At Modern Consensus, we spend a lot of time around our decentralized water cooler debating the finer points of blockchain. Is crypto in its current state an investment? When you buy it, are you speculating? Investing? Or just gambling? That’s a question we will put aside on Saturday for the greatest two and a half minutes in speculative analysis: the Kentucky Derby. Thoroughbred horse breeding has so much in common with blockchain that it’s ripe for disruption. Here’s everything you need to know about both.
To an outsider, horse racing and blockchain just sound like opaque word soup. Too insider-y, too mansplain-y to get into. But what we miss most—if you really had to explain why blockchain or horse racing is so captivating—is simple: it’s fun.
Every person working in the blockchain and horse breeding industries has a wonderful, wistful and often romantic story to tell. A crazy, split-second decision that led to a huge win. It’s not about the money, but that’s a really fun way to keep score.
A horse story
In 1998, I went to a summer program where I met a young Kentucky beauty queen who told me her parents were horse breeders. I had never left New England before and I knew nothing about horse racing, but I was a sophomore in high school and so I can tell you with great certainty that we would not have been friends if we met in the same high school. But this was the late ‘90s. Good Will Hunting and Ten Things I Hate About You made it cool to be Mysterious Boy and Girl You Misjudged. The program was at a university in the Midwest and there was definitely a guy there who, at 16, looked like Jim Morrison and would bring out his acoustic guitar to strum out his plagiarized tunes.
We kept in touch as old-school penpals. I’d write postcards to her P.O. box at the whistlestop post office across the train tracks from her family’s farm in Kentucky. The next year, she sent me a birthday card that said, “Happy birthday to my new friend. I can’t believe how much has changed in the year I’ve known you,” it concluded. “P.S. I just found out my family’s horse is running in the Derby!! Keep an eye on him. His name is ‘Charismatic.’”
After a year of having an exceptional friend, I still knew nothing about horse racing, horse breeding. But I had a cute girl who sent me a birthday card and would dot her i’s with hearts in pink pen. I looked up the horse. The only thing I could find about him in the Boston Globe said, “Charismatic, a cold nobody wanted, is ridden by Antley, a jockey everybody doubted…” The odds on May 1, 1999 were 30-1. Over AOL Instant Messenger I bet a friend $10.
What followed was one of the greatest runs in the history of horseracing. Charismatic came from 16th post and raced entirely midpack until the last stretch when he fought off the biggest money horses in the game. While $25,849,294 sat in the bettors box, Charismatic broke from the middle of the pack. I will never forget the moment that the announcer lost his mind 3 seconds before the finish line, “…Charismatic on the outside takes command, on the inside Cat Thief, in the middle of the track Menifee is flying, but it’s CHARISMATIC HOLDING ON TO WIN IT BY A HEAD.”
Everybody has a story
My friend never paid up the $300 that we’d laid out, but it made me a lifelong race lover.
A race like that will make a fan out of anybody. Especially if you have a soft spot for longshots. In her incredible book about Charismatic’s unlikely win, Three Strides Before the Wire, racing neophyte Elizabeth Mitchell wrote about wandering up to the race on a whim. She and her husband bet on Charismatic. “The great thing about horse racing is that once you experience an ecstatic moment at the track, you are granted access to a whole history of rapturous racing experiences,” she said. “I realized that everyone who worked the thoroughbred circuit seemed to have a horse story like mine.”
It’s the same in crypto. Whenever we go to blockchain events, lectures, and debates, the first thing people ask each other is how they got into crypto. There is an unspoken contest for who has the coolest origin story. People love to talk about the guy who blew 10,000 bitcoins (current value: $96 million) on two pizzas.
There’s all sorts of crazy stories about people who are bitcoin millionaires but they forgot their password.
But like horseracing, the crypto game can be fun. The world of business and finance is out of reach for most people on the globe, but the ability for any one of us to lay down a few bucks and make it big for a day is exciting enough to keep the whole operation going.
We say this a lot: don’t put it what you’re not willing to lose. I love horse racing and I don’t gamble. Our editor in chief is one of the best minds in blockchain and he owns zero crypto. So go figure.
The thoroughbred blockchain
This summer will mark 20 years of friendship and racing with my old pen pal. I mentioned earlier a romantic and egalitarian part of horse racing is how there’s something in it for everyone. But when I try to make a trip to Kentucky once a year to see her family, I love going with them to the Keeneland race track in Lexington. It’s a beautiful way to spend the day and spending it at their corner table at the Lifetime Members club above the jockey staging area is just lovely. But what gets me every time is how their mother can just flip open the program for the day and casually notice, “Oh this will be the first race for Denver Dust, her grandmother is Bricklayer and….”
She will then go on to tell me what she knows about the people behind every horse, how their grandparents ran. Of the 20 horses in the 2012 Derby, 16 can trace their lineage back to Secretariat, a horse widely believed to be the greatest of all time.
Getting celebrity horse stock into the bloodline is big business. A subscription to Pedigreequeery just to look up that data is $10/month. But a “date” with legendary stud named Tapit can fetch $300,000 if it produced a live foal.
All of these systems operate on trust and access. There is a separate race on now to put much of this on the blockchain. “Blockchain gives the power back to the people, not the authorities,” Irish born champion breeder Jack Cantillon said in The Thoroughbred Times. “Look beyond the Bitcoin hype to its foundations and we may just have found the building blocks for racing’s future.”
One billionaire software developer put the bitcoin horserace situation best on Twitter:
Yup, my BTC bet is paying out well. Theory? “It will be worth a lot, or zero”. Much like a horse racing. Not like investing. https://t.co/VrGz6JzWoQ
— Mike Cannon-Brookes 👨🏼💻🧢 (@mcannonbrookes) April 30, 2017
Cantillon looks to a successful startup known as CashCow as an example for how costs could be shared among horse investors. In the future instead of betting on a horse race, you could bet on a horse breeder. Then, instead of putting down $10 at a racetrack to support my friends in Kentucky, I could buy into their horses over time.
After the Derby in 1998, Charismatic went on to win two legs of the famed Triple Crown. He placed first at the Preakness Stakes before falling behind and finishing third at Belmont. He had an incredible career, but in horse breeding: he had a much more incredible retirement.
Charismatic had sired 371 starters from 424 foals of racing age and 263 winners who had combined earnings of more than $44.5 million. Yes, that horse I bet $10 on in 1998 had a total market cap of $44.5 million. Before he retired from breeding, a “date” with Charismatic cost about $5,000, but earned $169,201.52.
If you’re hooked now, there’s a hilarious and fun episode on Vimeo of ESPN’s 30 for 30 about Charismatic.