Latest / The Longest View with Dez Fleming / Why "Saving is a Scam" and How Basic Capital Unlocks Asset Ownership with Adbul Al-Assad of Basic Capital

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Why "Saving is a Scam" and How Basic Capital Unlocks Asset Ownership with Adbul Al-Assad of Basic Capital · The Longest View with Dez Fleming

• [Desmond Fleming] (0:00 - 0:21) One of the first places I want to start is I want to talk about the story of how you ended up in this seat. Your journey from where you were born to being here in the U.S. raising, I don't know, few, multiple millions of dollars of venture capital. Walk us through that journey. [Abdul Al-Assad] (0:22 - 1:19) Well, I came to the U.S. as an international student. I'm originally originally Palestinian, but I grew up in Damascus, in Syria. I left when I was 16 on a scholarship to go to boarding high school in Europe. And then I was lucky enough to get another scholarship to come to America for college. And after I graduated, I worked at Goldman Sachs. And I remember when I worked at Goldman Sachs, you know, you are an intern. I was interning there. And during the internship process, the people who are interested in hiring you, they have you meet all the senior partners. They're like, OK, I like this intern. I like this analyst. I want to hire them. I want to give them a job offer. So they start putting you in front of all these senior people to basically get their buy in. And they put me in front of the global head of trading at the time, Justin Gimelick. Shout out Justin Gimelick if you're listening. There we go. And I sat down and, you know, college kid. I was like a junior in college. [Desmond Fleming] (1:20 - 1:22) So you were like 21, 22? [Abdul Al-Assad] (1:22 - 3:14) Yeah, 21, 22. And I walk into his office and I sit down and sling a lunch at the trading floor, very loud outside. You walk into his office, you sit down, he can see the entire trading floor. You're talking about like 700 people on the same floor trading everything from fixed income to commodities to currencies. And he's just like looking at them all. And he looks at me and he's like, so, you know, I'm telling my life story. He's like, so Abdul, you were in high school in Europe. Why didn't you just stay in Europe? Why did you come to America? And then I proceeded to give him one of the most articulate answers I've ever given. And I have no idea. But it must have worked. Thankfully it did. But I have no idea how I came up with that. But like just on the spot, like it got so serious so quick. Like similar to what, you know, you started the conversation about like, tell me about your background. But his question just hit me so hard. He's like, why didn't you stay in Europe? Why did you come to America? And I told him, you know, Jay-Z, when you look at where are the best actors, they are in Hollywood. When you look at where are the best dancers, they are at the Lincoln Center. When you look at where are the best playwrights, they are at Broadway. Where are the best engineers and innovators? They are in Silicon Valley. What are the best pharma companies? It's in Cambridge, Massachusetts. What are the best financiers? They're in New York on Wall Street. And I have no interest in being nothing but the best. There is something about America that really, if you really want to play in the big leagues, you have to come to America. [Desmond Fleming] (3:14 - 3:36) That idea of playing in the big leagues, did you feel that in Europe? What was the, what were the influences that pulled you? You know, like for me, a lot of my influences of wanting to get into venture and tech and entrepreneurship, it was media, specifically like Forbes, Wired, you know, TechCrunch. That was what I was exposed to. So do you remember even what that was maybe for you? [Abdul Al-Assad] (3:36 - 3:45) Americans underestimate how influential is American pop culture, globally speaking. Global pop culture is American culture. [Desmond Fleming] (3:45 - 3:45) Yes. [Abdul Al-Assad] (3:46 - 3:47) Whether you like it or not. [Desmond Fleming] (3:47 - 3:48) Yeah, it could be a good or bad thing. [Abdul Al-Assad] (3:48 - 3:54) You go to, it's good or mostly bad, but that's like globalization, right? Like you go to Europe, Hannah Montana is everywhere. [Desmond Fleming] (3:54 - 3:54) Yeah. [Abdul Al-Assad] (3:54 - 4:15) You go to fucking Syria, excuse my language, Hannah Montana is there. You know what I mean? Like it's hard to ignore America. Yes. It's virtually impossible to ignore America from an economic standpoint, from a financial standpoint, from a military standpoint, but especially from a cultural standpoint. Yes. Which is counterintuitive because when we talk about America, we don't usually think of America as a culture. [Desmond Fleming] (4:15 - 4:17) Yeah. Not a cultural bastion. [Abdul Al-Assad] (4:17 - 4:20) We look to the old world. Exactly. We're like, oh no, Americans have no culture. [Desmond Fleming] (4:20 - 4:22) Like Europe is where it's at. You know what I mean? [Abdul Al-Assad] (4:22 - 4:57) Like the truth is actually, no, no, no. Like American pop, the global pop culture is American culture. Yeah. So there is an aspect of like, do not underestimate that. So when you ask me the question of like, what attract you and pulled you to America? How did you know that the best people were in America? It's like I was sitting, hearing about all these stories and hearing about all these people and they were all Americans. And when I saw that, I said to myself, I want to be as close to the heat as possible. Yep. I want to be as close to the heat as possible. And the heat seemed to come from America. [Desmond Fleming] (4:57 - 4:59) Certainly in Wall Street. [Abdul Al-Assad] (4:59 - 6:29) Certainly in Wall Street. And I don't know what is about me personally that finds the idea of being so close to the heat attractive. I think that is perhaps like some innate, you know, openness to new experiences that I have or some innate ambition or something I'm trying to correct in my life or something that really attracts me to this idea of like being as close to the heat as possible. Are you a risk seeking person? I'm an adventure seeking person. I think life is extremely, extremely precious. You know, I grew up in Damascus in Syria and the Middle East is just a tough neighborhood. And when I was 16, the Syrian civil war started and I left Syria and I went to Europe during the war on a scholarship. And I think when you realize, you know, the Syrian civil war was so bloody, so many people died, so many people's lives were destroyed. And when you're that close to the idea of mortality, when you're that close to the idea of like your life could be ruined so quickly, you develop a sense of appreciation to the gift that life is. And I think I've had that from when I was young, given my background. So it's not like I go out of my way to take risk. Really, I just want to live as full of a life as possible. [Desmond Fleming] (6:29 - 6:34) And is entrepreneurship a way to express living a full life? [Abdul Al-Assad] (6:34 - 6:52) Absolutely, absolutely. I think to live a full life, you need to kind of immerse yourself. You need true, true immersion, true intention. And ultimately, ideally, that combination of immersion translates itself into some act of original creation. [Desmond Fleming] (6:52 - 6:52) Yeah. [Abdul Al-Assad] (6:53 - 6:58) That you're not just taking, taking, taking from the world, but you're also putting something out there. [Desmond Fleming] (6:58 - 7:14) You don't want to be constantly consuming. Exactly. The world is set up today where it's like, you're going to consume, you know, media, you're going to consume products, you're going to consume, you know, technology, but entrepreneurship is a complete opposite of that. You're creating something from nothing. Yes. Effectively. [Abdul Al-Assad] (7:14 - 7:38) Yes, yes, absolutely. Absolutely. And I had that basically in me. I just want to see as much of the world as possible. I just want to experience as much of the world as possible. I want to experience all the spectrums of emotions. I want to experience pure joy and happiness. I want to experience terror and paranoia. I want to experience anxiety, but also want to experience gratitude. And I think building a company. [Desmond Fleming] (7:38 - 7:40) You're going to get all that in a week. [Abdul Al-Assad] (7:41 - 7:50) It's deeply emotional experience. You end up feeling everything that could be possibly felt under the sun. Yes. And how do you deal with that? [Desmond Fleming] (7:51 - 8:09) Like that, that is, that is, uh, you know, it's a lot for lack of a better word. What I'm in my head, I'm like, that's a pain in the ass to deal with all the time. And it's constant change. So how have you found your ways of just, you know, wrestling with what entrepreneurship actually is? [Abdul Al-Assad] (8:09 - 8:09) Yeah. [Desmond Fleming] (8:10 - 8:11) The reality of entrepreneurship. [Abdul Al-Assad] (8:12 - 8:23) There is an aspect of basically understanding that all in all states are fleeting. So if you are in extreme happiness and you're super successful at some point, this is going to change. [Desmond Fleming] (8:24 - 8:24) Yeah. [Abdul Al-Assad] (8:24 - 8:56) And if you are in deep state of anxiety, at some point you're going to feel comfort. Yeah. And if you are very depressed and sad and lonely, it'll be a moment where you're going to feel loved. And if you feel very loved, there'll be a moment where you feel lonely. And once you get to a really good terms with this idea that virtually all emotions are fleeting and all states are fleeting, and you are already in the process of dying. Death is not something you're going to encounter one day, but you're already, it's a process you're already going through. I'm a third there. [Desmond Fleming] (8:57 - 8:57) Exactly. [Abdul Al-Assad] (8:57 - 9:33) Once, once you get to that level of like basically understanding, you start to take every single daily emotion slightly less seriously. Yeah. Are you religious? I grew up religious. And then, you know, like all high school and college kids, I started reading Christopher Hitchens and Sam Harris and these people, and I became less religious. Yeah. And I think now I'm starting to kind of go back to a little bit of spirituality, but I'm not, I don't, I don't practice say day to day, but, but I, I, uh, I grew up very religious and I'm, and I miss it in some ways. [Desmond Fleming] (9:33 - 9:39) Yeah. Yeah. Who is Rich Bagna or Bogda? Bogda. [Abdul Al-Assad] (9:39 - 9:41) Who is Rich Bogda? Bogda. He's a legend. [Desmond Fleming] (9:42 - 9:43) Tell us about him. [Abdul Al-Assad] (9:43 - 9:53) I love Rich Bogda. So Rich Bogda is this gentleman who is the founder and CEO of Service Professionals. Yeah. Service Professionals is one of our early customers at BSA Capital. I believe they were number three. [Desmond Fleming] (9:53 - 9:54) Yes. [Abdul Al-Assad] (9:54 - 10:00) And they are, you know, 117 employee company. Yes. It's an HVAC company out in Union, New Jersey. [Desmond Fleming] (10:00 - 10:01) Yes. [Abdul Al-Assad] (10:01 - 10:09) And this legend started Service Professionals in 1994. Okay. Which is the year I was born. [Desmond Fleming] (10:09 - 10:11) Yeah. Same 30 years old. Let's go. [Abdul Al-Assad] (10:11 - 10:44) 30 years old. Exactly. So this, like, so first of all, like to go out and have a customer, it's a family owned business, founder owned business. That's his life's work. That's literally his life work. He started out by himself as an HVAC worker, as a plumber and electrician, then HVAC, and then grew it from one man shop to 117 employee company. And that is like, life is so funny. There is something so entertaining about the thought that like in the year I was born, this guy started his company. [Desmond Fleming] (10:45 - 10:45) Yeah. [Abdul Al-Assad] (10:46 - 10:55) So anyway, he starts with Service Professionals. He grows at 217 employee company. It's a massive business and top line, a bottom line. We know the details, but I don't know if I'm authorized. Yeah. [Desmond Fleming] (10:56 - 10:56) Don't share. [Abdul Al-Assad] (10:57 - 10:57) He makes money. [Desmond Fleming] (10:57 - 10:58) He makes money. [Abdul Al-Assad] (10:58 - 11:03) And you know, and he's getting bed every day by like these Harvard business school guys. [Desmond Fleming] (11:03 - 11:06) Some private equity associate is like, hello, Service Professionals. [Abdul Al-Assad] (11:06 - 11:08) I'm really passionate about HVAC. [Desmond Fleming] (11:08 - 11:11) Can I buy your business? Sure you are. You're the third one in my inbox today. [Abdul Al-Assad] (11:11 - 13:42) Exactly. Exactly. So he's an OG man. Like he, he cares for his people. He cares for his workers. His head of growth, Casey Thompson, God bless his soul, who essentially is in charge of growing the business. Yeah. And you know, to give you a sense of the structural challenges we have as a society, last year in New Jersey alone, 65 HVAC license expired, but there were only three new licenses issued. That's the Delta between the supply and the demand. I think we as a society, somehow like 20, 30 years ago decided that college is a great idea. And we sent a bunch of kids to college to study liberal arts. And we told them to get into a hundred grand of debt for recourse, by the way. To study art history. To study art history. No shade to art history though. No shade to art history. No shade to college in general, but like, I think it's worth just discussing this dynamic. Debt unlocked education for them. Yep. Because if not for debt, these people would not have been able to go to college. But we decided it's a good idea for somebody to borrow a hundred thousand dollars to buy an asset, right? That is intangible. And that is not clear that the asset is completely unclear. So this is just a footnote talking about basic capital. We're going to come back to this later of how we as society have different perceptions of debt and how we are okay with some use cases of debt, but we're not okay with other use cases of debt. And many people did not become plumber. They went to college instead. And now today there is a massive shortage of plumbers, massive shortage of HVAC workers. Casey Thompson is in charge of essentially growing the hit count of service professionals from a hundred to 200, 300 people. Yep. And he needs to attract and retain talent. So he comes across basic capital as a retail product for himself. And he hears about us in Reddit. Like there was a bunch of people on Reddit discussing basic capital. And he was like in the fire community subreddit. He's like, this is really interesting. And he goes in and tries to sign up and buy basic capital. And basically we tell him like, ah, like, good luck. There is like a 10,000 people wait list line. And like, we're picking people, I know, 10, 20 people a day. We feel like it. And we're focusing all of our efforts on the employer business. Because 90% of our business is B2B. And the retail business is just like good top of funnel, good awareness business for us. [Desmond Fleming] (13:43 - 13:53) And that the focus on B2B was a business decision, largely basically aggregating, you know, one to many relationship. It's a higher quality business for us as a company. [Abdul Al-Assad] (13:54 - 14:41) And as well as it's a better application of our product. We sell retirement investing at its most basic level. And the retirement is one of these things that is often thought of as an employer provided product for one case, just like healthcare. Yep. So you can try to set up like your own DTC healthcare company, but most people get their employer. Investing is the same thing. Like Robinhood, Webull, all these people are like, in my opinion, like coming after the smaller slice of the market, which is like retail brokerage accounts. But the largest pool of assets for retail is actually into defunct contribution plans, which is the 401k. And there is $12 trillion of assets there. So if you're starting a business as an entrepreneur, you look at the brokerage space and you have Robinhood, Webull, Kalshi, and everybody is competing for that small wallet. Yep. [Desmond Fleming] (14:42 - 14:46) Now, that's without throwing in someone like Schwab. Yeah, that's a giant. [Abdul Al-Assad] (14:46 - 14:52) Yeah. Forget about Schwab. I'm just talking about like these guys. Robinhood is still like a $20 billion market cap business. Yep. [Desmond Fleming] (14:53 - 14:54) I actually think they're closer to 50. [Abdul Al-Assad] (14:55 - 14:55) Oh, here you go. [Desmond Fleming] (14:55 - 14:56) Yeah. [Abdul Al-Assad] (14:56 - 16:17) Robinhood is a $50 billion market cap business. Public is about to go public, no pun intended. And they're probably a multi-billion dollar business. Yep. Webull, Kalshi, like all these businesses. And they're competing for this small line, like wallet share. And I was like, hold on, guys. Most of retail money, $12 trillion of it, is actually in 401ks. Why aren't you there? And that's because their value proposition is fundamentally different. We want to enable people to trade and we want to enable people to invest. So I decided to go into the B2B business. It's a bigger opportunity. People think of retirement as something that's employer provided, not something as self-administered. So anyway, so Casey is like, I want to buy basic capital. How do I get it? We're like, we're really focused on employers. He's like, well, I'm the head of growth at my company. I love this product. I'm sure other people would love it. Let me bring it up to Rich. And Evan, Evan is the CEO. And Rich Bogda is the CEO. And he brought it up to them. And you know, how do I get more mom and pop HVAC companies to join me? Like if you think about how does Rich think day to day, there is a three employee HVAC company operating independently in Jersey or in Connecticut or whatever. He scales his business through headcount. So he goes out. So he goes out and acquires them basically. It's like a PE roll up, but it's not actually PE back. [Desmond Fleming] (16:17 - 16:21) Yeah. It's yeah. He's basically a holding company or like a small conglomerate. [Abdul Al-Assad] (16:21 - 18:05) He goes and he's like, listen, you have this like HVAC company that has no name recognition, no brand, no systems. You just want to be an electrician. I can tuck you in. I handle the payroll. I handle the 401k, the health insurance, and you just continue to be an electrician. And I get to expand my geographical footprint and you get to have my brand, my brand name from my recognition. He gets to grow his platform. But how do you convince these three HVAC workers who are operating completely independently to join your business? You show up and you say, we offer basic capital. And they sit down and they say, hold on. What is like, why would I join you? Well, one reason why we join you is like, it's easier to administer the business if there is like a roll up, up top. Another reason is like you pay me some money. But another reason is I get things that I wouldn't get access to otherwise. And one of them is basic capital. So now Rich is able to go to these HVAC workers and say, listen, we have a world-class 401k provider called basic capital that gives you access to more investing power if you choose to. If you do not want to use it, you can invest in something else. And we offer all these other perks. And that's basically our growth model. We exclusively sell into PE roll-ups. We exclusively sell into platforms where, you know, they are trying to triple, quadruple their headcount over the next two, three years. We go sell into one of these platforms and we, you know, triple, quadruple with them organically via negative CAC, which I believe is actually a first mark. Shout out, Adam Nelson. Shout out to my boy, Adam Nelson. So that's who, you know, Casey pitches it to Rich Bogda. I meet Rich Bogda and I love, I just love Rich. He's like an honest man, hardworking man. And there is something real about people who have real jobs. There's something really kind about people, like Rich has a real job. [Desmond Fleming] (18:05 - 18:07) He uses his hands every day. [Abdul Al-Assad] (18:07 - 18:08) Yeah. We have fake jobs. [Desmond Fleming] (18:08 - 18:11) Yes. We're on email pranking it out. [Abdul Al-Assad] (18:11 - 18:17) Playing video games all day. Hey, hope my email finds you. Okay. Please find, you know, like he has a real job. [Desmond Fleming] (18:17 - 18:17) Yeah. [Abdul Al-Assad] (18:17 - 18:58) And there is something really beautiful about wanting to serve them. And yeah, I believe since I've been pitching basic capital to venture capitalists, such as yourself, I've been saying in every pitch meeting, I cannot wait for the day to put on my hard hat on and go into a Home Depot warehouse and onboard folks. I remember this. Yeah. And luckily for me, I got to do that earlier this March when we onboarded service professionals. They have a massive, beautiful warehouse. And I walked in and I was walking in their warehouse and I got to speak with every single one of them and onboard them myself in the mobile application on our platform. [Desmond Fleming] (18:58 - 19:39) And what's their reaction? You know, like when I think about the meta problem or challenge that basic capital is solving in a very elegant manner is it is helping bridge the gap between the haves and the have nots. It's helping bridge the gap between people who are growing their net worth because they have access to capital and make a lot of their income off of existing capital versus people who are making their income and growing their net worth via basically salaries. So it's that split between wages and labor and capital. [Abdul Al-Assad] (19:39 - 20:39) Absolutely. Listen, at its most basic level, no pun intended, basic capital is trying to help people solve the cold start problem. So if you want to be wealthy in America- You should have money already. You should already, you want to own capital. You want to own assets. That's usually the saying is you want to be a capital owner. Why do you want to be a capital owner, not a laborer? Like, let's kind of take a step back and just think about this from a meta point. There are only two sources of income in the entire economy. Capital income, you invest in something and you make a return, and labor income. Labor income depreciates over time. What does that mean? It means as you age, you depreciate. You become less productive as a human depending on what sector you're in generally. Yes, but even if you are the world-class lawyer and you're not working with your own hand, at some point, your memory starts to fade. [Desmond Fleming] (20:39 - 20:43) Yes. You do not work as hard as- And then someone else at Skadden says, you got to get out of here. [Abdul Al-Assad] (20:43 - 20:54) Exactly. There's a young stud behind you trying to push you out. But not only that labor depreciates over time, but labor is a massive threat from capital. [Desmond Fleming] (20:55 - 20:57) Yeah. There's no leverage with labor. [Abdul Al-Assad] (20:57 - 21:28) Well, exactly. There's no leverage with labor, but also think about automation. Yes. Right? So like, if there's only two sources of income in the economy, I either work and I get paid money for my work, or I invest and I get paid from other people's work. Yes. That's called leverage, right? Yep. In order for you as a human being to get wealth, you want to diversify your sources of wealth between these two sources. You want a little bit of labor income and you want a lot of capital income. The problem is to get capital income, you need to own assets. [Desmond Fleming] (21:28 - 21:29) Yep. [Abdul Al-Assad] (21:29 - 23:14) To own assets, you need to already have the money to buy the assets. Yep. It takes money to make money. Takes time as well. It takes time, but it takes money to make money, right? So if you want to hedge your risk of getting automated by AI, the best thing you can do is buy an Nvidia share. But what if you do not have the money to buy an Nvidia share? Yep. Or what if you're not even aware of it? Or even you're not aware of it. Right? So that's essentially the problem that basic capital is trying to solve, which is people need to buy assets, but they do not have the money to buy assets. So they're stuck in this vicious cycle where they are exclusively dependent on their labor income for wealth. Their labor income depreciates over time and their labor income is actually a threat by AI. Yep. So I call basic capital an AI derivative company. Yep. You know, hopefully that will do well for our evaluation. Yeah. You know, we are an AI derivative company. We're not an AI company outright. Yeah. But we're solving what I think is going to be a massive societal consequences. Yes. From AI automation. So if you want to buy assets, you need to have the money to buy the assets. I kind of want to talk about this one more time. The median income in America is $72,000. Yes. The median cost of living in America is $105,000. Yes. That means the median American is like $35,000 in revolving credit card debt. Yep. On ongoing basis. Yep. Which kind of ties up because there is $5 trillion of outstanding non-mortgage consumer credit. So the vast majority of Americans are not living paycheck to paycheck. They're living negative paycheck to paycheck. Yep. And they're one like hit away. [Desmond Fleming] (23:14 - 23:16) Said another way, a lot of people are in debt. [Abdul Al-Assad] (23:16 - 23:17) A lot of people are in debt. [Desmond Fleming] (23:17 - 23:21) And therefore a lot of people are in debt and therefore they have no capacity to save. [Abdul Al-Assad] (23:21 - 23:52) Exactly. They have no capacity to save. And the question is like, okay, well now if I want to buy assets, I need to save, but I cannot save. How do I buy assets? Yep. Saving is a scam. Sorry. You think saving is a scam? I think saving is a scam. Here is why. If you make $100,000 a year and the cost of living is $105,000. Yeah. Let's say, how much do you think you can save of the $100,000? Let's say 2% just for the sake. [Desmond Fleming] (23:52 - 24:11) Yeah. Well, let's push back on that. The $105,000 of cost of living, because I think some people would rationally say, hey, if I'm only making $100,000, but it costs me $105,000 to live, there's some areas in my life where I can cut back on expenses. So maybe bring it into more of a realm of, you know. [Abdul Al-Assad] (24:12 - 24:12) 70-70. [Desmond Fleming] (24:12 - 24:13) Yeah, whatever. Sure. [Abdul Al-Assad] (24:13 - 24:38) Sure. I agree. So let's say, I think the vast majority of Americans would disagree with you in an age of 8.5% inflation over the past two, three years. But the idea here is, if you make $100,000 a year, the most you can save is like 1% or 2% of your income. If you save 1% of your income, that's $1,000. Yep. That means it takes you 100 years to get to $100,000 in savings. [Desmond Fleming] (24:39 - 24:41) Yes. Which is not going to pay for your retirement. [Abdul Al-Assad] (24:41 - 24:42) That's called capitalization rate. [Desmond Fleming] (24:42 - 24:43) Yep. [Abdul Al-Assad] (24:43 - 24:55) Right? It takes you like, in order to capitalize your own annual income. Now there is an element of compounding that shrinks this. Yep. So if you're saving this $1,000 and you're compounding at 8%. But at that dollar amount, it's still de minimis. It's still de minimis. [Desmond Fleming] (24:55 - 24:55) In the long term. [Abdul Al-Assad] (24:55 - 25:14) Now here is the deal. If you make a million dollar a year, working at FirstMark. Yep. Or working at Paul Weiss. Yeah. Or working at Goldman Sachs. Yep. You can save something like 30% of your income. Because if you make a million a year, you have to try really hard to spend it. [Desmond Fleming] (25:14 - 25:17) Yeah. The cost of living doesn't scale with your income. [Abdul Al-Assad] (25:17 - 25:44) So you can save something like 30% of your income. And if you save 30% of your income, it takes you three years to capitalize your annual income. So saving inherently is a mechanism that works for the rich. Yes. That's why I call it a scam. Yep. Saving inherently works for rich people. Why? Because the richer you are, the higher income you are, the higher your saving rate is, the faster you can build real wealth. [Desmond Fleming] (25:44 - 25:52) Yeah. And it's almost like the savings rate for the wealthy isn't, I would say it's not even saving. It's about ownership. Yes. Because then they have assets that then produce income. [Abdul Al-Assad] (25:52 - 25:52) Exactly. [Desmond Fleming] (25:53 - 25:55) So, you know, build on top of themselves. [Abdul Al-Assad] (25:55 - 26:07) Exactly. So what you're describing is like the Thomas Piketty phenomenon, where basically like if you have 100K already invested, and the market went up by 8%, that's your saving rate is 8%, even though you did not actually take an 8% pay cut. [Desmond Fleming] (26:07 - 26:08) Yeah, yeah, yeah, yeah. [Abdul Al-Assad] (26:08 - 26:21) Right? Yeah. So now you get into like a whole other element of like, what is the true saving rate? Yeah. Of somebody who makes a million dollars a year, who has a million dollars of investments, who saved 30% of their income? [Desmond Fleming] (26:21 - 26:22) Yeah. [Abdul Al-Assad] (26:22 - 26:23) It's probably closer to 38%. [Desmond Fleming] (26:23 - 27:14) Yeah, it's a lot. Yeah, it's a lot. I always think one of the things that frustrated me about my education and I went to a good public school in Texas, I went to Cornell, a great private school here in New York, no one ever told me explicitly like, hey, Des, the way to get rich in this country is to own assets. No one ever told me that. But what people did tell me, what they did teach me is, hey, there's a time value to money, and there is this element of compounding. The longer you allow your money to work generally in the market, for example, the larger that pool of capital that you put in at the beginning will be in at the end. So it's better to be invested in the market for 30 years versus 10 years. [Abdul Al-Assad] (27:14 - 27:42) And that's absolutely correct. And generally speaking, like, when I say savings is a scam, I'm being rather fictitious or rather provocative. It's a good marketing line. People are like, hey, wait, savings is a scam, what do you mean? You should save if you can, and you should save as early as possible. But what I'm trying to get at is the saving inherently, the solution to people's financial problems is usually you should save more. And I think that's a really condescending solution. [Desmond Fleming] (27:42 - 27:42) Yeah. [Abdul Al-Assad] (27:42 - 27:47) Because I think we are telling the people who can afford to save the least. Just do more. [Desmond Fleming] (27:47 - 28:13) To do more. Cut back on your Starbucks. Yeah. It's not going to move the needle. It's not going to move the needle. But what I think does move the needle, if you inject into this world this concept of what you want to be is an owner. You want to be an owner of the American economy, the American experiment, however you want to frame it. And what is most readily accessible for anyone to be an owner is the stock market. And the challenge is not just participation. We've solved access. [Abdul Al-Assad] (28:13 - 28:14) Yes. [Desmond Fleming] (28:14 - 28:28) We've solved access, at least in public markets. We've not solved the problem of how do we make sure at your point of access and earliest in your life, you have the most amount of dollars coming in. Some people want to solve this. Brad Gerstner from Altimeter. [Abdul Al-Assad] (28:28 - 28:29) Yeah. [Desmond Fleming] (28:29 - 28:31) And I think Bill Ackman does this as well. [Abdul Al-Assad] (28:31 - 28:32) You know, the baby bond. Invest in America. [Desmond Fleming] (28:33 - 28:46) You know, let's put a thousand bucks when you're, you know, literally zero years old. Yeah. Which makes sense, right? Because that a thousand will just compound earlier. Compounding will be epic. Yeah. Epic for everyone. But you're saying, hey, if you miss, let's say that legislation doesn't go through or whatever. [Abdul Al-Assad] (28:46 - 29:22) It went through. My God, shout out to Brad. Shout out to Bill. Huge fan of the initiative. Love what Brad is trying to do there. But he is relying on a government solution. And I generally speaking, I'm generally speaking skeptical of us asking the government to solve our problems for us. Yes. And I am a capitalist at heart. Yes. And I believe in market-based solution. So let's kind of take the problem. The problem is people want to be owners. People should be owners, but they cannot afford to be owners. That's the problem. [Desmond Fleming] (29:23 - 29:23) You help with that. [Abdul Al-Assad] (29:23 - 29:25) I help with that. I want to afford a house. [Desmond Fleming] (29:25 - 29:28) Yeah. I can't afford a house. Exactly. So let's talk about that now. [Abdul Al-Assad] (29:29 - 30:11) We agree that ownership is really important. Yes. How do we unlock ownership? One way to unlock ownership is you go to the government and you say, hey, government. Finance my house. Finance my house or buy me bonds, buy me stocks. That's an okay solution. Another way to solve this ownership problem. Let's talk about how do people get to own things. When you want to buy a house, what do you do? You buy now, pay later the house. You mortgage the house. When you want to buy a car, what do you do? Same thing. You buy now, pay later the car. You auto loan it. When you want to buy an intangible asset called education, going back to earlier, what do you do? Same thing. You buy now, pay later education via student loan. [Desmond Fleming] (30:12 - 31:02) When you think about those three things, which do you think is the easiest to access in terms of accessing that loan? If we thought about one component of level of difficulty and level of value to you, I'm just thinking about it out loud. It's pretty easy to access a loan for education, pretty easy to access a loan for your automobile, pretty easy to access a loan for, or on a relative basis, a little harder to get a loan for your home. Out of those three, auto immediately depreciating asset, education somewhere in between depends on what you choose. And then for the home, it's not a high value compounding asset. [Abdul Al-Assad] (31:03 - 31:44) Yeah. Well, it's also highly concentrated, but let's kind of think about this. The important point that I'm trying to make, and I was going to write a Twitter thread about this and I got distracted, but history of middle-class ownership in America is history of debt. Yes. And people fail to understand that online. Debt has been the most and only reliable tool to unlock ownership in this country. Yes. If not for debt, there will be no housing. No middle-class. There will be no middle-class. If not for debt, there will be no cars, which is important if you live in the middle of the country and you need to drive 10 miles to get to your job. [Desmond Fleming] (31:44 - 31:54) Yeah. And if you think about, I guess, post-war period as well of growth, because I'm sure at some point the auto industry was the number one industry in the US. [Abdul Al-Assad] (31:55 - 32:47) Yes. And basically the history of the auto loan is also fascinating. It's mostly what started by General Motors, actually. Yeah. They needed people to buy their cars. People were not putting up to buy their cars. So they started like a seller financing situation. Yeah. And then you think of education, if not for education, if not for student loans, there will be no education in this country. So it's important to understand that like history of middle-class ownership in America is the history of debt in America. Yep. These are the same book. They're literally, somebody should make it like an art project where the book from left to right is like history of ownership, from right to left is the history of debt, and they literally collide. They're the same thing. And we as a society, we're okay with people buying in a metaphysical asset called education. By the way, you could pick the right measure. How many people picked computer science? Not enough. But no, I would, I would argue like a lot of people pick computer science and now AI is going to coach for you. [Desmond Fleming] (32:47 - 32:48) Now they're being challenged. [Abdul Al-Assad] (32:49 - 33:06) Right. Like imagine this actually, like, I'm not, I don't know why I even like talk, I don't know why I even like blame the art history kids. Cause like, that's kind of just mean, but imagine the person who actually went to college, took 200 grand of debt, studied computer science. Yep. And I was like, I'm going to go become a software engineer. [Desmond Fleming] (33:07 - 33:08) Yep. I want to go work at Google. [Abdul Al-Assad] (33:08 - 33:36) And then they graduate and then cursor shows up and open AI shows up and now they're like toast. Yeah. They're basically toast. Yep. And there's 200 grand in debt. And we as a society, we're completely okay with that. Yes. We're completely okay with people financing and appreciating assets like a car and a house, which is a highly concentrated asset. You are like taking basically a bet on your local labor market. Yep. That's what housing is. It's like, Hey, let me look at my local labor market and let me look at my local zip code and I'm going to take my entire life saving and put it in this thing. [Desmond Fleming] (33:36 - 33:45) And what are those? And, you know, without knowing it, you know, what are there going to be the supply demand? Exactly. Uh, functions in my local zip code. What's the replacement rate of these houses as well? Exactly. Exactly. [Abdul Al-Assad] (33:45 - 34:26) And then I showed up or basic capital showed up and our radical idea is you should finance appreciating asset, not depreciating assets. So unlike cars, you should finance diversified assets, not concentrated assets, unlike homes. And you should finance cash generating assets, not metaphysical assets, like education. Cash generating, appreciating, diversified. And you should get credit to become an owner of these assets that have these three criteria. Yep. And everybody on the internet lost it. Yeah, yeah, yeah, yeah, yeah. [Desmond Fleming] (34:26 - 34:36) What's been the reaction thus far? How do people, how do people think, how do people feel? What have been some of the more notable reactions to basic capital? [Abdul Al-Assad] (34:37 - 34:44) There is a knee-jerk reaction in our society to the idea of mixing assets and financing. [Desmond Fleming] (34:45 - 34:55) It already happens at, you know, the top 1%. Of course. When I heard about, uh, you know, an S-block or a HELOC for the first time, I was like, wait, you're doing what? [Abdul Al-Assad] (34:55 - 35:43) Yeah, yeah, yeah. I think as a society, like as a society, we are, uh, there is a healthy level of allergic reaction to new ideas. And the way I like to think of startups is like, almost like a vaccine. Yeah. And, you know, you inject the vaccine in the body. Yeah. And the body rejects you. The body doesn't want you. The body is freaking out. The body gets sick and gets fever for a day or two. And then eventually the body just accepts you. Yep. And then you develop immunity. Yep. You know, Marc Andreessen has one of the most beautiful maxims that I believe in. It's one of our operating principles at Basic Capital. The universe is extremely malleable place. Yes. And you can really bend it and mold it to your desire more than you think. I love that quote. [Desmond Fleming] (35:45 - 36:13) Tactically, how do you go about that? So imagine you are a 25 year old who wants to be an entrepreneur, who wants to be in your seat and maybe hasn't heard that quote before. And they're like, society is malleable. That is a very freeing statement, but it's also a, I think, a counterintuitive statement when you hear it for the first time. So how do you tactically go about pushing on the world? [Abdul Al-Assad] (36:13 - 37:37) Yeah. I think there are multiple points that come to my mind. One is read about how it has been done before. Yeah. So the best thing you can do as a 25 years old is actually learn about how other 25 years olds change the world. That's the best thing you can do. Because once you start building a frame of reference in your mind, that change is possible. Once you build that frame of reference, it starts to become like a way of life. It starts to become an attitude. It starts to become an approach. So number one is try to read or listen to stories of people who changed the world. Shout out to David Sundarar, the founder of this podcast. And it's essentially an archival history of people who really bended and molded the world to their own vision. So that's number one. Number two, understand that it's not a walk in the park. It's not gonna, things can change and things do change, but they take a long time to change. And by a long time, I do not mean 30 or 40 years. I mean five or 10 years. Yeah, I was thinking a decade. Yeah. I think people, generally speaking, overestimate what they can get done in one year. And they underestimate what they can do in 10 years. Yeah. [Desmond Fleming] (37:37 - 37:56) And in those 10 years, there will be opportunity costs. Yeah. And I don't love this term, what I'm about to say, but I do think you may have some suffering in your life. Your life will be harder for choosing the role of entrepreneurship, but continue. [Abdul Al-Assad] (37:56 - 38:35) Yeah, I 100% agree. There will be suffering and there is an opportunity cost. But we kind of go back to the earlier point. Spectrum. It's a spectrum. And you need to ask yourself, do I perceive life to be a precious gift? That it is. And do I want to live it in the fullest, richest way possible? And if you do, entrepreneurship is a really great path for you. If you have no interest in experiencing all the spectrum of emotions of the human experience, that's what entrepreneurship is. Entrepreneurship is essentially, in effect, a way to get the full spectrum of the human experience. [Desmond Fleming] (38:36 - 38:59) So do you think entrepreneurship is a good outlet for achievement-seeking people? Because if I, you know, it's a horrible outlet, but I'll push you on this. Goldman is actually a very good producer of entrepreneurs. And Goldman, largely, I don't think of as a castle or bastion for entrepreneurship. I think of it as a castle and bastion for achievement-seeking people. [Abdul Al-Assad] (38:59 - 39:00) And these are two different things. [Desmond Fleming] (39:00 - 39:10) So what do you think is in the Goldman DNA that attracts both, you know, entrepreneurial-oriented individuals, as well as, obviously, the achievement-oriented people? [Abdul Al-Assad] (39:10 - 40:54) Yeah. I think both people share the DNA to be successful at entrepreneurship, but they're fundamentally different to a human being from a personality trait perspective. So to be a high-achieving person and to succeed at entrepreneurship, you need to be tenacious and you need to rank really high on conscientiousness. And I think high-achieving people and successful entrepreneurs share that. So the reason why a lot of Goldman alumni are successful is because you go to Goldman and you essentially see what it takes to succeed. And that's actually one of our hiring principles, is how close this person has been to someone who's excellent. Because if you've been so close to somebody who's excellent, even if you were carrying the towels at an NBA team, you see the process. You see the process. You know what it takes to be Steph Curry. You know what it takes to be LeBron James. You know what it takes to be Michael Jordan. And I think that they share that in common. However, high-achieving people usually make terrible entrepreneurs because high-achieving people are too attached to outcomes and too attached to quick feedback loops. Yes. So they are very attached to the idea of like, I got promoted this year. Yep. I got paid a big bonus. Yep. I got like a new Hamptons house. Yep. And they basically use this as like a sign of progress. Yep. To be a successful entrepreneur, you need to have like a positive, you need to like innately in your mind and your brain, you need to be willing to tolerate a much longer feedback loop. [Desmond Fleming] (40:54 - 40:55) Yeah. [Abdul Al-Assad] (40:55 - 41:19) Like basically work for four or five years with no results and then get some result and like then work for another four or five years and no result and then get result. And I think that's why like a lot of successful lawyers and successful Goldman Sachs alumni do not necessarily make great entrepreneurs is because these folks are literally biologically, intellectually trained for quick feedback loops. [Desmond Fleming] (41:19 - 41:21) Yeah. Sometimes I think about it, you know. [Abdul Al-Assad] (41:22 - 41:23) But they're both similar in that they both grind. [Desmond Fleming] (41:24 - 41:25) Yeah, they grind for sure. [Abdul Al-Assad] (41:25 - 41:35) That's a prerequisite. Yeah, yeah, exactly. I think similar in that sense, but they're very different in that one of them needs to have like a much longer ability, whatever you want to call it, marshmallow test, whatever you want to call it. [Desmond Fleming] (41:35 - 41:35) Yeah. [Abdul Al-Assad] (41:35 - 41:55) The ability to really delay gratification for like a really long time, you know, that's called opportunity cost. And like it's, what's opportunity cost? It's the one marshmallow now versus the two marshmallows tomorrow. Yeah. And I think very few people have the ability to think in five, 10 year terms. And that's a competitive advantage if you can have it. [Desmond Fleming] (41:55 - 42:18) I think that's partially because the world's so messy. It's extremely hard to predict where the world's going to go five years from now. Five years from now. Easier to predict what's going to stay the same about the world, which I think is one of the beautiful aspects of your business. It's about saying, hey, the momentum we're already on isn't going to change five, 10, 20 years from now. Actually 20 years from now, the problem will be worse for people who have not opted into basic capital. [Abdul Al-Assad] (42:19 - 44:18) I mean, I just look at the past 200 years and I look at... I would have loved to be part of the Medici family. Yeah. I'd have a lot of capital now. A hundred percent. But I would just look at like the past, the history of capitalism and what percent of economic outputs are a byproduct of labor versus capital. And I think if you go... How would you measure that? Like the true output or like what produced this? Well, you can literally figure it out, right? You can aggregate the labor income in the economy and you can... GDP minus labor income is capital. Yeah. That's how you would create it. If there is productivity coefficient, that is also important in this. But it's somewhat a tautology how we calculate productivity because we just divide GDP by the number of workers. So the calculation itself does not really make sense. You cannot take it seriously. But let's go back to the Bronze Age. Let's go back all the way to like literally like hunter-gatherer. All income, all economic output is a byproduct of labor. You run and you hunt. At some point we created the knife or we created an arrow or we created a tool. We created fire. And that really increased our productivity. Now we can hunt at night because we have this fire. Okay. Now we can actually like stab an animal and like that's faster. And now some part of the economic output is actually driven by productivity and by capital, not by labor. And if you try to plot that over a 2,000 year period, you will notice that increasingly capital has been going up in a share of national input and labor has been going down. And in effect, basic capital is a bit that that will continue to be the case. And what we really want to make sure is like people who... Everyday people get to own capital. And one way to own capital is by saving. And another way to own capital is by financing it. And that's what we're going to enable folks to do is to finance assets rather than finance consumption. [Desmond Fleming] (44:20 - 44:47) You have found a way to be incredibly well-networked. And this is all public. You know, you've got in front of Henry Kravis, Bill Ackman, the team at Lux, um, the founder of TeamShares. How have you figured out how to get in front of people who, for lack of a better word, have a lot of leverage in their life? [Abdul Al-Assad] (44:48 - 46:59) I want to bring up a story of one of my old bosses at Goldman. His name is Earl Hunt. He now works at Apollo. And Earl Hunt was one of my mentors at GS. And he played basketball at Brown. Shout out Brown. Shout out Brown. And he, I was networking for my internship. I was trying to get a job on his desk, the distress desk. And he basically sits down with me and he says, Abdul, if you want the gig, just ask for it. And that really stuck with me. And basically what I was going with that is, you know, I came to America with $140 in my pocket. I did not know a single person. I did not have a laptop. I did not have a cell phone. I had a thick accent. And I came here completely alone. And my family was back home in Syria. And somehow I found my way from a small liberal arts college into Goldman Sachs, into the, you know, the Navy SEALs of the teams within Goldman, the leveraged finance team, the distressed team, into Harvard Business School, into Bill Ackman, into Henry Kravis, into others. Because when I wanted the gig, I asked for it. And I think people really underestimate that power, that high agency power. Like if you want somebody to mentor you, ask. It's the malleability you're talking about. If you, it's like this high agency. If you want somebody to invest in them, in you, ask. If you approach life with this perspective of like, I want something, I go get it. I want something, I ask for it. You will be shocked by how often people reply to your cold email and how often people reply to your DMs. It cannot be a show. Like it cannot be a show. You have to actually like have that in you. And I'm really lucky to have really important people being invested in me on a personal level, on a financial professional level. It's because they actually like, like they see in me like a sincere desire to be great. [Desmond Fleming] (47:00 - 47:14) They feel that what you want to create for the world is genuine. Yes. And I think passion is very important. One important aspect of being able to ask what you want for with confidence. [Abdul Al-Assad] (47:14 - 47:14) Yeah. [Desmond Fleming] (47:14 - 47:43) But I also think another thing is sometimes when you send that cold email, meet that person for the first time, you do have to communicate your expertise early to them. And sometimes that expertise is communicated in your passion because you have all the details about the thing. And sometimes your expertise is communicated in, you know, other ways. At least in the US, it's like the reputation signaling of a Goldman or HBS and saying, hey, you've been vetted by the world. So therefore this person in front of me is competent. [Abdul Al-Assad] (47:43 - 47:49) Naval has amazing, he has incredible maximum, which is like networking is bullshit. And I believe in it. [Desmond Fleming] (47:49 - 47:51) Do something successful and people will show up. [Abdul Al-Assad] (47:51 - 47:59) Yeah, I believe in the same thing. I believe networking is bullshit. I don't network even though I'm very well networked. But you've been pushing up against this idea. Yes. [Desmond Fleming] (48:00 - 48:02) And that was the equivalent of you creating something. [Abdul Al-Assad] (48:02 - 48:15) I guess what I'm trying to say is like, you cannot cold email somebody just to network with them. Yes. Like you need to actually have like a passion towards something and you need to actually have a project. And like, you need to have a very concrete ask from them. [Desmond Fleming] (48:15 - 48:16) Yep. [Abdul Al-Assad] (48:16 - 48:31) And like when you reach out to them and you are concrete and sincere about your ask and you're concrete and sincere about how they can help and they can actually help, you will be surprised by how often people reply. Yes, yes. But you cannot be like, you know what? I really would love to be boys with Elon Musk. [Desmond Fleming] (48:31 - 48:35) Yeah. I'm Dez. Hey, Jamie, you want to hang out with me? [Abdul Al-Assad] (48:35 - 48:55) Yeah. Like, for example, Jamie Dimon. Like let's actually take him. Yeah. I don't have a relationship with him, but I have a tremendous respect for Jamie. He'll be the fifth guest of the pod. Let's go. You know, Jamie Dimon making the pod. Abdul Al Asad making the pod. But you know, like I have a lot of respect for him. I look up to him. I admire him, blah, blah, blah. Like, but I have no reason to hit him up. [Desmond Fleming] (48:55 - 48:55) Yes. [Abdul Al-Assad] (48:55 - 48:56) So I'm not hitting him up. [Desmond Fleming] (48:56 - 48:57) Yeah. [Abdul Al-Assad] (48:57 - 49:07) You know what I mean? Yeah. But like there will be a moment where like maybe it makes sense for me to hit him up and I will not be shy about cold emailing him. Yes. So you have to be like sincere about what you're reaching out. It cannot be just for networking sake. [Desmond Fleming] (49:08 - 49:58) Yes, yes. Which I think that's what, you know, people don't, young people don't realize as early on in their career that just by, for lack of a better word, building and trying things and talking about it, how valuable that is. And I also think now, and we haven't talked about this, so I do want to get your thoughts on AI, what AI does is it lowers the cost of building and trying and getting ideas off the ground. And when I think about what it means now to start a company versus even what it meant 42 years ago, three years ago to start a company, you know, pre-ChatGPT, the difficulty of distributing that idea has gone down dramatically. So I agree. [Abdul Al-Assad] (49:58 - 51:19) And I'm not sure that's a good thing. I have a half-baked opinion on this. What's here? I started building basic capital before ChatGPT in a very, very niche area of financial services, 401ks, ERISA, securitization, credit. And I had a lot of unanswered questions and building a company felt like a Sherlock Holmes investigative journey where you're piecing together the different elements of the story from different sources. They're literally in this like investigative journey, you know, the IDMAs, let's call it. Right. And you're developing expertise. And it used to be really hard to develop expertise. It used to be really hard to get an answer. Today, I use ChatGPT every single day. It's up on my thing. I talk to her all day long and the answers comes back like this. And like back in the days you had to like. Grind. You'd have to grind. You had to really get an answer. Like if you had like an answer about a niche tax thing, like I literally remember buying books called Tax Facts 2023. It's like this 700 page book that like tax lawyers read. [Desmond Fleming] (51:19 - 51:19) Yeah. [Abdul Al-Assad] (51:20 - 52:08) And it's basically how the IRC, the Internal Revenue Code changes every year. And the book gets republished every year again based on updates in the Internal Revenue Code. And what we do has a lot to do with ERISA tax issues. So I literally used to buy the book that lawyers read in order to get like an update on how is something taxed. And I guess what I'm going with this is to say that like if getting answers is 10 times easier. If launching new projects is 10 times easier. I'm not sure if that's going to result into an increase in the volume of things being launched. An increase in the volume of things being answered or an increase in the quality of things being launched and things being answered. I'm not entirely. [Desmond Fleming] (52:09 - 52:13) I think there'll be a lot more junk. Yes. In general, let's call it entrepreneurship generally. [Abdul Al-Assad] (52:14 - 52:14) Exactly. [Desmond Fleming] (52:14 - 52:15) There will be a lot of junk. [Abdul Al-Assad] (52:16 - 52:40) Exactly. But my- Basically lowered, like that's what AI does, right? It lowers the barrier to entry. Yeah. Because now anybody can become a 401k expert overnight. Anybody can become an ERISA expert overnight. Anybody can become anything expert overnight. Anybody can ship an app overnight. Anybody can code. Anybody can. So you're lowering the barriers of entry. And when you lower the barrier of entry, you're just increasing the supply of something. As you increase the supply, there's going to be a lot of junk. And that's basically what I'm trying to say. [Desmond Fleming] (52:40 - 52:54) I'm not entirely sure that like lowering the- I think in that net, you will capture people who are more like Jimi Hendrix. And the reason why I bring up Jimi Hendrix is I always use the analogy of, hey, what if Jimi Hendrix never picked up a guitar? [Abdul Al-Assad] (52:55 - 52:55) Yeah. [Desmond Fleming] (52:55 - 53:01) Right. So what if you never had, you know, Toby start creating that first lines of code for the Shopify store? [Abdul Al-Assad] (53:01 - 53:01) Yeah. [Desmond Fleming] (53:01 - 53:03) Like that's why I get excited about it. [Abdul Al-Assad] (53:03 - 53:19) That's an interesting challenge for you as a venture capitalist. I would love to hear your thoughts about it. Like if the barrier of entry is so low and people now can become experts on virtually any topic over the weekend and can ship a product over a month, how do you as a venture capitalist go about selection? [Desmond Fleming] (53:19 - 53:20) We're all figuring it out. [Abdul Al-Assad] (53:21 - 53:21) You know what I mean? [Desmond Fleming] (53:22 - 53:37) Like literally- Because like now, like there's just- There's any hot category, any hot idea, let's say, you know, cybersecurity for AI products or AI native cybersecurity or AI code testing, whatever it is. 20 companies in a space. [Abdul Al-Assad] (53:37 - 53:37) Yeah. [Desmond Fleming] (53:37 - 53:38) Straight up 20. [Abdul Al-Assad] (53:38 - 53:38) Yeah. [Desmond Fleming] (53:38 - 54:29) And so for- Disaster. For early stage entrepreneurship, extremely hard. I think some firms and companies will play the game of capital can become your moat or at least capital becomes your weapon. Just deploy. Just deploy it. And a lot of people start to say, hey, maybe earlier than the true signals that we have of product market fit, let's just go brute force this in the market. And at the same time, there are, you know, lots of venture capital firms who now have defund sizes where they are not making a one-off bet with that strategy that is consistent within the entire portfolio strategy that they have. Yeah. In this point in time of, you know, we will anoint a winner. And the firm that has done that most successfully over successive periods of venture is obviously, you know, SoftBank. [Abdul Al-Assad] (54:29 - 55:58) So let's talk about the flip side of this. If it's really hard for- If the barrier to entry is so low, how do venture capitalists- One question is how do venture capitalists pick? But another way is like, how do you as a founder differentiate yourself? And here is like my advice on this topic. Like try to actually become an expert in something. Like I became fascinated with this relationship of capital formation, capital accumulation, insurance, credit, and the interplay of how the economy finances itself and how that has consequences on wealth inequality and on the individual building wealth. And I like really studied insurance. I really studied float. I really studied credit, credit markets, relation to insurance, public credit, public credit, how it's related to retirement savers, time matching and mismatching. And it has been the most rewarding intellectual experience of my life. And I think what a lot of people go wrong is they go really general. I'm not saying don't have passions. I'm not saying don't be well-read and curious, but I think increasingly, increasingly speaking, it's really hard to find somebody who's willing to go deep, a rabbit hole for four, five, six years. Yeah. You just don't see that as often. And I think- What was your process of doing everything that you just did? I swear to God, there was no process as much as there was just pure curiosity. [Desmond Fleming] (55:58 - 56:03) Or not even the process. What were the acts? Because even when you communicate all that, plus I've known you for a while. [Abdul Al-Assad] (56:03 - 56:03) Yeah. [Desmond Fleming] (56:03 - 56:07) When you communicate all that, it's clear that it has taken time. [Abdul Al-Assad] (56:08 - 56:08) Yeah. [Desmond Fleming] (56:08 - 56:22) And that's where I think, you know, yes, AI is a lever for improving productivity. It helps you get down the curve more quickly and in greater depth than relative to without it. But it's still going to be relatively shallow. [Abdul Al-Assad] (56:23 - 56:23) Yeah. [Desmond Fleming] (56:23 - 56:32) Like someone isn't going to, even if they want to get to your level of depth of what you've built, it may compress four years into two. I don't know. [Abdul Al-Assad] (56:33 - 57:27) Or they won't see, like, here is the advantage that I have over the AI person. Again, like this is actually a fascinating thing. Take Abdul, a guy who went down the IDMAs for five years with no AI. Yeah. Or AI only for the past two years. And take a guy who's going to start his IDMAs in the same space as Abdul. Today. And it's probably going to take him six months to get to the same level Abdul got. Six months is even probably too much. Maybe like one month, I would argue. Who would win? Who would win? And here's my answer to this. There is a difference between the imitator and the innovator. Yes. And the difference is the imitator has developed the muscle to problem solve while the innovator developed the muscle to problem solve, but the imitator never did. [Desmond Fleming] (57:27 - 57:27) Yes. [Abdul Al-Assad] (57:27 - 58:32) Yes. It's kind of like copying an answer in an exam. So that's why like the VCs are always like, well, what if there's a copycat? That's my mind. That's your VC voice? That's my VC voice. What is the most? How do you control this? Is Google going to build this? Yeah, Google's building, you know, I talk to someone else building something different, you know, like, is Fidelity going to copy you? Like, yeah. And like, if they could, they would. And let's say they do. But what I have over them is that I went down multiple dead ends. And that might seem like a waste of time because dead ends are by definition, definitionally, they're unproductive. They're a dead end. But when you know where all the bodies are buried, so to speak, and you know where all the dead ends are, you get two advantages. One is you develop a muscle to hit a dead end and come back. Resilience. Exactly. It's really not an emotional resilience. I'm not talking about like being rejected by VCs or not able to raise money. I'm talking about intellectual resilience. [Desmond Fleming] (58:32 - 58:33) Yes. [Abdul Al-Assad] (58:33 - 58:56) Like the idea of like really like working on a problem for three, four days, whether it's a legal problem or a finance problem. Yep. And work on it for a few months, work on it for a few years, and then eventually cracking the code on it. Yep. The imitator does not have that muscle. So the next time you hit a dead end, the imitator is going to fold. Yep. They're going to collapse under pressure. [Desmond Fleming] (58:56 - 59:12) I think back to kind of the analogy we were talking about earlier with the Goldman High Achievement versus Goldman Entrepreneur. Exactly. High Achievement wants to know, what is the path? Yes. I'll go cross that path. Yes. Entrepreneur says, it doesn't matter what the path is. I figured it out. I figured it out. [Abdul Al-Assad] (59:12 - 59:30) Yeah. There will be, I'm sure there is like three, four different like VC studios right now trying to spin off their own version of basic capital and trying to compete with us. But the difference between- For the record, I haven't heard of any. None other have I, to be clear. But I just can't imagine. I'm also like a deeply paranoid person. [Desmond Fleming] (59:30 - 59:39) Yeah. Well, once they see that it's you de-risk it and then it's success and there's some volume, people will be like, yeah, this is a capital product. We'll do the same thing. [Abdul Al-Assad] (59:39 - 1:00:28) But what I'm trying to say, even if they do, there will be a moment where our business and our space will hit another problem. And what you are investing in as a basic capitalist is not what Abdul has de-risked or what the founder has de-risked, but rather what you're investing in is the founder's demonstrable capacity for de-risking things. And the imitator has no demonstrable capacity to de-risk. Yep. The innovator does. And I think that's a really important distinction of why the founders who actually go, the trailblazers are the ones to bet on. Because they have the resilience. They have the ability to come back again and again and again. [Desmond Fleming] (1:00:28 - 1:01:14) Yeah. Well, I think coming back to how this came up with the whole topic of AI, right? One component of why... And look, I have no inside information on where all these things are going. And let's say they will continue on this path where they are scaling their ability to reason and solve unsolved problems today. Right now, they can't. Seems reasonable, but yeah. Right now, they are regurgitating information that has already been provided. So I still think for, at least in general with entrepreneurship, when you think about how do you separate that noise from the 20 out of a group, you are really looking for people who can unlock that last mile of information or solve that unsolved general problem. [Abdul Al-Assad] (1:01:14 - 1:01:39) One of the most formative things that I read in college is an essay called The Irritation of Doubt. And The Irritation of Doubt is an essay by Pascal. And it talks about how we as humans, biologically, are irritated by uncertainty. So we have a tendency to want to hold up to a belief tenaciously. That's like primal, right? [Desmond Fleming] (1:01:39 - 1:01:46) That's like about survival. Exactly. If I'm in a forest and I hear, oh, there's something rustling over there. Predator, I gotta get out of here. [Abdul Al-Assad] (1:01:46 - 1:02:04) I would not like uncertainty. As humans, we're not built... Why? Because this is like the Daniel Cameron thing, because like uncertainty is negatively convexed. Yeah. Which basically means if you hear a noise and you run, but it's a fake, it's a false positive, whatever you call it. Like it's actually not a threat. [Desmond Fleming] (1:02:04 - 1:02:04) It's fine. [Abdul Al-Assad] (1:02:04 - 1:02:13) It's fine. You just ran. You wasted 50 calories to run. Whatever. I can get those 50 calories back. You can get those. But like, if it's actually a lion and the lion eats you, you're dead, right? [Desmond Fleming] (1:02:13 - 1:02:13) Yeah. [Abdul Al-Assad] (1:02:13 - 1:02:53) So as a result, we as a human, we have like a... It's wired into us. It's wired into us. And Pascal was talking about what it takes in this essay, The Irritation of Doubt, what it takes to be a great scientist. And he, in effect, was saying like a great scientist is somebody who is comfortable with the irritation of doubt, who is comfortable being in the gray area, who is comfortable saying, I do not know. And I think people who have changed... Like one thing I look for intellectually in people is how much they've changed their mind fundamentally on a topic. Like that's why religious people are actually super interesting. Like somebody who grew up really religious... [Desmond Fleming] (1:02:54 - 1:02:57) And you're talking about in the context of recruiting people into basic? [Abdul Al-Assad] (1:02:58 - 1:03:08) Exactly, recruiting people into basic. Like somebody who grew up with a really strong belief about something, and then they moved away from it. Then they moved back to it, or they just moved away from it. [Desmond Fleming] (1:03:08 - 1:03:09) Yeah. [Abdul Al-Assad] (1:03:09 - 1:03:48) That reflects a certain level of neuroplasticity. Yeah. That I think somebody else does not have. And basically what you and I look for in great engineers, what you and I look for in great thinkers are people who are comfortable with the idea of being irritated by doubt, people who are comfortable with the unknown. And I think very few people have that neuroplasticity in them. The very few people who do have it are usually scientists. Yep. The most inspiring site I went to, or one of the most inspiring sites I went to was the Institute for Advanced Studies at Princeton University in Princeton, New Jersey. And is that like Einstein? Or fucking Einstein? [Desmond Fleming] (1:03:48 - 1:03:49) Einstein was there. [Abdul Al-Assad] (1:03:50 - 1:03:58) John Nash was there. It's basically like a think tank at Princeton. It's the only think tank of the world, I believe, where once you become a fellow, you do not have to teach. [Desmond Fleming] (1:03:58 - 1:03:59) Yeah. [Abdul Al-Assad] (1:03:59 - 1:04:28) So if you are an academic or a physicist or a mathematician, your dream is to go work at the Institute for Advanced Studies because you do not have to deal with all the kids. So you get to just do math. Yeah. And at the time when I was in college, I really wanted to go to graduate school in mathematics and to go to graduate school in economics. And I really wanted to go to this Institute for Advanced Studies. And at some point I realized there's no chance that's going to happen. So I pivoted. Why didn't you think it was going to happen? When you meet really smart people, you realize... Oh, yeah. Like, damn. [Desmond Fleming] (1:04:28 - 1:04:32) There's a big gap. I'm smart, but I'm not going to go to the Institute for Advanced Studies. [Abdul Al-Assad] (1:04:33 - 1:04:34) Yeah, yeah, yeah. [Desmond Fleming] (1:04:34 - 1:04:37) Gotcha. I think that happened to Jeff Bezos as well. [Abdul Al-Assad] (1:04:37 - 1:05:02) Yeah, when you meet really top people, you realize like, okay, the Institute for Advanced Studies is truly reserved for 10, 20 people in a generation. Yeah. And you go there... The LeBrons of physics. Exactly. And there are these mathematicians who work on a single problem for eight years with no clear sight that this problem is actually going to be solved or not. [Desmond Fleming] (1:05:02 - 1:05:02) Yeah. [Abdul Al-Assad] (1:05:03 - 1:05:10) And they wake up and they go and they write it on chalkboard all day. And they think about it and they think about it. And one day they solve it and they get a Nobel Prize or the Field Medal for it. [Desmond Fleming] (1:05:11 - 1:05:11) Or they get nothing. [Abdul Al-Assad] (1:05:11 - 1:05:25) Or they die and solve. Now, this sounds horrific to venture capitalists and to most people. Because venture capitalists are like, I don't want to invest in your intellectual journey. I want commercial applications. I want you to make money. [Desmond Fleming] (1:05:25 - 1:05:30) I'm not going to lie. In my head, I was like, I would hate that job. Yeah. It would be terrible for me. [Abdul Al-Assad] (1:05:30 - 1:05:43) It sounds perfect. Yeah. To me, I love it. Like the idea of like working on one single mathematical black hole equation for 10 years and then solving it 10 years later. That's something I would actually eventually solve it. [Desmond Fleming] (1:05:43 - 1:05:43) Yeah. [Abdul Al-Assad] (1:05:43 - 1:05:52) Sounds epic. Yeah. You know what I mean? But like that's the scientist mentality is like they are more attached to the process of problem solving than to the outcome of it. [Desmond Fleming] (1:05:53 - 1:05:53) Yes. [Abdul Al-Assad] (1:05:53 - 1:05:55) And I mean... [Desmond Fleming] (1:05:55 - 1:06:05) As I've thought about entrepreneurship, that's, I think, a key. Be excited about the process of building your comfortable and be comfortable knowing that there's a spectrum of outcomes that could occur. [Abdul Al-Assad] (1:06:05 - 1:06:05) Yeah. [Desmond Fleming] (1:06:06 - 1:06:20) One could be zero. You walk away with literally zero dollars, nothing to speak of it, but you have that experience of building out a company on your own or in the case that everyone wants for you sell for a billion, 2 billion, 10 billion, you go public, whatever it wants. [Abdul Al-Assad] (1:06:20 - 1:07:21) Yes. But the way I like to think about this, like you need to take, you need to get different hats as an entrepreneur. So like you need to have the attitude sometimes and you want to have that attitude like 80% of the time, which is what I call is like you are zen. You are zen, you're comfortable, you're at peace, you're playing light. And you are like, listen, this could go in many ways. And I'm just a scientist, just an experiment. Yes. And I'm just, I'm just experimenting. I'm just problem solving. It's like you've already won because you're playing the game. You're playing, exactly. You're just playing light. You're playing light. You're light on your feet. But there are moments in your company where it's just about brute force. It's just about being competitive. It's just about fight, fight, fight, push, push, push, win, win, win. And I think the biggest challenge a founder finds or might have to deal with is figuring out at what point do you just play push, push, push, fight, fight, fight? [Desmond Fleming] (1:07:21 - 1:08:05) Yeah. I think a lot of people are binary. A lot of people play to their, their natural strength. If you are, let's say the archetype or the stereotypical, you know, Stanford engineer or M&T grad out of Penn, and you love to code your happy places in front of an IDE, right? Like that person, what they know to do is I know how to maybe all the time use the brute force. Let me just ship out code 24 seven, seven days a week, whatever it is. But they actually may have no conception of what it means to play light on their feet, which may be the process of, you know, let me get out in front of these people and tell my story and galvanize interest in what I'm doing. [Abdul Al-Assad] (1:08:05 - 1:08:37) Yeah. But sometimes it's like, that's what I'm saying is like, you, you, like you can tell the founder, I see founders, for example, who are building like incremental things. Yes. And, but they are like very active on LinkedIn or very active on Twitter. And you can tell like, that's just a brute force. Yeah. They're going for it. They're just like, there's just like a founder who like, there's not really like, there's just like mental strength founders that are just like, I'm aggressive. I'm competitive. I'm going to go after like, I'm going to build yet another management company and I'm going to go and I'm going to compete. And I'm going to like pretend like it's like the most important thing in the world. You know what I mean? It's the most important thing in the world. [Desmond Fleming] (1:08:37 - 1:08:59) But I think that's also to your point on Americans not appreciating American culture. Yeah. Even if I think about venture capital as a subset of American culture, what venture capital has done incredibly well is attracting smart, competitive people to build incremental software products. [Abdul Al-Assad] (1:08:59 - 1:09:10) Yeah. Right? Like... Well, I don't think venture capital did that. I think the tax code in America did that. Explain more. Well, I think QSPS, I think the idea that you can build a $10 billion company. I think the idea... [Desmond Fleming] (1:09:10 - 1:09:13) I think most people who are founders have no idea what QSPS is. [Abdul Al-Assad] (1:09:13 - 1:09:58) Well, I'm not talking about QSPS itself. What I'm talking about is like the reason why America has more entrepreneurship than anyone else in the world is not because venture capital as an industry has more depth than America. I think that's part of the reason. But I think the true reason is... Let's divide the world into three different places. One place where it's not meritocratic. So that's basically like Latin America, Africa, Middle East, Asia. And that's basically like you could build a business and if the government does not like or you get in trouble, they will just take your money. They'll just put you in jail. They will just beat you up. You know, that's just like... So like basically the only thing that's left is like North America and Europe. Yep. So that's one category of the world. It's just like a place where you have this massive... [Desmond Fleming] (1:09:58 - 1:09:59) It's going to be tough no matter what. [Abdul Al-Assad] (1:09:59 - 1:10:14) Yeah. And then the second category of the world is like a place where like if you achieve a big outcome, you get to keep most of it versus they tax most of it. Yep. And I think the reason why America is so good at innovation is because it has this combination of like one, it's a meritocracy. [Desmond Fleming] (1:10:15 - 1:10:18) Yeah. And our incentive structure leans you toward, pushes people toward it. Exactly. [Abdul Al-Assad] (1:10:18 - 1:10:27) There is a universe where you actually, if you crush it, you keep most of the money. Yep. In a way that I think like in Europe, like if you crush it, it's not clear that you get to keep most of the money. [Desmond Fleming] (1:10:27 - 1:10:28) Yep. You know what I mean? [Abdul Al-Assad] (1:10:28 - 1:10:41) Like just from like a pure, you know, tax perspective. Like I think in America, we've done a really good job just incentivizing innovation. Like if you do a really good job, you know, you get to be a billionaire in America like no one else. [Desmond Fleming] (1:10:41 - 1:11:18) That wouldn't explain why people still push for and create incremental. Okay. I think incremental is low hanging fruit. Yeah. And I think people get told a story of- I don't know why people do that. I think people get told a story of you are the exception to creating this incremental product and because you are so smart, you will achieve the outcome that everyone wants. And I, you know, candidly investors fall for that themselves too. They tell a story of, oh, I've, I've figured out something that others haven't about this product and or category. And even if there are 10, you know, we are the exception, not the rule. [Abdul Al-Assad] (1:11:18 - 1:11:19) Yeah. [Desmond Fleming] (1:11:19 - 1:11:19) Which can be challenging. [Abdul Al-Assad] (1:11:20 - 1:11:22) Yeah. A hundred percent. [Desmond Fleming] (1:11:22 - 1:12:01) Yeah. So Abdul, we covered a lot. Maybe the very last thing or last 10 minutes or so, where are you at in your journey of basic capital? Where are you at in building the business? That's the first question. And then the second question is, you know, when you think about who you want to come into this journey with you, the other basic capitalites, I have no idea, you know, your team members, who are you looking for? If someone is out there, they hear this, they see this, they, they listen to it, you know, who are you trying to attract? Who do you want to bring onto the team? [Abdul Al-Assad] (1:12:01 - 1:15:35) The best thing about entrepreneurship and the best thing about building basic capital is it really, really, really feels like the best days are yet to come. We've had an incredibly amazing journey so far. We've had an incredibly fulfilling journey. Hasn't been a straight line. It hasn't been easy. Me and the team can tell you that. We've had an epic run, an epic run. And we just all know, we, our investors, the team, that our best days are still ahead of us. There's so much to build. There's so much growth, growth to grow. And there are so many people to serve us. And we're so excited about that. So we launched the product earlier this month or earlier, yeah, earlier this month. We're getting massive traction. And we just want to serve more and more of the American public. And we want to, as well, build more and more product. So that's where we are in the journey. I would say we are at the stage where the singular focus of the company and the singular focus of me is grow, grow, grow, grow, grow. I have this maxim right now at Basic Capital called no new toys. No new toys. We're done building new things. We're not going to build, all what we want to do right now is just automate as much as possible of the 401k system by using as much we can of AI agents and other things that we're building proprietary and we're trying to see what can work and let's just try to grow as much as possible. So no new toys. And we want to bring on board people who are a bit like us in that like people who want to do well and want to do good. I have no interest in doing good alone. I will never be a social worker. I will never be an activist. So I don't think I'm capable of being just doing good on its own. But I also don't know if I am capable of doing well on its own. Like I have no interest of being a hedge fund manager. I really would love to do something where we create something good for society. We create a lot of value for society and we capture a lot of it as well. And what we're looking for is bringing on board these individuals who are really ambitious. They want to work on society's most impactful problems and they want to work on it with a team that's young, that's aggressive, that's ambitious. That's here in New York. That's here in New York. I think when I really look at it, I think there is in society, there is like four or five problems that are really important. There is the problem of the environment, broadly speaking, whatever that means. There is the problem of like AI. I think that's a really important project to work on. I think there is a problem of like Western dominance, like making sure that the West wins, that we do not get undermined by Russia or China. And what everybody's doing in defense is really important there. And then I think there is the problem of like wealth inequality of like, how do we make sure that we do not eat ourselves from the inside and we do not as an empire crumble internally? And I really think basic capital basically stands alongside these four other problems where you want to make sure that we do not die from climate change or we do not die from some sort of environmental causes. And Elon Musk is working on a solution there. Other people are working on a solution there. You want to make sure we build artificial intelligence. You want to make sure that democracy and the West and the rule of law wins, and you want to make sure that the society that has democracy and the rule of law does not eat itself and crumble internally because of class struggle. [Desmond Fleming] (1:15:35 - 1:15:39) Yeah. If the bottom 50% own 10% of all wealth, that's probably not a great system. [Abdul Al-Assad] (1:15:40 - 1:15:56) And I really, and basically our, we think of our purpose as basic capital is to make sure that our society does not crumble from the inside by making everybody an owner, an owner by giving everybody a tool to unlock ownership, diversified financial assets in our economy. [Desmond Fleming] (1:15:57 - 1:16:05) Yeah. Very last question because it came to mind. Yes. Are you looking for mercenaries, missionaries, mercenaries, missionaries, or scientists? [Abdul Al-Assad] (1:16:06 - 1:16:40) Missionaries, missionaries, missionaries, missionaries. I think scientists can be too comfortable in their own curiosity. I think mercenaries are just not people I want to be around on a personal level. And there are people who fold quickly. And I'm really interested in the people that don't fold quickly and the people who get massive, massive, massive pleasure from reaching the outcome, from achieving the mission, not from just exploring it like a scientist. You want to have a little bit of a scientist, otherwise you're not going to enjoy the process. But if you're too much of a scientist. [Desmond Fleming] (1:16:40 - 1:16:40) Yeah. [Abdul Al-Assad] (1:16:40 - 1:16:42) You will never, you never really care about reaching the end result. [Desmond Fleming] (1:16:43 - 1:16:43) Scientists turn missionary. [Abdul Al-Assad] (1:16:44 - 1:16:44) Yeah. [Desmond Fleming] (1:16:44 - 1:16:44) Yeah. [Abdul Al-Assad] (1:16:45 - 1:16:46) Scientists turn missionary. That's what we want. [Desmond Fleming] (1:16:46 - 1:16:46) Yeah. [Abdul Al-Assad] (1:16:47 - 1:16:54) And somebody who like really wants it bad. Yeah. You know, oftentimes like, it's really, I really believe at the end of the day, it's all about like how bad you want it. [Desmond Fleming] (1:16:54 - 1:16:58) Yeah. That is a lot of life. That's simple. A lot of life. Well, Duluth, this was great. [Abdul Al-Assad] (1:16:58 - 1:16:59) Yes. Thanks for having me. [Desmond Fleming] (1:16:59 - 1:17:00) We went way over time. [Abdul Al-Assad] (1:17:00 - 1:17:02) Thanks for having me. This was great. This was really fun.