103 Crypto: Still Early Innings with Ric Edelman, Founder DACFP & Edelman Financial Engines

Read the transcript

[00:00:01] Pierre Daillie: Hello, and welcome to Raise Your Average. I’m Pierre Daillie, Managing Editor of AdvisorAnalyst.com. My co-hosts are Mike Philbrick and Rodrigo Gordillo of Resolve Asset Management Global. Our special guest today is Ric Edelman, founder of the Digital Assets, Council of Financial Professionals or DACFP.

And today we’re going to be talking all about things in the domain of digital assets. And by that, Bitcoin. Ether. DeFi, and all else Crypto, and how DACFP and Ric Edelman are helping advisors to widen their scope of knowledge in that realm. Previously, Ric has been ranked three times as the nation’s number one, independent financial advisor by Barron’s is widely regarded as one of the most influential people in the investment management profession.

And just in case you don’t know, Ric Edelman is the founder of one of the largest retail investor focused RAs in the U S that bears his name.

[00:01:00] Disclaimer Announcement: The views and opinions expressed in this broadcast are those of the individual guests and do not necessarily reflect the official policy or position of adviser, analysts.com or of our guests. This broadcast is meant to be for informational purposes. Only nothing discussed in this broadcast is intended to be considered as advice.

[00:01:20] Pierre Daillie: Rick, welcome to the show. It’s great to have you.

[00:01:23] Ric Edelman: Thank you, Pierre. Good to be with you all.

[00:01:26] Pierre Daillie: So Ric to kick things off, please tell us about the arc of your career and your background, where you’ve been and what you’re up to now with doc FP.

[00:01:36] Ric Edelman: Well, I have an unusual background because I never went to business school.

No economics degree never took a business class in college. I used to brag about that. Still do actually I was a communications major. And I think that helped me in this business, partly because in communications they teach us, have a talk, how to explain complex concepts in plain English. But I also wasn’t brainwashed by professors in economics, business and finance.

And so when I got into this field which I did because my wife and I newly weds, wanting to buy a house like so many typical young couples went to a financial planner for advice and he ended up giving us. Really bad advice. Basically he told us to commit a felony. He told us to lie on our mortgage application in order to qualify for the loan.

We were just infuriated. And so we decided, you know what, we’re going to teach ourselves how to do this, and we’re going to show others what we’ve learned. And that’s why we became financial advisors, started our practice in 1986. And you fast forward to 2021 Edelman financial engines is the, I think the largest independent RIA in the country managing close to $300 billion in assets for 1.4 million families across the country.

And along the way, I’ve always challenged conventional thinking because I didn’t have a background in business. So when someone would say, here’s why we do it, I would like, I’d be like, why explain that again? How will you know everything from how to pay off your mortgage own your home outright? It was like and people’s answer, was it because that’s the way we’ve always done it.

I’ve discovered that a lot of people merely repeat what they’ve been told. They don’t bother to check it out for themselves. And as a journalist, we’re taught to ask questions most fundamentally, Y validate the answers do your own research get three sources before you proceed. And so I began to realize that a lot of the advice that was commonplace in the 1980s and nineties, it was nonsense.

So we began offering different advice than was traditionally provided in the financial services community. And I began to get a reputation as controversial and unconventional. But the fact is my advice is valid. And now widely adopted in the industry. I had a bully pulpit of my radio show and television.

And I’ve now written 10 books on personal finance. With I’m the number one New York times bestselling author. We have a million copies of my books in print and seven languages. And I’ve been acknowledged as one of the leading influencers, as you mentioned, and a thought leader in our field, because I’m always trying to look ahead, where are we going?

What’s coming. What’s the advice my clients are going to need in the future. Not what the advice they got in the past. Doesn’t matter what got us here. Doesn’t matter. It’s where we are today and where are we going? How are we going to get there? And so we’ve always provided innovative advice to our clients based on the future that we think they’re going to have.

And that’s what led me toward crypto. I discovered Bitcoin in 2012. That’s when I was introduced to it didn’t make any sense to me, but it struck me as worth investigating. And so I did throughout much of 2013 began investing in 2014. And realize that this is the most profound, innovative technology since the internet itself.

And most advisors don’t realize it. They don’t realize the incredible impact it’s going to have on global commerce. They don’t realize the incredible investment opportunities for their clients. And that’s why I created doc FP, the digital assets, council, or financial professionals to teach the financial community about the incredible opportunities, as well as the disruptive nature of these technologies, so that we can continue doing a great job for our clients and our investors.

And it’s been very exciting. And as the ultimate way of saying that, I believe in this, I’m leaving Edelman financial engines the end of 2021. We announced it back in June that I, after 36 years, my wife and I are leaving the firm and we are focusing our energies on this educational pursuit for both investment advisors, as well as consumers across the.

Because this is the most transformative opportunity since the mid nineties. We don’t want anyone to miss it.

[00:06:11] Mike Philbrick: So how does the, digital assets council for the financial planners? So that is a totally new venture then. So you’ve walked, you’ve left or moved away from the IRR, the RIA altogether, or what’s the relationship there still?

Yeah, it

[00:06:30] Ric Edelman: is. And the company that I’ve created, Mike I have we knew this was coming, I’ve been talking with our private equity partners for years. I’ve had PE partners and so five and starting six years ago, we realized that I would eventually be leaving the firm. The firm needs to be able to stand on its own feet and grow all by itself without dependency on me and my wife.

So we realized that we would eventually be leaving the firm and partly in anticipation of that three years ago we founded back FP. And it’s an independent organization. It’s a, an educational focus. We’re not selling product. It’s not an AUM based business. It’s a sponsor based business companies in the crypto field and companies in the financial services field are our sponsors because we enable them to reach financial advisors in a way nobody else can with important programming, content, webinars, these live events online content, video content.

And we created this certificate in blockchain and digital assets. There’s nothing else like it to teach financial professionals about this space. Although I say I’m leaving Edelman financial at the end of 2021 I’m remaining on the board and I’m still the largest individual shareholder. But that that’s really it.

My day to day activities and involvement of the firm Amazing.

[00:07:54] Mike Philbrick: And so, yeah, so you built that business, you’re on the board. You S you see the new opportunity in the digital asset space and the lack of education and support. Are you so, so how does that work? Where do you start?

So there’s some video education. Do you get into the nuts and bolts of what’s required in the business in helping financial advisors secure, understand the need for insurance, let’s say, as they advise on this asset class, how this integrates into the portfolio from an optimization perspective, the, the, the suite of things, one has to cover here are quite wide and broad.

So give us, give us the shakedown.

[00:08:37] Ric Edelman: You’re exactly right, Mike. It is a broad conversation and that is a little daunting and it’s also, what I’m discovering is there’s been a metamorphosis over the last decade as Bitcoin has evolved. And it’s not done evolving yet, but in the beginning it was really easy for an advisor to just with a wave of their hand, wave off Bitcoin.

It’s a fad, it’s a fraud tulip bulbs or beanie babies. Just ignore a dismiss. It’s too risky, too speculative, too much fraud stay away. It was easy for an advisory to state to say that they can’t say it anymore. This isn’t a fad. It isn’t a fraud. It isn’t going away. It’s here to stay. It is increasingly impactful and increasingly ubiquitous in the marketplace and advisors who continue to be ignorant to the subject are at significant risk of losing credibility, which is going to cause them to lose clients and assets.

And the fascinating element of this is that there has been, a weird scenario with advisors. Most advisors are in their sixties. The average age of certified financial planners is 62. Most advisors have been doing this for 20, 30 years. Like me and most advisors are very successful.

We’ve got a thriving practice serving a lot of clients, managing a lot of money, hundreds of millions, often billions of dollars. And the clients are making a lot of money there. They’re fat and happy. The advisors are fat and happy visors, or maybe with our clients periodically playing golf one day a week, or why bother learning something new?

Why bother getting involved in something new, especially as weird as Bitcoin. It’s easy to just blow it off as unnecessary, irrelevant. Even if you don’t consider it a fat or a fraud, you could just argue it as a, so what, I I’m perfectly happy with my Coca Cola. I don’t need Dr. Pepper and just leave it at that.

The problem. Is that this asset class represents such an incredible investment opportunity. And because we’re hearing about it and seeing about it so much everywhere, clients are now increasingly asking them about it and recent surveys, 80% of advisors say, they’re getting questions about this. And if I’m a client and I ask you, explain Bitcoin, should I buy Bitcoin?

And then the advisor can’t answer those questions. I have to wonder what else don’t they know, what else can they help me with my question about their credibility begins to come into into focus. And so advisors really don’t have a choice, but to become knowledgeable about this. And here’s the crazy part, Mike.

Bitcoin and digital assets broadly along with blockchain technology, which allows Bitcoin to exist is totally different. It has nothing in common with any other asset class. There’s no similarities to stocks or bonds or real estate or gold or oil or commodities it’s wholly new and different. And that means you’ve got to start from scratch.

You can’t base your exploration on what you already know. And so here’s the first message I give folks when they go through our seminars, the more knowledge you have as an advisor, the more experience you have, the more years you’ve been managing money, the harder it is for you to get your arm around this, because all of your training, all your education, your college degrees, your professional designations, none of that is relevant here.

None of it is helpful. This is why Jamie Dimon walks around the country saying Bitcoin is worthless. Bitcoin has no value. It’s because Jamie Dimon is applying his classic experiences, training and economics and finance it’s of known value. And if you use those classic historic approaches, your head just explodes when you talk about Bitcoin.

So this forces advisors to start from scratch, understand the technology, examine the commercial use cases, explore the different investment opportunities. And then we have to get into taxation, regulation, and compliance. There’s no shortcut to this. And that’s why we created the certificate program because in the 11 modules of that online self study course, you learn all that.

The first half is all about the tech. What is blockchain? What is Bitcoin? How does it work? But the second half of the course is all about practice math. What’s the investment thesis. How do you construct a portfolio? What are the investment options? How do you deal with taxation? What about regulation and compliance?

How do I do this without my compliance officer, freaking out? How do I do it? So I don’t end up on page one of the local newspaper. How do I do it? So I don’t harm my clients. And that’s what the course teaches you. And the final module in, in, in our courses, how to communicate with clients, how do you explain this?

How do you talk about it? How do you overcome the objections? So it’s a very practical hands-on approach that allows advisors to get their arms around this so they can say, yeah, I get it. Now I can figure out how to proceed. Simple as that.

[00:13:57] Rodrigo Gordillo: And I think that It’s interesting that it’s such a changing fast changing landscape right now, especially on the regulatory taxation side of things.

Do you get advisors and financial planners to go through the course with the expectation that they have to update their CE credits every other week? How are you handling the content updating in such an incredibly fast paced?

[00:14:23] Ric Edelman: Here’s the good news Rodrigo is that the events are changing daily.

In fact minute by minute, that’s the crazy thing. Bitcoin trades 24, 7, 7 days a week. So we don’t have bankers hours like stocks and bonds do. So although that is evolving on an incredibly rapid pace, the fundamental content, the basic education parameters are evergreen and therefore it doesn’t change much.

The taxation is pretty much well set. So there isn’t a lot of evolution there. The regulation also comes very slowly. The regulation there’s a lot of it in place enough of it that you can with companies. Engage in your client portfolios without worrying about regulatory backlash. And by, by having this basic core understanding of how Bitcoin works and the difference between it and a theory understanding defy and what is a central bank, digital currency.

These are evergreen topics. These are carved in stone on like the 10 commandments. It doesn’t require a lot of updating. It doesn’t require a lot of newness. Just if I were to say to you, when interest rates rise, bond prices fall, we know that’s true. And we know that never changes. That’s not the same as telling you what interest rates are going to do next.

So I can teach the principles, which you can then adapt on a daily basis as needed. And that’s very different from trying to predict tomorrows interest rates. Does that make sense?

[00:16:00] Rodrigo Gordillo: Yep. For sure. So the basic, the basic underlying philosophy is low correlation. High volatility, probably so proper portfolio construction, where we were, I’m curious about is talking about the differentiation between Bitcoin and Ethereum.

Now we’re going from like a concept and asset class, a space to security selection. Not that there’s many securities to choose from as a financial planner right now. But you know, I’m with you on the concept being important in portfolio construction, how do you put it together at which point do you think it’s important to get that granular at this stage for financial planners to really discern between one cryptocurrency?

[00:16:46] Ric Edelman: It doesn’t matter that you understand the basic concepts, but that’s most of what you need to be doing. So I’ll walk you through the steps very simply first get a basic understanding of the technology. It’s not hard. Second. Learn how that technology is used in current. This provides the legitimacy and justification for why it’s not a beanie baby.

Every baby babies are cuddly and tulip bulbs are pretty to look at, but they don’t have any use in business. Bitcoin does, there is a legitimate use case, thousands of them really for how it helps businesses operate. And it’s easy to understand those use cases because we’re all good people of business.

We understand how business works and we can easily quickly see how Bitcoin is applicable in business. Next you say, okay, what are the different options that are available in the world of digital assets? Bitcoin and Ethereum are the two elephants in the room between the two of them. They have 80% of the market share.

So just like Coke and Pepsi are enough in the soft drink industry. You could just go with Bitcoin and Ethereum and ignore everything else. And you’ll be fine, directionally. Correct? You don’t have to be precisely right. In order to be directionally. The next question is, how do I buy Bitcoin? How do I buy a theorem today?

You have a wide variety of options. There are probably a dozen different ways, different investment vehicles, everything from buying the coin directly to mining it, to buying a, a mining stock to buying an OTC security, a private placement for accredited investors, hedge funds, venture capital. You could buy ETFs, uh, you could buy Bitcoin futures, ETFs.

You could buy picks and shovels ETFs. There are so many different ways you see simply need to examine which of those different methods make sense for your practice because advisors all have a particular way. We engage in investments for our clients. You could find the methodology that fits your practice.

And then you simply need a basic understanding of the tax rules. And you already know, without my telling you anything, you already know 90% of the tax rules. It’s not complicated. No, I should say it’s not different from what you already know with stocks and bonds and real estate. And then finally, regulation and compliance.

And a lot of these things like ETFs, they’re just CTS. There’s nothing new or different from a compliance perspective. So once you walk through those basics, you’ll realize, wow, this was something that’s hard to learn as I thought. And it wasn’t as complex either. It makes sense. And I can now explain it to my clients, which by the way, doesn’t necessarily mean you’re going to explain for them to act fast.

You could very easily explain why they shouldn’t. The point is you’ll be able to do your job, right? The best example I can give you or comparison would be annuities. All advisors have strong opinions about a new. I am. Everybody knows my opinions too. I’m not a fan of annuity products, but guess what? I’m an expert in them.

I can explain in great detail why I don’t like them. And the few cases where I do recommend them. I want you to have that same fluency with Bitcoin. I don’t care whether you like Bitcoin. I want you to be able to talk about it, competently, professionally as a fiduciary. So you can do your job this way, whether you recommend it or not.

I don’t care. I just want you to be able to serve your client’s best interest. And at the moment most advisors can’t do that because they don’t know anything.

[00:20:32] Mike Philbrick: I think you hit on a really important point there and something that we were talking about in our other show that we do live called Resolve Riffs it’s it was with, uh, one of the CIOs from another major RIA in the U S and just talking about that fiduciary obligation on a number of different asset classes and types, it’s not just about the fee, right?

In the absence of value. Sure. You negotiate fee and beta can be very cheap, but as you progress out to more sort of different frontier asset classes, like digital assets or futures asset-based products, or alpha type products, you’re going to pay more to have access, but it’s not about the paying more. It’s what does it add to the portfolio overall?

And I think that’s something too to really grasp. And the other thing that’s been interesting, and I want to understand if you’re feeling this being on the cutting edge of this space. If we went back a year, I would say discussing digital assets and Bitcoin and Ethereum as a financial professional, probably put you as a bit of a weirdo, maybe too much of a speculator and puts you maybe to frontier almost something that you couldn’t quite talk about.

You maybe had to tip toe around it. How do you feel about this, that Overton window over the last 12 to 16 months has shifted dramatically where I think you absolutely need to be knowledgeable and can’t be dismissive of the asset class anymore. It’s a two, $3 trillion asset class. And so are you feeling and seeing that as well?

I’m sure you’re banking on that sort of a ride that way, but are you seeing that wave of advisers come to you and looking for that because of that pressure from the client?

[00:22:23] Ric Edelman: Yes. It’s entirely bottom up driven. It’s entirely investor driven. Investors are hearing about Bitcoin. 17% of American adults own Bitcoin, 65%, two thirds, call themselves crypto curious.

We’re hearing about this everywhere. They’re hearing it originally from their teenagers right now. They’re seeing in routine places, stories in USA today, and the wall street journal. You watching the world series FTX. The world’s biggest exchange is plastered on the empires. Yeah. Now you’ve got crypto.com just bought uh, the major stadium in Los Angeles.

You have Matt Damon as their spokesman uh, Gronk and Tom Brady are both brand ambassadors for crypto companies. So this is everywhere. There’s no lock in a await from it. And as a result, if it’s in your face all the time, how can you say, I don’t know anything about it. No, I can’t explain it. Oh, just stay away.

It’s a fad. It’s a fraud. That is just, that is too dismissive to be legitimate. So here’s where the , especially if you’re going

[00:23:32] Mike Philbrick: to declare yourself a fiduciary, right? You can, you can have an opinion that this is maybe not for somebody extremely speculative or you don’t think it lasts. You had to do some research and as a fiduciary you should you should be well-grounded

[00:23:48] Ric Edelman: in your opinion.

Let me add

[00:23:50] Pierre Daillie: the same thing. You know,Ric, the same thing seems to be happening with ESG is. Where, where, people don’t, people don’t know where to begin with it. They don’t know. They don’t know where it starts and where it ends. And I think the same thing is true with crypto. They don’t know where it begins and ends either.

Is it? So

[00:24:09] Ric Edelman: I’ll take it this way. In, several years ago, people would ask, why are you buying Bitcoin to your point, Mike? It was early and you must be a fringe lunatic out there. Why are you buying it today? The question is morphed. Why aren’t you buying it? You’ve got to be able to defend to your client why you’re saying no, why?

You’re not recommending this. You couldn’t have reasons, but you need to be able to articulate them. And if you don’t know anything about the subject, how can you articulate it? I was talking with a compliance attorney, a consultant in the field of compliance two, uh, major firms. And she told me something fast.

She said that she is getting reports from financial firms telling her that in sec examinations. Now the examiners are asking the firms, are you recommending Bitcoin to your clients? And when the clients say no, the examiner then says, why not? You’ve got to have a legitimate reason for why you’re not joining it.

That’s as important as your reason for why you are doing it. In other words, you’ve got to fulfill your fiduciary duty. It’s okay. Not to recommend it. You just have to have a legitimate reason for it. The simple attitude of, oh, it’s too volatile. That that just doesn’t cut it anymore. Yeah, it’s

[00:25:32] Pierre Daillie: ironic.

I think that’s really ironic

[00:25:37] Rodrigo Gordillo: how it’s just such a complex object. It can be very simple, but people need a bit of a elevator pitch. That’s. The classic. I like the blockchain. I don’t know. But that, that Bitcoin thing though, I think the first barrier break has to be Bitcoin. What is the elevator pitch for Bitcoin?

What’s the economic reasoning for Bitcoin? What’s the five minute economic

[00:26:01] Ric Edelman: reasoning for that. It’s not an apple, is it sounds like, yeah. I can give you a couple of very easy elevator pitches of explaining blockchain, explaining Bitcoin, explaining Ethereum and why they have legitimacy and global commerce.

It’s not complicated at all. If you want to take a few minutes, I can go into that for you.

[00:26:21] Mike Philbrick: I actually had that as one of my questions that I was going to ask you to explain it. You know, we’ve gone down the rabbit hole and down, down, down, and and you know, we’re quite positive on the technology and the investment asset class, but conveying it in ways that help the client understand it, or I think are extremely useful.

I also think that there is a limited ability for the end client to actually understand any investment including something as simple as Coca Cola that they think they know and love, right? Understanding the price of shirt and sugar and, and petrol in the delivery of Coke and Pepsi and the food market.

And the intricacies between the commodities markets that they face in delivering all those foods is extremely complex and defies their ability to understand it. So having said that, that that sort of sets the playing field, even that if you can explain a bank balance sheet to me you, you you can certainly understand Bitcoin long before you can understand the derivatives book of a major bank that you might have.


[00:27:36] Ric Edelman: all yes. To all the above. And I’ll take it a step further though, because all of it can seem intimidating. And here’s what I simply tell folks. You don’t have to understand the principles of internal combustion in order to be able to drive a car. Uh, and by the same thing here, you don’t have to understand the technology underlying Bitcoin.

You don’t have to understand blockchain. It’d be nice if you did, but it’s not a prerequisite nor is it a prerequisite that you like Bitcoin, or that you agree with it as a premise for investment purposes, if you’re truly a fiduciary I’m willing to bet that you have recommended to your clients a highly diversified portfolio, 16, 15, 20 asset classes, stocks, bonds, government securities, real estate, oil, commodities, foreign gut.

The list goes on and on doesn’t it. You have a pre Trek breach. You have a broad portfolio. I’m willing to bet that in your portfolio right now, there are assets. You don’t. But you have them in the portfolio because you know that a diversified portfolio, that’s the whole point, of net positive and negative correlations of having different assets that have different features, different, all different profiles, different risk and return and all that kind of good

[00:28:53] Mike Philbrick: stuff.

different structural relationships to different markets that caused them to move in price at

[00:28:59] Ric Edelman: different times. So therefore Bitcoin is simply yet another asset


[00:29:05] Rodrigo Gordillo: this is all true and we don’t have to like it, but it’s literally only asset class that feels like it has no economic reasoning. It feels like that beanie baby scenario feels like something made up in the internet so that you could buy and sell drugs.

So how do we go from that to talk about Bitcoin as an, with an economic reason? Okay.

[00:29:29] Ric Edelman: I

[00:29:30] Mike Philbrick: see. Yeah, where do you, let me give you is playing devil’s advocate. Let

[00:29:35] Ric Edelman: me give you a ride minute riff here. Cause Rodrigo has just asked him the question that matters most. So let me just walk you through this to help you understand why it isn’t tulip bulbs and beanie babies and why it isn’t only for drug smugglers and road nations.

You begin with blockchain blockchain technology is nothing more than a public ledger. What the heck is that? Contrast a public ledger to a private ledger. We all know a private lenders are that’s your checkbook. That’s your Excel spreadsheet on your computer monitor. When you create a ledger, you own it.

It’s yours. You’re the only one who has access to it. You enter data as you wish you put data in the cell of an Excel spreadsheet. You put an entry in your checkbook, a deposit or withdrawal. That’s all there is. You can change that data whenever you want. And if somebody wants to take a look at your data, you can falsify the data and show them a duplicate checkbook or a ledger that is fake.

And we’ve all heard of two sets of books. This is how Al Capone ended up in prison. So it’s because we don’t trust the ledger because it’s personal private, you have control over it. That’s why we have auditors. That’s why we have so many accountants in the world. That’s why banking is so expensive because we hire all of these auditors and then government regulators on top of them because nobody trusts the data.

And that’s the whole key is the word trust. We work in a trust economy. I want to buy a house from you. You want to sell it to me? I have to trust that you own the. Free and clear, and I don’t trust you. So I hire a title settlement company, and then I pay for title insurance. I add thousands of dollars to the transaction spending months in additional time and effort and paperwork, because I don’t trust you with our trust economy, forces us to behave that way.

Blockchain is a public ledger, not a private ledger. When the blockchain is created, the ledger is on computers all over the world. Anybody can put data onto the blockchain, but once the data is there, it’s permanent immutable. It cannot be changed, deleted, copied, or erased. It’s there for everybody to see all the time.

So imagine three cells in an Excel spreadsheet, the seller of the house, the deed, and the buyer of the house, three cells of data all next to each other. They are linked three blocks of data and they are connected like links and. Block chain it’s as simple as that. So the blockchain makes sense. It allows us to put data available.

It’s transparent. It’s permanent, it’s free. That is easy to understand, but what’s Bitcoin got to do with that. Yeah. Think about a casino. If you like to play blackjack, you walk into a casino. They won’t let you play dollars on the table. They force you to convert your dollars into casino chips. You play your roulette, your CRA, your craps, and your poker and your blackjack.

You play with casino chips. And when you’re done, you convert your casino chips back to dollars. If you want to play on the blockchain, if you want to put data onto the blockchain, the medium of exchange is. Just like casino chips. So the medium of exchange in a casino, just like airline miles are the medium of exchange for loyalty points to get free air travel.

It’s just the medium that we use on the technology. We needed a digital form of money because paper, money doesn’t work on the internet. We needed digital money. So Bitcoin Sibley allows us to do what we’re trying to do on the blockchain. That’s all there is to it with me so far. Yes. And why are there more coins than just Bitcoin?

Why don’t we have 5,000 coins? I’ll give you an example. Bitcoin is pretty dumb. If I send you Bitcoin, you receive it, but I might not want you to receive it. I might want you to receive the Bitcoin only when you perform a task such as sending me concert tickets or giving me the deed to that house. Or I might want you to receive my Bitcoin only if the temperature reaches a certain level or somebody wins a sporting event, or somebody wins an election, or if it rains.

In other words, it’s an if then scenario, in other words, a contract, that’s what contracts are. I do something you do something and money changes hands that’s what a theory is. That’s why if they’re in was invented, it’s known as also as a smart contract. Whereas Bitcoin is a dumb contract. I press the button and you receive it.

The barium says, I press the button. You receive it. When you perform. In other words, it works like an escrow account. Every industry in the planet can take advantage of online digital contracts that eliminate the middleman, because we’re no longer dealing with trust. You don’t have to trust me that I’m going to pay you.

Because I’ve already sent the money. It’s an escrow on the internet. When you deliver the product or the service, you automatically receive the money. So Bitcoin is dumb money. It’s fast, it’s easy. Ethereum is smart money that allows you to execute corporate contracts. And that’s why the two of them represent 80% of the market.

All the other coins. They do other nifty stuff, solving a particular need that a particular business has. And they’re all fascinating in their own ways. But Bitcoin thing. So the Coke and Pepsi of the soft drink world, I

[00:35:34] Mike Philbrick: suppose you could. That’s where you get the next layer goes into the Oracles. Beside that in fact said, thing was done to said quality level and said, payment should be made,

[00:35:45] Ric Edelman: but it is deeply as you want.

Correct. What I’ve just done for you is provided the very basic rudimentary elements of what is blockchain. Why do we need Bitcoin? And then why do we need a theory him if we have Bitcoin. Yeah. And then, yeah.

[00:36:04] Rodrigo Gordillo: Yeah. And I think one of the key aspects here that you mentioned was that how you can cut out the middlemen and why that’s important.

I don’t think people understand how clunky, anything that has to do with contracts, exchanges of deeds, even trying to audit your Aeroplan miles and whether, okay. Did they give me the right miles or not? I have to trust that company. That they did the calculation in the background to give me the appropriate amount of miles.

There’s no way for me to have a public ledger where youRic, Mike or pier also made sure that what they were putting on was correct. And that’s publicly available for anybody to see anybody to audit, not have to pay KPN.

[00:36:48] Ric Edelman: I have a very simple, let me do this pier and all this will help explain your point, Rodrigo.

If you want to move money cross border, this is a $4 trillion industry. Every year, $4 trillion moves from one country to another cross border to do that. We use the swift system. This is what the international banking process. It takes five days and an average of six and a half percent in fees to move money from one country to another of that 4 trillion, about 20% of it are individually.

Immigrants in the United States who came from central or south America, for example, left their home country for economic opportunity. They left behind their parents, their families, they’re living in the U S making money. So they want to send money home. They do it through Western union, the switch system with Bitcoin El Salvador declared Bitcoin legal tender in 2021 mail using Bitcoin.

It doesn’t take five days, six and a half percent. It takes 10 minutes and it’s free when they did this in El Salvador. By the way, their economy is so bad, 20% of their GDP are transmittals people spending money

[00:38:14] Mike Philbrick: from overseas companies. This is huge. This is literally a 20%. VIG on a large part of a small economies, GDP stuff is caught up in remittance, a total tax upon the

[00:38:32] Ric Edelman: unbanked.

It was estimated that when El Salvador did this Western union was going to lose $400 million because people no longer needed to use Western union to send money home to mom. And I’ll take it a step further. The El Salvadorian government announced a couple of months after they did this. There was a dramatic reduction in street crime because crooks know that mom is walking from her village, 10 miles on a dirt road to the Western union office and is going to walk out with cash and she gets robbed.

Yeah. Now the money showed up on mom’s phone in her house.

[00:39:14] Rodrigo Gordillo: She, these are the cases that are important to talk about. I grew up in Lima. And there was a F there was a block where you had in every corner of that block was a different bank and people would get paid, would have the preferred banks.

So you would get paid in different banks and have to transfer money from one place to the other. The cost was so much to move it from one bank to the other over the phone that people would take out cash and then go in groups of three, split out the money and run to the other side of the bank. Because you knew that if you like, if anybody gathered that you had a nice chunk of change, you weren’t going to get robbed.

And people didn’t all the time. It was a cottage industry for bank robbers in between exchanging money physically, because you had to carry the dough. This is an interesting case study of people wanting to make a living, not having to fear that their life’s money was,

[00:40:04] Ric Edelman: is just going to Paul and of thousands of commercial use cases across the planet to illustrate how this matters.

See as Americans it’s easy for us and in Canadian. As well to look at Bitcoin as an interesting fad, but so what, the banking system works. We all love to hate it, it works. I get my money digitally. I’m paying my bills often with an auto-pay. I have a good banking relationship. What’s the big deal.

We forget that there are a billion people on this planet that don’t have a bank account, but they do have us have a telephone. You don’t even need a smartphone. An ordinary cell phone is all, you need to be able to work with Bitcoin. This is a big deal in countries and economies that are not as solid and stable and huge.

Is that of those in north America.

[00:40:54] Mike Philbrick: I think it goes beyond just the, sort of. You know, even into some of the European countries you know, there is often well, Latin America is a great example where you’ve had all kinds of different types of inflation, all types of confiscation, right? It is the structure and the rule of law and the certainty of that rule of law that provides the confidence in the system and the actual lubrication in the system that makes it, that function in an okay way.

I would say, largely in Canada, it’s the same. We have you, you, you can do something via swift. You can do something through, through an EFT. There’s half a dozen banks in the country. Things move really smoothly. You’re pretty safe walking to, and from your bank, like all of these things are make, I think some folks in developed nations truly underestimate.

The potential impact on not only third world emerging, but also those second world countries. This has serious implications in, in all of those cases. And then you get into some of the business cases, whether it’s, um, uh, tracking, packages, the sort of the tracking side of it beyond the financial industry, global payments, as you say that you just keep going down the list of things that this technology can help accomplish it.

It’s pretty amazing. And I think that, in a first world nation like in north America, it’s easily overlooked. Yeah.

[00:42:32] Ric Edelman: Yeah. You had a question. I think I had a question

[00:42:34] Rodrigo Gordillo: even in domestic. Okay, go ahead. Yeah. My

[00:42:37] Pierre Daillie: question was, going back to the origins of Bitcoin, how was it established?

Like I know when I buy U S dollars for Canadian. I, I pay a price for it. There’s an exchange rate it’s established. I know it’s, the full faith and honor of the U S government when I buy a U S dollar or any other currency for that matter. How how and who, and where was it established that Bitcoin had an initial value that you could exchange for money for cash or for one currency for another?

Uh, so, and, and how has that carried on and how this is like, because most people look at this and they think this came out of a vapor, this came out of a server, it’s created on a computer on Silicon and, and, so how do you justify what it’s worth then? And, Ben, when it was a dollar or less than a dollar, and now when it’s, 60, $70,000,

[00:43:34] Ric Edelman: it was a tiny fraction of a penny in the beginning at its first valuation, which took.

You’re right. This is where people’s heads explode because who are these people who says Bitcoin is worth anything? Why should I believe them? Who backs Bitcoin? And the answer is nobody backs it. And when they sit and the funny thing is nobody backs the dollar. Either the dollar used to be backed by gold.

We left the gold standard during Richard Nixon’s presidency, and right now gold or other, the dollar is just printed. Look at the pandemic. The fed has printed $5 trillion. Joe Biden is pushing through Congress and other three and a half trillion and a couple of major pieces of legislation that money is coming off.

The printing press and nothing is backing it other than the government’s saying they will back it. In other words, it’s confidence. It is investor and consumer confidence that says, I believe you, when you tell me a dollar is worth a dollar we’re more accurately, a dollar was worth 300. But there is nothing backing it.

So when Bitcoin was, I


[00:44:35] Mike Philbrick: I would offer one nuance there. So the dollar is largely backed by the power of taxation and the right of confiscation over the assets within the economy that the governing body of those people have. It’s the right of power of taxation written into the rule of law.

So in essence, it’s the right of violence over the people within the governing populace.

[00:45:00] Ric Edelman: I’m not sure ever worse, right?

[00:45:03] Mike Philbrick: Not, it’s not better. It’s just fact. How, how would we look at what the gold confiscation in the great depression look at the money printing throughout time. Look at confiscation in Argentina, right?

It’s violent financial violence against the populace discovered that’s what backs, whatever dollar there is and the

[00:45:24] Ric Edelman: security you may like or not like. And even when the government is benign and helpful, it has in the U S a price target of reducing the value of the dollar by 2% per year in 2021, it’s being reduced by six and a half percent a year.

Uh, that makes it easier for the government to repay its debts of the future because they repay with cheaper future dollars. It was in this environment in 2008, that led Satoshi Nakamoto, who nobody knows who that is to introduce an alternative that Satoshi felt was superior. A currency that was not invented created, or sponsored by government.

It is not a Fiat currency. And so Bitcoin was invented via computer code with a specific 21 million coins made. That’s it, that’s the maximum they’re being released over time, 18 and a half million of them. So far, the remaining will be released over the next 120 years on a set programmable schedule.

Bitcoins are released about a retirement. And it is the crux of the issue here. And that’s why, I’m glad you asked. I mentioned earlier that Jamie diamond says that Bitcoin is worthless. It has no intrinsic value. He’s been saying this consistently Warren buffet called Bitcoin rat poison squared.

[00:46:46] Mike Philbrick: Can I also offer a little nuance on Warren buffet and his major investment in new bank, out of Brazil, a massive digital asset bank that serves digital asset companies and digital asset infrastructure and funds and. I don’t know. We all know that, but he, a couple of billion dollars, which now they’re taking public as an IPO on the NASDAQ, which he’s been funding at the same time that he was talking about it being rat poison.

So don’t look at what these professionals say. They’re talking their book, look at what they do. And Jamie diamond doesn’t have the infrastructure yet to offer you this thing. So he says it’s garbage. He doesn’t have the infrastructure yet. Mark. My words, there’ll be offering it to their top clients eventually,

[00:47:33] Ric Edelman: but let’s examine why all yes.

To all the above. And let’s also examine why Jeanie says it is of no intrinsic value. We talked about the economic formulas that you use. If I’m trying to figure out what’s the value of a stock. I look at the company, I look at its revenues, its profits, its products. I look at how much a competing company in the same industry has recently sold for.

And I can come out with a valuation based on. But Bitcoin is not a company. It has no product. There are no employees. There are no revenues, there’s no sales, there’s no profits. There’s no location of headquarters. All those answers are zero. And on that basis, you have to conclude the value is zero. That’s why Jamie says this because all the numbers are zeros.

Here’s the point. Bitcoin might not have a value, but it sure as hell has a price. And just as we all agree as to the value of a dollar, we all agree on the value of a Bitcoin as we’re recording this about $60,000. So we agree on the price and the reason we’re agreeing on it is because of the law of supply and demand.

There are only 18 and a half million Bitcoins, about 4 million are presumed to be lost, just like there’s gold at the bottom of the ocean from galleons that sank in the Mediterranean a thousand years ago, Bitcoin’s loss from hard crash. Failing people losing their passwords because they’re idiots, all kinds of reasons.

When a team

[00:49:07] Mike Philbrick: know, Hey, I’m right here,

[00:49:10] Ric Edelman: sorry. I’m like, you’re scratching a million Bitcoins out there. There’s going to be another couple of million minted over the next century. If every millionaire in the world wanted to buy one Bitcoin, they couldn’t do it because there were 47 million millionaires.

There’s only 21 million Bitcoins. So as demand grows right now only 200 million people around the world own Bitcoin. As the domain grows, if the supply cannot grow, the price has to it’s basic economics. And this is one of the big reasons. So many people are so excited about digital assets because of the law of supply and demand.

Imagine if you could have bought Facebook, one had 200 million users instead of the two and a half billion users. It has two. Looking at the price of Facebook then to today, look at the price of Bitcoin today to where it may be in the future,

[00:50:02] Mike Philbrick: how much?

[00:50:02] Rodrigo Gordillo: And I think the important thing to understand about this currency thing and might, yes, the U S has power and every sovereign nation has power over their people.

But when we’re talking about global community, there is a network effect required for you to be the reserve currency of the world, and enough people in the world need to want to use your currency for it to have value above everybody. Else’s. And this is what’s happened over the years in the United States, based on a wide variety of things, no less the, our economy is strong enough to back from a perceptual perspective that the U S currency should be strong as well.

And you look at Venezuela and Argentina, they try to do the same thing. The U S. But their currency is not in high demand. This is why it hyperinflation exists there in Brazil, it’s been fits and starts. And most of south American countries we’ve seen it. The network effect is how you get the exchange rate between one currency in one world.

And another, the network effect is all that the us has back and forth. And the network effect is what’s driving the price of all of these currencies. Now we do have to talk about the elephant in the room here. It’s a network effect law, this strong enough to eventually see the type of volatility we see in currencies today, which is very small, right.

We don’t see big swings between the Euro and the us dollar, but we do see 10, 20, 30% swings in Bitcoin right now. And so how does this is an emerging economy, an emerging asset class, the big players still hold the vast majority of coins. We don’t know who they are. The world is coming to play.

And the big players are going to be doling off a piece of what they have until it becomes fully democratized. So at some point as more people adopt, the volatility is going to subside. The question is, how quickly does it come? Can we really call it a currency or anything like that until that day?

[00:52:02] Ric Edelman: I think you’re right. I think it is continuing to evolve, even though it is entering the mainstream. It is still extraordinarily young. We still don’t have the ultimate set of regulations we’re going to have on a global basis. Individual companies are still trying to sort all this out. You have technological innovation that will continue, that could make some current coins obsolete replaced by the next new thing that doesn’t even exist yet.

Facebook versus my space, blockbuster video killed by Netflix, that kind of thing. So we don’t know you’re raising really good concerns and that is why my recommendation is 1% asset allocation. That’s all. I would not recommend 20, 30, 50, 60% of your portfolio in Bitcoin and digital assets, because the future is still yet to be written.

I’m pretty confident about the stock market over the next 50 years. But I can’t say with as great, a degree of confidence, what the digital asset marketplace is going to look like. I don’t know where the winners are going to be. I don’t know what the regulation is going to be. I don’t know what the technology is going to be.

I don’t know what consumer demand is going to be, but a 1% allocation has been demonstrated through the life of Bitcoin over the last 12 years that this can have a material improvement in your returns, but if it blows up, the 1% is not going to interfere with your financial security. You’ll still be able to retire in comfort.

So you have the upside potential without excessive risk. 1% allocation is really all that. Yeah, but


[00:53:37] Rodrigo Gordillo: what, this brings up another important question about portfolio construction, especially with Bitcoin and asset class that has a volatility of 80 to a hundred percent when it comes to financial planners and how they deal with portfolios.

Let’s say they meet with our clients once a quarter, once every six months, sometimes once a year. And that’s generally when they have the rebalancing conversation, right? When an asset class can go up 3, 4, 5, 10 times, how often does one need to rebalance and I’m imagine it’s higher frequency. And then how do we take into account the cost of rebalancing and having to keep on top of things.

And as a planner, as a, as an investment advisor, how do you recommend people handle rebalancing and portfolio

[00:54:17] Ric Edelman: construct history shows us that rebalancing is tremendously valuable. It reducing risks and. Um, that it makes a lot of sense to rebalance and to do tax management in the portfolio using Bitcoin it’s volatility is your friend, especially when you dollar cost average.

So the volatility, we know volatility is our friend and stocks, and since Bitcoin’s volatility is even more, it’s even more of our friend. So should you rebalance? And if so, how often? My personal view is more of a, let it ride scenario today. I have not sold any of my digital assets since buying in 2014.

It is now become a much larger piece of my overall portfolio than it started out as, but I believe that there’s still a lot of runway and I am a my wife and I are over the financial circumstances. We can afford the risk that we’re taking. So we’ve got. So let it ride for now without rebalancing.

In fact, we’re continuing to add to the portfolio with new investments, but for most folks who are trying to balance risk and return, who are simply trying to improve the uh, efficiency of their portfolio, we know that efficient frontier and Markowitz’s modern portfolio theory, then you should rebalance on a quarterly or semi-annual basis.

You should do that. It’s entirely up to you. You should look at it through your risk return profile with your goals and objectives in conjunction with your client and financial advisor relationship to determine what’s best.

[00:55:55] Mike Philbrick: Yeah, there, there’s a couple of good resources out there. I think Bitwise has a really good white paper on, walking through that whole process of what’s the allocation, how often you should Uh, rebalance.

I think on-ramp also has some very similar and good quality information that would help build your knowledge pool. And, granted,Ric, you’ve got a deep understanding of this space. So having an overweight is perfectly legitimate, but you don’t want a tourist. Who’s more used to having more traditional assets encounter a tracking error that is going to be deleterious to their long-term behavioral commitment to their investment program.

Yeah, I think that’s, we’re not sure. And

[00:56:39] Rodrigo Gordillo: look, there is a cost to rebalancing too much, and I think there’s a product out there for Americans that I find interesting that just come out. I think it’s, it’s very innovative where they said, look let us handle the rebalancing costs by the CTF, which is the S and P 500, but with a 10% allocation to crypto, we’ll do the rebalancing for you and, size it so that you get your 1%.

Right. I thought that was very neat and interesting.

[00:57:03] Ric Edelman: Yeah. And that’s pretty products. There’s so many different ways to invest. That fit perfectly into an advisor’s practice management.

[00:57:11] Pierre Daillie: So I want to come back and just briefly,Ric, I just want to come back to the question of how the value came about.

And I, I think from what I understood you say, maybe you can just verify if I was right or wrong in, in the understanding was that the exchange rate itself and the, which is being moderated on the other side, by the mining, the verification process, which creates new coins in the long run.

And then, the third factor being the supply and demand the overall supply and demand, basically the use, the increasing use, the network effect use on Bitcoin and the exchange rate on the exchange rate. It’s, it’s really, I almost feel like it’s an exchange rate on an exchange. And

[00:58:06] Ric Edelman: somebody wants to ask me here one day, how come the stock market went up?

And I said, because there were more buyers than sellers. Yeah. And it’s, it’s hard to answer the question definitively. Why is Bitcoin’s price? What it is today, widened it go up or down from yesterday or last hour. I, we can, we can play all day long with answering that question.

[00:58:28] Pierre Daillie: It exists. Sorry. Didn’t mean to interrupt you, but it exists because it exists.

[00:58:36] Ric Edelman: Yeah. I mean it’s

[00:58:39] Pierre Daillie: because there’s demand. It exists because it’s useful. Yeah.

[00:58:44] Ric Edelman: Mean, it was once used for no, no, no, no. This is not a chicken in that question. It exists because people are buying it.

People are buying it because it is useful and people believing it will continue to be usefulness. And that means there will be an increase in the number of people who want to be. And since there’s a limited supply, I’ll be able to, they have no choice, but to buy mine from me because there’s no other way for them to get it.

And therefore the supply demand wins out. It’s

[00:59:13] Pierre Daillie: like, yeah, it’s like the big bang of the universe to what came before then?

[00:59:20] Mike Philbrick: It’s not, it’s not totally unique though, but I th I don’t think we should think about it as totally unique. There are other asset classes that historically have been around for quite some time that have the same properties.

Gold is one of them. The industrial use case for gold is almost zero. It’s less than 1% of the gold production, and there’s a stock to flow model. So if you have, again, as advisors want to dig into this further and understand some ways in which. Have a valuation metric for these types of assets. Bitcoin is a store of value.

AsRic has alluded to, there are only going to be X number of coins. And so if you think about that stock to flow model diamonds, real estate, gold, silver, all of those assets share very similar qualities. And if you look up plan B a plan BCC, he’s done some pretty extensive research on how one might think about that.

I’m not saying he’s right. I’m not saying he’s wrong. What I’m saying is he presents very good and thoughtful mathematical models that lever off of the experience that we’ve had in other asset classes. PR PR primarily gold as a store of value. It’s something that you can’t make $5 trillion worth of gold, just appear in your feed, that currency, right?

You don’t have the ability to do that. Maybe if you go mind off off an asteroid, like, uh, uh, a Tesla guy said, but really you don’t have that. So there are some very good mathematical formulas that are out there that I would offer for people to go dig into those things. If they really want to, you want to go deep down the rabbit hole, then


[01:01:05] Pierre Daillie: will say, Mike, people will say that gold is a finite element in the periodic table.

So there’s only so much that yeah. But Bitcoin came out of the digital world, it was created with a finite comp component of 21 million coins.

[01:01:21] Mike Philbrick: And here’s the beautiful thing. And I thinkRic, I’m going to ask you to actually maybe elaborate on how you would explain this to people.

I want a better story to explain for folks, but you takes energy to actually do the mathematical calculations behind those blocks that were linked together. ThatRic talked about earlier. There’s a cost

[01:01:46] Ric Edelman: to that.

[01:01:47] Mike Philbrick: So money’s not free just like mining gold. There’s a cost to it. So the cost of the mining and production versus the price today will encourage miners to mine, the gold or not.

This is very similar to how mining works in, in the crypto space. There’s a difficulty adjustment. If there’s a lots of capacity generating the hashes and solving the ownership puzzle of who owns what the difficulty rises, if there’s not the difficulty falls and the profit to the miner fluctuates based on that.

[01:02:22] Ric Edelman: So it’s like, all of this is.

[01:02:24] Pierre Daillie: It’s like when people traded, when people, when people first started using money and they figured out, a specialization, I can work. And in return for that work, I get money. That’s the rate of exchange is the amount of work that I do. And in this case what you’re getting at here is that the rate of exchange for Bitcoin is the amount of work and energy that’s required to verify the transactions.

[01:02:49] Mike Philbrick: Well, it’s not only that. Yes. Yes. It’s that, and that’s a hard thing that makes the money hard. A fee money is soft. It can be printed out of thin air hard money is like gold is like Bitcoin. There is a process that must happen that has energy costs to actually doing this calculation. This is what a trust list society, a trustless ledger, why it provides so much.

Faith and trust that you can have in it. And this is the thing,Ric, I would turn over you. How do you explain, or have you come up with a good way to explain this idea of this trustless calculation of these blocks, right? Like you were saying we need trust. I don’t trust you. So I have to have this third party come in and verify the title.

And in the mathematical calculation, no one trusts anybody. So you have to do these very hard calculations in order to create the actual blockchain. But within this trustless society comes something you can actually trust. There’s no more currency that’s going to be made. That it’s a hard currency and the calculations that you can rely on the transition of value that’s happened, whether it’s coming from a theory from, to a Bitcoin or lightening anyway,

[01:04:08] Ric Edelman: I’ll shut up. There are a couple of things to that. Number one is instead of trust, I would love to rely on. Better words. And that’s what Bitcoin is. It is proof of work. We’ve got the mining process, which validates transactions is proof of work. And that work requires energy to power those computers and it uses quite a bit of energy which has been a criticism, but proof of work is not the only way to prove that the information on a blockchain is valid.

There’s also a process called proof of stake instead of proof of work. And the theory them among others uses proof of stake. They don’t require the mining crypto cryptographic exercise. They don’t use all of that energy consumption of hard drives and computers. They’re much more energy efficient because they use a different technological methodology that was invented after Bitcoin, partly because of criticism about Bitcoins, energy consumption.

So you can use Ethereum, which doesn’t burn all that energy. Using a proof of stake model. The bottom line is they’re still both cryptographically proven, which eliminates the trust. And that goes very far to allowing people to say with confidence, I’m willing to engage in this. And it’s, we’re getting into an internal combustion conversation.

I’d rather stick with steering with a break in the gas pedal. Cause that’s all the people that can be worried about along with maybe a rear view mirror.

[01:05:50] Pierre Daillie: All these things are,

[01:05:52] Rodrigo Gordillo: talk about the criticism at a time where we have ESG as a, the second most favorite topic. So you got the European union pushing back on anything crypto because of this criticism of it being a energy consumer that is going to pollute.

And, uh, and so that’s become front and center has come it’s come back. I think there’s been a couple of arguments back and forth that have helped the case, but why don’t you walk us through what you’re seeing there and how

[01:06:20] Ric Edelman: the battle? Oh yeah. There’s data showing that the Bitcoin miners all around the world are burning more energy than some small countries.

They’re burning more energy than Argentina, for example. And therefore this is bad for the planet because Bitcoin doesn’t have any particular in intrinsic purpose. So it’s burning energy in and we all know about the climate change problem and therefore Bitcoin is bad. I have two answers. The first one is really fast and the other one is a little longer.

The fast answer is if Bitcoin’s energy usage bothers. Don’t buy Bitcoin, buy Ethereum because the Ethereum doesn’t burn energy in that way. It’s proof of stake, proof of work. So there are plenty of digital assets that use proof of stake. Don’t have this energy issue. That’s the short answer. Second answer.

The criticism that Bitcoin is getting is mostly nonsense for a lot of reasons. Number one, it’s not about the energy. It’s about the CO2 levels. If the energy is clean energy, then nobody cares. And the estimates range between 40% and 60% of all the Bitcoin mining is clean energy, renewable energy. In El Salvador, it’s volcanic 30.

We’re taking geothermal energy from our nearby volcano to power the Bitcoin. In a ride blockchain’s case, the biggest publicly traded Bitcoin miner. They’re doing this next to water. They’re doing it alongside rivers and waterfalls, where the energy is producing the waters producing the water power, the energy.

And by the way, if they didn’t use it to power, a Bitcoin mining facility would just end up in the Gulf of Mexico. Nobody’s using the energy because it’s excess energy. There are lots of examples of this. Here’s another one. Another illustration, the amount of energy it takes to manufacture a car is huge.

But once the car is built, the amount of energy it takes to use the cart, isn’t very much, Bitcoin’s the same thing. Once the Bitcoins are mined, they trade, they move back and forth among users at extraordinarily little levels of energy. So that bothers you about Bitcoin don’t mind. Buy a Bitcoin that already exists from somebody else minimal energy

[01:08:47] Rodrigo Gordillo: use, right?

It’s the idea of it’s the idea of goals, right? You can, I can go in and exchange and buy a gold ETF right now, put it into my account. It’s done three-day settlement, which is eight year, late years, like too much compared to crypto, but I have some gold in my account. Now what actually happened is, was a change in ownership within an exchange.

No gold went from one ball to the next, but if I do want my goal to be moved from one vault to the next, it’s going to cost me thousands of dollars and we’re going to pollute in order to make this happen. I want to take it from the European vault to my Caymanian vault over here, and then transfer it over.

It’s a massive proposition. The same way crypto has this need right now, take mine. Once you’ve mined to transact, big blocks, you need to continuously, you have to have those miners, do the work through the proof of work for these big blocks. But now we have layer two. And layer three solutions.

We have exchanges when I buy or sell a Bitcoin and FTX. I’m not going out to the blockchain and asking them to transact. For me, I’m literally doing a change of a, of ownership and a second layer that allows us to not pollute and be able to use Bitcoin from for real purposes. So this is where it’s just going to get easier and easier.

It’s going to get, and again the economic reasoning for economic uh, incentive for these minors is not to find the most polluting way of capturing and mining it’s to find the cheapest way to capture it. And what is that? It’s everything you mentioned. It’s going out to a nuclear power plant that has peak hours where they can’t use that energy, but when they have a lulls and all this energy is coming into the the nuclear power plant, they can use it at halftime.

So they’re getting cheap access by being smart nephew using enter. There are some people who argue again. It’s


[01:10:40] Ric Edelman: very interesting. There are some people who argue that as a corporate leaders struggle to figure out how to go green. I mean, they have a motivation to do we understand that there’s an economic motivation, the slide from a social and a human one. There’s an economic motivation for them to lower their energy costs. No business has Mueller of its P and L associated with energy. Then Bitcoin miners, because Bitcoin miners aren’t manufacturing a product.

They don’t have employees. They’re just mining with a computer. They spend more money on energy than they do any other aspect of their business. They have more motivation to lower their energy costs than anybody. And the best way to lower your energy costs is to go green burning coals, absurdly excited.

Doing it in a green way is the cheapest possible way. So some people argue that our nature, our world’s climate problem is going to be solved by Bitcoin miners because they are the most incentive to do the literally

[01:11:46] Mike Philbrick: the,

[01:11:48] Rodrigo Gordillo: I like that judo move right there. You,

[01:11:50] Mike Philbrick: you, you look at the the wasted electron.

So we’re moving from a petrodollar society, which is the petrodollar was why the U S dollar was so popular. And it was the basis for the oil trade, which is what powered the world. But now we move away from that trade. And now it’s electrons that power, everything, whether that be the batteries in cars or.

Potentially the currency and the blockchain technology. And as we move there, stranded opportunities of energy become live to the entire global system. So you’ve got all the flare gas coming out of Alberta and Texas, and Validis is a company that’s partnered with how to eight. And, Valitus the, one of the guys, there is an old friend from back in GMP days.

And so here we have gas, that’s being flared into the atmosphere, burned without any recuperation whatsoever. That’s now being harnessed repurposed, and it can be done anywhere. You satellite link to the, uh, to the node. And now you mined Bitcoin with what was wasted energy and all the other byproducts that come out of there because the profitability of the mining of this asset class, you also have the money to get all the other liquids out of it.

And so now you have. Iceland and all of its geothermal potential energies that can now be put into the system into the financial system. Now think about earlier, how we talked about the tax that was on the transfer of payments that tax has gone. Where does that money go? That money goes back. It goes to those who need it most so they can feed their families, maybe upgrade their standard of living.

So we have this old system and people will make these comparisons as though the current system has no energy footprint. The current system has a significant energy footprint. You have to have all those Western union the branches, you have to have all those bank branches need electricity.

They need employees. There’s all kinds. They need buildings, all kinds of stuff here. That is really interesting. And I get it’s you know, it’s one of these charged topics. Change is tough. But it, it really, it’s

[01:14:08] Rodrigo Gordillo: a meme of fide. It’s a MIMA fide world. And so these things it’s been driven largely by Mimi’s, but it’s also been the biggest attractor, almost always when something becomes Mimi five, where my wife is oh my God, I heard that Bitcoin’s really bad for the economy.

I knew I had to be like, yeah, this is the opposite of this, obviously. Something became, so God damn popular that if I dig one level lower, I’m actually going to find most of the truth. And then fi five to six levels lowers. You actually get the complete opposite reality. And so I think it needs to, as we, as this becomes more popular and it has more enemies than anything I’ve ever seen in my life, whatever the headline is that gets caught up in it’s it’s time for you to ask a question.

If, if I’m part of that majority, it’s time to pause and reflect. And I think this is a mark Twain quote, whenever it becomes part of a majority, send a pause and reflect and actually do your homework. So yes, all those are major objections. Cool. Do your homework and go to a doc FP and actually find out what the truth is, right?

This is, it’s an important technology that we need to understand fully and memes aren’t going to help you.

[01:15:19] Mike Philbrick: Uh, I think we’ve been at this for over an hour and I can feel that we’re winding up, butRic was there any. Questions that we didn’t get to for you or any features in the course that you want to bring particular attention to.

I think, the materials are going to be absolutely critical for advisors who really want to grab this and differentiate themselves and really get up to speed. But what did we forget to ask you on this topic?

[01:15:45] Ric Edelman: And talk about, um, I’ll mention four acronyms. We didn’t talk about NFTs, defy, Dao.

Those are CBD CS all of them incredibly important and opportunistic, and we cover all of it in the certificate program. Let’s, you as we mentioned, it’s an 11 module online self study self-paced course with a world-class faculty. There are no product sponsors participating in our faculty, give you just one illustration.

Scott Stornetta, who is the co-inventor of blockchain technology is on our phone. So it’s a world-class faculty of folks that explained to you very clearly what this is, how it works, how you can apply this to your financial planning practice and serving your client’s best interest as a fiduciary.

And it’s a really inexpensive course. You get 13 continuing ed credits. The retail price of the course is just $549 and you are doing something special there. You’re offering a discount to it. Pru people can get a 20% discount uh, one in law. Um, you know, it’s it’s even better. And the discount code by the way is Ginsler wealth 20.

And, uh, um, we’re really excited to be able to offer that for you because can

[01:17:10] Mike Philbrick: you just say Ginsler wealth 20? Is that a play on

[01:17:15] Ric Edelman: yes, he’s in the chair. In fact, My staff who figures this stuff out. We, you know, our goal is to get this education and content in front of folks as fast and effectively as possible.

And to give you 13 CE credits and at the same time, be able to get this content to you for what 450 bucks. It’s, it’s great. Uh, we’d encourage folks to go to DAC, FP and enroll in the course. You can blow through it and binge it in a weekend. If you want, you can take your time and do it over a longer period.

And it’s just the beginning of the ways that we’re helping advisors attract clients and assets and improve their professionalism and being able to serve clients in the new economy of the 21st century.

[01:18:05] Mike Philbrick: That’s brilliant. It’s awesome.

[01:18:06] Rodrigo Gordillo: Would, I would do a great job. Thank

[01:18:08] Ric Edelman: you for that. My version of gentlemen.

[01:18:10] Mike Philbrick: And but yeah, so before we go, what, I think piers got a last question as well. But also is what is it? It says Dak epi.com. Can people find you on Twitter to follow you anywhere? Are you on LinkedIn? Where’s your other social sites? Where are you? Where are you dumping the

[01:18:28] Ric Edelman: magic? Yeah, we can do all the above and too many, social media handles for me to recognize you remember what they all are.

But go to Dak, fp.com. You’ll get all the content there. It’s all free for you with the exception of the certificate course, and we encourage you to enroll. Alright,

[01:18:47] Pierre Daillie: one last question,Ric. Would you rather spend a week in the past or a week in the

[01:18:55] Ric Edelman: future? A week in the future and why snap?

[01:19:00] Pierre Daillie: Just like that.

[01:19:02] Ric Edelman: Why, why? Because the future is here, the future is all that matters. It’s where we’re going, where we’re headed, what we’re going to accomplish who we’re going to help. The future is all that matters. That’s why I’m a futurist and not an accountant. Yeah. Accountants document to all the accounts out there.

I love accounts, but the captains document the past, here’s how you did spend your money. I’m a financial planner by trade. I plan for the future. Going ahead, history matters. I’m a huge fan of early American history. For example, I read a lot about history. If you don’t remember or know your history, you’re doomed to repeat it.

It’s important that we understand where we came from and who we are because where we came from helps us understand who we are. But if we focus on our past exclusively and insist that changes bad, we want to preserve our past. We’re going to fail in the future. So we have to constantly reinvent ourselves and our.

To adapt to the ever-changing circumstances in which we find ourselves we’ve largely, uh, duplicated, the pandemic experience of the 1917, because most of us grew up never having heard about it. And so a lot of the mistakes that were made in the night a hundred years ago were made again, this time around.

So how do we prevent making the same old mistakes over and over learn from the past, but apply them to the future. We’re going to live in the future. So it makes sense to spend all of our effort there, whereas one that,

[01:20:33] Mike Philbrick: yep. That’s the best answer we’ve had. Yeah, I think certainly the most confident, yeah.

Sounds like you’ve thought about it before.

[01:20:42] Ric Edelman: Well, it was a futurist you’ve really got to pay attention to time. It’s one asset. We all have an equal amounts, which is irreplaceable and, uh, time is the number one asset all of us have, and it’s very important. We don’t see. So I’ve enjoyed my time with you, gentlemen.

I look forward to doing it.


Listen on The Move


Ric Edelman, Founder, DACFP (Digital Assets Council of Financial Professionals & Edelman Financial Engines, the largest independent U.S. RIA firm joins us for 80 minutes to discuss his thoughts on Crypto, Bitcoin, Ethereum, and Blockchain.

Ric Edelman shares his history in the financial industry as the founder of Edelman Financial Engines, and as founder of DACFP, the Digital Assets Council of Financial Professionals, which he founded more recently to address the growing needs advisors have to level up their awareness and knowledge of the transformational 'Crypto' asset class.

In our conversation, Mr. Edelman provides an excellent overview and understanding of the most important components of the cryptocurrency and blockchain space.

He warns advisors to not be caught on the back foot when they are advising clients on whether or not e.g. Bitcoin is an asset they should or should not consider adding to their portfolios.

Currently 17% of all Americans own some bitcoin, and it's popularity has taken on wide network effects during the run-up of the last two year. It's expected that 20 million Americans will invest in digital assets in the near future. 78% of U.S. investors say digital assets are appealing. 82% of clients expect their financial advisors to be knowledgeable about bitcoin.

"It's no longer an asset you can wave off as a fad," explains Edelman. "If you're going to provide any kind of advice on anything 'crypto' you had better make sure you have acquired the required knowledge to do so."

"It is real. It is here to stay, and it is one of the most profound and transformational innovations that will shape the world," says Edelman. "You have a fiduciary responsibility to your clients to become an expert on this subject. It will also set you apart competitively from all other advisors who perilously continue to wave it off as irrelevant or unimportant."

If you've been asked, for example, what Blockchain, Bitcoin or Ethereum are, and found you weren't having much success sticking the landing, here in our conversation, Ric Edelman shares some of his most successful anecdotes and analogies that will help you to provide a significantly better understanding to your clients, and everyone else you talk to.

We also get into a wide ranging and deeper discussion on the scalability and implementation of real-world commercial use cases, valuation and the origins of Bitcoin and Ethereum valuations.


The DACFP was conceived in 2018 by Ric Edelman, one of the top thought leaders in the financial services industry, and is an independent, educational organization, with a most impressive faculty of instructors, providing advisors with a 13-Credit Course Certificate in Blockchain and Digital Assets (designed for financial advisors).

Raise Your Average listeners get 20% OFF the fee for the DACFP program with the
discount code:


Visit https://dacfp.com to enroll and claim your discount.


Where to find Ric Edelman, DACFP:

Ric Edelman on Linkedin - https://www.linkedin.com/in/ricedelman/
Ric Edelman on Twitter - https://twitter.com/ricedelman
DACFP - https://dacfp.com
The Truth About Your Future - https://www.thetayf.com/

Where to find the Raise Your Average crew:

ReSolve Asset Management - https://investresolve.com/
ReSolve Asset Management Blog - https://investresolve.com/blog/
Mike Philbrick on Linkedin - https://www.linkedin.com/in/michaelphilbrick/
Rodrigo Gordillo on Linkedin - https://www.linkedin.com/in/rodrigogordillo/
Adam Butler on Linkedin - https://www.linkedin.com/in/adamdbutler/

Pierre Daillie on Linkedin - https://www.linkedin.com/in/pierre-daillie-advisoranalyst/
Joseph Lamanna on Linkedin - https://www.linkedin.com/in/josephlamanna/
AdvisorAnalyst.com - https://advisoranalyst.com


"You don't have to be brilliant, just wiser than the other guys, on average, for a long time." Charlie Munger

Welcome to Raise Your Average, our deep dive journey into learning from the people and process behind the world of investing. Through conversations with leaders in the investments game, we peel back the layers of the onion on how these holders of the keys to the kingdom allocate their time, their energy, and their dollars.

We are all students and we are all teachers. We are the average of the 5 people we spend the most time with. Come hang out with us for a while and raise your average, as we raise ours.

Music credit: In Hip Hop, Paul Velchev (8MJZA6T3LK)

Previous Article

Baker Hughes Company - (BKR) - January 24, 2022 (Daily Stock Report)

Next Article

The 2021 Finish: Fast Growth, High Inflation

Related Posts
Subscribe to AdvisorAnalyst.com notifications
Watch. Listen. Read. Raise your average.