Circle CEO Jeremy Allaire worked his way up from selling baseball cards as a kid to having one of the most influential IPOs of the year

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Transcript:

Jeremy Allaire: I knew that it was going to require changing global policy to take on this technology, and in turn, changing the policies and laws of the biggest countries in the world.

Diane Brady: Hello everybody, and welcome to Leadership Next. I’m Diane Brady.

Kristin Stoller: And I’m Kristin Stoller. 

Brady: This week, we are speaking with Jeremy Allaire, the CEO of the very popular IPO this year, Circle.

Stoller: The first time that he spoke with us, which was at the Fortune Global Forum in Riyadh, Saudi Arabia. And it was months after he had been at the White House in July when President Trump was establishing a legal framework for stablecoins, when they signed the Genius Act together. So he talks to us about that.

Brady: Well, that’s what they do, basically, is the USDC stablecoin, and he has been a lone wolf out there for many years talking about the need for regulation. He very much distinguishes between a lot of the cryptocurrencies out there, stablecoin being very different, and just the whole realm of blockchain, financial innovation. He’s a three-time entrepreneur…

Stoller: …and founded Brightcove, and we talk a lot about trust, about regulation, about the balance he’s felt between innovation and also lobbying on the hill as well.

Brady: Definitely a role that has a more political tone in this environment, and I think it is an area everybody’s curious about, because the words “financial” and “innovation” have not always ended well in this country. And he has very different predictions of what the future looks like. So we’ll be right back with Jeremy after this break.

Brady: Quantum computing has the potential to transform industries by solving optimization problems, boosting machine learning, and sparking innovation in logistics, finance, and material science. Jason Girzadas, CEO of Deloitte US, is a longtime sponsor of this podcast and is here with us today. Hi Jason, thanks for joining us.

Jason Girzadas: Great to see you, Diane.

Brady: So what is quantum computing, and how do you see it transforming industries?

Girzadas: Well, quantum computing has been a topic for some time in research circles, certainly closely watched by business, but it’s fundamentally a different computing paradigm that uses the principles of physics instead of mathematics to drive the computing outcomes. That’s been largely the domain of research, and it’s becoming seen as being a more viable commercial computing methodology and an approach. And I think the real uses will be ultimately around very complex optimization scenarios, further enhancements to scaling, machine learning, and also very complicated simulations that could be relevant to a whole host of different business applications.

Stoller: Jason, what steps should leaders take to prepare for both its potential benefits as well as its potential risks?

Girzadas: It’s really about readiness planning right now, and preparing an organization to understand the implications. So it’s about understanding what skill sets would be required, what type of cybersecurity protocols would need to be in place, and begin to think about the types of use cases that would be very germane around optimization and simulation.

Stoller: Excellent advice. Thank you so much, Jason.

Brady: Thanks, Jason.

Brady: Jeremy, let’s start with the basics of—what is stablecoin?

Allaire: This word, stablecoin, kind of emerged organically. It was not a word we chose. The most obvious definition is—you have all of these cryptocurrencies that are volatile and not stable. And something came along that was a cryptocurrency that was stable, therefore a stablecoin. Now, the definitions around this have really gotten more precise, and so I think that the most important definition is actually the legal definition. So what’s happened over the past few years is that stablecoins, a particular form of stablecoins, have been codified into banking and payments law in many of the biggest jurisdictions in the world.

Brady: …which is pegged to the currency…

Allaire: …yes, so in this definition, a stablecoin. What is often—in the U.S., for example, the law calls these payment stablecoins. But in these legal frameworks, a stablecoin is issued on a one-for-one basis with an existing fiat currency. A dollar, a euro, a Hong Kong dollar, a peso, etc. So it’s fully reserved. It’s typically, by law, required to be held in the safest of backing assets. So unlike a bank—which you give a bank $1, they go lend it and invest it 12 times. That’s why there’s all this risk in banking. Whereas a stablecoin always needs to be redeemable, and so by holding it in these very, very safe T bills, or cash with the big cash custodians of the world, or even holding money with the central bank itself. So this one-for-one backing, high-quality reserves. And then, oftentimes from a technological perspective, what makes these unique and powerful is that the digital currency unit that you issue, the so-called stablecoin, like USDC, is something that just free circulates on the internet. And so you’re basically untethering the money from the legacy electronic money system and turning it into actual digital assets, actual digital currency that can move around the internet at the speed of the internet, with very low costs and with high utility.

Stoller: You’ve had quite a win with that recently, too. In July, I believe you were at the White House with President Trump, establishing the legal framework for stablecoins, the Genius Act. Tell us about what that was like. Describe the scene. How were you feeling? What was it like meeting with President Trump?

Allaire: Well, you know, it’s an amazing experience. And a lot of times people see these things and they think, wow, where did this come from? I didn’t know about this. Well, I’ve been going to the capital for 12 years, testifying to the Senate, in the House, meeting with policymakers in every country in the world. And really for five years, trying to work with members of Congress to enact a stablecoin bill. And there has been, in fact, a very strong bipartisan effort for many years to do that. And it really all culminated, obviously, in the past several months as this actually got momentum and bipartisan momentum. And one thing I like to always remind people is that this is the only major piece of bipartisan legislation passed in this Congress. It is, in fact, bipartisan. Super-majority in the Senate, really broad support in the House. And so this issue, of, how do we upgrade the dollar? How do we make the dollar more competitive? How do we unleash the market with safety and soundness and consumer protection built in? How we do that is a national economic, if not national security, priority. So that was really the backdrop for this, and then coming to the White House and being part of the actual event itself. Yes, I certainly, you know, got to meet the president, and…

Brady: …you’re a big donor to the president, so I assume you’d met him before…

Allaire: So actually, I had not met President Trump before, and Circle supports both the Republican Party, the Democratic Party. As I like to say, Circle is purple. We recognize that these are bipartisan issues, and whether it’s stablecoin issues or, right now, new laws that are being discussed around the structure of digital tokens and the markets for digital tokens. Again, a very bipartisan issue, and we’re seeing that. And you know, we’re in the early days of this technological development. The laws and policies that we’ll need to deal with this new internet financial system are going to continue on for the next five years, 10 years, 15 years, 20 years. So we take a long-term view on how the existing legal systems they have are going to evolve.

Stoller: It certainly seems easier under this administration to get all of this through. Or how are you feeling?

Brady: I feel like that’s complicated.

Stoller: Yeah, I’m curious your take on that.

Allaire: There is no doubt that this administration saw the development of blockchain technology, digital assets, and stablecoins as an important technology area. Just like AI is an important technology area, there are other important technology areas, and made a big push to take what had been already, I think, moving pieces of legislation, and really push that. But also, I think it’s [an] innovation-forward, technology-forward, entrepreneur-forward environment. And that’s very positive, from my perspective. And so we’re seeing that, and I give the administration a lot of credit for really seeing this as an innovation issue, not just a risk.

Brady: Yeah, I think it’s one of the areas people do look at and see a win. You know, you have been, especially in this iteration with Circle, you’ve been talking to Elizabeth Warren, with Tether and Howard Lutnick. I feel like you’ve been out there creating a market, building legitimacy for this, and in many cases to me, you’ve seemed like you’ve been alone in a lot of those pursuits, just from being a figurehead in the industry. Did that take any courage, or was it just, hey, if I don’t do it, my industry, this company, won’t exist?

Allaire: I think it’s really more the latter. And actually, one thing I’d say, is, when I got started with the company, one of the things that was very clear to me is, to reach the ambition of what I saw becoming possible, I knew that it was going to require changing global policy.  Literally changing global policy. And, in turn, changing the policies and laws of the biggest countries in the world to actually update them to take on this technology. And that’s generally not something that an entrepreneur does, but that’s actually what I felt. And I felt like at that stage in my career, which, again, was back in 2013, that’s really hard, but it’s worth it. I have this high conviction, I have this belief system, and I’m trying to provide leadership and I think it’s been effective, and I’ve grown a huge amount from that experience.

Stoller: I think you said it right that there’s a lot of misconceptions out there about what you’re trying to do. I think at this moment, especially, people are really hesitant to trust the government, Big Tech, especially as it relates to money. So who do you think we should trust with our money in this digital economy?

Allaire: Certainly as a firm, we’ve gone out of our way to be trusted and transparent and compliant and have good governance and so on. But one of the things I’d say, is, what’s really powerful about blockchains and cryptography, and cryptographic innovations in money and economic systems, is they actually give us an underlying set of materials to work with that societies never really had. They give us this material where all of the building blocks of economic activity, from who owns what, to who transfers what, to who borrows what, to what risk is underlying that, to—the entire life cycle of economic activity can be moved from, let’s just call it the paper/legacy electronic world, into something where everything is transparent, provable, auditable in real time. Where you can have the execution of rules and contracts in code and have that all be auditable in real time. And so part of this is the reason people call blockchains trust machines or truth machines. Cryptography gives us, with math, the ability to prove things. And so I think a big part of the impetus, not just for Circle but for so many others in the industry, is, how do we build a more trustworthy economic system with more transparency, more inclusiveness, more visibility, as opposed to one which is opaque and centralized and we don’t really know what’s going on? And where that opacity and the risks that are embedded in that opacity are real challenges. So I think it’s part of a technology movement to build a more trusted infrastructure.

Brady: I want to go back, not totally to the beginning, unless you have some childhood memories you want to share, but your first company you cofounded. Talk about the genesis of that, because I’d like to take a bit of a walk through the Allaire greatest works, because you have had, I think, an interesting history that’s brought you to where you are today.

Allaire: I mean, look, the only thing I’ll say that’s relevant from my childhood is, I was very lucky to be born in the Apple II generation and had access to really great personal computing technology when I was really young. And so that captured my imagination about what’s possible when you have this technology at your fingertips.

Stoller: Well, you started your first venture at 14, correct?

Allaire: That is actually true. Allaire Sports Cards was the first venture, which actually, in the end, has been quite successful, because I have unearthed some of these baseball cards recently with my daughters.

Brady: Now they’re valuable?

Allaire: And I was like, wow, these are so valuable.

Stoller: Explain it to us.

Brady: You were “Moneyballing” early on.

Allaire: So, Bill James is a famous econometrician who wrote the kind-of-book on applying statistical metrics to baseball, which then actually relates to the movie Moneyball, which is a great book. But basically, when my grandparents died, my brother and I each got a little bit of money, very small, and I convinced my parents to let me just use it to buy baseball cards and start a baseball card business. So I was trading cards, going to trade shows, all of that. But I was also trying to use spreadsheets, which was very novel at the time, to be able to forecast which players might, based on their prior record, perform well.

Brady: And do what, bet on them?

Stoller: So a lucrative business for you. There you go.

Allaire: I think, kind of coming back to the other question, though, during college, in 1990, I got really lucky and got connected to the precursor to the internet. It was an academic network that was part of a network of academic networks that were connected to other networks of academic networks around the world. But that was the internet, and I became completely obsessed with this. And there are a lot of experiences that I had at the time in 1990, ’91, ’92, but basically, it became my obsession, and I was interested in how this could be commercialized as an infrastructure. I was fascinated by the technology protocols of it itself. And really, when I graduated college, in 1993—not a technical background, political science, philosophy, economics as a background.

Brady: It’s usually what you study to go into office. PPE, isn’t it?

Allaire: PPE, yeah, exactly. But I was quite interested in the impact of this globally available technology and how it could actually change society. Before the web really existed, I was very passionate about all of these ideas, and then, in the very early genesis of web technology, really saw the opportunity to essentially create a way for people to actually create interactive software that can run through these emergent web browsers and kind of unlock interactivity and commerce and other things on the internet. So that first business, we created a product called ColdFusion.

Brady: We being who?

Allaire: My brother, myself, and some other college friends who were really involved in the startup. And we had a highly successful product that millions of people used and grew to be some of the most popular tools for building the web and building a lot of capabilities that people had on the web.

Brady: I’ve used Brightcove, but that’s part two.

Brady: Did you guys collapse? Did your stock?

Brady: Do you see a through line in terms of the types of companies that you like to build? I do, but I’m just curious if you do in terms of what you gravitate towards.

Brady: You’re so healthy, someday you’ll be saying, gee, that was 60 years.

Allaire: We’ll try. That is sort of the backdrop. And I think, when I was first getting introduced to the internet in the early ’90s, what I was thinking about academically was, how does the world work? How does the economic system work? What are these different international, political, and economic structures? It was the end of the Cold War. It was the “End of History” at the time. And so I was very interested in what shapes that could take. And really, that brings us full circle to Circle itself, which is, after the global financial crisis in 2008 and 2009, my interests in the global political economy, as I call it, were very seriously rekindled, and I became extremely interested in what went wrong here. What are the issues in the global banking system? What are the issues in the monetary system? What can be changed? And I developed a lot of ideas, but I didn’t have anywhere to put them at the time, because I was more like an armchair academic running a video company. And that really led me, in 2012, to connect the dots between this innovation of crypto as a technology and these ideas about how one might be able to reshape the way the global economic system works. And the more I thought about it, the more obsessed I got about it, and the more it really led me to want to found Circle in 2013.

Stoller: Well, we’ve talked about Circle’s recent successes, but I know the road hasn’t always been easy for you. There have been a couple near death experiences, Silicon Valley Bank being one. Walk us through those and your leadership during those times, and how you came out of it.

Brady: Doesn’t it help to have a nemesis, because you were certainly the nemesis for Tether. For example, I remember Silicon Valley Bank where they had a field day because they were not going for the route you were taking, saying, Well, look, here’s what happens when you do go within the system. Do you find that motivating, having these others that have looked at you as an alternative that they were trying to differentiate themselves from?

Allaire: Yeah. When I look at things, I generally am not looking at a nemesis or this or that. Always have to be aware of what other things are happening around and the market itself, people who want to use these technologies are going to be giving you feedback. Why do I want to use it? Why do I not want to use it? Like, what would be better? But for the most part, when you’re dealing with something as new as this—we’ve invented a new form of digital dollars, that’s pretty cool. Now, when you’re dealing with something that new, the vast majority of the opportunity is still in front of you. It’s not what’s going on around you right now, it’s sort of in front of you. And so it really depends on what your ultimate end-state goal is. And so for us we’ve always known that we want to build something that is trusted, transparent, compliant, well-integrated with the existing financial system, and helps accelerate and build off of that, and had a very high conviction that that would be the right strategy. And there may be other strategies that are also successful, but that strategy we felt very strongly was one that we could build on.

Stoller: Well, circling back and again, no pun intended, was there ever a moment that you felt like, oh, this could be it for the company, and how to come back from that?

Brady: I’d be remiss not to mention that if I look at pictures of you several years ago, you’re a different, smaller, leaner man today. Do you think that’s actually—obviously, you know, tell us your secrets. But I’m curious, how important do you feel your journey to wellness, weight loss, etc. was in the success of the company.

Brady: Was there a moment where you sat there and said, Okay, that’s it?

Stoller: So Jeremy, you recently made an announcement about a new blockchain. Can you talk to us about that and why, when there are so many blockchains out there today?

Allaire: So yeah, we’ve announced Arc, a new layer one blockchain network, and we’re really positioning Arc as an economic operating system for the internet. And you know, when we got started in this, back in 2013, blockchain technology was very immature. There was really only one blockchain, it was very limited in what it could do. And gradually, over the last five to ten years, we’ve seen blockchain technology maturing. But broadly, over the last ten years, it’s been kind of the early adopter phase. And if you think back to other big platform shifts in technology, there are these extensive periods of time, sometimes 10, 15, 20 years, where people are really going after something but it’s still not all the way there. AI was like that. Actually, for decades, mobile was like that. You know, there was Mobile World Congress, where hundreds of thousands of people would go, and there were many billion dollar companies building mobile handsets and different platforms. You remember the Palm Pilot or the BlackBerry or the Windows Phone. I mean, so, so many. I wanted them all. Everyone wanted them all. They’re like, Oh, this is going to be the one. This is going to be the one that makes it better. It’s going to be easier. But none of them were any good, actually. And then you kind of hit an inflection point, and a number of things happened simultaneously: the 3g adoption, the touch screen, innovation and building the right kind of operating system for that era, which is really what iOS did and what Apple achieved. And that was this huge inflection point, and all of that stuff just looked like noise at that point. Now I don’t know that that’s exactly where we are, but what I can tell you is that the early adopter phase of blockchain network technology is not the technology that we need for this mainstream scaling phase. And so at Circle, we’ve worked with many of the leading institutions in the world as they’ve begun to use things like stablecoins and blockchains. We learned a lot. And so we’ve been able to build a purpose-built blockchain network with the needs of the mainstream economic system in mind. It has a lot of very distinct capabilities, from a technology, from a governance, from other perspectives, and we’re really, we’re trying to paint with a slightly bigger canvas here, which is our idea that this is actually a new operating system paradigm, just like mobile or cloud or the desktop. The economic operating systems, which are actually these infrastructures that are available that will bring, not just moving money, but the entirety of what it is to operate in the economy. What is a firm? What are contracts? How does AI interact with that? We’re actually building a layer in anticipation of this literal upgrading of the economic system onto the internet, and we believe it’s one of the largest opportunities possible. And we’re bringing amazing companies in, as you’ve seen from our announcement. Some of the world’s leading companies, leading financial companies, technology companies, others are joining us and exploring this and building on this.

Brady: Final question for me, this is a podcast, but leadership—what do you think at this juncture is one of the under-appreciated qualities to be a great leader right now?

Stoller: That’s a good one. Well, thank you so much.

Brady: Jeremy, thanks.

Brady:Leadership Next is produced and edited by Joyce Koh.

Stoller: Our theme is by Jason Snell.