FULL TRANSCRIPT

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Slava Rubin (00:00)

In this episode of Smart Humans, we talk with Arjun Sethi, who has not only one amazing role, but actually two as chairman and co-founder of Tribe Capital, as well as co-CEO of Kraken. He talks to us about how he was all in with his own net worth into those assets and doesn't really diversify into the public markets. He tells us his point of view on the macro and actually what is happening in private markets, public markets, and in the global economy at large.

And finally, he of course gives us his perspectives on three years out.

Slava Rubin (01:01)

Hello and welcome to the latest episode of Smart Humans. I am very excited for today's guest. We have somebody who's doing some super exciting stuff and in two worlds of alternative investments. So we have Arjun Sethi, who is the chairman and co-founder of Tribe Capital, as well as co-CEO of Kraken. Arjun, welcome.

Arjun Sethi (01:23)

Thanks for having me.

Slava Rubin (01:24)

We're gonna have to figure this all out. You have two huge jobs. So we'll get into that in just a second. But how did you even get into this world of alternative investments? Take us as far back as you'd like, whether it's childhood, high school, your first job, how did you get into this world?

Arjun Sethi (01:40)

Yeah, I'd have to go a ways back. so, I mean, first and foremost, I didn't start off as an investor. started building.

probably since I was a little kid, not companies, mostly products, tinkering around on stuff. So cars, wood shop classes. My dad was an investor and an operator. So very similar, but I just always got exposed to whatever he was doing. And a lot of them were not successful. I kind of watched people build in the garage, just had the, you know, the California style dream. But when I say exposure, I was exposed to a lot of people in the industry. So, you know, Steve Jobs,

jobs, working from where he lived in Palo Alto, just seeing these people all the time. While I was growing up here, it didn't seem like it was a big deal. ⁓

Slava Rubin (02:25)

Sorry, you saw Steve

Jobs regularly?

Arjun Sethi (02:27)

We lived nearby. He had crashed at ⁓ my uncle's house. Like this was like a part growing up at the time where they weren't famous and they hadn't built anything. And he's one of many that we had met. I remember ⁓ I was in one of my dad's offices and he was doing a presentation to Bill Gates really, really early. And it was just like, you know, very similar to how we walk around here now with other.

entrepreneurs that have companies that are worth a billion or five or 10, et cetera. And it's commonplace and it's normal. And I know that seems extreme, but at that time, the scale and size of these companies were ⁓ much, much smaller. I'm talking about when I was seven years old.

Slava Rubin (03:06)

and what kind of investor was your father at the time?

Arjun Sethi (03:09)

So he was also a builder to an investor and he worked in venture capital for a bit. So going back to your question, I never started out as an investor. I started by building, always drawn to systems. I didn't even go to school. I was just trying to build my own computers, tried to sell computers.

And so I always was thinking about, you why do some product scales, others plateau? I used to think about, you know, gaming, because I used to play a lot of games, I used to set up my own servers. And so like really, really early on, actually, I used to ask and think, why do users stay loyal to like one product or abandon another? What are early signals of compounding behavior?

I say the word compounding behavior now because it's more articulate, but at the time it was different, right? You started thinking about, someone got these many page views and it's just so cool. There was a website called hamsterstyle.com way back in the day. I don't think a lot of people remember that used to be like my go-to to get an understanding of what the community was thinking about and what type of new...

codexes were out there that we could sort of use on top of websites, way before like AJAX and HTML5, this is a long time ago. So my early years, I was just an operator. I worked with teams, I interned with teams. I would just walk around during the dot com boom and just do anything I could to be a part of what was happening and learn. like.

network operators, network engineers, I would just sit, listen, see what these guys were talking about, eat pizza with them, just because I had exposure. And so over time, after college, and I started getting new opportunities, then I just jumped right into it, tried to build my own teams. Maybe I had the audacity or the hubris that I could do it to, starting writing product specs because I had been a...

exposed to it and then I wrote about how to think about LTVs, retention curves. This is maybe 2007, 2008 timeframe when these verbiages weren't used at all.

And, you know, I would, would be thinking about the stuff, you know, 2am, 5am. I wouldn't go to sleep, play video games in between for some sanity. And I think that experience has taught me something a little bit more fundamental, is that honestly, I think like data doesn't lie. And a lot of the times stories do. So I was reading people's blog posts about how this company was working or this product was working. This was the beginning of venture capitalists starting to post blogs. And I would read what they wrote and I would just think, wow, these guys are

just full of shit.

they're like rewriting history and they don't understand like the nuances of what like when you've lived through the grind of failing or when you or the grind of scaling something from zero I think you start to see markets very differently you realize like the most important question is not necessarily how big is the market but is there any sort of market pool and is there proof of that pool and can you quantify that and I think I was just obsessed with that no matter what I was building

You could say it was to my detriment in some cases because you could say, hey, well, you don't have belief that something could happen. But I always used to go back to square one, first principles and say, okay, well, what do I need to do in order to have proof points to figure out if there is something that I can build around it? And to be frank, it was in my mind for years and years and years around how investors thought. And I used to spend a lot of time reading private equity books.

because they had fundamental analysis, not to say that they thought about the world better, but they had a different fundamental analysis around how they thought about a company. And I was always kind of obsessed, how do you bridge the gap between quantitative analysis that you saw from hedge funds and private equity funds or people? And then how do you take the operating and engineer prowess of what we're used to building a company, having a fast feedback loop?

and being able to test and iterate and could you merge that? And I went around to every...

venture capitalists as I was building my companies to say, this is how I build my companies. This is how I do mobile games and social games, gifts and quizzes. This is how I've, you know, ⁓ scaled to millions, not billions of, you know, touch points. ⁓ couldn't we do this across companies and help them along the way or invest in them? Is there a way to quantify it? And so I would make these pitches and I remember one, investor.

⁓ he just looked at me like I was crazy. And he's like, look, this is never going to happen. Ventures never going to change. And you'll never use data. Like you have to, you know, look into the founder's eyes. You know, when it's the real person. And then I came back with that cookie. I don't know. Well, why do you fail 95 % of the time? just, it just didn't, for me, it didn't make sense. It didn't quantify. So I always thought about these concepts of, how do you reduce that loss ratio? How do you start identifying?

And I think I eventually.

you know, capitulated and I just kind of stopped thinking about it for, for years and years and years, ⁓ until, know, until I got a shot at it again and had my own capital to sort of invest and invest in my friend's company and then start building around that thesis. I could go on forever, but like, that's kind of the way in which I slowly went from, you know, operator to pitching to VCs to hating them, to figuring out ways to, to work with them, ⁓ to, building teams to sort of think in this systems based approach.

Slava Rubin (08:26)

There's lot to unpack there, thank you. So you mentioned market pool versus TAM. I think a lot of people have heard of TAM. What does market pool really mean and how do you compare that versus TAM?

Arjun Sethi (08:38)

So take a step back. Let's not think about Tam for a second. We at Tribe had this thesis because we were building it at a firm previously at Social Capital by an individual named Chamath Palihapitiya. He was famously in charge of growth at Facebook and built out a lot of this.

similar system style thinking and infrastructure. And a lot of companies and people had, were building their companies around this thesis as well. But again, it was from the operator's side. a few of us, when we spun out in 2018, this was kind of basically like the birth of what I call tribe.

We basically, ⁓ engineers, other founders, data scientists, were kind of sat down. ⁓ And it's a kind of, it's not a famous story, but it's like a, ⁓ it's a cute story. There's this place called True Foods in Palo Alto. think it's like the most woke food, LA style, like healthy foods possible. It's really gross. That's why I never, I never forget about it. And we just started thinking about like the structural, structural flaw in venture capital. And as I had mentioned before, most investors talk about narratives. They don't think about evidence-based approach.

So everybody wants to use this term and I see podcasts all day long pattern matching based on anecdotes. And they say, well, this founder did this. So maybe it'll happen the same way here, but there was no like quantifiable underwriting around any concept of product market fit. So we thought.

If we apply the same analytical discipline that defines when you work at a great company, you build this out as a product manager or data scientist. Given that's how we were trained and we apply that to different stages of venture. This isn't about like AI or sourcing or anything like that. This is just purely, can you take a look at the fundamental data set that exists within the company given you've got tons of customer interaction? And from that, can you quantify product market fit or the poll that I mentioned?

And that became the seed of Tribe Capital, like a firm built from the bottom up, like a startup where product market fit is the fundamental unit of our analysis. And we've written about this, ⁓ the system, how we think about what it takes to have an N of one company, what are the types of metrics that we look at. But we look at that analysis across a distribution of customers and engagement of customers and how those customers monetize. And not every company may have all three. And so, you know, we...

We called our North Star and of one company and businesses so distinct in their utility and network effects that they can stand alone in their category. That's our aim. That's our North Star. It doesn't mean we do it. It's just that we wanted to take that, what I call operator style DNA and then expand with that framework. And so that it's actually the basis of everything we do, regardless of if we are operating, if we're incubating, if we are running a company at the same time.

⁓ or if we're investing or partnering, this is the system that we used and we built software around that and spun that out as well.

Slava Rubin (11:28)

So I think you hopped around just a little bit, but can you connect some dots with me for me so you finish college, do you become an entrepreneur at some point before you create Tribe Capital? What are the dots to Tribe Capital?

Arjun Sethi (11:40)

⁓ in a, I had always started companies prior to college. almost none of them worked. but I was always, ⁓ you know, finagling around the one that had like a decent amount of success was this company called advanced tuning products. If you go type in atpturbo.com, it was aftermarket car parts for Volkswagen's Supras, ⁓ sorry, Toyota Supras at the time.

It's kind how we started. And then we moved from aftermarket to more OEM style products. so in order to program an ECM on a car, means you have to learn how to code. I had to solder and desolder EPROMs. So you just do what you need to do to learn how to make sure that you can serve your customer. ⁓ This is before college, yeah. I actually got kicked out of high school and then

Slava Rubin (12:24)

This is before college. Yeah, yeah.

Arjun Sethi (12:30)

I started the company because I didn't really have anything else to do. said, okay, well, what should I, the reason I got kicked out of high school was I almost just never attended. and so, ⁓ that was,

Slava Rubin (12:38)

Sorry, your parents

were okay with that?

Arjun Sethi (12:41)

No, absolutely not that we're not okay with it. But like, what do you do when, you know, your kid can't go to school or there might be going, they might be forced to go to like a continuation school, which is almost de facto like juvenile hall or, or a junior jail in some cases. So my parents were like, okay, well, I guess this is all you got. But I did go to community college at the same time, because in California, when you're 16, you can take this.

It's called California Proficiency Exam and it's an equivalent to a high school diploma and that's what I took.

Slava Rubin (13:12)

Awesome, so sorry, so you started doing some building pre-college and then after college, what are the steps of like what you work on, on the way to Tribe?

Arjun Sethi (13:24)

So I worked as a freelancer while I was in college, mostly in PHP. I started doing a lot of consulting and freelancing. I worked for Orkut, worked for MySpace, worked for Facebook. When I came here back to California, which is where I grew up, I started working at other companies as well. So micro payments and gaming. There's a company called PlaySpan. I'm going really back in history. Then I started working.

for companies that were trying to make messaging products on J2ME and Brew. So I basically just topped around from company to company. Along the way, I built a bunch of friendships and folks that were smart. And the first company I started had merged into a company called Lolapps The company I started was rolling on the floor, laughing games. And so Raffle Play. And merged with Lolapps and Lolapps built mobile games.

social games, and eventually a mobile platform, which is where I built the analytical prowess. And from Lolapps started a company called MessageMe, sold that to Yahoo. At Yahoo, was in charge of mobile and emerging products. Again, used these frameworks to build out the portfolio. So Yahoo at the time was moving from a web-based to mobile-based platform, and there was not a lot of expertise to do that. So my team was in charge of that. So the advertising side...

I built that from zero to a billion in revenue from scratch. Moved, know, Yahoo games, Yahoo fantasy, news, mail, all over to mobile. Pretty, pretty large effort given there wasn't a lot of expertise, but essentially, you know, a mobile evolution. And then from there, I went to social capital and then from social capital, I started Tribe.

Slava Rubin (14:58)

Great, I know that was very fast for a lot of time. And then super high level, because I know there could be an entire story here. How do you go from being a tribe to becoming co-CEO of Kraken? And we'll dive a little bit more into that later, but I just want a high level here as part of your trajectory.

Arjun Sethi (15:15)

So we, I had met a lot of crypto founders and companies at my time at Social Capital. I almost knew nothing about financial services. Pretty much zero, to be honest. I just assumed it works. I had read a little bit of the Bitcoin white paper. I kind of scoffed it off. I didn't take a lot of time to study it philosophically or architecturally. But we talked about it and

At Social Capital, I started meeting more fintech companies. This was kind of like what I call fintech, know, wave one to 1.5. And so we had invested in a number of companies, a company called DCG, which is called Digital Currency Group, which, you know, was kind of a holdco slash crypto based, you know, trading company. But it used to be a company called Second Market before that, where they, you know, that started off with a thesis before they got into crypto.

We'd also invested in Wealthfront. I had invested in Carta. I just started deep diving into financial services, insurance companies, et cetera. And for me, actually, it just opened up a new world. I think for others, maybe they already knew it, but I just felt like this was like a new universe. And I was infatuated about everything, structured products.

eventually crypto, the rails, the liquidity, the systems, public markets, the difference between private contracts and a publicly traded company, just a full stack. I just got enamored with it. And frankly, I never stopped. And so I just thought about, okay, well, as a venture capitalist, how do we start? How would I start thinking about this along the way? Just, was a thought process, nothing really materialized. And while I...

while I was finally at Tribe, all the relationships that I had built, I started thinking about, okay, well, how do I get more inclusive with the companies rather than just being an investor? so at Tribe, one of the things that we had thought of was, okay, great, well, how do we incubate ideas from scratch? How do we partner? How do we take over a company in some cases? How do we think about building financial products? How do we think about credit? These were things that we were kind of debating at Social Capital, but I really wanted to do them and I've...

And I had to figure out a way to find a facility to do it, find LPs that were supportive of that, and then also have partners around the table that had that, what I call long duration horizon thinking that we could use that mindset to be able to build into alternative investments. And again, crypto structure products, public markets, et cetera.

Slava Rubin (17:44)

So did you create Kraken? mean, what's the story there? How do you become co-CEO?

Arjun Sethi (17:49)

So we, ⁓ I became an independent board director with Jesse and Ton who are the two co-founders and same framework, thought about product market fit, ⁓ how to help them expand. And again, there's only so, this ⁓ is about four or five years after the company had existed, but I was a shareholder earlier. So it built a relationship, which is what you do in the Valley.

Slava Rubin (18:00)

This is, sorry, sorry, sorry, this is at inception or the company already exists.

Arjun Sethi (18:13)

kind of around you may be friends, may not be friends, your acquaintances, everyone's got different experiences. And I, over time, just built more and more trust with the team and other folks in the industry. And while I was building my firm, while I was building other companies and incubating them, Jesse and Ton had asked that if I come in and spend more time with Kraken, which naturally led for me to be the co-CEO and run the company at the same time. It wasn't the...

you know, a one or two week process, I think it became a natural evolution as things happen in the crypto industry and you're forced to spend time as well with the company given, you know, regulatory pressures and it's just, you know, diving deeper. But along the way from individual investor, shareholder to investing from tribe, you know, being on the board as an independent and just continuing to double down at the company and spending more time even building in your crypto, it became much more natural.

for me to come in step in and work much more closely with them.

Slava Rubin (19:09)

So from getting kicked out of high school to not only getting to invest a little bit, but actually creating an entire fund and then happening to become co-CEO of a massive crypto company. It's a pretty good trajectory. So thanks for sharing all that. I'm going to change the page here for a second, which is, you are a smart investor. You invest other people's money, but we would love to know how you invest your money. So ⁓ how do you invest your own net worth? So the traditional

Portfolio is 60 % public markets, 40 % bonds, 0 % alternative investments. Obviously that's probably not what you have. How would your three numbers add up to 100 %?

Arjun Sethi (19:48)

Sure, so my full net worth is in Tribe, Bitcoin, and Kraken. And Tribe's got a full portfolio of companies and products that we have.

But I don't trade public equities. It's not to say that I don't know how to. It's just that I spend so much time across all of these financial services and products that there's one conflict to another where I just don't trade my own capital. ⁓

Slava Rubin (20:13)

Do you have like a retirement account

in ETFs or something or not even?

Arjun Sethi (20:17)

no, no, no, no, today. ⁓

Slava Rubin (20:20)

Okay, so

you're not in the public markets really.

Arjun Sethi (20:24)

If our companies have gone public, regardless of whether they're in the US or India, I hold on to them and I have my own sort of framework for keeping it. Or my team has it if we're holding on to public equities at Tribe. Or if a protocol has gone or listed on an exchange and those are freely tradable, then I also will hold on to those all the way up, in some cases all the way down and all the way back up.

Slava Rubin (20:47)

Incredible and then how about bonds?

Arjun Sethi (20:50)

I do not have any.

Slava Rubin (20:52)

Not a surprise. So would you say that you're like 100 % alternative investments?

Arjun Sethi (20:59)

Today, would say 99.99%. Of course, there's some real estate that I own, but that is a very, very small fraction of what I have.

Slava Rubin (21:08)

So outside of your primary real estate that you have for your own use, do you have any real estate? What percentage would you say real estate is an investment? That's why you're putting it into that asset class of a hundred percent.

Arjun Sethi (21:18)

So

it's less than one to 2%. Everything is, at least today, everything is in Kraken and Tribe. That's primarily where my own capital is gone, my own compensation is, my own carry incentives. I'm all in to everything I work on, nothing else.

Slava Rubin (21:33)

So

this is amazing, because part of the show is really educating people to get a little bit of exposure to alternative investments. And you're the exact opposite of a little bit. You're a lot of exposure to alternatives. So I'm going to ask you to count.

Arjun Sethi (21:43)

Yeah,

I'll take a step back. So look, I think the way you invest your time and your capital is, again, I go back to my quantitative lens, which is like, okay, well, I built this whole system.

Not necessarily because I think I'm smarter in any case. It's just more that I have the system to make sure that I don't make the mistakes I would have made if I was thinking about pattern recognition the same way other people do. So through a quantitative lens with a full alignment between my personal capital and the firm's capital and then my time, I'm not passive. So every dollar I deploy, whether personally through tribe, I use the same frameworks, right? So it's the velocity of compounding, signal density, quality of the product market fit. That's what I care. So

The personal capital philosophy for me is our tribe capitals values. If you just go to our website, I wrote that, I continue to evolve it, which is...

Can we continue to emphasize transparency or progress in open collaboration with employees, with customers, with investors? I am my own employee. I'm my own investor in some cases. And I want to be able to mirror that and how I manage my own personal capital through a disciplined, transparent approach. A lot of the times LPs tell me, know, you know, why do you think about this this way? Why do you think about this this way? And I say, look, at the end of the day, like you can hear anything I say. But the reason I have a high conviction bet or I'm very, very

concentrated in this across any of our investment portfolio or our funds and why I've also historically warehoused some investments through my own vehicles to just get things up and running is, you know, I'm putting my own skin in the game regardless of what I have at any given time. If I've got no liquidity, I'll borrow and I've done that too. So I do think you can treat liquidity as an optionality. keep reserve allocations for asymmetric opportunity just like I do with my own capital where I say, okay, great, this is for something

that might come in, often in like a crossover or secondary transaction, etc. But I, know, every dollar of DPI or liquidity I get in my own personal balance sheet, I dump right back into the companies and the time that I'm spending. And it's exactly what would done with Kraken. I've deployed my own capital into Kraken just because I'm spending time there and I'm voting with my time and my capital.

Slava Rubin (23:52)

⁓ This is all fascinating for everybody. how do you balance that with, and you kind of mentioned this a little bit already, but how do you balance having all these high risk investments, let's call it, or long-term deployments with having any safer bets or liquidity needs?

Arjun Sethi (24:12)

Look, in venture, you mean as an individual? Look, yeah.

Slava Rubin (24:16)

Of course, as you Arjun, and I don't know if

you're married or single or whatever, but what responsibilities you have, but everybody as they're listening has to try to balance all that.

Arjun Sethi (24:24)

Yeah.

Look, I think there is this term, right? Like you live within your means and...

That's a very hard thing to do. And then there's the other one, which is how do you validate from the inside out versus outside in? I think the mistake I think people make is that there's a certain amount of capital that you have and so that you'll spend. So that becomes your standard. And by the way, companies run into this, governments run into this, which is I've got a certain amount of revenue stream. So I need to keep up my lifestyle for it. So there's a lot of terms that I use to kind of educate people, which is you prepare for the worst, you hope for the best.

And so it just gives you the freedom and flexibility to do what you want. So even the real estate that I do own, it's very, very minimal because I don't want to be beholden to any sort of institution or infrastructure. I want to be able to use my own time, my own capital. I want to be free to move. I do have two kids. I used to be married. And I do what I can to make sure that the tools that are there for my family and

friends are available, but that doesn't necessarily mean that you need this huge safety net. Because I think in some cases the safety net in people's mind is the shackles around your body at the same time. And I think that then it becomes hard for you to be able to do the things that you need to do. And so I would rather invest my own time and capital into companies or people that I work with than have a house.

I'd rather, if need be, I know this sounds extreme, like live in an apartment if I really needed to. Now I don't, because I don't need to, as I've kept a regular structure, but I know I live in the same house I started with almost 10 plus years ago. I haven't really moved.

I bought at a time like an investment where I said, if I'm spend my time in capital somewhere and I have a workflow and I want my workflow to be as efficient as possible, I'm, if you were here right now, my computer is in the middle of the dining room. I've got a Zoom TV here. It probably looks ridiculous now that I'm looking at it, but this is how I live and this is how I bring people here. And I like the ability to have entrepreneurs and companies come here and feel that.

I am grinding at the same velocity that they are because I like to do it, not because I have to do it. So that's the goal.

Slava Rubin (26:53)

Awesome, and thank you for sharing all that. You're more unique person, so where are you keeping some of your, let's, the minimal amount of safer dollars? Are you in USDC? Are you just in a bank account? Are you just knowing that you'll be able to trade out of some secondary position whenever you need? Are you gonna take a loan against your assets, because that's how you get some cash? If there is a need for some, you know, where are you keeping your, let's call it cash reserves, whatever that is, and I have heard you already say it three times, that you don't try to keep too much of that, but where are you keeping any of your safer dollars, let's call it?

just so people listening can have an understanding of the options.

Arjun Sethi (27:26)

Sure, I think it depends on what you define as safe, right? Which is like, what is your monthly burn? Like, what do you spend on?

So the only monthly burn I really have is a small amount that I have to pay, you know, property taxes per year with where I live and, you know, I co-bought it with my parents. I've been like helping them here and there. And then, you know, my kids' school, education, food, et cetera. So the burn is extremely small, right? Like I cook at home. I travel when need be. But when I travel, it's on behalf of tribe or Kraken, et cetera, et cetera. So I keep my burn as low as possible. You know, I don't...

I don't have a boat, don't have a yacht, I don't have fancy cars. I got a Tesla Cybertruck that's probably like the most extreme thing that I've done. But I just, I've always loved cars. So if your burden is low, then you know, the safety net delta and definition becomes very different. And I just dedicate all my time and effort to what I work on. So there's not a moment that I'm not working on something that isn't Kraken related or tribe related or portfolio related. know, 24 hours a day if need be, depending on the,

of

the structure, right? And so, and I think that's really important. If you are working on alternative, or if you're working on something that's 24 seven, like crypto, so venture crypto.

SPVs, co-investments, SMAs that we do, know, late stage private structured liquidity, secondary stakes. This is a lot of work. And you have people around all the time. so portfolio risk management. This is why like I put everything into what I do, because I am actively managing my capital as well as other people's capital all the time. And so you could say like, yeah, maybe we've got like a 10 % liquidity management reserve used tactically for other opportunistic entries, but that

capital is reserved to invest, not to save.

Slava Rubin (29:12)

Perfect. What do you think about gold?

Arjun Sethi (29:17)

you know, just like not too dissimilar to, you know, BTC, you know, just a store of value. People use it. And I mean, I've generally been a fan. I own gold through crypto tokenization efforts. I don't hold any gold. I don't hold any gold, in traditional venues, but, you know, I can make an argument for or against it, but I generally say like, look, it's a, lot of people have generally accepted it as a hedge against, you know, fiat currencies in some cases. so to the most extreme, like Peter Schiff.

to some government, know, sovereign holdings. I'm forgetting how much we hold, but I still think the US is like one of the top five holders of gold, you know, obviously. And so even here in the United States, we still have an approach where it is a store of value and it's valuable in the way in which we think about our own economy.

Slava Rubin (30:00)

And what do think about Bitcoin in relation to that?

Arjun Sethi (30:03)

The coin's more interesting in that it is philosophical, it's technical, it's permissionless, and it's a way to think about borderless world. And I think when you use that construct to why...

the whole ecosystem of crypto has started. I think that becomes more important than the way in which people just attribute our BTC gold equivalent. It's more about what this does for people worldwide and what the type of rails and liquidity. Bitcoin also is a network and so you can build off of it and you can start thinking about sending and receiving of capital, store of value, yield generation products, et cetera, et cetera. Off of something that everyone trusts.

For the overall crypto industry, Bitcoin has been the first sort of trusted asset. And so regardless, if you think of it as a store of value today versus what it could be in the future, I believe it is here to stay and I believe that it's changed the world and it's gonna continue to do so, which is why we spend so much time building supporting protocols that enable that.

Slava Rubin (31:03)

We're at approximately 110 Bitcoin right now, 110,000. What do you think it is three years from now?

Arjun Sethi (31:12)

So I think.

The way I think about crypto, and I'll get to Bitcoin in a second, is we're moving a lot of traditional assets that have been in locked liquidity or fragmented liquidity into what I call collateral that's on chain. And obviously, Bitcoin is a formation of that.

That kind of changes the way in which you think about investing and risk management. And frankly, all the questions that you were asking me, you start putting a different framework around it, which is like, how do you define this collateral and what can you do actually with it? instead of thinking about what the price of Bitcoin is gonna look like on the shorthand, you're gonna think about BTC price action volatility.

and think, okay, well, do we think it'll hit 150? It'll think it'll 200k, et cetera, et cetera. It really depends on how much capital flow is gonna come into the ecosystem and do people believe in Bitcoin in a similar state of how they do today, which is store of value, then you have to think about what the value of the asset's gonna be. If people start thinking about it in a currency level, then it could look differently because people are gonna care about stability. So it's hard to tell, but I'm more in the camp that...

people have already voted with their time and capital for BTC that it's going to be a store of value. so my assumption is that given the limited supply of Bitcoin in the ecosystem, the value of the asset will go up as more and more capital doesn't necessarily come into Bitcoin, but more and more capital comes into crypto collateral systems. And the more you have that, then people will do more risk management around, where do I want to keep it in stable coins, insurance vehicles, yield vehicles, volatile vehicles.

you know, tokenized stocks and tokenized equities, real world assets and Bitcoin, Ethereum, et cetera. So I think Bitcoin is like a natural sort of participant and a beneficiary of what happens in the ecosystem.

Slava Rubin (33:00)

but you don't want to give me a number for three years out.

Arjun Sethi (33:03)

No, I mean, I don't trade and speculate on these numbers. A lot of what I do is I just build against it and then have a long view. So do I think it'll be more valuable than what it is today? Absolutely. Do I know what the range is gonna be? No.

Slava Rubin (33:14)

Okay, so changing pages again, what do you think of today's market? And it's a very open-ended question. The stock market, the economy, jobs, inflation, Fed, IPOs, lot of stuff going on. So, know, gold at all-time high, Bitcoin touched all-time high, came down a little bit. Like I said, lots of stuff going on. We got presidents, we got global conflict. Tell me Arjun's point of view on where the market's at today and where is it going for the next 12 months?

Arjun Sethi (33:41)

Look, I think there is, so there's the economy and macro, which is what you asked, and there's the stock markets and behavior, which is a little bit different.

Then there's the private markets and the IPO markets. I spend most of my time in the private markets, but because of crypto, think about macro a lot more than I ever did before over last few years. So I think it's always good to look at steady state. And again, I go back to data sets. So today, if you just look at the overall US economy, it's generally pretty resilient. I wouldn't say we're like an exuberance level, but I do think the word exuberant is important.

which is okay, great. Well, where are we for 2025 and what are we projected for in terms of overall growth? And so you can say like, hey, at the base layer, we're probably around 1.8 % year over year to about 1.4%. That's correct, yeah.

Slava Rubin (34:35)

Sorry, you're talking about GDP growth? Okay.

Arjun Sethi (34:39)

And so I think, you know, inflation has still been sticky, especially core inflation. So it's not yet back to like what the Fed's target is. You can make an argument that the Fed's target is too conservative or not, but it is something to look at as a baseline. The policy and data environment are pretty messy, frankly, right? Like, so when you think about partial government shutdown, it complicates more of these data releases, which is what we all rely on.

But you can also take a look at your own third party data sets, which I do. There's actually a great site called trueflation.com. It kind of gives you their version of what's happening with inflation. And frankly, because of what's been happening, it's not to be political, but global growth has subdued. So advanced economies are growing slower. Let's just say averaged about a percent and a half. And emerging markets are at 4 % plus, depending on which one you want to take. So my take is that the environment

today is poised for moderate growth with persistent risk. So you kind of take that for what it means. And so I'm not bullish in the classic sense, which is everything goes up. I won't be. I've never have been, actually. And it's not a collapse either. For me, that means favoring businesses with very, very clear compounding metrics, networks, platform infrastructure, rather than any high risk bets, which is what people had previously bet on. In some cases, they're doing today, where they use the term

growth at any cost and you've seen that a lot. Okay, now what does that mean for stocks and market behavior? So you've got equity markets have gotten a lift from AI semiconductors, technology infrastructure. I'd say that's a little bit of FOMO with this supply and demand issue, which is low supply, high demand. People love this theme, so they put more money behind it. You see this in private markets too, and I'll get to that in a second. So volatility is elevated, leadership is concentrated, etc, etc. So mega caps, AI names, know, like the open eyes of the world.

private side and then you've got the companies that support that on the public side. So I do think when you have this, you generally have what I call a rotation risk. So if inflation surprises upward or growth disappoints. By the way, the reason I say this is we talk about this actually in our venture team, which is ironic. Every Monday we go through this, we look at the data sets because it actually affects our companies at early, mid and late stage where we've deployed, you know, $5 million all the way to $500 million in some cases where we've double, triple down on companies because they're getting

you know, closer and closer to public style company behavior, given when they're at 500 million revenue, a billion, two billion or three billion revenue, which some of our companies have gotten to. Or in some cases, OpenAI it's a portfolio company or 10 billion plus in revenue. so stocks that I look at, not that I am betting on that I just look at our infrastructure and enablers, that's chips, data centers, cloud network effects. I think that's obvious. Everyone's talked about it. I'm not saying anything that's new, but I pay a lot of attention.

However, within that enabling stack, there are very strong quality businesses that I think people overlook, but I look at them to see what they do. People talk about Broadcom, but I don't think they actually pay attention to what they do and what they've done with VMware, their own hyper-scaling technologies, et cetera. So I'm less focused on speculative high-evaluation names and what they do in the market. People keep talking about them, but I look at what product market fit they have the same way I would look at a company

in

the private markets and what are they actually doing? Now the reason that becomes important for me is then I start thinking about, okay, well, my companies that I'm a part of, how do you think about the private markets and the IPOs? I sit on the board of a company called Carta, a cap table for a lot of companies. A lot of those companies come to Carta and ask for advice, fundraising, capital formation, the funds do the same thing, where should we do it? And so I kind of take those signals and say, great, well, what is actually happening versus what people are saying?

And I think the IPO market, not just in the United States, but India, China, are really robust and it gives you a perspective of what may or may not happen in the United States. And again, I go back to the structure of supply and demand, which is how are people voting for their dollars based on these themes, not necessarily right or wrong, right? Because there's that famous quote from Buffett where the markets are a...

What is it, weighing machine versus a voting machine? And so that depends on where you are in your timeline. And so the IPO markets, I think is interesting because the window always ends up being a lot narrower than you think. And so the markets today care a lot more about underlying fundamentals. But if I said that last year, they care a little bit less about those fundamentals today than they did last year. So true traction, credible business model, and then...

you know, how do they fare during the frothy years? And the reason I say that is that I generally take a look at growth rates, because that's what we care about, you know, venture backed businesses. And are those types of companies actually rewarded in the public markets? And sometimes they're not right, like you could be growing 20 to 30 % year over year, but if you grow 40 to 50 % year over year, people may not care, right? And so like, why grow that much? I'm not saying you should or should not. Or if you grow 80 % year over year, do you get the benefit of that growth? And a lot of the times,

the investors don't vote in that way. And so you have to kind of think about that private companies then, that I've gone into like the late cycle and what I'd call, they carry a higher risk because they're getting closer and closer to that. So what happens is a lot of those crossover funds or public markets guys, including myself, yours, we think about demand and clarity and all that kind of good stuff. By the way, I could go on forever, but the way to think about it is my own personal capital and a tribe is today.

We have been more overweight in the private markets infrastructure, compounding systems and platforms. And so for example, like OpenAI or XAI, we think of that as infrastructure. And so I'm underweight on momentum plays. I'm very, very underweight. In some cases, we have not invested in any companies that are, you know,

Slava Rubin (40:18)

What

are you calling a momentum play as examples?

Arjun Sethi (40:21)

So it's like AI for doctors, AI for lawyers, AI for something else. I just think about what's the underlying infrastructure or supply chain that's gonna enable the next level. And so what generally happens is people think the next level is here today. Think of pets.com style companies, you had the, I'm forgetting the.

Slava Rubin (40:39)

Sorry, would you be shorter

than what the people are calling the wrapper companies, the cursors, the replicates, cetera?

Arjun Sethi (40:45)

I think of replit and cursors as infrastructure. I think of healthcare, financial services, accounting, lawyers that are gonna be automated as not infrastructure. I think of them as wrappers today, in the future.

Slava Rubin (40:48)

you do, okay, that's fine.

So you didn't say the names,

you didn't say the names, but I'm gonna call out a couple names and you just say yes or no. So are you referring to like Harvey or like a bridge, like Harvey in legal or a bridge in healthcare, so you're like less interested in those types of companies?

Arjun Sethi (41:12)

I think some of those companies have a little bit more fundamental, not AI, but vertically integrated software stacks. So it's a little bit different. But there are companies that create a lot of wrappers or service oriented companies where they haven't really changed their fundamental unit economics and they don't really have, what I'd say, deep engagement with their customers, but they've got some sort of AI wrapper. And those are the types of companies where I think you get into FOMO and you think it's exciting because you get a little bit of traction, but it tactically...

They're not pure, what I call fundamental businesses or businesses that can be created off of their distribution or off of their engagement because they don't really have any.

Slava Rubin (41:47)

So I wanna do a quick lightning round with you. I'm just gonna say a couple of the metrics that we all are looking out for. I wanna hear your point of view on it. And this is not investment advice and I just wanna hear your thoughts. So recession or not, 12 months from now.

Arjun Sethi (42:03)

No.

Slava Rubin (42:04)

Inflation is flat up or down 12 months from now.

Arjun Sethi (42:10)

flat.

Slava Rubin (42:12)

That's interesting. Fed fund rates is flat, up or down 12 months from now.

Arjun Sethi (42:18)

down.

Slava Rubin (42:20)

Jobs, unemployment is flat, up or down.

Arjun Sethi (42:25)

It depends on how you calculate it, but I would say flat.

Slava Rubin (42:29)

And that all then combines into the stock market, which you're not very involved with, but the public markets are flat up or down 12 months from now.

Arjun Sethi (42:40)

⁓ US public markets or public markets outside the United States? My US public markets will be up.

Slava Rubin (42:41)

Yeah, sorry, US public markets, yes.

Interesting. Okay. So in general you're somewhat bullish

Arjun Sethi (42:54)

⁓ I look at supply and demand. So there's a lot of capital being unlocked, redeploying into the ecosystem. You said 12 months out, 24 months out, I would say we could be flat from where we are now.

Slava Rubin (43:00)

Yeah. Yeah.

And is that all an election cycle process?

Arjun Sethi (43:07)

No, I literally look at supply and demand, right? So scarcity of capital coming into the ecosystem across these markets, how much is coming into AI or infrastructure or energy, or are they rotating or not? And I think that's where people make a lot of mistakes. And that's the overall macro. So you would have to do it across health care, fintech, AI, infrastructure, energy, et cetera. And some of these will go up while the other ones go down. And I pay more attention to the subsectors.

Slava Rubin (43:30)

So I think we could do a six hour podcast, but I don't think you signed up for that. That's not typically our format. So really quickly, can you tell us what Tribe does? And just so the listeners, everybody understands. Tribe Capital.

Arjun Sethi (43:42)

Sure. So,

Tribe Capital.

⁓ that high level is we're a quant based firm that was born out of building a lot of these quant based systems for Facebook, for Airbnb, et cetera, to scale them at a pretty high velocity. We took those learnings and that infrastructure and frameworks. We built our own software system to quantify private markets across early, mid and late stage companies. And then we invest across those stages. And in some cases we will incubate and start companies from scratch as well. So myself and my partners, we were a lot

of the dual hats. ⁓ I've started companies, ⁓ banking and financial services. One of the largest ones is a company called Capitol. So we started it from scratch. I'm a co-founder there. We do the same thing in Bio Pharma and in crypto, crypto protocols where we wrote the white papers and we get those up and running. And then I spend my time today as chairman and co-founder of Tribe Capital, sort of overseeing aspects of venture. And then I run Kraken, which is a global crypto exchange across the world.

Slava Rubin (44:39)

And then at the tribe level, can you just share some numbers like how much AUM, a few of your winners, just so people have perspective?

Arjun Sethi (44:47)

Sure, so we've invested in OpenAI, XAI, Carta, company called Shiprock in India, Blackbuck in India, Blackbuck is public and a fast growing company. We've invested in Applied Intuition, is an AI company that is focused on automotive assisted AI as well on top of sorry not devices, cars, manufacturing vehicles, etc.

So those are the types of themes and all of these companies have one theme that's really, really important is that they build software that can be quantified and engaged and they've got a customer set that we can take a look at. But we've also been previous investors in Slack and in Zoom. So these are the types of companies that you can think of that we sort of get attuned to or excited about. We're also investors in SpaceX, not at the earliest stage, but at different stages as we could quantify their product market fit. So that's the way to sort of think about where we spend our time. That's on the venture side, on the crypto side.

there's multiple protocols that we've been a part of ⁓ over the years and helped incubate as well.

Slava Rubin (45:41)

And then you've mentioned Kraken now several times, but again for the listeners, if not everybody knows what Kraken is, can you just share what is Kraken doing and just give some perspective on scale?

Arjun Sethi (45:52)

Sure, we're, Kraken is basically one of the oldest and.

safest, you know, old digital asset exchanges. So full stock platform, crypto trading, custody, financial infrastructure. We serve both retail and institutional investors. That's how people kind of define it in traditional, but we think of it as we serve consumers worldwide. We serve professional traders, which is primarily how we started as an exchange, vertically integrated and institutional custody slash trading. So what we offer is spot trading futures, you know, spot margin.

staking, secure custody, lending across hundreds and hundreds of digital assets. And what we've been really, really strong on for many years, you know, we're a company that's almost 15 years old now, regulatory discipline, longevity. We are in the United States, UK, US, Canada, and Europe and EEA. And then we started growing all over the world as well. So we've been operating for over a decade. We've raised less than 25 million in capital, which I think is like crazy when you think

about we're crypto native. Yeah, it's a sort of like an Atlassian style story where we built a very disciplined approach to building out the company and we released our Q4 financials yesterday so you can kind of take a look at it but

Slava Rubin (46:53)

That's incredible.

How much of that was

Tribe?

Arjun Sethi (47:07)

So Tribe came in through secondaries. So the company has done tenders and secondaries on behalf of employees and early shareholders from that, 25 million. But we don't make any announcements after that, but historically that's what we had raised.

Slava Rubin (47:22)

Incredible. This is all awesome. Like I mentioned, we could talk for a lot longer, but what are some of the things that make you so smart? Like, what do you like reading? You mentioned True Flation as a website, which is great. What are other some of the secrets of origin? What are the podcasts that you like? What are the newsletters you like? What are the shows you like to watch? How do you get some of your information?

Arjun Sethi (47:44)

Let's see.

I have a bunch of books here. So there's actually this really great book that actually got me much more excited about financial services. I don't necessarily agree with them, but it's a book called Crashed by Adam Tooze. It is a big, long, dense book. There's one that's always kind of interesting that I always kind of revisit. It's called Power Law for Venture Pattern Recognition. I'm forgetting the name of the author. It'll come back to me. think it'll come back to me.

And then obviously the one that I think is one of the most important that I talk about with lot of people is the Only the Paranoid Survived by Andy Grove, the Intel individual. And I think like all these books, you sort of think about like strategic inflection points that you can apply to everything, not just tech, but even like your own life.

⁓ there is invest like the best. think it's a great podcast. listened to it. think a 16 Z crypto for frontier thinking is exceptional. but it could be dense and boring for some people, but I, you know, it's a part of what I look at. ⁓ exponent for systems and product strategy. I'm not sure if you've seen that and then odd lots is another one. ⁓ that's, wouldn't say it's habitual, but every once in a while there's someone that's interesting. And I take a look at it. ⁓ look, I I don't, I don't think I'm smarter than most people out there. I think that I just spend a lot of time.

thinking about synthesizing there is a great great book and it's it's it's on my bookcase right now I gotta I go back to it but it's a

It's a professor at Harvard who basically said like, need to synthesize more than anything else and holistically understand stuff because there's so much noise and so much pattern that's coming in. And it's like, how do you get into a more signal dense environment that compounds rather than continuing to read all the noise? So sometimes you've got to just take time, step away. I've got sometimes an hour or two just locked where I'm reading a deep technical paper. It could be a bio paper.

I read a lot of our founder updates. In fact, when a founder takes the time for any of our companies to write something that's like nine pages, you should read it all. Not just once, not just twice, but again and again and again. And obviously we do our own quantitative data. So the things that I read every single day are our quantitative reports. We have about 15,000 reports per year. I read every single one of them. I print it out and I put it down on my desk. And I'm a little bit more old school that way. And I'll take notes and just try to understand what

am I looking at what does this company do outside of their deck, outside of their pitch. So it's just a lot of learning that's happening, what I call bottoms up again. And so then when you're reading thesis, when you're reading theory, and you're reading the news, and you've got a framework around how to think about the world, I think it just gives you a little bit more insight around where you want to spend your time. So like I said, I don't think it makes us smarter in any capacity. I don't think we're smart.

I just think that the access to how we synthesize our data gives us the ability to have sort of asymmetric information around what the world may do. And then we can again spend our time and capital in that direction. So I don't think it's about chasing information. It's more about how do I continually sustain and get access to what I call durable insight. And that's where I think that's where you can compound your knowledge and as an outcome, your capital.

Slava Rubin (50:53)

Awesome, so the final segment is we always put people on the spot, which is we ask them for two picks, one in the US public markets and one in the non US public markets, meaning any other alternative ⁓ private, et cetera, et cetera. So what will be your two picks and why start in either order?

Arjun Sethi (51:14)

So I'm in crypto and I really urge folks to read the Bitcoin white paper. Again, philosophically and technically, just type it in.

by Satoshi and just reread it, read it again, read it again. And then I would say read the Bill of Rights with the country the United States was founded upon. And I think it's really important to sort of think about that. And so I choose to invest in BTC, not because I think it is necessarily something that's always going to continue to go up, but I think it's a vote for what I care about. ⁓ And so I know that's not the answer of like the pick, but I just think like that's the single most important asset of my lifetime. And I have to own as much of it as

possible and store and save my money in some cases over a period of time into that asset. The second one that I spend a lot of time thinking about as I had mentioned about it before, I wouldn't necessarily say it's a pick, obviously a lot of people talk about Nvidia, but I think there's a lot of great parallels to this company called Broadcom. It's across the board in spectrum of what they do in terms of chipsets, software products, and now even on the hyperscaler side. And they are just a business that continues

to compound. I'm really impressed with what they do. I wouldn't necessarily call them picks, it's just these are two assets that I think about on a daily basis. At least today, if you ask me next year, know, I think BTC will still be there, but I'm not sure Broadcom will be.

Slava Rubin (52:35)

Sorry, you're not sure if Broadcom will still be the choice that you wanna talk about a year from now, you're saying?

Arjun Sethi (52:40)

⁓ Yeah, given the frameworks around how I think about the world, might change. ⁓

Slava Rubin (52:44)

But this is the one that you choose today for three

years out. All good. I'm glad that you played. You know, it's always interesting, but Arjun, we covered a whole lot of ground starting from the fact that I had no idea that you dropped out of high school. Well, actually got kicked out of high school before even then it was normal for you to be walking around with your really cool dad. And Steve Jobs was actually somebody that you might see you right away were a tinkerer from seven year olds, older, more, whether it's building your computer, whether it's going on to hamster style to check out what was cool.

you right away started believing that the data doesn't lie, kind of like the ball doesn't lie on the hoops court, but stories do, and you quickly figure that out. You taught us about MarketPool versus TAM, which I thought was super interesting. You obviously have an incredible background, whether it's like starting with advanced tuning products and turning that into other businesses, or message me and then to Yahoo and then building billion dollar businesses at Yahoo, creating social capital, I mean, sorry, going to social capital and then onto Tribe.

investing into lots of incredible companies. But I like that from your own perspective, you're like not in the public markets at all. You're totally into kind of dog fooding everything, which is Kraken in tribe, which is actually shocking in almost a scary way. But I love it personally. I don't really advise it for everybody that's listening. But you did say keep my burn low, which is amazing. You always have love cars, whether it's tinkering before or or now, but you don't try to live beyond your means there.

You are a huge fan of BTC actually more than gold, even though you do appreciate that gold can be a store of value as well. When we got to the economy, it was really interesting. You had some good lines here. So moderate growth, but persistent risk. You do think that the U S economy is generally okay, but it does have some potential challenges. You mentioned about trueflation.com to check that out. You really like getting into the enabling infrastructure, as opposed to some of the things that can be hyped on top. You mentioned Broadcom multiple times. You did play the game with us.

You said no recession, inflation will be flat, the Fed will be coming down with rates, unemployment will be flat, which was very interesting. And yet our public markets, all of that will compound into the US public markets going up, which is quite good. I mean, like I said, we could have spent hours talking about Tribe or Kraken separately, but we only talked about it for minutes. With Tribe, you're an incredible investor, whether it's OpenAI, XAI, Kraken, Applied Intuition, Slack, Zoom, SpaceX, so many.

and at Kraken you guys are just crushing it, having one of the largest exchanges in the world, been around for well over a decade. You gave us tons of great content that I think everybody's gonna pause very slowly, one at a time to listen to all those mentions that you said. But I do think you finished with some incredible information, which is you said, don't just chase more information, but learn how to synthesize, learn how to take a breath, take a moment, and actually process everything that you know and what is it telling you.

I think we all have challenges doing that. And I think that is a huge takeaway. I'm a founder myself. So I love the fact that you said we need to read founders updates. Totally awesome. And you did again, play the game. You gave us two picks. One was Bitcoin for the future and the other one was Broadcom. You picked those for three years out, even though you did hedge saying you might change it a year from now, but this will be archived forever. So it's all good. Thank you very much Arjun.

Arjun Sethi (55:52)

appreciate

it. Thanks, man. I appreciate it.

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