20VC Coinbase's Brian Armstrong on Real vs Fake Emergencies, Coinbase's Failed NFT Launch, The Politicisation of Leadership, Why This Crypto Winter is Different From The Past & Brian's Development and Insecurities as a Leader

In a candid conversation on 20 VC with host Harry Stebbings, Coinbase CEO Brian Armstrong discusses the broader economic downturn, the uniqueness of the current crypto winter, and the challenges and opportunities of running a public company. Armstrong reflects on his personal journey, from overcoming shyness and the fear of insignificance to finding motivation in creating large-scale impact through technology. He candidly addresses the highs and lows of Coinbase's growth, including handling public scrutiny and maintaining company culture amidst rapid expansion. Armstrong also shares his vision for Coinbase as a multiproduct company and contemplates its potential evolution into a broader mission of increasing global freedom. The episode touches on Armstrong's perspectives on leadership, decision-making, and his relationship with money, as well as his interactions with regulators and thoughts on competitors like FTX.

• The current economic climate is broadly challenging, affecting various sectors, not just crypto.
• This period is described as a "macro winter," indicating widespread downturn.

"The main thing is that the macro environment is down too. So it's not really a crypto winter, it's an everything winter. It's a macro winter."

This quote highlights the speaker's perception that the economic downturn is not limited to the cryptocurrency sector but is affecting the broader macroeconomic environment.

• Brian Armstrong is the co-founder and CEO of Coinbase.
• Coinbase has grown over a decade to become a public company with thousands of employees and billions in revenue.
• The discussion in the show includes topics like the uniqueness of the current crypto winter, the effects of Coinbase going public, and defining real versus perceived emergencies.

"This show with Brian today is such a good one. This is Harry Stebings and 20 VC, and as you heard, our guest today is Brian Armstrong, cofounder and CEO at Coinbase. Over the last ten years, Brian has scaled Coinbase to being a public company with over 3500 employees and over seven and a half billion dollars in revenue in 2021."

Harry Stebbings introduces Brian Armstrong and outlines his achievements with Coinbase, setting the stage for the discussion topics of the episode.

• Thanks given to individuals for their contribution to the show's preparation.

"Huge thank you to Mickey at Ribbit, Emily Choi and Adam Draper for some amazing questions suggestions today, and I so appreciated that."

Harry Stebbings expresses gratitude to Mickey, Emily Choi, and Adam Draper for their input on the questions for the show.

• HMC manages Harvard University's endowment and has been a pioneer in institutional venture capital investment.
• HMC is described as an ideal partner for entrepreneurs and investors due to their experience and perspective.
• The company seeks partnerships with new and established fund managers.

"Harvard Management Company is constantly seeking out the next generation of great investors and entrepreneurs. HMC has managed Harvard University's endowment for nearly 50 years and was one of the first institutional investors in venture capital."

This quote emphasizes HMC's role and history in supporting investors and entrepreneurs, highlighting their long-standing presence in the venture capital space.

• Mercury offers banking services tailored for startups, including various financial tools and integrations.
• Mercury Rays connects startups with top Silicon Valley investors.
• MarketX provides a platform for investing in pre-IPO technology companies and enables the creation of syndicates for investors.

"Mercury is building full stack banking for startups. Apply in under 10 minutes from anywhere for FDIC, insured bank accounts, physical and virtual debit cards, domestic and international wires and integrations... MarketX provides investors with a streamlined platform to access, evaluate and exit global growth stage to pre ipo technology companies."

The quote describes the services offered by Mercury and MarketX, which are designed to support startups and investors in various stages of growth and funding.

• Brian Armstrong discusses his personal motivations for founding Coinbase and his evolution as an entrepreneur.
• He started with a desire to prove himself due to his shyness and fear of not achieving something important.
• Over time, Armstrong's motivation shifted from fear-based to passion-based, focusing on building and learning.
• Armstrong is driven by the impact he can make at scale rather than smaller, individual successes.

"I think a lot of people start off in their career running from something... And then they have to move towards something that brings them actual joy or love or just that they're actually passionate about."

This quote reflects on the common trajectory of entrepreneurs who initially may be driven by negative emotions but eventually find a positive and fulfilling motivation in their work.

• Armstrong acknowledges the difficulty in taking time to celebrate achievements and the constant drive for more success.
• He discusses how he finds fulfillment in progress and impact rather than specific celebratory moments.
• Armstrong also touches on the concept of work-life harmony, where work and enjoyment are interwoven.

"I have definitely thought about that because I'm not somebody who's really good at celebrating... I think if I wasn't working on something hard and really difficult, I wouldn't feel as fulfilled."

Armstrong explains his personal approach to work and fulfillment, indicating that he finds joy in the ongoing process and challenge rather than in pausing to celebrate milestones.

• Armstrong discusses the importance of complementing his own weaknesses with team members who excel in areas he does not, such as celebrating achievements.
• He emphasizes the role of other leaders within the company to foster a culture of celebration and recognition.

"That's part of being a CEO, is complementing yourself with people around you that are good at the stuff you're not good at."

The quote captures Armstrong's strategy for building a well-rounded executive team that can address various aspects of company culture, including celebration and employee recognition.

• Armstrong shares his approach to handling emergencies and the importance of discerning between real and perceived crises.
• He discusses the importance of taking time to understand the facts before responding publicly to a situation.
• Armstrong also mentions the value of having a strong communications team to manage public statements during crises.

"There's real emergencies, and then there's a lot of fake emergencies... My default, almost to a fault, is I don't really feel any pressure to get out there with some kind of quick statement before we've actually figured out what are the facts, what do we want to do about it?"

This quote demonstrates Armstrong's measured approach to crisis management, favoring a thoughtful response over a hasty one, and the role of communication in such situations.

• The challenge of discerning the ground truth in a high-pressure corporate environment.
• The importance of calming employees in order to get accurate information about issues.
• The tendency of people to defend their actions when questioned, especially in stressful situations.
• The value of identifying areas for improvement rather than focusing on blame.
• The need to acknowledge mistakes to the public and differentiate between misinformation and areas that genuinely need improvement.

"It's surprisingly hard to figure out ground truth sometimes... And whenever the CEO pulls a bunch of people into a meeting, you can imagine people are a little nervous... We're just trying to figure out what happened."

This quote emphasizes the difficulty of obtaining truthful and accurate information within a company, especially during crisis meetings led by the CEO, as employees may feel intimidated or defensive.

"Oftentimes I'll find out later, like the story was a little more nuanced... What's the piece that we could have done better?"

The speaker acknowledges that initial explanations can be oversimplified and that it is crucial to look beyond the surface to identify real areas for improvement within the company's operations or decisions.

"Here's the part that we could have done better. Here's the part, by the way, that's misinformation..."

The quote highlights the importance of distinguishing between genuine shortcomings in a company's actions and the misinformation that can circulate, especially on social media platforms like Twitter.

• The concept of real and fake emergencies in the business context.
• The NFT platform launch as an example of a non-emergency situation.
• The common mistake of overhyping products, leading to high expectations and subsequent disappointment.
• The strategy of integrating NFT marketplaces natively into the app to simplify the user experience.
• The long-term view on the potential return of NFTs in future market cycles.

"NFT platform launch that obviously didn't work. Was that a real emergency or a fake emergency and why in your mind did it not work?"

The speaker categorizes the unsuccessful NFT platform launch as a fake emergency, explaining that product launch failures are common and not necessarily critical crises.

"The version one of every product sucks... We made a mistake, which we started talking about the product and putting out screenshots ahead of time."

This quote reveals the speaker's belief that initial versions of tech products are often flawed and that pre-launch hype can set unrealistic expectations, leading to disappointment upon release.

"So that's not a real emergency."

The speaker concludes that the NFT platform launch issue did not constitute a real emergency, implying that the situation was manageable and part of a normal product development process.

• The significance of carefully handling public statements on sensitive topics.
• The internal division on political engagement and the need to establish a clear company stance.
• The process of drafting and consulting before releasing a controversial statement.
• The categorization of the politicization of leadership as a real but self-induced emergency.
• The importance of addressing slow-moving issues that hinder company progress.

"A real emergency, but it was self induced. We knew it was going to cause all hell to break loose when we put out that statement."

The speaker describes a situation where a deliberate decision to make a controversial public statement resulted in a self-induced crisis, indicating a calculated risk taken by the company.

"We weren't aligned internally about being apolitical... That was like a slow rolling emergency."

This quote explains that a lack of internal consensus on the company's political stance was an ongoing issue that needed to be addressed, illustrating how internal misalignment can create persistent challenges.

"That's not like a true emergency... Those are true emergencies."

The speaker differentiates between a self-induced emergency, like the politicization of leadership, and true emergencies, such as extended website downtime or widespread misinformation, that require immediate and intense response.

• The use of decision-making frameworks to handle various levels of potential loss.
• The implementation of a risk framework and signature authority policies in larger companies.
• The RAPID decision-making framework developed by Bain to clarify roles and responsibilities.
• The need to avoid vetocracies and ensure efficient decision-making by appointing a single responsible individual.
• The benefit of documenting decisions for future reference and accountability.

"Olaf had this system he developed where he was like, is the potential loss four figures, five figures, six figures, seven figures."

Olaf, an early employee, created a system to assess the severity of issues based on potential financial loss, which determined when to interrupt the CEO's work for immediate attention.

"We have, like, a whole risk framework... Rapid, which Bain developed."

The speaker discusses the adoption of a comprehensive risk management framework and the RAPID model to facilitate clear and effective decision-making in a large organization.

"Rapids are good ways to do that, because they basically help you identify who's going to be the decider, who's giving input..."

This quote outlines the benefits of the RAPID framework in determining decision-making roles, ensuring that everyone involved understands their part in the process and preventing slowdowns caused by unclear authority.

• The decision process and considerations before taking a company public.
• The advantages of becoming a public company, including legitimacy, easier fundraising, and better business opportunities.
• The challenges of dealing with activist shareholders and maintaining company focus amidst external pressures.
• The impact of public market fluctuations on employee morale and the cultural norm of not discussing short-term stock price movements.

"Okay, so this was a big question for me before Coinbase went public, and I wanted to go figure out, do I even want to be a public company CEO?"

The speaker reflects on the contemplation process prior to Coinbase's IPO, indicating the significance of understanding the role of a public company CEO.

"The pros are that it's a great marketing event for the company... The other thing is, it's a lot easier to raise money as a public company."

Here, the speaker lists the benefits of being a public company, such as enhanced credibility, easier fundraising, and the ability to form partnerships with other established companies.

"You took the words out of my mouth. The other downside is people are looking at the stock price every day..."

The quote addresses one of the downsides of being public—employees' fixation on daily stock price movements, which can affect morale and distract from long-term goals.

• The experience with cryptocurrency volatility prepared the company for public markets.
• Employees were accustomed to the fluctuation in the value of their assets.
• This familiarity with market dynamics helped in the transition to being a publicly traded company.

"Crypto company actually helped us prepare a little bit for being a public company, because the whole time we were private, people were looking at the price of bitcoin and the ethereum and things like that every day. So they were used to seeing the value of at least part of their net worth go up and down all, all the time."

This quote explains how the constant monitoring and valuation changes in the crypto space were a formative experience for employees, offering a primer for the ups and downs of public market valuation.

• The cyclical nature of the crypto market is acknowledged.
• The speaker notes that downturns are followed by upturns, indicating an acceptance of market cycles.
• The current 'crypto winter' is seen as part of a broader economic downturn, not just limited to crypto.
• The speaker observes a shift in sentiment where the belief in the future of crypto remains strong despite the downturn.

"So mostly it's the same. I can tell you what we do in every cycle, right when things are up, everyone's focused on scaling... In down markets... we also make sure we invest in the future... The main thing is that the macro environment is down too... people are not coming up to me and saying, is crypto not going to work or is crypto over?"

The quote summarizes the company's approach to dealing with the cyclical nature of the crypto market, highlighting the importance of managing costs and investing in innovation during down markets. It also reflects the current sentiment towards crypto, which remains positive despite broader economic challenges.

• The speaker had an early interest in money and business.
• Money is seen as a means to acquire resources and achieve goals, not just for personal consumption.
• The speaker believes that generating capital allows for greater impact on the world.
• The speaker prioritizes spending on things that save time or enhance productivity over luxury items.

"As a young kid, I was always interested in making money... capital is a way to have the ability to do more things in the world... A lot of things that people misunderstand about people who've made money is that they think that they want to do it for personal consumption... It allows you to do more things in the world."

The quote highlights the speaker's lifelong interest in money and clarifies that for them, wealth is not about personal consumption but about the ability to do more and have a greater impact on the world.

• The speaker once worried that having children would be a 'productivity drag'.
• Observing others, the speaker now believes that parenting can be additive to life and does not necessarily harm productivity.
• The speaker values the fulfillment and productivity that can come from caring for others.

"When I was younger, I definitely worried about this... but I've basically gotten over that completely. I've seen enough people now who have kids and they're highly productive... It makes your day more fulfilling and you can still be very productive."

This quote reflects the speaker's changed perspective on parenting, suggesting that while it may be challenging, it can also be fulfilling and compatible with maintaining high productivity levels.

• Fred Wilson, a board member, has been a significant mentor for the speaker.
• The speaker values Wilson's ability to simplify complex problems with straightforward questions.
• The speaker has also benefited from executive coaches and peer CEOs.
• Elon Musk is mentioned as an inspiration for his scale of ambition and tackling hard tech problems.

"Fred Wilson was an investor in our series A and he's still on our board to this very day... He just has an incredible ability to distill things down to the simple question... I've had various executive coaches over the last ten years... I think Elon is unmatched right now."

The quote emphasizes the importance of mentorship and the impact of figures like Fred Wilson and Elon Musk on the speaker's approach to problem-solving, leadership, and ambition.

• The speaker considers creating a new economy a 100-year mission for Coinbase.
• There's contemplation about expanding the mission to increasing freedom in the world, beyond financial services.
• The idea of a 'freedom stack' is introduced, encompassing various aspects of life that could be decentralized.
• The barrier to expanding the mission is capital; the focus remains on financial services for the time being.

"Creating an entirely new economy for the whole world is a pretty ambitious thing... if somehow we feel like we're starting to make a real dent in economic freedom, would we expand the mission of the company at some point to just be about increasing freedom in the world, period?"

This quote outlines the speaker's long-term vision for Coinbase and its potential evolution into a broader mission focused on increasing freedom across different aspects of life, highlighting the need for capital to pursue such ambitions.

• The current challenge is maintaining morale and focus during economic downturns.
• The speaker emphasizes the importance of managing costs, innovating, and preparing for the next upturn.
• The speaker draws on past experiences to encourage the team to persevere.

"Right now, in this moment? It's just keeping everybody in the boat... manage costs, keep innovating, and we're going to come out of this way stronger."

This quote reflects the speaker's focus on leadership and resilience during challenging times, stressing the importance of maintaining a forward-thinking and cost-conscious approach.

• The speaker regrets not taking a more global perspective on international expansion.
• Acknowledges that other companies have succeeded by offering products not available in the U.S. due to regulatory constraints.
• The speaker sees this as a missed opportunity for growth in the last cycle.

"One, is that I think from an international expansion point of view, we probably took too much of a US focus or US lens on international... So that was one thing. We were probably late to the game on."

The quote reveals a reflection on strategic decisions, particularly in international expansion, and recognizes the benefits of a more global approach that other companies have capitalized on.

• Overhiring in 2021 was acknowledged as a mistake by the company.
• The company experienced a high demand with customers eager for their services.
• The decision to double headcount was seen as a necessary risk at the time.
• Remote work increased the hiring funnel significantly.
• The speaker anticipates avoiding the same mistake in the future.

"We knew if you more than double headcount in a year, you're really flirting with danger in terms of communication might break down. Culture could break down."

This quote highlights the risks associated with rapid expansion of staff, particularly the potential negative impact on communication and company culture.

• Heavy growth can lead to unclear decision-making processes.
• New hires may not fully absorb company culture, leading to unexpected behaviors.
• Processes and communication are likely to falter with rapid expansion.

"You get pockets of weird behavior in the company as well. You'll jump in and you're like, they're doing what? Why are people doing that inside this company?"

The quote illustrates the confusion and misalignment that can occur when a company grows too quickly, leading to employees acting in ways that are not consistent with established norms or expectations.

• Sam Bankman-Fried of FTX is recognized for his effective public persona.
• Coinbase's early days were characterized by rapid execution with a smaller team.
• The speaker made a conscious choice to evolve Coinbase into a multi-product company.
• Coinbase is focused on being trusted, compliant, and user-friendly.
• The company values growth and sees competition as secondary to industry expansion.

"But I generally have nothing but respect for those folks. And I think that the more the barrier this is about growing the pie 100 x rather than any kind of competitive thing, short term."

The quote emphasizes respect for competitors and the belief that the industry's growth is more important than short-term competition.

• The company proactively reached out to regulators to build a cooperative relationship.
• Adhering to regulations has sometimes slowed the company's ability to serve customers.
• There have been frustrations with the SEC, particularly with the current chair, Gary Gensler.
• The company believes in being the most trusted brand, sometimes by challenging government overreach.

"95% of the time, I think being the most trusted brand in the space is about working with the government. 5% of time, it's about protecting our customers from bad government."

This quote reflects the company's approach to regulation: mostly cooperative, but willing to stand up against what they perceive as harmful policies.

• Bad government is characterized by policies that don't benefit consumers.
• The company generally finds common ground with regulators worldwide.
• Occasionally, the company feels the need to oppose policies that are seen as damaging to the crypto industry.

"5% of the time we see something come out that is, it's actually harming crypto in a way that doesn't protect consumers."

The quote conveys the speaker's view that not all government actions are beneficial, and some can harm the industry without offering consumer protection.

• The speaker envisions Coinbase Global becoming more like a holding company.
• Different product groups within Coinbase may become more decentralized and less coupled.
• The company is moving towards generating P&Ls for each product group and empowering leaders.
• There is speculation about potentially changing the name of the parent company to reflect its evolution.

"I think the parent company will be more like a holding company. And who knows, we may even change the name at some point to reflect that."

This quote suggests a long-term vision for Coinbase where it operates more like a holding company with a diverse range of products and potentially a new name to represent this structure.