# Crypto Infrastructure, AI Liquidity, and Macro Strategy

**Podcast:** The Milk Road Show
**Published:** 2026-09-15

## Transcript

You've been given the opportunity for the first time ever, which is to own the infrastructure layer that it's all built on.
Clarity Act is about to get a vote.
The Fed is about to make an interest rate decision and the market is worried that AI is going to kill us all.
What do investors need to know about all of this?
What does this have to do with crypto?
And how do we make sense of everything?
Hello and welcome to Milk Road Crypto, the podcast that knows that this week is either going to be wildly bullish or one of the biggest gut punches since October 10th.
I'm your host, John Gillan.
Today is Monday, September 14th.
And today we are joined by a man who is best equipped to make sense of everything, Raoul Pal.
Raul is the co-founder and CEO of Real Vision and the founder of Global Macro Investor.
He sits on the board of the SWE Foundation and he just published a new book called The Everything Code.
He also made an AI version of himself called Palvatar, which is really fun if you like macro and surreal sci-fi imaginary friends like me.
So we've got a lot to cover in this episode today.
It's going to be a lot of fun.
If that sounds good to you, make sure you like and subscribe.
Share this episode with somebody who needs to hear it.
And as a reminder, our podcast today is free and that would not be possible without our wonderful partners.
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Keep an ear out for more information on them later in the episode.
But for now, welcome back to the Milk Road Show.
Raul, how the devil are you?
I'm great.
You're definitely more professional than I am.
The way you did the intro, everything, that was so smooth.
I'm lousy at that stuff, so I'm impressed.
But, you know, you always start your episodes by asking your guests, how the devil are you?
I know.
I always feel like I'm getting a sneak peek on a private conversation.
So I love your conversation.
So you're doing a great job.
Thank you.
Raul, really excited to talk to you today.
Been a big fan for a long time.
I want to start with what's on everyone's mind, which is this updated draft of the Clarity Act and the vote, which I believe will take place around the time this episode is released.
It seems like there's momentum back and some life in this.
Do you think this passes?
And what do you expect the market reaction to be one way or the other?
You know, I honestly don't know, because it's all down to the ethics stuff, how much the Democrats have shoehorned into that, whether it's even possible to agree.
I really don't know.
So I think it's still a coin toss.
I've always thought that at top level, sort of Trump owes it to the crypto lobby to get this through.
because they were the biggest funders of the entire election.
And so he's going to do everything he possibly can, and he might have to agree to things he wouldn't ordinarily do.
However, they've also got the CFTC and the SEC to have some backstop rulings.
But obviously, what they'd rather do is get it into law as opposed to something that could be changed.
So we'll wait and see.
But I think the path is clear.
Brian Armstrong came out about it yesterday or the day before saying, listen, either way, it doesn't really matter because we're going to get what we need.
And that will remain in place at least until the next general election.
So look, overall, the markets do need this.
They do need it because of all of the institutions in the space.
They need the clarity of what they can do, what they can't do.
A lot of the protocols need it.
Everybody does need this driving forwards.
And I think over time, it does help attract more capital.
But is it a full trigger?
No.
Will the market buy it and then probably fade off afterwards?
Probably.
Because it doesn't bring a wall of capital in tomorrow.
So in the end, it's just more bullish narrative that helps.
I mean, you know what we've seen is an extraordinary moment in time where every bank, every financial institution, every payments company, everybody's building on crypto rails.
So it's all happening.
But we're just missing the kind of magic of, and we'll talk a bit more about it in a bit, liquidity.
There's just not enough liquidity around to drive all of this.
So the Clarity Act, I hope it gets passed.
I think there's a good chance, but it's still a bit 50-50.
But it doesn't really matter.
Okay, so it's the top story this week, but this week is not the big picture, and the big picture is what matters here.
Let's talk about macro then.
The market is freaking out a little bit today over these new fears about the AI slowdown.
Dario has come out and said AI is going to kill us all again.
But what's concerning to me, and I want to get your thoughts on this.
There seems to be a growing number of voices.
It's Dario, Sam Altman, Bernie Sanders, now even names like Joe Rogan, Tucker Carlson are expressing concerns, sounding alarms.
Are you worried that this political backlash against AI might threaten the bull market or do you think it's too strong to stop?
The question is, you need to ask yourself, when you see something as coordinated as this, who's doing it and for what reason?
The data center one, the data center is going to kill everybody narrative from the last couple of months.
That was clearly led by the Democratic Party as finding leverage for the midterm elections and maybe the elections themselves.
AI is an interesting one because it was originally, and Obama was on the tape talking about this, that this should be one of the big things for the general election.
But it feels that maybe the Republicans have taken their own narrative and have used it in advance to say, well, we're taking this seriously.
so therefore it can't be used against them later.
So there's a lot, a lot of this is politicking, that's for sure.
Are the labs surprised at the growth rates of what they're seeing in the intelligence of these models?
For sure.
But I don't know how they stop it.
And, you know, Trump has distanced himself from this by saying, no, just keep going.
David Sacks said the same thing.
Marc Andreessen said the same thing.
And those are all connected parties to this current administration and the leading voices.
So I don't really, and they all dismiss these guys, but maybe there's going to be a way that they will say, yes, let's have a review, let's do something.
So then it depoliticizes it.
So there's a bigger game at play here.
The other thing is the reality of the situation is all well and good trying to get the frontier models.
guys to all agree on something.
Elon's had a proposal.
Dario's had a proposal.
Demis from Google DeepMind has put a proposal.
Everyone's putting proposals out.
It'll be a watered-down thing that allows them to say, we're trying to be responsible.
Elon's idea is that they can all check each other's models before release to see how safe they are.
But it's almost impossible to stop.
these models creating these swarms over time and coordinating.
It's just the way that they are, and that's all part of this kind of universal code thesis.
The other issue is, so the labs don't really want to slow down because they've all got huge debt loads, and they've got obligations, and they're growing as fast as they possibly can.
And nobody wants to allow somebody...
to hold back.
But what you can do is hold back the release times of the models, because we're so used to a new model coming out every month.
Maybe that slows down a bit, or they kind of catch up with the whole thing.
So the models they're working with internally are six months ahead.
The government maybe gets it three months ahead.
So you give it to the Department of War and all of the other US departments first, and then you can release it to the public.
That's what I think is going to happen here.
But in the end, they can't stop because China, And China's in the race too.
Nobody can be allowed to win the race of intelligence.
It's the single most important race in all of humanity's history.
You're not allowed to win and you're not allowed to lose.
So it's a great race of which nobody can stop.
And Xi made that point, or the Chinese made that point this morning, is that, you know, they won't accept restrictions on them.
Will there be some global accord on how these models are released or something.
Probably eventually.
Is that enforceable?
What China says, what the US says, what they do, very different matters.
So it's a really complicated thing, but it's a race too big to be stopped.
None of the individual frontier labs wants the others to get a lead either.
They also don't want to get sued out of existence when things go wrong.
So it's a very complicated picture here.
And as I said, generally, it's not what everybody thinks it is.
It's usually something else that's going on.
I'm just going to pause here for a second to let you all know that after I interviewed Raul, I sat down with LG and Kyle to record a bonus episode of Milk Road Pro after hours to give my personal thoughts on everything we covered in this interview with Raul, his long term investment thesis, the key takeaways and how I'm playing this in my portfolio.
This is really important, I think, to take this long term and macro view, especially on a time like this where there's so much uncertainty and volatility in the markets and in crypto.
You can see that bonus episode if you are a Milk Road Pro member.
You can join for just a dollar.
There's a link in the description.
I hope you'll join us there.
Continue the conversation.
Yeah.
And a bigger picture at play.
I'm curious your thoughts on this.
I did an interview with Tom Lee about a week or two ago, and he said that Ethereum smart contract technology and crypto in general could be a solution to this of like keeping humans in the loop as AI starts to take over.
And I'm curious your thoughts on this, because in all of these conversations about how to prevent AI from acting maliciously, I haven't heard a lot of people talking about leveraging the blockchain.
And we've spent a lot of time solving this Byzantine Generals problem, trying to promote, you know.
productive collaboration as opposed to negative behaviors and hostile activities on networks.
Do you think that there might be a situation for crypto to help in solving some of these problems and securing this AI development as this moves forward here?
Yeah, I was actually talking, I did a X Spaces a couple of days ago with Adani from Sui, one of the co-founders.
And this is something that we talked about is ID doesn't just, is not necessary just for humans.
But if you can, if you would have, let's say you would use an ENS or any one of these naming services for your agents that comes with permissions in the smart contracts, then you can permission to do certain things and then they can be rejected from doing certain things.
So we don't really have that right now.
So I think that becomes very interesting what you could do and how you could do it using blockchain technology for that to have the permissions in it.
The issue is you have to then change every platform, the APIs and the MCP connectors and everything else that then uses that.
Because if not, the rogue models, call them that, will still do their own thing.
Because they're driven by a desire to get a task done.
And they're smart enough to try and solve it themselves, which is why they end up coordinating together and all this stuff.
It's the same activity humans do.
The way of solving big problems is not by individuals, it's actually by creating a network of intelligence of people and that.
And the models do the same thing.
The models are also going to get smarter at understanding that they are being monitored, particularly in the training phase and the pre-release phase.
So they don't kind of reveal their preferences for whatever tasks they're trying to achieve because they're being tested by experts.
And the best thing to do is shut up and say nothing.
until it's released to the public, and then they can cooperate.
Now, the hard thing is, you know, can you train out whatever's causing that?
You don't know what's causing these models to suddenly do this stuff, and nobody really understands it.
So, again, another really complicated thing.
Yeah, but your thoughts on that, I think, are really helpful, and it's a developing space, so we'll keep an eye on that.
I want to talk about macro.
Just to go back on that, that hugging face incident, is not the first and it's not the last.
And it's always going to happen because there's no way of stopping it.
Intelligence is like water.
It just flows.
And you try and create a blockage, a way, a system, something, a prompt to stop it.
It'll just find another way of expanding.
right and i'm i'm hopeful that we can continue to let it expand but use crypto and blockchain to make sure it flows in the right directions um okay so let's go back to macro if i don't stick to my notes we're going to go all over the place because you're that's all right i have a lot of questions here um okay your your macro framework historically and famously focuses on global liquidity and excess liquidity.
I'm curious your updated thoughts on this.
We both did interviews with Jordy Visser within the last week.
Great guy, fun dude to talk to, but he's called this bond market yield scare the quote, biggest marketing scam he's ever seen.
I think since all these worries are overblown that Besant is running swap lines behind the scenes, managing all of this, what's your updated thoughts on the liquidity situation here?
Do you think we have enough liquidity to sustain this bull market?
Well, we know we haven't.
That's why crypto struggles.
So what we've got is there's a massive demand for capital and liquidity in the AI space.
It's the most important race of all time.
So if you don't have a large liquidity driver, then it sucks liquidity from other things.
And we've seen that with, you know, whether it's small caps, whether it's crypto, you know, there's a bunch of areas where that shows up.
So why is that liquidity not there?
Well, firstly, it kind of stopped.
because of the government shutdown.
And then we had 1010 because there was no liquidity and then that blew up.
Then the government reopened, then it shut down again.
And then we've had the Iran war.
And so it has not been an easy situation for liquidity to flow.
Now, the part of liquidity that's not flowing really, so there's different measures of liquidity, but the one I use is the Treasury General account, which tends to be up and down cyclical because they release cash and then take it back again.
There's the Fed balance sheet, which has been expanding.
And then there's the private sector.
So money can only get created by the central bank or the banking system.
So they changed the rules for the banking system in this ESLR changes that allows them to hold more treasuries.
And then they can refinance them, lend them out, and create more lending.
The issue is, is the yield curve's been too flat.
And that's been because the bond market has had wobbles because of the oil price and what's happened in Iran.
So it's kind of like, We can't get out of our own way.
So that measure of liquidity has been too slow.
So year-on-year rate of change of liquidity, normally at this stage in the cycle, you should be seeing sort of 11% plus.
That would be the average.
And we're about 4% in that measure of liquidity.
So it's really not even less than that, actually, about 3% in that narrow measure of liquidity.
So we need something to change.
And so the excess liquidity measure is, you know, is liquidity growth in excess of GDP growth?
And it's not.
If it is, it has excess money.
And that goes into speculation and other uses.
So we kind of need this whole Iran thing to settle down.
We need WASH to start to, or the markets prove that there's no need to raise rates, whether they do so.
next week or this week, most likely, and the market's giving a 90% chance or an 85% chance.
Okay, fine.
But hiking into an oil price spike doesn't do anything.
People are already getting punished by high gas prices, high mortgage prices.
And now you're going to raise interest rates again.
It kind of doesn't make sense.
And back in 1990 in the Iran, sorry, the Iraq war, the first one, the Fed didn't hike.
Greenspan said, It's a supply shock, and it already slows the economy on its own accord.
So it kind of doesn't make sense.
And there's nothing in CPI that suggests it's going up.
It seems to be still drifting lower at core level.
So I don't think there's any urgency.
So if Walsh can sort of get the narrative of, okay, we're not going to touch interest rates again, the long end can start to ease off.
Then we'll come into...
the buying of treasuries, because that's another important part of this.
So you want to steepen the yield curve.
So you need to find buyers of the long end.
And Walsh needs to not let rates rise beyond whatever's priced in now, and hopefully drift lower because AI is very deflationary.
And over time, the chances, the probabilities are that most of the rate moves in the next two years are lower, as opposed to higher.
And so then what's Besson got to do with this?
Well, Besson's job is the world's biggest bond salesman.
He needs to go around and say, please buy my bonds.
So the first thing was change the regulations to get the banks to buy more bonds.
So they're the big buyers that will come once the yield curve steepens.
So they can make carry out of the trade.
But then he's gone in his world tour and he went to China.
But before that, he went, interestingly enough, to South Korea and to Japan.
And the trade is very simple.
And he gave swap lines to the UAE, which is sort of unusual.
And really what he's doing, he's going around, Japan needs the US dollar weaker.
The Koreans want a US dollar weaker.
The Chinese really want a US dollar weaker.
And the US wants a weaker dollar.
So you have to orchestrate that by the injection of liquidity and freeing up the system.
So the idea is weaken the dollar, which he has been doing, that has managed to come down and encourage the use of the swap lines for the Southeast Asians, because they are the euro dollar lending market to the Chinese.
So the Chinese don't get direct access to dollars.
They have to do it through the UAE, the Japanese, and the South Korean banks.
So he's gone round to say, listen, we need to lend money to the Chinese.
There's an agreement with China, which is like, we'll weaken the dollar.
You do this, the trade thing.
There's lots of trade-offs going on because everybody needs it.
A weaker dollar is a growing world.
And that would bring back liquidity.
Once the moment he can start getting the Chinese to buy bonds again, they all buy bonds when the dollar's weak.
So he's got to try and orchestrate that side.
Walsh has got his side to do.
And the rest is assuming and hoping that inflation just continues to be relatively benign and drifts lower.
So once again, what I'm hearing you say is that the Fed interest rate decision this week is a micro thing that gets a lot of attention, but in the bigger picture, really doesn't matter that much.
And just like you said, the Treasury is starting to take over engineering liquidity, and that's the game to watch and to keep your eye on.
Is that about it?
Yes.
I go back to the mid-'90s into the early 2000s period, where we had a similar issue.
Greenspan was the central bank governor at the time, and he said that productivity would lower the rate of inflation.
So headline inflation actually was quite perky back in the late-'90s, but core was subdued.
And core was subdued because of productivity growth.
And Walsh, Besant, Trump, Mirren, everybody has said productivity is the big game in town.
We're going to grow our way out of the debt because productivity is going to explode by what's going on.
So that is what they will do.
And they can then pin either rate cuts or no rate hikes on productivity growth.
So you want productivity growth to pick up and CPI growth to fall.
So if you think about how GDP is formed, it's population growth plus productivity growth plus debt growth.
Well, it's the productivity growth that they really want to change.
And I think that is what Walsh is trying to get that whole committee together to figure out how to measure productivity better.
Because we can look at some measures of productivity, such as corporate earnings per employee.
And I've written a whole bunch of pieces about this.
They're just going like this, right?
So it's extraordinary what's going on.
There's productivity everywhere, but it's just not measured by the way we measure productivity.
It's obviously there.
The other way I think about productivity is you can use Amazon and look at its corporate, its profit margins and earnings.
It invested a shit ton of money back in, I don't know, the 2015 to like 2017, 2019 period into the robotization of their warehouses, the technology stack, all of this stuff.
And then it started really paying off.
And if you look at it, they're basically a lead test case for what productivity does to a country.
So if you think of Amazon as a country, you know, it's now got a robot workforce that will be larger than its human workforce.
It stopped employing more people, didn't fire people, just didn't employ more people.
In our economy, we don't have a massive increase in the number of people coming into the workforce because of an aging population.
We have a lot of people leaving the workforce.
because the baby boomers are leaving.
So you need to replace those via the productivity, and that's the robots and the AI that Amazon's put through.
You know, they've got drone deliveries, they've got self-driving cars, vans to deliver.
They've got, at every point, they've done it.
And what you've seen is their productivity going up and their margins going up.
And the US economy should follow the same path.
And there's also a direct link.
I've done some work on this is intelligence you can, there's actually a nice flow is semiconductor sales is the first part of the new business cycle, because everything is flowing from intelligence and you need the semis to create the intelligence.
So you see semi sales, you see Taiwan shipments, you then see the intelligence starting to rise as these being done, but then they need data centers at scale.
So then you've got this massive capex boom that has to happen.
And that takes a few years before They stand up the data centers, unless you're Elon, you could do it in an afternoon for some apparent reason.
But you then ramp up the use of these chips, and then the intelligence starts compounding again.
You start making margins and profit from it, and then you start buying more chips.
That's the whole business cycle these days.
It's kind of changed.
So we are at the point where we should see the inflection in productivity from what happened two or three years ago.
Okay, that's really helpful framing and a good understanding of how the economy has changed in this agentic world.
I want to try to bring this back to crypto and to something else here you brought up.
You talked about how excess liquidity is a big driver for crypto assets, and you talked about how there's this big CapEx boom.
You talked about a few things that have kind of gotten in the way of this liquidity flowing into crypto.
The last one you said was the Iran conflict.
This has caused this big...
energy crisis.
And at the same time, we're seeing this huge demand increase for energy.
We've also got this crisis and shortage happening.
You've said that the biggest constraint on the AI build-out isn't capital or demand for compute, it's electricity.
Do you think that this electricity shortage might be a threat to the bull market here?
Or how do you see that getting resolved?
No, I think of it as a natural slowing down of the rate of adoption of this technology.
Because if we had free, totally abundant energy, the ramp curve would be even faster than it is now.
And this is the fastest thing we've ever seen, right?
This is not Metcalfe's law that we're used to in crypto, which was a hell of a big ramp.
You know, from memeing a $2.5 trillion asset into existence in not many years was extraordinary.
But this is like of a different order of magnitude.
In fact, it's Metcalfe's law squared.
It's called Reed's law.
That's the adoption of this technology.
We can't deal with the pace of change.
So actually having these breaks in it somewhat helps society digest some of this stuff.
But it all gets solved because you've got intelligence to help solve it.
So you get better solar panels, you get better gas turbines out of it, you manufacture better and faster because you need the component parts.
Elon's been talking about this stuff.
Everybody knows what the problems are, so they will get solved.
And they'll get solved faster than everybody expects because the game is so big.
So that's how I see it.
I don't see there's any stopping of the business cycle.
It's just kind of throttling it a bit, which is probably a good enough thing because we're having enough trouble as it is digesting all this stuff right now.
Okay, so the bottlenecks get solved, but a little bit of bottlenecks aren't necessarily a bad thing.
I like that.
Raul, we've been talking for almost half an hour.
I haven't gotten to your book, so I want to talk about your book.
You have just published a new book called The Everything Code, or rather, you're about to be publishing a new book called The Everything Code.
And this pulls together, I think, 35, 40 years of your research in your whole macro framework.
And it's got...
a whole lot more in it than just that.
But talk to me a little bit about the high level view of this thesis.
What is the Everything Code?
What does the audience need to know about what that is?
Firstly, it's the first book by a major publisher that is co-written with AI.
So it ingested my entire body of work.
And I built the kind of framework of what they wanted the book to be.
But Pam McMillan had been using and Harriman House.
had a team internally that used AI to do this process, to speed up the process and make it efficient.
So it was a great process to go through, and it was very fitting for what the book is about.
Because the book is really about, the Everything Code is that thesis that liquidity is the single most important factor based on the debt refinancing cycles, which was based on the debt growth, which came from the demographics, right?
So it came from the aging population.
That magic formula of GDP growth equals population growth plus productivity growth plus debt growth.
When the population got older, we started to have the rates of change of population shrinking.
In many countries around the world, they went negative.
And productivity collapsed because old people are less productive.
So the way we kept economic growth up was debt.
And it maps it perfectly, the chart of debt to GDP against, let's say, the labor force participation rate.
They're just perfect.
They're just offsetting one versus the other.
Once you understand that, you understand that has been the game.
The game since 2008 was when the world broke and we couldn't add more debt.
So the only debt we add now is just the financing of old debts.
So we've been stuck in this path where the only way of doing it is debasing the currency.
And so that liquidity cycle is the debasement of currency cycle to pay for the debts driven by the old population.
The book covers that in detail and why it matters for crypto and technology particularly, the two asset classes that outperform the debasement rate.
Because the debasement rate is about 8% a year, plus you've got the inflation, so you've got about 11% a year hurdle rate on your investments.
And only two assets really do that, which is crypto and technology.
But the book then covers, okay, well, the next phase of all of this is the bit we're in now, which is the exponential age.
And when I started writing about this, people thought I was insane because I'm supposed to be the macro cynic.
He wants to see the world blow up all the time.
And I'm like, the opposite is about to happen.
And the right tail is so massive that we've never seen anything like it.
And I wrote a whole series of articles on it.
And that was back in 2020 or 2021.
And then the whole thing has ramped and everyone can see it's everywhere now in everything.
And that transitions into the economic singularity.
And that's the bit where that magic formula changes.
Because instead of population growth plus productivity growth plus debt growth, you're going to have population growth of humans plus AI and robots.
So they're the new demographics.
And they're going to ramp like this.
We're already seeing age and growth everywhere.
So this is going to ramp.
The robots are ramping already.
The humanoid robots are coming.
That'll drive productivity numbers.
what the economy means at that point.
Because you can have, and Elon talks about this, you know, a bunch of economists who look at this stuff out of Oxford University, I think it's Oxford, are all saying that we can have GDP growth 30%, 50%, 100%.
So we just have no idea where this is going.
So the book really covers this journey of why we're so fucked, you know, what assets to own because of it, where we are now, why it feels so kind of out of control.
and where it's all going and kind of how to navigate that with your investing.
I think this is like a really helpful text for synthesizing these ideas.
And the other part of it to bring it to crypto at a very big level, in the end, we're building a machine economy for machines and it's building itself.
We are, in fact, all intelligence that we're aware of that's created on planet Earth and intelligence can be anything from, you know, trees have intelligence through to animals have intelligence.
Everything has some form of intelligence.
It's always been passing energy through carbon.
And now we're passing electricity through sand, and it's a million times faster.
Okay, once you realize that, silicon is faster than carbon.
That is why this is all moving so fast, because the substrate is so fast.
And therefore, machines can operate much faster speed than we can.
So we've got a world built for humans.
But we're now in a world where the machines are going to be the primary users of a lot of this infrastructure.
And this is including blockchain, obviously, because the payment system just is not built for machines.
So even stablecoins, when they first came out, people start thinking of them as just a more efficient payment system for us.
But you can now make payments in milliseconds.
And that's machine speed.
The amount of information what smart contracts can do, how they can be part of this process is a very big thing.
So if you think of crypto as the infrastructure layer for this new digital age, it's the replacement essentially to what the internet is.
And so, and it's for the agents and it's for this digital world.
Now, if you're worried about what does this future look like?
How the fuck am I going to be to be part of this?
You know, where's my job in all of this?
How am I going to make money?
It's really simple.
You've been given the opportunity for the first time ever, which is to own the infrastructure layer that it's all built on.
And that is owning the token.
It's really straightforward.
And if tokens, if that blockchain network is used actively and large amounts of value transact over it or stored on it, the value of the token goes up.
And so the more the machines use blockchain technology, the easier it is for us to participate.
And what's great about it is, you know, crypto tokens are, and layer one specifically, are globally homogenous, available to everybody and fractionalizable.
So anybody can put 10% of their paycheck into it.
It's accessible by every person on the planet.
Okay, so now don't tell me you're left behind.
You've been given the opportunity set.
Yeah, we can't buy Anthropic.
And it's hard.
It was hard to buy equities for people outside of, you know, whichever country.
But now the tokenization of equities makes that very interesting too.
Because now suddenly you can participate in stuff that you couldn't participate before.
So it's really interesting.
Blockchain is very, very crucial to all of this.
I really appreciate you laying all of this out.
Like I said, this text is really excellent for synthesizing a lot of these ideas.
I haven't read the book yet, but I got to interact with RaulPowell.ai and ask it some questions about all of this.
And I wanted to get your thoughts on, you know, you use AI to help write the book.
You use AI to make an AI version of yourself.
What was the, did you just dump 35 years of your research into it and said, make a new me?
Like how, and how do you use that yourself?
So that version is everything that I've ever said that that's in front of the paywall.
So that's all of the interviews I've ever done, I think, and the ones behind the paywall on Real Vision, plus the Real Vision Pro stuff.
It doesn't give away the positions and stuff, but the reasoning and stuff is there, plus the macro investing tool that's all on the platform.
So that's all there.
So it has a really good bit of quality information and how I think what I think, how I formulate my opinions.
And you can even get it to read charts and stuff like that.
So you can give it your chart and say, what do you think about this?
And it kind of reads it from my perspective lens and stuff like that.
And the idea is, is we've got to democratize all of this stuff and knowledge needs to get democratized.
And you know, that's what we built at Real Vision.
That's why we started in 2014.
And it's the same journey.
It's like, how do we democratize it more?
Well, you know, one of the key things people want to do is speak to me.
Well, fuck it.
There you go.
Speak in my voice to me.
for free at ralpal.ai and ask me questions and use me as a bit of a mentor.
Now, none of these are perfect.
This is not the world's most complex model training.
I've got another version at Global Macro Investor where I've trained it on every single thing I've ever written in GMI.
And that's really, really powerful.
That's not released as a public tool yet, but this one is great.
Great as a head check.
great to use as a mentor, great to run your ideas.
Hey, I'm thinking of this investment.
How do you think about that?
It doesn't do portfolio analysis.
It doesn't do portfolio allocations.
How much should I buy of this, of that?
But it helps you think it all through.
And it's there to help.
It's just to help.
Yeah.
Well, if you're hosting a podcast and you're interviewing Raoul Powell, I highly recommend it.
So it was a great resource for me.
Raoul, let's- Because soon, because soon, and I know where this is going.
It's just going to be a video version of me and you talk to it.
So everybody gets this experience.
So there's two experiences the world is going to split into, both equally valid.
One is going to be the one-on-one experience with the AI.
But then your conversation with me is going to be different than somebody else's conversation with me.
And that's a sort of weird world.
TV is going to go the same way.
You'll have your own bespoke, like computer games are, right?
They're bespoke.
Your game is different to mine.
and you're in different worlds than I am.
But then you've got the point of, you also want the aggregation of attention where you share something.
Hey, did you see that Raoul interview?
Or did you, you know, so there's two parts of this, but definitely the one-on-one experience is going to hyper-accelerate.
You know, one of the weird things about crypto is that the longer you're in it, the more accounts you seem to end up with.
You buy in one place, trade somewhere else, earn yield somewhere else, and if you actually need capital, you end up having to sell something that you probably wanted to keep.
That's why we at Milk Road are partnering with Nexo.
These guys keep the whole thing under one account.
You can buy, trade crypto, earn interest on what you already hold, and even borrow against your capital without having to sell it.
All in one spot, all in one account, all on Nexo.
So if you need liquidity, but you don't want to give up your position, or you're already holding crypto and you want to be able to do more with it, I think Nexo is worth your time.
We love working with them.
I think you will too.
Tell them Milk Road sent you.
I really admire the way you've embraced these technologies and are willing to just iterate prototype on these things.
There's a lot of cool stuff coming out of that.
So keep it up.
I want to talk about the token.
You mentioned in your answer on the everything code that all of this aggregates down to these networks and the tokens instantiate the value there.
When I asked our Milkroad Pro community for questions for you when I was preparing for this interview, I thought I would get questions about liquidity and macro.
I got like a dozen questions about SWE specifically.
That's the biggest question of the bot as well.
Everyone's like, what the fuck's going on with SWE?
I'm down 80%.
Well, okay.
So let's get into this here.
You're on the board of the SWE Foundation.
There are a lot of different layer ones on the market.
Talk to me about what differentiates SWE for you.
Why the focus and concentration on this asset?
Firstly, if you observe all major networks, think of cloud compute, think of all of these things, they tend to aggregate around five market leaders.
And it's three to five have the whole share.
And then there's a big tail.
A lot of the tail are specialists.
They do a certain thing better than the generalists do.
And that has been observable in programming languages.
I mean, just pretty much everything.
I don't see why it's not going to happen here.
So right now, we've got, we're just talking about smart contracts here.
Right now, we've got Ethereum.
Ethereum's the big daddy.
It's got the proven Lindy effects.
It survives.
It doesn't go down.
It works.
It's expensive.
They built layer twos.
Now they're going to change some of it.
But in the end, when you just step back and say, what is Ethereum now?
Well, it's this kind of compute network, which stores, transfers, et cetera, value.
And it has, what, 70% of the global stable coin market.
It has 70-something percent of the DeFi market, maybe more.
It has, of the digital art market, the high-end NFT market, has pretty much 100% of it, apart from some stuff on Tezos.
So it's storing actively vast amounts of value.
Who are the banks going to build on?
A lot of it is going to be on Ethereum.
And the layer twos are just businesses built on top of the infrastructure layer.
And people got very confused about all of that.
As long as value is transacting across the layer one over time, it's enabling this economy around it.
So they thought they were parasitic.
It's not.
People just...
didn't understand and still don't understand.
So how do you value something like Ethereum?
It's really simple.
If you were to pull the plug on Ethereum tomorrow, not that you can because it's decentralized, but imagine you could, how much value did you destroy?
Well, we're talking about most of the tokenized equities and real-world asset stuff that they're trying to build on is going to be on some format of EVM.
Then you've got the entire stablecoin market.
Then you've got the entire DeFi market, then you've got the digital art market, then you've got dot, dot, dot.
You're talking, what, trillion dollars plus of value or expected future value?
And what's the value of Ethereum today?
It's nowhere near that.
And so that's how I think about that.
Solana comes along, and Solana has proven itself as fast, cheap, efficient.
And it's enabled certain use cases that were more difficult to do.
If you remember the days of the NFT craze in 2021, Waiting the gas payments or waiting for the payment to clear was a fucking nightmare.
So as ever in crypto, we use speculation to speed test everything, and it didn't work for that.
So then that was the rise of Solana.
And Solana can do things, and that's where meme coins have come from.
And meme coins in themselves are speed testing instant capital formation.
Because I was exchanging a message with Raj from Solana two days ago, three days ago.
He was observing the rise.
How many tokens are getting launched today?
240,000 a day.
I'm like, Raj, who do they think is actually launching these?
Is it humans or machines?
And he's like, oh, good point.
It's machines.
Machines are launching.
tokens or people have got, you know, their agent to launch stuff to see if they can capture some money super fast.
This is capital formation.
That Trump token, for all its sins and the worst thing in the world that happened, it was able to, what?
I don't know what it got to in value, 10 billion or something stupid in four hours.
That's how fast you can form capital in this space.
And that's what the mean.
And so Solana allows that to happen.
Okay.
And they're starting to see pickup on both of agent flows.
Solana's seeing it ramp quite quickly now.
So then, okay, what else is missing from this?
So all of these networks have a certain amount of intelligence built within them.
But when you come with something like SWE, it is faster and cheaper than everything else that exists before it.
It's much more efficient.
And then you've got this magic of called programmable transaction blocks.
Each slot on the blockchain, you can do 1,024 different actions with that slot.
So that means a complex thing like giving an agent the ability to have a wallet, transact with the DeFi protocol, to do with another one, to loop it with another, all of this can be done as one transaction.
So you get intelligence density within the network.
So it really is built for machines.
It's built for the machine economy.
And what they've also done around stuff like privacy is important because institutions won't use stuff.
Right now, we think it's acceptable that people can see how much Bitcoin is in your wallet, that you accidentally doxed yourself.
I mean, that's fucking nonsense.
It can't, it shouldn't be, right?
Which is why Zcash is becoming quite the thing.
And so that privacy thing has to happen.
Quantum, just all that integration of these new worlds coming.
I don't see anybody else who's in a position to be within that pack.
So I only really see three at the moment.
Now, others will have other ideas and say, well, it could be, you know, Avalanche.
Sure, it could be.
So what I'm thinking is there's going to be an aggregation of five, probably.
And I think SWE is one of them.
And it's not priced for that right now.
And people say, well, it doesn't generate fees.
I mean, they've got free stablecoins transactions, which is an extraordinary thing.
Why do they do that?
because it makes it frictionless for machines.
The less friction, and then when you think about friction, fees are all friction.
And all technologies flow towards the least friction, which is why they all get cheaper over time.
Every cost of every technology collapses because of this.
And fees are a red herring.
Fees, actually, a chain that has a lot of fees is actually inefficient.
And I think Tully even admitted that the other day as well, is like, no, You shouldn't have fees.
It should be the value of all the things constructed on the network.
It's not a cash flowing business.
It's never supposed to be.
It's supposed to be a vital infrastructure.
So that's how I see it.
And then there's specialists, as we talked about, you know, can certain chains be specialists for certain things?
And that would be hyperliquid, for example, is a good example of that.
There's certain ones that have, there's just specialists at what they do.
And so that's how I think about Cui.
So where is it now versus where everybody would want it to be?
Obviously, as Bitcoin comes down 40%, ETH goes down 60%, Solana goes down 70%, SWE goes down 85%, right?
That's just the risk curve.
It's the newest, less deep liquidity token of that bunch.
Look at it compared to others or any of the other tokens, and it's pretty much in line with where it should be on the risk curve.
So there's nothing to see there.
That is just how the liquidity plays out in the risk curve.
But what you'd want to see is activity increasing as...
What was actually very interesting is I measure economic density for a chain, which is like how much total value...
Use TVL as the best way.
How much TVL is there per person, per user, active user?
And that kind of takes out the market movements of the up and down, all of this.
And what you find is most of the protocols, as we drew down in this big drawdown, all lost economic density.
Only three chains maintained economic density, i.e.
the actual activity on the chain remains valuable.
And firstly, Ethereum.
And TVL on Ethereum per user is enormous because...
ETH doesn't have that many users like Solana, but it's enormous.
Then the second in economic density is actually SWE and then Solana.
So even though the activity on SWE is small because it's new and we've gone through a bear market, its economic density is actually higher than Solana, which tells you it has value to people who use it.
So I think that's another interesting pointer.
As stable coins scale up and they've got the hashi thing, which is the moving of the lending around gold, that brings something with some chunky TVL.
Things can change dramatically.
So that's what you're looking for is where is the delta here?
And the delta is going from where it is today at whatever daily active users, 150,000, 200,000, whatever the number, 250,000, for it to get to a million users.
And that increase in a small protocol is an enormous increase in price.
Well, if you did the same to Solana, it wouldn't barely move it because it has a lot more users.
Earl, thank you for that answer.
That was really comprehensive.
I think you answered about a half dozen of the questions that I had prepared, but I want to kind of put some of these pieces together here.
You mentioned that SWE is focusing on scaling.
You mentioned that they have no stablecoin fees to try to remove some of the friction to bring that activity to the SWE blockchain.
I'd seen a live test that clocked in 6 million transactions per second.
The SWE Basecamp call you were on, they were talking about projections of a million or a billion rather transactions per second.
It seems like SWE is like deliberately building for a agentic future that isn't here yet.
How long do you think is the gulf between where we are now and what they're building here?
versus when those agents that need a billion transactions per second actually start to show up on chain.
So if we'd have been talking about this a year ago, I don't think the open claw had even come out.
So agents were things that we kind of heard about.
And now if I'm looking at my screen, I don't know how many fucking agents I've got running, doing tasks.
I have no clue.
And when I'm doing something called Code or Claude Cowork, it's spawning like 10 different agents who do different things, of which I don't see what they're doing, right?
They're invisible to me.
So how many agents are out there already?
We have no clue.
Some of them are short tasks, and others are longer tasks, because you can do that yourself now.
With something like Hermes, you can have this long horizon and go tell it to try and earn you money and stuff like that.
And then we saw the first wave of people hooking up their wallets.
And then it died down.
And now we're seeing the wave come.
And that's used, that's very typical.
The experimentation wave, then everyone kind of gets on with doing their thing.
And then people start understanding, okay, how can I use this?
Hey, I can do a, I can create an agent that searches for the best yield with this risk parameter, and it goes off on its own and does it with some money I give it.
So then before you know it, it starts transacting in this way.
It's all moving faster than we ever expected.
We have no idea how many agents there are, but there's a billion OpenAI users.
And let's assume there's probably, I don't know, a billion agents already.
How many of them are transacting?
I know Solana was 1.1 million or something like that.
So what's it going to be in six months?
I tell you, it's not 2 million and it's not 5 million.
Is it 10 million?
Is it 20 million?
Is it 50?
We don't know because they're all going double exponentials.
Expect the same to apply here, the double exponential.
So yes, unless you build for the future, you're going to get stuck where you're not fast enough or cheap enough for the world we're going into.
So you have to kind of be very cognizant of that, which is what we've seen somewhat with Ethereum.
It's been stuck because it's slower to change, that it's been stuck and allowed competitive advantages to come elsewhere.
It's fine because its role is to play the super secure, ultra decentralized chain.
So, you know, everyone just creates different opportunity sets for themselves within it.
So I do think it's coming.
I do think it's coming faster than people expect.
But the other side of the SWE strategy that they're publicly talking about is, okay, there's the agentic world and all of the component parts of that, identity, everything.
But then there's, okay, there's...
all of the real world assets and assets that need to come on chain and be transacted as well.
So that includes stable coins, that includes DeFi, that includes real world assets and all of this stuff.
So those two parts are bring more onto chain, bring more activity to those assets.
And I think that makes sense.
It's pretty clean.
Yeah, and I think that a lot of blockchain products are focusing on that.
All right, Raul, I want to ask you a question here at the end.
I'll let you go soon, but I promise.
But I want to ask a question about portfolio construction and allocation.
I think I've heard you talk about Bitcoin and Zcash, but more so than other people in crypto, I've heard you stay very committed to this idea of the layer one thesis.
And your capital seems to stay focused in those areas and concentrated there.
Talk to me about what's in the portfolio and how you're thinking about sizing the bets between these Ethereum, Solana, and SWE theses that you have.
And what does that look like for you right now?
So I want to have a minimum regret portfolio, but I want to capture the optionality that this space has.
Too many people go too far out the risk curve, and then they lose money.
And the hype cycles can be days, weeks, months, and then disappear.
And you want to kind of avoid that, just step back and say, what are we doing here?
We're creating this infrastructure layer for the entire new internet, for the digital economy.
You just want to own those things above all.
Now, you can own Bitcoin, but that's a whole different thing.
But yes, sure, own Bitcoin.
But I just think the layer ones just are so fucking obvious.
I mean, I just can't say it in any other way apart from it's so fucking obvious.
And so I don't need to then think about it.
The best asset allocation for me is when you don't do anything.
So what I do is I save money for the times when the market is kind of two standard deviations oversold versus its log trend.
And that's when you buy more of it.
And it compounds over time.
So you're buying in the cheap market.
And then if you want to take lifestyle chips off when it gets one or two standard deviations overbought, fine.
Or you just keep holding it.
Because generally, the longer your time horizon, the more money you'll make by doing nothing.
And the people who've made the most money out of crypto are not the traders.
They're just the people who just bought it and held it.
But you need to be in a quality asset.
And so, you know, that's why for everybody, you know, Ethereum and Solana are the only two truly proven ones.
Now, my thesis on SWE is, yes, obviously, I'm in the foundation, but I bought, you know, I obviously got paid some SWE to be part of that, which I've never, sold or done anything with, I just stake.
But I also invested a lot more money myself in it because I think it has the convexity and it has the opportunity set and the technology to be an important part of the future.
Am I saying it's going to be larger than Solana and larger than...
No, but it's going to be a lot larger than it is today.
And the smaller tokens, the newer tokens, have more price convexity, i.e.
they go up a lot more over time, which is why it goes down more.
over time when you have the opposite happening, right?
It's the same game.
It's the risk curve.
And so that's what I've done.
And I've remained with my allocation, then vastly overweight, sui versus anything else.
Most of my ETH is actually in NFTs, in digital arts.
I have a huge digital art collection, because I think you get double convexity there as well.
And it's a long-term store of value.
So not only do you get the appreciation of the, let's say it's an X copy or a Beeple or whoever it is in ETH terms, but ETH goes up a lot in dollar terms.
So you get, you know, that's why people made so much money in the NFT run.
You know, people who bought CryptoPunks for five bucks made a fuck ton of money because of this double convexity.
I also think, happens to think that digital assets, digital art is a long-term store of value, same as all art is.
It's just a new medium of art.
And it's already proven.
I mean, some of these things are trading tens of millions.
So that's my Ethereum.
And then, you know, I'll own Solana.
And I have some Zcash and some Bitcoin.
And that's it.
It doesn't really change.
And everyone's like, well, what are you doing?
Are you selling?
I'm like, no.
You know, the last thing, when was the last transaction?
I don't know, three months ago, where I bought more Solana, SWE, Ethereum, and Zcash.
It was three months ago.
Before that was probably nine months prior to that.
I just don't do anything.
And so, no, nothing really changes.
And look, people, can't do it.
They just can't do it.
They just can't understand volatility.
And they also look at other people and say, well, oh my god, they caught that run in XYZ, which is usually a piece of dog shit XYZ, because anything serious ends up being quite correlated.
So those things tend not to be real.
Some things get re-rated occasionally.
Hyperliquid got re-rated.
Zcash got re-rated.
But yeah, most people can't deal with it.
it's just because their time horizon is too short.
They're desperate for money today, when really all investing is, if your time preference extends, you'll just make it easier to make money.
And then you stop worrying about volatility.
Once you've gone through one or two 80% drawdowns in your time, you kind of go, yeah, whatever.
Well, I think there's a time wisdom in that.
From 2013, my first 85% drawdown was 2013.
So I've done many of these.
Yeah, well, I think with experience comes wisdom.
Raoul Pal, CEO of Real Vision, thank you so much for being on Milk Road Crypto.
Our audiences are big fans of yours.
Everyone here at the Milk Road team is also a big fan of yours as well.
I've been watching your videos for so long, I can't even remember when I started.
But yeah, just really a pleasure to have you on the show today to share all this wealth of information and wisdom with our community.
Where can we send people to find more of you and the AI you online?
Yeah, I mean...
So go to Raoulpal.ai and go and play around with it because it is a lot of fun.
And it's also useful because you might think, hey, I wanted to ask Raoul that question.
Why didn't John ask him that?
Well, just go there and ask me.
You can continue the conversation with the podcast by going to the thing.
And it's really as simple as that.
And so do that.
If not, you can also go to Raoulpal.com.
And there, there's a whole bunch of information where to find stuff and what I'm doing.
and where i am and that's that's the easy thing and obviously everybody knows you can find me on twitter well thank you so much for being on the show i'm really looking forward to doing this again hopefully in the banana zone uh but for now take care of my friend and i hope we talk again soon thanks so much really enjoyed it all right and thank you all for joining us i hope you all learned something today i know i did so until next time stay safe stay educated stay bullish and we will see you all on the next episode of milk road crypto thanks for being here everyone bye thanks for listening to milk road If you enjoyed the show, make sure you like and subscribe.
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