Speaker 1All right, Sean, I'm going to make the case that if you're not an AI person, which I'm not, there's still a lot of money to be made by building businesses that will grow with AI and they won't actually be AI. And what are those businesses? Communities. So here's two different communities I want to show you that crush it.
Speaker 2I feel like I can rule the world. I know I could be what I want to. I put my all in it like no day's off. On the road, let's travel, never look back.
Speaker 1Okay, I want to talk about two businesses that I think are AI-proof and they fascinate me. Hard F on that, on that fascinate.
Speaker 3That's a P8 almost.
Speaker 1All right, let me give you the first one. So I was talking to a friend. One of my buddies has a company that is selling to auto dealers. And he's been telling me all about the auto dealer like industry. And they're kind of like, as you'd expect, cowboys a little bit. Like they're like, think of like an auto dealer, Midwestern guy wearing loafers and like baggy jeans. And he like probably makes $5 million a year, but he's like, you know, kind of got hillbilly energy a little bit. And so I enjoy hearing these stories.
Speaker 3Not only can I see his face, I can see his crack also, just in my mind's eye.
Speaker 1Yeah, yeah. Like, have you seen that picture of the guy in the airlines where he's like sitting down with both hands on his big jeans and he's got this fat Rolex and he's kind of fat and overweight. And it says like, you know, this guy's about to win the negotiation. That's like sort of how I think about them. But let me tell you about this like interesting company. It's called Nata 20.
Speaker 3Nata 20 Group. Learn from the best. Your peers supported by world-class 20 group consultants and Nata driving you to your dealership success.
Speaker 1Okay. Yeah. Yeah. Horrible marketing. Just absolutely horrible marketing. Okay. So Nata, I think it stands for National Automotive Dealer Association. It's a big association for auto dealers. And they do this thing called Nata 20 Groups. And it started, I believe in the 70s to where if you are an auto dealer, you want to grow your business and get better. And so what they do is you apply to join and you pay something like six or eight grand a year to get in. And then they put you in groups of 24. And the groups are non-competitive, meaning people who aren't in your region and you fly to the same city three times once a year. And it's very simple. It's the most simple peer group ever. All you do is you bring a P&L statement of your business, of your dealership, and you sit down with 20 others and you go line for line and you explain your profit and loss statement. And other people can look at you and be like, oh, you're killing it. I'm going to copy that. Or you suck. Have you thought about doing this? And eventually they've started letting in founders of HVAC companies, people who own like marinas or boat repair shops. And the whole premise is very simple. Just share their P&L. If I had to guess, it probably does like $13 to $15 million a year in revenue because they kind of say what their member dues are and they say what the price is. But as you saw, when you go to the website, looks horrible. It's horribly marketed. And I think if I'm listening to this and I'm not like an AI nerd, I would do one of two things.
Speaker 3By the way, the Nata guy was so excited that he's getting featured on the podcast today. Out of nowhere, his friend sent him this clip. He's listening. And then he just gets the looks horrible, ugly, terrible. Well,
Speaker 1I think it's like a, I think it's a good nonprofit, isn't it? It's either an association or a nonprofit. Okay, okay. And I would do one of two things.
Speaker 3With all due respect. Yeah. No offense, but here's the next five minutes of insults.
Speaker 1Yes. As long as you say that, you can say anything. I would either copy this and just do a little bit better and run ads because I don't think these guys are ever going to run ads.
Speaker 3It says for a hundred years they've been running.
Speaker 1Yeah, that's why it's interesting. They can last forever. I think that you could do this. Do you remember how you had this thing called Club LTV? It was like a community for e-com owners. Yeah. I wouldn't, I mean, you could do e-com, but I would do something a little bit less competitive. It's like dentist practices, lawyers, whatever is like boring where like the average person makes a million dollars a year or like in take-home income. Whatever is one of these boring things where it's just someone in South Dakota who is just a normal guy, millionaire next door type of energy. Yeah. And I would create one of these. And I think it would be a good idea. It would be a great, great, great business that could last for decades.
Speaker 3This is like, like White Coat Investors is kind of like this in the doctor space, right? I love White Coat Investors.
Speaker 1Do you want to explain what that is?
Speaker 3Yeah, it's basically like, it's a community of doctors, maybe dentists also, but I think it's mostly doctors. But it's for them to talk about more of like their finance side of their life. It's not about sharing, you know, the latest and greatest research and how they're applying it in their practice or anything like that. It's more so like, hey, I'm thinking about buying a rental property and, you know, the cap rate is this. Like, what do you guys think? And, you know, there's a lot of that going on. They do media. There's Facebook groups. There's like, it's been going for a long time. It started as a blog. Yeah, it's a successful business. And there's many, there's actually a few others in the doctor space. I think like, I think I might've talked about this on the podcast before. I think there's a pretty big opportunity to just do that. But new age model, because media has changed a lot, right? Like what blogging was, well, today there's a whole new set of media tools and a whole new set of, of doctors and dentists that you could reach and build like a 2.0 version of those. But basically every profession kind of has these. There's even another one. You might know the name of it more than me, but there's a version of this that's not for the same job. Have you seen this one? It's like local chapters in cities. BMI. Wait. No, that's body mass index.
Speaker 1BNI. It's BM something or it's B, what is it? BNI, buyer network. By the way, they were just acquired and I heard rumors it was in the billion dollar plus number.
Speaker 3And so explain what they do. So they bring, they bring together folks with different jobs. So you'll get like the local accountant with the HVAC guy with whatever. And it's like a, it's kind of like, hey, we're all local business owners. We have some shared problems, but we also have shared opportunity, which is we can share leads with each other. Oh, you're, you could be my guy. I refer people to when it's landscaping and I'll refer you people when it's about, you know, whatever legal services.
Speaker 1Yeah, basically. And I used to go to the YMCA and I would see them have their BNI meeting and there'd be like 30 people in the room and everyone has to go through and say some type of like lead. They wouldn't meet at the YMCA.
Speaker 3Where do they meet? Like in the yoga room? What do they do? Yeah. The YMCA is not a co-working space.
Speaker 1You're right. Like what's going on? Yeah, they just like figured it out. But that, because it's like a community-based thing. And so it'd be like a realtor with a garage door service with a lawyer, with a landscape business. So things that are non-competitive and they share leads and they just go in a room and you have to like say like, this person just moved here. We're doing the garage doors. You know, who wants that? And they just sold, I think they have 800,000 members and it costs low digit, thousands of dollars a year to join. I hung out with the CEO of it, really nice lady from Texas and they just got acquired.
Speaker 3So are you going to do just Hampton for every vertical or are you just keeping Hampton as what it is? You're saying, you know, that's not the move for you, but basically there is some version of peer group for most professions where people have enough disposable income and you know, you get the dynamics right where either it's, they can share because it's fundamentally not competitive or you match people, like you said, from other geographies where it's not going to be competitive.
Speaker 1So the reason why I've been learning about investing is because I think that over the next handful of years, no time soon are we going to do this, but I think that what we'll eventually do is buy other communities because I think we know how to operate them well. And I think that the way, like my goal is to build a multi hundred million or sorry, a multi-billion dollar company. And I think that we can get there by owning a variety of communities.
Speaker 3Was that a Freudian ambition slip right there? Being like, my goal is to lose five pounds. No, no, 50 pounds, 50 pounds. You know what I mean? Well, hundreds of millions a year in profit. Steve Jobs didn't get on stage and say a hundred songs in your pocket. No, he said a thousand, Sam. You can't do that. Can't invest that out.
Speaker 1We want to do, when I say hundreds of millions, that's the profit and billions is the revenue. Gotcha. And so we do say like, we think we could do like hundreds of millions of profit. Is that a classic slip? But because there's a few businesses in our space and like the threshold of like you're killing it is do cross nine figures a year in free cashflow. And so, yes, I think that there's a bunch of these businesses that can be combined and be awesome. And so I'm interested in it. Do you want to hear another one?
Speaker 3Yeah. Same industry or different?
Speaker 1Different. Totally different. Okay. So type this in.
Speaker 3Hey, I want to tell you about something pretty cool. We have a database of all of the business ideas that have been discussed on this podcast. So hundreds of episodes, the team at HubSpot went through, they pulled out all the simple, relatable, interesting, profitable ideas that we have brainstormed and they're all available for download for free. Just click the link in the description below. Thank you to our friends at HubSpot for sponsoring this podcast and putting together this free resource for you guys. Back to the show.
Speaker 1So it's called Moda Communities. Okay. So the story is basically this. There's this guy. Well, tell me what you see first.
Speaker 3Buy right, sell better. Moda runs 23 Facebook communities where a bunch of people buy, sell watches, cars, gold, and jewelry.
Speaker 1So I was talking to this guy. He's based out of Sioux Falls. Is that North Dakota or South Dakota?
Speaker 3I'm going to plead the fifth on that question.
Speaker 1Not strong. I'm like Dakotas. Yeah, I'm sorry, guys. South Dakota. Sioux Falls, South Dakota. Okay. And he, in 2018, he was like buying a watch or selling a watch. He was doing both. And he thought, I don't really have a good place to do this. And so he created a Facebook group of buyers and sellers of watches, basically like a community of watch enthusiasts. And at this point, he has grown it to where he told me, I messaged him and asked him, he has over a dozen full-time employees and they have 600,000 members across like 20,000 people. 20 or 25 different communities. They have communities for watches and they have it broken down into watches under 10 grand, watches above 10 grand. And then there's also a community for like the super fans, which is above like $100,000, I believe. Then he has groups for collectible cars. He has groups for gold and a bunch of stuff. And in order to get in, it's all trust-based, meaning you have to talk with him if you're a dealer and you have to like do like a vetting interview. And then another person in the community has to vet you. And then you pay one to two million dollars to five to $10,000 a year in order to be a dealer on there. And you could list the watches that you have for sale. And people love it. And what's interesting is I think that they probably do somewhere between $5 and $10 million a year in revenue. How do they make money? You pay to be a member or you. A dealer pays to be a member.
Speaker 3Okay, because they're accessing this buyer pool of super enthusiasts.
Speaker 1A dealer pays to post there. And in order to post there, you have to do a vet check. And I think it's awesome, A, because Facebook communities, Facebook groups have built this guy a huge business. And this can be applied to so many different ways of selling stuff on the internet. And I think that when it comes to moats, Peter Lovell has been talking about what moats are going to go away with AI. And previously, technology was a moat. That's not a moat anymore. And I think communities, networks, and marketplaces are still a really good moat. And this is a really interesting business that this guy started. He started on Facebook groups.
Speaker 3Yeah, this is fascinating. I mean, it's always dangerous to build a business on Facebook groups just because the Facebook platform has changed so many times where you lose reach or you lose the ability to add new members, things like that. They change the rules quite often. But at the same time, you get the benefits of plugging into such a huge network, right? So it kind of giveth and taketh away. But I really like this idea of aggregating super enthusiasts, whales. Whales drive. It's just a shocking amount of the economy. If you've ever been on the inside of any of these businesses that are especially a collector's business, but even not a collector's business, like a mobile game, right? You might see like Candy Crush or something, and it's got like millions and millions and millions of players. But the bulk of the revenue, 80%, 90% of the revenue will come from just a tiny sliver of those players who are spending thousands of dollars a year each and make up for all the free players, the players who have paid $2.99 to remove ads, that type of thing. And so whales. Whales, whether it's in video games, it's Pokemon card collecting, you know, any kind of marketplace. Like when I was at Twitch, same thing. You know, Twitch has these whales. And the whales go through and they have subscriptions to tons of channels. They'll go and they'll just make it rain like the club. I don't know if you've ever seen this, but one of the best features they launched at Twitch was not a very fancy feature, but it was called gifting subs. So you could basically say, like, go into someone's channel and from the chat, you could give away 200 subscriptions. So that would be like $1,000, right? You're $5 a month. You're giving away 200 to random people in the chat. And everyone thinks you're the man. And it's literally like buying a bottle at the club. And, you know, the streamer shouts you out. You would get this whole thing. And it dramatically drove, like, you know, revenue up per channel because it just turns out that the whales were ready to spend more. You just needed to give them new ways to spend. And this is true with, like, pretty much all luxury products, but also a lot of gambling products where there's certain people with a certain level of, you know, addiction and, you know, disposable income that makes for an incredibly lucrative customer.
Speaker 1That's awesome. How much did that sub cost?
Speaker 3Well, like, I think the average, like, $5 or $6 a month.
Speaker 1Have you ever worked with a gaming company? Because I know that you were around those guys.
Speaker 3What do you mean? I didn't work for one, but, you know.
Speaker 1Work with. Like, did you have, like, insight? Like, what percent of people drive the bulk of revenue?
Speaker 3Candy Crush has 82 million monthly actives. And all the revenue comes from 4% of the players. So, 96% of the players are just kind of the cost of doing business. Just the cost of finding those whales. And so, like, for example, you know, my co-founder at Bebo, Furcon, he was the CTO of Applovin. Applovin is the biggest advertising network for mobile games. So, he saw under the hood, basically, you know, these games are paying to acquire players. So, he knows how much they make off the player. He knows how much they pay for the player. And he knows what types of targeting gets them to spend more. And really, what you want is essentially a whale. You want somebody who spends. A bunch of money in Candy Crush. Because they're highly likely to spend a bunch of money in Block Blast. It's the same player. And Farmville. And all those things. So, if you, you know, I talked to the guys who started Farmville. And, you know, the guys who make the big kind of, like, Candy Crush style games. And they would explain to me the game economy. And how it works. And sources. And sinks. And hard currencies. And soft currencies. And how you nurture the whales. And, like, all this. It's a total science. Right? Like, it's literally like talking to a slot machine operator. When you talk to them. It's like, but there's no rules. It's not like a slot machine. Where Vegas says, you must have this kind of 89% payout rate. It doesn't matter. You know, in mobile gaming, you set the payout rate to be whatever you want it to be. And there's a trade-off of churn and growth versus, you know, frustrating the player versus whatever. There's actually a very interesting guy who, he basically looks at the source code of various apps. And will be like, here's how Tinder's matching algorithm works.
Speaker 1Oh, I love that kid.
Speaker 3But I don't know exactly how he's getting the code. Like, the code's not public for somebody. So, there's something a little bit, my understanding. His understanding is either off or he's a little bit off. I don't know exactly what's going on. But he's explaining, like, you know, for example, in these games, if you're a player who's paid before, but you haven't paid in 30 days. It'll optimize you to have this, like, run of success. And then you'll hit a wall. And that wall will be so frustrating for you. But it's optimized to get you to, you know, click the button to pay again. Right? This is like when people say the greatest minds of our generation are sitting inside these companies trying to figure out how to get people to click ads. Like, you know, this is kind of what they're talking about. It's like some of the smartest engineers. And builders in the world and designers spend their life trying to figure out how to get people to, you know, put a little more, put a few more coins in the slot machine. Sad in a way, but also just from a pure business point of view, it is fascinating.
Speaker 1I was just looking at when I DM'd the guy who ran this community business. It's the same thing. Wells funded. He goes, virtually everything we do is for free. And the top 1% or even the top.001% pay to keep everything running.
Speaker 3Hey, let's take a quick break. You know that feeling when strategy is done, the brief is done. It's written, everyone's aligned. And you realize someone still has to sit down and actually create all the content that someone is usually you and it's due tomorrow. Well, the breeze assistant from HubSpot can help. It works right inside HubSpot. You can draft a campaign, copy blog posts, emails, all in your brand voice, all using your actual customer data. So you don't create just content. You create content that converts, check out HubSpot.com, the agentic customer platform for growing businesses. There's a, a huge trend growing right now, right now. Have you seen this trend around? Ripping? No. It's like going to a store and you would buy a pack of Pokemon cards and you would open the pack and would hope to find a holographic Charizard inside. Cause that's going to be really valuable, right? That's the, the kind of the brick and mortar way of doing this. Well, these guys just reduced friction. So, you know, the Eve Williams quote of you want to build a billion dollar business, just to find a universal desire, ideally one that's been around for awhile and remove friction. Well, this behavior already existed amongst collectors and what these apps have done of make it where you open the app. There's a pack on the screen. You tap it to open the pack, you open it up, you didn't get anything. Maybe you got some junk. So let's say you paid 50 bucks for the pack. Then it'll say, you want to sell back the pack for 43 bucks right now. You're like, yeah, give me my 43 bucks. Cause I didn't get what I wanted. Let me buy again. This app has done a billion dollars in revenue and like the, you know, last, like last year. And so there's like, I mean, just an app you've never heard of an app. You've never heard of that's doing a billion dollars.
Speaker 1How does revenue calculated? Cause that's. That's not that would that be considered as a marketplace? So would that be like real revenue?
Speaker 3It's a bit of a mix. So it is like GMV in that, that they're spending to buy the cards and, and you know, obviously the cards have a cost. You have to fill the card reselling it, but the genius of the thing was the buyback, the buyback changed everything. And so the, the, the trick with the buyback is people want the it's, um, they want the treasure hunt, right? They're looking for the treasure. And what they realize is if I spend 50 bucks and I get nothing, I feel like I'm out 50 bucks, but if I get 43 dollars back, I'm kind of just like, I just got 43 bucks to store credit. Should I buy another pack for 50? Yeah, it's only a seven bucks more. Let's go again. Let me give me another shot. And for the company, what they did was they booked. So they got 40, 50 bucks of revenue. They get 43 back. Seven is free. They never had to sell you to give you the card. They just put the card right back in the deck. It's shuffled. They'll sell that same card again to somebody else.
Speaker 1So the guy who started it was a quant at Citadel and Bridgewater.
Speaker 3Yeah, no, no surprise, but there's a bunch of these dudes like. Logan Paul launched his own called Rip It. This is like a mega, mega like, you know, fad right now. Collector's Crip, what he did was he kind of was, I think they might have been the first, but definitely they benefited from this, what they call the vending machine thing where they buy it back. They were doing something like 50 grand a month and now it's 25 million a month now. How did you hear about this? I was at a dinner and somebody was talking about Triumph doing a billion dollars in revenue now for an app to do a billion dollars in revenue. It's extremely rare, especially an app I've never heard of. Like Snapchat does what, like 4 billion, something like that. You know, like this is like the size of the social apps that you can count on your, you know, on two hands that you've, we've all heard of household names. And so I was like, how is this app? I've never heard of doing this in a year. And then when I heard, oh, they're basically doing the gotcha mechanic. So have you ever heard of gotcha games? No, but it's not gotcha like gotcha, but it kind of is. It's gotcha, G-A-C-H-A. It's a Japanese term. Oh. So basically what they would do is they had these kind of mystery unboxings. So you would buy like a mystery ball, you would unbox it, you would get something and then you would kind of go again and you try again. And it's a sort of like toy form of gambling. And gotcha got so popular in Japan that they had to ban it. I think it's like outlawed by law at this point. Now, American games started to steal this. So if you've ever played like Overwatch or different things like that, they would have loot boxes. Same thing. You open up a box, you might get the rare skin, you might get the common skin, but it's very easy to very addictive to just put in some credits into the machine and start opening up a bunch of packs and fifa started doing this a bunch of people started doing this all these games started copying this gotcha mechanic well the mobile games have figured this out even more and the thing with the collectors is they attached real money to the other side because if you happen to get a real thing it's not like getting a skin in overwatch where it's this purely aesthetic like you kind of know some part of your brain that this is somewhat stupid right there's no real value to it but when you do it with collecting and you say well i could get this rare card that's worth you know like i like the top pikachu card will sell for like 15 million dollars right like they these cards can be worth a lot and so they attach the kind of gambling mechanic of i might make money to the very addictive gotcha behavior and so that's like the you know the underlying psychology that's worked in many many different form factors toys do this now all the time lol surprise doll right what is it it's a you know all of the squishies that are super popular right now i don't know if you've i don't know if your kids are old enough to
Speaker 1be in this crazy craze no but my wife
Speaker 3is the dumplings and the squishies and the mystery boxes like my daughter just loves to open these dumplings right and like you know tries to get a rare dumpling right it's like this crazy thing but it's the mystery ball mechanic that gets you to spend way more i actually have a friend who's in the toy business and showing me the data of before when they're in walmart or target they were just selling where you pick what you want and um like here's a shelf here's all the different things you could pick what you want and then they just took the same things and put it in a mystery box and it was 7x the revenue and literally like with which sounds like the opposite right like well the consumer gets less choice they might get something crappy and i heard him on the phone he was talking to one of the major ip holders in the world wait this guy just called you while he was negotiating i was hanging out with him he's like just join they just like just listen in like sit right next to me it's fine like no problem they don't know who you are it's they'll just assume you work with me and um he's talking to them and they were like yeah well like our customers really like choice and he puts up on the screen he's like yeah i know like everybody thinks they like choice but here's what the data shows across category one two three four five like over and over again this overperforms this this kind of gotcha mystery box mechanic today's podcast is brought to you by my friends at mercury uh they make the world's best banking product i think you know this already i use mercury for all my businesses i think i have like maybe seven or eight businesses we use mercury as our business banking and we use mercury as our business banking and we use mercury as our business across all of them and now they actually just launched a personal banking account so i have my personal account there i moved off of wells fargo and chase i'm just all in on mercury why uh i like products that are easy to use i like products that get me and the problems that i have so like very easy to make a joint account with my wife very easy to spin up virtual cards uh one click and i get savings yield it just has all the stuff that i need in one place so if you're looking for the best banking product on the market it's definitely mercury i will fistfight anybody who disagrees with me on that go to mercury.com slash mercury slash personal and learn more mercury is a fintech not an fdic insured bank banking services are provided through choice financial group and column and a members
Speaker 1fdic kind of give you one quick app update before we move on from apps do you remember about three years ago you and i maybe you brought it up i don't remember talked about this thing called private photo vault it's basically where you hide photos it's like to put bluntly it's like where people hide like nude photos on their phone and you have to like lock it so yeah i think this is one
Speaker 3of my drunk ideas right hiding it behind a calculator
Speaker 1we talked either you brought it up and i said this is a thing or somehow it got brought up well look at the reviews do you see how many ratings it has a million so it has a million reviews so it's called private photo vault also it says like dash pick safe like a safe for pictures and uh i met the founder he came to a hampton event and uh i started talking to him and i was like he's like yeah you guys talked to me talked about me like three or four years ago and i was like how's it going and i can't this is going to be like such a tease i'm sorry i can't reveal the numbers but he told me the numbers and how many people work there it's a behemoth
Speaker 3this this private picture sending
Speaker 1thing yes yes it's a it's not a picture sending thing it's all it is is storage it just stores photos that you can delete off your photo roll and keep in this photo vault right it's not a picture sending thing it's all it is why and so why do people want that for nudes but they're not sending them if you are sent to them and you want to store them all right do i have to walk this guy through this i'm just trying
Speaker 3to understand the mechanism here you receive one you save it here you delete it off your photo that's it or you're taking it that's saving it
Speaker 1here the first one the first one it's all it is is a place on
Speaker 3your phone i've never received a nude i'm unfamiliar with your game i've always always wanted to yeah you always wanted to
Speaker 1participate i don't think it's ever going to happen unless i've got a rash uh but uh this app has and is doing over revenue and has been doing it that for a long time that's
Speaker 3impressive are they also eastern europe i feel like these are all eastern no it's just a
Speaker 1guy american it's a nice guy just i'm proud to be an
Speaker 3american if that's an american doing that this is normally the the work of you know somebody in in czech republic or something nope
Speaker 1just a guy just a nice guy he does live in vegas but he's a nerd so he was raised there he didn't move there by
Speaker 3the way the collect crypt thing that i was talking about uh just pulled up the data they do 100 million a month right now and this is like uh it's like a blockchain thing so you can see like the actual fees that are rented out of this
Speaker 1thing do you think the um are the crypto guys like are you you know you you're formerly known as but you still are a little bit folk are you are you people are you people like the are you guys like emo now like you're so pissed off at ai for taking your guys now
Speaker 3what are you talking about it's the same guy you transitioned you guys are trans seamless transition to becoming an ai guy don't worry i would have thought that you would have been like shut up everyone the only people left that are like true crypto only are the incredibly smart high conviction diehards who deserve to get rich and the idiots who still think like the vietnam war still happened and they're still going to get rich and they're still going to get rich and nobody told them like hey man we all moved to ai we're gone it's over you know we can we can move on now there's a new thing that to be excited about so there's like the idiots and the geniuses that are still there are the meetups like empty now i don't know i i honestly you know i don't go to meetups so i can't say for certain but um there's a lot of talk right now that that uh you know ai hacking slash quantum is gonna like basically break the encryption protocols and so that's kind of scary because you know for bitcoin that you You know, it's like Bitcoin started with like 100 risks and is down to kind of like just a couple left. You know, if Satoshi woke up and started moving the coins or the actual encryption gets hacked, you know, it'll cause like extreme panic. Like Binance got hacked for $5 billion last week.
Speaker 1Yeah, I saw they said they're just going to pay it. They're like, we're just going to give you the money back. That's how much money they have that they said.
Speaker 3He's trying. So they had a hack in 2018. And after that, there was a smaller, much smaller hack, like maybe, I don't know exactly how much, but nowhere near a billion dollars. And they created a fund called the Seifu Fund. I don't know what it stands for. Safety of funds for users or something like that. And they started taking 10% of all the trading fees that they were collecting and started putting it into this like kind of rainy day fund in case they ever needed it. And that was up to about $2 billion, which was the 10% of the funds collected by the company since 2018. And this hack was for $5 billion. And so they need to cover the spread. And who got it?
Speaker 1Obviously, no one knows, but was it like one wallet?
Speaker 3Last thing I read was North Korea took it. And the way they did it was they had a woman who was in a romantic relationship with an engineer and just physically got his laptop. Nice. And they had enough in their hot wallet to be able to transfer out that amount. And so I think like, you know, a certain amount is gone. A certain amount got frozen. They got the other protocols to like freeze it. They don't let them withdraw. But it's like, you know, the thing with crypto is the ethos and the premise of the whole thing is it's like gold bars or dollar bills. Like once you have it in your possession, it's yours.
Speaker 1But it's trackable. So like it seems like someone who does a heist or like it's kind of hard to get that into actual money you could spend.
Speaker 3Yeah, yes and no. So there's all kinds of things. There's these like tornado cash, which lets you kind of like wash the money a little bit. There's, you know, there's like offense and defense, right? So there's like ways that they can split it into a bunch of different wallets. Transfer, transfer, transfer. You don't know what's going on. Like there's one of the things they did is they immediately took the money, put it into like a DeFi protocol. So the way that DeFi works, which is kind of like a DeFi, by the way, is awesome. And I think people are completely overlooking this and it's going to come back with like the vengeance in the same way that prediction markets were very like, like common thing in crypto that people were working on and lots of money got raised and smart people tried to go build prediction markets back in like, I don't know, 2015, 2016, 2017. And it was called like Augur. And there was a bunch of prediction markets that are now all dead and you never heard of them. But then PolyMarket and CalSheet broke out, you know, eight years later doing the exact same thing. I think the same things that happened with DeFi. But what they did with, what you do with DeFi is like, it's like a bank, but you don't, there's no physical bank you need to go to. It's like a permissionless thing. So you put money in just like you would a bank. And then you could borrow some percentage of that. Not like five times more than you have. You can borrow like up to 50% of what you put in as collateral. And if the price is, of that thing ever dropped it'll automatically like sell it so that you're like you know um you're you basically cover your whatever you borrowed you can't like you it can like self sustain that way so what this hacker did was they put the money and right away they took the money put it in a protocol and borrowed a stable coin and got the stable coins out and left it so now even if that money's frozen you know cool take that you could take my collateral i got the i got the stable coins out on my side and i you know washed it you know dude we got to interview the
Speaker 1guy and figure out if it was worth it the north korean guy yeah what was
Speaker 3she like yeah oh the engineer yeah he
Speaker 1needed a pick safe account yeah this did not go well um all right that's it that's
Speaker 2a pod i feel like i can rule the world i know i could be what i want to i put my all in it like no days off on the road let's travel never looking back all
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