back to indexRobert Breedlove: Philosophy of Bitcoin from First Principles | Lex Fridman Podcast #176
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The following is a conversation with Robert Breedlove,
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someone who caught my attention
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and was recommended highly as a rigorous scholar
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and thinker in the space of decentralized finance
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His podcast titled What is Money?
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is a good representation of the way his mind works.
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He's willing to talk through ideas for many hours,
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willing to listen, willing to think,
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which makes him a great companion in conversation
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to explore the history, philosophy, and future of money.
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Quick mention of our sponsors,
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Fundrise, Element, MonkPak, and BetterHelp.
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Check them out in the description to support this podcast.
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As a side note, let me say that I'll have
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a number of conversations in the coming months
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on Bitcoin and other cryptocurrencies.
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None of these conversations are financial advice.
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That's not a legal warning, that's a genuine description
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of my goals and approach with these chats.
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At least for a while, I personally won't actively invest
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in Bitcoin or any other cryptocurrencies,
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except to learn about the technology itself.
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I don't think this should be a journalistic standard
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like the New York Times trying to establish,
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which I very much disagree with.
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In my humble opinion, I think journalists should be free
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to invest in Bitcoin if they want to.
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Luckily, I'm not a journalist.
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I just know my own psychology and I feel that my thinking
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will be muddled by excitement
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if I invest before I understand.
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I feel the same way about Tesla, for example.
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I still don't own any Tesla stock
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and I am still indeed fascinated by Tesla Autopilot
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as an artificial intelligence system.
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I work hard to be cognizant of the biases
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that arise in my mind and always try to choose the path
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that maximizes or maintains a freedom of thought
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as much as possible.
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Also, let me say that I try to be very careful
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in selecting guests based not only on the contents
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of their ideas, but the richness, complexity, music,
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style of their mind and character.
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Yes, I will talk with people with whom you
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and I may disagree, people who some may call bad
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or even evil human beings.
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I want to understand them because I believe that,
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as Solzhenitsyn said, the battle line between good and evil
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runs through the heart of every man.
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I think if you always run from evil,
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you become blind to the truth of human nature.
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This is the Lex Friedman Podcast
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and here is my conversation with Robert Breedlove.
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Rousseau opens his 1762 book, The Social Contract,
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with the following statement.
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"'Man is born free and everywhere he is in chains.'"
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So you talk about freedom and sovereignty quite a bit.
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What do these ideas mean to you, the idea of sovereignty?
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Freedom and sovereignty, I think they're very
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Let's start just focusing on sovereignty,
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which is a word I don't think we talk about enough.
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And the general definition of that I would give
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is the authority to act as you see fit.
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And it's a word that's etymologically associated
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with words like monarchy, money, reign.
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So historically, it's referred to whatever the locus
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of supreme power is in the sphere of human action.
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So whether, if you go like back into ancient Egypt,
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the Pharaoh had absolute sovereignty
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and everyone else was pretty much operating
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according to his interests.
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You fast forward to today, modern Western democracy,
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we have more decentralized sovereignty
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and that we all get to go vote and elect officials
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that make decisions on our behalf.
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So the theme of sovereignty across history
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is that it's been gradually decentralizing
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across our different models of socioeconomics.
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And it's largely, you could say it's rooted heavily
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in the money, I would argue,
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which is something we'll get a lot into here,
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where if you have money, you have the authority
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to act as you see fit in the world.
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And even in our current political sphere,
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if you have enough money, you can actually reshape the rules.
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You can reshape laws, you can lobby Congress.
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If you're in a certain situation, like many billionaires,
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you can negotiate your own tax treaty
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such that you can get favorable tax treatment
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with certain jurisdictions in the world.
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So this concept of sovereignty, which today we call,
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it's common to call states or nation states
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or government sovereign,
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meaning that they have power over people.
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But as I argue in a lot of my writing,
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I actually think that sovereignty
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and here's within the individual
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and that we each have our own interiorized space of choice,
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which is something like Victor Frankl
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called the final human freedom.
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And that we, no matter what our circumstances are,
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no matter what exogenous situation we face,
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we always have this endogenous power
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to choose how we respond to it.
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That's one of my favorite books is,
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A Man's Search for Meaning.
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Maybe we can break that apart a little bit.
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So you've kind of spoken about sovereignty
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as a closely linked to power,
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but is there something about your own mind
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being able to achieve sovereignty
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no matter what the monetary system is,
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no matter what, who has the control over centralized power,
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the money or whatever the mechanisms of sovereignty
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and the societal level?
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You as an individual, isn't ultimately all boiled down
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to what you can do with your mind, how you see the world?
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How you interpret it.
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And as we get a little bit deeper into this,
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I think we'll come to see money
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as an extension of your mind.
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So there's a feedback between money and mind.
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For instance, you think in dollars today,
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almost guarantee it, most of us do here in the US.
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And it's a tool, right?
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It's a tool we're using to decomplexify the world around us,
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to deal with it, to understand the sacrifices and successes
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across an entire history of economic transactions.
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We can boil that all down to the price.
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So it's data compression.
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And if you can change,
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if there's a central body or central governance mechanism
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that can manipulate that money,
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it can have an impact on your mind.
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For instance, today, so I agree with you on the first hand,
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say that I do believe in free will.
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I do believe in individual autonomy,
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but I also think that there are certain devices and powers
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in the world around us
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that can actually influence how we think.
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And it's fascinating to think about the fact
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that money might be actually deeply integrated
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into the way we think and into our mind.
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You think about what are the core aspects of the human mind?
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What influences cognition,
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the way you reason about the world?
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You have the Chomsky languages at the core of everything,
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but you're kind of placing money as pretty close
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to the core of what it means
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to be an intelligent reasoning human.
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I think money is a direct derivation
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of action and speech, actually.
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It's another expression of the logos.
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If we even think of what it means to think
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is that we are generating two different courses of action,
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potential courses of action,
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and we're populating them with avatars, right?
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Maybe ourselves or others.
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And then we're comparing how we may act in each situation
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and what we think the result would be.
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So actually it's comparison.
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Basically it's comparison and contrasting
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of possible courses of action.
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And that's the same thing with words themselves.
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Most words, the vast majority of words
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only have meaning in relationship to other words, right?
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It's all contextual definitions of a word or more words.
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Now people have argued with me about this
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because there is a first word, right?
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Where you pick up rock and say rock.
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But most other words in higher abstraction
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tend to be relative.
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And what's funny about action and speech,
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and this gets, I got into a bit of this in our paper here,
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is that it's linked to evolutionary biology
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and that once human beings adopted upright stance,
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we freed our hands.
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We no longer needed our hands for locomotion.
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So we started to evolve more dexterity
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and notably we have opposable thumbs.
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So this gives us an ability to manipulate
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and particularize the environment
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in a way that most other animals cannot.
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And what's interesting about this is that
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as we gain this ability to manipulate natural resources
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and count, point, pointing was a big deal
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and that we could indicate prey
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or items that are far off distance
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and we could organize ourselves.
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At the same time we co evolved this fine musculature
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in the face and tongue.
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So it's as if speech developed,
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co evolved really with our dexterity.
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And as a natural extension of that came us making tools.
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Right, we started to create things
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to better satisfy our wants over time.
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And the most tradable tool in any society
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or the most tradable thing is money.
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So I really, I argue that action and speech
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are quintessential modes of self sovereign expression.
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And the money is just sort of a tech layer
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we've put right on top of that.
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And that it's a natural derivation of action and speech.
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Okay, that's fascinating to think about sovereignty
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from the evolutionary perspective.
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And then ultimately money is the technology layer
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that enables sovereignty.
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So, you know, it's really fascinating to think about
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our modern human society as deeply rooted
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in these like evolutionary roots
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from the very origins of life on earth.
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So what, you know, some of the ideas you just mentioned,
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what do you see are some interesting characteristics
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of just life on earth that propagated to us humans?
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Like what ideas propagated through,
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have roots in the evolution?
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Yeah, I think one of the deepest impulsions in life
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is the territorial imperative.
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So all life is seeking to expand its dominion
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over space and time.
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And we think about, you know, again, physically with space,
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it's advantageous to an animal or an organism
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to have more territory under its control
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to raise offspring.
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So it's all about reproductive fitness
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at the end of the day.
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And then we'd also think of reproduction itself
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as the genetic impulse to have more,
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to replicate oneself across time.
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So it's territoriality across time in a way.
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And this is very common in most animals.
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Not all animals are territorial, but many are.
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And you see very interesting behaviors
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resulting from territoriality.
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This is like animal combat.
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You know, the reason birds sing is territoriality,
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a number of other things.
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And it's my hypothesis and others have shared
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this hypothesis as well, that mankind is clearly,
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I think, would argue a territorial species
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and that he expresses this territoriality in property rights.
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So property, when we hear that word,
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we typically think of an asset.
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We think of, oh, this house or this stock or whatever.
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But property is actually the socially acknowledged
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relationship between a human and an asset,
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such that you have exclusive rights and responsibilities
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to a particular asset.
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It is not the asset itself.
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So property, it's information, it's a relationship.
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By the way, my mind was just blown.
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Property is information, it's not the actual asset.
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That's really important.
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That's really interesting.
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Yeah, and then it comes down to how do we organize ourselves
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such that property, that the contributions people are making
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are commensurate with the consideration they're receiving.
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So if you're adding value to a piece of property,
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you're developing a piece of land for use,
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in theory, to be fair, you should have the rights
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to that fruit if you go out and plant a garden
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or whatever it may be.
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And this is rooted in natural law,
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where we have rights to life, liberty, and property.
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Those are kind of just the base,
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the fundamental layer of morality and capitalism, frankly.
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And you could think of, to get really primordial with it,
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the first capitalist in the world,
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just to kind of get some definitions out here,
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I'll say capitalism versus communism or socialism
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as the spectrum I'll speak on.
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The first capitalist in the world would be the guy,
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the caveman, that maybe dug a little hole for himself
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to shield himself from the elements.
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Maybe there was a rainstorm or a snowstorm
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and he dug a little enclave and he protected himself.
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I thought you were gonna go, because you said primordial,
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I thought you were gonna go back to like
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earlier biological systems.
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I guess primordial for human, perhaps.
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And then the first communist or socialist
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would be someone that decided the fruits of his labor
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So he would have violently encroached on that individual
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and taken his plot for himself, for his own use.
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And that's the spectrum across which capitalism,
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in the pure sense, and communism in the pure sense operate
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in that capitalism, each individual has the exclusive rights
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to the fruits of their labor.
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So anything they spend their time, effort, energy
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creating in the world, they own the rights to that
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and they can trade those rights with others,
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other self owned people that have done similar things.
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Communism or socialism would imply that other people,
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typically the state, have the rights,
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at least some rights to the value you've created.
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So there's this interesting moment when that first caveman,
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that first capitalist drew a line, a circle in this cave
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and said, you know, this is mine.
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You could say it was free to be claimed
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at the time he claimed it.
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But it's an interesting moment when asset becomes an asset.
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When space time, as you were referring to it,
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becomes something that's now can be possessed
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Is there something special about this moment?
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Because it feels like, first of all,
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in terms of space and time, it feels like there's a lot
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of available space time yet to be claimed.
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So if we just look at like the universe, right?
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We're talking about, there's a funny thing
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with Elon Musk and Mars, I think they sneaked in there
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for SpaceX, that nobody on earth has any authority
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on Mars or any, this is a very interesting question.
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It seems almost like humorous at this time,
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but perhaps not, perhaps there'll be sections of space,
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not just on planets that are gonna be even fought over.
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So is there something special about this moment?
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Because in discussing sort of violence
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and respect for property, it feels like this is
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a special moment because ultimately conflict arises
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when you make claims on a particular territory.
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It's not always in conflict where people say,
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when you look at Hitler or something, for example,
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his claim would be in many of the lands that he attacked
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and invaded that this is ultimately,
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this has always belonged to Germany.
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So is there something you could say as to like
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what it means to own an asset or a property?
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Yeah, so in the ancient days of hunters and gatherers,
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we could say that property was mostly a loyal title,
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which meant it's just whatever you can defend, right?
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So if you've got knives and daggers and satchels
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and maybe some pelts you've hunted,
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whatever you can hold and defend is yours.
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And there's not like, there's a government to appeal to,
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you're just sort of a free agent operating in the wild,
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defending the assets you can protect on you more or less.
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And what really changed the nature of property
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is when we get into the agricultural age.
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So there's a big flip where we went from just foraging
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and hunting all the time, constantly moving,
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trying to stay alive to deciding we're gonna settle here.
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We figured out how to cultivate crops.
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We can create, we can increase the population
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because we can harvest more energy from the sun
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and we can establish a longer term civilization.
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What happens in that transition
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is that we begin creating economic surplus.
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So for the first time in history,
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we have stock houses of grain to defend
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or maybe meat or cattle or whatever it is we're creating,
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we now have savings.
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And it's at that time when government emerges as well,
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because once you have savings
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or you have an economic surplus,
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you have something that other people want to steal, right?
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This one thing we'll touch on a lot today
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is people always want something for nothing.
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People are always seeking the path
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to get something for nothing.
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And I think that drives a lot of our decision making.
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And it actually encourages us to be innovative
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in a lot of ways, right?
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We're trying to, you could say it's our laziness
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that's helping us be inventive in a way.
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We're trying to accomplish greater results
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with less efforts over time,
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but we can cross that line in seeking something for nothing
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where we start to violate the life, liberty,
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and property of others.
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And that's where we shift from kind of capitalistic society
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to something more communistic.
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And so that's what government is.
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It's a protection producing enterprise
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for the economic surplus generated by a trading society.
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So when people begin to trade,
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they create what's called the division of labor,
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which is a very common economic term,
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basically means you're better at making hats,
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I'm better at making boots.
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If you specialize in hats, I specialize in boots,
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and we trade, we've created a positive sum game
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where you and I both benefit.
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So we become collectively more than the sum of our parts
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And that's why human beings do trade
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because we become more energy efficient as a result.
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We create more outputs per unit of input.
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And you can think of government in that respect,
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if we're looking at it maybe in a tech sense
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that the economy is the trade network that generates wealth,
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generates innovation, generates all,
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this whole lap of luxury we live in today
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that we've inherited from our forebears is from the market.
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It's not from a government.
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The government is the network security, if you will.
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So we're paying expenses to a vendor to protect peace,
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to preserve life, liberty, and property in that network
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so that we can have, you know,
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when there's inevitably disputes over private property,
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we can have nonviolent dispute resolution
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in the rule of law.
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And we can have a reasonable expectation
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of being able to conduct commerce without violence.
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The problem has been that the protector tends to,
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you know, they're in a monopolistic position, we would say.
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They tend to start abusing that position
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to obtain property for themselves.
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Again, trying to get that something for nothing.
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When you control, you know, you are the security guard
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The first thing they tend to monopolize is money
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because if you can control the money,
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you're effectively controlling people, their energy,
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their perceptions.
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And that becomes a, you know,
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particularly through inflation,
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becomes an avenue to get something for nothing
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and that you can just print more money
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that everyone else is forced to sacrifice their time
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and energy to obtain.
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What are your thoughts about anarchism?
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So I talk quite a bit, he'll be here in a few days,
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actually, Michael Malice, about ideas of anarchy.
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And his idea or the idea of anarchists
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is that any amount of government will eventually become
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the very kind of thing that you're referring to.
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So there's almost no way to have a government
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that doesn't then try to monopolize power,
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money, and all those kinds of things.
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Do you think it's possible to have a government
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sort of on that spectrum of like anarchy,
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maybe libertarianism,
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I'm not sure how exactly the spectrum goes,
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but where you have a small government
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that protects the liberty and property rights
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and those kinds of things and doesn't expand
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to then also control the monetary system
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and all those other things?
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Agreed completely, it was not possible until Satoshi Nakamoto.
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So for the first time in history,
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we have a money that cannot be monopolized,
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cannot be corrupted, cannot be changed,
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cannot be weaponized, frankly.
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Our current monetary system is weaponized
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by those who can print money against those who cannot.
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And I think when you have,
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at the heart of every modern economy,
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which even we could say the US,
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we pride ourselves as free market capitalists.
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You know, we out competed communism in the 20th century.
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We think that this is the superior model.
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Most business people will tell you
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that the free market is the best allocator of resources,
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all of these things.
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But what we have at the heart of every modern economy,
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including the US, is an anti capitalistic institution,
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which is the central bank.
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The temptation to monopolize money
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throughout all of history has been too strong
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for anyone to resist.
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So any, even benevolent, quote unquote,
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dictators that have taken over,
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many dictators have inherited, say,
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an inflationary regime where society is coming apart
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because someone was clipping the coins
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or someone was printing too much money,
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and they'll commit to going back to a hard money standard.
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So they'll keep society on a gold standard, for instance,
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such that they cannot violate the money
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to benefit themselves.
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But inevitably, over time, because it is
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a political institution, there's an incentive there, right?
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For, again, to get something for nothing,
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to spend more than you're making through tax revenues.
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And with that incentive, people typically,
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ultimately end up pursuing that inflationary path.
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So we can get deeper into that about,
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inflation is a term that we've been conditioned
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to think today is just something normal.
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The prices just go up, and then it's pertinent
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to a healthy economy, but it's actually,
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if you look at it from real first principles,
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it is just theft integrated into the money.
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It's a technology backdoor,
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is another way to think about it.
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You wouldn't buy a cell phone knowing
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that someone could siphon your data off your private calls
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and sell it into the market.
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Now, I know we do that with a lot of social media stuff
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today, and that's something else we can get into,
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but you wouldn't do it willingly, right?
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You prefer that your cell phone and your data
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was monetized by you, or if you're gonna sell it,
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you would be able to selectively sell it.
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Inflation is that it's similar, it's a tech backdoor.
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So it's a money that only a few people
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can siphon value off of surreptitiously, typically slowly,
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but eventually, as we've seen throughout history,
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that slowly builds up into a rapidly
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and then causes the monetary system to collapse.
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Do you think there's a benefit to inflation, possibly?
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So when you have perfect information,
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perhaps you don't need inflation,
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perhaps it is purely theft, but I think of inflation
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as like the snooze button on the alarm.
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So if you have a hard standard,
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you better wake up when the alarm rings,
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but all of us kind of like probably shouldn't,
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but use the snooze button.
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It's like, okay, well, five more minutes
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or 10 more minutes, and then you're saying
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there's naturally a slippery slope
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where it becomes a drug that you fall in love with
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and you abuse, but nevertheless,
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the usefulness of the snooze button
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is that you don't know how you'll be actually feeling
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when the alarm rings.
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You might be able to ready to pop up.
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It might be like you really need those few more minutes
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to psychologically get yourself out of bed.
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This metaphor is just not working at all,
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but do you think there's a use to inflation sometimes
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from like an economics perspective?
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I think the drug metaphor is a little more apt
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in that inflation does provide
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an immediately stimulative effect when used early on.
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But what it's doing is it's, again,
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we talk about the balance between incentives
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and disincentives, right?
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That being necessary for a system to function properly.
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With inflation, you're essentially giving the people
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that can print money a way to dampen
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the disincentives they face.
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So it destroys feedback loops, I guess you might say.
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And another way to look at this is when you,
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so using inflation, using quantitative easing,
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you can decrease short term volatility in the marketplace.
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So the market is basically this idea,
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this form of free exchange that's trying to zero in
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on the best ideas.
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And the ideas are those that are most fit to reality,
link |
to satisfying the most wants.
link |
It's gonna overshoot, it's gonna undershoot,
link |
you have these little business cycles.
link |
But when it's undershooting
link |
and you're experiencing a business recession,
link |
in a capitalist environment,
link |
the market needs to clear that malinvestment,
link |
that misallocation of capital.
link |
That means someone made a bet on a certain idea
link |
that it would satisfy wants in a particular way,
link |
and that bet did not pan out.
link |
If you then paper over the losses
link |
that business is creating,
link |
you're now delaying and exacerbating the volatility
link |
that that idea created.
link |
So this is kind of a Tel Aviv concept
link |
where you can dampen short run volatility,
link |
but volatility is truth.
link |
Volatility is us matching our ideas to reality, right?
link |
We're constantly, again, overshooting and undershooting.
link |
So you delay volatility,
link |
you're just amplifying it and exacerbating it
link |
And that's what central bank is doing.
link |
The central bank mandate is low unemployment
link |
and low and expected inflation, basically.
link |
And so they're trying to achieve economic growth
link |
in a stable way, quote unquote, stable way.
link |
This is their ostensible purpose.
link |
And that's just not possible.
link |
Growth is an inherently instable process.
link |
Can you elaborate a little bit
link |
about the nature of volatility?
link |
Why is it communicating truth?
link |
That's something that a lot of people are afraid of
link |
is the volatility.
link |
Almost like it's a sign of chaos,
link |
and so they want to escape chaos.
link |
But you're saying that that's actually,
link |
whether it's chaos or not, I don't know,
link |
but it's getting us closer to the fundamental reality
link |
that we should not be trying to escape.
link |
Yeah, so if we consider that the universe
link |
is pervaded by entropy, right?
link |
This is the second law of thermodynamics
link |
is that every closed system
link |
tends towards greater disorder over time.
link |
And that life itself, again,
link |
I would argue expressed through the logos,
link |
we, life, is the antientropic principle.
link |
It's the only thing that's converting entropy into order,
link |
And that's what entrepreneurs are doing, right?
link |
We're living at the edges of the known,
link |
and we're testing ourself against the entropy of nature,
link |
trying to figure out new and better ways
link |
of saying, doing, or making things.
link |
And then if we do crack a code or figure something out,
link |
we then have a big incentive.
link |
The incentive is to get rich, right?
link |
Because then you have a new idea
link |
that you could then sell back into the marketplace.
link |
So it's this sequence of courageously confronting
link |
the entropy of nature and converting it
link |
into good and useful order,
link |
which by the way is like the ancient idea of God in Genesis,
link |
which I think is interesting,
link |
that actually enables us to construct civilization
link |
in these layers of anti entropy or order, you might say.
link |
So today we live in a bubble of anti entropy or order,
link |
like the coastlines are guarded by the nation
link |
and the city has a certain police force
link |
that keeps it in order.
link |
Even the way we talk,
link |
like clearly the words matter,
link |
but also the nonverbal cues,
link |
all these things are like order that has been established
link |
over many, many, many thousands of years of human evolution.
link |
And I think that's, when I say volatility is truth,
link |
what I'm saying is that the experience of uncertainty
link |
is something that's ineradicable from life, right?
link |
And certainty, like it's kind of a paradox
link |
because we're fighting against it, right?
link |
We're trying to innovate our way away from uncertainty
link |
to create more capital,
link |
which capital is very simply a way of mitigating uncertainty.
link |
So this is why you might have like a stash of food
link |
in case the power goes out or a generator,
link |
like it helps you overcome uncertainty over time.
link |
But uncertainty is also where all the sweetness of life is.
link |
So there's gotta be this balance
link |
with one foot in, one foot out.
link |
So human society is this kind of bubble of order
link |
that we've constructed and slowly expanding,
link |
but at the edges, you're always going to have that chaos,
link |
that volatility, and that the entrepreneurs
link |
are kind of like jumping into that chaos
link |
and some of them die and some of them succeed.
link |
And so like, if you wanna grow this bubble of order,
link |
you have to be embracing the volatility at the edges.
link |
And reverence for entrepreneurship
link |
because these are the people putting their neck out,
link |
so to speak, risking themselves.
link |
And they're gonna contribute to society, by the way,
link |
whether they go up in flames or not.
link |
If they go up in flames,
link |
society has witnessed their experience
link |
as something not to do or something that doesn't work
link |
in a particular time and place.
link |
So that you could say them going up in flames
link |
is a way of enlightening the rest of us.
link |
Or if they figure something out,
link |
Steve Jobs creates the iPhone, changes the world forever.
link |
So enlightening the rest of us, okay.
link |
And Taleb would say.
link |
The fire of their failure, okay.
link |
Taleb would say individual fragility
link |
is inseparable from ensemble anti fragility.
link |
So this means that, again,
link |
every time that entrepreneur goes up in flames
link |
or say a restaurant goes out of business,
link |
when a restaurant goes out of business,
link |
that particular cuisine strategy they were implementing
link |
in that particular time and place,
link |
that's a signal to all the other restaurants in the area
link |
that that doesn't work.
link |
So restaurant food improves from bankruptcy to bankruptcy.
link |
So it's this death of the individual components
link |
that contributes to the growth of the ensemble.
link |
As a small aside, maybe you can guide me through it.
link |
I don't know if you're paying attention,
link |
but there was some chaos around Taleb
link |
and the Bitcoin community.
link |
I wasn't quite paying attention,
link |
but from my outsider's perspective,
link |
I thought it seemed Taleb was a supporter of Bitcoin.
link |
And then a lot of people were very upset about something.
link |
I'm sorry if I don't know the details,
link |
but can you pull out some profound philosophical ideas
link |
from the disagreement of the chaos?
link |
I admittedly don't know too much about it either.
link |
I'm a big fan of his writing.
link |
He's always been a little different in person.
link |
Like I actually, he signed one of my books.
link |
I met him in person.
link |
He's just, he's got a very abrasive personality.
link |
He's kind of known for it.
link |
It's not, I don't think I'm passing any judgment here.
link |
He sort of embraces it.
link |
But he had written the forward
link |
to a really important book in Bitcoin
link |
called the Bitcoin Standard for safety in a moose.
link |
And then I think they had a little Twitter beef
link |
because safety is very much against COVID mask
link |
and state intervention,
link |
whereas Taleb's on the other side of the fence.
link |
And so, and then after that beef,
link |
Taleb came out against Bitcoiners saying,
link |
oh, Bitcoiners are crazy and wrong.
link |
I think the great mask debate of the 2020
link |
will probably be the thing
link |
that ultimately leads to World War III.
link |
I've been very surprised how tense, how much like division
link |
this one little arguably silly thing has led to.
link |
I think a lot of people sort of project their,
link |
like, it's almost like not wearing a mask
link |
is a statement of sovereignty, of freedom,
link |
of like saying fuck you to the man,
link |
the government, the centralized power,
link |
or the dishonesty or the, in the scientific community,
link |
all those kinds of things.
link |
And then wearing a mask is a sort of kind of signaling
link |
of various kind of social aspects.
link |
I'm not paying attention to it.
link |
I actually tuned out.
link |
I was part of a group of scientists
link |
that were looking into like, do masks work?
link |
This very interesting question.
link |
To me, it was an interesting question.
link |
I sort of roll in to ask that very interesting question
link |
because I think it is an interesting scientific question.
link |
But then I quickly realized that just as I was doing this,
link |
like scientific exploration of this very interesting question
link |
about Viron particles, like what kind of things,
link |
like from a scientific perspective,
link |
how do we prevent the spread of a pandemic?
link |
Forget COVID, any pandemic, super deadly or not deadly.
link |
Like there's tools, there's testing, there's masks,
link |
there's all these tools, how well do they work?
link |
And then I realized, you know, in April or so,
link |
it became a tool of politics, a tool of philosophy.
link |
And that's when I sort of pulled out.
link |
So it's fascinating.
link |
I think it's a canvas on which people project
link |
their emotions and I guess Tillam got caught up
link |
in that kind of, so there's nothing fundamental,
link |
I suppose, to their disagreement.
link |
Not that I'm aware of, but he is, you know,
link |
he's written some about in his books,
link |
the problem with centralization.
link |
I mean, a lot of his writing addresses that
link |
and he actually points to, I think Switzerland
link |
is the best government in the world
link |
because it's decentralized.
link |
So there's that, I don't think he has any,
link |
I'm not to speak for him, but I don't think he's voiced
link |
any specific critiques on Bitcoin per se.
link |
Could be wrong about that.
link |
It's just maybe his flavorful language
link |
and the way he likes to communicate.
link |
And the other theory is that maybe he's playing 4D chess
link |
and having a Twitter boating accident, you know.
link |
So I don't believe in Bitcoin, I've sold all my Bitcoin.
link |
Sorry, the boating accident in Bitcoin is this,
link |
I guess it's proverbial by this point,
link |
where it's the way you lose your Bitcoin.
link |
So if someone comes after you and says,
link |
hey, you know, whether it's a government
link |
or an individual's coming after you saying,
link |
give me all your Bitcoin or pay these taxes in Bitcoin,
link |
you go, oh, I had a boating accident and lost them all.
link |
But back to the fundamental nature of space time.
link |
Let me ask you, because we're kind of left at,
link |
I'd like to go back to this idea of,
link |
that you said that everything we think, say,
link |
or do occurs within the bounds of space time.
link |
So first of all, maybe you can comment on
link |
what do you mean in this context about space time,
link |
but also about the nature of truth.
link |
Like how much of all of this is knowable?
link |
How much of this is accessible to us humans?
link |
How much uncertainty, like what we're talking about,
link |
is there in the world?
link |
Are you, do you fall in a place
link |
where we can reason deeply about this world
link |
and it's knowable, or is it mostly chaos
link |
and we're just holding on for dear life?
link |
Yeah, I think I said that all action occurs
link |
within the bounds of space time.
link |
The other thing, everything we say, do, or make,
link |
the other thing is that everything we say, do, or make
link |
starts out as an idea.
link |
So there's this concept of universal Darwinism,
link |
which basically applies Darwinian principles,
link |
but outside of the biological sphere.
link |
So we could say that this kind of gets into
link |
Richard Dawkins memetics, that even ideas are competing,
link |
reproducing, recombining.
link |
That idea is so powerful, by the way.
link |
I don't think it's been understood fully.
link |
I think in the digital, in the 21st century,
link |
in the digital world, from my perspective
link |
in artificial intelligence,
link |
there's yet to be some profound things
link |
to be discovered about this whole construct.
link |
Agreed completely.
link |
It's been called an acid, actually,
link |
in that it strips away all of the noninformational
link |
components of something, just strips it down
link |
to its bare bones.
link |
I have a quote in here somewhere about that, but.
link |
I'm sorry, which is called an acid?
link |
The universal Darwinism.
link |
Darwinism applied broadly, outside of the.
link |
Applied broadly, and I'll condition all of this
link |
by saying that a lot, most of my thinking
link |
is shaped by a book I read recently
link |
called The Case Against Reality,
link |
which introduced me to this concept,
link |
but it tied into Darwinism that I've used
link |
more broadly in the past, looking at things
link |
like money and economics.
link |
So the book, The Case Against Reality,
link |
by Donald Hoffman, he has a quote in the book
link |
that describes universal Darwinism.
link |
It says, quote, universal Darwinism can,
link |
without risk of refuting itself,
link |
address our key question.
link |
Does natural selection favor true perceptions?
link |
If the answer happens to be no,
link |
then it hasn't shot itself in the foot.
link |
The uncanny power of universal Darwinism
link |
has been likened by the philosopher Dan Dennett
link |
to a universal acid.
link |
And Dan Dennett says, quote, there is no denying
link |
at this point that Darwin's idea is a universal solvent,
link |
capable of cutting right to the heart
link |
of everything in sight.
link |
The question is, what does it leave behind?
link |
I have tried to show that once it passes through everything,
link |
we are left with stronger, sounder versions
link |
of our most important ideas.
link |
Some of the traditional details perish,
link |
and some of these are losses to be regretted,
link |
but good riddance to the rest of them.
link |
What remains is more than enough to build on, unquote.
link |
So the way I would interpret that is that life itself,
link |
I've come to view life as information propagating
link |
through flesh, and that we are,
link |
I guess DNA is a quadratic code.
link |
I think it's four letters, maybe,
link |
versus a binary, zeros and ones.
link |
And we are ideas, we are strategies competing
link |
with each other, and nature is that which selects.
link |
It's what selects the winning ideas,
link |
the ones that are most fit
link |
to environmental conditions, frankly.
link |
You know, talking about sovereignty and individualism,
link |
there might need to be some rethinking here
link |
about what is actually the basic individual entity
link |
that is to be sovereign.
link |
Like maybe our biological meat vehicles
link |
were like way overly attached to them.
link |
Like maybe, especially with genetics
link |
and all those kinds of things,
link |
or artificial intelligence, or living more and more
link |
in virtual worlds will become detached
link |
from that kind of idea.
link |
So for example, if I can clone you,
link |
you know, make one million robbers,
link |
and, you know, but you'll all have the same idea,
link |
what is your real value as the,
link |
like I could just shoot you,
link |
and there'll still be 999 of you,
link |
but the idea is the important thing,
link |
the things you believe, so.
link |
I would argue that I don't know,
link |
even if you clone someone perfectly,
link |
I don't think you can reproduce the individual themselves,
link |
because we're all a product of nature and nurture, right?
link |
So my particular concourse of experiences,
link |
the path dependence that I represent cannot be replicated,
link |
nor can anyone's for that matter.
link |
Well, that's a hypothesis, so.
link |
That's of course a human meat bag would say.
link |
Like desperate trying to preserve himself.
link |
You know, I think it reduces
link |
to some fundamental questions about what is consciousness,
link |
and whether that can be cloned.
link |
All those kind of, you know,
link |
it gets to the core of what it is to be human.
link |
What are the things that make you particularly you?
link |
Yeah, I think it would assume
link |
kind of a materialist viewpoint on reality,
link |
and that if you could reproduce every atom of an individual
link |
that you would have their experience encapsulated in that.
link |
And, you know, Hoffman's, which his book is very radical,
link |
he argues that space and time is not an objective reality,
link |
it's a biological interface.
link |
So we are scanning our environment for fitness payoffs,
link |
and this space and time is the rendering
link |
specific to human beings
link |
that allows us to navigate reality effectively.
link |
So the further argument would be
link |
that we all have pretty similar interfaces,
link |
but they're all slightly different too,
link |
because we're all, you know, adapting in different ways,
link |
and that different animals have their own unique interfaces.
link |
So we have a certain amount of photoreceptors in our eye,
link |
whereas I think the number is three, might be five,
link |
or something like the mantis shrimp has like seven or nine.
link |
and we only see one 10 trillionth of the light spectrum.
link |
So talk about a tiny fraction.
link |
I mean, one 10 trillionth is a very minuscule number,
link |
and that makes up all of the light
link |
that we can interpret with our eyes.
link |
But something like a mantis shrimp
link |
could see, you know, much more of that.
link |
So I think there's this, we're very conditioned
link |
to have a fully materialist viewpoint on reality today,
link |
where we think, you know,
link |
the atomic clockwork kind of universe.
link |
But I think there's, I don't think that's true exactly.
link |
And another school that goes into that
link |
is actually Austrian economics,
link |
where we could say that, you know,
link |
we mentioned earlier that an asset is not property.
link |
It's actually based on the relationship
link |
between the individual and the property.
link |
There's this whole realm of relevance associated with,
link |
we're all moving through life
link |
in the course of a goal directed action.
link |
So when we walk across a room, I go from A to B,
link |
it's because I valued B more than A.
link |
So value is inseparable from human action.
link |
We have a rank ordered value system in our mind,
link |
each of us, and we're constantly taking action
link |
in accordance with those rank values.
link |
Anything that accelerates us on the course
link |
of our goal directed action towards our goal is useful.
link |
Anything that impedes us, or we could say is valuable,
link |
anything that impedes us is actually obstructing to value.
link |
And anything that's irrelevant is just valueless.
link |
So this table that we're using right now,
link |
like this is an accessory to UNI
link |
because it's holding this paper
link |
that's holding the information
link |
that's guiding our conversation.
link |
But we could pay someone $100 to jump over this table.
link |
And this table could simultaneously be an accessory to UNI
link |
and an obstacle to someone else.
link |
So it's this domain, this silent contention of willpower
link |
and agendas occurring across the face of the earth
link |
that is what Austrian economics really looks at.
link |
It's the realm of human action, as they call it.
link |
It's called praxeology.
link |
So it's a non materialist viewpoint on reality
link |
and that things, we think in terms of matter being reality,
link |
but it's often more so in the sphere of human action,
link |
what matters, that is reality.
link |
It's the relevance of a thing
link |
to the course of one's goal directed action.
link |
And that's ultimately exists in the space of ideas.
link |
Not in the space of physical matter.
link |
And just to jump back to this line here,
link |
I think his fundamental line here is the question is,
link |
talking about universal Darwinism as an asset,
link |
what does it leave behind?
link |
I've tried to show that once it passes through everything,
link |
we're left with stronger, sounder versions
link |
of our most useful ideas.
link |
That's the key point to me.
link |
And that ideas and information, so far as we can tell,
link |
are the most fundamental substrate of reality.
link |
And information itself, back to entropy,
link |
information is the resolution of entropy.
link |
That's what the bit is, right?
link |
It's a one or a zero.
link |
Whatever reduces your entropy by half is a bit.
link |
And we measure information in bits.
link |
People don't have ideas, ideas have people.
link |
Honestly, it's a really profound idea
link |
or a statement about reality, a reframing of reality.
link |
If we're actually being deeply honest about it,
link |
it's quite painful.
link |
I do appreciate that you defended
link |
your biological meatbag earlier,
link |
but it seems like ideas are the things that have power.
link |
That me, Lex, for example, is worthless.
link |
And relative to the ideas that used my brain
link |
for a bit of a time.
link |
But so far as we know, only human beings
link |
can generate and share ideas.
link |
So you can't say Lex is worthless.
link |
Like you are the node of the idea sphere.
link |
I'm the newest fear.
link |
From a Bitcoin perspective, I'm like, I'm mining.
link |
I'm solving the cryptographic problem and generate.
link |
In that sense, I'm a useful node.
link |
Yeah, you're competing to solve the puzzle of entropy,
link |
And when you do solve it, it benefits the entire network.
link |
But I guess from my perspective,
link |
just because just working in AI,
link |
I'm looking at the longterm vision.
link |
I see us humans and AI systems as really the same
link |
and AI systems ultimately as something
link |
that supersedes humans.
link |
So what is intelligence?
link |
So in the context of our current discussion,
link |
I think intelligence is very closely linked
link |
to this notion of ideas.
link |
And it's the ability to generate ideas,
link |
to mold ideas, to compress seeming chaos
link |
into some model, into some theory
link |
that efficiently compresses the chaos
link |
in a way where you can then integrate it with other ideas
link |
and they can play and all those kinds of things.
link |
So in that sense, it's the turning chaos into order.
link |
It's the molding of ideas such that our human brains
link |
And just from my perspective,
link |
I don't see any reason why that can not be algorithmatized,
link |
converted into computational systems.
link |
Scary or potentially really promising, right?
link |
It's kind of the case of all novelty.
link |
It's terrifying as much as it is promising.
link |
That's why you're pursuing it so heavily.
link |
I would maybe take it a step further
link |
and say that intelligence
link |
in maybe its most simplistic form is error correction.
link |
So we, humans have wants.
link |
Again, we're constantly expressing our value through action.
link |
There's no other way to express it by the way.
link |
It's whatever you choose to do in any moment,
link |
you are expressing the values you hold
link |
in your mind and your heart.
link |
So as we move from less valued A to more valued B,
link |
entropy happens, uncertainty happens, we fall off course.
link |
And it is intelligence that enables us
link |
to render information from that experience
link |
and error correct, right?
link |
So that we can move slightly,
link |
shift our trajectory slightly more towards B
link |
that we're trying to move towards.
link |
So I think that there's something there
link |
that I don't know that we can make synthetically.
link |
And that if we define intelligence as error correction,
link |
it's like error correction to what?
link |
It's error correction towards what we find is valuable.
link |
So we're trying to satisfy human wants.
link |
Might not just be our own, could be others as well.
link |
If I'm an entrepreneur,
link |
I'm trying to solve the wants of others, not just myself.
link |
And I'm trying to error correct myself towards that goal,
link |
using intelligence and processing environmental feedback
link |
through intelligence to error correct.
link |
So I don't know how,
link |
if you eliminate the human element completely,
link |
who's doing the wanting, right?
link |
Where does value come from?
link |
I know the machine learning people who are listening
link |
are saying that's exactly what machine learning is,
link |
which is error correction
link |
because you have a loss function, objective function
link |
that measures how wrong your thing is
link |
and you wanna make it less wrong next time.
link |
That's the whole process of machine learning.
link |
But you're saying what humans are able to do
link |
is in a world where there's no maybe objective values,
link |
absolute values, you're generating that very loss function,
link |
that objective function that measures the error
link |
comes from the human mind.
link |
Some aliens might disagree with you
link |
because they might have a different objective function.
link |
Obviously, the purpose comes from consciousness, I think.
link |
And without purpose, there's not error correction.
link |
Yeah, I mean, this is again, a hypothesis.
link |
Like where does purpose come from?
link |
It seems to come from consciousness, you're right.
link |
That's where suffering comes from
link |
and you want to lessen suffering.
link |
That's where pleasure comes from.
link |
It seems like it's consciousness.
link |
Maybe there's something to this biological meat bag.
link |
So to take it one layer deeper on this
link |
and the reason I like this book so much,
link |
again, The Case Against Reality.
link |
So he's making the case that space and time
link |
are not fundamental.
link |
Which I started my intellectual explorations in physics,
link |
actually astrophysics.
link |
So for the longest time, even the way I describe money
link |
as I talk about space and time, so that blew my mind.
link |
But this dovetailed nicely with another book called Lila.
link |
The author is Robert Persig.
link |
So he wrote Zen and the Art of Motorcycle Maintenance,
link |
which is a very popular book.
link |
20 years later, he wrote Lila, which no one's heard of,
link |
And he basically says he was wrong about his first book.
link |
And he lays out this entire other metaphysics of quality,
link |
So it's the metaphysics, I think it's metaphysics of quality.
link |
But his supposition is that it's not physical reality
link |
that's fundamental.
link |
It's not informational information that's fundamental,
link |
So he actually, and it's a beautiful book,
link |
I highly recommend it.
link |
He essentially is refuting causality itself.
link |
We think A causes B.
link |
This book makes the case that B values precondition A,
link |
so that we are actually creating our future
link |
through our value systems.
link |
And this goes back to something,
link |
I think Solzhenitsyn said this,
link |
that the line between good and evil
link |
runs down the heart of every man.
link |
So it's as if our moral decisions
link |
are actually what's creating the outcomes
link |
in reality over time.
link |
And then that gets into all the wisdom traditions
link |
related to religion,
link |
where it's always talking about loving thy neighbor
link |
and loving God and all of these other things
link |
that are good morally to create the best outcomes.
link |
So values are fundamental.
link |
Value is fundamental.
link |
Oh boy, yeah, that's interesting.
link |
It does feel like physics is not capturing something.
link |
You know, there's some people, panpsychists argue
link |
that consciousness might be one of the fundamental
link |
properties of nature,
link |
like from which emerges everything we see.
link |
So that could be just other words
link |
for this same notion of value.
link |
And then the basic laws of physics
link |
are not capturing that currently.
link |
So maybe humans, in order to understand
link |
from where humans came from,
link |
we have to understand these other properties of nature,
link |
which are yet to be discovered at the physics level.
link |
And it's, we contend with that underlying nature,
link |
whatever it is, with the logos, right?
link |
So we're looking at uncategorized nature
link |
and then we're assigning a word to it.
link |
So we're slicing up chaos into little boxes of order.
link |
And then we're establishing this social consensus
link |
as to those labels, which we'd call words.
link |
And we're using that to communicate.
link |
And when we communicate,
link |
we can start to build these other things.
link |
This is like the Yuval Harari imagined orders.
link |
So we can create these useful fictions, right?
link |
Whether it's the nation state or human rights or money.
link |
And that allows us to cooperate flexibly in large numbers
link |
so that we can better contend with reality.
link |
We can produce more complicated things.
link |
We can enlarge that bubble of civilization against entropy.
link |
And that's what capitalism is all about.
link |
It's about further specializing knowledge,
link |
further enriching mankind's treasury of knowledge
link |
But to do that, the communication media that we're using,
link |
the words have to have stable meaning.
link |
The money needs to have value that's dependable, right?
link |
It needs to be something that's, it's not dictated
link |
It's reached by consensus of the entire group.
link |
That's how, so you could think it's like optimizing
link |
for error correction again,
link |
where a free market would be harnessing the intelligence
link |
of all market actors and a central planning
link |
or essentially planned market would be harnessing
link |
just the intelligence of a small group of bureaucrats.
link |
And it's not obvious how to achieve this kind
link |
of consensus mechanism.
link |
I mean, there's obviously, we'll talk about sort of Bitcoin
link |
Ultimately, the idea of Bitcoin is connecting it to physics.
link |
So like, you can trust that physical matter won't change.
link |
But, you know, there could be other ideas that we get.
link |
Maybe physics could be changed.
link |
If Eric Weinstein has anything to say about it.
link |
Like it's, you know, we right now believe
link |
that physics can't be changed.
link |
The physical matter of the world, but maybe it can
link |
in a way that we're totally not understanding.
link |
You mentioned sort of reality
link |
from Donald Hoffman's perspective.
link |
Like if we don't have even close to direct access
link |
to the fabric of reality, maybe we're living in a world
link |
that's very like many dimensions,
link |
that the notions of space and time is just like a silly,
link |
useful construct that's not at all connected.
link |
You're starting to look at like Stephen Wolframs.
link |
I don't know if you're familiar with this view
link |
of the world that it's like hypergraphs underneath it all.
link |
Like these mathematical structures
link |
from which everything emerges.
link |
Like they're like many, many, many orders of magnitude,
link |
smaller than what we think of.
link |
They're even smaller than like strings and string theory.
link |
So like those are the basic mathematical objects
link |
from which it emerges.
link |
I don't, you know,
link |
I think that's an interesting philosophical framework.
link |
It's also, people should check out a cool way to play
link |
with beautiful hypergraph mathematical structures.
link |
So he has, I don't know if you know who Stephen Wolfram is,
link |
but he created Wolfram Alpha and all these tools
link |
that you can actually visualize and play with.
link |
So you can play with physics in a visual way,
link |
which, or at least discrete mathematics,
link |
which I think is incredible.
link |
He doesn't get enough love.
link |
One of the reasons he, I think doesn't get enough love
link |
is because of this little quirk of human nature,
link |
And he sometimes frustrates a few folks
link |
because he's very, let's say proud of his work.
link |
But it's interesting to think about a world
link |
where we don't have direct access to reality,
link |
as Hoffman argues.
link |
And maybe, I don't know if you can comment.
link |
I don't know if you're familiar with Ayn Rand's work
link |
and her whole philosophy of objectivism
link |
or her whole contention is that, you know,
link |
we do have access.
link |
I don't want to misstate it,
link |
but at least she would claim
link |
that it's not useful,
link |
or I think she would probably say it's not correct
link |
to argue that we don't have access to reality.
link |
We have, hence, objectivism.
link |
We have direct access to reality.
link |
That's the only thing we can reason about.
link |
And the only way to live life morally
link |
is to reason through everything,
link |
starting with the axioms of reality,
link |
which we do have direct access to.
link |
Do you have thoughts about her work?
link |
I am slightly ashamed to say I have not read Ayn Rand yet.
link |
So she is high on my list
link |
and she's been recommended a number of times.
link |
So I don't know a lot specifically
link |
about her philosophy or objectivism,
link |
but to me, it resonates closely
link |
with what the American pragmatist commented on truth.
link |
And they distinguished what you could say
link |
is absolute truth, which is at the bottom of reality,
link |
whether it's Mr. Wolfram's mathematical formulas or value,
link |
whatever it may be, it's something ineffable,
link |
something beyond the reach of epistemology, perhaps even.
link |
And maybe that's why religion just sort of points to it.
link |
It's trying to use, I think Joseph Campbell said something
link |
like religion is using stories
link |
to point towards the same transcendental mystery
link |
we all experience but cannot articulate.
link |
So something like the artist,
link |
the artist uses lies to point to the truth,
link |
something like that, that kind of thing.
link |
That's really good.
link |
But the American pragmatist said that,
link |
because at the end of the day, this is all about,
link |
when we say truth, we need something
link |
that is close to social consensus
link |
and is not shakable by political action.
link |
So that's what physics and mathematics are.
link |
It's an unshakable point of reference,
link |
I guess you might say.
link |
So the American pragmatist defined truth
link |
as the end of inquiry.
link |
And in markets, we could say that the market itself
link |
is a forum that generates truth.
link |
We call this pragmatic truth
link |
to separate pure objective truth
link |
that we can't even talk about without polluting it
link |
versus pragmatic truth,
link |
which is something that's useful.
link |
So the example here would be,
link |
if I give you a map and you're trying to go
link |
from your house to the local brisket restaurant,
link |
and the map gets you from your house
link |
to the brisket restaurant,
link |
is that because the map is true
link |
or is that because the map is useful?
link |
They're very hard to disentangle
link |
when you're just looking at it pragmatically.
link |
And in markets, markets, I argue,
link |
generate three forms of pragmatic truth.
link |
So this is the collective subjective demand
link |
and purchasing power of humanity
link |
running up against the objective supply of capital
link |
and resources in the marketplace.
link |
So there's demand overlaid on supply.
link |
The result of that is the price.
link |
So that is the most truthful exchange ratio,
link |
which is the closest approximation to the value
link |
of any good in the marketplace.
link |
So it gives us a data point on which we can operate.
link |
It's compressing all known market realities
link |
down into a single actionable number.
link |
You know, based on the price of bread or copper,
link |
whether you wanna buy more of it,
link |
you wanna abstain from buying it,
link |
or maybe you wanna try and find substitutes.
link |
And you can think of that price signal,
link |
it's like an economic nerve signal.
link |
It's coordinating human action across time.
link |
So if we're one socioeconomic superorganism or collective,
link |
that the price signal is the nerve.
link |
And that's the first form of pragmatic truth
link |
that markets generate.
link |
The second form would be tools and innovations themselves.
link |
So entrepreneurs are experimenting across time.
link |
They're trying to satisfy the wants of consumers.
link |
Consumers are sovereign in the marketplace.
link |
Whatever the consumer wants, the consumer gets, right?
link |
I'm trying to satisfy that.
link |
I'm trying to do it at a profit.
link |
So I'm trying to take viewing the existing price signals
link |
of goods in the marketplace.
link |
I'm trying to assemble those in a way
link |
at a cost lower than the final solution
link |
I'm delivering to my customer.
link |
I'm selling it at a price higher
link |
than the productive factors I combined to create it.
link |
And in that iterative process,
link |
we're constantly discovering new and better ways
link |
of solving problems or satisfying the wants.
link |
So we could say, to go out and dig a hole, right?
link |
Someone wants a hole dug,
link |
that a shovel is gonna let you do it much faster per hour
link |
than you would with your bare hands.
link |
So what is the pragmatic truth of digging holes?
link |
It's a shovel, right?
link |
It's the best way we know how to solve
link |
any particular problem based on
link |
the existing treasury of knowledge.
link |
So every tool, again, we're back to ideas being fundamental.
link |
The shovel itself is just a knowledge structure.
link |
We've figured out a way to create this particular implement
link |
and then we've indexed the raw materials
link |
we found in nature to this knowledge structure
link |
to create a shovel,
link |
which allows us to better satisfy human wants
link |
faster, cheaper, better, effectively.
link |
I'm trying to generalize,
link |
you're blowing my mind a little bit here.
link |
I'm trying to generalize the idea of tool
link |
to how to think about it.
link |
Cause I keep just, when you say tool,
link |
I keep imagining different tools,
link |
like specific instantiations of a tool.
link |
I'm trying to see, so the price is a pragmatic truth
link |
that's communicating value in this network.
link |
Subjective demands against objective supply.
link |
So it's an economic democracy.
link |
So that's the demand supply.
link |
And then the tools are the ways of extracting
link |
or solving problems is the more general kind of thing.
link |
Or satisfying wants.
link |
So wants are somehow, that's part of the supply
link |
And wants are back to value, right?
link |
Cause everything someone wants,
link |
they're expressing their value.
link |
So the shovel is a pragmatic truth.
link |
The shovel is truth.
link |
It feels like a good book title.
link |
So what other pragma, what is it?
link |
And then the third one I would argue is virtue actually.
link |
And another way to maybe think about this
link |
is competitive competency,
link |
but it's also cooperative competency.
link |
So we're learning over time what characteristics,
link |
what patterns of action, what mindsets,
link |
what mental tools, what heuristics are most useful
link |
to satisfying customer wants.
link |
So I think that becomes over time,
link |
becomes sharpened into virtue, right?
link |
Like we know it's best to be honest
link |
because if you lie, it's very energy inefficient, right?
link |
You're creating this little fork of reality.
link |
And then if someone else asks you about that lie again,
link |
you have to put another layer of lies on top of it.
link |
Where if you just tell the truth,
link |
you're just recollecting what happened.
link |
And so that sort of keeps,
link |
again, when we're talking about delaying volatility, right?
link |
If you lie, you're delaying short term volatility,
link |
but you're increasing longterm volatility.
link |
What about murder?
link |
I haven't been able to figure out why murder is bad
link |
because I just keep wanting to murder people.
link |
And I've murdered many.
link |
She's the one for that.
link |
Well, that's why I'm trying to get an interview
link |
with Vladimir Putin.
link |
So that's fascinating, virtue in this market
link |
with the supplies and demands, and there's the tools,
link |
which is also a pragmatic truth, and there's virtue.
link |
It's a pragmatic truth.
link |
Yeah, and if we interfere with that free market process,
link |
again, if we overstep, which this maybe ties into murder,
link |
if you start to be coercive against life,
link |
liberty or property,
link |
so if you're forcibly taking someone's life,
link |
you're breaking down the trust in that market
link |
that generates these pragmatic truths.
link |
If you forcibly infringe on someone's liberty, right?
link |
For any reason other than them originally breaking
link |
or infringing upon life, liberty or property,
link |
then that's not gonna work either.
link |
And then if you violate private property rights,
link |
if you steal property from others,
link |
you're breaking down the trust
link |
that the intersubjective fabric of money and markets
link |
and the rule of law, all of these useful fictions
link |
are meant to preserve,
link |
you're corrupting it and breaking it down.
link |
What's kind of interesting to think about the market
link |
as helping evolve the virtues.
link |
It's sharpened into virtues.
link |
And then these virtues can then go
link |
into motivational posters,
link |
or like in books that we all agree on,
link |
and then eventually take for granted
link |
as if they were somehow fundamental to human nature,
link |
but they're not perhaps fundamental,
link |
they're just pragmatic truths.
link |
Yeah, another way to consider competition itself
link |
is that it is a discovery process.
link |
So, you know, entrepreneurs are competing with one another
link |
and they're trying to best satisfy consumer wants
link |
at the lowest possible price.
link |
So they're placing bets of time, energy and capital
link |
on themselves, on their idea, their business plan.
link |
And then the market decides, right?
link |
The consensus of market actors decide which one was better.
link |
One lives, one dies.
link |
So competition itself is helping us get closer to truth,
link |
to pragmatic truth.
link |
So we're discovering what is the right price for this asset.
link |
And that price, by the way, it's derived,
link |
again, in the sense of data compression.
link |
Everyone in the world can see that price.
link |
Everyone in the world can then put their skin in the game
link |
by choosing to buy or sell or short or go long
link |
or do any number of financial actions on that price.
link |
And that information is then propagated back out
link |
So it's this feedback loop between market actor and price
link |
that makes it so useful.
link |
And that's what carries us,
link |
so it's these collisions of interest that carry us,
link |
it removes the unuseful aspects of ourselves
link |
or of our tools or of a price
link |
and reveals pragmatic truth to us.
link |
Can you play my therapist for a second?
link |
And if we talk about creative destruction,
link |
I think, not Bukowski,
link |
Hunter S. Thompson has a quote,
link |
something like, for all instances of beauty,
link |
many souls must be trampled.
link |
But there does seem to be an aspect of competition
link |
that destroys, you were talking about entrepreneurs
link |
sort of on the outside of the circle of order,
link |
striving to make sense, to compress volatility
link |
of the chaos of the universe.
link |
Is there some way to protect a little bit
link |
against the pain of that destruction
link |
or that creative destruction,
link |
that entrepreneur screaming on fire
link |
as he enlightens the rest of us,
link |
is there some role for us humans together
link |
in the togetherness of it?
link |
Also government, but any kind of collectives
link |
in helping that entrepreneur who's on fire
link |
maybe after a few minutes to spray him with some water
link |
and put him out of his misery?
link |
I would say that pain is the inarguable basis of being.
link |
Pain is, no matter how you try to explain it away
link |
or it's not something you can rationalize away.
link |
No one, I think ever,
link |
someone may want to cut themselves to have an endorphin high
link |
but no one wants to suffer, we'd say, right?
link |
So pain in that sense,
link |
it is what we're constantly trying to deal with
link |
and to move away from or create buffers between us
link |
and potential pain or potential uncertainty.
link |
And that pain is information.
link |
When we experience something
link |
that is misfit to the outcome we desired,
link |
that pain is what puts us,
link |
it encourages us to change our trajectory
link |
to get back on course towards our valued aim.
link |
So as far as, you need entrepreneurs that are exploring,
link |
and you're trying to do something new,
link |
if you're a pioneer of any kind,
link |
you are courageously facing pain.
link |
You're willfully confronting it.
link |
So I don't think it's avoidable in that sense.
link |
It's not like we can have pain free economic growth
link |
like the central bank would maybe have us lend to believe
link |
that we can just run these experiments
link |
and when they fail,
link |
we'll just paper over all the losses and continue.
link |
Or you're just delaying and exacerbating
link |
the inevitable volatility back to reality.
link |
But what I would say is that capitalism,
link |
because we're building,
link |
we're increasing the capital stock of the world,
link |
which again, capital is the mitigation of risk.
link |
So we're reducing the overall risk of existence
link |
by accumulating more capital in the world.
link |
And that's what protects that entrepreneur
link |
that's deciding, hey, I saved up a million bucks.
link |
I'm gonna go try this business idea.
link |
I'm gonna put all my money on the line.
link |
And if he goes up in flames,
link |
then his cost of living when he comes back to reality
link |
and he's starting over from zero,
link |
his cost of living is substantially lower
link |
starting over from zero than it was in the past.
link |
So then he would be out in the wilderness on his own.
link |
So it's the accumulation of capital stock
link |
is the buffer against uncertainty for everyone.
link |
And it gives you actually more potential
link |
to go out and experiment,
link |
to go out and confront the chaos of nature
link |
because you are better healed effectively.
link |
So I think we're speaking
link |
in sort of idealistic terms about the power of capitals
link |
and when it works well.
link |
Is there any aspects that you think
link |
that don't work well in a free market
link |
in all the basic pragmatic truths
link |
that we were talking about?
link |
Is there ways it can go wrong?
link |
So I would first argue that we have never seen
link |
an actual purely free market.
link |
Closest example would be kind of geopolitically
link |
we have a free market
link |
and that governments are not necessarily governed
link |
but they are premised on governing large groups
link |
So that's not, doesn't exactly.
link |
You mean between governments?
link |
See, but isn't there still,
link |
so a free market, maybe you can correct me,
link |
is the free market still grounded in the ideas
link |
of property rights and all those kinds of things, right?
link |
So governments tend to also sometimes
link |
be violent towards each other.
link |
So they don't respect all the basic aspects of capitalism.
link |
So maybe another way to look at this is that
link |
gold is the original governor of government actually.
link |
And this is the reason governments have abused
link |
and gone off of the gold standard.
link |
So historically, if you are a bank or a nation state
link |
and you produce more currency
link |
than your gold reserves can justify,
link |
then gold will flow out of your bank
link |
or out of your country.
link |
So there's this natural check via the money
link |
that via capitalistic money, which is gold, right?
link |
Gold was selected by the free market.
link |
It's not decreed by government.
link |
It provided this natural check on government action.
link |
So my, I guess to get back to the original question is
link |
we've never seen a pure free market
link |
because money has always been monopolized
link |
and coerced, frankly.
link |
So to try and answer what goes wrong with a free market
link |
is really difficult because we've never actually seen it.
link |
And I would define free market is one
link |
in which government only protects life, liberty and property.
link |
And so that has a very minimal role in society.
link |
Again, just as network security
link |
for the economic trade network.
link |
And anything that, any government function that goes beyond
link |
those three core functions, which by the way,
link |
are pretty much the core tenants of morality as well.
link |
So government's just really intended to preserve,
link |
you know, natural law, if you will.
link |
Anything that goes beyond that is,
link |
moves us closer to an unfree market.
link |
So every regulation, every act of coercion
link |
is actually a gradation closer to a purely unfree market,
link |
which would be a monopoly.
link |
So in terms of what I guess theoretically we could say
link |
goes wrong in the free market is that it's volatile.
link |
It's trading off, it's accepting short term volatility
link |
in exchange for less long run volatility.
link |
And this tends to be the way of nature, by the way.
link |
So if we look at something like there's a region
link |
in North America called Baja, California,
link |
and it runs into the United States
link |
and it runs down into Mexico as well.
link |
So the same topology, but two different jurisdictions.
link |
In the US, we very heavily manage forest fires.
link |
We're trying to manage nature effectively.
link |
Whereas in Mexico is much more unregulated.
link |
It just, when wildfires spring up, they let them burn off.
link |
North America, when wildfires spring up,
link |
we're actually extinguishing them.
link |
So we're constantly trying to dampen
link |
the short run volatility of these small brush fires.
link |
Whereas in Mexico, we just let them burn.
link |
We let nature do its thing.
link |
The consequence of this is that the wildfires
link |
still occur eventually, but they're much larger
link |
and much more devastating in North America
link |
where human intervention has occurred
link |
because it's dampening nature's natural corrective mechanism
link |
of clearing this underbrush with these more frequent
link |
and smaller fires at the cost of much larger fires.
link |
So again, we're delaying short term volatility
link |
and exacerbating long run volatility.
link |
And in Mexico, it's the opposite, right?
link |
Just these wildfires burn much smaller
link |
and more continuously over time.
link |
The further effect of that in North America
link |
is that the fires can get so big and so hot
link |
that it burns away the top soil.
link |
So it actually destroys the fertility of the soil itself.
link |
So the point of this is that human intervention, right?
link |
Even the intention behind North American authorities
link |
managing that forest fire is to create less destruction.
link |
That is the intention,
link |
but the intention is divergent from the outcome.
link |
So in Taliban speak, he would say that human intervention
link |
moves us from mediocre stan into extremist stan.
link |
So mediocre stan would be something much more like nature
link |
where for instance, you can't double your body weight
link |
in a day, probably can't even do it in a year, right?
link |
But in extremist stan,
link |
which is something much more information based,
link |
you can double or send your net worth to zero
link |
in a single trade in a single moment, right?
link |
So when we try and intervene
link |
with natural biological systems
link |
that have these feedback loops,
link |
we actually start to push the system more
link |
to behave more like an extremist stan system
link |
that has less short run volatility,
link |
but more extreme long run volatility.
link |
So, but the question is,
link |
where you look at capitalism or communism, for example,
link |
and by the way, yes,
link |
I will talk to somebody who's a Marxist or a communist,
link |
like Richard Wolff is a pretty eloquent defender
link |
of these ideas because it's always good
link |
to really understand ideas
link |
as opposed to just reject them offhand.
link |
When you look at the system of capitalism
link |
or the system of communism,
link |
there's ideals and a lot of people argue
link |
in this perfect form would actually be good for the world.
link |
The question is how resilient are they
link |
to the corruption of human nature?
link |
And I mean, you're saying that there's not a,
link |
there's never been a free market.
link |
It's a very true statement.
link |
The question is how resilient is capitalism
link |
or whatever implementations of capitalism
link |
we had up to this point to human nature
link |
where one person will become successful
link |
through legitimate means
link |
and starts to try to manipulate the system
link |
that takes it away from a free market
link |
or takes it away from the things
link |
that gave them the riches in the first place.
link |
And then try to, through corruption, get more,
link |
get this, the thing you said, the lazy human ways.
link |
Now try to figure out how to get something for nothing.
link |
So how resilient do you think is capitalism to that?
link |
Well, the best implementation we've had of it
link |
really has been the United States, I think,
link |
up until this point.
link |
But it's still the central banking itself.
link |
This was in the 1848 Manifesto to the Communist Party.
link |
Measure number five reads an exclusive state monopoly
link |
and centralized control over cash and credit.
link |
So the central bank is a Marxist or communist institution.
link |
It is antithetical to the free market principles
link |
on which the United States was founded.
link |
And indeed, the United States resisted
link |
the implementation of a central bank.
link |
I think it was Andrew Jackson.
link |
I know there was the first national bank,
link |
the second national bank were both disbanded.
link |
And then Andrew Jackson, which is my favorite Tennessean,
link |
he has some famous quotes about routing out the bankers
link |
like a den of vipers.
link |
I think he punched one of the central bankers in the face.
link |
Back when our leaders were a bit more badass,
link |
I guess you might say.
link |
And finally in 1913, the Federal Reserve was implemented.
link |
And it's been kind of all downhill from there.
link |
So what is, can you, oh, sorry, go ahead.
link |
I was just gonna say that communism and capitalism,
link |
it's also a matter of scale.
link |
The ideal behind communism is from each
link |
according to their ability to each according to their need.
link |
Sounds beautiful, right?
link |
Sounds like a great, peaceful, harmonious way
link |
to organize ourselves.
link |
The problem is, and by the way, I am a communist
link |
in my family, in my home, right?
link |
At that very smallest of scales.
link |
Yes, in your very small circles of trust,
link |
you're much more likely to behave selflessly
link |
towards one another.
link |
By the way, I look forward to the Bitcoin community
link |
clipping out that part, saying that Robert Breedlove
link |
was a communist and the ideals of communism are beautiful.
link |
Yeah, context matters, people.
link |
But to your point, it does not scale, right?
link |
As we move into this larger system
link |
of socioeconomic cooperation, which is necessary
link |
to deepen the division of labor, to generate more wealth.
link |
We need to interact with one another on much larger scales
link |
than this communistic utopian ideal.
link |
We get into the realm of capitalism
link |
where we need really sound rules, hard rules,
link |
consensus, verifiability, and frankly, prices.
link |
Because the other thing in Soviet Russia
link |
is they tried to replace the profit motive
link |
or the price signal with this devotion to,
link |
this nationalistic faith and devotion.
link |
Where it's like, you don't need self interest anymore.
link |
You don't need prices or profits.
link |
You can just protect Mother Russia, right?
link |
And serve Mother Russia and that would create wealth.
link |
And what happened, right?
link |
They destroyed price signals.
link |
There were shortages, there were famines,
link |
there's all levels of corruption.
link |
Because to your point, it's once you,
link |
people have to run the system no matter what.
link |
So when people are always pursuing something for nothing
link |
and you put someone in a seat
link |
of much closer to absolute power
link |
where they're making all the pricing decisions,
link |
they own all of the productive factors in the economy,
link |
they're not beholden to any market force.
link |
There's no market check on their action
link |
that that institution tends to become more corrupt.
link |
And further, it's an inferior resource strategy.
link |
I alluded to this earlier where the other way
link |
to think about free market versus central planning is
link |
it's decentralized or distributed computing
link |
versus centralized computing.
link |
So each one of us, I think that the number
link |
is 120 bits per second of active awareness.
link |
And so we can take in, clearly we process a lot more
link |
than that, but our active awareness,
link |
I think is 120 bits per second.
link |
In a centralized planning body like in Soviet Russia,
link |
they had the pricing czar.
link |
Maybe they had 10, 20,000 people deciding the prices
link |
for the entire country.
link |
You're only getting that much data throughput, right?
link |
20,000 people times 120 bits per second.
link |
Whereas in a free market, if everyone is free to interact
link |
with deep capital markets based on an accurate price,
link |
you're getting the data throughput of 120 bits per second
link |
times the entire economy, right?
link |
So you're getting, it's a more efficient means
link |
for disseminating knowledge effectively.
link |
And then again, knowledge is just,
link |
the more knowledge a socioeconomic structure can contain,
link |
the more wealthy it is, right?
link |
Prices, tools, all these things are just knowledge.
link |
So in that respect, that's why something like capitalism,
link |
even in its marginalized form, state capitalism,
link |
out competes communism.
link |
It's distributed computing versus centralized computing.
link |
You know, we kind of brought up religion
link |
and Joseph Campbell and myth and the propagation of ideas.
link |
And kind of before I forget,
link |
I wanted to ask your thoughts about this.
link |
You know, Jordan Peterson, I haven't really understood
link |
exactly like be able to pin him down exactly
link |
what he sees as the role of religion in human society.
link |
But it feels like he's describing it as having value for us.
link |
The ideas of myth are valuable.
link |
They're valuable mechanisms toward,
link |
I think you mentioned kind of directing us
link |
in this world as a human society.
link |
Do you think about myth?
link |
Do you think about religion?
link |
What's the use of it in this construct of markets
link |
in this framework of where ideas are ultimately
link |
the fundamental thing that makes societies work?
link |
Yeah, I think Jordan Peterson, who I'm a huge fan of,
link |
he's been very influential in my thinking
link |
and influential on my own religious views as well.
link |
I think his position would be, and he's said this before,
link |
that he acts as if God exists.
link |
And I've had some arguments about this before,
link |
but to me that points towards the preeminence of action
link |
and how important action is
link |
versus your cognitive beliefs necessarily.
link |
And I think there is a lot of utility in that,
link |
that if you follow the moral code of something,
link |
like the Bible, you do reap benefits from that.
link |
Society reaps benefits from that.
link |
And sometimes I bring up this point and people are like,
link |
oh my God, are you kidding me?
link |
Have you read the Old Testament?
link |
They're clobbering people with rocks
link |
when they do the wrong thing.
link |
The Bible doesn't claim to be this,
link |
like do everything that was done in the Bible.
link |
It's more like charting this moral progression
link |
where we came from this very barbaric society
link |
into something more like the New Testament
link |
where we're honoring individual sovereignty
link |
above the state and things like that.
link |
So I think that mythology itself
link |
is another form of data compression.
link |
If you look at these stories,
link |
Cain and Abel is a good example,
link |
or Peterson makes the point that it's a tiny story.
link |
It's a paragraph ish long,
link |
but it contains so many layers of meaning
link |
in regards to violence, to evil, betrayal, work,
link |
the divergence between intention and result,
link |
because I think Cain is actually making,
link |
he's making the effort to sacrifice for God,
link |
but the sacrifices he's making are not,
link |
God doesn't find them useful.
link |
And so he sort of rejects them.
link |
Again, if we're organizing these stories
link |
we're organized by these useful fictions, right?
link |
These, these Herarian imagined orders.
link |
I think mythology is kind of the original version of that,
link |
where we were learning to organize ourselves around stories
link |
to best coordinate our action across space and time.
link |
And so I think it's very foundational.
link |
And back to what we were saying in the beginning
link |
that if value truly is fundamental,
link |
I think it's interesting that all these stories
link |
point towards often common moral values.
link |
They're not perfectly aligned,
link |
but it does speak to just the evolutionary importance
link |
of morality and the subjectivity of morality,
link |
where morality sort of evolves over time based on,
link |
frankly, the capital stock we've accumulated.
link |
The more capital stock we've accumulated,
link |
the easier life is, the less barbaric we have to be.
link |
Whereas if we're living in conditions of true scarcity,
link |
then we tend to be a bit more barbaric towards one another.
link |
And that too, to dovetail this
link |
into something largely unrelated,
link |
but I think is really important is inflation.
link |
Inflation by artificially increasing the prices
link |
of goods and services in the world, right?
link |
We're injecting more dollars,
link |
chasing the same level of goods and services.
link |
We are artificially increasing scarcity,
link |
perceived scarcity, right?
link |
And when you increase perceived scarcity,
link |
you are amplifying divisiveness.
link |
The natural state of man is when everything is scarce
link |
and you really have to fight hard
link |
just to eat or drink water that day.
link |
So it's decivilizing in a way
link |
by artificially amplifying
link |
the perceived scarcity in the world.
link |
Can you elaborate how does inflation increase
link |
the perceived scarcity in the world?
link |
So we could think the price itself is an indication,
link |
it's a data packet, if you will.
link |
The price is a data packet on supply and demand, right?
link |
It's telling you how much supply there is
link |
of something in the world relative to the demand.
link |
So when you print money
link |
and artificially increase that price,
link |
it's diverging away from supply and demand.
link |
It's becoming just more of a product of policy
link |
than it is of free market fundamentals.
link |
The more expensive something is,
link |
that is a signal to the marketplace and to market actors
link |
that it is scarce, right?
link |
That's why a Leonardo painting
link |
might sell for $16 million, there's only one,
link |
there's a lot of demand for it.
link |
Maybe my numbers are off, but you get the point.
link |
It's the reason mask spiked in price
link |
after the COVID announcement, right?
link |
There was not enough supply,
link |
toilet paper, et cetera, et cetera.
link |
So inflation, and by inflation,
link |
I specifically mean arbitrary fiat currency
link |
supply inflation by legal monopoly,
link |
not inflation is a commonly misunderstood word.
link |
That is amplifying the perception of scarcity
link |
among market actors in the world.
link |
And I would argue that it actually amplifies divisiveness.
link |
I think this is the key maybe to looking at
link |
the connection between the monopolization of money
link |
and things like cancel culture,
link |
because it's increasing our natural predilection
link |
to be combative with one another,
link |
because we think there's more scarcity in the world
link |
than there actually is,
link |
versus in a world where you're not increasing
link |
the money supply, prices are declining every year.
link |
As prices decline, this is a signal to market actors
link |
and the market that scarcity is declining.
link |
There's less need to fight over things.
link |
And all of this ties back into the old Bastiat saying
link |
that if goods don't cross borders, soldiers will.
link |
So if we're not trading with one another,
link |
if we're not acting interdependently,
link |
and we're not becoming more intelligent as a market,
link |
and that increased intelligence or increased knowledge
link |
is reflected in decreased prices,
link |
because prices are just the exchange ratios of things.
link |
So the smarter we can solve problems,
link |
the better we can solve problems, the less prices would be.
link |
So it induces more cooperation.
link |
I love how you tie inflation and cancel culture together
link |
as essentially artificial creation of increase of conflict.
link |
Artificially increasing scarcity
link |
and thereby artificially increasing conflict.
link |
That's really fascinating.
link |
You're short circuiting my brain
link |
many times throughout this conversation.
link |
Okay, this robot is struggling to keep up.
link |
Okay, maybe to step back at the useful fictions
link |
or pragmatic truths.
link |
Let me ask the question that you've answered
link |
in many ways already, but let's explicitly look at.
link |
Oh, as you know, that's my favorite question.
link |
Is the name of the show I just launched,
link |
the What is Money show?
link |
Clearly, we could say that the Bitcoin rabbit hole
link |
is what's led me to explore a lot of these ideas in depth.
link |
And I think as we've demonstrated today,
link |
it goes well beyond just the economic sphere
link |
when you start to think about things like exchange
link |
and morality and time preference and civilization.
link |
So I love the question, what is money?
link |
I think it is the key to incepting a deeper understanding
link |
of the world into people that if you actually
link |
just start to ask the seemingly simple question,
link |
it surfaces more and more layers of truth.
link |
And I recently, I just wrote a piece,
link |
I think I have 30 something answers to this question.
link |
So sometimes it's actually a more systematic way
link |
of asking the question of what is the meaning of life?
link |
There's some questions that are almost unanswerable,
link |
but in their asking allow you to deeply get closer to truth,
link |
deeply understand the nature of our human existence.
link |
And the meaning of life is almost like
link |
this initial philosophers striving towards that.
link |
If money is indeed as fundamental as you've described,
link |
especially in the context of value being fundamental,
link |
then that is a really, that's a more,
link |
let's take a 21st century way of asking the same question
link |
about what is the meaning of life.
link |
You mentioned that it's a meta property
link |
out of the list of many ways to answer that question.
link |
How would you help people to think about that?
link |
Yeah, the first most serious answer
link |
comes from the school of Austrian economics
link |
and it defines money as a universal medium of exchange.
link |
So this would be any good that is used,
link |
held and used purely for purposes of facilitating exchange.
link |
So in the configuration of demand for any particular asset,
link |
it's bifurcated between its utility,
link |
which is something a service
link |
that it can render to you in real time,
link |
whether it's, if it's water, you're thirsty,
link |
that's the utility of water is that it can quench your thirst
link |
whereas the marketability would be the expectation
link |
of future exchange that other people would want this asset
link |
in the future to trade it for whatever they may have.
link |
Money is just going to be the good in any trading economy
link |
that has the highest proportion of marketability
link |
relative to utility.
link |
So today that would be gold.
link |
Gold has utility, it's used in electronics,
link |
it's used in dental dentistry and whatnot,
link |
but it's largely used as a store of value across time
link |
and that's what it's been used for for 5,000 years.
link |
So if we say gold has a $10 trillion market cap,
link |
maybe 2 trillion of that is its utility value
link |
or it's actually demand for use in computers and dentistry
link |
and an 8 trillion of that is demand
link |
for its use as a store of value.
link |
Money, the marketability aspects of money
link |
boils down to five services that money can render.
link |
Money needs to be divisible, it needs to be durable,
link |
it needs to be recognizable, it needs to be portable
link |
and it needs to be scarce.
link |
So I'll gloss over a lot of history with this
link |
and just say that historically,
link |
money's always been a technology,
link |
still is a technology or a tool.
link |
I use these terms interchangeably
link |
and you think of a technology
link |
as just a more sophisticated tool effectively.
link |
To best satisfy those properties,
link |
monetary metals were determined
link |
to be the most satisfactory tool,
link |
the most divisible, most durable, most recognizable,
link |
most portable tool in the marketplace.
link |
Of the monetary metals, gold was the most scarce
link |
as quantified by either its stock to flow ratio
link |
or its inflation resistance.
link |
So simple way to say this is that people always prefer
link |
the money most resistant to inflation.
link |
That's a nice definition of scarcity in the context.
link |
The money is, if you were to measure it,
link |
the resistance to inflation.
link |
So how hard is it to artificially increase
link |
the supply of the thing?
link |
That is the hardness of money.
link |
And that's why gold is hard money.
link |
Because the alchemy is hard.
link |
Because no one cracked the alchemy.
link |
So gold became money.
link |
So that's such a nice clean explanation of what is money
link |
with the five elements and gold ultimately won out
link |
because of the last piece of scarcity.
link |
And to get to maybe dig a little deeper there.
link |
So scarcity, we commonly think of scarcity
link |
as strictly a supply property,
link |
where if there's not much of something, then it's scarce.
link |
But it's not actually true.
link |
Scarcity occurs when demand exceeds supply.
link |
So when there's more demand than the supply can justify,
link |
the thing becomes an economic good
link |
and it establishes itself a market price.
link |
So there's more demand for the thing
link |
than the supply can satisfy.
link |
The unique thing about money as a concept at least
link |
is that demand always exceeds supply.
link |
There's never enough money to satisfy everyone, right?
link |
Because another definition for money,
link |
it's the most marketable good.
link |
So it can be traded for any other good service,
link |
piece of knowledge in the marketplace.
link |
So humans being what we are, we're never satisfied, right?
link |
We always want more of something, whatever it may be.
link |
So money as the ultimate token of obtaining that something
link |
is always scarce as a concept.
link |
But the problem with money is that if you can,
link |
as you alluded to, easily increase its supply,
link |
then all of a sudden you can compromise
link |
the scarcity of it over time
link |
and you can rob people through inflation.
link |
So that's why the market settled on gold as money.
link |
And robbing is reallocating the value that I,
link |
so essentially the one property, like why scarcity
link |
is important is it adds a lot more friction
link |
to the reallocation, like through essentially violence
link |
or implied violence.
link |
Well, it prevents it through cost of extraction too.
link |
So if you want to go out and dilute gold holders today,
link |
you have to go out into the world and mine gold.
link |
It's a very expensive process.
link |
That process tends to find equilibrium
link |
where production cost equals the market value of gold.
link |
So if market value is $2,000 an ounce today of gold,
link |
its production cost is going to be around there.
link |
That's the natural market equilibrium.
link |
So that way gold miners cannot just dilute people over time.
link |
Whereas if you look at something like fiat currency,
link |
which we're jumping ahead a little bit,
link |
but its production cost is zero.
link |
So there's a reason the market value of fiat currency
link |
historically has always converged to zero
link |
because its production cost is near zero.
link |
So the extension to that question might be
link |
how did we get from gold to paper currency?
link |
And again, this is rooted in the properties of money.
link |
As good as monetary metals were
link |
and as good as gold is as money at holding value across time,
link |
it's rather limited in terms of portability.
link |
It is not as useful for moving value across space.
link |
This is another definition of money, by the way,
link |
a social device for moving value across space and time.
link |
So to rectify this technological shortcoming of gold,
link |
we introduced, first of all,
link |
the custody of gold was gradually centralized
link |
into fewer and fewer warehousing operations.
link |
This is because there are economies of scale
link |
associated with using gold as money.
link |
And that if you centralize the custody,
link |
the warehouse owner can then issue a paper receipt
link |
called a warehouse receipt for that gold.
link |
And then market participants can trade that paper
link |
as if it's good as gold.
link |
And everyone has an option at any time
link |
to go and redeem real gold from the warehouse.
link |
So that system works until the problem with it
link |
is that it introduces the need to trust the custodian.
link |
So it's introducing counterparty risk
link |
in the form of the custodian.
link |
And now should that warehouse choose
link |
to increase the supply of paper notes to gold
link |
beyond its supply.
link |
So if it's got three tons of gold
link |
and it issues six tons worth of paper receipts,
link |
all of a sudden it's participating in a fraud.
link |
It's basically lying.
link |
It's representing that it has more gold
link |
than it actually does.
link |
And that is the pathway that we got into banking
link |
and central banking,
link |
is we needed a convenience mechanism
link |
to rectify the portability shortcomings of gold.
link |
We needed to be able to move value across space, right?
link |
Gold was doing a great job at moving value over time,
link |
Paper currency gave us the ability
link |
to move value across space,
link |
but it introduced this attack vector
link |
for warehouse operators, which became banks,
link |
which became central banks,
link |
to modify the supply to suit their own political agendas.
link |
Added the snooze button.
link |
That allows you to do a little fraud.
link |
To get something for nothing.
link |
Something, just a little bit at first.
link |
Just this one morning, just a little bit.
link |
I mean, I don't know if you can speak
link |
to the birth of fiat currency.
link |
Is there some interesting characteristics
link |
to those early steps that created it?
link |
Like, could it have been averted?
link |
Or is this the natural progression of governments?
link |
You know, what's funny is that central banking
link |
was initially designed to be the custodian of gold, right?
link |
And so they were going to custody the gold,
link |
issue paper on top of it,
link |
and then they would maintain,
link |
you could trust the public stamp effectively.
link |
You could trust that the central bank
link |
had as much gold on reserve as they said they had,
link |
and they were supposed to be the trustworthy institution.
link |
So we went from placing our trust
link |
in a free market game theoretic process,
link |
and we began trusting this institution instead.
link |
This, that institution would not have arisen
link |
if the portability of gold was really high.
link |
If we could have somehow sent gold
link |
across a telecommunications channel,
link |
there would have been no need for a central bank.
link |
Everyone could have custodyed their gold
link |
in any information bearing medium, frankly,
link |
and they could beam it around the world at any time.
link |
So this whole institution itself
link |
is rooted in a technological shortcoming of gold.
link |
So I think it's, another way to think about that
link |
is maybe had there been all the gold in the world today
link |
fills two Olympic sized swimming pools,
link |
all the gold mined throughout all of human history.
link |
So there's not a lot, right?
link |
What if there had been just like way more?
link |
There'd just been, I don't know,
link |
20,000 Olympic swimming pools worth.
link |
Portability wouldn't have been as much of an issue, right?
link |
We could have, and this is to say,
link |
assuming gold was still the most scarce metal
link |
and all these things,
link |
portability would have been less of an issue.
link |
We would have had less dependence
link |
or need for a central bank.
link |
So I think it's kind of idiosyncratic
link |
in that we just happened to end up here on this planet
link |
with a certain amount of gold.
link |
It best satisfied the properties of money.
link |
And a certain amount of humans,
link |
a geographic dispersed such that portability
link |
had certain properties that you want to achieve
link |
for humans in the geographical space
link |
to be able to be a exchange value.
link |
It became more of an issue as we globalized, right?
link |
As we became more of a global society,
link |
we needed money that could move across space really fast.
link |
So we could trade in international capital markets.
link |
So that drove the central bank
link |
to become the dominant institution of the world.
link |
And if you follow the flows of gold throughout history,
link |
you know, I've been watching this documentary
link |
on World War I and World War II on Netflix.
link |
I think it's called World War II in Color.
link |
Oh yeah, that's really good.
link |
When I say gold has been the governor of governments
link |
or gold is geopolitical money,
link |
like it is the base layer operating system,
link |
has been the base layer operating system for analog society.
link |
So it's always been about who controls the gold,
link |
is who makes the rules.
link |
And that's, in that context,
link |
is why Bitcoin is so interesting
link |
because it is the disruptor to
link |
this base level operating system
link |
that's functioned for all of human history.
link |
I think this is a good place to ask,
link |
we asked the what is money question.
link |
That's a question as complicated as what is money?
link |
I think if you get a general understanding of money
link |
from a number of angles,
link |
that we could say Bitcoin is the most superior
link |
monetary technology that has ever existed.
link |
So one of the most superior implementation
link |
of the ideas of money that you talked about,
link |
you talked about money as speech,
link |
you talked about money as an idea,
link |
we talked about money as sovereignty.
link |
So we're attaching the concept of money, to your point,
link |
to whatever tool best satisfies those properties of money
link |
or best renders those services we need for money.
link |
And as you said, you're using the word tool
link |
and technology interchangeably here.
link |
And another thing to think about here is that
link |
we think often in terms of goods or services,
link |
but actually everything is a service.
link |
So it's not the physical properties of this pen
link |
that I find valuable,
link |
it's the services that it renders to me,
link |
that I want to write a letter,
link |
this serves me by allowing me to lay ink on paper
link |
and communicate information.
link |
So value, humans attach value as we alluded to earlier,
link |
two services, not goods.
link |
So the properties or the services that money renders
link |
that human beings value are those five properties,
link |
divisibility, durability,
link |
recognizability, portability, scarcity.
link |
Metals best satisfied those services historically,
link |
but Bitcoin as the most superior monetary technology
link |
in human history, essentially perfects them.
link |
It's as close to perfection as we've ever been.
link |
So in terms of divisibility,
link |
each Bitcoin can be broken down into 100 million subunits
link |
If that divisibility were ever a problem,
link |
which actually there was a question that came up recently,
link |
if you divide the world population
link |
by the total supply of Bitcoin,
link |
you end up at like 0.3 Bitcoin per person,
link |
call it 300,000 satoshis per person.
link |
What if that was not enough to facilitate economic activity?
link |
And the answer to that is Bitcoin can soft fork
link |
into further divisibility.
link |
So if Bitcoin ate all the money in the world
link |
and the average Bitcoin or wealth
link |
will say 300,000 satoshis each,
link |
but that wasn't divisible enough maybe to buy coffee
link |
and do all these day to day transactions,
link |
what would happen?
link |
Well, we would increase its divisibility.
link |
So Bitcoin's perfected divisibility,
link |
the divisibility of money,
link |
lets us transact across scales, right?
link |
We can buy coffee or we can buy a house.
link |
Durability is an interesting one.
link |
So clearly something like gold is very durable.
link |
It's resistant to degradation over time.
link |
Bitcoin is just pure information,
link |
but it's stored in a distributed format.
link |
So information stored in a distributed fashion
link |
tends to be virtually infinitely durable.
link |
The example I'd like to give here
link |
is something like the Bible.
link |
The Bible is just distributed information.
link |
It's stored everywhere and nowhere, so to speak.
link |
And for that reason, it has outlasted empires.
link |
And Bitcoin's similar, right?
link |
You can't make changes to it unilaterally.
link |
But to make explicit the ways in which it is not durable
link |
is the fact that it relies on computing infrastructure.
link |
Like it needs computers.
link |
So if you were to destroy all the computers in the world,
link |
it needs mechanisms that store and transfer information.
link |
And so you could attack it.
link |
I mean, you could attack gold in the same kind of way,
link |
I suppose, through the physics,
link |
but it's probably easier to destroy
link |
all the computers in the world
link |
than it is to destroy all the gold in the world.
link |
Maybe not, I don't know.
link |
Yeah, you're right.
link |
Maybe, I'm not sure which one would be harder to destroy.
link |
The other thing is there's a dynamic incentive.
link |
So every time you destroy Bitcoin miners,
link |
you're creating incentives for anyone else
link |
with access to electricity to mine
link |
because you're making the algorithm easier.
link |
Yeah, so the destruction is difficult
link |
because of the decentralized nature of the whole thing.
link |
And the difficulty adjustment.
link |
Yeah, so you're gonna have to use nuclear weapons
link |
and cover the whole globe, but anyway.
link |
Yeah, and by then,
link |
we've got much bigger problems than money, right?
link |
That's right, so okay, so that's durability.
link |
So portability, Bitcoin's pure information,
link |
it can move at the speed of light,
link |
can't get much faster than that.
link |
Recognizability refers to the ability
link |
to verify the veracity of the money or its authenticity.
link |
So you can actually, when we used to transact gold,
link |
there were time honored techniques for verifying
link |
that it was gold and not gold plated lead, for instance.
link |
This is where we get the term sound money.
link |
A gold coin made a very particular sound
link |
when dropped from a certain height.
link |
You've seen people biting coins.
link |
These are all techniques for testing the authenticity of gold.
link |
And with Bitcoin, we have something unique
link |
in that if you're running a full node,
link |
you can verify that the Bitcoin is Bitcoin, right?
link |
It cannot be tampered with, it cannot be faked.
link |
And in addition to that, as a node operator,
link |
you can audit the total supply of Bitcoin at any time,
link |
which is unlike any money in history.
link |
So you know with full certainty,
link |
if you're holding 1000 Bitcoin,
link |
you have 1000 out of a possible 21 million forever.
link |
You have a guaranteed fraction of the total supply.
link |
Yeah, so a full node contains information
link |
about every transaction that's ever been had
link |
so you can figure out, yeah, I mean,
link |
all the truth of this money is all right there.
link |
Yeah, it's like a fractal constituent
link |
of the whole network, right?
link |
The whole Bitcoin blockchain is comprised in a node too.
link |
Not the proof of work piece,
link |
but the entire transaction history.
link |
And so that's unique as well.
link |
And that's what makes Bitcoin the ultimate store of value
link |
is that you know with certainty what the total supply is
link |
And you know that your share of that supply is fixed.
link |
It can only improve actually.
link |
If someone loses, you know,
link |
if the Satoshi stash is truly gone forever,
link |
the million Bitcoin never moves,
link |
then we're talking about 1000 Bitcoin
link |
out of 20 million instead and so on and so forth.
link |
As more people lose access to their Bitcoin,
link |
they're basically making a contribution to everyone else.
link |
It's anti dilutive.
link |
And there's certain properties of Bitcoin
link |
that are sort of a little bit more into the details
link |
that ensure that the full nodes,
link |
like the size of all the transactions that ever happened,
link |
at least currently can be stored
link |
in a single computer, for example.
link |
So it doesn't blow up too quickly.
link |
But you know, there's arguments that that's not necessarily,
link |
you can make arguments for that to be a very nice property,
link |
but you can also say that there's like drawbacks to it.
link |
That's hence the block size debates
link |
and all those kinds of things.
link |
Yeah, that was the Bitcoin Cash Civil War, right?
link |
Was that particular piece.
link |
And, you know, ostensibly they were saying,
link |
oh, we need more transaction throughput
link |
to buy more coffee and do more transactions.
link |
But what they were actually doing
link |
was increasing the size computing power necessary
link |
to run a full node,
link |
which would have theoretically compromised decentralization.
link |
So yeah, but it would in theory,
link |
and this is, you know, in theory,
link |
it would allow you to have much more transactions.
link |
But the drawback, it would,
link |
because of no longer can be stored in a single computer,
link |
personal computer, then it naturally leads
link |
to the centralization.
link |
Which you see with gold.
link |
Which would have compromised its survivability.
link |
So, I said, what else is there?
link |
The last one, which leads straight into this one,
link |
actually is the most important one of money,
link |
which is scarcity.
link |
And that you need to know the supply is fixed
link |
and safeguarded from counterfeiting and inflation,
link |
which counterfeiting and inflation are the same thing,
link |
Counterfeiting is criminalized inflation.
link |
Inflation is legalized counterfeiting.
link |
So central banks today,
link |
when they say they're printing money, they're not.
link |
They're counterfeiting currency.
link |
That's a very important part.
link |
And Bitcoin, as I've argued in some of my writing,
link |
is more than just an invention.
link |
It's actually the discovery of absolute scarcity.
link |
And that we have unveiled a property of money
link |
that we will only discover once, and it's got really
link |
major ramifications for the world at large.
link |
So with gold, for instance, as we've covered,
link |
it became money because it was the most relatively scarce
link |
monetary metal, right?
link |
Its supply was hardest to increase over time.
link |
However, if we could somehow flip a switch today
link |
and make everyone in the world go out and start mining gold,
link |
we could increase the supply much more quickly.
link |
We could, you know, it's historic inflation rates
link |
about 2%, we could double that pretty quickly.
link |
Bitcoin, with Bitcoin, it is not possible.
link |
So no matter how much effort and energy and capital
link |
and operational expenditure we pour into the mining network,
link |
we cannot deviate from its fixed
link |
and diminishing supply curve from between now
link |
and the last Bitcoin being mined in 2140
link |
because of the difficulty adjustment.
link |
It's constantly, it's adapting to human action actually.
link |
So the harder we pursue it, the more that it recedes,
link |
and then the less we pursue it,
link |
the more available it makes itself.
link |
And this is, it's a real major breakthrough
link |
because it's the closest thing to perfect information
link |
we've ever had in an economy.
link |
And perfect information is this, it's a theoretical,
link |
but unattainable state of the market where all market actors
link |
have all the relevant information about everything
link |
so that they can compete as efficiently as possible.
link |
And in a state of pure information, we have,
link |
I'm sorry, perfect information, we have perfect competition.
link |
And in perfect competition, we maximize wealth generation.
link |
So we're competing as freely as possible
link |
from coercive and violent impediments.
link |
And so I think Bitcoin in that sense
link |
is going to pull the world closer to a state
link |
of perfect competition than we've ever been before,
link |
which would increase wealth generation
link |
to an extent we've never seen before.
link |
Many of the things you said about Bitcoin
link |
also hold for other cryptocurrency technologies
link |
that followed after.
link |
Can you say something to why you think Bitcoin
link |
is the superior technology
link |
from a pragmatic truth perspective than say Ethereum,
link |
but also other crypto, like Bitcoin Cash,
link |
like other hard forks of Bitcoin,
link |
and maybe things that might yet to be invented,
link |
tools yet to be invented?
link |
Yeah, so this is a good point of argument
link |
because a lot of people have countered me and said,
link |
Bitcoin cannot be absolute scarcity
link |
because you can fork it and create something
link |
with the same properties as Bitcoin
link |
or potentially even better properties, right?
link |
You create something with a deflationary monetary policy.
link |
That's what Bitcoin Cash was actually.
link |
It forked Bitcoin with all of the same properties
link |
except for the block size that we alluded to earlier.
link |
The problem is that money is valued.
link |
Again, it's the good with a configuration of demand
link |
that is predominantly marketability.
link |
So it is valued based on its liquidity.
link |
That is how many other trading partners are there
link |
in that monetary network.
link |
So it is a network valued because of its liquidity
link |
and network effects.
link |
So any new entrant into the market for money
link |
is incentivized to always choose the money
link |
with the deepest liquidity and the most network effects.
link |
This is why money has tended to be a winner take all market
link |
because it's essentially a single purpose tool, right?
link |
if we consider that tools are time saving devices, right?
link |
The shovel that you dig more holes per man hour
link |
than you can with your bare hands.
link |
Money is a tool, there's yet another definition of money
link |
that lets us calculate, negotiate
link |
and execute trades more quickly.
link |
So that function tends to coalesce
link |
towards one solution.
link |
And so the short answer would be that
link |
for the same reasons, quantifiable reasons, right?
link |
Like inflation resistance and liquidity and network effects
link |
that we have one analog gold,
link |
we're only likely to have one digital gold.
link |
And I think the Bitcoin Cash Fork
link |
proves that out empirically.
link |
It's a good case study because.
link |
Well, it's one case study, right?
link |
But okay, so that's really well put.
link |
So like gold was sticky.
link |
Once it was accepted, the network effects,
link |
the winner take all took over.
link |
And here's a fundamentally different kind of like
link |
analog versus digital is a leap in technologies.
link |
And you're suggesting that there may not be,
link |
there's unlikely to be other leaps of that kind
link |
into a whole nother kind of space of technologies.
link |
I would argue that Bitcoin,
link |
it's kind of like the ideological synthesis of gold,
link |
taking the monetary properties of gold
link |
and combining them with the internet itself.
link |
it has essentially perfected the properties of money, right?
link |
You can't get more divisible, durable, recognizable,
link |
portable, or scarce than Bitcoin.
link |
So Satoshi has kind of,
link |
he left no design space for a superior technology
link |
to intercede and out compete Bitcoin at this point.
link |
Now that it's established liquidity
link |
in the network effects. Far superior technology, right?
link |
Yeah, but it's a combination of the tech itself
link |
and the social layer that is coalesced to it.
link |
You can't separate those two out.
link |
Like they're all connected and then the political as well.
link |
I mean, but the portability, for example,
link |
that's another way to phrase that is the,
link |
what is it, the scaling.
link |
So the number of transactions,
link |
that's a limitation for Bitcoin
link |
that many argue is a feature, many argue is a bug.
link |
You have a bunch of cryptocurrency technologies
link |
that are able to achieve much higher,
link |
much faster frequency of transactions,
link |
much more transactions, you know, all that kind of stuff.
link |
What are your thoughts on that?
link |
You know, the low level of transactions
link |
that's possible with Bitcoin.
link |
Do you think that's a feature?
link |
Do you think that's a bug?
link |
Necessary for security actually.
link |
And even these other crypto assets that settle more quickly,
link |
they settle with less assurance of finality.
link |
So Nick Carter has a great piece on this actually called,
link |
the settlement assurance is stupid.
link |
It's really good where the gist of it is
link |
that there is more work being done in each block of Bitcoin
link |
that it can't, it is less vulnerable to reversion.
link |
So it's giving you higher degrees of assurance
link |
that your settlement or your trade has occurred
link |
with finality, whereas other blockchains
link |
are much more vulnerable.
link |
And again, with Bitcoin, the evolutionary path of money
link |
with gold is that it was first used as a collectible.
link |
It then became used as a store value.
link |
After it had stored enough value,
link |
it began to be used as a medium of exchange.
link |
And then finally, when it was used widely enough
link |
as a medium of exchange, it becomes a unit of account.
link |
We actually start to think in the money.
link |
Bitcoin's following a similar path.
link |
So started out as kind of a collectible.
link |
Today, I would argue it's a store value,
link |
one of the most effective store value we've ever seen.
link |
So that evolutionary path that Bitcoin's following
link |
is similar to gold.
link |
First a collectible, today a store value.
link |
To be an effective store value,
link |
it has to optimize for supply cap.
link |
That has to be the first,
link |
and this is all Bitcoin really needs to do
link |
to be successful by the way.
link |
Exactly what it's been doing for 12 years,
link |
virtually flawlessly,
link |
which is keep creating a block every 10 minutes
link |
and keep enforcing a supply cap of 21 million.
link |
As long as those two things hold,
link |
it is sound money, the ultimate sound money,
link |
the most inflation resistant money there's ever been.
link |
It's actually completely immune.
link |
It's taken unexpected inflation to 0%.
link |
We know with perfect certainty
link |
what Bitcoin supply will ever be.
link |
For it to be used more broadly as a medium of exchange,
link |
it can't make trade offs at the base layer
link |
to increase its portability for instance.
link |
Even though portability is maybe kind of a misnomer
link |
because Bitcoin has extremely high portability,
link |
just doesn't have extremely high transaction throughput.
link |
So we could say you can move it pretty quickly
link |
anywhere in the world
link |
as long as you're willing to bid up for the block space,
link |
but you can't satisfy all the world's economic volume.
link |
You can't do 300 million transactions per second
link |
like you can on a centralized database like Visa.
link |
But Bitcoin needs to be this,
link |
it has to be a store value first
link |
before it can be a medium of exchange.
link |
So it has to protect the supply cap first
link |
before making any trade offs for that.
link |
And I would argue that that's why Bitcoin is so rigid,
link |
is that it's optimized for survivability
link |
and optimized for that supply cap.
link |
And it's pushing experimentation and other features
link |
that would increase its transaction throughput
link |
So I think Lightning Network
link |
is something that's very interesting.
link |
but there's a lot of throughput already being used
link |
on the Lightning Network.
link |
And it makes some slight trade offs
link |
in terms of the trust minimization of Bitcoin.
link |
You end up trusting these smart contracts
link |
instead of move the Bitcoin,
link |
but you pick up nearly unlimited transaction throughput.
link |
So that's how, and that's how biology evolves.
link |
That's how the internet evolved.
link |
It evolves in layers.
link |
So I think Bitcoin,
link |
you can sort of conceive of it
link |
as the latest layer to the internet.
link |
And it's one that preserves this store value property
link |
better than any asset we've ever had.
link |
Let me ask sort of a critical question of,
link |
if you're wrong about your statements about Bitcoin,
link |
and you find out years from now that you were wrong,
link |
what would that look like?
link |
What would be the things
link |
that make you realize you were wrong?
link |
Likely ideas or crazy out there ideas?
link |
Do you think about this kind of stuff?
link |
Because you speak very confidently about Bitcoin.
link |
And one of the things, let me put it this way.
link |
I think certainty,
link |
I feel like that's like a stoic statement.
link |
Certainty leads to ruin, something like that.
link |
Like certainty, I think is an antithesis to progress often.
link |
And especially in your writing,
link |
but this is true for the Bitcoin community.
link |
There's a certainty about the Bitcoin.
link |
And that makes me very skeptical,
link |
no matter how good the ideas are.
link |
Whenever things are good, this might be the Russian in me.
link |
I think like, what are the ways this is gonna go wrong?
link |
So what do you think are the ways this might go wrong
link |
or you're wrong in your conception of what Bitcoin is?
link |
Yeah, so science evolves via negativa,
link |
meaning that we're not proving hypotheses
link |
and that's what becomes the body of science.
link |
Science is whatever is left over as we disprove hypotheses.
link |
Whatever we can empirically, through experimentation,
link |
disprove, gets discarded.
link |
And whatever remains, whatever theory remains,
link |
it hasn't been disproven, is science, effectively.
link |
This process is similar to market actors zeroing in
link |
on a store value, right?
link |
They're experimenting with different forms
link |
of storing wealth across time.
link |
Some do better than others
link |
and eventually everyone ends up on the one that is best.
link |
That's what gold was.
link |
In terms of understanding Bitcoin,
link |
I look at it as a similar approach.
link |
And that is the main question I'm asking myself
link |
is how do you stop this thing?
link |
How do you turn it off?
link |
How do you end it?
link |
If you're a nation state, particularly,
link |
who has the most to lose in this transition,
link |
what is the attack vector by which they neutralize Bitcoin?
link |
I mean, that is the $250 trillion question.
link |
And I've spent five years thinking about this thing
link |
I've read everything on monetary history.
link |
I can get my hands on.
link |
The general thought of how it is stopped,
link |
and this is the snag point that a lot of people get to
link |
in their explorations down the rabbit hole,
link |
is they just say the government will never allow it.
link |
And that becomes kind of their bottom.
link |
It's like, all right, Bitcoin's interesting,
link |
it's superior money, blah, blah, blah,
link |
but the government will never allow it.
link |
Was Ray Dalio, did he say that?
link |
Dalio was currently stuck there, yeah.
link |
So Ray Dalio said that Bitcoin seems to be too promising.
link |
If it is in fact as promising as it looks,
link |
governments are going to,
link |
I don't forget what the exact quote is,
link |
Governments will ban it.
link |
So how do you get Ray Dalio unstuck from your perspective?
link |
And how do you get unstuck from that idea
link |
that governments, will governments,
link |
how do you prevent governments from stopping a thing
link |
that threatens centralized power?
link |
Well, Bitcoin is an idea.
link |
So governments that are really good
link |
at fighting centralized threats to their power, right?
link |
Whether that's a currency counterfeiter
link |
or competing nation state or business they don't like,
link |
or an individual they don't like,
link |
you know, they can kill them, they can throw them in jail.
link |
They can use any number of course
link |
of a violent tactics to suppress it.
link |
But how do you point a gun at an idea?
link |
How do you coerce an idea?
link |
And that's, you know, there's some anecdotal history here
link |
where there's the PGP case, which in the United States,
link |
the court was trying to classify it as munitions.
link |
When we were shipping this
link |
pretty good privacy software overseas,
link |
government wanted to classify it as munitions
link |
and restrict that exportation.
link |
But, and this was a circuit court case precedent.
link |
When the PGP attorneys actually printed out the source code
link |
on paper and presented it as evidence in the court,
link |
all of a sudden it became protected under freedom of speech
link |
and that it's just code is speech, code is language.
link |
And therefore, at least in the United States,
link |
it's protected under the first amendment.
link |
I think a government ban would be largely unenforceable,
link |
frankly, on Bitcoin.
link |
Being that it's pure information,
link |
if you suppress market actors
link |
from using it in one jurisdiction,
link |
you're just creating incentives for them to go elsewhere.
link |
And you're actually increasing the incentive
link |
for other jurisdictions to be favorable towards it
link |
because then they can create,
link |
they get to benefit from the tax revenue
link |
and the businesses and the innovation
link |
that's occurring in and around Bitcoin as a result.
link |
So you don't think if a particular central bank,
link |
like in Europe or United States,
link |
bans it, not maybe using those terms,
link |
but in some kind of way,
link |
you think that provides a really strong incentive
link |
for the other big players to enable it.
link |
And that they're more likely, by the way,
link |
and governments know this, by the way, too.
link |
The other thing that causes a government
link |
to shoot itself in the foot is that if they ban something,
link |
they draw a lot of attention to it.
link |
I mean, people ask why, why would a government ban it?
link |
Why can't I use this?
link |
So that's kind of typically be the last arrow
link |
They may try to ban it if Bitcoin
link |
really starts to monetize very quickly.
link |
And the power structures that they impose today
link |
start to dissolve faster than others might think they will,
link |
then they might try and ban it.
link |
But I think that ban will be largely unenforceable.
link |
They're more likely to tax it,
link |
which they already do tax it.
link |
They're likely to increase taxation of it.
link |
They're likely to try and make it more white market
link |
by actually tracing Bitcoin, seeing who has it,
link |
attaching identities to Bitcoin ownership,
link |
and making sure that they're getting their pound of flesh
link |
on all the transactions it results in.
link |
But I don't think, the other thing about this is,
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so we saw the internet outcompete intranets,
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in that we'd say that open source networks
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tend to outcompete closed source networks.
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And there's a really good reason for this.
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And it's because in a closed source network,
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there are costs associated with defending the network itself.
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So you have to, the network owners,
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the owners of the closed source network
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have to expend resources protecting it from competitors.
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And they have to expend resources imposing its rules
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because they're not voluntarily adopted rules.
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So you actually have to impose these rule sets.
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Whereas an open source network,
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which is something much more akin to capitalism
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in its pure sense, these are voluntarily adopted rules.
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So all market participants have agreed
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and consented to this rule set.
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So there's no enforcement costs
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and there's no turf protection
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because anyone can freely enter or exit the open network.
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For that energetic reason,
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I think open networks outcompete close networks typically.
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And in the digital age, that's why I think open,
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that's why internet outcompetes intranet
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and that's why open source networks
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are gonna eat closed source networks.
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So what Bitcoin would be in that lens
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is the ultimate open source monetary network
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devouring closed source central bank monetary networks.
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And I just don't see how there's no possibility
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of unilaterally stopping Bitcoin or destroying it.
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So then they're more likely to regulate or tax it.
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And again, the other fallacy here
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is that a lot of people tend to think of governments
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as these singular indivisible entities,
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like they just move under one plan.
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But in reality, it's a lot of people, right?
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A lot of people with loosely coupled interests
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and agendas and whatnot, regulators and others
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whether wearing their citizen hat,
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they're gonna see this thing monetizing,
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they're gonna be on the front lines
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of trying to regulate it, trying to control it.
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And I think what's likely to happen
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is they're gonna start to adopt it,
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to buy some of it even as an individual
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or possibly even ultimately at a central bank
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or sovereign wealth fund level,
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as an insurance policy against its success.
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And once you start to acquire something
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and then you have a vested economic interest
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in its monetization,
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I think it kind of dissolves any of the power structures
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that are arrayed against it from the inside.
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So I've written a lot about this
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in a new series called Sovereignism,
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which is based loosely on a book
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called The Sovereign Individual.
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And that's the general thesis
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is that microprocessing technology would devour
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our organizational models,
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the most important of which is the nation state.
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So I think we're going into this world
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where coercion and violence is just much less rewarding.
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The economics of violence are declining
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because of the low cost of protecting property, right?
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You can now protect your monetary property in Bitcoin
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at orders of magnitude less cost
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than is necessary to run a banking network.
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So it changes the way we organize ourselves.
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And again, zooming back to gold
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as kind of the original governor to governments,
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where if they manipulated the money,
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gold would leave their country.
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That's why governments have taken relatively concerted action
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to go off of the gold standard.
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There's a great book on this called The Gold Wars
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that outlines how governments have been waging
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a cold war against gold for the past 50 years.
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Bitcoin sort of renews hope
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for that free market governor of governments.
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And that is this digital gold
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that governments cannot stop or coopt.
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So I think it's something,
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that's why I think it's such a big deal
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is that it is changing,
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it's a new useful fiction, you might say.
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A useful fiction that's superordinate
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to the mythology of the nation state and government
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as the dominant institution in the world.
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Well, I hope you're right
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that all forms of centralized power
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start breaking apart naturally.
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So governments, the more and more power
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is given to the individual, whatever the technology is.
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And Bitcoin seems to be a promising technology
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that empowers that, enables that.
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That seems to be the trend.
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And that's a promising trend
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at least from a perspective of somebody
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who values this particular biological meat bag
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that's full of consciousness.
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I think Bitcoin is exposing the greatest scam
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in human history, which is political authority.
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Like who gives anyone the right to be politically,
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have political authority over anyone else?
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People should be free to adopt the rules
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and systems and tools that best suit their needs.
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And that arc of history we covered earlier
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where as socioeconomic systems have become more favorable
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towards individual sovereignty,
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the more wealthy we have become,
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the more we have given the individual,
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we've maximized individual choice,
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the more wealth that society has created
link |
and the more it has out competed
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the systems that have come before it.
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The latest would be capitalism triumphing over socialism.
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Before maybe we eat, you are in Texas,
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you brought over some brisket.
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Before we may be indulge in that,
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let me bring up one quick topic
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and then we'll take a break.
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And the topic of what some may term
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the toxicity of the Bitcoin community.
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You've written that Bitcoin toxicity is tough love.
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Do you wanna break that apart a little bit
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sort of the idea, the philosophy of the toxicity
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that seems to be present in part in the Bitcoin community?
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Yeah, we were talking about this a little bit
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before we recorded and I've been through the gauntlet
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with Bitcoin toxicity as well.
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I came into this space professionally in 2017.
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I was originally running a multi strategy
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crypto asset hedge fund.
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And my initial investment thesis on the world
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was that Bitcoin was a big deal,
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but there were all these other exciting coins
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and projects and ways the technology was going to be used.
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And that view of reality met this immune,
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I guess you could say as an ideological immune system,
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this Bitcoin toxicity and that it's kind of a filter
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that's trying to catch bad or useless
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or even scamming ideas that this space is very well known for.
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As we've touched on today, Bitcoin, in my opinion,
link |
is this world shattering innovation,
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but it's in a sea of the most scammy stuff ever, right?
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People, anybody can go and create a coin.
link |
So you can go and launch one immediately online
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and you can throw up a website, an advisor page,
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post a white paper talking about
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how great your technology is gonna be
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and how it's gonna change the world.
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And then you can raise $30 million in Bitcoin
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or Ethereum in 30 seconds kind of thing.
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So it's drawn in a lot of this scam artistry, you might say.
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And I think people living through that,
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because there is this natural predilection for people
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when they first come into Bitcoin, you're excited about it,
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then you get lost in the shit coin universe.
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And then just looking at the market success
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of Bitcoin versus, and when I use the word shit coin,
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You say with all the love in the world.
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All the love in the world.
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I guess you could call me a toxic maximalist in some ways,
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although I consider myself a freedom maximalist,
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not a Bitcoin maximalist.
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Yeah, I saw that line, that's a good line.
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Bitcoin, tracking the market success of Bitcoin
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versus alternative crypto assets,
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the signal is very clear
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that Bitcoin has out competed all of them.
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So I think that Bitcoin cultural toxicity has evolved
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as an immune response to those bad ideas,
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which is actually, if you think about it,
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kind of is a tough love, right?
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You don't want new entrance to the space
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to get lost in shit coin jungle and learn the hard way,
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the way many Bitcoin maximalists have
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that the real innovation is Bitcoin.
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But like an immune system, I think it can also go too far.
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And so I think it's useful when it is defending the space
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from false narratives, we might say,
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but it becomes detrimental when it's attacking people
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that are inquiring about Bitcoin
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or people that are approaching Bitcoin
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with a good spirit and good intention
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and a desire to learn.
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Because then at that point,
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it's actually impeding the free flow of ideas,
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which the example in your clip
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that was totally taken out of context.
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And then you're literally just saying,
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I'm here to learn and contribute.
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I think I've got some stuff to do.
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And then people attack that.
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Like that doesn't make any fucking sense.
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It's like you're attacking someone who's approaching it
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in a good spirit and asking questions.
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Yeah, and I think sometimes talking about it,
link |
the toxicity in the Bitcoin community as an immune response
link |
has a negative effect of giving it a pass
link |
because like it almost says,
link |
look, it equates it with the human immune system,
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which seems to do a really good job.
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And so you could say that the toxicity has a lot of features
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in the sea of fraudulent projects
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that steal money from people.
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It's really useful to make sure
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that you give people the harsh truth
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about who is and isn't a scammer.
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You have to take it apart,
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take it away from that metaphor of the immune system
link |
and look at basic human nature.
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And human nature can go to some dark places,
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which is it's sad to say that some people,
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maybe many of us can enjoy for its own sake, the toxicity,
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the mockery, the derision,
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and you stop being part of the immune system
link |
that makes a successful idea propagate
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and start being a sort of a destructive virus yourself.
link |
And that's something I think about
link |
because I am new to this particular immune system,
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but I've explored other immune systems.
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And I think you understand this world much better than me,
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but I tend to prefer sort of love
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as a mechanism for spreading ideas,
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to err on the side of love and kindness
link |
and almost like an open mindedness
link |
in a way where you're constantly lowering yourself
link |
in the face of other ideas, constantly questioning yourself.
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But I think I understand that that might be more applicable
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in certain contexts,
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like maybe in the space of science or something like that.
link |
But in the space of Bitcoin, as it currently stands,
link |
there's so many people that are trying to scam others
link |
out of their money
link |
that the kind of harshness required is different.
link |
Nevertheless, I do want to put it on people like yourself
link |
and others who I know you wouldn't consider yourself this,
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but you're one of the faces or leaders in this space
link |
to call people out a little bit,
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to inspire them to be more loving, I suppose.
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But it's difficult,
link |
because you want to walk that line carefully.
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You don't want to be too loving and open minded,
link |
otherwise your brain falls out.
link |
I get it, it's a difficult balance to walk.
link |
It is subtle and it's nuanced and it is difficult to walk.
link |
And I think that, that's why I try to say tough love,
link |
because when we're young, we may have certain ideas
link |
about the way we want our life to go,
link |
but then maybe our parents
link |
are not letting us do certain things.
link |
And we think they're, I know when I was a kid,
link |
I wanted to get my, when I was in fifth grade,
link |
I wanted to get my ear pierced.
link |
My mom wouldn't let me do it.
link |
And I was, oh, come on, mom, I thought it was so cool.
link |
And then two years later, I'm like, thank you, mom,
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for letting me get my ear pierced.
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I think it comes from a place of good intention
link |
that they are actually,
link |
they have asked themselves that question, right?
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That they've been inquiring
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in why not this crypto asset or this crypto asset?
link |
And they've done the exploration,
link |
they keep coming back to Bitcoin
link |
and they've seen people being taken advantage of.
link |
But to your point, it's like it can,
link |
this tough love can become detrimental,
link |
just like the immune system can become detrimental, right?
link |
It can overreact and it can actually harm the human body.
link |
So I would say that it's such a tricky and nuanced topic
link |
that even biology hasn't figured it out, right?
link |
A lot of people have autoimmune diseases.
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And then there's the other thing
link |
that we have this natural, I agree with you about love.
link |
I think love is like the deepest value.
link |
That's a whole nother philosophical thing,
link |
but we're biologically programmed to pay more attention
link |
to things that are adversarial or harmful, right?
link |
That's part of us protecting the meat suit, so to speak.
link |
So there is some maybe better delivery method
link |
by being a little bit toxic to really get the point across,
link |
like, hey, don't get lost over here.
link |
These things can hurt you.
link |
Really try to focus on Bitcoin.
link |
But the toxicity of that message,
link |
I guess it increases its ability
link |
to penetrate the individual, but it can also go too far.
link |
It's interesting, but I almost to push back a little bit,
link |
toxicity is a funny word.
link |
I think maybe another way to say it is,
link |
I brought up like Christopher Hitchens
link |
and somebody who like, okay,
link |
you might say he's toxic or something like that,
link |
because he's basically a intellectual powerhouse
link |
who's also a troll.
link |
So he's constantly, it's like guerrilla warfare
link |
in the space of ideas.
link |
He's very harsh in his disagreements and criticisms,
link |
but he's done with incredible grace and skill and poetry.
link |
We could use more of that.
link |
We could use more of that.
link |
So toxicity just like...
link |
These are just words.
link |
They can mean a lot of different things,
link |
but disagreement doesn't have to be done with love,
link |
but it should be done with skill if it's to be effective.
link |
So there's a lot of ways to be effective in guerrilla warfare,
link |
but you wanna learn how to shoot
link |
or whatever the weapon you're using and to do it well.
link |
Some people do it better than others.
link |
And it's worthwhile to learn to do it well.
link |
Again, I prefer love, but even love,
link |
just because you think you're communicating a good idea,
link |
which you very well may be,
link |
doesn't mean it also doesn't require skill