E233: Why Stablecoins Could Rewrite Global Finance — Faster Than Anyone Thinks
Timestamps are as accurate as they can be but may be slightly off. We encourage you to listen to the full context.
Podcast Summary
Avichal Garg, Co-Founder and Managing Partner of Electric Capital, shares his evolution from accidentally starting a crypto fund in 2018 to building a billion-dollar AUM firm by treating crypto as software infrastructure rather than speculation. (02:33) The conversation explores Electric Capital's core thesis that distributed systems and cryptography will replace traditional financial infrastructure over the next 20-25 years, positioning them at the forefront of what Garg calls "programmable money." (14:14) Garg discusses why Electric Capital hires only engineers who become investors, rather than traditional finance professionals, and how this approach has helped them navigate multiple crypto cycles while maintaining top-tier fund performance. The episode delves deep into macroeconomic challenges, including currency debasement, inflation's true impact on Americans, and why fixed-supply assets like Bitcoin and high-growth tech represent the optimal portfolio allocation strategy for the coming decade.
Speakers
Avichal Garg
Co-Founder and Managing Partner of Electric Capital, Avichal has built one of the most successful crypto-focused venture firms with over $1 billion in assets under management. He previously co-founded a startup that was acquired by Facebook, where he gained valuable experience in Silicon Valley before transitioning to venture capital. His background includes engineering roles at Google and Meta, giving him deep technical expertise that informs Electric Capital's thesis that crypto represents the next evolution of financial infrastructure. Electric Capital has achieved top 1% fund performance by focusing on the intersection of distributed systems, cryptography, and capital markets.
Key Takeaways
Trust Is Built Through Revealed Preferences, Not Words
Garg emphasizes that true trustworthiness is demonstrated through actions over time, not virtue signaling. (04:48) When Electric Capital's previous startup was acquired by Facebook, Garg and his co-founder redistributed significant portions of their equity to employees and ensured investors received healthy returns. This behavioral demonstration of character became the foundation for investor trust when they launched their fund. The lesson for professionals is that reputation is built through consistent actions during moments when real money and difficult decisions are at stake.
Hire for Infrastructure Understanding, Not Traditional Credentials
Electric Capital exclusively hires engineers who become investors rather than traditional finance professionals. (18:23) Garg's thesis is that when infrastructure changes, you must put people who understand that infrastructure in charge. Just as Amazon succeeded by having engineers drive decisions around software-driven operations, future financial firms will need technologists who understand blockchain infrastructure. For professionals, this means developing deep technical skills in emerging infrastructure areas rather than relying solely on traditional credentials.
Directional Correctness Trumps Perfect Execution
Garg notes that while Electric Capital made numerous small mistakes, being directionally correct on their core thesis allowed those details to resolve themselves. (08:25) Their early belief that crypto would become the backbone of global finance has largely proven correct, even with implementation challenges along the way. This teaches professionals to focus on identifying and committing to major directional trends rather than getting paralyzed by tactical uncertainties.
Portfolio Allocation Should Reflect Fiscal Reality
Given unsustainable government debt levels and limited political will to cut spending or raise taxes, Garg advocates for a barbell portfolio strategy. (40:14) He recommends significant allocations to fixed-supply assets (Bitcoin, gold, California coastline) that governments cannot create more of, combined with high-growth tech that can compound at rates exceeding currency debasement. Traditional assets yielding 15% annually may be insufficient in an environment of persistent currency debasement.
Measure What Matters to Users, Not Just Official Metrics
Garg challenges traditional inflation measurements by applying product management principles to economic data. (43:25) When users (Americans) report they cannot afford their parents' quality of life despite official inflation metrics showing manageable levels, the problem is likely with the measurement methodology. He suggests tracking metrics like homeownership rates among 30-year-olds and debt loads rather than CPI. For professionals, this means questioning conventional wisdom when ground-truth user feedback contradicts official metrics.
Statistics & Facts
- Electric Capital grew from a $15 million fund in 2018 to over $1 billion in assets under management, representing top 1% fund performance in the venture capital industry. (57:07)
- There is currently about $250 billion in stablecoins today, but Garg predicts this will grow to at least $2.5-5 trillion worth of dollars on-chain as crypto becomes financial infrastructure. (25:16)
- The US government currently runs a 7% debt load, which is twice what socialist countries in the EU maintain, making the fiscal situation unsustainable according to Garg's analysis. (37:47)
