John Arnold

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This is the oil and gas startups podcast where we showcase emerging technology and the stories of industry founders, investors, and leaders with your hosts Jake Corley and Colin McClellant. What's going on guys? Welcome back to the show. We are so excited about today. We've got the living legend Mr. John Arnold with us here in the studio. John, thanks for joining us, man. Thanks. It was a couple weeks ago when I saw the Twitter message saying it would be great to get John on the show. And I was really flattered to see the number of likes and interactions with that tweet. And so I think people still remember me. That's great. This too. Jake's been rubbing it in my face because I think I've tweeted you like three times like, hey, come on our show and talk about this. And then you responded to his tweet. So you can hang me that over my head here for the last couple of weeks. But no, this definitely feels like the pinnacle of our show. You know, when we started the podcast two and a half years ago, we thought, hey, if nothing else, if no one listens to the show, at least we'll get some cool people in the room. And here we are with, with John Arnold. So it's pretty cool to have you here, man. Thank you. I appreciate you doing this and taking the time. And so what I really wanted to talk about today was, you know, I was telling you before we started recording that I had people, you know, a lot of trading buddies hitting me up and, hey, you know, as John were, you think about this. And, you know, let's, let's, let's, that's on the market. You know, we can talk about those things, but what I really want to talk about is you as a person and your path to where you're at today, you know, I want to know, you know, the early days of, you know, building your career at in-ron, no prior to that. And what you're doing today in philanthropy. And I know this is a big boxed on pack, but there's really inspired generation and the energy industry and there's a lot of people that look up to you. And so I think a lot of people can find value out of just knowing your story. And so it's kind of what I want to dive in today. And, you know, just want to know the story. And so let's talk about, you know, how, you know, I know that you're at in-ron, I know the things that you did at in-ron. So let's talk about before that, you know, how did you end up in-ron and how did you even get into, you know, the trading game. Yeah. So growing up, I was, I was always good at math. Right. So I was the kid that was in fourth grade and I go to sixth grade math and that kind of continued through my educational life. And so I thought, you know, that on this really smart kid who's going to go to Harvard or MIT. And but I was lazy, lazy as a student. So I was thought I was smart, but I was getting a minuses and the teachers didn't like me because I was kind of a smart, I like kid. And so I think when I went to apply to college, I got a lot of nose. I'm a teacher, Rex. I'm sure we're terrible. Now I'm retrospecting. And it didn't have a really good story to tell. And so I ended up not going to the Ivy League's that I really wanted to went to Vanderbilt, which now is a very competitive school back then. It was wasn't that hard to get into. And so that kind of put a chip on my shoulder. And even going there, I didn't have that much interest in in getting the education. I wanted to get out. And so I did Vanderbilt in three years. And I want to get out and go into the business world. And I don't even know what business. But I had read. I'd been reading the Wall Street Journal since I was in high school every day. I revires poker. Sorry. I kind of knew somewhat about Wall Street. And I knew that that was a kind of a quick way to go make some money. And so I thought, that's, this seems like a good path. So coming out of Vanderbilt, I'm going to go try to work at a New York bank. So go through that process. And again, Vanderbilt at that time, kind of a tier two, tier three school in terms of the selective schools. And so there wasn't this big pipeline from Vanderbilt to Wall Street. Got a couple of interviews, but they said no. So now I got a really big chip on my shoulder. Some still, like, still has some confidence in me, but like I've been rejected not twice. And so best job I got was company and Ron. Now I was born and raised in Dallas. I father was in the energy business, kind of tangentially. But even in college, I didn't know what and Ron was. I never heard of the company. And they started to research it. And they called themselves the investment bank of the energy industry. And they had this big trading floor and one of the trading magazines magazines ranked them as the number one energy trader and marketer. So like close enough. Right. I'll go do that for a couple of years. Go back to business school, figure things out and see where I want to be. So that was really a start. It was like, came down here. It did my interviews. The super Saturday interviews we go talk to five different people for 45 minutes each and ended up talking to some guys on the trading floor. And at the time it was very hard as an undergraduate to start on the trading floor. Right. They wanted to put you in these other groups because make a mistake on the trading floor. It can be a big problem. Yeah. Right. They're the wrong words. And it's a big problem. So like, yeah, they wanted to save those seats for the for the MBAs. And but I had had some good talks with guys on the trading floor. And I remember it was probably late April, maybe early May and they had a call from anyone. I already had the job. I'd accepted it. And they call me and say, if you can get here, they tomorrow, we have a spot on the trading floor open for you. And I said, look, I graduated in two weeks. How about two weeks in a day. Right. And so I literally, I think I walked graduation on a Friday and on Monday, I was starting on the trading floor at Enron. And I started on the oil trading desk. And it was. So that was the red headed stepchild of Enron. And kind of did this because the clients also produce some oil. So they needed to hedging over here. But it was kind of great small group. And had these great mentors from the very first day and sat down and just start learning the business. And in retrospect, I realized that although I want to, you know, the boards university. I did a double major in math and economics. And my math was a specialization in statistics and an e-con it was an econometrics. And in retrospect, that's the perfect education for trading. So econometrics is how do you explain the past and statistics is how do you predict the future? And that's what trading is. Yeah, all this data from the past, like, why did things happen the way that they did? How do you manipulate the data to try to build a model? And then how do you think in terms of probability and statistics about how to how to take bets on the future. And so I had this wonderful experience of the perfect profession for me, my skill set, I found the first day of my career, being on commodity trading floor. And that was just a look back. It takes some people, you know, years, 10 years more. Some people never find kind of a, they're perfect profession early on. And I was there on day one. So I'm on the oil trading floor for about a year, about six months into it. There's a big blow up on the floor. You get a new head of the desk comes in and he actually sits right next to me for about six months, pulls me aside one day. It says, I'm about to blow this desk up. Right. I really like you. It's not going to be good for your career to be on this desk. You got to find someplace else. You can either go to the oil trading desk in London, or you can go downstairs and trade natural gas. And so here I am. I'm 21 still at this point. And I'm being offered an expat package in London. Wow, this is really cool. But as an oil and this is a natural gas company. So how much do you prioritize like the personal real of being in London with an expat package versus if I want to succeed in this company, I need to be a natural gas. So I ended up going down to natural gas and is that a hard decision for you or yeah. So after I mean, I imagine myself being 21, you know, I've got expat package in London. I mean, you talk about the experience. The life experience of going over that'd be cool. But you also know for career progression that you should be on the net guess. - Yeah, as well. So I remember my boss coming to me, he offered them, he was thinking about it, and then like a week later, he's like, "All right, come on, you gotta tell me." - Which one is it? - I'm like, that's gas. And that's kind of how it happened. Just kind of almost flipping it coin. - Yeah. - 'Cause I'm still thinking, I'm gonna be in this company for two of the years, maybe three years, go back to business school. - Yeah. - But I probably should learn this in that gas business while I'm here. So, good end there. And it ended up being, the reason the spot opened up on the gas trading floor was, so this is early 1996, I graduated in '95, the winner of '95, '96 in natural gas, there was this cold snap. And you had the first time since gas really became this traded commodity that you had this basis blowout. So everything west of Louisiana was one prize, everything. Louisiana East was at a very significant premium. So there was a trader trading desk down there that traded Texas basis that had lost a lot of money that winner and so there was an opening. So they put me, it was kind of, smart young kid that didn't know anything about the natural gas business to go assist an older gentleman who knew a lot about the natural gas business had been there in gas for decades, but knew nothing about trading. And you're like, you guys go figure it out. - All right. - And so I'm teaching him trading and he's teaching me about gas and it worked great. - It's a one, two combo. - Yeah. - Yeah. - And it was also great because nobody knew anything now. So gas as a traded commodity and that kind of that modern era was all new. - Yeah. - Right. Now you had for the first time, these relationships, historical relationships that blowout. And so now, historical knowledge of this is almost meaningless because nobody knows what the future holds. How do you, you have this one time shock? Is that one time or is that how this thing's gonna trade forever? Nobody knows. So coming down there and not knowing anything, like I'm kind of equal footing with the rest of the industry that's been there forever. So kind of things happen, the industry at the time, you have Enron is growing exponentially. And then all the Enron copycat companies who are trying to mimic what Enron is doing and the easiest way to do that is to go hire some Enron traders to help start your trading. - Yeah. - And so meanwhile Enron's starting to trade other commodities, notably electricity, and then gets into other things later on. And so how do you start trading electricity at Enron where you, and go get a couple guys who know a lot about electricity and go get some guys from the natural gas floor and put them together and let them go figure out that. But what would actually happen because of that was it was very easy for a young guy that showed responsibility and that showed promise to escalate quickly. And so, yeah, my, with, yeah, I'm on the trading, I have junior responsibility for a trading book within 12 months of graduating college, within 24 months on the head trader on the Texas basis book. And then, with them 36 months, I'm now the assistant on the NIMEX book. - Yeah. - And so, my career is doing this, Enron is doing this, people are trying to hire me, people are trying to hire everybody from Enron. Getting offers for, two acts of what I'm making there. And all of a sudden I'm thinking, whoa, I'm taking the GMAT course at night. - Yeah. - Yeah. Maybe one more year here, right? And one more year turns into one more year. And all of a sudden, I've got MBA graduates working for me. - Yeah. - And so, that started this crazy path through Enron. - Yeah, that's, you know, it's wild because, you know, you take someone like, that's my age, you know, 31 years old, was a kid, while, you know, Enron was around and it's hard to wrap my head around, you know, how fast and how large Enron was. And you look at the energy industry today, specifically in Houston, I mean, Enron's tentacles still, you know, all throughout the city. And so I can only imagine, you know, your career progression during that time, you have Enron on this exponential path. And then your career is an individual, is on that same, that same exponential growth pattern. And I imagine that, you know, you had to be, there just had to be a lot at one time. And I'm sure life is pretty crazy for you. - It was fun. It was crazy and it was fun. And it's everything that, you know, you want your life to be, like in the 20s, where high stress, high work, a lot of, you know, you, work all day and then go out with the industry. Because there was a bunch of 20s, early 30s, single guys, dominated the trading industry. - Yeah. - Right. And then the brokers would come down and take out all the traders and they, you just, your life was kind of 24/7, around this same group of people, both within the company as well as your peer group at other companies. - So it's pretty much like that, Wall Street life, but just here in Houston. - Yeah. (laughing) - Where was the, where was the trader hangout spot? - The Velvet Elvis. - The Velvet Elvis. - So the Velvet Elvis. - So the Velvet Elvis, is on Richmond, around Buffalo Speedway. - Okay. - It was the Velvet Elvis until the estate of Elvis Presley sued them. - It was a great bargain for Richmond. But they sent him a season to Sistletter. And they changed their name to Velvet Melvin. But that's the Velvet's not your school. - Yeah. - Yeah. - Yeah. The estate of Melvin didn't, didn't get a hold of that. So they were able to keep their name to Velvet Melvin. But this was during the cigar smoking craze. So the Velvet Elvis was the cigar bar. He used to come home every night and just like stinkin' - Yeah, just cigar smoke. - Just smoke 'em. - How do you smoke 'em? - But I'm like, "Everybody around and just smoke 'em." - The morning you pick up your clothes. (laughing) - So we got a little bit of a local Houston history here. I didn't know about the Velvet Elvis. So you go check that place out. - Yeah. I don't know what it is today. - I thought I'd go find it down and see what it is today. - Yeah. - So, you know, everyone knows the story of Inron with the downfall. Sure, it's very, you know, a lot of turmoil there for you individually. Tell us about, you know, the transition after Inron. And I mean, if you wanna dive into, you know, what it was like when everything was crashing down you can, but I wanna know about the transition of when you go in and start your own shot. - So I became the head trader at Inron, I think in '99. And here I am, I think I'm 25 years old. - That's crazy. - And have the biggest trading job in the industry. - Yeah. - And again, I think about how I gotten the M&A banking job at Merrill Lynch, which is what I wanted. - You know, I would be grinding out the models and the presentations. - But I mean, this is so significant too. Starting in a routine, but I mean, Inron created the markets. I mean, the way that natural gas was traded, electricity was traded. I mean, Inron created that. So here you are in the mid 20s and you're leading that effort. - Yeah. - I mean, just talk about the amount of responsibility and just, you know, for the way that markets operate today, and you are a primary driver for that happening. And it's just wild to think about. - It's just cool to see that you were kind of like, because you were rejected at the schools and then maybe even at the banks and stuff, it's like you were kind of like this forced outsider. And that ship on that shoulder, and it's like now you're 25 years old, kind of top of the world. - There's a great quote by the way from a VC. And the quote is, "Chips on shoulders, put chips in pockets." (laughing) - I thought that ship on the shoulder. I think you're the titlin. - Yeah, I think I had that, right? - So, Inron was doing things, was really leading the industry. Had an amazing group of people, or kind of look back on it. I think it, people that were there, kind of similar to people that were at Drexel Burnham, right, when Drexel went bankrupt, it was a stain on one's resume for a while. And now people look back and go, "Oh, you worked at Drexel, wow." You know, the people that worked at Drexel are now throughout the financial industry, and it's the same with Enron, just the people that worked there. You know, it was a scarlet letter for several years. And now you look back and like, where those people ended up in the number of different things that they started is amazing. - Yeah. - So one of the real innovations that Enron did is the exchanges and the electronic exchanges started going during this time. And then Enron created Enron Online. Do you remember, did you? - Yeah. - For like this. - Enron Online. - So Enron Online was about it though, because there's a lot of people that aren't. - So there was ice. Ice had started. And ice was a group of banks and some energy companies that had taken, they got an ownership stake in exchange for promising volume to the platform. - Yeah. - But it's very hard to get momentum on these platforms. - Yeah. - And so if no one's posting numbers, nobody wants to post numbers. And so that's why the founders of it said that it will give these 10 big market participants who's about 10 equity in exchange for guaranteeing volume on the thing and try to use that as a mechanism to get momentum onto the platform. It for many years was largely failed. And you see firms that last day of the month go do some big block trade, which wasn't the intent of these volumetric commitments, but they had a real hard time getting liquidity. And so Enron decided it's gonna do a one-to-many, so rather than the many-to-many platform, it was a one-to-many where Enron was the counterpart on every trade. Enron posted live two ways in dozens of products. And so from the fixed price side, we would have front month, one or two seasons, and usually a calendar strip. And so all the customers would see this. There wouldn't be marketing fees added onto it, a customer who wanted to hedge, who had agreements with Enron could just log onto the thing and get a really good pricing on it. And my assistant would keep the markets that I was responsible for, but we did a lot of our physical gas trading on this, our basis trading on it. So we had dozens of live markets during the day. And so during this time, there was big volumes coming through Enron online, 'cause people just found it easy. They didn't have to pick up a phone and call the floor, the exchange, they didn't have to call it over the counter-broker. Those markets were still both active, but it was just easier just to take your mouse and click it. And you did your transaction. - It's so funny to you know, for like our generation that came up with the internet, just thinking about life before the internet. - Yeah. - You guys had to pick up a phone and call it broker. (laughing) - Yeah, I think back about, I mean so prior to that, there were two ways to trade. You were calling the floor of the exchange, right? Some broker who was sitting in New York at the 9x now, of course, a CME, and you talked to this phone clerk, and you'd ask him where the market was. He would shout into the pit, right, asking his trader where the market was. Trader would kind of sense it out, ask one of the market makers down there for a market if it wasn't obvious. And like get relayed back, market maker would tell the trader, the trader would tell the phone clerk, the phone clerk would tell me, I might tell a customer or I might be from me, right, just the inefficiencies of it. And so this is all, how do we disrupt this terribly inefficient platform? But volumes on the floor during this time were still very high over the counter market, was still very active. And so it was, I would have one phone, one year was with the floor from the opening belt of the closing bell, I'd have, and my other ear was for the over the counter brokers. And then they had the mouse controlling the markets and then people shouting too, 'cause I would execute all the floors business, whether we had a customer or whether there was another floor that was taking fixed price risks and needed to hedge it out. - Yeah. - And just like at the end of the day, it looked back and just the amount of volumes that were coming through there were astronomical. But it was amazing learning experience. - Yeah, because I mean, you guys, the volume that you were doing compared to ice back then, I mean, I can't remember what the ratio was of, you know, trades, how many y'all were making for every one on ice, but I mean, ice wasn't even a contender. - It wasn't at those days. - Yeah, it was nothing. The partners on ice, people that own the equity steaks, were trading on an online. - Yeah. - It was, yeah. - That's, and you know, you have a good product when they competitive using it, right? - And it was, there was real value in a number of ways. Or when it was, it's great liquidity engine. And it was the largest trader. So by just fading, if you want to sell, you just fade your bid offer a little bit to the sell side and you can sell a lot of contracts. - Yeah. - And you also got to see who the other side was. And so we had that information nobody else did. - Yeah. - So we could see what everybody else in the industry was doing. - Yeah. - Which was tremendously valuable. - Yeah, absolutely. - Yeah. - You have that data, you know, where the market's going, right? So you can use that data. - Yeah, you just know what everybody else is doing. So, you know, just get to the end of the day and just look back at the volumes traded and it was massive, but it was a great place to work. It was a lot of innovation. Some of it worked, some of it didn't, obviously. - Yeah. - So, Enron, you know, Fah Bankruptcy, December 2001. All right, so shortly after 9/11, the financial markets freeze up. It was kind of, and, you know, I'm trying to decide what to do. So, I could have stayed at Enron forever. I just really enjoyed it. It was a great place. But now I'm kind of being forced out. And I got to make a decision. And so, the, now is, so the Enron trading floor is deemed to have value, just keeping the systems and the people together. And so, the estate of Enron cut a deal with UBS. And so UBS took a paradigm version of the Enron trading floor. And so, took maybe half the people, half the head count, in all the systems. And so, Enron provided the, the human capital and the technology, and UBS provided a balance sheet. And so, you know, if all the things that worked at Enron, you know, of all the different divisions, the gas trading thing always worked. - Yeah. - That was the money maker of the business. And so, it came down to the decision, like, do I wanna go with UBS? And I decided, this is my time. I've gotten paid well. I'm single, I don't have kids, I have no responsibilities. I've got some money in the bank. I wanna go take a swing at it. I wanna go run something. And the deal with UBS, it was, it was a bit of Morpheus. They wasn't a, a structured financial deal. It wasn't for me to lake. And it wasn't sure what the trading capacity would be, what the limit's gonna be. And it was still pretty large. And so, I just, I wanna do something small, I wanna go run something small. Didn't know under what capacity, right? So, I thought about, do I wanna go run an energy desk at a bank? Do I wanna go to a hedge fund? Or do I wanna go out on my own? And I just kinda explored those three options. And again, now I'm still kinda 27, but I'm like, you know, I'm, I think I'm king of the world. And so I have all this. - You get a lot of good offers at the time too, right? - Yeah, so I had, I could have gone and run an energy group at an energy firm, and the trading group at an energy firm. I could have gone and run the desk at one of the big New York banks. I got offers to go to a couple hedge funds, but it became clear, I started getting calls from people in town, some people out of town saying, you know, if you go do your own thing, like I'm interested in investing with you. And so as I thought about it, I remember going to visit a gentleman, one of the, one of the first guys who did commodity trading in a hedge fund format and a small hedge fund format. And he, I go into his office, and I know him, he had 10, generally up to that, I go and just talk to him about his experience with it. And I show up about noon, and he's got a glass of wine on his desk. This is like, my wife doesn't like me to drink, but my doctor says I need to have a glass of red wine that helps me for my heart, right? - I like, this is pretty cool. I just came from this big corporate atmosphere. Like, you know, the fact that, you know, you do something on your own and you can have a glass of wine at your desk and your wife. (laughing) It's kind of good. And so he kind of set me up with his bank, and I had gotten high confidence that I could raise the money, the day one money. And so it was really between, do I go work for a hedge fund or do I go start my own? That's where the best economics lay. Formula-Age payout. And I realized that the only thing that working for another hedge fund provided was day one capital. - Yeah. - Right? - That there wasn't really any synergy between what I was doing and what they were doing. - Yeah. - And so if I could raise my own day one capital, then why share half of it with my employer? - Yeah. - So this is kind of first quarter of 2002, right? And so I told UBS I'm not going with you, I'm starting up on my own. And then the stories on Enron start getting really bad about the second quarter. So first quarter I'm out setting up my business. I go, we went off the space, I start hiring some people, start buying computers and raising money. I'm doing the NM, I just traded off a balance sheet before I never had a fixed capital stack. And so I want to start $50 million as a capital and just kind of start small work my way up. I'm going to have to cut people back because there's so much interest. I think I, you know, I think there's $100 million of demand for this product. And then second quarter comes. And I've signed the commitments for the lease and I've signed commitments to hire people and bought furniture and the rhetoric on Enron just was horrible. And every week there was a new scandal coming out. - I think the Houston Chronicle ran What was it like, 1,400 negative? of articles about in run that year alone. - Yeah. - And then New York Times and the Washington one. There was a lot of stories to report on. And so everybody, all the investors, or almost all the investors said, "Hey, you know, like I'm not sure everything's kosher over there, but I'm not sure, you know, there's started to be some of the scandals in the power trading side of Enron. We're hitting the papers." And so they all said like, you know what? Oh, I'm not gonna be day one, but, you know, I'm gonna stay in touch. Right? So it took two million of my own money. I had my clearing firm had this program where they, if you clear there, they had this emerging manager, where they put five million. So they stayed and I had one other investor, a random guy out of Chicago who put in a million. And he got eight million dollars. I'm like, that's what I got. Like I got to start. So, it's the same thing you got. - It's the same thing you got. - I don't know what's real in this industry. We need to regroup. - Yeah. - And so, all the big trading firms, either also went under or got their risk limits severely pulled back. And so, there was just chaos in the market. And I'd come from, I was the biggest market maker in the market. And so, here I am, from first day, it was like, there's this free money. Just arbitrage and market making. And you don't even have to put on any risk. And you can make good returns. So, first three months, I'm doing it. I, you know, all three months were 30 something percent returns on capital. And I remember, and I'm still trying to raise money. And I remember going to, literally, I went to this dentist in Houston. And I'm trying to get $100,000 from this dentist. Right? And I'm beating my head against the wall. I'm like, what am I doing? I make $100,000 a day in the markets right now. Just stop. Just stop trying to raise money and just focus on making money. And if you make money, then everybody's gonna show up again. Ensure enough, kind of within, kind of six months, I was sending out the monthly letter to all the investors that I had thought were coming in on day one. And so, a lot of them start calling up and going, "Yeah, I think I'll send you some money." Right? So it starts to go well. And the market still chaos. And the market, the forward market in most commodities, and especially in energy is sellers over. We just have more concentrated fixed price risk is in the hands of producers than is in the hands of end users. So the market's always sellers over for term. And there was just no risk capital to take the other side of that. And so the market's trading at what I view is very depressed levels relative to fundamental value that kind of fall into the winner of 2001. And it starts being a bit cold winner, right? And balances are getting tight. But the market still doesn't have that much risk capital. And it's just not many traders in it. And so, market stays too low for too long. And it gets to a point where, you know, it's long, the risk reward on the trades really good. Start buying some way out of the money calls for March and get lucky, right? If this cold snap forecast late February, and the market goes from $6 to $11 and two days. - Wow. - And at the time I have maybe 50 million, under management. And in those two days it made 70 million. And so like over 100% in two days. And like, wow, right? I'd like to do this more often. Okay, now this is big time. - Yeah. - And so, you know, so now we're 2003. So sorry, that was the winner of 2002, 2003. Right, so not 2003. And a bunch of the guys that worked for me or worked with me at Enron, they'd gone to UBS, we're all starting to get frustrated. Now all of a sudden I have some real capital. Right, come on over. Right, come work for me. - How big's the team run this time? - So early 2003, it's probably, it's like six or eight people. But we probably double in 2003, so there's more assets. So I can start bringing in real traders. - Yeah. - Yeah, other traders and diversifying some of the bets we're making. - Yeah. - Because there was pretty much just me in the beginning. - Yeah. - And then from there is just this remarkable run. It was kind of, the industry provided incredible opportunity really through 2009. It was just this unique time in this space, probably, you know, certainly in the history of natural gas, but in the history of kind of traded financial products, it was just, it's an incredible run with lots of crazy stories we can get into if you want. - But, where do you want to go? - I want to hear all the crazy stories from, you know, I imagine, you know, going through, you know, financial crisis and the impact that that had on markets. I mean, I'm just sure that there was a ton of crazy stories from the market at that time. You know, that's also at the beginning of, you know, the shell revolution, you know, starting to get there in the 2010 time frame. So, you know, would love to hear a little bit, you know, why the opportunity was good during these times. So, natural gas is this, if you had to create a right down characteristics of what makes a commodity good to trade, it would kind of define natural gas. So, it was one that especially in the 2000s, in the 90s and 2000s, people still didn't know about. It was, you know, kind of late 2000s it started to become much more prevalent. But before that, people weren't graduating from college saying I want to be a commodity trader. I want to be a natural gas trader. Yeah, right. It was like, I want to trade currency, I want to trade bonds, I want to trade stocks. And so, and the banks kind of got in and out of the market. Sometimes they were bigger, sometimes they were, you know, had some risk capital, sometimes they didn't. But it wasn't getting the best people in the banks. But it was some market that was, you know, you have, it's the marginal demand. So, from the power sector, you look at just the stack, the power stack and natural gases at the top. Right. So, there's a lot of flux, a lot of volatility in demand. Yeah. Right. Supply is very inelastic in the short and medium term. Right. It was the market during that kind of 90s and 2000s was getting tighter every year. As demand was going up, mostly through power generation. And the next molecule was getting harder to find and extract from the ground. So, you were getting to new pricing levels and you had this boom and bust cycle associated with that. You had a market that had to balance at least once in kind of twice a year, right, with defined storage. And so, the market almost demanded that going into the winter that you had at least, you had a minimum level of minimum amount of storage. And then you had a maximum amount defined by how much storage capacity is there. Right. And so, it had to at least once a year had to get back to that fundamental value. It could deviate before that. But by October 31st, the market had to be in this range of storage. And then by March 31st, you had to at least have this minimum amount of storage. So, twice a year, you were constrained. And the price had to move, it had to move in order to get you to low storage levels. Yeah. It was very highly traded. Right. So, from for quarter 636, that bifurcated producers and users, right, that the molecules had to trade, had to change title. Right. It had to get traded. And so, that created that role for the marketer. And there was a lot of people who had significant exposure to natural gas, both from the producer side and the end user side. So, a lot of forward hedging. Yeah. And it was a closed system, right? You can model it. You didn't have to worry about who was the error to the thrown in Saudi Arabia, or what's OPEC going to do over the weekend. You know, economic trends didn't affect it in the short and medium term. And so, you had just kind of inelastic supply and demand, you had to have these big price moves to balance the market. And then it set up the boom bus cycle. Right. And then you had a lot of passive money that would come in over the years. It was just great. It's kind of all these things. It kind of sounds like, I mean, listening to you, it's almost as predictable as. that comes to commodities. Like when you have these two points of the year where these events happen, it sets up, you know, it's gonna go one way or the other right, and so you can play on that where you have another commodities, you're not able to do that. - So, yes, when some commodities, copper, for instance, right, you can have, if people are bullish copper over the longer term, you can store copper anywhere. - Right, yeah, there's no constraint on maximum amount. And so, you need some minimum storage, but that doesn't come into play very often. And so, you don't have that or gold, right? There's no constraint on storage or gold. - Yeah, right. - For those of you that haven't heard of Petroviser platform from Dategorization yet, well, you're in luck because it just so happened to be the sponsor of the Willingess Service Podcast. So, Petroviser is a knowledge automation platform for EMP companies production and operations data. If you're watching this on video, I know you can see the screen share, they're walking us through a demo here, super, super slick. So, what does it do? It removes existing data silos to automate the flow of data and knowledge across the EMP value chain. So, what is that? So, doing this creates knowledge automation for everyday work, while enabling scalability, speed of deployment, and data transparency throughout the organization. Customers use Petroviser to make the best use of their data, preparing themselves and their organizations for a generational evolution of technology. With the platform operators have seen an increase in operating netbacks, having lower lifting cost by 10-20% through advanced problem detection, and lift optimization. In addition, operators can reduce data management cost by 80 to 90% that is no joke, while increasing data utilization with Petroviser. These guys make it super simple. Petroviser can be implemented in a matter of weeks, not months, saving hundreds of thousands of dollars to the operator, if not millions. Head over to digression.com to learn more. - What was the single biggest trade you ever made? - Let's talk the Emirate trade for a minute. So, that was not the single biggest trade, although I think that's, that was definitely something to me. - It's so known the Twitter thread that everybody was asking. - People know me from Emirate. - Okay. - And they ever just received so much attention, and it was presented in the press as Centauras versus Emirate, and it wasn't that, and I'll get into that. But I think people, I think get interested in the story, so I'll get into that. - But get into the story, right? - Yeah, so, and I'll start with a little bit of background, because I think it's important. In the 90s, a lot of hedge funds were doing arbitrage type strategies, convertible bond-arb, on the run off the run bond yields, merger-arb, right? And that stuff started to get arb-dapped. And so the returns on that were going down. And so you had these big hedge funds, like the Citadel and the HBKs, who said, like we need to start ramping up risk. We just have to, because otherwise, we're not gonna earn above market returns. And a number of hedge funds ended up getting into the business, right, including Emirate. And Emirate hired Brian Hunter, and Brian made a ton of money in 2005. So this was a year Katrina hit, and then Rita hit. And so, market was already tight. Katrina hit just, runs right through a lot of the processing facilities. Louisiana, prices bike, Brian makes a fortune. Right, he comes out and thinks he's top of the world. And in '06, puts on a very, very large position. And I had a piece of the other side, but it wasn't me versus him. He was the, he was versus the market. And I think he tried to get very cute. And again, this is a time I can, I see a lot of the trades that are happening. And I can reverse engineer what his thinking is. Yeah. And so he ends up in August of 2006, the whole trade starts to blow up on him. And, you know, his main trade, he had kind of two big trades, who was kind of short, summer of 2006, long the winner of 67 and then short the summer of 2007. So kind of short summer, double long winner, short the following summer. And he had him on at such a size that the market, I think in my view, and many people's view had gotten distorted on these pricings. And when he started going through and the market, just eventually is bigger than any one trader. And he couldn't hold it up and it started to collapse on him. And then they just ran out of money, and I'm not sure whether the risk managers that Amrath really understood because he had it on a spread, really understood the risk he had on. And I think they'd given him so much rope that he was allowed to run with it and put on these enormous positions without a lot of scrutiny. And it all came unwind there. And the market collapsed in August 2006, September 2006. So August and September 2006. And that brought in all the regulators. You started saying like, how could this happen? 'Cause there was real chaos that was created during that time. Yeah. But I had a piece of it, the market had a piece of it. I was surprised whenever, and he called me up as the thing was blowing up, asking me to buy his book. And he kind of showed me what he had. I was surprised. I thought I knew 'cause I thought I had seen a lot of the trades. I was surprised at how big it was. And so the whole thing came and wound, but I was never gonna put my firm at risk by being the other side. It wasn't like, one of us is gonna be right. One of us is gonna be wrong. Yeah, right. And the whole thing. So it's not the binary fight. Yeah. The media made it out to be the first thing. And in fact, if you go back and look at the Senate subcommittee report and it says, in 2006, Amherent dominated the market for natural gas. It wasn't, Amherent then sent to her, has dominated the market for natural gas. Like, we got listed a number of times in that report, but it was like, Amherent dominated the market for natural gas. And I'm like, it was true. Like, it was, it was crazy times. But the best trade, the best trade of my career was 2008. Right? When things were falling apart. And it was this time when the market started the year very tight. Low inventories had had a cold winter. And there's just this rampant trend in all commodities. This is when oil hits 140 something. Gas hits $14, $13 something that year. But although the market had started with coming out of the winter with low inventories, the pricing had got ahead of itself. Right? And so supplies were coming on and demand was being lost. And so the market was actually pretty loose. And people were still kind of worried because of absolute levels. And this is really where Shell started to come in. And it's, I remember seeing a few people come to the office and just like present here are their pitches to invest in the physical assets of, of Shell. And I kind of, so you had already had Fayetteville. You kind of had born net, started had started to be defined. Fayetteville has started to be defined. And the big one now is Marcel's. And people were just putting out the maps of how big Marcel's was. And how big the modeling was about the amount of gas. And that's I think the second quarter of 2008 was like, wow, this is complete game changer. And this is not built into the market. And so there's still fear because we're at low inventories, but this market was just trading so double digits. It's just fundamentally mispriced. And so we kind of as a firm wrote up the price into the summer. And then the economy starts to fall apart. And we reversed kind of pretty much at the top. And kind of wrote it, the market up the first half of the year and then wrote it down in the second half of the year. And that's when kind of that late '08 into '09, the market really started to start understanding the shell industry. And how this was going to change the volumes that were associated with this. And that we were going from a market where you had to use price to allocate scarce resource to one that was going to bounce around marginal cost to produce. It's just completely different how the market prices. Yeah. So I want to rewind it a little bit. I've got this question on my mind. Talking about when you made the decision to start your own operation. I was kind of laughing when you were telling the story about raising capital. And you know, you're talking about well, I should just do it and just make money instead of trying to raise this 100k. I just go make 100k. It's reminding me of our story because we had that same epiphany last year. It's like wasting all our time trying to raise capital. Let's just go do it and generate revenue and then start doing that investor start. I come into you, I'm trying to put money in. So it's funny to hear you have a similar startup story, but was the big driver for you starting your own operation? I know you said that there wasn't a lot of value from UBS or anyone else. It was just kind of, they provided the capital, but outside of that there wasn't a lot of value. I mean, did you have like that entrepreneurial drive and spirit to go do your own thing? Was that a big driver for you? - Yeah, I just wanted to, you know, especially coming out of Veneron. And again, I could have stayed at Veneron forever, had the company taking a different path. But it didn't, and it kind of was the kick in the butt, I think people need, you know, at times in their career. I think they're inertia of just staying in that seat because you did it yesterday can be very strong. - Right. - And sometimes when you're forced out of that seat and you have to then go decide, what do I want to do? That then, okay, do I want to take a similar seat at UBS or no, I'm gonna go do my own thing. And that was when I'm gonna go do my own thing. - And I also had, when I was at Veneron, they half my comp was in stock. And yeah, the stock was golden handcuffs for a while. And then it was, those handcuffs were obviously released. But I really did want to control my own destiny. At that point, like, you know, I had worked for the big company. I had had the goods, the good and bad of working for a big company. All the resources around it. And so I knew I wanted to go have control. And the question was, when I go from this trading floor of 800 people to one of eight people, right? I think I can replicate 95% of the information flow. The big question was, can I, does that translate into 95% of the profitability or 90% of the profitability or 0% of the profitability? Is all the value add that other 5% that the 95% other people can get that as well? And that's not the secret sauce. And it turned out, again, like, it's had the benefit of great timing in my career, that when I was started Centaurus, like the market was just in chaos. And like even people who had the knowledge didn't have the capital. They didn't have the corporate capital or the hedge fund capital. And so it was just on my own, my small team, we were able to go take advantage of those opportunities. And then we started getting much more sophisticated. And so, you know, one of the great things about gas, NAC NAC gas is, the information is out there. Because of 636 and the pipelines are independent and they have to publish their information. If you knew where to find the information, they wouldn't make it easy to find. And it was, and it would just be a huge set of numbers. You had to know where to go and what those numbers meant and how to use those numbers to build your model. What is, yeah, at this station, where's the demand? Okay, it's a power generation facility. Okay, you start getting all the flows into power generation and you can start building a model of power generation demand. Right. And, but you had to know where to go and how to do it. And so we started doing that. And so my goal was, I want to, I'm going to spend more money than anybody else than maybe BP on fundamental. And Ron was always deep, deep fundamentals. Count the molecules. Yeah. Molecules of demand count molecules of supply model what's happened in the past and that creates, you know, the model for what's going to happen in the future. Yeah. And so starting to replicate that. And so as a hedge fund and one that has these management fees now that are starting to be very significant, I can go higher to these people who have the expertise. They how to use that information that's out there. I can hire people who are great at using big data. Right. And let's create the model. And so I will, I need to have the highest confidence level possible whenever I'm putting on the trade that, that we're right. And again, like at the time, I think BP was the only shop because they were both sophisticated in the market about how to use the data as well as, they were still touching customers and we as a hedge fund weren't. Yeah. It's crazy. This is like the pre-inverest days when nobody really had access to any kind of public data. So it's kind of nuts to think about that being like the major competitive edge. But I mean, honestly, not much has changed even in the space today. I mean, if you don't have access to data, it's really hard to make any kind of moves. I want to ask you really quickly about, being an entrepreneur is stressful. I've been doing this for about a decade now and you got really high highs, you got really low lows. I'm curious, was it more stressful working and running the trading desk and in-run or working for yourself now that you're, you're playing with your own money, which you're also playing with, your LP's money and things like that. I'm just kind of curious as to, yeah, it's a great question. You know, I think it was, it was more stressful at Enderon 'cause I'm still trying to build my career and build my reputation and it's really at risk early in one's career. I think there's a lot of path dependency toward in trading about, you know, if you start off with two bad years, you're out of trading. Yeah. If you have those two bad years and you're 10 and 11, you still have your seat. Yeah. And so if you start off well, then you build up reputational capital for those down times 'cause you're gonna have those down times. And I think I also learned how to deal with the stress over time. It was, had some unhealthy habits, just kind of at Enderon, just the amount of stress that came out and it was hard to manage. I think the trading is generally a young person's game just because it's harder to manage that stress level. The older you get and the more responsibility, especially on the outside of work that you have. Yeah. What were some of the things that you found out by like allowing you to handle that? Was it like exercise or meditation, journaling? Yeah, I wish I had a good answer. I think a lot of it was self-confidence. Okay. And so whenever we started making really good money at Centaurus, I made sure we'd do forced distributions to all the investors, including to me. And so over time we handed back way more than a hundred cents on the dollar to investors. We just say like, everybody's taking 20% off the table this month, it's a sending out check. So now I'd take money off too, right? So that it was like, if we ever have the blow up time, because it's markets, you're always susceptible to that. Yeah. Right? Like we can all walk away and be okay. Yeah. Right? And it's like, if you're on the craps table and you never take money off, right? At some point you're going to seven out. Right? And when you seven out, does everybody go, good job. Like that was a great role. Right? Or does everybody cost? And I wanted to make sure that everybody, if that ever happened, or I sevened out, that everybody said that was a great run. Thanks. I was glad to be a part of it. Yeah. Plus like, I'm good financially. Yeah. And so I had gotten a point, and I talked a little bit about that path dependency. I had earned the investors trust. And so I was able to do, to handle bigger drawdowns than I think the rest of the industry was. Yeah. And so the investors with me had already gotten their money back multiple times over. And it was house money for them. And so they had confidence in me. I had enough money outside. Like, you know, I'm set. And so if we believe in the trade, if we really believe in it and think this is more of a squeeze than change in fundamentals, we can stick with it. We're not getting the tap on the shoulder from our investor base. Yeah. Yeah. Really helped with this dress. So you go and build Centaurus. And it's very successful. Guys build a fortune, you know, for LPs, for everyone at the fund, for yourself. Why'd you quit? Such an early age. Yeah. So there was, or a lot of reasons. I think the easiest thing to say is, I didn't enjoy going into the office anymore. I just didn't enjoy it. And when I had enough resources that I should be spending my time in a manner that I enjoy. And so the second order question is, okay, why wasn't I enjoying going into the office? And there's kind of a hundred little reasons. Some bigger, some little ones. I had gotten married, had kids. So you start using some of your mental energy over there. We had, my wife and I had put together this foundation and started having a little bit of mental energy over this way. The markets had gotten harder over time. They were just, as they should, the market should always get more efficient over time. Yeah. But especially when I pushed '09 when the markets, when you had extreme volatility pre '09. And then the shell overhang and supply overhang that made the volatility. really removed the volatility from the market. And so this became, you know, little price moves. - Yeah. - The regulatory environment had changed. It felt like I had a target on my back, and a post-amaranth, and then into a different administration, it was like, do I need this? And I had done 17 years in energy trading. And that was the only thing I had done professionally, and I just wasn't getting that mental challenge anymore. I was coming in and going through the motions. And I always enjoyed the game of it, and that challenge of it. And I was no longer challenged. And so I think, you know, there's other reasons besides that, but kind of everything together, it would get to Monday morning, and it would be like, it's Monday morning, whereas in the earlier years, it would be Sunday night, I'd be like, yes. Tomorrow's Monday morning. - Dr. Stovart. - Great. - Yeah. - And so I've got the resource, I want to spend my time doing things that make me happy. - It's such a great lesson, 'cause it's all start of founders. You know, we think about, you know, the exit and the end goal. And I've taken a lot of time recently to appreciate the journey and the challenge and building. And I think a lot of people take that for granted, because once you reach, you know, the end destination, you get to that point where, you're just going through the motions or it's no longer fun for you. And so, you know, I think that that's a great lesson from that is kind of slow down and enjoy the day to day process of the journey, because once you get to that point, you know, got all the money in the world, you know, now you've got a family and you're doing philanthropy, and you know, you, other things become important to you, right? And so I think that's really important to appreciate the journey of building what you're doing it to, because someday, you know, may come to an end and it's not something that you enjoy necessarily. - Yeah, and the exit's, is hard psychologically for a lot of people, and I was worried about it. And I think I stayed in that seat two years longer than I should have in retrospect. Again, like just that inertia of, you're coming into, you're going into more because you came in today, right? It becomes really strong. And I can texturally change careers or to shut something down or to sell something as hard because you have to say, make this proactive move of change. And so, especially when it's, they metaphorically my name on the wall, it was hard and I had a bunch of people working for me and I was worried about what happens to them. You know, if I closed this thing down, ended up finding a great solution for that. But I'd seen a number of people leave the industry because they had gotten burnt out or frustrated and they went and searched for something else and couldn't find that other challenge and came back to the industry. And I was really nervous about that that when I shut this down, like was I going to be back in two years, kind of starting a new firm because I didn't find fulfillment in my life outside of energy trading. - Yeah. - And in retrospect now, like I found a lot of fulfillment and I never second guessed that decision to shut it down. The only second guessing was, yeah, I wish I should have done it a year earlier. - Yeah. So let's talk about the foundation that you and your wife started. What was kind of like the genesis of that and like what was the mission behind it? - Yeah. So I think a lot of people from the financial industry have been interested in K-12 education. K-12 is associated with a lot of life outcomes that people care about from employment, poverty, physical health, mental health, family structure. So it's associated with the outcomes of K-12 or associated with those other life outcomes. And so I had gotten involved kind of early on and it was really when I was back at Enron, kind of a funny story. I was at the supermarket and checking out and they had all the magazines right there. And there is a magazine at top 200 nonprofits in America. And it's like pick it up. Starting to make some money, I should do something good with this. Throw it in, go home. Turn to the K-12 ed section. And one of the groups there is Kip, the Kip schools, which were founded in Houston. And so I called up the founder of it and actually I just called up the school and said I wanna come visit. Came home and wrote them a, like a $25,000 check. And this is back when they were really small. And I get a call from the founder a few days later when he gets it and I'm like thank you and I wanna meet you. Like who are you? Like this is awesome. It takes us a lot longer to reach 25 grand than having someone come for 30 minute visit to this school. And that was the start of a very long journey for me thinking of these Edward form circles and starting to think about, why does one school get different outcomes from the school that serves a very similar demographic that's down the block? And I had lots of theories about that and the Edward form movement kind of moved in like trying a lot of different things. And by the end, I started to think this is a lot of it's policy. It's kind of how do you set up this system? Drives the outcomes. And so when we got married and Lauren, I decided like we want to be very, really ramp up the philanthropic efforts, she quit her job as an M&A lawyer and then kind of co-founder of an oil firm to go do philanthropy full time. I joined her a year later and we were doing K-12 but then we had broader ambitions and so we started getting into public pension reform. And again, like the system that was having bad outcomes and the system was defined by special interests, concentrated interest that had a stake in it and had created a system that got structural underfunding and had benefit design problems. And my wife again, from having a legal background, she got interested in criminal justice and some of the problems with the criminal justice system had her first experience was with the Innocence Project, which goes and will prove that innocence for people that were on death row by using DNA evidence that had not been tested during the trial. And I really respected their work because they were using the individual, they were saving the individual but using the individual to show the flaws of the system. How do you fix the system so that this innocent person isn't convicted of this horrible crime to begin with? And so not by design, but we ended up working in these areas that were these big systems where that really affected individuals that had historically been very partisan and there started to be political will to find new solutions for these systems. And there were ideas about it. And so that led us to kind of over time, really morph into this policy foundation. So again, concentrating on issues of policy because I think that those solutions are the most scalable and sustainable, right? It's not a programmatic intervention. It is how to change the rules and incentives of its system to get better behavior. And a lot of our work now is, a lot of people are trying to add programs to the government, right? And we're concentrated on how do we improve the systems that we already have? - Yeah. - How do we improve the healthcare system? And how do we improve the criminal justice system? How do you improve the educational system? We already have this stuff. You think the outcomes on it are mediocre, right? And we can improve people's lives by getting better outcomes. And so that's led to this very long journey now. You know, you have a foundation that's kind of 11 years old now in this current formation. We have about 100 people, offices in DC, New York, Houston, programmatic experts in all these areas. We get very interested in areas where we call them orphan areas where other philanthropic interest doesn't, it isn't already involved. So when we got involved in healthcare, there was a lot of philanthropic interest in innovation, a lot of funding on that. Like so let's find a better cure for disease X, right? And we thought about it, like nobody's working on price. What's the cost of healthcare? It's both affecting government, right? Is healthcare is eating government resources. So government can't fund the other things that we want government to do, as well as it's affecting access at the individual level, both the financial outcomes of the individual as well as just access. People can't afford to go to the doctor to get the treatment that they need. And the system is very much dominated by special interests. and really nobody, no philanthropy had come in. with this perspective. Let's try to make this system less expensive. We've been involved in a number of areas to improve the system of democracy through things like anti-gerrymandering, promoting ranked-choice voting, for instance, higher education financing. Federal government spends a ton of money, hundreds of billions of dollars on subsidizing higher-red. For a system that gets very mediocre outcomes. There needs to be accountability in that system. To both protect the government's investment and more importantly, make the outcomes for the individual better. And so we've just, like, it's just grown into this broad policy foundation and it's the hardest thing I've ever done. I imagine so. I mean, you're talking about trying to solve some of the world's hardest problems there, right? And I want to thank you for doing that. It's incredibly noble. We start talking about the healthcare system. Talk about an industry that has. We've talked about this. How many car rides have we talked about? Just how it's completely broken from. Especially like being founders, it's like if you're going to pay for insurance, it comes out of one hand or the other whether it's yours or the companies. Especially when you're a boost-trapped, you try to save every penny you possibly can. And so then your health is at risk. You have a jack-up health issues. But you know, there's just such misaligned incentives in the medical industry. And there's just the systems broken. And you know, you made a really good point where a lot of foundations focus on technological innovation and things of that nature but really have to focus on the core issue, which is how the system's set up and that's what controls you. And we need both, right? The innovation is important for sure. It's just like, we weren't sure how our. The value ad was on innovation. We were not science experts. And a lot of this stuff was already funded by smart capital allocators and smart grantees. Yeah. I would imagine that it's like equal parts fulfilling as it is frustrating, as you dive in and you uncover like just all of the policies about why things are the way that they are and just how much of an uphill battle it can be to change those kind of things, to the worst of those kind of things. Yeah. You know, certainly at the federal government level, just the power of entrenched interests. I thought I understood it. I didn't understand it. We have a healthcare system that looks the way it does today because the most powerful lobby are none in DC is healthcare. Really? Yeah. Are none. And you have the drug companies, the hospitals, the physicians groups, the disease-specific organizations. And any time you start proposing something, there's the saying that a dollar of spending is someone's dollar revenue. Right. And if you try to decrease spending, you're also decreasing someone's revenue. And then they come out with a story of how it's going to destroy the healthcare system if their revenues get cut by 2%. Yeah. And how people are going to die. And you don't hear the story of people are dying today because they don't have access. And people are dying today. Or we have governments, right, is particularly true of the state government that can't print money, right, where every dollar that's being spent on healthcare is a dollar that's not being spent on something else that government could be doing. And there's just, there's very little accountability in the system about how things are priced. And the market power of the actors in the system. I bet we could have an entire other podcast on issues that you're trying to combat. You know, before we end this one, I got to ask you a couple questions. You're also going to have people pissed off at me that I didn't ask you these types of questions. But we don't have to go super deep in this. But let's talk about energy transition. I know you've sent off a couple of tweets talking about the transition. And you know, what role, you know, I had a really big report that came out this week. Just talking about how aggressive the adoption of renewables and electric vehicles and carbonization will be until 2050. You know, what do you see happening with oil and gas over the next, you know, two, three decades. And especially everything that's happening with electric vehicles, like, I'm not going to lie, that Ford F-150 that just came out. Oh, yeah. Hell yeah. It's pretty slick. I love that. I love when technology drives adoption. Right. And I think that's how it should be. But how does this impact oil and gas markets, you know, moving forward. And I'm really, it's really good to hear, you know, talk when you talked about, you know, the catalysts or the beginning of the Shell revolution. Yeah. There's just such a huge supply of net gas and that completely changed, you know, the volatility of markets. You know, what do you think this oil and gas industry looks like over the next couple decades? Let's say next decade. I'll give two perspective that are counter each other. So one goes back to this, the Shell metaphor. Right. And if you look back, if Shell volumes in the kind of 2005 to 2008 time period. And they were very low. Right. And they're increasing and it's very difficult in the beginning for a revolution like that to distinguish between a linear trend and an exponential trend. The S curve versus a linear curve. Right. And so a lot of people were looking at the Shell volumes. And again, when is it a very low base? 30% a year compounded isn't that much. And you can still draw a linear trend through that. And it still kind of fits. And psychologically, especially people in the energy industry, I self included. There's very little revolutionary things that happen. Things are evolutionary. We're used to linear trends. Right. And this is why I think the industry missed the Shell revolution. The ramifications of Shell for a long time. Even people who were knee deep in it like Aubrey McClendon. But still didn't understand. He was the cause. He was leading the charge on this. And he didn't understand the ramifications of it because we're all. We're all just trying to make sure that we're all on the same. We're all on the same level. So, we're all on the same level. And so, you know, the real thing is that we're all on the same level. And we're all on the same level. And so, we're all on the same level. And so those projects aren't getting funded and oil demand is still pretty much set for the 2020s You can argue about where the 2030s are gonna look like yeah, but 2020s is like it's hard to change Mm-hmm and Is that investment being made? For like where those 2030 barrels coming from yeah, I think that's the bull story at least in terms of prices Yeah for oil 100% I agree with you. I got a wild card question for you For you in this for a guy that loves volatility. What do you think about Bitcoin? I did a trade about this I think last week So I'm very open to it. I came very close to buying cryptocurrency a couple times and Certainly kicking myself that I didn't the problem I had with it was What is the real use case for it? Right, and I just always struggled with the use case because the promise of it was Micro payments it was low cost cross currency transfers There was a few other other aspects of like the problem that crypto was trying to solve Right versus how's it being used today? Mm-hmm, and how it's being used today is a Payment for illicit goods speculation tax evasion You know it's People is a bet against the US dollar Right which I think that may be the legitimate use but yeah, but it just become I struggled to see What the use of it is besides just the speculative instrument yeah now Gold's arguably a speculative instrument and that Was existed for a long time and people use it as a store of value Yeah, and I think there is a believable story about crypto being a store of value that's independent of Central banks and I think that's what got me interested in it. Yeah But I do worry and why I haven't bought it in the past couple of years is because I worry about Governments don't like Having this out there As being able to evade taxes as being a way to pay for illicit goods as being a facilitator of ransomware You got rid of all crypto Hey, the ransomware Goes to zero like how do you pay the person yeah, right? And so I do think governments are gonna become Much more aggressive at trying to stamp this out and you've seen some headlines from China We're about China's role on on crypto. Yeah, even this week past day or two US has come out and started talking about the tax reporting that needs to happen For yes, it's like 10 like up to or as soon as it's over 10,000 Any transfer of more than $10,000 of it you have to report just like it's cash Yeah, yeah cash right kind of the same thing like cash is used as yeah as a payment for illicit goods It's used to evade taxes USD's always been a favorable currency for criminals. You know, so yeah Yeah, so like this is why there used to be $10,000 bills. Yeah, right and government got rid of that They're like who needs a $10,000 bill? Yeah, they got rid of that and got rid of the $1,000 bill the biggest bills a hundred dollars now So right if you're trying to move significant money and cash It's actually hard because you have these you need big suitcases It's kind of harder than if you pull out if you you have a handful of $10,000 bills like having a hundred thousand dollars of hundreds It's just harder and I think Government's just gonna put up roadblocks. So I don't know where it goes. What would a 28 year old John think about cryptocurrency Seeing the volatility in the market and being a trader. I mean would you be all over that or yeah He's like you said like yeah, they made it really bad. Yeah, I think The market makers in crypto or just brushing. Oh, they had to be crushing it. Yeah, rushing it. The arbitrage across exchanges Yeah, the market making revenues that send it they're just rushing. Yeah, and that's what you know I don't want to get too deep into this conversation But you know if you talk about the intended purpose of Bitcoin being a currency and obviously it hasn't fulfilled that but then you look at it as a store of value And it's just keeps getting more deeply ingrained into the market you know the longer that it exists Yeah, it's like how long can you let it keep going before it becomes I mean, you have futures trading on it now and you have hedge funds that are focused on crypto currencies and just getting deeper and Great into the economy and into the markets as a whole and so um, you know, it's just really interesting to see where it's come in the last decade From being currency that you use it on illegal website. Yeah, where it's at now. Yeah, I mean, I don't think anybody Under the age of 40 owns gold Yeah, right. I don't think yeah, I'll Bitcoin Yeah, everybody yeah, and I think everybody in their 20s, you know has interest yeah in buying some crypto Yeah, yeah, so I think the money flows are very much You know pointed on a very bullcase for it. Yeah, it's great And that's the government finds a way to try to shut it down. Yeah, for sure Well, I'd have thought that random one actually That's like my personal has john Arnold. He thinks about Bitcoin Maybe the only person on the internet has got to do that. So john man, thanks for coming and doing this Yeah, it's been fun. This means the real pleasure. Yeah, it means a lot to Jake and I I mean I said at the beginning. This is like the pinnacle of our podcast and we started our podcast a couple years ago We want to guys like you on the show and so Seeing that come to fruition and you just taking the time to do it I mean speaks a lot to your character and I know a lot of people out there listening are gonna find a lot of value in this and You know, just appreciate you giving back to the ecosystem here in Houston. Oh, thanks. It's great to be here. Yeah, absolutely All right guys, what an episode if you got two seconds, please take time and share with your friends family Leave us a rating or review and we'll catch you guys on the next episode Baby