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Bitcoin Fixes This #70: Agile Businesses with Fred Thiel

November 25, 2021

Fred Thiel, CEO of Marathon Digital Holdings, shares insights from his diverse 40-year tech industry journey. Thiel underscores the pivotal role of agility and quick decision making in achieving business success. Thiel's approach centers on generating strategic value, leading and motivating teams, and leveraging data-driven insights. He highlights the necessity of adaptability and innovation, drawing parallels between the tech and industrial domains. Thiel's experiences underscore the significance of maintaining agility and seizing opportunities in today's evolving business landscape.

0:00 Intro

0:30 Family time

1:33 Fred's background

3:47 Fred's early career

5:51 Raid Technology

6:25 Plantronics

8:51 Local com

12:29 Career Path

17:27 Private Equity Playbook

21:29 Adding Value

24:48 DeRisk

27:48 Large Companies

31:55 Flight Readiness

35:36 Problem Solving Mode

38:02 Why doesn't the world work that way

39:25 Entropy

40:40 What happens to most companies

41:59 Technology Industry

43:35 The Problem With Large Companies

44:44 The DOW

47:26 Innovation vs Legacy

48:28 Siemens

49:49 Organizational Development

50:58 Fractional Talent

52:13 Network vs Hierarchy

53:11 Core Team

55:28 China

57:50 Red Teams

Transcripts are autogenerated. May contain typos.


[Music] welcome to bitcoin fixes this where we explore the impact that bitcoin will have in all aspects of society today's guest is fred teal ceo of marathon digital holdings we talk about his path to becoming ceo how he focuses on adding value his company's strategy and how being able to move fast has led him to success [Music] fred teal how's everything going it is awesome it is the monday before thanksgiving so looking forward to some great family time this week i see um are you gonna travel for


thanksgiving or is it are you just staying where you are no i'm gonna stay home and family's gonna come to me which will be great so yeah that's always nice you know like i don't know how it's been for you for the past year and a half but you know like getting time to spend with the family is like such a critical part of you know keeping community i feel like that that's been you know not handled very well in the past year and a half yeah that is so true it's it's been nice to be able to see family i'm from europe


originally so i have most of my siblings live in europe and still and my kids are on the east coast i live on the west coast my mom's on the east coast so it's been kind of a tough year from a family perspective but you know as things have opened up taking advantage of being able to you know visit everybody and spend time reconnecting which has been great okay well so i brought you on because you're obviously uh somebody that's prominent in the bitcoin space and everything else but more importantly


like you've been around in other industries and stuff so can you talk a little bit or tell my audience you know like what your background is and how you got into you know like i guess the role of ceo and everything else sure so i've been in the tech industry for a little over 40 years actually i started when i was in high school i went to high school in london and had a job working in the um information systems department of a bank in the city of london um as a kind of summer job and uh my senior year in high school and uh


started writing software for banks i'd always been kind of interested in technology i'd had one of these early programmable calculators that you could have do some interesting things and this is back in the mid 70s so you know when it came to writing software it was punch cards you had a machine that you typed on that poked holes in these hollow earth cards and then you stacked the cards together and you handed them through this slot into the highly secretive kind of computing department where the mainframe was


located and guys in white coats what it was almost like a covet situation right you put put the stack of cards through through the hole in the wall and then a couple hours later there'd be this print out which was a dump as it's called which is uh showing you all the errors in your coding and then you made corrections and then you submitted it for another run the next day hopefully and it was very interesting because in those days you know you just you didn't just say open a file and do this to it


you had to literally address the physical disk pack and what sectors so you learned a lot about how computers actually work and then i went off to study business and realized i didn't want to be a banker or a finance guy and was recruited to go work for a what was at the time the fastest growing computing company in the world it was a norwegian company called norsk data and i went to university in sweden by the way i'm swedish by origin my parents are both swedish and this company was essentially building


you know real-time control systems for the particle accelerator at cern and they built systems for the singer link flight simulator for the f-16 and industrial controls so think of it as the old old old days of iot but they competed with digital equipment in tandem at the time and so it was great i was basically in the sales side helping them enter into the commercial markets with banks in sweden and along came this very disruptive technology called the pc and so a group of colleagues and i decided to start a company representing


pc peripheral vendors in scandinavia that was quite successful and then over time sold my interest in that company and was in south america by way of marriage love kind of i got married to my sweetheart if you would and we ended up living in venezuela this is back while country was still democratic and the economy was doing very well it was a wealthy opec country at the time and wrote software which i deployed in banks there and then moved to florida in the late 80s and started a company together with colleague to design a new ethernet


technology a network adapter and this is at the time when computer networks desktop networks were exploding and was able to cut a deal with national semiconductor and gil emilio who later went on to be ceo of apple for world-class pricing in that product and surprisingly bite magazine which at the time was kind of the bible of the computing industry selected us as ethernet adapter of the year long story short you know there were a lot of much bigger players who decided that uh you know we shouldn't exist as an


independent company and uh off i went to go join uh standard microsystems and was kind of the number two guy helping them with their desktop business which happened to be located out in california and that's how we got to california 27 years ago and that division was later sold to a taiwanese company and i went on to run a raid technology company called cmd which was building uh raid technology so a redundant array of independent disks which was how originally when you did video editing you need to have lots of hard drives in


bonded together in parallel because that was the throughput you needed to have video actually work this is long before you had solid state drives and all that but our technology was kind of the core controller technology for systems by people like digital storage works and things like that left that company became ceo of a company called lantronics in orange county california which was doing console serving technology and printer servers joined that company in 98 and quickly figured out that you could use these


devices for controlling intelligent devices that weren't computers and so created the first iot company really we built essentially devices that allowed you to connect alarm systems robots anything to the internet and control them remotely took that company public on the nasdaq in 2000 and then even after the internet winter of 2000 was able to do a secondary offering with that company in 2001 companies still exist today it's very successful what it does left there and went into was asked to sort of become ceo of a digital media company in


the online pc game space called gamespy uh many people who are you know lovers of video games are familiar with games by and helped sort of get that company positioned for a very successful exit to a private equity firm in 2004 and that company was the private equity firm 18 months after closing our deal sold the company to fox interactive for a crazy amount of money at the same time as fox was buying myspace so you know a three-digit million dollar deal that was you know amazing for the investors at that time and then spent a bunch of time


really mentoring startups and doing some angel investing and was asked to become managing partner for private equity firm in l.a called triton pacific capital partners and so went to the dark side and ended up buying and selling technology companies predominantly software companies in the business to business space that were perpetual license and then the model was to convert them to sas businesses that worked out quite successfully but decided i didn't really want to be a private equity inside a private equity


firm loved the business but didn't like the being inside the firm with the politics and all that and uh became an advisor to private equity firms and really helped them you know figure out how to leverage technology to create value i'd done so much transformation work over my career and leveraging technology that was kind of what i've always been good at is you know how do you take technology and make a an industry or a business more successful and even more efficient and did a quick stint as a ceo to go


essentially take apart a company called local.com which was a publicly traded ad tech business that was on the board of that i then had to step in particular time become ceo and eventually take the company apart and sell off its assets uh which we did and then went back to kind of being an advisor to large private equity firms and sat on a bunch of boards of portfolio companies in a variety of spaces everything from material handling systems such as you know very modern conveyor systems that had robotics added


to them all the way to some of the top cryptographic security companies in the world which were doing things like hardware security modules that hold digital keys so i spent a lot of time in kind of the late teens if you would you know 16 7 2016 2017 into 2018 kind of really looking at cryptography and impacts of technology on the cryptographic keys and security and as part of that also got involved in the crypto world looking at bitcoin because hsms these hardware security modules are key stores of keys for custodians


and though the industry was very nascent at the time many of the crypto exchanges that existed then needed these technologies to store their keys so people couldn't hack in and get them these are the keys for the corporate wallets things like that and really became enthralled with blockchain as a technology and how you know eventually data will migrate out of the cloud providers storage onto the blockchain such that uh you know companies and people will own their data on the blockchain and i can refund that


whole topic uh later if you want but i think that's really where the internet and data is going and as part of that sort of was enthralled with setting up an otc desk and an exchange in the space and so started a company together with partners called sprocket and we built and got licensed in liechtenstein one of the first licensed companies to actually trade crypto licensing being an eu country had certain advantages and at the same time was asked by a close friend of mine who had just become ceo of marathon


to join the board of marathon as they were looking at getting into the kind of crypto mining space and this is early 2018. and so joined the board of marathon and uh together with merrick okamoto the then ceo and chairman of the board really helped conceptualize the strategy that marathon's executing today and you know the initial part was taking a company that had was essentially borderline insolvent i was about to be delisted from the nasdaq and turn it around get it solvent convert the debt to equity raise capital and then you


know our big kind of move last year was the very large order with bit main for tens of thousands of bitmain ant miners for crypto mining and then in the spring of this year america and i decided to do sort of a swap of roles if you would where i would step uh in a ceo he would remain as executive chairman and we kind of transitioned the reins in april and ever since then it's been just a great ride companies obviously doing real well we're growing we're deploying lots of minors and really focused on you know watching this whole


industry become institutionalized and mature and become mainstream and super excited about everything that's going on all over the world well so you described your career and it's fascinating to me that you got in just so very early right like you were coding things you know back in high school in the 70s which to me is is astounding and you've sort of watched all of this stuff evolve what was it that you saw in this sort of like you know in all of this stuff that that sort of led you down this particular career path where you


become basically a tech ceo of like many times over like what was it that like pointed you in that direction well yeah like was your personality or circumstances or what well i i think a mixture of all that i think on one hand i've always been an avid reader of science fiction and so you know people talk about the book dune well i read it in the 70s and it was kind of a bible of mine and then you know a lot of isaac asimov novels foundation series all of those things so i've always been a big science fiction


buff and a futurist at heart if you would and so even back when you know i was at the super mini computer manufacturer uh you know we were looking at things of you know you know how do you do how could you do essentially almost like a first person type video game where you have all this compute power if you could only get display technology because they had models of cities that they were you know in their system so there's some cool stuff there and then with lantronics it was this vision of imagine a world where


everything is connected to the internet and you know think late 90s the internet was really web browsing and ecommerce was just starting you know would cost you five million dollars to set up a website because you had to buy these spark servers and all this custom software and i've always just had this vision of imagine if and if you were to talk to anybody who's known me for many years they would say my head has always typically been in the clouds thinking about what's the next new disruptive technology and how is it going to impact


the world layer on top of that the fact that my father was a banker and so i was you know exposed continually to kind of large kind of conversations about you know banking and government finance he was very involved in the late 70s in working with european governments to finance north sea oil expansion so he was doing these large project finance transactions with governments and so you know constantly was talking about what the president of this country or the prime minister of that country was thinking about and how they were going about


financing this and so i grew up in this kind of environment where the power of finance if you would and the complexities of finance were being discussed and then my stepmother became senior economist at the oecd and at the time of the fall of the soviet union was responsible for helping craft and instantiate the regulatory frameworks for those east block countries to come into the oecd before they came into the eu so i was dinner table conversation for me was you know financial regulatory stuff well it's interesting that you do come


from sort of this financial background or at least your family was and you spent quite a lot of time with private equity firms can you talk about what that was like just you know like you're advising companies and then you're like taking over companies you're turning around company what was that like you know it's i have all my life been one of these people who likes to make things better whether it's you know redesigning something whether it's just designing something to make a system or or something else


better or providing constructive criticism and if you talk to people who grew up with me they'd say yeah fred was always the one who said hey that's really good but imagine if and then i'd layer on some improvements and that's just how my mind works and so in if you look at kind of the private equity world i was and i've always had this kind of i guess ability to when i look at something i think about how could you make it more valuable how could you make it more relevant more important more powerful if


you would and in the private equity world that's all about how do you make something more valuable so that when you sell it your investors get more money back than they put into the deal and it was the perfect kind of platform because you're looking at thousands of companies a year in-depth financial models and then you're picking just a handful of companies to actually make investments in and so it was like imagine drinking from a fire hose of business models i saw so many business models of so many


companies across so many industries that you develop pattern recognition after a while and it's like okay this model works this model doesn't work and so you get better and better refining that kind of sensory acuity and then you also start developing a playbook and this is very typical in the private equity world they have kind of a uh think of it just like a football team you've got a playbook of you know in this given situation here's what you do and private equity firms at the time were just starting to build out teams of


operating partners who were kind of functional experts who can help portfolio companies do things better and you know be finance hr i.t all sorts of things and then digital transformation became a key part and that's kind of where i stepped in and was really helping companies understand the power of digital transformation what you could do with it at the portfolio company level and how it could create value and there's this concept in valuing companies that what really drives a company's value is kind of what's its growth rate what's


its cash flow and then you discount that by risk and especially in the private equity world you don't have concept risks like you have in the venture world right in the venture world you're constantly worrying about will this idea even fly in private equity you're buying a company that's already existing it has customers it has products so you know the concept works the question is can you make it bigger better more valuable and the one thing that drives value more than anything else that differentiates


the top companies in a space from anywhere else is what i call strategic value some people call it goodwill but it's strategic value it's this intangible it might be they have long-term recurring contracts that will guarantee long-term cash flows so you have de-risked essentially the need to generate revenue long-term because it's contractually booked it might be patents it might be some form of market dominance customer control dominance or whatever it might be and you look at how can you leverage


technology to make that even greater and more powerful so how in the case of operations for manufacturing companies could you make the products smarter such that you could predict maintenance events you could predict when they would need spare parts you could gather data about how the device was being used so you could feed that back into the r d process and make the product even better so leveraging technology throughout not just supply chain but also customer operations etc and just you thoroughly enjoyed that kind of


creative process because you're tinkering with companies at a variety of different stages and industries and it was a great lesson in you know how do you build management teams that can execute because if you're working for the private equity firm or you are the private equity firm you're an owner but you really have a board seat and there's a management team that has to execute so if you're a former ceo like i am the key challenge is how do you learn to influence and persuade versus do because there's a ceo for the company


you're not the ceo you're an advisor right so it taught me some hugely valuable skills about how you work with other people and how you collaborate that have been invaluable later in my career and you also learn how to do this in parallel across multiple companies you know i at any time was involved with five six seven eight companies at a time and so you really learn how to focus on what's the value i'm going to add and then what does the team need to do around that and how do you get them to


execute and you know we use that very much even you know marathon we're a small company we have 10 employees and yet you know we're quite large in our footprint in the outside world so it's it's really a a skill set of learning how to lead through getting people motivated to want to do things and building smart teams of people who know what to do so that you know what you're really doing is rallying troops and just getting people focused on an objective and then giving them the resources and helping remove


hurdles from the execution well so what you said right there was really interesting to me because your focus as either a board member or even ceo is figuring out how you can add value and that's not something that a lot of people think about especially you know if you work at a normal job or something like that the tendency is to focus on salary and what you need to do to advance and not necessarily about the value that you're adding and it's interesting that from your perspective the thing that you're adding


to these companies that you know either coming in as a board member or as ceo is okay what's the value that i'm adding to this company and how do i make it better what's the key to figuring that out because in a sense i think for a lot of people they instead of thinking about what value they're adding they're instead thinking about the next promotion or the you know how do i get paid a little bit more or how do i de-risk this particular career or how do i make sure i get you know enough options like it's very internal whereas


your focus seems very external if that makes sense yeah i think it's a great question because it's i've kind of all my life focused on just making things better so i've always had that external kind of focus and one of my mentors many many years ago said to me that you know the you can never get promoted or advance in the world unless you make yourself redundant um and so you know my follow-up question was then well how do i make myself redundant well you make sure that you're not necessary for the function that you're responsible


for to operate and that's like well wait a second i'm working myself out of a job and he said no you're not at all you're actually working yourself into your next job because nobody will promote you if there's a void that has to be filled when you get promoted so you need to make sure that you make yourself redundant and when you apply that to being ceo of a company it comes down to how do you build a management team where your focus as a leader is leading and vision and the team's responsibility is


execution so that you are redundant and uh you know that's something that i harp on with ceos that i mentor or boards that i sit on is you know make yourselves redundant you know ideally this business should be able to run by itself with some key inputs and you know the board is there for strategic advice and governance purposes but really you know the company needs to have the vision leadership and executed and if it can't do that then you need to put in place the management team that can do that and there is no single


activity that is more important from a sort of corporate governance perspective than making sure you have the right management team because vision is very important strategy is very important but having the right management team is the absolute most important thing because they need to make choices they're executing and it's their ability to make the right choices that's critical to the success of the company and so that's the first thing i always do is do we have the right management team how


do we put the right people in place and the rest will figure itself out so that's the main value add is sort of like making sure that you have a team that can execute that is what it sounds like yeah so if you think about how do venture capitalists invest they're looking at a concept they don't know if that concept is going to work out or not yes they can go hire mackenzie to go to his study or you know but you don't know the only thing you do know is evaluating the management team that's going to do


the idea and the key questions that go through venture capitalist minds and and private equity guys is okay has this team ever done something like this before a do they have the experience what was the outcome have they ever worked together and it's all about how do you de-risk it right if they've never done it before there's high risk if they've done something like this before there's less risk if they've worked together there's less risk because you know the chemistry works and


you know how it worked out so you kind of de-risk around people and that's especially important if you're turning around a company or transforming it that you know everybody has a point at which the role they are in either gets to be too big for them or they can't kind of be promoted beyond where they are because they just don't have the experience or the skill sets required to do it you look at any sports team and it's an ecosystem right it's it's not just you know think about what kind


of this book moneyball and what billy bean did with the oakland a's kind of how that changed the whole team building and roster building in baseball was all around it's not about having a bunch of superstars because that's no certainty that they're going to execute properly it's about building players who have a proven ability to get on base and eventually get runs and it's building that kind of team and then getting everybody aligned on a vision you look at every successful sports franchise and it comes down to


the coach getting the team all aligned on a vision and getting egos out of the way such that they execute and you know this is a big challenge says sports team as as coaches move from college football where coach is god to professional football or sports where the player is kind of the diva in business it's not dissimilar you know small scale businesses it's a lot easier sometimes to find you know have the right leadership and all that it gets harder and harder as the business scales because you need to have


the ability to deal with these huge projects and risks and have long-term vision and the ability to execute and make things happen that are much more sophisticated and so as a business grows the skill sets required by the management team changes and so that's this constant challenge of it's like an ecosystem you have an aquarium you change a fish all of a sudden all the other fish may have a problem with that so you're constantly looking at that chemistry of people and resources and it's a puzzle and chess


game that i just for me fascinates me well that brings up something that i've been you know wondering about which is you know it seems like when companies are on the small side like you said it's a lot easier to sort of figure out like that what's working or what's not but i've been at large companies and it's like you know they're clearly people that are not producing but that have been there for like 15 years or something like that and i always wonder like okay how is this person able to like sort of survive and


it turns out like they know how to game the system and you know i mean things like that i hear about things like that happening and like at google for example like they have these like 360 reviews and they figure out you know people to lie with so you know if you have a peer that you're going to write reviews for each other and you're going to make sure that it's done that way so it's all games and stuff like that what is it about large companies that makes this sort of like management of things so much harder like


what causes sort of like this behavior that seems to be sort of counterproductive i guess versus something in a smaller company where you know it's a lot easier like you said it's a great question and it's something i think managers and boards struggle with across the in any organization there's this old saying that i forget who said it that basically a mission of a bureaucracy is to keep itself in business or in power and in a company in the early stages you basically have a leader with a vision


who's also kind of a doer leader and then you have people who are responsible for things and it's easy to measure whether people are doing their jobs or not because the data is available and you can see what everybody's doing and as you add layers of management you're adding layers of management complexity but you're also adding opportunities to obfuscate data not with maleficence but it's just it you know at the end of the day kpis are numbers in tuxedos and there's this old saying that people


respect what you inspect so if you're having people report on something they will optimize to that outcome you hire a salesperson and you give them a comp plan the comp plan is meant to incentivize them to achieve an outcome well they will gain that comp plan so that they maximize it somehow and you know this is across the board in companies that given an objective our nature as human beings as competitive as we are is to maximize the outcome and so one of the key challenges is structuring the kpis and the data you use to run your business


such that it is as objective as possible and not dressed up and gussied up to look good it's kind of like that old new yorker cartoon where a guy is showing the sales chart and instead of while the line goes from the lower left to the upper right the chart's actually on its side [Laughter] so it's all in presentation but yeah i've always believed that if you can run a business based on data and not opinion you do away with a lot of the politics because data is transparent and if you today with computing systems the way they are


and dashboards and display systems it's not difficult for a company to build a set of dashboards that tell you exactly what's going on and then you have to design the kpi such that they really tell you what you need to know you need to know some backward-looking kpis you need to look at some current state apis that tell you the state of the machine if you would and then you need to have some forward-looking apis you know pipeline things like that and whenever reality and the kpi deviate you know you've got an issue and then you have to


dig into it and you know andy grove at intel was famous for wanting to have a certain amount of contention in meetings because if you had a certain amount of contention no idea goes through a contentious discussion without becoming more valuable because people will poke at it and they'll identify weaknesses and then you'll come up with reasons why or to mitigate the weakness but if you can have discussions based on data then you know it's much more relevant and i had an experience about 17 years ago i had the opportunity


to spend 24 hours on an aircraft carrier and was on the abraham lincoln before she set off to the middle east for deployment and before an aircraft carrier does that they have to do what it's called flight readiness where they basically will have 24 hours they will be doing landings and takeoffs day and night and it's an amazing experience to spend 24 hours on an aircraft carrier and see this and see just the hard work that these servicemen do with technology that's pretty old the abraham lincoln


was built in the 70s and you know they had laptops that were more powerful than the most sophisticated computer systems on that aircraft carrier but you know here you had these you know you know 18 and 20 year old kids essentially you know managing tens of millions of dollars of hardware moving around on the deck of these things and landing and taking off it was absolutely amazing but they had this one thing in the navy which i found very interesting which is a rankless blameless debrief and so they always plan a


mission all the stuff you have to do to plan a mission there's some great stuff the military's designed around that that i'd recommend anybody who really wants to know about how do you deal with supply chain issues and all that look at how the military does it because they've solved that problem about agility and resilience and sustainability but more importantly when at the end of every mission they get everybody in a room it might be an admiral it might be a captain it might be the flight leaders and the mechanics


and the guy who's responsible for sweeping the deck of foreign objects that could get sucked up into engines and they look at okay what worked on this mission and what didn't work all objective it has to be databased it can't be opinion so what did happen what didn't happen and then it's why do we think it happened or didn't have what was the root cause and then how do we improve our checklists and our models so that this doesn't happen again and so there's a learning component and


this is a little bit like an adaptation of lean methodology from the toyota method of manufacturing and how do you kind of have this continual learning in an organization where you're looking at data learning from it and then you know going improving your processes accordingly but the interesting thing is that you know the lowly guy who's responsible for sweeping the deck of the aircraft carrier has just as much weight in his comments as the admiral does in this meeting and there's no fear of retribution or


rebuke obviously you're not going to call people names or anything like that but it's the fact of the matter is if you know this person says well you know i saw so-and-so on the deck and they you know didn't remove this object it got sucked up into an engine and that was a problem that's an observation and you know things like that are just very critical so if you can teach a management team to operate that way so it's very objective it's data driven and you're making decisions based on data


then you can do things that are short medium and long term in nature and execute very successfully and i've run a number of companies where for example when i ran gamespy we operated you know hundreds of servers that were websites for games and we ran the network that enabled multiplayer capability amongst most games in the industry you can look at any pc game back then you look on the back and it says powered by game spy our network ran the game arbitration network if you would where if you wanted to say i want to


play multiplayer and it would then list all the servers and you could sign up for whichever competition you wanted to that was all run on our network so we were constantly having hackers attacking us with denial of service attacks always on christmas eve or new year's eve but we were running a 24-hour seven day a week 365 operation that was mission critical to the games industry and so you have you know real-time metrics you're constantly looking at and then when something happens you got to go into problem solving mode okay you


know we have you know what we believe is a denial of service attack how are they doing it you know is it a sequel injection threat what what's it saying you know you work through and as unemotionally as possible just keep focusing on what do we know what don't we know what assumptions are we going to make how are we going to test that assumption what's the result from the test what do we know now and you're continually improving your knowledge of what's going on and i use the example imagine walking


into a gym where there's an obstacle course and there are no lights on and you have a flashlight you can only see where the flashlight shines so as you eventually go through this gym you will identify where all the obstacles are but it's not like you could turn on the lights and see everything at once so you have to think of that as an organization right you want to go into you want to launch a product in a space what do you know about the space for fact what assumptions are you making how do we test the assumptions


you test those assumptions as you get more data you get more certainty and there's an expression somebody i don't know who it was who came up with it but essentially fear is just not knowing means is a lack of data so the more data you can collect to validate your assumptions you don't want to go to the point of paralysis by analysis but you know what do we absolutely need to know to know if we can if this will work okay then test that one thing right so if you look at how you launch a develop a product


in the old world of software you wrote this complex spec and then you did all this work on the front end and then you wrote the whole thing and then you launched it in lean methodology today with agile you know it's what's the idea okay let's put up a website and see if anybody even is interested in this before we build it okay we've got some responses okay let's what's the bare minimum we would need to do to prove whether the market likes this and what do we need to build and then you instantiate and test and


you look at what's the biggest problem we have to solve and if we can't solve it it makes no sense to do the project so let's try and solve just the biggest problem then you work your way down and things get easier and easier and easier and if companies just operated that way and people operated that way i think the world would be a much better place because um it really should be well that kind of begs the question why doesn't the world work that way because i mean what you're saying is just so rational and logical


to me and it's very objective you know database and everything else i mean what is it about the current environment that makes it go the other way because we're clearly seeing lots of companies that are kind of sick puppies right like they're they're not really operating very well a lot of them are zombie companies you know i mean like i read recently that ibm has you know used more money on stock dividend or not stock dividends on stock buybacks than their entire market cap at this point like in the last 20


years something like that like what's going on like why aren't they doing like what you would do as a good ceo what's the sort of force that's making sort of these companies be zombies essentially well yeah i'm not going to tell you what i think about ibm necessarily because you know they've been in business longer than the technology industries really existed right over 100 years at this point but i think what happens to most companies is that and this is something i learned in the private equity world


if you have a mindset of return on assets right your investors give you capital to invest and your job as a fiduciary that capital is to generate the best return for them in some cases for these public companies they can do more to raise the price of their stock and their market cap by doing share buybacks than they can by running their business and that's i'm not saying that's a good thing i'm just saying that's what's motivating them right to do that but it's this constant need to innovate


i don't know if you're familiar with the term entropy but you know companies are continually in a state of entropy and there's the law of s curves which is kind of based a little bit on kind of what jeff moore crossing the chasm wrote back in the day where you know and then jim collins who wrote good to great and the other books also wrote a book why the mighty fail which is his shortest book and the one most people have never read which is about why how these uh you know top companies actually did


fail and ibm is one that he talks about and microsoft is another and microsoft is a great example here was a company that was built on windows and dos that was their 98 of the profits came from that and they would do anything to protect that franchise even to the extent that they didn't launch the early version of the surface tablet when it first was conceptualized internally because it wasn't going to run windows and you know they could have been first to the tablet space with that product and now you look at microsoft and what


have they done they've totally turned the business upside down um right and it's this need to innovate and so you have this combination of evolution and revolution that you're constantly having to tear down the old and build the new and then improve what you have such that you're constantly moving down the field so to say and you know it's like the propeller driven airplanes after world war ii you know jets were around but the airlines felt they were impractical and unsafe and so they were doing everything to


extend the life of propeller driven airplanes you know how many more engines can we put on what can we do to tweak the propeller it's all this evolutionary incremental enhancements that are giving less and less of a return on the investment and then all of a sudden the 707 was launched and bingo jet travel became the de facto and all these propeller driven airplanes were put out of business that's the way technology industry works that's the way all industries work it's all a question of the capital and


product life cycles in consumer technology product life cycles are months six nine months look at the televisions right every year there's a brand new technology for televisions right in the industrial world it's you know for heavy industry machinery it's 20 and 30 years because that's the life of the product and it takes you know these slow-moving industries take longer to improve but it's this constant entropy that's happening and you constantly have to be focused on renewing yourself


as opposed to just eking out the most the next incremental profit dollar and that's a mindset difference right optimizing for bottom line without driving growth in top line and you know being early in markets and being a leader in a market drives accept much higher margins than if you're just in a legacy market that's mature and you're kind of maintaining your market share and playing defense it's a different mindset and many companies as they grow go from having this growth oriented leadership to a


maintenance mode leadership put in place don't mess anything up for the shareholders keep the dividends flowing kind of you know this is a utility company just make sure the electricity flows as opposed to you know what's the next big bet and i think i have always been kind of okay what's the next thing you know how do we make this better what's next i would be the worst person to put in place of a company if it's just you know keep it on the rails and don't do anything edgy or challenging


so it sounds like there's a different mentality i guess for some of these bigger companies that maybe like kind of they can't seem to outgrow or to really get away from if that makes sense is that the problem with a lot of these larger companies that eventually go bankrupt i guess well you know it's look at the s p 500 index the companies in that and look at what the average life of a company on that index is so that's the 500 most valuable companies on the stock market and the average life is down under five


years now what yeah so that means that doesn't mean the company's bankrupt but it means it has shrunk enough or has been passed by enough companies such that they're no longer the 500 top companies of the world look at the dow look at how the dow component has changed the 30 companies you know look at most of the indexes and you know it's all technology companies today that are in the top 10 mostly because they're able to grow and innovate and create this you know much more dramatically valuable companies


than heavy industries you know airbnb you know books more hotel night stays than marriott and they don't own a single hotel room um right you know it's just it's you look at these industries where you're moving to acid light models and you're breaking the mold that's what drives corporate and shareholder value it's doing stuff like that and a lot of companies get in this mode where it's just it's defense as opposed to offense and what's next and sometimes the simple fact of


moving to optimize yourself to the point where you're as efficient as possible actually makes you very rigid as a company and this supply chain crisis is the perfect example of that people have optimized their supply chains over the past 20 years with offshoring to the point where they're totally dependent on this supply chain and it's rigid because that's what drives the efficiency and the low cost but in the event of a crisis it means that they don't have agility anymore and so being agile is critical because


it gives you optionality and to be agile you have to have two things access to capital and freedom of movement and that's something these big companies that are have these very asia-dependent supply chains have gotten caught with during this crisis now is they're unable to shift things around and move quickly and that is a typical thing that big companies do smaller companies have to be agile because they need to be able to change and move quickly a big companies tend to lock in long-term contracts with you know low


prices and just you know try and operate to optimize margin as opposed to you know how do you create value in your products versus maximize the just the bottom line around efficiency you know apple's a great example of that where they've been able to bridge this model of you know they have one of the most efficient supply chains out there jim cook is you know that's by far one of his you know kudos to him for doing that but at the same time they understand market timing of when they go into markets and how to get


people to pay them more money than anybody else for their products by making the right feature choices and look at the smartphone market you know 80 plus percent of the gross margins by the whole smartphone industry are collected by apple they still make over 50 margin in the hardware of the phone you know it's unheard of it's that's an amazing company so that's what excites me every day is you know companies that do that type of stuff well it's interesting that you make this distinction between sort of like the


tech companies that are sort of innovating versus maybe more legacy companies that are you know like trying to squeeze blood out of a stone at this point yeah have the tech companies more or less just taken all of the innovative people like is that what's happening like the legacy companies aren't able to hire the you know people that have the ideas and things and stuff like that to advance their industry instead you basically have seated ground to all these tech upstarts that are actually willing to experiment so


i think it has to do with ease of you know how easy is it to implement change inertia is the bane of large organizations right and so i remember having conversations with a former chairman of siemens uh the large german industrial conglomerate and he said to me that you know the the challenge we have at siemens is it takes us longer to innovate and launch a product than most of our competitors and if you think back to this jack welch quote about you know if the world outside of ge is changing faster than the world inside of ge we're


going to be out of business soon which is why they chose to be number one or number two in every business and granted his legacy is you know being kind of chipped away at these days oh seriously chipped away yeah but in talking with this former chairman of siemens it was you know he said listen by the time we launch a new product the market's moved ahead of where that product is and so they had tried to do innovation through a venture arm that they had that was kind of external where people with good ideas could get funded and they would


leave siemens and actually go into this venture arm and and execute those deals and you know many companies have adopted many large companies have adopted a similar model but essentially the problem is that the systems that make these big companies so efficient make them rigid and very difficult to adapt to change and so as i look at industrial company organizations or organizations in general it is much better to be organized as networks than it is a rigid hierarchy because a network can constantly adapt and adjust whereas a hierarchy


you have reporting and responsibility and authority and you don't want to do something to piss your boss off you want to take risks that will jeopardize your career there's all sorts of things working against innovation in a hierarchical structure we're in a network that doesn't exist and if i were to go back to some of my college professors who were talking about organizational development at the time you know it's this whole concept of how do you have uh systems of systems that interoperate together in networks


independently but still codependent such that they're all adding value to each other and it's this network of networks that is what decentralized technology is really bringing about now and look at the number of people leaving the workforce to go start their own businesses because all of a sudden companies are realizing and people are realizing hey you know i can do more to generate value for myself maybe if i go it alone and start a company and my former employer all of a sudden has the ability to choose


different vendors and providers for a particular service to get the best possible outcome and you know why not have the ability to have best-in-class talent on a fractional basis instead of having to have full-time mediocre talent and i think that's something that we're starting to see and again the tech industry which is so driven by time of execution is really focused on this they're also driven on capital efficiency um and you know there's a reason why tech companies get so much capital and it's


because they can do stuff they can make things happen and that's because they're not afraid to in certain cases break the mold and do it differently just look at how the whole lean entrepreneur has impacted startups today and just the capital that goes to those companies so yeah i'm super excited about the future i think the us is in a great place to continue to be one of the top innovators and i think that you know just touching back on the crypto market for a second you know the biggest benefit to


the industry was china shutting down crypto that if anything moved the nexus of kind of the core of the industry squarely into the western world and essentially to some extent legitimized it well i mean you're bringing up so many thoughts for me every time you speak so it's hard to keep up like the different things that i want to ask you about but the one thing that you said in this last one is about this difference between networks and hierarchy and if i understand you correctly basically what you're saying


is that hierarchies make things very rigid and very hard to change and very hard to react to different sort of inputs that are coming in whereas networks are very very much flexible and it allows you to do things that you can change how it works because it's very flexible and their incentives and so on and the question for me that comes up is if you're a ceo i mean you kind of have to have a hierarchy within your organization how do you make it more like a network and less like a hierarchy how do you make it more sort of like


work like bitcoin which is decentralized and less like fiat money which is very hierarchical great question so it comes down to on the one hand you need a core team it's just like you know there's a think of it as my management team is kind of a group of people who together are each experts in certain areas who are quarterbacks so they're all kind of junior ceos if you would responsible for a particular function of the organism that is our company and that changes depending on the challenge we're faced you know are we


in the case of marathon you know are we doing deployment well there's lots of people who have to be involved in that and focus on that are we looking at technologies then it's a different group of people is it financing it's a different group so these are teams of essentially teams that get built and taken down based on a network of individuals and we have an advisory board outs which is different than our fiduciary governance board which has experts in things like research around global hash rates and


minor technology and deployments asic design technology you know different types of blockchain businesses etc and you know financial systems and models capital raising etc and so we have this core group if you would that are the executive team that are players if you would responsible for defense offense etc just like in a sports world and then we have networks of people that we bring on as we need them and that's why we're so lean as a company you know you look at a company that owns hosting infrastructure


which we don't for example in our model going forward here and they have to have you know hundreds of employees managing facilities and building out data centers and talking with power companies and dealing with things we outsource all that and by outsourcing it and not owning it it means you know what if we find a better vendor we can find a better vendor we don't have an asset all of a sudden on our books that now we own and are saddled with so it gives us a lot of agility and a lot of ability to move quickly


and you know it's the gets back to the two things having optionality you got to have a lot of capital and if you have capital and you have the ability to move quickly you can do things faster than anybody else in the industry and in this particular industry speed is critical so let's talk about that because you've clearly had to move very fast given sort of like the news that came out of china earlier in the year and all of those miners had to relocate give us an example of how this ability to move very quickly


allowed you to take advantage of this unprecedented situation well the you know i wish i could say that we made decisions around our strategy post china making their news we you know a lot of the decisions we made we made last year before the china move happened and it was really more based on sensory acuity so think of it as your radar screen we had an assumption that we believed bitcoin was going to move in a certain direction after the happening and we believed that there was an opportunity while the market was kind of in we just


finished over expanding and we just went through this nuclear winter 2018 and 2019 that bitcoin was going to go for another run and so we decided okay we have the ability now that we have capital to place a huge order when nobody else is thinking about buying machines and so we sprang on that opportunity and we ended up ordering you know in total now you know 133 000 machines which you know now think about it what did that do well all of a sudden we sucked up a lot of the supply in the industry making it harder for our competitors and


this is a zero-sum game business because they're only 900 bitcoin made per day and whoever has the the engine to do that will get the lion's share and then it came down to you know how do we solve the hosting problems and and those became pretty easy to solve because we were early enough in the cycle and this is where agility and optionality are critical is if you wait too long your decisions are made for you right so when that china mining ban happened if anything we knew then that a we had made the right decision but more


importantly hosting in north america was going to become a bottleneck and so we very quickly moved to tie up long-term hosting capacity and so it's that agility to move quickly and understand the implications of actions and constantly having your radar looking out at the kind of event horizon if you would you know you're you want to be out looking far enough because there's this great class by the way that i forget the name of the professor at mit you teaches it but it's about weak signals and if you google wheat weak signals


it's what are these little kind of tremors that happen out there that are early indicators of some change that's going to happen and then if you start doing what i call it's another military kind of tool called red teams and you know in the technology industry people say red teams oh that's all about cypress cyber security yeah that's one application for it where you have a group of people who act as an aggressor and try to break into your systems and then you have a blue team that's the defender if you


would and this comes from nato originally red and blue teams the red was the aggressor i use red teams as a way to okay what are all the possible things that could happen with this signal what could it mean and you know let's have one or two people just think about you know what are the implica possible implications of this and then let's come up with a series of scenarios that might happen and what would be our response to that is it an opportunity is it a threat all right do we have a weakness that will cause this threat to be even worse


to us do we have a strength that will let us take advantage of this opportunity and so and this again goes back to kind of this way the navy works and it's why the us military is so good at what they do when they do it right which is the ability to if you already have scenarios for what might happen and you've already have contingency plans for it when you do decide you have to move you can move with speed because you've already planned for it right and it's this preparation and people say to me you know marathon


was just lucky that they ordered the machines when they did and then the china band happened etc and i said well look how do you define luck luck is an opportunity that meets preparation if you weren't prepared you couldn't take advantage of it if we didn't have lots of money in the bank we couldn't have ordered those machines right so you know luck is something you make by being able to take advantage of opportunities when they arise that's what increases your luck and that's something most companies


don't get and most management teams don't get is you make your luck by being agile by being able to have the right resources to take advantage of opportunities when they arise because you know it's kind of like you know in a in a crisis when the stock market is down or the crypto market's down if you have cash in the bank you can buy the dip if you don't have cash in the bank you can't buy the dip because you're hurting because you just lost a lot of money because the market's


down it's kind of that you know as simple as that is when something goes on sale if you really want it and you have cash you can negotiate a better deal for it wow i feel like i'm getting sort of like a master class and like being a ceo or something like that thank you so much where can people find you where can people contact you sure so uh i'm on twitter uh f-g-t-h-i-e-l is my twitter handle nothing original just first initial second initial and last name you can find me at marathon it's fred


marathondh.com that's my email address so feel free to reach out to me and you know look forward to speaking to you know anybody who has kind of questions uh on this uh you know if you're interested i do teach guest lecture for a class at the marshall school at usc on corporate ventures and ventures and really enjoy that and love giving back and also do a lot of kind of just general talks on the topic to groups and organizations so happy to do that for groups as well well i can certainly tell that's the


case all right well thank you for being on the show thank you jimmy really appreciate it unchained capital is a sponsor of this podcast i'm an advisor to the company i know the team well and i'm excited for what they are building if you need multi-sig collaborative custody or a bitcoin natives financial services partner learn more at unchained.


com well that wraps it up for this episode of bitcoin fixes this fred teal can be found at fgteal on twitter and marathondg.com until next time fiat the lands