WBD665 Audio Transcription
I Was Kidnapped… Twice with John D'Agostino
Release date: Wednesday 31st May
Note: the following is a transcription of my interview with John D’Agostino. 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.
John D'Agostino is the Institutional Lead for Advisory and Strategic Partnerships at Coinbase. In this interview, we discuss his background working for the New York Mercantile Exchange, seeking out enjoyment, and the flip side of getting kidnapped. We also talk about the maturity of the Bitcoin market, covering both the regulatory threats and institutional appetite.
“Action begets action. Bodies at rest tend to stay at rest. Bodies in motion tend to stay in motion… Make something happen, anything.”
— John D'Agostino
Interview Transcription
Peter McCormack: All right, good morning, John, good to see you again.
John D'Agostino: Good to see you Peter.
Peter McCormack: From Bedford to Miami.
John D'Agostino: Yes.
Peter McCormack: How was that experience for you? Be honest.
John D'Agostino: I don't want to come off as too flattering. So I went to Oxford and I'm very familiar with England, I love it, a bit of an Anglophile, very close to the UK Consulate in New York, but I had not experienced that side of it.
Peter McCormack: I was actually born in Reading, the next town from Oxford.
John D'Agostino: Okay, so great experience. Everyone loved Americans back then, Friends was popular. It was fantastic, amazing. Oxford's kind of rural I guess, but you have the whole educational component to it, so I'd never seen that side of England. Maybe this will come off as obsequious, but what you've done there is extraordinary. And so, I'd heard stories about the way that these teams are sort of communal activities and family activity, but as a father, seeing how those families came together and seeing what you've created in the community, it was awesome, I'm a huge fan.
Peter McCormack: Well, I can't take all the credit. There's a lot of people who have been involved in it. Connor there has been hugely involved, Danny's been involved, he's there. Emma, who will be arriving, landing very soon, she's a massive part of it. Had you been to a football match before?
John D'Agostino: No.
Peter McCormack: So your first ever football match was a 10th tier, non-league football match in Bedford?!
John D'Agostino: I mean, just watching the World Cup at a cafe in New York count?
Peter McCormack: No, that doesn't count.
John D'Agostino: Okay, then no.
Peter McCormack: You got lucky as well. What was it, like 7-0, 7-1?
John D'Agostino: Yeah, you crushed them.
Peter McCormack: Yeah. Who were we playing; was it Thame?
Danny Knowles: Yeah, Thame.
Peter McCormack: Oh, we also got the trophy.
John D'Agostino: You got the trophy, I bought a scarf.
Peter McCormack: Yeah.
John D'Agostino: I was walking through the town and I was told by somebody not to wear that scarf in certain parts of the town. So, I almost felt like if you had hired a group of actors to create the idyllic football rural England experience for a visiting American, it could not have gone better.
Peter McCormack: Well, Bedford's very different from Oxford. So Oxford is a, you'd say a posh town.
John D'Agostino: Posh, yeah.
Peter McCormack: It's a wealthy town. Bedford's more of a deprived town. Like any town, it's got its good areas and bad areas, but it's quite deprived. So it's definitely a different experience for people. But what's always amazed me is, actually, I don't think I've ever appreciated it enough, because people come in, they come down the river, they stay at the Embankment or the Swan, they're like, "This is a nice place".
John D'Agostino: From the outside in, it's gorgeous. But I came from Staten Island, which is the Bedford of New York, it sounds like, and from the outside in, Staten Island is not beautiful. It's nice, there's parts that are nice, but for me coming to Bedford, it looked like this idyllic, gorgeous town. I mean, are those real swans?
Peter McCormack: They're real swans, yeah.
John D'Agostino: You could not have those in New York City, somebody would go after the swans.
Peter McCormack: Isn't it a crime against the king to kill a swan?
Danny Knowles: Yeah I think so. They're the property of the king.
Peter McCormack: Yeah, the property of the king. I think if you kill a swan, you go to jail; treason.
John D'Agostino: I always thought those were things they told visiting yanks to just get us --
Danny Knowles: That could also be true!
Peter McCormack: No, I think it's true. What, ten years? Apparently ten years.
John D'Agostino: Ten years per swan?
Peter McCormack: Yeah.
John D'Agostino: Wow!
Peter McCormack: Yeah, so they're real swans, we have real rowers there.
John D'Agostino: Yes, well I rowed, I rowed for Oxford.
Peter McCormack: Oh, did you?
John D'Agostino: That was how I kind of ingratiated myself into UK society.
Peter McCormack: Did you race the boat race?
John D'Agostino: I was not on -- I was on Exeter college team, not in the boat race. I went to the boat race, but I did the summer sprints at Oxford, which are like the university level boat race.
Peter McCormack: So, I went to the boat race this year. Cameron and Tyler Winklevoss got me on the boat that follows the rowers, whatever they call that. That was a wild experience. I didn't appreciate how hard the rowing is from the TV, but when you're following it and you're seeing the water move, how choppy it was, it's like, "This is hard".
John D'Agostino: Oh it's insanely hard. It's the hardest thing I've ever done athletically, and I'm biased, but I think rowers are the optimal athletes, just cardio, fitness, strength. It's tough; if you're not built like Cameron and Tyler, it's tough to row for Oxford, because I think, I forget the physics, but every inch of reach, which is height plus arm length, you give up like 40 pounds of pressure. I'm probably directionally correct, but not exactly. So, if someone's six inches taller than me and has six inches more reach or eight inches more reach, it's a couple of hundred pounds of force that they're able to exert that I'm not. So I had to be -- I don't look it now, I'm about 175, 180 pounds now; I was 210 with almost no body fat.
I used to get up and eat a chicken and lift weights because my only way to catch up, because I'm 6' if I stretch, all the guys I rode with on the senior varsity boat were 6'4", 6'5", and to make up those 4 inches I had to be 100 pounds stronger than them on my pull.
Peter McCormack: I can match you on the weight just not the height. I'm 6' if I lie!
John D'Agostino: Wear lifts; everyone wears lifts now. Reality doesn't matter anymore.
Peter McCormack: So my accountant, Laura, she's very tall, she's basically 6' and she's always ribbing me about my height. We went out one night, she came along, she gave me some lifts to put into my shoes. I was like, "Fuck off". She's like, "No come on you've got to wear them, you're a midget!" and I was like, "No, I'm not wearing them".
Danny Knowles: Did you wear them?
Peter McCormack: I put them in. I got to say, it felt good to be tall!
John D'Agostino: I mean, it's kind of the last thing you can make fun of, right? Short men.
Peter McCormack: Yeah, you get away with that.
John D'Agostino: That's it.
Peter McCormack: Yeah, we haven't we haven't made that --
John D'Agostino: No one's been cancelled for making fun of a short guy.
Peter McCormack: No, I can take -- I mean, my children give it to me all the time. My daughter's 13 and she's caught me up.
John D'Agostino: Does she hold things over you? I used to hold things over my mom's head. My mom, she's Italian, we call them stove height. She says she's 5', but she's -- I used to grab things and hold them over her head. Just, it's cringeworthy how bad I treated my mother.
Peter McCormack: Well, I get it all the time from my son, constantly. I think he asked me, he wanted a step yesterday. But I can still kick his ass.
John D'Agostino: Yeah, until that day you can't.
Peter McCormack: It's close. Occasionally he wins and then I lie, I'm like, "Oh, my back!" But anyway, mate, good to see you.
John D'Agostino: Good to see you.
Peter McCormack: We've got the trophies, we're going to get you back. So, when we were planning this interview, we sat down to talk about it, Danny started telling me stories and I was like, "What? What, that as well?" I was like, "Who is this guy?" There's some shit to talk about today. I know we're going to get into Bitcoin at some point, but there's so much more mad stuff to talk about.
So, most of us have never been kidnapped, let alone twice.
John D'Agostino: We're jumping right in, yeah.
Peter McCormack: Let alone twice! Which one are we starting with; which kidnapping?
Danny Knowles: Which one came first?
John D'Agostino: The fake one. So okay, just to set the stage for why I'm interesting enough to be on your podcast, I guess, if I am at all, I think I've been asked this question a lot, and so the answer I've now come up with is, I realise looking back, I made a decision after business school to optimise for stories. So, I don't know where I got it from, I think it was my dad, but I've always -- whoever dies with the most stories wins; that's been my motto. So, I think when I get asked to give young men advice, my advice to them is just, "You have to optimise for something". I don't know what age, maybe mid-20s. You can optimise for wealth. I went to Harvard Business School, a lot of my friends optimised for wealth, there's nothing wrong with that. I do think you have a moral obligation to do something with it, but fine, optimise for wealth.
Peter McCormack: It's never fulfilling.
John D'Agostino: Probably not, but I know John Arnold, to name-drop him, he's a guy in my industry, the hedge fund industry, who became a multi-billionaire and is doing unbelievable things for the world. I think you're right, I think it's hard to be happy, but it's possible.
Peter McCormack: I think if you make money and you want to do something with it for other people, it's fine. But if you want to make money for you, it never works.
John D'Agostino: I agree, I try not to judge, you do you. But yes, personally, off the record, I don't think that's a happy life. And no one I know, no billionaire I know, who has not turned to others -- look, you can do both, that's the thing about being a billionaire. You can have the planes and jets and everything and still change the world and still do that. I'm not expecting people to be altruistic and give away everything and live in a shack after making $1 billion, but it's always striking to me that you can absolutely do both and have all the elements of life. It's shocking more people don't do it.
But there's that, you can optimise for wealth. You can optimise for power. So a lot of people go into politics or to try to get up in an organisation and don't care as much about equity, value and wealth and whatnot because they want power. Again, that's fine, as long as you are happy and maybe do something good with it. I optimise for stories. So, practically what that means is I just put myself in situations where I could likely do interesting things, and when the opportunity to do those interesting things happened, I grabbed it.
So when I graduated Harvard Business School and signed up to go work for a big investment bank and I'd won this weird fellowship, this interesting organisation called the National Italian American Foundation, I'd won their fellowship. I couldn't afford to go to business school, so they paid for like 90% of it; I won their fellowship that year. And so I graduated, I was going to thank them at their annual event and the Chairman of the New York Mercantile Exchange, which is not a place most Harvard Business School graduates went, was being honoured as man of the year, very famous wealthy Italian guy.
After my speech, he approached me and said, "Are you happy? Where are you going?" I said, "I'm going to go work for XYZ bulge bracket investment bank, two immigrant parents, every dream. It's like, I had made it. And he said, are you happy? I was like, "I'm not really that excited". And he said, "Well, I work for the New York Mercantile Exchange. We're a bunch of degenerate oil traders in the southern pit of Manhattan that set the benchmark for the world's most valuable commodity. You should come work for me". And that was a chance to optimise for wealth or stories, and I chose stories, and that was sort of the beginning of the end.
Then one day, I was in the office late, and he called me up and said, he stuck his head out of his office and said, "I just got a phone call from Sheikh Mohammed in Dubai. They want to open up --" and again, this is 2002, "They want to open up an exchange in Dubai. We're never opening up an exchange in Dubai, that's how he talked, I tell you, we're never doing this, but we've got to be nice, he's a Sheikh. Go over there", just because I was the only one in the office still, "Go to Dubai and just be nice and tell him no". And I went to Dubai and I was supposed to stay for two days. I stayed for ten and I came back and I said, "Vinny, there's something incredible happening there, we need to really consider this", and he was like, "There is no way our board of directors -- we've never done anything internationally. Our first thing is not going to be Dubai". Now everyone talks about Dubai. Back then, nobody talked about Dubai. Six years later, we opened up the exchange in Dubai, first ever derivative exchange to price crude oil in the Middle East.
So stories, the fake kidnapping story. We talked about billionaires getting bored, so I'm not going to name-drop them because you don't want to piss off billionaires, but there's a billionaire I know who does good things. He's a good guy, but he's also bored. One way boredom manifests in men, I found, with wealth is they start doing outrageous things with their wealth. I had not known him, I didn't know him, but I knew a very good friend of his who was his attorney. The attorney and I were working on a deal together and he said, "Oh, you should come meet this guy". I'm going to change the country too because I want to identify him. Let's say Cambodia. He goes, "He's throwing a party in Cambodia and we should go. And I've told him about you", and so I'll keep it brief.
We go to Cambodia, we surprise him. He had a huge party for his family, throwing a party, and we show up and he picks us up in this beautiful minivan with like 20 of his friends from wherever, college, wherever, old friends. And we go and he does a lot of charitable investing. As we go to this very bad part of Cambodia, to show us this charitable school he's built, the van pulls over in a very bad part of Cambodia, and the door opens up and the driver just runs. So we're all sitting there like, "What is going on?" And I was by the front, so I closed the door, because I'm from New York and my Spidey-Sense is sort of tingling, something's going on, I closed the door.
There was a hut, like a shack, door opens up and these ten jacked dudes just come running out and they're pushing the van and they're punching it and they're screaming, "We're going to kill you, we're going to kill you!" They tear the door open, rush in, go straight for me. 20 guys there, straight for me, ignore everybody else, drag me out. One of them grabs this wooden chair on the street, he smashes it, he holds the wood up to my neck, he's like, "We're going to kill you", drags me to the back of this Quonset hut. They got me on my knees, two guys are holding me from the back, very tight, which I found out later was to protect me, and they're doing these crazy kicks, like spin kicks, missing my face by an inch, screaming. The whole thing lasted like probably 90 seconds to 120 seconds, maybe 3 or 4 minutes.
Peter McCormack: Felt longer?
John D'Agostino: Felt like a lifetime. And now, Peter, as men, we all like to think how we'll act in that situation, when we think we're about to die, and we'll act stoically. Absolutely not. I was a mess, I was offering anything they wanted, I just melted down completely.
Peter McCormack: Be all shit and tears.
John D'Agostino: And this is pre-kids. Now I'd probably go into a puddle. And then all sudden, I hear laughing, and I see the billionaire guy and his friends peeking out from behind the hut, hysterical laughter. And the guys let me go, and it turns out they're professional Kung Fu actors, like in the backgrounds of Bollywood films. And he does donate money to the school, and they train them in Kung Fu as a way to get out. It's like basketball in the inner city in the US; it's a way to get out of the ghetto there, is to develop the skill.
I go up to the guy and I'm like, "What --" I don't want to curse on your podcast.
Peter McCormack: You can say what the fuck you like, yeah.
John D'Agostino: I go, "What the fuck?" and he looks at me and he goes, "I'm so sorry, it wasn't supposed to be you. They were supposed to grab my buddy of 20 years, but you look like him". And I'm like, "But why didn't you stop it?" and he's like, "This took me like six months to set up. It was going really well", and that was it, just no remorse, just I can do it, I wanted to do it --
Peter McCormack: So I did it.
John D'Agostino: -- so I did it. And how few people can do that? The people that had to be involved, the driver. I mean, it takes not just money, it takes just resources to set that up, right? You can do it, like you can ask your buddy to punch me on the street, you can do the middle-class billionaire version of that! The way he did it, I was safe, they were protected. He had a medic just in case something went wrong, he hired a medic to be there. That's a billionaire practical joke.
Peter McCormack: How long until you were able to look back and laugh at that?
John D'Agostino: I got him back a couple of years later. It took me about, I'd say, almost six months, I think. It definitely messed with my head a little bit. I was born in Brooklyn, in Staten Island. I'd had a, I wouldn't say a rough life, but I definitely didn't grow up privileged. But I never had a fear for my life, I was privileged to that degree, so yeah, I probably was privileged. But it was the first time that I felt truly in danger, and that shakes you to the core, and I realised how I act in those situations, which is not manly!
Peter McCormack: It's one of those scenarios where you think, "I may die here".
John D'Agostino: Yeah.
Peter McCormack: Well, nice one, billionaire friend. Okay, tell me about the real kidnap.
John D'Agostino: So the first time I went to, it was not in the UAE, by the way, UAE is incredibly safe. I'm a huge fan of the UAE and we should talk about that because I know now it's the hottest thing in the world and I have some guidance for your listeners who are thinking they're just going to get on a plane and get off and get handed bags of money from the UAE. Yeah, I mean, this was a lot less dramatic, amazingly. The first time I went to Dubai with NYMEX, NYMEX was interesting. It's now owned by the CMA; it was a critically important company. It was very sleepy, but when I joined, it was private, it wasn't even public at that time, but it's critically important.
It produces one of the two most important benchmarks in the world, the price of crude oil. And after 9/11, it was one of the first two businesses that the US Government wanted open. There were executives being flown over in military helicopters to open up the NYMEX. It's kind of why I chose exchanges as my entry into finance. They're incredibly cool institutions; they're the epicentre of all financial activity. If exchanges break down, if pricing breaks down, all of finance breaks down because you can't price anything. All loans go away, all equity values go away. And so I'm a huge fan of exchanges, I'm very romantic about them. So NYMEX was critically important. I travel around the world for NYMEX, so it was sending me around the world to these places and they were always, you know, hyper, hyper cybersecurity sensitive.
My first time to the Middle East, I came back, and this was back in the days where you plug your computer into a LAN in the hotel. I came back and the CIA and FBI visited the NYMEX because we had a DDoS attack against our website and they traced it to my laptop, and they couldn't figure out exactly where, but it was somewhere in my travels. They weren't sure if it was when I went to China, UAE, but they said, "Somebody basically ghosted your laptop when you plugged it into the LAN, and they hijacked it and they used it as part of a DDoS attack against the NYMEX's website". And again, this elevated to the DOJ level, because this is a critically important institution.
So, we had meetings with the CIA, and they took my laptop, and they interviewed me, and they were trying to figure out what's going on. And then when we started doing the deal in Dubai, there were folks who were just not that excited about it. If you think about it, and this is why I think the UAE was so prescient and so forward-thinking and I give credit to the NYMEX guys as well, exchanges are the epitome of capitalism, right? There's nothing more capitalist than a free market to set the price of something. It is the exact opposite of autocracy, of dictation by fiat.
For the UAE back then, again 2002, to say, "We are going to allow a western capitalist mechanism, the westernest capitalistic of mechanisms, to price crude oil", of all things was really extraordinary. Economic-wise, it was small; they were putting up billion dollar hotels every day back then, it was nothing. This was like $125 million dollar equity deals, it was peanuts to them, but they understood the critical -- I remember when the delegation came over and I took them to the floor of the NYMEX, which back then was pre-electronic trading, which is guys screaming and yelling like the movie, Trading Places.
Peter McCormack: Yeah, I love it.
John D'Agostino: It was filmed on the floor of the NYMEX, actually.
Peter McCormack: Oh, right.
John D'Agostino: Yeah, the movie was filmed on the floor. That was the commodity exchange.
Peter McCormack: So, we've got this ongoing thing where basically, Danny hasn't seen any good films, and he's got this fucking terrible taste. He always recommends films, I put them on, they're shit. Please, please tell me you've seen Trading Places.
Danny Knowles: I think part of the problem is I never remember the films I've seen, but I'm pretty sure I've seen that.
Peter McCormack: Eddie Murphy.
John D'Agostino: Eddie Murphy.
Peter McCormack: Homeless guy.
Danny Knowles: Yeah, I think you've seen it.
Peter McCormack: You've seen it, haven't you? Yeah.
John D'Agostino: The two films to learn about finance, The Big Short and Trading Places. That will cover everything, you're good.
Peter McCormack: Yeah. Danny only just saw Back to the Future.
John D'Agostino: Oh no!
Danny Knowles: It wasn't that bad. I watched Back to the Future II though on the way here.
John D'Agostino: "It wasn't that bad"; is that how you just described it?
Danny Knowles: Why, do you think it's really good?
Peter McCormack: Are you a similar age to me? How old are you?
John D'Agostino: Mid-40s.
Danny Knowles: But Back to the Future II was terrible.
John D'Agostino: That's fair.
Peter McCormack: Have you seen Back to the Future II recently?
John D'Agostino: No, but I'm picturing it in my head and I know it'd be cringy.
Peter McCormack: It didn't age well. So the thing was, when we had Back to the Future, brilliant; Back to the Future II was set in the future to us at the time, so you're like --
John D'Agostino: The hoverboard!
Peter McCormack: Yeah, the hoverboard, they wear cool clothes. Now when you look at it, it's like, "We never dressed like that", and it just hasn't aged well.
Danny Knowles: And it was based in like 2015!
Peter McCormack: Yeah.
John D'Agostino: Dumb.
Peter McCormack: Whereas Back to the Future, the first one, was set in the past, so it's historically correct because they wore the clothes that people would have worn at that time. I think Terminator and Terminator 2 have a similar issue.
John D'Agostino: Yeah, and the Jaws movies, like, jumped off a cliff, right? So yeah, just ignore the derivatives and just go back to commodities; just ignore the derivatives and go to the spot, that's where the action is.
Danny Knowles: Jaws is the same though. I don't mind that movie, but just the special effects are terrible.
Peter McCormack: The first Jaws is brilliant, it's still brilliant.
John D'Agostino: But we used to like camp back then. The cheesy, bad special effects were part of the charm.
Danny Knowles: Yeah, but were they cheesy at the time?
John D'Agostino: Think of early metaverse, our movies were like early metaverse. It's clunky, but you kind of see the potential, and the clunkiness is part of the charm.
Peter McCormack: I think the thing about Jaws is, it's not about when you see the shark; the tension's when you don't see the shark. That's the tension and I think Spielberg was a master at that, absolutely killed it.
John D'Agostino: Yeah, and believing that a shark would follow from New York to the Bahamas, which was the premise of Jaws 4, I think. Yeah, so it's the suspension of disbelief.
Danny Knowles: I've definitely not seen Jaws 4.
Peter McCormack: I mean, Jaws 2 is kind of interesting, then it was like Jaws 3D.
John D'Agostino: Yeah, then it was like, dude, take your family and move to Wisconsin, get inland. The plot, the holes are just too much.
Peter McCormack: Well, I'm glad you've actually seen trading places!
John D'Agostino: So, okay, so back to it, guys. So, yeah, I'll forever be indebted because it was the most interesting thing that I've done in my career. I'm very indebted to the forward-looking nature of the UAE Government to realise, "We need this". They came to New York and I told them about after 9/11, they saw the floor of the exchange and they got it. They said, "Okay, we want to build a financial centre that's globally respected". And I told them a story about when I was travelling to China, I'm in rural China, turn the TV on in the hotel, no English channels, I see NYMEX crude oil prices, and I remember the guy from Dubai, remember his eyes getting big and he's like, "I want the world to see prices emanating from Dubai. That's what makes a financial centre a financial centre is information eminence.
Now, we may move eventually to world of just pure decentralisation where none of this matters, I don't think it'll happen purely in my lifetime, so for at least a few more lifetimes, I think sources matter. So, the source of truth for what a price of crude oil is comes out of, back then, only New York, now it's New York and Brent, and I said, "You should want that. Most the oil comes from your part of the world, why shouldn't you own that pricing as well?" And he got it, man, and he said, "Wait you come to my Gold Souk, you'll understand. When I took the NYMEX board guys, who were very sceptical, I took them to the Gold Souk in Dubai, and they looked around it and they were like, "Shit, this is the NYMEX floor, these guys get it, they're traders, they understand. There's like 100, 1,000 guys screaming and yelling, setting gold prices at the Souk in Dubai.
But there were some folks who didn't like this idea, and we were warned. We were warned there's going to be people who don't like it. And they give you what's called K&R insurance, Kidnap and Ransom, and K&R training. And they tell you, they say, "Okay, here's what happens. Most kidnappings are economic in nature", and they tell you, "Here's characteristics that it's an economic kidnapping and if that's the case, you don't fight. You don't fight because they'll call us, we'll negotiate a fee and you'll be released. That's how it works". And then they tell you, they give you hints if it's non-economic, if it's political or religious, etc. And then it's the advice, I don't know if you dive, but the advice is like, "If you get attacked by a shark, if it's a bull shark, fight like hell. Other sharks tend to nip and then go away. Quietly move away, try not to be like a fish, but if it's a bull shark or a bear, fight like hell because they're going to kill you".
Peter McCormack: Just out of interest, how do you fight a shark?
John D'Agostino: Gills; eyes, and gills. Don't try to punch it. There's a myth that they are sensitive in the nose, that they have a massive mass of nerves, but they have fat around it. So punching a shark in the nose, if you try, you'll miss, and your fist will probably go in the mouth and it'll tear your arm off. So if you can hook the gills, they're sensitive there, because you cut their breathing off. So if you get their hands in their gills, and they want to shake off to breathe, and then obviously you can gouge their eyes if you can. I mean, ideally, really it's just about trying to make yourself harder. And then there, I think you're supposed to cover your neck and go in a ball.
Peter McCormack: I mean, it's hard to go into training for that. There's no real shark fighting training!
John D'Agostino: No, especially, now remember, I knew how I acted in life-or-death situations and I turn into a puddle, right?
Peter McCormack: Just out of interest, did I ever tell you the bear story?
John D'Agostino: You have a bear story?
Peter McCormack: I don't have a bear story as such, it's more just kind of funny. So when I was out in Canada, I was like on my own travelling around and just going for walks and checking stuff out, and there were signs for warnings of bears. And my mate was out there, I was like, "How serious is this?" He's like, "It's serious. Bears find people and they will attack and they'll kill". I was like, "Oh, shit". He was like, "But this is what you need to do", and I might get it the wrong way round, but he said, "If it's a black bear, you have to stand up and be loud and noisy --"
John D'Agostino: I think that's right.
Peter McCormack: "-- and if it's a brown bear, cover up into a ball". I was like, "Okay", he said, "Just one warning: black bears can be brown and brown bears can be black". I was like, "What the fuck do you do with that then?!"
John D'Agostino: I think the proper position is to bend over, put your head between your legs and kiss your ass goodbye, I really think that's kind of it! I think we tell ourselves these things to make ourselves feel like we're in control. The reality is, if a raccoon attacked you, there's a decent chance it's taking you down.
Peter McCormack: I kind of jumped up with a cockroach last night, the size of my thumb!
John D'Agostino: I get it, man, I get it. The ones here fly.
Peter McCormack: He heard the scream.
John D'Agostino: At least in New York, they stay on the ground. In Miami, you go to squish it and it could fly up in your face. So you had the right instinct.
Peter McCormack: All right, so anyway.
John D'Agostino: So, long story short, I really don't love talking about this because this kind of brings back some bad memories, but I was not in the UAE, it was a different part of the world, working on the project and was really stupid and forgot all the training, and had a driver and went downstairs and it was a different guy and he said, "Oh, it's my cousin. He couldn't make it", and like an idiot, I got in the car and was on my Blackberry, that's how long ago it was, and wasn't paying attention. All of a sudden, we were not in the city any more, and I was like, "Where are we going?" and he said, "Shut up". And it became real very, very fast.
The rest of the story, that's actually the most exciting part. The rest of the story was, shockingly, I was very, very lucky that it was the former type and it was a ransom negotiation with the K&R company, and they knew exactly what they were doing. There were some things, some signs that I was going to be okay. I saw women. I was in the Middle East, I saw women, so that indicated I was not -- they teach you about if they trade you to increasingly rural places and there's no women, not a good sign. So there were women, and there were other people. I was in like a village, so it was an indication, and the other people were seeing me and were seeing them with me, and they just kept me in a room. They just showed me a weapon to say, don't do anything stupid, but I wasn't beaten, they fed me, I wasn't spoken to in a way, they didn't ask questions about the project, they didn't ask questions about my beliefs.
So everything, the training was actually really, really good because it kept me from doing something dumb, which would have been the only way I think I would have gotten hurt in that situation. And you know, you don't sleep, at least I didn't sleep. And they always gave me lots of tea, which has a lot of caffeine, that tea. And yeah, this is all in the book that that guy wrote about me, and I want to say 36, maybe 48, 48 hours later, there was one point where they came in, they were like, "You need to make a phone call". The only time they got angry was I think they just were negotiating. Like, I'm not a big shot, so the company was negotiating and I guess they got frustrated with the negotiations. So, they came in at one point and they handed me a phone and they were like, "You need to call someone who loves you and you need to tell them that this is serious". And that was the part where it went from surreal, I can't believe this is happening, but hey, everything's happening the way I was told it would happen, and that's a good sign, to a brief moment where I was like, "Wow".
Honestly, Peter, what I was thinking was, "Yeah, I have people who love me, but I don't have anyone who can write --" at that point in my life, I had no one who could write a huge cheque. So I'm thinking, "Okay, if a loved-one calls the insurance company, they're not going to give a shit. I'm sure they get that all the time". So really what that guy was telling me was, "You'd better call someone who has a lot of money", and I didn't know anyone who had a lot of money. I guess I could have called the chairman of the NYMEX. I didn't feel at that point in my life I had anyone cared about me enough to write a huge cheque for me. And so that was the only moment that I was like really wired.
But then it was weird, he left, and then somebody else came in like ten seconds later and said, "Give me the phone". Obviously that guy who did that wasn't supposed to do that, so they were fighting amongst themselves about the best way. And then they reached a bid-ask spread and so a market maker came in and hit the bid and they put me in a car and they took me two blocks away from the US Embassy. And so the embassy is that way, because they had taken my passport, and then that was it.
Peter McCormack: And were you done with the UAE at that point?
John D'Agostino: Well again, it wasn't the UAE. Not the UAE.
Peter McCormack: Sorry, wherever you were.
John D'Agostino: No. I think like those people that get bit by sharks and go back in the water, I think that was a lightning strike type situation. I processed that better than the fake kidnapping, because I remember my buddy, who was a lot older wiser and more successful than me, I was stressing about it, I thought I was scared to go back, and he said to me, "You know, Johnny", people just called me Johnny back then, "you're nobody until somebody sues you, and you're really nobody so somebody tries to kidnap you". And so, he convinced me that I was doing something important with my life.
Then he said to me, "You're always talking about stories". He's like, "Holy shit, you've got a story, man!" And I was like, "I don't want to be a hypocrite. I preach this gospel of, 'He who dies with the best stories wins', and now I'm going to shit my pants and not lead an interesting life because of this". So, yeah.
Peter McCormack: So what was the shift that led to; what came after?
John D'Agostino: Sorry?
Peter McCormack: So, what was the shift afterwards; how did that change you?
John D'Agostino: So, I think I developed a higher risk tolerance at that point. I think when you grow up without money, you're naturally conservative, at least that was my take. I was naturally conservative, I'm a saver. I've always been a saver, it doesn't matter if I wind up creating tremendous wealth, I'll still be the billionaire with -- I don't think I'll be a billionaire -- but if I ever create tremendous wealth, I'll probably save 90% of it, that's just how I grew up, parents fighting about bills, and so I just save. And then that bled over into my life.
I took risks with my career, because I think the benefit of not having money growing up is I don't need it. So, even though I had the opportunity to make a lot more money after HBS, I could optimise for stories, because I'll live in a studio the rest of my life. I have kids now, that changes a bit, but I want more for them. It's a superpower.
Peter McCormack: I don't know, I see it slightly differently. So I grew up, my parents didn't have much money, my dad put everything into our schooling, so we just didn't have a lot and so I'm used to not having money and I've never been wealthy. I've done okay, but I just spend the shit out of it.
John D'Agostino: Really?
Peter McCormack: Yeah, because I'm not worried about going back to zero. Schooling's done for one kid, and the other one's nearly done, and so I think I could go back to zero and have a job in a café, and still be -- like, I'm always happy. The money, I think what it was is at one point having money, I was miserable, and so I never equated the two. So I don't save, I'm the opposite. I spend money on stupid shit all the time.
John D'Agostino: I think that's great. Look, I don't think I optimise for enjoyment of my life, so I envy people. The right answer is probably in the middle, right?
Peter McCormack: Well, if you optimise for enjoyment, you're also optimising for stories because you'll put in the money so you can go and do stupid shit.
John D'Agostino: Yeah, that's a different way, you're right, that's a fair point. You can achieve those stories through zero savings; that's fair.
Peter McCormack: Activities, yeah.
John D'Agostino: I have a bad relationship with money because of how I grew up, so I know that. So I don't think I have a better -- I don't give money advice, because I don't think I have a good relationship with money. But however you achieve those stories, good for you, that's great. For me, I'm more open to stories if I know I have some savings in the bank. If I have that cushion, then I'm more willing to take that risk.
Peter McCormack: I love risk!
John D'Agostino: But whatever works, as long as you just lead a fucking interesting life. There's nothing worse than sitting next to somebody who's achieved monetary success at a party and they have no good stories to tell; what a fucking waste.
Peter McCormack: Yeah.
John D'Agostino: By the way, your stories don't have to be like my crazy stories, they could be like Ray Chambers, I'll throw him out there. Ray Chambers, legendary icon in the investment industry, Founder of Wesray Capital. Met this guy on vacation, I met him on Necker Island, I got a free trip, he didn't.
Peter McCormack: You've been to Necker?
Danny Knowles: What is Necker?
Peter McCormack: That's Richard Branson's island.
John D'Agostino: I got invited to speak there.
Peter McCormack: Whenever you've been to Necker, you've made it!
John D'Agostino: But I got invited to speak there. But I met Ray Chambers on Necker, I met the most amazing people on Necker. I got married by Desmond Tutu because of my Necker trip.
Peter McCormack: What?!
John D'Agostino: Yeah!
Peter McCormack: What do you mean, Desmond Tutu married you?
John D'Agostino: Yeah. He was there, and so I was going to propose to my wife, my girlfriend at the time, and I had it all set. I was going to propose on the steps of the Metropolitan Museum in New York. It was always my favourite spot in New York. At night, lit up, the steps, beautiful.
Peter McCormack: I got engaged in New York.
John D'Agostino: Yeah, I had it all set up. And then, six weeks before I was going to propose, I get invited to speak at a conference on Necker Island. And I'm like, "Fuck the steps at the Met", because they let my girlfriend come, and I'm going to propose there. And Tutu was on the island, and I proposed the first night. And when you propose, you become the centre of attention. And I don't know if I can call her out. Yeah, you know what, why not? She's amazing. Queen Noor of Jordan was on the island. She saw me -- now the island, when you're on the island, you're part of this little home, you're small. I may be breaking all the rules, but whatever, I think it's a great story, I think she was lovely.
So, she saw us getting engaged, and she's an amazing woman. She befriended my wife, for that trip at least, and then Tutu was there and she said, "Tutu, you should marry them, you should marry them". And there's very few people, when people say Clinton's like this, there's very few people that -- Mandela I've heard, I've not met any of them, I met Tutu, that when they speak to you, even if you're not religious, you feel God. I'm not religious, I felt God. The guy was, God rest his soul, unbelievable, unbelievable man. And the next morning, we're on the beach and she kept bugging him, "Marry them, marry them". And he said, "Okay". And everyone gathered around, someone pulled out a phone and he took us in the water. He was wearing shorts, we were in bathing suits and he married us. I mean, not obviously entirely officially, but he did a little, mini wedding ceremony.
Peter McCormack: Oh my God, my stories are so shit! "Yeah, I was just on Necker Island, got married by Tutu"!
John D'Agostino: Yeah! But my point is, I got to Necker, I got the free invite to Necker because I agreed to do the book. I agreed to do the book because I agreed to take the job that everyone at Harvard Business School said you were insane to take, the NYMEX; who the hell went to the NYMEX? NYMEX was a bunch of degenerate oil traders. And so, I'm not going to be the wealthiest guy from my class at HBS, but I do think I'll have the best stories.
Peter McCormack: You've got to put yourself in situations, that's what it is. So about, it was about six years ago, just after I got divorced, I quit advertising, quit the advertising industry. I was just running a lot, and I was listening to a podcast by this guy. Everyone who listens to podcasts has heard this story many times.
John D'Agostino: You were running, physically running?
Peter McCormack: Physically running, I used to run every day, it was like therapy. And I googled a guy and he's running a retreat in Italy, like a yoga retreat with his wife, he's American. Yeah, it's Rich Roll. And so I was like, "I think I need to be there". So I phoned up, they were like, "We've got one place left", so I went, got there, did the retreat.
John D'Agostino: So pre-kids, right?
Peter McCormack: No, no, Connor was about 12.
John D'Agostino: That's awesome, by the way, awesome. So many people, they de-risk when they have kids. It's bad for the kids, bad for the dad, but so go ahead.
Peter McCormack: No, we risk more. And then I went on the trip and at the end of it Rich was like, "I hope you had a good time. If you're ever in LA, let me know", so I'm like "Fuck this". I booked the flight to LA I'm like, "I'm here!" and I turned up and I said, "I think you're the best job in the world. You're a podcaster, I love it. How do you do it?" He said, "Buy this equipment". So I went back to my buddy's place in Santa Monica, bought the equipment, phoned up Luke Martin, said, "I want to make a podcast" and just did it.
What I found with this is just constantly put yourself in situations, go to places. What's that thing? Is it the Yes Project you told me about? Yes Theory. You know about it?
John D'Agostino: Yeah, it was a movie, a kid's movie called Yes Day, where you say yes to everything the kids want for a day. The kids love it. And so I've just always said, put yourself in situations, right? Can you buy a football team? Yes, buy a football team, let's do it. There's a bar available, buy it. Just constantly do shit. And because of that, stuff happens. Like when you talk about manifesting stuff, there isn't some magic in the universe that happens and goes, "Well done for that", the manifesting is just making shit happen.
It's like Danny. Danny one day just thought, "Do you know, I'm going to email Pete". Danny emails me and says, "I think your production's shit".
John D'Agostino: He told me this story; amazing, awesome. It's physics, inertia, action begets action. Bodies that rest tend to stay at rest, bodies in motion tend to stay in motion. Make something, fucking make something happen, anything.
Peter McCormack: And now we've travelled the world together making this show. Connor said he's bored of uni. Do you mind me talking about this? He came home and I knew he wasn't enjoying it, and then I could see him wandering around and I was like, "What's the matter?" He's like, "I'm behind in my work". I said, "Do you care about it?" He's like, "No". I was like, "That's why you've not done it". I was like, "You can quit". I said, "You've got another option. You can come out to Miami in a few weeks with me and Danny, you can learn production, become part of the show", and now he's taking action, he's here doing this. And, I always say to people, it's like, yes, there's luck in life, of course there is. But if you keep putting yourself out there, you keep saying yes, going to places, doing stuff, stuff will work out.
John D'Agostino: Connor, it's such great advice, and by the way, it's not carpe diem, fucking hate that, it's not that. Carpe diem is selfish, irrational and silly. This is about taking smart, thoughtful risks that put yourself in a position to be happy. Here's a quick story for you.
I went to Harvard Business School, I was super-lucky to go. Anyone who says they're not lucky to get into a place like that is fucking delusional, because if the person reading my essay had a bad day that day, I wouldn't have gone in. Not the smartest guy there at all, but I had a friend. I know I was smarter than that friend. I had more intellectual horsepower than that friend. Second year, I took a fixed income bond pricing course. Boring, I couldn't fucking stand it, bored out of my mind. He crushed me in that class, because he bizarrely, annoyingly, he loved doing bond pricing. And I realised something. Unless you're lucky enough to be a true savant, unless you're just at a different gamma level intelligence, which 99.99% of us are not, even if you have more intellectual horsepower, even if you work harder than someone, they're going to beat you if they enjoy what they do.
That's carpe diem to me. It's practical, it's not this air-in-the-sky bullshit, because by the way, whatever you choose, you're going to hate parts of it. There's grunt work in everything. It's not carpe diem, it's not do what you love all the time, that's bullshit. But if you don't have an underlying -- purely for me, it's purely practical. You will not win and be competitive if you wake up every day just a pit in your stomach as to what you're going to do.
Peter McCormack: And so, I'd recognise it when you're on Twitter and there's people just fucking yelling at you all day, and I think these people, what's really happened is they haven't gone out and manifested what they want; again, not in a hippie way, they're miserable. That's why they're on there like, "Fuck you, fuck this, you're shit, you're fat", it's because they're miserable. I just think everyone could just go out there, just go and do the shit you want and just make it happen. And I've seen so many people do it, but just go out there and make it happen. Just say yes to everything!
John D'Agostino: I also think it's just, I'm not advocating violence, but I did grow up in a time where if you said that to somebody to their face, they'd punch you right in the face. And I think a lot of these guys on Twitter need to be punched in the face just once. I don't want them to get hurt, I just want to sting, because they're just… I remember when there were consequences to being a complete and utter prick.
Peter McCormack: What was the Tyson quote?
John D'Agostino: "Everyone has a plan until they get punched in the face".
Peter McCormack: Yeah! Anyway, so where's, okay, come on, where's the Bitcoin connection? There's going to be people -- how long are we in?
Danny Knowles: 40 minutes.
Peter McCormack: Someone's going to --
John D'Agostino: Sorry.
Peter McCormack: Their first comment's going to be, "Interview starts at 40 minutes"!
John D'Agostino: Okay, so I'm a TradFi guy, but I was in derivatives, so it was always idiosyncratic stuff, like wacky stuff. My advice to young people is always, learn about the weird stuff and you'll always have a job. So, I've taught at Columbia and MIT for a while. I'm not a professor, I'm a lecturer. There's a lot of folks who lecture, pretend they're professors. But being at MIT and Columbia, just being around, you get to see the cool technologies. That's why I do it. My trade with the business school is I'll teach for free, but I want to become buddies with the nerds, because that's where all the power is. And so I've made all these friends at the Connection Sciences Lab and Media Lab, and so I want to stay relevant.
So over a decade ago, I said, "Okay, I have friends at the regulators. I want the regulators to like me". And so I cut a deal. I told the regulators, "I will do research in cutting-edge technology that impacts financial markets, not just crypto, AI, low-latency trading. I'll do it at MIT, I'll do it at Columbia. We'll teach it as a class, and then I'll bring that research and those professors to the regulators". So, I've been doing that for ten years and crypto was obviously something everyone was interested in a while ago. And so I wrote a paper with a friend of mine at MIT on the DAO hack, the original DAO hack that sparked the Ethereum chain. And the paper got the attention of some pretty big folks in crypto, early OGs, I won't name-drop them. But one of them who had a big, big fund called me and said, "Hey, I read your paper".
I called myself a cynical enthusiast in the paper about crypto and he said, "I've got too many enthusiasts around me, I need some cynical enthusiasts. I don't want cynics, they're useless, but the enthusiasts are also kind of useless; I need this". And so I joined the board of that very prestigious crypto VC and hedge fund, and what better place to learn. I mean, so I just developed -- you know what, actually it's public information, it's on their ADV, so it's Polychain.
Peter McCormack: Okay. With, what's his name, Carson?
John D'Agostino: Yeah, Olaf, yeah.
Peter McCormack: Olaf.
John D'Agostino: So, yeah, amazing place to learn. So between, I had the MIT guys who could -- the best thing about having a bunch of really, really smart nerds, and I say it with all love, by the way, I love my nerds; having them on a WhatsApp group is amazing, because whenever I get some bullshit pitch about what a technology can or cannot do, I've got like 50 people I can just text, and they'll just send me a thumbs up or thumbs down emoji, and I can call bullshit on any of that stuff immediately, with good verification. So that was the shift into crypto. So I got to learn in an amazing place, being on the board of this fund. And then Coinbase called me.
Peter McCormack: Crypto is a bad word around these parts.
John D'Agostino: These parts being the show or…?
Peter McCormack: Yeah. They're going to be like, "What's he talking about crypto for? This is a Bitcoin show".
John D'Agostino: I'm sorry, Bitcoin, sorry.
Peter McCormack: Just pre-warning!
John D'Agostino: I understand. I'm prepped for getting flamed. Look, humbly, I am a TradFi crossover person that I do think the sector should help ease into this. So, forgive me if I've used an inappropriate word. But because my background's in exchanges, when I got the call from Coinbase, again, I believe exchanges are critically important pieces of economic infrastructure. I know exchanges pretty well, I had learned enough about digital assets, Bitcoin, crypto, to become dangerous through my time with Polychain, and it just was a natural fit. And then lastly, whenever you have an idiosyncratic, volatile asset class, I think you have to bet on people, and I really respected Brian and the people, Brett and Greg and the folks who run Institutional at Coinbase.
Peter McCormack: Yeah, Coinbase is an interesting one. It's kind of a weird paradox that goes on for me with them, because they've received heavy criticism in the past, certainly from the Bitcoin community, for their focus on other chains and crypto and less of a dedication to Bitcoin, which I think some of it's fair. But at the same time, I'm really aware how much Coinbase has done behind the scenes to hold off the freight train of regulation and bad regulation, which I think not everyone is aware about, but I'm aware they've done a lot in the background to just keep that freight train from running over this industry. Can you say what you do for them?
John D'Agostino: Yeah, sure, I work for strategies. I used to be Head of Strategy for NYMEX. I'm not Head of Strategy for Coinbase Institutional, but that's the function I serve in, is strategy. We don't really have a Head of Strategy, but I work for Brett and Greg, the Head of Institutional, and I help them think through the same problems I helped NYMEX think through, like where should we be in the world; how do we get more institutional investors to get onchain; and just help build the Institutional business.
Peter McCormack: So, in doing that, having come from a traditional TradFi world and coming into this, and I'm really stealing Danny's question, but yeah, come on, I'm stealing it from you.
Danny Knowles: No, no, that's all right. Well, the big question I had is, how immature did this seem when you came into it, as a space?
John D'Agostino: Yeah, so a lot of folks in -- can I keep saying in crypto, or in Bitcoin; what do you want me to say here?
Peter McCormack: I mean if you're describing them…
John D'Agostino: Yeah, a lot of folks in crypto will say we're in the first inning, "Oh, we're so early". I actually don't like that, I'll be honest, because the technology is 10 to 15 years old. So, I think you have to acknowledge we're not in the first inning. I don't even like the analogy, I don't know what inning we're in. I mean, people are still educating on commodity derivatives, which is a 30-year-old thing, so I don't find that discussion useful. Just from a numbers' perspective, there is a smaller percentage of institutional investors who engage in this asset class than other idiosyncratic asset classes, like derivatives, like swaptions, like all that stuff. So I think we are under-engaged, I think of it that way.
Now, that could be good and bad, right? It's good if we're under-engaged because either the asset class is not ready and will come ready, or institutions aren't aware of the asset class. The problem that crypto has is it's eaten up a lot of airspace. My mother knows where crypto is, and my mother still can't change the time on her microwave, and that is good and bad. The good part of that obviously is people know about it, that's great. The bad part is people know. And so if they've decided to not engage at this point, it becomes a harder sell, because they've already made up their minds about the asset class.
I think for institutions, this notion that they're naturally going to engage, that's not true, we have to work at it. There are a lot of institutions that don't trade commodity derivatives. I remember my early days at NYMEX, we launched a jet fuel contract and we were talking to the airlines and we were like, "Hey, we have this amazing thing that you can hedge your jet fuel exposure". And you talk to these CFOs who are not dumb people and they're like, "Yeah, we're not in the business of speculating on commodities". I'm like, "Well, dude, you're short jet fuel, you have to buy it. If you don't hedge, you're speculating, that's the whole fucking point", and it was very, very frustrating. And eventually they came on, but it took a long time. And there's a lot of firms that use natural gas to bake their ovens, like companies that make muffins, and they don't hedge. And it's insane, they just don't do it, because they just view that as another thing, this complex, crazy derivative space.
So, I don't think the early narrative is helpful. I don't think the, "Everyone who doesn't do it is a Luddite and doesn't get it" narrative is helpful. Maybe that was the case five, ten years ago. They're not dumb. When we speak about regulators and we speak about folks who've chosen to not engage in the sector, if we just say, "They're all dumb, they just don't get it, they don't see the future", it's self-defeating. It didn't work when we tried to sell derivatives on people, and it's not going to work when we try to sell digital assets, engagement in digital assets.
I will say that what made me optimistic enough to want to work with a firm like Coinbase in the institutional section is I think that appetite is there, I do think it's the former. I think it's they're waiting. Some will just never engage, and we have to be okay with that, just like some never trade derivatives. But there's a pretty big chunk of institutional activity, especially hedge funds, it's to seek out alpha, that they're just waiting for this asset class to have all the bells and whistles they need to trade it in a regulated manner, because they themselves are regulated. No different from commodities.
Danny Knowles: So they're waiting on regulation; or new tools that we don't have yet?
John D'Agostino: They're waiting on some degree of regulation. They're also okay with opaque, an opaque -- if the other stuff is there, they're okay. I mean, there are things like, there's this wacky thing in fixed income called "season and sell", which is if you're in the credit market, and you have offshore investors, and you buy something in the US that produces what's called ECI, Effectively Connected, like rent. You buy an apartment building that pays rent into it, that's taxable US income. But you have offshore investors, they don't want to pay taxes.
So what you do is you buy it and then you let it sit for 30 days or 60 days or 90 days and then you sell it to the offshore fund, and magically it all goes away. And half of the attorneys you talk to go, "That's bullshit!" The other half go, "Yeah, it works". It's a relatively opaque area. There's no law, there's no thing they can point to that says this is okay. Tomorrow, the IRS could turn around and say, "Yeah, of course that's bullshit", but everybody does it. So again, this notion that you have to have regulatory clarity, certainty, is not true. You have to have more than what we have in crypto for sure. And you certainly can't have an adversarial regulator, which is unfortunately what we have right now. But you can have some opaqueness.
But if you have the opaqueness, you have to have the institutional infrastructure. You have to have the market makers, you have to have the credibility, the clear counterparties, right? I'm not going to take regulatory risk and idiosyncratic market risk. I'll take one or the other, but not both. And then of course, the alpha has to be there. Alpha solves everything, just returns solve everything. If you can make 500%, I'll get comfortable with the risk in some small way.
Danny Knowles: So in that case then, what's happening now with the Operation Choke Point and them closing down banking for this, that must be a huge burden.
John D'Agostino: For the US, yeah. Look, I've always been in weird asset classes so I'm used to regulatory arbitrage, right? Back in the day when I was at NYMEX, they had this thing called the NYMEX ICE Henry Hub arb, which because of idiosyncrasies in the way the US regulator and the UK regulator regulated natural gas options, there was this arb that exists. You could buy New York, sell London, because they were fungible to each other, or vice versa. And you could lever that up, and you could lock in at points like a 16% risk free. Your risk was just to the relative exchanges, which were AAA. And that thing hung around for like a decade. Arbs are supposed to go away, it's just because it was based on, back then it mattered the time of day. And it was based.
So in complex asset classes, there are always regulatory nuances. I have never seen as wide of a spread as I see now between the rest of the world and the US. And what's really interesting is because the US is still the bellwether market. It is still the world's premier respected regulatory and most liquid capital market, and my concern would be because the US is so incredibly negative that it would taint the rest of the world. They would say, "Oh, we've got to wait until the SEC..." They're not. They were for a little bit, but now they've made a decision that they think the US is wrong, and they think that the US will eventually come to reasonability, which I also think so, and they think they're getting a year to 18-month head start and they're off to the races.
Peter McCormack: So that means therefore you as a business, your strategy, is to make sure you corner those international markets?
John D'Agostino: Yeah, I mean Coinbase has been public, especially recently, about it's not leaving the US by any means, but remember NYMEX lasted for 80 years before it had to go overseas. I think digital assets will have to move faster to build a pole position in those markets. So look, I think if the US was a fabulous regulatory environment, I would still be urging Coinbase to set up overseas. Every major exchange in the world, NYSE, Euronext, Deutsche Börse, CME, they all have exchanges in Dubai or Abu Dhabi, they have them in London. These are fungibly global instruments, you have to be; if you're an exchange and you want to trade a global instrument, you have to be overseas.
Certainly; there's an increased urgency to accelerate that because of the way the US is approaching it, but I'm optimistic, I do think the US -- I think we're wrong. I mean, maybe we're right and the rest of the world is wrong, maybe. I don't think so. So, I think eventually that'll become apparent and the US doesn't lose, we don't like to lose. So eventually, we'll figure out how to save face and do maybe not a full about, I don't think we'll ever be as enthusiastic as the UAE, but I do think that it'll revert to the mean because I think we'll see the widening gap and we'll see the rest of the world saying, "Sorry, we love you guys, but we're all in". And we will not give up that tax revenue, we will not give up that positioning. And so, I do think we'll come back to reasonability.
Peter McCormack: Yeah, I'm finding the expansion in all the adoption in South America quite interesting. Obviously, I know it's Central America, but we have a very good case study in El Salvador. We have various stories about politicians from Brazil, Argentina, Colombia, it's very popular. And so, I think I can see why it's happening. I mean the US has a goal of defending its position as the global reserve currency and everyone else has a need to get away from the US, because they suffer; when there's massive inflation in the US, it compounds the issues for other countries who are buying their resources in the dollar. So, there's a natural need to try and get away from that position, so I think it's only natural. I think you're right, I think the US is wrong on this, I think the UK similarly is wrong on this.
John D'Agostino: They're coming around. The UK made a big U-turn in the last six to eight months. I mean, the new administration there, the Rishi Administration, is night and day different from the previous administration, there's no question. I mean, their FCA is still lukewarm to positive, but way better than it was six to eight months ago. The UK in my mind is doing what I think America will eventually do. They're abandoning an untenable position for a thoughtful position. We could all maybe want to be a little more thoughtful, but I love that growth path over a relatively short period of time, and I hope the US follows suit.
Peter McCormack: Yeah, and another concern on the US side is it seems to be non-partisan, or some bipartisan support for certain bills.
John D'Agostino: Yeah, I don't know how we got here, it's so weird.
Peter McCormack: Yeah, "Let's literally fight on everything apart from this".
John D'Agostino: I mean, we have politicians who think that an anti-crypto stance is a winning political strategy.
Peter McCormack: I know.
John D'Agostino: I mean, we have to take some blame for that as a community. For it to get to that point, we have to be introspective and say, "How did we get to a point where --" because these aren't stupid people, right? They have polling, we can say they're all dumb, they're not. I still stand by, I don't like what the SEC is doing, but the people at the SEC, I know the rank-and-file staff, they're not dumb, they're not; they're smart, thoughtful people who are doing what they think is best. Maybe I'll get flamed for this, but I do think so.
Peter McCormack: You will!
John D'Agostino: But I know some of them, I know them.
Peter McCormack: It depends who it is. I mean if it's Hester Peirce, I'm with you. If it's Gary Gensler, I'm not.
John D'Agostino: I'm not going to say names, but I may be hopefully optimistic that there is thoughtfulness there, because I know some of the people who still work there, and I have presented to them over the years, and I know they're thoughtful, because I've had drinks with them afterwards, and I know they're not closed-minded, and I know they're not dumb. But the zeitgeist, unfortunately, has just shifted from the top down. But yeah, I think that, yeah, I agree, it's unfortunate, but I am a hopeless optimist about our country and I do think we eventually -- the Brits say that, "Eventually Americans do the right thing", right? Eventually we come around and do the right thing.
So yeah, I mean, I hope so. But if only for self-interest because this is growing, this is growing in the rest of the world and the narrative right now, back to this political campaign about anti-crypto, they went and they did polling, and the polling came back and said this is a good way to win hearts and minds. So, how the hell did we get there? How did a technology and/or asset class -- derivatives never got to this point. And by the way, I remember early NYMEX days, there was a conscious discussion, "Why do we need this stuff? Why do we need crude oil derivatives? What the hell is this? This is all paper, this is nonsense". The same bullshit we're hearing about digital assets, I heard about derivatives. They were just, we don't, just kill this whole thing. We don't need any of this stuff. That was a real conversation 20 years ago.
Peter McCormack: But I kind of agree with what you're saying. Most of this digital assets, I don't think we need it. I think we need Bitcoin. I think Bitcoin is very, very important. I don't think we need the other stuff, but at the same time, I don't care if people want to fuck around with it and gamble with it.
John D'Agostino: I don't know where the technology is going to go. I do see really cool stuff that can happen, unlocking value with NFTs between relationships. When I first started at NYMEX, we made 90% of our money with commission trading, 10% with data sales. By the time I left, it was flipped. And so, because we realised, "Oh wow, you can time slice data and you can sell it in infinite time slices". So I think about if Taylor Swift issued an NFT that could, if ownership of which allowed you to see her tweets five seconds before anybody else…
Way smarter people than me are going to develop mechanisms using programmable, immutable instruments that convey ownership with possession, that are programmable and can link to digital experiences, that are going to unlock hundreds of billions of dollars of value, just like we unlocked hundreds of billions of dollars of value figuring out you can time slice data. So I want them to have those experiences, so let them. I'm probably not going to do it, just like I don't buy skins, but I just gave my daughter a gift card for a box to buy skins, because I'd be a fucking hypocrite if I didn't because when I was her age, I made my parents buy me Z Cavariccis.
Peter McCormack: Dude, I checked my bank account about two years ago and I'm really bad at finance, and I had to go to my bank account and find something, and I went in there and there was hundreds of pounds of these payments to Apple over and over again. I was like, "What the hell is this?" I looked it up. I'd linked my daughter's iPhone account to be able once, she wanted to buy something on Roblox. I didn't realise that it left the channel open. She'd spent hundreds of pounds buying skins for Roblox. I sat down with Scarlett and I said, "Scarlett, can I talk to you about something?" She said, "Yeah". I said, "You know you like that game Roblox?" She's like, "Yeah". I said, "You know that time I let you buy that giraffe skin?" She's like, "Yeah". I said, "Did you press the button a few more times?" Instant floods of tears, she knew what she'd done. I was like, "Don't worry about it". Then when she calmed down, she showed me and said, "But look at all these animals I've got"!
John D'Agostino: Yeah, and look, we have to teach them good financial behaviours, but what I realised is, so I made my parents buy me Z Cavariccis. Z Cavariccis, if you're Italian from Brooklyn in the 1990s, you want the Z Cavs. Remember MC hammer?
Peter McCormack: Of course.
John D'Agostino: Remember those parachute pants he had? Ugliest things in the world; $100 in the 90s. My parents had no money, they got them for me. My mother made me take a photo.
Danny Knowles: Wait, you wore those pants?
John D'Agostino: I wore them, because that was the physical manifestation of how I wanted to be perceived as a young, Italian male. She took a photo because she said, "I want you to see how fucking stupid you look"! We showed the photo at my wedding. I show the photo when I teach my class on NFTs.
Peter McCormack: I need to see this photo.
Danny Knowles: Can we put this photo on the video?
John D'Agostino: Done, I'll send it to you, done. And the reason is, my daughter lives part of her life online and those avatars are the physical manifestation of how she wants to be perceived by her friends. And it would be fucking hypocritical -- and by the way, it's better than clothing because clothing degrades, child labour problems, clothing is infinitely commoditised; whereas theoretically, that avatar, that skin, could be immutable and it could be rare. So, it's not better than clothing. And so, we have to teach them good financial skills because they're targeted in a predatory manner.
I explained to my daughter, she's only nine, this is probably crazy, I explained to her that these companies hire behavioural psychologists to trick her into buying more. But how stupid would we be if we didn't allow these kids, to some degree, they should touch grass too, but to some degree represent themselves the way we represent ourselves with fucking ridiculous clothing.
Peter McCormack: I need to see this photo!
John D'Agostino: Oh, it's insane. Do you have guidos in England? I guess lads would be your equivalent to guidos. Yeah, Brooklyn lads are called guidos.
Danny Knowles: Would that be like a scally?
John D'Agostino: Yes.
Peter McCormack: Scally's a northern lad.
John D'Agostino: It would be dressed slightly differently but the same concept.
Danny Knowles: Yeah, yeah.
Peter McCormack: You're a scally.
Danny Knowles: No, a scally would be like a chav.
Peter McCormack: You're a scally!
John D'Agostino: It's Chavish. It's Chavish, but not as sporty, although some Italians did do the whole Louis Vuitton head-to-toe, Sergio Tacchini. It just was fucking awful. It was awful.
Peter McCormack: Do you know the word "chav" is now seen as highly derogatory?
John D'Agostino: Oh.
Peter McCormack: Yeah, it's now seen as --
John D'Agostino: Oh, shit, are you going to be cancelled now?
Peter McCormack: Yeah, because it's almost used to marginalise people from poorer backgrounds.
John D'Agostino: Yeah, I could see that.
Danny Knowles: Their clothes are expensive.
Peter McCormack: Gucci!
John D'Agostino: Knockoffs.
Peter McCormack: So, John, what have you got going on this week?
John D'Agostino: So, I just came to see you, Peter! No, look, I was talking to Danny before, I am here for the Miami Beach thing. Coinbase sends me, I'm the TradFi guy, I'm the crossover guy, so I do really well at like Milken. I don't do as well in your conference. I was scared, I was legitimately scared to talk to anyone, because I just, I don't do well. You scared me just now, "You said crypto. Oh, they're all going to come after you on Twitter".
Peter McCormack: I'm just warning you, man.
John D'Agostino: I'm just seriously, I'm so bad at Twitter. Am I going to get --
Peter McCormack: YouTube, they'll be like -- so two things are going to happen. A bunch of people are going to go, "Interview starts in 40 minutes", because they don't care about the bullshit at the start; and then other ones will be like, "Why did he say crypto?" And then others are going to be like, "NFTs", and they'll be like, "Who's this shitcoiner?"
John D'Agostino: Oh, God!
Peter McCormack: Yeah, it's brutal out there! But we wanted you here for a specific reason.
John D'Agostino: I do believe Bitcoin's world changing, I do.
Peter McCormack: No, you don't have to defend yourself. We can get as many people on as we want, talking about Bitcoin all the time, but at the same time, there are other people who've got different skills or experiences. Firstly, obviously, we wanted to know about the kidnappings. But as somebody who's come from that traditional background, your observations of our markets and how we operate are super-interesting.
John D'Agostino: I will say this, commodities markets are dominated by two contracts: natural gas and crude oil, gold; energy commodities: natural gas and crude oil, physical commodities: precious metals, gold, silver, platinum. It helps -- but if that's all energy commodities was, just crude oil and natural gas, that's it, it'd be decidedly less influential in the world. So, at the risk of pissing everybody off even more, for any asset class it helps to have permutations and derivatives, because what you get is you get trading activity between, you get these arbs, you get these relationships that build. And all of that trading activity creates -- and some people might say, "Well it's all financial, it's all BS". I actually think it's the lifeblood of an economy.
You need to waste, some of it's wasteful, a lot of it's bullshit. You need bullshit. I'd argue we wouldn't have Google without Pets.com. It would be wonderful if we could sit down as a species and invent a really cool technology like the internet or blockchain or other and say, "Okay, all right, guys, let's avoid the bullshit, here's what we need. We need a search engine, we need a payments mechanism". We don't, we're ineffective investors as a species. So, you've got to throw money at things. Bubbles, in my view, are actually good because they pop and you have…
I did a research study a long time ago, shared it with my buddy, Nouriel Roubini, who is my friend.
Peter McCormack: Really?!
John D'Agostino: Yeah, he's my friend. Yeah, we don't agree, but he's my friend. I've known him pre-Bitcoin, I've known him for 20 years. And I may disagree with everything he says, but I think if you don't listen to a smart head, he's a smart guy, and if you don't listen, it's your loss.
Peter McCormack: How do I get him on this show?
John D'Agostino: That I'm not so sure about; I'm not that close with him. But we're friends and I respect him, and I think you have to listen to smart people, even if you don't agree with what they say. But I did a study, I did this a long time ago, that Nouriel liked actually, and it showed that during bubbly periods in asset classes, patent filings go up by about four to five times, for obvious reasons, right? There's more money, there's more money sloshing through and the money flows to universities. And so if you believe, like I do, that we're not necessarily that much smarter as a species than we were 50 years ago, having more patents has just a higher statistical probability of that eureka moment.
So, I like bubbles, I don't like what they do to average people. I'm a believer in suitability, I don't know that we should be pushing some of this stuff, anything volatile onto someone with like $100 of income. But that being said, bubbles do produce innovation. And so, yeah, a lot of it's crap, a lot of it's going to go away, but in that going away is going to be the infrastructure that moves us to using blockchain for the future. So, yeah, I like bubbles.
Peter McCormack: That's a great place to end. John, I appreciate you, man. Thank you for coming on. Thank you for coming to Bedford, I appreciate that as well. We'll have you back next season.
John D'Agostino: Thank you for doing that. The families I saw there, you're building a community and I wish more folks who have made money in Bitcoin or crypto did what you did, do what you do.
Peter McCormack: Well, they can just give me their money and I'll put it into my team.
John D'Agostino: Or, I'm a big fan of St Jude Children's -- I'll give a plug for St Jude Children's Research Hospital. He's doing a lot of cool stuff with NFTs, by the way.
Peter McCormack: Thank you, John.
John D'Agostino: Cheers.
