Relentless
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?
00:32:20 · Brian Armstrong
[00:32:20] S0: A lot of the crypto companies got traction being outside The US. And in some ways that was a huge advantage for them, right, because they did feel like they could take more liberties, not follow US law, even though sometimes oftentimes US customers were actually using them through VPNs or otherwise. And so that was a pretty valid strategy, I would say, to get big fast. And then now the question is, can they try to clean it up later? Just because we were based in The US and I didn't want to live outside The US or go to jail, I was like, let's do it the legitimate way. That was also a valid approach, and it allowed us to land many of the largest institutions and be the trusted provider. So we consistently see our brand as the most trusted in crypto. That allows people to store more crypto with us, and we plug more products into that. It's a nice flywheel that's very defensible. I think the trend that we're seeing now is toward regulatory clarity in The US, in Europe, in Asia, everywhere, really. And so in that environment, I think Coinbase wins. Right? Like, in a regulatory clarity environment, we are the trusted option. It doesn't mean we don't have competition. They're gonna... Others that did more of a get rich or die trying approach are now gonna try to clean it up. And so we are, you just like any industry, we're in competition with them. Competition makes us better, actually. And as regulatory clarity has emerged, we're seeing lots of other fintechs and traditional financial service companies that are not in crypto now enter into crypto and start to use crypto rails. So that's definitely increased the amount of competition, but the TAM is also just getting much, much bigger. So our goal is stay the most trusted crypto brand, store more crypto than any other company in the world, which we currently do today, plug more products into those deposits, which makes it sticky, and use the proceeds of that to reinvest in trust and growing.
00:33:59 · Brian Armstrong, Ty Morse
If if we see, as I believe is gonna happen, like, the financial system continues this transformation to running more and more on crypto rails because they're faster and cheaper, more global, I I don't see a reason why we shouldn't be the leading company in the world doing that, but it's gonna be thousands of companies coming in and doing that, which is why we provide kind of products and services for them as well, like, through Coinbase developer platform and etcetera, etcetera. How do you [00:34:24] S1: think about, like, building a very trusted brand over time while maybe short term taking a bunch of decisions that could potentially increase growth, but because you don't take that action, you will be trusted in the long run?