Business Bitcoinization Podcast: Accelerate Your Business Plan by 20 Years with Bitcoin with Joe Wood
Joe, welcome to the podcast.
Nice having me, Josh.
So I’d like to start off every single interview with a few questions that help us to get to know you a little bit better and give us some insight for our own lives. You ready for this?
When and how did you first learn about bitcoin? Maybe 2012, maybe 2013 on some libertarian message board. Not really diving into it too much. Kind of saying, hey, this is a new thing. Price is probably around $100 or so, but didn’t have the technical capabilities nearly to dove down, run a note, do all that stuff. But I would say I probably kind of first actually dove into it around 2014. Coinbase was up at that point and just watching Andreas videos that speeches that he had given. So 2014 is probably the time that I kind of dove in a little bit and kind of gravitated from there.
What’s an insight or fact about bitcoin do you wish that everyone understood?
I think really that you just don’t have to understand everything all at once. You don’t have to get all of bitcoin. You can get one portion of it, starting to buy a little bit, diving down the rabbit hole. I think anyone who has been in it for a while realizes that, hey, I thought I understood it at this point. You keep on going further and further understanding it, but you don’t have to get it all at once in order to buy a little bit and learn about it. I think that’s what intimidates a lot of people are like, hey, I don’t understand this thing. I’m not going to worry about it. If they realize, hey, I could just learn a little bit of, hey, there’s a 21 million hard cat. That’s one thing I know, and kind of go from there. What’s the bitcoin resource that you most recommend to other people? I feel like this is always changing as stuff comes out. I think right now Swan does a great job and that if people are talking about bitcoin inherently, they’re thinking about buying some. And so Swan is a place where you can do that in one place where they have really good educational resources, but then there’s also the ability to buy right there. So that’s kind of the one I’ve been sending people lately. And then I think as much as you can personalize that to the person that you’re talking to as possible, that can really be helpful. And that some people you might know, they’re not really going to be interested in some of the more technical side where some people are more younger, tech savvy, they want to dive into stuff, sending right to Lightning Network. So really kind of knowing your audience, who you’re talking to, I think is helpful there as well. Beyond bitcoin, what’s a resource or an idea that’s been valuable to you or your business recently? Probably not unrelated to bitcoin, but I think really just value and time as a resource intentionally is something I focused on a lot of the last couple of years of where do I want to direct my energy? What am I trying to do? Or the place that I’m spending my time, the things I think are the most valuable. Just out of curiosity, how do you do that? Is it resources that you’ve read, looked at? Or I guess, is there anything that would help people to do that if what you’ve just shared connect with listeners right now? Yeah, I think for me, it’s just a kind of an internal gut thing of like, hey, I’m making progress on things that I think are important. Right. And so I think that’s just a question that you ask yourself of, am I making progress in the areas I want to? And if I’m not, well, is that because I’m spending time on the wrong things? I think that was one of the things for me as I left, kind of say easy, but the constant w two paycheck was like, is this worth it for me? This constant stability? Good pay coming in, but it’s where I want to be spending my time and my focus. And so that was kind of one of the mental models for me to be thinking through. And now we have our final arbitrary, but insightful question, which is this as a general life principle, is it better to ask why or why not? It’s a good question. I think kind of going back to bitcoin again, I would say probably why is a good general rule in that if you’re really trying to dig down and understand things, you got to ask why. And so if you have that mindset, if you’re actually intellectually open and honest and trying to think through things, why is a really good question to say. Why is this the case? Why is this the current process? If you do that openly, you can get, I think, to some really good answers, whereas why not can kind of give you a, hey, this is why. We’re not going down this rabbit hole, or this is not the process that’s going to work. But I think why is a more open ended question that can lead you to a bunch of different options. Well, Joe, we’re here today to talk about your new business venture, satoshi patrol accounting. I’m curious, can you just share with us a little bit about the vision for the company and then after that, maybe if we can get into a little bit about the naming of it as well. Yeah, so really the vision of the company is really just to set out to say what are the ways that I can go and help bitcoiners? And I think there’s the gap there on the accounting side that some people see a hurdle. And so I think there’s probably two elements that I’m trying to kind of reach as far as businesses. One of them I really set out to say, hey, I know there’s a bunch of bitcoin businesses out there. I know they’re going to need accounting support. What role can I play there? Some of them have grown to where they might already have a main accountant. Some of them might just be starting up and they could use additional resources. And so that kind of was my initial thought and push and really where I focused so far. I think the other sector there that I didn’t realize so more recently that I think is probably much bigger is one of those sifting businesses out there that could really use bitcoin. And if they had a little bit more education and knowledge behind it, could integrate it into their current business, even though they may not be a bitcoin or they may be a bitcoin or just haven’t considered it. So I think that’s another area where someone with understanding of bitcoin as well as accounting can help integrate that into businesses in a more seamless way. So it doesn’t have to be this big hurdle of, hey, bitcoin is complicated. There are tax implications. I just don’t want to touch it. And the other part of your question as far as name. Right, so Toshi, obviously everyone knows to, toshi Nakamoto and vendor of Bitcoin. I tried to combine that with Luca Patrol, who was essentially the godfather of modern accounting back in the 1400 in Italy. And so he created what we consider today double entry bookkeeping that’s been used for hundreds of years. It’s really the foundation of corporations issued financial statements. It’s all based on this double entry bookkeeping model, which seems really easy and straightforward today, but at the time, it was revolutionary and really caused a ton of innovation and just additional information flowing from businesses. Originally within one city, two cities, right around Petroleum, where he was spreading this message, but then obviously spread throughout Italy and then the world. And so I think you can easily see analogies there of something like that spreading hundreds of years ago and see how Bitcoin is currently doing it and continue to spread rapidly throughout the world and really just create efficiencies that we haven’t considered yet. So Luca Petrole was the founder, father, godfather, the originator of double entry accounting. I’ve heard of people talking about Satoshi as the father of triple entry accounting. Is that something that you subscribe to as well? Is that a good way of describing what Bitcoin is? Yeah, I think so. If you just want to kind of think about it simply, it’s maybe one extra step there where double entry bookkeeping is really a method where you are making sure that your books are balanced in real time. So there are two sides to that. There’s always a debit and a credit where you’re saying, hey, I spent some cash on something that resulted in an asset. And so I’m just moving things between my balance sheet from one area to another. Where accounting kind of adds to that is you’re adding money to the system, where I have one bitcoin, you have one bitcoin, I send you a half bitcoin. Now you have one and a half. There’s a double entry side there where you know and I know it right. But then there’s also this third side where everyone can see it. It’s an open public ledger. And so there’s always at least three parties. I can see it openly, transparently, which adds just a whole other layer of openness to a financial system that we’ve never seen before. And it hasn’t really been used yet from a transparency reporting standpoint. But there’s a world I think you could see where if a business did want that to really be able to show how they’re doing day to day, week to week. You could do that through a ledger. Obviously, from a privacy standpoint, personal standpoint, that’s kind of a different side of things that you might not want that, but if a business did want that, a nonprofit potentially wanted that from transparency, you can have that all in an open ledger. Yes, it sounds like something that in some people’s minds becomes a little bit dangerous because of security concerns. Is there anything that businesses need to be worried about or is this something that because there is more openness, it leads to more trust and innovation and things like that? I’m just curious to know your thoughts there. Yeah, I think that’s kind of yet to be seen. I think the classic example there is if I’m an individual and I have all my bitcoin in one wallet and I’m sitting from that wallet and you can see all the bitcoin you have, that doesn’t seem great. Right. Whereas a company, specifically a public company right. Or a nonprofit potentially that has open financials that you’re going to be showing to the world, that’s not as much of a risk. Right. Like, hey, I’m about to tell you in a month that I have three Bitcoin in the balance sheet, that the fact that you see my wallet that’s open, that’s not a big deal. Same with nonprofits. Even though they’re smaller, they file annually. Right. But there’s still incentive there, especially if they have donors that you want to be able to say, hey, I sent you a bitcoin, you’re not moving. It’s going to stay there until the time that I want you to spend it in. But I think for a while at least, I think for small or medium sized businesses that don’t have these reporting requirements, they’re going to want to use the same privacy practices that individuals want to use where you’re not. Reusing wallet addresses you’re keeping that not easily reviewed on the blockchain, which is kind of always a constant battle, it seems like, where the privacy tools are battling against the gene analysis tools. And so that’s a fight I think that we’re going to see in the years to come. But for some that I want to have that transparency, I think there’s a possibility. So there’s a whole lot that is incorporated into the term accounting. I would like to hear from you a little bit, especially from the perspective of a business owner, what business owners should be thinking about from a personal side and from their business side. Yeah. So depending on the size of the business, if they are a small business owner and kind of on their personal side, I would try to link those to as much as possible. And that if you are running your own business, it’s going to flow through to you as an individual, either through tax file, but I would consider it kind of rolling it all into the same tax entity if you want to look at that way. So kind of three main areas I would focus on is the traditional accounting bookkeeping side of things. How are you going to look at your financial statements on a monthly basis? I think tax is always a factor that you have to consider there as well. And then probably the third factor is operationally, how do I do this? And so the accounting side is probably honestly the most straightforward, the bookkeeping side of things. You just really have to think that you’re using bitcoin, accepting bitcoin or buying bitcoin, making sure that you have a really good cost basis there. And so that just means good record keeping from the start. You are tracking either when you purchased it or when you received it, and you know what the original cost basis was there. From there, you’re adjusting the value of that over time. I would probably recommend it’s going to be reflected in that if it goes up, you’re going to have gains, if it goes down, you’re going to have losses regardless of whether you sell it or not. I would probably just put that on a different area of your income statement so that you’re not thinking about it as operationally, hey, we did a lot better this month and a lot worse because of your bitcoin. So thinking through that process on the tax side, it can be really straightforward or really complicated depending on whether you sell or not. You don’t sell, you don’t have to worry about it. If you are selling or you’re using that bitcoin, it’s not something that you can’t handle. It’s just you have a lot more transactions. But any kind of accountant that’s comfortable with a bunch of transactions flowing through using excel file, going through that work, it shouldn’t be an over complication. If you do want to use bitcoin in that way for payments to pay your vendors or that you just need to sell because you need cash, that shouldn’t be something that inhibits you from using bitcoin in your business if it makes sense otherwise. And then operationally, you just get into some really interesting ideas of your sole proprietor or like a partnership. You have a relatively limited number of people that are owners of that business, and so you can treat bitcoin in much of the same way as you would as an individual, but knowing that bitcoin really acts as a barrier instrument, right, if you’re using in a noncustodial way. And so to the sense that you have an accountant that’s working for you, that’s making payments, how do you feel about them having access to your bitcoin? Do you do something with multi SIG where you have multiple keys? That’s something that’s going to be more complicated, that you need to think through as far as if you’re holding bitcoin in your business more than just you. How do you do that in a way that you feel really comfortable about holding the asset and not having to trust your account and that they’re not going to run away with the keys, just like you wouldn’t want to trust someone with your keys personally. As the businesses get bigger, I think you move to custodial solutions, which is just going to make more sense and probably more streamlined whereas today if you’re a business, you have a bank account, you’re regulated, you’re reporting to the government anyways. That custodial solution probably makes more sense as a trade off for a company. Then you might think of an individual where you’re thinking, I really want to hold my keys and have access to my money and not have to rely on a bank. That’s probably a ways away for any business that’s more than a couple of people. As far as ownership, what’s the best word on smaller expenditures? Using bitcoin, for instance, like if you go to a restaurant that accepts bitcoin, you buy a meal for fifteen dollars to twenty dollars. Is there any official guidance on that? Are there capital gains taxes on it or is it to a certain amount? Any thoughts or official words there from the US government? The official word is that every time you use bitcoin and it’s not a gain or loss, you have to report that lovely. I guess I wouldn’t care if you didn’t report the law. But yes, that’s the official ruling. I would never guide someone to not do that. I think there’s practical realities there. If you missed the $50, $100 that you paid for your meal there, the IRS is probably not coming after you in the full force, although they just are looking to hire 87,000 people. So who knows? But I think a good way to think about that is you have to be paying, you really shouldn’t have to worry about it. But if you are someone who’s really moving toward a type of bitcoin, ization you’re going to have, at least for now, that’s going to create taxable events. And so knowing that I have a list of transactions where here’s all my cost basis, I’m keeping track of that. I know my cost basis on a running base, like on a running total, and then similarly having money going out, whether it’s I bought a new car, right, for my business, or bought merchandise, or I bought the $50 meal, that can pretty much regardless of the amount, it’s going to be the same accounting for it. So I would just start thinking in that way, keeping track of things in that way. And realistically the iris isn’t coming after you for that. But if you are moving down the rabbit hole, I want to use bitcoin for everything. That’s my main source of money, being able to track it right now, until there’s some threshold where you don’t have to report it, it’s something that you’re going to want to keep an eye on. There’s been quite a few bills that’s been submitted that I don’t think it’s going anywhere to say under $50, under $200, under $600. You don’t have to report this, but the current state is they want to know about it, they’re going to track it. Sure. So my guess is there are multiple different types of business owners listening to this podcast. Some people are all into bitcoin, probably thinking some of that direction, like, how can I get as much as possible into bitcoin and operate from a bitcoin standard even before it’s popularly used? Other people are interested in bitcoin. They see the value of it long term, but starting to use bitcoin, accept it. Having the balance sheet feels like a headache that is probably worth putting up with for the long term. Does bitcoin make anything easier at this point in time? Or is it just one of those things that you have to take extra hurdles because you believe in the long term benefit of it? So I wouldn’t say it makes any easier, but I think it produces possibilities that are possible in the current system. And so I think if you think about it, as I’m a business, I have limited capital, I can only do so much. Right, and you’re kind of running a small business is constantly like, you’re not going to be bringing in a ton of money. There’s not a ton of small businesses out there that are cash flow, don’t have to worry about things month to month that are just killing it. It takes a long time to get there probably multiple, whether it’s multiple restaurants or multiple locations. And so I think what bitcoin has the ability to do there is, say, if I have a business and I’m bringing in money and I use bitcoin on my balance sheet, potentially I have the potential to say, I made, let’s say, $10,000 last year, and I put half of that in bitcoin. And because bitcoin grew over the next few years, it enables me to do things that my small business wouldn’t have been able to do for 20 years. Right? And so that’s the possibility. I think what becomes really important there is good treasury management that most small businesses currently probably aren’t considering today. And so if you look at large businesses, they’ll have a whole team focus on this, right? Like, what’s my cash at? Where am I using my money? What’s my cash flow for the next quarter, six months, year? Small businesses being able to do that in a really precise way is going to become more important, I think, in that if I know precisely what are my expenses, what’s my realistic revenue, be conservative about that I can safely say I don’t need this money for two years. I feel better about putting it into bitcoin, then, hey, I might not need it for five years, or I might need it in three months. I don’t really know. I haven’t spent the time on that. And so I can’t considerably make that bet of, hey, I’m just betting on bitcoin going up in the short term versus I know I don’t need it, we’re cashflow positive. This is money that I shouldn’t need to touch. And realistically, maybe the thought there is more. So, okay, this is money that I might go out to acquire more equipment or acquire a competitor that I would need cash for it. And you say instead of doing that, I’m actually going to put it in Bitcoin with a thought, but that’s going to outperform any large acquisition that probably has a lower risk involved that I would want to use this cash for. I think businesses reassessing their money as a tool versus purely looking at it from a short term. If I buy this, how long is the Ri on it with the money that’s depreciating? So you just mentioned treasury management, which is going to be largely just buying Bitcoin with the excess money that you have and holding it. You also have something that maybe the employee corollary to that would be something like swan’s bitcoin benefit plan where you can pay small amounts consistently to your employees in Bitcoin. I’m curious for the business, are there any other easy first steps or next steps that you would recommend in general for businesses? I think certainly using it as an incentive tool is something that’s been used and interesting. I don’t know how much that varies from, hey, you gave me $100 bonus in Bitcoin versus you gave me $100 and I put it into Bitcoin. Whether that push people along, that could be useful. This is not something I’ve thought through. And so I don’t know the other options out there for this, but I think something interesting that crowd health has done recently is integrated into their customers basis. And so are you familiar with this? Yeah, Andy Screwed Over was, I think, the first interview for this podcast. He’s definitely someone that was very interesting to me because it was a non bitcoin specific business beginning to use bitcoin as a key part of their strategy. Exactly. So really what they’re looking for, like, it’s not an insurance business, but it’s essentially a crowdfunding business for health care. And essentially their business model is saying, we’re going to have you pay a certain amount per month and allow you to put part of it in a bitcoin, essentially is my understanding of it. And so that’s an interesting, certainly a way to attract customers that are Bitcoin is currently and then it’s really just a long term thing where you are saying, I don’t intend to go and break my leg tomorrow. Right. It’s something that may happen a year, two, three years from now. How am I saving for that today? And so Bitcoin seems like a natural direction there that you’re using it in a product, it rolls out to your consumer. If bitcoin does continue to accelerate value, that’s a really good use case. I imagine there’s a whole bunch of other use cases out there for consumer facing companies that I haven’t thought through but that probably are valuable to grow their consumer base, put their consumers in a better position. And at this point, they’re not even touching Bitcoin. It’s just a product that. They’re offering. So I think there’s a lot of possibilities there that if crowdhouse does well with this, if they’re successful, I think you’ll see a lot of business saying, hey, how do we follow this? Can we integrate this into our product? If I understood you correctly earlier, you seem to be saying that there are some businesses that bitcoin is more beneficial for upfront than others. Did I understand you correctly? And if so, what are some of those businesses? So I think it’s more, so what’s the financial state of your business? If you are a start up and you are just running through cash and you are just trying to create a product, bitcoin or short term may not be all that useful for you. If you are someone who’s been in business for five years, you have steady cash flow. You know, hey, I make 10% every month. That’s a great business. So you can say, hey, that 10% that you’re making every month that you’re really competent in, put half of it or put all of it in bitcoin, whatever kind of risk tolerance there. So a company that’s cash flow positive, I mean, Microsoft or MicroStrategy is the classic example of this. They know their business really well. They’ve been around forever. They know they make a certain percent per month. They know they can take loans out and cover the interest on the loans with their profits from their business. If you’ve been around, if you know kind of where you’re at, if you have a strong cash position, if you’re a business that maybe you only do a million dollars in revenue a year, you have expenses of $800,000, but you’re sitting on cash of 5 million, 6 million that you’ve accumulated. That’s a business that you can say, hey, we’re probably not using all this in the next couple of years. Let’s take a portion of that and put into bitcoin. So for me, it’s not so much the type of business as where’s their financial statements at, what is their balance sheets look like, and how confident are they that they’re going to continue to produce at the current rate. Well, Joe, I appreciate you sharing today. Maybe if there are any final thoughts, anything you want to make sure the listeners get before we get off today, share that with them and then also where they can go to find out more about you and the services that you provide. Yeah, certainly. So I think anyone who is obviously working with bitcoin today that needs accounting support, reach out to me. Anyone who’s listening to this that is just kind of runs a business today that’s interested in bitcoin, that wants to dive into this more, you might hold a little bit, you might kind of be thinking about it. Those are the people I want to talk to. So if you found this interesting, if you have questions, certainly feel free to reach out. My website is satoshiparatroli.com and you find me on twitter. Same name there. Those are probably the two best places to connect with me. Awesome. Joe, thank you so much for your time today. It’s been a pleasure. Yeah, thanks, Josh. Much. All right, friends, it’s a wrap. Thank you so much for listening to this episode of the business bitcoin is a show. If you want to reach out to either me or Joe, you can find our contact information down in the show notes. And if you know of other business owners who could benefit from this episode in particular or the show as a whole, please do share it with them and let them know about what’s happening in this space. As always, keep building, keep growing, and until next time, keep living and leading well.
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