The Hyper-Financialization of the World
Conversation with Tushar Aggarwal of Persistence One
2020 was not only the year we were hit by a pandemic, but also the year of events around the Black Lives Matter movement, Bitcoin, climate change and GameStop. Although these might seem unrelated, there is a common theme amongst these of inefficiencies in the way the current system works and solutions driven by groups of people with collective beliefs.
While historically, there have been moments where groups of people banded together to challenge the system, it was the first time we saw them pervade one of the most powerful industries that has remained untouched — Finance. This has led to decentralised finance entering the mainstream financial market and I spoke to Tushar Aggarwal on his perception around it.
Tushar is currently the CEO of Persistence, a blockchain company he founded in 2019, that powers next-gen financial products. In two years, he has helped to scale the company to a current market capitalisation of US$900 million. Before founding his own company, he worked on the sell-side of finance as a consultant as well as on the buy-side as a venture capitalist. With this 360 degree view of the finance industry, this year he was listed on Forbes 30 Under 30 for Finance and Venture Capital, as a leader influencing how money flows in Asia’s economy.
While he is known for his work in the blockchain community, I happen to know him not only as that, but also as my friend, mentor and big brother. And suffice to say, growing up with him was a very interesting experience. He has always been a dreamer and as kids who grew up in a small town in India where conventionality is encouraged, I watched him challenge the norm at every step and chase after his dreams even when no one believed in him.
The year he graduated from high school was the year ‘The Social Network’ was released. The moment we finished watching the movie, as a 17-year old he told me that that was his dream. He wanted to build a unicorn from scratch. The day he graduated from university, he told me that it was his dream to be on Forbes 30 Under 30.
And I watched him go after these dreams relentlessly even when his path did not make sense to most people. When he was 25, I watched him quit his cushy six-figure job to move back in with my parents to start a podcast from their couch. When he was 26, I watched him borrow a sizeable amount of money from friends and family to put into cryptocurrencies, at a time when no one believed in the industry. And when he was 28, I watched him quit his coveted venture capital job to start a company in the middle of a pandemic.
As his little sister, I was always blown away by the confidence he had in himself and admired him for it despite always thinking he was crazy. But as he himself has told me more times than I can count, you have one life so “Dream Crazy” (watch the video).
Let’s start with your story and how you got involved in the blockchain space.
I grew up in India and graduated from The Doon School in 2010. From there I went to Nanyang Technological University in Singapore for university, and did a Bachelors in Business with a focus in both Banking & Finance, and Marketing. After graduating in 2013, I worked at PwC for a couple of years and then worked for a boutique management consulting firm that focused on private banking and investment banking. During this time, I had also been actively investing in real estate with my parents, who have been investing in real estate in India since the 90s. In 2016, I had a liquidity event leading to some surplus capital that I was looking to invest in startups in Southeast Asia. At this point, I was trying to work actively with multiple startups, but instead came across a few people in Singapore who were working in the cryptocurrency ecosystem.
It was then that I met someone who was working in crypto and he told me that working in a traditional startup is like taking a staircase, whereas working in crypto was like getting on an escalator. So with a startup you grow incrementally, but with crypto you are climbing the staircase but the escalator is moving up very rapidly as well. When I look back, it was this very simple analogy that stuck with me and really changed my perspective on macro conditions, and how the tailwinds for crypto help you rise up exponentially faster. I was very intrigued by the industry and started putting in money as an investor. As I started investing, I wanted to get better access to founders and other relevant stakeholders in the industry including people running exchanges, market makers, people trading on the liquid side, regulators and compliance folks. So I quit my consulting job and started a podcast called Decrypt Asia at the beginning of 2018 to give me access to these people, which was my first professional entry into the industry.
And from there, how did Persistence come about?
My high-level thought process was inspired by a few people. I consider myself lucky to have grown in the age of social media and the internet where you have access to some of the biggest thought leaders and have access to how they think. A few of them have almost become like spiritual guides in life and business for me. One of them is Naval Ravikant, who is very popular now but I’ve been following him for about six years. He talks a lot about how media, capital and technology are the three pillars on which successful individuals and successful businesses are built. Most successful individuals and most successful businesses are heavily leveraged up on all three. That was sort of the guiding principle, which led me to Persistence.
To break it down further — the first step for me was betting on the industry. At the time, crypto was going through a hyper growth stage so I decided to bet on it. And then within crypto, I started building on the media piece of the three pillars. I started a podcast called Decrypt Asia, which further led to writing opportunities on Tech in Asia and YourStory. Through leveraging on the media aspect, I was able to position myself as somewhat of a thought leader and create a small personal brand in the industry. This led to an opportunity with the crypto arm of a traditional venture capital fund in Singapore called Golden Gate Ventures. Some folks within Golden Gate came across my podcast and I was hired as the first employee at the crypto arm. Working at a fund helped me to leverage on the capital aspect where instead of just investing the $100,000–200,000 of my own money, suddenly I was helping to manage external capital and investing millions of dollars of other people’s money into blockchain startups and digital assets. I kept running my podcast while I was working at the VC fund and so was leveraged on both media and capital.
Then came the technology piece. What the leverage of technology means is that, say you create Gmail as a product, you can then have a hundred thousand people using it or a million people using it or a billion people using it. The product essentially remains the same but it’s just about how much usage you can drive. By virtue of being an investor in tech, you are tangentially leveraged on technology but the best way to actually leverage up on tech is through building products, and that’s how Persistence came about for me. At Persistence, we are leveraged on technology through our products, leveraged on capital through our investors, and leveraged on media through our Telegram and Twitter audiences.
Based on your story, you quit your consulting job to start a podcast. You then invested money into crypto when the industry was at an extremely nascent stage and you quit your VC job to start a company in the middle of a pandemic. All these things require a lot of risk, and so what do you think differentiates your risk appetite and the career path you took as opposed to a more “traditional path?”
Just speaking in terms of risk, externally it may seem like I have a huge risk appetite but internally, I think it would be false of me to say that. I was never too academically inclined so I finished university fairly quickly. I was 20 years old when I graduated and put myself in the corporate world. Then I had a very, very conventional path of most people who graduate from college. I worked at PwC and Sia Partners for four and a half years before getting into crypto. During these four years, I was just a little bit prudent with my money. I always kept my expenses really low and didn’t let my lifestyle scale up even as I started making more money by 25–26. This helped me to save up to have a decent amount of capital to play around with.
So people say that founders take on excessive risk but I think founders are good risk mitigators or good risk managers. By the time I was 25, from a conventional perspective I had a decent six-figure job and was already “successful”. But when I looked at what the partners in my firm were doing, I realised that it wasn’t exciting and definitely not the life that I wanted to lead. I’ve always been a big believer in a 1x downside,100x upside kind of play. What this means to me is that you could lose everything you have and still be able to make it back really quickly, especially if you’re enterprising and hard working, but the upside is just insanely big.
So I think what happens especially if you’re in a job, you become used to getting that monthly paycheque. And as cliché as the saying goes, that monthly paycheque is one of the biggest drugs in the world. I was very influenced by Gary Vaynerchuk, who is a very successful businessman and creates a lot of content. Different people have different opinions about him because he’s a little bit loud and obnoxious sometimes. But he keeps driving this point that if you’re below 30, you’re still so young. I was stuck in this mindset where I thought I was 25 and I still hadn’t figured life out. But here was this extremely successful businessman who was saying that if you’re below 30 you’re super young. And you can essentially take all the risks and fail for five years and still be 30, which is really young. So I took his energy and his optimism, and drilled it into my head. Then at 25, I made the decision that for the next five years, I’m not going to focus on optimising for money. As long as I have enough money to live, I’m going to optimise for experiences and learning.
That allowed me to take that leap of faith and quit my six-figure job to do something that is deemed to be risky by most people. From the get-go, I invested a significant portion of my net worth into crypto and professionally bet my career on this industry succeeding as well. And these bets have now paid off but there were moments where I’ve been 40% down on my personal portfolio on money that I had borrowed from my parents. At that moment, it was sizeable capital, but because I had that fundamental belief in the industry and belief in my capabilities, I never felt that I was taking on too much risk. I especially believe that in today’s world the bigger risk is essentially not taking any risk.
Now going a little bit deeper into what you’re working on right now, Persistence facilitates the creation of next-gen financial products. So what exactly do next-gen financial products mean?
Let’s just take a simple example — if you have some money with you today, there are different things you would do with it. You would probably keep some in the bank to pay for your expenses. You would typically also want to lend some out to earn some fixed income. Right now interest rates are super low, so most people are opting out of that and investing in, say stocks. But the problem with that is that, a lot of people talk about investing in American tech stocks or in S&P 500. But what they forget is that there are big parts of the world, including China, India and Indonesia where there are capital controls. In these countries, it’s extremely tough to get access to global financial markets.
Essentially, what we are doing is expanding the scope of that and crypto in general with the ethos of facilitating financial markets or creating financial markets that do not have borders. So creation of borderless financial markets and creation of trustless financial markets where you don’t need to trust the counterparty that you’re dealing with. The protocol (or the platform) facilitates that trust algorithmically or through code, and that is what the next generation financial products look like. With the principles of instant, borderless, and trustless finance, we’re creating a suite of financial products focused on solving what we call real world problems as well as, crypto native problems.
On the real world side, we have two products. One is called Comdex, which is a commodity trading and trade financing platform that facilitates the trading of commodities like wheat, soybean, copper. The other is related to NFTs or non fungible tokens, that have suddenly become very popular. These are real world objects that are unique and can be tokenized such as — cars, houses, paintings or even Pokemons. So the second product is Asset Mantle, which is an NFT marketplace framework where multiple people can create their own marketplaces without having tech expertise.
And then we have a couple of products on the crypto native side. So these are for folks who already have crypto wallets, know how to manage public-private key pairs and essentially, can interact with web 3.0 applications or decentralised applications. So on that side, we have a product called Audit.one that runs mining infrastructure on proof-of-stake protocols. It is now the largest miner in Southeast Asia and South Asia, as far as proof-of-stake is concerned. And the other product is a little complex but when you’re mining, a lot of your assets get locked up and can’t be usable. So what we do is we use certain derivative products to unlock liquidity from those assets, which become unusable when you’re using them to mine cryptocurrencies. This is what the financial products suite looks like for Persistence.
Given your background in traditional finance on both the sell-side and the buy-side, as well as in Finance 3.0, why do you think it is only recently that a lot of people have gotten interested in investing, a space that was traditionally reserved for institutions?
I think there are a lot of factors but the two big ones are the recent hyper-financialization of the world and COVID-19. During the lockdown, a lot of people were just sitting at home, didn’t have too many social activities to do and had their expenses go down. At the same time, the Fed and different central banks around the world were printing a lot of cash. While financialization of the world was already a trend pre-COVID, it was further exacerbated during this time at a consumer level because there was a lot of liquidity in the market and the markets were doing well. As a result, more and more people were signing up on platforms like Robinhood in the US or Zerodha in India or multiple other platforms around the world.
With the increase in the number of consumers on these platforms, the companies have also been looking for ways to retain them. And the biggest way for them do it was through gamification and pushing the community aspect. While community-driven finance has existed in different forms in traditional finance such as communities around different credit card products, it is only very recently that we are seeing platforms gamify investing and create almost like their own social media around it. And because of this, there has almost been a democratisation around investing (from an access and education perspective) to the extent where even high school students or university students understand things like stocks and actually have their own portfolios.
At the same time, industries that don’t directly seem linked to finance are also being financialized. The biggest example of this is gaming, whether that’s through in-game purchases or games where you can trade your armours or costumes. So I really believe that this trend of financialization is something that we will see more and more of, and across industries. Obviously there’s a caveat if tomorrow there’s a huge recession and a huge bear market, a lot of this will change. People’s perception and risk appetite will change but we’ve been in a 12 year bull market where most investors have only seen markets go up and to the right. But I do think if the macro stays like this, then this trend is here to stay.
Speaking of community-driven investing, I wanted to get your thoughts on the recent episode with GameStop and how do you think it relates to the rise of decentralised finance?
Yeah so having spoken to a lot of private bankers, and people working in traditional finance, most people working on the institutional side feel like they have to play catch up with retail. A lot of retail investors are now doing research which is at par or even sometimes deeper than what some of the institutions do. Retail investors are well informed, and some of the influential ones have large social media following. If you look at StockTwits or Crypto Twitter, a lot of it has become community driven, where there is a sentiment of big financial institutions having had it too good for too long. The overall narrative, which what crypto encompasses as well, is giving the power back to the people or decentralisation. That’s the narrative that has become super strong, where individuals, sometimes even those using anonymous or pseudonymous accounts have gained enough influence where what large institutions were able to do in the past, individuals are now able to.
In GameStop’s case, the regulators stepped in but there was huge backlash from the community around the regulators stepping in and saving the big companies. But I’m a macro guy and I think from a macro trend perspective, once the virus has been planted you can’t unplant it and you cannot fight trends. Maybe in the beginning you can curb it, but when things are community driven especially at the level of pervasiveness that social media has, you cannot put an end to it.
As we’ve seen with some of the other hyper growth tech companies like Uber or Airbnb that have fundamentally changed how the world is, similarly we’re going to see these changes in the financial world as well.
