Fred Thiel - CEO of Marathon Digital Holdings
Fred Thiel, CEO of Marathon Digital Holdings, discusses his role and the company's endeavors in the digital asset technology space. Marathon, a public company, specializes in Bitcoin mining. Thiel's extensive experience spans various sectors such as semiconductors, data communications, IoT, AI, and digital media. Joining Marathon's board in 2018, he played a pivotal role in strategizing growth and recently transitioned to CEO to lead the company's expansion. Thiel highlighted Bitcoin's energy usage, its function as a financial settlement network, its growing adoption in developing nations, and its potential to fuel investment in startups.
Transcripts are autogenerated. May contain typos.
welcome to the operate podcast where we give you a behind-the-scenes look at company building from the perspective of the builders themselves this is how we operate welcome to the operate podcast i'm carrie ransom today's episode is sponsored by collective genius and my friend jeff martin they build high performing teams for venture-backed growth companies and venture capital firms their peak planning operating system helps leadership teams with a three-year vision one-year plan quarterly okrs and tools
to stay on track along the way i have several friends who have used peak planning very successfully message me if you want to talk with jeff or you want to talk to me about peak planning and how it might work for your firm i'm super excited to finally have my longtime friend fred teal with me on the podcast today before we get to hear from him though let me tell you a bit about fred he is currently the ceo of marathon digital holdings which is a public company in the digital asset technology space they mine
cryptocurrencies with a focus on the blockchain ecosystem and generating digital assets from it he is an expert and frequent speaker on the topic including fintech specifically internet of things artificial intelligence and he's been around the vc and private equity community for a long time also was early doing a lot of digital transformation in various companies and industries ahead of most other people which makes him well suited i think for his work in the the digital asset economy as well he's been doing this for over 25 years
he has led companies across a whole bunch of sectors as i mentioned including semiconductors data communications internet internet of things ai as well as even digital media and software i find his breadth of knowledge and experience to just be incredible and i always enjoy our conversations we seem to always cover a tremendous amount of ground when we do connect as a ceo he's been through virtually every part of a cycle from startup to rapid growth to ipo he's repositioned companies for high value exits he's turned them around
he's led m a and roll-up strategies as well we've known each other almost 20 years which is remarkable we met shortly after i made it to southern california and i really appreciate the friendship it's super exciting to see him at the forefront of the digital asset world as i said and fred it's great to have you on the show today gary great to be here as always uh you know humbled by the introduction um but it's been great to you know be a close friend of yours for years and look forward to our conversation today likewise well
let's start with this somewhat new opportunity and you've been involved with marathon for a while as you said but recently stepped into the ceo role so tell me the story what what led you to marathon and uh where you are right now so uh about four years ago a close friend of mine marek okamoto who i've known for 20 years um got involved with marathon marathon originally or in its prior manifestation was a patent troll essentially it was called marathon patent group and marathon owned a variety of patents
amongst them uh was a patent around a voice assistance on electronic devices so think siri alexa and um they had successfully monetized that patent with apple um and um were in the process of prosecuting a patent with amazon over alexa and that cost a lot of money and uh the company eventually started running out of money uh because of the fact that uh after the alice decision which you may or may not be familiar with in 2014 software patents became very hard to prosecute and protect and you know patent trolls sitting on a
bunch of software patents uh made it sort of there the wind went out of their sails when that happened so uh merrick was brought in uh by the then board to try and core group of investors to try and figure out what to do with the business um he thought that bitcoin mining was kind of the right place to go at the time realize the timing here this is late 2017 just before the crash um and uh so he's kind of getting his ducks in a row the crash happens and he realizes that he needs to reconstitute the um the board uh asked me to join the board
and i joined the board in april of 2018. and uh together we formulated the strategy for uh taking the company from kind of where it was to where it's going today and we worked closely uh throughout that time um marathon had a number of major kind of milestones along the way you know at the time he took over the company was virtually insolvent um had a market cap of around four million dollars and uh a stock price that was you know in the uh cents versus dollars which on the nasdaq is a risky thing and so they went
through a number of reverse splits um but the company was able to get some note holders to convert into equity at that point the company was debt free then was able to start raising some money and merrick was just an amazing capital raiser was able to eventually raise over half a billion dollars and over time using a variety of strategies both just direct placements and then what are called atms at the money sales which is a public company you can do it's kind of like trading your own stock only you're only selling it you're
never buying it back and uh was able to raise a significant amount of capital that way and then placed what at the time was uh kind of a earth-shattering order of essentially uh nearly a hundred thousand machines from bitmain to mine bitcoin um and this is you know the market is only just starting to kind of come back here and uh you know we're talking uh early 2020.
and um when marathon placed those orders it was kind of able to get at the front of the line with a huge volume of machines and then you know bitcoin did what it's done and gone up in price and marathon was very well positioned uh to grow and the company started growing very quickly and um uh together with the board uh we kind of all realized that it's time to kind of build out the management team uh some more and uh everybody kind of looked at me and said well you're the public company ceo guy so why don't you
jump in and help and so merrick rolled up into the executive chairman role and uh so i'm the ceo today really primarily focused on you know continuing to build out um the business as we scale from you know doing a couple million dollars a month to hundreds of millions of dollars a month and billions of dollars a year over the next few years amazing story well thanks for that background and i think just a great jumping off point for this conversation so i i mean first of all incredible transformation from where the business
was to where it is today explain so primarily primary business is mining bitcoin today as you said you're going from a business that today is doing you know a couple million dollars a month where does it go and how does it generate revenue at the level that you're projecting in your mind sure so actually we do more than a couple million dollars a month now uh you know sure but uh if you think about it's the world of bitcoin um is different than many businesses uh for one thing you're selling a commodity
where there's no product differentiation on purpose bitcoin from one vendor is the same as a bitcoin from another vendor they're all the same because they're generated by the bitcoin network itself as a reward for mining which is what we do which is essentially we provide the security and assurance in the bitcoin network that transactions are being properly validated and added to the blockchain so we provide a service and for that we get paid rewards in bitcoin and we're also paid transaction fees um
that being said the way the bitcoin protocol works only 900 bitcoin today are minted per day and paid in rewards so no matter how much mining equipment you put to work you could never ever get more than 900 bitcoin a day that's the max today and every four years that number is divided by two is halved and they call it the happening uh and the last one was in may uh of last year um the next one will be in march estimated to be around march of uh 2024 when instead of 900 bitcoin a day will go down to 450 bitcoin a day so
hopefully the price of bitcoin will go up to enable that to still be a very viable business um which we're sure it will be um bitcoin is really unique in that um not only is it a store of value but the bitcoin network really is a financial settlement network and what you're going to see are going to be banks and large financial institutions essentially doing clearing transactions on the bitcoin blockchain the bitcoin blockchain has huge amount of volume on it from a network effect perspective it's a
hugely diverse and decentralized network so it's very secure and it's the perfect technology platform on which to do settlement and to essentially hold ownership of things so think nfts things like that they depend on smart contracts which has been for the longest time kind of one of the benefits of ethereum which is not a settlement network ethereum is really a technology platform to build other applications on but with the taproot addition to bitcoin and now uh how the lightning network is developed i think
you're going to see a lot of those smart contract based systems start shifting over to the bitcoin um network but it's a really interesting business because it's all about fighting over um how much of the 900 bitcoin per day you can win and it literally is a contest you are deploying hardware and that's solving a mathematical equation and guessing a number and if you solve the mathematical equation guess the right number then you're awarded that block and you're paid a fee in bitcoin for
winning that plus the transaction fees so it is a game of massive scale and you know as an example we're ramping from a handful of miners to over a hundred thousand miners um and you know these aren't inexpensive machines over the course of this year and so our business is growing dramatically and we're going from less than one percent of the overall global mining capacity uh to uh nearly uh six seven eight percent by the uh early part of next year so it's uh very exciting times and that will be what ultimately
drives most of that revenue growth correct okay and you know if bitcoin is at you know like today around 30 000 um and if we're mining um you know 40 50 bitcoin a day at 30 000 that would be our daily revenue just do the math and then are you holding some of those as balance sheet and then you kind of sell them off as you see the either the market or some sort of regular or or are you also being hired on behalf of others to to do this no actually we we hold all the bitcoin that we might so uh we have over 5000 bitcoin on the
balance sheet today and continue to hold we've actually gone into the market to buy bitcoin opportunistically at times we believe that you know bitcoin on our balance sheet is worth more than cash on the balance sheet at least fiat currency um so it's definitely about walking the talk if you would so what what is it about covid i mean this last year and change has just been this amazing time for i i almost say like you know cryptocurrencies time in the sun and it's the whole array not just bitcoin it's
it is ether and dogecoin and a whole variety of different cryptocurrencies i mean what as you think back about kobe what is it about covid that really brought that to the forefront you know i don't think so much uh covid per se where you you could definitely say that you know when it came to um you know the shift to work from home it drove a whole acceleration of digital transformation in businesses there's a lot of direct correlations in the crypto world um i think it's just uh the adoption cycle was doing its
thing and we were moving kind of through that it just happened to be aligned yeah okay yeah absolutely because the um what ends up happening is whenever there's a great appreciation uh in the price of a commodity people who are invested in that commodity now have excess investment capacity because they have huge profits so they then look to where else can they invest that and so as more startups in the crypto world develop those become very attractive places for people to invest and you get this run-up in asset prices what the pandemic in
general did was people who were asset rich and cash rich became even better off because they were able to acquire assets that appreciated in price and whether those are real estate assets or stocks bonds you know the stock market's been doing very well so sure i think whenever an investor feels really confident and has gotten a great return they're going to start placing bets on other things to diversify and so ether started growing uh alongside bitcoin and then you know these other meme stocks um you get a lot of retail traders and you know
a lot of the crypto uh currency trading that's done uh on exchanges is retail buyers and sellers people like you and me who go into the market they take some of their savings and buy some bitcoin buy some ether they maybe do some uni swap they do some other things and you know it's a very volatile market um and more and more institutional buyers are now coming into the bitcoin specific uh cryptocurrency market and that'll create more stability in the price over time as that bitcoin is essentially held via etfs and other funds
um but you just have this dynamic of it became it's kind of like in the startup world you know when i remember back here in orange county when broadcom went public in the mid to late 90s um all of a sudden it was like this uh the ferrari and mercedes dealerships were putting cards on all the cars in the parking lot outside broadcom's office and my office was across the street at the time and it was like you know all these newly wealthy newly minted millionaires um and so you know when you have that kind of uh beneficial event in your
financial life you look to invest it in other things and i think that's it's created a whole industry just like the startup industry you know silicon valley and orange county and and you know as you and i have talked a lot you know in our octane days about this uh it's this virtuous cycle yeah it's fascinating i mean when you see somebody like coinbase having 50 million plus accounts it has to be individuals retail you know it just to get to that scale um there aren't enough institutions anywhere near that right so it is
remarkable to see the participation that this has enabled globally yeah and what's interesting about so coinbase realized that 80 of the volume that's traded on coinbase is actually institutional which tells you how small the average transaction for a retail buyer is um but the blockchain is this completely transparent world i know exactly when a deal happens i can go look and see from what wallet did that transaction go from and to whom did it go and if i can infer enough about who owns those wallets i can see movements and so there are
these great tools out there that let you see is this retail buying and selling that's going on is it institutional what sort of volumes are moving on to exchanges versus from cold storage and what type of transactions are moving off exchanges and you can infer from that different things and so it's there's much more transparency than even the stock market um today which uh if you think about it a lot of trading in the stock market is done in dark pools which isn't ever exposed right and not very
transparent i mean i would say if anything that that marketplace has gone in the other direction yes yep absolutely but it's an it's an exciting world and uh you know there's a lot of dynamic stuff going on and it is a an industry in a business where uh is perfectly suited to work from home i mean marathon uh our whole organization works remotely always has always well uh it seems and we're very small we're really six seven people today that's it amazing so a couple couple other topics um you know one thing that has been at
least somewhat out there in in recent days has been how much energy is required to mine bitcoin and there there's been some criticism of that as a drain so share sort of the perspective that you have on on the energy relatedness to to this sure yeah this is um the primary topic that most people ask me about um so yes bitcoin uses a lot of electricity um if you look at where we source that electricity from as an industry excluding china for a minute predominantly in the western world um bitcoin miners are the buyer of last
resort for electricity meaning we're cheapskates and we want to buy the cheapest electricity what does that mean well it means we're buying excess capacity the electrical industry for example in the u.s uh we generate four terawatts of electricity daily and consume it or lose it uh you can't store that energy anywhere today yet very efficiently and so um if you think about electricity you have to generate it somewhere then you have to distribute it to where the consumer is where they can consume it
that distribution phase if you would alone loses somewhere between five to eight percent of the power that's generated in the u.s so upwards of 200 gigawatts of electricity is just wasted simply by transmitting it down the line and it disappears through heat and other things um you look at a large bitcoin miner like ourselves and you look at all of the north american miners put together and we most probably all together consume less than 200 gigawatts of electricity so the equivalent of the energy that's
wasted is kind of what we would consume most bitcoin miners actually are located on or near power generation facilities and that means we're a base load customer so if you think about the way the grid operates the grid has to generate enough electricity for to meet peak demand because let's face it if it's a sunny afternoon it's warm out when you get home you want to turn on your air conditioning you want your tv to work you want your oven to work etc when it doesn't work you get irritated
so the electrical grid is designed around providing peak capacity the problem is that load varies right during the day load varies yet you're having to be produced enough to meet that load and any excesses and so you have this need to turn on and off power which is very difficult for the grid to do and so they just generate it and they they're they lose a lot of it so by having bitcoin miners uh either on the grid or near or on power plant grounds as base load clients we can consume and suck up that excess energy
and it provides a better roi for the energy company because they now have a balanced load that they're generating for and you know the great thing about bitcoin miners is a bitcoin miner can be shut off or turned on for a demand response mechanism very easily it's not like a steel plant or it's not like a bottling facility or a factory that's hard to shut down for you know a couple hours because it happens to be late afternoon it's very hot out and you know the grid needs electricity for the air conditioning
systems i haven't asked you this have have any energy companies invested in or developed their own mining capability the one of the single largest growing groups of miners today are power companies who have realized oh wow this is a great way for me to generate extra revenue i can mine bitcoin and then when the grid needs my electricity i just turn off my miners and pump the electricity out to the grid and so they can optimize the yield on their return on assets which is think about and especially when you think about
renewable energy this is a huge issue so you know we you know our stated objective is to be 100 carbon neutral by the end of next year uh the 70 000 machines will roll out in the second half of this year and into early next year we'll all be on carbon neutral energy sources and the balance of our uh power will shift to uh carbon neutral uh over the course of next year so we'll be 100 carbon neutral from an energy consumption perspective but if you're a solar producer a wind farm or hydro um you know you're generating
electricity and you have nowhere to put it typically other than when the grid consumes it and so we're the perfect client uh or partner if you would for those uh types of businesses because especially with solar farms you know the big issue is you need a lot of land um you build a solar farm well you've got to get somebody to run power lines from the solar farm to where the consumers are and the grid's not going to invest in that unless the solar farm is built so it's a chicken or egg thing sure and by then putting bitcoin miners
on the solar farm you can generate income while you're waiting for the grid to catch up to you so to say amazing so let's let's shift a little bit um you we talked a little bit about some of the other crypto currencies beyond bitcoin how how do you think about interoperability in the i mean they'll be winners and losers like a lot of things right we certainly know that i mean you know if you think about fiat currencies and countries they're winners and losers for sure but how do you think about i mean i
don't see it being a single global in my mind single global uh blockchain but how do you think about that from where you use well i think they're going to be tons of different blockchains for different uses um and then you have to think about that you have multiple layers in the technology stack so bitcoin network is a layer 1 network it's a base network just like ethereum is on top of that you then build applications layer 2 protocols like lightning in the world of bitcoin uh and in the world of um ethereum you're
building erc20 tokens essentially um that then create uh ways for you to do things so the difference between the bitcoin blockchain and the ethereum blockchain is property versus utility bitcoin is about property who owns what it's the best technology and network for tracking ownership of an asset and the settlement of transactions around ownership of an asset so think of it as everything from kind of the equivalent of a letter of credit to a title on a house on a boat on a plane uh car whatever it might be artwork
anything could be fractionalization ownership of stocks or bonds things like that the ethereum network is about utility so that is about being able to deposit bitcoin uh do yield farming on that and then um generating income uh and you're doing that by wrapping uh this uh bitcoin uh in a um smart contract on the ethereum network uh such that you can track exactly what's going on with that a lot of the block fi or d5 type businesses are built on the ethereum network because of the nature of smart contracts and the ability to kind of
have an automatic clearing if you would of a transaction such that when a certain set of conditions occur a payment will be then completed and so um that's kind of the nature of those two different networks then cardano and these other networks are competing against similar use cases to ethereum more so than uh bitcoin and i think as you look into the future and granted i i have a bias towards bitcoin uh being in the mining industry of bitcoin but um i think back to the times of the early age of the internet when tcpip was
kind of establishing itself as the protocol there were lots of other attempts to do things and tcp ended up winning out was it the best protocol maybe not but it was the one that became the most predominant one and it had the kind of the network effect and i think the bitcoin blockchain has that network effect going for it today uh where there are just so many millions of nodes on the network that it becomes more and more valuable the fact that el salvador has essentially passed legislation approving bitcoin as
legal tender means that uh there will be lots of people in the country who will be using bitcoin as a form of remittance or sending money um back to their families and el salvador's economy 20 of gdp is just remittances from outside of the country of citizens who are working outside of the country and sending money home to their families and so as more and more underdeveloped nations uh start moving towards bitcoin because their own currency either has issues due to inflation or other things like that or they're a dollarized economy as many
countries like nigeria el salvador and others are um bitcoin's a perfect settlement network for those transactions on the corporate level i think you'll see banks doing settlement between each other using the bitcoin blockchain um so you won't see you know small transactions for you know renting a movie buying a hamburger or things like that necessarily but what you will see is people using as a store of value and then for settling transactions internationally or even domestically very interesting and
that i think that helps uh sort of show where you're thinking is as where things are moving ahead in the coming years is there a secondary equivalent in your mind to bitcoin i'll call it the the silver to the bitcoin gold that you're paying attention to that maybe you're even thinking about maybe we should start dipping our toeing um you know to be fair um i think there are some promising projects out there but it really comes down to scale um are there better social networks than facebook out there
sure are there better search engines than google out there sure but the fact of the matter is um you know to displace google you would have to be at least 10 times better sure to displace facebook you have to be at least 10 times better and you know that's standard metric in the in the venture world right you know 10 times better or 10 times lower in price and i haven't yet found something that has as much promise that you could say this is ten times better than bitcoin um and again it gets down to the fact
that you know the bitcoin blockchain is one of the most secure blockchains out there you know microsoft is building their identity management platform on the bitcoin blockchain instead of on ethereum and um you know if you do some research into ethereum you'll see um you know it is not a decentralized network so much as it's very centrally controlled there's a handful of people that determine when forks happen how things happen that doesn't exist in the bitcoin world um it takes 90 of the participants for
anything to happen as could be seen with this taproot um edition that's happening to bitcoin right now so the ethereum world is a little bit more of a world where there's a lot of continual development going on um you know people are constantly out there breaking things if you would and um you know you read stories about okay well this particular d5 application just had 30 million dollars that got stolen or something and so the security level isn't quite there yet and i think that's the challenge it's
like you know here we are it is 2021 the swift monetary transmitting system was developed in the early 70s to be used primarily on telex's right it's tech space you know please send it up yeah the fact that it still exists today it's shocking yeah exactly shocking right and it's only now you know the fed is going to change it so the financial markets and um uh are a highly regulated and b very skeptical and so you really need to provide comfort that is safe it's secure it's transparent and bad things aren't going
to happen for it to kind of get good steam and i think bitcoin has proven that the amount of institutional interest in bitcoin today and the number of applications that are being built on the bitcoin network and the fact that companies are willing to hold bitcoin on their balance sheet says a lot oh absolutely well great intro and i think perspective on uh on crypto and blockchain for you know a lot of my audience that i think has a wide variety of experience with it from a lot to very very little so thank you for that let's
let's go a little bit back uh you know you've been in and around technology i talked about all the different industries that you've participated in throughout your career as you think about that at the core what is it about new emerging technologies that really captivates you um you know great question at heart i think i'm a futurist um i have a uh i guess a skill if you would uh or a talent at looking at a technology and figuring out interesting ways that it could be used for the benefit of society
or for businesses you know you go back to uh back in the day uh when i was ceo of lantronics you know we took that company and shifted from providing i.t equipment into all of a sudden enabling the whole internet of things granted we thought that you would have uh iot enabled vending machines and uh devices all over the place within five years it's taken a lot longer than that um still not in my case but now you know most people understand the value of it and how it works and so um and you know i've kind of done this
repeatedly across some industries and you know it's just i think i'm a futurist at heart i loved science fiction as a kid and i think technology is one of the biggest enablers of value creation that exists today just look at the sheer value of digital transformation and what it's doing to companies you know mckenzie has done reports that companies that go through digital transformation and our technology first companies no matter what industry they're in tend to have profits that are 25 percent higher than companies that
don't do it that says a lot and if you prescribe to the um the form you know the jack welch uh comment about you know if the rate of change inside your business is slower than the rate of change outside your business you know you're going to go out of business uh then you you need to be digitally transforming your business uh consumers especially with the pandemic now you know they 70 to 80 of the buying decision is done without ever interacting with the company through websites social media referrals etc
um purchasing is all done through electronic means today you know even in the m a world and you know i've been in the pe world in vc world for a long time yeah i see groups closing transactions with very little in-person interaction at all it's all done through zoom and diligence tools and so technology is you know accelerating our ability to get more done i think we're going to see huge gains in productivity with the whole work from home thing part of that is people working more hours obviously um but part of it is just hey i don't
have to be on an airplane five hours to go do a meeting where i could do that over zoom instead so what can i do with the rest of that time so i think technology is going to be a huge value creator going forward um and i wouldn't surprise me to see companies that really are 100 percent software like they call them dows in the chapter world right um but i i see that happening very soon so that good good uh sort of transition the next we've both been at this for a long time and you know the the comment you know it's
rate of change as you were talking about with jack welch or you know mark andreessen you know comment about software eating the world and i think it's from one perspective it's sort of that feeling of it's eaten everything but i know you probably share the similar view i do which is it hasn't it's almost just barely begun i mean you talk about the idea of a software entirely software driven company we haven't really seen that fully yet but i think it is to your point it's on the horizon but as you think about that
like how do you keep yourself relevant and fresh wow um reading a lot talking to people a lot uh being out there it's so easy to fall into kind of an ivory tower syndrome uh in this space um especially if you're kind of at the leading edge because you can get a little bit kind of fully yourself in your opinions but i think it's really just talking to a lot of people reading a lot understanding people's perspectives i'm a big subscriber to the lean methodology um not just lean entrepreneur but just lean
generally in running a company in this constantly evolving constantly learning organization and so i always i'm a big believer you know whenever you have any assumption you're getting ready to make or any hypothesis you have go out and test it just talk to people get feedback because though you may have a great vision the marketplace isn't ready for that vision possibly and there are kind of baby steps that have to be taken to build confidence in a vision before you can execute it you know apple is
famously expert at dabbling in a technology and waiting for a market to develop to the point where as a multi-billion dollar company they're able to take advantage of it you know it makes no sense for apple to go into a market that's a hundred million dollar market sure right but if it's a five to ten billion dollar market and they can get 20 market share possibly you know look at what they've done in smart watches it's incredible that's right absolutely incredible what they do and um i think you know part of it is that it's
the being able to understand when a market is ready uh you know facebook wasn't the first social media uh network uh google wasn't the first um search engine but they developed a key amount of relevance at the right time on the backs of the pioneers who went before them and i think every industry is like that um with technology adoption and you know you've got the early adopters you know the proverbial jeff moore um crossing the chasm curve where you've got the early adopters who are testing things that you know don't
really work 100 and they're very customized uh and then you have the late adopters who are only now starting to use you know facebook advertising for example you know look at the the yoga studio that pre pandemic um maybe had a website was limited by the number of physical spaces in its classrooms the number of teachers it had and it's kind of prox geographic proximity to their clients for convenience and look post-pandemic those same yoga instructors now do classes online where they have subscribers from all over the world and
they're able to not have that capacity constraint anymore that is happening still now across all sorts of industries that are being disrupted by this technology wave and yes there were a lot of early adopters and you know we who operate in the industry think oh wow yeah that's passe at this point it's not it's the long tail is a very long tail that's right so good let's let's get a little bit of uh fred advice so you're new in starting your career i think you you probably would agree
with me that the rate of change is not slowing down or even stay steady it's increasing technology actually increases that rate so i'm i'm newly starting my career how do you advise me on how to how to even think about what i'm going to be doing for the next 40 years um it's a tough question so if i look back at kind of when i got started in the industry i was a software engineer being paid by a bank to develop software when i was in high school so i i was a little jaded in that uh i kind of was already in the tech industry
at an early age um but my advice and i teach at uh the marshall school at usc as a guest lecturer um a few times a year and what i always tell the students there is look at how and where you can add value where you can add value is what's going to generate value in your career so if you have a talent and skill for design then look at ways that the designs that you make can add value to companies or people's lives if you are really good at uh if you have a penchant for in analytics and analysis well then
maybe you should do something around financial uh instruments or the financial world where you can add value or maybe it's data mining uh what's really great today is that technology is enabling a whole new set of industries around data science for example just the fact that we have this huge volume of data of very high resolution data that's generated by all sorts of applications and sensors and things that alone providing the analysis and insights granted leveraging ai and other tools you know people can add huge amounts of
value to businesses and so i think it's really find a way where you can have the intersection of your passion and kind of what's happening in an industry so that at the at the nexus of those two uh the confluence of those two things you're generating huge value for somebody and that's going to generate not just it's going to help your career enormously but if you can create a lot of value for people people will pay you a lot of money and so i always recommend people focus on where and how you can add value great
advice great advice i've got a lot of entrepreneurs kind of leads to the potential to take that uh value capability and turn it into your own business potentially so i've got a lot of entrepreneurs in my audience how do you think about the current state of entrepreneurship because i think there's there's different ways you could look at it in this current environment well i think the barrier to entry to being an entrepreneur um at least in the tech business has come down immensely you know go back to
1995 uh when the internet was young if you wanted to build a website and god forbid sell something on that website you had to go buy unix servers for the sun you had to go write a lot of software you know it was multi millions of dollars before you could even turn the key uh today you go to uh squarespace shopify whatever and you're in business in all of 10 minutes so the barrier to entry has come down um the tools for marketing have become hugely inexpensive and you know with facebook you can target down to um you know really fine set of
metrics and very inexpensively market and promote your brand and test even more so there's so much infrastructure out there that it really is easy to build businesses and it's more about having clarity you know entrepreneurship today is about having real clarity about what you're trying to do understanding your customer value proposition and testing it and getting that tuned to the point where when you do start investing in the business and building stuff you know you're on the right track already and it's this
constant process of you know make an assumption put something out there get some feedback make an assumption put something out there get some feedback and iterate your way and realize that you know the market uh needs to be educated needs to learn about what you're doing and that takes time there's a certain amount of just inertia um and resistance you have to kind of push through to get the word out there so um you got to be really realistic about your plans you know people uh some people think that oh i just have to put
a website up and i'm going to be printing money um you know it's a lot harder than that but that being said um the cost to start a business has essentially disappeared right you can run a side business side gig very easily these days on the internet um and you know just look at all the money people make by doing youtube courses and youtube videos and um you know it's just a huge uh huge opportunity for people to start small businesses today so you talked earlier about you you tend to look ahead you like to see what's coming up in the
future are there any areas that you would encourage entrepreneurs to really pay attention to well i would definitely say um you know artificial intelligence is a huge area uh we are still way way way early we're in 1995 internet days of the use of ai today um and we have made leaps and bounds forward over the past five years um and over the past decade and you know ai's been around for a lot longer than that yes yeah let's face it the video phone was launched at the world's fair in 1964 and didn't really become popular until we
started having smartphones um so there are infrastructure and technology pieces that have to come into play but we're getting to a place with ai where you will soon have marketplaces where you can rent a model as a service i want an ai model to calculate um you know a turbine's friction and temperature changes that'll predict a failure i want uh to rent a model for analyzing you know bitcoin price fluctuations for example and predicting where bitcoin is going to be priced you have data as a service where i need
to rent data to build a model or validate a model you have ai processors available on call through aws and other hosting facilities where you can literally rent ai capacity um on an hour-by-hour basis so that's an area where i think you're going to see a huge explosion in businesses around all of the services related to to ai because you don't need to build everything from scratch in that business today so just like the whole website hosting business developed along with the internet i think you're going
to see that in ai the other area is blockchain and here i'll kind of you know put the the kind of big change is that if you think about what happened with cloud computing we went from hosting applications and data in our own data centers to putting them out in somebody else's data center with amazon and you know microsoft azure and other services like that we now have the ability to at the click of a mouse button instantiate new servers grow capacity do whatever we want and they have a lot of tools that make it very easy for us to
manage these applications and essentially our outsourced data center however with cloud computing companies like salesforce oracle you know netsuite and others um they are effectively just taking what would normally have run in our data center and they're running it in their data center and with the kind of value that they provide being we'll take managing all these i.
t assets and these applications and data off your hands you just need to use it and uh pay us a monthly fee which was great fabulous business model fabulous practical solution for companies what's interesting is that as you now move forward with the blockchain you could take all your data put it on the blockchain and now you could use multiple applications to access that data and create value from that data and your data is not being held hostage by the sas company and this i think is the kind of final death of a thousand cuts to people like
sap where you pay tens of millions of dollars to implement it you pay tens of millions of dollars in licenses and the cost of switching away from it is huge um and because of that they don't have a huge incentive to continually improve the product and make it better because they earn more money by not investing more in r d sure i'm not saying they don't do that but the biggest fear that sap has is that somebody is going to come up with a better user interface to put on the front of sap and then disintermediate all of the back end
through thousands of small apps and best-in-class services it's kind of like um you know i need a manufacturing uh erp system well depending on the industry i'm in there are a variety of different manufacturing platforms that are better than others and i think what you're going to find is eventually you know my crm data is going to be on the blockchain fully tokenized and you know part of my team is going to use hubspot because they're top of funnel people my sales team that does strategic sales is going to use salesforce
possibly and then you know the finance team is going to use something else because you know possibly sap or something all on that same set of data where today if you wanted to do that it would require apis and all sorts of complex things i think all our data will be on the blockchain data ownership will revert to companies into individuals who will control it and it will change the economics in the business substantially but that's 10 years off i think most probably fascinating fascinating and thank you for sharing that i think
there's a lot to investigate for really creative entrepreneurs in that so thank you well we're coming up on time and i could stay on here all day with you as i'm sure you know what are you most excited about the world's kind of coming back to being able to get back together in person we haven't had coffee together in person in quite a while but as we start to get back together again what are you most excited about so i think the ability for people to get out of their heads a little bit and talk to other people
the pandemic actually accelerated in this country of polarization that i think is very dangerous to society because um because of the benefit of the internet you can choose what news sources and information sources you want to listen to and if you're a believer in um you know the social dilemma uh hypothesis that you know the social media sites will feed you more of what you need to read to keep you engaged then um the fact that going out and spending time with actual people gives you a chance to actually have conversations where you exchange
ideas and can become more of a critical thinker because you're going to be exposed to alternate views on things and i think this is a huge and very important thing that society needs to really adopt again which is this becoming critical thinkers there are so many people who adopt ideas that any rational individual would say this is ludicrous and you know as simple as the uh and you know i'm not gonna you know go into any religious conversation but you know there are people today who still believe the world
is flat there are people who believe that vaccinations are bad for you those are all fine beliefs to have but the point of the fact is you can silo yourself and isolate yourself in a world where you only interact with people who think that way online and you can go down that rabbit hole or you can spend time out in society with people who have different backgrounds and see get exposed to different ideas and understand that maybe those ideas aren't really quite as realistic as one originally thought and there might be value to looking at the
other side of the argument and so i i think we're in uh urgent need of more critical thinking in society today and i think the younger generations are really driving um they have more power today to have their voices heard and they have more power today to um do things with their voices the whole meme issue in stocks and what happened with gamestop uh all of the canceled culture you know that's real and people need to wake up to the fact that um you know there is a portion of society that will vote with their dollars and
vote with their feet and you know there are a plethora of choices out there today and it's easy to create new choices and companies need to realize that it's very easy to lose market share if you do the wrong things spoken like a true futurist fred thank you so much for joining me and sharing all this perspective and wisdom as expected we covered a lot of ground and we could cover a lot more we're going to have to do this again in the not too distant future for sure i'm super excited for you in this new role or new-ish role
at marathon and look forward to really tracking your progress in the in the coming months great to finally have you on the show um super fun conversation as i knew it would be good all right thank you so much really appreciate being on and look forward to continuing the conversation over coffee in person very soon thank you for listening to this week's episode of operate podcast if you like this conversation as a favor to me you can rate us review us or subscribe or tell your friends you can also reach out to us on twitter operate podcast
until next week get out there and operate
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