Intro

Patrick: [00:01:24] My guest this week is Anthony Pompliano. Pomp began his career in the military and has since been a successful entrepreneur, worked as a head of growth at Facebook, and started Full Tilt Capital, an early-stage investing firm in North Carolina. This conversation has three memorable sections. Early on, we discuss the four traits that Pomp looks for in founders, which we cover in detail. These double as traits that are important when hiring anyone. Next, we discuss his unique take on cryptocurrencies, where he is excited about the prospects for tokenized securities. Finally, we explore a unique media company, Barstool Sports, and what makes it such a powerful brand. Please enjoy our somewhat abbreviated discussion, and know that we will continue the conversation soon.

Military Experience

Patrick: [00:02:06] Anthony, this is going to be a really fun, wide ranging conversation given the diversity of things that you've done in your past. Maybe it'd be fun, in this case, to start chronologically. You've got an unusually long military background relative to most people I've had on the podcast, a unique angle or start to a career. Maybe we could just start there, by you describing what you were doing. I know you spent some time in the intelligence side of the military, and we'll use that as a way to get into the rest of your career.

Anthony: [00:02:29] Absolutely. I started my career, spent six and a half years in the Army, both in and out of reserve and active components. Did a deployment overseas to Iraq, and then did everything from infantry to route clearance, looking for roadside bombs, ambushes, and then intelligence support. So basically, when things would go wrong or anything would happen while we were on the ground, with infantry units, gathering intelligence and bringing it back to help the actual intelligence teams piece everything together.

Patrick: [00:02:55] So when you first commit, I'm sure it's not as long of a commitment as you spent over there, which implies that you probably recommitted to spend more time.

Anthony: [00:03:01] Yeah. Most military contracts are actually eight years, so people who just go active all the way through, they do, I think it's like two or four years active. And then the rest of the remainder of the eight years they spend on a Individual Ready Reserve, an IRR, which basically means you're out, kind of, unless we really need you, and then we can pull you back. And then after that eight-year period, they're completely out. I actually signed initially with the National Guard. I signed coming out of high school, and I knew I was going to go to school, play football at Bucknell University, and it was a way that I could do the military service plus still go to school. And then after that, I'd figure out how I wanted to finish out the military service. But during my junior year of college, I actually got deployed. I was unprotected. I wasn't in ROTC or anything like that. And so literally, one day go from a 20-year-old kid worried about football practice, parties, school, whatever. To get deployed with a bunch of guys who were young 30s. They got families and kids and mortgages, and I'm like, "Where am I?" Both from human perspective, but then also obviously you're sitting in the Middle East with a gun, and you're like, "Okay, this is a little bit different."

Patrick: [00:04:07] What was your most memorable experience over there?

Anthony: [00:04:09] The people. I've never experienced such volatility in the way that a single population looks at you. I've been very fortunate in my life to do a bunch of traveling, and I think that most countries it's either they really like Americans, they don't like Americans. Somewhat of a generalization, but there's a sentiment. Iraq was one of these places where there was people who absolutely loved us and looked at us as liberators. They could not be more happy for us to be there. And literally, on the same street, there's a 14-year-old kid who's looking at you, and it's just hate, and you're like, look, this kid would literally hurt me if he had the opportunity. I think it was very telling to me.

I was 20 when I went, turned 21 when I was there, and you just get to see I think the human perspective and how it can change based on their individual experiences. And so you start talking to these people and you realize, why does that 14-year-old kid hate you? Well, some roadside bomb went off, and it was targeted at a US convoy, instead it killed his dad or his uncle. I think back and I'm like, if somebody came to my country and that happened to me, this kid is actually handling it pretty well. And so I think that when you start to really understand the intricacies and complexities of war and geopolitics and all this stuff, it's not as simple, I think, as just the headline of a newspaper. So when you see that, it's just really eye-opening.

Patrick: [00:05:27] What was the transition like out of the military, and maybe what the seeds were for your investment philosophy or your interest in business and investment?

Anthony: [00:05:34] I was very fortunate, a lot of the guys that I went with, we were there during a time of pretty heavy combat and all this stuff. I was there 2008/2009. A lot of people of the 2006 to 2010 era, PTSD is rampant, all this stuff. When I came back, I actually went back and finished school. So I went from a military unit which was all male, very macho, very violence driven to a football team that's all male, very macho, very violence driven, just without weapons. I credit a lot to the opportunity I had to go back and finish school, play football to softening the transition a little bit and making it a little bit easier, compared to guys who had to go back and they're immediately working a 9:00 to 5:00 job and no one can relate to them. It's difficult.

I think that when you pull that out to investing, I think a lot of my friends would say my philosophy and outlook on life changed a lot. When you see that type of environment, we literally can die tomorrow. It sounds very cliche, but you just want to live life, have as much fun and to the fullest. And then two is we live in a global world. I actually think that people who don't have the ability to travel are at a huge disadvantage when it comes to life in general, but really investing, and especially as the borders of our nations matter less and less to the global markets. And so that experience at a relatively young age I think really just seared in my mind hey, this is a global world where people have different perspectives, and they have different experiences. You need to understand that in order to succeed on that global scale.

Investing Philosophy

Patrick: [00:07:06] Let's talk about the unique thesis that Full Tilt has, not just thesis in terms of industries, things like crypto, etc. But also the founding ethos of the firm, things like deal economics, things that set the firm apart. Maybe we could start there with the deal economics.

Anthony: [00:07:20] When me and my partner started Full Tilt, we really went back and we said, we've never worked at an investment firm before. We've never worked at a venture firm, a private equity firm, anything. We're not conditioned to believe something is true. A lot of people think that's a disadvantage, but if we look at that as an advantage, why don't we actually go look at the data and see what is the right thesis, deployment strategy, all these things that I think people who just grow up in venture, specifically, they just take it as kind of gospel. What we realized when we looked at the data was there's a lot of misconceptions.

One of the biggest things was the only thing that matters for the outsized returns is being in the best deals early. Your follow-on decision, your check size, all these intricate investment strategies, that can make a good deal great, it can't make a bad deal good. And so if you're just looking at it from a binary perspective, the key is how do we get into the best deals as early as possible. From a capital perspective, we started out writing $50 to $100,000 checks, and we wanted to be in as many deals as possible. But we were investing so early that everyone else was doing diligence on, what is the market? What is the competitors? What is all this stuff? We built enough companies ourselves where we said, all this is going to change. Everything is going to change in this dynamic environment, from the product they're building, the market they're in, their competitors, the funding. The one thing that is likely to not change is who's running the company. And so if we just focus on, who is that person? And why do they do what they do? How do they make decisions? Are they not going to give up? I mean, that's one of the easiest signals, but also the hardest thing to get at. And so we said, if we just back the right founders, they'll figure everything else out. And if we're there to help when they need help, we've got a higher probability of being successful, and so we started doing that.

We invested in 64 companies in the first fund. It has gone much better than our wildest dreams. And really the way that we measure that, I think one is just cash on cash returns. Two is who are we investing alongside of, who has followed on, and then how many companies go to zero? And so, to date, we are now 18 months in, we've had 3 of the 64 go to zero. We've had one company that was acquired. Cash on cash returns will take a while to measure, so that's always the question mark. But then we've been incredibly fortunate to invest alongside or be followed on by the Andreessen Horowitz, the Founders Funds, the Lowercase, the NEAs of the world. I think that for a firm that's sitting in Raleigh, North Carolina, that prides itself on trying not to meet the founders in person before making an investment, I think people are kind of, "There's something here that is different, because the results are impressive, I think, to our LPs, etc."

Patrick: [00:10:01] Your results are, based on that description, going to hinge on your ability to evaluate founders and some of these characteristics?

Anthony: [00:10:07] Absolutely.

Patrick: [00:10:08] I'm a quant, so I can never help but try to dimensionalize this stuff, and maybe poke at what you believe are the key attributes. You already mentioned persistence being one, that seems like an obvious one. What are the other attributes you're looking for? And maybe for each one, specifically, how do you suss them out?

Anthony: [00:10:21] We've spent a ton of time trying to build an actual mathematical way to quantify this stuff. It is incredibly difficult to do. I always say I want to build the SAT for founders, but one that actually shows the probability of being successful. We've got some hacks that we've tried. But ultimately, what we're trying to get at is some key characteristics. Persistence is by far the number one indicator of success. We have seen companies that we passed on, that we thought the founder was incredibly smart, they end up getting some sort of traction, something goes wrong, they give up, company is down. We would rather invest in someone who's not as smart, not as creative, whatever, but is not going to give up, because at least we've got a shot. Persistence is really important and probably understated by most investors.

Two goes back to this idea of empathy, and empathy really revolves around a whole host of things. So we look at, have they had a very wide variety of life experiences, job experiences? Have they traveled a lot? Somebody who is trying to build technology for a restaurant, has he ever worked at a restaurant? It's really hard to wrap your head around how they're going to understand everyone from the cashier, to the waiter, to the cook. It's not a requirement, but we think that just having that breadth of experience is really important.

The third thing is their communication skills. Life, whether we like it or not, is people and communication. One of the things that we always ask for is I want to see a lot of your previous updates, whether they're to advisors, your internal team, investors, whoever. And it's less about the substance, and it's much more about, are they clearly articulating ideas? How thorough are they? How consistent are they with their updates? Can I see the progression of their thought process and how they're explaining, "We made a projection, and we missed it. Here's why it happened." All that kind of stuff. So that's the writing aspect.

And then frankly, they got to get us excited, and that's hard to quantify. If you're asking an investor for money, and you can't get that investor excited about what you're doing, it's hard for that investor to then see how you're going to get potential teammates excited to join the company, other investors excited to invest, customers to become customers. That's a key piece, and it's part storytelling, it's part enthusiasm, it's part just the idea of communicating inevitability, all of these things. That one, in particular, really goes back to the name of the firm, Full Tilt Capital. I loved it for two reasons. Me and my partner came up with it, and one is just everyone thinks of poker, and they're like, "Oh, you're early stage investing, you've got this pray and spray," is what everyone would say, like, "You're gambling." That's fine. But if you actually looked at the definition of the word, it's mass acceleration at top speed, so exactly what we want to do. We want to take things that are not moving and get them as much momentum as quickly as possible, because our belief is momentum makes the four key tenants of building a company easier, so this is hiring, customers, fundraising and press. So if those four things become easier because you've built momentum, you're increasing probability of being successful, but you're not guaranteed. I think that those are some of the aspects, and there's a whole host more. But it's really just trying to pick at a founder, and what makes them tick and how they make these decisions. And ultimately, I told a founder the other day, I said, if investors could, the ideal scenario would be we would put you through a simulation, then we would see how you would act in all these situations, and then we'd go back to making the decision. Do we want to be on that ride with you or not? That would be ideal. We can't do that, so instead, questions we ask, things we look at, we're trying to figure out how you're going to act or make decisions in those environments moving forward, without being able to do the simulation.

Patrick: [00:13:50] What I find so interesting about the checklist, so to recap it, persistence, empathy, communication, salesmanship, basically the four things you ticked off. None of those are taught in school. Which is criminal because here you've got this paradigm of the American dream and entrepreneurial spirit of the US, and the four key ingredients, at least according to you, are things that we don't really formally learn. We have to teach ourselves in the real world.

Anthony: [00:14:13] Yeah. And I think you get them through life experiences, so it's-

Patrick: [00:14:17] Right, something like travel is a good one then.

Anthony: [00:14:18] Yeah. Part of it is like, hey, if you don't understand finance, us or somebody else can either teach it to you, or we can hire somebody who understands finance. Those are problems that can be solvable, but I'm not going to change whether you're persistent or not. I'm not going to be able to do anything to change whether you have empathy or not. It's trying to understand the non controllable things, and then everything else we can figure out.

Times of Biggest Risk

Patrick: [00:14:41] There's a question I've started to ask people, especially given your military background, this is an interesting one. Which is the time or times in your life where you feel like you've had the most on the line. So when you've taken the biggest risks, the biggest leap, like every founder is taking a huge leap, feeling very personally exposed. What would the answer be for you in terms of looking back where you felt the most exposed or at risk, in a positive sense.

Anthony: [00:15:06] I think there's probably three separate times. One, definitely deployment overseas. You don't even understand what you're doing. You're going, and you've done all this training, whatever. That's certainly one. Two, when I went to Facebook. I moved out there, I knew one person. They weren't involved in the tech industry. I'm so glad that I did, because it just threw myself into a completely different environment. I mean, I think it's a testament to the tech industry in general, of like, here's a random kid from Raleigh, North Carolina, who moves out, working at one of the large tech companies, and was able to be accepted into a community and meet all these great people. There was no judging, there was no anything, it was just, "Hey, you're one of us." I think that that was another time where I felt exposed, and then very quickly was like, oh, everything's going to be okay.

And then the third one was starting the fund. And with the fund, it was less about, what are we going to go do, and the conviction in doing it? It was the first time that I took somebody else's money and said, I'm going to go put this on the line, and whether we're successful or not, does not only impact me, it impacts you. I laugh because the first couple of times I talked to potential LPs, I was like, "By the way, give me a small amount of money as possible." As you get more and more confidence, you realize, hey, this person is not giving me money that's going to affect their family. But that's how I looked at it at first. I try to remind myself that when you're making these decisions, it's less about the decision today, it's the decision I make, can I go back and defend this in a conversation where I say, "I lost your money."? Can I look somebody in the eye and say, "I lost you money."? And I think that changes the way you think about making decisions in a positive way. That's an exposure that I think it takes time to get used to.

Full Tilt's Areas of Focus

Patrick: [00:16:46] I'm always fascinated by the dichotomy of skill and luck explaining outcomes in all investing. There's no doubt that there's a mix, and it's a sliding scale, and different parts of the market involve different degrees of both. In the venture world, I've always had trouble disentangling these two things. But one thing that I'm sure of is that in the venture world, just like everywhere else, real alpha or real skill based excess return, we'll call it, comes when you originate, when you do different things, when you've got a different perspective, different information, different analysis, better discipline to stick to the four attributes, for example, that you look for in founders. That's really kind of the only way to earn true differentiated excess return that's based on skill and not luck. I'm curious, today as you look at the world, and maybe not just technology, you mentioned you're industry agnostic, where are some of those areas that you're focusing on where the market maybe isn't paying enough attention? Or it's paying too much attention? What is the differentiated view that Full Tilt has today?

Anthony: [00:17:39] One, I think most investors are not willing to admit that there's more luck than skill. I mean, there's been enough academic research, I've seen it, just myself personally, where they'll say, hey, stack rank your portfolio. So you've sourced these, you've vetted them, you made a decision, you're now getting updates, you're on the board, whatever, stack rank the outcomes of your investment today, and let's see how it plays out. They're always wrong. It's just a dynamic environment. I've always looked at it as a probability game. I just want to put ourselves in a position where we have a higher probability of being successful than less, so that's more of the framework.

We looked at it for our second fund. We were going to exclusively focus on protocols, tokenized securities and blockchain. Tokenized securities I think is the one area that is the most interesting. What convinced us to go ahead and really make the leap 100% into it was we said, look, in five years, do we think people are raising money through priced equity and convertible debt or tokenized securities? And I am absolutely convinced that it's going to be tokenized securities. And the reason is it's a more advantageous mechanism for both the founder and the investor. So if it was more advantageous for either side of that relationship, I don't think that we'd have as much conviction, but it actually helps both sides.

Patrick: [00:18:498 I certainly get why it's more advantageous to not dilute themselves for the issuer of the token, but why for the investor?

Anthony: [00:18:55] You get liquidity faster. A lot of times right now how the deals are being structured, you're actually getting equity in the business, plus you're getting a token, so there's a pro-rata ownership in both. And then it ends up solving a lot of the transferability, obviously, liquidity. The part that we think is the most interesting in the crypto space has nothing to do with decentralization, it has to do with fractional ownership and a global 24/7 marketplace. When you look at fractional ownership and that global marketplace, those are things that are not applicable, or they don't exist when it comes to convertible debt or priced equity. If you've got an emerging industry where more and more of the tech talent is starting to shift their focus, and I think that will continue, and there's this new mechanism for fundraising that provides advantages to investors, that we know are problems in the large companies that have been successful today, they're solved. And then from a founder perspective, it's more attractive. Why would people not go do that?

Patrick: [00:19:52] I really like this angle on it. Frankly, sometimes I'm sick of talking crypto just because it's so incredibly ubiquitous, and-

Anthony: [00:19:59] Everyone thinks we're building the New World Order, and it's like, just relax for a second.

Patrick: [00:20:03] And it's overdone. I've certainly spent a lot of time on it, but this is a fairly unique angle. So equity debt, the traditional investing instruments represent a legal claim on a stream of cash flows or residual interest in a business. So when you say tokenized securities, I think what you mean is a token which embedded in the ownership of that is a legal claim on some stream of cash flows or some underlying asset or something. Can you describe in as much detail as you can, very specifically what you think that means, and whether or not it will require changes in regulation for that to be realized?

Anthony: [00:20:37] I'll give you two examples. Let's use a business, and let's use a piece of real estate. Tokenized security for business is literally tokenizing a share of the company. We think that while today there's a bunch of questions around regulation, etc. I think that regulators have been very clear that they do not want to just stomp on this innovation and say, we're going to absolutely ban it. But they're also not going to let the Wild West continue where there's some pretty obvious scams and stuff going on. We think that there will be tightening of regulation for a net good. And we think that tokenized security will look very similar to what shares look like, but just have a couple of new advantages for investors and founders.

When you look at real estate, for example, very similar to how crowdfunding works. But again, you're providing a token, fractional ownership, global 24/7 marketplace. But what you're able to get there, let's say it's a income-producing real estate, you can structure it to tokenize the actual equity of the hard asset. You could tokenize only the revenue stream and allow the owner to retain 100% equity, or you do some mix. And so what we think is this mechanism is so new that the regulators haven't even figured out where are the boundaries and the rules. But what we see is the good actors are going to be able to take a blend of the existing, traditional world of fundraising, etc, and apply it with this new mechanism. And it's not going to be binary, it's not going to be, hey, do you fundraise privately or do you conduct an ICO? There's going to be almost like this center of a Venn diagram, and that is where we believe tokenized securities are going to exist. We actually think that's going to be the largest asset class when you look at how capital is deployed five years from now. And really, it's because that's where you're going to get the traditional capital allocators and the new capital allocators, where they can meet in the middle and then that's where they see opportunity.

Patrick: [00:22:23] I want to come back in a second to how you then play this as an investor. So assume that that outcome is true, what are the types of companies that will benefit from that truth coming to be? But first, I just want to spend a minute on your opinion on liquidity as an idea. I've always been fascinated by more liquid instruments, let's say this securitization of a very illiquid real estate asset or something like that, as an interesting means to bring capital into a sector, or where it was typically difficult to get capital in before. Obviously, this would be an extreme example of that where you can tap previously untappable capital sources. But do you worry that that could be a really vicious double-edged sword, where ETFs seem great, but maybe the fact that you can trade them so often is actually terrible, right? Maybe part of the VC advantage is that you can't go in and mess it up for 10 years, so how do you think about that?

Anthony: [00:23:11] It's the Uber example, right? Everyone's like, "I wish my Uber stock was liquid." And then most investors are like, "Yeah, I would have sold it at the $2 billion valuation, because I thought I had a home run," and it continued to obviously increase in value. I personally am a fan of shifting the decision making on to the individual investors. I think that if you sell early, you trade too much, whatever, you live and die with your own decisions, rather than there's some subset of people that would have let the Uber evaluation reach $69 billion, they would have been geniuses and sold at the top, and then everyone takes a little haircut. Probably not that many of them, but somebody would have done that.

I think that optimizing for optionality for investors is really important, but also doing it in a way that fits within legal frameworks, that I think most of us agree are good to prevent the fraud, the scams, all that kind of stuff. The nice thing about tokenized securities as it stands today is they are accredited investors. They're not the grandmas putting in $100, who is going to hurt if she loses it. I think from a liquidity standpoint, teams are being smart. I'm now starting to see teams who are doing these token sales, where the team is locking themselves up for four, six, eight years. They're asking investors for long lockups as well. I think that when you give optionality, you say, hey, look, you could be liquid day one, but we're going to allow the teams and investors to decide, do they want to self impose lock ups, etc. It ends up just being, again, a net good for the industry.

Patrick: [00:24:38] Back to that original question of how you then invest according to this thesis. Are you investing in LLCs? Are you buying tokens? Are you buying SAFEs? What is the actual expression of this idea?

Anthony: [00:24:48] We're definitely still figuring it out with everybody else, and part of this is just being honest enough with ourselves, of like, there's no answer. There's no right answer to how this is going to all play out, but we think that we can help figure it out along with everybody else. Actually, one thing that's important to call out, we look at this industry in a very, very risk-adjusted way. I'm a huge fan of Howard Marks. And Howard, I'm going to paraphrase him, he basically says, "In order to have top 5% of returns, you have to take such an inordinate amount of risk that you can end up in the bottom 5% if you're wrong." If you want to be on the extreme and have the binary outcome of top five, bottom five, that's great, that's not what we want to do.

We're more than happy to just hit above-average returns for 20, 30, 40 years, and what that ends up doing is it makes you one of the best investors in the world. When you compare that to the mania of crypto today, there's not very many people who are, "I'm cool with a 50% annual return." "I want the 30,000% Ripple return in 2017." I think, for us, we actually are setting the fund up in a very interesting structure, where we're incentivizing ourselves with added, carried interest for returning capital, the principal investment to LPs on a faster timeframe.

In the first fund, we charge no management fee, and we'll continue to do that moving forward. We think it's really important to just align our incentives with our investors. We don't make money until they make money. And in fact, we don't make money until we've returned their capital, and then they start to make money. I think here, what we figured out was if we incentivized ourselves to return the principal investment amount in 18, 12, 6 months, our investors actually have a very large appetite to give us more and more carried interest. In venture, you can't do that. You could never say, "Listen, I'm going to return your capital in 12 months," because it's just not going to happen. When there's liquidity, though, there's the potential to be able to do that. We're still working out exactly how that will look, but that's definitely something that both our LPs and us are really excited about. I think that when it comes to investing, we really like hard assets. So the tokenizing of all these hard assets, we think is a massive market that is one just beginning. And two, there's a very small number of people who understand what I would consider more traditional finance, and then also this tokenized world. And so, again, trying to find where is there very little competition and just massive market opportunity? So that's one. Two is we're now at three mining facilities within the venture fund, and really the thought process there is we don't look at it as a crypto investment. We look at that as a pure real estate investment. Depending on where the price point is, depending on your electricity costs, etc, these are investments where you're investing in a hard asset, you're able to 2, 3, 4, 5x return on an annual basis. There's nowhere else you're going to do that investing in infrastructure and real estate. Why would we not want to deploy capital there? I think that, again, we just look at it as, how do we protect the downside as much as possible? We don't need the 15X, we're cool with 2.

Patrick: [00:27:39] How do you think about the commodity risk there, assuming the cryptocurrencies themselves in this case are the commodity being mined? I'd love to hear a little bit about Standard American Mining, great name for an interesting company that you've incubated. So maybe you could describe how that business is structured. But it seems like that whole thing, the 2x, the 3x, whatever, is just predicated on the coins or the things being mined not crashing in value.

Anthony: [00:28:01] We completely eliminate that risk. We sell into cash immediately. Again, we just look at it as just like if I had a franchise business, I would get a physical location, I would put employees in, I would do some activity and I'd get revenue. We look at this as, we get a physical location, our employees are the machines, they do an activity and we receive revenue. That revenue is in the form of Bitcoin, Ethereum, whatever, and we immediately sell into fiat. And so it's just a cash flow business, which every single person who's ever mined will be yelling and screaming when they hear this, and they'll say, "I can't believe you're doing that. Appreciate it 300% afterwards." That's fine. But again, we don't need the ridiculous returns. We're okay 2, 3x-ing. I think that's the short term. The long term is a race against time. Because you can pay back your initial investment so quickly, you're basically making the decision, can I recoup my investment before the likelihood of a crash? If you said to me right now, hey, that's a five-year payback period," probably not going to pull the trigger on it. If you tell me it's three months, I got a lot more confidence now.

Patrick: [00:29:03] Can you describe Standard American Mining? What's unique about it, and what it does?

Anthony: [00:29:06] There's literally nothing unique about it, which is the beauty of it. We take mining hardware, we put it on to energy sources that are free, near-zero costs.

Patrick: [00:29:17] What are those sources?

Anthony: [00:29:18] Right now, two of the facilities are just traditional energy from local grid. We have a business that my partner runs day to day that takes whole car tires, puts it through a thermal demanufacturing process, which is a big word for basically burns it within a cylinder. And it breaks the tire down into carbon, oil, steel and syngas. He sells the oil and the steel as a commodity, and then basically creates energy through a turbine. We self consume that energy on-site and use it to mine cryptocurrency.

Patrick: [00:29:51] Fascinating stuff.

Anthony: [00:29:52] Yeah. I don't think that was in the plan when they originally built the plant.

Patrick: [00:29:57] I've seen you write before about the shift from a CPU world to a GPU world. That's something that we haven't really talked a whole lot about on the podcast, maybe you could explain that idea.

Anthony: [00:30:06] I believe that's going to happen. Two, I think that the United States is drastically behind many other countries. And three is this shift, really today, there is not that many job requests for GPU farms.

Patrick: [00:30:29] GPU being? Just maybe describe what the fundamental difference is?

Anthony: [00:30:23] Basically, with a CPU, it's somewhat of an elementary computational capability. GPU is more complex. That's the very basic definitions. And so with GPU, you can do things like mine cryptocurrency, you can do CGI rendering, you can do AI simulation, all this stuff. And so as the need for more and more complex computational power permeates society, there will be a shift to, obviously, the hardware will be built up to fulfill the demand. What we think is most of the CPU world is based on today's technologies, and that's why those farms were built and those data centers were built. As the demand increases on the GPU side, the Googles, the Amazons of the world, all the way down to the local, regional data centers are going to have to shift and fulfill that demand. If you look today at how that shift is going, it's going very slowly outside of the crypto world. But in the crypto world, there's 200, 500 megawatt facilities that are being built all over the world. And so what is nice about the GPU based mining versus the ASIC mining, if you put in a GPU piece of hardware, you don't just have to mine Ethereum, Zcash, etc, you can then use that to do CGI rendering, AI, whatever. So again, it de-risks a lot of the hardware investment. Whereas with an ASIC, you're pretty much going to mine Bitcoin, or you're going to be sitting staring at hardware that has very little value.

Patrick: [00:31:47] It's an interesting angle where processing power is all of a sudden this underlying, raw element that we need. And part of your thesis is thinking about how to get involved in places where we haven't caught up yet.

Anthony: [00:31:58] I think that computing power will be one of the most valuable resources in the world. I think it already is, actually. But when you look at this from a business perspective, I think it's true. When you look at it from a national defense perspective, it's true. And I think that that trend will not only continue, but it's actually going to accelerate. People always talk about, data is the new oil, I think computing power is the new steel. When you look at Standard American Mining, it's definitely a tip of the hat to the Rockefellers, the Carnegies of the world, where it just says, look, this is the infrastructure on which the next 100 years is going to be built, and there is a ton of competition running at data. I mean, SoftBank literally has 100 billion dollars, and that's what they're trying to do.

We think that there is a ton of opportunity and actually a lack of understanding on how to build, own and maintain the computing power. What really ends up happening is when you talk to a tech entrepreneur about, hey, we're going to do a construction project. They throw their hands up and they go, "What? I'm just going to write software code." There's just fewer people who want to go in and do this work, and so we like it, because again, it's-

Patrick: [00:33:02] Differentiated, for sure

Anthony: [00:33:03] Yeah.

Thoughts on Barstool

Patrick: [00:33:04] Let's go a completely different direction because of something that you wrote about which I was really interested in, which is your thoughts on Barstool Sports. A brand that probably a lot of people are now familiar with. I didn't even know what this was until 6 months ago, and I kind of can't stop watching the business. It just seems insane to me, the brand that they've build, the way that they think about the business model. You wrote a long write-up on it, maybe you could summarize why you're interested in it, like I am. I'll use that in our last section here of our chat to talk about some of the insights and the different ways of doing business that are reflected in a brand like Barstool.

Anthony: [00:33:41] Man, Dave and Erika are going to love this. I think what I said was it'll be the most powerful media brand in the world by 2025, and people, they laughed, and of all that. But I think that there's a lot of substance behind it, because they're doing a number of different, very intricate, nuanced things that are incredibly powerful. One is their revenue model. They make money off physical goods. Well, now BuzzFeed is trying to do that. Everyone else is now trying to do this. Well, they've been doing it for like 12, 15 years. That's how they survived, that and events, so I think that's one. They're not dependent on ad. Now, that dependency as they grow larger and larger, that will be a very real revenue stream for them, but their core business has always been they literally sell T-shirts.

Two is audience. I mean, literally, we have a debate whether people are creating fake news or not, they have this rabid, digital-first, millennial audience. That it's not uncommon for these guys, the individual reporters to tweet and get thousands of pieces of engagement, and that's a tweet. When they tweet their articles, they're driving incredible page views. People are showing up in the thousands to events that they have, where they're going to be. It's this business that they're a media company, part reality show, part T-shirt salesman. And then they wrap all that up and they're doing corporate deals with a professional CEO with ESPN. A lot of things that just the blogging community has not previously been able to do. I think that it has this really unique mix of content that draws that audience in.

The third thing is it's a lifestyle. I mean, they coined a term, Saturdays Are For The Boys. Sounds incredibly juvenile, which it is, by the way, but it has permeated society. I've got a 21-year-old brother, and that's the rallying cry of the college scene, all the way up to professional sports athletes, politicians. They get the videos of these guys saying, "Saturdays Are For The Boys." I think that, again, they're able to create culture, and the people who create culture end up being in a really powerful position. I think that you can look at like, urban hip-hop has done this for a long time, and so I think these guys are doing it for a completely different segment of the population.

I think that the last piece is, Erika said this at one point, where she doesn't have employees, she has sports figures or sports stars. If you look at it as a team, each individual reporter is a star that then has their own audience, has their own products, has their own whatever. No other media company in the world would ever do that, one. And then two is they look at this as their personalities. So if you think of them more as a reality TV show, each person has a personality, each one has an audience, you go through this whole thing. And so what they're doing is they're meshing a whole bunch of stuff into a single entity, and it's all online. They're filming everything. They're writing everything. They have these Twitter wars. They do all this stuff. So that's the core foundation of the business. And then when you take all the controversy, because of course, anyone who's doing all of this is so forward-thinking, is so controversial, all the stuff where they go and they're chaining themselves to the NFL offices. Or people are yelling at them about how they're sexist, and I laugh and I say, the ESPNs of the world don't realize that they're actually helping them by creating the controversies. They did a show with them. They did one episode then they canceled the show.

Patrick: [00:37:00] It's almost Trump-like. They're sucking up all the oxygen in the room.

Anthony: [00:37:03] The best book I read in 2017 was a book, Win Bigly, Scott Adams. Somebody recommended it to me, and I was like, I don't know if I want to. Then he said, "Just read it." And so when I got through this book, I am absolutely convinced that Barstool Sports, Trump, etc, what they are doing is they have figured out that we live in a very different world. We live in a world where because of the digital-first interactions that we have, and the sensationalism and all this stuff, that is how you drive eyeballs, attention. Well, if you've been in business for any period of time, you know that if you're able to drive eyeballs, you can monetize it in some way, whether that's become president, whether that's make money, whatever. I think that they're definitely looking for the controversies, and fortunately or unfortunately, there's been no lack of them. I think when you look at Barstool holistically, I don't think that there'll be a $20 billion company that no one else can compete with from a financial perspective, but I think that they already are close to, definitely in sports, they're the most powerful. ESPN has a lot of eyeballs, but ESPN just can't get people. Here's the example I sent somebody, Barstool Sports gets more people to watch a video of their former CEO, Dave Portnoy, sitting on his couch videoing himself on the selfie view, he's just live streaming and he'll have 2000, 10,000, however many people watching. He can get more people to do than what multibillion-dollar ESPN does with a professionally created video that they post on the internet.

What is power in today's world? To me, power is really who can drive eyeballs and have their audience fulfill call to actions. I can't think of a better media company than Barstool Sports. I shied away when I wrote this thing from saying they already are the most powerful, to they will be. And I think that if they can continue on this path, I see them as a billion-dollar company. Frankly, I just hope they don't sell it too early.

Patrick: [00:39:01] Taking that idea, that mindset, those lessons, and also your experience with the 64 plus whatever other investments that you've made. If you had to extract a couple of closing thoughts or lessons for, I'll call them more standard businesses, family-run businesses, smaller businesses, more bread and butter type things that are operating, maybe have been around for a long time, but are ambitious and want to grow. What would your closing thoughts be on the lessons that you've learned from the much faster-paced, Full Tilt world.

Anthony: [00:39:28] One is definitely just persistence, just don't give up. You got a shot if you don't give up. That's definitely number one. Number two is you don't need to hit home runs every time. Singles and doubles can win games, and so I think that's important. And then I think the third one, and this is very true across anything you do, it's just the people. So whether you look at the talent at Barstool Sports, whether you look at Facebook, whether you look at the founders you want to invest in, or you look at a family business, I think making sure that you have the best people in the room, again, increases the probability you're going to be successful in whatever you're doing.

I think that gets lost a lot of times because everyone thinks that the new cool revenue source, the new cool business model, whatever, is going to save the day. But if you just have the right people in the room ... It's that pizza shop analogy. If you open a pizza shop, you're not reinventing the wheel. If you just have operational excellence, and you put it in the right location, you will be successful. We know people like to eat pizza, we know how that business works. There's thousands of them in the United States, but it just comes down to having the right people and the right processes. I think it's the same thing across all these businesses, whether you're a high tech business, small business. It's just this is how the winning playbook looks, you just got to go execute it.

Patrick: [00:40:34] So my closing question for everyone is to ask what the kindest thing that anyone's ever done for you is?

Anthony: [00:40:38] It's probably my parents. I grew up in a house, so I'm the oldest of five boys. My dad traveled a lot when I was younger. My mom's a saint, obviously. We're all alive, all have our arms and legs. But I remember many times as a kid where they would do things for us that didn't cost any money, but they would take us somewhere, or they would just spend time with us or do things where now looking back, there is zero chance that they were still happy and sane and calm and all that stuff, but they knew it was important. I think those are the memories probably from growing up that mean the most to me. It was probably at the times where my parents least wanted to do that. To me, that's the ultimate definition of kindness. It's somebody who doesn't need to do something, probably doesn't even want to do it, but they do it anyways for the betterment of somebody else or the enjoyment somebody else. I think that's probably what it is. I'm so grateful for them having done that. I don't get to see my brothers as much, I don't get to see my family as much, but we have those memories. And so I think that's probably what it is, which it's nice to not have to go that far to find that.

Patrick: [00:41:45] This has been fun. I'm bummed that we're a little short on time. Maybe what it means is that we'll have to do a round two, especially as you start to deploy this fund number two at Full Tilt. Thanks for your time.

Anthony: [00:41:52] Absolutely. Thank you so much.

Created by @_Nick_Diller