The Exchanges

Q So at what point did you say, hey, you know, that, like, Fred could actually be the co-founder I've been looking for?

A At that point, I, after the two weeks, I was like, this is great. He's adding a lot of value. He's also just a jack of all trades. Like, he was like, okay, let me try and hire some people. Let me do customer support. Let me go pick up the trash on the floor. Like, you know, and he was like, I'm going to do anything because this is This is huge. And I saw that fire in him, like the determination was really important. And it wasn't until I think maybe three or four months later, we were working together. And that's when I was like, okay, Fred is truly acting as the co-founder here. I need to make that official. And that's kind of when I asked him to be co-founder, solidified it, and it ended up working incredibly well. Basically for the next five or six years, we built the company together and I don't think Coinbase would have been successful if I hadn't found Fred, so I am eternally grateful to him on that.

AI assessment note: “it wasn't until I think maybe three or four months later, we were working together”

Q I mean, there was a point where it was like, down to 300 bucks in, in 2014, and then it went to 2005 thousand, and it hits 20,000 in 2017, it goes down to 5000 in March of 20, I mean, it's, Insanely volatile currency. How was it that it wasn't making your business volatile? There's no predictability about how much revenue we're going to be making.

A Totally. And this was a huge challenge, I guess, disadvantage in our business was that the revenues were so volatile. I remember Dropbox, uh, the CEO, he drew a house and one time he told me, he's like, we can predict our revenue quarter to quarter within one percent because it's a subscription product and, you know, it just, the growth marketing and all that stuff. But yeah, we were having like, we could predict our revenue within one order of magnitude up or down, which I always thought was funny. But what it meant was that we had to get really good at operating a business in uncertainty. So basically when things were good, we didn't overexpand. We kind of tried to stockpile cash when things were really good. And then when things were bad, we didn't cut things too much. And I don't, I wouldn't say that we got it perfect, but I think That is one of the reasons we were successful is we just didn't die. We didn't die through all the ups and downs that thinned out the herd, um, with a lot of the other crypto companies in the space.

AI assessment note: “we had to get really good at operating a business in uncertainty.”

Q How high do you think crypto or Bitcoin could go?

A Yeah. I mean, I'm, I'm not an investment advisor here, so we'd have to disclaim all that. But so today the, the market cap of Bitcoin is about a trillion dollars. One comparable people talk about a lot is gold, which is about 10 trillion dollars. But I think in many ways, Bitcoin is actually better than gold because it's, it's portable. You can send it anywhere in the world instantly, you know? And so could Bitcoin be as big as gold? I think absolutely. Could it be 10 X gold? Probably. It's actually pretty hard for me to imagine that there's not more people using crypto in 10 years. And the reason is that, you know, think about all the trends that are correlated with that. There's, are there going to be more people using the internet? Are there going to be more people doing e-commerce and online games? You know, crypto is much bigger than just digital gold. It's, it's an entirely new economy. I mean, so crypto as a whole industry, I think could become 10, 20% of global GDP, like in maybe 10 or 20 years, something like that. That's what the internet did. I mean, e-commerce was tiny in 1999, and now it's about 15% of global GDP. So I think, I think the crypto economy could follow a similar path.

AI assessment note: “Could it be 10 X gold? Probably.”

Q All right. So you're kind of living this, this expat life in Argentina and, and I guess supporting yourself with some income from, from the university tutor business. But I guess eventually, I mean, you decided to move back to California to, to the Bay area where you grew up. What was your plan around that time? Like, what, what were you thinking that you'd do next?

A Well, I came to California, and that's kind of an interesting story, too, because I remember, I think I realized, I was also, I was reading this book at that time. It was called The Dip by Seth Godin, and it was this idea that, what are you actually going to enjoy doing for the next 10 years, even if you don't see any signs of success? You know, what's the thing that you're passionate about long-term, not, not the thing that is just a hobby right now? And so, I was kind of sitting there, Putting on a piece of paper, like what's the thing that I will actually still want to do in 10 years, whether I'm successful or not. And I, the only thing I could really think of was tech entrepreneurship. That was something that I'd been doing since I was a kid in high school. And I realized, okay, well, if that's what I'm going to focus on, why am I living in Buenos Aires? I want to go play in the major leagues, you know, go to Silicon Valley. Like that's, if I want to be an actor, I should go to Hollywood. If I want to be in finance, I should go to New York. But I wanted to be a tech entrepreneur, so I, what am I doing here? And I, and I decided at that point to move back to Silicon Valley. I want to say, 2000, late 2009.

AI assessment note: “the only thing I could really think of was tech entrepreneurship.”

Q How did you, did you guys get along right away? Did you like each other right away? Was it that simple?

A Well, I think we were, we were kind of sizing each other up, right? My first impression of him was, This guy's smart. He's confident. His first impression of me was probably, okay, this guy's very driven. Um, when he saw the website, he was like, he assumed that it was some kind of a company with like an, uh, at least a handful of employees. Cause there was like a customer support line and a sales line and a press PR email address. And he showed up and it was like, it's just you. And I was like, yeah, I'm, I'm the only one. And he was like, okay, this guy has some real talent to create this thing. He's probably like a little unsure of himself and he's a little rough around the edges or whatever. But what I did was I said, why don't we try working together for two weeks? You know, I'll pay you a couple thousand dollars or whatever, but the point would just be to see how we like working together. And there was a few things that I really noticed about him. I mean, one was that like me, he had incredible work ethic. So we would work like 10 a.m. to midnight every day. Another thing was that he started to I challenged my ideas, and I realized this is not somebody who's just someone who's going to follow what I do. One of the things I remember Fred said when we were doing that week was I was getting ready to code up this feature so people could have an easy way to buy Bitcoin on the …

AI assessment note: “we were kind of sizing each other up, right? My first impression of him was”

Q right, in any free market system is when you take a stand, or you don't take a stand, or you make a position clear, one side is going to potentially punish you, right? If, and so, there are potential economic consequences to, to doing certain things. Um, did that ever cross your mind that there could be people with their wallets and, and that people would stop using your platform?

A Absolutely. I mean, this was one of the concerns that was discussed in advance was, hey, we're getting ready to go public, and is this going to scare everyone and scuttle the company from going public? Or, you know, is there going to be a delete Coinbase hashtag trending on social media and everyone's going to boycott us or whatever? This is where I think founder CEOs sometimes have a little bit of a disproportionate advantage in the sense that founder CEOs, by the way, kind of, if you look at them as a cohort in public companies, they, they outperform Professional CEOs. And I think one of the reasons is that they have a bit higher risk tolerance, right? This is not some job where I'm doing for five or 10 years where I'm trying to get good, good scores from the market and then go on to my next thing.

AI assessment note: “Absolutely. I mean, this was one of the concerns that was discussed in advance”

Q And, um, with that money that you got from Y Combinator, I'm assuming you, did you get an office or did you, were you able to hire anybody? Were you and Ben able to do anything beyond just the two of you kind of grinding away at the keyboard and, and starting to develop this app?

A Um, yeah. So honestly, things didn't really work out with Ben even before we got the money because, um, Ben had flown back to the UK. We were kind of like getting all these things prepared. I was like, all right, when are you going to move here? And let's try to get this office. And there's all this incorporation paperwork. And there was basically some red flags, right? Like he hadn't really bought his plane ticket. He missed a couple of meetings. And I was like, he's not fully in it. You know, like I was kind of talking to, um, the Y Combinator partners throughout this whole thing. And I was like, I'm trying to make this progress. And what do you think? And they were like, You need to go make a decision basically. Like, do you want to co-found with this guy or not? Because if you're not, if it's not going to work out, end it now. And so I basically took that to heart and had to go have a real difficult note to send him, which was like, I don't think we should co-found together. And we really only knew each other, I think like four weeks or something like start, you know, from the moment we first spoke to getting accepted and, and then the whole thing didn't work. It was like a three or four week thing.

AI assessment note: “honestly, things didn't really work out with Ben even before we got the money”

Q So tell me, explain this, walk me through it. I mean, many leaders are kind of leaning into trying to You know, kind of be responsive to employees who, you know, have various, some very legitimate political grievances and, and, but you decided to take an opposite position and to essentially push it away. Can you walk me through your, your thinking and why?

A Yeah, sure. I mean, this was definitely, there was a time period there for quite a while inside Coinbase where I would say there was this growing tension and unrest. And, um, but something happened last year, which actually started to take a different tone. And I, I had this gut sense that was like something different is happening here. One of the things that would happen was that we would host these kind of weekly Q and A sessions with the company. You know, there's all kinds of challenges that are going on in the company. How do we improve our products? We've got these competitors, we've got these regulators coming after us, but It got to a place where like the majority of the questions at the weekly Q&A were about things that I didn't think were actually what the company should be focusing on. They were about various societal, political issues, current events. And, you know, these are very important things happening in the world, but they're not really related to what we're doing. And there was a, there was a tone and that, that was happening there that was different than what I had seen before, where employees were almost like, um, like grandstanding or holding the mic hostage, you know, it was almost became almost a game of like, Who can make the exec team squirm the most on stage or something like that? And it kind of culminated with a walkout that happened, actually.

AI assessment note: “majority of the questions at the weekly Q&A were about things that I didn't think”

Q Were you ever worried that it wasn't going to work? I mean, I guess, I guess you could have always gone back to, to being a software engineer somewhere else, but were you ever, did you ever have any doubts that, Because there are lots of Y Combinator companies that didn't work, that went nowhere.

A Oh, absolutely. I mean, I knew basically that this was, I had been dealt a hand where I at least got to play a couple of rounds, you know, but I, this was by no means success, you know, and that was one of the messages they drilled into it. Why commuter was do not treat fundraising as success. Some people raise some money and then suddenly they think that they're like, they're going and advising all these other startups. And it's like, so I w I was very much in the heads down. Let's try to keep making progress. I have, this is, we have no idea if we're going to be able to make this work, but we're going to make sure we give it our all. In fact, Around the end of Y Combinator, I was thinking, I'm going to work on this all out for two years. If after two years, nothing is working, then maybe I will contemplate, you know, trying something different, but I'm not going to give up before two years. Because there was other Y Combinator companies I had seen where they try something, and then three months later, you know, there's a bunch of co-founder fighting, and the thing just blows up, and they're like, I guess it didn't work. Well, it's like, to me, no, that's, nothing ever works the The first time you try it. So three months in you is way too early to quit. You got to keep trying over and over and over again to see if something can break through.

AI assessment note: “Oh, absolutely. I mean, I knew basically that this was... by no means success”

Q just you, and then you and Fred, and then And then it grew, grew, grew, and grew, and over time, now you've got thousands of employees. How did you learn how to lead a business? I mean, your previous experience was running a business from your laptop in Buenos Aires, more or less. I mean, there's no playbook, so how did you know, how did you learn how to lead?

A Yeah. So, you know, I was never somebody who thought of myself as a natural leader. In fact, I was always kind of awkward, frankly, around people and trying to make decisions and like even just running a meeting to this day, I'm still kind of awkward sometimes. But, um, I think one thing I realized was that if you just put yourself into slightly uncomfortable situations, you can basically grow your comfort zone. And over time, You just get more and more comfortable with things which used to make you uncomfortable. So five or 10 years ago, actually, when I was first starting Coinbase, you know, I'd never, had never managed a single person. I had never done an interview with the press. I had never gone out and raised money. I was never meeting with heads of government or any of this stuff. But I guess I got more comfortable in my own skin a little bit over time and just kind of embraced the, the introvert, you know, somewhere on the spectrum, probably personality that I have. And I just realized.

AI assessment note: “if you just put yourself into slightly uncomfortable situations, you can basically grow your comfort zone”

Q Yeah, I think in 2013, like, somebody stole 250,000 dollars out of a Coinbase wallet, and that made news, right? I mean, I remember that story.

A Yeah, I mean, actually, I'm not even sure exactly which one you're referring to, but yeah, that, that was the other big challenge. It was, there was, not only were there people putting in stolen credit cards, there was also hackers trying to just break into our systems and steal. Customer funds. That was incredibly stressful. You know, I think at that time, by the way, we also got our first threat of a lawsuit. You know, some other, um, fintech company had like threatened to sue us over something, which I don't even remember what it was. I mean, there was all, this is, this is kind of the default state, by the way, of a new company. It's like.

AI assessment note: “I'm not even sure exactly which one you're referring to, but yeah”

Q numbers on this, and they're all over the map, and I, but there's one study from It says something like close to 50% of Bitcoin transactions were related to illegal activity. Obviously, there are other numbers that are a lot lower than that, but the thing is, I mean, the way crypto is designed, it's more anonymous, right? And that, that makes it a lot more attractive to criminals, right?

A So, yeah, this is an interesting topic that comes up a lot when I talk with, um, folks in government in D.C. and regulators and everything today, and, you know, I'm actually not familiar with that study that you mentioned earlier. I have to say, I'm a little skeptical of it being that high, 50%. And, you know, even today, people are using crypto for all kinds of things, you know, NFTs and artwork and all this stuff. So I, but did I occasionally run to somebody who said, hey, you know, I got some magic mushrooms on Silk Road? Yes. But it's like, it's like one percent of people or something. And so the best data that I have on it, um, today, like over the last couple of years, is that crypto transactions, it's, it's less than one percent are for illicit purposes. I think even if you were to go back to, like, 2014 or 15, you know, it could have been as high as five or 10% or something like that, I could believe. But I guess maybe the broader point to make here is that this is actually a really key part of Coinbase's success, I think, which is that very early on, we decided to be a regulated company. We decided to proactively reach out to regulators. I have to say that was a very contrarian idea at the time amongst my, the crypto peers that I had, because they felt like, Hey, this is all about crypto anarchy, and we should build the anti, you know, anti-establishment financial syst…

AI assessment note: “the best data that I have on it... crypto transactions, it's, it's less than one percent”

Q I mean, did you socialize with people? Were you lonely? What did you, who did you hang out with in Argentina?

A Yeah. So part of the reason, so, so you're right. I was very introverted. I was not very confident with people, but one thing I did was I kept forcing myself to Push myself into situations where I had to be more extroverted. You know, as an example, when I was in grad school, I was actually, I got a job bartending randomly. And the part of the reason I got a job bartending was because I wanted to force myself to learn how to talk to people, which sounds kind of odd, but that's what I was doing at the time. I also, I remember I joined this, uh, club called Toastmasters where people practice public speaking because I was like kind of nervous about that. And I was just, I was pushing myself into these uncomfortable situations as kind of a personal growth And that's kind of what Argentina was for me too. I was like, all right, you know what? I'm just going to go to a foreign country by myself where I don't speak the language very well, and I'm not going to have any plan. I'm just going to show up and figure it out.

AI assessment note: “you're right. I was very introverted. I was not very confident with people”