Are you Overestimating or Underestimating NFTs? - Transcripts

June 18, 2022

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Today's episode is a great conversation I had at the Toys"R"Us summit! We discussed what toys meant to me in my early life and mean to me now as an adult, why I believe NFTs give us the best opportunity for IP building, insights into Veecon and VeeFriends, cryptocurrency vs NFTs and much more!

Enjoy! Let me know what you thought.

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this is the Gary v audio experience. Mhm. I grew up I was born in the Soviet Union and moved to the us when I was three In 1978 I moved to New Jersey in 1982 And grew up a really 1980s kid on the east coast so I'm sure for anybody who knows or enjoys the history of toys R. Us you can imagine what that meant. It is for me one of the most iconic brands. It was such a tale you know north star of my childhood. We were talking about Geoffrey bucks outside You know Charles is an entrepreneur I look up to because also on top of my obsession with I. p. and storytelling and pop culture and being very affected by 80s cartoons which were driving toy sales. I grew up as a retailer you know I grew up in a family liquor store business and so I've always thought retail I've always thought and caps like I remember when he man and transformers and cabbage patch, kids hit toys R us and what that meant and how they merchandised and teddy ruxpin and like I took note even as everything that's happening with me right now with the building of my I. P. On the back of N.

F. T. S. Now seems so a proposed with the way that I rolled um even even in my older age I sold my entire sports card collection when I was 17 because I thought the market was moving and spent four years only investing and trading on collectible toys. So living on Geoffrey bucks starting lineups and you know action figures and all that stuff. So a profoundly interested in the mascot driven entrepreneur in retail really. You know definitely one of those characters that I know a lot about and admire how he did it and how the company did it. Um and I'm just really really humbled to be with all of you today.

We're gonna talk a lot about areas of your expertise that I know we're all interested in such as N. F. T. S. And the metaphors and just what's happening globally and marketing. But first I gotta point out maybe we'll even show the clear when we announced the partnership together with Macy's and we have 13 executives from Macy's here in the room today. The partnership that Macy's is going to roll out toys r us inside every Macy's store across the US. We actually didn't know each other at the time. Uh we met afterwards but unprompted. You posted a video twitter. Do you mind if we play it? Yeah.

Okay. You can go for

it. Love the toys. R. Us is coming back as a store inside historic Macy's Red for under locations. It's just a classic example of like brand always matters if Macy's announced today that they were putting toys in their stores, it wouldn't even hit like a press release, toysr us a store inside store people brand always matters how somebody operates brand, how they make it contemporary how they execute that brand is the barrier. But you can resurrect any classic. Um I'll tell you about that in a very interesting way. 14 years ago I started a client service business. The president of the United States told me he was disappointed in me when I did. Mark Zuckerberg told me he was disappointed all my friends that knew me, that kind of had a sense of me at that point in my life who thought I was on to big things, did not comprehend why I decided to start such a stupid business. Um what I knew or what I thought I knew now I can say, I feel like I nailed it was I sensed in 2007 08 and nine that the only thing that wasn't going to be commoditized was brands and the ability to be a contemporary marketer and at that point I just didn't have any money. You know, I spent my entire career building my dad's business for him.

If any of you are an immigrant family businesses, you know, he'd always be like, well you'll get the business one day. I'm like dad, you have great D. N. A. I'm gonna be fucking 75 years old when that happens. So I had to start my own thing. I wanted to learn fortune 5000 land. I knew entrepreneur land. I knew Silicon Valley land, I did not know Fortune 500 land. So I decided to have the humility and the patience to build a client service business and work with four fortune 500 businesses. But I always knew that I was building an operating system. I knew that my agency would eventually turn insular and be a reverse private equity machine.

So instead of buying brands and cf owing them, I wanted to buy brands and CMO them great hypergrowth. Um and I've always thought about arbitrage like this, like what is out there, that's you know, for whatever circumstances an opportunity and how do you inject this is to me the brilliance was it was distribution in a moment's notice. For me, the thing I spend the majority of my time on is You know, I have 14 million followers on Tiktok because I got serious about it when it was musically. Now that's a mode for me to market. But then it's also been a mode for all the brands I work with and as I build be friends, I'm always looking for the arm. As a matter of fact, let's talk real really about toys r us and toys for a second. I believe as a preview to I'm sure we'll get to it. I believe that N. F. T. S right now are the first thing I've seen since after school television in the eighties as a platform for I. P.

Building at this scale. If you think about 1981-1986. After school television, you're talking about Transformers. Thundercats. He man strawberry shortcake care bears my little pony all building through that distribution channel. The rebirth of G. I. Joe. It's profound. If you think about that window we've had for 30 years, there's been other pockets of I. P. building but that many of significance.

It was a moment in time where there was a lot of attention on a specific distribution. I feel like N. F. T. Land 99% of the N. F. T. I. P. S. That we see right now are destined to go to 0 99. And I'm talking about the ones that are valuable right now because the operators are young and not focused on I.

P. Development. But there will be 15 meaningful I. P. S. Out of the tens of thousands that I think will replicate that era. And so I'm always looking for those moments underpriced attention I call it in marketing. And what I saw in that deal when I saw the headline was underpriced arbitrage of distribution against an I. P. That I thought carried a lot more weight than a lot of people might have not recognized. And so I thought it was a masterful job on both ends.

Let's zoom into the minute you mentioned the friends briefly describe that. But he also just came back from which is really if we want to talk about what's happening the cutting edge of N. F. T. S. And maybe the ones that will work in your view as you imagine many won't work more won't work than will um How is weaken? What is beacon, what will make as you just said the I. P. S. That are real I. D. What will make an FTS work?

Because we were thinking about N. F. T. S. We've launched a couple of the rest. We definitely want to launch more. We want to on a global scale. We'd love to hear your thoughts. I

think the first thing to think about N. F. T. S. And looking around this room, not everybody but a lot of the people in this room lived through when the internet hit as a professional definitely when social media hit as a professional people are very good at underestimating and overestimating things when they are new. And so the same thing that happened with Web one and Web two is going to happen with Web three. The the I remember when I launched an E- Commerce wine retail website in 1997 um Remember in 98 99 2000 when I started getting attention for it because we became the largest independent wine retailer in the country People would come up to me and say gary, I've got a website now and they thought that was the win and I was like that's nice like what are you gonna do with it, Twitter and Facebook for sure. At that point my career was in a different place. So many people would come up to me in 2007 and eight and say I've got a twitter as if that was the win. Same thing with this. Just because you have an N.

F. T. Every single business on earth will have N. F. T. Integration to their business in 15 years. The way that every business has a website and social media accounts, that's not the moat, how you use the tool is the moat. And so um that's how I think about that as far as beacon when I did be friends. So be friends is an ip that I stood up last May. Um It's 268 characters that really focus on the attributes in the world that I most admire, patience, kindness, empathy. I think it's a mix of Sesame street meets sweet pickles. If you remember that book series with a little bit of like Pokemon.

Um And so I'm really excited about it. I've always wanted to buy an old I. P. I mean literally three months before um I started the friends. I had heard that Gumby was on the market and was like gonna like look into it like that's how much my brain's been in this world for two decades and so I stood that up for context of economics. We've done two series drops in 15 months. Actually I'm sorry what's the name in one year we did 13 months backs. Yeah 12.5 months. We've done two series drops. We've done $100 million in revenue. And then more interestingly enough and that's an N. F.

T. Revenue more interestingly enough. And this is where this gets real serious real fast. When you drop an N. F. T. You get the royalties in perpetuity. So when I go find like I did two years ago a Thunder cat at a garage sale for a dollar in package Still L. J. N. May they rest in peace. I sell it on ebay for $280.

And I make all that margin. Ebay makes all that margin. Fedex makes all that margin and whoever owns LJ on these days makes none of it. Whoever owns Thundercats makes none of it. I the friends in 12 months has done $250 million dollars in secondary sales. I have three different series in play. I'm getting between 5.5 and 10% royalties on every transaction. These are staggering economics on an level my great great grandkids are going to be losers and think that I was a genius. That's how profound royalties are. You know I always say if George Lucas was lucky enough to have his timing down because if you look at how thoughtful he was when he made his kenner deal and why he didn't make other deals. If he had done that when N. F.

T. S. Were happening let's say destiny had N. F. T. S. And the Blockchain happening in 76 77. There wouldn't be anybody in a mile of his wealth today. And so I think for everybody here I mean it's very rare to actually have it. That matters. There's a lot to think through uh now the economics I just threw out are a byproduct of timing. You know there's a lot of grown ups in this room.

If you remember what was valued at in 1999 on the stock market. You know I knock on wood. Feel like I'll be able to put my head on my pillow because I'm gonna spend the next four decades executing this I. P. Um But if I was to launch be friends today I would not be able to get the economics I just threw out because the market is already out of its gold rush phase. Which is actually a great thing because there's a lot of scamming and a lot of like gold rush. You know just the mockery that's not fun with early technology but but the royalty component stays in place. The I. P. Building stays in place. As a matter of fact I will tell you I can't find a logical reason why anybody on earth wouldn't start an intellectual property first as an N. F.

T. To establish their economics. There's absolutely no sense to start an I. P. As a book as a toy as a youtube video as anything else as than an N. F. T. Because of the way the economics and the royalties and the leverage work. So it's going to be a big impact this show everybody in it. Everybody in this convention center right now is going to be aggressively affected by the consumer Blockchain because of what it means for royalties and ownership and I. P. Rights.

And if you are sitting in this room knowing what you do for a living even though you might not be touching directly I. P. You're gonna be interacting with I. P. In a very aggressive way. Please don't read the headlines. Please don't have your opinion on FTS based on one friend's opinion on it? Please if you're in this room Please spend the 25 hours to understand what the Blockchain actually is, what it actually means, how it's actually gonna impact because it's going to impact everybody on earth.

Speaking of Blockchain and gold rushes and I want to just mention Q. And A. Is preferred. So any questions we have a microphone that's going to go around. If your hands up we will definitely recognize you to ask questions. Um Gary. But speaking of gold rushes and then you mentioned Blockchain, let's maybe segue from N. F. T. S. To crypto. Are you a buyer or seller Bitcoin.

Bitcoin in 2014. So as you can imagine I'm in a very unique spot where my basis is so low I think Cryptocurrency is in such a different place than LFTs. So for me, N. F. T. S come very natural based on some of the things I just said cryptocurrencies put far more pressure on governments than N. F. T. S. Do are going to be tax profit centers for governments. Bitcoin starts going after tender in a real serious way when when Emirates air announces that it's now accepting Bitcoin. You know governments only have so much control.

They have control around the money and the bombs. And if you take the money away there's only one thing left. And so I'm I haven't spent the intellectual time on Cryptocurrency that I have on N. F. T. S. I would hold Bitcoin from me myself even if I bought it today because I think it's crossed the chasm as a brand. As far as every other Cryptocurrency I have besides ethereum and solano which I need to buy N. F. T. S. I spent no time on it.

So when all week in the last couple of weeks when everyone's like what do you think about luna? I'm like I have no idea. You know I what I understand is why people buy things.

Speaking about things. Gary I'm gonna bring us back to toys R. Us. We've got as mentioned we've got Really 1400 stores represent this room 900 today but we've got a heck of a lot of stores open US stores opening in Asia stores open the Middle East. We've got all sorts of new concepts in work deep in the pipeline is a possible airport store. There's lots of things happening. Um what are you doing in toys and collectibles? Because as you mentioned in your talk about some of your kind of growing up and your roots, it's very well known that you were an avid collector of a lot of things. In fact you mentioned Jeffrey dollars, I believe you told us on the phone that you have. I think you told us $17,000.

I should definitely not tell this room what I used to do with Jeffrey dollars. Refund policies were very different back in the nineties. Um so so once, as you can imagine when you do $50 million 94% margin you're like oh I've got a big tax event, I've got a big opportunity and so for me, be friends is gonna be vertically and horizontally integrated. The animation studio, the toys, all of it comma I want to do lots of things with other partners as well. Yes, I want to make my own plush. I'm incredibly open to mattel and Hasbro and anybody else who wants to have a conversation. I want to do J. B. S. I want to own my own stuff, serendipity clicks in. It's really fun that they're here down just like you know I met toy keto early on. He was fundraising.

Darren told me about his background. I've made the majority of my decisions in my life around intuition. I made a substantial investment in his company and I felt that I owned enough of toy keto where I could do my core business instead of just fully doing it inside myself. Here was somebody who really knows the business I like, I think it's capable and so we're doing our toys right now with toy keto, but from day one, from the first combo, I'm looking at him right now. I said, hey, I'm gonna probably do stuff with Hasbro mattel and squish mellows and moose toys and like I need to, you need to understand how I think about the world. I think about the world as, and as long as you're very upfront and over communicate what your strategies are and who you are. I think there's a lot more and than, or I'm thrilled to do an exclusive. I'm thrilled to do exclusive for a period of time, but I always want to be able to have flexibility. Um, and so we've uh, we've got very serious about that conversation and then obviously we got connected and we got very serious about our conversation