A few weeks ago, I was lucky enough to have an awesome conversation with Jack Gavigan, who is the COO of Z-Cash and someone who’s been at the intersection of tech and finance for a long time (he’s worked at Credit Suisse, Morgan Stanley, & Lloyds, to name just a few places he’s landed during his career).
Our conversation was fantastic and lasted for a while, so this is a longer than usual episode with a lot of content that was too good to cut out.
We talked about the intersection of cryptocurrency with the financial industry, the financial industry’s ability to innovate, and some of the factors that have hindered innovation.
In the second half of the conversation, we discuss Zcash and the importance of privacy when using cryptocurrency, including why this is significant for the banking industry.
Lastly – and perhaps most interestingly, Jack shares some tips for how he thinks about approaching cryptocurrency from an investment standpoint.
At one point, we jokingly reference the Dunning-Kruger effect. The Dunning-Kruger effect has become an internet meme over the past 20 or so years, but it’s perhaps especially applicable to investing or speculating in things like cryptocurrency.
David Dunning – then a psychology professor at Cornell – started his research into this phenomenon shortly after hearing the story of McArthur Wheeler. McArthur Wheeler was a large man – 270 pounds – who robbed two banks in 1995, without a mask, believing that his face was invisible to the security cameras.
He believed this because he’d rubbed lemon juice on his face, which he knew was used as invisible ink.
Mr. Wheeler was wrong, of course – lemon juice is used this way because it’s an organic compound that oxidizes and turns brown when heated.
But this incident indirectly led to a series of studies by Professor Dunning and one of his graduate students, in which they found that the people who are most ignorant in an area tend to be the most overconfident.
For instance, students who whose knowledge of grammar tended to dramatically overestimate how good their grammar was. And gun owners who had the least amount of training and education tended to dramatically overestimate their knowledge of gun safety.
The phenomenon applies to almost everything, and it comes up in our conversation today because cryptocurrency and investing are not immune.
You don’t necessarily need to know everything about cryptocurrency, but it’s undeniably useful in this case to know how much you don’t know. As Spencer Bogart mentioned in the last episode, everyone thinks they’re brilliant when there’s a huge bull market. Not so much when prices start moving the opposite direction.
Jack Gavigan, COO, ZCash
Jeremy Hendon grew up in Georgia, practiced law for a while, and then built several companies - from food manufacturing to magazines to digital events. Jeremy has also developed apps with 500,000+ downloads, co-authored multiple books, had his products featured on national TV, and has lived in 9 different countries over the last 4 years.
S01E05 - Privacy, Security, and the Blockchain (Arvind Narayanan)
S01E12: Smarter Security and Precaution in Cryptocurrency with Thomas France
S01E11: ICOs, FOMO, and the Promise and Hype of Cryptocurrency with Brad Mills
S01E10: The Perils and Promises of Investing in Cryptocurrency with Teddy Wayne
S01E08: Investment, Speculation, and The Future of Cryptocurrency with Spencer Bogart
S01E07: The Philosophy and Ethics of Cryptocurrency and the Blockchain with Dmitry Buterin
S01E06: Cryptocurrency - How’d We Get Here and Why Now?
S01E04 - How Cryptocurrency Will Be Used in the Future (Bernard Golden)