Ex Goldman Trader: The 80 Year Debt Cycle Will End With Wealth Redistribution | Bill Barhydt Abra
What this covers
Before Bill Barhydt started Abra, he build security systems for the CIA and NASA. We talked about his time working for the government, as well as his role getting banks online through Netscape, and what is looks like to come out of a debt cycle.
00:00 ・ Introductions 02:01 ・ What was it like working at the CIA? 05:40 ・ Finding bugs in the US-Moscow embassy 09:40 ・ How do you even get a job at the CIA? 11:32 ・ Why did you leave the CIA? 14:52 ・ Leaving NASA for Goldman 17:54 ・ Recruitment at CIA VS. Recruitment ast Goldman 22:25 ・ Goldman's business model 24:37 ・ What is a distressed country / company? 26:30 ・ How did Goldman shape current thoughts about finance? 29:40 ・ What is the 100 year debt cycle? 31:04 ・ What happens when yields fall 90%? 34:25 ・ Building SSL and privacy into Netscape 39:50 ・ What got you interested in emerging markets? 48:35 ・ How did he transfer into Bitcoin? 52:28 ・ How is Abra different from other exchanges? 56:20 ・ Why is Abra banned in New York? 58:23 ・ What's the most challenging thing you've ever done? 59:35 ・ RAPID FIRE 1:05:35 ・ JASON ANSWERS
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Source description (no synthesized summary yet).
Bill Barheit argues that crypto and self-sovereign finance represent the technological resolution to decades of regulatory barriers that prevented him from serving unbanked populations, and that bitcoin adoption is accelerating as people recognize governments are running monetary policy recklessly late in a 100-year debt cycle.
- Regulatory frameworks prevented traditional fintech solutions for remittances and unbanked populations despite clear demand
- Late-stage debt cycle with negative yields and unprecedented money printing creates urgency for alternative store of value
- Bitcoin's self-sovereignty model directly solves the banking access problems Barheit encountered in emerging markets
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Unbanked remittance-receiving populations have no documentation (ID), cannot access formal loans, maintain cash under mattresses because they don't trust banks, and live in a completely cash-based financial mindset where every dollar is allocated to survival.
“i wish we had more economic opportunity we're shut out of loans i can't get a bank account um i don't have an id you know all these crazy stories i had people crying in my arms about what it means to be unbanked”
Barheit spent time researching remittances in Mexico, the Philippines, Africa, and other regions, discovering that migrant workers leave their home villages to work in the U.S. (particularly in California fields), and their families in remote villages receive remittances once or twice a month.
“i'd go to remote villages where people left to go work in the u.s and there was no men in the villages because all the men would be like in california work in the fields and the women were left behind in the villages tending to the kids right and they would receive remittances from their husbands or fathers once a month or once a week or whatever how often they got paid”
The U.S. embassy in Moscow was built with thousands of hidden microphones embedded in the concrete by Soviet workers, discovered during security inspections in the late 1970s or early 1980s, which prompted a major shift in CIA cryptography priorities from preventing eavesdropping to assuming everyone listens and instead focusing on making communications undecipherable.
“we had to use local workers to do the work... we discover lo and behold in the concrete in the building there are bugs every few inches so i mean it's insane the number of bugs that they basically put in this building”
Accredited investor restrictions that prevent retail investors from accessing alternative debt investments yielding 10% on real estate are absurd and corrupt, especially when those same people can gamble in casinos with millions of dollars.
“you can go to the casino with a million dollars but you can't invest in a alternative investment that pays a 10 yield on real estate debt it's insane um and and so um i don't know how it's people haven't figured it out yet”
Early Bitcoin (circa 2012) was 'worthless' and nobody thought of it as 'digital gold'—anyone who claims they did is lying—and it was instead viewed as a cheap way to send money in a self-sovereign way with the expectation of ephemeral transactions rather than appreciation.
“at the time bitcoin was worthless so i didn't really think of it in terms of digital gold terms no one did anybody who says they did is lying um it was really about you know cheap way to send money in a self-sovereign way right and no one was going to get rich on bitcoin in those days that changed later once we realized that you know the price was going to continue to go up even if we were using it for ephemeral transactions at the time”
The traditional 60/40 stock-bond portfolio allocation is now dead because negative interest rates have made bonds a poor store of value, forcing institutional investors to shift to 80/20 allocations that still make no sense, and leaving retail investors desperate for yield with no good options since alternative investments paying 8-12% are restricted to accredited investors only.
“the 60 40 allocation that um you are taught is the most reasonable kind of conservative approach to a diversified portfolio is basically dead now i think it's moving to 80 20 in a lot of institutional portfolios but that makes no sense”
New York State's BitLicense regulation is 'over the top' and 'onerous piece of crap legislation,' and causes significant harm by making Abra unable to serve New York customers, forcing crypto workers and companies to leave the state, with most crypto companies choosing not to support New York including Kraken and ShapeShift.
“new york has this law and license requirement referred to as the bit license which is this onerous piece of crap legislation that um requires companies to get this license we'll get it eventually because we have no choice we want to have happy customers in new york but it's just it's just over the top owners and it's just not fair to the consumers in new york”
Government money printing accelerated dramatically—the US printed 20% of the total money supply in a single year (2020-2021), whereas it took 25 years to accumulate that amount previously.
“watching the government basically print another twenty percent of the money supply in one year one year it took 25 years to get there before the one year”
Ray Dalio is correct in his analysis that we are currently in the late stages of a 100-year debt cycle where interest rates have gone negative, governments are printing money without end, and this same pattern appeared in the late stages before World War II, with Barheit being worried that without structural change the debt can only be resolved through widespread debt write-offs with unknown consequences.
“when ray dalio talks about being at the end of a 100-year debt cycle today i understand what he's talking about i understand why he's right and when he says he's worried that the same thing is happening now that didn't end well in the 20s and 30s he's right i get it”
Barheit financed a Kings of Leon NFT auction by having bidders purchase Ethereum using Abra's lending system when banks were closed on a weekend, allowing six-figure bids without waiting for traditional banking.
“so i worked on this nft auction over the weekend where we financed this auction and so some stuff i was supposed to do personally ended up not doing saturday night i was working you know with some people who wanted to bid on this kings of leon auction but didn't even know ethereum and they're like how do i buy ethereum on the weekend again well the banks closed and so we ended up financing the token purchases using our lending system wow and they were at auction i mean this was a six figure these were six figure bids so it was a big deal”
Barheit observed that unbanked and underbanked people in remittance-receiving villages would deliberately wait to send money in larger chunks less frequently because the fees were so high on a percentage basis, meaning they would optimize for lower total cost rather than speed, and would hide cash under mattresses rather than in formal banking.
“they would receive remittances from their husbands or fathers uh you know once a month or once a week or whatever how often they got paid usually once or twice a month and and i also learned that they did that because you didn't want to send the money more often because the fees were too high so you would wait to as long as you could to send a bigger chunk of money because on a percentage basis that would lower the cost”
At Stanford, Barheit took graduate-level classes as a NASA employee, including Don Knuth's concrete mathematics course, which featured a six-day take-home exam that no one in the class finished, serving as a 'weeding function' for the PhD program and making Barheit realize he didn't want to pursue a PhD despite being capable of the work.
“i took a bunch of classes some computer science i was also taking classes related to um the the master's and phd requirements there's some base level requirements and it was really brutal i mean this is a an amazing program it was a tough it was like really a weeding function for the best of the best and these are people who are all like wherever they came from uh they were the best at computer science they you know top of the class”
Digicel, a wireless carrier operating in 35+ countries, primarily in remittance-recipient and unbanked markets, wanted to acquire Boom Financial to build a system offering banking services via smartphone and debit card connected across its global footprint, because Digicel already had a large business in selling airtime as gift cards to family members in remittance corridors.
“digicel is a wireless carrier in like 35 countries i believe and they operate in a lot of countries that are remittance recipient countries and also largely unbanked and they wanted to basically build a system to offer banking services via smartphone and debit card and then connect them all and be able to do money transfer with the united states”
Barheit's interest in the internet started at NASA Ames, where the facility served as the west coast peering point and major global hub for the early research-only internet (NASA Science Internet), motivating him to transition into the internet industry as soon as it commercialized.
“i wanted to be part of this i knew i wanted to be part of it as soon as it was becoming commercialized and so that's when i started looking hard to make the jump to um to you know anything to do with the internet and i had some friends that uh at the time from my from my days out out here in california that had already made the jump to netscape”
Western Union's business model took advantage of high remittance fees and regulatory barriers to extract substantial cash from emerging market economies, but was also valuable because alternatives (like bank wires) were far more expensive for consumers, and remittance corridors between the US and Mexico are actually relatively competitive with fees sometimes cheaper than domestic US transfers.
“western union was built on the uh on the idea that they could take advantage of that system uh to extract a ton of cash from this economy right um and and and for a lot of people thank god they were there because they could facilitate these transactions that otherwise would just be insanely expensive right western union sounds expensive until you start doing bank wires as a poor consumer right”
At Netscape, Barheit led one of the first public key infrastructure (PKI) businesses, primarily focused on Europe, managing the requirements for SSL encryption key management for companies and governments creating web servers with private keys, and also built the PKI business around selling the Netscape browser commercially before Internet Explorer was free.
“i really built one of the first what we call pki uh public key private key infrastructure businesses uh for netscape and and and mostly in Europe i was going back and forth a lot between san francisco and europe at the time”
Regulation was 'by far the biggest challenge' Barheit faced across all his attempts to build financial services for unbanked populations, requiring him to become expert in money transfer regulation, local banking regulation, FiCEN, OCC, state MSBs, and emerging e-money licenses that didn't exist at the time.
“the biggest challenge though by far and all of this was regulation by far the biggest challenge i'm trying to build services through the phone that enable people to open up bank accounts do small dollar money transfer across border and i'm running into brick wall at the brick wall at the brick wall”
Goldman Sachs offered Barheit a position after identifying that his NASA research work in algorithms and computing mirrored the approach used in quantitative analysis on their trading desks, and the recruitment process was more intense than his CIA background investigation and security clearance.
“one of the recruiters came back to me and said you know what you were doing what you were talking about is like exactly the way a lot of the quantitative analysis works you know for us”
Price movement drives adoption: as Bitcoin moves from $20k to $50k to $100k to $250k, it brings hundreds of thousands to millions to tens of millions of new people into the crypto space, and the motivation for Jason's media company and Empire podcast is to preserve the stories and narratives behind crypto companies so that history isn't lost as adoption scales.
“my interest in your world is the same interest i have in a lot of founders worlds there are price movement drives price adoption right or drives adoption right so as the price goes from 20k to 50k 50k to 100k 100k to 250k that drives hundreds of thousands millions tens of millions of new people coming into into this space”
Barheit identified mobile gaming as a near-term application for mobile wallets pre-iPhone, but recognized the long-term opportunity was remittances and banking for unbanked populations, so pivoted Scenario into Boom Financial to focus on money transfer and banking.
“while the early days of the platform were all about games i became really interested in other applications of this wallet platform that we had created particularly around banking and money transfer”
Regulators in developing markets and the US were not equipped to serve the bottom of the income pyramid and unbanked populations, wanting everyone to have bank accounts with full tracking rather than understanding the actual needs and constraints of cash-based economies.
“spending a lot of time with these regulators realizing that they just aren't equipped to deal with this part of the income pyramid it's crazy they just want everybody to have a bank account and be able to track everything and it just doesn't it just didn't doesn't work”
Barheit read the Bitcoin white paper very early during his Boom Financial days but was 'really committed' to what he was doing at Boom and came back to Bitcoin 'a couple of years later,' becoming 'all in' at that point, mining bitcoin at home and in the office (when possible) and giving away tens of millions of dollars worth of Bitcoin by today's valuation to educate people.
“at the same time you know i had read the bitcoin white paper very early in in the early days of boom but was really committed to what i was doing and kind of came full circle back to it um a couple of years later into it and and i just was kind of all in at that point”
On the fixed income desk at Goldman Sachs in the early 1990s, Barheit primarily traded Mexican bank debt, Brady bonds (government debt converted to new bonds underwritten by the U.S. government in exchange for structural reforms), and distressed corporate LBO debt from companies like Macy's and Federated, which required models that combined interest rate analysis with equity-like analysis because pure fixed income mathematics was insufficient.
“mexican bank debt right or uh you had a lot of what was called brady bonds which was converted government debts uh into these new bonds that were underwritten by the u.s government in exchange for companies uh countries willing to make certain structural reforms... macy's federated uh when macy's was when the lbo happened there”
COVID-era permanent remote work has created challenges for Abra's scaling because all new employees hired over the past year have never met each other in person, making team-building difficult despite having physical offices in Mountain View, Manila, and other cities with the option to use them.
“doing that during covet has meant that everybody's remote i mean all any new employ any new employee we've hired and we've hired a bunch over the past year has never met any of the other employees in person none”
Moore's Law implied that cell phones would eventually merge with PCs based on exponential computing growth, which was obvious to technologists but wasn't clear how the merger would occur—this was about 10 years before the iPhone when 10 years in computing is 'an eternity.'
“you think about moore's law you like okay it's obvious that that the cell phone because we refer to them as cell phones we're going to merge with the pc at some point if you were paying attention to like this kind of exponential growth curve in moore's law but just wasn't clear how that was going to happen this was you know 10 years before the iphone and in computing time 10 years is an eternity”
Netscape worked with ISPs to distribute the browser on CDs, and Barheit negotiated deals with European ISPs including in Scandinavia and central Europe, working with teams at Deutsche Telekom, Swedish Post, and other regional carriers to embed the browser on distribution discs.
“we also sold the browser at the time uh commercially so this was before internet explorer was embedded in the windows desktop and became free and so a lot of the isps the companies that you would use to connect to your internet um would distribute cds with the netscape browser on it and so we would do deals with those isps to embed the browser so i would work on that with the team and we had a team already now in scandinavia we had a team in central europe and we would go in and help them do those deals to put the browser on the cds which they would pay insane amounts of money for so so the bottom line is to make this not boring i i had a i basically had an mba in finance at goldman and i got an mba in business via trial by fire at netscape because i didn't know what a p l was i never managed a p l i didn't really manage people before to be honest we had teams of people on site at deutsche telekom and swedish post”
Abra is a retail crypto banking app focused on the everyday consumer (not pro traders) enabling buying, holding, and earning interest on cryptocurrencies, with institutional services offering 10% yield on stablecoins, with 65% of current revenue from US/Europe but new signups increasingly coming from outside the US, likely to flip to majority non-US revenue within a year.
“abra is not the only company that's done this the vast majority of companies have chosen not to support the bit license at this point anyway um we'll get it eventually but it's incredibly frustrating most most regulated or most geographies have taken a a reasonable tact to regulation”
In the 1980s when Barheit was working at the CIA, public key cryptography barely existed and was not a mainstay of anything, making encryption fundamentally different than it is today, with computing constrained to 16-bit and 32-bit processors that had a tiny fraction of the power available on modern iPhones.
“public key cryptography and encryption was not a mainstay of anything it barely existed at the time so and remember the computing power that we had available to us was on the desktop was a fraction of a tiny fraction of what we have now you know dealing with 16-bit processors 32-bit processors”
Netscape's business model included distributing their browser commercially on ISP CDs before Internet Explorer became free with Windows, which was a significant revenue stream that collapsed overnight when Microsoft bundled their browser.
“we also sold the browser at the time uh commercially so this was before internet explorer was embedded in the windows desktop and became free and so a lot of the isps the companies that you would use to connect to your internet um would distribute cds with the netscape browser on it and so we would do deals with those isps”
Alternative debt instruments offered through platforms like Cadre, Yieldstreet, and Fundrise provide 8-12% returns and are accessible only to high-net-worth accredited investors, while retail consumers with stimulus checks should deploy to stocks or Bitcoin as the only available return-generating assets.
“so we have all these services now that are basically trying to provide that yield to retail consumers especially high net worth investors but but but you know cadre yield street fundrise all basically offering alternative 8 to 12 investment opportunities that um you know are are debt based because they're they're higher risk than than government bonds”
Goldman Sachs in the early 1990s was a much smaller institution (around 2,000 employees) where quants built their own models on Sun workstations in C/C++ and networked them together, fundamentally different from today's centralized computing infrastructure.
“i joined when the entire bank was like a couple thousand people um and and so like i think it was 2000 the entire company”
Building Abra is more challenging than working at NASA, the CIA, Netscape, or Goldman Sachs due to the combination of scaling speed, technology complexity, product simplicity requirements, regulatory complexity, and fundraising demands.
“it is by far the most challenging thing i've ever done because we're scaling so fast um the technology is complex we have to make it really super simple for the consumer so we have the product complexity we have the regulatory complexity we have the complexity of scaling a business uh as cio i have a ceo i have to basically you know deal with fundraising and and scaling”
When portfolio allocation money flows shift from bonds to stocks, the upside for stock valuations will be substantial because institutions will need to reallocate large portions of assets, but this reallocation hasn't happened yet.
“just means that there's going to be more upside to stocks when you see the money flows change let's uh let's start talking about crypto actually because this is a nice segue”
Barheit grew up in the Bronx from a 'relatively poor' family, which informed his sense of amazement at his Goldman Sachs compensation and his later focus on serving unbanked populations.
“i mean i grew up my family is relatively poor so uh you know from the bronx and then and then spread out from there and i was just i just couldn't believe it i said this is insane that people get paid this much money”
Barheit has known Mike Belkesh (of Bitcoin), Zach (Block Five), Jesse (Kraken), Daniel (Bitson Mexico), and Vinnie Lingam (Civic) since the early days of crypto when they were all making bets while most people thought they were crazy; many are now billionaires, which Barheit views positively though his friendship is not motivated by their wealth.
“you mentioned mike bellship bitco mike and i have known each other for a very long time uh pre pre-crypto mike's great um yeah there's a lot of smart people doing really good things in crypto um you mentioned block five zach's a great guy”
Barheit learned about the operational complexity of managing a P&L and leading people through 'trial by fire' at Netscape after coming from Goldman Sachs with an MBA-equivalent education in finance gained from trading distressed debt, picking up a 'business MBA' through his experiences managing international teams at Deutsche Telekom, Swedish Post, Deutsche Bank, and US banks like Wells Fargo.
“so the bottom line is to make this not boring i i had a i basically had an mba in finance at goldman and i got an mba in business via trial by fire at netscape because i didn't know what a p l was i never managed a p l i didn't really manage people before to be honest we had teams of people on site at deutsche telekom and swedish post which is like their equivalent”
Working for the government (CIA and NASA) taught Barheit what he didn't want to do—solidifying his decision to pursue private sector opportunities despite the psychic rewards of public service.
“it really taught me a lot because it was my actually my first kind of real job besides you know delivering newspapers selling newspaper subscriptions which i think i had done fixing bowling alley machines which i think i had done so but this is my first kind of real job uh air quotes and and so um yeah i mean it taught me a lot i mean it taught me what i didn't want to do”
At Goldman Sachs in the early 1990s, Barheit received a first-year total compensation (salary plus bonus) of 4 to 5 times his NASA salary, representing a dramatic financial shift though modest by today's standards.
“oh god um i think with my bonus the first year it was somewhere between four and five x my salary”
Goldman Sachs' profitability model functions like a continuously circulating tray at a buffet where money keeps circulating and seemingly multiplying, with bankers reaching in to extract value from each circuit, with the underlying assumption that the tray will keep coming around indefinitely.
“i like in it to the you know you ever sit at the buffet in hong kong or japan when the tray comes around and it just never stops coming around but there seems to be more stuff on the tray as it keeps moving around well that's banking right the money just keeps moving in a circle there seems to be more of it as it's moving in a circle and your job is to reach in and grab some off the tray while it's moving around knowing that it's going to keep coming around”
Barheit's biggest current challenge is managing rapid growth of both Abra's consumer and institutional businesses while simultaneously scaling operations, maintaining employee welfare, and customer satisfaction, which is why the biggest decision he's grappling with is how to scale Abra to reach as many consumers and businesses as possible while doing right by both.
“right now i'm in scaling mode and so i spent a lot of time thinking about the best way to scale averages to reach as many consumers and and businesses as possible we have a growing institutional business and a growing consumer business and so so that's really the biggest challenge for me right now is managing that growth and um doing the right thing by our employees and by our customers at the same time”
Barheit learned IBM 360/370 mainframe programming, COBOL, Fortran, C, assembly language, and other languages in his early career because these were necessary skills for the work—not by choice but by necessity given the available tools.
“i had to i mean there's a lot of things i didn't know that i had to learn i didn't know uh ibm 360 370 programming which is a mainframe by the way uh and and i had to learn that i had to learn a little bit of cobol i had to learn fortran i had learned c i had learned some c plus”
Barheit's personal wellness practices that sustain him through 15-16 hour work days include working out regularly (CrossFit), walking extensively (standing at least 12 hours per day at a standing desk), and trying to maintain time with family and friends, though his social life has declined in recent months due to Abra growth and COVID.
“i think i do work out a lot i try to i try to stay fit i walk a lot i'm standing right now i have a standing desk that's why i wobble a little bit you know which is probably annoying on podcasts but but it keeps me sane so i actually stand at least 12 hours a day probably more and and that's not including the long walks and the workouts to do crossfit”
January and February 2021 saw 'nuts' signup levels at Abra coinciding with Bitcoin's rise from earlier to around $54k, with March 2021 also looking strong, with the company doubling every couple of months.
“yeah i mean january february we're nuts um so far feb uh march is looking good too i mean we're at uh yeah bitcoins at about 54 000 as of this recording and so you know i mean it's just a crazy time”
Abra is currently profitable and growing, but the daily workload is 15-16 hours, and Barheit loves the work despite the intensity.
“we're profitable now which is great but that wasn't always the case you know and and so just just it sounds like oh it's paradise because these guys are profitable growing fast and you know right now it's 15 16 hour days and i love it i love what i do uh but it's hard”
Most geographies have taken a 'reasonable' approach to crypto regulation compared to New York, making Barheit comfortable managing Abra's regulatory compliance across most jurisdictions, viewing it as an expected cost of the business.
“most most regulated or most geographies have taken a a reasonable tact to regulation i have to say so i'm pretty comfortable with what we have to manage at abra from a regulatory perspective it's a moving target for sure but that's the business we've chosen so i don't mind dealing with that that's our job”
Barheit gave the first Bitcoin TED talk in 2012, positioning himself as an early public advocate for cryptocurrency when most people viewed it as purely speculative or illegal.
“i also saw you gave the first ever bitcoin ted talk that same year in 2012”
Barheit was probably the youngest person in his NASA research group by 15 years, which gave him unique value as a translator between the older PhD researchers and modern computing facilities.
“i was probably the youngest person in my research group at nasa by 15 years and this is early 90s this would be yeah this would be early 90s now and and it was really i mean the nasa at the time was a lot of lifers right this was a great life great work”
Abra is currently under 100 employees but growing fast (doubling every couple of months), which means they probably need to hire to around 200 employees soon to maintain operational capacity.
“how many people are at abra now uh we're still pretty small we're under 100 but we're growing fast we're trying to hire as fast as we can yeah i i don't want to dive too deep into regulation now but you did mention a few times before and so i went to buy bitcoin uh using ibra i've heard amazing things from dozens of people who use avra and they love it um i went to buy bitcoin i live in new york i couldn't do it what what's going on with regulation what's the hold up here yeah you live in the one state that we don't provide service to in the united states if you live in new york it's incredibly frustrating and i'm all my family's in new york so they can't use the product either it's it's it's incredibly annoying”