Jim Robinson - Bitcoin Investor
Jim Robinson is managing partner at RR&E Ventures.
### PODCAST INTERVIEW TRANSCRIPT
Interview with Jim Robinson, a Bitcoin Investor
Trace Mayer: Okay. Welcome back to the Bitcoin Knowledge Podcast. We've got Jim Robinson. He's managing partner at RR&E Ventures, one of the premier of venture capital fund. So welcome to podcast, Jim.Jim Robinson: Thank you, sir. Glad to be here.
Trace Mayer: You got a smirk a little bit. Is it not one of the premier ones?
Jim Robinson: Well, listen, it's just a great lead and we should go everywhere together and you can open for me.
Trace Mayer: Yeah. I can be your introduction. No, but I mean you've had what five funds of?
Jim Robinson: Seven.
Trace Mayer: Seven funds of two hundred and fifty million usually I think or like how large are they?
Jim Robinson: So all of our funds, except our first one which was 20 ago which was a one hundred billion, all of our funds have been targeted at about 250. Sometimes our current one is 280. I mean, it varies depending on season and what's happening in the market. But typically in any fund we invest in 20 or 25 companies and we're pretty broad so we do a lot of different things.
I mean as you know I'm full time and have been for 15 or 18 months on bitcoin, but we're doing a lot in robotics. We're in the satellite business for launching nanosats. So we're pretty broad organization, a lot of enterprise in internet as well.
Trace Mayer: These are mainly tech focused VC funds, right?
Jim Robinson: Yeah. Pretty much everything.
Trace Mayer: And so, I mean, you've had some of the big names out there like BuzzFeed, what are --.
Jim Robinson: BuzzFeed media, the way we divide the world up because we're based in New York is New York has seven industries that are sort of the stovepipes and people know what they are. They are financial services and media and publishing and advertising, you know, even things like fashion and we invest in those sectors that are being transformed.
I've stay away from the disrupted, in the sense that, you know, a lot of those industries actually adapt to the technology. So it's transformed by technology and that's where we're investing.
Trace Mayer: Okay. You mentioned you're now full time bitcoin investor for like the last 18 months and I find this very interesting because your father, he had been CEO at American Express, right? And so, I mean, you're one of the vanguard premier VC funds in tech. Why is bitcoin getting your time and attention?
Jim Robinson: Sure. Well, it actually goes back 15 years or more. We've always been payment system investors. You know, in the mid 90's we spent a lot of time with folks like David Chaum of DigiCash and with, you know, CyberCash and the whole ilk of them. In the then era, the problem that we were all trying to solve was micropayments. So, if you think about the internet as it begin to roll out the first industries it really put at risk were media and publishing. There are a couple roads you could go down. One is the world we live in today which you know for half a percent of those places have a paywall because they can and --.
Trace Mayer: Like, New York Times or Financial Times, Wall Street Journal.
Jim Robinson: Very small list and then there's everyone else. So what we were trying to do was unlock essentially, you know, the 402 protocol land of allowing --.
Trace Mayer: Your payment method not specify.
Jim Robinson: Yeah. Payment method not specified. Which you couldn't do it because you simply could not use the existing, you know, oligopoly infrastructure in the interchange to transact a 10 cents, 15 cents, 5 cents, 25 cents, 50 cents because it costs more to actually do the transaction than transaction amounts.
Trace Mayer: And they were just not built for the internet. Like credit cards, debit cards. I mean they're an obsolete technology in that sense. Like you're trying to bring a Gutenberg press on to the internet and like no amount of duct tapes can that help with like work with the server, right.
We need a native digital or virtual technology to be able to accomplish this. Because at the end of the day, we're talking about protocols and the transfer of data or information over this World Wide Web and so like they just didn't work.
Jim Robinson: Yeah. No, that's absolutely right and, you know, always with the new technology and the new protocol you try to initially sort of glom on the past metaphor to the present. But in the case of those guys, this was all using elliptic curves. It was all crypto currency related. It was sort of the underpinnings of kind of where this thing ultimately evolved. But it was the wrong time. The world wasn't ready. It was a 56K dial up world, most people were just beginning to get AOL lies, if you will.
Trace Mayer: Yeah. I mean there was no Facebook. YouTube didn't exist.
Jim Robinson: That's right. We have chat rooms and all groups and tiny bit of shopping here and then. Of course, the dotcom's full that up. So our history has been in investing in lots of different things, but lots of payment related systems as well and processing related systems. For whatever reasons, I've been focused personally for many years, I'm trying to figure out how to undo what amounts to an oligopoly of just a few names that charge 2 to 250 basis points to everybody that has credit cards. There's no reason why they charge that. Fact is --.
Trace Mayer: Well, they can.
Jim Robinson: Well, they do it because they can. But the fact is they could do it profitably for 70 or 80 basis point. I know this because we sold a company a few years ago that gave exactly that possibility. They do it because they can. And so, I look at bitcoin and the block chain as a way to completely reset not just upset, but reset how we transact.
Trace Mayer: What bitcoin companies have you made investments in so far with RR&E as a bitcoin investor?
Jim Robinson: Well, we've made about 9 investments. A couple of them are in stealth. I mean, some you know. Bitpay is one. I can't talk about the fund structure that we're invested in publicly, but we're in one of the larger, what amounts to, indexes in the space. We're a large investor chain, we're in mirror. So, there's a, you know, a long list of them and we're continuing to invest. We've probably put about 15 million into this space. I'm in the process of now putting another 10 or so and really it's in all five of the areas, right. So we're somewhat in mining and then everything north of the mining stack. We participate in whether it's wallets or accounts.
Trace Mayer: Exchanges, merchant processors.
Jim Robinson: 2.0 stuff, people that are focused on the block chain, smart contracts.
Opportunities in Developing economies as a bitcoin investor
Trace Mayer: Now, why is the block chain so fascinating to you? I mean doesn't actually solve any pain points for people? Or is this just like fund tag to twiddle our thumbs with?Jim Robinson: So I break out the world into developed and developing. That to me is the sort of the central mind in terms of use cases. True with digital currency, true with block chain. In the developed world there are any number of I think important applications around using a public general ledger that's available to everybody at every time. Whether is everything that happens at Wall Street and right off to even how we do disclosures today, which is silly and creates enormous cottage industries of accounting and audits and, you know, it's the climate of the trust based to the industry at the trust based backbone is so expensive. And frankly we could do away with all of that.
Trace Mayer: And automate a ton of it.
Jim Robinson: And automate most all of it and have a whole lot less. But it's also, you know, where the rubber meets the road with consumers. Think about TransUnion and Experia. I mean, all of these offshoots that create arguably more problems than they solve could go away with a block chain.
Trace Mayer: Or be radically changed.
Jim Robinson: Radically transformed.
Trace Mayer: I mean, because I don't necessarily think we're going to see like just this kind of flipping of the iceberg. I think we're going to see, you know, gradual incremental organic change. I mean, do we have a specific example of a pain point that this block chain technology could solve?
Jim Robinson: Sure. By the way, just briefly on your point about the iceberg flip, I agree. It seems like tipping points like that happen and yet I -- one of the things that I always like to point to when I teach classes is name for me more than six brands from the dotcom era.
In other words, the incumbents tend to win more often than not and that will be true here too, but if we radically change how they do things just because the brands itself may win it doesn't mean that the spirit of that organization hasn't been forever altered.
Yeah, there are a lot of use cases. I'll give you a great example of one. So not long ago, I spent about an hour and a half with the State AG, one of our nation's largest states and probably shouldn't say which one. And it was interesting, because, you know, as someone who spends a lot of his time in the public eye, you know, on issues like you're AirBnB and Uber, just all of these kinds of things.
It turns out the single biggest problem that he faces day to day and that his staff faces are inbound calls. Now, this is a large state with a large population. And there's about 300 a week. People saying I can't find my damn house title or the bank never sends to me. I don't have the title.
Trace Mayer: And he has 300 calls a week.
Jim Robinson: 300 a week minimum.
Trace Mayer: That's 60 a day.
Jim Robinson: Yeah.
Trace Mayer: I mean, that's probably like a full time person just to answer these calls and well, we can't find your house mortgage either.
Jim Robinson: Right. So, here's, you know, here's a simple small scale yet super important. You know, whether or not we can sort of, you know, ultimately migrate or create, you know, an identity that's a digital identity for physical asset en mass we can surely do with titles. Certainly, titles to things like homes, cars, etcetera.
In that use case, if you just said okay, let's take these bank tiles from these banks in this state and put them into the block chain where you know the assets there, you know its pedigree or history of the asset, etcetera. Then you solve, I don't know, you tell me 90 plus percent of their problem. And that's one small use case in one big state.
Trace Mayer: Isn't that what we want to accomplish with technology? I mean when Nikola Tesla envisioned the electrical system he remembered Goethe's words, "The glow retreats, done is the day of toil". I mean, you know, people didn't necessarily have to be washing clothes and just so much of the manual labor that went into day to day life.
I mean, why do we have, how many people sitting there answering phone calls like trying to find their mortgages when it can instantly be looked up the chain, the quality, all of it could be instantly ascertained. We could know what securities are pledged or hypothecated or where the ownership is.
I mean, all this stuff should be automated, very easy to verify. I was talking with a Federal Reserve Bank, bank examiner. She was like, you know, we should be able to automate pretty much all this examination process. Which if we're able to put more and more of these assets on to the block chain, whether it's houses or cars or airplanes or stocks or bonds or whatever it is. Then we can know who owns what and then we can know how it's encumbered and then a lot of our verification in confidence and trust a lot of that can all just be automated.
Jim Robinson: Well, we don't have to have all the cottage industries, the title insurance and all the validation and verification pieces of that puzzle that we have to have today in order to transact.
Trace Mayer: Right. And that freeze up that human capital to then be working on what's more complex problems like things that are going to be having more values to humanity. I mean, you know, we invent the washing machine, we don't need people. There's a whole cottage industry of people like washing clothes. But now we're able to do it with washing machines and like humanity is better for that you could say. I mean, that's what our technology helps us to do.
Jim Robinson: Well, it's the classic issue of okay, what about robotics and we displace jobs and washing machine are an example that. Yes, all technologies, although there's never been one that's ever been positive or negative. They're all neutral by definition is what we do with them. But advance the ball in terms of making us more productive and more efficient and there is a displacement period where the training and education from the beginning has to start in a different direction. It actually generates typically more opportunities than that it erases.
At least that's been our historical human experience. Perhaps there's a point to which that isn't true and some people say it's robots and AI who knows. But you know in general these technologies will evolve and we will have some pain in transitions, to jobs and so forth.
Take banking. I mean, take retail banking. How many people that you know actually use their retail chain? I don't mean ATM that's stuck on the side a bit, but actually go and stand on line and deal with next. So, awful lot of people involved in maintaining, carrying, impeding, supporting, cleaning, securitizing and working out those things. And yet the fact is, you know, what is a major bank today? You know, I would argue it's an early version of Dropbox.
Trace Mayer: That a very interesting tangent. Bitpay recently landed Microsoft as somebody who now, you know, they process the bitcoin transactions for. And in the press release Microsoft said, you know, we're dipping our toe into it. We're learning about it but we've got big plans for bitcoin. I mean are they tipping their hand like what -- I mean, why do you bring that up? Like why are you analogizing a bank to Dropbox? Maybe you can help people make the connection. Not all of us went to Harvard Business School, you know.
Jim Robinson: So to me if you're JP Morgan or HSBC or Citibank then today you have several businesses. One of your main businesses is you're federally internationally allowed to be a depository institution. You can take deposits and you can store money. Well, it turns out you don't actually store money. You don't walk into a bank and then say, okay, Tracy let me go to, you know, Trace's safe over on wall and take out Trace's money.
You are already a digit string. You're probably a digit to them today in most of what you do and it really doesn't matter what you transact. Whether or not it's getting cash from an ATM or taking out mortgage or you know, any kind of payment stream, wiring money etc. You're basically a digital file.
Trace Mayer: In their database, in their ledger.
Jim Robinson: In their ledger they have digital strings that represent your money. So they're already in some ways Dropbox, if you think about it. Now, they do other things. There's the investment banking arm and obviously there is, you know, prop trading and then if you're managing your money and so forth, asset management.
But in that part of the business and the part that touches most people when they think of these banks, Citibank, Wells Fargo, B of A whatever. The part that they're thinking about, the consumer part which is generally the biggest part other than bricks and mortar retail locations, ATM's, what are they? I would argue they're Dropbox.
Trace Mayer: Dropbox for assets.
Jim Robinson: An early incarnation of Dropbox for assets. So, in 10 years or 15 years you can debate the timeline it's not too but in a timeline that is something I think like that. They are going to be in the business if you ask me of storing digital proxies of assets that are physical and much like a safe deposit box which by the way isn't where your house title and you're car titles are probably. If you're like most people and maybe where they should be but they aren't because nobody has those.
Trace Mayer: Well, you don't know where they are. That's why you're calling the attorney general's office.
Jim Robinson: Exactly right.
Trace Mayer: You know, that this kind of raises another issue. I had interviewed Perianne Boring. She is down there at the Chamber of Digital Commerce. You've been a big supporter of the Chamber of Digital Commerce. They do, you know, a lot of education lobbying down in D.C. and on the Hill. Why do you think that's important?
Jim Robinson: So, right you can make the case that, you know, are you cavorting with the enemy or you know, should you be doing this to begin with, are you inviting intention? Here's how I look at it. They have a great code. First let's make sure that we do no harm with bad legislation.
So to me before people that actually have trigger pull on legislative acts, make them, let's try to make sure if they're going to make them anyway, which in certain cases they are. Let's try to make sure they've taken the time to be thoughtful and understand all the different aspects of the argument. If that has the effect of delaying three months, six months, two years whatever legislative action, I view that as a win.
That gives the ecosystem more time to develop, more time to do its own thing, to do its own self sort of writing work and prevents bad legislation. So it's not so much about pro-legislation today. Maybe that day comes. I guess with most technologies as they mature out enough, you end up on the pro side of how do we do the right things versus wrong things. But for today it's in my mind strictly an educational exercise.
Trace Mayer: Yeah. Because, I mean, if we go back and look at other technologies like cars, for example. In England, they had passed a law that somebody had to be out in front of the car to keep people walking in front of a car. You had to walk in front of the car to keep people from like getting run over or whatever. And that limited the speed at which the cars could go to like three or four miles per hour.
Jim Robinson: You find that inefficient, do you?
US Brain Drain
Trace Mayer: Not only is an efficient but there are unintended consequences and those consequences played out for decades. You know, why are the major car companies, none of them are U.K. brands? Probably, because they stifled in its very earliest days this new industry, this new technology of the cars and then along with that the airplanes.
Because you know if we're going to have combustion engines and we're going to be innovating in this area if you know how to build cars well you know you put wings on it and you're going to be transferring a lot of that institutional knowledge and technology into that additional industry and then airplanes and would the U.S. really have gotten to space had they like Britain stifled their automobile industry which stifled their aerospace industry, which would have stifled their space industry, which would then lead to all types of lack of competitive advantage with satellites and other technologies like that.
And so we don't necessarily know all the unintended consequences or the future reality tree, the legislation in the present can do to hamper stuff.
Jim Robinson: Well, just look the state of the internet today, particularly in the western world. Let's take American as an example. You've got really only four or five providers that handle the backbone or something like 75 or 80% of the traffic.
That's why we have, you know, highbrow discussions around net neutrality and things like this. But the fact is we live again in an oligopoly there too where a very few are able to control and effect regulation and legislation around the gateways because it's in their interest to do so and that's an unintended consequence it probably cost us, I don't know, you can tell me five years, ten years, fifteen years, twenty years some real amount of time.
Ultimately, the technologies tend to win out, but it can definitely stall and effect for many decades to come, the curve.
Trace Mayer: That's one thing that I think that's worrisome for the U.S. is I mean, I know hundreds of people that have now left the U.S. to pursue their bitcoin businesses in more friendly jurisdiction. Whether it's Isle of Man, whether it's London, particularly, Vienna, Germany, Singapore, Hong Kong.
I mean, I know very smart people that are leaving. Like one of my friends he recently finished a Ph. D in Statistics and Netflix had offered him like 400,000 a year and working from home and he turned it down to go to Hong Kong to work on bitcoin related businesses.
I mean this brain drain that's happening from the US because we don't really have the regulatory environment that is friendly enough to the industry we don't know what long term effects that's going to have on our tech industry particularly. I mean is that something you're kind of worried about I mean we're going to see other tech industries follow suit and kind of get up and leave?
Jim Robinson: Well, we have inflection point with the internet, 15, 20 years ago where this very similar issue came up. I mean, today if you buy a TV it has a V-chip in it. You don't know what that is any more, and most people don't because they don't have to because we never really lit it up and we don't really use it.
But the reality is there is a chipset in TVs. The chip that is limited or aimed at controlling content because we fretted 15, 18 years ago about bad things happening in your living room and therefore the government imposed the requirement that a chip go into your TV that can prevent bad things ie, the internet, you know, or that part of the internet that they deemed bad from happening.
So, you know, we manage to mow through that and we've hazed in my view that same issue today. Of the block chain and will the US regulatory environment stymie development here and drive people to go overseas. It's already happened some. I'm actually not terribly worried about the amount that's happened to date, I think.
Trace Mayer: Well, because it's just so nascent. I mean, bitcoin's not even a spec on the fly on the elephants behind right now. It's just so tiny.
Jim Robinson: But if it stays this way and then I would say two things about it. One is it's a problem for the US and two, is thank god, we've got a global economy today. And so the fact is there are other places they can go. And so it won't stymie as much the development as it might have historically but it's not good for the US.
Trace Mayer: Not good for it in a lot of ways, you know.
Jim Robinson: Brain drain --.
Trace Mayer: Like a brain drain, national security, like there's recently been reignited talk about this clipper chip 2.0.
Jim Robinson: Right, yeah. For security again, right?
Geopolitical views of a bitcoin investor
Trace Mayer: I mean, like one of the reasons we have such a strong national security and cryptography industry in the US is because we didn't let things like the Clipper chip go through, what 10 years ago. I mean, do we kind of have any thoughts on that area? If the US loses some of the brain drain in this financial services in this new creative destruction coming out of blockchain technology. I mean, could that have larger ramifications of geopolitical significance?Jim Robinson: Well. So my guess is the answer is yes. It's easy to sort of spiral into a bunch of use cases where that could to be true over time, but it's hard to really know. To me what you just mentioned the thing that's most interesting is, you know, when you take at least the enforcement side or the latter agencies what's called in the US most that I've talked to actually ultimately like the direction this thing is going. They don't want it to happen tomorrow. They want to slow it down.
Trace Mayer: Well, I don't think any of us want it to happen tomorrow. I mean that would just be a gigantic bubble that would burst and cause all types of problems.
Jim Robinson: It would be a nightmare. That's right.
Trace Mayer: I kind of like the organic growth that, you know, we're able to grow in a very sustainable --.
Jim Robinson: End at the nodes, not central stations.
Trace Mayer: Yeah.
Jim Robinson: So I don't mind that part of the development cycle because I think that it actually is important to your point that this be at the nodes not at the central station and that it sort of take hold and take root and develop strong roots.
And I love the survivability of it. When I say survivability, I don't mean just because we're some sort of a nuclear cataclysm. I'm just talking about survivability against any one sovereign and which includes certainly the US, but any other sovereigns as well.
Trace Mayer: Yeah, I mean, we're seeing big growth of bitcoin in a lot of these developing markets. Philippines.
Jim Robinson: Developing world. Trace Mayer: You know there's a lot coins.ph and Ribbit.ph. I mean, you can send bitcoins now to someone in the Philippines and the physical peso cash is delivered to their house by motorbike within an hour.
Jim Robinson: One of our start-ups is actually in that business.
Trace Mayer: In that space.
Jim Robinson: So in the developing world as opposed to the developed world, the use cases for that the currency itself are -- and then, by the way, there actually are in my view use cases in developed world as well. People say what's use case? I always say well, payments is the first app. First of many. But in the developing world you don't even have payments. You have two-thirds of world really doesn't have access financial structure of any kind.
Trace Mayer: Yeah. They don't even have credit cards.
Jim Robinson: Well, forget credit cards. Most of the world uses debit cards. Most of the world that has cards uses debit cards which is still about half or less. So it's an enormous opportunity.
Trace Mayer: And yet FedEx and UPS still ship to these countries.
Jim Robinson: They do.
Trace Mayer: I mean, we could really increase US jobs and exports by being able to open up this new markets that we previously couldn't open up because of payments being a bottleneck.
Jim Robinson: I think that whether it's repatriation of funds or remittances back home, whether it's enabling buyers that couldn't heretofore access markets that now have access. By the way, very, very little incremental cost for them to both come online and utilize the systems. To me this is where the world gets the most interesting. Particularly around payments is when you light up half of the world that doesn't make payments to date.
Trace Mayer: Well, that's kind of, I guess, to close on, that's really what we want to do is light up the world.
Jim Robinson: That's right.
Trace Mayer: Just like electricity lighted up the world, just like airplanes that lighted up destinations, just like automobiles and washing machines and the internet and fax machines. All of this is just part of humanity's long journey from the swamps to the stars and we're just in kind of the next iteration, the next development of technology and it's really great having you with us. One of the premiere tech funds looking at these new technologies, deciding which ones get funded which one's don't, which are the good ideas.
Thanks so much for taking the time to be with us to discuss these things. Is there kind of a closing thought that you'd like to leave with everybody before we wrap it up?
Jim Robinson: Well, listen, I think this is all fine and well until our robotic overlords arrive, but hopefully they will accept bitcoin.
Trace Mayer: And for any of our bitcoin entrepreneurs that need to come and beg for money. How did they find you?
Jim Robinson: Well, I'm easy to find Jim at RRE. You know, we're actively investing and supporting and in the community and are believers that this is a huge tectonic shift in how people transact around the world.
Trace Mayer: Wonderful. We've had Jim Robinson, managing partner at RR&E Ventures at RRE.com. Thanks for being with us.
Jim Robinson: Cheers.