it's quite funny, because I've read one of your articles before we started and I'm going to quote you from it.  It was based on when you were in the --

Richard Burton: I don't know whether any of it's quoteworthy at all!

Peter McCormack: No, it's good.  So it actually relates to this quite interestingly, because it's when you're in the HackAHouse and you went to a talk with the CTO of the Ethereal Foundation, Gavin Wood and you said --

Richard Burton: It wasn't even a foundation at that point.  It was just a bunch of ragtag nutters just saying Ethereum was a thing.

Peter McCormack: In your quote, he spoke about the goals of the project and how they wanted to build a blockchain supercomputer which could run programmes which couldn't be stopped.

Richard Burton: Yeah, and that's actually a really great way I think to describe these blockchains.  Everyone talks about decentralisation but for the regular folks, they don't understand what that means.  But every time I've said you can write unstoppable software, that kind of makes people feel strange.  They're like, "What do you mean unstoppable?"  Well it just cannot be stopped.  I mean there is now no government, company, person, project or anything that can stop Ethereum or bring it totally to its knees.  They can certainly slow it down, as they've proved in the last weekend, but unstoppable software has some very interesting properties and that I think is why Ethereum is this expensive, trustworthy world computer for unstoppable software, and I think that's great.

Peter McCormack: Whereas EOS could be stopped?

Richard Burton: EOS, the way it works I believe, I mean my level of understanding is that people wish to become block producers or they wish to run these kind of large data centres on which EOS-based dapps will run.  And let's say that there's a bunch of these data centres, just like Amazon or Google, and the market cap of EOS and all the applications running on top of it is several trillion.  At a certain point it makes sense to just send a bunch of guys in with grenades and blow the data centres up and short the whole market. 

So the level of decentralisation there is very limited.  So you've kind of got this really narrow set of trade-offs, which again is super interesting if you're going to burn say $50 million to $100 million; but when you get into the billions without actually shipping anything, it's absolutely mental.

Peter McCormack: So I try and understand, myself as somebody who might invest in this or talks to other people who might invest in this, therefore what is the point; what is that middle ground between a fully decentralised Ethereum and a fully centralised AWS?  What is the benefit of this middle ground which isn't as fast as… ?  So essentially you don't get the benefits of --

Richard Burton: I honestly think that it's very hard to understand these things beforehand.  I mean we didn't know that the killer dapp for Ethereum would be the token, right?  No one anticipated that really.  I mean obviously, I did a bunch of mock-ups for it where it was like Goldcoin and other kinds of tokens on top of Ethereum, in the couple of months that I helped out for a little bit; but nobody knew that tokens were going to take off like this.  So, you can never really know what the emergent killer dapp for a protocol is.  I mean, everyone thought that Bitcoin would be useful for payments and it's turned out to be great as a store of value.  Some people believed that the whole time, but others didn't. 

So it's great to run these experiments, it's great to see what emerges, but when the kind of founding principles of the project are just so morally questionable and the people involved are all just terrible human beings, as far as I can tell from a bit of light googling and just some of the evidence I've dug up, and when our entire industry is willing to invite people like Brock Pierce to prognosticate on the blockchain, I mean it just drives me nuts.  Like this guy, you only need to google for five minutes to know that this person has had a very dark history, and he is like the Harvey Weinstein of our industry.  He really is awful.

I mean, John Oliver took more courage calling him out than anyone I've ever known in our industry, and that's one of the advisers.  And note that people only parted ways with him when John Oliver actually called him out in public.  So it's just a total shitfest of this kind of EOS, Tether, Bitfinex, circling of money in this crazy dark vortex of shit and we should call it out for what it is, which is a massive scam in which a lot of people are going to lose a load of money, and I think that the more vocal we are about that, the more evidence we'll have to point back to people and say, "Look, we told you".

At the end of the day, you need to focus on the original founding principles and the people of the protocol and where all the mistakes are made.  Ethereum is by no means a paragon of virtue, but I can tell you from personal experience that Vitalik means well and I think that's very different to the founding team at EOS.

Peter McCormack: Can I tell you an interesting fact about John Oliver?

Richard Burton: Sure.

Peter McCormack: He's from Bedford.  This funny little town.

Richard Burton: Really!

Peter McCormack: He is.  Okay.  So if we move beyond the bullshit of EOS, but imagine there's another protocol that's going to arrive that is of a similar middle-of-the-road centralisation.  So technology-wise, I'm trying to again imagine if you don't get the benefits of decentralisation that you have with Ethereum and you don't get the benefits of the speed of Amazon, I'm trying to understand the middle ground why it exists; and the only scenario I can imagine you would want something that is on a blockchain, which isn't decentralised and isn't as fast as Amazon, is because it allows you to plug into the crypto infrastructure.  Because, once you're part of the crypto infrastructure, you can buy trade coins one of the other.  So, with EOS, you can buy EOS with Ethereum.  So you're part of that network of tokens.  If you go onto Amazon, you're not really part of that network of tokens.

Richard Burton: Well first of all, there's a whole set of things that Amazon doesn't allow to run on their webservers.  So, there are a bunch of different projects that they just deem it unethical or they decide they want to shut down.  Second of all, there are times you can imagine in the future where Amazon may be requested to shut off certain pieces of software depending on where they're at, and so having some kind of middle ground could be super valuable.

I mean a good example, people who experience censorship of their software and payments all the time is the porn industry and that's why you see things like SpankChain coming out, where girls wish to perform online and earn money and web service companies and banks aren't willing to help them.  So, put aside your moral arguments about whether those projects are good or not, censorship does occur even in the most economically developed countries.

So that's just one example I can think of; but I'm not going to really purport to be an expert on understanding what kinds of things might emerge as this set of trade-offs go left and right.  You're asking a question I know I don't know the answer to, so I'm going to be honest about that; but we can always talk from first principles about what great software projects have as the kind of nourishing initial ingredients, and usually it's very interesting people who work incredibly hard, who have strong principles and ideas about the future and that's not something that can be said for the EOS team.

Peter McCormack: So interestingly, usually I start an interview with a bit of an origin story!  I've got to the origin of how I've got to know you!  I actually think before we go back to protocols, because I do have more questions for you, it would probably be good also to just let people know a bit about your story, because actually I was reading a bit about you living in a HackAHouse in San Francisco, you were running out of money, you were living on credit cards, you did a bit of work and then you got a random email telling you you'd be paid in ETH, and then the bull market changed everything.

Richard Burton: Yeah.  There's quite a few aspects to that. 

Peter McCormack: The whole story is worth telling.

Richard Burton: Yeah sure.  I mean in brief, I stumbled into a project call Stripe for a few months which is where I met my business partner, Christian.  Stripe, if you don't know, is a payments company which was growing incredibly fast in San Francisco.  Previously I'd sold some clothing online, so I had some experience of how hard it is to integrate a payment system, and joining Stripe really changed my life because just for a few months, I got to see inside a company that was growing exponentially; it was just basically growing like that.  And after that, you have this bar for what's possible and also looking back, I have this mental model of what a really great founder looks like, because Patrick and John from Stripe are just truly next-level people.  I like to call them aliens, because they're just operating on different frequencies. 

So after Stripe, I wanted to learn how to make things and write software and I was travelling and teaching myself to code and doing different things.  I kept investing in crazy stuff and one of the projects I invested in was a recruiting website called Sourcing.io.  I put all of my time and personal capital into that to help a friend.  We got that to break even.  Unfortunately, we parted ways and weren't working together anymore.

But I was basically flat broke and I was running around San Francisco and heard Vitalik come on a podcast, which was amazing, listening to him talking about building a blockchain computer.  It sounded really fascinating, although I couldn't quite fathom what he was talking about.  But then it just so happened that the HackAHouse I was staying at, Gavin Wood was there giving a talk, and I hung out with him a little bit in California, wandered around with the whole ragtag Ethereum crew around Silicon Valley and then when I got back to Britain.  I went to London, crashed on a friend's couch and met up with Gavin a couple of times and just iterated on loads of designs for what Ethereum might look like for people to use.  I made a dapp store, a whisper monitor, a wallet, a bunch of network monitoring tools, a whole set of things that people might use for Ethereum.

Then literally, the credit card debt got too much, so I went back to freelancing and started paying off all that debt and kind of just left the Ethereum community until the presale came along and I was like, "Oh, great, they managed to actually get the sale going".  I chucked in a little bit of money and then honestly just forgot about Ethereum for a couple of years.  And then Ethan Wilding, who's a goddam saint who'd stuck with it the whole time, got in touch and said, "Hey, we owe you some Ethereum", and I was like, "You know, I don't even think about it", and then a few months later Vitalik paid me and I just couldn't believe it; it was just a whole different level. 

I went from being in massive debt to the banks, or not massive; I was paying down a lot of it and it was nearly done and some of the investments I was making started to pay off.  But I went from being in debt to the banks to being in debt, I think, to the Ethereum protocol and the team behind it and all the people who put in the hard work for the years whilst I wasn't there.  And last year, when the mega bull run hit, I was like, "Right I've got to see what the hell's going on here.  I mean this is just bonkers and I want to see if I can help", and that's what I've being trying to do for the last year together with my business partner, Christian, and the team we have here at Balance.

Peter McCormack: At what level did you first sell a bit of Ethereum, because as the price went up it was rather tempting?

Richard Burton: Dude, when I first got it, I sold a bunch for like $9 because I was like, "This is crazy.  It's gone from 30 cents to $9, I've made a huge return".

Peter McCormack: That might have been me actually!  When I first got in, it was $9.

Richard Burton: I hope it was yours mate and I'm glad you had it.  It seemed like crazy when it went to $9, so ever since then it's been bananas.  But I have to say that the major thing I've invested in since is just trying to keep Balance alive. 

Peter McCormack: I was going to say from there, that kind of reignited your interest back into it?

Richard Burton: Yeah.  I mean I like to say that people get interested for the prices and they stick around for the values.  If you're only here to trade, most people fuck off the minute they lose a load of money.

Peter McCormack: Yeah.  So you came back in and you realised you wanted to work building something.  Was Balance the first project you started on?

Richard Burton: Well Balance was like a personal finance Mac app that me and Christian and a friend of ours were working on as a side project, and it just so happened that Christian was living with the mastermind of the Filecoin sale.  This chap invited us out to the Caribbean to go and meet the Filecoin team and we were thinking about helping them, and after a week, two things were kind of set in my mind were that 2017 is going to be nuts, and that protocol developers really undervalue product design.

With those two things in mind, we set about starting refocussing the company from personal finance tools for banks to products for protocols, and it's been a kind of year-long reorientation which has been extremely painful, because it's really hard to make great software that people actually like.  We've made a load of beautiful things that no one uses and finally we've shipped something that people actually like.

Peter McCormack: Okay, so let's go through that.  What was the first original idea, because there are a whole suite of things you can do with Balance.  I've seen the long-term road map, I've seen the suite of products that you want to create interfaces for, but what was the original spark; what was the idea you guys came to?

Richard Burton: The spark was just I went to interview at a company called Plaid which is a really cool project.  They do banking data and we spent a year and a half building a personal finance Mac app that sits in the top row of your Mac as a fun side project.  We launched this thing and then Plaid's data provider, Intuit, pulled all the data and wrecked our app, so just destroyed it.  So a year and a half, half my Ether and a hell of a lot of time and effort went into building a personal finance tool that was basically unusable.  So that was great.

Then the bull run came and I was like, "Oh fantastic.  Let's actually dive back into Ethereum".  And then we made a bunch of Mac apps for different exchanges and an iPhone app and all this stuff that's just absolutely shit, and then in December we started kind of experimenting with a web app, and in February we made a huge shift in the company.  We went from writing Swift Mac apps to writing React web apps.  We went from doing things closed source to open source.  We went from a team of ten people distributed across the world to three or four people in one place.  We went from talking about our products at the end of the product cycle to me raving about them on Twitter beforehand to get feedback and constantly iterating.

So it was an incredibly painful shift for the company, but now what we've settled on is a set of user interfaces, initially for Ethereum and then other protocols we believe in, which together will make up an open-source bank.  And that's really Balance's goal, is to build a fully open-source bank, so you can do everything you can do with a normal bank, but do it with Balance.

Peter McCormack:  How does somebody like me get my head around an open-source bank in that, I can look at your wallet and I can get my head round, okay, there's a wallet here, but this is a wallet for holding crypto tokens.  When you say an open source bank, does this mean you're building technology that anyone else can build upon, or are you building a suite that sits within Balance?

Richard Burton: I'm not sure I'd use any of those words to describe it, so you've set up a false dichotomy there.

Peter McCormack: Right, okay.

Richard Burton: Here's the bottom line.  By the end of this year, you will be able to go into our products on the phone and the web, you'll be able to get a loan, you'll be able to exchange any kind of token, you'll be able to store your money in stable tokens like Dai, you'll be able to exchange assets from Bitcoin to Ethereum and you'll be able to do basically any of the economic functions that are available on Ethereum as a set of smart contracts that we really like.

So we love the DAMA protocol for lending, the 0x protocol for exchanging assets and things like dYdX for derivatives.  So, if you think about that -- and obviously Dai as the stable coin -- if you think about that, we just recreated every major function of a bank, not ourselves but by using the sets of smart contracts that exist on Ethereum that come from other teams. 

So if we zoom out and look at all the banks in the world, they all write a ledger, they all write sending, they all write receiving, they all write exchanging, they all write lending, but now you don't need to do that anymore, because right now we have a common economic infrastructure that exists on Ethereum that today is super slow, super hard to use and basically won't benefit anyone; but that will change very quickly. 

The first product that I think's going have a meaningful impact is doing student loans for programming courses entirely on Ethereum, and you can view them and manage them in Balance.

Peter McCormack: So that sounds really interesting, but can you explain that as a user experience?  If somebody wants a loan and imagine they're non-crypto, imagine they've had no exposure to crypto, what would their experience be of then going to take a loan?

Richard Burton: So, you would get an email saying, "Hey you're accepted to the student programming course.  It's a three-month course and by the way, you can get $5,000 of super-low interest debt from our partner, Balance".  They click on that link, they go to Balance and they've got $5,000 of Dai and they go, "What the fuck is Dai?", and then they have to learn about Dai and then convert that to dollars with one of our partners, who's going to do a Dai to dollar exchange, and then they'll start to go, "Wait, where's this loan come from; why are they lending it to me and how does it function?"

So the beauty of this is that we're going to give money to people denominated in Dai, so it's a crypto-based loan, and then they have to themselves go and convert it into dollars.  So we will teach people about crypto by kind of inviting them in with a very, very low interest loan.  I think that's a very good hook.  And the reason why I want to do programming courses or design courses is I think there's a massive student loan bubble where people are spending way too much on way too useless courses.  I've helped a few people through some programming courses and it changes their life.  I mean it changed my life doing a programming course.  Not that I'm necessarily a great engineer, but it helped me in three months completely level up.

Peter McCormack: So, okay I'm going to just focus in on that.  So they've received their loan, they access it on a mobile app, on a web browser, they can view it and it's denominated in Dai and that's MakerDAO?

Richard Burton: Yeah, that's right.

Peter McCormack: If they want to withdraw that to their bank account so they can use the money, is that what it is or is the loan paying for the course?

Richard Burton: They can spend it however they want, but the bottom line is we know that they're going to be three months doing an intense programming course and that this course will have said, "These are our lowest economically-secure students".  So we're certainly not going to help people who are getting mummy and daddy paying for the whole thing.  It's more like every one of these courses has a band of students who couldn't do it if they couldn't access finance, so we're going to help those people.

Peter McCormack: Okay, so there will be some method of transferring it, converting it to dollar, pound, whatever and back into their bank account.

Richard Burton: Yeah, and we've got a partnership we'll be announcing.  We can't announce it yet.  We'd like to be open about it, but they're not able to discuss it.  But yeah, essentially these are people who are opting into a programming course who are going to learn about programmatic money.  I mean it's the perfect time, right?

Peter McCormack: Right and they can withdraw $20 or the whole amount in one go?

Richard Burton: They can do whatever they want.  They can take the $5,000 out and they can spend it and never pay it back, but this is going to be an alumni smart contract.  So, when you pay it back, the vast majority of the capital will be given then to future students of that school.

Peter McCormack: Okay, that's cool and Dai is a stable coin.  Is it DAO or Dai?

Richard Burton: It's Dai, so dollar or Dai, and it's Maker is the governance token for that project.  It's an amazing set of smart contracts.

Peter McCormack: What is it pegged to; is it pegged to the dollar?

Richard Burton: Yeah, it's a peg coin to the dollar.

Peter McCormack: Okay, and is there an interest on this loan?

Richard Burton: Yeah, we haven't decided yet what that'll be.  The goal will be just to make the system economically viable and it'll be an experiment.  We'll just start with say a few hundred thousand dollars of loans and kick the flywheel off.

Peter McCormack: I guess this is like an interesting concept in that you know we have loans from banks traditionally.  How do loans scan in a crypto world where we don't always know who we're lending to; will there always be a KYC process of identity before they can receive the loan; is that something you're planning for?

Richard Burton: So, I believe that because more people can start and create an issue debt on DAMA, which runs on Ethereum, we're going to just see a massive set of experiments.  So Bloom is creating a credit score network on Ethereum, and so you can imagine for sizeable loans for hundreds of thousands of dollars.  You will need KYC and things like that, but imagine that you also participate in some kind of microfinance event in a country in some of these less economically developed regions.  You get $10 of microcredit, you pay it back and you build some kind of credit score anonymously and then you want that Ethereum address never to have a dipped credit score, because you want to keep borrowing more and more money to improve your life. 

So that's one area.  We're also talking about pawning CryptoKitties, which could be fascinating, and another thing is the ability to stake your existing tokens to borrow different kinds. We're going to see just an unbelievable Cambrian explosion of experimentation around debt.  It's my opinion that when the ability to issue debt is commoditised, the only thing people will trust is brand and customer service and that's what Balance plans to deliver, is a fantastic way to get sensible loans out that exist on top of open-source software; and you can take those loans to any other wallet or you can take them to any other service provider.  So the only reason why you would use Balance as your originator and pay us the interest and continue to pay off our initial capital expenditure is because we give great customer service.

So, in the same way that Microsoft has a monopoly on its software and so its customer support is dogshit, whereas Linux is this kind of horizontal ecosystem, where every company competes based on user experience and customer support, we think the exact same thing is about to happen to the banking system that just happened to the operating system.  When everything is open source, what do people stick to?  They stick to community, they stick to brand and they stick to customer support, and those are the things that we're spending an awful lot of time focussing on at Balance.

Peter McCormack: So is Balance a software company or a "future bank"?

Richard Burton: Well, I think we're an attempt at creating an open-source bank.  I don't think that regular people on the street are going to gravitate towards an open-source bank because it's open source, I think they'll gravitate towards it because it's better; and I believe that we should be able to do something better because it's open source.  In the same way that Linux One and Windows made a bit of money, in the long term Linux cajoled Windows over the head with its free, open-source software. 

Eventually, the only reason Microsoft has returned to growth as a company is they've said, "We're an open-source running company"; that is why Satya Nadella is an incredible CEO, is he recognised they made a mistake in the long term.

Peter McCormack: So if that's the journey you're on and that's the path you're going down, does that mean there are certain regulatory things you have to do; do you have to register for a banking licence; is that something you have to look at?

Richard Burton: I think if we interact with the USD or GBP or EUR protocol, we absolutely will have to, and that's something I'm definitely willing to explore further down the line.  But right now, I'm focussed and we are all focussed as a team on the ETH protocol, which is permissionless and currently doesn't have any meaningful regulation whatsoever.  So, as and when the regulation comes in, we'll definitely pay attention to it; but so far, no government has made any meaningful regulations over the Ethereum protocol, so it's not something I'm going to focus on right now. 

I'm very happy to abide by all laws and regulations as and when they come in, but the problem is it's an unstoppable protocol that cannot really be affected by government, so I don't know how they're going to regulate over it.

Peter McCormack: Okay that sounds cool.  So, at the moment though your products, you do have a wallet out there, right?

Richard Burton: No, we don't.  What we have is a manager.

Peter McCormack: What's the difference between a manager and a wallet?

Richard Burton: A manager manages wallets.  A wallet actually has private keys.  So, a manager is a tool to interact with your wallets.  So, it interacts with MetaMask, Trezor and Ledger and it allows you to view your Ethereum and your Ethereum-based tokens.  It's relatively limited in scope.

Peter McCormack: So it's like a beautiful interface.  Is that similar then to -- is MyEtherWallet considered a manager?

Richard Burton: That's what we described it as.  So, MyEtherWallet became quite confusing to people, because they didn't understand the difference between a wallet which actually has private keys and a thing that actually interacts with it and how these different products work.  MyCrypto, which has spun off from MyEtherWallet and is doing much better work than the MyEtherWallet team, is just doing a much better job of articulating that MyCrypto is a user interface to Ethereum which interacts with your private keys and the Ethereum protocol and brings it together in a useful user experience; that's why we called Balance Manager, "Balance Manager"; it's for managing a wallet.  But we are working on a wallet for iOS right now, which is coming along really nicely.

Peter McCormack: Does your manager work also with Ledger and Trezor and their hardware?

Richard Burton: Yeah, it works with Ledger, Trezor and MetaMask.

Peter McCormack: So, where do you consider yourself when you compare yourself -- I've looked at MyEtherWallet and MyCrypto and I've looked at yours and what it looks like, I just can't stand MyEtherWallet, I think it's ugly and just horrible to use and MyCrypto was similar to begin with.  They've done a lot more work on UX.  It looks like you're setting your UX as your USP.

Richard Burton: Yeah.  I mean first of all, I won't hear much criticism for any of the projects that got us from zero to one.  I mean these are people who -- there was nothing and then something existed and a huge part of Ethereum's value was derived by MyEtherWallet existing, and an enormous amount of value was derived from MetaMask existing.  So, I hear a lot of people criticising these projects without any appreciation of just how hard these people worked to manage the ICO boom last year. 

When I hear companies saying, "We're waiting on MetaMask to add this feature", I'm like, "Well, you've got $100 million, why don't you hire a MetaMask engineer, someone to work on the project full time?  It's open-source code, why don't you help them instead of moaning?"  So I think the MetaMask and MyCrypto team have done an amazing job of building Swiss Army Knives for Ethereum that can do loads and loads of things. 

If you log in to MyCrypto, it's amazing the amount of things you can do.  You can submit to contracts, you can do all kinds of byte code initialisation, you can do things on your desktop with your private keys, you can do air-gap stuff, you can import your JSON wallet.  There's so many advance tools in there that I view it like the Swiss Army Knife.  What we felt was missing is not a suggestion that better usability can't be done, it's that just by focussing on a couple of features, the ability to send and the ability to receive and the ability to view your tokens, that would be of some value and that's really what Balance is.  It's focussing on managing your token balances and exchanging them and sending them, and that's it.

Peter McCormack: I think you've done a great job there of being respectful to everyone who's come before you.  That isn't something I've had to experience or understand or care for.  What I can see is that Balance seems to me to be a more consumer-ready product.

So, I'm always trying to think of when I go out on Friday night with my friends, who are doing traditional jobs, traditional markets, how do we bridge the gap from crypto to it being part of their lives?  We're a long way from that.  Even the ones who have bought a little bit of Bitcoin because they've heard about it from me, say they bought a token, say they figured out how to find a token, if you put them in front of MyEtherWallet, they are not going to know what to do.

Richard Burton: Yeah.  Well, that's because you need to give up talking to people in England and you need to go to Argentina.  You need to stop talking to people older than you and go start talking to kids.  I will not waste one iota of energy on anyone who's grown up in a strong financial country or never experienced debt, because that's what I had.  I got to experience crippling credit card debt, so I got to see the tricks that these banks did when I tried to even just pay off my credit cards; it was crazy. 

I actually recently logged in and just tried to pay off an entire credit card and it wouldn't let me.  So I've actually screenshotted all of the user interface and I've decided, "You know what, I'm never going to pay you back until you fix this design".  So that's going to be one of the little posts that I stand on.  I don't care about my credit rating on the GBP protocol, you can do one.  So, I don't spend any energy trying to talk to these people who've never actually been persecuted by the financial system.  So, if you're going to try and convince your mates down the pub, it's not going to work. 

If you go to countries that actually have suffered from men continually printing money and men continually setting up incentives incorrectly like they do at most banks, then we're going to have a conversation; and that's why I don't care about people who don't agree that Bitcoin's a good idea, I care about students who are terrified of potentially going into massive amounts of debt to go to university, who could go and do a programming course for three months and change their lives.  Those are the people I focus on and by focussing down on those people, I've saved myself a whole lot of heartache and headache, because those are the people who eventually will grow up as crypto natives and all the rest of these people are just going to die and that's fine.

Peter McCormack: Well that's quite interesting then actually, because funnily enough, I'm talking about what I think is the USP that you guys have is just a beautiful experience as a product, but actually for you --

Richard Burton: But it's for advanced users still.  It's like, if you're trading tokens and moving them around Ethereum, this is the premium model-esque product and we want to deliver something that's middle of the range with the wallet, but then our plan is to do user interfaces that everyone can benefit from, whether you've got a tiny android phone or a something more advanced.  So, absolutely our goal is to make this thing accessible and useful to regular people. 

Peter McCormack: So what have been your biggest challenges to getting to where you are now and what are the future challenges you're facing?  You alluded to them earlier that you had trouble creating things that people wanted to use.  What are your challenges?

Richard Burton: Yeah.  Well my biggest challenge is I'm a shit CEO, because I've only been doing this for about a year.  So by definition, I'm a junior manager, I've no idea what I'm doing.  I get loads of people commenting on me all the time and I get pretty pissed off with them.  Hiring and firing, well not even firing, just hiring and having to part ways with friends, we haven't fired anyone because no one's done a bad job, it's just we've completely shifted the direction of the company, and that's been incredibly painful.

Realising that just because you've punted into Ethereum early doesn't mean you're any good at anything whatsoever, and coming to terms with that as a reality, of looking yourself in the mirror, that's bloody painful psychologically.  Running a start-up is quite frankly I think -- the only thing that's more stressful is being a soldier or a fireman, because you actually put your life on the line.  The only thing I won't do for Balance is die for it.

Peter McCormack: What is it you said this week?  You said, "Running a start-up is like trying to get out of a plane which is about to crash".  I've got the quote here…

Richard Burton: I'm not trying to get out, I'm trying to fucking right it!  It's like the beginning of Goldeneye if you've seen that movie.

Peter McCormack: Oh yeah.

Richard Burton: Where he sends the plane off the cliff and he jumps after it on the motorbike, and then you get into the plane and try and pull the stick back.  I'd say the only thing Balance has managed to achieve is pull ourselves out of terminal decline and we're starting to head up, but Christ alive, I don't recommend anyone start a company unless they're really up for it, because it's bloody psychologically painful and it's exhausting.  You have to be relentless in a way that I didn't really realise until you actually really try and do it.

I've always done little self-funded instantly profitable, little side projects; that's totally different to raising $1.4 million at a $10 million valuation, genuinely looking people in the face and saying, "I can deliver you a $50 million to $100 million company at a minimum".  I mean that's just a whole different kettle of fish.  So that's the struggle, it's the struggle of every founder of, "Actually I'm shit and I've got to get better".  So, yeah.

Peter McCormack: Okay, because this is the first time you've really done this, right?

Richard Burton: Well, it's the first time I've raised outside capital for a company.  Everything else, I put my own money at risk and that's been it.

Peter McCormack: So, you're feeling the pressure of what, delivery of the product, or delivery of a return, or just everything?

Richard Burton: For seven months after we raised money, we were doing a shit job, we really were.  We were making crap products and that was for several reasons, and that's not a nice feeling.  You can see I spent about four or five months off Twitter, because it was a combination of a breakup, token depression where I just saw this whole industry as a load of dogshit, and then not even using our own product because I thought it was crap. 

So, that's just the reality of it, is I really did not like what was happening in the industry, did not like what was happening in my personal life and didn't like the products we were making.  So, that doesn't make for a fun six months.  So, although I made an absolute fortune selling Ether at $1,400 or whatever, where I just couldn't believe that these people are actually buying off me at this price, it didn't make me happy at all.  Once we got the basics covered, Christ, to be honest it's not easy.  It's not easy running a company at all and I've a lot of empathy and sympathy for all the founders I know and honestly, I think only a founder can know actually. 

I've more respect now for people who sold a bloody glass of lemonade then anyone who's just had a job their entire life, if they're going to comment on what we're doing and that's something I think very strongly is that, until you actually start something yourself, you can't really know what it's like.  It's like you don't take advice on how to make love from a virgin, and the same is true of starting companies and starting a new project is that, if someone has had a job their whole life, it's like they silent when they're giving me advice.  I just can't listen to it.

Peter McCormack: So, where are you now?  You're obviously in a better place now, you said you've turned it back a bit, what's changed then; what's happened; what have you learned along the way or what's happened with the product that makes you a little bit happier and a little bit more confident?

Richard Burton: Oh, I'm loads happier.  First of all, we all really believe in what we're doing; second of all, customers absolutely love it; third of all, it's open source, so we're getting really good support from the community on how we're building out; fourth, we've got a clear plan for what we're going to ship; and fifth, even if the whole project fails and I had to sit opposite the 1,600 people who invested money in this company, I would very happily say, "I absolutely tried my goddam best and I could not have done anything more", and that's a good feeling.

It's very liberating to know that, because the chances of us building a successful open-source bank are, from outside, infinitesimally small.  From inside my head, it's damn certain we're going to do it, but there is a reality that most start-ups fail.  And if this failed, I could very happily say to all of the people that invested in us that no one tried harder to make this thing work and that's a great feeling.  It really is the most liberating feeling, because I go forward just fighting instead of agonising over every dollar spent and that's good.

Peter McCormack: So your current status now is you have your manager out.

Richard Burton: Yeah, Balance Manager is out and it's growing nicely and we're getting thousands of users.  We don't track them, so we can just know the number of people who are entering our marketing website, but we're currently thinking very carefully about what things we want to track, because we really want to make sure that we don't have any data that any government agency could ask for.

Peter McCormack: Right.  Okay, that's an interesting separate thing to talk about!  Why is that?

Richard Burton: Well, because that's the principle of crypto, is that people should be able to tell their government what they would like, they shouldn't be surveilled; and so we shy away from adding any tool.  We're quite happy to add Google Analytics to the marketing page as people come in.  At the point at which you're associating your MetaMask address with our product, we need to be super careful about what code we allow in terms of tracking and things like that.  We just haven't had the mental bandwidth to think about that really carefully, and so we're not actually tracking any usage of Manager right now.  It's something we're thinking really carefully about before we introduce that.

Peter McCormack: Right, okay.  So, what is coming next then?  If the Manager is going well, what is the next product you're looking at; do you have an exchange as well?  I've seen an exchange on your website.  Is that your own exchange?

Richard Burton: It's a basic ShapeShift integration, so if you want to exchange Ether for any Ethereum-based token that ShapeShift offer, you can do that.  We spent an incredible amount of time thinking about that interface and trying to get that right.  I think that nearly all exchanges are designed terribly and are very confusing, so we just try to present the token that you've got, the token that you'd like, the price for that in the native currency that you operate in, the price that you'll get, the fees that are associated with that, the minimum and the maximum trade and the likely price outcome; just stuff that seems relatively simple when you view it, but actually we iterated on that design for the better part of four months to get to it and we'll be adding more and more tokens to it very shortly, particularly when we do an integration with the version 2 of the 0x project's protocol and I'm very excited about that.

Peter McCormack: So what are the next things within the product suite for this decentralised bank or open-source bank?

Richard Burton: Yeah, so one thing that we incubated is something called WalletConnect, which is something like a QR code style login for dapps.  We've spun that out from Balance after it was awarded an Ethereum Foundation grant.  We've separated it from Balance and that's being run by Pedro, this guy who came up with the idea.  So, WalletConnect is really cool.  You're going to start seeing this popping up not just in Balance Manager, but in projects like Radar Relay and CryptoKitties and a ton of other dapps. 

What this allows you to do is use your mobile wallet, whether it's ION token or Trust Wallet or any of the other popular Ethereum wallets that live on your phone, you can just scan a QR code to log in to the dapp, and then when you initiate a transaction, say buying a CryptoKitty or making a trade on Radar Relay, a notification is going to pop up on your phone; you can tap on that and that's going to connect and initiate the transaction on the Ethereum network. 

The reason this is good is that it's providing an alternative to a Chrome-based or browser-based wallet like MetaMask.  If you've ever used WhatsApp on the web, you'll understand the user experience here, where the kind of core app is living on your phone, but you authenticate it on your desktop and you can log in.  So, that's actually very close to a 1.0 and Pedro is doing a fantastic job there, and this summer we want to release our take on a mobile wallet for Ethereum and Ethereum-based tokens.  So, that'll be the Balance wallet which will only run on iOS to start with, with full WalletConnect support, and you'll be able to initially log in to Manager on the web using that.

So, really what we're doing is laying the usability groundwork.  There's not many reasons there why someone would use us over anything else, but this is all of the tools we need to then issue things like loans, offer insurance, offer derivatives, offer much more rich exchange products.  This is the kind of set of user experiences we want to offer, so a web-based application, a mobile wallet as the core store of keys and then WalletConnect, which links the two; and then we're going to start to offer loads of financial services on top of that.  Hopefully, we'll have student loans done before the end of the year, ideally in the autumn.

Peter McCormack: It's funny you should say student loans as well, because it makes me think of a couple of things.  I saw you tweet out recently about, you re-tweeted something where somebody paid so much off their debt or they paid so much against their student debt, but hardly paid any actually off.  So, it's obviously something that's important to you; but also at the same time conversely, I noticed the other day you were talking about recruiting on Twitter and on AngelList. 

You just ask four questions when they apply for a job, but actually what was really interesting about that is there's nothing there related to education as well.  So I'm getting the sense that you're not the biggest fan of the education system or the need for higher education or the need to get in so much debt for certain areas of higher education.

Richard Burton: Yeah.  Let me be totally clear here about a few things.  Having dropped out of university after three lectures, I've never ever cared about what credentials someone has.  I care much more about the content of their being. 

Peter McCormack: Where did you drop out?

Richard Burton: I was at Edinburgh University.

Peter McCormack: Three lectures in.  So the first day?

Richard Burton: No, it may have been the fifth day, because I'd missed a bunch of lectures on the first few days, so I don't know.

Peter McCormack: What happened?

Richard Burton: Well actually, what happened is I walked into the thing and I was like, "Do you mind if I stay in halls, but drop out?" because there were like lots of nice people in halls and I was kind of enjoying it; and they were like, "No, you can't do that", and I was like, "Okay".  I really love studying and I just didn't do anything for a year and I dropped out on the last day.

Peter McCormack: So what went wrong?  Sorry, before you go into that, because that's really interesting to know.

Richard Burton: What went right, don't you mean?  I mean it's all been right, well not all been right actually, some things have been wrong --

Peter McCormack: No, but you obviously went to university with good intentions.  What did you go to study?

Richard Burton: I was running a clothing company called hoodeasy and it sold hoodies and it made it easy, so a really clever name!  But basically, if you can imagine, every order I got my phone buzzed.  It was the only thing I let my phone buzz.  I was sat in these lectures and I'm bored to hell already after two lectures and my phone's going, "Buzz, buzz, buzz" and I was like, "Fuck this studying thing".  So, it isn't like I dropped out, I dropped into something I was enjoying more, which is building this website and running this clothing company.

Peter McCormack: It's funny, I had a similar thing.  I dropped out of my second-ish year at uni.  I used to write a fanzine when I was a kid, a music one.  I used to get it printed at my friend's dad's estate agents.  We used to print it and just give it out at concerts, and then I went to uni and I wanted to put it online and the internet had just started.  I learned to code websites and I was working in a Wetherspoon's pub for about £3.50 an hour.  My landlord had a company and he said, "Will you build me a website?" and I built it for like £400, so I didn't have to go to work for two weeks.  Then there was a recruitment company, which was £2,500 for a website.

Then I got a phone call from one of the very first dotcoms, they were called ecountries.com.  They'd seen me on a freelancer's board, and bear in mind I'd been learning to code html for two months and they said, "Can you come and work for us?  We've got a contract", I think it was three weeks, "but we can only afford to pay you £900 a week", and bear in mind I was earning £3 an hour as a student.  So, I took it and I never went back to uni.  So a similar scenario, right?

Richard Burton: Yeah, but then let's take the opposite side of the case there.  You're a programmer, I'm a programmer, but neither of us sound like we're engineers.

Peter McCormack: Yeah.

Richard Burton: Now, engineers are people who just are on a different planet when it comes to the thoroughness with which they assess problems, go through them and solve them and I've really learned the difference; and higher-education-taught engineers are completely different beasts.  Usually self-taught programmers are good at hustling and getting stuff done quickly and throwing it together and getting it working.  Engineers are good at solving massive intractable problems and there's very, very different qualities to those types of people. 

So I don't want to suggest that higher education has no value.  The problem is that when the government subsidises all the student debt, you get all the incentives misaligned where people are incentivised to study for years when they could study for months.  They're incentivised to take out loans that are backstopped by society instead of a marketplace.  The problem is that if no student can default on their loans, then you can't have a healthy marketplace for debt.  You need to be able to read which degrees pay you back and which don't, and then those are the ones that should be supported by higher education. 

Unfortunately a three-year degree in photography, it does not result in enough cashflow from a human being to pay off their debts, and so they should default on their loans and then the market should adjust.  A three-year degree in computer science will more than pay back multiple times, and so the market should adjust.  So, the problem with the student debt bubble is just a bunch of mispricing of opportunity and debt.  And the reason why I like things like programming courses is it's like a modern-day apprenticeship.  So you do that hyperintense three months with a couple of months of study before and a month or so afterwards of finding a job and then you're in an internship and you're actually learning. 

You're not going to be an engineer after three months, but you are going to be a competent programmer who can level up over time at a company that wants to invest in you, and you can eventually become an engineer; and that's true for design, it's true for a whole bunch of things like project management and all these things, these high-skilled jobs that the economy needs.  Those things can be kickstarted with a three-month course that's hyperintense and there's not enough of that, I think.

Peter McCormack: That's interesting.  You're not just thinking about open-sourcing banking protocols, but you're rethinking the approach to debt and how people might consider debt with education; that's just very interesting.

Richard Burton: Yeah, I mean I wouldn't say that it's original thought coming from me; this is just lucky experience.  I experienced going to a programming course, it completely changed the trajectory of my life.  That's where I discovered both the lady that I work with here at Balance, who's one of the best engineers I've ever worked with, and I discovered Bitcoin.  So it completely changed my life.  And then last year, I helped a couple of kids go through one of these programming courses.  They went from exactly as you were, just serving coffee and having absolutely no hope whatsoever, to living in Portugal and programming by the coast and surfing and travelling the world.  I mean they're having a great time. 

So seeing these transformations, it's the very definition of -- everyone talks about upward mobility and these really vague top-level concepts.  I want to know specifically how many people we've helped just completely right-angle their life and right now it's a few.  Hopefully by the end of the year, it'll be a couple of dozen and next year it'll be several hundred and we'll go from there.

Peter McCormack: Amazing.  We did an hour there really quick!

Richard Burton: I'm happy talking some more, no problem.

Peter McCormack: Well we've got a few people on.  Some might want to ask some questions, so before we move onto that, because this will go out as a podcast, can you let people know how to get hold of you, how to keep an eye on what balance is doing, who you want to hear from and why you want to hear from people?

Richard Burton: Sure, I mean the best way is Twitter.  I get a lot of idiots email me, but a lot of very smart people DM me, so I really appreciate Twitter.  So, if you'd like to send me a direct message on Twitter, I stay on top of it all the time and to the extent that I can help, I will.  So it's @ricburton.  I'm not really searching for anyone right now, I'm working with all the people that we need. 

We're always interested in talking to great engineers, particularly we're focussed on React right now, but if anyone's interested in actually working on a project, if you're technical then check out our GitHub, it's all open source; and if you're non-technical, then join our community in Spectrum which is this awesome community tool at spectrum.chat/balance and you can see all of the things that we need help on that are non-technical, but unfortunately no one's been able to help with any of those.  So, that's it.

Peter McCormack: Well I'll share that on the show notes as well.  So that's been amazing, thank you.

Richard Burton: Cheers for that.