FULL TRANSCRIPT

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Slava Rubin (00:00)

In this episode of Smart Humans, we talk with Alan Konevsky who's the CEO of TZERO. TZERO is the marketplace for tokenized assets and also helps with all things infrastructure. We discuss what is a tokenized asset? Why is it becoming up the Zeitgeist now? And where is the market headed? Where is the economy at? And what are the opportunities for investment today? And of course, we have our predictions for three years out.

Slava Rubin (00:51)

Hello and welcome to the latest episode of Smart Humans. My name is Slava Rubin and I'm excited for today's guest. We have Alan Konevsky, who's CEO of TZERO. Alan, welcome.

Alan Konevsky (01:03)

Slava, thank you for having me. Delighted to be here.

Slava Rubin (01:06)

Absolutely, we're gonna talk about some innovative topics today, so this should be a great conversation. Let's get started from the beginning, which is how did you even get into the world of alternative investments? Take us as far back as you like. Last week, when you were born, your parents, school, how did you get into this world?

Alan Konevsky (01:23)

You know, that's fantastic. I wish it was last week, but it kind of goes back and you know, it's such a fun meta question. And so I'm gonna take you up on your offer and I'm gonna go really far back. So I was born and grew up in the Soviet Union. We came to the US when I was in my early teens. And so each of these things was a transformational experience that I think feeds directly into how I think about the space and how I ended up in this space.

When you come from an environment where the concept of personal wealth and personal wealth creation and asset creation generally was largely theoretical or at least had to be hidden, that sort of shapes your worldview in a particular way, and particularly how you think about money.

and how you think about asset creation, how you think about day-to-day things, and how you think about kind of a longer term legacy type issues. And probably more so than you would pick up in any finance course. And in particular, I think what it does, it instills this deep, visceral appreciation for

optionality, liquidity, and asset sovereignty, right? Being trapped is not an abstract concept, you know, to folks with my sort of backgrounds. And so it does inform how you think about your personal finances and how you think about the financial services industry, how you think about financial infrastructure and where the future

is going or should be. Having said that, I came to the industry after about 20 years in kind of very deep, traditional finance.

I'm a lawyer by training. I started out in a large law firm in New York and in London. So I think they kind of the cross border perspective and the cross border optionality on asset creation and asset trading is with me from the beginning. And my practice focused on traditional capital markets, traditional &A, private equity, regulatory matters.

Then I spent about three or four years at Goldman Sachs where I was an MD looking after the private equity, credit, real estate, infrastructure and fintech investing that Goldman did in the EMEA region using the firm's own capital as well as capital of its investors. Then I spent about four years at MasterCard.

in various senior roles, including looking after critical strategic initiatives and &A and technology and operations. And that brought me to kind of where I am now, and that's looking at digital asset innovation, looking at private market innovation from a perspective of tokenization infrastructure.

And if you go back again to the earliest themes, the earliest cultural themes that I mentioned about optionality and illiquidity and transparency and asset sovereignty, and you think about how tokenization infrastructure seeks to transform not just alternative or private assets, whether they're private securities, private credit, real world assets, and we can talk more about that.

a little bit later on, but also public markets, again, through bringing a more transparent set of rails, bringing deeper connectivity between the investor and his or her assets, and providing asset sovereignty and asset control. All these themes kind of informed to how I ended up.

where I did with my personal journey and again with TZero as one of the leading and earliest innovators with tokenization infrastructure.

Slava Rubin (05:27)

Amazing. So how many years ago did you join TZERO?

Alan Konevsky (05:30)

I've been here for seven and a half years.

Slava Rubin (05:32)

So seven and half years. So how do you go from Big Law, Big Finance, Goldman Sachs, amazing name, MasterCard, big name, to all of a sudden T-Zero? Not so well known, especially seven and a half years ago. What was that decision? Walk us through that, you know, one night you were at a huge name and then the next day, you know, no disrespect, T-Zero is not so well known comparatively. How do you make that decision? I mean, that's really interesting for all the listeners.

Alan Konevsky (06:00)

Yeah, no, absolutely. you're sort of channeling my wife or my mother with that question. And as well as my inner monologue at the time, I'll tell you, having spent 20 plus years, as you say, with big names, financial services, highly regulated industries,

I was looking at what transformational technology has the potential to, again, address the kind of macro psychological things that we've talked about, but also to address the real needs in a financial ecosystem that is evolving from the traditional institutional approach to one that is based more on

kind of the fluidity of assets and fluidity of asset ownership and asset custody and asset experiences for freer global movement of capital that isn't.

so much constrained by regulatory operational controls that kind of stand at the borders. And at that point, probably less so now, but at that point you had to take a leap into one of the more growth stage companies that were in the space. And I think TZERO appealed to me for a couple of reasons. First, they had the right perspective on

on evolution of the tokenization industry, of the digital asset industry, and how blockchain can transform the securities industry in particular. That is that it's going to be a journey of gradual incremental innovation. In order to do it right, you have to build the right financial infrastructure, which means regulatory infrastructure. And as a lawyer, as you kind of march through the steps,

in your career, that is where you can add particularly a lot of value. know, a lawyer at a cement company has some marginal utility. A lawyer in a financial services business that is looking to innovate in gray zones, but is putting compliance and regulatory infrastructure first can really bring a lot of value. And the background that I accumulated in the years that preceded that would have been particularly worthwhile.

not a household name, but honestly, no one really was in that industry at the time. And there were some folks that were pure play crypto then that were probably a little bit higher profile, but everything was nascent. And so it was a leap of faith, but it was an informed leap of faith based on how you think about where the puck in the industry should be going and who is really doing it the right way.

Slava Rubin (08:33)

Perfect. I mean, I could see how finance and legal, all of your experience converges into TZero So that makes a ton of sense. Turning the page here, a lot of our listeners know that traditional investment portfolio is 60 % public equities, 40 % bonds, 0 % alternative investments. That's obviously not what we're pushing here on this show, but we love to hear how folks who are our guests here, how they think about their portfolio.

So when you're investing your own net worth, this is separate from Tzero, what is your percentage breakdown between public equities, bonds, and then what's leave, what percentage is alternative investments? Is it zero or is there some number bigger than zero?

Alan Konevsky (09:14)

⁓ It's some number bigger than zero. And you got to think about just my life generally, right? You got to think about how short or long you are, you know, across the various parts that kind of shape what your financial asset base is. Beyond just what's in your brokerage account or your bank account, right? My life is very long in digital assets. When you think about my career, my earning potential, my reputation, my capabilities.

⁓ the equity exposure I have just by virtue of living and working in that space. I have to balance that against my broader portfolio that would need to take that into account. Having said that, you got to look at a couple of things. I have young kids, I'm sure a lot of people do, and that changes how you think about your time horizons in a way that maybe is a little bit hard to articulate.

But you stop thinking in quarters necessarily, or months, or days, and start thinking in terms of decades and legacy. And so a lot of my allocation decisions run through that filter. My life is very long in digital assets period, just from a from and therefore, to some extent, private assets, just because of what I do.

And I got to think about in terms of kind of longer time horizons. And again, keeping in mind the deep psychology about liquidity and illiquidity and optionality and pathways. So I am.

significantly invested in alternative private assets, both digital assets as well as traditional assets. But I balance it off, again, in view of how long I am on that space just because of who I am with exposure to the more traditional sectors. ⁓

Slava Rubin (10:59)

So let's start with

the top down, the three percentages. So what's your percentage into public equities, bonds, and alternatives?

Alan Konevsky (11:06)

Yeah,

alternatives are probably about 30%. Bonds are probably about 30%. Public equities at this point are probably about 20 to 30%. And then there's an increasing cash allocation that I have. And look.

Slava Rubin (11:28)

Okay.

Alan Konevsky (11:31)

know, cash I think is important because as we heading into some periods of uncertainty, you want to be able to take advantage of opportunities, particularly in the private markets.

Slava Rubin (11:42)

Super helpful. Where are you parking, Cash?

Alan Konevsky (11:45)

⁓ Money market funds.

Slava Rubin (11:47)

got it. So 30-30-30, very interesting. So double clicking into alternatives. When people think of alternatives, they think crypto, they think pre-IPO venture, they think real estate, maybe some art, collectibles, think private credit, things like that. So of that 30 % alternatives, if you were just gonna blow it up to be 100%, how do you split your 100 % of alternatives into those various assets?

Alan Konevsky (12:11)

I'd like to do more on collectibles and art. I think that's part of our mission at TZERO is to bring more transparency and liquidity to these types of marketplaces. But actually, if you think about it, I'm heavily overweight in real estate in that space, both directly and through vehicles. That's easily half of that.

And then the remainder is private equity, a little bit of private credit, and a little bit in the collectible space.

Slava Rubin (12:42)

and what amount in crypto or digital.

Alan Konevsky (12:44)

And so if you put crypto and digital, probably it cuts across some of these classes, certainly you got to think about how long my life is in crypto and digital, but certainly 20%.

Slava Rubin (12:56)

Yeah, yeah.

Got it, so 50 % real estate, 20 % crypto, and 30 % the other stuff. Super helpful. And just for the listener, why is it 50 % real estate? I mean, a lot of people tend to have the largest alternative to be real estate. Why is that for you?

Alan Konevsky (13:06)

Yeah.

So that's a great question. And you know, people think about real estate differently. And in my industry comes up, there's this walking around assumption that real estate is the easiest class to fractionalize, securitize, and tokenize, and democratize, therefore. And kind of abilities to invest in single asset real estate have been limited unless you're willing to cut larger checks.

Real estate is the easiest thing to understand, rightly or wrongly, as an investor in this space. It's one of the easier things to model cash flows on, particularly for income producing real estate. we've seen some severe disruption with commercial real estate recently. And that's going to continue. So a lot of it is just thinking about it that it's one of the easier asset classes to...

to think about, to touch from your perspective. And I'll tell you, as I think more and more about what asset classes and activities can be significantly disrupted by evolving technology, particularly AI,

I find that harder assets, real estate is a prime example of that, experiences and these sorts of activities are least susceptible to that sort of disruption. And funnily enough, probably becoming increasingly more important, particularly from a human perspective, particularly to the higher earning segment of the population that are looking

more for the human kind of experiences that are not going to get automated away.

Slava Rubin (14:51)

I love that counter to AI, that's really interesting. When you're getting your real estate exposure, are you, identifying your own individual assets and deploying into it, or are you trying to find it through a fund? How do you try to deploy it into real estate?

Alan Konevsky (15:04)

It's a bit of both. It's probably three vectors, just working with people who I know who are friends and partners, then looking at some of the more organized, fun type opportunities available out there and just doing things on my own.

Slava Rubin (15:17)

Awesome. Okay, so you mentioned how the market is going, commercial real estate and such. We'd love to hear your thoughts. What are your thoughts on the market? And this is the economy, the stock market. It's a very open-ended question on purpose for you to just take wherever you'd like. What's the state of our market? Where are we headed in the coming months and quarters?

Alan Konevsky (15:36)

Look, I think that we are.

probably both overestimating and underestimating the impact of disruptive technologies on multiple layers of the market. That goes for equities.

That goes for private credit and public credit for that matter associated with impacted institutions. The efficiencies that are driven by AI automation and agentic AI and machine to machine to economy, particularly in sectors where people are struggling for revenue growth. They're struggling for market share.

but there are very ripe opportunities to impact the cost side of your income statement and by automating more with AI. That will continue to push on that. Then there are a number of businesses whose revenue models.

are going to be disrupted in a very fundamental and probably secular way by AI automation. And I think we're understanding the scale and velocity of that as well. I'll tell you just from where I'm sitting on the tokenization side, people have struggled from time to time to articulate.

the reason for why tokenize. We're not gonna get into a lot of detail with that, but people sort of talk about, well, tokenization kind of converges a bunch of disparate asset classes together, and so it makes user experience differently, unlocks trap liquidity, or it makes cross-border activities easier because...

Stablecoins are a good example of that, or it's more efficient, faster, cheaper, more transparent, or programmable, or kind of the asset sovereignty part that we talked about. But to me, I think the interoperability with AI and how AI, and particularly agentic AI, is going to be a driving force for tokenization because AI agents need to be able to pay each other, may need to be able to balance portfolios, engage in trading activities. It's hard for them to interact with traditional brokerage accounts and bank accounts at

at this point, really easy for them to touch a wallet and tokenize assets inside that wallet. So that to be a top down force function for tokenization and the knock on consequences that has on the rest of the financial services industry, for example. So I think we're really underestimating the scale and velocity and downstream impacts of disruptive technology and I think AI. Larry Fink sort of compared it to the way internet was in 96, I think it's

It's a lot more pervasive and dramatic than that. So I think you are going to see very significant value creation opportunities. I think you're also going to see a lot of value transformed or obviated.

because workflows and processes have gone on, it's gonna have a very significant human impact in terms of how people work, where people work, and the impact that has on the broader economy. I think politics, we are in a period of...

domestic uncertainty in terms of what's going to happen after the midterm elections. And I'm not going to call kind of the odds on that, as well as global geopolitical uncertainty. if you're looking for calm, predictable times where you can model cash flows easily and follow your 60-40 model, it's probably not one of those times.

Slava Rubin (19:04)

All right, well, ⁓ you set it up for the lightning round here for me to put you on the spot on some specific points of view here, which is inflation 12 months from now. Is it up, down or flat?

⁓ any perspective on how much.

Alan Konevsky (19:21)

You know, calling numbers is hard at this point. I think that, you know, we have a real risk of being stuck in the groove of kind of fairly flat growth and inflation, which is the worst possible combination. And honestly, at that point, the numbers or the incremental increase in inflation is less important than the fact that it's coupled with no growth. ⁓

Slava Rubin (19:46)

Okay, perfect. And then the unemployment rate, up, down or flat? 12 months from now.

Alan Konevsky (19:54)

I think you're going to see ongoing impact of some of the just the cyclicality in some industries that leads to job cuts, as well as AI related efficiency and workflow improvements. Coinbase cut their payroll by what 14 % yesterday. And if you look at Brian's letter, a lot of it has to do with the fact that there are permanent secular changes to how people work.

how workflows are organized. So I think that's gonna trickle across the economy and it's gonna increase unemployment over the medium terms.

Slava Rubin (20:28)

So 12 months from now, unemployment is up. So right now it's around 4%. You think it goes above 5%, 6%, 7%, 8 or it's...

Alan Konevsky (20:37)

I don't think you're gonna see numbers that high, I think, you know, going up from four to five or so is possible.

Slava Rubin (20:43)

All right, how about rates? So Fed Fund rates 12 months from now, flat, up or down?

Alan Konevsky (20:51)

You know, that's a, it's, you know, there's a very kind of tricky push and pull here and it's bundled up with Washington politics, as you know. It's, you know, the, probably the easy answer and might be the correct answer is that there's going to be enough pressure on the Fed, particularly given the personnel changes there to.

to introduce more liquidity into the economy, for the various growth related reasons that we talked about and employment related reasons. that's going to, so that would lead to lower rates and that would lead to the earlier point about higher inflation potentially coupled with flat to negative growths.

Slava Rubin (21:26)

Totally. So in that situation, 12 months from now, you're predicting one cut, two cut, five cuts.

Alan Konevsky (21:31)

Less than five, more than one.

Slava Rubin (21:34)

All right, so let's say three cuts. All right. And then you said I'm not gonna call it, but I'm asking you to call since it's not that far away. What's the impact of the election? Does it go more Democrat? Does it go more Republican? Or is it just kind of stay where it's at?

Alan Konevsky (21:52)

Republicans are likely gonna lose control of the House. And the White House obviously is staying the way it is for another couple of years. Republicans will probably hold on to the Senate.

Slava Rubin (22:02)

All right, great. I love when I put you on the spot, you're very clear. I love it.

Alan Konevsky (22:06)

Yeah.

Yeah. And I'll tell you, I'll tell you, I that sort of means that there are a lot of agenda items that are going to have difficult time getting traction. It means you're going to spend more time on inquiries and investigations. know, kind of the I word impeachment might come up again, as it did, you know, during the first term of the president. you know, it's, you know, it's not going to lead necessarily, it's not going to lead to a more functional environment in Washington.

Slava Rubin (22:35)

So all of that, you've given me a lot of pieces of information. Inflation potentially up, growth pretty flat, rates coming down maybe about three turns, so 75 basis points. Unemployment may be seen 5 % or more, which is a pretty big call. Republicans lose the House, hold on to the Senate. What does this all impact 12 months from now to the stock market? Because right now the stock market, we're here in May, it's pretty fully valued.

but it's on a run. Is this all continuing? We just had a big finance person say that the AI trade is only, sorry, still has a year or two to run. So are you in the, we're going down 12 months from now in the stock market or are we going up or are we kind of chopping flat?

Alan Konevsky (23:24)

I think you're going to see, it's probably going to be a tale of two cities a little bit. There going to be some sectors like the AI trade with new innovative technologies that are fundamentally transforming various marketplaces, some financial technology and other spaces that are probably going to do really well. And then you're going to see other sectors, particularly those that are going to be disrupted by this technology that are going to do less well.

Slava Rubin (23:51)

So in that situation, given the averages and such of the big companies, are the QQQs, the Dow, the S &Ps, are they all pulling up higher? Or are they...

Alan Konevsky (23:59)

I

think in the near term, yes.

Slava Rubin (24:02)

12 months from now.

Alan Konevsky (24:05)

I think the transformative technology run, I agree with you, still has at least a year to run. that may sort of sustain it on an upward trajectory. But it's going to run into tailwinds. Sorry, into headwinds at some point. And the tailwinds will start to peter away.

Slava Rubin (24:27)

All right, well, thank you for playing that game. So let's get into TZERO. So not everybody has heard of TZERO, but it's a big company doing interesting things. You did mention the word tokenization a few times. We didn't dig into it yet. Not everybody knows what it is. are experts. Can we just start with what is TZERO and what is tokenization?

Alan Konevsky (24:48)

Absolutely. So TZERO is one of the earliest companies that looked at what can blockchain technology do for the financial services markets. And blockchain technology, again, to get to sort of at least some basics is an idea that a number of industries would operate a lot better if instead of having multiple databases, you had one database.

and that one database was publicly accessible, was transparent, was immutable, fully auditable, and the data that's represented on that database was programmable, self-regulating, and automated. So what that means for financial services in particular is you look at an industry that has multiple participants, broker dealers.

custodians, transfer agents, exchanges, banks, XYZ, and the assets that you think you own kind of trickle through a series of records represented by all these middlemen, it goes onto one database with digitally native representation of your share or of course your stablecoin.

natively digital assets or your bond or your securitized real world assets like a securitized building or derivatives or predictive markets. And that leads to an environment that is faster, cheaper, more transparent. Now TZERO's approach was that in order for that journey to take place, you need to develop

robust regulated infrastructure because the transformation is not going to happen overnight. The technology is not going to be permitted to be self-governing, self-regulating overnight. You're going to need to have traditional market participants, like again the broker dealers and the endeclaring.

and the clearing firms and the transfer agents become more adapted to the digitally native environment so they can support this development. this transition from that perspective, it's easier to develop what I think is the best vertically integrated, regulated infrastructure stack for tokenized securities in the US with a range of assets and capabilities that we have. And we are increasingly expanding into

into tokenized assets beyond tokenized securities with a footprint in tokenized derivatives and potentially predictive markets and spot crypto capabilities depending on how regulatory reform plays out in Congress and what role CFTC licensed entities will play in that. ⁓ Why? Go ahead, please.

Slava Rubin (27:25)

Sorry, really quick, what

is a tokenized asset?

Alan Konevsky (27:29)

A tokenized asset is, again, a share that, let's take a share of stock. Your share of stock, people always say paper certificates. No one does paper certificates anymore. It's a bit of a bogus point of comparison. But your shares were presented as a book entry on some spreadsheet, actually on a number of spreadsheets maintained by your broker dealer.

It's clearing firm, the transfer agent maybe. When it hits an exchange in some fashion, it touches exchanges, books, and records. A tokenized asset says, we're going to take all of that away, and we're going to create one representation of your share. And we're going to write a little bit of computer code. It's a computer program, effectively. We're going to write a little bit of computer code, and then we're going to anchor that little bit of computer code.

on a global database that is not maintained or controlled by any single person. It's distributed and

your asset is going to be forever represented on that one global database in this bit of computer code that is programmed to never behave in some ways, always behave in other ways, and again, as opposed to bits of data scattered around books and records of financial intermediaries.

know, at its basic, that's what you're trying to do. Now that leads to a bunch of consequences, right? If you want to custody your own asset in your own wallet, as opposed to some brokerage account, you know, we talked about, you know, kind of some of the, kind of the trust issues from, know, from my own political background. And it certainly seems to be a...

more of a secular thing with the younger investing population as well. People always say it's only kind of crypto maximalists who care about self custody. If you actually look at the younger investing population, 35 and under, I think blockchain maxis unintentionally anticipated a generational trend where people want to be able to custody their own assets. And a tokenized asset allows you to do that. You don't have to trust the bank. You don't have to trust the broker dealer.

You just have to trust the technology. Now, you've to unpack that concept a little bit. tokenized asset allows you to do that. You can trade and move these assets in a more transparent way and capture economics in a more transparent way than the traditional Wall Street system. You can have other user experiences. But at end of the day, you're just converting bits of information scattered across

kind of opaque databases maintained by regulated market participants into one transparent software-based representation of value.

Slava Rubin (30:21)

So is TZERO providing the services to do the tokenization or are they providing the ability to buy and sell the tokens that have been created or are they doing both?

Alan Konevsky (30:32)

We're doing both, I would say, and there's a third item. We're also providing regulated rails for other broker dealers who don't have the same digital capabilities or asset managers who want to tap the distribution potential of the digitally native crowd.

by doing tokenized fund offerings, for example, or want to provide secondary liquidity. And again, they don't have the infrastructure, but they can use ours. Or you're looking at layer one protocols, so these blockchain protocols that are looking to create compliant gateways so developers can use their technology.

Slava Rubin (31:06)

Layer ones like

Ethereum, Solana, and others.

Alan Konevsky (31:09)

That's exactly right. Exactly right, Slava. So their developers can build products using their technology. So remember, that's how they make money. regulated products that have gateways into the regulated ⁓ ecosystems. Issuers, again, that are looking to raise capital from digitally native crowds. ⁓ Fintech platforms. Sorry, go ahead.

Slava Rubin (31:30)

So is Tzero

should Tzero be thought of as almost like a tokenized version of the NASDAQ, meaning they have their own marketplace of offerings, but the NASDAQ has its marketplace of offerings?

Alan Konevsky (31:45)

I think there's an element of that. I would think of it more of just connective tissue. So we have technological capabilities, so the actual act of tokenization. And then we have importantly regulatory capabilities, the brokerage licenses, the clearing licenses, the on-chain custody license, an alternative trading system or ATS that we maintain.

Slava Rubin (31:49)

Okay.

Alan Konevsky (32:08)

investor verification capabilities, the CFTC licenses that we're applying for derivatives and predictive markets, and spot crypto again, depending on regulatory reform. So it's really the connective tissue as opposed to necessarily trying to displace or compete with major exchanges for marketplaces of liquidity. For example, I look...

if and when large exchanges, whether it's a NASDAQ or NYSE, develop tokenized marketplaces, whether because they're following what DTCC is doing, whether because they're creating their own platforms, we would be a gateway for that for participants who want to access that.

But I don't necessarily view us as this kind of this as, you know, a black and white competitor that's going to displace national securities exchanges. think, you the pathway to relevance lies more in just enabling other people to do that.

Slava Rubin (33:02)

So TZERO has been around for years. What are some, let's call it metrics or milestones that you can speak to so the audience can understand your scale and experience?

Alan Konevsky (33:14)

Yeah, absolutely. Look, can talk about Tzero has been around for almost 10 years. We've been tokenizing financial assets for about nine of them. We've been trading tokenized assets in an active retail-based environment with 35,000 plus investors for about seven years. In terms of gross notional value of assets that have been traded,

on the secondary markets that we operated or capabilities that we offered, or been offered on the primary capital raising rails that we offered. You're looking at about $850 to $900 million worth of gross notional volume of that. So again, in a developing denominator, you're looking at a marketplace where

We are among the top tokenized asset ATSs by volume and number of trades over the years, depending on the metrics. I think we've been a leader in developing intellectual property in this space. We have over 100 patents that are all blockchain and financial services related across about 25 patent families, and that's globally in the US and abroad. And again, in terms of our regulatory capabilities,

in our footprint that's fairly unmatched.

Slava Rubin (34:42)

Amazing, that was super helpful. Over $35,000, is that accredited or retail or both or do have a limitation there?

Alan Konevsky (34:50)

So some of them are going to be accredited, so it's both. We also have a separate investor accreditation business where we have a database of about 90,000 accredited investors only. That's in addition to the 35,000 investors in our platforms.

Slava Rubin (35:06)

So you mentioned the AML KYC capability and some others in terms of how you make money. How is it that you're monetizing? It sounds like there may be multiple revenue lines. So can you share maybe let's call it the three major revenue lines as to how you monetize?

Alan Konevsky (35:23)

Yeah, absolutely. So I think, look, they probably fall into three buckets. One is technology-based revenue. That's for partners, whether they're issuers, whether they're other broker dealers, whether they're exchanges, whether they're fintech platforms, asset managers paying you for the physical act of tokenizing an asset. That's one. That's technology-based revenue. Then you have onboarding and due diligence and structural type fees for getting access to the

to the regulated platform. And then you have transaction-based revenue and that's really volume-based depending on what your partners are using for. Are they using you for capital formation, in which case you get a percentage of capital raise? Are they using you for secondary liquidity, in which case you get a percentage of notional trading on the platform? Are they using you for custody, in which case you charge custody fees that are based on some number of bips of assets under.

custody effect of the voice.

Slava Rubin (36:22)

So really it's almost like you're a new version of an investment bank. mean, an investment bank meets ATS, Alternative Trading System, right? So it's investment bank meets trading system.

Alan Konevsky (36:28)

Yeah, it is effectively.

Yeah.

That's effectively a bank meets technology company.

Slava Rubin (36:39)

Yeah, okay, great. I had to just wrap my head around it for myself and the audience. So that's super helpful. ⁓ What is it that most people on this, you who listening don't know about TZERO beyond what you already just mentioned, which was awesome about the milestones and numbers that they should know as they navigate all their alternative investment opportunities. What's one thing they just need to know?

Alan Konevsky (36:44)

No, spot on.

Yeah, absolutely. Look, think TZERO historically has been in the groove of thinking of itself as more of a niche retail-focused marketplace that has a certain number of investors, a certain number of assets, but it's effectively a walled garden. By the way, that perspective...

cut across the tokenization industry in its earlier and kind of in middle stages where everyone was running walled gardens with a limited number of assets, a limited number of investors. What I want people to think of TZERO as is as this unseen infrastructure that sits behind key brand names in the financial services sector, in the asset management sector, in the digital asset sector that are looking to bring

tokenized securities and tokenized assets, broadly speaking, to retail and institutional buyers, right? What I want is the best of all possible worlds for me is that TZERO is sort of the unseen X factor across some of the best user experiences and brand names in the marketplace, and you wouldn't even know it.

Slava Rubin (38:05)

That's super helpful. It's like Intel inside. So tokenization, real world assets, RWAs, this is becoming like a trendy phrase. It's been around now for about a decade. Most people don't know that. Why is it that it's so, let's call it hot today? What has happened? What are the new things that have evolved? What are the evolutions of convergence here? So

Alan Konevsky (38:07)

Correct.

Slava Rubin (38:33)

Why are we having a moment?

Alan Konevsky (38:36)

That's a great question. And honestly, the answer to that probably fluctuated over the years. And depending on who you talk to, you're going to get really good or really bad answers. I'll try to avoid the latter, at least. But the really bad answer usually is, you should tokenize something because it makes things more liquid. Just the physical act of tokenization makes an asset more liquid, which, of course, is pretty wrong.

Some of the most liquid marketplaces on the planet, look at US equities markets, are for now not tokenized at all. Again, that's changing as we talked about. And some of the least liquid marketplaces in the world arguably are pretty blockchain heavy. And I know people think crypto is really liquid, but actually the more you learn about how crypto liquidity works, the less you think it should be transportable into other asset classes. So the answer can't be that.

I think I've always thought about kind of why tokenize in a couple of ways. I talked about multi-asset convergence. Again, you're tearing the...

Slava Rubin (39:38)

Well, not only why

tokenize, why tokenize now.

Alan Konevsky (39:41)

Yeah. And so multi-asset convergence, right? have multiple asset classes. They're all siloed. Liquidity is trapped. You tear it down. You make public stocks, private stocks, bonds, derivatives, predictive markets, crypto, course, including stable coins, sit on same digital rails. Now you can create very, very kind of transferable, composable, unique user experiences. You can unlock trapped liquidity as it sits inside these silos. think

Why is that piece particularly relevant now? I think markets are reaching certain degree of kind of maturity and sophistication. And as you look to unlock new potential, you have to take that step, right? You have to defragment the industry. so multi-asset convergence is one. That's by the way why you've seen some platforms chasing kind of universal apps or super platforms, as you've seen. Robinhood has been a good example of that.

There is a user experience and a liquidity logic behind it, other than just selling more stuff to your customers once you acquire them, which is also important. But multi-asset convergence is one reason. Cross-border convergence. Cross-border movement of capital has been a topic as long as I've been doing this. It's one of the reasons why I wanted to go work in London in the 90s when I was first starting out.

And cross-border has always, cross-border in the financial services sector has always kept running into regulatory walls. Each country has its own laws. And it's nice you're a broker dealer in the US. Doesn't mean anything in the UK. And the other way around. But you see that tokenization technology, particularly the single global database, has the potential to do what intranet did for data and voice.

for financial services. Stablecoins have been a great example of that. So cross border convergence and cross border movement of capital is a very important driver of that. And again, as again, we look for more efficient ways to conduct global commerce, to engage in global remittance and payments and other activities, that's driving that. User experience convergence, that's number three.

talked about that. I think it is heavily generational, not just philosophical, with blockchain maximalists. People want control over their own assets. People don't trust institutions, not as much as they used to, not blindly. I think the experience of the great financial crisis ⁓ and some of the aftershocks that have been happening since then had a lot to do with it. And tokenization helps deliver on that. And that's not going to change.

Again, efficiency, right? We're all chasing efficiency, faster, cheaper, faster, cheaper, better, more transparent, less susceptible to bad behavior. So that's driving it. know, programmability, people want rich experiences. They don't want just a passive financial relationship. You know, they want experience and data rich relationships. And so the programmable nature of tokenized assets have a lot to do with it. Now on my list,

Slava Rubin (42:24)

Fast and very, yeah.

Alan Konevsky (42:48)

AI was always sort of there just in terms of an X factor. But a couple of months ago, I started moving it closer to the top of the list. And that's the interoperability with machine-to-machine economy with agentic AI and how that can drive increasing tokenization of financial assets. Again, as companies across the board are chasing efficiency using agentic AI,

AI agents need to be interoperable with payment ecosystems and other financial assets.

Slava Rubin (43:21)

I have a question.

So beyond the quote unquote obvious of an agent will buy an asset and because of its interoperability, it'll make it easier to buy it. Okay. So let's call that obvious. me a prediction for two years out how AI changes the world of tokenization.

Alan Konevsky (43:31)

Mm-hmm. Yep.

I think, you know what, I'll zoom out a little bit more to financial services. think onboarding AML KYC compliance is going to be very significantly automated, far more real time, far more intuitive. As you said, AI is going to, the bulk of trading and payment activity is not going to be human-based. For now.

It's all the way around, but it's increasing. And I think that you're going to reach an inflection point at some point where that's going to be driven largely by AI. Data needs and front end needs are going to flip around. You don't need a front end for an AI agent. Arguably, if you're a human being using an AI agent, you don't need a front end either. I think how you consume data.

how you consume marketing, Slava, to the point of a lot of what kind of what you talk about here, how you consume those sorts of inputs into investment decisions is gonna change fundamentally, both what that information is, how it's packaged, how it's presented, how it's analyzed. I think the velocity of activities is gonna increase exponentially. Obviously, timing is gonna change as well. 930 to four, why, right? 24 seven.

And 24-7 was always kind of an odd thing, necessarily an odd hill to die on in an entirely human-driven environment. It's certainly not in a machine-driven environment. Same thing for global fluidity of opportunities and movement of capital.

Slava Rubin (45:17)

I love it. Give me one more prediction being the CEO of TZERO. Give me some crazy tokenization oriented prediction for 2030.

Alan Konevsky (45:27)

You know what? I was giving a talk probably six, 12 months ago, and it was a room full of lawyers and broker dealers and transfer agents. And somebody said, well, how do you know if this is really working? I said, honestly, if half of you don't have jobs anymore, right? that's sort of a reality. You're going to see a financial services ecosystem that looks far more like a SaaS type of an industry and far less

as a piecemeal driven in this fractional, kind of balkanized, fragmented industry that it is.

Slava Rubin (46:03)

You're obviously a smart guy. What is it that you're listening to, watching or reading that, you know, on the daily or a book you like, what is it that you can share with the audience?

Alan Konevsky (46:11)

I gotta tell you, you gotta learn from the past and you gotta learn from the basics. A lot of what I do, rightly or wrongly, and I actually do think in an increasingly automated world, what we as humans can bring are these kinds of insights and intuitions and judgment and creativity that cannot be replicated yet, is you learn from the past and you learn from history and you learn, and whether it's strategy, whether it's tactics, you know,

whether it's financial history or military history. That informs a lot of how I think about things. Machines are great, but machines will take you 90 % there, which is sort of a difference between human DNA and a banana, pretty much. So the extra 10 % really make a difference. I think, reasoning by analogy from lessons in financial history, military history.

History, just broadly speaking, is a lot of what I do. In terms of sources, I don't stick to anything in particular. I crowdsource my information. think social media has a lot to do with it. Podcasts like...

Slava Rubin (47:14)

Any particular

podcast that you like, any particular folks on X that you follow, any particular people you like to listen to on Instagram or you like to read or newsletters or anything?

Alan Konevsky (47:26)

You know what, if I mention one, then like five others are going to get upset. And I'll tell you, it's also not accurate. I'm pretty omnivorous and almost source agnostic within the realm of what's credible on the information I get. increasingly, AI is also becoming a source of information, or at least an analytical aid in processing that information.

Slava Rubin (47:47)

⁓ What's your percentage breakdown of AI usage? Meaning between any of the models.

Alan Konevsky (47:53)

I gotta tell you, I am a big fan of Claude.

Slava Rubin (47:56)

Are you 100%,

90%, 50 %?

Alan Konevsky (48:00)

I would say for me it's 70 % Claude, 30 % Grok

Slava Rubin (48:06)

Okay, 30 % grok. I didn't see that coming.

Alan Konevsky (48:11)

Yeah, and I'll tell you why. mean, I think some of it is just, it gets back to the point for why single user experience actually matters. You know, if you're trying to pivot off...

Slava Rubin (48:22)

Is it Grok inside of X or Grok separate from X?

Alan Konevsky (48:24)

Correct,

correct. It's mostly inside of X. So if you're trying to pivot off something that you just saw and you're trying to process that piece of information, it's a lot easier. So user experience matters.

Slava Rubin (48:35)

Got it, got it. So

that, yeah, that is a user experience. Awesome. Last thing, put you on the spot looking for two picks. One public equities company with a ticker and a name that you tell us why you like it for three years out. And one that's not in the public markets. It could be any crypto or any private asset or anything, any fund, whatever that you like today for three years out. So give us your two picks and why.

Alan Konevsky (48:59)

So on the public side, I'll look at, and again, this is sort of consistent with just my broader theme, including at TZERO, I'll look at public plumbing, public financial plumbing, companies that are unseen, unheard, connected to everyone in the industry, and a best position to continue to drive innovation. You look at companies like Broadridge, for example. Not interesting, most people don't think about it, but...

It is core to institutional finance. It is core to these fundamentals. Again, it's a business no one really talks about much, but the connectivity and scale and therefore the potential, just from a competitive perspective for me, but also from a partner perspective for me of effective change across the industry and really surviving transformation. It's companies like that. that's on the...

Slava Rubin (49:51)

So you like

it for three years out? And why exactly do you like it? What do you think is gonna happen over the next three years that you like it?

Alan Konevsky (49:54)

Yes.

I think the deep connectivity across the US financial ecosystem, with thousands of issuers, is going to really position it optimally to deploy new technology in ways that for younger entrants means that they have to go out and rebuild these relationships. Folks like Broadridge can just push it out. They are unseen. They're already connected. they can continue to remain relevant. Assuming they adjust.

Slava Rubin (50:24)

Awesome. We definitely have not had Broadway

on the show before, so that is a bold pick. I like it. It's five year chart is not beautiful, but if you span out over the life, it's had some nice growth over the course of its many years in existence.

Alan Konevsky (50:37)

Yeah.

Yeah. And to your point, assuming that, right, they could fall asleep and become irrelevant. But if they leverage the connectivity they have, which, right, and to push out new technology, new capabilities, that's one piece. They don't have to rebuild that fundamental connectivity that other people have. I know.

Slava Rubin (50:57)

They're down 35 % year over year.

All right, well it's a good value pick then. And then what's your non-public markets pick?

Alan Konevsky (51:04)

You know, that's interesting. I'm going to flip a little bit. And so not everything is going to be tech or plumbing or infrastructure related. And I'll look at the human piece of it. And particularly the side, the industry that is going to be least susceptible to AI disruption on the revenue or the cost side. And that's experiential real estate.

I think high-end experiential real estate, you look at companies like Aubert's Resorts, which I think is still private, certainly with the more affluent segments of the population that are increasingly chasing experiences. And with AI pretty much saturating every other part of experience where physical experience and experiential real estate is probably the last thing.

Slava Rubin (51:51)

So is

Westfield interesting there? Because they're like an experiential mall creator. really... Oh, you know what's interesting there? Is Sphere. Sphere. Sphere's on fire and that's real estate. I don't know, experiential real estate. No, I'm following you.

Alan Konevsky (51:57)

If they continue to adjust,

I agree. I agree. Why do you think sphere is on fire?

It's experiential real estate. I think we're going to keep digging for what it means to be human and in a world that's going to keep shrinking a little bit from that perspective. And to me, that's a really interesting part of it. Look, it might be a little contrarian, but Slava, haven't even thought about it. Sphere, you're absolutely right. That's a good example of that.

Slava Rubin (52:32)

Alan, we've covered a lot of ground from being born in the Soviet Union, 20 years of big law and finance, talking to us about how you like to split up your personal net worth 30 % into all 30 % bonds, 30 % equities, 10 % cash, keeping it for a rainy day. You zoom into your alternatives and you prefer real estate, real estate, some nice hedge against AI. But you do have a nice chunk of crypto and some others. You gave us lots of predictions on the markets, which I love. Inflation is going to be up, growth is going to be flat.

rates are going to come down a bit. Unemployment is actually going to be up on the rise. Stock market is going to do OK along the way. We talked about Tzero, which not everybody knew yet, but it's amazing what can happen when you're starting to actually program and have interoperable information. It's been around for 10 years. Over 35,000 investors accredited and non over 850 million dollars of Notional. You have all these patents, you have the ATS and you have a lot of things to build on top of. also have almost 100,000 other investors that are accredited, which is totally amazing.

I love all the reasons of the why now with tokenization, multi-asset, cross border, faster, better, cheaper, better user experiences that I convert, programmability, interoperability, I'm sold. And you don't need an AI for an agent. Strong quote. I love that. And then I asked you to be bold, a prediction, half the people in financial services are going to be gone from their jobs, which, you know, that is a bold statement. Can't say I disagree. I do think there'll be other jobs created, but half the jobs being gone is a huge statement.

It's first time I heard the word omnivorous on this chat. So it's great. You like all content, which is amazing. 71 % Claude, 30 % Grok. And you gave us two huge, huge bold bets for coming forward. Broadridge, which we haven't heard of before here. And then experiential real estate, maybe Sphere, maybe some other private play. Thank you very much, Alan.

Alan Konevsky (54:18)

Slava, thank you for having me.

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