david: this is my kitchen table, and it is also my filing system.

over much of the past three decades, i have been an investor. the highest calling of mankind, i have often thought, is private equity. then i started interviewing. i have learned from doing my interviews how leaders make it to the top. >> i asked him how much he wanted. he said $250,000. i said, fine, i did not negotiate with him, and i did no due diligence. david: i have something i would like to sell. [laughter] david: and how they stay there. you don't feel inadequate being the second wealthiest man in the world? about a decade ago a young entrepreneur brian armstrong who was working at airbnb left that company to start a company to trade cryptocurrencies. the company he started, coinbase, became one of the hottest ipo's on wall street. this year, because of the ftx meltdown, coinbase has had some challenges. i sat down to talk with brian armstrong to talk about the future of his company. for those who don't know much about cryptocurrencies, what

exactly is coinbase and what does it do? brian: so, coinbase is the primary financial account for many people participating in the crypto economy. so, we help people buy and sell crypto. we also help them use it in a variety of ways. they can use it to send money, or borrow and lend assets. we think of ourselves as the primary financial account for people in that economy. david: i know you are different than another company i will mention, but is this what ftx more or less did as well , theoretically, for its clients? it enabled them to trade? brian: ftx did one feature which i mentioned, which was the trading aspect. that is correct. david: what you think happened to ftx? you have been quoted as saying you think there was more than just the occasional bad bookkeeping. you think there was more to it. is that right? brian: that's right. i am sitting here as an outsider, it seems clear to me it is not just a run on the bank or poor management of funds.

it appears that they took customer funds from their exchange and commingled them or -- them into their hedge, and ended up in an underwater position. that was, i believe, against their terms of service and against the law. from my point of view it looks like a massive fraud and we know that because they turned off withdrawals under the customer funds, which should have been held to one-to-one. that appears to be fraud from my point of view. david: in your view will be ftx -- will maybe -- will the ftx bankruptcy hurt the industry and maybe produce enormous regulation you may not want? brian: i think the ftx downfall is a bit of a black mark for the industry. it is not representative of the whole industry, of course, though. in traditional financial services occasionally you see bad actors as well. like bernie made off or -- bernie made off or enron. in terms of regulation i don't think it will be a bad thing. coinbase has been calling for clear regulation and trying to work with policymakers for quite a while. we have made some progress across various g20 countries.

i think it will serve as a wake-up call and a moment of catalyst, we will get more clear regulation in the united states. i think that will be a good thing for coinbase and the industry. david: for your company and people who are clients of coinbase, you reassure them i assume regularly, or they can find out if their account is managed the way it is supposed to? is that right? brian: that is right. we are very different from what happened with ftx. coinbase is based in the united states. we did not incorporate in an offshore jurisdiction like the bahamas. we are also a public company. which means we need to meet all of the audit requirements of a public company. we show in our publicly-audited financial statements corporate cash is separate from customer funds. you don't have to take our word for it. hey big-four accounting firm has proven that in these cases. there are other differences as well. we operate an exchange, but we have never created an exchange

token, like the way ftx did. we never operated our own market maker or hedge fund, because we believe that would be a conflict of interest. the difference between the two firms, i believe, cannot be overstated. it is a validation of the approach we have taken over the last 10 years to build this is miss in a trusted and compliant way, as opposed to what happened with ftx. david: for people who may not be that familiar with what your service is, let's suppose i wanted to buy a stock. i would call a stockbroker or somebody that is a market maker, say i want to buy a certain share. they would say, ok, you pay a commission. if somebody wants to trade a cryptocurrency, they have an , -- they have an account with you, i assume, and they pay some kind of fee for the exchange. is that right? brian: that is right. trading fees is one of our major sources of revenue. we have begun to diversify that as well. we have a different category of revenue which we call subscription and services, which has started to grow. that is 36% of our revenue in q3 of this year.

david: but today people have accounts with you. if they want to pull their account out a can get the money , i guess, because you are not subject to a run on the bank, in effect? brian: that is correct. all customer funds are clearly segregated and assets are held one-to-one for customers. so, there is really no such thing as a run on the bank in coinbase's world because we are not regulated as a bank so we don't do fractional reserve lending. but also 100% of customer funds are stored one-to-one. so if 100% of people wanted to withdraw, they can do that. and we will have their funds for them. david: you started the company in 2012 and you took it public , i think, in april 2021. the ipo was an enormous success. i think at the end of the day your company was worth $75 billion or more. you personally were worth, i think, $10 billion or more. the company's stock has come

down about 80% in recent times , in part because of ftx and other things that have happened in the crypto world. how does it feel to be with $10 billion one day and not too long after a lot less? brian: well, you know, it has obviously been a difficult market for all growth tech. and biotech too, i would say. we are in good company. netflix and spotify and all these companies have come down similar amounts. we knew that going public would not be an easy path, especially in a new industry, being a leader we wanted to be the first company to go out there and we assumed it would take three or four years to go through a cycle, build trust in the public markets. that is the process we are going through now. my own personal net worth is not something that is particularly motivating to me in the sense of , like, driving personal consumption or something like that. i am excited about building things with technology and cryptocurrency is one of the most exciting areas out there right now. so i'm going to keep working on this company for the next, hopefully, decade or two.

i think it is an exciting road ahead. david: so you told your parents you're going to start a cryptocurrency exchange. what did they say? brian: i don't think they quite understood what it was in that moment. and my mom, you know, asked me if i was going to have health insurance, which, you know, i learned even if you are crating -- creating a new company you can pay for your own health insurance. ♪

david: all right. let's go to talking about the time you started the company, and what were you doing about the time you started? he started in 2012. what were you doing before you started? did you know a lot about cryptocurrencies? where were you working? brian: so, before this i was a software engineer and product manager at airbnb. the travel and home rental company. i studied computer science and economics at school. i tried creating a couple other startups that were not very successful. when i was working at airbnb, they were trying to move money to 190 different countries all over the world. both collecting payments and paying out the people renting their homes. i was one of the engineer seeing how difficult it was to move money globally. both how opaque the fees were,

how long the delays were, the chargebacks. all kinds of things like that. at that time -- this was around december of 2010. i read the bitcoin white paper which came out, and it really captured my attention in a profound way. i remember reading it and thinking, this might be one of the most important things i have ever read. it was describing something like the internet, which was global and decentralized, and new protocol. -- a new protocol. instead of moving information around, this was for moving value around in different forms. i cannot stop thinking about this paper, and for the next six months after that. i attended -- in san francisco. some early bitcoin meet ups and met some of the early people working on it. i could not get this idea out of my head and decided i had to try to build a prototype that would make this technology easier to use for the average person. david: what was the valuation of your company for the first round from the first investors? brian: i think y combinator

probably got 7% of the company for $150,000. so, not a very high valuation. the series a was, i think, we raised $5 million and $25 million post. those investors did well. david: when the company went public, the return on the initial investments were staggering. i remember reading about it at the time. i guess they were happy with you at the time. i don't whether they have sold their shares or still hold them , but it is still very profitable in today's valuation, i assume? brian: that is correct. they earned it, right? that is the nature of these bets. if you can see something early on most people are skeptical of , and you are contrarian but right, occasionally you get massive wins that come out of it. when coinbase went public, a thousand employees i believe became millionaires and people wrote me incredible letters telling us how we had change

d their life and all of these things. that was a powerful moment. david: is being a publicly traded company ceo a pleasurable experience are not? [laughter] brian: you know, before we went public i did not know much about what it would be like. i did a bunch of research. my research played out roughly how i expected, and i kind of enjoyed being a public company ceo. it is a good forcing function for us to get feedback from the market, to get input from analysts and investors. i have found their thoughts to be helpful in terms of operating our business, periodically. i spend the vast majority of my time working with the team on , how do we build better products for our customers? i don't want to lose sight of that as the primary objective. david: let's talk about yourself for a moment. earlier in your life, where were you born? brian: i was born in silicon valley. david: were your parents technology people?

brian: my mom is a programmer and manager at ibm. so, a lot of the -- so we had a lot of the early ibm computers in our home. my dad is a civil and environmental engineer. we had a focus on stem and math and science and education in my household growing up. david: when you were growing up , what did you want to be when you were in high school? did he want to be an athlete or private equity investor, something important like that? brian: i don't think i knew exactly what i wanted to be in high school. even in high school i was learning program and i was learning computers. i was fascinated with that. i built some early websites. i started a business with a friend of mine in high school. we were reselling computer hardware. i don't think i knew i wanted to be a tech entrepreneur, but in hindsight that was where my energy and enthusiasm was. i was often staying up until 2:00 a.m. learning when it --

linux and computers, and i would be too tired to pay attention in history class. those were my early interests. david: where did you go to college? brian: i went to rice university in houston, texas. david: how long were you at airbnb, and how did you get that job? brian: i was a airbnb end for a -- i was at airbnb for a year and a half or so. i was employee number 40 when i joined, and when i left there were maybe 600 people. and i gone through this incredible growth. i learned a lot from them. how to run a great product building process with engineers, how to raise money, how to operate in silicon valley. i learned quite a lot from that process. david: when you left to start your own company, did brian chesky, one of the founders there, tell you you were making a mistake? you should stay at a stable company like airbnb? brian: my boss at that time was the cto. he was very supportive.

obviously they try to get me to stay a little bit, generally there is an incredible culture in silicon valley of employees who join these early startups, sometimes they go on to do their own startups. it is very much a positive sum environment. you know, one of the things i'm most proud of is a lot of the early coinbase employees have gone on to found other companies in crypto. that has been rewarding for us to see as well. david: so you told your parents you are going to start a cryptocurrency exchange. what did they say? [laughter] brian: i don't think they quite understood what it was at the moment. my mom asked me if i was going to have health insurance. which, you know, i learned even if you are creating a new company you can pay for your own health insurance, and there are little things like that helped her sleep at her at night. ultimately they trusted me and supported me, even if they did not quite understand what it was. they said if this does not work out, hopefully you can get another job and he will be fine. they sort of knew i was always going to try new things like this. it was not worth trying to talk me out of it at a certain point.

♪ david: after coinbase went public, you decided to join the giving pledge. it was started by bill and melinda gates and warren buffett. why did you decide at such a young age that you were going to give away so much of your money, and did anybody say to you, why don't you just save the money and not give it away? brian: to be honest, yeah, i just wanted to learn about philanthropy. i don't think i'm very far along that journey. especially given the market correct doing, it is not as much money as i would like to give away. but i want to start to learn about it. where can you do well, where can you do good in the world with capital? building private companies and i've invested in private companies, those have a potential to do a lot of good as well.

star some areas i am passionate about in scientific research. things like that. i think philanthropy can also be helpful. just like startups, a large percentage of philanthropic organizations are probably not well-managed and not effective. you have to be good at finding the ones that are high-impact and rewarding. david: how old are you now? brian: 39. david: 39. so, you will be 40, presumably next year. you are still very young by the standards of most ceos i know. so what do you do to relieve the pressure? are you a mountain climber, a bike rider? do you have any other exercise or hobbies? brian: i think the thing i'm most passionate about in life broadly is how technology can be used to improve the world and improve the human condition. i think that has been true going back to the first time somebody invented fire, or, you know, putting shoes on their feet, or whatever. technology is a way we can improve everything from health care, to education, to global

economic freedom with cryptocurrency. i am passionate about how we can accelerate the pace of scientific and technological advancement in the world. ♪ david: so what do you say to some of the old-line investors , old-line meeting people my age or older, or may be slightly younger than me, who say cryptocurrency serves no useful social purposes, and all cryptocurrencies will go to zero? how do you respond to them? brian: i think there is a long history in technology of bubbles being created, and then corrections. there is hype cycles and doom cycles, and this has been true obviously with the internet in recent memory, if you go back to the railroads and television -- and telephone, and all of these

things, studying the history of this, you see when a big technology innovation happens, early adopters come in. you see a bubble form. there is exuberance and a correction happens. ultimately there is a breakthrough. takes sometimes a decade or more for these benefits to come to fruition. one in four u.s. households have used cryptocurrency. it is not a niche thing. it does tend to skew toward a younger audience. sometimes people who grew up and their whole career was in traditional financial services , it is hard for them to -- this is the innovator's dilemma. if you are familiar with the book. it is hard for people to see what the disruptive potential could be. sometimes there is blindness that. nevertheless, changes happening and more people are using crypto through every cycle that happens. david: before you started the company or while you were starting your company, coinbase, did you buy some

cryptocurrencies yourself just to show you were a believer, or did you not want to have a conflict by owning some of these cryptocurrencies? brian: i did not have much money when i started coinbase. i just left airbnb. i had a little bit of money saved, but i wanted to exercise my options at airbnb when i left. that almost cleaned out my bank account. i think i have 3000 or $4000 when i coinbase. i certainly bought a little bit of bitcoin early on, but we are talking $1000 or something in that range. for the first five years -- still to a large degree to this day, myself and early employees, we took our salary in that coin. you can imagine that had some interesting appreciation value. we had to sell a lot of it to pay rent and things like that, so it was not like we were able to hold all of it, but there was some appreciation. i wish i had more money in the early days, for sure. david: how do you respond to the idea many people don't know what they are doing when there -- when they are buying

cryptocurrencies? that they are not well informed, and they are going to wind up losing their money because they are inexperienced? how do you respond to that concern? brian: i think that is a concern across any type of investment people might make. not just in crypto but in stocks and everything. my perception is we do need more clear regulation that is crypto -specific. crypto businesses like coinbase were already regulated like a traditional financial business. we have a new york bit license and various money transmission licenses. that is just in the u.s. but i think we need more crypto-specific regulation in the u.s. both around stablecoins, how centralized exchanges and custodians are the best practices they should have in place around audits and not comingling funds. many of those things we are already doing. big piece will be getting clarity around what is a commodity, what is a security, what is a stablecoin? we need an updated version of the test the sec uses that

applies more to cryptocurrency. so, there is a lot of legislation being put through congress now, and coinbase has been very active in bc, working -- d.c., working with policymakers there. there is strong bipartisan support in the u.s. to get clear crypto regulation. the ftx situation created a little bit of a delay in the legislation i was hoping was was -- was going to be getting past -- passed in the next quarter, but i think the next year we can hopefully get something in the u.s. and go for the rest of the g20. david: sam bankman-fried was well known for giving money to politicians as campaign contributions and lobbying members directly on capitol hill. do you go to capitol hill very much to lobby directly for legislation of one type or another, or are you involved in political contributions? brian: i go to d.c. -- historically i have gone to d.c. two or three times a year. i imagine that may be more frequent in the next year or two. we have made small donations to certain candidates that are pro -crypto.

just standard stuff, like $5,800. these kind of basic minimums. we have never made any kind of donations on the scale sam bankman-fried was doing through these large pacs. and, you know, part of it is how the game is played. you need to sort of make relevant donations. that is what all companies do, public companies do, around policy issues. it did seem the way sam was doing it, he was so visible in d.c., there was such a large amount of money. i think he was the second largest donor to the democratic party or something like that. it does seem like it was happening at a different scale. you know, i think there are some serious questions to be asked now about, should some of that money be clawed back? because it appears it was stolen from customers. david: when you come from washington and you meet with members of congress, do they understand cryptocurrency or do you have to educate them a fair bit? brian: when i first started going to d.c. maybe eight or nine years ago, i think many of them did not understand at all , and there was a lot of very

basic conversations. i think today probably 80% of congress understands the basis and the potential of this technology. that it has a lot of innovation potential that we want to preserve, but also has some risks. unfortunately it has attracted some bad actors to come into this industry to profit from it. they recognize the balance. the need for both clear regulation and preserving that innovation potential. there is still probably 20% of congress where they are either just very hostile to it or just ignorant of it, but it is not the majority view at this point. i have been pleasantly surprised to see strong bipartisan support to get clear regulation, but help this industry grow here in the united states, the financial center of the world, as opposed to it being built in these havens or offshore jurisdictions where we have seen customers can get hurt, including u.s. citizens, who may be attracted to those kind of products. david: suppose i listen to your

interview and i would like to buy some cryptocurrencies. what would you recommend to somebody who does not know much about crypto to get educated, and would you recommend to somebody who is a young professional, he or she has a modest about of money under the -- in the bank, you recommend they put 100% in crypto? what would you recommend to people if they want to experiment investing in crypto? brian: we are not a registered investment advisor. i have to be careful. we are not giving investment advice to people. what i say personally is, if this is something new, don't invest in anything you don't understand. if you want to learn about it, you can put 1% of your net worth into it, or something like that, that you would be ok if it all went to zero. if it is not, then that is a way for you to dip your toe in the water and hopefully own a little piece of this crypto economy that is happening more and more on the internet for the next five or 10 years. i'm more in the mindset -- i don't actively trade crypto.

i am more of a long-term buyer and holder. i try to help the company build good products and services. i am not an active trader , personally. david: for somebody that is a young person watching who would say, i want to be brian armstrong, i want to be a person who starts a company, very successful, a leader in his industry, what would you recommend is the skill set or the thing somebody should do to become you? brian: well, it is an odd question. i'm sure some people want to do that. not everybody wants to do that. for people who do, number one is study engineering, science, math, stem. i think that is the language of our future that you can have the most impact. then i would say, try building companies. i think that building technology companies is probably one of the best levers we have to improve the world, regardless of what problem we are talking about, whether education, health care. -- whether that is climate

change, or fixing education, war health care. anything like that. starting companies is hard. i started the number of companies that did not work or they were barely successful in some small way. coinbase is the 10th idea i had that i tried, and that one ended up working really well. but there are others i hope to create in the future. maybe some will work, maybe some will not. you have to be ok with failures and setbacks along the way. ♪

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emily: hello! katie: how are you? emily: good! how are you? it is so great to see you. thank you so much for doing this. what do you think about all the celebs getting into crypto?