back to index

Michael Saylor: Bitcoin, Inflation, and the Future of Money | Lex Fridman Podcast #276


small model | large model

link |
00:00:00.000
Remember George Washington, you know how he died?
link |
00:00:02.200
Well, meaning physicians bled him to death.
link |
00:00:04.680
And this was the most important patient in the country,
link |
00:00:08.340
maybe in the history of the country,
link |
00:00:10.480
and we bled him to death, trying to help him.
link |
00:00:13.660
So when you're actually inflating the money supply
link |
00:00:17.200
at 7%, but you're calling it 2%
link |
00:00:20.240
because you wanna help the economy,
link |
00:00:22.840
you're literally bleeding the free market to death.
link |
00:00:27.840
But the sad fact is George Washington went along with it
link |
00:00:31.400
because he thought that they were gonna do him good.
link |
00:00:33.920
And the majority of the society, most companies,
link |
00:00:39.440
most conventional thinkers, you know, the working class,
link |
00:00:44.480
they go along with this because they think
link |
00:00:47.120
that someone has their best interest in mind.
link |
00:00:49.820
And the people that are bleeding them to death believe,
link |
00:00:53.740
they believe that prescription
link |
00:00:55.480
because their mental models are just so defective.
link |
00:01:00.440
The following is a conversation with Michael Saylor,
link |
00:01:03.000
one of the most prominent and brilliant
link |
00:01:04.960
Bitcoin proponents in the world.
link |
00:01:06.840
He is the CEO of MicroStrategy,
link |
00:01:09.760
founder of Saylor Academy, graduate of MIT,
link |
00:01:13.880
and Michael is one of the most fascinating
link |
00:01:16.440
and rigorous thinkers I've ever gotten a chance
link |
00:01:18.640
to explore ideas with.
link |
00:01:20.220
He can effortlessly zoom out to the big perspectives
link |
00:01:23.240
of human civilization and human history
link |
00:01:25.520
and zoom back in to the technical details of blockchains,
link |
00:01:29.720
markets, governments, and financial systems.
link |
00:01:33.120
This is the Lex Friedman podcast.
link |
00:01:35.120
To support it, please check out our sponsors
link |
00:01:37.320
in the description.
link |
00:01:38.360
And now, dear friends, here's Michael Saylor.
link |
00:01:43.440
Let's start with a big question of truth and wisdom.
link |
00:01:48.200
When advanced humans or aliens or AI systems,
link |
00:01:50.720
let's say five to 10 centuries from now,
link |
00:01:53.280
look back at Earth on this early 21st century,
link |
00:01:58.240
how much do you think they would say we understood
link |
00:02:01.120
about money and economics, or even about engineering,
link |
00:02:04.960
science, life, death, meaning, intelligence,
link |
00:02:07.240
consciousness, all the big interesting questions?
link |
00:02:12.240
I think they would probably give us a B minus on engineering,
link |
00:02:17.240
on all the engineering things, the hard sciences.
link |
00:02:23.120
A passing grade.
link |
00:02:24.760
Like we're doing okay.
link |
00:02:26.240
We're working our way through rockets and jets
link |
00:02:28.680
and electric cars and electricity transport systems
link |
00:02:32.880
and nuclear power and space flight and the like.
link |
00:02:37.280
And if you look at the walls that grace the great court
link |
00:02:43.800
at MIT, it's full of all the great thinkers
link |
00:02:46.640
and they're all pretty admirable.
link |
00:02:48.880
You know, if you could be with Newton or Gauss
link |
00:02:52.320
or Madame Curie or Einstein, you know, you would respect them.
link |
00:02:59.400
I would say they'd give us like a D minus on economics.
link |
00:03:04.880
Like, you know, an F plus or a D minus.
link |
00:03:08.000
You see, I have an optimistic vision.
link |
00:03:09.720
First of all, optimistic vision of engineering,
link |
00:03:12.120
because everybody you've listed, not everybody,
link |
00:03:15.240
but most people you've listed is just
link |
00:03:16.920
over the past couple of centuries.
link |
00:03:19.280
And maybe stretches a little farther back,
link |
00:03:21.240
but mostly all the cool stuff we've done in engineering
link |
00:03:24.400
is the past couple of centuries.
link |
00:03:26.440
I mean, Archimedes, you know, had his virtues.
link |
00:03:31.480
You know, I studied the history of science at MIT
link |
00:03:33.720
and I also studied aerospace engineering.
link |
00:03:35.960
And so I clearly have a bias in favor of science.
link |
00:03:39.840
And if I look at the past 10,000 years
link |
00:03:42.520
and I consider all of the philosophy and the politics
link |
00:03:47.120
and their impact on the human condition,
link |
00:03:49.880
I think it's a wash for every politician
link |
00:03:51.920
that came up with a good idea.
link |
00:03:53.560
Another politician came up with a bad idea, right?
link |
00:03:56.960
And it's not clear to me that, you know,
link |
00:03:59.400
most of the political and philosophical, you know,
link |
00:04:03.120
contributions to the human race and the human conditions
link |
00:04:07.040
have advanced so much.
link |
00:04:08.400
I mean, we're still taking, you know,
link |
00:04:10.680
taking guidance and admiring, Aristotle and Plato
link |
00:04:14.640
and Seneca and the like.
link |
00:04:17.280
And on the other hand, you know,
link |
00:04:19.760
if you think about what has made the human condition better,
link |
00:04:25.360
fire, water, harnessing of wind energy,
link |
00:04:30.840
try to row across an ocean, right?
link |
00:04:33.560
Not easy.
link |
00:04:34.800
And for people who are just listening or watching,
link |
00:04:37.600
there's a beautiful sexy ship from 16th, 17th century.
link |
00:04:42.160
This is a 19th century handmade model
link |
00:04:44.400
of a 17th century sailing ship,
link |
00:04:47.560
which is of the type that the Dutch East India's company
link |
00:04:51.160
used to sail the world and trade.
link |
00:04:54.120
So that was made, you know,
link |
00:04:56.160
the original is made sometime in the 1600s
link |
00:04:59.560
and then this model is made in the 19th century
link |
00:05:03.480
by individuals.
link |
00:05:04.560
Both the model and the ship itself
link |
00:05:06.280
is engineering at its best and just imagine,
link |
00:05:08.440
just like rock is flying out to space,
link |
00:05:10.160
how much hope this filled people with,
link |
00:05:12.120
exploring the unknown, going into the mystery.
link |
00:05:17.080
Both the entrepreneurs and the business people
link |
00:05:19.720
and the engineers and just humans, what's out there?
link |
00:05:23.120
What's out there to be discovered?
link |
00:05:24.520
Yeah, the metaphor of human beings leaving shore
link |
00:05:27.760
sailing across the horizon,
link |
00:05:29.600
risking their lives in pursuit of a better life
link |
00:05:32.080
is an incredibly powerful one.
link |
00:05:33.820
In 1900, I suppose the average life expectancy is 50.
link |
00:05:41.820
During the Revolutionary War,
link |
00:05:43.740
you know, while our founding fathers were fighting
link |
00:05:46.020
to establish, you know, life, liberty,
link |
00:05:48.820
pursuit of happiness, the constitution,
link |
00:05:51.200
average life expectancy of it's like 32,
link |
00:05:54.700
some between 32 and 36.
link |
00:05:56.900
So all the sound in the fury doesn't make you live past 32,
link |
00:06:01.300
but what does, right, antibiotics?
link |
00:06:04.340
Conquest of infectious diseases,
link |
00:06:06.620
if we understand the science of infectious disease,
link |
00:06:10.460
you know, sterilizing a knife and harnessing antibiotics
link |
00:06:16.020
gets you from 50 to 70 and that happened fast, right?
link |
00:06:18.880
That happens from 1900 to 1950 or something like that.
link |
00:06:24.440
And I think if you look at the human condition,
link |
00:06:28.140
you ever get on one of those rowing machines
link |
00:06:31.620
where they actually keep track of your watts output
link |
00:06:34.180
when you're on the, it's like 200 is a lot.
link |
00:06:38.660
Okay, 200 is a lot.
link |
00:06:41.100
So a kilowatt hour is like all the energy
link |
00:06:44.820
that a human trained athlete can deliver in a day.
link |
00:06:50.220
And probably not 1% of the people in the world
link |
00:06:53.940
could deliver a kilowatt hour in a day
link |
00:06:56.220
and the commercial value of a kilowatt hour,
link |
00:06:59.060
the retail value is 11 cents today.
link |
00:07:02.020
And the wholesale value is two cents.
link |
00:07:05.580
And so you have to look at the contribution
link |
00:07:10.180
of politicians and philosophers and economists
link |
00:07:13.580
to the human condition.
link |
00:07:15.300
And it's like at best to wash one way or the other.
link |
00:07:19.060
And then if you look at the contribution of John D. Rockefeller
link |
00:07:22.940
when he delivered you a barrel of oil,
link |
00:07:25.660
and the energy in oil, liquid energy
link |
00:07:29.420
or the contribution of Tesla as we deliver electricity.
link |
00:07:36.260
And what's the impact on the human condition
link |
00:07:38.420
if I have electric power, if I have chemical power,
link |
00:07:43.420
if I have wind energy,
link |
00:07:45.340
if I can actually set up a reservoir,
link |
00:07:47.940
create a dam, spend a turbine
link |
00:07:51.260
and generate energy from a hydraulic source,
link |
00:07:55.780
that's extraordinary, right?
link |
00:07:58.060
And so our ability to cross the ocean,
link |
00:08:02.380
our ability to grow food, our ability to live,
link |
00:08:05.980
it's technology that gets the human race from,
link |
00:08:10.020
you know, a brutal life where life expectancy is 30
link |
00:08:15.020
to a world where life expectancy is 80.
link |
00:08:18.340
You gave a D minus to the economists.
link |
00:08:20.620
So are they too like the politicians to wash
link |
00:08:23.340
in terms of there's good ideas and bad ideas
link |
00:08:25.980
and that tiny delta between good and bad
link |
00:08:30.180
is how you squeak past the F plus
link |
00:08:32.820
onto the D minus territory?
link |
00:08:34.940
I think most economic ideas are bad ideas.
link |
00:08:38.100
Like, you know, like take us back to MIT
link |
00:08:43.100
and you want to solve a fluid dynamics problem.
link |
00:08:46.100
Like design the shape of the hull of that ship
link |
00:08:49.900
or you want to design an airfoil, a wing,
link |
00:08:52.980
or if you want to design an engine
link |
00:08:56.260
or a nozzle in a rocket ship,
link |
00:09:00.340
you wouldn't do it with simple arithmetic.
link |
00:09:03.340
You wouldn't do it with a scalar.
link |
00:09:04.740
There's not a single number, right?
link |
00:09:06.380
It's vector math, you know, computational fluid dynamics
link |
00:09:10.180
is indimensional, higher level math, you know?
link |
00:09:14.700
Complicated stuff.
link |
00:09:16.260
So when an economist says the inflation rate is 2%,
link |
00:09:20.460
that's a scalar.
link |
00:09:21.580
And when an economist says,
link |
00:09:23.980
it's not a problem to print more money
link |
00:09:26.500
because the velocity of the money is very low,
link |
00:09:29.580
monetary velocity is low.
link |
00:09:31.180
That's another scalar.
link |
00:09:33.100
Okay, so the truth of the matter is
link |
00:09:37.500
inflation is not a scalar.
link |
00:09:39.180
Inflation is an indimensional vector.
link |
00:09:42.140
Money velocity is not a scalar.
link |
00:09:47.420
Saying what's the velocity of money?
link |
00:09:50.340
Oh, it's slow or it's fast.
link |
00:09:52.740
It ignores the question of
link |
00:09:55.340
what medium is the money moving through?
link |
00:09:58.140
And the same way that, you know,
link |
00:10:00.460
what's the speed of sound?
link |
00:10:02.820
Okay, well, what is sound, right?
link |
00:10:05.140
Sound, you know, sound is a compression wave.
link |
00:10:09.260
It's energy moving through a medium,
link |
00:10:12.540
but the speed is different.
link |
00:10:14.140
So for example, the speed of sound through air
link |
00:10:16.500
is different than the speed of sound through water.
link |
00:10:19.100
And sound moves faster through water.
link |
00:10:21.460
It moves faster through a solid
link |
00:10:22.820
and it moves faster through a stiffer solid.
link |
00:10:25.380
So there isn't one.
link |
00:10:27.260
What is the fundamental problem
link |
00:10:28.740
with the way economists reduce the world down to a model?
link |
00:10:32.220
Is it too simple?
link |
00:10:33.860
Or is it just even the first principles
link |
00:10:35.940
of constructing the model is wrong?
link |
00:10:37.900
I think that the fundamental problem is
link |
00:10:41.900
if you see the world as a scalar,
link |
00:10:43.820
you simply pick the one number
link |
00:10:46.980
which supports whatever you wanna do
link |
00:10:50.580
and you ignore the universe of other consequences
link |
00:10:55.700
from your behavior.
link |
00:10:57.220
In general, I don't know if you've heard
link |
00:10:59.060
of like Eric Watson has been talking about this
link |
00:11:02.380
with gauge theory.
link |
00:11:03.220
So different kinds of approaches from the physics world,
link |
00:11:06.660
from the mathematical world to extend
link |
00:11:09.380
past this scalar view of economics.
link |
00:11:13.260
So gauge theory is one way that comes from physics.
link |
00:11:16.100
Do you find that a way of exploring economics interesting?
link |
00:11:20.820
So outside of cryptocurrency,
link |
00:11:22.700
outside of the extra technologies and so on,
link |
00:11:24.380
just analysis of how economics works.
link |
00:11:27.420
Do you find that interesting?
link |
00:11:30.660
Yeah, I think that if we're gonna wanna
link |
00:11:33.260
really make any scientific progress in economics,
link |
00:11:36.020
we have to apply much more computationally intensive
link |
00:11:40.740
and richer forms of mathematics.
link |
00:11:43.180
So simulation perhaps or?
link |
00:11:45.300
Yeah, you know, when I was in MIT,
link |
00:11:47.100
I studied system dynamics, you know,
link |
00:11:49.780
they taught it out of the Sloan School.
link |
00:11:51.100
It was developed by Jay Forrester
link |
00:11:53.660
who was an extraordinary computer scientist.
link |
00:11:59.300
And when we've created models of economic behavior,
link |
00:12:04.300
they were all multidimensional nonlinear models.
link |
00:12:07.940
So if you wanna describe how anything works
link |
00:12:11.540
in the real world,
link |
00:12:12.620
you have to start with the concept of feedback.
link |
00:12:15.140
If I double the price of something,
link |
00:12:17.780
demand will fall and attempts to create supply will increase.
link |
00:12:22.940
And there will be a delay before the capacity increases.
link |
00:12:27.620
There'll be an instant demand change
link |
00:12:29.980
and there'll be rippling effects
link |
00:12:31.700
throughout every other segment of the economy.
link |
00:12:33.980
Downstream and upstream of such thing.
link |
00:12:36.780
So it's kind of common sense,
link |
00:12:39.020
but most economics, most classical economics,
link |
00:12:41.460
it's always, you know, taught with linear models,
link |
00:12:45.700
you know, fairly simplistic linear models.
link |
00:12:48.300
And oftentimes even, I'm really shocked today
link |
00:12:52.300
that the entire mainstream dialogue of economics
link |
00:12:56.380
has been captured by scale or arithmetic.
link |
00:13:00.300
For example, if you read, you know,
link |
00:13:04.500
read any article in the New York Times
link |
00:13:06.340
or the Wall Street Journal, right?
link |
00:13:07.700
They just refer to, there's an inflation number
link |
00:13:09.980
or the CPI or the inflation rate is X.
link |
00:13:14.380
And if you look at all the historic studies
link |
00:13:17.340
of the impact of inflation,
link |
00:13:19.580
generally they're all based upon the idea
link |
00:13:23.940
that inflation equals CPI
link |
00:13:26.220
and then they try to extrapolate from that
link |
00:13:28.420
and then you just get nowhere with it.
link |
00:13:32.300
So at the very least, we should be considering inflation
link |
00:13:35.820
and other economics concept as a nonlinear dynamical system.
link |
00:13:39.820
So nonlinearity and also just embracing the full complexity
link |
00:13:44.060
of just how the variables interact,
link |
00:13:45.620
maybe through simulation,
link |
00:13:47.180
maybe some have some interesting models around that.
link |
00:13:50.220
Wouldn't it be refreshing if somebody for once
link |
00:13:52.500
published a table of the change in price
link |
00:13:55.340
of every product, every service and every asset
link |
00:13:58.460
and every place over time?
link |
00:14:01.380
You said table.
link |
00:14:02.300
Some of that also is the task of visualization,
link |
00:14:05.060
how to extract from this complex set of numbers patterns
link |
00:14:09.780
that somehow indicate something fundamental
link |
00:14:14.020
about what's happening.
link |
00:14:15.220
So like summarization of data is still important.
link |
00:14:18.820
Perhaps summarization not down to a single scale of value,
link |
00:14:22.220
but looking at that whole sea of numbers,
link |
00:14:25.420
you have to find patterns.
link |
00:14:30.020
Like what is inflation in a particular sector?
link |
00:14:32.380
What is it maybe a change over time?
link |
00:14:34.940
Maybe different geographical regions,
link |
00:14:37.380
things of that nature.
link |
00:14:39.180
I think that's kind of,
link |
00:14:40.580
I don't know even what that task is.
link |
00:14:43.020
That's what you could look at machine learning.
link |
00:14:44.940
You can look at AI with that perspective,
link |
00:14:47.260
which is like how do you represent
link |
00:14:50.060
what's happening efficiently as efficiently as possible?
link |
00:14:54.060
That's never going to be a single number,
link |
00:14:55.700
but it might be a compressed model
link |
00:14:57.220
that captures something beautiful,
link |
00:14:59.580
something fundamental about what's happening.
link |
00:15:02.060
It's an opportunity for sure, right?
link |
00:15:08.900
If we take, for example, during the pandemic,
link |
00:15:13.220
the response of the political apparatus
link |
00:15:16.700
was to lower interest rates to zero
link |
00:15:20.180
and to start buying assets, in essence, printing money.
link |
00:15:24.700
And the defense was there's no inflation.
link |
00:15:28.700
But of course, you had one part of the economy
link |
00:15:31.980
where it was locked down,
link |
00:15:33.500
so it was illegal to buy anything.
link |
00:15:36.660
But you couldn't, you know, it was either illegal
link |
00:15:39.220
or it was impractical.
link |
00:15:41.380
So it would be impossible for demand to manifest.
link |
00:15:44.260
So of course, there is no inflation.
link |
00:15:46.140
On the other hand,
link |
00:15:47.860
there was instantaneous immediate inflation
link |
00:15:51.580
in another part of the economy.
link |
00:15:53.580
For example, you lower the interest rates to zero.
link |
00:15:58.220
At one point we saw the swap rate on a 30 year note
link |
00:16:01.460
go to 72 basis points.
link |
00:16:04.420
Okay, that means that the value
link |
00:16:06.700
of a long dated bond immediately inflates.
link |
00:16:09.540
So the bond market had hyperinflation
link |
00:16:12.060
within minutes of these financial decisions.
link |
00:16:17.660
The asset market had hyperinflation.
link |
00:16:20.460
We had what you call a K shape recovery,
link |
00:16:23.340
what we affectionately call a K shape recovery.
link |
00:16:26.140
Main street shut down,
link |
00:16:27.660
Wall Street recovered all within six weeks.
link |
00:16:30.980
The inflation was in the assets,
link |
00:16:33.340
like in the stocks, in the bonds.
link |
00:16:37.220
You know, if you look today,
link |
00:16:38.340
you see that a typical house, according to the case,
link |
00:16:42.020
Schiller index today is up 19.2% year over year.
link |
00:16:46.700
So if you're a first time home buyer,
link |
00:16:50.420
the inflation rate is 19%.
link |
00:16:53.700
The formal CPI announced a 7.9%.
link |
00:16:58.940
You can pretty much create any inflation rate you want
link |
00:17:03.380
by constructing a market basket,
link |
00:17:05.980
a weighted basket of products or services
link |
00:17:08.820
or assets that yield you the answer.
link |
00:17:11.860
I think that, you know,
link |
00:17:13.780
the fundamental failing of economists is,
link |
00:17:16.420
first of all, they don't really have a term
link |
00:17:20.780
for asset inflation, right?
link |
00:17:24.340
What's an asset, what's asset hyperinflation?
link |
00:17:27.340
You mentioned bond market swap rate
link |
00:17:29.780
and asset is where the all majority
link |
00:17:32.300
of the hyperinflation happened.
link |
00:17:33.780
What's inflation?
link |
00:17:35.780
What's hyperinflation?
link |
00:17:36.820
What's an asset market?
link |
00:17:39.340
I'm gonna ask so many dumb questions.
link |
00:17:40.860
In the conventional economic world,
link |
00:17:43.540
you would treat inflation as the rate of increase in price
link |
00:17:48.980
of a market basket of consumer products
link |
00:17:52.260
defined by a government agency.
link |
00:17:56.060
So they have like traditional things
link |
00:17:58.460
that a regular consumer would be buying.
link |
00:18:01.180
The government selects like toilet paper, food,
link |
00:18:05.740
toaster, refrigerator, electronics,
link |
00:18:09.060
all that kind of stuff.
link |
00:18:09.900
And it's like a representative basket of goods
link |
00:18:14.540
that lead to a content existence on this earth
link |
00:18:18.220
for a regular consumer.
link |
00:18:19.780
They define a synthetic metric, right?
link |
00:18:22.700
I mean, I'm gonna say you should have 1,000 square foot
link |
00:18:25.940
apartment and you should have a used car
link |
00:18:29.780
and you should eat three hamburgers a week.
link |
00:18:33.180
Now, 10 years go by and the apartment costs more.
link |
00:18:37.460
I could adjust the market basket by a,
link |
00:18:40.740
they call them hedonic adjustments.
link |
00:18:42.220
I could decide that it used to be a 1970
link |
00:18:45.140
to 1,000 square feet, but in the year 2020,
link |
00:18:48.660
you only need 700 square feet
link |
00:18:50.460
because we've miniaturized televisions
link |
00:18:53.700
and we've got more efficient electric appliances
link |
00:18:56.740
and because things have collapsed into the iPhone,
link |
00:18:58.620
you just don't need as much space.
link |
00:19:00.300
So now I, it may be that the apartment costs 50% more,
link |
00:19:04.780
but after the hedonic adjustment, there is no inflation
link |
00:19:07.460
because I just downgraded the expectation
link |
00:19:10.260
of what a normal person should have.
link |
00:19:11.860
So the synthetic nature of the metric
link |
00:19:13.460
allows for manipulation by people in power?
link |
00:19:17.540
Pretty much.
link |
00:19:19.740
I guess my criticism of economists is rather than embracing
link |
00:19:24.140
inflation based upon its fundamental idea,
link |
00:19:28.260
which is the rate at which the price of things go up, right?
link |
00:19:33.540
They've been captured by mainstream conventional thinking
link |
00:19:39.260
to immediately equate inflation
link |
00:19:41.340
to the government issued CPI or government issued PCE
link |
00:19:46.020
or government issued PPI measure,
link |
00:19:48.300
which was never the rate at which things go up.
link |
00:19:51.460
It's simply the rate at which a synthetic basket of products
link |
00:19:56.460
and services the government wishes to track go up.
link |
00:20:00.220
Now the problem with that is two big things.
link |
00:20:04.460
One thing is the government gets to create the market basket
link |
00:20:08.540
and so they keep changing what's in the basket over time.
link |
00:20:13.340
So I mean, if I keep, if I said three years ago,
link |
00:20:16.860
you should go see 10 concerts a year
link |
00:20:18.660
and the concert tickets now cost $200 each.
link |
00:20:21.620
Now it's $2,000 a year to go see concerts.
link |
00:20:24.660
Now I'm in charge of calculating inflation.
link |
00:20:27.060
So I redefine, you know, your entertainment quota
link |
00:20:30.380
for the year to be eight Netflix streaming concerts
link |
00:20:33.580
and now they don't cost $2,000.
link |
00:20:35.540
They cost nothing and there is no inflation
link |
00:20:37.820
but you don't get your concerts, right?
link |
00:20:39.620
So the problem starts with continually changing
link |
00:20:44.380
the definition of the market basket.
link |
00:20:47.500
But in my opinion, that's not the biggest problem.
link |
00:20:50.780
The more egregious problem is the fundamental idea
link |
00:20:57.380
that assets aren't products or services.
link |
00:21:00.380
Assets can't be inflated.
link |
00:21:02.620
What's an asset?
link |
00:21:03.820
A house, a share of Apple stock,
link |
00:21:08.060
a bond, a Bitcoin is an asset or a Picasso painting.
link |
00:21:16.460
So...
link |
00:21:17.500
Not a consumable good.
link |
00:21:19.620
Not an Apple that you can eat.
link |
00:21:23.180
Right, if I throw away an asset,
link |
00:21:26.260
then I'm not on the hook to track the inflation rate for it.
link |
00:21:30.260
So what happens if I change the policy
link |
00:21:33.100
such that, let's take the classic example,
link |
00:21:35.700
a million dollar bond at a 5% interest rate
link |
00:21:38.260
gives you $50,000 a year in risk free income.
link |
00:21:41.900
You might retire on $50,000 a year
link |
00:21:44.260
in a low cost jurisdiction.
link |
00:21:46.860
So the cost of social security or early retirement
link |
00:21:49.820
is $1 million when the interest rate is 5%.
link |
00:21:53.980
During the crisis of March of 2020,
link |
00:21:56.740
the interest rate on a 10 year bond went to 50 basis points.
link |
00:22:01.420
So now the cost of that bond is $10 million.
link |
00:22:05.500
Okay, the cost of social security
link |
00:22:07.300
went from a million dollars to $10 million.
link |
00:22:09.740
So if you wanted to work your entire life, save money
link |
00:22:13.340
and then retire risk free and live happily ever after
link |
00:22:16.580
on a $50,000 salary, live in on a beach in Mexico
link |
00:22:19.740
wherever you want it to go, you had hyperinflation.
link |
00:22:23.340
The cost of your aspiration increased by a factor of 10
link |
00:22:28.220
over the course of some amount of time.
link |
00:22:30.660
In fact, in that case,
link |
00:22:32.380
that was over the course of about 12 years, right?
link |
00:22:35.380
As the inflation rate ground down, the asset traded up,
link |
00:22:39.540
but the conventional view is,
link |
00:22:43.220
oh, that's not a problem
link |
00:22:44.900
because it's good that the bond is highly priced
link |
00:22:49.220
because we own the bond.
link |
00:22:51.100
Or what's the problem with the inflation rate
link |
00:22:54.540
and housing being 19%?
link |
00:22:56.860
It's an awful problem for a 22 year old
link |
00:22:59.860
that's starting their first job,
link |
00:23:01.460
that's saving money to buy a house,
link |
00:23:03.620
but it would be characterized as a benefit to society
link |
00:23:07.660
by a conventional economist who would say,
link |
00:23:09.620
well, housing asset values are higher
link |
00:23:12.900
because of interest rate fluctuation.
link |
00:23:14.820
And now the economy's got more wealth.
link |
00:23:17.180
And so that's viewed as a benefit.
link |
00:23:20.900
So the, what's being missed here,
link |
00:23:24.100
like the suffering of the average person
link |
00:23:27.220
or the struggle, the suffering,
link |
00:23:31.180
the pain of the average person,
link |
00:23:34.260
like metrics that captured that within the economic system.
link |
00:23:36.740
Is that, is it when you're talking about?
link |
00:23:38.060
One way to say it is a conventional view of inflation
link |
00:23:42.460
as CPI understates the human misery
link |
00:23:46.100
that's inflicted upon the working class
link |
00:23:49.540
and on mainstream companies by the political class.
link |
00:23:57.980
And so it's a massive shift of wealth
link |
00:24:00.220
from the working class to the property class.
link |
00:24:03.060
It's a massive shift of power from the free market
link |
00:24:07.100
to the centrally governed or the controlled market.
link |
00:24:11.260
It's a massive shift of power
link |
00:24:12.900
from the people to the government.
link |
00:24:14.900
And maybe one more illustrative point here, Alexis,
link |
00:24:20.980
is what do you think the inflation rate's been
link |
00:24:23.500
for the past 100 years?
link |
00:24:25.860
Oh, you're talking about the scaler again?
link |
00:24:27.740
If you took a survey of everybody on the street
link |
00:24:30.660
and you asked them, what do they think inflation was?
link |
00:24:33.340
What is it, you know?
link |
00:24:35.500
You remember when Jerome Powell said our target's 2%
link |
00:24:37.820
but we're not there.
link |
00:24:38.820
If you go around the corner,
link |
00:24:42.460
I have posted the deed to this house sold in 1930.
link |
00:24:48.420
Okay, and the number on that deed is $100,000, 1930.
link |
00:24:54.980
And if you go on Zillow and you get the Z estimate.
link |
00:24:58.780
Is it higher than that?
link |
00:25:00.180
$30,500,000.
link |
00:25:02.100
Yeah.
link |
00:25:02.940
So that's 92 years, 1930 or 2022, and in 92 years,
link |
00:25:12.220
we've had 305X increase in price of the house.
link |
00:25:17.220
Now, if you actually back calculate,
link |
00:25:19.380
you come to a conclusion that the inflation rate
link |
00:25:22.460
was approximately 6.5% a year every year for 92 years.
link |
00:25:27.460
Okay, and there's nobody in government,
link |
00:25:33.340
no conventional economists that would ever admit
link |
00:25:36.020
to an inflation rate of 7% a year
link |
00:25:38.580
in the US dollar over the last century.
link |
00:25:41.540
Now, if you dig deeper,
link |
00:25:45.100
I mean, one guy that's done a great job working on this
link |
00:25:48.860
is Saifidine Amos who wrote the book, The Bitcoin Standard.
link |
00:25:52.420
And he notes that on average,
link |
00:25:54.420
it looks like the inflation rate and the money supply
link |
00:25:57.820
is about 7% a year all the way up to the year 2020.
link |
00:26:03.100
If you look at the S&P index,
link |
00:26:04.900
which is a market basket of scarce desirable stocks,
link |
00:26:09.260
it returned about 10%.
link |
00:26:12.140
If you talk to 10% a year for 100 years,
link |
00:26:15.580
the money supply is expanding at 7% 100 years.
link |
00:26:19.300
If you actually talk to economists
link |
00:26:21.500
or you look at the economy and you ask the question,
link |
00:26:24.500
how fast does the economy grow in its entirety
link |
00:26:28.220
year over year, generally about two to 3%
link |
00:26:31.660
like the sum total impact of all this technology
link |
00:26:34.820
and human ingenuity might get you a two and a half,
link |
00:26:37.980
3% improvement a year.
link |
00:26:39.860
As measured by GDP.
link |
00:26:42.900
Are you okay with that?
link |
00:26:44.340
I'm not sure I go that far yet,
link |
00:26:45.740
but I would just say that if you had the human race
link |
00:26:49.740
doing stuff, and if you ask the question,
link |
00:26:53.540
how much more efficiently will we do the stuff
link |
00:26:56.300
next year than this year?
link |
00:26:57.500
Or what's the value of all of our innovations
link |
00:27:01.500
and inventions and investments in the past 12 months?
link |
00:27:05.140
You'd be hard pressed to say we get 2% better.
link |
00:27:09.500
Typical investor thinks they're 10% better every year.
link |
00:27:13.620
So if you look at what's going on,
link |
00:27:16.180
really when you're holding a million dollars of stocks
link |
00:27:19.260
and you're getting a 10% gain a year,
link |
00:27:21.220
you really get a 7% expansion of the money supply.
link |
00:27:25.460
You're getting a two or 3% gain under best circumstances.
link |
00:27:30.060
And another way to say that is,
link |
00:27:33.300
if the money supply stopped expanding at 7% a year,
link |
00:27:36.220
the S&P yield might be 3% and not 10%.
link |
00:27:39.580
It probably should be.
link |
00:27:42.820
Now that gets you to start to ask a bunch
link |
00:27:45.740
of other fundamental questions.
link |
00:27:47.180
Like, if I borrow a billion dollars and pay 3% interest
link |
00:27:51.420
and the money supply expands at 7% to 10% a year
link |
00:27:54.980
and I ended up making a 10% return
link |
00:27:58.900
on a billion dollar investment paying 3% interest,
link |
00:28:02.100
is that fair?
link |
00:28:03.940
And who suffered so that I could do that?
link |
00:28:07.380
Because in an environment where you're just inflating
link |
00:28:11.420
the money supply and you're holding the assets constant,
link |
00:28:15.260
it stands the reason that the price of all the assets
link |
00:28:18.540
is going to appreciate somewhat proportional
link |
00:28:21.660
to the money supply and the difference
link |
00:28:24.180
in asset appreciation is gonna be a function
link |
00:28:26.780
of the scarce desirable quality of the assets
link |
00:28:29.660
and to what extent can I make more of them
link |
00:28:32.420
and to what extent are they truly limited in supply?
link |
00:28:37.940
Yeah, so we'll get to a lot of the words you said there.
link |
00:28:41.620
The scarer city and so connected to how limited they are
link |
00:28:47.060
and the value of those assets.
link |
00:28:49.740
But you also said, so the expansion of the money supply
link |
00:28:52.980
which is put another way is printing money.
link |
00:28:56.860
And so is that always bad, the expansion of the money supply?
link |
00:29:00.620
Is this just to put some terms on the table
link |
00:29:03.380
so we understand them?
link |
00:29:06.660
You nonchalantly say it's always on average,
link |
00:29:09.780
expanding every year, the money supply is expanding
link |
00:29:12.100
every year by seven percent.
link |
00:29:13.820
That's a bad thing, that's a university bad thing.
link |
00:29:17.260
It's awful, I guess to be precise, it's the currency.
link |
00:29:25.900
I would say money is monetary energy or economic energy.
link |
00:29:30.420
And the economic energy has to find its way into a medium.
link |
00:29:34.140
So if you wanna move it rapidly as a medium of exchange
link |
00:29:37.340
has to find its way into currency.
link |
00:29:39.460
But the money can also flow into property
link |
00:29:41.980
like a house or gold.
link |
00:29:44.380
If the money flows into property,
link |
00:29:46.900
it'll probably hold its value much better.
link |
00:29:50.060
If the money flows into currency, right?
link |
00:29:52.340
If you had put $100,000 in this house,
link |
00:29:56.140
you would have 305X return over 92 years.
link |
00:29:59.780
But if you had put the money, $100,000
link |
00:30:01.980
in a safe deposit box and buried it in the basement,
link |
00:30:05.300
you would have lost 99.7% of your wealth
link |
00:30:09.780
over the same time period.
link |
00:30:11.980
So the expansion of the currency
link |
00:30:17.860
creates a massive inefficiency in the society.
link |
00:30:20.180
What I'll call an adiabatic lapse.
link |
00:30:22.580
It's what we're doing is we're bleeding
link |
00:30:26.700
the civilization to death, right?
link |
00:30:29.020
What's the adiabatic, what's that word?
link |
00:30:31.940
Adiabatic lapse.
link |
00:30:33.020
Adiabatic.
link |
00:30:34.260
Right, in aerospace engineering,
link |
00:30:36.260
you wanna solve any problem,
link |
00:30:37.780
they start with the phrase,
link |
00:30:39.580
assume an adiabatic system.
link |
00:30:41.740
And what that means is a closed system.
link |
00:30:44.260
Okay, got it.
link |
00:30:45.580
I've got a container and in that container,
link |
00:30:48.220
no air leaves and no air enters,
link |
00:30:50.460
no energy exits or enters.
link |
00:30:52.420
So it's a closed system.
link |
00:30:54.540
So you've got the closed system lapse.
link |
00:30:57.100
Okay, what's a closed?
link |
00:30:59.180
Okay, I'm gonna use a.
link |
00:31:00.700
There's a leak in the ship.
link |
00:31:02.020
I'm gonna use a physical metaphor for you
link |
00:31:04.580
because you're the jujitsu, right?
link |
00:31:06.060
Like you got 10 pints of blood in your body.
link |
00:31:09.340
And so before your next workout,
link |
00:31:12.140
I'm gonna take one pint from you.
link |
00:31:15.020
Now you're gonna go exercise, but you're one pint,
link |
00:31:17.300
you've lost 10% of your blood.
link |
00:31:19.980
Okay, you're not gonna perform as well.
link |
00:31:22.900
It takes about one month for your body
link |
00:31:25.460
to replace the Rudd blood platelets.
link |
00:31:27.740
So what if I tell you every month,
link |
00:31:29.300
you gotta show up and I'm gonna bleed you?
link |
00:31:31.900
Okay, so if I'm draining the energy,
link |
00:31:35.700
I'm draining the blood from your body, you can't perform.
link |
00:31:39.460
If you, adiabatic lapse is when you go up an altitude,
link |
00:31:42.780
every 1,000 feet, you lose three degrees.
link |
00:31:45.820
You go 50,000 feet, you're 150 degrees colder than sea level.
link |
00:31:50.220
That's why you look at your instruments
link |
00:31:53.580
and instead of 80 degrees, you're minus 70 degrees.
link |
00:31:56.780
Why is the temperature falling?
link |
00:31:58.900
Temperature's falling because it's not a closed system.
link |
00:32:01.820
It's an open system as the air expands,
link |
00:32:04.500
the density falls, right?
link |
00:32:06.780
The energy per cubic whatever falls
link |
00:32:14.940
and therefore the temperature falls, right?
link |
00:32:16.900
The heat's falling out of the solution.
link |
00:32:18.940
So when you're inflating,
link |
00:32:21.900
let's say you're inflating the money,
link |
00:32:23.540
the currency supply by 6%,
link |
00:32:25.700
you're sucking 6% of the energy out of the fluid
link |
00:32:31.860
that the economy is using to function.
link |
00:32:34.620
So the currency, this kind of ocean of currency,
link |
00:32:37.540
that's a nice way for the economy to function.
link |
00:32:39.900
It's the most kind of,
link |
00:32:41.340
it's being inefficient when you expand the money supply,
link |
00:32:44.500
but it's the liquid,
link |
00:32:48.300
I'm trying to find the right kind of adjective here.
link |
00:32:50.820
It's how you do transactions at a scale of billions.
link |
00:32:54.980
Currency is the asset we use
link |
00:32:57.820
to move monetary energy around and you could use the dollar
link |
00:33:00.980
or you could use the peso or you could use the boulevard.
link |
00:33:04.540
Selling houses and buying houses is much more inefficient
link |
00:33:08.100
or like you can't transact
link |
00:33:11.580
between billions of people with houses.
link |
00:33:14.700
Yeah, properties don't make such good mediums of exchange.
link |
00:33:18.740
They make better stores of value
link |
00:33:20.860
and they have utility value
link |
00:33:22.740
if it's a ship or a house or a plane or a bushel of corn.
link |
00:33:28.620
Right?
link |
00:33:29.460
Can I zoom out just for,
link |
00:33:30.860
can we zoom out, keep zooming out
link |
00:33:32.340
until we reach the origin of human civilization?
link |
00:33:34.980
But on the way, ask,
link |
00:33:37.300
you gave economists a D minus,
link |
00:33:39.820
I'm not even gonna ask you what you give to governments.
link |
00:33:44.140
Do you think their failure, economists
link |
00:33:46.940
and government failure is malevolence or incompetence?
link |
00:33:53.020
I think policymakers are well intentioned
link |
00:33:56.300
but generally all government policy is inflationary
link |
00:34:00.540
and all government, it's inflammatory and inflationary.
link |
00:34:03.620
So what I mean by that is,
link |
00:34:06.060
when you have a policy pursuing supply chain independence,
link |
00:34:12.700
if you have an energy policy, if you have a labor policy,
link |
00:34:15.780
if you have a trade policy,
link |
00:34:17.380
if you have any kind of foreign policy,
link |
00:34:21.100
a domestic policy, a manufacturing policy,
link |
00:34:25.020
every one of these medical policy,
link |
00:34:27.780
every one of these policies interferes with the free market
link |
00:34:32.220
and generally prevents some rational actor
link |
00:34:36.900
from doing it in a cheaper, more efficient way.
link |
00:34:40.140
So when you layer them on top of each other,
link |
00:34:43.140
they all have to be paid for.
link |
00:34:44.940
If you wanna shut down the entire economy for a year,
link |
00:34:47.820
you have to pay for it.
link |
00:34:49.300
If you wanna fight a war, you have to pay for it.
link |
00:34:52.940
If you don't wanna use oil or natural gas,
link |
00:34:55.540
you have to pay for it.
link |
00:34:57.020
If you don't wanna manufacture semiconductors in China
link |
00:35:00.660
and you wanna manufacture them in the US,
link |
00:35:02.540
you gotta pay for it.
link |
00:35:03.580
If I rebuild the entire supply chain in Pennsylvania
link |
00:35:06.860
and I hire a bunch of employees
link |
00:35:08.820
and then I unionize the employees,
link |
00:35:11.460
then not only am I idle the factory in the Far East,
link |
00:35:16.860
it goes to 50% capacity.
link |
00:35:18.500
So whatever it sells, it has to raise the price on.
link |
00:35:22.340
And then I drive up the cost of labor
link |
00:35:24.540
for every other manufacturer in the US
link |
00:35:26.740
because I competing against them, right?
link |
00:35:30.020
I'm changing that condition.
link |
00:35:31.220
So everything gets less efficient,
link |
00:35:33.580
everything gets more expensive.
link |
00:35:35.580
And of course the government couldn't really pay for
link |
00:35:38.980
its policies and its wars with taxes.
link |
00:35:42.540
We didn't pay for World War I with tax.
link |
00:35:44.380
We didn't pay for World War II with tax.
link |
00:35:46.140
We didn't pay for Vietnam with tax.
link |
00:35:47.860
In fact, when you trace this,
link |
00:35:50.060
what you realize is the government
link |
00:35:51.700
never pays for all of its policies with tax.
link |
00:35:54.260
It pays for...
link |
00:35:55.100
Because it's too painful to ask,
link |
00:35:56.420
to raise the taxes to truly,
link |
00:35:58.700
transparently pay for the things you're doing with taxes,
link |
00:36:02.660
with taxpayer money, because they feel the pain.
link |
00:36:05.180
That's one interpretation or it's just too transparent.
link |
00:36:09.020
If people understood the true cost of war,
link |
00:36:13.620
they wouldn't wanna go to war.
link |
00:36:15.220
If you were told that you would lose 95% of your assets
link |
00:36:21.060
and 90% of everything you will be ever,
link |
00:36:23.940
will be taken from you,
link |
00:36:25.780
you might reprioritize your thought about a given policy
link |
00:36:30.140
and you might not vote for that politician.
link |
00:36:32.020
But you're still saying incompetence, not malevolence.
link |
00:36:35.700
So fundamentally, government creates a bureaucracy
link |
00:36:38.860
of incompetence is kind of how you look at it.
link |
00:36:42.140
I think a lack of humility, right?
link |
00:36:45.260
Like, if people had more humility,
link |
00:36:49.380
then they would realize...
link |
00:36:51.860
Humility about how little they know,
link |
00:36:53.900
how little they understand about the function
link |
00:36:56.220
of complex systems.
link |
00:36:57.060
There's a phrase from Quinneas towards movie Unforgiven
link |
00:36:59.420
where he says, a man's gotta know his limitations.
link |
00:37:02.020
I think that a lot of people overestimate
link |
00:37:07.740
what they can accomplish and experience,
link |
00:37:12.100
experience in life causes you to reevaluate that.
link |
00:37:17.780
So I mean, I've done a lot of things in my life
link |
00:37:20.100
and generally my mistakes were always my good ideas
link |
00:37:25.300
that I enthusiastically pursued.
link |
00:37:27.900
To the detriment of my great ideas
link |
00:37:31.140
that required 150% of my attention to prosper.
link |
00:37:36.220
So I think people pursue too many good ideas.
link |
00:37:39.540
You know, they all sound good,
link |
00:37:41.700
but there's just a limit to what you can accomplish.
link |
00:37:45.620
And everybody underestimates the challenges
link |
00:37:49.660
of implementing an idea, right?
link |
00:37:53.340
And they always overestimate the benefits
link |
00:37:57.540
of the pursuit of that.
link |
00:37:58.500
And so I think it's an overconfidence
link |
00:38:01.100
that causes an over exuberance in pursuit of policies.
link |
00:38:05.180
And as the ambition of the government expands,
link |
00:38:09.060
so must the currency supply.
link |
00:38:12.660
Well, you know, I could say the money supply,
link |
00:38:14.300
but let's say the currency supply.
link |
00:38:17.420
You can triple the number of pesos in the economy,
link |
00:38:21.300
but it doesn't triple the amount of manufacturing capacity
link |
00:38:25.060
in the set economy.
link |
00:38:26.980
And it doesn't triple the amount of assets in the economy.
link |
00:38:29.780
It just triples the pesos.
link |
00:38:31.100
So as you increase the currency supply,
link |
00:38:35.580
then the price of all those scarce desirable things
link |
00:38:39.500
will tend to go up rapidly.
link |
00:38:42.420
And the confidence of all of the institutions,
link |
00:38:47.140
the corporations and the individual actors
link |
00:38:50.180
and trading partners will collapse.
link |
00:38:53.460
If we take a tangent on a tangent
link |
00:38:55.260
and we will return soon to the big human civilization question.
link |
00:39:02.980
So if government naturally wants to buy stuff
link |
00:39:07.660
it can't afford, what's the best form of government?
link |
00:39:13.660
Anarchism, libertarianism.
link |
00:39:17.100
So not even, there's not even armies.
link |
00:39:20.060
There's no borders.
link |
00:39:21.820
That's anarchism.
link |
00:39:22.660
Not least.
link |
00:39:23.980
The smallest possible, the smallest possible.
link |
00:39:27.580
The best government would be the least
link |
00:39:29.380
and the debate will be over that.
link |
00:39:32.100
When you think about the stuff, do you think about,
link |
00:39:34.420
okay, government is the way it is.
link |
00:39:36.140
I, as a person that can generate great ideas,
link |
00:39:39.700
how do I operate in this world?
link |
00:39:41.420
Or do you also think about the big picture
link |
00:39:43.340
if we start a new civilization somewhere on Mars?
link |
00:39:47.460
Do you think about what's the ultimate form of government?
link |
00:39:50.980
What's at least a promising thing to try?
link |
00:39:59.100
You know, I have laser eyes on my profile on Twitter, Lex.
link |
00:40:06.780
What does that mean?
link |
00:40:07.620
And the significance of laser eyes is to focus
link |
00:40:11.580
on the thing that can make a difference.
link |
00:40:14.260
And if I look at the civilization,
link |
00:40:17.800
I would say half the problems in the civilization
link |
00:40:24.400
are due to the fact that our understanding of economics
link |
00:40:27.600
and money is defective.
link |
00:40:29.400
Half, 50%, I don't know.
link |
00:40:31.400
It's worth $500 trillion worth of problems.
link |
00:40:34.200
Like money represents all the economic energy
link |
00:40:40.200
and the civilization.
link |
00:40:41.200
And it kind of equates to all the products,
link |
00:40:44.200
all the services and all the assets
link |
00:40:46.600
that we have and wherever we're gonna have.
link |
00:40:48.600
So that's half.
link |
00:40:50.000
The other half of the problems in the civilization
link |
00:40:53.000
are medical and military and political
link |
00:40:59.000
and philosophical and, you know, and natural.
link |
00:41:05.000
And I think that there are a lot of different solutions
link |
00:41:08.800
to all those problems.
link |
00:41:10.200
And they're all, they are all honorable professions
link |
00:41:15.200
and they all merit a lifetime of consideration
link |
00:41:19.200
for the specialist in all those areas.
link |
00:41:22.600
I think that what I could offer it's constructive is
link |
00:41:29.600
inflation is completely misunderstood.
link |
00:41:32.400
It's a much bigger problem than we understand it to be.
link |
00:41:36.400
We need to introduce engineering and science techniques
link |
00:41:39.400
into economics if we wanna further the human condition.
link |
00:41:42.800
All government policy is inflationary, you know.
link |
00:41:47.800
And another pernicious myth is inflation is always
link |
00:41:52.800
and everywhere a monetary phenomena.
link |
00:41:54.800
You know, a famous quote by Milton Friedman, I believe.
link |
00:41:57.800
It's like, it's a monetary phenomena.
link |
00:41:59.800
That is inflation comes from expanding the currency supply.
link |
00:42:02.800
It's a nice phrase and it's oftentimes quoted by people
link |
00:42:06.800
that are anti inflation.
link |
00:42:08.800
But again, it just signifies a lack of appreciation
link |
00:42:12.800
of what the issue is.
link |
00:42:14.800
Inflation is, if I had a currency
link |
00:42:17.800
which was completely non inflationary,
link |
00:42:20.800
if I never printed another dollar
link |
00:42:23.800
and if I eliminated fractional reserve banking
link |
00:42:25.800
from the face of the earth, we'd still have inflation.
link |
00:42:29.800
And we'd have inflation as long as we have government
link |
00:42:32.800
that is capable of pursuing any kind of policies,
link |
00:42:37.800
that are in themselves inflationary
link |
00:42:40.800
and generally they all are.
link |
00:42:42.800
So in general, inflationary is the big characteristic
link |
00:42:47.800
of human nature that governments,
link |
00:42:49.800
collection of groups that have power over others
link |
00:42:52.800
and allocate other people's resources
link |
00:42:54.800
will try to intentionally or not hide the costs
link |
00:42:59.800
of those allocations, like in some tricky ways,
link |
00:43:03.800
whatever the options are available.
link |
00:43:06.800
Hiding the cost is like the tertiary thing.
link |
00:43:11.800
The primary goal is the government will attempt to do good.
link |
00:43:16.800
That's the primary problem?
link |
00:43:20.800
They will attempt to do good and they will do good imperfectly
link |
00:43:25.800
and they will create oftentimes as much damage,
link |
00:43:29.800
more damage than the good they do.
link |
00:43:31.800
Most government policy will be iatrogenic.
link |
00:43:34.800
It will create more harm than good in the pursuit of it,
link |
00:43:37.800
but it is what it is.
link |
00:43:39.800
The secondary issue is they will unintentionally pay for it
link |
00:43:46.800
by expanding the currency supply without realizing
link |
00:43:50.800
that they're actually paying for it in a suboptimal fashion.
link |
00:43:58.800
They'll collapse their own currencies
link |
00:44:00.800
while they attempt to do good.
link |
00:44:02.800
The tertiary issue is they will mismeasure
link |
00:44:06.800
how badly they're collapsing the currency.
link |
00:44:09.800
For example, if you go to the Bureau of Labor Statistics
link |
00:44:13.800
and look at the numbers printed by the Fed,
link |
00:44:15.800
they'll say, oh, it looks like the dollar has lost
link |
00:44:18.800
95% of its purchasing power over 100 years.
link |
00:44:22.800
They sort of fess up that there's a problem,
link |
00:44:24.800
but they make it 95% loss over 100 years.
link |
00:44:27.800
What they don't do is realize it's a 99.7% loss over 80 years,
link |
00:44:33.800
so they will mismeasure just the horrific extent
link |
00:44:37.800
of the monetary policy in pursuit of the foreign policy
link |
00:44:43.800
and the domestic policy,
link |
00:44:45.800
which they overestimate their budget
link |
00:44:50.800
and their means to accomplish their ends
link |
00:44:53.800
and they underestimate the cost
link |
00:44:56.800
and they're oblivious to the horrific damage
link |
00:45:01.800
that they do to the civilization
link |
00:45:03.800
because the mental models that they use
link |
00:45:06.800
that are conventionally taught are wrong.
link |
00:45:09.800
The mental model that...
link |
00:45:12.800
It's okay, we can print all this money
link |
00:45:14.800
because the velocity of the money is low,
link |
00:45:18.800
because money velocity is a scalar
link |
00:45:20.800
and inflation is a scalar
link |
00:45:22.800
and we don't see 2% inflation yet
link |
00:45:24.800
and the money velocity is low
link |
00:45:26.800
and so it's okay if we print trillions of dollars.
link |
00:45:29.800
Well, the money velocity was immediate.
link |
00:45:33.800
The velocity of money through the crypto economy
link |
00:45:37.800
is 10,000 times faster
link |
00:45:40.800
than the velocity of money through the consumer economy.
link |
00:45:45.800
I think Nick pointed out when you spoke to him,
link |
00:45:47.800
he said it takes two months
link |
00:45:49.800
for a credit card transaction to settle.
link |
00:45:52.800
If you want to spend a million dollars
link |
00:45:54.800
in the consumer economy,
link |
00:45:56.800
you can move it six times a year.
link |
00:45:58.800
You put a million dollars in a gold.
link |
00:46:01.800
Gold will sit in a vault for a decade.
link |
00:46:03.800
Okay, so the velocity of money through gold is 0.1.
link |
00:46:07.800
You put the money in the stock market
link |
00:46:09.800
and you can trade it once a week.
link |
00:46:11.800
The settlement is T plus two.
link |
00:46:13.800
Maybe you get to two to one leverage.
link |
00:46:15.800
You might get to a money velocity of 100 a year
link |
00:46:18.800
in the stock market.
link |
00:46:20.800
You put the money into the crypto economy
link |
00:46:22.800
and these people are settling every four hours.
link |
00:46:25.800
And if you're offshore,
link |
00:46:27.800
they're trading with 20X leverage.
link |
00:46:29.800
So if you settle every day
link |
00:46:32.800
and you trade with 20X leverage,
link |
00:46:34.800
you just went to 7,000.
link |
00:46:37.800
So the velocity of the money varies.
link |
00:46:41.800
I think the politicians,
link |
00:46:43.800
they don't really understand inflation
link |
00:46:45.800
and they don't understand economics,
link |
00:46:47.800
but you can't blame them
link |
00:46:49.800
because the economists don't understand economics
link |
00:46:52.800
because if they did,
link |
00:46:54.800
they would be creating multivariate computer simulations
link |
00:46:59.800
where they actually put in the price
link |
00:47:02.800
of every piece of housing in every city in the world,
link |
00:47:05.800
the full array of foods
link |
00:47:07.800
and the full array of products
link |
00:47:09.800
and the full array of assets.
link |
00:47:11.800
And then on a monthly basis,
link |
00:47:14.800
they would publish all those results.
link |
00:47:17.800
And that's a high bandwidth requirement.
link |
00:47:21.800
And I think the people don't really want to embrace it.
link |
00:47:24.800
And also there's the most pernicious thing.
link |
00:47:28.800
There's that phrase,
link |
00:47:30.800
you can't tell people what to think,
link |
00:47:33.800
but you can tell them what to think about.
link |
00:47:35.800
The most pernicious thing is,
link |
00:47:38.800
I get you to misunderstand the phenomena
link |
00:47:42.800
so that even when it's happening to you,
link |
00:47:46.800
you don't appreciate that it's a bad thing
link |
00:47:48.800
and you think it's a good thing.
link |
00:47:50.800
So if housing prices are going up 20% year over year
link |
00:47:53.800
and I say this is great for the American public
link |
00:47:55.800
because most of them are homeowners,
link |
00:47:57.800
then I have misrepresented a phenomena.
link |
00:48:01.800
Inflation is 20%, not 7%,
link |
00:48:05.800
and then I have misrepresented it
link |
00:48:07.800
as being a positive rather than a negative
link |
00:48:10.800
and people will stare at it
link |
00:48:12.800
and you could even show them their house on fire
link |
00:48:16.800
and they would perceive it as being great
link |
00:48:18.800
because it's warming them up
link |
00:48:20.800
and they're going to save on their heat costs.
link |
00:48:22.800
It does seem that the cruder the model,
link |
00:48:24.800
whether it's economics, whether it's psychology,
link |
00:48:28.800
the easier it is to weave whatever the heck narrative you want
link |
00:48:32.800
and not in a malicious way,
link |
00:48:35.800
but just like it's some kind of like a emergent phenomena,
link |
00:48:40.800
this narrative thing that we tell ourselves.
link |
00:48:42.800
So you can tell any kind of story about inflation.
link |
00:48:45.800
Inflation is good, inflation is bad.
link |
00:48:47.800
Like the cruder the model,
link |
00:48:48.800
the easier it is to tell a narrative about it.
link |
00:48:51.800
So like if you take an engineering approach,
link |
00:48:54.800
I feel like it becomes more and more difficult
link |
00:48:58.800
to run away from sort of a true deep understanding
link |
00:49:02.800
of the dynamics of the system.
link |
00:49:05.800
I mean, honestly, if you went to 100 people on the street
link |
00:49:08.800
and you asked them to define inflation,
link |
00:49:10.800
how many would say it's a vector
link |
00:49:13.800
tracking the change in price
link |
00:49:16.800
of every product service asset in the world over time?
link |
00:49:21.800
Not many.
link |
00:49:23.800
If you went to them and you said,
link |
00:49:26.800
do you think 2% inflation a year is good or bad?
link |
00:49:30.800
The majority would probably say, well, here it's good.
link |
00:49:33.800
The majority of economists would say,
link |
00:49:35.800
2% inflation a year is good.
link |
00:49:39.800
And of course, look at the ship next to us.
link |
00:49:42.800
What if I told you that the ship leaked 2% of its volume
link |
00:49:50.800
every something, right?
link |
00:49:51.800
The ship is rotting 2% a year.
link |
00:49:53.800
That means the useful life of the ship is 50 years.
link |
00:49:56.800
Now, ironically, that's true.
link |
00:49:57.800
Like a wooden ship had a 50 year to 100 year life,
link |
00:50:01.800
100 be long, 50 years, not unlikely.
link |
00:50:04.800
So when we built ships out of wood,
link |
00:50:06.800
they had a useful life of about 50 years,
link |
00:50:09.800
and then they sunk, they rotted.
link |
00:50:12.800
There's nothing good about it, right?
link |
00:50:14.800
You build a ship out of steel, you know,
link |
00:50:17.800
and it's zero as opposed to 2% degradation.
link |
00:50:21.800
And how much better is 0% versus 2%?
link |
00:50:24.800
Well, 2% means you have a useful life of, you know,
link |
00:50:29.800
it's half life at 35 years.
link |
00:50:32.800
2% is a half life of 35 years.
link |
00:50:34.800
That's basically the half life of money and gold.
link |
00:50:37.800
If I store your life force in gold under perfect circumstances,
link |
00:50:41.800
you have a useful life of 35 years.
link |
00:50:44.800
0% is a useful life of forever.
link |
00:50:47.800
So 0% is immortal.
link |
00:50:50.800
2% is 35 years average life expectancy.
link |
00:50:55.800
So the idea that you would think the life expectancy
link |
00:50:58.800
of the currency and the civilization
link |
00:51:00.800
should be 35 years instead of forever is kind of a silly notion.
link |
00:51:04.800
But the tragic notion is it was, you know,
link |
00:51:08.800
seven into 70 or 10 years.
link |
00:51:11.800
Money has had a half life of 10 years,
link |
00:51:14.800
except for the fact that in weak societies in Argentina
link |
00:51:19.800
or the like, the half life of the money is three to four years
link |
00:51:23.800
in Venezuela one year.
link |
00:51:25.800
So the United States dollar and the United States
link |
00:51:30.800
economic system was the most successful economic system
link |
00:51:34.800
in the last 100 years in the world.
link |
00:51:36.800
We won every war.
link |
00:51:37.800
We were the world superpower.
link |
00:51:39.800
Our currency lost 99.7% of its value.
link |
00:51:42.800
And that means horrifically every other currency lost everything.
link |
00:51:48.800
Right.
link |
00:51:49.800
In essence, the other ones were 99.9% except for most
link |
00:51:53.800
that were 100% because they all completely failed.
link |
00:51:57.800
And, you know, you've got a mainstream economic community,
link |
00:52:02.800
you know, that thinks that inflation is a number
link |
00:52:06.800
and 2% is desirable.
link |
00:52:09.800
It's kind of like, you know,
link |
00:52:13.800
remember George Washington, you know how he died?
link |
00:52:16.800
Well, meaning physicians bled him to death.
link |
00:52:22.800
Okay.
link |
00:52:23.800
The last thing in the world you would want to do to a sick person
link |
00:52:27.800
is bleed them, right, in the modern world.
link |
00:52:30.800
I think we understand that oxygen is carried by the blood cells
link |
00:52:34.800
and, you know, and if, you know, there's that phrase, right,
link |
00:52:42.800
a triage phrase, what's the first thing you do in an injury?
link |
00:52:46.800
Stop the bleeding.
link |
00:52:48.800
Single first thing, right?
link |
00:52:49.800
You show up after any action.
link |
00:52:51.800
Look at you.
link |
00:52:52.800
Stop the bleeding because you're going to be dead in a matter
link |
00:52:55.800
of minutes if you bleed out.
link |
00:52:57.800
So it strikes me as being ironic that Orthodox conventional
link |
00:53:02.800
wisdom was bleed the patient to death.
link |
00:53:05.800
And this was the most important patient in the country,
link |
00:53:08.800
maybe in the history of the country.
link |
00:53:10.800
And it's, and we bled him to death trying to help him.
link |
00:53:13.800
So when you're actually inflating the money supply at 7%,
link |
00:53:18.800
but you're calling it 2% because you want to help the economy,
link |
00:53:22.800
you're literally bleeding the free market to death.
link |
00:53:27.800
But the sad fact is George Washington went along with it
link |
00:53:31.800
because he thought that they were going to do him good.
link |
00:53:34.800
And the majority of the society, most companies,
link |
00:53:39.800
most conventional thinkers, you know, the working class,
link |
00:53:44.800
they go along with this because they think that someone has
link |
00:53:48.800
their best interest in mind and the people that are bleeding
link |
00:53:51.800
them to death believe, they believe that prescription
link |
00:53:55.800
because their mental models are just so defective.
link |
00:53:58.800
And then an understanding of energy and engineering
link |
00:54:03.800
and the economics that are at play is crippled
link |
00:54:09.800
by these mental models.
link |
00:54:11.800
But that's both the bug in the feature of human civilization
link |
00:54:13.800
that ideas take hold.
link |
00:54:15.800
They unite us.
link |
00:54:16.800
We believe in them.
link |
00:54:19.800
And we make a lot of cool stuff happen by,
link |
00:54:24.800
as an average sort of, just the fact of the matter,
link |
00:54:28.800
a lot of people believe the same thing.
link |
00:54:30.800
They get together and they get some shit done
link |
00:54:33.800
because they believe that thing.
link |
00:54:35.800
And then some ideas can be really bad and really destructive.
link |
00:54:39.800
But on average, the ideas seem to be progressing
link |
00:54:43.800
in a direction of good.
link |
00:54:44.800
Let me just step back.
link |
00:54:46.800
What the hell are we doing here?
link |
00:54:48.800
Us humans on this earth.
link |
00:54:50.800
How do you think of humans?
link |
00:54:52.800
How special are humans?
link |
00:54:54.800
How did human civilization originate on this earth?
link |
00:54:58.800
And what is this human project that we're all taking on?
link |
00:55:02.800
You mentioned fire and water and apparently bleeding you
link |
00:55:06.800
to death is not a good idea.
link |
00:55:08.800
I always thought you can get the demons out in that way.
link |
00:55:11.800
But that was a recent invention.
link |
00:55:14.800
So what's this thing we're doing here?
link |
00:55:19.800
I think what distinguishes human beings
link |
00:55:22.800
from all the other creatures on the earth
link |
00:55:25.800
is our ability to engineer.
link |
00:55:29.800
We're engineers, right?
link |
00:55:31.800
To solve problems or just build incredible cool things.
link |
00:55:37.800
Engineering, harnessing energy and technique
link |
00:55:41.800
to make the world a better place than you found it.
link |
00:55:45.800
From the point that we actually started to play with fire,
link |
00:55:50.800
that was a big leap forward.
link |
00:55:53.800
Harnessing the power of kinetic energy and missiles,
link |
00:55:57.800
another step forward.
link |
00:56:00.800
Every city built on water.
link |
00:56:03.800
Why water?
link |
00:56:04.800
Well, water is bringing energy.
link |
00:56:07.800
If you actually put a turbine on a river
link |
00:56:12.800
or you capture a change in elevation of water,
link |
00:56:16.800
you've literally harnessed gravitational energy.
link |
00:56:18.800
But water is also bringing you food.
link |
00:56:21.800
It's also giving you a cheap form of getting rid of your waste.
link |
00:56:27.800
It's also giving you free transportation.
link |
00:56:29.800
You want to move one ton blocks around.
link |
00:56:32.800
You want to move them in water.
link |
00:56:34.800
I think the human story is really the story
link |
00:56:38.800
of engineering a better world.
link |
00:56:42.800
The rise in the human condition is determined
link |
00:56:47.800
by those groups of people, those civilizations
link |
00:56:50.800
that were best at harnessing energy.
link |
00:56:54.800
If you look at the Greek civilization,
link |
00:56:57.800
they built it around ports and seaports
link |
00:57:00.800
and water and created a trading network.
link |
00:57:03.800
The Romans were really good at harnessing
link |
00:57:06.800
all sorts of engineering.
link |
00:57:08.800
I mean, the aqueducts are a great example.
link |
00:57:11.800
If you go to any big city, you travel through cities in the med,
link |
00:57:15.800
you find that the carrying capacity of the city
link |
00:57:18.800
or the island is 5,000 people without running water.
link |
00:57:21.800
And then if you can find a way to bring water to it,
link |
00:57:24.800
it increases by a factor of 10.
link |
00:57:26.800
And so human flourishing is really only possible
link |
00:57:30.800
through that channeling of energy, right?
link |
00:57:34.800
That eventually takes the form of air power, right?
link |
00:57:40.800
I mean, that ship, I mean, look at the intricacy of those sails.
link |
00:57:45.800
I mean, it's just the model is intricate.
link |
00:57:48.800
Now think about all of the experimentation
link |
00:57:50.800
that took place to figure out how many sails to put on that ship
link |
00:57:53.800
and how to rig them and how to repair them
link |
00:57:56.800
and how to operate them.
link |
00:57:59.800
It's thousands of lives spent thinking through
link |
00:58:03.800
all the tiny little details,
link |
00:58:05.800
all to increase the efficiency of this,
link |
00:58:08.800
the effectiveness, the efficiency of this ship
link |
00:58:11.800
as it sails through water.
link |
00:58:13.800
And we should also note there's a bunch of cannons on the side,
link |
00:58:16.800
so obviously.
link |
00:58:17.800
Another form of engineering, right?
link |
00:58:20.800
Energy harnessing with explosives.
link |
00:58:23.800
To achieve what end?
link |
00:58:24.800
That's another discussion, exactly.
link |
00:58:26.800
Suppose we're trying to get off the planet, right?
link |
00:58:29.800
Well, there's a selection mechanism going on.
link |
00:58:31.800
So natural selection, whatever, however evolution works,
link |
00:58:35.800
it seems that one of the interesting inventions on Earth
link |
00:58:38.800
was the predator prey dynamic,
link |
00:58:41.800
that you want to be the bigger fish.
link |
00:58:44.800
That violence seems to serve a useful purpose
link |
00:58:47.800
if you look at Earth as a whole.
link |
00:58:49.800
We as humans now like to think of violence
link |
00:58:53.800
as really a bad thing.
link |
00:58:55.800
It seems to be one of the amazing things about humans
link |
00:58:58.800
is we're ultimately 10 towards cooperation.
link |
00:59:01.800
We like peace.
link |
00:59:03.800
If you just look at history,
link |
00:59:06.800
we want things to be nice and calm.
link |
00:59:08.800
But just wars break out every once in a while
link |
00:59:13.800
and lead to immense suffering and destruction and so on.
link |
00:59:17.800
And they have a kind of like resetting the palate effect.
link |
00:59:25.800
It's one that's full of just immeasurable human suffering,
link |
00:59:30.800
but it's like a way to start over.
link |
00:59:33.800
We're quite the apex predator on the planet.
link |
00:59:36.800
I googled something the other day.
link |
00:59:39.800
What's the most common form of mammal life on Earth?
link |
00:59:46.800
Life by number of organisms.
link |
00:59:48.800
Count.
link |
00:59:49.800
And the answer that came back was human beings.
link |
00:59:52.800
I was shocked.
link |
00:59:53.800
I couldn't believe it, right?
link |
00:59:55.800
Apparently, if we're just looking at mammals,
link |
00:59:57.800
the answer was human beings are the most common,
link |
00:59:59.800
which was very interesting to me.
link |
01:00:01.800
I didn't believe it,
link |
01:00:03.800
but I was trying to, you know, 8 billion or so human beings.
link |
01:00:06.800
There's no other mammal that's got more than 8 billion.
link |
01:00:09.800
If you walk through downtown Edinburgh and Scotland
link |
01:00:12.800
and you look up on this hill and this castle up on the hill,
link |
01:00:15.800
you know, and you talk to people and the story is,
link |
01:00:20.800
oh yeah, well, that was a British castle before the Scottish castle,
link |
01:00:24.800
before it was a Pick Castle, before it was a Roman castle,
link |
01:00:27.800
before it was, you know, some other Celtic castle,
link |
01:00:31.800
before, you know, then they found 13 prehistoric castles
link |
01:00:35.800
buried one under the other under the other.
link |
01:00:37.800
And you get the conclusion that 100,000 years ago,
link |
01:00:41.800
somebody showed up and grabbed the high point, the apex of the city,
link |
01:00:46.800
and they built a stronghold there and they flourished
link |
01:00:50.800
and their family flourished and their tribe flourished
link |
01:00:52.800
until someone came along and knocked them off the hill.
link |
01:00:55.800
And it's been a nonstop, never ending fight
link |
01:00:59.800
by the aggressive, most powerful entity, family,
link |
01:01:04.800
organization, municipality, tribe, whatever.
link |
01:01:07.800
All for the hill.
link |
01:01:08.800
For that one hill, going back since time immemorial.
link |
01:01:13.800
And, you know, you scratch your head and you think,
link |
01:01:19.800
it seems like it's like just this never ending wheel.
link |
01:01:23.800
But doesn't that lead if you just, all kinds of metrics
link |
01:01:27.800
that seems to improve the quality of our cannons and ships as a result?
link |
01:01:32.800
Like it seems that war, just like your laser eyes
link |
01:01:36.800
focuses the mind on the engineering tasks.
link |
01:01:39.800
It is that.
link |
01:01:40.800
And it does remind you that the winner is always the most powerful.
link |
01:01:47.800
And we throw that phrase out,
link |
01:01:50.800
but no one thinks about what that phrase means.
link |
01:01:52.800
Like who's the most powerful or the, you know,
link |
01:01:56.800
or the most powerful side one, but they don't think about it.
link |
01:01:59.800
And they think about power, energy delivered in a period of time.
link |
01:02:04.800
And then you think a guy with a spear is more powerful than someone
link |
01:02:09.800
with their fists and somewhere the bow and arrow is more powerful
link |
01:02:12.800
than the person with the spear.
link |
01:02:14.800
And then you realize that somebody with bronze is more powerful
link |
01:02:17.800
than without and steel is more powerful than bronze.
link |
01:02:21.800
And if you look at the Romans, you know,
link |
01:02:23.800
they persevered, you know, with artillery and they could stand
link |
01:02:26.800
off from 800 meters and blast you to smithereens, right?
link |
01:02:30.800
You know, you study the history of the Bolarex slingers, right?
link |
01:02:35.800
And, you know, you think we invented bullets,
link |
01:02:37.800
but they invented bullets to put in slings thousands of years ago.
link |
01:02:42.800
They could have stood off 500 meters and put a hole in your head, right?
link |
01:02:46.800
And so there was never a time when humanity wasn't vying to come
link |
01:02:55.800
up with an asymmetric form of projecting their own power via technology.
link |
01:03:01.800
And absolute power is when a leader is able to control large amount
link |
01:03:07.800
of humans, they're facing the same direction,
link |
01:03:12.800
working in the same direction to leverage energy.
link |
01:03:16.800
The most organized society wins.
link |
01:03:19.800
Yeah.
link |
01:03:20.800
When the Romans were dominating everybody,
link |
01:03:23.800
they were the most organized civilization in Europe.
link |
01:03:27.800
As long as they stayed organized, they dominated,
link |
01:03:31.800
and at some point they over expanded and got disorganized
link |
01:03:34.800
and they collapsed.
link |
01:03:36.800
And I guess you could say that, you know, the struggle
link |
01:03:39.800
of human condition, it catalyzes the development
link |
01:03:43.800
of new technologies one after the other.
link |
01:03:45.800
It penalizes anybody that rejects ocean power, right?
link |
01:03:51.800
It gets penalized, you reject artillery, you get penalized,
link |
01:03:54.800
you reject atomic power, you get penalized.
link |
01:03:57.800
If you reject digital power, cyber power, you get penalized.
link |
01:04:02.800
And the underlying control of the property keeps shifting hands
link |
01:04:08.800
from, you know, one institution or one government to another
link |
01:04:13.800
based upon how rationally they're able to channel that energy
link |
01:04:16.800
and how well organized or coordinated they are.
link |
01:04:20.800
That's a really interesting thing about both human mind
link |
01:04:23.800
and governments, that they, once they get a few good,
link |
01:04:26.800
and companies, once they get a few good ideas,
link |
01:04:28.800
they seem to stick with them.
link |
01:04:30.800
They reject new ideas.
link |
01:04:32.800
It's almost, whether that's emergent or however that evolved,
link |
01:04:38.800
it seems to have a really interesting effect,
link |
01:04:40.800
because when you're young, you fight for the new ideas.
link |
01:04:44.800
You push them through, then a few of us humans find success,
link |
01:04:49.800
then we get complacent, we take over the world
link |
01:04:53.800
using that new idea, and then the new young person
link |
01:04:57.800
with a better new idea challenges you,
link |
01:05:01.800
and you, as opposed to pivoting, you stick with the old
link |
01:05:05.800
and lose because of it, and that's how empires collapse.
link |
01:05:08.800
And it's just both at the individual level that happens,
link |
01:05:11.800
with two academics fighting about ideas or something like that,
link |
01:05:14.800
and at the human civilization level, governments,
link |
01:05:19.800
they hold on to the ideas of old. It's fascinating.
link |
01:05:23.800
Yeah, an ever persistent theme in the history of science
link |
01:05:27.800
is the paradigm shift, and the paradigms shift
link |
01:05:30.800
when the old guard dies and a new generation arrives,
link |
01:05:34.800
or the paradigm shifts when there's a war,
link |
01:05:37.800
and everyone that disagrees with the idea of aviation
link |
01:05:42.800
finds bombs dropping on their head,
link |
01:05:44.800
or everyone that disagrees with whatever your technology is
link |
01:05:47.800
as a rude awakening, and if they totally disagree,
link |
01:05:50.800
their society collapses and they're replaced by that new thing.
link |
01:05:56.800
A lot of the engineering you talked about
link |
01:05:58.800
had to do with ships and cannons and leveraging water.
link |
01:06:03.800
What about this whole digital thing that's happening?
link |
01:06:06.800
It's been happening over the past century.
link |
01:06:10.800
Is that still engineering in your mind?
link |
01:06:13.800
You're starting to operate in these bits of information.
link |
01:06:18.800
I think there's two big ideas.
link |
01:06:20.800
The first wave of ideas were digital information,
link |
01:06:24.800
and that was the internet wave that's been running since 1990 or so for 30 years.
link |
01:06:30.800
And the second wave is digital energy.
link |
01:06:33.800
So if I look at digital information,
link |
01:06:37.800
this idea that we want to digitally transform a book,
link |
01:06:42.800
I'm going to dematerialize every book in this room into bits,
link |
01:06:47.800
and then I'm going to deliver a copy of the entire library
link |
01:06:51.800
to a billion people, and I'm going to do it
link |
01:06:54.800
for pretty much de minimis electricity.
link |
01:06:58.800
If I can dematerialize music, books, education,
link |
01:07:03.800
entertainment, maps.
link |
01:07:08.800
That is an incredibly exothermic transaction.
link |
01:07:14.800
It's a crystallization when we collapse into a lower energy state as a civilization,
link |
01:07:19.800
and we give off massive amounts of energy.
link |
01:07:22.800
If you look at what Carnegie did,
link |
01:07:24.800
the richest man in the world created libraries everywhere at the time,
link |
01:07:27.800
and he gave away his entire fortune.
link |
01:07:29.800
And now we can give a better library to every six year old for nothing.
link |
01:07:34.800
And so what's the value of giving a million books to eight billion people?
link |
01:07:40.800
That's the explosion in prosperity that comes from digital transformation.
link |
01:07:46.800
And when we do it with maps, I transform the map,
link |
01:07:51.800
I put it into a car, you get in the car,
link |
01:07:53.800
and the car drives you where you want to go with the map.
link |
01:07:56.800
And how much better is that than a Ram McNally Atlas right here?
link |
01:08:00.800
It's like a million times better.
link |
01:08:03.800
So the first wave of digital transformation
link |
01:08:07.800
was the dematerialization of all of these informational things,
link |
01:08:12.800
which are non conservative.
link |
01:08:14.800
I could take Beethoven's Fifth Symphony,
link |
01:08:17.800
played for by the best orchestra in Germany,
link |
01:08:20.800
and I could give it to a billion people,
link |
01:08:22.800
and they could play it a thousand times each
link |
01:08:26.800
at less than the cost of the one performance, right?
link |
01:08:29.800
So I deliver culture and education and erudition and intelligence
link |
01:08:34.800
and insight to the entire civilization over digital rails.
link |
01:08:39.800
And the consequence of the human race are first order generally good, right?
link |
01:08:44.800
The world is a better place, it drives growth.
link |
01:08:47.800
And you create these trillion dollar entities like Apple and Amazon and Facebook
link |
01:08:51.800
and Google and Microsoft, right?
link |
01:08:54.800
That is the first wave, the second wave.
link |
01:08:57.800
Do you mind?
link |
01:08:58.800
I'm sorry to interrupt, but that first wave,
link |
01:09:02.800
it feels like the impact that's positive,
link |
01:09:07.800
you said the first order impact is generally positive.
link |
01:09:10.800
It feels like it's positive in a way that nothing else in history has been positive.
link |
01:09:14.800
And then we may not actually truly be able to understand
link |
01:09:21.800
the orders and magnitude of increase in productivity
link |
01:09:25.800
and just progress and human civilization
link |
01:09:29.800
until we look back centuries from now.
link |
01:09:32.800
It just feels, or maybe just looking at the impact of Wikipedia.
link |
01:09:37.800
Right.
link |
01:09:38.800
Giving access to basic wisdom or basic knowledge
link |
01:09:43.800
and then perhaps wisdom to billions of people.
link |
01:09:47.800
If you can just linger on that for a second,
link |
01:09:49.800
what's your sense of the impact of that?
link |
01:09:53.800
You know, I would say if you're a technologist, philosopher,
link |
01:10:02.800
the impact of a technology is so much greater on the civilization
link |
01:10:07.800
and the human condition than a non technology
link |
01:10:11.800
that is almost not worth your trouble to bother
link |
01:10:13.800
trying to fix things a conventional way.
link |
01:10:16.800
So let's take an example.
link |
01:10:19.800
I have a foundation, the Sailor Academy,
link |
01:10:22.800
and the Sailor Academy gives away free education,
link |
01:10:26.800
free college education to anybody on Earth that wants it.
link |
01:10:30.800
And we've had more than a million students.
link |
01:10:32.800
And if you go and you take the physics class,
link |
01:10:35.800
the lectures were by the same physics lecture
link |
01:10:38.800
that taught me physics at MIT.
link |
01:10:40.800
Except when I was at MIT,
link |
01:10:43.800
the cost of the first four weeks of MIT
link |
01:10:46.800
would have drained my family's collective life savings
link |
01:10:50.800
for the first last 100 years.
link |
01:10:52.800
Like 100 years worth of my father, my grandfather,
link |
01:10:55.800
my great grandfather, they saved every penny they had
link |
01:10:58.800
after 100 years they could have paid for one week
link |
01:11:00.800
or two weeks of MIT.
link |
01:11:02.800
That's how fiendishly expensive and inefficient it was.
link |
01:11:05.800
So I went on scholarship.
link |
01:11:07.800
I was lucky to have a scholarship.
link |
01:11:09.800
But on the other hand,
link |
01:11:12.800
I sat in the back of the 801 lecture hall
link |
01:11:16.800
and I was like right up in the rafters.
link |
01:11:18.800
It's an awful experience on these like uncomfortable
link |
01:11:21.800
wooden benches and you can barely see the blackboard.
link |
01:11:24.800
And you got to be there synchronously.
link |
01:11:27.800
And the stuff we upload,
link |
01:11:29.800
you can start it and stop it and watch it on your iPad
link |
01:11:32.800
or watch it on your computer and rewind it multiple times
link |
01:11:35.800
and sit in a comfortable chair
link |
01:11:37.800
and you can do it from anywhere on earth
link |
01:11:39.800
and it's absolutely free.
link |
01:11:41.800
So I think about this and I think
link |
01:11:43.800
you want to improve the human condition.
link |
01:11:46.800
You need people with postgraduate level education.
link |
01:11:51.800
You need PhDs.
link |
01:11:52.800
And I know this sounds kind of elitist,
link |
01:11:54.800
but you want to cure cancer and you know,
link |
01:11:56.800
you want to go to the stars, fusion drive.
link |
01:12:00.800
We need new propulsion, right?
link |
01:12:02.800
We need extraordinary breakthroughs
link |
01:12:06.800
in every area of basic science,
link |
01:12:09.800
you know, be it biology or propulsion
link |
01:12:12.800
or material science or computer science.
link |
01:12:15.800
You're not doing that with an undergraduate degree.
link |
01:12:18.800
You're certainly not doing it with a high school education.
link |
01:12:21.800
But the cost of a PhD is like a million bucks.
link |
01:12:24.800
There's like 10 million PhDs in the world.
link |
01:12:27.800
If you go do the, if you check it out,
link |
01:12:29.800
there's eight billion people in the world.
link |
01:12:31.800
How many people could get a PhD or would want to?
link |
01:12:34.800
Maybe not eight billion, but a billion, 500 million.
link |
01:12:37.800
Let's just say 500 million to a billion.
link |
01:12:40.800
How do you go from 10 million to a billion
link |
01:12:43.800
highly educated people, all of them specializing in,
link |
01:12:48.800
and I don't have to tell you how many different fields
link |
01:12:51.800
of human endeavor there are.
link |
01:12:53.800
I mean, your life is interviewing these experts
link |
01:12:55.800
and there's so many, right?
link |
01:12:59.800
You know, it's amazing.
link |
01:13:01.800
So how do I give a multimillion dollar education
link |
01:13:05.800
to a billion people?
link |
01:13:07.800
And there's two choices.
link |
01:13:09.800
You can either endow a scholarship,
link |
01:13:11.800
in which case you pay $75,000 a year.
link |
01:13:14.800
Okay, $75,000.
link |
01:13:16.800
Let's pay a million dollars and a million dollars a person.
link |
01:13:20.800
I can do it that way.
link |
01:13:22.800
And you're never, even if you had a trillion dollars,
link |
01:13:26.800
if you had $10 trillion to throw at the problem,
link |
01:13:29.800
and we've just thrown $10 trillion at certain problems,
link |
01:13:33.800
you don't solve the problem, right?
link |
01:13:36.800
If I put $10 trillion on the table and I said,
link |
01:13:38.800
educate everybody, give them all a PhD,
link |
01:13:40.800
you still wouldn't solve the problem.
link |
01:13:42.800
Harvard University can't educate 18,000 people simultaneously
link |
01:13:47.800
or $87,000 or $800,000 or $8 million.
link |
01:13:51.800
So you have to dematerialize the professor
link |
01:13:53.800
and dematerialize the experience.
link |
01:13:55.800
So you put it all as streaming, on demand,
link |
01:13:58.800
computer generated education,
link |
01:14:01.800
and you create simulations where you need to create simulations,
link |
01:14:05.800
and you upload it.
link |
01:14:07.800
It's like the human condition is being held back
link |
01:14:10.800
by 500,000 well meaning average algebra teachers.
link |
01:14:18.800
I love them.
link |
01:14:20.800
I mean, please don't take offense if you're an algebra teacher,
link |
01:14:23.800
but instead of 500,000 algebra teachers
link |
01:14:26.800
going through the same motion over and over again,
link |
01:14:30.800
what you need is like one or five or 10
link |
01:14:34.800
really good algebra teachers,
link |
01:14:36.800
and they need to do it a billion times a day
link |
01:14:39.800
or a billion times a year for free.
link |
01:14:42.800
And if we do that,
link |
01:14:45.800
there's no reason why you can't give infinite education,
link |
01:14:49.800
certainly in science, technology, engineering, and math, right?
link |
01:14:53.800
Infinite education to everybody with no constraint.
link |
01:14:59.800
And I think the same is true, right,
link |
01:15:01.800
with just about every other thing.
link |
01:15:03.800
If you want to bring joy to the world,
link |
01:15:06.800
you need digital music.
link |
01:15:08.800
If you want to bring, you know, enlightenment to the world,
link |
01:15:11.800
you need digital education.
link |
01:15:13.800
If you, you know, want to bring anything of consequence
link |
01:15:17.800
in the world, you got to digitally transform it,
link |
01:15:20.800
you got to manufacture it something like
link |
01:15:23.800
100 times more efficiently as a start,
link |
01:15:26.800
but a million times more efficiently
link |
01:15:29.800
is probably, you know, that's hopeful.
link |
01:15:34.800
Maybe you have a chance.
link |
01:15:36.800
If you look at all of these space endeavors
link |
01:15:39.800
and everything we're thinking about getting to Mars,
link |
01:15:41.800
getting off the planet, getting to other worlds,
link |
01:15:43.800
number one thing you got to do
link |
01:15:45.800
is you got to make a fundamental breakthrough in an engine.
link |
01:15:49.800
People dreamed about flying for thousands of years,
link |
01:15:52.800
but until the internal combustion engine,
link |
01:15:55.800
you didn't have enough, you know, enough energy,
link |
01:15:59.800
enough power in a light enough package
link |
01:16:02.800
in order to solve the problem.
link |
01:16:05.800
And the human race has all sorts of those fundamental engines
link |
01:16:11.800
and materials and techniques that we need to master.
link |
01:16:16.800
And each one of them is a lifetime of experimentation
link |
01:16:20.800
of someone capable of making a seminal contribution
link |
01:16:25.800
to the body of human knowledge.
link |
01:16:27.800
There are certain problems like education
link |
01:16:29.800
that could be solved through this process of dematerialization.
link |
01:16:32.800
And by the way, to give props to the 500k algebra teachers,
link |
01:16:38.800
when I look at YouTube, for example,
link |
01:16:40.800
one possible approach is each one of those 500,000 teachers
link |
01:16:44.800
probably had days and moments of brilliance
link |
01:16:47.800
and if they had the ability to contribute to
link |
01:16:50.800
in the natural selection process,
link |
01:16:52.800
like the market of education where the best ones rise up,
link |
01:16:56.800
that's a really interesting way,
link |
01:16:58.800
which is like the best day of your life,
link |
01:17:02.800
the best lesson you've ever taught
link |
01:17:05.800
could be found and sort of broadcast to billions of people.
link |
01:17:13.800
So all of those kinds of ideas can be made real in the digital world.
link |
01:17:18.800
Now traveling across planets,
link |
01:17:20.800
you still can't solve that problem with dematerialization.
link |
01:17:26.800
What you could solve potentially is dematerializing the human brain
link |
01:17:30.800
where you can transfer, like you don't need to have astronauts on the ship.
link |
01:17:35.800
You can have a floppy disk carrying a human brain.
link |
01:17:40.800
Touching on those points, you'd love for the 500,000 algebra teachers
link |
01:17:44.800
to become 500,000 math specialists
link |
01:17:47.800
and maybe they comp into 50,000 specialties as teams
link |
01:17:51.800
and they all pursue 50,000 new problems
link |
01:17:54.800
and they put their algebra teaching on autopilot.
link |
01:17:56.800
That's the same as when I give you 11 cents worth of electricity
link |
01:18:01.800
and you don't have to row about eight hours a day
link |
01:18:07.800
before you can eat.
link |
01:18:09.800
It would be a lot better, you know,
link |
01:18:11.800
that you would pay for your food in the first eight seconds of your day
link |
01:18:15.800
and then you could start thinking about other things, right?
link |
01:18:19.800
With regard to technology, you know,
link |
01:18:23.800
one thing that I learned studying technology when you look at S curves
link |
01:18:27.800
is until you start the S curve,
link |
01:18:31.800
you don't know whether you're 100 years from viability,
link |
01:18:36.800
1,000 years from viability, or a few months from viability.
link |
01:18:41.800
Isn't that fun? That's so fun.
link |
01:18:45.800
The early part of the S curve is so fun because you don't know.
link |
01:18:49.800
In 1900, you could have got any number of learned academics
link |
01:18:54.800
to give you 10,000 reasons why humans will never fly, right?
link |
01:18:58.800
And in 1903, the Wright brothers flew
link |
01:19:00.800
and by 1969, we're walking on the moon.
link |
01:19:03.800
So the advance that we made in that field was extraordinary,
link |
01:19:09.800
but for the 100 years and 200 years before,
link |
01:19:12.800
they were just back and forth and nobody was close.
link |
01:19:15.800
And that's the happy part.
link |
01:19:18.800
The happy part is we went from flying 20 miles an hour or whatever
link |
01:19:23.800
to flying 25,000 miles an hour in 66 years.
link |
01:19:29.800
The unhappy part is I studied aeronautical engineering at MIT in the 80s.
link |
01:19:35.800
And in the 80s, we had Gulfstream aircraft.
link |
01:19:38.800
We had Boeing 737s.
link |
01:19:40.800
We had the space shuttle and you fast forward 40 years
link |
01:19:45.800
and we pretty much had the same exact aircraft.
link |
01:19:49.800
The efficiency of the engines was 20, 30% more.
link |
01:19:55.800
We slammed into a brick wall around 69 to 75.
link |
01:20:01.800
In fact, the global express, the Gulfstream,
link |
01:20:06.800
these were all engineered in the 70s, some in the 60s.
link |
01:20:11.800
The actual fuselage silhouette of a Gulfstream of a G5
link |
01:20:17.800
was the same shape as a G4, is the same shape as a G3,
link |
01:20:20.800
is the same shape as a G2.
link |
01:20:22.800
And that's because they were afraid to change the shape for 40 years
link |
01:20:25.800
because they worked it out in a wind tunnel.
link |
01:20:27.800
I knew it worked.
link |
01:20:29.800
And when they finally decided to change the shape,
link |
01:20:32.800
it was like a $10 billion exercise with modern supercomputers
link |
01:20:36.800
and computational fluid dynamics.
link |
01:20:40.800
Why was this so hard?
link |
01:20:42.800
What is that wall made of that you slammed into?
link |
01:20:46.800
The right question is,
link |
01:20:47.800
so why does a guy that went to MIT that got an aeronautical engineering degree
link |
01:20:50.800
spend his career in software?
link |
01:20:52.800
Why is it that I never, a day in my life,
link |
01:20:55.800
with the exception of some Air Force reserve work,
link |
01:20:58.800
I never got paid to be an aeronautical engineer
link |
01:21:00.800
and I worked in software engineering my entire career?
link |
01:21:03.800
Maybe software engineering is the new aeronautical engineering
link |
01:21:06.800
in some way.
link |
01:21:08.800
Maybe you hit fundamental walls in certain
link |
01:21:11.800
until you have to return to it centuries later.
link |
01:21:16.800
The National Gallery of Art was endowed by a very rich man,
link |
01:21:21.800
Andrew Mellon.
link |
01:21:23.800
And you know how he made his money?
link |
01:21:25.800
Aluminum.
link |
01:21:27.800
Okay?
link |
01:21:29.800
And you know what kind of airplanes you can create without aluminum?
link |
01:21:34.800
Nothing.
link |
01:21:36.800
Nothing, right?
link |
01:21:38.800
So some materials problem.
link |
01:21:40.800
Okay, so 1900, we made massive advances in metallurgy, right?
link |
01:21:44.800
I mean, that was US steel.
link |
01:21:46.800
That was iron to steel, aluminum.
link |
01:21:49.800
Massive fortunes were created because this was a massive technical advance.
link |
01:21:53.800
And then we also had the internal combustion engine
link |
01:21:56.800
and you know, the story of Ford and General Motors
link |
01:21:59.800
and Daimler Chrysler and the like is informed by that.
link |
01:22:03.800
So you have no jet engines, no rocket motors,
link |
01:22:06.800
no internal combustion engines, you have no aviation.
link |
01:22:09.800
But even if you had those engines,
link |
01:22:11.800
if you were trying to build those things with steel, no chance.
link |
01:22:15.800
You had to have aluminum.
link |
01:22:17.800
So there's like two pretty basic technologies.
link |
01:22:22.800
And once you have those two technologies, stuff happens very fast.
link |
01:22:26.800
So tell me the last big advance in like jet engines.
link |
01:22:33.800
There hasn't been one.
link |
01:22:35.800
Like the last big advance in rocket engines, hasn't been one.
link |
01:22:39.800
The big advances in spaceship design from what I can see
link |
01:22:43.800
are in the control systems, the gyros and the ability to land, right?
link |
01:22:48.800
In a stable fashion.
link |
01:22:50.800
That's pretty amazing landing a rocket.
link |
01:22:52.800
Also in the, at least according to Elon and so on,
link |
01:22:57.800
the manufacture of the more efficient
link |
01:23:02.800
and less expensive manufacturer of rockets.
link |
01:23:05.800
So like it's a production, whatever that you call that discipline of
link |
01:23:09.800
at scale manufacturer at scale production, so factory work.
link |
01:23:12.800
But it's not 10X.
link |
01:23:14.800
I mean, maybe it's 10X over a period of a few decades.
link |
01:23:17.800
When we figure out how to operate a spaceship, you know,
link |
01:23:22.800
on the water in your water bottle for a year, right?
link |
01:23:26.800
Now, then you've got a breakthrough.
link |
01:23:28.800
So the bottom line is propulsion, propulsion technology,
link |
01:23:33.800
propellants and the materials technology.
link |
01:23:36.800
They were critical to getting on that aviation S curve.
link |
01:23:40.800
And then we slammed into a wall in the 70s.
link |
01:23:43.800
And the Boeing 747, the Global Express, the Gulf Stream,
link |
01:23:49.800
these things were the space shuttle.
link |
01:23:51.800
They were all pretty much reflective of that.
link |
01:23:54.800
And then we kind of, then we stopped.
link |
01:23:56.800
And at that point, you have to switch to a new S curve.
link |
01:23:58.800
So the next equivalent to the internal combustion engine was the CPU
link |
01:24:04.800
and the next aluminum equivalent was silicon.
link |
01:24:07.800
So when we actually started developing CPUs,
link |
01:24:10.800
the transistor gave way to CPUs.
link |
01:24:12.800
And if you look at the power, right,
link |
01:24:16.800
the bandwidth that we had on computers and Moore's law, right?
link |
01:24:20.800
What if the efficiency of jet engines had doubled every three years?
link |
01:24:27.800
Right, in the last 40 years, where we'd be right now, right?
link |
01:24:30.800
So I think that if you're a business person,
link |
01:24:35.800
if you're looking for a commercially viable application of your mind,
link |
01:24:41.800
then you have to find that S curve.
link |
01:24:43.800
And ideally, you have to find it in the first five, six, 10 years.
link |
01:24:49.800
But people always miss this.
link |
01:24:52.800
Let's say Google Glass, right?
link |
01:24:55.800
Google Glass was an idea 2013, the year is 2022,
link |
01:25:00.800
and people were quite sure this was going to be a big thing.
link |
01:25:03.800
And it could have been at the beginning of the S curve.
link |
01:25:06.800
But fundamentally, we didn't really have an effective mechanism.
link |
01:25:11.800
I mean, people getting vertigo in there.
link |
01:25:13.800
But you didn't know that at the beginning of the S curve, right?
link |
01:25:16.800
I mean, maybe some people had a deep intuition about the fundamentals
link |
01:25:20.800
of augmented reality, but you don't know that.
link |
01:25:23.800
You're looking through the fog.
link |
01:25:26.800
You don't know.
link |
01:25:27.800
So the point is, we're year zero in 2013,
link |
01:25:31.800
and we're still year zero in 2022 on that augmented reality.
link |
01:25:36.800
And when somebody puts out a set of glasses
link |
01:25:39.800
that you can wear comfortably without getting vertigo, right?
link |
01:25:45.800
Without any disorientation that managed to have the stability
link |
01:25:49.800
and the bandwidth necessary to sync with the real world,
link |
01:25:52.800
you'll be in year one.
link |
01:25:54.800
And from that point, you'll have a 70 year
link |
01:25:57.800
or some interesting future until you slam into a limit to growth.
link |
01:26:03.800
And then it'll slow down.
link |
01:26:05.800
And this is the story of a lot of things, right?
link |
01:26:09.800
I mean, John D. Rockefeller got in the oil business in the 1860s,
link |
01:26:14.800
and the oil business, as we understood it,
link |
01:26:18.800
became fairly mature by the 1920s to 30s.
link |
01:26:24.800
And then it actually stayed that way until we got to fracking,
link |
01:26:27.800
which was like 70 years later, and then it burst forward.
link |
01:26:31.800
So the interesting story about Moore's Law, though,
link |
01:26:34.800
is that you get this constant burst of escars on top of escars on top of escars.
link |
01:26:40.800
It's like the moment you start slowing down
link |
01:26:43.800
or almost ahead of you slowing down,
link |
01:26:46.800
you come up with another innovation, another innovation.
link |
01:26:49.800
So Moore's Law doesn't seem to happen in every technological advancement.
link |
01:26:55.800
It seems like you only get a couple of escars, and then you're done for a bit.
link |
01:27:00.800
So I wonder what the pressures there are that resulted in such success
link |
01:27:03.800
over several decades that's still going.
link |
01:27:06.800
Humility dictates that nobody knows when the escarge kicks off
link |
01:27:12.800
and you could be 20 years early or 100 years early.
link |
01:27:17.800
Leonardo da Vinci, you know, they were Michelangelo,
link |
01:27:21.800
they were designing flying machines hundreds and hundreds of years ago.
link |
01:27:25.800
So humility says you're not quite sure when you really hit that commercial viability,
link |
01:27:30.800
and it also dictates, you don't know when it ends.
link |
01:27:33.800
Like when will the party stop?
link |
01:27:36.800
When will Moore's Law stop and we'll get to the point
link |
01:27:39.800
where they're exponentially diminishing returns on silicon performance.
link |
01:27:44.800
And just like we got exponentially diminishing returns on jet engines, you know,
link |
01:27:51.800
and it just takes an exponential increase in effort to make it 10% better.
link |
01:27:56.800
But while you're in the middle of it, then you know you can do things.
link |
01:28:00.800
So the reason that the digital revolution is so important
link |
01:28:04.800
is because the underlying platforms, the bandwidth and the performance of the components,
link |
01:28:11.800
and I said the components are the radio protocols, mobile protocols,
link |
01:28:18.800
the batteries, the CPUs, and the displays, right?
link |
01:28:25.800
Those four components are pretty critical.
link |
01:28:27.800
They're all critical in the creation of an iPhone.
link |
01:28:30.800
I wrote about it in the book, The Mobile Wave, and they catalyzed this entire mobile revolution.
link |
01:28:37.800
Because they have advanced and continue to advance,
link |
01:28:42.800
they created a very fertile environment for all these digital transformations.
link |
01:28:48.800
And the digital transformations themselves, right, they call for creativity in their own, right?
link |
01:28:57.800
Like, I think the interesting thing about, let's take digital maps, right?
link |
01:29:03.800
When you conceptualize something as a dematerialized map, right,
link |
01:29:07.800
it becomes a map because I can put it on a display, like an iPad,
link |
01:29:13.800
or I can put it in a car, like a Tesla.
link |
01:29:16.800
But if you really want to figure it out, you can't think like an engineer,
link |
01:29:20.800
you need to think like a fantasy writer.
link |
01:29:23.800
Like, this is where it's useful if you studied, if you played Dungeons & Dragons,
link |
01:29:28.800
and you read Lord of the Rings, and you studied all the fantasy literature,
link |
01:29:32.800
because when I dematerialize the map, first I put 10 million pages of satellite imagery into the map, right?
link |
01:29:42.800
That's a simple physical transform.
link |
01:29:46.800
But then I start to put telemetry into the map,
link |
01:29:50.800
and I keep track of the traffic rates on the roads,
link |
01:29:53.800
and I tell you whether you're being a traffic jam if you drive that way,
link |
01:29:56.800
and I tell you which way to drive, and then I start to get feedback on where you're going,
link |
01:30:00.800
and I tell you the restaurants close, and people don't like it anyway.
link |
01:30:04.800
And then I put an AI on top of it, and I have it drive your car for you.
link |
01:30:08.800
And eventually, the implication of digital transformation of maps is,
link |
01:30:14.800
I get in a self driving car, and I say, take me someplace cool where I can eat.
link |
01:30:19.800
And how did you get to that last step, right?
link |
01:30:23.800
It wasn't simple engineering.
link |
01:30:26.800
There's a bit of fantasy in there, a bit of magic.
link |
01:30:29.800
Design, art, whatever the heck you call it.
link |
01:30:32.800
It's whatever, yeah, fantasy injects magic into the engineering process.
link |
01:30:37.800
Imagination precedes great revolutions in engineering.
link |
01:30:45.800
It's like imagining a world of what you can do with the display.
link |
01:30:50.800
How will the interaction be?
link |
01:30:52.800
That's where Google Glass actually came in, augmented reality, virtual reality.
link |
01:30:55.800
People were playing in the space of sci fi imagination.
link |
01:30:59.800
They called a moan shot. They tried.
link |
01:31:01.800
It didn't work, but to their credit, they stopped trying, right?
link |
01:31:04.800
Oh, and then there's new people. They keep dreaming.
link |
01:31:06.800
Dreamers are all around us.
link |
01:31:08.800
I love those dreamers, and most of them fail and suffer because of it,
link |
01:31:12.800
but some of them win Nobel Prizes or become billionaires.
link |
01:31:17.800
Well, what I would say is if half the civilization dropped what they were doing tomorrow
link |
01:31:25.800
and eagerly started working on launching a rocket to Alpha Centauri,
link |
01:31:33.800
it might not be the best use of our resources
link |
01:31:37.800
because it's kind of like if half of Athens in the year 500 BC eagerly started working on flying machines.
link |
01:31:45.800
If you went back and you said, what advice would you give them?
link |
01:31:49.800
You would say, it's not going to work until you get to aluminum,
link |
01:31:52.800
and you're not going to get to aluminum until you work out the steel and certain other things,
link |
01:31:57.800
and you're not going to get to that until you work out the calculus of variations and some metallurgy.
link |
01:32:02.800
There's a dude, Newton, that won't come along for quite a while,
link |
01:32:05.800
and he's going to give you the calculus to do it, and until then, it's hopeless.
link |
01:32:09.800
So you might be better off to work on the aqueduct or to focus upon sales or something.
link |
01:32:16.800
So if I look at this today, I say there's massive profound civilization advances to be made
link |
01:32:25.800
through digital transformation of information, and you can see them like that.
link |
01:32:29.800
This is not the story of today, right? It's 10 years old, what we've been seeing.
link |
01:32:35.800
We're living through different manifestations of that story today, too, though.
link |
01:32:39.800
Like social media, the effects of that is very interesting
link |
01:32:44.800
because ideas spread even, you talk about velocity of money.
link |
01:32:47.800
The velocity of ideas keeps increasing.
link |
01:32:51.800
So Wikipedia is a passive store, it's a store of knowledge.
link |
01:32:56.800
Twitter is like a water hose or something.
link |
01:33:02.800
It's like spraying you with knowledge whether you want it or not.
link |
01:33:05.800
It's like social media is just like this explosion of ideas, and then we pick them up,
link |
01:33:11.800
and then we try to understand ourselves because the drama of it also plays with our human psyche.
link |
01:33:17.800
So sometimes there's more ability for misinformation, for propaganda to take hold,
link |
01:33:22.800
so we get to learn about ourselves.
link |
01:33:24.800
We get to learn about the technology that can decelerate the propaganda, for example,
link |
01:33:28.800
all that kind of stuff.
link |
01:33:30.800
But the reality is, I feel like we're living through a singularity in the digital information space,
link |
01:33:36.800
and we don't have a great understanding of exactly how it's transforming our lives.
link |
01:33:43.800
This is where money is useful as a metaphor for significance
link |
01:33:47.800
because if money is the economic energy of the civilization,
link |
01:33:54.800
then something that's extraordinarily lucrative that's going to generate a monetary or a wealth increase
link |
01:34:01.800
is a way to increase the net energy in the civilization.
link |
01:34:04.800
And ultimately, if we had ten times as much of everything,
link |
01:34:08.800
we'd have a lot more free resources to pursue all of our advanced scientific and mathematical and theoretical endeavors.
link |
01:34:16.800
So let's take Twitter.
link |
01:34:18.800
Twitter is something that could be ten times more valuable than it is.
link |
01:34:22.800
Twitter could be made ten times better.
link |
01:34:26.800
Oh, by the way, I should say that people should follow you on Twitter. Your Twitter account is awesome.
link |
01:34:30.800
Thank you.
link |
01:34:31.800
It could be made ten times better, yeah.
link |
01:34:33.800
Yeah, Twitter can be made ten times better.
link |
01:34:35.800
If we take YouTube or take education, we could generate a billion PhDs.
link |
01:34:44.800
And the question is, do you need any profound breakthrough in materials or technology to do that?
link |
01:34:51.800
Yeah, it's not really.
link |
01:34:53.800
So if you want to, you could make Apple, Amazon, Facebook, Google, Twitter, all these things better.
link |
01:35:02.800
The United States government, if they took 1% of the money they spend on the Department of Education
link |
01:35:08.800
and they simply poured it into digital education and they gave degrees to people that actually met those requirements,
link |
01:35:18.800
they could provide 100x as much education for one one hundredth of the cost and they could do it with no new technology.
link |
01:35:26.800
That's a marketing and political challenge.
link |
01:35:30.800
So I don't think every objective is equally practical.
link |
01:35:35.800
And I think the benefit of being an engineer or thinking about practical achievements is when the government pursues an impractical objective
link |
01:35:48.800
or when anybody, an entrepreneur, not so bad with an entrepreneur because they don't have that much money to waste.
link |
01:35:54.800
When a government pursues an impractical objective, they squander trillions and trillions of dollars and achieve nothing.
link |
01:36:01.800
Whereas if they pursue a practical objective or if they simply get out of the way and do nothing
link |
01:36:10.800
and they allow the free market to pursue the practical objectives, then I think you can have profound impact on the human civilization.
link |
01:36:19.800
And if I look at the world we're in today, I think that there are multi trillion, 10, 20, 50 trillion dollars worth of opportunities
link |
01:36:35.800
in the digital information realm yet to be obtained.
link |
01:36:41.800
But there's hundreds of trillions of dollars of opportunities in the digital energy realm that not only are they not obtained.
link |
01:36:51.800
The majority of people don't even know what digital energy is.
link |
01:36:55.800
Most of them reject the concept.
link |
01:36:57.800
They're not looking for it.
link |
01:36:59.800
They're not expecting to find it.
link |
01:37:01.800
It's inconceivable because it is a paradigm shift.
link |
01:37:04.800
But in fact, it's completely practical right under our nose.
link |
01:37:09.800
It's staring at us and it could make the entire civilization work dramatically better in every respect.
link |
01:37:18.800
So you mentioned in the digital world, digital information is one.
link |
01:37:24.800
Digital energy is two and the possible impact on the world and the set of opportunities available in the digital energy space is much greater.
link |
01:37:35.800
So how do you think about the digital energy? What is it?
link |
01:37:40.800
So I'll start with Tesla.
link |
01:37:42.800
He had a very famous quote.
link |
01:37:44.800
He said, if you want to understand the universe, think in terms of energy, vibration and frequency.
link |
01:37:51.800
And it gets you thinking about what is the universe?
link |
01:37:54.800
And of course the universe is just all energy.
link |
01:37:57.800
And then what does matter?
link |
01:37:59.800
Matter is low frequency energy.
link |
01:38:02.800
And what are we?
link |
01:38:05.800
We're vibrating from ashes to ashes, dust to dust.
link |
01:38:09.800
I can turn a tree into light.
link |
01:38:12.800
I can turn light back into a tree.
link |
01:38:15.800
If I consider the entire universe and it's very important because we don't really think this way.
link |
01:38:21.800
Let's take the New York disco model.
link |
01:38:25.800
If I walk into a nightclub and there's loud music blaring in New York City, what's really going on there?
link |
01:38:34.800
If you blast out 14 billion years ago, the universe is formed.
link |
01:38:40.800
That's a low frequency thing, the universe.
link |
01:38:43.800
Four and a billion years ago, the sun, maybe the earth are formed.
link |
01:38:48.800
The continents are 400 million years old, the schist that New York City is on is some hundreds of millions of years.
link |
01:38:55.800
But the Hudson River is only 20,000 years.
link |
01:38:58.800
There's a building that's probably 50 years old.
link |
01:39:02.800
There's a company operating that disco or that club, which is five to 10 years old.
link |
01:39:08.800
There's a person, a customer walking in there for an experience for a few hours.
link |
01:39:13.800
There's music that's oscillating at some kilohertz and then there's light.
link |
01:39:20.800
And you have all forms of energy, all frequencies, all layered, all moving through different medium.
link |
01:39:29.800
And how you perceive the world is a question of at what frequency do you want to perceive the world?
link |
01:39:36.800
And I think that once you start to think that way, you're catalyzed to think about what would digital energy look like
link |
01:39:47.800
and why would I want it and what is it?
link |
01:39:53.800
So why don't we just start right there?
link |
01:39:56.800
What is it?
link |
01:39:57.800
The most famous manifestation of digital energy is Bitcoin.
link |
01:40:01.800
Bitcoin is a crypto asset.
link |
01:40:04.800
It's a crypto asset that has monetary value.
link |
01:40:07.800
Can we just link on that?
link |
01:40:09.800
Bitcoin is a digital asset that has monetary value.
link |
01:40:17.800
What is a digital asset?
link |
01:40:19.800
What is monetary?
link |
01:40:20.800
Why use those terms versus the words of money and currency?
link |
01:40:25.800
Is there something interesting in that disambiguation of different terms?
link |
01:40:29.800
I'd call it a crypto asset network.
link |
01:40:32.800
The goal is to create a billion dollar block of pure energy in cyberspace.
link |
01:40:41.800
One that I could then move with no friction at the speed of light.
link |
01:40:48.800
It's the equivalent of putting a million pounds in orbit.
link |
01:40:53.800
How do I actually launch something into orbit?
link |
01:40:58.800
How do I launch something into cyberspace such that it moves friction free?
link |
01:41:03.800
And the solution is a decentralized proof of work network.
link |
01:41:09.800
Satoshi's solution was I'm going to establish protocol running on a distributed set of computers
link |
01:41:16.800
that will maintain a constant supply of never more than 21 million Bitcoins
link |
01:41:22.800
that are subdividable by 100 million Satoshi's, each transferable via transferring private keys.
link |
01:41:30.800
Now, the innovation is to create that in a ethical, durable fashion.
link |
01:41:44.800
The ethical innovation is I want it to be property and not a security.
link |
01:41:49.800
A bushel of corn, an acre of land, a stack of lumber, and a bar of gold, and a Bitcoin are all property.
link |
01:41:58.800
And that means they're all commonly occurring elements in the world.
link |
01:42:03.800
You could call them commodities, but commodity is a little bit misleading, and I'll tell you in a second.
link |
01:42:08.800
But they're all distinguished by the fact that no one entity or person or government controls them.
link |
01:42:15.800
If you have a barrel of oil and you're in Ukraine versus Russia versus Saudi Arabia versus the U.S.,
link |
01:42:23.800
you have a barrel of oil, right?
link |
01:42:27.800
And it doesn't matter what the premier in Japan or the mayor of Miami Beach thinks about your barrel of oil.
link |
01:42:35.800
They cannot wave their hand and make it not a barrel of oil or a quart of wood, right?
link |
01:42:42.800
And so property is just a naturally occurring element in the universe, right?
link |
01:42:48.800
Why use the word ethical?
link |
01:42:50.800
Sorry, I may interrupt occasionally.
link |
01:42:53.800
Why ethical assigned to property?
link |
01:42:57.800
Because if it's a security, a security would be an example of a share of a stock or a crypto token controlled by a small team.
link |
01:43:08.800
And in the event that something is a security because some small group or some identifiable group can control its nature, character, supply,
link |
01:43:21.800
then it really only becomes ethical to promote it or sell it pursuant to fair disclosures.
link |
01:43:30.800
So I'll give you maybe practical example.
link |
01:43:34.800
I'm the mayor of Chicago.
link |
01:43:36.800
I give a speech.
link |
01:43:38.800
My speech, I say, I think everybody in Chicago should own their own farm and have chicken, a chicken in the backyard and their own horse and an automobile.
link |
01:43:49.800
That's ethical.
link |
01:43:51.800
I give the same speech and I say, I think everybody in Chicago should buy Twitter stock, sell their house or sell their cash and buy Twitter stock.
link |
01:44:01.800
Is that ethical?
link |
01:44:03.800
Not really. At that point, you've ended into a conflict of interest because what you're doing is you're promoting an asset which is substantially controlled by a small group of people,
link |
01:44:15.800
the board of directors or the CEO of the company.
link |
01:44:18.800
So how would you feel if the president of the United States said, I really think Americans should all buy Apple stock?
link |
01:44:27.800
Especially if you worked at Google, but you worked anywhere, you'd be like, why isn't he saying buy mine?
link |
01:44:33.800
A security is a proprietary asset in some way, shape or form.
link |
01:44:40.800
And the whole nature of securities law, it starts from this ancient idea, they'll shall not lie, cheat or steal.
link |
01:44:49.800
So if I'm going to sell you securities or I'm going to promote securities as a public figure or as an influencer or anybody else,
link |
01:45:01.800
if I create my own Yoyo coin or Mikey coin and then there's a million of them and I tell you that I think that it's a really good thing and Mikey coin will go up forever,
link |
01:45:13.800
everybody buys Mikey coin and then I give 10 million to you and don't tell the public, I've cheated them.
link |
01:45:21.800
Maybe if I have Mikey coin and I think there's only 2 million Mikey coin and I swear to you there's only 2 million
link |
01:45:28.800
and then I get married and I have three kids and my third kid is in the hospital and my kid's going to die
link |
01:45:35.800
and I have this ethical reason to print 500,000 more Mikey coin or else people are going to die and everybody tells me it's fine.
link |
01:45:42.800
I've still abused the investor, right? It's an ethical challenge.
link |
01:45:49.800
If you look at ethics laws everywhere in the world, they all boil down to having a clause which says that if you're a public figure,
link |
01:46:00.800
you can't endorse any security, you can't endorse something that would cause you to have a conflict of interest.
link |
01:46:07.800
So if you're a mayor, a governor, a country, a public figure, an influencer and you want to promote or promulgate
link |
01:46:16.800
or support something using any public influence or funds or resources you may have, it needs to be property.
link |
01:46:24.800
It can't be security. So it goes beyond that, right?
link |
01:46:29.800
I mean like what the Chinese want to support an American company, right?
link |
01:46:34.800
As soon as you look at what's in the best interest of the human race, the civilization,
link |
01:46:40.800
you realize that if you want an ethical path forward, it needs to be based on common property which is fair
link |
01:46:51.800
and the way you get to a common property is through an open permissionless protocol.
link |
01:46:57.800
If it's not open, right, it's proprietary and I know what the code says and you don't know what the code says, that makes it a security.
link |
01:47:05.800
If it's permissioned, if you're not allowed on my network or if you can be censored or booted off my network, that also makes it a security.
link |
01:47:19.800
So when I talk about property, I mean the challenge here is how do I create something that's equivalent to a barrel of oil in cyberspace?
link |
01:47:32.800
And that means it has to be a non sovereign bearer instrument, open permissionless, not censorable, right?
link |
01:47:42.800
If I could do that, then I could deliver you 10,000 dematerialized barrels of oil and you would take settlement of them
link |
01:47:53.800
and you would know that you have possession of that property irregardless of the opinion of any politician or any company or anybody else in the world.
link |
01:48:04.800
That's a really critical characteristic and it actually is, it's probably one of the fundamental things that makes Bitcoin special.
link |
01:48:15.800
Bitcoin isn't just a crypto asset network, it's easy to create a crypto asset network.
link |
01:48:19.800
It's very hard to create an ethical crypto asset network because you have to create one without any government or corporation or investor exercising into influence to make it successful.
link |
01:48:37.800
Open permissionless, non censorable, so basically no way for you without explicitly saying so, outsourcing control to somebody else.
link |
01:48:50.800
So it's a kind of, you have full control.
link |
01:48:54.800
Even with a barrel of oil, what's the difference in between a barrel of oil and a Bitcoin to you?
link |
01:49:01.800
Because you kind of mentioned that both are property.
link |
01:49:07.800
You mentioned Russia and China and so on.
link |
01:49:10.800
Is it the ability of the government to confiscate?
link |
01:49:13.800
In the end, governments can probably confiscate no matter what the asset is, but you want to lessen the effort involved.
link |
01:49:21.800
A barrel of oil is a bucket of physical property, liquid property, and Bitcoin is a digital property.
link |
01:49:27.800
But it's easier to confiscate a barrel of oil.
link |
01:49:31.800
It's easier to confiscate things in the real world than things in cyberspace. Much easier.
link |
01:49:38.800
So that's not universally true. Some things in the digital space are actually easier to confiscate because just the nature of how things move easily with information.
link |
01:49:49.800
I think in the Bitcoin world, what we would say is that Bitcoin is the most difficult property that the human race possesses or has yet invented to confiscate.
link |
01:50:01.800
And that's by virtue of the fact that you could take possession of it by your private keys.
link |
01:50:06.800
So if you got your 12 seed phrases in your head, then that would be the highest form of property right because I literally have to crack your head open and read your mind to take it.
link |
01:50:18.800
It doesn't mean I couldn't extract it from you under duress, but it means that it's harder than every other thing you might own.
link |
01:50:26.800
In fact, it's exponentially harder.
link |
01:50:29.800
If you consider every other thing you might own, a car, a house, a share of stock, gold, diamonds, property rights, intellectual property rights, movie rights, music rights, anything imaginable, they would all be easier by orders and orders of magnitude to seize.
link |
01:50:47.800
So digital property in the form of a set of private keys is by far the apex property of the human race.
link |
01:50:57.800
In terms of ethics, I want to make one more point.
link |
01:50:59.800
It's like, I might say to you, Lex, I think Bitcoin is the best, most secure, most durable crypto asset network in the world is going to go up forever and there's nothing better in the world.
link |
01:51:10.800
I might be right.
link |
01:51:12.800
I might be wrong.
link |
01:51:14.800
But the point is, because it's property, it's ethical for me to say that.
link |
01:51:20.800
If I were to turn around and say, you know, Lex, I think the same about micro strategy stock, MSTR, that's a security, okay?
link |
01:51:29.800
If I'm wrong about that, I have civil liability or other liability because I could go to a board meeting tomorrow and I could actually propose we issue a million more shares of micro strategy stock.
link |
01:51:42.800
Whereas the thing that makes Bitcoin ethical for me to even promote is the knowledge that I can't change it.
link |
01:51:50.800
If I knew that I could make it 42 million instead of 21 million and I had the button back here, right?
link |
01:52:00.800
Then I have a different degree of ethical responsibility.
link |
01:52:04.800
Now, I could tell you your life will be better if you buy Bitcoin and it might not.
link |
01:52:08.800
You might go buy Bitcoin, you might lose the keys and be bankrupt and your life ends and your life is not better because you bought Bitcoin, right?
link |
01:52:15.800
But it wouldn't be my ethical liability any more than if I were to say, Lex, I think you ought to get a farm.
link |
01:52:24.800
I think you should be a farmer.
link |
01:52:26.800
I think a chicken in every pot, you should get a horse.
link |
01:52:29.800
I think you'd be better.
link |
01:52:31.800
These are all opinions expressed about property which may or may not be right that you may or may not agree with.
link |
01:52:41.800
But in a legal sense, if we read the law, if we understand securities law, and I would say most people in the crypto industry, they didn't take companies public and so they're not really focused on the securities law.
link |
01:52:56.800
They don't even know the securities law.
link |
01:52:58.800
If you focus on the securities law, that would say you just can't legally sell this stuff to the general public or promote it without a full set of continuing disclosures signed off on by a regulator.
link |
01:53:13.800
So there's a fairly bright line there with regard to securities.
link |
01:53:18.800
But when you get to the secondary issue, it's how do you actually build a world based on digital property if public figures can't embrace it or endorse it?
link |
01:53:35.800
You see, so you're not going to build a better world based upon Twitter stock if that's your idea of property because Twitter stock is a security and Twitter stock is never going to be a non sovereign bearer instrument in Russia or in China.
link |
01:53:52.800
It's not even legal in China.
link |
01:53:54.800
It's not a global permissionless open thing.
link |
01:53:57.800
It will never be trusted by the rest of the world and legally it's impractical, but would you really want to put $100 trillion worth of economic value on Twitter stock if there's a board of directors and a CEO that could just get up and take half of it tomorrow?
link |
01:54:12.800
The answer is no.
link |
01:54:13.800
So if you want to build a better world based on digital energy, you need to start with constructing a digital property.
link |
01:54:24.800
And I'm using property here in the legal sense, but I would also go to the next step and say property is low frequency money.
link |
01:54:38.800
So if I give you a million dollars and you want to hold it for a decade, you might go buy a house with it, right?
link |
01:54:48.800
And the house is low frequency money. You converted the million dollars of economic energy into a structure called a house.
link |
01:54:57.800
Maybe after a decade, you might convert it back into energy.
link |
01:55:01.800
You might sell the house for currency and it'll be more worth more or less depending upon the monetary climate.
link |
01:55:08.800
The frequency means what here?
link |
01:55:10.800
How quickly it changes state?
link |
01:55:13.800
How quickly does something vibrate?
link |
01:55:16.800
So if I transfer $10 from me to you for a drink and then you turn around and you buy another, right?
link |
01:55:26.800
We're vibrating on a frequency of every few hours, right?
link |
01:55:29.800
The energy is changing hands, but it's not likely that you sell and buy houses every few hours, right?
link |
01:55:36.800
The frequency of a transaction in real estate is every 10 years, every five years.
link |
01:55:42.800
It's a much lower frequency transaction.
link |
01:55:45.800
And so when you think about what's going on here, you have extremely low frequency things which we'll call property.
link |
01:55:57.800
Then you have mid frequency things. I'm going to call them money or currency.
link |
01:56:03.800
And then you have high frequency and that's energy.
link |
01:56:08.800
And that's why I use the illustration of you got the building, you got the light and you got the sound.
link |
01:56:14.800
And they're all just energy moving at different frequencies.
link |
01:56:18.800
Now, Bitcoin is magical and it is truly the innovation.
link |
01:56:25.800
It's like a singularity because it represents the first time in the history of human race that we managed to create a digital property properly understood.
link |
01:56:37.800
It's easy to create something digital, right? Every coupon and every skin on Fortnite and Roblox and Apple TV credits and all these things.
link |
01:56:49.800
They're all digital something, but they're securities, right?
link |
01:56:52.800
Chairs of stock are securities.
link |
01:56:54.800
Whenever anybody transfers, when you transfer money on PayPal or Apple Pay, you're transferring, in essence, a security or an IOU.
link |
01:57:03.800
And so transferring a bearer instrument with final settlement in the internet domain or in cyberspace, that's a critical thing.
link |
01:57:15.800
And anybody in the crypto world can do that. All the cryptos can do that.
link |
01:57:20.800
But what they can't do, what 99% of them fail to do is be property. They're securities.
link |
01:57:27.800
Well, there's a line there I'd like to explore a little further. For example, what about when you, my Coinbase or something like that, when there's an exchange that you buy Bitcoin is in, you start to move away from this kind of some of the aspects that you said makes up a property, which is this nonsensable and permissionless.
link |
01:57:56.800
And open.
link |
01:57:58.800
So in order to achieve the convenience, the effectiveness of the transfer of energy, you have to leverage some of these places that remove the aspects of property.
link |
01:58:12.800
So maybe you can comment on that.
link |
01:58:14.800
Let me give you a good model for that.
link |
01:58:16.800
If you think about the Layer 1 of Bitcoin, the Layer 1 is the property settlement layer and we're going to do 350,000 transactions or less a day, 100 million transactions a year is the bandwidth on the Layer 1.
link |
01:58:31.800
And it would be an ideal Layer 1 to move a billion dollars from point A to point B with the massive security.
link |
01:58:39.800
The role of the Layer 1 is two things.
link |
01:58:43.800
One thing is I want to move a large sum of money through space with security.
link |
01:58:50.800
I can move any amount of Bitcoin in a matter of minutes for dollars on Layer 1.
link |
01:58:58.800
The second important feature of the Layer 1 is I need the money to last forever.
link |
01:59:05.800
I need the money indestructible immortal, so the bigger trick is not to move a billion dollars from here to Tokyo.
link |
01:59:13.800
The big trick is to move a billion dollars from here to the year 2140.
link |
01:59:18.800
And that's what we want to solve with Layer 1.
link |
01:59:23.800
And the best real metaphor in New York City would be the granite or the schist.
link |
01:59:28.800
What you want is a city block of bedrock and how long has it been there? Like millions of years it's been there.
link |
01:59:36.800
And how fast do you want it to move? You don't.
link |
01:59:39.800
In fact, the single thing that's most important is that it not deflect.
link |
01:59:44.800
If it deflects a foot in 100 years, it's too much.
link |
01:59:48.800
If it deflects an inch in 100 years, you might not want that.
link |
01:59:52.800
So the Layer 1 of Bitcoin is a foundation upon which you put weight. How much weight can you put on it?
link |
01:59:58.800
You put a trillion, 10 trillion, 100 trillion, a quadrillion.
link |
02:00:03.800
How much weight is on the bedrock in Manhattan, right?
link |
02:00:07.800
Think about 100 story buildings.
link |
02:00:10.800
The real key there is the foundational asset needs to be there at all.
link |
02:00:16.800
So the fact that you can create a hundred trillion Layer 1 that would stand for 100 years,
link |
02:00:23.800
that is the revolutionary breakthrough first time.
link |
02:00:27.800
And the fact that it's ethical, right? It's ethical and it's common property, global, permissionless.
link |
02:00:33.800
Extremely unlikely that would happen.
link |
02:00:36.800
People tried 50 times before and they all failed.
link |
02:00:39.800
They tried 15,000 times after and they've all been, they've all generally failed.
link |
02:00:44.800
And a couple have like been less successful.
link |
02:00:48.800
But for the most part, that's an extraordinary thing.
link |
02:00:53.800
Now, just really quickly pause, just to define some terms.
link |
02:00:56.800
Maybe people don't know.
link |
02:00:58.800
Layer 1 is that Michael's referring to is in general what people know of as the Bitcoin technology originally defined,
link |
02:01:09.800
which is the blockchain, there's a consensus mechanism of proof of work, a low number of transactions,
link |
02:01:15.800
but you can move a very large amount of money.
link |
02:01:21.800
The reason he's using the term Layer 1 is now that there's a lot of ideas of Layer 2 technologies
link |
02:01:27.800
that are built on top of this bedrock that allow you to move a much larger number of transactions.
link |
02:01:33.800
So, sort of higher frequency, I don't know what terminology you want to use,
link |
02:01:40.800
but basically be able to use now something that is based on Bitcoin to then buy stuff, be a consumer,
link |
02:01:48.800
to transfer money, to use it as currency, just to define some terms.
link |
02:01:53.800
Yeah.
link |
02:01:55.800
So, the Layer 1 is the foundation for the entire cyber economy.
link |
02:02:01.800
And we don't want it to move fast.
link |
02:02:05.800
What we want is immortality, immoral, incorruptible, and destructible.
link |
02:02:14.800
That's what you want, integrity from the Layer 1.
link |
02:02:18.800
Now, there's Layer 2 and Layer 3, and Layer 2 I would define as an open, permissionless, noncostodial protocol
link |
02:02:27.800
that uses the underlying Layer 1 token as its gas fee.
link |
02:02:33.800
So, what's custodial mean, and how does the different markets, like, is lightning network?
link |
02:02:39.800
So, lightning network would be an example of a Layer 2, noncostodial.
link |
02:02:43.800
So, the lightning network will sit on top of Layer 1.
link |
02:02:48.800
It'll sit on top of Bitcoin.
link |
02:02:50.800
And what you want to do is solve the problem of, it's well and fine.
link |
02:02:56.800
I don't want to move a billion dollars every day.
link |
02:02:58.800
What I want to move is five dollars a billion times a day.
link |
02:03:04.800
So, if I want to move five dollars a billion times a day,
link |
02:03:07.800
I don't really need to put the entire trillion dollars of assets at risk every time I move five dollars.
link |
02:03:15.800
All I really need to do is put a hundred thousand dollars in a channel, or a million dollars in a channel.
link |
02:03:21.800
And then I do ten million transactions where I have a million dollars at risk.
link |
02:03:26.800
And of course, it's kind of simple.
link |
02:03:28.800
If I lower my security requirement by a factor of a million,
link |
02:03:35.800
I can probably move the stuff a million times faster.
link |
02:03:38.800
And that's how lightning works.
link |
02:03:40.800
It's noncostodial because there's no corporation or custodian or counterparty you're trusting.
link |
02:03:49.800
There's the risk of moving through the channel.
link |
02:03:52.800
But lightning is an example of how I go from 350,000 transactions a day to 350 million transactions a day.
link |
02:04:02.800
So, on that layer too, you could move the Bitcoin in seconds for fractions of pennies.
link |
02:04:07.800
Now, that's not the end all be all because the truth is there are a lot of open protocols.
link |
02:04:14.800
Lightning probably won't be the only one.
link |
02:04:16.800
There's an open market competition of other permissionless open source protocols to do this work.
link |
02:04:23.800
And in theory, any other crypto network that was deemed to be property, deemed to be non security,
link |
02:04:33.800
you could also think of as potentially a layer two to Bitcoin.
link |
02:04:37.800
There's a debate about are there any and what are they, and we can leave that for a later time.
link |
02:04:42.800
But why do you think of them as layer two as opposed to contending for layer one?
link |
02:04:49.800
Yeah, actually, if they're using their own token, then they are a layer one.
link |
02:04:54.800
If you create an open protocol that uses the Bitcoin token as the fee, then it becomes a layer two.
link |
02:05:01.800
Bitcoin itself incentivizes its own transactions with its own token and that's what makes it layer one.
link |
02:05:10.800
Okay, what's layer three then?
link |
02:05:13.800
Layer three is a custodial layer.
link |
02:05:15.800
So if you want to move Bitcoin in milliseconds for free, you move it through Binance or Coinbase or Cash App.
link |
02:05:25.800
So this is a very straightforward thing.
link |
02:05:27.800
I mean, it seems pretty obvious when you think about it that there are going to be hundreds of thousands of layer threes.
link |
02:05:33.800
There may be dozens of layer twos.
link |
02:05:36.800
I mean, lightning is A1, but it's not the only one. Anybody can invent something, right?
link |
02:05:42.800
And we can have this debate about custodial, noncustodial.
link |
02:05:50.800
Don't you think there's a monopolization possibilities at layer three?
link |
02:05:57.800
So you mentioned Binance, Coinbase, what if they start to dominate and basically everybody's using them practically speaking
link |
02:06:08.800
and then it becomes too costly to memorize the private key in your brain?
link |
02:06:15.800
Or like a cold storage of layer one technology.
link |
02:06:19.800
The idealist fear the layer threes because they think, and especially they detest, there's almost like a layer four, by the way, if you want to.
link |
02:06:30.800
A layer four would be, I've got Bitcoin on an application, but I can't withdraw it.
link |
02:06:37.800
So I've got an application that's backed by Bitcoin, but the Bitcoin is sealed.
link |
02:06:42.800
It's a proprietary example.
link |
02:06:44.800
And I'll give you an example of that.
link |
02:06:45.800
It would be like Grayscale, if I own a share of GBTC, and so I own a security.
link |
02:06:53.800
Actually, you could own MSTR.
link |
02:06:56.800
If you own a security or you own a product that has Bitcoin embedded in it, you get the benefits of Bitcoin, but you don't have the ability to withdraw the asset.
link |
02:07:07.800
To get out of the security market at layer four?
link |
02:07:10.800
Am I understanding this correctly?
link |
02:07:12.800
I don't know if I would say, not all securities are layer four, but anything that's a proprietary product based upon with Bitcoin embedded in it where you can't withdraw the Bitcoin is another application of Bitcoin.
link |
02:07:28.800
So if you think about different ways you can use this, you can either stay completely on the layer one and use the base chain for your transactions.
link |
02:07:38.800
Or you can limit yourself to layer one and layer two lightning, and the purist would say we stay there, get your Bitcoin off the exchange.
link |
02:07:47.800
But you could also go to the layer three.
link |
02:07:50.800
When Cash App supported Bitcoin, they made it very easy to buy it, and then they gave you the bill that would draw.
link |
02:07:57.800
When PayPal or I think Robinhood let you buy it, they wouldn't let you withdraw it and it was a big community uproar, and people want these layer threes to make it possible to withdraw the bitcoins.
link |
02:08:08.800
You can take it to your own private wallet and get it off the exchange.
link |
02:08:13.800
I think the answer to the question of, well, is corruption possible?
link |
02:08:18.800
Corruption is possible in all human institutions and all governments everywhere. The difference between digital property and physical property is when you own a building in Los Angeles and the city politics turn against you, you can't move the building.
link |
02:08:35.800
And when you own a share of a security that's like a US traded security and you wish to move to some other country, you can't take the security with you either.
link |
02:08:49.800
And when you own a bunch of gold and you try to get through the airport, they might not let you take it.
link |
02:08:55.800
So Bitcoin is advantageous versus all those because you actually do have the option to withdraw your asset from the exchange.
link |
02:09:05.800
And if you had Bitcoin with Fidelity and you had shares of stock with Fidelity and if you had bonds and sovereign debt with Fidelity and if you own some mutual funds and some other random limited partnerships with Fidelity,
link |
02:09:22.800
none of those things can be removed from the custodian, but the Bitcoin you can take off the exchange you can remove from the custodian.
link |
02:09:32.800
So there's a deterrent that's an anti corrupting element and the phrase is an armed society is a polite society.
link |
02:09:44.800
Right, because you have the optionality to withdraw all your assets from the crypto exchange, you can enforce fairness.
link |
02:09:53.800
And at the point where you disagree with their policies, you can within an hour move your assets to another counterparty or take personal custody of those assets.
link |
02:10:04.800
And you don't have that option with most other forms of property.
link |
02:10:08.800
You don't have as much optionality with any other form of property on earth. And so what what makes digital property distinct is the fact that it has the most optionality for custody.
link |
02:10:22.800
Now coming back to this digital energy issue, the real key point is the energy moves in milliseconds for free on layer threes.
link |
02:10:31.800
It moves in seconds or less than seconds on layer twos it moves in minutes on the layer one.
link |
02:10:38.800
And I don't think it makes any sense to even think about trying to solve all three problems on the layer one because it's impossible to achieve the security and the incorruptibility and immortality.
link |
02:10:52.800
If you try to build that much speed and that functionality and performance.
link |
02:10:57.800
In fact, if you come back to a New York model, you really wanted a block of granite, a building and a company.
link |
02:11:05.800
That's what makes the economy.
link |
02:11:07.800
Right. If you said if I said to you, you're going to build a building, but you can only have one company in it for the life of the building.
link |
02:11:13.800
It would be very fragile, like very brittle.
link |
02:11:16.800
What company 100 years ago is still relevant today.
link |
02:11:20.800
You want all three layers because they all oscillated different frequencies.
link |
02:11:25.800
And there's a tendency to think, well, it's got to be this L1 or that L1, not really.
link |
02:11:33.800
And sometimes people think, well, I don't really want any L3.
link |
02:11:37.800
But companies, it's not an even or companies are better than crypto asset networks at certain things.
link |
02:11:46.800
If you want complexity, you want to implement complexity or you want to implement compliance or customer service.
link |
02:11:54.800
Companies do these things well.
link |
02:11:57.800
We know you couldn't decentralize Apple or Netflix or even YouTube.
link |
02:12:05.800
The performance wouldn't be there and the subtlety wouldn't be there.
link |
02:12:09.800
And you can't really legally decentralize certain forms of banking and insurance because they will become illegal in the political jurisdiction they're in.
link |
02:12:19.800
So unless you're a crypto anarchist and you believe in no companies and no nation states, which is just not very practical, not any time soon.
link |
02:12:31.800
Once you allow that nation states will continue and companies have a role, then the layered architecture follows and the free market determines who wins.
link |
02:12:44.800
For example, there are layer threes that let you acquire Bitcoin and withdraw Bitcoin.
link |
02:12:52.800
There are other applications that let you acquire but not withdraw it.
link |
02:12:57.800
And they don't get the same market share but they might give you some other advantage.
link |
02:13:03.800
There are certain layer threes like Jack Dorsey's Cash App where they just incorporated lightning and implementation of it.
link |
02:13:12.800
So that makes it advantageous versus an application that doesn't incorporate lightning.
link |
02:13:24.800
If you think about the big picture, the big picture is 8 billion people with mobile phones served by 100 million companies doing billions of transactions an hour.
link |
02:13:36.800
And the companies are settling with each other on the base layer in blocks of 80 million at a time.
link |
02:13:45.800
And then the companies are trading with the consumers in proprietary layers like layer three.
link |
02:13:55.800
And then on occasion people are shuffling assets across custodians with lightning layer two because you don't want to pay $5 to move $50.
link |
02:14:05.800
You want to pay a 20th of a penny to move $50.
link |
02:14:09.800
And so all of these things create efficiency in the economy.
link |
02:14:15.800
And Lex, if you want to consider how much efficiency, if you gave me a billion dollars in 20 years, I couldn't find a way to trade with another company or a counterparty in Nigeria.
link |
02:14:27.800
Like no amount of money.
link |
02:14:31.800
Like $10 billion. I couldn't do it because you get shut down at the banking level.
link |
02:14:38.800
You can't link up a bank in Nigeria with the bank in the U.S.
link |
02:14:42.800
You get shut down at this credit card level because they don't have the credit cards or they won't clear.
link |
02:14:48.800
You get shut down at the compliance FCPA level because you wouldn't be able to implement a system that interfaced with somebody else's system if it's not in the right political jurisdiction.
link |
02:15:03.800
On the other hand, three entrepreneurs in Nigeria on the weekend could create a website that would trade in this lightning economy using open protocols without asking anybody's permission.
link |
02:15:15.800
So you're talking about something that's like a million times cheaper, less friction and faster to do it.
link |
02:15:23.800
If you want to get money to move.
link |
02:15:26.800
What do you think that looks like?
link |
02:15:28.800
So now there's a war going on in Ukraine.
link |
02:15:31.800
There's other wars, Yemen, going out throughout the world in this most difficult of states that a nation can be in, which is at war.
link |
02:15:43.800
Civil war or war with other nations.
link |
02:15:46.800
What's the role of Bitcoin in this context?
link |
02:15:51.800
I mean, Bitcoin is a universal trust protocol, a universal energy protocol, if you will.
link |
02:15:58.800
English is one.
link |
02:16:00.800
What I see is a bunch of fragmentation of applications.
link |
02:16:04.800
For example, the Russian payment app is not going to work in Ukraine.
link |
02:16:09.800
The Ukraine payment app is not going to work in Russia.
link |
02:16:12.800
The U.S. payment apps won't work either of those places, as far as I know.
link |
02:16:18.800
In Argentina, their payment app may not work in certain parts of Africa.
link |
02:16:23.800
So what you have is different local economies where people spin up their own applications, compliant with their own local laws or in war zones, not compliant, but just spinning up.
link |
02:16:41.800
How do you build something that's not compliant?
link |
02:16:43.800
What is the revolutionary act here when you don't agree with the government or what you want to free yourself from the constraints?
link |
02:16:52.800
So here's the thing.
link |
02:16:54.800
When a nation is really at war, especially if it's an authoritarian regime, it's going to try to control the pipe, like lock everything down with the spread of information.
link |
02:17:05.800
How do you break through that?
link |
02:17:07.800
How do you do the thing that you mentioned, which is you have to build another app, essentially, that allows you to flow of money outside the legal constraints placed on you by the government?
link |
02:17:17.800
So basically break the law.
link |
02:17:20.800
Is that possible?
link |
02:17:22.800
Metaphorically speaking, if you want to break out the constraints of your culture, you learn to speak English.
link |
02:17:27.800
For example, it's not illegal to speak English, or even if it is, right?
link |
02:17:31.800
It doesn't matter, but English works everywhere in the world if you can speak it, and then you can tap into a global commerce and intelligence network.
link |
02:17:41.800
So Bitcoin is a language, so you learn to speak Bitcoin or you learn to speak lightning, and then you tap into that network in whatever manner you can.
link |
02:17:52.800
But the problem is it's still very difficult to move Bitcoin around in Russia and Ukraine now during war.
link |
02:17:59.800
There was a sense to me that the cryptocurrency in general could be the savior for helping people.
link |
02:18:06.800
There's millions of refugees that are moving all around.
link |
02:18:10.800
It's very difficult to move money around in that space to help people.
link |
02:18:17.800
I think we're very early.
link |
02:18:19.800
We're very embryonic here.
link |
02:18:21.800
If you look at the...
link |
02:18:22.800
Who's we?
link |
02:18:23.800
Sorry, we as a human civilization, are we operating in the cryptocurrency space?
link |
02:18:27.800
I think the entire crypto economy is very embryonic, and the human race's adoption of it is embryonic.
link |
02:18:35.800
We're like one, two percent down that adoption curve.
link |
02:18:40.800
If you take lightning, for example, the first real commercial applications of lightning are just in the last 12 months.
link |
02:18:47.800
So we're like year one.
link |
02:18:49.800
We might be approaching year two of commercial lightning adoption, and if you look at lightning adoption,
link |
02:18:55.800
lightning's not built into Coinbase.
link |
02:18:58.800
It's not built into Binance.
link |
02:19:00.800
It's not built into FTX.
link |
02:19:02.800
Cash app just implemented the first implementation, but not all the features are built into it.
link |
02:19:08.800
There's a few dozen, a dozen lightning wallets circulating out there.
link |
02:19:13.800
So I think that we're probably going to be 36 months of software development
link |
02:19:20.800
at the point that every Android phone and every iPhone has a Bitcoin wallet or a crypto wallet in it of sorts.
link |
02:19:31.800
That's a big deal.
link |
02:19:33.800
If Apple embraced lightning, that's a big deal.
link |
02:19:36.800
So the adoption is the thing, like in a war zone, adoption, the people who struggle the most in war
link |
02:19:45.800
are people who weren't doing that great before the war started.
link |
02:19:50.800
They don't have the technological sophistication.
link |
02:19:52.800
The hackers and all those kinds of people will find a way.
link |
02:19:55.800
It's just regular people who are just struggling to make day by day living.
link |
02:20:00.800
And so if the adoption permeates the entire culture, then you can start to move money around in the digital space.
link |
02:20:10.800
If you can psychoanalyze Jack Dorsey for a second.
link |
02:20:16.800
So he's one of the early adopters or he's one of the people pushing the early adoption in this Layer 3 inside Cash App.
link |
02:20:24.800
What do you make of the man of this decision as a business owner, as somebody playing in the space?
link |
02:20:32.800
Why did he do it and what does that mean for others at the scale that might be doing the same?
link |
02:20:40.800
So incorporating lightning networking, incorporating Bitcoin into their products.
link |
02:20:45.800
I think he's been pretty clear about this.
link |
02:20:48.800
He feels that Bitcoin is an instrument of economic empowerment for billions of people that are unbanked and have no property rights in the world.
link |
02:20:58.800
If you want to give an incorruptible bank to 8 billion people on the planet,
link |
02:21:11.800
that's the same as asking the question, how do you give a full education through PhD to 8 billion people on the planet?
link |
02:21:21.800
And the answer is a digital version of the 20th century thing running on a mobile phone.
link |
02:21:29.800
And Bitcoin is a bank and cyberspace is run by incorruptible software and it's for everybody on earth.
link |
02:21:35.800
So I think when Jack looks at it, he's very sensitive to the plight of everybody in Africa.
link |
02:21:40.800
If you look at Africans, right, like you're going to give them banks, you're not going to put a bank branch on every corner.
link |
02:21:45.800
That's an obscene waste of energy.
link |
02:21:47.800
You're not going to run copper wires across the continent. That's an obscene waste of energy.
link |
02:21:52.800
You're not going to give them gold.
link |
02:21:56.800
So how are you going to provide people with a decent life?
link |
02:22:03.800
The metaphor I think is relevant here.
link |
02:22:05.800
The biological metaphor lacks is type one diabetic.
link |
02:22:09.800
If you're type one diabetic, you can't form fat.
link |
02:22:12.800
And if you can't form fat, then you can't store excess energy.
link |
02:22:16.800
So that means that, I mean, fat is the ultimate organic battery.
link |
02:22:20.800
And if you've got 30 pounds of it, you can go 60 days without eating.
link |
02:22:24.800
But if you can't generate insulin, you can't form fat cells.
link |
02:22:28.800
And if you can't form fat cells and store energy, then you can eat yourself to death.
link |
02:22:33.800
I mean, you will eat and you will die.
link |
02:22:35.800
You'll starve to death.
link |
02:22:37.800
So the lack of property rights is like being a type one diabetic.
link |
02:22:42.800
And so if you look at most people everywhere in the world, they don't have property rights.
link |
02:22:49.800
They don't have effective bank and their currency is broken.
link |
02:22:54.800
Like what are the two things that in theory would serve as the equivalent of an organic battery
link |
02:23:02.800
or an economic battery to civilization would be, I have a currency which holds its value
link |
02:23:08.800
and I can store it in a bank.
link |
02:23:10.800
So a risk free currency derivative.
link |
02:23:17.800
I pay you your money.
link |
02:23:19.800
You take your life savings.
link |
02:23:21.800
You put it in a bank.
link |
02:23:22.800
You save up for your retirement.
link |
02:23:23.800
You'll have happily ever after.
link |
02:23:25.800
That's the American dream, right?
link |
02:23:27.800
That's the idyllic situation.
link |
02:23:30.800
The real situation is there are no banks.
link |
02:23:33.800
You can't get a bank account.
link |
02:23:35.800
So I give you your pay and currency and then I double the supply and I give it to my cousin
link |
02:23:41.800
or I give it to whatever cause I want or I use it to buy weapons
link |
02:23:45.800
and then you find a loaf of bread cost triple next month is what it costs
link |
02:23:49.800
and your life savings is worthless.
link |
02:23:52.800
And so in that environment, everybody's ripped back to Stone Age barter
link |
02:23:57.800
and the problem with that even Stone Age barter is you're going to carry your life savings on your back
link |
02:24:03.800
and what happens when the guy with the machine gun points it at your head
link |
02:24:05.800
and just takes your life savings.
link |
02:24:07.800
So I think from Jack's point of view, he thinks that life is, this is maybe too strong
link |
02:24:14.800
but these are my words, life is hopeless for a lot of people and Bitcoin is hope.
link |
02:24:21.800
Because it gives everyone an engineered monetary asset that's a bearer instrument
link |
02:24:31.800
and it gives them a bank on their mobile phone
link |
02:24:35.800
and they don't have to trust their government or another counterparty with their life force.
link |
02:24:45.800
So there's a secondary thing I think he's interested in
link |
02:24:50.800
which is the first thing is the human rights issue
link |
02:24:53.800
and the second thing would be the friction to trade cross borders is so great, right?
link |
02:25:03.800
Like, you know, you're like AI, so I'll give you a beautiful notion.
link |
02:25:09.800
Maybe one day there'll be an artificially intelligent creature in cyberspace
link |
02:25:16.800
that is self sufficient and rich.
link |
02:25:20.800
Like, it would have sovereignty.
link |
02:25:23.800
Can a robot own money or property?
link |
02:25:28.800
How about kind of Tesla car?
link |
02:25:30.800
Can I actually put enough money in a car for it to drive itself and maintain itself forever?
link |
02:25:35.800
Or can I create an artificially intelligent creature in cyberspace that is endowed
link |
02:25:42.800
such that it would live a thousand years and continue to do its job, right?
link |
02:25:47.800
You know, we have a word for that in the real world.
link |
02:25:50.800
It's institution, Harvard, Cambridge, Stanford, right?
link |
02:25:53.800
There are institutions with endowments that go on in perpetuity.
link |
02:25:58.800
But what if I wanted to perpetuate a software program?
link |
02:26:04.800
And with something like digital property with Bitcoin and lightning, you could do it.
link |
02:26:12.800
And on the other hand, with banks and credit cards, you couldn't, right?
link |
02:26:21.800
You couldn't ever.
link |
02:26:22.800
So you can create things that are beautiful and lasting.
link |
02:26:28.800
And what's the difference in speed?
link |
02:26:31.800
Well, so I can either trade with everybody in the world at the speed of light, friction free,
link |
02:26:39.800
in 24 hours writing a Python script, or I can spend a hundred billion dollars to trade
link |
02:26:46.800
with a few million people in the world after it takes them six months of application.
link |
02:26:52.800
The impedance is like a 10 million to one difference, right?
link |
02:26:58.800
And the metaphors are literally like launching something in orbit versus almost orbit
link |
02:27:04.800
or vacuum sealing something.
link |
02:27:07.800
Does it last forever?
link |
02:27:09.800
And does it orbit forever?
link |
02:27:10.800
Or does it go up and come down and burn up?
link |
02:27:13.800
Right?
link |
02:27:14.800
And I think Jack is interested in, you know, putting freedom in orbit, right?
link |
02:27:22.800
Putting freedom in orbit.
link |
02:27:23.800
Putting freedom in orbit.
link |
02:27:24.800
And he said it many times.
link |
02:27:25.800
He said, this is that the internet needs a native currency, right?
link |
02:27:30.800
And no political construct or security can be a native currency.
link |
02:27:36.800
You need a property and you need a property that can be moved a million times a second.
link |
02:27:41.800
Can you oscillate it at 10 kilohertz or 100 kilohertz?
link |
02:27:46.800
And the answer is only if it's a pure digital construct, permissionless and open.
link |
02:27:54.800
And so I think he's enthusiastic as the technologist and he's enthusiastic as the humanitarian.
link |
02:28:01.800
And what he's doing is support both those areas.
link |
02:28:05.800
He's supporting the Bitcoin and the lightning protocol by building them into his products.
link |
02:28:09.800
But he's also building the applications, which you need at the cash app level in order to commercialize
link |
02:28:17.800
and deliver the functionality and the compliance necessary.
link |
02:28:20.800
And they're related.
link |
02:28:23.800
And I should also say, he's just a fascinating person.
link |
02:28:27.800
For a random reason that I couldn't even explain if I tried, I met him a few days ago and gave him a great big hug in the middle of nowhere.
link |
02:28:37.800
There was no explanation.
link |
02:28:39.800
He just appeared.
link |
02:28:40.800
That's a fascinating human.
link |
02:28:42.800
His relationship with art, with the world, with human suffering, with technology is fascinating.
link |
02:28:48.800
I don't know what his path looks like, but it's interesting that people like that exist.
link |
02:28:55.800
And in part, I'm saddened that he no longer is involved with Twitter directly as a CEO.
link |
02:29:02.800
Because I was hoping something inside Twitter would also integrate some of these ideas of what you're calling digital energy.
link |
02:29:12.800
To see how social networks, something I'm really interested in and passionate about could be transformed.
link |
02:29:18.800
Let me ask you just for educational purposes.
link |
02:29:21.800
Can you please explain to me what Web3 and the beef between Jack and Mark Andreessen is exactly?
link |
02:29:30.800
Did you see what happened?
link |
02:29:32.800
Sorry to have you analyze Twitter like it's Shakespeare, but can you please explain to me why there was any drama over this topic?
link |
02:29:41.800
First of all, Web3 is a term that's used to refer to the part of the economy that's token finance.
link |
02:29:51.800
So if I'm launching an application and my idea is to create a token along with the application and issue the token to the community so as to finance the application and build support for it.
link |
02:30:03.800
I think that that's the most common interpretation of Web3.
link |
02:30:09.800
There are other interpretations too.
link |
02:30:11.800
So I'm just going to refer to that one.
link |
02:30:13.800
And I think the beef in a nutshell, not articulated, but I'll articulate it is whether or not you should focus all your energy creating applications on top of an ethical digital property like Bitcoin,
link |
02:30:27.800
or whether you should attempt to create a competitor to it, which generally would be deemed as a security by the Bitcoin community.
link |
02:30:39.800
So I'm going to put on my Bitcoin hat here.
link |
02:30:42.800
All the tokens that are, if it's driven by a venture capitalist, well, it's a security.
link |
02:30:47.800
If there's a CEO and a CTO, it's a security.
link |
02:30:50.800
All these projects, they're companies, foundations are companies.
link |
02:30:54.800
If you call them a project or a foundation, it doesn't make it not a security.
link |
02:31:00.800
They're all in essence, collections of individuals that are issuing equity in the form of a token.
link |
02:31:07.800
And if there's a premine, an IPO, an ICO, a foundation or any kind of protocol where there's a group of engineers that have influence over it, then to a securities lawyer,
link |
02:31:27.800
or to most Bitcoiners and definitely to anybody that's steeped in securities law, you're looking to say, well, that passes the Howie test.
link |
02:31:36.800
It looks like a security.
link |
02:31:39.800
It should be sold to the public pursuant to disclosures and regulations.
link |
02:31:45.800
And you're just ducking the IPO process.
link |
02:31:49.800
And so now we get back to the ethical issue.
link |
02:31:53.800
The ethical issue is, if you're trading it as a commodity and representing it as a commodity, while truthfully it's a security,
link |
02:32:03.800
then it's a violation of ethics rules and it's probably illegal.
link |
02:32:06.800
Well, you keep leaning on this.
link |
02:32:08.800
Let me push back on that part.
link |
02:32:09.800
Maybe you can educate me, but you keep leaning on this line of securities law as if it would all do respect to lawyers.
link |
02:32:18.800
As if that line somehow defines what is and isn't ethical.
link |
02:32:23.800
I think there's a lot of correlation as you've discussed, but I'd like to leave the line aside.
link |
02:32:30.800
If the law calls something as a security, it doesn't mean in my eyes that it is unethical.
link |
02:32:37.800
I mean, there could be some technicalities and lawyers and people play games with this kind of stuff all the time.
link |
02:32:43.800
But I take your bigger point that if there's a CEO, there's a project lead that's fundamentally, well, that to you is fundamentally different than the structure of Bitcoin.
link |
02:32:54.800
It's not that creating securities is unethical.
link |
02:32:56.800
I create a security, I took a company public, right?
link |
02:33:00.800
That's not the unethical part.
link |
02:33:01.800
It's completely ethical to create securities.
link |
02:33:04.800
Block is a security.
link |
02:33:05.800
All companies are security.
link |
02:33:07.800
The unethical part is to represent it as property when it's a security and to promote it or trade it as such.
link |
02:33:15.800
This whole promotion, that's also a technical thing because what counts as a not as promotion is a legal thing.
link |
02:33:26.800
And you get in trouble for all these things, but that's the game that lawyers play.
link |
02:33:31.800
There's an ethical thing here, which is like, what's the right to promote a not?
link |
02:33:35.800
To me, propaganda is unethical, but it's usually not illegal.
link |
02:33:42.800
You roll the clock back 20 years, right?
link |
02:33:47.800
All the boiler room pump and dump schemes were all about someone pitching a penny stock, selling Swamplin in Florida.
link |
02:33:54.800
And if you roll the clock back forward 20 years and I create my own company and I represent it as the same thing and I don't make the disclosures, right?
link |
02:34:04.800
You're just one step removed from the boiler room scheme.
link |
02:34:09.800
And that's what's distasteful about it.
link |
02:34:12.800
There are ways to sell securities to the public, but there are expectations.
link |
02:34:17.800
Maybe we could forget about whether the security laws are ethical or not, right?
link |
02:34:23.800
I will leave that alone.
link |
02:34:25.800
We'll just start with the biblical definition of ethics.
link |
02:34:28.800
Don't lie, cheat or steal.
link |
02:34:30.800
So if I'm going to sell something to you, I need to fully disclose what I'm selling to you, right?
link |
02:34:37.800
And that's a matter of great debate right now.
link |
02:34:44.800
So I think that that's part of the debate.
link |
02:34:46.800
But the other part of the debate is whether or not we need more than one token.
link |
02:34:56.800
We need at least one, right?
link |
02:34:58.800
We need at least one digital property because zero means there is no digital economy.
link |
02:35:05.800
And by the way, the conventional view of maximalists is they think there's only one and everything else isn't.
link |
02:35:12.800
That's not the point I'm going to make.
link |
02:35:14.800
I would say we know there is at least one digital property and that is Bitcoin.
link |
02:35:21.800
If you can create a truly decentralized, non custodial, you know, bearer instrument that is not under the control of any organization that is fairly distributed, then you might create another or multiple.
link |
02:35:39.800
And there may be others out there.
link |
02:35:41.800
But I think that the frustration of a lot of people in the Bitcoin community, and I share this with Jack, is we could create $100 trillion of value in the real world simply by building applications on top of Bitcoin as a foundation.
link |
02:36:01.800
And so continually trying to reinvent the wheel and create competitive things is a massive waste of time and its diversion of human creativity.
link |
02:36:18.800
It's like we have an ethical good thing.
link |
02:36:22.800
And now we're going to try to create a third or a fourth one.
link |
02:36:27.800
Why?
link |
02:36:28.800
Well, let's talk about it. So first of all, I'm with you.
link |
02:36:31.800
But let me ask you this interesting question because we talked about properties and securities.
link |
02:36:36.800
Let's talk about conflict of interest.
link |
02:36:38.800
You said you could advertise public.
link |
02:36:41.800
You have a popular Twitter account.
link |
02:36:43.800
It's it's hilarious and insightful.
link |
02:36:47.800
You do promote Bitcoin in a sense.
link |
02:36:51.800
I don't know if you would say that.
link |
02:36:53.800
But do you think there's a conflict of interest in anyone who owns Bitcoin promoting Bitcoin?
link |
02:36:59.800
Is it the same as you promoting the farming?
link |
02:37:03.800
I would say no, there's an interest.
link |
02:37:06.800
I think that I think that you can promote a property or an idea to the extent that you don't control it.
link |
02:37:18.800
I think that the point at which you start to have a conflict of interest is when you're promoting a proprietary product or proprietary security,
link |
02:37:28.800
a security and generalist proprietary asset.
link |
02:37:31.800
So for example, if you look at my Twitter, you will find that I make lots of statements about Bitcoin.
link |
02:37:37.800
You won't ever see me making a statement that say MicroStrategy stock will go forever.
link |
02:37:42.800
I'm not promoting a security MSTR because at the end of the day, MSTR is a security.
link |
02:37:50.800
It is proprietary.
link |
02:37:51.800
I have proprietary interest in it.
link |
02:37:53.800
I have a disproportionate amount of control and influence on the direction.
link |
02:38:00.800
The control is the problem.
link |
02:38:01.800
The control is the problem because you have interest in both.
link |
02:38:05.800
If Bitcoin is as successful as we're talking about, you are very possibly can become the richest human on earth,
link |
02:38:15.800
given how much you own in Bitcoin, right?
link |
02:38:18.800
The wealthiest, not the richest.
link |
02:38:20.800
I don't know what those words mean.
link |
02:38:21.800
I would benefit economically.
link |
02:38:24.800
You would benefit economically.
link |
02:38:25.800
That's true.
link |
02:38:26.800
So the reason that's not conflict of interest is because the word property, that Bitcoin is an idea and Bitcoin is open.
link |
02:38:37.800
It's because I don't own it.
link |
02:38:39.800
I don't control it.
link |
02:38:41.800
In essence, the ethical line here is could I print myself 10 million more Bitcoin or not, right?
link |
02:38:50.800
Or can anyone, right?
link |
02:38:52.800
It's not just you.
link |
02:38:53.800
Can anyone?
link |
02:38:55.800
Can you promote somebody else's?
link |
02:38:57.800
Yes, I guess you can.
link |
02:38:59.800
Can you promote Apple when you have no stake?
link |
02:39:04.800
You could have a Twitter account where you promote oil, or you promote camping, or you promote family values,
link |
02:39:11.800
or promote a carnivore diet, or promote the Iron Man, right?
link |
02:39:17.800
You're not going to get wealthier if you promote camping because you can't own a stake.
link |
02:39:24.800
You own a lot of Bitcoin.
link |
02:39:25.800
What is that?
link |
02:39:27.800
Don't you own a stake in the idea of Bitcoin?
link |
02:39:31.800
Yeah, I would grant you that.
link |
02:39:34.800
But the lack of control is the fundamental ethical line.
link |
02:39:39.800
All you are is you're a fan of the idea.
link |
02:39:42.800
You believe in the idea and the power of the idea.
link |
02:39:46.800
Yeah, I think...
link |
02:39:47.800
You can't take that idea away from others.
link |
02:39:49.800
Let's come back to...
link |
02:39:50.800
Let me give you some maybe easier examples.
link |
02:39:53.800
If you were the head of the Marine Corps, right, and someone came to you and said,
link |
02:40:01.800
I created Marine Coin, and the twist on Marine Coin is I want you to tell every Marine
link |
02:40:08.800
that they'll get an extra Marine Coin when they get their next stripe.
link |
02:40:14.800
And then I'm going to let you buy Marine Coin now, and then after you buy Marine Coin,
link |
02:40:19.800
I want you to promote it to them, right?
link |
02:40:25.800
At some point, if you start to have a disproportionate influence on it, or if you're in a conversation
link |
02:40:32.800
with people with disproportionate influence, it becomes a conflict of interest.
link |
02:40:35.800
And it would make you profoundly uncomfortable, I think, if the head of the Marine Corps
link |
02:40:40.800
started promoting anything that looked like a security.
link |
02:40:44.800
Now, if the head of the Marine Corps started promoting canoeing, you might think he's
link |
02:40:50.800
kind of wacky, like maybe...
link |
02:40:52.800
That's kind of a waste of time at a distraction.
link |
02:40:57.800
But to the extent that canoeing is not a security, not a problem unless you...
link |
02:41:03.800
Ultimately, the issue of decentralization is really a critical...
link |
02:41:08.800
So not having a head.
link |
02:41:09.800
One.
link |
02:41:10.800
Is it something... can Bitcoin be replicated?
link |
02:41:17.800
So all the things that you're saying that make it a property, can that be replicated?
link |
02:41:22.800
I think it's possible to create other crypto properties.
link |
02:41:26.800
Does having a head of a project, a thing that limits its ability to be a property,
link |
02:41:34.800
if you try to replicate a project?
link |
02:41:38.800
Is that the fundamental flaw?
link |
02:41:40.800
Look, I think the real fundamental issue is you just never want it to change.
link |
02:41:46.800
Like if you really want something decentralized, you want a genetic template that substantially
link |
02:41:54.800
is not going to change for a thousand years.
link |
02:41:57.800
So I think Satoshi said at one point, he said the nature of the software is such that
link |
02:42:02.800
by version 0.1, its genetic code was set.
link |
02:42:07.800
If there was any development team that's continually changing it on a routine basis,
link |
02:42:13.800
it becomes harder and harder to maintain its decentralization because now there's the
link |
02:42:19.800
issue of who's influencing the changes.
link |
02:42:23.800
So what you really want is a very, very simple idea.
link |
02:42:29.800
The simplest idea, I'm just going to keep track of who owns 21 million parts of energy.
link |
02:42:35.800
And when someone proposes big functional upgrades, you almost don't really want that development
link |
02:42:42.800
to go on the base layer.
link |
02:42:44.800
You want that development to go on the layer 3s because now Cash App has a proprietary set
link |
02:42:50.800
of functionality and it's a security.
link |
02:42:53.800
And if you're going to promote the use of this thing, you're not going to promote the
link |
02:43:00.800
layer 3 security because that's an edge to a given entity and you're trusting the
link |
02:43:06.800
counterparty, you're going to promote the layer 1 or most the layer 2.
link |
02:43:13.800
Okay, so one of the fascinating things about Bitcoin, and sorry to romanticize certain
link |
02:43:20.800
notions, but Satoshi Nakamoto, that the founder is anonymous, maybe can speak to
link |
02:43:26.800
you whether that's useful, but also I just like the psychology of that to imagine that
link |
02:43:32.800
there's a human being that was able to create something special and walk away.
link |
02:43:36.800
So first, are you Satoshi Nakamoto?
link |
02:43:39.800
I'm certain I'm not.
link |
02:43:44.800
Actually, I think the provenance is really important and if I were to look at the highlighted
link |
02:43:50.800
points, I think having a founder that was anonymous or should anonymous is important.
link |
02:43:56.800
I think the founder disappearing is also important.
link |
02:43:59.800
I think that the fact that the Satoshi coins never moved is also important.
link |
02:44:04.800
I think the lack of an initial coin offering is also important.
link |
02:44:09.800
I think the lack of a corporate sponsor is important.
link |
02:44:13.800
I think the fact that it traded for 15 months with no commercial value was also important.
link |
02:44:21.800
I think that the simplicity of the protocol is very important.
link |
02:44:28.800
I think that the outcome of the block size wars is very important and all of those things
link |
02:44:35.800
add up to common property.
link |
02:44:38.800
They're all indicia indicators of a digital property as opposed to security.
link |
02:44:44.800
If there was a Satoshi sitting around sitting on top of $50 billion worth of Bitcoin,
link |
02:44:51.800
I don't think it would cripple Bitcoin as property, but I think it would undermine its digital property.
link |
02:45:01.800
If I wanted to undermine a crypto asset network, I would do the opposite of all those things.
link |
02:45:07.800
I would launch one myself.
link |
02:45:09.800
I would sell 25% or 50% of the general public.
link |
02:45:13.800
I would keep some of the initial, I would premind some stuff or early mine it, you know,
link |
02:45:18.800
and I would keep an influence on it.
link |
02:45:20.800
Those are all the opposite of what you would do in order to create common property.
link |
02:45:28.800
I see the entire story as Satoshi giving a gift of digital property to the human race and disappearing.
link |
02:45:38.800
Do you think it was one person? Do you have ideas of who it could be?
link |
02:45:42.800
I don't care to speculate.
link |
02:45:45.800
But do you think it was one person?
link |
02:45:47.800
I think it was one person.
link |
02:45:49.800
Maybe in conjunction with a bunch of others.
link |
02:45:51.800
It might have been a group of people that were working together, but certainly there's a Satoshi.
link |
02:45:56.800
It's so fascinating to me that one person could be so brave and thoughtful.
link |
02:46:01.800
Or do you think a lot of it is accident, like the block size wars, the decision to make a block a certain size.
link |
02:46:07.800
All the things you mentioned led up to the characteristics that make Bitcoin property.
link |
02:46:14.800
Do you think that's an accident or it was deeply thought through?
link |
02:46:18.800
This is almost like a history of science question.
link |
02:46:21.800
I think people tried it for, they tried 40 of them.
link |
02:46:23.800
I think there's a history of attempting to create something like this.
link |
02:46:27.800
And it was tried many, many times and they failed for different reasons.
link |
02:46:31.800
And I think that Prometheus tried to start a fire 47 times and maybe the 48th time it sparked.
link |
02:46:38.800
And that's how I see this.
link |
02:46:40.800
This is the first one that sparked and it sets a roadmap for us.
link |
02:46:46.800
And I think if you're looking for any one word that characterizes, it's fair.
link |
02:46:51.800
The whole point of the network is it's a fair launch, a fair distribution.
link |
02:46:57.800
I have Bitcoin, but I bought it.
link |
02:47:02.800
In fact, at this point, we've paid $4 billion of real cash to buy it.
link |
02:47:10.800
If I was sitting on the same position and I had it for free, then there's always this question of,
link |
02:47:18.800
did I, you know, or I bought it for a nickel coin or a penny.
link |
02:47:21.800
The question is, was it fair?
link |
02:47:23.800
And that's a very hard question to answer.
link |
02:47:27.800
Did you acquire the Bitcoin that you own fairly?
link |
02:47:31.800
And if you roll the clock back, you know, you could have bought it for a nickel or a dime,
link |
02:47:36.800
but that was when it was a million times more likely to fail.
link |
02:47:40.800
When the risk was greater, the cost was lower.
link |
02:47:44.800
And then over time, the risk became lower and the cost became greater.
link |
02:47:49.800
And the real critical thing was to allow the marketplace absent any powerful interested actor.
link |
02:47:58.800
Right?
link |
02:47:59.800
It's almost like if Satoshi had held a million coins and then stayed engaged for 10 more years,
link |
02:48:03.800
tweaking things in the background, there's still be that question.
link |
02:48:08.800
But what we've got is really a beautiful thing.
link |
02:48:11.800
We've got a chain reaction in cyberspace or an ideology spreading virally in the world
link |
02:48:19.800
that has seasoned in a fair ethical fashion.
link |
02:48:26.800
Sometimes it's a very violent, brutal fashion with all the volatility, right?
link |
02:48:31.800
And there's been a lot of, you know, a lot of sound and fury along the way.
link |
02:48:35.800
How do you psychoanalyze, how do you deal from a financial, from a human perspective with the volatility?
link |
02:48:42.800
You mentioned you could have gotten it for a nickel and the risk was great.
link |
02:48:46.800
Where's the risk today?
link |
02:48:48.800
What's your sense?
link |
02:48:49.800
You know, we're 13 years into this entire activity.
link |
02:48:53.800
I think the risk has never been lower.
link |
02:48:55.800
If you look at all the risks, right?
link |
02:48:58.800
The risks in the early years are, is the engineering protocol proper?
link |
02:49:04.800
Like one megabyte block size, 10 minute clock frequency, cryptography is first,
link |
02:49:12.800
will it be hacked or will it crash?
link |
02:49:15.800
730,000 blocks and it hasn't crashed.
link |
02:49:18.800
Will it be hacked?
link |
02:49:19.800
Hasn't been hacked.
link |
02:49:20.800
But you know, it's a lindy thing, right?
link |
02:49:22.800
You wait 13 years to see if it'll be hacked.
link |
02:49:24.800
But on the other hand, with a billion dollars, it's not as interesting a target as it is with 100 billion.
link |
02:49:30.800
And when it gets to be worth a trillion, then it's a bigger target.
link |
02:49:33.800
So the risk has been bleeding off over time as the network monetized.
link |
02:49:42.800
I think the second question is, will it be banned?
link |
02:49:45.800
You couldn't know.
link |
02:49:46.800
It literally could have been banned many times early on.
link |
02:49:50.800
In fact, in 2013, I tweeted on the subject, I thought it would be banned.
link |
02:49:54.800
I made a very infamous tweet.
link |
02:49:56.800
Infamous tweet, yeah.
link |
02:49:57.800
I thought it was going to be banned.
link |
02:49:59.800
In 2014, the IRS designated it as property and gave it property tax treatment.
link |
02:50:05.800
Okay, so they could have given it a tax treatment where you had to pay tax on the unrealized capital gains every year
link |
02:50:14.800
and it probably would have crushed it to death, right?
link |
02:50:17.800
So it could have been in any number of places banned by a government,
link |
02:50:24.800
but in fact, it was legitimized as property.
link |
02:50:27.800
And then the question is, would it be hacked or would it be copied?
link |
02:50:30.800
Will it be something better than that?
link |
02:50:31.800
And it was copied 15,000 times.
link |
02:50:33.800
And you know the story of all those and they either diverged to be something totally different and not comparable
link |
02:50:41.800
or someone trying to copy a non sovereign bearer instrument store of value
link |
02:50:47.800
found that their networks crashed to be 1% of what Bitcoin is.
link |
02:50:51.800
So now we're sitting at a point where all those risks are out of the way.
link |
02:50:58.800
I would say that year one of institutional adoption is it started August 2020.
link |
02:51:05.800
That's when MicroStrategy bought $250 million worth of Bitcoin and we put that on the wire.
link |
02:51:10.800
We were the first publicly traded company to actually buy Bitcoin.
link |
02:51:15.800
I don't think you could have found a $5 million purchase from a public company before we did that.
link |
02:51:19.800
So that was kind of like a gun going off.
link |
02:51:23.800
And then in the next 12 months, Tesla bought Bitcoin, Square bought Bitcoin.
link |
02:51:29.800
And I'd say now we're in year two of institutional adoption.
link |
02:51:33.800
And about 24, should be 24 publicly traded Bitcoin miners by the end of this quarter.
link |
02:51:39.800
So you're looking at 36 publicly traded companies and you've got 50,
link |
02:51:47.800
at least in the range of $50 billion on the balance of Bitcoin on the balance sheet of publicly traded companies
link |
02:51:54.800
and hundreds of billions of dollars of market cap of Bitcoin exposed companies.
link |
02:52:01.800
So I would say the asset decade one was entrepreneurial experimental.
link |
02:52:10.800
Decade two is a rotation from entrepreneurs institutions and is becoming institutionalized.
link |
02:52:16.800
So maybe decade one, you go from zero to a trillion and in decade two, you go from one trillion to a hundred trillion.
link |
02:52:22.800
What about government adoption, institutional adoption?
link |
02:52:26.800
Are governments important in this?
link |
02:52:28.800
Maybe making it some governments, incorporating it as a currency into their banks, all that kind of stuff.
link |
02:52:37.800
Is that important?
link |
02:52:38.800
And if it is, when will it happen?
link |
02:52:42.800
It's not essential for the success of the asset class, but I think it's inevitable in various degrees over time.
link |
02:52:50.800
But the most likely thing to happen next is large acquisitions by institutional investors of Bitcoin as a digital gold,
link |
02:53:03.800
where they're just swapping out gold for digital gold and thinking of it like that.
link |
02:53:08.800
And the government entities most likely to be involved with that would be sovereign wealth funds.
link |
02:53:12.800
If you look at all the sovereign wealth funds that are holding a big tech stock, equities, the Swiss, the Norwegians, the Middle Easterners.
link |
02:53:21.800
If you can hold big tech, then holding digital gold would be not far removed from that.
link |
02:53:28.800
That's a noncontroversial adoption.
link |
02:53:33.800
I think there are opportunities for governments that are much more profound.
link |
02:53:39.800
If a government started to adopt Bitcoin as a treasury reserve asset,
link |
02:53:46.800
that's much bigger than just an asset investment.
link |
02:53:50.800
That's a hundred X bigger.
link |
02:53:53.800
And you could imagine that's like a trillion dollar opportunity.
link |
02:53:57.800
A government that wanted to adopt it as a treasury reserve asset would probably generate trillions of dollars, a trillion or more of value.
link |
02:54:05.800
And then the thing that people think about is, well, will oil ever be priced in Bitcoin or any other export commodity?
link |
02:54:15.800
I think there's like $1.8 trillion or more of export commodities in the world.
link |
02:54:21.800
And right now they're all priced in dollars.
link |
02:54:23.800
I think that this is a colorful thing, but it's not really that relevant.
link |
02:54:27.800
You could sell all that stuff in dollars.
link |
02:54:30.800
The relevant decision that any institution makes, whether they're a nonprofit, a university, a corporation, or a government, is what's your treasury reserve asset?
link |
02:54:40.800
And if your treasury reserve asset is the peso, and if the peso is losing 20% or 30% of its value a year,
link |
02:54:49.800
then your balance sheet is collapsing within five years.
link |
02:54:56.800
And if the treasury reserve asset is dollars and currency derivatives and US treasuries, then you're getting your seven.
link |
02:55:07.800
Right now it's probably 15% or more monetary inflation.
link |
02:55:12.800
We're running double the historic average.
link |
02:55:15.800
You could argue triple, somewhere between double and triple, depending upon what your metric is.
link |
02:55:21.800
So do I think it'll happen?
link |
02:55:23.800
I think that they're conservative, but they have to be shocked.
link |
02:55:25.800
And I think there is a shock.
link |
02:55:28.800
The late Russian sanctions are a big shock that when the West sees $300 billion worth of Russian gold and currency derivatives,
link |
02:55:37.800
you know, you got the famous quote by Putin that, you know, we have to rethink our treasury strategies.
link |
02:55:45.800
And that pushes everybody toward a commodity strategy.
link |
02:55:48.800
What commodities do I want to hold?
link |
02:55:50.800
I think that's got a lot of people thinking.
link |
02:55:52.800
I think it's got the Chinese thinking.
link |
02:55:54.800
Everybody wants to be the reserve currency, right?
link |
02:55:57.800
So if I buy $50 billion worth of dollars every year, then I buy $500 billion over a decade.
link |
02:56:07.800
And I probably pay $250 billion of inflation cost on the backs of my citizens in a decade.
link |
02:56:19.800
So inflation could be one of the sources of shock.
link |
02:56:22.800
And you wonder if there is a switch to Bitcoin, whether it will be a bang or a whimper,
link |
02:56:28.800
like what is the nature of the shock or the transition?
link |
02:56:31.800
I think that the year 2022 is pretty catalytic for digital assets in general and for Bitcoin in particular.
link |
02:56:41.800
The Canadian trucker crisis, I think, educated hundreds of millions of people
link |
02:56:46.800
and made them start questioning their property rights and their banks.
link |
02:56:52.800
I think the Ukraine war was a second shock, but I think that the Russian sanctions was a third shock.
link |
02:57:03.800
I think all three of them, and I think hyperinflation in the rest of the world is a fourth shock
link |
02:57:10.800
and then persistent inflation in the U.S. is a fifth shock.
link |
02:57:13.800
So I think it's a perfect storm.
link |
02:57:16.800
And if you put all these events together, what do they signify?
link |
02:57:21.800
They signify the rational conclusion for any person thinking about this is I'm not sure if I can trust my property.
link |
02:57:30.800
I don't know if I have property rights.
link |
02:57:32.800
I don't know if I can trust the bank.
link |
02:57:34.800
And if I'm politically at odds with the leader of my own country, I'm going to lose my property.
link |
02:57:42.800
And if I'm politically at odds with the owner of another country, I'm still going to lose my property.
link |
02:57:49.800
And when push comes to shove, the banks will freeze my assets and seize them.
link |
02:57:55.800
And I think that that is playing out in front of everybody in the world such that your logical response would be,
link |
02:58:08.800
I'm going to convert my weak currency to a strong currency like I'll convert my peso and lira to the dollar.
link |
02:58:17.800
I'm going to convert my weak property to strong property.
link |
02:58:22.800
I'm going to sell my building downtown Moscow and I'd rather own a building in New York City.
link |
02:58:30.800
I'd rather own in a powerful nation than be stuck with a building in Nigeria or a building in Argentina or whatever.
link |
02:58:39.800
So I'm going to sell my weak properties by strong properties.
link |
02:58:42.800
I'm going to convert my physical assets to digital assets.
link |
02:58:46.800
I'd rather own a digital building than own a physical building because if I had a billion dollar building in Moscow,
link |
02:58:53.800
who can I rent that to?
link |
02:58:55.800
But if I have a billion dollar digital building, I can rent it to anybody in any city in the world.
link |
02:59:01.800
Anybody with money and the maintenance cost is almost nothing and I can hold it for 100 years.
link |
02:59:07.800
So it's an indestructible building.
link |
02:59:09.800
And then finally, I want to move from having my assets in a bank with a counterparty to self custody assets.
link |
02:59:18.800
And this is not just Ukraine, but this is like the story in Turkey, Lebanon, Syria, Afghanistan, Iraq, South America.
link |
02:59:28.800
You don't really want to be sitting with $10 million in a bank in Istanbul.
link |
02:59:33.800
The bank's going to freeze your money, convert it to lira, devalue the lira, and then feed it back to you over 17 years, right?
link |
02:59:41.800
So self custody assets would be layer one, Bitcoin.
link |
02:59:45.800
Self custody assets.
link |
02:59:48.800
If I got my own hardware wallet and I've either got your highest form of self custody would be Bitcoin on your own hardware wallet
link |
02:59:59.800
or Bitcoin in your own self custody.
link |
03:00:01.800
And the other thing people think about is how do I get crypto dollars like Tether, like some stablecoin?
link |
03:00:09.800
Like I'd rather, if you had a choice, would you rather have your money in a bank in a war zone in dollars
link |
03:00:15.800
or have your money in a stablecoin on your mobile phone in dollars, right?
link |
03:00:22.800
I mean, you take the latter risk rather than the former risk.
link |
03:00:26.800
In a war zone, definitely, yeah.
link |
03:00:27.800
And you can see that happening.
link |
03:00:29.800
Like we've gone from $5 billion in stablecoins to $200 billion in the last 24 months.
link |
03:00:35.800
So I do think there's massive demand for crypto dollars in the form of a US dollar asset.
link |
03:00:43.800
And there's, and everybody in the world would say, yeah, I want that.
link |
03:00:48.800
Well, unless you're just an extreme patriot, but most people in the world would say I want that.
link |
03:00:54.800
And then a lesser group of people would say, I think I want to be able to carry my property in the palm of my hand.
link |
03:01:00.800
So I have self custody of it.
link |
03:01:03.800
So a Bitcoin price has gone through quite a roller coaster.
link |
03:01:07.800
What do you think is the high point it's going to hit?
link |
03:01:11.800
I think it'll go forever, right?
link |
03:01:13.800
I mean, I think the Bitcoin is going to, it's going to climb in a serpentine fashion.
link |
03:01:19.800
It's going to advance and come back and it's going to keep, it's going to keep climbing.
link |
03:01:25.800
I think that the volatility attracts all the capital into the marketplace.
link |
03:01:31.800
And so the volatility makes it the most interesting thing in the financial universe.
link |
03:01:36.800
It also generates massive yield and massive returns for traders.
link |
03:01:41.800
And that attracts capital.
link |
03:01:43.800
Like we're talking about the difference between 5% return and 500% return.
link |
03:01:48.800
So the fast money is attracted by the volatility.
link |
03:01:54.800
The volatility has been decreasing year by year by year.
link |
03:01:58.800
I think that it's stabilizing.
link |
03:02:02.800
I don't think we'll see as much volatility in the future as we have in the past.
link |
03:02:06.800
I think that if we look at Bitcoin and model it as digital gold, you know,
link |
03:02:14.800
the market cap goes to between 10 and 20 trillion.
link |
03:02:18.800
But gold is, remember, gold is defective property.
link |
03:02:22.800
Gold is dead money.
link |
03:02:24.800
You have a billion dollars of gold that sits in a vault for a decade.
link |
03:02:27.800
It's very hard to mortgage the gold.
link |
03:02:29.800
It's also very hard to rent the gold.
link |
03:02:31.800
You can't loan the gold.
link |
03:02:33.800
No one's going to create a business with your gold.
link |
03:02:36.800
So gold doesn't generate much of a yield.
link |
03:02:39.800
So for that reason, most people wouldn't store a billion dollars for a decade in gold.
link |
03:02:43.800
They would buy a billion dollars of commercial real estate property.
link |
03:02:46.800
And the reason why is because I can rent it and generate a yield on it
link |
03:02:51.800
that's in excess of the maintenance cost.
link |
03:02:53.800
So if you consider digital property, that's 100 to 200 trillion dollar addressable market.
link |
03:03:02.800
So I would think it, you know, it goes from 10 trillion to 100 trillion
link |
03:03:05.800
as people start to think of it as digital property.
link |
03:03:07.800
What does that mean in terms of price per coin?
link |
03:03:11.800
At 500,000, right?
link |
03:03:14.800
That's a 10 trillion dollar asset.
link |
03:03:16.800
At 5 million, that's 100 trillion dollar asset.
link |
03:03:20.800
So I think it crosses a million, it can go even higher.
link |
03:03:23.800
Yeah, I think it keeps going up forever.
link |
03:03:25.800
I mean, as a result, it can go to 10 million a coin, right?
link |
03:03:28.800
Because digital property isn't the highest form, right?
link |
03:03:31.800
Gold was that low frequency money.
link |
03:03:34.800
Property is a mid frequency money.
link |
03:03:37.800
But when I start to program it faster, it starts to look like digital energy.
link |
03:03:45.800
And then it doesn't just replace property.
link |
03:03:49.800
Then you're starting to replace bonds.
link |
03:03:52.800
It's 100 trillion in bonds.
link |
03:03:54.800
There's 50 to 100 trillion in other currency derivatives.
link |
03:03:58.800
And then these are all conventional use cases, right?
link |
03:04:02.800
I think that there's 350 trillion to 500 trillion dollars worth of currency derivatives in the world.
link |
03:04:13.800
And when I say that, I mean things that are valued based upon fiat cash flows.
link |
03:04:18.800
Any commercial real estate, any bond, any sovereign debt, any currency itself,
link |
03:04:24.800
any derivatives to those things, they're all derivatives and they're all defective.
link |
03:04:31.800
And they're all defective because of this persistent 7 to 14 percent lapse,
link |
03:04:37.800
which we call inflation or monetary expansion.
link |
03:04:40.800
Can we switch?
link |
03:04:41.800
So I'm just going to talk about the energy side of it, like the innovative piece.
link |
03:04:46.800
Let's just start with this idea that I've got a hotel worth a billion dollars with a thousand rooms.
link |
03:04:53.800
When it becomes a dematerialized hotel.
link |
03:04:56.800
I love that word so much, by the way.
link |
03:04:58.800
Dematerialized hotel.
link |
03:04:59.800
We're across in the fountain blow here.
link |
03:05:01.800
Imagine the fountain blow is dematerialized.
link |
03:05:03.800
The problem with the physical hotel is I've got to hire real people moving subject to the speed of sound
link |
03:05:09.800
and physics laws and Newton's laws and I can rent it to people in Miami Beach.
link |
03:05:14.800
But if it was a digital hotel, I could rent the room to people in Paris,
link |
03:05:19.800
London and New York every night and I can run it with robots.
link |
03:05:24.800
And as soon as I do that, I can rent it by the room hour and I can rent it by the room minute.
link |
03:05:29.800
And so I start to chop my hotel up into a hundred thousand room hours that I sell to the highest bidder anywhere in the world.
link |
03:05:39.800
And you can see all of a sudden the yield, the rent and the income of the property is dramatically increased.
link |
03:05:49.800
I can also see the maintenance cost of the property falls.
link |
03:05:53.800
I get on Moore's law and I'm operating in cyberspace.
link |
03:05:57.800
So I got rid of Newton's laws.
link |
03:05:59.800
I got rid of all the friction and all those problems.
link |
03:06:02.800
I tapped into the benefits of cyberspace.
link |
03:06:06.800
I created a global property.
link |
03:06:09.800
I started monetizing at different frequencies.
link |
03:06:12.800
And of course now I can mortgage it to anybody in the world.
link |
03:06:17.800
You're not going to be able to get a mortgage on a Turkish building from someone in South Africa.
link |
03:06:23.800
You have to have to find someone that's local to the culture you're in.
link |
03:06:28.800
So when you start to move from analog property to digital property, it's not just a little bit better.
link |
03:06:35.800
It's a lot better.
link |
03:06:37.800
And what I just described, Lex, is like the DeFi vision.
link |
03:06:41.800
It's the beauty of DeFi, flash loans, money moving at high velocity.
link |
03:06:47.800
At some point, if the hotel is dematerialized, then what's the difference between running a hotel room and loaning a block of stock?
link |
03:07:01.800
I'm just finding the highest best use of the thing.
link |
03:07:04.800
It feels like the magic really emerges, though, when you build a lot, a market of layer two and layer three technologies on top of that.
link |
03:07:13.800
Maybe you can correct me if I'm wrong, but for all these hotels and all these kinds of ideas, it's always touching humans at some point.
link |
03:07:24.800
And consumers or humans, business owners and so on, so you have to create interface, you have to create services that make all of that super efficient, super fun to use, pleasant, effective, all those kinds of things.
link |
03:07:40.800
So you have to build a whole economy on top of that.
link |
03:07:43.800
Yeah, and I happen to think that won't be done by the crypto industry at all.
link |
03:07:47.800
I think that'll be done by centralized applications.
link |
03:07:50.800
I think it'll be the citadels of the world, the high speed traders of the world, the New Yorkers.
link |
03:07:56.800
I think it'll be Binance FTX and Coinbase as a layer three exchange that will give you the yield and will give you the loan and the best terms.
link |
03:08:09.800
Because ultimately, you have to jump these compliance hoops. Like BlockFi can give you yield, but they have to do it in a compliant way with the United States jurisdiction.
link |
03:08:21.800
So ultimately, those applications to use that digital property and either generate a loan, give you a loan on it or give you yield on it are going to come from companies.
link |
03:08:33.800
But the difference, the fundamental difference is it could be companies anywhere in the world.
link |
03:08:40.800
So if a company in Singapore comes up with a better offering, right, then the capital is going to start to flow to Singapore.
link |
03:08:49.800
I can't send 10 city blocks of LA to Singapore to rent during a festival, but I can send 10 blocks of Bitcoin to Singapore.
link |
03:09:00.800
So you've got a truly global market that's functioning in this asset and is a second order asset.
link |
03:09:07.800
For example, maybe you're an American citizen and you own 10 Bitcoin and someone in Singapore will generate 27% yield in the Bitcoin.
link |
03:09:15.800
But legally, you can't send the money to them or the Bitcoin to them.
link |
03:09:19.800
It doesn't matter because the fact that that exists means that someone in Hong Kong will borrow the 10 Bitcoin from somebody in New York
link |
03:09:28.800
and then they will put on the trade in Singapore and that will create a demand for Bitcoin, which will drive up the price of Bitcoin,
link |
03:09:35.800
which will result in an effective tax free yield for the person in the US that's not even in the jurisdiction.
link |
03:09:42.800
So there's nothing that's going on in Singapore to drive up the price of your land in LA.
link |
03:09:49.800
But there is something going on everywhere in the world to drive up the price of property in cyberspace if there's only one digital Manhattan.
link |
03:09:58.800
And so there's a dynamic there, which is profound because it's global.
link |
03:10:04.800
But now let's go to the next extreme.
link |
03:10:06.800
I'm still giving you a fairly conventional idea, which is let's just loan the money fast on a global network and let's just rent the hotel room fast in cyberspace.
link |
03:10:18.800
But let's move to maybe a more innovative idea.
link |
03:10:23.800
The first generation of internet brought a lot of productivity, but there's also just a lot of flaws in it.
link |
03:10:30.800
For example, Twitter is full of garbage.
link |
03:10:33.800
Instagram DMs are full of garbage.
link |
03:10:36.800
Your Twitter DMs are full of garbage.
link |
03:10:38.800
YouTube is full of scams.
link |
03:10:40.800
Every 15 minutes, there's a Michael Saylor Bitcoin giveaway spun up on YouTube.
link |
03:10:45.800
My Office 365 inbox is full of garbage.
link |
03:10:49.800
Millions of spam messages.
link |
03:10:51.800
I'm running four different email filters.
link |
03:10:55.800
My company spends million dollars a year to fight denial of service attacks and all sorts of other security things.
link |
03:11:02.800
There are denial of service attacks everywhere against everybody in cyberspace all the time.
link |
03:11:08.800
It's extreme.
link |
03:11:09.800
And we're all beset with hostility, right?
link |
03:11:11.800
You've been a victim of it on Twitter.
link |
03:11:14.800
You go on Twitter and people post stuff they would never say to your face.
link |
03:11:19.800
And then if you look, you find out that their account was created like three days ago and it's not even a real person.
link |
03:11:26.800
So we're beset with phishing attacks and scams and spam bots and garbage.
link |
03:11:32.800
And why?
link |
03:11:34.800
And the answer is because the first generation of internet was digital information and there's no energy.
link |
03:11:39.800
There's no conservation of energy in cyberspace.
link |
03:11:43.800
The thing that makes the universe work is conservation of energy.
link |
03:11:48.800
Like if I went to a hotel room, I'd have to post a credit card and then if I smashed the place up, there'd be economic consequences.
link |
03:11:59.800
Maybe there'd be criminal consequences.
link |
03:12:02.800
There might be reputational consequences.
link |
03:12:05.800
You know, lamp might fall on me.
link |
03:12:07.800
But in the worst case, I can only smash up one hotel room.
link |
03:12:11.800
Now imagine I could actually write a Python script to send myself to every hotel room in the world every minute,
link |
03:12:18.800
not post a credit card and smash them all up anonymously.
link |
03:12:25.800
The thing that makes the universe work is friction, speed of sound, speed of light,
link |
03:12:31.800
and the fact that ultimately it's conservative.
link |
03:12:35.800
You're either energy or matter, but once you've used the energy, it's gone.
link |
03:12:39.800
You can't do infinite everything.
link |
03:12:42.800
That's missing in cyberspace right now.
link |
03:12:45.800
And if you look at all of the moral hazards and all of the product defects that we have in all of these products,
link |
03:12:54.800
most of them, 99% of them could be cured if we introduced conservation of energy into cyberspace.
link |
03:13:04.800
And that's what you can do with high speed digital property, high speed Bitcoin.
link |
03:13:09.800
And by high speed, I mean not 20 transactions a day, I mean 20,000 transactions a day.
link |
03:13:15.800
So how do you do that?
link |
03:13:18.800
Well, I let everybody on Twitter post 1,000 or 10,000 Satoshis via a lightning badge.
link |
03:13:28.800
Give me an orange check.
link |
03:13:30.800
If you put up 20 bucks once in your life, you could give 300 million people an orange check.
link |
03:13:37.800
Right now, you don't have a blue check, Lex.
link |
03:13:41.800
You're a famous person.
link |
03:13:42.800
I don't know why you don't have a blue check.
link |
03:13:44.800
Have you ever applied for a blue check?
link |
03:13:46.800
No.
link |
03:13:47.800
There are 360,000 people on Twitter with a blue check.
link |
03:13:50.800
There are 300 million people on Twitter.
link |
03:13:53.800
So the conventional way to verify accounts is elitist archaic.
link |
03:14:01.800
How does it work?
link |
03:14:02.800
How did you get a blue check?
link |
03:14:04.800
You got to apply and wait six months and you have to post three articles in the public mainstream media that illustrates you're a person of interest.
link |
03:14:14.800
Interesting.
link |
03:14:15.800
Generally, they would grant them to CEOs of public companies or the whole idea is to verify that you are who you say you are.
link |
03:14:26.800
But the question is, why isn't everybody verified?
link |
03:14:29.800
And there's a couple of threads on that.
link |
03:14:31.800
One is some people don't want to be doxxed.
link |
03:14:33.800
They want to be anonymous.
link |
03:14:35.800
But they're even anonymous people that should be verified.
link |
03:14:40.800
Because otherwise, you're subjecting their entire following to phishing attacks and scams and hostility.
link |
03:14:48.800
But the other...
link |
03:14:50.800
What's the orange verification?
link |
03:14:52.800
So this idea, can you actually elaborate a little bit more if you put up 20 bucks?
link |
03:14:56.800
Yeah, I think everybody on Twitter ought to be able to get an orange check if they could come up with like $10.
link |
03:15:02.800
And what is the power of that orange check?
link |
03:15:05.800
What does that verify exactly?
link |
03:15:07.800
You basically post a security deposit for your safe passage through cyberspace.
link |
03:15:13.800
So the way it would work is, if you've got $10 once in your life, you can basically show that you're credit worthy.
link |
03:15:21.800
And that's your pledge to me that you're going to act responsibly.
link |
03:15:26.800
So you put the $10 or the $20 into the lightning wallet, you get an orange check.
link |
03:15:32.800
Then Twitter just gives you a setting where I can say, the only people who can DM me are orange checks.
link |
03:15:37.800
The only people who can post on my tweets are orange checks.
link |
03:15:40.800
So instead of locking out the public and just letting your followers, you know, comment, you lock out all the unverified.
link |
03:15:48.800
And that means people that don't want to post $10 security deposit can't comment.
link |
03:15:53.800
Once you've done those two things, then you're in a position to monetize malice.
link |
03:16:00.800
Monetize motion or malice for that matter.
link |
03:16:03.800
But let's just say, for the sake of argument, you post something and 9700 bots spin up and pitch their whatever scam.
link |
03:16:14.800
Right now you sit and you go report, report, report, report, report, report.
link |
03:16:19.800
And if you spend an hour, you get through half of them, you waste an hour of your life.
link |
03:16:24.800
They just spin up another 97 gazillion because they've got a Python script spinning it up, so it's hopeless.
link |
03:16:30.800
But on the other hand, if you report them and they really are a bot,
link |
03:16:34.800
Twitter's got a method to actually delete the account.
link |
03:16:38.800
They know that they're bots.
link |
03:16:40.800
The problem is not they don't want to delete the account.
link |
03:16:42.800
The problem is there are no consequences when they delete the account.
link |
03:16:45.800
So if there are consequences, Twitter could give, they could just seize the $10 or seize the $20 because it's a bot.
link |
03:16:53.800
It's a malicious criminal act or whatever as a violation of the platform rules.
link |
03:17:00.800
You end up seizing $10,000, give half the money to the reporter and half the money to the Twitter platform.
link |
03:17:07.800
That's a really powerful idea, but that's tying it, that's adding friction akin to the kind of friction you have in the physical world.
link |
03:17:15.800
You're tying, you have consequences, you have real consequences.
link |
03:17:18.800
It's putting conservation of energy.
link |
03:17:20.800
Conservation of energy.
link |
03:17:21.800
There's no friction, there's no nothing on this earth.
link |
03:17:24.800
You can't walk across the room without friction.
link |
03:17:28.800
Friction is not bad.
link |
03:17:31.800
Unnecessary friction is bad.
link |
03:17:37.800
So in this particular case, you're introducing conservation of energy.
link |
03:17:41.800
In essence, you're introducing the concept of consequence or truth into cyberspace.
link |
03:17:47.800
And that means if you do want to spend up 10 million fake less Freedmen's, right?
link |
03:17:54.800
It's going to cost you $100 million to spend up 10 million fake Lexus.
link |
03:17:59.800
But the thing is, you could do that with the dollar, but you're saying that it's more tied to physical reality when you do that with Bitcoin.
link |
03:18:09.800
Yeah, well, let's follow up on that idea a bit more.
link |
03:18:12.800
If you did do it with the dollar, then the question is, how does 6 billion people deposit the dollars?
link |
03:18:20.800
Because what you're doing is, could you do it with a credit card?
link |
03:18:24.800
Like, how do you send dollars?
link |
03:18:27.800
You have to dox yourself.
link |
03:18:29.800
It's not easy.
link |
03:18:31.800
So you're talking about inputting a credit card transaction, doxing yourself.
link |
03:18:35.800
And now you've just eliminated the 2 billion people that don't have credit cards or don't have banks.
link |
03:18:40.800
You've also got a problem with everybody that wants to remain anonymous.
link |
03:18:43.800
But you've also got this other problem, which is credit cards are expensive transactions, low frequency, slow settlement.
link |
03:18:54.800
So do you really want to pay 2.5% every time you actually show a $20 deposit?
link |
03:19:01.800
And maybe you could do a Kluge version of this for a subset of people.
link |
03:19:07.800
It's 10% as good if you did it with conventional payment rails.
link |
03:19:13.800
But what you can't do is the next idea, which is, I want the orange badge to be used to give me safe passage through cyberspace,
link |
03:19:25.800
tripping across every platform.
link |
03:19:27.800
So how do I solve the denial of service attacks against a website?
link |
03:19:33.800
I publish a website, you hit it with a million requests.
link |
03:19:39.800
Okay, now how do I deal with that?
link |
03:19:41.800
Well, I can lock you out and I can make it a zero trust website.
link |
03:19:45.800
And then you have to be coming at me through a trusted firewall or with a trusted credential.
link |
03:19:51.800
But that's a pretty draconian thing.
link |
03:19:54.800
Or I could put it behind a lightning wall.
link |
03:19:57.800
A lightning wall would be, you know, I just challenge you, Lex.
link |
03:20:01.800
You want to browse my website, you have to show me your 100,000 Satoshis.
link |
03:20:07.800
Do you have 100,000 Satoshis?
link |
03:20:09.800
Click.
link |
03:20:10.800
Okay.
link |
03:20:11.800
Now you click away a hundred times or a thousand times.
link |
03:20:15.800
And after a thousand times, you know, well, now, Lex, you're getting offensive,
link |
03:20:19.800
but I take a Satoshi from you or 10 Satoshis, a microtransaction.
link |
03:20:23.800
You want to hit me a million times?
link |
03:20:24.800
I'm taking all your Satoshis and locking you out.
link |
03:20:27.800
What you want to do is you want to go through 200 websites a day.
link |
03:20:33.800
And what you want, every time you cross a domain, you need to be able to, in a split second,
link |
03:20:40.800
prove that you've got some asset.
link |
03:20:43.800
And now when you cross back, when you exit domain, you want to fetch your asset back.
link |
03:20:48.800
So how do I, in a friction free fashion, browse through dozens or hundreds of websites,
link |
03:20:54.800
post a security deposit for safe passage and then get it back.
link |
03:20:59.800
You couldn't afford to pay a credit card fee each time.
link |
03:21:03.800
When you think about 2.5% as a transaction fee, it means you trade the money 40 times and it's gone.
link |
03:21:12.800
Yeah.
link |
03:21:13.800
It's gone.
link |
03:21:14.800
Yeah.
link |
03:21:15.800
So you can't do this kind of hopping around through the internet with this kind of verification
link |
03:21:19.800
that grounds you to physical reality.
link |
03:21:22.800
It's a really, really interesting idea.
link |
03:21:24.800
Why hasn't that been done?
link |
03:21:27.800
I think you need two things.
link |
03:21:29.800
You need an idea like a digital asset like Bitcoin.
link |
03:21:33.800
It's a bearer instrument for final settlement.
link |
03:21:36.800
And then you need a high speed transaction network like Lightning where the transaction cost might be a 20th of a penny or less.
link |
03:21:46.800
And if you roll the clock back 24 months,
link |
03:21:50.800
I don't think you had the Lightning network in a stable point.
link |
03:21:54.800
It's really just the past 12 months.
link |
03:21:56.800
It's an idea you could think about this year.
link |
03:22:00.800
And I think you need to be aware of Bitcoin as something other than like a scary speculative asset.
link |
03:22:09.800
So I really think we're just the beginning.
link |
03:22:11.800
The embryonic stage.
link |
03:22:13.800
I have to ask Michael Saylor, you said before there's no second best to Bitcoin.
link |
03:22:19.800
What would be the second best?
link |
03:22:21.800
Traditionally, there's Ethereum with smart contracts.
link |
03:22:23.800
Cardano with proof of stake.
link |
03:22:25.800
Polkadot with interoperability between blockchains.
link |
03:22:30.800
Dogecoin has the incredible power of the meme.
link |
03:22:34.800
Privacy with Monero.
link |
03:22:37.800
I just can't keep going.
link |
03:22:39.800
There's, of course, after the block size wars, the different offshoots of Bitcoin.
link |
03:22:47.800
I think if you decompose or segment the crypto market, you've got crypto property.
link |
03:22:53.800
Bitcoin is the king of that.
link |
03:22:55.800
Another Bitcoin fork that wanted to be a bearer instrument store of value would be a property.
link |
03:23:03.800
Bitcoin cash or litecoin, something like that.
link |
03:23:06.800
Then you've got cryptocurrencies.
link |
03:23:09.800
I don't think Bitcoin is a currency because a currency I define in nation states since,
link |
03:23:15.800
a currency is a digital asset that you can transfer in a transaction without incurring a taxable obligation.
link |
03:23:24.800
That means it has to be a stable dollar or a stable euro or a stable yen, a stablecoin.
link |
03:23:29.800
I think you've got cryptocurrencies.
link |
03:23:31.800
Tether, Circle Most Famous.
link |
03:23:33.800
I think you've got crypto platforms.
link |
03:23:36.800
Ethereum is the most famous of the crypto platforms.
link |
03:23:39.800
It's the platform upon which, with smart contract functionality, et cetera.
link |
03:23:45.800
Then I think you've got just crypto securities.
link |
03:23:47.800
It's just like my favorite, whatever, meme coin.
link |
03:23:51.800
I love it because I love it and it's attached to my game or my company or my persona or my whatever.
link |
03:23:56.800
I think if you pushed me and said, what's the second best?
link |
03:24:01.800
I would say the world wants two things.
link |
03:24:03.800
It wants crypto property as a savings account and it wants cryptocurrency as a checking account.
link |
03:24:09.800
That means that the most popular thing really is going to be a stablecoin dollar.
link |
03:24:16.800
There's maybe a fight right now.
link |
03:24:19.800
It might be tether, but a stable dollar because I feel like the market opportunity,
link |
03:24:27.800
it's not clear that there'll be one that will win.
link |
03:24:29.800
The class of stable dollars is probably a $1 to $10 trillion market easily.
link |
03:24:35.800
I think that in a crypto platform space, Ethereum will compete with Solana and Binance Smart Chain and the like.
link |
03:24:43.800
Are there certain characteristics of any of them that kind of stand out to you?
link |
03:24:48.800
Don't you think the competition is based on a set of features?
link |
03:24:52.800
Also, the set of features that cryptocurrency provides but also the community that it provides.
link |
03:24:59.800
The community matters and the adoption, the dynamic of the adoption both across the developers and the investors.
link |
03:25:05.800
If I'm looking at them, the first question is, what's the regulatory risk?
link |
03:25:11.800
How likely is it to be deemed a property versus security?
link |
03:25:14.800
The second is, what's the competitive risk? The third is, what's the speed and the performance?
link |
03:25:22.800
All those things lead to the question of what's the security risk?
link |
03:25:27.800
How likely is it to crash and burn and how stable or unstable is it?
link |
03:25:33.800
Then there's the marketing risk.
link |
03:25:36.800
There are different teams behind each of these things and communities behind them.
link |
03:25:41.800
I think that the big cloud looming over the crypto industry is regulatory treatment of cryptocurrencies
link |
03:25:50.800
and regulatory treatment of crypto securities and crypto platforms.
link |
03:25:54.800
I think that won't be determined until the end of the first Biden administration.
link |
03:25:58.800
For example, there are people that would like only US FDIC insured banks to issue cryptocurrencies.
link |
03:26:06.800
They want JP Morgan to issue a crypto dollar backed one to one.
link |
03:26:11.800
But then in the US right now, we have Circle and we have other companies that are licensed entities
link |
03:26:17.800
that are backed by cash and cash equivalents, but they're not FDIC insured banks.
link |
03:26:21.800
There's also a debate in Congress about whether state chartered banks should be able to issue these things.
link |
03:26:27.800
Then we have Tether and others that are outside of the US jurisdiction.
link |
03:26:34.800
They're probably not backed by cash and cash equivalents.
link |
03:26:36.800
They're backed by stuff and we don't know what stuff.
link |
03:26:39.800
Then finally, you have UST and DAI, which are algorithmic stablecoins that are even more innovative further outside the compliance framework.
link |
03:26:52.800
If you ask who's going to win, the question is really, I don't know, will the market decide or will the regulators decide?
link |
03:27:00.800
If the regulators get out of the way and the market fought out, well, then it's an interesting discussion.
link |
03:27:05.800
Then I think that all bets are off if the regulators get more heavy handed with this.
link |
03:27:11.800
I think you could have the same discussion with crypto properties, like the DeFi exchanges and the crypto exchanges.
link |
03:27:17.800
The SEC would like to regulate the crypto exchanges.
link |
03:27:20.800
They'd like to regulate the DeFi exchanges.
link |
03:27:22.800
That means they may regulate the crypto platforms and at what rate and in what fashion.
link |
03:27:28.800
I think that I could give you an opinion if it was limited to competition and the current regulatory regime.
link |
03:27:37.800
I think that the regulations are so fast moving and it's so uncertain that you can't make a decision without considering the potential actions of the regulators.
link |
03:27:55.800
I hope the regulators get out of the way.
link |
03:27:57.800
Can you still man the case that Dogecoin is, I guess, the second best cryptocurrency if you don't consider Bitcoin a cryptocurrency, but instead a crypto property?
link |
03:28:08.800
I would classify it as crypto property because the US dollar is a currency.
link |
03:28:12.800
So unless your crypto asset is pegged algorithmically or stably to the value of the dollar, it's not a currency.
link |
03:28:19.800
It's a property or it's an asset.
link |
03:28:22.800
So then can you still man the case that Dogecoin is the best cryptocurrency then?
link |
03:28:28.800
Because Bitcoin is not even in that list.
link |
03:28:32.800
The debate is going to be whether it's property or security and there's a debate whether it's decentralized enough.
link |
03:28:38.800
So let's assume it was decentralized.
link |
03:28:41.800
Well, it's increasing at not quite what, 5% a year inflation rate, but it's not 5% exponentially. It's like a plus 5 million, 5% something captain is less.
link |
03:28:55.800
I forget the exact number, but it's an inflationary property.
link |
03:28:59.800
It's got a lower inflation rate than the US dollar and it's got a much lower inflation rate than many other fiat currencies.
link |
03:29:09.800
So I think you could say that.
link |
03:29:11.800
But don't you see the power of meme, the power of ideas, the power of fun or whatever mechanism is used to captivate a community?
link |
03:29:24.800
I do, but there are meme stocks.
link |
03:29:26.800
It doesn't absolve you of your ethical and securities liabilities if you're promoting it.
link |
03:29:33.800
So I don't have a problem with people buying a stock.
link |
03:29:39.800
The way I divide the world is there's investment, there's saving and there's speculation and there's trading.
link |
03:29:49.800
So Bitcoin is an asset for saving.
link |
03:29:53.800
If you want to save money for 100 years, you don't really want to take on execution risk or the like.
link |
03:30:00.800
So you're just buying something to hold forever.
link |
03:30:03.800
For you to actually endorse something as a property, like if you said to me, Mike, what should I buy for the next 100 years?
link |
03:30:10.800
I say, well, some amount of real estate, some amount of scarce collectibles, some amount of Bitcoin.
link |
03:30:16.800
You can run your company, but running your company is an investment.
link |
03:30:21.800
So the savings are properties.
link |
03:30:23.800
If you said, what should I invest in?
link |
03:30:25.800
I'd say, well, here's a list of good companies, private companies.
link |
03:30:28.800
You can start your own company, that's an investment.
link |
03:30:33.800
If you said, what should I trade?
link |
03:30:36.800
Well, trading is like a proprietary thing.
link |
03:30:38.800
I don't have any special insight into that.
link |
03:30:42.800
If you're a good trader, you know you are.
link |
03:30:44.800
If you said to me, what should you speculate in?
link |
03:30:47.800
We talk about meme stocks and meme coins and it kind of sits up there.
link |
03:30:54.800
It's right in the same space with what horse should you bet on and what sports team should you gamble on?
link |
03:30:59.800
And should you bet on black six times in a row and double down each time?
link |
03:31:04.800
I mean, it's fun, but at the end of the day, it's a speculation, right?
link |
03:31:11.800
You can't build a civilization on it.
link |
03:31:15.800
It's not an institutional asset.
link |
03:31:17.800
In fact, where I'd leave it, right, is Bitcoin is clearly a digital product which makes it an institutional grade
link |
03:31:24.800
investable asset for a public company, a public figure, a public investor, or anybody that's risk adverse.
link |
03:31:31.800
I think that the top 100 other cryptos are like venture capital investments.
link |
03:31:39.800
And if you're a VC and if you're a qualified technical investor and you have a pool of capital and you can take that kind of risk,
link |
03:31:45.800
then you can parse through that and form opinions.
link |
03:31:49.800
It's just orders of magnitude more risky because of competition, because of ambition, and because of regulation.
link |
03:31:56.800
And if you take the meme coins, it's like, you know, when some rapper comes out with a meme coin,
link |
03:32:03.800
it's like maybe it'll peak when I hear about it, right?
link |
03:32:07.800
I mean, SHIB was created as the coin such that it had so many zeros after decimal point that when you looked at it on the exchanges,
link |
03:32:17.800
it always showed 0, 0, 0, 0.
link |
03:32:20.800
And it wasn't until like six months after it got popular that they started expanding the display so you could see whether the price had changed.
link |
03:32:27.800
That's speculation.
link |
03:32:28.800
Maybe you can correct me, but you've been critical of Elon Musk in the past in the crypto space.
link |
03:32:36.800
Where do you stand on Elon's effect on Bitcoin and cryptocurrency in general these days?
link |
03:32:41.800
I believe that Bitcoin is a massive breakthrough for the human race that will cure half the problems in the world
link |
03:32:49.800
and generate hundreds of trillions of dollars of economic value to the civilization.
link |
03:32:54.800
And I believe that it's in an early stage where many people don't understand it and they're afraid of it and there's FUD.
link |
03:33:04.800
And there's uncertainty, there's doubt and there's fear.
link |
03:33:07.800
And there's a very noisy crypto world and there's 15,000 other cryptos that are seeking relevance.
link |
03:33:15.800
And I think most of the FUD is actually fueled by the other crypto entrepreneurs.
link |
03:33:22.800
So the environmental FUD and the other types of uncertainty that surround Bitcoin, generally, they're not coming from legitimate environmentalists.
link |
03:33:32.800
They don't come from legitimate critics.
link |
03:33:35.800
They actually are guerrilla marketing campaigns that are being financed and fueled by other crypto entrepreneurs because they have an interest in doing so.
link |
03:33:47.800
So if I look at the constructive path forward, first, I think it'd be very constructive for corporations to embrace Bitcoin and build applications on top of it.
link |
03:34:01.800
You don't need to fix it. There's nothing wrong with it, right?
link |
03:34:06.800
Like when you put it on a layer two and a layer three, it moves a billion times a second at the speed of light.
link |
03:34:12.800
So every beautiful, cool, DeFi application, every crypto application, everything you could imagine you might want to do,
link |
03:34:21.800
you can do with a legitimate company and a legitimate website or mobile application sitting on top of Bitcoin or lightning if you want to.
link |
03:34:35.800
So I think that to the extent that people do that, that's going to be better for the world.
link |
03:34:41.800
If you consider what holds people back, I think it's just misperceptions about what Bitcoin is.
link |
03:34:49.800
So I'm a big fan of just educating people.
link |
03:34:53.800
If you're not going to commercialize it, then just educate people on what it is.
link |
03:34:58.800
So for example, Bitcoin is the most efficient use of energy in the world by far, right?
link |
03:35:06.800
Most people don't necessarily perceive that or realize that, but if you were to take any metric, energy intensity,
link |
03:35:13.800
you put like $2 billion worth of electricity in the network every year and it's worth $850 billion.
link |
03:35:21.800
There is no industry in the real world that is that energy efficient.
link |
03:35:28.800
Not only that energy efficient, it's also the most sustainable industry.
link |
03:35:31.800
We do surveys.
link |
03:35:33.800
58% of Bitcoin mining energy is sustainable.
link |
03:35:37.800
So there's a very good story.
link |
03:35:40.800
In fact, every other industry, planes, trains, automobiles, construction, food, medicine, everything else.
link |
03:35:47.800
It's less clean, less efficient.
link |
03:35:51.800
So the basic debate was...
link |
03:35:53.800
I wouldn't say there is a debate.
link |
03:35:55.800
I would just say that to the extent that the Bitcoin community had any issue with Elon,
link |
03:35:59.800
it was just this environmental uncertainty that he fueled in a couple of his tweets, right?
link |
03:36:09.800
Which I think just is very distracting.
link |
03:36:12.800
Well, that was one of them, but I think it's like the Bitcoin maximalist,
link |
03:36:16.800
but generally the crypto community, what you call the crypto entrepreneurs,
link |
03:36:20.800
is also they're using it for investment, for speculation,
link |
03:36:28.800
and therefore get very passionate about people's kind of celebrities, including you, like famous people,
link |
03:36:37.800
saying positive stuff about any one particular crypto thing,
link |
03:36:45.800
a thing you can buy in Coinbase.
link |
03:36:47.800
And so they might be unhappy with Elon Musk that he's promoting Bitcoin and then not,
link |
03:36:53.800
and then promoting Dogecoin, then not,
link |
03:36:56.800
and this kind of...
link |
03:36:59.800
There's so much emotion tied up in the communication on this topic.
link |
03:37:04.800
And I think that's where a lot of the...
link |
03:37:07.800
Look, I don't have a criticism of Elon Musk.
link |
03:37:11.800
He's free to do whatever he wishes to do.
link |
03:37:13.800
In fact, Elon Musk is the second largest supporter of Bitcoin in the world.
link |
03:37:20.800
So I think that the Bitcoin community tends to eat its own quite a bit.
link |
03:37:24.800
It tends to be very self critical.
link |
03:37:28.800
And instead of saying, well, Elon is more supportive of Bitcoin
link |
03:37:34.800
than the other 10,000 people in the world with serious amounts of money,
link |
03:37:39.800
they focus upon...
link |
03:37:42.800
Yeah, this is strange.
link |
03:37:43.800
Eating your own is just...
link |
03:37:45.800
So I mean, I think he's free to do what he wants to do.
link |
03:37:48.800
And I think he's done a lot of good for Bitcoin
link |
03:37:51.800
in putting it on the balance sheet of Tesla and holding it.
link |
03:37:55.800
And I think that sent a very powerful message.
link |
03:37:59.800
Do you have advice for young people?
link |
03:38:01.800
So you've had a heck of a life.
link |
03:38:04.800
You've done quite a lot of things.
link |
03:38:07.800
Start before MIT, but starting with MIT.
link |
03:38:10.800
Is there advice here for young people in high school and college?
link |
03:38:14.800
How to have a career they can be proud of?
link |
03:38:20.800
How to have a life they can be proud of?
link |
03:38:23.800
I was asked by somebody for quick advice for his young children.
link |
03:38:30.800
He had twins when they entered adulthood.
link |
03:38:33.800
He said, give me your advice for them in a letter.
link |
03:38:36.800
I'm going to give it to them when they turn 21 or something.
link |
03:38:41.800
So then he handed...
link |
03:38:43.800
I thought I was at a party and then he handed me this sheet of paper.
link |
03:38:46.800
I thought, oh, he wants me to write it down right now.
link |
03:38:48.800
So I sat down, I started writing and I figured,
link |
03:38:50.800
do you want to tell someone at age 21?
link |
03:38:53.800
You wrote it down.
link |
03:38:54.800
So I wrote it down.
link |
03:38:55.800
Then I tweeted it and it's sitting on Twitter,
link |
03:38:57.800
but I tell you what I said.
link |
03:38:58.800
I said, my advice if you're entering adulthood.
link |
03:39:01.800
Focus your energy.
link |
03:39:05.800
Guard your time.
link |
03:39:07.800
Train your mind.
link |
03:39:10.800
Train your body.
link |
03:39:13.800
Think for yourself.
link |
03:39:15.800
Curate your friends.
link |
03:39:18.800
Curate your environment.
link |
03:39:22.800
Keep your promises.
link |
03:39:25.800
Stay cheerful and constructive.
link |
03:39:28.800
And upgrade the world.
link |
03:39:30.800
That was the 10.
link |
03:39:32.800
Upgrade the world.
link |
03:39:33.800
That's an interesting choice of words.
link |
03:39:35.800
Upgrade the world.
link |
03:39:37.800
Upgrade the world.
link |
03:39:39.800
It's like an engineer.
link |
03:39:41.800
It's a very engineering themed...
link |
03:39:46.800
Keep your promises to the interesting one.
link |
03:39:50.800
I think most people suffer because they just...
link |
03:39:53.800
They don't focus.
link |
03:39:55.800
You got to figure out...
link |
03:39:57.800
I think the big risk in this world is there's too much of everything.
link |
03:40:01.800
You can sit and watch chess videos a hundred hours a week
link |
03:40:05.800
and you'll never get through all the chess videos.
link |
03:40:08.800
There's too much of every possible thing,
link |
03:40:12.800
too much of every good thing.
link |
03:40:14.800
So figuring out what you want to do
link |
03:40:18.800
and then everything will suck up your time, right?
link |
03:40:21.800
There's a hundred streaming channels to binge watch on.
link |
03:40:24.800
So you got to guard your time
link |
03:40:26.800
and then train your body, train your mind
link |
03:40:29.800
and control who's around you.
link |
03:40:32.800
Control what surrounds you.
link |
03:40:35.800
So ultimately in a world where there's too much of everything,
link |
03:40:40.800
then your success... It's like those laser eyes.
link |
03:40:44.800
You have to focus on just a few of those things.
link |
03:40:50.800
Yeah, I mean, I got a thousand opinions we could talk about
link |
03:40:54.800
and I could pursue a thousand things,
link |
03:40:56.800
but I don't expect to be successful
link |
03:40:58.800
and I'm not sure that my opinion in any of the 999
link |
03:41:03.800
is any more valid than the leader of thought in that area.
link |
03:41:08.800
So how about if I just focus upon one thing
link |
03:41:13.800
and then deliver the best I can in the one thing?
link |
03:41:17.800
That's the laser eye message.
link |
03:41:20.800
The rest get you distracted.
link |
03:41:22.800
How do you achieve that?
link |
03:41:23.800
Do you find yourself given where you are in life
link |
03:41:26.800
having to say no a lot
link |
03:41:29.800
or just focus comes naturally when you just ignore everything?
link |
03:41:33.800
So how do you achieve that focus?
link |
03:41:36.800
I think it helps if people know what you're focused on.
link |
03:41:39.800
So everything about you just radiates that people know.
link |
03:41:43.800
If they know what you're focused on,
link |
03:41:45.800
then you won't get so many other things coming your way.
link |
03:41:50.800
If you dally or if you flirt with 27 different things,
link |
03:41:58.800
then you're going to get approached by people
link |
03:42:00.800
in each of the 27 communities, right?
link |
03:42:03.800
You mentioned getting a PhD and giving your roots at MIT.
link |
03:42:08.800
Do you think there's all kinds of journeys you can take
link |
03:42:12.800
to educate yourself?
link |
03:42:14.800
Do you think a PhD or school is still worth it?
link |
03:42:19.800
Or is there other paths through life that...
link |
03:42:22.800
Is it worth it if you have to pay for it?
link |
03:42:24.800
Is it worth it if you spend the time on it?
link |
03:42:26.800
The time and the money is a big cost.
link |
03:42:30.800
I think...
link |
03:42:33.800
Time probably the bigger one, right?
link |
03:42:35.800
It seems clear to me that the world wants more specialists.
link |
03:42:40.800
It wants you to be an expert and to focus on one area.
link |
03:42:47.800
And it's punishing generalist jack of all trades,
link |
03:42:52.800
especially people that are generalists in the physical realm,
link |
03:42:55.800
because if you're a specialist in the digital realm,
link |
03:42:58.800
you're the person with 700,000 followers on Twitter
link |
03:43:03.800
and you show them how to tie knots,
link |
03:43:05.800
or you're the banjo player with 1.8 million followers,
link |
03:43:10.800
and whenever he types banjo, it's you, right?
link |
03:43:14.800
And so the world wants people that do something well
link |
03:43:19.800
and then it wants to stamp out 18 million copies of them.
link |
03:43:26.800
That argues in favor of focus.
link |
03:43:28.800
Now, the definition of a PhD is someone with enough of an education
link |
03:43:33.800
that they're capable of or have made.
link |
03:43:35.800
I guess to get a PhD, technically,
link |
03:43:37.800
you have to have done a dissertation
link |
03:43:40.800
where you made a seminal contribution to the body of human knowledge.
link |
03:43:45.800
And if you haven't done that, technically,
link |
03:43:47.800
you have a master's degree, but you're not a doctor.
link |
03:43:50.800
So if you're interested in any of the academic disciplines
link |
03:43:55.800
that a PhD would be granted for,
link |
03:43:58.800
then I can see that being a reasonable pursuit.
link |
03:44:01.800
But there are many people that are specialists.
link |
03:44:05.800
You know the agitator?
link |
03:44:07.800
Yeah, yeah, yeah.
link |
03:44:08.800
The agitator on YouTube?
link |
03:44:09.800
Yeah, yeah, yeah.
link |
03:44:10.800
He's the world's greatest chess commentator.
link |
03:44:13.800
Yeah.
link |
03:44:14.800
And I've watched his career
link |
03:44:15.800
and he's got progressed way better and he's really good.
link |
03:44:18.800
He's gonna love hearing this.
link |
03:44:20.800
Yeah, if the agitator ever hears this,
link |
03:44:22.800
I'm a big fan of the agitator.
link |
03:44:23.800
I have to cut myself off, right,
link |
03:44:25.800
because otherwise you'll watch the entire Paul Morphe saga
link |
03:44:28.800
for your weekend.
link |
03:44:30.800
But the point really is,
link |
03:44:32.800
YouTube is full of experts who are specialists in something
link |
03:44:36.800
and they rise to the top of their profession.
link |
03:44:39.800
And Twitter is too, and the internet is.
link |
03:44:44.800
So I would advocate that you figure out
link |
03:44:49.800
what you're passionate about and what you're good at
link |
03:44:53.800
and you do focus on it,
link |
03:44:56.800
especially if the thing that you're doing can be automated.
link |
03:45:01.800
The problem is, you know,
link |
03:45:04.800
back to that 500,000 algebra teacher type comment,
link |
03:45:08.800
the problem is if it is possible to be automated,
link |
03:45:11.800
then over time someone's probably gonna automate it
link |
03:45:15.800
and that squeezes, you know, the state space
link |
03:45:20.800
of everybody else.
link |
03:45:22.800
It's like, after the lockdowns,
link |
03:45:24.800
it used to be there are like all these local bands
link |
03:45:27.800
that played in bars and everybody went to the bar
link |
03:45:30.800
to see the local band.
link |
03:45:31.800
And then during the lockdown,
link |
03:45:33.800
you would have like these six super groups
link |
03:45:36.800
and they would all get 500,000 or a million followers
link |
03:45:39.800
and all these smaller local bands just got no attention.
link |
03:45:44.800
At all.
link |
03:45:47.800
Well, the interesting thing is one of those 500,000
link |
03:45:50.800
algebra teachers is likely to be part of the automation.
link |
03:45:53.800
So it's like, it's an opportunity for you to think,
link |
03:45:56.800
where's my field, my discipline evolving into?
link |
03:46:02.800
I talked to a bunch of librarians,
link |
03:46:04.800
just happened to be friends of librarians.
link |
03:46:06.800
And that's libraries will probably be evolving
link |
03:46:10.800
and it's up to you as a librarian to be one of the few
link |
03:46:13.800
that remain in the rubble.
link |
03:46:17.800
If you're gonna give commentary on Shakespeare plays,
link |
03:46:19.800
I want you to basically do it for every Shakespeare play.
link |
03:46:22.800
Like I want you to be the Shakespeare dude
link |
03:46:24.800
because once I, once, just like Lex, you're like...
link |
03:46:28.800
I don't know what kind of...
link |
03:46:30.800
You're the deep thinking podcaster, right?
link |
03:46:34.800
Or you're the podcaster that goes after
link |
03:46:37.800
the deep intellectual conversations
link |
03:46:41.800
and once I get comfortable with you and I like you,
link |
03:46:46.800
then I start binge watching Lex.
link |
03:46:49.800
But if you changed your format through 16 different formats
link |
03:46:54.800
so that you could compete with 16 different other
link |
03:46:57.800
personalities on YouTube,
link |
03:46:59.800
you probably wouldn't beat any of them, right?
link |
03:47:02.800
You would probably just kind of sink into the...
link |
03:47:04.800
You're the number two or number three guy.
link |
03:47:06.800
You're not the number one guy in the format.
link |
03:47:09.800
And I think the algorithm, right?
link |
03:47:14.800
The Twitter algorithm and the YouTube algorithm,
link |
03:47:16.800
they really reward the person that's focused
link |
03:47:19.800
on message consistent.
link |
03:47:21.800
The world wants somebody they can trust
link |
03:47:24.800
that's consistent and reliable
link |
03:47:26.800
and they kind of want to know what they're getting into
link |
03:47:29.800
because this is taken for granted maybe,
link |
03:47:33.800
but there's 10 million people vying
link |
03:47:37.800
for every hour of your time.
link |
03:47:39.800
And so the fact that anybody gives you any time at all
link |
03:47:43.800
is a huge privilege, right?
link |
03:47:45.800
And you should be thanking them
link |
03:47:47.800
and you should respect their time.
link |
03:47:50.800
It's interesting that everything you said is very interesting,
link |
03:47:53.800
but of course from my perspective
link |
03:47:54.800
and probably from your perspective,
link |
03:47:56.800
my actual life has nothing to do with...
link |
03:47:59.800
It's just being focused on stuff.
link |
03:48:01.800
And in my case, it's like focused on
link |
03:48:04.800
doing the thing I really enjoy doing
link |
03:48:07.800
and being myself and not caring about anything else.
link |
03:48:10.800
Like I don't care about views or likes or attention.
link |
03:48:14.800
And that just maintaining that focus
link |
03:48:16.800
is the way from an individual perspective,
link |
03:48:18.800
you live that life.
link |
03:48:20.800
But yeah, it does seem that there's...
link |
03:48:23.800
The world and technology is rewarding the specialization
link |
03:48:27.800
and creating bigger and bigger platforms
link |
03:48:29.800
for the different specializations.
link |
03:48:31.800
And that lifts all boats actually
link |
03:48:34.800
because the specializations get better
link |
03:48:36.800
and better and better at teaching people
link |
03:48:38.800
to do specific things and they educate themselves.
link |
03:48:41.800
And it's just everybody gets more and more knowledgeable
link |
03:48:44.800
and more and more empowered.
link |
03:48:46.800
The reward for authenticity more than offsets
link |
03:48:49.800
the specificity with which you pursue your mission.
link |
03:48:52.800
It's like...
link |
03:48:54.800
Another way to say it is like nobody wants to read advertising.
link |
03:48:58.800
Like if you were to spend $100 million advertising your thing,
link |
03:49:03.800
I probably wouldn't want to watch it.
link |
03:49:05.800
But if you...
link |
03:49:07.800
That's so fascinating.
link |
03:49:09.800
We see the death of that.
link |
03:49:11.800
And so the commercial shows are losing their audiences
link |
03:49:15.800
and the authentic specialist
link |
03:49:18.800
or the authentic artist are gaining their audience.
link |
03:49:23.800
And that's a beautiful thing.
link |
03:49:25.800
Speaking of deep thinking,
link |
03:49:28.800
you're just a human.
link |
03:49:30.800
Your life ends.
link |
03:49:32.800
You've accumulated so much wisdom,
link |
03:49:35.800
so much money, but the right ends.
link |
03:49:38.800
Do you think about that?
link |
03:49:40.800
Do you ponder your death, your mortality?
link |
03:49:43.800
Are you afraid of it?
link |
03:49:46.800
When I go, all my assets will flow into a foundation
link |
03:49:50.800
and the foundation's mission is to make education free
link |
03:49:53.800
for everybody forever.
link |
03:49:55.800
And if I'm able to contribute to the creation
link |
03:50:00.800
of a more perfect monetary system,
link |
03:50:05.800
then maybe that foundation will go on forever.
link |
03:50:09.800
The idea.
link |
03:50:11.800
The foundation of the idea.
link |
03:50:13.800
Each of the foundations.
link |
03:50:16.800
It's not clear we're on the S curve of immortal life yet.
link |
03:50:19.800
Like that's a biological question
link |
03:50:21.800
and you asked that on some of your other interviews a lot.
link |
03:50:25.800
I think that we are on the threshold of immortal life
link |
03:50:31.800
for ideas or immortal life for certain institutions
link |
03:50:36.800
or computer programs.
link |
03:50:38.800
So if we can fix the money,
link |
03:50:40.800
then you can create a technically perfected endowment.
link |
03:50:45.800
And then the question really is what are your ideas?
link |
03:50:48.800
What do you want to leave behind?
link |
03:50:50.800
And so if it's a park, then you endow the park, right?
link |
03:50:54.800
If it's free education, you endow that.
link |
03:50:56.800
If it's some other ethical idea, right?
link |
03:51:01.800
Does it make you sad that there's something
link |
03:51:05.800
that you've endowed some very powerful idea
link |
03:51:10.800
of digital energy that you help put into the world?
link |
03:51:16.800
And your mind, your conscious mind
link |
03:51:20.800
will no longer be there to experience it.
link |
03:51:24.800
It's just gone forever.
link |
03:51:26.800
I'd rather think that the thing that Satoshi taught us
link |
03:51:31.800
is you should do your part during some phase of the journey
link |
03:51:35.800
and then you should get out of the way.
link |
03:51:38.800
And I think Steve Jobs said something similar to that effect
link |
03:51:43.800
in a very, very famous speech one day,
link |
03:51:46.800
which is, you know, death is a natural part of life
link |
03:51:49.800
and it makes way for the next generation.
link |
03:51:52.800
And I think the goal is you upgrade the world, right?
link |
03:51:57.800
You leave it a better place, but you get out of the way.
link |
03:52:00.800
And I think when that breaks down, you know, bad things happen.
link |
03:52:09.800
I think nature cleanses itself as a cycle of life.
link |
03:52:14.800
And speaking of one of great people who did also get out of the way
link |
03:52:18.800
is George Washington.
link |
03:52:19.800
So hopefully when you get out of the way,
link |
03:52:21.800
nobody's bleeding you to death in hope of helping you.
link |
03:52:28.800
What do you think, Joe?
link |
03:52:30.800
A bit of a callback.
link |
03:52:32.800
What do you think is the meaning of this whole thing?
link |
03:52:34.800
What's the meaning of life?
link |
03:52:35.800
Why are we here?
link |
03:52:36.800
We talked about the rise of human civilization.
link |
03:52:39.800
It seems like we're engineers at heart.
link |
03:52:41.800
We'll build cool stuff, better and better use of energy,
link |
03:52:46.800
channeling energy to be productive.
link |
03:52:48.800
Why?
link |
03:52:49.800
What's it all for?
link |
03:52:54.800
You're getting metaphysical on me.
link |
03:52:56.800
Very.
link |
03:52:57.800
There's a beautiful boat to the left of us.
link |
03:52:58.800
Like, why do we do that?
link |
03:52:59.800
There's this boat that sailed the ocean.
link |
03:53:02.800
Then we build models of it to celebrate great engineering of the past.
link |
03:53:07.800
To engineer is divine.
link |
03:53:10.800
You can make lots of arguments as well.
link |
03:53:13.800
We're here to entertain ourselves or we're here to create something
link |
03:53:18.800
that's beautiful or something that's functional.
link |
03:53:21.800
I think if you're an engineer, you entertain yourself
link |
03:53:23.800
by creating something that's both beautiful and functional.
link |
03:53:26.800
So I think all three of those things, it's entertaining,
link |
03:53:29.800
but it's ethical.
link |
03:53:32.800
You've got to admire the first person that built a bridge
link |
03:53:37.800
crossing a chasm or the first person to work out the problem
link |
03:53:41.800
of how to get running water to a village.
link |
03:53:44.800
The first person that figured out how to dam up a river
link |
03:53:50.800
or mastered agriculture.
link |
03:53:53.800
The guy that figured out how to grow fruit on trees
link |
03:53:56.800
or created orchards and maybe one day had like 10 fruit trees
link |
03:54:00.800
is pretty proud of himself.
link |
03:54:02.800
So that's functional.
link |
03:54:04.800
There is also something to that, just like you said,
link |
03:54:07.800
that's just beautiful.
link |
03:54:09.800
It does get you closer to, like you said, the divine.
link |
03:54:15.800
Something, when you step back and look at the entirety of it,
link |
03:54:21.800
a collective of humans using a beautiful invention
link |
03:54:27.800
or creation or just something about this instrument
link |
03:54:32.800
is creating a beautiful piece of music.
link |
03:54:37.800
That seems just right.
link |
03:54:39.800
That's what we're here for.
link |
03:54:41.800
Whatever the divine is, it seems like we're here for that.
link |
03:54:44.800
And I, of course, love talking to you because from the
link |
03:54:47.800
parent perspective, the functional is ultimately the mechanism
link |
03:54:51.800
towards the beauty.
link |
03:54:53.800
Isn't there something beautiful about making the world
link |
03:54:56.800
a better place for people that you love, your friends,
link |
03:54:59.800
your family or yourself?
link |
03:55:02.800
Yeah.
link |
03:55:04.800
When you think about the entire arc of human existence
link |
03:55:11.800
and you roll the clock back 500,000 years
link |
03:55:14.800
and you think about every struggle of everyone
link |
03:55:17.800
that came before us and everything they had to overcome
link |
03:55:20.800
in order to put you here right now,
link |
03:55:23.800
you gotta admire that, right?
link |
03:55:27.800
You gotta respect that.
link |
03:55:29.800
That's a heck of a gift they gave us.
link |
03:55:31.800
It's also a heck of a responsibility.
link |
03:55:35.800
Don't screw it up.
link |
03:55:38.800
If I dropped you 500,000 years ago and I said
link |
03:55:41.800
figure out steel refining or, you know, figure out
link |
03:55:47.800
silicon chips, fabric production or whatever it is.
link |
03:55:51.800
Just fly or fire.
link |
03:55:53.800
And so now we're here and I guess the way you repay them is
link |
03:55:57.800
you fix everything in front of your face you can, right?
link |
03:56:01.800
And that means to someone like Elon, it means
link |
03:56:05.800
get us off the planet, right?
link |
03:56:08.800
To someone like me, it's like, I think, you know,
link |
03:56:11.800
fix the energy in the system.
link |
03:56:14.800
And that gives me hope, Michael.
link |
03:56:16.800
This is an incredible conversation.
link |
03:56:17.800
You're an incredible human.
link |
03:56:18.800
It's a huge honor you would sit down with me.
link |
03:56:21.800
Thank you so much for talking to me.
link |
03:56:23.800
Yeah, thanks for having me, Alex.
link |
03:56:25.800
Thanks for listening to this conversation with Michael Saylor.
link |
03:56:28.800
To support this podcast, please check out our sponsors
link |
03:56:30.800
in the description.
link |
03:56:32.800
And now let me leave you with a few words from Francis Bacon.
link |
03:56:36.800
Money is a great servant, but a bad master.
link |
03:56:42.800
Thank you for listening and hope to see you next time.