Relentless
00:25:04 · Brian Armstrong
[00:25:04] S0: Actually, internally at Coinbase, for a long time, we had just a retail product, and most people know us for that. But today, we actually have, like, a very large institutional product for crypto as well that does trading and custody and financing and all kinds of things. It's it's the leading product in the institutional space. So there was a moment there where we were thinking, alright. Institutions are gonna come into crypto. Maybe we should try to launch something here for custody and trading. And we went and talked to a couple of startups out there that were working on this, and we got really close to actually buying one of these companies as a way to kind of start the team. And for whatever reason, it didn't quite work out with that company. And I remember thinking we just need a bias for action. Like... And I kinda set this crazy... It was like a Friday or Thursday night or something like that when this team kinda told us, nah. We don't wanna take your offer to be acquired. And I was like, Monday, we're launching our institutional product. And people are like, what are you talking about? Like, this is gonna take, like, six to twelve months to build it, the version one. And I was like, no. We're launching a v one on Monday, like, because this company turned us down. You know? And I was kinda like Fuck them. Yeah. I was a little pissed about that. And so we basically threw together a landing page, like a marketing page. We started to sketch out what some of the back end might... Because we built a lot of stuff that could be repurposed. And Monday morning, like, we announced it, and it had like a page where you can... All you could do was come and sign up and be... Express interest. And then we went and hired like the right person to go kick it off and run it. We had more... Like in our New York office, we had more people with institutional connections. We tried a bunch of things which totally flopped. Like we initially went after the biggest institutions in the world, the biggest, like Goldman Sachs and like BlackRock or whatever. Yeah. And we were so unprepared for it. We basically failed by going after the big ones. So then we totally changed our strategy. We went after the smallest institutions, like a two person hedge fund or a couple of crypto traders or whatever and family offices, and so we started to land some minnows.
00:27:04 · Brian Armstrong
And then we got our... Like, our cybersecurity systems got way better, and our audits got way better, and, like, we learned how to do a sales process with institutions that were, like, multiyear long. And then we we ate, like, a bigger fish and a bigger fish, and eventually we landed BlackRock and, you know, like, the biggest financial institutions in the world. So that was just an example of me just, like, action. Just, like, let's just move and and launch and then iterate from there. And if you're not embarrassed by the first thing you launch, you know, it's... You waited too long.
00:27:34 · Ty Morse
[00:27:34] S1: Recently, we got back from New Zealand. We're recording with, Peter Beck at Rocket Lab. And as soon... We have a little bit of a fun experience there where as soon as we arrived, we realized that we didn't have some very critical document that apparently we were supposed to have because ChatGPT didn't tell us that we needed it. And so they immediately confiscated our gear at customs. And basically, no one was helpful. No one knew the process for getting our stuff back. We were told that it was gonna be at least five days, maybe up to three weeks. Our shoot was in thirty six hours. And over the course of the next, like, twenty four hours, we just pulled all these different strings, had like a backup of maybe we can rent gear all this stuff. But eventually, we figured out that if we just quote unquote semi bribed the right government person, things could just unlock and get our gear back immediately. We did that, and we got our gear back and did the shoot. Has there been any examples in the history of Coinbase where there was a completely unknown map and you just made up the rules?
00:28:28 · Brian Armstrong
[00:28:28] S0: Yeah. Well, I want to state for the record that we have never engaged any bribery, just to put that out there. But there are a lot of cases where the rules are undefined. That is definitely true. There's actually a lot of areas of the law that are unclear. Like if you go get legal advice and they'll say, it depends. Like, that's actually a very common answer from lawyers. So it's always a danger. Like if you wait for perfect clarity, you know, you're just never gonna get anything done because it... Sometimes that comes only after the fact, like, five or ten years later, you'll get... You'll see legislation get passed. Like, we're finally seeing it passed now in the crypto space. But if you also go off and do something that is, like, unethical, whether it's legal or not, that is going to come back to bite you. So there are a lot of times where you have to make risk judgment calls. Right? And, you know, you often... The first test I always ask myself is, do I feel good about it? Like, would I feel good? Let's say this whole thing got leaked or whatever, and, you know, do I feel good about it? Would I stand... Like, this was the right thing to do for customers or for the country or whatever it is. And so first is like that kind of look yourself in the mirror test, which I think is important. And then you have to and say, okay, well, there's gray area in the law. It's unclear. You know, what are the actual penalties if someone, this case gets litigated and it goes against us? What's the upside? There this... If it's like 100,000,000 revenue potential and there's a 20% chance we get fined $20,000,000 I'm like, that's a good trade. Right? Now, if there's a 20% chance that you're going to get fined $10,000,000,000 and that could be existential to the company, then you probably shouldn't do it. Right? So these are the kinds that you always have to look at the upside and the downside. I mean, it sounds simple, but a lot of people don't do this. You go into a meeting. This often happens. You go into a meeting and someone's just like, I don't know. This is really risky because of like X and Y and Z. I'm like, Okay, those are risks. There's also a risk that we just don't do this and we completely miss the market. And it impacts our market cap by $10,000,000,000 So like, I actually think you're creating that risk.
00:30:27 · Brian Armstrong, Ty Morse
So you have to reframe it in their mind of like, you're not just mitigating these risks. You're actually creating risks. Like there is a risk that this company becomes irrelevant and dies because we're being too conservative, right? So you have to balance all the risks, not just looking myopically at one set of risks. And this is actually a rare thing. A lot of lawyers aren't good at this. The best ones are. A lot of lawyers, they actually only think their job is to protect the company from some kind of case coming against them. Like, believe me, there... There's worse things in the world than having, like, some litigation happen, like, which is the whole company dying or becoming irrelevant or just never mattering. Like, that's... That is worse than getting a lot... And and, you know... So, you you know, litigation is just like a part of business. Like, you have to sometimes go to the courts to figure out what the rule is because the law is not clear and that you create... You need to create legal precedent through litigation. Like, that is actually an important part of how our system works. So I think some people don't quite get that sometimes, and they think their job is to mitigate litigation. And I actually think it's to take intelligent risks that create the outcomes you want and look at the ROI. It's almost like being [00:31:36] S1: a forcing function for clarity. [00:31:38] S0: Yeah. And there's times where if we're not getting clarity from the law or congress, it's important to go to the courts. Like, that is, you know, checks and balances.
00:31:38 · Brian Armstrong, Ty Morse
[00:31:38] S0: Yeah. And there's times where if we're not getting clarity from the law or congress, it's important to go to the courts. Like, that is, you know, checks and balances. [00:31:46] S1: This almost kinda reminds me of the Uber Lyft scenario where, like, initially, Uber was just doing, like, limos and black car service, all this, and then Lyft comes along and just opens it up to basically everyone. And then Uber for a while doesn't copy. And just because of that, they could get litigated, all that. They don't copy, and they just lose market share and lose market share. And eventually they just say, Fuck it. We have to do this or else we're gonna lose. And then only then, like, the courts start working through. What was it kinda like seeing that play out since this is very... It feels kind of similar to the situation that you've experienced?